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TMI Blog2021 (4) TMI 453X X X X Extracts X X X X X X X X Extracts X X X X ..... ts reopened the case of the assessee u/s 147 of the Act. We, thus, not being able to persuade ourselves to subscribe to the view taken by the CIT(A) that the A.O had validly assumed jurisdiction u/s 147 of the Act therein set aside his order to the said extent. Accordingly, in the absence of valid assumption of jurisdiction by the A.O u/s 147 of the Act, the consequential assessment framed by him u/s 143(3) r.w.s 147, dated 29.03.2015 cannot be sustained and is quashed. Genuineness and veracity of F O transactions - We are unable to persuade ourselves to subscribe to the view taken by the A.O, wherein adopting a predetermined approach he had discarded the documentary evidences that were furnished by the assessee in support of the authenticity of the F O transactions, and had without giving any cogent reason held the same as bogus and accommodation transactions. As is discernible from the order of the CIT(A), we find that he had taken cognizance of the fact that the assessee in the course of the assessment proceedings had on the basis of supporting documentary evidences substantiated the authenticity of the F O transactions, which however were not accepted by the A.O witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of time in force. In the backdrop of the aforesaid facts, we concur with the view taken by the CIT(A) that now when the broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009 therefore, no adverse inferences as regards the bills issued by it during the year in question viz. A.Y 2008-09 were liable to be drawn. Thus as the assessee had in the course of the reassessment proceedings by drawing support from clinching documentary evidences substantiated the authenticity of the F O transactions carried out through the aforesaid broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd., which had not been dislodged or disproved by the revenue therefore, the CIT(A) had rightly observed that no adverse inference as regards the authenticity of such F O transactions and the resultant loss could have been drawn in the hands of the assessee. We, thus, concur with the view taken by the CIT(A) insofar the merits of the case are concerned and uphold his order to the said extent. - Decided in favour of assessee. - ITA No. 656/MUM/2016, C.O No.323/MUM/2017 (Arising out of ITA No. 656/Mum/2016) - - - Dated:- 8-4-2021 - Shri Shamim Ya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which assessment was completed u/s 143(3) whereby there is no new material; (b) There are no documents or statement depicting any escapement of income by the respondent. The respondent craves leave to add, amend, alter or modify the ground or grounds before the hearing. 2. Briefly stated, the assessee company which is engaged in the business of trading in shares and derivatives had filed its return of income for A.Y. 2008-09 on 10.09.2008, declaring a total income of ₹ 3,50,59,070/-. Original assessment was framed by the A.O vide his order passed under Sec. 143(3), dated 29.10.2010 at an income of ₹ 4,14,25,800/-. Appeal against the original assessment under Sec. 143(3), dated 29.10.2010 was partly allowed by the CIT(A), vide his order dated 05.01.2012, and the assessed income of the assessee was reduced to an amount of ₹ 3,69,05,065/-. 3. Information was thereafter received by the A.O from the DIT(I CI), New Delhi, vide letter dated 19.03.2013, wherein it was intimated that search and seizure proceedings conducted on 25.11.2009 by the DDIT(Inv.), Unit-1(4), Mumbai under Sec. 132 of the Act in the case of Mahasagar Securities Pvt Ltd. had revealed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lliance Intermediaries Network Pvt. Ltd. On being queried as to why the aforesaid F O loss of ₹ 11,97,47,626/- may not be disallowed by treating the same as an accommodation entry, it was submitted by the assessee that the transactions resulting to the said loss were looked into by the A.O in the course of original assessment proceedings and were only after exhaustive deliberations accepted by him. Assailing the validity of the reasons on the basis of which its case had been reopened, it was the claim of the assessee that the very allegation forming the basis for reopening of its case i.e the assessee had invested in shares of different scripts amounting to ₹ 12,15,67,252/- through M/s Alliance Intermediaries Network Pvt. Ltd. was factually incorrect. It was submitted by the assessee that it had never invested in any shares but had transacted in F O transactions for the period 01.04.2007 to 31.03.2008, wherein it had incurred a loss of ₹ 11,97,47,626/-; and for the period 01.04.2008 to 31.03.2009, wherein it had earned a profit of ₹ 2,25,37,840/-. In order to substantiate the genuineness and veracity of its claim of having carried out the F O transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he had therein inter alia admitted that M/s Alliance Intermediaries Network Pvt. Ltd. was one of the company through which he was carrying out its nefarious activities of providing accommodation entries. Accordingly, the A.O drawing support from the statement of Shri. Mukesh Choksi (supra) a/w the information received from the DDIT(Inv.), Unit-1(4), Mumbai that the name of the assessee, viz. M/s Shradha Trade Links Pvt. Ltd had figured as a beneficiary that had taken accommodation entries through its broker i.e M/s Alliance Intermediaries Network Pvt. Ltd., therein treated the F O transactions of the assessee for the year in question as bogus transactions and disallowed the assessee s claim of loss of ₹ 11,97,47,626/- arising therefrom. After disallowing the F O loss of ₹ 11,97,47,626/- the A.O reassessed the income of the assessee company vide his order passed under Sec. 143(3) r.w.s 147, dated 01.11.2013 at ₹ 15,66,52,691/-. 