9911796707
TMI Blog2006 (11) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,47,500 without paying any tax on it as the assessee set of its loss of Rs. 11,59,066 from the sale of its gold jewellery against the said gain." 2. We have heard the parties and perused the record. 3. The relevant facts, briefly stated, are that the assessee had filed return of income for asst. yr. 1998-99 on 31st Oct., 1998, which was processed under s. 143(1) on 26th Feb., 1999. Subsequently notice under s. 148 was issued to the assessee on 29th May, 2001. In response to the said notice, the assessee filed the return on 16th Oct., 2001 declaring the same income of Rs. 7,93,140 as shown in the original return. The AO completed the reassessment at an income of Rs. 20,24,602 vide order dt. 21st March, 2003. 4. The assessee appealed to the CIT(A) and the latter vide impugned order allowed relief to the assessee against which the Revenue is in appeal before us. 5. It is also pertinent to mention that during the financial year 1997-98, the assessee had made a disclosure under VDIS of diamond jewellery valued at Rs. 29,02,395. In the return of income filed for asst. yr. 1998-98, the assessee had claimed to have sold the said jewellery for a consideration of Rs. 83,40,000. On the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been sold through a broker, namely Shri S.K. Sharma & Co. in the month of February/March, 1998 @ Rs. 48.50 to Rs. 54.50 per share. In para 4.2 of the assessment order, the AO has pointed out that in the case of Shri Som Nath Maini, a family member of the assessee, a similar exercise of purchase of 45,000 shares and subsequent sale of 43,000 shares of M/s Ankur International Ltd., Ludhiana had been carried out. It has been pointed out by the AO that Shri Som Nath Maini too has set off the short term capital loss on the sale of gold jewellery declared under VDIS, 1997 against the capital gain on the sale of above shares. The AO has expressed surprise that in both the cases, the short term capital gain was almost matching with the long term capital loss in the case of both the family members under different circumstances. The AO had made enquiries from Ludhiana Stock Exchange during the assessment proceedings in the case of Shri Som Nath Maini and obtained the P&L a/c/balance sheet of M/s Ankur International Ltd., Ludhiana for asst. yrs. 1996-97 to 1999-2000. According to the AO, the company had never declared any dividend and that it was declaring marginal profits and as per inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es had been deposited in cash before the issue of cheques in the name of the assessee for purchase of shares. According to the AO the sale of shares through M/s S.K. Sharma & Co. was nothing but collusive affair so as to introduce assessee's own money amounting to Rs. 12,47,500 in assessee's books of account. The AO accordingly made an addition of Rs. 12,47,500 as income from undisclosed sources. The long term capital loss was determined at Rs. 2,85,620 to be carried forward. The AO had computed the income of the assessee as under: "1. Income from house property (as shown) 76,800 2. Long term capital gains a. On sale of diamond jewellery (as 10,14,333 discussed in para 3.14 above) b. On sale of gold jewellery (as shown) (-)12,99,983 ------------ Long term capital loss to be C/f (-) 2,85,620 3. Income from other sources (as declared) 7,12,745 4. Addition on a/c of sale of shares (as 12,47,500 discussed in para 4.27 above) --------- 20,37,045 Less: Deduction under s. 80-I 12,443 --------- 20,24,602 Rounded off 20,24,600" 7. The assessee appealed to the CIT(A) and the latter vide impugned order has rejected the ground of appeal raised by the assessee in regard to the validity o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AO. Also the sale was made through broker and the payment was received through cheque. This fact has not been denied by the AO. These factors proved that addition under s. 68 cannot be made as the source of the cash credit has been proved by the appellant. Hence, the addition of Rs. 12,47,500 is hereby deleted." 11. The Revenue is in appeal before us. 12. The learned Departmental Representative contended that in regard to the ground relating to loss on sale of jewellery, she relies upon the order of the AO. In regard to bogus sale of shares, the learned Departmental Representative claimed that the issue was covered in favour of the Revenue by the decision of the Tribunal in the case of Asstt. CIT vs. Som Nath Maini a family member of the assessee, in ITA No. 829/Chd/2002 for asst. yr. 1998-99 [reported at (2006) 100 TTJ (Chd) 917-Ed.]