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TMI Blog2016 (12) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... A) erred in upholding the AO’s action in treating the capital gains on sale of shares amounting to ₹ 35,17,598/- as a bogus transaction, charging commission thereon and denying the assessee’s claim for exemption under section 54F of the Act. We accordingly set aside the orders of the authorities below on these issues. Since it appears that the authorities below have denied the assessee’s claim for exemption under section 54F of the Act summarily, without examining the facts of the claim and computation thereof, the AO is directed to do so while giving effect to this order. We hold and direct accordingly. - ITA No. 1264/Mum/2013 ITA No. 1736/Mum/2014 - - - Dated:- 14-12-2016 - Shri Jason P. Boaz, Accountant Member And Shri Sandeep Gosain , Judicial Member Appellant by : S/s. Saboo Deepak S. Shah Respondent by : Shri Rajat Mittal ORDER Per Jason P. Boaz, A. M. These appeals by the assessee are directed against the orders of the CIT(A)-27, Mumbai dated 30.11.2012 for A.Y. 2003-04 and of the CIT(A)- 28, Mumbai dated 30.12.2013 for A.Y. 2004-05. Since similar issues are involved in both these appeals, they were heard together and are disposed off by wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this year, the assessee claimed to have purchased 5500 shares of Buniyad Chemicals Ltd. on 13.04.2001 during F.Y. 2001-02, @ 60 paise per share. The shares were in physical form and were sent to the company for transfer. The shares were sold in the period between 02.05.2003 to 30.05.2003 resulting in capital gains of ₹ 6,07,034/-, which was invested in purchase of residential flat at Jaldarshan, Malabar Hills, Mumbai and in respect of which exemption under section 54F of the Act was claimed. On similar factual situation as in A.Y. 2003-04 (supra), proceedings under section 147 of the Act were initiated and after recording reasons in this regard, notice under section 148 of the Act was issued to the assessee on 29.03.2011. The assessment was completed under section 143(3) r.w.s. 147 of the Act vide order dated 30.12.2011 wherein the AO treated the capital gains of ₹ 6,07,034/- on sale of shares as a bogus transaction and the exemption claimed by the assessee of this amount was treated as unexplained investment and exemption claimed under section 54F of the Act was denied. Further, 5% of the above amount was treated as commission paid to M/s. Gold Star Finvest Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant. 13. Your appellant craves your leave to add, alter or modify these grounds of appeal. 4. Grounds No. 2, 5, 10 13 4.1 At the outset of the hearing, the learned A.R. of the assessee submitted that grounds raised at S. Nos 2, 5, 10 and 13 (supra) were general in nature and no adjudication was called for thereon. In this view of the matter, these grounds are rendered infructuous and are accordingly dismissed. 5. Grounds No. 4, 6 11 Validity of Reopening of assessment 5.1 In these grounds, the assessee challenges the impugned order of the learned CIT(A) in upholding the action of the AO in reopening the assessment proceedings for A.Y. 2003-04 by merely relying on information received from DDIT (Inv) I(4), Mumbai and statement of Shri Mukesh Choksi recorded on oath under section 131 of the Act. According to the learned A.R. of the assessee, no independent enquiry was made by the AO before recording the reasons for initiation of proceedings under section 147 of the Act or issue of notice under section 148 of the Act. It was contended that the learned CIT(A) has not considered the submissions put forth by the assessee and has erroneously upheld the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e A.O. are to be deleted in the light of the evidence placed on record. 5. I have carefully considered the contents of the assessment order and the appellant's submissions. On perusal of the assessment records it is noted that the A.O. has recorded the reasons for reopening the assessment duly mentioning the facts as to the search conducted in the Mahasagar Group of companies and the accommodation entries given by the said group companies, which involves the appellant's case also. The information from DDIT (Inv.) was received on 15-03-2010 and the A.O. sought to reopen the assessment on 26-03-2010, for which the sanction of the JCIT was obtained on 29-03-2010. On the same date i.e. on 29-032010, the assessment was reopened and the notice u/s. 148 was served on 30- 03-2010. In view of the above facts, I do not find any illegality in reopening the assessment u/s 147 of the Act. Accordingly, this ground is dismissed. 5.3.2 As contended by the AO, we find that on similar facts, in respect of similar transactions, the Coordinate Bench of the Tribunal in the assessee s own case for A.Y. 2005-06 in its order in ITA No. 1978 1979/ Mum/2014 dated 07.10.2016 has upheld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from 01-04-1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the department to make certain adjustments in the income or loss declared in the return. