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Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the assessee. The relevant assessment year is 2010-11. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-51, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) r.w.s. 153C of the Income Tax Act 1961, (the ‘Act’).
The grounds of appeal
filed by the assessee read as under:
1. The Ld. CIT(A) has erred in law and in facts in passing the order u/s 250 of the Act.
2. The Ld. CIT(A) has erred in facts and in law in confirming the disallowance of Short Term Capital Loss of Rs.5,35,71,250/- made by the AO on account of alleged fictitious transaction of Sale of Shares of M/s J.B. Diamonds Ltd.
3. The Ld. CIT(A) has erred in facts and in law in confirming the disallowance of Long Term Capital Loss of Rs.4,46,66,516/- made by the AO on account of alleged fictitious transaction of Sale of Shares of M/s J.B. Diamonds Ltd. 3. Briefly stated, the facts of the case are that a search action u/s 132 of the Act was carried out by the Investigation Wing of the Income Tax Department in the case of J.B. Diamond Group on 29.10.2010. The assessee was one of the partners of the erstwhile firm M/s J.B. Diamonds and subsequently became shareholder of the company M/s J.B. Diamonds Ltd. Consequent to the search, the Assessing Officer (AO) issued notice u/s 153C r.w.s. 153A dated 17.11.2011 to the assessee. In response to it, the assessee filed her return of income for the assessment year (AY) 2010-11 on 13.04.2012 declaring total income at Rs. Nil. The assessee had filed the original return of income u/s 139(1) on 29.09.2010 declaring total income at Rs. Nil and current year loss of Rs.2,72,77,830/-. The AO completed assessment u/s 143(3) r.w.s. 153C on 11.11.2013 at a total income of Rs.7,19,67,190/-. 4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A) with the following grounds: “1. The learned Assessing Officer has erred in disallowing Short Term Capital Loss of Rs.5,35,71,250/- and Long Term Capital Loss of Rs.4,46,66,516/- on Sale of Shares of M/s, J.B. Diamonds Ltd.
2. The learned Assessing Officer has erred in disallowing Long Term Capital Loss of Rs.4,46,66,516/- on Sale of Shares of M/s J.B. Diamonds Ltd.
The learned Assessing Officer has erred in disallowing the Setoff of Capital loss on sale of shares claimed against the Capital gains earned on sale of properties. 4. The Learned Assessing Officer has erred in not allowing set off of Business loss of Rs.10,19,975/- against long term capital gain of Rs.7,19,64,628/-. 5. The learned Assessing Officer has failed to appreciate the facts of the case and made additions on the basis of presumptions, surmises and conjectures. 6. The learned Assessing Officer has failed to follow principle of natural justice and made high pitch assessment without any base or any supporting evidences. 7. The learned Assessing Officer has failed to consider the detailed submissions given to her and passed order summarily without considering each and every contention of the assessee. 8. The appellant reserves his rights to add, amend or alter any of the grounds of appeal.”
4.1 The Ld. CIT(A) allowed the 4th ground of appeal and dismissed the 1st, 2nd, 3rd, 5th, 6th and 7th ground of appeal.
5. Before the Tribunal, the assessee has filed an application requesting for admission of the following additional ground of appeals:
1. The learned CIT(A) ought to have held that the assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 153C of the Act is void ab initio and bad in law.
2. Let CIT(A) ought to have held that Assessment Order passed by Assessing Officer u/s. 153C is bad in law for want of proper satisfaction notes recorded by the Assessing Officers.
3. On the facts and circumstances of the case and in law, the learned CIT(A) ought to have held that the assessment order passed by the Assessing Officer u/s. 143(3) r.w.s 153C of the Act is time barred and in violation of provisions of section 153 of the Act and hence, bad in law. 4. On the facts and circumstances of the case and in law, the learned CIT(A) ought to have held that the appointment made by the Assessing Officer of the Special Auditor is not in accordance with the provisions of section 142(2A) of the Act. 5.1 In application for admission of the above additional grounds of appeals, the assessee has submitted that since the assessment u/s 153C and the appointment of the Special Auditor itself is bad in law, the consequential assessment order passed by the AO suffers from the legal infirmity, bad in law and void ab initio. It is further stated that the assessee had not raised the above ground challenging the validity of the assessment order passed by the AO u/s 143(3) r.w.s. 153C before the Ld. CIT(A) for want of proper advice. It is also submitted that the above additional ground of appeal raises purely a question of law and no new facts are required to be investigated. Finally, stating that legal grounds going to the root of the validity of the assessment can be raised at any stage of appeal, the assessee submits that the above additional grounds of appeal may be admitted and adjudicated. 5.2 Before us, regarding the issue of validity of notice u/s 153C, the Ld. counsel of the assessee relied on the decision in Pepsi Foods P. Ltd. v. ACIT (2014) 367 ITR 112 (Delhi), Pepsico India Holdings P. Ltd. v. ACIT Mrs. Kalavati Surani (2015) 370 ITR 295 (Delhi), CIT v. M/s Arpit Land P. Ltd. (ITA No. 83 of 2014) & CIT v. M/s Ambit Realty Pvt. Ltd. (ITA No. 150 of 2014) (Bombay), ARN Infrastructure India Ltd. v. ACIT 394 ITR 569 (Delhi), CIT v. Sinhgad Technical Education Society 378 ITR 84 (Bombay) and CIT v. Sinhgad Technical Education Society (Civil Appeal No. 11080 of 2017) (SC). Also in support of his contentions that the assessment made by the AO is barred by limitation, the Ld. counsel relied on the decision in CIT v. BJN Hotels Ltd. (2016) 382 ITR 110 (Karn), order of the Tribunal in Shanti Lal Godawad v. ACIT 126 TTJ 135 and M/s Haldia Petrochemicals Ltd. v. CIT in for AY 2008-09 (ITAT, Kolkata). In support of his contentions regarding validity of special audit, the Ld. counsel relied on the decision in Sahara India (Firm) v. CIT (2008) 300 ITR 403 (SC), RPS Associates v. DIT (Inv) (2015) 280 CTR (All) 582, Alidhara Texpro Engg. P. Ltd. v. DCIT (2011) 332 ITR 115 (Guj), West Bengal State Coop Bank Ltd. v. JCIT (2004) 267 ITR 345 (Cal), order of the Tribunal in ITO v. Vilsons Particle Board Industries Ltd. (2017) 184 TTJ (Pune) 84 and M/s Jyoti Traders v. DCIT in IT(SS) 62/Mum/2008 and 111/Mum/2008 & others dated 20.05.201 (ITAT-Mumbai).
The Ld. DR, however, filed an application dated 19.07.2018 stating that certain details were called for from the AO and those details had not been received and therefore adjournment be given.