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Facts
The assessee filed appeals against orders related to assessment years 2013-14 to 2016-17, concerning an addition of Rs. 66,83,00,000/- made under Section 69A for unexplained money. The Assessing Officer reopened the assessment based on information regarding circular movement of funds without actual trade. The assessee did not provide details to the Assessing Officer and also did not appear before the AO.
Held
The Tribunal noted that the Assessing Officer and the CIT(A) had not referred to materials supporting the addition, and the CIT(A)'s order was cryptic. Finding a lack of material to adjudicate the grounds, the Tribunal set aside the orders and restored the issues to the Assessing Officer for fresh examination.
Key Issues
Whether the assessment order is bad in law due to procedural infirmities, lack of independent inquiry, and absence of proper material to support the additions, and whether the circular movement of funds per se constitutes income.
Sections Cited
148, 143(2), 69A, 151, 147, 144, 115BBE, 130(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: JUSTICE (RETD.) C.V. BHADANG & SHRI B R BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
The assessee has filed these appeals challenging the orders passed by learned Commissioner of Income Tax (Appeals), NFAC (‘CIT(A)’ for short) and they relate to assessment years 2013-14 to 2016-17. Since identical issues are contested in all the appeals, they were heard together and are being disposed of by this common order.
2. The assessee has challenged the said orders on following grounds in all the four years:-
“1. On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in reopening confirming the reopening the assessment under old provisions of section 148 of the Income Tax Act which are no more in existence after 01.04.2021 and there are no old provisions in 3800 to 3802/Mum/2023 M/s. Alchemist Multitrade Pvt. Ltd. existence after 01.04.2021 to complete the assessment & pass the assessment order. Therefore impugned re-assessment order is bad in law and void abinitio.
2. On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the reopening the assessment merely on the basis of vague information received from the Investigation Wing and no independent inquiry was made by him. Therefore impugned re- assessment order is bad in law and void abinitio.
3. On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the impugned reassessment order passed by the Ld. Α.Ο. without issuing 143(2) the notice u/s of the Act, though the appellant filed the return of income in response to notice u/s 148 and therefore the impugned assessment order is bad in law and void abinitio.
On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the conclusion of ld. A.O. that income chargeable to tax has escaped assessment without appreciating the reply submitted in response to show cause notice alongwith Draft Assessment Order during assessment proceedings.
5. On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the addition made of Rs. 66,83,00,000/- u/s 69A on account of unexplained money.
6. On the facts and under the circumstances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred on account of preference dividend warrants / shares allotted by Sharon Bio Medicine Ltd. of Rs. 66,83,00,000/- ignoring the fact that no such warrants were allotted to appellant company.
3. The assessee has raised following additional ground on 26.11.2024 in all the years :
"On the facts and in the circumstances of the case, the assessment unit has erred in making addition w/s. 69A of the Act in absence of any addition made in respect of the reasons recorded for reassessment.
The appellant respectfully submits that since no addition has been made in respect of the alleged circular movement of funds, which was the reason recorded for reassessment, it is not permissible for the assessment unit to make addition in respect of any other issue. Accordingly the addition made by the assessment unit deserves to be deleted."
3800 to 3802/Mum/2023 M/s. Alchemist Multitrade Pvt. Ltd. 4. At the time of hearing, the assessee did not press ground nos. 1 and 3. Accordingly, they are dismissed as not pressed. Ground nos. 2, 5 and 6 relate to the addition of Rs.66.83 crores made by the Assessing Officer under Section 69A of the Income Tax Act, 1961 (‘Act’ for short) in all the four years. In the additional grounds, the assessee has challenged the legality of the addition made.
The facts relating to the case are stated in brief. The Assessing Officer received information from the DDIT (Investigation Wing), Unit-III (1), Mumbai with regard to circular movement of funds between certain concerns without carrying out any actual trade. It is noticed that the assessee herein was identified as one of the concerns involved in circular movement of funds. On the basis of said information, the Assessing Officer reopened the assessment of all the four assessment years under consideration by recording identical reasons for reopening. The reasons recorded for assessment year 2013-14 are extracted below :-
“The assessee is a Private Limited Company is required to file the return of income in respect of income chargeable to tax as per the provisions of Sec. 130(1) of the IT Act, 1961. It has filed R.O.I. for A.Y.- 2013-14 declaring total income of Rs. 5,05,002/-. The case has been selected in High Risk CRIU/VRU information on Insight portal.
Information has been received from DDIT(Inv.), Unit-3(1), Mumbai regarding Circular movement of funds without having any actual trade with the assessee during AY 2013-14. The details are as under :
Sr. No. Information Source Name of party Amount (Rs.) 1 DDIT (Inv.) Unit-3(1), M/s Impressive Trading Pvt. Ltd. 66,83,00,000 Mumbai TOTAL 66,83,00,000
As per the above information, it is apparent that the assessee has earned an income to the tune of Rs. 66,83,00,000/- during the relevant previous year. Since the assessee has not included this amount in the income while filing return of income for AY 2013-14, this income has escaped assessment.
3800 to 3802/Mum/2023 M/s. Alchemist Multitrade Pvt. Ltd. 4. In this case return of income was filed by the assessee for the year under consideration. However, in this case no assessment was made and the only requirement to initiate proceedings u/s. 147 is to record reason to believe that income chargeable to tax has escaped assessment.
5. In view of the above, the provisions of clause (b) of Explanation 2 to Section 147 are applicable to facts of this case and it is deemed to be a case where income chargeable to tax has escaped assessment.
