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TMI Blog2014 (4) TMI 902X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment proceedings, that too beyond a period of four years, unless it is with the sole intention of bringing the case under the purview of section 149(b) of the Act, it is not permissible in law - what cannot be done directly cannot be done indirectly - AO having initiated the reassessment proceedings after a lapse of four years from the end of the relevant assessment year – thus, the reassessment proceedings are bad in law – also, the addition and assessment made on the strength of proceedings set aside – Decided in favour of Assessee. - ITA No. 7186/Mum/2013 - - - Dated:- 4-3-2014 - Shri D. Manmohan,JJ. For the Appellant : Shri Bikash Kumar Bogi For the Respondent : Shri K. C. P. Patnayak ORDER Per D. Manmohan, V. P. This appeal by the assessee is directed against the order passed by the CIT(A)-35, Mumbai and it pertains to A.Y. 2004-05. 2. In this appeal the assessee mainly challenges the validity of notice issued under section 148 of the act apart from challenging the addition made by the AO as unexplained cash credits. 3. Facts relevant for disposal of the appeal are stated in brief. For the year under consideration the assessee declared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the broker with vested interest. Assessee's own cash is introduced and comes back in the form of capital gain thereby claiming concessional tax rate and in all such type of cases the assessee himself has transacted through the broker with whom he never had a direct dealing. After making the above observations the AO noted, in para 6.2 of his order, that the records clearly reveal that the above features are present in the share transactions claimed to have been made by the assessee. In his opinion the actual purchase value should be Rs.7.70 per share. Regarding the contract bill of M/s. G.R. Pandya Share Broking Ltd. dated 13.10.2003, 05.11.2003 and 06.11.2003, the National Stock Exchange and the Bombay Stock Exchange in its report mentioned that there is no such matching record uploaded by the trading members to the Exchange as on those dates for the client Jalpa Manish Rughani and in fact the terminal of trading member M/s. G.R. Pandya Share Broking Ltd. was deactivated by the Exchange w.e.f. 8th November, 2002 and finally suspended by the Exchange w.e.f. 7th April, 2004. Under these circumstances the AO assumed that the said bills are nothing but bogus accommodation b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... too in the year 2011-12. It was also contended that the claim of the Revenue that the share price at that point of time was Rs.7.70 was not based on any tangible evidence and it was not put to the assessee and in fact it was claimed that assessee purchased the shares @ Rs.2.45 to Rs.2.75 per share and this investment having been declared in the books of account there cannot be any addition towards unexplained investment. It was also submitted that section 68 of the Act, dealing with cash credit, has no application in the present case since it is a case of investment but the AO has not applied the provisions of section 69B and it was not treated as investment not fully disclosed and even on that count the addition has no legs to stand. 7. The learned CIT(A) referred to provisions of section 149 of the Act wherein it is stated that if the income which is likely to escape assessment is less than Rs.1,00,000/- then section 149(a) will apply but if it is likely to be more than Rs.1,00,000/- assessment can be reopened within a period of six years as per section 149(b) of the Act. In the instant case the AO sought to make an addition of Rs.1,23,200/- and thus the reopening of assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the instant case the AO has not independently applied his mind at any stage of the proceedings, which is evident from the fact that at the time of issuing of notice he assumed that the assessee has adopted this modus operandi to convert the unaccounted cash through the route of capital gains whereas the assessee did not sell the shares at all till date. Similarly the assessee declared the purchase price of Rs.42,564/- in the books and thus the addition, if any, can only be Rs.80,636/- and, moreover, such an addition can be under the head 'unexplained investment', if permissible under the law, but the AO assumed that it is an unexplained cash credit for which section 68 is applicable whereas in the instant case the assessee declared the investment in the books of account and hence it is the duty of the AO to prove that section 69B is applicable whereas the AO has not applied the said provision. Under these circumstances the addition made by the AO and confirmed by the CIT(A) deserves to be deleted and in fact the notice issued under section 148 r.w.s. 149 of the Act has to be treated as invalid in law since the so called unexplained investment is less than Rs.1,00,000/- whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of section 149(1)(a) gets attracted. In the instant case the AO having initiated the reassessment proceedings after a lapse of four years from the end of the relevant assessment year, in my considered opinion, the reassessment proceedings are bad in law. The resultant addition and assessment, made on the strength of such proceedings, deserve to be quashed. I order accordingly. 11. Since the reassessment proceedings are already held to be bad in law, it is not necessary to go into the merits of the addition. But, for the sake of completeness and to show the casual attitude of the AO it deserves to be pointed out that the AO sought to treat the differential amount as unexplained cash credit implying thereby that section 68 was made applicable whereas in the instant case section 68 cannot come into play since the assessee has recorded the purchase of shares as investment and declared the investment of Rs.42,564/- in her books. Nothing was brought to the notice of the Bench to show as to on what basis the price of Rs.7.70 was taken as basis for making the impugned addition and that too under section 68 of the Act overlooking the fact that the assessee declared the investment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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