PREMLATA SANTOSH KUMAR MAHESHWARI,MUMBAI vs. INCOME TAX OFFICER WARD 19(2)(4), MUMBAI

Briefly stated, the assessee, an individual, filed her return of income on 28.07.2014 declaring total income of ₹38,840/-. Subsequently, information was received from the Deputy Director of Income Tax (Inv.), Unit–6(3), Mumbai, based on an investigation conducted by the Serious Fraud Investigation Office (SFIO) into the affairs of National Spot Exchange Limited (NSEL). The investigation report, shared with the Director General of Income Tax (Investigation), Mumbai, inter alia, dealt with instances of client code modification by certain brokers. As per the information, 219 brokers had carried out 51,565 client code modifications involving purchase and sale transactions aggregating to ₹6,311 crores. It was reported that the purchase and sale transactions were generally executed on the same day and that the brokers were

In the case of the assessee, the Assessing Officer observed that the assessee had undertaken transactions on the NSEL platform during the previous year relevant to AY 2014-15, aggregating to ₹92,06,400/-, which, according to the Assessing Officer, had not been disclosed in the original return of income. On the basis of the aforesaid information, the Assessing Officer formed a belief that income chargeable to tax had escaped assessment to the extent of ₹92,06,400/-.

Accordingly, after following the directions of the Hon'ble Supreme Court in Union of India & Ors. v. Ashish Agarwal & Ors., notice under section 148 of the Income-tax Act, 1961 was issued on 30.07.2022. On the same date, an order under section 148A(d) was passed with the prior approval of the specified authority. In response to the notice under section 148, the assessee filed her return of income on 22.08.2022 declaring total income of ₹1,49,110/-. Thereafter, notices under sections 143(2) and 142(1) were issued calling upon the assessee to furnish details and information relating to her transactions on the NSEL platform. In response thereto, the assessee furnished her reply on 24.01.2023 along with copies of the purchase and sale contract notes. However, the assessee did not furnish a copy of the demat account as called for by the Assessing Officer.

It was submitted by the assessee before the Ld. AO that she had deposited ₹30,00,000/- with her broker, M/s. Anand Rathi Commodities Ltd., in December 2012. However, the assessee did not furnish any documentary evidence in support of the said claim. Further, in response to notice under section 148 of the Act, the assessee filed her return of income declaring income of ₹1,10,277/- under the head “Profit from Speculative Business”, thereby admitting profit arising from commodity transactions.

The Ld. AO further observed that the assessee had undertaken transactions aggregating to ₹92,06,400/- on the NSEL platform during the previous year relevant to AY 2014-15. According to the Ld. AO, although the assessee had admitted the profit arising from commodity transactions, she had failed to furnish satisfactory details regarding the nature and source of the funds deployed in the commodity transactions aggregating to ₹92,06,400/-, as well as the mode through

Accordingly, as per Ld. AO the nature and source of investment of aforesaid amount remains unexplained in the hands of assessee. A final show- cause notice was also issued on 28.04.2023 to furnish reply before 04.05.2023, but the assessee chooses not to utilize this opportunity. In absence of satisfactory explanation on the part of assessee, the Ld. AO added the entire amount of investment amounting to Rs.92,06,400/- treating the same as unexplained money in the hands of assessee u/s 69A and added to the taxable income of the assessee.

Being aggrieved, the assessee preferred an appeal before the Ld. CIT(A). The assessee again raised the issue of validity of re-opening before the Ld. CIT(A) which is dismissed by him. On merits, Ld. CIT(A) referred to section 68/69A and held that the onus under these sections is very high, requiring the assessee to prove the source, nature and genuineness of the transaction. Ld. AO has established that the assessee was identified as a beneficiary in a scheme involving non-genuine transaction amounting to Rs.92,06,400/-. Given the information and nature of the transaction, the assessee’s mere reliance on the broker’s letter is a flimsy defense and does not constitute a satisfactory explanation sufficient to discharge the onus cast by the Act. The Ld. AO was justified in concluding that the entire amount represents unexplained investment/money. Further, the assessee’s plea for cross-examination of Shri

Before us, Ld. Counsel of assessee raised an additional ground regarding validity of re-opening assessment u/s 147 alleging that the approval granted u/s 151 was not in accordance with the mandate of law. He referred to the first notice issued u/s 148 dated 20th April, 2021 wherein the approval was granted by Ld. PCIT Mumbai-19. He further referred to the final notice u/s 148 issued in terms of directions of Hon’ble Apex Court in the case of Union of India and others vs. Shri Ashish Agarwal and Others, Civil Appeal No.3005/2022 dated 4th May, 2022 wherein the approval was granted by Pr. CCIT Mumbai on 25.07.2022.

