9911796707
TMI Blog2025 (1) TMI 1481X X X X Extracts X X X X X X X X Extracts X X X X ..... ction No.5/2016 [F.NO.225/269/2015- ITA.11], Dated 14-7-2016. 2. Hon'ble CIT(Appeals), NFAC has erred in law and on facts in confirming the addition of Rs. 44,00,000.00 u/s 68 of the Income Tax Act, 1961. 3. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 2. Brief facts of the case are that the assessee is an individual and is engaged in the business of printing and publishing besides having transactions in shares through stock market. The return of income for the year under appeal was filed declaring income of Rs. 5,61,830/- which constitutes the income from business of printing and no income was declared on account of transactions carried out in shares. The case was taken up for limited scrutiny for the reason that during the year under appeal the assessee has entered into the share transactions where the STT was paid on the transactions made without actual delivery under "STT Code 3" and no income is declared in the return of income filed. The reason for limited scrutiny was to verify as to whether the investments and income from share transactions bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeded his jurisdiction in a 'limited scrutiny case selected under CASS only to examine whether the investment and income relating to securities transactions are duly disclosed or not and added a sum of Rs. 44,00,000.00 u/s 68 of the Income Tax Act, 1961, without obtaining prior administrative approval of the concerned Pr. CIT/CIT as prescribed in Circular F. No.225/402/2018/TTA.II, Dated 28-11- 2018, and Instruction No.5/2016 [F.NO.225/269/2015-ITA.11], Dated 14-7-2016." 3.1.2. Ground No-1 goes to the root of the matter being a jurisdiction issue, even though not specifically taken before the 1" appellate authority. 3.1.3. The appellant would make a prayer before this Hon'ble Bench of the Tribunal to allow the raising of this ground for the 1" time keeping in view the ratios of the following judgments: a) National Thermal Power Co. Ltd. v. CIT [1998] 229 ITR 383 (SC) b) Jute Corpn of India Ltd. v. CIT [1991] 187 ITR 688 (SC) c) Siksha "O" Anusandhan vs. Commissioner of Income-tax [2012] 20 taxmann.com 798 (Orissa) 3.1.4. Paragraph 2 of the assessment order enumerates the reason for which the ITR was selected for 'limited scrutiny' and for the sake of con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share transactions of the appellant which were settled otherwise than by the actual delivery nor any profit/loss from such activities. 3.1.12 This has resulted in the mismatch of the information uploaded in Form-1 by stock exchanges with the information provided in ITR by the appellant. 3.1.13. It is thus evident that due to the mismatch of the turnover figure as reported in ITR with that of Form-1, 'limited scrutiny' was initiated Computer Aided Scrutiny Selection (CASS) to examine whether the investment and income relating to securities transactions are duly disclosed. 3.1.14. It is pertinent to mention here that the Income Tax Act makes a distinction between a "capital asset" and a "trading asset". Gains from the sale of "capital assets" are taxable under the head "Capital Gain" and gains from the sale of "trading assets" are taxable under the head "Profits and gains of business or profession". 3.1.15. CBDT has issued Instruction No. 1827, dated August 31, 1989, and Circular No. 4 of 2007 dated June 15, 2007 (Annexure-12; P:38-39), for guidance of the field formations laying down different parameters to distinguish the shares held as investments from the shares h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Annexure No Instruction No. 20/2015 dated 29.12.2015 Annexure-13: P:40-41 Instruction No. 05/2016 dated 14.07.2016 Annexure-14: P:42 Letter [F.NO.DGIT(VIG.)/HQ/S1/2017-18] Dated 30-11-2017 Annexure -15: P:42 3.1.23. Sub-paragraphs (a) to (c) of paragraph 3 of Instruction No. 20/2015 dated 29.12.2015, which contain the procedure for conducting the 'limited scrutiny' are reproduced hereunder: a. In 'limited scrutiny cases, the reasons/issues shall be forthwith communicated to the assessee concerned. b. The Questionnaire under section 142(1) of the Act in 'limited scrutiny cases shall remain confined only to the specific reasons/issues for which case has been picked up for scrutiny. Further, the scope of enquiry shall be restricted to the 'limited scrutiny' issues. c. These cases shall be completed expeditiously in a limited number of hearings. 