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2022 (7) TMI 1040 - AT - Income TaxDisallowance of loss - absence of any justification to support the incurring of any genuine loss by the appellant in any business carried on in the name and style of M/s.Dindayal Associates - proprietorship firm DA where the assessee purportedly was carrying on share trading business - claim of the Revenue is that this share trading business was the benami of SG and not of the assessee, and therefore denied claim of loss - HELD THAT - We uphold the order of the ld.CIT(A) that the business of share trading transactions carried on in the proprietorship concern, DA was not that of the assessee, but of SG and denial of claim of business loss to the tune is accordingly upheld. Ground No.1 raised by the assessee is dismissed. The appeal of the assessee is dismissed. Reopening of assessment u/s 147 - We fail to understand how the AO could now attribute escapement of income of the assessee on account of this same share trading business, which as per the AO himself ,does not belong to the assessee at all. As on the date of recording reasons for escapement of income i.e. on 4.10.2006, the assessment order passed, which was reopened under section 148 of the Act ,dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore, this very order passed u/s 143(3) wherein the assessee was held to have not carried out any share trading transactions, could not possibly have been reopened u/s 147 on account of escapement of income relating to this very share trading business only. Assumption of jurisdiction to frame reassessment u/s 147 is clearly invalid. Re-assessment framed, therefore, u/s 147 of the Act is set aside. The appeal of the assessee is allowed on this count. Validity of assessment order passed u/s 158BD - satisfaction note recorded by the AO of the assessee on various grounds - HELD THAT - The information against the assessee not emanating from search conducted on any person, the proceedings u/s 158BD to assess undisclosed income of the assessee for the block period could not have been conducted as per law. The order passed therefore u/s 158BD of the Act is, we hold, invalid. The satisfaction note records confirmation of the assessment order passed in the case of MRS which event took place on 28/12/2004, which is much subsequent to the date of issuance of notice under section 158BD i.e. on 24.11.2003. This goes to show that in any case the satisfaction whatsoever was recorded by the AO after issuance of notice u/s 158BD. Thus we hold that present proceedings conducted on the assessee under section 158BD of the Act and consequent assessment order passed under section 158BD of the Act is against the law and hence invalid. The order so passed under section 158BD is therefore set aside. This ground is allowed, and the appeal of the assessee is allowed. Addition of withdrawal of cash from the benami accounts - CIT-A deleted the addition - HELD THAT - Though the appeal of the Revenue is merely academic since we have already held the order passed by the AO under section 158BD in the present case in the appeal of the assessee, but even on merits, we find that the ld.CIT(A) thrashed the very basis of the AO for making addition of Rs.1.05 crores by noting that there was no cash withdrawal from the benami account of the proprietorship concern, DA , but in fact it was kept in fixed deposits in the name of proprietorship concern. The Department was unable to controvert this fact. Therefore, the very basis of the AO for making addition in the hands of the assessee of Rs.1.05 crores does not survive, since the Ld CIT(A) has noted the fact that no cash was actually withdrawn. In view of the same, we see no reason to interfere in the order of the CIT(A) in deleting the addition.
Issues Involved:
1. Denial of loss claimed on account of share trading transactions. 2. Validity of reassessment proceedings under section 147 of the Act. 3. Validity of assessment order passed under section 158BD of the Act. 4. Deletion of addition on account of withdrawal of cash from benami accounts. Detailed Analysis: 1. Denial of Loss Claimed on Account of Share Trading Transactions: The primary issue in the appeals related to the denial of loss claimed by the assessee, “MRS,€ on account of share trading transactions in the proprietary concern, “DA.€ The Revenue contended that the business was actually a benami of “SG,€ and not of “MRS.€ The AO disallowed the loss claimed by “MRS€ on the grounds that he was only a salaried employee of “SG€ and had no means to conduct such a large volume of share trading transactions. This was corroborated by statements from third parties and the financial status of “MRS.€ The Tribunal upheld the findings of the CIT(A) and AO, concluding that the business did not belong to “MRS€ and thus, the denial of the loss claim was justified. 2. Validity of Reassessment Proceedings Under Section 147 of the Act: The reassessment proceedings for AY 2001-02 were challenged by “MRS€ on the grounds that the reasons for reopening were based on the same share trading business, which the AO had already determined did not belong to “MRS.€ The Tribunal found that the AO could not attribute escapement of income to “MRS€ for the same business he had earlier determined did not belong to him. Consequently, the reassessment framed under section 147 was deemed invalid and set aside. 3. Validity of Assessment Order Passed Under Section 158BD of the Act: The assessee, “SG,€ challenged the validity of the assessment order passed under section 158BD on multiple grounds: - The prescribed procedure for initiating proceedings under section 158BD was not followed, as there was no satisfaction recorded by the AO of the searched person. - The satisfaction note was recorded after the issuance of the notice under section 158BD. - The satisfaction note was based on information obtained during assessment proceedings under section 158BD of another person, “MRS,€ which is not permissible. The Tribunal noted that the information against “SG€ did not emanate from any search action but from regular assessment proceedings of “MRS.€ Moreover, the satisfaction note was recorded after the issuance of the notice under section 158BD. Therefore, the proceedings under section 158BD and the consequent assessment order were held invalid and set aside. 4. Deletion of Addition on Account of Withdrawal of Cash from Benami Accounts: The Revenue's appeal against the deletion of an addition of Rs.1,05,00,000/- by the CIT(A) was based on the AO's finding that the cash withdrawals from the benami accounts were actually kept in fixed deposits in the name of the proprietary concern, “DA.€ The Tribunal upheld the CIT(A)'s finding that there was no actual cash withdrawal, and thus, the addition was not justified. Consequently, the Revenue's appeal was dismissed. Conclusion: - The appeals of “MRS€ regarding the denial of loss claims were dismissed. - The reassessment proceedings under section 147 for AY 2001-02 were set aside as invalid. - The assessment order under section 158BD against “SG€ was set aside as invalid. - The deletion of the addition on account of cash withdrawals was upheld, and the Revenue's appeal was dismissed.
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