NITI RASTOGI,MUMBAI vs. ITO-WARD 28(2)(3), MUMBAI

Per Amit Shukla, Judicial Member:

2. In both the years here Assessee has challenged the validity of re-opening u/s 147 and the ‘reasons recorded’ u/s 148, on the ground that same were based on incorrect facts which were contrary to the evidence in material on record. Besides this, Assessee has also challenged addition of; i) Rs. 10,07,950/- on account shares treating it to be a bogus transaction; ii) Rs. 19,25,000/- as gift received from HUF in which assessee is a member; iii) Rs 17,56,906/- on account of unexpected investment; and iv) Rs. 46,821 /- on account of expenses in the Assessment Year 2009-10. In the Assessment Year 2010-11 the assessee has challenged the addition of; i) Rs.38,25,617/- on account of sale of shares treating it to be a bogus transaction; ii) Rs 15 lacs on 3 3258/Mum/2022 NITI RASTOGI MUMBAI account of gift received from actual; iii) Rs.17,56,906/- on account of unexpected investment; iv) disallowance of Rs. 2,67,219/-on account of commission of paid; and lastly, v) Rs.46,821/-on account of expenses.

3. We will take up the appeal for the Assessment Year 2009-10 and our finding given in this appeal will apply mutatis mutandis in the appeal for the Assessment Year 2010-11 as similar facts are permeating and the finding given by the Ld.CIT(A) are same accept for variation in figure.

4 3258/Mum/2022 NITI RASTOGI MUMBAI “1. The assessee is an individual and involved in the profession of consultancy. No return of income for the A.Y. 2009-10 was filed by the assessee as per records.

5 3258/Mum/2022 NITI RASTOGI MUMBAI This amount has escaped assessment since no return of income for the A.Y. 2009-10 has been filed by the assessee. Therefore, there is failure on the part of the assessee to disclose all material facts necessary for making assessment in his case for the A.Y. 2009-10.

4. In view of the above facts, I have reason to believe that income chargeable to tax amounting to Rs. 10,07,950/- (Rs.6,84,239/- Rs.323711/-) has escaped assessment for the A.Y. 2009-10 within the meaning of the section 147 of the Act. The case is therefore reopened u/s. 147 for the A.Y. 2009-10 and notice u/s. 148 of the Income Tax Act, 1961 is hereby issued. Date: 11.02.2014 Sd/-11.02.14 (Manoj Kumar) Income Tax Officer 22(3)(3) Mumbai.”

5. After filing the return of income in response to the notice u/s 148 by stating that return filed on 16.04.2009 should be treated as return file in response to u/s 148, the assessee filed objections before the Assessing Officer against the re-opening and the reasons recorded and also filed reply in response to the notice sent by the Assessing Officer on the issue raised in reason recorded. One of the 6 3258/Mum/2022 NITI RASTOGI MUMBAI main contentions which were raised by the assessee was that, she has not entered into any such transaction with the said party which has been mentioned in the reasons recorded, i.e. she has not purchased any shares through M/s. Mahasagar Group presented by Mr. Mukesh Chowksi. The relevant replied filed by the Assessee dated, 09.02.2015 reads as under:

“To The Income Tax Officer Ward 28(2)(3) Mumbai Tower No.6, 3rd floor, Vashi Railway Station Complex, Vashi, Navi Mumbai. Sub. Your show cause notice dated 03.02.2015, incase of Niti Rastogi for A.Y.200910 PAN. ADYPR 5589 E Respected Sir, With reference to your above notice, we submit as below: A. Sir, as mentioned by Your Honour in notice which states that the Assessee has entered into transaction of sale and purchase of shares of M/s. Zen Shaving Limited through M/s.Alliance Intermediaries & Network Private Limited, M/s Mahasagar Group, represented by Mr.Mukesh Chowksi, for Rs.6,84,239 and Rs.3,23,711.