7. Aggrieved, the assessee assailed the assessment framed by the A.O under Sec.143(3) r.w.s 147, dated 01.11.2013 in appeal before the CIT(A). Before the CIT(A) the assessee assailed the validity of the jurisdiction that was assum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... F O transactions which had resulted to a loss of ₹ 11,97,47,626/- during the year in question. On the basis of his aforesaid contentions, it was submitted by the ld. A.R that not only the impugned basis for reopening the case i.e the assessee had invested in shares through the aforesaid broker was factually incorrect rather, till date it had remained a mystery as to on what basis the figure of ₹ 12,15,67,252/- was adopted by the A.O in his reasons to believe . It was submitted by the ld. A.R that as the reopening of its case had been done on the basis of absolutely incorrect facts, the same, thus, was liable to be vacated on the said count itself. Apart from that, it was submitted by the ld. A.R that the A.O while recording the reasons to believe had absolutely failed to apply his mind for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. It was stated by the ld. A.R that the A.O while reopening the assessee s case had mechanically acted upon the information received from the DDIT(Inv.), Unit-1(4), Mumbai, and had not even cared to even consult the assessment records of the assessee company. In order to buttres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edger account of the broker etc., and the genuineness and veracity of the same had not been dislodged much the less doubted by the lower authorities. Ld. A.R in order to fortify his said contention took us through the relevant pages of the assessee s paper book (for short APB ). Rebutting the observation of the A.O that as the aforesaid broker i.e M/s Alliance Intermediaries Network Pvt. Ltd. was barred by SEBI in 2008 thus, the said fact in itself substantiated that the bills issued by it were bogus, it was stated by the ld. A.R that the said observation of the A.O was based on incorrect facts. It was stated by the ld. A.R that as per information gathered from the public domain records and sites, namely BSE, NSE and SEBI, it stood revealed that the aforesaid broker viz. M/s Alliance Intermediaries Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009. In order to buttress his aforesaid claim the ld. A.R took us through the relevant pages of the assessee s paper book (for short APB ) i.e Page 191 to 214 wherein the BSE notices and NSE circular were placed. On the basis of the aforesaid facts, it was submitted by the ld. A.R that not only the A.O had wrongly assume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .), Unit-1(4), Mumbai under Sec. 132 of the Act in the case of Mahasagar Securities Pvt Ltd. had revealed that the assessee viz. M/s Shradha Tradelinks Pvt. Ltd. was one of the beneficiaries that had obtained accommodation entries of investment in shares of different securities amounting to ₹ 12,15,62,252/-, the A.O reopened the concluded assessment of the assessee company u/s 147 of the Act by recording the following reasons to believe : M/s Shradha Tradelinks Pvt. Ltd. (PAN : AAFCS1489R), A.Y 2008-09 Reasons for Reopening assessment u/ 147 of the Act. The assessee filed the return of income for A.Y 2008-09 on 10.09.2008. The return was processed u/s 143(1) of the Act on 11.10.2009. A search and seizure action u/s 132 of the I.T Act was carried out in the case of M/s Mahasagar Securities (P) Ltd (Now Alag Securities Pvt. Ltd.) by DDIT(Inv.) Unit1(4), Mumbai on 25.11.2009 based on the information that the company and its related companies including M/s Mahasagar Securities (P) Ltd. were engaged in procuring bogus bills of transactions in shares and securities. The directors of these companies were engaged in fraudulent billing activities and in the busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns to believe that the assessee had invested in shares of different scripts amounting to ₹ 12,15,67,252/- through a broker concern, M/s Alliance Intermediaries Network Pvt. Ltd. during the year under consideration. Abruptly thereafter, it is stated by the A.O that in view of the above he was satisfied that the income of the assessee to the extent of ₹ 12,15,67,252/- had escaped assessment within the meaning of Sec. 147 of the Act. On a careful perusal of the reasons to believe , it can safely be gathered that the A.O had merely referred to the information that was received by him from the DDIT(Inv.), Mumbai, Unit 1(4), Mumbai, and had dispensed with the statutory obligation that was cast upon him as regards formation of an independent and a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. Before adverting any further, we may herein observe that as can be gathered from the reassessment order passed by the A.O u/s 143(3) r.w.s 147, dated 01.11.2013, the DDIT(Inv.), Unit 1(4), Mumbai in his report had further informed the A.O that the assessee had