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Income Tax Appellate Tribunal, “SMC”
Before: Sri Sanjay Garg
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” (Virtual Court Hearing), BENCH KOLKATA
Before Sri Sanjay Garg, Judicial Member I.T.A. No.2008/KOL/2019 Assessment Year: 2010-11 Sharad Chandra Jhunjhunwala........……….…....……………………………..………Appellant [PAN : AEDPJ8850J] ITO, Ward-36(2), Kolkata.………………………………………………………..………..Respondent Appearances by: Shri S. S. Gupta, A/R, appeared on behalf of the appellant. Smt. Ranu Biswas, Addl. CIT, Sr. DR, appeared on behalf of the Respondent.
Date of concluding the hearing : January 07, 2021 Date of pronouncing the order : January 07, 2021 Hearing through Video Conferencing ORDER The present appeal for the assessment year 2010-11 has been preferred by the assessee against the order of the Commissioner of Income Tax-10 (hereinafter referred to as the ‘CIT(A)’) dated 30.07.2019.
The assessee in this appeal has raised the following grounds of appeal:
“1. That the Ld. ITO Wd. 36(2), Kolkata (hereinafter referred to as the Assessing Officer) while passing the assessment order dated 13th December, 2017 u/s. 143(3)/147 of the Income Tax Act, 1961, erred in law as well as in facts in arbitrarily computing the total income of the appellant assessee in the sum of Rs. 15,30,050/- as against income of Rs.2,13,196/-disclosed in the Income Tax Return filed u/s. 139(1) of the Income Tax Act, 1961 and Ld. CIT (A) erred in confirming the same. 2. That the Ld. Assessing Officer erred in law as well as in facts in disallowing the trading loss of Rs. 13,11,020/-arising on account of closing stock valuation of equity shares as bogus in as much as in view of the facts and circumstances of the case no such disallowance was at all called for and Ld. CIT (A) erred in confirming the same. 3. That the Ld. Assessing Officer erred in law as well as in facts in relying on the report of Investigation wing of the Income Tax Department for treating loss arising on account of closing stock valuation of Equity Shares of Rs. 13,11,020/- as bogus in as much as in view of the facts and circumstances of the case no such reliance on such report could be placed by the Ld. Assessing Officer and Ld. CIT (A) erred in confirming the same. 4. That without prejudice to Grounds No. 2 and 3, the Ld. Assessing Officer and the Ld. CIT (A) erred in law as well as in facts in treating the loss arising on account of closing stock valuation of Equity
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Shares of Rs. 13,11,020/- as unexplained cash credit u/s. 68 of the Income Tax Act, 1961 in as much as in view of the facts and circumstances of the case no such treatment was at all called for. 5. That the ld. Assessing Officer erred in law as well as in facts in making the disallowances and additions on untenable and unfounded allegations made by him in the impugned assessment order dt. 13-12-2017 based on the surmises, suspicions and conjectures and Ld. CIT(A) erred in confirming the same. 6. That the appellant craves leave to add, alter, change and/or modify any of the grounds of appeal at or before hearing of the appeal and claim further relief or reliefs which is necessary for the ends of justice.”
Apart from that the assessee has taken the following additions grounds of appeal:
“That the Ld. Assessing Officer erred in law as well as in facts in disallowing/making addition of Rs.13,11,020/- arising on account of closing stock valuation as bogus in as much as in view of the facts and circumstances of the case the sum of Rs.24,92,000/- alleged to have escaped assessment which was the sole reason to believe of income having escaped assessment and the same not having been assessed/assessable and in view of the provisions of section 147 of the Income Tax Act, 1961 the said amount of Rs.13,11,020/- could not have been assessed to tax.”
