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Facts
The assessee, M/s Rukhmani Traders, filed its return of income for assessment year 2010-11. The Assessing Officer (AO) reopened the assessment based on information regarding fictitious profits and losses created by brokers misusing the client code modification (CCM) facility. The AO made additions to the income based on these allegations, which were upheld by the CIT(A).
Held
The Tribunal held that the reopening of the assessment for the second time was based on the same information as the first reassessment, which constituted a 'change of opinion' and 'review' of the assessment, not permissible under Section 147 of the Act. Consequently, the second reassessment proceedings were quashed.
Key Issues
Whether the second reassessment proceedings, based on the same information used in the first reassessment, are valid as it amounts to a 'change of opinion' and 'review' of the assessment.
Sections Cited
147, 151, 68, 133A, 143(1), 148, 143(3), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal has been preferred by the assessee against order dated 26.12.2023 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
1. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. CIT(A)/National Faceless Appeal Center (NFAC) has erred in CIT(A)/National Faceless Appeal Center (NFAC) has erred in CIT(A)/National Faceless Appeal Center (NFAC) has erred in passing the order, in the first appellate proceedings, ex passing the order, in the first appellate proceedings, ex passing the order, in the first appellate proceedings, ex-parte, without affording adequate opportunity to the assessee firm, to without affording adequate opportunity to the assessee firm, to without affording adequate opportunity to the assessee firm, to present its case and make appropriate submissions. The action of present its case and make appropriate submissions. The action of present its case and make appropriate submissions. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. the facts of the case. Relief may be please be granted by Relief may be please be granted by quashing the entire order passed by the Id. CIT(A)/NFAC, being quashing the entire order passed by the Id. CIT(A)/NFAC, being quashing the entire order passed by the Id. CIT(A)/NFAC, being against the principles of natural justice. against the principles of natural justice.
2. In the facts and circumstan In the facts and circumstances of the case and in law, Id. ces of the case and in law, Id. CIT(A)/NFAC has erred in, confirming the action of the Id. CIT(A)/NFAC has erred in, confirming the action of the Id. CIT(A)/NFAC has erred in, confirming the action of the Id. AO in reopening the case of the assessee firm under Section 147 of the reopening the case of the assessee firm under Section 147 of the reopening the case of the assessee firm under Section 147 of the Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and unjustified, arbitrary and against the facts of the case. Relief may against the facts of the case. Relief may be please be granted by quashing the entire reassessment be please be granted by quashing the entire reassessment be please be granted by quashing the entire reassessment proceedings initiated by the Id. AO and confirmed by the Id. proceedings initiated by the Id. AO and confirmed by the Id. proceedings initiated by the Id. AO and confirmed by the Id. CIT(A)/NFAC. CIT(A)/NFAC.
3. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred i CIT(A)/NFAC has erred in, confirming the action of the Id. n, confirming the action of the Id. AO in reopening the case of the assessee firm, without obtaining reopening the case of the assessee firm, without obtaining reopening the case of the assessee firm, without obtaining approval, in accordance with law, under Section 151 of the approval, in accordance with law, under Section 151 of the approval, in accordance with law, under Section 151 of the Income Tax Act, 1961. The action of the Id. Income Tax Act, 1961. The action of the Id. CIT(A)/NFAC is illegal, CIT(A)/NFAC is illegal, unjustified, unjustified, arbitrary and against the facts of the case. Relief may the facts of the case. Relief may be please be granted by quashing the entire reassessment be please be granted by quashing the entire reassessment be please be granted by quashing the entire reassessment proceedings initiated by the Id. AO and confirmed by the Id. proceedings initiated by the Id. AO and confirmed by the Id. proceedings initiated by the Id. AO and confirmed by the Id. CIT(A)/NFAC. CIT(A)/NFAC.
4. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. In the facts and circumstances of the case and in law, Id. CIT(A)/NFAC has erred in CIT(A)/NFAC has erred in confirming the action of Id. AO in confirming the action of Id. AO in making addition of Rs.75,48,010/ making addition of Rs.75,48,010/- to the income of the assessee to the income of the assessee firm, under Section 68, of the Income Tax Act, firm, under Section 68, of the Income Tax Act, 1961. The action of 1961. The action of the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the Id. CIT(A)/NFAC is illegal, unjustified, arbitrary and against the facts of the case. the facts of the case. Relief may be please be granted by deleting Relief may be please be granted by deleting the entire addition made by Id. AO and confirmed by Id. the entire addition made by Id. AO and confirmed by Id. the entire addition made by Id. AO and confirmed by Id. CIT(A)/NFAC. CIT(A)/NFAC.
Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its Briefly stated facts of the case are that the assessee filed its return of income for the year under consideration on 15.10.2010 return of income for the year under consideration on 15.10.2010 return of income for the year under consideration on 15.10.2010 declaring total income at Rs.16,92,95,420/ otal income at Rs.16,92,95,420/-. The assessee is a . The assessee is a partnership firm deriving income from dealing in shares and partnership firm deriving income from dealing in shares and partnership firm deriving income from dealing in shares and securities and dealing in commodities derivatives. The return of securities and dealing in commodities derivatives. The return of securities and dealing in commodities derivatives. The return of income filed by the assessee was processed u/s 143(1) of the income filed by the assessee was processed u/s 143(1) of the income filed by the assessee was processed u/s 143(1) of the Income-tax Act, 1961 (in short ‘the Act’). 61 (in short ‘the Act’).
2.1 Subsequently, the Assessing Officer received information from Subsequently, the Assessing Officer received information from Subsequently, the Assessing Officer received information from the Director of Income the Director of Income-tax (I &CI), Mumbai, wherein it was stated wherein it was stated that assessee had received fictitious profit and losses created by that assessee had received fictitious profit and losses created by that assessee had received fictitious profit and losses created by some brokers by misusing some brokers by misusing client code modification code modification (CCM) facilities provided for dealing provided for dealing in future and options (F&O) segment in future and options (F&O) segment on National Stock Exchange (NSE) during March, 2010. In view of on National Stock Exchange (NSE) during March, 2010. In view of on National Stock Exchange (NSE) during March, 2010. In view of the information, the Assessing Officer recorded reasons to believe the information, the Assessing Officer recorded reasons to believe the information, the Assessing Officer recorded reasons to believe that income escapement assessment that income escapement assessment and accordingly he issued and accordingly he issued notice u/s 148 of the Act on 01.06.2015 notice u/s 148 of the Act on 01.06.2015. During the course of uring the course of reassessment proceedings reassessment proceedings the Assessing Officer issued various the Assessing Officer issued various notices and the assessee responded the same. After considering the notices and the assessee responded the same. After considering the notices and the assessee responded the same. After considering the submissions of the assessee of the assessee, the Assessing Officer accepted the sing Officer accepted the returned income filed by the assessee vide its order dated returned income filed by the assessee vide its order dated returned income filed by the assessee vide its order dated 22.12.2016 passed u/s 147 r.w.s. 143(3) of the Act. 22.12.2016 passed u/s 147 r.w.s. 143(3) of the Act. 22.12.2016 passed u/s 147 r.w.s. 143(3) of the Act.
2.2 Thereafter, one more information was received from the office one more information was received from the office one more information was received from the office of the Dy. Director of of the Dy. Director of Income-tax (Investigation), Kolkata olkata, where he referred to a survey u/s 133A of the Act carried out by the referred to a survey u/s 133A of the Act carried out by the referred to a survey u/s 133A of the Act carried out by the Investigation Wing of Income of Income-tax Department, Ahmadabad tax Department, Ahmadabad at the premises of the brokers and few of their clients on 23.03.2015. The premises of the brokers and few of their clients on 23.03.2015. The premises of the brokers and few of their clients on 23.03.2015. The facility of client code information further refers to the misuse of the information further refers to the misuse of the facility of modification(CCM) for creating fictitious losses/profit for creating fictitious losses/profit by the brokers for their client for their clients. According to the information . According to the information, the assessee was one of the beneficiaries of the client code modification. In view was one of the beneficiaries of the client code modification. In view was one of the beneficiaries of the client code modification. In view of the information, the Asse of the information, the Assessing again issued notice u/s 148 of the ssing again issued notice u/s 148 of the Act dated 06.04.2017. In compliance the assessee requested to Act dated 06.04.2017. In compliance the assessee requested to Act dated 06.04.2017. In compliance the assessee requested to consider the original return of income filed on 15.10.2010 as return consider the original return of income filed on 15.10.2010 as consider the original return of income filed on 15.10.2010 as filed in response to the notice u/s 148 of the Act dated 06.04.2017. response to the notice u/s 148 of the Act dated 06.04.2017. response to the notice u/s 148 of the Act dated 06.04.2017. Thereafter, the Assessing Officer provided Assessing Officer provided reasons to believe that reasons to believe that income escaped assessment. The assessee filed objection against income escaped assessment. The assessee filed objection against income escaped