9911796707
TMI Blog2020 (11) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... has given categorically each item of sale of shares in his revised return of income it cannot be said that the assessee has not disclosed the capital gain in the revised return of income. Had this revised return been examined by the learned assessing officer, it could have been found that assessee has disclosed long-term capital loss on sale of 40 lakhs shares of Sudarshan oversees Ltd in the month of December, 2008 wherein assessee has shown the long-term capital loss of ₹ 1, 23,30,161. AO could have stated that the long-term capital loss shown by the assessee is bogus but that is not the fact coming out from the reasons recorded. In spite of having a material, AO failed to show live nexus with the escapement of income. Whether the AO has applied his mind to the material available or not? - Reason of escapement of income is based on the fact that assessee was director of Willey Agrotech Ltd (sudarshan Consolidated Ltd) up to December 2008 and thereafter its President is found to be incorrect. Another fact that assessee has not disclosed the transaction of the sale of those shares in its revised return of income is also found to be incorrect. The third presumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law in rejecting the additional grounds of appeal raised by the assessee which the assessee sought to challenge the reopening of assessment u/s 147 and 148 on various grounds and reasons. v. That the CIT (A) has grossly erred in upholding the assessment order passed u/s 147/143. The notice issued u/s 148 is illegal, bad in law and without jurisdiction. vi. That the reasons recorded by the AO for issuance of notice u/s 148 are illegal, bad in law and contrary to the various judicial pronouncements. vii. That the reasons are recorded by one officer and the notice u/s 148 is issued by a different officer and hence the notice u/s 148 is illegal and without jurisdiction. Moreover no valid approval of the higher authority has been taken by the AO before initiating action u/s 147/148. viii. That the CIT (A) has grossly erred in law and on facts in upholding the addition of ₹ 4 crores u/s 68 of the IT act. This addition is illegal, bad in law and should be deleted. ix. That the CIT (A) has grossly erred in not appreciating the fact that Section 68 cannot be applied to the facts of the present case. x. That the CIT (A) has grossly erred on facts and in law in not ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT DR vehemently objected to the additional grounds raised by the assessee stating that they were not raised before the lower authorities and have never been objected before the learned assessing officer; therefore, these grounds of appeal cannot be admitted at this stage. It is further argued that for the adjudication of these grounds, necessarily, further facts needs to be adjudicated. Hence, he submitted that these grounds should not be admitted at all. 05. We have carefully considered the rival contention and perused the application of the assessee for admission of the additional ground. On perusal of the additional ground as well as the main grounds raised in the appeal memo it is apparent that, by these grounds, assessee is challenging various aspects of the reopening of the assessment. Reopening of the assessment goes to the root of the matter and is jurisdictional issue. Naturally, for determining the jurisdiction of the reopening of the assessment, no fresh facts are required to be investigated. Even otherwise challenge to the reopening of the assessment goes to the root of the matter, therefore before deciding on the merits of the case, this issue needs to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2009 10, neither in the original return ( filed on 31/7/2009) nor in the revised return (filed on 29.09.2009). No balance sheet was enclosed with these returns to reflect any investment in shares. The case was not selected for scrutiny for the assessment year 2009 10. 08. Based on the above reasons, notice u/s 148 of the act was issued on 30/3/2016. The assessee submitted in response to that notice a letter dated 27/4/2016 accompanying ITR along with computation of income declaring total income of ₹ 3,942,130/ as against return of income of ₹ 4,149,840/ declared in the original return of income. The assessee was provided copy of the reasons recorded for reopening of the assessment on 18/11/ 2016. The assessee objected to the reopening of the assessment as per letter dated 18/11/2016 stating that it is not correct to say that assessee has not disclosed any capital gain for these transactions of the share. For this, the assessee put to the notice of the assessing officer that these transactions are duly reflected as sale proceeds of the share and after indexation the loss under the head capital gain amounting to ₹ 123,30,161/ has duly been reflected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper. 09. On the merits of the issue, he noted that claim of loss of ₹ 123,30,159/- in return filed in response to notice for reopening is merely an afterthought. He relied on the statement of Mr. Rana where he stated that the receipt of ₹ 4 crores was not part of his income and the