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed after accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No.2) Act of 1991 with effect from 1-10-1991 and, subsequently, with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 01-06-1999, an intimation sent to the assessee under section 143(1)(a ) was deemed to be an order for the purposes of section 246 between 1-6-1994 and 31-05-1999, and under section 264 between 1-10-1991 and 31-05-1999. The expressions 'intimation' and 'assessment order' have been used at different places. The contextual difference between the two expressions has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of-action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regards essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding one. Therefore, what is required is a full and true disclosure of all material facts necessary for making assessment for that year. I find from the reasons recorded by the Ld. AO. that the true nature of these transactions were not disclosed by the appellant and therefore, prima facie he had valid grounds to reopen the case. 2.4.11 It has been held in a number of cases that once the AO. records the mandatory reasons before initiating reassessment proceedings on the basis of evidence brought to his knowledge, the courts cannot step into his shoes as regards the sufficiency of the reasons recorded. The belief must be honest and of reasonable person based on reasonable grounds. The AO may act on direct or circumstantial evidence: but his belief must not be based on mere suspicion, gossip or rumour. I find from the facts of the case that the reason is based on specific facts. The Hon'ble Apex court has held that the court can always examine this aspect (Le. formation of belief) though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court. {(Sheo Nath Singh 82 ITR 147)(SC) : Bhagwan Industrial P.Ltd. 31STC 293 (SC):} ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate or cases in which income has been made the subject of excessive relief under the Act or where excessive loss or depreciation allowance of any other allowance under the Act has been computed, would constitute cases of income escaping assessee. There is considerable authority for the proposition that the jurisdiction of the AO to initiate proceedings would depend upon whether he has reasons to believe that any income chargeable to tax has escaped assessment. A long string of decisions rendered by the Supreme Court have emphasized that the belief of the AO must be in good faith and must not be a mere pretence. The apex Court has further held that there must be a nexus between the material before the AO and the belief which he forms regarding the escapement of the assessee's income. A writ Court, therefore, is entitled to examine whether the AO's belief was in good faith and whether such reasons had a nexus with the action proposed to be taken. 2.4.15 The present case is not one of change of opinion as alleged by the appellant. Question of change of opinion arises when the AO forms an opinion and decides not to make an addition and holds that the appellant was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts necessary for the purposes of assessment. The terms of the Explanation, declared the Court, were too plain to permit an argument that the duty of the assessee to disclose fully and truly all material facts would stand discharged when he produces the books of account or evidence which has a material bearing on the assessment. The Court observed (P.644): 'It is the duty of the assessee to bring to the notice of the ITO particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced, the ITO may not on that account be precluded from exercising the power to assess income which had escaped assessment 2.4.18 To the same effect is the decision of the Supreme Court in Malegaon Electricity Co. (P) Ltd. vs. CIT (1970) 78 ITR 466 (SC) where the Court observed (page 471) : 'It is true that if the ITO had made some investigation, particularly if he had looked into the previous assessment records, he would have been able to find out what the written down value of the assets sold was and consequently he would have been able to find out the price in excess of their written down value re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hest of the audit party or on its report. It has independently examined the material collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question, therefore, in the affirmative, in favour of the Revenue and against the assessee. 2.4.21 When there is no discussion on the issue in the Assessment order and no details were called for by the AO or filed by the assessee on the issue, no finding either positive or negative can be said to have been arrived at during the course of original assessment proceedings. Hence, there is no question of change of opinion as held in the following judgements: 1. Kalyanji Mavji Co. vs. CIT 102 ITR 287 (SC) 2. Esskay Engineering P. Ltd. vs. CIT 247 ITR 818 3. ITO vs. Purushottam Das Bangur Anr. 224 ITR 362 (SC) In the light of the above discussion, the contention of the assessee that the present case is of change of opinion has to be rejected. 2.4.22 The second question arises for consideration is whether the appellant had made full and true disclosure of material facts. I have already reproduced above the contentions of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment proceedings. Sustenance in this regard is also drawn from the judgement of Hon'ble jurisdictional High Court in the case of M/s.Girilal CO. YS. ITO 300 ITR 432 (Born). 