assessment. The assessee filed objection against the reopening which was duly disposed off by way of order dated the reopening which was duly disposed off by way of order dated the reopening which was duly disposed off by way of order dated 03.11.2017. During the course of the reassessment proceedings, 03.11.2017. During the course of the reassessment proceedings, 03.11.2017. During the course of the reassessment proceedings, the assessee submitte submitted that the assessee had entered d that the assessee had entered to transactions of commodity derivatives with two brokers M/s Kissan transactions of commodity derivatives with two brokers M/s Kissan transactions of commodity derivatives with two brokers M/s Kissan Commodities Pvt. Ltd. and M/s Tejas Commodities Pvt. Ltd. and not Commodities Pvt. Ltd. and M/s Tejas Commodities Pvt. Ltd. Commodities Pvt. Ltd. and M/s Tejas Commodities Pvt. Ltd. entered into transaction entered into transactions with the brokers listed in the information with the brokers listed in the information provided by the Assessing Officer. However, the Assessing Officer provided by the Assessing Officer. However, the Assessing Officer provided by the Assessing Officer. However, the Assessing Officer rejected the contention of the assessee and treated the profit of rejected the contention of the assessee and treated the profit of rejected the contention of the assessee and treated the profit of Rs.1,33,76,170/- from the National Multi Commodity Exchange from the National Multi Commodity Exchange from the National Multi Commodity Exchange (NMCE) through the s the sub-brokers namely M/s Dignity Tie Up, M/s Dignity Tie Up, Gulistan Vanjiya, M/as Jackson Investment and M/s Vision Gulistan Vanjiya, M/as Jackson Investment and M/s Vision Gulistan Vanjiya, M/as Jackson Investment and M/s Vision Enterprises as unexplained cash credit in Enterprises as unexplained cash credit in terms of section 68 of the terms of section 68 of the Act. Further, the Assessing Officer Act. Further, the Assessing Officer also disallowed loss of disallowed loss of Rs.75,48,010/- from the commodit from the commodity transaction and added the y transaction and added the same to the total income same to the total income invoking section 68 of the Act. 68 of the Act.
On further appeal, the assessee challenged validity of the On further appeal, the assessee challenged validity of the On further appeal, the assessee challenged validity of the reassessment proceedings as well as addition on merit. reassessment proceedings as well as addition on merit. reassessment proceedings as well as addition on merit.
4. Before the Ld. CIT(A), the assessee filed complet Before the Ld. CIT(A), the assessee filed complet Before the Ld. CIT(A), the assessee filed complete statement of the facts however in response to few notices issued the assessee the facts however in response to few notices issued the assessee the facts however in response to few notices issued the assessee sought adjournment which was declined and the Ld. CIT(A) passed sought adjournment which was declined and the Ld. CIT(A) passed sought adjournment which was declined and the Ld. CIT(A) passed the order on the basis of material the order on the basis of material available on record and upheld on record and upheld the addition made by the Assessing Officer obs the addition made by the Assessing Officer observing as under: erving as under:
“10.2 Grounds of Appeal
No. 2 to 4 pertains to addition of Rs. 7548010/ 10.2 Grounds of Appeal No. 2 to 4 pertains to addition of Rs. 7548010/ 10.2 Grounds of Appeal No. 2 to 4 pertains to addition of Rs. 7548010/- made by the AO u/s 68 of the Act vide order dated 22.12.2017. According to made by the AO u/s 68 of the Act vide order dated 22.12.2017. According to made by the AO u/s 68 of the Act vide order dated 22.12.2017. According to AO, the Appellant has obtained bogus loss on account of share trading. As AO, the Appellant has obtained bogus loss on account of share trading. As AO, the Appellant has obtained bogus loss on account of share trading. As per AO, the broke per AO, the brokers confirmed such bogus losses. The Appellant failed to rs confirmed such bogus losses. The Appellant failed to submit any explanation regarding such losses. During the course of submit any explanation regarding such losses. During the course of submit any explanation regarding such losses. During the course of appellate proceedings, various notices were issued to the appellant but the appellate proceedings, various notices were issued to the appellant but the appellate proceedings, various notices were issued to the appellant but the Appellant failed to furnish any reply to explain the loss Appellant failed to furnish any reply to explain the loss earned on bogus earned on bogus trading and to counter the findings of the AO. I have noticed that AO has trading and to counter the findings of the AO. I have noticed that AO has trading and to counter the findings of the AO. I have noticed that AO has correctly made additions in the absence of any reply from the appellant. correctly made additions in the absence of any reply from the appellant. correctly made additions in the absence of any reply from the appellant. Keeping in view of this, these grounds of appeal are dismissed Keeping in view of this, these grounds of appeal are dismissed Keeping in view of this, these grounds of appeal are dismissed.”
