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Income Tax Appellate Tribunal, MUMBAI BENCH “D”, MUMBAI
Before: SHRI AMAR JIT SINGH & SHRI S. RIFAUR RAHMAN
O R D E R
Per Amar Jit Singh, Judicial Member:
The assessee has filed the above mentioned appeals against the orders passed by the National Faceless Appeal Centre (NFAC) Delhi dated 30.12.2021 for the assessment years 2010-11 & 2011-12 in & ITA No.249/M/2022 respectively. (A.Y. 2010-11) 2. The assessee has raised the following grounds: “
1. On facts and circumstances of the case and in law learned CIT (Appeals) erred in passing the order on 30-12-2021 ignoring the amendment dated 28-12-2021. The appellate order being in violation of the amended provisions that are effective from 28-12-2021 needs to be cancelled and additions needs to be deleted.
2. On facts and circumstances of the case and in law learned CIT (Appeals) erred in not admitting the additional grounds of appeal that were not wilful and were reasonable as they go to the root of the entire issue related to invalid proceeding under section 147 and assessment order passed thereafter. The additional grounds need to be admitted and submissions made thereon needs to be considered in the interest of natural justice.
2 & 250/M/2022 Mr. Devkinandan Bagadia 3. On facts and circumstances of the case and in law learned CIT (Appeals) erred in not quashing the invalid reopening of the assessment and thereafter invalid passing of the assessment. In the absence of any addition of the item forming part of the reasons recorded for reopening the reopening fails and other items added need to be deleted.
On the fact and circumstances of the case and in law the learned CIT (Appeal) erred in confirming the addition of Rs.22,06,563/- on account of alleged cash receipt of brokerage/ commission. Confirmation of addition without providing relevant documents, statements relied upon and without allowing cross examination is bad in law and same needs to be deleted.
5. The Appellant craves leave to add to amend, alter, delete and/or modify the above grounds of appeal
on or before the final date of hearing of this appeal petition.”
3. The brief facts of the case are that the assessee is an individual who filed the return of income on 22.07.2010 declaring total income to the tune of Rs.16,73,371/-. The return was processed under section 143(1) of the Act. The case of the assessee was reopened by issuance of notice under section 148 of the Act. In pursuance of notice, the assessee filed the return of income which he had filed earlier on 22.07.2010. Necessary notices under section 143(2) & 143(1) were also issued and served upon the assessee. The assessee is an individual and is deriving income by way of house property, business income and income from other sources by way of interest. The assessee received the cash by way of brokerage. Therefore, the notice was given and after the reply of the assessee an amount of Rs.22,06,563/- was added to the income of the assessee. The total income of the assessee was assessed to the tune of Rs.40,71,370/-.
4. Feeling aggrieved, the assessee filed an appeal before the NFAC Delhi who decided the matter of controversy vide order dated 30.12.2021 but the assessee was not satisfied on the grounds mentioned above. Therefore, the assessee filed the present appeals before us.
Ground No.1
This issue was not pressed by the assessee, therefore, the same is hereby ordered to be dismissed being not pressed.
3 & 250/M/2022 Mr. Devkinandan Bagadia Grounds No.2, 3 & 4 6. Under these issues the assessee has challenged the reopening in view of the provisions under section 147/148 of the Act. The AO issued the notice under section 148 of the Act dated 30.03.2017 and in pursuance of the said notice the assessee filed the return of income which he had filed earlier on 22.07.2010. The AO also filed the copy of reasons recorded which are hereby reproduced as under: “……….. Information has been received from the O/O. DOT - Central Circle - 4(1) Mumbai, that a search and seizure action was conducted in the Yashovardhan Birla Group on 7.1.2014. Birla Power Solution Ltd. (BPSL) is one of the entities of this group. It is found that Shri D. N. Bagadia, PAN AAAPB9847J has undertaken transactions with Birla Power Solutions Ltd in cash.
During the search and seizure action several incriminating documents were seized which proved that the company was involved in accepting cash loans/ICD's and payment of interest in cash & cheque both. Also, commission payment was made to several parties in cash & cheque both.
As per the information received, cash ICD's worth Rs. 211 lacs were arranged by Mr. Devkinandan Bagadia for BPSL. It is further intimated that the official portion of ICD's were obtained by BPSL through banking channel, however, interest payments were made in partly in cash and partly through banking channel.