3.1.24. Sub-paragraph (d) of paragraph 3 of Instruction No. 20/2015 dated 29.12.2015, which contains the procedures for converting 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Team of the CBDT was tasked with examination of assessment records on receipt of allegations of several irregularities. Amongst other irregularities, it was found that no reasons had been recorded for expanding the scope of 'limited scrutiny', no approval was taken from the PCIT for conversion of the 'limited scrutiny' case to a complete scrutiny case and the order sheet was maintained very perfunctorily. This gave rise to a very strong suspicion of mala fide intentions. The Officer concerned has been placed under suspension. 4. In view of discussion in the preceding paragraphs it is once again reiterated that the Assessing Officers should abide by the instructions of CBDT while completing 'limited scrutiny' assessments and should be scrupulous about maintenance of note sheets in assessment folders." 3.1.27. From the reading of 142(1) notices it is evident the learned AO has completely disregarded the instruction of CBDT and has made fishing and roving 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by allowing him to take post facto permission from the competent authority. 3.1.38. The appellant would cite some case decisions in support of her prayer. 3.1.39. In the case of Vudatha Vani Rao v. ITO [2024] 159 taxmann.com 1394 (Visakhapatnam Trib.), 'limited scrutiny' was initiated to examine the sources of the cash deposits made during the demonetization period. The learned AO added a sum of Rs. 5,00,000.00 u/s 69A relating to cash deposits made before the demonetization period. The Hon'ble Tribunal deleted the addition because cash deposited before the demonetization period was beyond the scope of notice issued under section 143(2) for 'limited scrutiny' assessment. 3.1.40. In the case of Srimanta Kumar Shit v. ACIT [2024] 169 taxmann.com 185 (Kolkata Trib.), though the case was selected for 'limited scrutiny' of cash deposits during demonetization, the learned AO made additions on issues that were not part of the issues for which '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 'com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble High Court in PCIT V Sukhdham Infrastructures LLP [2024] 165 taxmann.com 84 (Calcutta) 3.1.45. In the case of Dev Milk Foods (P.) Ltd V ACIT [2020] 118 taxmann.com 685 (Delhi Trib.) it has been held that where the assessee's case was converted from 'limited scrutiny' to 'complete scrutiny' on mere suspicion, entire assessment proceedings were to be quashed as such conversion was in clear violation of mandate given by CBDT's Instruction No. 5/2016, dated 14-7-2016. 3.1.46. This Hon'ble Bench in ITA No.30/CTK/2022, relying on the ratio of the judgment of Hon'ble High Court of Odisha in the case of PCIT v. Shark Mines and Minerals Pvt Ltd [2023] 151 taxmann.com 71 (Orissa), has quashed the order passed u/s 263 as the issues raised by the Pr. CIT in the revision order is unconnected to the issues in the 'limited scrutiny' assessment. 3.1.47. In the case of Rajesh Jain v. ITO [2007] 162 Taxman 212 (Chandigarh) (Mag.) it has 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 (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue of investment it covers all the aspects related to it i.e. source. As the assessee stated that investments were made out of loans taken, the AO has left with no other option but to examine these loans and it is the duty of assessee to establish the genuineness and creditworthiness of such loan creditors. Under these circumstances, we are not inclined to accept the argument 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. 7. Ground No.2 relates to the addition of Rs. 44 lakhs made on account of loans taken by the assessee for making investments in the share business. 8. Brief facts to this ground are that during the year under appeal the assessee has carried out certain transactions in share market with Kotak Securities Ltd. and as per the statement of account of Kotak 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 investmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces of such investments and evidences thereof." 