5. We have heard rival subm We have heard rival submission of the parties and perused the ission of the parties and perused the relevant material on record. Before us, the Ld. counsel for the relevant material on record. Before us, the Ld. counsel for the relevant material on record. Before us, the Ld. counsel for the assessee explained that part of the notices sent by the Ld. CIT(A) assessee explained that part of the notices sent by the Ld. CIT(A) assessee explained that part of the notices sent by the Ld. CIT(A) were went to the ‘spam spam’ folder of the e-mail box, box, therefore, the Chartered Accountant l Chartered Accountant looking after the appeal could not timely ooking after the appeal could not timely respond, however he submitted that entire details however he submitted that entire details was was provided in statement of the facts statement of the facts and written submission before the Ld. CIT(A). and written submission before the Ld. CIT(A).
5.1 Before us, the Ld. counsel for the assessee referred to Ground Before us, the Ld. counsel for the assessee referred to Ground Before us, the Ld. counsel for the assessee referred to Ground No. 2 of the appeal challenging the reassessment proceedings on appeal challenging the reassessment proceedings on appeal challenging the reassessment proceedings on the ground that the issue of client code modification arising from the ground that the issue of client code modification arising from the ground that the issue of client code modification arising from the survey carried out by the Investigation Wing of the Ahmadabad the survey carried out by the Investigation Wing of the Ahmadabad the survey carried out by the Investigation Wing of the Ahmadabad was duly examined in the first reassessment proceedings/order was duly examined in the first reassessment proceedings/order was duly examined in the first reassessment proceedings/order dated 22.12.2016 and therefore, reopening of the assessments for 12.2016 and therefore, reopening of the assessments for 12.2016 and therefore, reopening of the assessments for second time, based on the very same material based on the very same material, amounts to amounts to ‘change of opinion’ and ‘review review’ of the assessment by the AO, by the AO, which is not permitted under the law. The Ld. counsel referred to the permitted under the law. The Ld. counsel referred to the permitted under the law. The Ld. counsel referred to the assessment order dated 22.12.2016 wherein the Assessing Officer order dated 22.12.2016 wherein the Assessing Officer order dated 22.12.2016 wherein the Assessing Officer has referred to the information related to the client code has referred to the information related to the client code has referred to the information related to the client code modification. The relevant part is reproduced as under: modification. The relevant part is reproduced as under: modification. The relevant part is reproduced as under:
“2. In the mean time, incriminating information related to assessee In the mean time, incriminating information related to assessee In the mean time, incriminating information related to assessee has been received fr has been received from the director of Income Tax (Intell. & CR. Inv.), om the director of Income Tax (Intell. & CR. Inv.), Mumbai vide letter no. DIT(I&CI)/CCM/2014 Mumbai vide letter no. DIT(I&CI)/CCM/2014-15 dated 27.02.2015 15 dated 27.02.2015 that fictitious profits and losses were created by some brokers by that fictitious profits and losses were created by some brokers by that fictitious profits and losses were created by some brokers by misusing the client code modification facility in F&0 segment on NSE misusing the client code modification facility in F&0 segment on NSE misusing the client code modification facility in F&0 segment on NSE during March, 2010. The assessee is a beneficiary, availing the March, 2010. The assessee is a beneficiary, availing the March, 2010. The assessee is a beneficiary, availing the transaction/s of non transaction/s of non-genuine losses and profits created by the brokers genuine losses and profits created by the brokers by using the facility of client code modification thus reducing their by using the facility of client code modification thus reducing their by using the facility of client code modification thus reducing their taxable income to the extent of Rs. taxable income to the extent of Rs. 1,94,93,083/- for the FY 2009 FY 2009-10 relevant to the AY 2010 relevant to the AY 2010-11.” 