9911796707
TMI Blog2025 (1) TMI 1481X X X X Extracts X X X X X X X X Extracts X X X X ..... of the ld. AR that the AO has exceeded his jurisdiction without following the procedure of converting the limited scrutiny assessment to the completed scrutiny. Accordingly, this ground of appeal i.e. Ground No.1 of the assessee is dismissed. Addition on account of loans taken by the assessee for making investments in the share business - We find that the assessee has submitted the affidavits and other documents which were also submitted before the AO during the course of hearing, however, besides filing these details no further evidence such as their return of income etc were filed to prove the creditworthiness of the loan creditors. It is also seen that a sum of Rs. 21 lakhs was received by the assessee from her husband Shri Pradipta Kumar Pradhan and the immediate source of the same is explained as withdrawals from the bank account where he has taken loan against the property. All these facts need to be verified and considered by the AO, who has not made any comment on such evidences filed by the assessee. Therefore, we set aside the issue to the file of AO to make necessary verification of the loan credits and if needed, necessary summons to be issued to such loan creditors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Thereafter the assessment was completed wherein the addition of Rs. 44 lakhs was made towards the loans taken for making investments in the share business held as unexplained. The assessee has also claimed that it had incurred loss from share transaction business of Rs. 16.88 lakhs, however, as the same was related to share transactions and since such loss was not declared by the assessee in the return of income filed, the AO has taken no cognizance of the same. In first appeal, the ld. CIT(A), NFAC has confirmed the action of the AO. Thus, the present appeal is filed by assessee before us. 3. In ground No.1, the assessee has challenged the action of the AO in completing the assessment by making the addition on account of unsecured loans taken under limited scrutiny where the reasons for limited scrutiny was as under :- "Large values of share or unit reported in Securities Transaction Tax Return which is settled otherwise than by the actual delivery or transfer (STT code 3)" and "Large value sale of shares unit reported in Securities Transaction Tax Return which is settled otherwise than by the actual delivery or transfer (STT Code 3 and Turnover in Part-A P&L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crutiny' and for the sake of convenience the same is reproduced hereunder: 2. The case was selected for scrutiny assessment under Computer Aided Scrutiny Selection (CASS) in 'limited scrutiny category with the reason Large values of share or unit reported in Securities Transaction Tax Return which is settled otherwise than by the actual delivery or transfer (STT code 3)" and "Large value sale of shares unit reported in Securities Transaction Tax Return which is settled otherwise than by the actual delivery or transfer (STT Code 3 and Turnover in Part-A PAL Account of ITR)" with the issue of both the reasons "Whether the investment and income relating to securities transactions are duly disclosed". 3.1.5. Recognized stock exchanges are required to file a return of taxable securities transactions in Form-1 (Annexure-11: P:34-37) as per Rule 7 of Securities Transaction Tax Rules, 2004. 3.1.6. In Form-1, codes have been assigned for different types of taxable securities transactions. STT Code 3 has been assigned to the following type of transaction: "Sale of an equity share in a company or a unit of an equity oriented fund, where (a) the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38-39), for guidance of the field formations laying down different parameters to distinguish the shares held as investments from the shares held as stock-in-trade. 3.1.16. Paragraph 10 of Circular No. 4 of 2007 says, "CBDT also wishes to emphasize that it is possible for a taxpayer to have two portfolios, i.e., an investment portfolio comprising of securities which are to be treated as capital assets and a trading portfolio comprising of stock-in-trade which are to be treated as trading assets. Where an assessee has two portfolios, the assessee may have income under both heads, Le., capital gains as well as business income." 3.1.17. Paragraph 11 of Circular No. 4 of 2007 says, "Assessing officers are advised that the above principles should guide them in determining whether, in a given case, the shares are held by the assessee as investment (and therefore giving rise to capital gains) or as stock-in-trade (and therefore giving rise to business profits). The Assessing Officers are further advised that no single principle would be decisive and the total effect of all the principles should be considered to determine whether, in a given case, the shares are held by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nverting a 'limited scrutiny case to a Complete Scrutiny' case is reproduced hereunder: (d) During the course of assessment proceedings in "limited scrutiny" cases, if it comes to the notice of the Assessing Officer that there is potential escapement of income exceeding Rs. five lakhs (for metro charges, the monetary limit shall be Rs. ten lakhs) requiring substantial verification on any other issue(s), then, the case may be taken up for 'Complete Scrutiny' with the approval of the Pr.CIT/CIT concerned. However, such an approval shall be accorded by the Pr. CIT/CIT in writing after being satisfied about merits of the issue(s) necessitating 'Complete Scrutiny' in that particular case. Such cases shall be monitored by the Range Head concerned. The procedure indicated at points (a), (b) and (c) above shall no longer remain binding in such cases. (For the present purpose, 'Metro charges' would mean Delhi, Mumbai, Chennai, Kolkata, Bengaluru, Hyderabad and Ahmedabad). 