In view of the above, I have reason to believe that income amounting to Rs.66,83,00,000/- chargeable to tax has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts within the meaning of section 147 of the Income-tax Act, 1961 for the A.Y. 2013-14. Hence, it is a fit case for issue of notice u/s. 148 of the I.T. Act, 1961.
In view of the "Taxation and other laws" (Relaxation of certain provisions) ordinance 2020 and notification no. 35/2020 dated 24.06.2020, the applicability of provisions of sub section (1) of section 151 of the IT Act, 1961 stands extended from 31.03.2020 to 31.03.2021.
8. In accordance with the provisions of section 151(1) of the Income-tax Act, 1961, the Pr. Commissioner of Income Tax - 4, Mumbai may kindly accord approval for reopening the case in the case of assessee for A.Y. 2013-14.”
6. Before the Assessing Officer, the assessee did not furnish any details. Hence, the Assessing Officer completed the assessment of all the four years to the best of his judgement u/s 144 of the Act by making very same addition of Rs.66.83 crores as unexplained money in all the four years under Section 69A of the Act.
7. Before the learned CIT(A), the assessee raised various contentions, both on legal issues and on merits. The learned CIT(A) dismissed all the appeals of the assessee with the following observations :-
“CONCLUSION : From the above discussion it is very much clear that, the appellant assessee company is deliberately not providing the relevant information and documents with reference to its dealings or transactions with M/s Sharon Bio 3800 to 3802/Mum/2023 M/s. Alchemist Multitrade Pvt. Ltd. Medicine Ltd. and or other companies and firms in having nexus with it. The Appellant Assessee company is also included in the list of companies in nexus with M/s Sharon Bio Medicine Limited. The Forensic report as mentioned in the FIR filed by the Union Bank before the CBI also mentions about the Appellant assessee company along with other companies that had entered into fictitious trading transactions with Sharon Bio Medicine Limited. Hence, due to such behavior on the part of the appellant it is understood that, the assesse company's behavior is mysterious considering the quantum of additions made by the AO. It shows that, it reposes little or no faith in the appellate process and does not wish to come clean by submitting true and proper facts relevant to its appeal case.
The aforesaid mentioned circumstances also show that, the Appellant is not interested in pursuing its appeal properly and has no documentary evidence to really support the grounds raised in the appeal or to counter the additions made by the AO by means of relevant material or such supporting proof documents or details. Moreover, the maxim ‘vigilantibus non-dormientibus jura subvenunt’ i.e. the law assists those who are vigilant and not those who sleep over their right, is applicable in this case. for the AY 2002-03 in the case of Mis Chhabra Land & Housing Ltd. after following the decision of Hon'ble Supreme Court in the case of B.N. Bhattacharjee & other 118 ITR 461 [SC] held that the appeal does not mean merely filing of the appeal but effectively pursuing the same as well.
Considering the above facts of the case, details mentioned in FIR of the Union Bank of India before the Central Bureau of Investigation (CBI), against Sharon Bio Medicine Limited, the behavior and intention of the assessee for not providing the information and documents related to the transactions with Sharon Bio Medicine Limited and its group entities, this Appellate Authority has little choice than to decide the matter against the Appellant Assessee and hence in favor of Revenue. Consequently, the appeal of the Assessee is dismissed and the addition of Rs 66,83,00,000/- made by the Assessing Officer as unexplained money u/s 69A of the Income Tax Act, 1961 and to be taxed u/s 115BBE of the Income Tax Act, is UPHELD.”
Aggrieved, assessee has filed these four appeals before us. We have heard the parties and perused record.
We heard the parties and perused the record. We noticed that the assessee did not appear before the Assessing Officer and hence he was constrained to pass the order ex parte to the best of his judgment u/s 144 of the Act. We also noticed that the 3800 to 3802/Mum/2023 M/s. Alchemist Multitrade Pvt. Ltd. Assessing Officer has made the very same addition in all the four years and he did not refer to any material that would support his case that the funds of Rs.66.83 crores identified as circular movement of funds would constitute income in the hands of the assessee.
The contention of the assessee is that the alleged circular movement of funds per se cannot constitute ‘income’ in the hands of the assessee. It was also submitted that the Assessing Officer has not cited any material, except the information received from the Investigation Wing, which formed the basis for making the impugned addition. We notice that the AO has referred to the action taken in the hands of another company named M/s Sharan Bio-Medicines Ltd and implicated the assessee herein. We also notice that the learned CIT(A) has also passed a cryptic order without dealing with the various grounds contested by the assessee on the legal points as well as on merits.
Thus, we notice that both the authorities have not referred to the materials that actually refer to the assessee and the escapement of income in the hands of the assessee. Hence, in the absence of material which formed the basis for making the impugned order in all the four years, it would be difficult for the Tribunal to adjudicate the grounds, both legal and merits, raised by the assessee. Accordingly, we are of the view that all the issues contested before us require fresh examination at the end of the Assessing Officer. Accordingly, we set aside the order passed by the learned CIT(A) in all the four years under consideration and restore all the issues to the file of the Assessing Officer for examining them afresh. The Assessing Officer is also directed to furnish the material which formed the basis for making the addition to the assessee. We also direct the assessee to fully co-operate with the Assessing Officer for the expeditious completion of the assessment. After affording adequate opportunity of being heard to the assessee, the AO may take appropriate decision in accordance with law.
In the result, all the four appeals filed by the assessee are partly allowed.
Order pronounced in the open court on 02.04.2025.