invested in shares of different securities amounting to ₹ 12,15,67,252/- thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company is supported by certain glaring observations of the A.O in the reasons to believe . As is discernible from the reasons to believe , though the A.O had therein stated that the return of income filed by the assessee was processed under Sec. 143(1) on 11.10.2009, but he had absolutely lost sight of the fact that the same was thereafter subjected to a scrutiny assessment under Sec. 143(3), dated 19.10.2010 wherein its income was assessed at an amount of ₹ 4,14,25,800/-. Not only that, the material fact that the aforesaid assessment framed by the A.O under Sec.143(3), dated 29.10.2010 for the year in question i.e A.Y 2008-09 was assailed by the assessee before the CIT(A), who had vide his order dated 05.01.2012 partly allowed the appeal, as a result whereof the assessee s income for the year in question was determined at ₹ 3,69,05,065/- had also miserably been lost sight of by the A.O while arriving at the impugned belief that the income of the assessee chargeable to tax had escaped assessment. In the backdrop of the aforesaid material facts which had been lost sight of by the A.O while reopening the concluded assessment of the assessee for the year in question, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the reason that the assessee had invested in shares of different scripts amounting to ₹ 12,13,67,252/- through its broker concern, M/s Alliance Intermediaries Network Pvt. Ltd., which is factually incorrect. In the backdrop of the aforesaid facts, we find that it can safely be concluded that the A.O on the basis of incorrect and misconceived facts had under Sec. 147 reopened the concluded assessment of the assessee by mechanically acting upon the information that was received by him from the DDIT(Inv.)-Unit- 1(4), Mumbai, without applying his mind and consulting the assessment records of the assessee for the year in question, which in our considered view was indispensably required on his part for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. 13. In our considered view, if the A.O fails to apply his mind to the material on record for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment within the meaning of Sec. 147 of the Act then, the reopening of the assessment cannot be held to be justified. Our aforesaid view is fortified by the judgment of the Hon ble Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax had escaped assessment. Also a similar view was earlier taken by the Hon ble High Court of Delhi in the case of PCIT Vs. G G Pharma India Ltd. (2016) 384 ITR 147 (Del). In the case before the Hon ble High Court, it was observed that the A.O in his reasons to believe after setting out four entries which were stated to have been received by the assessee on a single date i.e 10th February, 2003 from four entities which were termed as accommodation entries, which information was received from the Directorate of Investigation, had therein stated : I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. In the backdrop of the aforesaid facts, it was observed by the Hon ble High Court that it could not be gathered that as to whether the A.O had applied his mind to the material that he talks about since he did not describe what those material was. Observing, that without forming a prima facie opinion, on the basis of the aforesaid material, it was not possible for the A.O to have simply conclude ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly referred to the information that was received by him from the DDIT(Inv.), Mumbai that the assessee as a beneficiary had received accommodation entries, and therein dispensing with the innate statutory obligation cast upon him of carrying out necessary verification, examination or any other exercise after consulting the assessee s assessment record for the year in question, had jumped to the conclusion that the income of the assessee in respect of the alleged accommodation transactions had escaped assessment. Accordingly, in the backdrop of the aforesaid factual matrix we hold a strong conviction that the A.O had mechanically acted upon the information received from the DDIT(Inv.), Unit 1(4), Mumbai, and without even doing the bare minimum i.e consulting the assessment records of the assessee for the year in question as was indispensably required on his part for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment therein reopened its concluded assessment. 15. On the basis of our aforesaid observations, we are of a strong conviction that as the A.O had failed to independently apply his mind to the material available on his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid details, we find that the assessee had placed on record the complete set of broker bills in relation to F O loss of ₹ 11,97,47,626/-, Page 32-188 of APB. As is discernible from the broker bills the complete contract specifications, contract note nos. and dates, order nos., trade nos., trade time etc. duly signed and bearing the stamp of the broker are therein mentioned. On a perusal of the assessment order, we find that the A.O had at no stage pointed out any infirmity in the aforesaid broker bills that were filed in the course of the assessment proceedings before him. As is discernible from the assessment order, the A.O had challenged the validity of the brokers bills on the standalone basis that those