5.2 He further referred to the para 4 and 5 of the assessment He further referred to the para 4 and 5 of the assessment He further referred to the para 4 and 5 of the assessment order wherein the Assessing Officer has accepted the returned order wherein the Assessing Officer has accepted the returned order wherein the Assessing Officer has accepted the returned income filed by the assessee after considering the submission of the income filed by the assessee after considering the submission of the income filed by the assessee after considering the submission of the assessee and explanati assessee and explanation in respect of client code modification. The on in respect of client code modification. The relevant part of the reassessment order dated 22.12.2016 are relevant part of the reassessment order dated 22.12.2016 are relevant part of the reassessment order dated 22.12.2016 are reproduced as under: reproduced as under:
In regards to this, notice us 148 has been issued to the assessee on In regards to this, notice us 148 has been issued to the assessee on In regards to this, notice us 148 has been issued to the assessee on 01.06.2015. The assessee did not reply. A letter for remin 01.06.2015. The assessee did not reply. A letter for reminder for filling der for filling of return u/s 148 of the IT Act, 1961 was issued and duly served of return u/s 148 of the IT Act, 1961 was issued and duly served of return u/s 148 of the IT Act, 1961 was issued and duly served upon the assessee. In response to this, the assessee has filed a reply, upon the assessee. In response to this, the assessee has filed a reply, upon the assessee. In response to this, the assessee has filed a reply, requesting to treat the return of income filed for A.Y. 2010 requesting to treat the return of income filed for A.Y. 2010 requesting to treat the return of income filed for A.Y. 2010-11 on 28.05.2011 to be the return filed fo 28.05.2011 to be the return filed for the purpose of section 148 of the r the purpose of section 148 of the Income Tax Act, 1961. Income Tax Act, 1961.
Then the assessee requested for the reasons for reopening of 4. Then the assessee requested for the reasons for reopening of 4. Then the assessee requested for the reasons for reopening of assessment, which have supplied to the assessee vide letter dated: assessment, which have supplied to the assessee vide letter dated: assessment, which have supplied to the assessee vide letter dated: 23.08.2016. Accordingly, notice u/s 143(2) has been issued and 23.08.2016. Accordingly, notice u/s 143(2) has been issued and 23.08.2016. Accordingly, notice u/s 143(2) has been issued and served upon the assessee. The assessee is then served upon with the ed upon the assessee. The assessee is then served upon with the ed upon the assessee. The assessee is then served upon with the notice us 142(1) dated: 19.10.2016 asking for the required details. notice us 142(1) dated: 19.10.2016 asking for the required details. notice us 142(1) dated: 19.10.2016 asking for the required details. In response to the said notices, Shri Manoj Sharma, CA being the In response to the said notices, Shri Manoj Sharma, CA being the In response to the said notices, Shri Manoj Sharma, CA being the Authorised Representative of the assessee, attended from ti Authorised Representative of the assessee, attended from ti Authorised Representative of the assessee, attended from time to time, furnished details and also gave clarifications with respect to the furnished details and also gave clarifications with respect to the furnished details and also gave clarifications with respect to the return of income and submission made and the case has been return of income and submission made and the case has been return of income and submission made and the case has been discussed with him. discussed with him.
