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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI C.M. GARG
BEFORE SHRI C.M. GARG, JUDICIAL MEMBER Assessment Year: 2010-11 Gyanendra Kumar Bansal (HUF), Vs. ITO, 25, Dayanand Vihar, Ward-59(3), Delhi. New Delhi. PAN: AACHG9684E (Appellant) (Respondent) Assessee by : Shri Sanjeev Saxena, CA Revenue by : Shri Om Prakash, Sr. DR Date of Hearing : 07.06.2022 Date of Pronouncement : 07.07.2022 ORDER
This appeal filed by the assessee is directed against the order dated 31.01.2019 of the CIT(A)-19, New Delhi, relating to Assessment Year 2010-11.
Application of the assessee for admission of additional ground 2. The ld. Counsel for the assessee submitted that while preparing the grounds of appeal in form No.35, the ground stated in the application was omitted to be specifically included in the grounds of appeal due to oversight and haste. The ld. Counsel further submitted that the ground raised by the assessee as ground No.5 is legal which can be adjudicated on the basis of the material already available on record without any other exercise or material beyond the record and this ground goes to the validity and illegality of the matter in assuming jurisdiction by the AO for making addition u/s 69C.
The ld. Sr. DR strongly opposed to the admission of additional ground and reiterated the written statement of ITO dated 02.06.2022 in response to application of the assessee for admission of additional ground.
The ld. Sr. DR precisely submitted that the addition made by the AO as unexplained expenditure u/s 69C of the Act has been made on the issue which was not stated in the satisfaction recorded for issuing notice u/s 148 of the Act is incorrect as the addition u/s 69C goes to the root of the sham transaction carried out by the assessee which is also reason to believe in this case.
On careful consideration of the above submissions, I am of the considered view that undisputedly, the reassessment proceedings was initiated by the AO to verify the profit earned by the assessee during commodity transactions and no addition has been made in this regard. It is also not in dispute that the issue of incriminating expenditure/brokerage commission was also not mentioned in the satisfaction note for initiation of reassessment proceedings by the AO. Therefore, the issue agitated by the AO in the satisfaction note is quite different and dissimilar from the ground on which the AO has made addition u/s 69C of the Act. Therefore, the contention of the AO in the reply dated 02.06.2022 is devoid of merit. In my humble understanding, the legal issue agitated by the assessee 2
goes to the root of the matter which can be adjudicated without any other extraneous material and the same can be adjudicated on the basis of the material already available on record. Therefore, respectfully following the proposition rendered by the Hon’ble Supreme Court in the case of NTPC Ltd., the additional ground No.5 sought to be raised by the assessee is admitted for consideration. The application is, thus, allowed.
Additional ground No.5 of the assessee
The ld. Counsel for the assessee, placing reliance on the order of the ITAT Delhi Bench in the case of Sheela Foam Ltd. vs. DCIT, vide for AY 2005-06, dated 27.04.2020, submitted that the issue is covered in favour of the assessee by this order and judgment of the Hon’ble jurisdictional High Court of Delhi in the case of Ranbaxy Laboratories Ltd. vs. CIT (2011) 336 ITR 136 (Del) and the judgement of the Hon’ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd. (2010) 331 ITR 236 (Bom). The ld. Counsel submitted that no addition has been made on the sole issue raised in the satisfaction note for initiation of reassessment proceedings and the addition has been made on different ground which was not recorded in the said satisfaction, therefore, the addition made by the AO and confirmed by the CIT(A) is not sustainable.
On careful consideration of the above submissions from the assessment as well as the first appellate order, it is clearly discernible that the reassessment proceedings was initiated to verify that the profit from commodity transaction of Rs.3,96,100/- was duly disclosed under the head ‘Income from other sources.’ However, considering the explanation of the assessee, the AO, in para 7 of the assessment order did not make any addition in this regard. However, he made an addition of Rs.2,60,656/- u/s 69C of the Act on a different issue by observing that the assessee had paid margin money/commission to the broker not less than 2.5% on the total turnover of Rs.1,04,26,250/- which comes to rs.2,60,656/- for carrying out commodity transaction and the AO has not made any addition in the hands of the assessee and this addition was confirmed by the CIT(A) by dismissing the appeal of the assessee.
The ld. Sr. DR did not controvert the factual position that the reassessment proceedings were initiated on the issue of profit of the assessee from the commodity transaction and no addition has been made by the AO on this issue. However, keeping aside the main sole issue stated in the reasons recorded for initiation of reassessment proceedings, the AO made addition u/s 69C of the Act by deeming that the assessee has paid margin money/commission to the broker not less than 2.5% of the total turnover.
The ld. Counsel for the assessee has placed reliance on the order of the ITAT Delhi Bench in the case of Sheela Foam Ltd. (supra) wherein the coordinate Bench of the Delhi Tribunal, after considering the judgment of the jurisdictional High Court of Delhi in the case of Ranbaxy Laboratories Ltd. (supra) and Jet Airways (I) Ltd. (supra), has held as follows:-
“15. The Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT (supra) relying on the ratio laid down by the Hon'ble Rajasthan High Court in the case of CIT vs Shri Ram Singh [2008] 306 ITR 346 (Raj.) and also referring to the decision of Hon'ble Bombay High Court in CIT vs Jet Airways (I) Ltd. (supra) and various other case laws finally referred to the conclusion of Hon'ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (supra) and held as under:- 18. "We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra). We may also note that the heading of Section 147 is "income escaping assessment" and that of Section 148 "issue of notice where income escaped assessment". Sections 148 is supplementary and complimentary to Section 147. Sub-section (2) of Section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of 5 escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section 148."
Applying the principle laid down by the Hon'ble Bombay High Court in Jet Airways (I) Ltd.(supra) and Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT (supra), we hold that in the facts and circumstances of the case where the basis for issuing the notice u/s 148 of the Act was, on account of reasons recorded for re-opening the re-assessment u/s 147 of the Act, i.e. share application money received from VPC Financial Services Ltd. of Rs.10 Lakhs and no addition on this account has been made in the hands of the assessee, then any other addition made in the case of the assessee would not survive. Accordingly, we hold so. Thus, we decide the preliminary issue raised before us i.e. one of the aspect of the preliminary issue raised before us, where no addition has been made on account of the reasons recorded for re-opening the assessment under the provisions of section 147/148 of the Act, then no addition can be made in the hands of the assessee on any other account. Hence, the order passed u/s 147 r.w.s. 143(3) of the Act is invalid. Accordingly, Ground No.1 raised by the assessee stands allowed and the other issues raised on the merits of addition become academic in nature.”
In view of the judgement of the Hon’ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. (supra) and the judgement of the Hon’ble Bombay High Court in the case of Jet Airways (I) Ltd. (supra), the legal additional ground No.5 of the assessee is squarely covered in favour of the assessee. Therefore, respectfully following the same, additional ground No.5 of the assessee is allowed and the addition made by the AO u/s 69C of the Act is directed to be deleted. Since, in the earlier part of this order, I
AO, the other grounds of the assessee have become academic and infructuous, therefore, the same are not being adjudicated upon.