were issued by the broker, viz. Alliance Intermediaries Network Pvt. Ltd at a time when it was debarred from trading. Insofar the aforesaid observation of the A.O is concerned the sustaininability of the same shall separately be dealt with by us hereinafter. Also, no infirmity had been pointed out by the A.O as regards the other documentary evidences which were produced by the assessee in support of its aforesaid claim of F O loss viz. contract notes; ledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al or dislodging of the same. Also, the view taken by the A.O that the broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. had issued bills to the assessee during the year in question despite having been debarred from trading was found by the CIT(A) to be factually incorrect and misconceived. Accordingly, the CIT(A) after deliberating at length had found favour with the claim of the assessee that it had carried out genuine F O transactions and suffered the resultant loss during the year in question, observing as under: 4. Now coming to ground no.11, the appellant was asked to substantiate his position on the disallowance made by the AO. In response, the appellant has made detailed submission as reproduced above. It is noted that in statement referred by the AO, there is no reference to the transaction in question or neither any specific reference to the appellant. Therefore, it appears that the Ld.AO reopened case on the basis of general statement. The facts mentioned by the AO for reopening case are also not specific to the transactions by assessee, as already discussed above such as the appellant is actually engaged in F O and has not purchased any shares and securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account in the books of its broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd, and the fact that all the payments were made by the assessee to the aforesaid broker by account payee cheques and the same had duly been acknowledged by the latter, however, the A.O without rebutting the genuineness and veracity of the said documentary evidences had in the reassessment proceedings without giving any reason held the F O transactions in question as bogus and accommodation entries. Also, we are in agreement with the view taken by the CIT(A) that though the A.O in the course of the original assessment proceedings had vide his order passed u/s 143(3), dated 29.10.2010 accepted the F O transactions, however, in the course of the reassessment proceedings he had without rebutting any of the evidence that was filed by the assessee in support of the authenticity of the transactions in question had declined to accept the same. We also concur with the view taken by the CIT(A) that in the course of the reassessment proceedings neither any material evidencing obtaining of bogus or accommodation entries by the assessee from its broker, viz. M/s Alliance Intermediaries and Network Pvt. Ltd. ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh M/s Alliance Intermediaries and Network Pvt. Ltd., therefore, the CIT(A) had rightly vacated the addition that was made by the A.O by treating the transaction in question as a bogus transaction on the standalone basis that information was received by him from the office of the Chief Commissioner of Income-tax, Mumbai that M/s Alliance Intermediaries Network Pvt. Ltd., one of the group companies of Shri. Mukesh Choksi (supra) and its other group entities had provided accommodation entries to various persons including the assessee. Involving identical facts, we find that the ITAT, Mumbai J Bench in the case of Kamla Devi S. Doshi Ors. Vs. ITO, ITA No. 1957/Mum/2015; dated 22.05.2017 had observed that as the assessee on the basis of supporting documentary evidence had established the genuineness of the purchase and sale of shares that was carried out through M/s Alliance Intermediaries Network Pvt. Ltd (an entity of Shri. Mukesh Choksi group) therefore, no adverse inferences as regards the genuineness of the said share transactions was liable to be drawn. Also, the ITAT, Mumbai in the case of viz. (i). Ashok T Shah Vs. ITO-33(1)(1), Mumbai, ITA No. 4318/Mum/2016; and (ii). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the bills were issued by him as membership was at the relevant point of time in force. In the backdrop of the aforesaid facts, we concur with the view taken by the CIT(A) that now when the broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009 therefore, no adverse inferences as regards the bills issued by it during the year in question viz. A.Y 2008-09 were liable to be drawn. 19. We shall now deal with the alternative claim of the ld. A.R that in case the F O transactions carried out by the assessee during the year in question i.e A.Y 2008-09 through its broker, viz M/s Alliance Intermediaries Network Pvt. Ltd. were to held as bogus and the resultant F O loss of Rs. ₹ 11,97,47,626/- was to be disallowed then, adopting a uniform approach the F O profits of ₹ 2,25,87,840/- earned by the assessee in the immediately succeeding year i.e A.Y 2009-10 from transactions carried out through the same broker, viz. M/s Alliance Intermediaries Network Pvt. Ltd. that was offered by it in its return of income for A.Y 2009-10 was also liable to be excluded from its total income for the said subsequent year. We hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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