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PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A)-57, Mumbai dated 22.03.2018 for Assessment Year 2007-08.
2. Brief facts of the case are that the assessee filed her return of income for Assessment Year 2007-08 on 31.07.2007 declaring total income of Rs. 6,69,651/-. In the return of income, the assessee claimed Short Term Capital Gain (STCG). The case was selected for scrutiny and assessment was completed under section 143(3) allowing the STCG. Subsequently, the case was re-opened on the basis of information received from CCIT Central-1 that assessee availed a bogus bill from Mukesh Chokshi, who Mum 2018-Smt. Kanchan Gaurav Raimalani. was allegedly indulging in providing such bogus bills/entry. Information was also received that a search action under section 132 was conducted in case of Mukesh Chokshi on 18.06.1998 and on 02.06.2006. On the basis of such information, the case of assessee was re-opened. Notice under section 148 dated 30.03.2013 was issued to the assessee. In response to the notice under section 148, the assessee filed its reply dated 15.04.2013. In the reply, the assessee stated that the return filed on 31.07.2007 may be treated as return in response to the notice under section 148. The assessee also requested for reasons recorded for re- opening. The assessee was served with the reasons recorded. On receipt of the reasons recorded, the assessee filed her objection dated 11.02.2014. The assessee objected for the re-opening and stated that she never involved in availing accommodation entry as allegedly disclosed by Mukesh Chokshi. The profit received by the assessee from the transaction has been shown in the return of income which was accepted in the assessment order passed under section 143(3). The assessee specifically denied about any fraudulent billing and payment details of M/s Alliance Intermediary and Network Pvt. Ltd. The assessee specifically stated that she purchased and sold share of Alchemist Ltd. worth Rs. 2,57,005/- and Rs. 8,03,344/- and Net Profit earned from sale of such scrip was shown as STCG. The Assessing Officer completed the re-assessment on 14.03.2014 and treated the capital gain as unexplained 2 ITA No. 4399 Mum 2018-Smt. Kanchan Gaurav Raimalani. cash credit. On appeal before the ld. CIT(A), the action of Assessing Officer on account of re-opening as well as addition on account of unexplained cash credit was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
The assessee has raised the following grounds of appeal:
1. The Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as "CIT (A)"] erred in confirming the following additions and disallowances made by the Ld. Assessing Officer without appreciating the facts and circumstances of the case:
Sr. Particulars Amount (Rs.) No. A Confirming the addition on account of sale of shares through Alliance Intermediaries and Network Pvt. Ltd. made in the assessment proceedings u/s 143(3) read with section 147.
B Confirming the addition of Rs. 8,04,605 8,04,605/- received from sale of shares through Alliance Intermediaries & Network Pvt. Ltd. as unexplained cash credit U/s 68.
C Confirming addition of Rs. 8,04,605/- 40,566/ - u/s 68 while the Appellant has already shown Short term capital gain from share transaction.
A. On the facts and in law, the learned CIT (A) erred in confirming the addition on account of sale of shares through Alliance Intermediaries and Network Pvt. Ltd. made in the assessment proceedings u/s 143(3) read with section 147 without appreciating the fact that the reopening of assessment was merely on the basis of the information received from the DGIT (Inv], Mumbai and without any material on record to show that the transactions entered into by the appellant were non genuine.
B. Addition of Rs. 8,04,605/- from sale of shares through Alliance Intermediaries & Network Pvt. Ltd. as unexplained cash credit U/s 68. On the facts and in law, the learned CIT (A) erred in confirming the addition of Rs. 8,04,605/- received from sale of shares of Alchemist Ltd. through Mum 2018-Smt. Kanchan Gaurav Raimalani.
Alliance Intermediaries & Network Pvt. Ltd. as unexplained cash credit U/s 68 on the basis of statement of Shri Mukesh Chokshi. C. Confirming addition of Rs. 8,04,605/- u/s 68 while the Appellant has already shown Short term capital gain from share transaction . On the facts and in law, the learned CIT (A) erred in confirming the addition of Rs. 8,04,605/ - received from sale of shares of Alchemist Ltd. through Alliance Intermediaries & Network Pvt. Ltd. as unexplained cash credit U/s 68 while the Appellant has already shown Short term capital gain of Rs.5,45,426/- from share transaction.
4. The assessee further vide application dated 27.06.2009 raised the following additional grounds of appeal:
The notice issued u/s 148( 1) of the Act is barred by limitation in view of the proviso to section 147 of the Act as the said notice is issued beyond four years from the end of the relevant assessment year when the original assessment was completed vide order dated 21.12.2014 u/s 143(3) of the Act.
The reasons recorded to issue notice u/s 148(1) dated 30.03.2013 have not alleged any failure on part of the Appellant to disclose all the material facts truly and fully. Thus, the notice under section 148 of the Act and subsequent reassessment order are bad in law and the same may be quashed and set aside.
5. At the outset of hearing, the ld. Authorized Representative (AR) of the assessee submits that he has raised addition ground of appeal. The additional ground of appeal raised by assessee is purely legal in nature.