. According to the learned Departmental Representative, the statement of Shri S.K. Sharma was also considered by the Tribunal in the case of Shri Som Nath Maini and, therefore, the decision of the Tribunal is applicable on all fours in the case of the assessee. According to the learned Departmental Representative, the CIT(A) has ignored the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the CIT(A) and has been considered. Inviting our attention to the letter issued by the AO during the course of reassessment proceedings and in particular to the letter placed on page Nos. 16 and 20 of the paper book, it was contended that the AO did not have a definite opinion to the effect that the sale of shares was bogus. The learned counsel for the assessee contended that the material collected by the AO was not confronted to the assessee and, therefore, the same could not be used against the assessee. Reliance was placed on the decision of the Punjab & Haryana High Court in the case of CIT vs. M.P. Iron Traders (2004) 189 CTR (P&H) 154 and the decision of the Tribunal in the case of Dy. CIT vs. A.G.G. Exports (P) Ltd. in ITA No. 457/Chd/2002 to support the contention that reopening of assessment made in respect of alleged bogus shares was illegal. According to the learned counsel, there was no material with the AO to suggest that the assessee had earned capital gains in respect of sale on diamond jewellery to the extent assessed by him. 14. The learned counsel for the assessee pointed out that the return of income filed by the assessee had been processed under s. 143(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed to have been sold through Jaipur Stock Exchange had been transferred back to the original owner and there was no genuine sale of shares. According to the learned Departmental Representative the sale of nominal shares at Jaipur Stock Exchange was created to serve as evidence in this case is established from facts and the circumstances coming to light after enquiry made by the AO. 17. Regarding the contentions advanced on behalf of the assessee relating to reassessment with reference to sale of shares, the learned Departmental Representative invited our attention to the language of s. 147 applicable w.e.f. 1st April, 1989. It was pointed out that as per the plain language of the section the AO is empowered not only to bring to tax the items of escaped income in respect of which notice under s. 148 was issued but also in respect of any other item which comes to the notice of the AO after reopening of assessment. Relying upon the decision of the Supreme Court in the case of Phool Chand Bajrang Lal & Anr. vs. ITO & Anr., it was contended that whereas the AO should have reasons to believe that the income of the assessee had escaped assessment the adequacy of the reasons cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue of notice under s. 148. 18. Responding to the contention advanced on behalf of the assessee that where no assessment under s. 143(3) has been made, the AO has no power to reopen the assessment, our attention was invited to the order of Chandigarh Bench of Tribunal in the case of Dy. CIT vs. A.G.G. Exports (P) Ltd. in ITA No. 457/Chd/2002 to the contrary. It was contended that in that case also no regular assessment was made but the reopening of assessment was held to be valid. Reliance was also placed on Full Bench decision of the Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB) to support the contention that when no regular assessment is made by the AO, he cannot be said to have expressed any opinion about any income that has escaped the assessment. Reliance was also placed on the decision of Punjab & Haryana High Court in the case of Gurera Gas Cylinders (P) Ltd. vs. CIT & Anr. (2003) 180 CTR (P&H) 159 : (2003) 258 ITR 170 (P&H) to support the contention that reopening of assessment in this case is valid and the assessment on account of bogus sale of shares was justified. 19. We have given our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12,380. On the basis of the said cost of acquisition, the AO determined long term capital gain on the sale of diamond jewellery at Rs. 10,14,333 as against Rs. 1,40,917 declared by the assessee. The assessee had also disclosed long term capital loss on sale of gold jewellery of Rs. 12,99,983. This was not disturbed by the AO. So however, the long term capital gain of Rs. 10,14,333 on sale of diamond jewellery was adjusted against the loss on sale of gold jewellery of Rs. 12,99,917. The AO determined long term capital loss at Rs. 2,85,620 to be carried forward to the subsequent year(s). Notice under s. 148 was issued on the basis of belief of the AO that the income of the assessee had escaped assessment. The learned CIT(A) has held that the AO is empowered to issue notice under s. 148 if he has a bona fide belief that the income of the assessee had escaped assessment. The belief of the AO has got to be honest belief. So however, it is not necessary that at the time of issue of notice under s. 148 the AO should have conclusive evidence that the income of the assessee had escaped assessment. Their Lordships of Supreme Court in the case of Phool Chand Bajrang Lal vs. ITO held that for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under s. 143(1) of the Act and the question of examination of the material by the AO did not arise at that stage. Thus, there was no question of change of opinion. The notice under s. 148 was valid." Therefore, on the basis of aforementioned facts and the law, we dismiss the claim of the assessee that the assessment was reopened on mere change of opinion and uphold the order of the CIT(A) in regard to validity of reopening of assessment. 