3.1.25. Instruction No. 05/2016 dated 14.07.2016 further clarified that in cases under 'limited scrutiny', the scrutiny assessment proceedings would initially be confin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oving inquiries 3.1.28. The learned AO, through the 142(1) notice dated 25-05-2018, asked the appellant to furnish the following accounts and/or documents which are in no way related to the reasons for which "limited scrutiny" was initiated: Point No.5: Details of movable & immovable properties held in your name and in the name of your family members, as on date. Point No.6: Documents evidencing deduction under chapter VIA for A.Y. 2016-17, if any. Point No.7: Details of TDS and Name and address of Principal Tax deductors, if any. 3.1.29. The appellant, vide 5th 142(1) notice dated 23.10.2018, was asked for the 1 time to explain the source of investment in Kotak Securities, and this point was reiterated in all the subsequent 142(1) notices. 3.1.30. At the cost of repetition, it must be mentioned here that 'limited scrutiny' was initiated to examine whether investment and income are duly disclosed in ITR. It was never issued to examine the source of investment. 3.1.31. Undisputably, the learned AO has jurisdiction to examine the taxability of income arising from share transactions of the appellant which were settled otherwise than by actual delivery o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'limited scrutiny' initiated. It was held that without following the procedure as contemplated in CBDT Instruction bearing No. 5 of 2016 for converting a 'limited scrutiny' assessment into a 'complete scrutiny' assessment, the AO could not assume jurisdiction to make any addition on issues that were not part of 'limited scrutiny' assessment and accordingly the assessment order was squashed. Cases relied on / referred to: a) National Thermal Power Co. Ltd. v. CIT [1999] 97 Taxman 358/229 ITR 383 (SC) b) Pr. CIT v. Weilburger Coatings (India) (P.) Ltd. [2023] 155 taxmann.com 580/296 Taxman 205/463 ITR 89 (Calcutta) c) VUDATHA VANI RAO v. ΙΤΟ [2024] 159 taxmann.com 1394 (Visakhapatnam - Trib.) 3.1.41. In the case of Weilburger Coatings (India) (P.) Ltd. V. DCIT [2024] 165 taxmann.com 232 (Kolkata Trib.) it was held that where under 'limited scrutiny', the case of assessee was selected on four issues, however, Assessing Officer made addition qua set off and carry forward of brought forward unabsorbed loss and depreciation which were not subject of 'limited scrutiny', Assessing Officer exceeded his jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been held that when the Assessing Officer does not have powers while making 'limited scrutiny' assessment to decide such issues which are not covered by 'limited scrutiny' notice, Commissioner (Appeals) on appeal against 'limited scrutiny assessment cannot exercise powers in excess of power vested with Assessing Officer. 3.1.48. In the case of Smt. Manju Kaushik v. DCIT[2020] 113 taxmann.com 643 (Jaipur Trib.) it has been held that the Assessing Officer had taken up the issue regarding disallowance of deduction under section 54B and initiated proceedings for 'complete scrutiny' without necessary receipt of approval from Pr. Commissioner for conversion of 'limited scrutiny' to 'complete scrutiny', assumption of jurisdiction by Assessing Officer was invalid and, consequently, the addition made by Assessing Officer was to be deleted. Cases relied on / referred to: a) CBS International Projects Pvt. Ltd. v. CIT [IT Appeal No. 144 (Delhi) of 2019, dated 28-2-2019]. 3.1.49. Accordingly, keeping in view the ratios of the judgments mentioned above, including the decisions of the Hon'ble jurisdictional High Court and Tribunal, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Securities Ltd.. The AO observed that the assessee has made total payment of Rs. 68,50,000/- on various dates which is tabulated in the assessment order at page 2. In order to examine the source of the said investment the assessee was asked to furnish the necessary details and it was found that the said investment was made out of the loans taken by the assessee from various persons besides some petty amounts invested out of her own capital. Therefore, the AO asked the assessee to establish genuineness of these loans and also the creditworthiness of creditors. The assessee could able to furnish part details and finally the AO was of the opinion that out of Rs. 68.5 lakhs received, a sum of Rs. 44 lakhs are unexplained and the AO allowed the loan of Rs. 24.5 lakhs as genuine. During the course of assessment proceedings the assessee had filed the affidavits and bank statement with respect to the certain parties, however, the ld. CIT(A) did not accept the details as no such advance loans were appearing in the balance sheet of the assessee. During the course of hearing, ld. AR submitted that the assessee has filed the affidavits confirming the loans given to the assessee from all the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an 104 (Punjab & Haryana) it has been held that addition can't be made u/s 68 based on an entry in the books of the partnership firm of which the assessee is a partner because the books of accounts of the partnership firm can't be treated as the books of a partner. 