At the outset, Ld. Counsel of assessee submitted that the notice u/s 148A(b) was issued on 25.05.2022 wherein the Ld. AO has relied upon the information received from DDIT (Inv.) in connection with certain transactions carried out by the assessee, which were alleged to be on account of client code modification (CCM). The said information stated that the assessee was one of the clients whose name is included in the list of modified clients in the details provided by NSEL. The addition was made on the basis of reasoning that the assessee could not explain transactions carried out at NSEL and, therefore, the

The Ld. AR submitted that the assessee had furnished all necessary documentary evidence before the Ld. AO in respect of the transactions under consideration, including the details furnished by the broker, M/s. Anand Rathi Commodities Ltd., the ledger account of the assessee maintained with the broker, and the relevant contract notes. Copies of the aforesaid documents were also placed before the Tribunal at pages 60 to 64 of the paper book.

It was contended that the provisions of section 69A of the Act were not attracted in the present case, as there was no finding of any money, bullion, jewellery or other valuable article being found in the possession or ownership of the assessee which was not recorded in the books of account and for which the assessee had failed to offer a satisfactory explanation regarding its nature and source. According to the Ld. AR, the transactions in question were duly recorded and, in fact, the assessee had admitted profit of ₹1,10,277/- arising from the said

Without prejudice to the aforesaid submissions, the Ld. AR, in the alternative, submitted that the assessee had not made any investment of ₹92,06,400/- as alleged by the Ld. AO. It was contended that the aforesaid figure represented the aggregate value of the transactions allegedly undertaken on the NSEL platform and that the information relied upon by the Ld. AO pertained to some other assessee and was not relatable to the assessee under consideration. It was, therefore, submitted that the said amount could not, by itself, be regarded as an investment made by the assessee or treated as unexplained investment in her 8

It was the submission that the break-up of transaction tabulated in the chart submitted, extracted (supra) shows that the purchased commodities were sold on the same date and the assessee was only entitled to the profit in the transaction. The fact is also evident from the contract notes in respect of such transactions. It is further submitted that the assessee has not made any payment for purchase of commodities through these transactions and the purchases were squared off against sale/transaction executed on the same date. Therefore, there was no investment made by the assessee in the securities. Accordingly, the transactions cannot be treated for their entire amount to be unexplained investments. It is also submitted that the main genesis of the allegation that the assessee was involved

Per contra, Ld. DR referred to the findings of Ld. AO in assessment order and findings of Ld. CIT(A) in appellate order wherein the main allegation was regarding the source of funds which the assessee has utilized in such transactions and, therefore the assessee was under obligation to furnish details and explain the nature and source of such investments which were used for such transactions. It was therefore, submitted that the Ld. AO and Ld. CIT(A) have rightly adjudicated the issue and accordingly the additions made deserves to be sustained.

We have considered the rival submissions, perused the material available on record. On perusal of the order u/s 148A(d), we find that the alleged transactions which were considered to be undertaken by the assessee are shown in the name of “Premila Bharat Kumar Shah, PAN No. ABRPG5272C”. Accordingly, the information furnished along with notice u/s 148A(d) do not reflect any information regarding the assessee. The contention of assessee, thus, that details do not pertain to assessee have been accepted, as borne out from the records. While the assessee has actually carried out such transactions and have furnished the details of buy quantity and sale quantity, but non furnishing of such information in reopening order u/s 148A(d), shows non application of mind by

We, thus in terms of aforesaid observations are of the considered view that the reopening on the basis of presumption, without proper enquiry qua the escapement of income, by furnishing information of some other assessee, does not prove involvement of assessee as original client or modified client, so as to invoke reopening provisions in accordance with the mandate of law, cannot be treated legal so the impugned order u/s 147 would be liable to be quashed.

In result, the appeal of assessee is allowed, in above terms.