3.2.3. It is thus evident that the learned AO relied on the credit entries of a ledger statement issued by Kotak Securities Ltd to make an addition u/s 68. 3.2.4. It is submitted that an addition can be made u/s 68 only when the amount is credited in the books of accounts of the assessee. Bank passbooks or bank statements are not books of accounts of an assessee. Even, the ledger copies of accounts of an assessee in the books of accounts of any other person are also not the books of accounts of the assessee. 3.2.5. In the case of CIT v. Bhai Chand N. Gandhi [1983] 141 ITR 67/[1982] 11 Taxman 59 (Bom) it has been held by the Hon'ble High Court that a passbook supplied by the bank to the assessee could not be regarded as a book of the assessee and accordingly no addition can be made u/s 68 based on any entry found in the bank passbook. 3.2.6. In the case of Smt Shanta Devi v. CIT [1988] 171 ITR 532/37 Taxman 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised before Hon'ble CIT(A), NFAC by the appellant in its submission dated 01.02.2021 (1ª paragraph of page-2 of Annexure-16; P:45) citing the case of Mayawati v. DCIT [2008] 19 SOT 460 (Delhi). Despite this, Hon'ble CIT(A), NFAC confirmed the addition u/s 68. 3.2.12. It is therefore submitted that relying on the ratios of the judgments cited above, the addition made u/s 68 by the learned AO and subsequently upheld by Hon'ble CIT(A), NFAC, may kindly be deleted because the addition u/s 68 can never be made unless entries are found in the books of account of the assessee. 3.2.13. It may further be mentioned here that the appellant furnished a statement to the learned AO explaining the sources of amounts remitted to Kotak Securities Ltd vide her letter dated 06.12.2018 (uploaded on 07.12.2018). Besides, affidavits, copies of PAN cards, and AADHAR cards of the persons from whom the appellant had received the funds were also furnished. 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar Pradhan CASH 14-1-16 5,00,000 Total 44,00,000 3.2.19. From the aforesaid summary, it is evident that though Mrs. Kalpana Mishra (i.e. the appellant) has remitted Rs. 2,00,000.00 and Rs. 2,00,000.00 on 24.12.15 and 21.01.16 respectively from her account maintained with SBI to her account maintained with Kotak Bank through the banking channel, the learned AO was not satisfied with the source and added it u/s 68. 3.2.20. It is also evident that though Sri Devi Prasad Dash (cousin of the appellant) has remitted Rs 35,000.00 and Rs. 50,000.00 on 21.08.15 and 12.08.15 respectively to the appellant through the banking channel, the learned AO was not satisfied with the source and added it u/s 68. 3.2.21. Though Auro Srijan Dash (nephew of the appellant) has remitted Rs. 75,000.00 and Rs. 3,00,000.00 on 23.7.15 and 12.08.15 respectively to the appellant through the banking channel, the learned AO was not satisfied with the source and added it u/s 68. 3.2.22. Moreover, the learned AO also added a sum of Rs. 1,20,000.00 u/s 68 which was paid by Mrs. Nalini Manjari Dash (Aunt of the appellant) in cash to the appellant and deposited on 21.08. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough both the assessee and creditors, have their own bank accounts from which such cash was withdrawn. He, therefore, prayed for confirmation of the addition so made. 10. We have heard rival submissions and perused the material available on record. Out of the total loans of Rs. 68.5 lakhs received by the assessee during the year under appeal, a sum of Rs. 44 lakhs were treated as unexplained cash credit by the AO. Partywise and datewise details of the amounts so received as tabulated by the assessee in its written submission is as under :- Details of the source of deposits not allowed by AO/CIT(A) Name of the person from whom the amount received Mode of receipt in Kotak Bank Date of deposit Kotak Bank Amount Kalpana Mishra (appellant) SBI Account TRF or CLG 24-12-15 2.00.000 Kalpana Mishra (appellant) SBI Account TRF or CLG 21-1-16 2,00,000 Devi Prasad Dash TRF or CLG 21-08-15 30,000 Devi Prasad Dash TRF or CLG 12-8-15 50.000 Auro Srijan Dash TRF or CLG 23-7-15 50.000 Aura Srijan Dash TRF or CLG 12-8-15 3.00.000 Nalini Manjari Dash CASH 21-8-15 1,20,000 Tapaswini Pani CASH 28-7-15 4,50,000 Tapaswini Pani CASH 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