As per the summary of broker wise details of interest paid, by BPSL to brokers, it is noticed that an amount of Rs. 73,26,499/- has been received by Mr. Devkinandan Bagadia from BPSL through banking channel. In addition, the cash component of interest paid by BPSL to Mr. Devkinandan Bagadia for the F. Y. 2009- 10 has been worked out at Rs. 97,68,665/-. In view of the foregoing facts, I have reason to believe that income chargeable to tax in the form of interest in cash of at least of Rs. 97,68,665/- over and above the official portion of interest of Rs. 73,26,499/- on ICD's, has escaped assessment for A. Y. 2010-11 in the case of said assessee, within the meaning of section 147 of the Income Tax Act, 1961. Therefore, it is a fit case for issue of notice u/s. 148 of the Act. ………..”
Subsequently, the assessee asked the necessary documents relied upon to form the reasons for the reopening of the assessment by virtue of letter dated 24.07.2017 lies at page 9 of the paper book. The AO disposed of the objection by virtue of order dated 13.11.2017 lies at page 12 of the paper book in which it was mentioned that necessary documents would be handed over to the assessee during the course of assessment proceedings. In brief the AO did not supply the documents before disposing the objections. Even before completion of assessment, nothing came into
4 & 250/M/2022 Mr. Devkinandan Bagadia the notice that the said documents were given to the assessee. The assessee by virtue of letter dated 17.11.2017, lies at page 18 of the paper book, also requested to provide the necessary documents for the working but no documents were given. A letter dated 13.12.2017 lies at page 20 of the paper book also given to the AO for providing the necessary document but there is nothing on record with regard to providing the seized document, if any, to the assessee on record. Non providing the relied documents leads to this fact that the reopening is bad in law. In this regard the co-ordinate Bench of the Tribunal, Delhi in case of Deepraj Hospital Pvt. Ltd. vs. ITO in ITA No.41/Agra/2017 has decided the issue in which the Tribunal has given the following findings: "22. Thus, in deference to "Sabh Infrastructure Limited" (supra), it is incumbent on the AO, while communicating the reasons for the reopening of the assessment, to provide the standard form, used for obtaining approval of the superior officers. Merely stating the reasons in a letter addressed by the AO, is not enough. Then, the reasons to believe escapement of income need to spell out all the reasons and grounds available with the AO for reopening the assessment. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof. Further, and this is most relevant for the case at hand, where the reasons make a reference to any document, such document and/ or relevant portion thereof must be enclosed along with the reasons. The Hon'ble High Court has underlined that consideration of the assessee's objections to the reopening of assessment is not a mechanical ritual, but it is a quasi judicial function. It has been mandated that the order disposing of the objections should deal with each objection, giving proper reasons for the conclusion and no attempt should be made to improve or add to the reasons, as recorded and disclosed.
In the case of the present assessee, it remains undisputed that though the reasons recorded by the A O for belief of escapement of income contain reference to material forming the basis thereof, such material, despite written request by the assessee to the AO in this regard, was never supplied by the AO to the assessee. This is in direct contravention of the principle of natural justice, as reiterated in "Sabh Infrastructure Limited" (supra). As noted, in the present case, the alleged material was only supplied to the assessee in the remand proceedings, where too, the objections of the assessee were not met The Id. CIT(A) also did not deal with these objections of the AO.
Therefore, the reasons recorded by the AO are found to be not in accordance with law. Accordingly, they are cancelled. Too, in view of "Sabh Infrastructure Limited" (supra), none of the other decisions cited by the Department are of any aid to it. Consequently, the reassessment proceedings, culminating in the order under appeal, are also notsustainable in the eye of law and they too are cancelled. Nothing further survives for adjudication."
5 & 250/M/2022 Mr. Devkinandan Bagadia 8. The jurisdictional High Court in case of Tata Capital Finance Services Ltd. vs. ACIT dated 15.02.2022 is also of the view that when the necessary documents were not supplied to the assessee then the reopening is bad in law. Therefore, taking into account of all these facts and circumstances, we are of the opinion that the reopening is bad in law, hence the order in question is not liable to be sustained in the eyes of law. Hence, reopening is hereby ordered to be set aside. Accordingly, ground No.2, 3 & 4 are decided in favour of the assessee and against the Revenue.
ITA No.249/M/2022 (A.Y. 2011-12) 9. The facts of the case are quite similar to the facts of the case as narrated above while deciding the appeal bearing therefore, there is no need to repeat the same, however, the figure is different. Since the matter of controversy has already been adjudicated while deciding the legal issue in case bearing ITA No.248//M/2022 above, therefore the finding given above while deciding ground Nos.2, 3 & 4 is quite applicable to the facts of the present case also as mutatis mutandis. Accordingly, this appeal is also decided in favour of the assessee and against the Revenue.
In the result, both the appeals of the assessee are allowed. Order pronounced in the open court on 21.042022.