The ld. AR of the assessee further submits that no new facts are necessary to be brought on record for adjudication of additional ground of appeal. In support of his submission, the ld. AR of the assessee relied upon the decision of National Thermal Corporation Ltd. (NTPC) [229 ITR 383(SC)] and full bench decision of Hon’ble Bombay High Court in Ahmadabad Electricity Company Ltd. Vs. CIT [199 ITR 351 (Bom)
(FB)]. 4 Mum 2018-Smt. Kanchan Gaurav Raimalani.
On the other hand, the ld. Departmental Representative (DR) for the revenue submits that assessee has not raised ground at earlier stage and now the assessee is precluded from raising the additional ground of appeal
as per the provision of section 124(3) of the Act. The ld. DR prayed that additional ground of appeal may not be admitted at this stage.
7. We have considered the contention of both the parties and find that the assessee has raised the additional ground of appeal challenging the validity of notice under section 148 dated 30.03.2013. In our view, no additional facts are necessary to be brought on record for adjudication of the additional ground of appeal. The facts related to adjudication of additional ground of appeal are already on record. The additional ground of appeal is purely legal in nature. The submission of ld. DR for the revenue that is that the assessee is precluded to raise the objection/ ground of appeal as it was not raised earlier in view of section 124(3). In our considered view that the submission of ld. DR is misconceived.
Section 124 prescribes the jurisdiction of Assessing Officer, which is not the issue raised by assessee in additional ground of appeal
. The assessee has raised the ground against the validity of notice under section 148 and that reasons recorded by Assessing Officer have no live link. Considering the fact that no new facts are necessary to be brought on record for adjudication of additional ground of appeal and that all 5 Mum 2018-Smt. Kanchan Gaurav Raimalani. facts related to the additional ground raised by assessee are available/emanating from the facts available on record. Thus, the additional ground of appeal raised by assessee is admitted.
8. On the merit of additional ground of appeal, the ld. AR of the assessee submits that the assessment was completed under section 143(3) on 25.11.2009. The notice under section 148 dated 30.03.2013 was served after four years from the end of relevant Assessment Year. The assessee demanded the reasons recorded which were served to the assessee. The copy of reasons of re-opening is placed on record at page no. 38 of the Paper Book. The reasons recorded, nowhere disclosed that any income escaped from the assessment for the Assessment Year under consideration due to the failure on the part of assessee in disclosing fully and truly all facts necessary for her assessment. The ld. AR of the assessee further submits admittedly the case of assessee is re-opened after the expiry of four year from the relevant Assessment Year and there is no reference in the reasons recorded that any income chargeable to tax has escaped assessment for this Assessment Year by the reasons of failure on the part of assessee. The assessee has disclosed all the material fully and truly at the time of filing return of income. Hence, there is no failure on the part of assessee in disclosing full and true material. Therefore, the notice under section 148 is bad-in-law. In support of his submission, the ld. AR of the assessee relied upon the 6 ITA No. 4399 Mum 2018-Smt. Kanchan Gaurav Raimalani. decision of Hon’ble Bombay High Court in Hindustan Lever Ltd. Vs. R.B. Wadkar (268 ITR 332). The ld. AR of the assessee further submits that in the reasons recorded, the Assessing Officer must disclosed in the reasons as to which fact or material not disclosed by assessee fully and truly necessary for assessment for that Assessment Year so as to establish live link between the reasons and evidence. The ld. AR submits that the re-opening is invalid and the subsequent action initiated by Assessing Officer including the assessment order is void ab-initio.
The ld. AR submits that even on merit, the case is covered by the decision of Mumbai Tribunal in Late Smt. Godavaridevi D. Raimalani vs. ITO in dated 30.01.2019. 9. On the other hand, the ld. DR supported the order of lower authorities.
The ld. DR submits that assessee was supplied the reasons recorded. The assessee contested the proceeding before the Assessing Officer and no such issue was raised by assessee. The contention of assessee is liable to be rejected.
We have considered the submission of both the parties and perused the material available on record. We have noted that the assessee on service of notice under section 148 filed its reply stating therein that the return filed originally on 31.07.2007 may be treated as return in response to the notice. The assessee is demanded reasons of re-opening. The assessee was furnished the reasons recorded by Assessing Officer. 7 Mum 2018-Smt. Kanchan Gaurav Raimalani.
