JITEN K. AJMERA (HUF),MUMBAI vs. DCIT - CC - 2(2), MUMBAI

3. Ld. Counsel for the assessee at the outset submitted that the reassessment order passed by the Assessing Officer is bad, illegal and without jurisdiction for the reason that the Assessing Officer ignored the mandatory requirement of disposing off objections raised by the assessee for reopening the assessment u/s. 147 of the Act. Ld. Counsel for the assessee referring to Para No. 4 of the re-assessment order at Page No.11, submitted that the Assessing Officer stated that assessee never submitted any objections and therefore disposing off the objections does not arise is contrary to record. Referring to Page Nos. 16 to 27 of the Paper Book Ld. Counsel for the assessee submits that in the course of proceedings before the Assessing Officer assessee made elaborate submissions and preliminary objections on reopening of assessment and these objections were never disposed off by the Assessing Officer before

(A.Y. 2011-12) Jiten K. Ajmera (HUF) framing the assessment, therefore, rendering the assessment order bad in law.

4. Ld. Counsel for the assessee placed reliance on the following decisions: - (i) DCIT v. M/s. Firstsource Solutions Ltd., in ITA.No. 3985 & 3986/Mum/2016 dated 22.05.2019. (ii) Maharashtra State Power Generation Co. Ltd., v. Addl. CIT in ITA.No. 2043/Mum/2011 dated 31.07.2019.

Referring to these two decisions Ld. Counsel for the assessee submits that the Tribunal following the decisions of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. ITO [259 ITR 19] and the decision of the Hon'ble Jurisdictional High Court in the case of KSS Petron Pvt. Ltd., v. ACIT in ITA.No. 224 of 2014 dated 03.10.2016 set- aside the Assessment Order as there was no separate order passed by the Assessing Officer dealing with the preliminary objections filed by the assessee in reopening the assessment.

5. Ld. Counsel for the assessee also placed reliance on the decision of the Hon'ble Bombay High Court at Goa Bench in the case of Fomento Resorts & Hotels Ltd., v. ACIT in Tax Appeal No. 63 of 2007 dated 30.08.2019 and submitted that it has been held by the Hon'ble Bombay

(A.Y. 2011-12) Jiten K. Ajmera (HUF) High Court that the Assessing Officer has to pass a separate order disposing off the preliminary objections and he cannot dispose off the objections while passing the Assessment Order itself.

6. On the other hand, Ld. DR strongly supported the orders of the Authorities below.

7. We have heard the rival submissions, perused the orders of the authorities below. In this case the Assessing Officer issued notice u/s.148 of the Act dated 25.02.2016 for reopening of assessment u/s. 147 of the Act. Assessing Officer also issued notice u/s. 143(2) of the Act calling for the details and objections. Assessee vide letter dated 28.07.2016 submitted detailed preliminary objections for reopening of assessment and not to proceed further and these objections are as under: - “With reference to your above Notice, we have to submit as under:-

1. 1. Vide your Notice dated 16.07.2016 you have called upon us to explain as to why the Long Term Capital (LTG), gain earned by us not be taxed.

2. At the outset, we strongly object to the observation made by you in your reason for reopening of assessment given alongwith notice dated 08.04.2016 for the following amongst other grounds as mentioned herein below.