The ld. counsel for the assessee at the outset has submitted that from the facts on record, it is apparent that the reasons recorded by the Assessing Officer did not mature into any addition of income on the issues on which the Assessing Officer allegedly formed belief of escapement of the income of the assessee. The ld. counsel for the assessee has invited my attention to the reasons recorded by the Assessing Officer which for the sake of ready reference are reproduced are as under:
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Inviting my attention to the above reasons recorded, the ld. counsel for the Inviting my attention to the above reasons recorded, the ld. counsel for the Inviting my attention to the above reasons recorded, the ld. counsel for the assessee has submitted that in t assessee has submitted that in the above reasons recorded, the main allegation of the he above reasons recorded, the main allegation of the Assessing Officer is that the assessee has dealt with /made transactions with a penny Assessing Officer is that the assessee has dealt with /made transactions with a penny Assessing Officer is that the assessee has dealt with /made transactions with a penny stock company namely “Pearl Elec”. However the assessee in fact did not make any stock company namely “Pearl Elec”. However the assessee in fact did not make any stock company namely “Pearl Elec”. However the assessee in fact did not make any transaction with the said penny sto transaction with the said penny stock company namely “Pearl Elec”. The ld. counsel ck company namely “Pearl Elec”. The ld. counsel therefore has submitted that under the circumstances there was no material before the therefore has submitted that under the circumstances there was no material before the therefore has submitted that under the circumstances there was no material before the Assessing Officer to form belief that the income of the assessee has escaped Assessing Officer to form belief that the income of the assessee has escaped Assessing Officer to form belief that the income of the assessee has escaped assessment. That the reasons recorded by the the reasons recorded by the Assessing Officer were wrong and false Assessing Officer were wrong and false
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as the assessee did not make any transaction with the said company namely “Pearl Elec”. 6. The ld. DR has been confronted with the above submissions of the ld. counsel for the assessee. Though the ld. DR has admitted that from the facts of the case it appears that the assessee did not make any transactions with “Pearl Elec” as no addition has been made by the Assessing Officer in respect of any transactions with any company named “Pearl Elec”. However the ld. DR has vehemently argued that the Assessing Officer during the assessment proceedings made enquiries relating to the share transactions made by the assessee and has rightly made the impugned additions; That if, the assessee had not made any transactions with the “Pearl Elec” company, the assessee should have brought this fact into the knowledge of the Assessing Officer; That even the assessee did not bring this crucial fact before the CIT(A) also. She, therefore, has submitted that the additions made by the lower authorities be confirmed. 7. I have considered the rival contentions made by the learned representatives of the parties and also gone through the record. It is held time and again by the various higher Courts of the country that the reopening of assessment cannot be made in a casual manner. That there must be some reliable material before the Assessing Officer which should be sufficient for forming belief by the Assessing Officer that income of the assessee has escaped assessment. In this case, admittedly in the reasons recorded, the Assessing Officer allegedly formed belief on the basis of a wrong information that the assessee had made transactions with some company named as “Pearl Elec” which as per the information of the department was a shell/bogus company. However the fact on the record is that the assessee had not made any transactions with the company namely “Pearl Elec”, therefore the Assessing Officer did not have the reliable information before him to make belief that the income of the assessee escaped assessment. Even the alleged reasons to believe recorded by the Assessing Officer did not mature into any additions. In the absence of any material to give reasons to the Assessing Officer to form belief that the income of the assessee has escaped
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assessment, the reopening of the assessment cannot be held to be justified. The Assessing Officer cannot be given a second innings to reassess the income of the assessee without there being any reliable material to form belief that the income of the assessee has escaped assessment. In view of this, I do not find justification in the action of the Assessing Officer for reopening of the assessment in question. The said action being held to be not justified, consequently the reopening of the assessment is quashed and the additions made in the reassessment order are hereby set aside. 8. In the result, the appeal of the assessee stands allowed.
Kolkata, the 7th January, 2021.
Sd/- [Sanjay Garg] Judicial Member Dated : 21.01.2021 RS Copy of the order forwarded to: 1. Sharad Chandra Jhunjhunwala 2. ITO, Ward-36(2), Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR),