SUSHEEL KUMAR GOVINDRAM SARAFF,MUMBAI vs. ITO, INTERNATIONAL TAXATION WARD-4(2)(1), MUMBAI

The Appellant craves leave to add, alter, amend or delete all or any of the ground(s)/sub-ground(s) of appeal before or during the course of hearing.”

Brief facts of the case are as under:

2. The assessee e-filed its return of income during the year under consideration on 27.02.2018 declaring total income of Rs.3.42,67,505/. The same was processed u/s.143(1) of the Act. Subsequently, the Ld.AO received certain information from the Investigation Wing. As per the investigation report of the A.Y. 2017-18 Susheel Kumar Govindram Saraff DGIT(Inv.), Ahmedabad unit, price of Kushal scrip was rigged at unusual high price without supportive financials and fundamental of the company. It was informed that the assessee received LTCG of Rs.1,17.29.585/- while trading in Kushal Ltd script on various dates during F.Y 2016-17, however it was not offered to tax in the return of income. Accordingly, notice u/s. 148 of the Act was issued on 31.03.2021. 2.1 In response to the same, the assessee filed its return of Income on 17.04.2021 declaring total income at Rs.3,29,65,010/- after claiming deduction under chapter VI-A of Rs.13,02,500/-, Accordingly notice u/s 143(2) of the Act was issued to the assessee on 03/12/2021. The assessee was issued the reasons recorded along with notice under section 143(2) on 03/12/2021. 2.2 Subsequently the assessee filed its objection for reopening of assessment u/s.148 of the Act on 31/12/2021. The same was disposed off by this office on 03/02/2022. 2.3 Accordingly, notice u/s. 142(1) r.w.s. 129 of the Act was issued to assessee on 26/02/2022 calling for necessary compliance/submission to examine the issue for which case of the assessee was re-opened. In response to the notices issued from this office, the assessee submitted the explanation/details electronically through e-proceedings from time to time and the same are verified. 2.4 After perusal of submissions by the assessee, the Ld.AO observed and held as under: 6.3.24 Therefore, considering the facts of the assessee's case and the preponderance of probabilities against the assessee, we are of the view that the entire capital gains of Rs.2,93,90,510/- disclosed as short term capital gain chargeable @ 15% by the assessee in the return of Income A.Y. 2017-18 Susheel Kumar Govindram Saraff has to be treated as fictitious and bogus more particularly when the assessee has not furnished cogent evidence to explain how the shares of the company jumped up in no time and such fantastic sale price was not at all possible when there was no economic or financial basis to justify the price rise. Accordingly, the addition of Rs.2,93,90,510/- to the total income of the assessee is confirmed.

3. On receipt of the draft assessment order, a city raised objections before the DRP. 3.1 The DRP rejected all the grounds and objections raised by the assessee and confirmed the addition proposed in the hands of the assessee. 3.2 On receipt of the DRP directions, Ld.AO passed the assessment order by making addition in the hands of the assessee. Aggrieved by the final assessment order passed, assessee is in appeal before the Tribunal.

. He submitted that, assessee also filed Application seeking admission of following additional grounds vide application dated 13/07/2024 challenging reasons recorded by the assessing officer to be based on change of opinion.

1. That on the facts and in the circumstances of the case of the appellant and in law Ld. Assessing Officer has failed to adhere that the original assessment order passed u/s. 143(3) of the Act in the case of the appellant has already considered the issue of short-term capital gain in the scrip of M/s. Kushal Limited and thereupon accepted the return of income so filed by the appellant.

A.Y. 2017-18 Susheel Kumar Govindram Saraff 2. That on the facts and in the circumstances of the case of the appellant and in law, Ld. Assessing Officer has erred in upholding the re-opening u/s. 147 of the Act which is based upon mere "change of opinion".

by the assessee. It is submitted that, the additional grounds raised do not require verification of any new facts. The Ld.AR, thus prayed for the admission of additional grounds so raised by assessee. 4.3 The Ld.DR though could not object to the submissions of the assessee, did not support the admission of additional ground. We have perused the submissions advanced by both sides in the light of records placed before us.