said amount was transferred by assessee into his saving account which immediately transferred to the personal saving account of the assessee. He further stated that assessee for his personal gain and benefits and to trap him transferred ₹ 4 crores from Sudarshan Consolidated Ltd (Erstwhile Willey Agrotech Limited) from Axis bank account, Punjabi Bagh, New Delhi through RTGS into his saving account in ICICI bank without his knowledge and consent. Mr. Rana further stated that he has also lodged a formal complaint against the assessee with police. On the basis of the above statement and information received from the investigation wing, the learned AO observed that the assessee had received an accommodation entry of ₹ 4 crores in account of the assessee which represents unexplained credit under the provisions of the act. The AO further raised an issue that the assessee has chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission of the same which claimed to prove that the statement of Mr. Rana is false. It was further stated that assessee has documents to prove that Mr. Rana is selling the property of the company, getting the bills of exchange discounted and never settle credit facilities for the company and even the signing of the cheques on behalf of the company. It was also stated that he was the managing director and the main person in charge of the Sudarshan Overseas Limited, company whose shares are transacted and entire finance of that company was under his control and supervision. To show this assessee submitted certain evidences that Mr. Rana got the money from a company called Willey Agrotech Ltd. the assessee preferred an application Under rule 46A of the income tax rules which is reproduced by the learned CIT A at page number 18 20 of his order. The learned CIT A noted that the appellant has not been able to rebut the facts as brought forth by Mr. Rana and find that the money originated from Sudarshan oversees Ltd controlled by assessee. The money was transferred to account of M/s Willey Agrotech Ltd and from that Mr. Rana and from there it came back to the assessee in the garb of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income tax return and therefore no income has escaped. He further stated that reopening of the assessment cannot be resorted to for the purpose of conducting a verification exercise also in a case where the capital gain has already been disclosed in the revised return filed by the assessee. With respect to the allegation of the learned assessing officer that assessee has not disclosed balance sheet along with the revised return he submitted that assessee is not required to maintain the balance sheet and profit and loss account as per requirement of the law as he does not have any business income. He therefore stated that it is a settled legal position that where the assessing officer proceeded for reopening of assessment on non-existent and factually incorrect reasons and he did not apply his mind independently on information received from investigation wing prior to recording of the reasons, reopening of assessment such case is invalid and unjustified. He referred to the several judicial precedents to support his case. He further stated that reasons to believe do not contain any tangible material having nexus to the escapement of income in the present case and therefore on this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shows that Mr. Rana has joined the company on 3rd March 2008. He has also executed a sale deed of immovable property and Moveable property of that company on 24/11/2008. He also submitted that various financial documents of that company are signed by Mr. Rana which clearly shows that he was the man at the helm of the affairs of that company. He also supported this with certified minutes of the meeting where Mr. Rana took the lead as the director of that company. v. He further stated that as per agreement dated 1/4/2008 for the sale of shares by the assessee to Mr. Rana, there is an acknowledgement dated 17/4/2008 by Mr. Rana regarding delivery of 20 share certificates for 40 lakhs equity shares and transfer deeds. Annual return of that particular company from the MCA website clearly shows the transfer of shares from Assessee to Mr. Rana, the annual return of the company showing that assessee holds 7939200 sales of that company, the application by Mr. Rana for splitting of the share certificate held by him in 25 share certificates and such share certificates held by him were cancelled and new five shares certificates were issued. All these applications are signed by Mr. Rana in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd was closed on 7/2009. In December 2008, there is an RTGS of ₹ 4 crores and therefore it was reported as a suspicious transaction in STR report. Summonses were issued u/s 131 (1A) to the assessee and in response to that summons, assessee was unable to explain the source of fund and the purpose of transfer of fund from M/s Willey Agrotech Ltd to Mr. Rana. He further referred to page number 95 of the paper book wherein on 18 April 2018 the statement of Mr. Rana was recorded. It shows that there was no income from salary and merely a flow of funds and therefore the bank reported it to be a suspicious transaction. He further submitted the purpose of the transfer was not explained by the assessee. With respect to the revised return he submitted that in column number 3a where current year loss (if any) is required to be shown it is nil. And therefore even in the revised return the assessee has not disclosed the above loss. He further stated that when the original return was filed by the assessee electronically, there was no reason to file revised return manually. In the return of income there was no balance sheet enclosed. Therefore, the STR report coupled with the investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any escapement of income. 