3.2.7. Following the Smt Shanta Devi case (Supra), Hon'ble High Court of Gauhati in the case of Anand Ram Raitani v. CIT [1997] 223 ITR 544 (Gauhati) held that no addition can be made u/s 68 in the assessment of a partner of a firm based on an entry found in the books of accounts of the partnership firm because books of accounts of the firm cannot be treated as books of accounts of the partner of the firm. 3.2.8. In the case of Smt. Bhagwati Devi v. ITO [1993] 47 ITD 58 (Cal.), it has been held as under: "The provisions of section 68 also in our view, are not attracted in the instant case as the sum of Rs. 1 lac was not found credited in the books of account maintained by the assessee for the previous year relevant to the year under appeal. Section 68 comes into operation if any sum is found credited in the books of account maintained by the assessee and no satisfactory explanation is offered in re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Copies of that letter dated 06.12.2018 and the statement which explains the source of payment to Kotak Securities Ltd are attached herewith as Annexure-17; P:47- 61. 3.2.14. Besides, the appellant furnished another letter dated 13.12.2018 (uploaded on 14.12.2018) to the learned AO in support of its claim regarding the receipt of funds from different persons. A copy of that letter is attached herewith as Annexure-18; P:62-65. The appellant, in support of its submission not to make any addition, has also cited the following case laws: a) Down Town Hospital Private Limited (2004) 267 ITR 439 (Gau) b) CIT vs. Jay Deep Securities and Finance Limited (2013) 350 ITR 220 (Ali) c) CIT vs. Nipuan Auto Private Limited (2014) 361 ITR 155 (Del). d) CIT vs. Orbital Communication Private Limited (2010) 327 ITR 566 (Del) e) CIT vs. Haresh D. Mehta (2017) 86 Taxmann.com 22 (Bombay). f) Nemi Chand Kothari vs. CIT (2003) 264 ITR 254 (GAU) g) Orient Trading Company Ltd. vs. CIT (1963) 49 ITR 723 (BOM), 3.2.15. Despite this, the learned AO was not satisfied with the explanation of the appellant for an aggregate sum of Rs. 44,00,000.00 out of the total amount of Rs. 68,50,000.00 which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Manjari Dash (Aunt of the appellant) in cash to the appellant and deposited on 21.08.15. 3.2.23. Mrs. Tapaswini Pani is the cousin of the appellant. She is married to Dr. Amiya Kumar Pani, a Professor of Mathematics at the Indian Institute of Technology, Mumbai. Dr. Pani is an income tax assessee and serves as visiting faculty at various international universities. A copy of Dr. Amiya Kumar Pani's PAN was also produced. Despite this, the learned Assessing Officer (AO) rejected the appellant's explanation regarding the receipt of funds from Mrs. Tapaswini Pani and added a sum of ₹13,50,000 under Section 68. 3.2.24. Sri Pradipta Kumar Pradhan is the husband of the appellant. During the financial year 2015-16, he was employed as a reader in a college. To support the source of the payment of ₹21,00,000 to the appellant, a copy of the sanction letter for a loan of ₹27,80,000, granted in the joint names of Sri Pradipta Kumar Pradhan and the appellant, was furnished during the assessment proceedings. Despite this, the learned Assessing Officer (AO) rejected the appellant's explanation regarding the receipt of funds from Sri Pradipta Kumar Pradhan and ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dash CASH 21-8-15 1,20,000 Tapaswini Pani CASH 28-7-15 4,50,000 Tapaswini Pani CASH 8-9-15 4,00,000 Tapaswini Pani CASH 12-1-16 5.00.000 Pradipta Kumar Pradhan CASH 24-8-15 8,00,000 Pradipta Kumar Pradhan CASH 25-8-15 3,00,000 Pradipta Kumar Pradhan CASH 11-1-16 5,00,000 Pradipta Kumar Pradhan CASH 14-1-16 5,00,000 Total 44,00,000 11. From the perusal of the paper book filed before us, we find that the assessee has submitted the affidavits and other documents which were also submitted before the AO during the course of hearing, however, besides filing these details no further evidence such as their return of income etc were filed to prove the creditworthiness of the loan creditors. It is also seen that a sum of Rs. 21 lakhs was received by the assessee from her husband Shri Pradipta Kumar Pradhan and the immediate source of the same is explained as withdrawals from the bank account where he has taken loan against the property. All these facts need to be verified and considered by the AO, who has not made any comment on such evidences filed by the assessee. Therefore, in the interest of justice, we set aside the issue to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