3. We say that our all transactions executed are genuine, and at the prevailing market rate, as per the trend of the market and are duly supported by all possible evidences.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) 4. On perusing your reason for reopening of assessment it is seen that, you have relied upon two so called evidences to support the allegation, A. The statement of Shri Jasmin Ajmera taken during the search operation and B. Alleged evidences collected in course of the search proceeding against one Shri Shirish C. Shah. In this preliminary submission, we deal with each of the two allegations as under: - A. Statement of Shri Jasmin Ajmera:- Here, the sole reliance is placed on the fact that in the statement Shri Jasmin Ajmera he had agreed to offer the amount of capital gain for taxation. In this regard, the following points are noteworthy:- i. First of all, except for this statement there is absolutely no evidence in support of the allegation. No incriminating document / evidence were found during the search from his or our property. Now, as far as the sole reliance on statement is concerned, we understand that such action is contrary to the specific directions issued by the CBDT. In any case, and otherwise also, we believe that the law is quite well settled in this regard and it has been emphatically held that no addition can be made to the income of an assessee, merely on the basis of a statement, without any corroborative evidence found during the search supporting such addition. ii. In any case, the statement of Shri Jasmin Ajmera was taken in coercion, pressure and undue influence and given In stress and utter duress. Therefore, we believe such statement is not a valid statement in the eyes of law and consequently, is not binding on the person who gave the statement and least binding on any third party. Further, the entire statement stood fully retracted by Shri Jasmin Ajmera in his detailed affidavit dated 02/08/2013 and 14/08/2015, submitted to the department, Shri Jasmin Ajmera in his affidavits, have very exhaustively dealt with the entire chain of events which transpired during the course of the search, as well as, has also placed on record the manner in which he was pressurized, threatened and also the circumstances under which this so called confession in the form of statement was extracted from him.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) iii. Shri Jasmin Ajmera has retracted from the statement/ confession so extracted. We say that in the given circumstances, the so called statement has absolutely no evidentiary value, on fact, as well as in law. Iv. In any case, the statement of Shri Jasmin Ajmera is not binding on us and we have not confessed any such disclosure, we say that in the given circumstances, even this so called statement has absolutely no evidentiary value, on fact, as well as in law. In view of the above, it is submitted that your reliance on the statement of Shri Jasmin Ajmera is not valid, on fact, as well as in law. B. Search proceeding against Shri Shirish C. Shah It appears that your observation is also based on the alleged information gathered in course of search action against one Shri Shirish C. Shah. Your good office has provided us data collected by you from BSE Ltd. with respect to the transactions in the shares of Prraneta Industries Ltd., now known as Adhaar Venture India Ltd. ["Prraneta"] for the period 01.04.2009 to 31.12.2011 and a pen drive, which contains copies of the material alleged to have been seized in course of the search and survey action taken against one Shri Shirish C. Shah, running into thousands of pages. You have also given hard copies of some affidavits of various persons, who are alleged to be directors of various companies, again alleged to be managed by Shirish Shah. In this regard, we have to submit as under:- I. Data provided of BSE Ltd 1. It appears that this data shows sale and purchase transactions of Prraneta.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) 7. Kind attention Is also drawn to the quantity of the shares, i.e. to say that the quantity of the shares which were sold by us and the shares purchased by the purchasers, as shown in reason for reopening of assessment miss matches.

8. Please note that total quantities of shares of Prraneta alleged to have been purchase by companies managed and controlled by Shirish C. Shah are much lesser than the quantities traded in the exchange. II. THE SCANNED DOCUMENTS PROVIDED IN THE PEN DRIVE:-

1.

2. However, strictly without prejudice to the above and under protest, we give our very preliminary and brief observations, upon going cursorily through the contents of the pen drive, hereinbelow: (1) In any case, many of the documents are rough notings /scribblings / chits, etc., which otherwise also have no evidentiary value, being 'dumb' documents. (ii) We are not aware who has prepared these data/documents/chits etc. and we would like to cross - examine the person and/or the author who has prepared the data, apart from this being a normal and essential requirement of the principle of natural justice, as the data appears to be incorrect, so far as the transactions relating to us. (iii) The rest of the details are incoherent and in no way are connected with us. Many of the scanned pages are loose sheets, rough pages and scribblings, which do not make any sense. (iv) In the circumstances, we say that no adverse inference can be raised on the basis of the material provided to us on fact as well as in law. This is, of course, without prejudice to our preliminary objection to (A.Y. 2011-12) Jiten K. Ajmera (HUF) let us know the precise material that you Intend to rely upon ultimately and the reason thereof so as to enable us to give meaningful reply thereon. III. AFFIDAVITS FILED BY THE DIRECTORS OF THE COMPANIES ALLEGED TO BE MANAGED AND CONTROLLED BY SHIRISH SHAH :-

1. 1. At the outset, we fail to understand in what way such affidavits are sought to be used against us. Therefore, we request you to let us know the exact relevance of these affidavits in our case, so as to give meaningful reply thereafter.