7 3258/Mum/2022 NITI RASTOGI MUMBAI B. We request Your Honour to please give a copy of the statement recorded in case of Mr.Mukesh Chowksi, on the basis of which said assessment is reopened. C. Further, the Assessee would like to cross examine the said party, who has alleged that he has entered into transaction with the Assessee. D. The Assessee further confirms that she has not entered into any transaction with the said party. The same can be confirmed from her bank accounts which are enclosed with this letter (Annexure A) E. Similarly, the Dmat Account, which the Assessee was holding during the financial year 2008- 09, do not show any entry for any such transaction entered into by the Assessee. F. The above will prove beyond doubt that the Assessee has not entered into any transaction of any sale or purchase with the said party and hence there is no question of any unexplained investment done by the Assessee. Your Honour is requested to accept the above facts on record and oblige.

6. Along with that, assessee also filed an affidavit before the Assessing Officer, the content of which reads as under: 1. Mrs. Nisi Rishi Rastogi, wife of Rishi Rastogi, residing at A 1901, Bhoomi Paradise, Sector-11, Sanpada, Navi Mumbai declares on solemn affirmation as under:

8 3258/Mum/2022 NITI RASTOGI MUMBAI I, say that I have led my return of income for FY 2008-09 and FY 2009-10 on 16.04.2009 and 12:04.2010 respectively vide acknowledgement number 223300083 and 2233000051. That during both these years, I had no other income except income from commission and bank interest. That I have only one Dmat Account with Union Bank of India having ID 1302590001345451 and further confirm that! do not possess any other Dmat Account in my name. That I have not entered into any transaction of sale or purchases of shares since the opening of above account till its closure on 15.01.2014. That my bank statements for financial year 2008-09 and 2009- 10 also do not show any payment or receipt for purchase or sale of shares. I say that I am making this affidavit to produce the same before Income Tax Officer 28(2) () Mumbai confirming that I have not entered into any transaction of purchase or sale of shares during the financial year 2008-09 or FY 2009-10. I say that whatever I have disclosed hereinabove is true to the best of my knowledge and belief and nothing material is concealed therein. Along with, said affidavit and letter assessee had filed demat account as well as bank account to show that no such credit entry on sale of shares was ever credited in the bank account or in the

10 3258/Mum/2022 NITI RASTOGI MUMBAI that, firstly, Assessing Officer has noted that assessee has not filed the return of income for Assessment Year 2009-10, which fact itself was contrary to the record and also goes to show that assessing officer and not perused the record before recording the ‘reasons’ and there is no independent application in the mind. Secondly, he has noted that during the course of search action in M/s Mahasagar group of cases on 25.11.2009, it came to surface that Mukesh Chowksi, one the key person was involved in providing various accommodation entries and assessee was one such beneficiary. According to the information assessee had taken accommodation entries for sums amounting to Rs. 6,84,239/- during the year shown as bogus bills and purchase of shares of Rs. 3,23,711/- being accommodation entry on sale of shares. He again reiterates that assessee has not filed the return of income and therefore there is a failure on part of the Assessee to disclose all material facts for making the assessment. Accordingly, he has reason to believe that income chargeable to tax has escaped assessment which was quantified at Rs. 10,07,950/-.

11 3258/Mum/2022 NITI RASTOGI MUMBAI 10. Now, as per the record and submissions made before the Assessing Officer and CIT (A) as noted above, there is no rebuttal of the fact that assessee has never purchased any such shares of M/s. Zen Shaving Limited through M/s. Alliance Intermediaries & Network Private Limited or M/s Mahasagar Group, represented by Mr. Mukesh Chowksi, for Rs.6,84,239 and Rs.3,23,711. This reply was given by the Assessee in response to the notice sent by the Assessing Officer on 03.02.2015. Apart from that, Assessee has also placed her bank statement, demat account before the Assessing Officer along with the affidavit that no such credit entry of any sale proceeds of shares have been credited in the bank account nor in the capital account of the assessee. It’s very surprising to note that, despite assessee had stated these facts along with all the evidences, the Assessing Officer instead of verifying this fact has simply gone on the basis of so called alleged information which on the face of the record turned out to be false or incorrect information. This shows complete lack of application of mind by the Assessing Officer, at the time of recording the reasons and also in the course of the assessing proceedings when assessee has brought these facts to his knowledge. Once the basis of information and the facts which are