17. On the merits in rejoinder he submitted that the various documents produced in the paper book by the assessee and referred by him is on his argument clearly shows that even the source of sources has been established by the assessee. The share certificates and various correspondences entered into by Mr. Rana including the splitting of the share certificates clearly shows that addition is not warranted u/s 68 of the income tax act. He stated that the source of the fund of ₹ 4 crore in the bank account of Mr. Rana was from sudarshan Consolidated Ltd. Mr. Parminder Rana has sold the property of that company. The assessee owned the shares which are demonstrated by the annual returns of the company, out of those holding the assessee has sold shares, the money has been received from Mr. Rana, the source of sale consideration received from Rana is a fund from M/s Willey Agrotech Ltd company owned by Mr. Rana therefore, there is no reason to make any addition in the hands of the assessee. He further relied upon the decision of the Honourable Delhi High Court in 357 ITR 586 stating that the AO was guided only by the reasons recorded for making the addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the specific issue on the merits of the addition as well as on the reopening of assessment which are dealt with in other grounds, ground number 1 is dismissed. Ground number (2) of the appeal is with respect to not providing sufficient opportunity to the assessee of being heard by the learned CIT A and therefore the order of the learned and CIT A was passed in violation of the principles of natural justice was devoid of any merit as assessee was granted proper opportunity of hearing. No evidences were relied before us on this ground and therefore same is dismissed. The ground number 12 and 13 is general in nature and therefore same is dismissed. 20. This leaves us with the ground number 4 10 of the appeal along with the additional grounds. Ground number (4) (7) is with respect to the rejection of the additional grounds of appeal raised by the assessee in which the assessee shot to challenge the reopening of the assessment u/s 147 and 148 on various grounds and reasons, as we have already admitted the additional grounds raised by the assessee on the reopening of the assessment where the same would be dealt with along with the additional grounds. Ground number 8 10 is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case let us first test whether there was any information i.e. some material was available with the assessing officer. According to us, the learned AO was having definite information about the assessee that there is a transfer of a sum of ₹ 4 crores from the account of Mr. Parminder Rana in the bank account of the assessee. It was STR information. Such bank account from where the money has been transferred in the account of the assessee is also found in suspicious transaction report. Therefore it is apparent that information available with the AO was a specific, definite and correct. More so this information is also not denied by assessee himself. 24. Now we come to the second aspect whether this information has any live nexus with escapement of income by the assessee. Merely receiving a credit in the bank account cannot per se lead to reason to believe of escapement of income. Now whatever was the credit in the bank account received by the assessee has already disclosed in the revised return filed by the assessee on 29/9/2009 which is placed at page number 19 31 of the paper book. In the computation of total income assessee has shown long-term capital loss of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of income stating the name of the company, the date of sale of shares, the sales price at the time of transaction, the date of acquisition of the shares, the purchase consideration, the indexed cost and the resultant capital loss, it cannot be said that the assessee has not disclosed the capital gain in the revised return of income. Had this revised return been examined by the learned assessing officer, it could have been found that assessee has disclosed long-term capital loss on sale of 40 lakhs shares of Sudarshan oversees Ltd in the month of December, 2008 wherein assessee has shown the long-term capital loss of ₹ 1, 23,30,161. The AO could have stated that the long-term capital loss shown by the assessee is bogus but that is not the fact coming out from the reasons recorded. Therefore, it is apparent that in spite of having a material, AO failed to show live nexus with the escapement of income. 