2. Strictly without prejudice to the above and under protest, our preliminary observations in this regard are as under: i) First of all, Ex- facie, these affidavits do not at all directly, indirectly or remotely concern us, nor do they indicate involvement of ourselves in any transaction, much less in any dubious transaction. ii) Besides, our few observations regarding the affidavits are as under: (a) In all, there are 134 affidavits / declarations and all are stereotyped. (b) Some documents are styled as" affidavits" and some documents are styled as" declarations". The affidavits do not appear to be legally and validly executed document of oath. All stamp papers appear to be purchased from one vendor. Almost all affidavits 134 on oath are notarised by only three notaries, and that too within few days, (81 affidavits are executed notarized on one single day), which is difficult to believe as the deponents are scattered at different places. Even the format of these affidavits is not as per the Oath Act. It is not properly verified, identified or administered. (c) The purported Declarations are not oil Paper as required under the law. (d) There is no mention of Notarial Register Sr. No. on any of the said purported Declarations and Affidavits. iii) In any case, as mentioned earlier, if you still intend to rely upon any of these affidavits/declarations, you are requested to let us know how and in what manner you intend to so rely and also give us an opportunity to cross - examine such persons. iv) In any case, the affidavits / declarations do not cover many other companies/ Individuals, who have alleged to have purchased shares sold by us on automated exchange platform.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) v) Please let us know what actions have been taken against the deponents as well as the concerned companies as well as against Shirish C. Shah. For example, whether the income supposed to have been received by them from Shirish C. Shah has been declared / assessed in their case? vi) In this background, these loose papers / affidavits cannot be called any material, much less cogent material, to rebut the preliminary presumption about correctness of the transaction. Please note that said Shirish C. Shah was nowhere concerned with our transactions of sale nor was he ever been contacted for any such transactions. Please provide us an opportunity of cross - examining said Shirish Shah and all the individuals on whose statements you are depending to bring at correct facts on record. The above are our preliminary submissions / objections on the issue. If you still intend to proceed further, we request that the same be Intimated to us, along with the reasons thereof, to enable us to make further submissions, On fact as well as in law. Needless to say that, in the meanwhile, if any further information / explanation is required, on the preliminary aspect the same shall be readily furnished upon intimation.”

8. However, the Assessing Officer without disposing off the preliminary objections proceeded and completed the assessment and while completing the assessment adverted to the objections filed by the assessee.

9. In the case of Maharashtra State Power Generation Co. Ltd., v. Addl. CIT (supra) the Tribunal considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., v. ITO (supra) and the decision of the Hon'ble Jurisdictional High Court in the case of KSS Petron Pvt. Ltd., v. ACIT (supra) and also the decision of the Coordinate Bench

(A.Y. 2011-12) Jiten K. Ajmera (HUF) in the case of DCIT v. Firstsource Solutions Ltd (supra) quashed the reassessment order passed u/s. 143(3) r.w.s. 147 of the Act. While quashing the re-assessment order the Coordinate Bench observed as under: - “2.1 The Ld. Authorized Representative for Assessee [AR], at the outset, submitted that the objections raised by the assessee against reopening the assessment were never disposed-off by Ld. Assessing Officer as mandated by the decision of Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. V/s ITO [259 ITR 19] and therefore, the reassessment proceedings stood vitiated in the eyes of law. Reliance has been placed on the decision of Jurisdictional Hon’ble Bombay High Court rendered in KSS Petron Private Limited V/s ACIT [ITA No. 224 of 2014 dated 03/10/2016] to submit that the matter could also not be restored back to the file of Ld. AO to pass order on objections raised by the assessee.

2.2 On the other hand, Ld. CIT-DR relied on para 3.3(a) of the impugned order which would read as under: -

3.3(a) The appellant’s first objection is that the AO did not dispose-off objections raised by it in respect of re-opening of the assessment proceedings. On this issue the appellant has relied on various case-laws. I have considered the facts of the case and decisions relied on by the appellant. Though as per decisions of the Hon'ble Supreme Court and other decisions, it was obligatory on the part of the AO to first dispose-off, by passing a speaking order, appellant’s objections raised against reopening of the assessment. However, the Assessing Officer’s action of not disposing off appellant’s objections was a procedural irregularity only which did not affect the legality of the assessment order passed. In the above decisions relied upon by the appellant, the assessment order passed was not held to be invalid on account of not disposing off the assessee’s objections raised against re-opening of the assessment. In those cases the assessment order was set aside to the file of the AO for first disposing off the objections by passing a speaking order and then frame assessment order. Therefore, on account of this irregularity, the assessment order passed by the AO cannot be held to be invalid. As per existing provisions of the Act,

(A.Y. 2011-12) Jiten K. Ajmera (HUF) the undersigned has no power to set aside the assessment order passed by the AO. Therefore, appellant’s objections/arguments on this issue are not acceptable.