2.4.25 Any fresh information received by the AO. can entitle him to issue notice u/s.148, if on the basis of such information he has prima facie reason to believe that income has escaped assessment. So much so that it was held by the Hon'ble Supreme Court in Claggett Brachi Co.Ld. vs CIT 177 ITR 409 (SC) that an information obtained during assessment proceedings of a subsequent year can also validate the proceedings initiated u/s.147 for earlier year. Similarly, Hon'ble Bombay High Court in the case of Anusandhan Investments Ltd. vs. M.R .. Singh, DCIT, 287 ITR 482 held that a notice issued u/s.148 based on assessment of subsequent assessment year is valid even if the appeal is pending for such assessment. Further, in the case of Piaggio Vehicles P. Ltd. YS. DCIT 290 ITR 377 (Bom), the Hon'ble Jurisdictional High Court held that in a case of reopening after 4 years subsequent to scrutiny assessments, contradiction was discovered between Tax Audit report and Return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merit in the arguments advanced by ld. AR we uphold the order of reopening. Accordingly this ground of appeal is dismissed. 5.3.3 On an appreciation of the facts on record and taking into account the factual and legal position of the case on hand, which we find is similar to that of A.Y. 2005-06 as laid out in the order of the Coordinate Bench of the Tribunal (supra), we are of the considered view that the AO had rightly exercised his power of reopening the assessment in proceedings under section 147/148 of the Act, as he had prima facie valid reasons to believe that income of the assessee exigible to tax for A.Y. 2003-04 had escaped assessment and had therefore correctly reopened the assessment for A.Y. 2005-06. Before us, no material evidence has been brought on record by the assessee to controvert the findings of the learned CIT(A) on this issue. In this view of the matter, while maintaining judicial consistency and finding no merit in the grounds raised or arguments put forth by the learned A.R. of the assessee, we uphold the action of the AO in reopening the assessment for A.Y. 2003-04 in the case on hand. Consequently, grounds 4, 6 11 of the assessee s appeal are dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding the judicial pronouncements cited. We find identical issue on similar facts has been considered and adjudicated in favour of the assessee by a Coordinate Bench of the Tribunal in the assessee s own case for A.Y. 2005-06 in ITA No. 1978 1979/Mum/2014 dated 07.10.2016, wherein at paras 8 to 10 thereof has held as under: - 8. Since all the grounds raised by the assessee are inter-connected and inter-related therefore we thought it fit to dispose off the same through the present common order. We have counsel for both the parties and we have also perused the material on record as well as the orders passed by revenue authorities. We have also perused the orders of coordinate bench of ITAT in the case of ITO vs. Shri Vishal Vinod Shah who is a family member of assessee and as per the ld. AR, the case of Vishal Vinod Shah was also on identical facts. The relevant para is reproduced below: 10. After hearing the counsel as well as the order passed by the revenue authorities, we have observed that the Co-ordinate Bench of ITAT, Mumbai had already dealt with the similar issue in the case of Shri Kamlesh Mundra vs. ITO in ITA No.6248(Mum)/2012 for the assessment year 2003-0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus. He has only examined the purchase of shares and doubted the date of purchase. But in the computation he has given benefit to the same cost of purchase of shares and taxed the long term capital gain offered as short term capital gain only. As far as the date of purchase is concerned, the evidence on record indicate that the assessee had indeed earned speculation profit by sale of APTECH shares which the Assessing Officer has not doubted. Further the assessee also suffered speculation loss as stated above in February, 2001 and debit and credit entries pertaining to same broker were shown in the balance sheet in the return filed for the AY 2001-2002 in August, 2001. There is also a mention of purchasing of shares of the company in the return. It is also on record that the said company vide letter dated 30-6-2000 had transferred the shares in the name of the assessee with the folio No. 15021 and certificate Nos. 105744 to 105848. The Assessing Officer neither questioned the said company nor disproved the transfer of share certificates by 30/6/2000. The only basis for arriving at the conclusion that the transaction is not genuine is on the basis of the statement given by Mr. Muk ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this is an 'adjustment transaction). In view of this statement in question Nos. 4 and 5) we are unable to understand how the transactions becomes a bogus one. There is no evidence except this oral statement which is also not submitted for cross- examination to prove/ disprove the transaction. Whereas the assessee furnished transaction details) the bank accounts) purchase and sale of other listed companies) speculation profit and loss and also evidence in the form of balance sheet filed much before the said shares were sold. The sale of shares was undertaken in December 2001 whereas the return for AY 2001- 2002 was filed by August 2001 itself indicating the purchase of shares and outstanding amounts to M/ s. Golden Finvest Ltd in the statements. In view