13 3258/Mum/2022 NITI RASTOGI MUMBAI reasons recorded are held to be invalid and the addition proposed in the reasons itself has been found to be untenable, then the other additions cannot be roped in such reassessment, because, jurisdiction itself is void-ab-initio. This issue now stands covered by the various decisions of the Hon’ble Bombay High Court starting from decision of CIT vs. Jet Air Ways (India Ltd) reported in 331 ITR 336. This judgment has been followed in the case of Yashoda Shivappa Nagangoudar in Writ petition no. 3640 of 2019, judgment and order dated 5th Jan 2022. The relevant extract of the judgment of the Hon’ble Bombay High Court reads as under:

“1. Petitioner received a notice dated 16th March, 2019 under Section 148 of the Income Tax Act, 1961 (the Act) for AY 2012-13. According to respondents they had reasons to believe that petitioner's income chargeable to tax for A.Y 2012-13 has escaped assessment. The reasons for re-opening is annexed to the petition. The reasons indicate that respondents have information that petitioner has deposited Rs. 13,40,000/- in cash during FY 2011-12 Notwithstanding that petitioner has not filed return of income for A.Y. 2012-13. Therefore, the income chargeable to tax amounting to Rs.13,40,000/- has escaped assessment due to failure on the part of the petitioner to disclose fully and truly all material facts for his assessment.

14 3258/Mum/2022 NITI RASTOGI MUMBAI 2. Petitioner filed objections dated 10th October, 2019 to the re- opening of assessment. In that petitioner has explained as under: "However, the bank, viz; Dena bank in which I hold an account, made a factual mistake in reporting the above transactions. I had deposited total cash of only Rs. 18,000/- on two occasions during the relevant year which were out of gifts received by me/out of my past savings. Whereas, the figure of Rs.13,40,000/- reported by the bank as cash deposited, was in fact the exact amount of cash withdrawn by me, whihe was erroneously reported as Cash depost in the AIR/CIB. In support of this, I have attached a copy of the bank statement for FY 2011- 12. Refenr Annexure-

1. 1. I have already written to Dena bank pointing out their mistake and have asked them to rectify the same and issue a clarificatory letter to me. I attach a copy of the letter submitted to them. Refer Annexure-2 Thus, this proves that the re-opening of my case u/s 147 of the Income-tax act, 1961 was made on the basis of incorrect material facts and the same should hence be dropped".

3. We have also considered bank statement which does not show any cash deposit of Rs.13,40,000/- It only shows cash deposits of Rs 18,000/-. In the order dated 6 November, 2019 disposing the objections respondents admit and accept that there were cash deposits of only Rs.18,000/- and not Rs 13,40,000/- as alleged in the reasons for re-opening. But according to respondents there were deposits/credits to petitioner account other than in the form 15 3258/Mum/2022 NITI RASTOGI MUMBAI of cash, i.e., total credits of Rs.18,81,092/- (cash and non cash) and therefore as no return of income was filed to show such credits it remained unexplained.

4. To confer jurisdiction under Section 147 of the Act, the Assessing Officer must have reasons to believe that income chargeable to tax has escaped assessment. In this case, the Assessing Officer felt that there were reasons to believe that income had escaped assessment on incorrect facts and that is even accepted in the order disposing the objections which is impugned in the petition. Therefore, the entire basis on which jurisdiction is assumed under Section 147 of the Act fails. On this ground alone, the notice dated 16th March, 2019 and consequential order on objections dated 6th November, 2019 has to be quashed and set aside.

17 3258/Mum/2022 NITI RASTOGI MUMBAI 13. The aforesaid judgment of the Jurisdiction High Court clearly clinches the issue in favour of the assessee. Thus, when entire re- assessment proceedings u/s 147 and 148 is held to be invalid then no addition can be made and consequently whole proceedings and assessment order is quashed and all the additions are held to be made without jurisdiction.

Orders pronounced in the open court on 23rd March, 2023.