SKYLARK MERCANTILE PRIVATE LIMITED,MUMBAI vs. ITO-11(2)(1), MUMBAI

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ITA 3120/MUM/2024Status: DisposedITAT Mumbai20 May 2025AY 2010-11Bench: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER AND\nANIKESH BANERJEE, JUDICIAL MEMBER\nITA No.3120/Mum/2024\n(Assessment year: 2010-11)\nSkylark Mercantile Private vs ITO 11(2)(1), R\nLimited,\n10, Nutan Laxmi Co-operative\nHousing Society Ltd, JVPD\nScheme, Vile Parle (West),\nMumbai-400 049\nPAN: AACCT4428L\nAPPELLANT\nAssessee by\nRespondent by\nDate of hearing\nDate of pronouncement :\nRoom No.425, 4th Floor, Aayakar\nBhavan, M.K. Road, Mumbai-400\n020\nRESPONDENT\nShri Aditya Maheshwari\6 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal observed that the entire addition was made solely on the basis of AIR data. While the revenue contended that the assessee was involved in the transactions, the Tribunal found no substantive material or evidence in the assessment records or the appellate order to indicate the assessee's involvement. The assessee's arguments that it was not served with transaction documents, did not have a DP account or a bank account for such transactions, and was unable to ascertain the basis of AIR information due to lack of KYC details were noted. The Tribunal also acknowledged that the assessee did not file a rejoinder before the Ld. CIT(A). In light of these facts, the Tribunal deemed it appropriate to remand the matter to the Assessing Officer for comprehensive verification and clarification of the entire transaction and underlying investigation. The Tribunal explicitly refrained from expressing any opinion on the merits to avoid prejudicing the reassessment proceedings. It directed that the assessee be given a reasonable opportunity to be heard and for its submissions and evidence to be considered. The assessee was also directed to cooperate diligently in the reassessment proceedings. No specific issue was left undecided, but the decision on the addition was deferred pending further inquiry.

What were the facts?

The assessee, Skylark Mercantile Private Limited, filed an appeal against the order of the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2010-11. The impugned order upheld the addition made by the Assessing Officer (AO) under section 143(3) read with section 147 of the Income Tax Act, 1961. The AO had added Rs.13,335,500/- as share trading income based on AIR information. The assessee was a non-filer for the assessment year. AIR information indicated total purchase transactions of shares amounting to Rs.5,38,81,286/-. BSE data showed 399 purchase entries costing Rs.88,94,420.27 and 412 sales entries with a cost of Rs.2,22,41,065. The AO treated the difference of Rs.1,33,46,644.80 as business income. The assessee denied involvement, stating transactions were done by Mr. Virendra Sharadaprasad Pandey, a former director, and claimed no beneficiary interest or involvement.

What were the issues?

1. Whether, on the facts and circumstances of the case, the learned Income Tax Officer erred in adding Rs.13,335,500/- assuming it to be share trading income as per details received from AIR, turning on Section 147 of the Income Tax Act, 1961. Assessee's Contentions: - The assessee denied any involvement in the share transactions, attributing them to Mr. Virendra Sharadaprasad Pandey, who was a director in an earlier assessment year (2008-09) but not in the impugned year (2010-11). - The assessee claimed to be neither the beneficiary nor involved in these transactions. - The assessee stated it did not possess a Demat (DP) account or a bank account through which such transactions could have been routed. - The assessee argued it was not provided with KYC details from BSE, hindering its ability to ascertain the basis of AIR information. - The assessee was undergoing a CBI investigation, which prevented it from filing the income-tax return on time. Revenue's Contentions: - The revenue authorities relied on the AIR information and the assessment order. - The Ld. CIT(A) noted that the assessee did not submit any rejoinder to the remand report and that the AO had critically examined the issue, providing detailed reasoning against the assessee's claim. - The Ld. DR argued that the assessee was involved in the impugned transactions, leading to the generation of AIR information in its name.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 147,Section 133(6),Section 2(31),Section 148

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH G, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER & ANIKESH BANERJEE

The instant appeal of the assesseewas filed against the order of the National Faceless Appeal Centre (NFAC), Delhi *in short, ‘Ld.CIT(A)+ passed under section 250 of the Income Tax Act, 1961 (in short, ‘the Act’)for A.Y. 2010-11, date of order 09/04/2024. The impugned order was originated from the order of the Learned Income-tax Officer, Ward 11(2)(1), Mumbai (for brevity the 2 ITA 3120/Mum/2024 Skylark Mercantile Pvt Ltd “Ld.AO”)passed under section 143(3)r.w.s. 147 of the Act, date of order 28/12/2017.

2.

The assessee has raised the following grounds of appeal:-

1. That on the facts and circumstances of the case, the learned Income Tax officer erred in adding Rs. 13,335,500/- assuming it to be share trading income as per details received from AIR

2. The appellant craves leave to add further grounds or to amend or alter the existing ground on or before the date of hearing.”