In the above background, Ld. CIT-DR pleaded for restoration of matter back to the file of Ld. AO for disposal of assessee’s objection against reassessment proceedings. However, the fact that the assessee had raised objections against the reopening of the assessment and the same was not disposed-off by Ld. AO, remain uncontroverted. Nothing on record would establish that the assessee’s objections against reopening of assessment were ever considered and rejected by Ld. AO at any point of time, during reassessment proceedings.

3. After due consideration of factual matrix, we find that the binding judicial precedent in the shape of cited decision of Hon’ble Bombay High Court squarely applies to the fact of the case. The relevant observation of Hon’ble court, for ease of reference, could be extracted in the following manner: -

8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) 10. The Director of the appellant has filed an affidavit dated 19th September, 2006. In the affidavit, it is stated that consequent to the impugned order of the Tribunal dated 14th August, 2013, the Assessing Officer has not passed any order of reassessment. Time was granted on the last occasion to enable the Respondent to respond to the affidavit dated 19thSeptember, 2006 of the Director of the Appellant Company. The Respondent is unable to dispute the facts stated in the affidavit dated 19th September, 2016 filed by the Director of the Appellant Company. The time to pass a order on the notice dated 28th March, 2008, even consequent to the impugned order of the Tribunal, has lapsed.

11. Therefore, on the above facts and law, the substantial question of law is answered in the negative i.e. in favour of the Appellant-Assessee and against the Respondent- Revenue.

This decision has subsequently been followed by the co-ordinate bench of the Tribunal in number of cases, few of which could be tabulated as follows: - 1. DCIT M/s. National Bank for Agriculture and Rural Development [ITA No.4964/Mum/2014 (A.Y.2004-05) dated 28/10/2016] 2. Baldev Ramratan Sharma Vs. ACIT [ITA No.1909/Mum/2017 (A.Y.2009-10) dated 28/08/2018] 3. DCIT V/s Firstsource Solutions Ltd. [ITA Nos. 3985- 86/Mum/2016 dated 22/05/2019]

4. The co-ordinate bench of the Tribunal in DCIT V/s Firstsource Solutions Ltd. [supra], after considering the contrary case-laws as cited by the revenue, has concluded the matter in the following manner: -

(A.Y. 2011-12) Jiten K. Ajmera (HUF) of assessment proceedings under section 143(3) r/w 147 of the Act. The Hon'ble Supreme Court in GKN Driveshafts India Ltd. (supra) has held that before completion of the assessment, the Assessing Officer is duty bound to dispose of the objections of the assessee separately. Therefore, the Assessing Officer in the instant appeal has not followed the due judicial process while dealing with the objections of the assessee. For that reason, the impugned assessment orders are legally unsustainable. Now the issue which arises is, whether in such circumstances, the re–assessment orders passed have to be quashed as void ab initio or they are to be restored back to the Assessing Officer for enabling him to dispose of the objections of the assessee and pass fresh assessment orders. In our view, the issue is no more res integra in view of the decision of the Hon'ble Jurisdictional High Court in KSS Petron Pvt. Ltd. (supra), wherein, the Hon'ble Jurisdictional High Court has held that if the re– assessment order is passed without disposing of the objections raised by the assessee, they have to be quashed and no second opportunity can be given to the Assessing Officer to pass fresh assessment orders after disposing of the objections of the assessee. The same view has been expressed by the Co–ordinate Bench in the decisions cited by the learned Sr. Counsel for the assessee. Upon careful reading of the decision of the Hon'ble Supreme Court in Larsen Toubro Ltd. v/s State of Jharkhand & Ors., in Civil Appeal no.5390/2007, cited by learned Departmental Representative, we find it to be not applicable to the facts of the present case, as the said decision is not on the issue of validity of re– assessment order on account of non– disposal of objection raised by the assessee. It is relevant to observe, post conclusion of hearing of the appeal, the learned Departmental Representative has submitted a note citing certain decisions in support of the proposition that non– disposal of objection is a procedural irregularity, hence, the assessment order should be set aside for enabling the Assessing Officer to dispose of the objections and pass a fresh assessment order. The first decision relied upon by the learned Departmental Representative is, Home Finders Housing Ltd. v/s ITO, [2018] 94 taxmann.com 84 (SC). This is a matter arising out of a judgment delivered by the Hon’ble Madras High Court holding that non–disposal of objection before completion of assessment is a procedural irregularity which can be cured by setting aside the assessment order to the Assessing Officer for disposing of assessee’s objection and thereafter completing the assessment. Against the aforesaid decision of the Hon’ble

(A.Y. 2011-12) Jiten K. Ajmera (HUF) Madras High Court, the assessee filed a Special Leave Petition (SLP) before the Hon'ble Supreme Court. The Hon'ble Supreme Court in the decision cited supra, dismissed the SLP in limine without laying down any ratio. The order passed by the Hon’ble Supreme Court is as under:-

“The Special Leave Petition is dismissed. Pending application stands disposed of.’’