22. The next issue raised before us is as to whether the AO was entitled to tackle any other income in the course of reassessment proceedings which did not form the basis for reopening of assessment. There is no dispute about the fact that the assessment of income on account of sale of shares was not the basis for reopening of assessment. During the course of reassessment proceedings the AO had raised the issue with the assessee giving sufficient opportunity and thereafter the addition of Rs. 12,47,500 under s. 68 for the reasons recorded in para 4.27 of the assessment order was made. It is nobody's case that the reasonable opportunity of being heard was not allowed to the assessee in regard to the said addition. So however, whether the AO is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 24. It is evident from the language of s. 147 that the AO is not only empowered to assess the income which had escaped assessment on the basis of which notice under s. 148 was issued but also any other income chargeable to tax which has escaped assessment and which comes to the notice of the AO subsequently in the course of proceedings under s. 147. The sum and substance of s. 147 is that once there is valid initiation of proceedings under s. 147, the AO is entitled to assess the escaped income for which proceedings have been taken by him by issue of notice under s. 147 and also to assess such income which had escaped assessment and which had come to the notice of the AO in the course of reassessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e escaping assessment. For assessing any other escaped income that comes to the notice of AO, it is necessary that the AO has material on record on the basis of which he could have a prima facie belief that the income of the assessee had escaped assessment. The said material is bound to be confronted to the assessee during reassessment proceedings and the issue decided in accordance with law. In this case, it is claimed by the Department that in the case of Shri Som Nath Maini with identical facts (and close relative of the assessee) the assessment had been reopened under s. 148 by Shri Ravi Aggarwal, Asstt. CIT, Circle-1(II) on 29th Oct., 2001 on the issue of understatement of capital gain on account of sale of jewellery. In the case of Som Nath Maini the sale of shares of M/s Ankur International Ltd. had come to the notice of the AO and he on the basis of enquiry treated the profit shown on sale of such shares as bogus. On restructuring in the IT Department, Shri M.S. Minhas, Asstt. CIT was posted in Range-VI and he was holding the jurisdiction of Balbir Singh Maini, the assessee as well as Shri Som Nath Maini. Shri M.S. Manhas had recommended 2nd appeal in the case of Shri Som N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in detail elsewhere in this order. The issue before us is as to whether the AO was justified in not accepting the sale of shares of M/s Ankur International Ltd. as genuine and in treating the amount of Rs. 12,47,500 as unaccounted income of the assessee. The assessee had purchased the shares of M/s Ankur International Ltd. through stockbroker, namely M/s Munish Arora & Co. The number of shares purchased was 30,000. 10,000 shares @ Rs. 3.40 per share on 9th April, 1997, 10,000 @ Rs. 3.10 per share on 15th April, 1997 and 10,000 shares @ Rs. 2.60 per share on 18th April, 1997 were purchased. 10,000 shares have been claimed to have been sold on 9th Feb., 1998 @ Rs. 48.50 per share through M/s S.K. Sharma & Co., stockbroker. Another 2,000 shares have been claimed to have been sold on 23rd Feb., 1998 @ Rs. 54.25 per share. Another 10,000 shares and 2,000 shares have been claimed to have been sold @ Rs. 54.50 per share on 23rd March, 1998. All the transactions are claimed to have been conducted through M/s S.K. Sharma & Co. The AO found that in the case of a family member of the company, Shri Som Nath Maini, a similar exercise of purchase of 45,000 shares and subsequent sale of 43,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee for non-production of records by M/s S.K. Sharma & Co. The contention advanced on behalf of the assessee appears to be attractive at first sight. So however, when all the facts and circumstances of this case are viewed in totality, the assessee cannot be said to have discharged the onus in regard to the genuineness of the transaction of sale of shares through M/s S.K. Sharma & Co. The information appearing from the bank account of M/s S.K. Sharma & Co. and the non-production of the records relating to transaction by M/s S.K. Sharma & Co. have got to be viewed in the light of the attendant facts and material collected by the AO. On enquiry by the AO, it was found that the shares of M/s Ankur International Ltd. had not been quoted in Ludhiana Stock Exchange beyond 17th July, 1997. As on 17th July, 1997, the said shares were quoted at Rs. 17 per share. Thereafter the shares were not quoted at all. As per Ludhiana Stock Exchange records, there was no trading of shares of M/s Ankur International Ltd. after 17th July, 1997. This is one aspect of the matter. The other aspect of the matter is that the assessee had furnished evidence to establish that the shares of M/s Ank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resent case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it." It was further laid down by their Lordships: "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive by law." 30. The above principles of law have been reiterated by the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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