5. We note that the issue raised by assessee in the additional grounds are legal issue challenging that reasons recorded is not by the same officer who issued notice under section 148 of the Act. It is thus submitted by the Ld.AR that that the reasons recorded are subsequent to issuance of reopening and therefore the entire re- assessment is bad in law.

A.Y. 2017-18 Susheel Kumar Govindram Saraff On the contrary, the Ld.DR though opposed admission of the additional grounds, could not bring anything on record which would challenge such a right available to assessee under the Act. 5.1 We upon perusal of the additional grounds find that these are directly connected with the validity of reassessment proceedings and no new facts needs to be investigated for adjudicating the same. Issues alleged by the assessee are a legal issue that does not require investigation of any new facts. 5.2 Considering the submissions and respectfully following the decisions of Hon’ble Supreme Court in case of National Thermal Power Co. Ltd. Vs. CIT reported in (1998) 229 ITR 383 and Jute Corporation of India Ltd. Vs. CIT reported in 187 ITR 688, we are admitting the additional grounds raised by the assessee. Respectfully following the above, we admit the additional grounds raised by assessee in both the years under consideration. Accordingly, the additional grounds filed by assessee stand admitted.

6. The Ld.AR’s submitted that notice under section 148 reopening the assessment was issued on 31/03/2021. It is submitted that, the assessee admittedly filed its return of income in response to notice under section 148 on 17/04/2021. The Ld.AR contested that assessee was not provided with actual copy of the reasons recorded by the Ld.AO, but a mere reproduction of the same as Annexure, along with notice under section 143 (2) issued on 03/12/20215. According to the Ld.AR, reasons are recorded beyond 31/03/2015 and therefore same is beyond the timeline prescribed for reopening the assessment. The Ld.AR submitted that, assessment was thus framed without supplying the reasons within six years from the end of the relevant assessment year, therefore, same deserve to be quashed.

A.Y. 2017-18 Susheel Kumar Govindram Saraff 6.1 The Ld.AR submitted that, assessing officer recorded the reasons subsequently after issuance of notice under section 148 of the act. He placed reliance on page 174 of the paper book wherein the notice under section 148 is placed. He also referred to page 175 wherein the reasons recorded are placed along with notice under section 143(2) of the act. He submitted that admittedly, both these notices are issued by different officers and therefore the reasons are recorded after the issuance of notice under section 148 of the act. He thus vehemently opposed to such procedure adopted by the assessing officer to the contrary to the principles laid down by various Hon’ble High Courts and Hon’ble Supreme Court 6.2 On the contrary the Ld.DR relied on orders passed by the authorities below. We have perused submissions advanced by both sides in the light of records placed before us.

A.Y. 2017-18 Susheel Kumar Govindram Saraff 7.1 Even when no return of income was filed, the basic requirement of recording reasons must be fulfilled. The department’s contention that since the assessee had not filed return of income and this was not a case of reassessment, the recording of reasons was not required was not acceptable. 7.2 In the present facts of the case, we are of the opinion that, the power of reopening was not exercised in a fair manner. Admittedly, the reasons were issued by an officer who completed the reassessment by issuing notice under section 143(2), is different from the officer who initiated reassessment proceeding by issuing notice under section 148 of the Act. The revenue placed nothing on record to show any thing contrary to the observation by this Tribunal. Thus the officer who issued notice under section 148 had not recorded reasons prior to its issuance and therefore did not validly assume jurisdiction to reopen the assessment. Further, the reasons recorded are post 31/03/2021, is beyond the period of 6 years and is therefore barred by limitation. 7.3 At this juncture, we place reliance on the decision of Hon’ble Supreme Court in Sri Krishna Pvt. v. ITO reported in (1996) 221 ITR 538 wherein Hon’ble Court held that, the power conferred u/s 147 can not be an unbridled one. It is protected with several safeguards in the interest of eliminating room for abuse of this power by the Assessing officer. 7.4 We therefore agree with the contentions raised by the Ld.AR in the additional Ground no.2 and therefore quash the reassessment notice issued under section 148 of the Act to be A.Y. 2017-18 Susheel Kumar Govindram Saraff bad in law. As the notice issued u/s. 148 is quashed, consequential reassessment order also stands quashed. Accordingly additional Ground no.2 stands allowed.