25. Further with respect to inquiry u/s 131 (1A) assessee has explained the sources of the funds as generating on account of sale of assets by Sudarshan Overseas Limited for ₹ 4 Crores where Mr. Rana [buyer] is Managing Directors of that company, which was transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sudarshan oversees Ltd till December 2008 is also not correct. Third fact that the AO has stated that assessee was President of the above company subsequently has been denied by the assessee. There is no evidence available that assessee was holding any such post in Sudarshan oversees Ltd. Further on the perusal of the annual return it is apparent that Mr. Parminder Rana, who purchased the shares from the assessee, was appointed as additional director of this company from 1 April 2008. Further, no evidences were laid before us by the revenue to show that how the learned assessing officer has recorded the fact that assessee was a director in that company i.e. Willey Agrotech Ltd till December 2008 and thereafter the President of that company. Therefore, there is a factual error in the reasons recorded by the AO on this count also. 27. The third fact that has been stated by the AO is that no balance sheet was enclosed with these returns to reflect any investment in shares. First of all the learned authorised representative stated that when assessee has filed form number 2 which is applicable to individuals and HUFs not having income from business of profession. Therefore accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn as well as with respect to the directorship of the assessee in Willey Agrotech Ltd. 29. Honourable Gujarat high court in case of Sagar Enterprises V ACIT (2002) 257 ITR 335 (Guj) has held where reopening of assessment on irrelevant facts cannot be sustained. In the present case even the facts are not irrelevant but are incorrect. None of the facts stated in the reasons for reopening are supported by any evidence. Therefore despite information available with the assessing officer he failed to establish live nexus of that information with the escapement of income and also apply the mind with the relevant facts available before him correctly. The honourable Gujarat High Court held that That On going through the entire reasons recorded, it can be seen that in the penultimate paragraph, the respondent has further recorded as under: Further, the assessee was required to file the return of the income for the assessment year 1991-92 which the assessee has failed. Moreover, it was the duty of the assessee to declare this transaction and to file the return of income for the assessment year 1991-92. The assessee has failed on both these counts. Therefore, the escapement of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd, on 2 December 2008 transferred in three tranches ₹ 2 crores and on 5 December 2008 in three tranches further ₹ 2 crores to Shri Parminder Rana. Further on the 2 December 2008 and on 5 December 2008 in three tranches on each of the day Mr. Rana transferred the sum of ₹ 2 crores in each date to the assessee. Therefore the source of the fund received by the assessee in his bank account for the sale of shares to Shri Rana was received from his bank account and further the source of money in bank account of the buyer was Willey Agrotech Ltd and source of fund in the account of M/s Willey Agrotech Ltd was from Sudarshan oversees Ltd. In the sale deed so furnished, the permanent account number of Sudarshan oversees Ltd (seller) and of the buyer Messer s origin foods Ltd was mentioned. Despite showing the sources of the funds, the learned assessing officer did not make any enquiry and this trail of the fund is not disputed by revenue. ii. On the transaction of the sale of the shares assessee has shown at page number 106 of the paper book an agreement dated first day of April 2008 of the sale of 40 lakh shares of ₹ 10 each for consideration of ₹ 4 cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey Agrotech Ltd. Further on 18 /06/ 2008, one Mr. Willey Sahni was appointed as director of this company. Undisputedly Mr. Rana was not a director of this company. However Mr. Col Rakesh Kumar Sahni is stated to be father-in-law of Mr. Rana and Mr. Willey Sahni is brother-in-law of Mr. Rana. Therefore, Willey Agrotech Ltd was also controlled by relatives of Mr. Rana. From this company, the money received from Sudarshan overseas Ltd by this company, funds of ₹ 4 Crores were transferred to Mr. Rana. This sum so received by Mr. Rana was transferred to the assessee towards purchase price sale of 40 lakh shares of Sudarshan overseas Ltd. v. All these transactions are made through banking channel from the companies which are controlled and managed by Mr. Rana and his family. Assessee neither owns any shareholding in Willey Agrotech Ltd and also transferred substantial shareholding from Sudarshan oversees Ltd to Mr. Rana. Therefore the creditworthiness of Mr. Rana for payment of sale consideration of shares cannot be doubted, in absence of any contrary evidences. vi. Allegation of the ld AO that transactions are layered is also not sustainable in view of the fact that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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