of the documentary evidence in favour of the assessee, we are unable to accept the contention of the Assessing Officer based on the statement which is also un supported by any other evidence to deny the benefit of purchase of shares by the assessee on 8-4-2000. Not only that the Assessing Officer has also gave credit for the same amount of purchase of shares at cost and did not treat the sale proceeds as bogus/unaccounted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undra (supra) allow ground no.2 in this appeal also and direct the A.O. to assess the long-term capital gain declared by the assessee as such and accept the same. 7. After analyzing the afore mentioned orders, we found that the issue contained in the present case are similar to the issues of afore mentioned cases. Therefore, keeping in view the principles of judicial consistency and while respectfully following the judgements passed by the co-ordinate bench, We also hold that in the present case by virtue of independent documents as referred in paper book the assessee has proved the genuineness of the share transaction and there was no justification to disallow the claim of the assessee in respect of long term capital gain merely on the basis of information received from DDIT which is based on admission of Shri Mukesh Chokshi. Therefore accordingly, we direct the AO to assess the long term capital gain declared by assessee as such and accept the same. 11. Apart from analyzing the aforesaid order, we have also noticed in paper book at pages 11 12 wherein specific directions were given by the ld. CIT(A) to the AO to provide opportunity of cross examination to the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cross examination was given to the assessee and moreover no independent enquiry has been done by AO to verify whether the statement of Shri Mokesh Chokshi admitting to issue bogus bills was correct in the case of the assessee or not by providing an opportunity of cross examination to the assessee of such person. Even otherwise, the statement of third party i.e. Mukesh Chokshi recorded at the back of the assessee cannot be used against him without giving the assessee an opportunity to cross examine or rebut the allegation. Therefore, keeping in view the principles of judicial consistency and while respectfully following the judgments passed by the coordinate benches and keeping in view our above findings we also hold that ld. CIT(A) erred in upholding the addition made by AO. Accordingly we set aside the order of CIT(A) and direct the AO to delete the additions. 6.3.2 On an appreciation of the facts on record in the case on hand and the decisions of various Coordinate Benches of this Tribunal in similar cases, we find that such additions/adverse findings rendered by AO s have been deleted/reversed on the grounds that no independent enquiry has been conducted by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hin the statutory time was issued in a proper manner. It is also noted that in the subsequent notices issued u/s. 142(1) of the Act also the assessment year was wrongly mentioned as A.Y. 2008-09. However, considering the fact that appellant has participated in the assessment proceedings and did not raise any objection before the A.O., the mistake in mentioning the assessment year as 2008-09 in the notice u/s. 142(1) of the Act is of no consequence and the impugned notice issued is deemed to be valid u/s. 292BB of the Act. Therefore, I do not find any merit in the appellant's argument on this ground. Accordingly, the same is dismissed. However, since in the appellate proceedings except for raising this ground, the assessee did not challenge the issue of the said notice under section 143(2) of the Act and in the light of the factual finding rendered by the learned CIT(A) (supra), we dismiss this ground raised by the assessee. 8. In the result, the assessee s appeal for A.Y. 2003-04 is partly allowed as indicated above. Assessee s appeal for A.Y. 200405 (ITA No. 1736/Mum/2014) 9. In this appeal the assessee has raised the following grounds: - 1. CIT (A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue raised in these grounds, on the validity of reopening the assessment for A.Y. 2004-05 are factually/legally similar to those raised in the assessee s own case for A.Y. 2003-04. We have addressed the same at paras 5.1 to 5.3.3 of this order in ITA No. 1264/Mum/2013 (supra) and dismissed the assessee s pleas. Following this decision of ours and in order to maintain judicial consistency, the same finding mutatis mutandis applies in the assessee s case for A.Y. 2004-05 also and we therefore finding no merits in these grounds raised by the assessee at S. Nos 4, 6 10 dismiss them. 13. Grounds No. 1, 5, 7, 8, 9 12 13.1 The issues raised in these grounds for A.Y. 2004-05 are factually similar on identical issues, as those raised in the assessee s own case for A.Y. 2003-04. We have addressed the same at paras 6.1 to 6.3.2 of this order in ITA No. 1264/Mum/2013 (supra) and decided those issues in favour of the assessee to the extent indicated therein. Following this decision of ours and in order to maintain judicial consistency, the same findings mutatis mutandis applies in the assessee s case for A.Y. 2004-05 also. We hold and direct accordingly. 14. In the result, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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