ANUP HIRAWAT,KOLKATA vs. INCOME TAX OFFICER, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC”, BENCH KOLKATA

BEFORE SHRI S. S. GODARA, JM आयकर अपीलसं./I.T.A No.1522/Kol/2019 (�नधा�रण वष� / Assessment Year: 2010-11) Anup Hirawat Vs. ITO, Ward – 34(2), Kolkata Hirawat Brothers, Shop No. 5-6, 196 Old Chaina Bazar Street, Kolkata-700 001. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ABUPH 4071 P (Appellant) .. (Respondent)

Appellant by : Shri Subash Agarwal, Advocate Respondent by : Shri Jayanta Khanra, JCIT, Sr. DR सुनवाईक�तार�ख/ Date of Hearing : 23/12/2019 घोषणाक�तार�ख/Date of Pronouncement : 31/12/2019 आदेश / O R D E R This assessee’s appeal for assessment year 2010-11 arises against the Commissioner of Income Tax (A)-10, Kolkata dated 02.04.2019 passed in case no.996/CIT(A)-10/W34(2)/2010-11/2017/18/Kol involving proceedings u/s 143(3)/147 of the Income Tax Act, 1961; in short ‘the Act’.

Heard both the parties. Case files perused.

“The assessee filed his return of income for the assessment year 2010-11 on 05.01.2011 electronically declaring total income of Rs 310180/-. The return was processed under section 143(1) on 03.05.2011. Information was received from the DIT (I & CI), Mumbai vide his letter bearing No. DIT(I&CI) /CCN| /2014-15 dated 27.02.2015 that some brokers by misusing the client code modification facility in F&O segment on NSE during March,2010 created fictitious profits and losses and transferred the same to their clients as per the requirement and earned commission: The clients had taken fictious losses to set off against their profits with a

I.T.A No.1522/Kol/2019 Anup Hirawat view to reduce their tax liability. Some of the clients also took fictious profits to cover up their undisclosed income or to set off these profits against huge losses. The details of such client code modification transactions have been provided in a CD. As per the details contained in the CD, fictious loss (-) 175390/- was availed by the assessee through client code modification. However, as per the return submitted by the assessee, neither any capital gain nor any capital loss was disclosed for FY 2009-10 relevant to the AY 2010-11. In view of the information received from the Directors, the assessee ought to have utilized his undisclosed fund for transaction of shares through which he has availed the Long Term Capital Loss of Rs. 175390/- by such client code modification. As no such capital gain or loss was disclosed by the assessee in his return, I have reason to believe that undisclosed income of the assessee has escaped assessment in terms of clause (b) of explanation 2 to section 147 of the Income Tax Act, 1961. Proposal in Form No. 10 is sent to the Pr. CIT-12, Kolkata seeking his kind approval for issuing notice under section 148 for the A.Y. 2010-11 to the assessee.” 3. Suffice to say, learned departmental representative fails to rebut the clinching fact that the Assessing Officer has himself made it very very clear that the assessee had not derived or disclosed any capital gains or losses. There is further no indication that the amount in question of Rs. 1,75,390/- assessee’s undisclosed income which had escaped assessment from being assessed. Case law in Hindustan Lever Ltd. vs R.B. Wadkar (2004) 137 TAXMAN 479 (Bombay) held long back that reopening reasons have to be read as such without any scope of further improvement therein in latter stages. Their lordship detailed discussion to this effect reads as under:

“20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded Page | 2

I.T.A No.1522/Kol/2019 Anup Hirawat by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. 21. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of proviso to section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside.”

I.T.A No.1522/Kol/2019 Anup Hirawat 5. This assessee’s appeal is allowed

Order is pronounced in the open court on 31.12.2019.

Sd/- (S. S. Godara) JUDICIAL MEMBER कोलकाता /Kolkata; �दनांक/ Date: 31/12/2019 (Biswajit, Sr.PS) आदेशक���त�ल�पअ�े�षत/Copy of the Order forwarded to : 1. The Appellant - Anup Hirawat. 2. The Respondent- ITO, Ward – 34(2), Kolkata. आयकरआयु�त(अपील) / The CIT(A), Kolkata [sent through email] 3. आयकरआयु�त/ CIT 4. 5. �वभागीय��त�न�ध, आयकरअपील�यअ�धकरण, कोलकाता/ DR, ITAT, Kolkata [sent through email] गाड�फाईल / Guard file. 6. स�या�पत��त