9. In view of the aforesaid, we do not find any infirmity in the orders passed by learned Commissioner (Appeals) in holding the assessment orders passed to be legally unsustainable. Accordingly, grounds raised in both the appeals are dismissed.

Respectfully following the cited binding judicial precedents, the action of Ld. first appellate authority in upholding the reassessment proceedings, could not be said to be in accordance with law. Therefore, we quash the reassessment order dated 29/12/2009 passed by Ld. Assessing Officer. In view of the same, dealing into the merits of the case become merely academic in nature and therefore, we refrain from dealing the same. Ground No. 1 stands allowed which makes other grounds of appeal infructuous.”

10. In the case of Fomento Resorts & Hotels Ltd., v. ACIT (supra) (supra) the Hon'ble Bombay High Court held as under: “13. In the present case, the Appellants did lodge their objections vide letter dated 14th April, 2003. By a further letter dated 25th

(A.Y. 2011-12) Jiten K. Ajmera (HUF) March, 2004, the Appellants requested the Assessing Officer to dispose of such objections by passing a speaking order before proceeding with the reassessment in respect of the Assessment Year 1997-98. However, the Assessing Officer, without proceeding to dispose of the objections raised by the Appellants by passing a speaking order, straight away proceeded to make the assessment order dated 26th March, 2004, bringing to charge taxable expenditure on ₹10,22,73,987/-. The assessment order dated 26th March, 2004, no doubt, deals with the objections raised by the Appellant and purports to dispose of the same. Ms. Linhares contends that this is a sufficient compliance with the procedure set out in GKN Driveshafts (India) Ltd. (supra), assuming that the same is at all applicable to the proceedings under the said Act. Mr. Dada, however, submits that such disposal in the assessment order itself does not constitute the compliance with the mandatory conditions prescribed by the Hon’ble Supreme Court in GKN Driveshafts (India) Ltd. (supra). In support, as noted earlier, Mr. Dada relies upon Bayer Material Science (P) Ltd. (supra) and KSS Petron Private Ltd. (supra).

“Heard the learned Counsel on behalf of the parties. This appeal is filed against the Order dated 4-4- 2006 of the ITAT wherein in para 7 the learned ITAT has come to the conclusion that the Assessing Officer is required to give reasons, when asked for by the Assessee. Giving of reasons has got to be considered as implicit in Section 11 of the Expenditure Tax Act,

(A.Y. 2011-12) Jiten K. Ajmera (HUF) 1987. It is now well settled that giving reasons in support of an order is part of complying with the principles of natural justice. In the light of that, no fault could be found with the order of the learned ITAT and as such no substantial question of law arises as well. Appeal dismissed.”

“Whether on the facts and circumstances of the case and in law, the Tribunal was justified in restoring the issue to the Assessing Officer after having quashed/set aside the order dated 14th December, 2009 passed by the Assessing Officer without having disposed of the objections filed by the appellant to the reasons recorded in support of the reopening Notice dated 28th March, 2008 ?”

“7. On further Appeal, the Tribunal passed the impugned order. By the impugned order it held that the Assessing Officer was not justified in finalizing the Assessment, without having first disposed of the objections of the appellant. This impugned order holds the Assessing Officer is obliged to do in terms of the Apex Court's decision in GKN Driveshafts (India) Ltd., v/s. ITO 259 ITR 19. In the aforesaid circumstances, the order of the CIT(A) and the Assessing Officer were quashed and set aside. However, after having set aside the orders, it restored the Assessment to the Assessing Officer to pass fresh order after disposing of the objections to reopening notice dated 28th March, 2008, in accordance with law.

(A.Y. 2011-12) Jiten K. Ajmera (HUF) 8. We note that once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters.”

Order pronounced on 08.12.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.