We have noted that the Assessing Officer has nowhere mentioned the reasons recorded in his order. The ld. AR of the assessee has placed on record, the copy of reasons recorded. To appreciate the facts of the reasons recorded, which was supplied to the assessee is extracted below:
The assessee filed the return of income on showing the income of Rs. 669650/- chargeable to tax. The total income includes short term capital gain of Rs. 545975/-. The return was processed u/s 143(1) of the I.T, Act 1961 and the returned income was accepted. Subsequently, information has been received from the CCIT(Central)-I, Mumbai that the assessee has obtained bogus bills from Shri Mukesh Chokshi and his group of companies showing the purchase and sales of shares. Information has also been received from the CCIT(Central)-1 Mumbai that the a search action U/s 132 was conducted on 25-11-20.0.9 in the case of M/s Mahasagar Securities and Mukesh Chokshi group and searches were also conducted on this group on 18.06.1998 and on 02.06.2006. Details of information is as under:
1. 1. In his sworn statement recorded, Shri Mukesh Chokshi admitted that he and his group of entities were engaged in fraudulent billing activities and in giving accommodation entries in order to enable the clients to declare Speculation profit/loss, Short term Capital gains, Long term Capital gains, profits /loss on account of commodity trading, introduce share application money, or introduce money in the form of Gifts.
2. Statements have also been recorded from two o~ his employees and an agent i.e. Miss Anupama Patel (Employee), on 25-11-200.9, Shri Kapil Chaturvedi (Employee) on 13-01-2010 and Shri Kamal Kishore Rathi (agent) on 25-11-20.0.9.
3. This group deliberately conducted transactions in such a manner that a part of the transaction is evidenced through Bank or through Stock Exchange such that a misleading picture is given and a colour of genuineness is given to the entire transactions. For example, shares are purchased from a broker/agent and transferred to demat account and within a few days the shares are shown as sold through Stock Exchange. 8 Mum 2018-Smt. Kanchan Gaurav Raimalani.
This gives the picture that the sale is genuine. However, the holding period is not a year or more.
In the sworn' statement dated 16.0.1.20.13 Shri Mukesh Chokshi has admitted that he was only involved in giving accommodation entries. Before, giving the said statement he has perused all the data and documents seized/impounded from his office premises. In the sworn statement he had identified 829 names of beneficiaries and certified that they are accommodations entries.
Out of the beneficiaries identified by Shri Mukesh Chokshi in his sworn statement, one of the beneficiaries is Smt. Kanchan G Raimalani is assessed in this charge. The specific information is that Smt. Kanchan G Raimalani has sought accommodation entries for the purchase shares Rs. 513150 and for the sales of same shares at Rs. 804605/- thus showing short term capital gain of Rs. 291455/-. Taking into account the statement given under oath by Shri Mukesh Chokshi , the purchase and sales are only accommodation entries. The assessee has introduced her unaccounted funds of Rs. 804605/- to the regular books by way of sales shares. In the process the assessee has shown short term capital gain of Rs. 291455/- by paying tax at 10% which is Rs. 29145/-. However, she has introduced unaccounted funds of Rs.804605/- to the regular books on which tax payable is 30%. Tax payable on Rs. 80460.5/- is Rs.241381/- . Thus the assessee has paid tax at too Iowa rate. In view of the above, I have reason to believe that the assessee’s taxable income has escaped assessment within the meaning of provisions of sec. 147 of the Income-tax Act, 1961.
A careful perusal of reasons recorded nowhere disclosed that there is any reference in the reasons recorded that the assessee has not disclosed all material fully and truly necessary for assessment of that Assessment Year while filing the return of income. The assessee has also placed on record the assessment order passed under section 143(3). The assessee has also furnished the copy of acknowledgment of return along with the 9 Mum 2018-Smt. Kanchan Gaurav Raimalani. computation of working of STCG, copy of bank statement, copy of DMAT statement, copy of ledger bill and brokerage showing the details of purchase and sale of the share. The assessee also furnished the certificate that all these documents were furnished before the Assessing Officer.
The Hon’ble Bombay High Court in case of Hindustan Lever Ltd. Vs. R.B. Wadkar (supra) held that when the petitioner had stated that the notice issued under section 148 is without jurisdiction being hit by the proviso of section 147 and that where the assessment is completed under section 143(3), no action can be taken under section 147 after the expiry of four year from the end of relevant Assessment Year. Unless any income chargeable to tax has escaped assessment for such Assessment Year by the reasons on the failure on the part of assessee to disclose all material facts necessary for his assessment for that Assessment Year.
Now turning to the facts of the present case, which relates to Assessment Year 2007-08 and four year for the end of relevant Assessment Year expired on 31.03.2012. Admittedly, the notice under section 148 dated 30.03.2013 was issued admittedly after the expiry of four year from the end of relevant Assessment Year. Further, the reasons recorded by Assessing Officer, nowhere suggests that there was any failure on the part of assessee to disclose fully and truly all material facts necessary for that Assessment Year. Considering the mandate of 10 ITA No. 4399 Mum 2018-Smt. Kanchan Gaurav Raimalani. decision of jurisdictional High Court in Hindustan Lever Ltd. Vs. R.B.
Wadkar (supra), we are of the view that the notice being beyond the four year from the end of relevant Assessment Year and does not comply with the requirement of proviso of section 147. Thus, the Assessing Officer has no jurisdiction to re-open the assessment concluded under section 143(3). Thus, we allowed the additional ground of appeal raised by assessee. Since we have allowed the additional ground of appeal raised by assessee. Therefore, the other grounds of appeal raised by assessee have become academic.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 13/11/2019.