GRACEUNITED DEVELOPERS PRIVATE LIMITED ,MUMBAI vs. INCOME TAX OFFICER-12(2)(1), MUMBAI

Aditya consumer Marketing Limited (ACML) 3. Steel Exchange Limited 4. Scan Steels Limited 5. Nyssa Corporation Ltd. 6. Diving Multimedia India Ltd ./Kaleidoscopic Films Ltd. 7. Shantanu Sheoray Aquakult ltd/52 Weeks 8. Aagam Capital Ltd. (Old Name: Shubhkam Capital Ltd. 9. Oasis Tradelink Ltd. 10. Monotype India Ltd. 11. Diamant Infrastructure Ltd. 12. Riddhi Steel & Tube Limited.

Applicability of the Provisions of section 147/151 of the facts of the case: In this case since ROI was filed for relevant A.Y.- 2013-14 and No regular assessment u/s 143(3) was made, the provision of clause (b) of Explanation 2 to "Section 147 are applicable and the assessment year under consideration is deemed to be a case where income chargeable tax has escaped assessment is more than four years have elapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 is sought as per the provision of section 151(1) of the Income Tax Act, 1961.

In view of the above, you may submit your response with supporting documents (if any) on the above mentioned issues to undersigned electronically in 'E-proceedings' facility through your account in e-Filling website(www.incometaxindiaefiling.gov.in) at your convenience on or before 13/07/2021 4. In course of assessment proceedings, if required specific questionnaire(s) or requisition(s) for information/document may be issued subsequently 5. A brief note on E- Proceeding is enclosed for your kind reference. In case you require any assistance in filing your response, you may contact toll free Call Centre number 1800 103 4215 6. Enclosure: As above.”

We have carefully perused the aforementioned reasons recorded for reopening the assessment. We find that the very basis of reopening the assessment is based on erroneous facts. Firstly, the assessee has nowhere claimed any long term capital gains/loss in the alleged penny stocks and secondly, the list of the penny stocks mentioned in the reasons, the assessee has not done any transactions in those stocks and most importantly, the claim of the AO that no regular assessment u/s 143(3) of the Act was made is factually incorrect. The original assessment for AY 2013-14 was framed u/s 143(3) of the Act vide order dated 28/01/2016 and for AY 2014-15 vide order dated 26/12/2016. & 2049/Mum/2024 5 Both the assessment orders are on record.

Notice u/s 148 of the Act has been issued after four years and, therefore, first proviso to Section 147 of the Act squarely applies, which reads as under:- “Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : …………… Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: ………. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.” [emphasis supplied]”

During the course of original assessment proceedings, specific queries were raised vide annexure to notice u/s 142(1) of the Act to which specific reply was filed vide letter dated 26/11/2015 in which the assessee has categorically mentioned that no exempt income was claimed during the year and furnished scrip-wise details of sale and & 2049/Mum/2024 6 purchase along with quantitative details. 8.1. A perusal of the profit and loss account show that the assessee has shown revenue from operations which includes sale of shares. Nowhere the assessee has shown or claimed long term capital gain or has claimed set off of any loss from alleged long term capital gain/loss and rigging of the price of various scrips of stock exchange by the syndicate of persons engaged in providing bogus long term capital gain/loss to the beneficiaries. The assessee has raised specific objections challenging the reopening of assessment and in its objections, the assessee has brought to the notice of the AO that it is incorrect to say that no scrutiny assessment was made for the assessment years under consideration as this assertion is blatantly incorrect and far from the true facts as mentioned hereinabove, scrutiny assessment was made u/s 143(3) of the Act. Therefore, application of clause (b) to Explanation (2) of Section 147 of the Act is not applicable on the facts mentioned hereinabove. 8.2. As mentioned above, first proviso to Section 147 of the Act, squarely applies and there is not even a whisper of failure on the part of the assessee to disclose fully and truly, all material facts for assessment as the audited statement of accounts show the nature of business of the assessee which is trading in shares and the financial details furnished show the opening stock of these scrips purchased during the year as well as closing stock of the scrip at the end of the year. In the return of income, nowhere the assessee has claimed any income exempt from tax suggesting the claim of bogus long term capital gain.

On similar situation, the Hon’ble High Court of Bombay in the case of TAO Publishing (P.) Ltd. vs. DCIT [2015] 370 ITR 135 (Bombay) has interalia held as under:- “10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full disclosure. It will have to be held that the Petitioner did not fail to make full and true disclosure of all material facts. The jurisdictional requirement for carrying out the reassessment, after the expiry of period of four years, is not fulfilled in the present case. 11. The learned counsel for the Petitioner also submitted that, in fact, there was no failure to disclose all material facts as the Respondent No.1 had specifically sought details as regard the relevant expenditure and which were furnished. He relied upon the decision of the Apex Court in the case of Gemini Leather Stores v. ITO [1975] 100 ITR 1, to contend that the duty of the assessee was to place on record all the primary facts and drawing of inference from the primary facts is upto the Assessing Officer. However, this issue need not be gone into in depth any further, as the Petitioner is entitled to succeed on the first ground mentioned above. 12. In the circumstances, the Petitioner is entitled to the reliefs prayed for in the Petition. It will have to be held that the Respondent No.1 had no jurisdiction to proceed with the impugned reassessment proceedings.”