3. The brief facts of the case are that the assessee is a non-filer of the income- tax return. On the basis of the AIR information, the Ld.AO found that the assessee had made transactions in BSE and the total purchase transaction of the share was Rs.5,38,81,286/- during the impugned assessment year. Accordingly, notice under section 133(6) of the Act was issued to BSE. The Ld.AO has received the information from the BSE and it was found that the total entries of purchase of shares are 399 with cost of purchase amounting to Rs.88,94,420.27 whereas the total entries for cost of sales was 412 and the cost of sales was Rs.2,22,41,065.60.The Ld. AO, therefore, treated the difference of Rs.1,33,46,644.80 as business income of the assessee and added back to the total income of the assessee. The aggrieved assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) called for remand report from the Ld. AO. The Ld.AO issued notice to the assessee on 16/02/2024, in response to which the assessee submitted a written submission but did not submit any credible evidences in support of its claim. The assessee denied the entire transaction as the transaction was done by one “Mr. Virendra Sharadaprasad Pandey” and client code mentioned as “BY0021”. The assessee claimed that the assessee was not at all involved in any of 3 ITA 3120/Mum/2024 Skylark Mercantile Pvt Ltd the transactions. The said “Mr. Pandey” was the director of the assessee company for the assessment year 2008-09, but not in this impugned assessment year. So the Ld.AR stated that the assessee is not at all beneficiary of the above transactions and not even involved in the above transactions. He further mentioned that the KYC of the BSE was not shared by the Ld. Assessing Officer to the assessee. So the assessee was incapable to find out the basis of AIR information. The Ld. AO, by relying on the AIR information made the impugned addition, which was confirmed by the Ld.CIT(A). Being aggrieved, the assessee filed an appeal before us.

4.

The Ld.AR argued and filed a written submission spanning pages 1 to 22, which is kept on the record. The Ld.AR explained that CBI Investigation was going on against the assessee. So assessee was engaged in the said investigation and was unable to submit the return of income. The Ld.AR invited our attention on the observation of the Ld.AO in the assessment order. The relevant paragraph of the assessment order page-6 is reproduced as below:- “The details submitted by the assessee are considered but cannot be accepted due to following reason: (1) While filing the 1. T. return for A.Y. 2008-09, the assessee has submitted that Mr. Virendra Pandey and Mr. Pandurang Chorge are the directors of the company. While e-filing the return in response to notice u/s. 148 the assessee has mentioned that Mr. Pandurang Chorge is the director of the company.

(ii) As per KYC detail submitted to Corporation Bank the assessee has submitted that Mr. Kaushik Shah and Mr. Pandurang Chroge are the directors of the company.

4 ITA 3120/Mum/2024 Skylark Mercantile Pvt Ltd (iii) As per KYC detail submitted to Corporation Bank Mis. Alka Securities Lid which owns 45% of the capital is controlling interest in the company. (iv) From the information received from BSE, regarding share trading, it is seen that, during the year under consideration assessee has entered into share trading of Mis. Alka Securities Ltd ip maximum number of time. (v) As per BSE database, the assessee has done share trading through Kothari Shares and Stockbrokers Pvt Ltd having address as 54, Bombay Mutual Chambers, Hamam Street, Mumbai 400023. The client’s name is mentioned as "Virendra Sharadaprasad Pandey” and client code mentioned as "BY0021". The client’s address is mentioned as "Maitri, Plot no. 10, Road no. 10, Nutan Laxmi CHS, JVPD Scheme, Juhu, Vile Parle (West), Mumbai-400049"

5.

The Ld.AR further stated that the assessee has no relation with the said “Mr. Virendra Sharadaprasad Pandey” after A.Y. 2008-09 and the assessee has no DP account and not even involved in any of the transactions. So, he denied the entire transactions, which were made in the name of “Mr. Virendra Sharadaprasad Pandey” bearing client code “BY0021”.

6.

The Ld.DR argued and relied on the order of the revenue authorities and argued. He invited our attention at para 6 of the impugned appellate order, which is as under:- “6. A copy of the Remand Report was forwarded to the appellant, calling for comments, if any. However, the appellant did not submit any rejoinder. Upon perusal of the Assessment Order, statement of facts, Remand Report and the comments of the Additional CIT it is evident that there was no doubt that the appellant company being a person as per section 2(31) of the IT Act did not file any return of income of the AY 2010-11. The AO was in receipt of certain information regarding Purchase and Sale of Shares by the company. On the basis of information, a notice u/s 148 of the IT Act was issued and served. The appellant filed the return of income by admitting only a sum of Rs.11,145/- as current year loss. When the AO 5 ITA 3120/Mum/2024 Skylark Mercantile Pvt Ltd communicated the reasons recorded, it was replied that they did not carry out any such share transaction and possibly someone might have misused the company name. However, the AO critically examined this issue and gave detailed reasoning against their claim. In the Remand Report also the AO and the Additional CIT gave their findings that, the claim of the appellant is not acceptable. The appellant could not submit any rejoinder.”

7.

We have heard the rival submissions and perused the material available on record. Upon consideration, we observe that both parties have narrated the factual background, and the entire addition has been made solely on the basis of the AIR data. The Ld. DR submitted that, in any event, the assessee was involved in the impugned transactions, which resulted in the generation of AIR information in the name of the assessee. However, upon examination of the assessment records and the appellate order, we find no substantive material or evidence indicating the assessee’s involvement in the said transactions. During the course of arguments, the Ld. AR contended that the assessee was never served with any documents pertaining to the alleged transactions, nor was any detailed statement in respect thereof furnished to the assessee. It was also submitted that the assessee neither held any Demat (DP) account nor maintained any bank account through which such transactions could have been routed.From the perusal of the appellate order, it is further evident that the assessee did not file a rejoinder or any conclusive submission before the Ld. CIT(A). In light of these facts, we deem it appropriate to remand the matter to the file of the Ld. Assessing Officer for comprehensive verification and clarification regarding the entire transaction and the underlying investigation.We make it clear that we are refraining from expressing any opinion on the merits of the case so as not to prejudice the outcome of the reassessment proceedings. It is, however, directed that the assessee shall be afforded a reasonable opportunity of being heard during the set 6 ITA 3120/Mum/2024 Skylark Mercantile Pvt Ltd aside proceedings, and any evidence or submission the assessee wishes to place on record shall be considered in accordance with law. Conversely, it shall be the duty of the assessee to act diligently and extend full cooperation in the reassessment proceedings.

8.

In the result, the appeal of the assessee is allowed for statistical purpose.

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