Subject to the above, the total income of the assessee is computed 5. Subject to the above, the total income of the assessee is computed 5. Subject to the above, the total income of the assessee is computed as under: Particulars Particulars Amounts (Rs.) Amount (Rs.) Amount (Rs.) Income Income from from 16,92,85,416 16,92,85,416 Business (As per Business (As per computation) computation) Total Taxable Income Total Taxable Income 16,92,95,416 16,92,95,416 Rounded off u/s 288A Rounded off u/s 288A 16,92,95,420 16,92,95,420 5.3 Before us, the Ld. counsel for the assessee also referred to the Before us, the Ld. counsel for the assessee also referred to the Before us, the Ld. counsel for the assessee also referred to the submission made by the assessee submission made by the assessee during the first reassessment during the first reassessment proceedings, wherein he referred that the information was based on wherein he referred that the information was based on wherein he referred that the information was based on the inquiry and Investigation carried out by the Investigation wing ry and Investigation carried out by the Investigation wing ry and Investigation carried out by the Investigation wing of the Ahmadabad. The relevant part of the reply to the notice of the of the Ahmadabad. The relevant part of the reply to the notice of the of the Ahmadabad. The relevant part of the reply to the notice of the AO dated 16.12.2016 i AO dated 16.12.2016 is reproduced as under:
“1.14 The alleged CCM was indulged by the brokers and the assessee 1.14 The alleged CCM was indulged by the brokers and the assessee 1.14 The alleged CCM was indulged by the brokers and the assessee had no hand in it. It may have been a genuine mistake on the part of had no hand in it. It may have been a genuine mistake on the part of had no hand in it. It may have been a genuine mistake on the part of the broker as the bills reflected the transactions ordered by him to the the broker as the bills reflected the transactions ordered by him to the the broker as the bills reflected the transactions ordered by him to the brokers. The opinion fo The opinion formed by your honour is based merely on rmed by your honour is based merely on the investigations conducted by the ADIT (Inv.), Ahmedabad and the investigations conducted by the ADIT (Inv.), Ahmedabad and the investigations conducted by the ADIT (Inv.), Ahmedabad and surveys conducted by the department on brokers surveys conducted by the department on brokers. It is actually . It is actually the belief of the investigation wing of the department in Ahmedabad the belief of the investigation wing of the department in Ahmedabad the belief of the investigation wing of the department in Ahmedabad on which your honour ha on which your honour has relied upon to form your opinion. In fact, s relied upon to form your opinion. In fact, your honour do not have any tangible material to form a belief that your honour do not have any tangible material to form a belief that your honour do not have any tangible material to form a belief that income has escaped assessment other than the one sided analysis of income has escaped assessment other than the one sided analysis of income has escaped assessment other than the one sided analysis of the the the data data data and and and investigation investigation investigation conducted conducted conducted by by by the the the ADIT ADIT ADIT (Inv.), (Inv.), (Inv.), Ahmemdabad.” ” 5.4 Further, the assessee also intimated that it was not having rther, the assessee also intimated that it was not having rther, the assessee also intimated that it was not having role in the client code role in the client code modification. The relevant part of his modification. The relevant part of his submission is reproduced as under: submission is reproduced as under:
1.10 The mere fact that the brokers were allegedly indulging in The mere fact that the brokers were allegedly indulging in The mere fact that the brokers were allegedly indulging in malpractices in the form of malpractices in the form of CM does not make the transactions entered not make the transactions entered into by the assesse as not genuine. What were the brokers doing at into by the assesse as not genuine. What were the brokers doing at into by the assesse as not genuine. What were the brokers doing at the back of the assessee in their offices was not known to the assesse the back of the assessee in their offices was not known to the assesse the back of the assessee in their offices was not known to the assesse and it had no clue as to what the brokers were doing with regard to and it had no clue as to what the brokers were doing with regard to and it had no clue as to what the brokers were doing with regard to the transactions the transactions executed on its behalf particularly when it did not executed on its behalf particularly when it did not notice any difference or wrong doing by the brokers during the course notice any difference or wrong doing by the brokers during the course notice any difference or wrong doing by the brokers during the course of entire transactions. It was merely concerned with whether the of entire transactions. It was merely concerned with whether the of entire transactions. It was merely concerned with whether the transactions as ordered by it were executed or not and whether the transactions as ordered by it were executed or not and whether the transactions as ordered by it were executed or not and whether the payments there against were received by it from the brokers. ayments there against were received by it from the brokers. ayments there against were received by it from the brokers. 1.11 It was neither possible for it to verify the information about CCM It was neither possible for it to verify the information about CCM It was neither possible for it to verify the information about CCM sitting at its place of business nor any reason to be suspicious about sitting at its place of business nor any reason to be suspicious about sitting at its place of business nor any reason to be suspicious about the whole transactions to make roving enquiries when the whole transactions to make roving enquiries when it had duly it had duly received all the relevant bills and its due payments. It never had any received all the relevant bills and its due payments. It never had any received all the relevant bills and its due payments. It never had any doubts about the authenticity of the transactions entered into by it as doubts about the authenticity of the transactions entered into by it as doubts about the authenticity of the transactions entered into by it as the transactions reflected in the bills were as per the orders placed by the transactions reflected in the bills were as per the orders placed by the transactions reflected in the bills were as per the orders placed by it. Also, with the limited r it. Also, with the limited resources and powers at its disposal, it could esources and powers at its disposal, it could not have checked the transactions not have checked the transactions with the National Stock not have checked the transactions with the National Stock with the National Stock Exchange/other exchanges data nor could have come to know Exchange/other exchanges data nor could have come to know Exchange/other exchanges data nor could have come to know about the alleged malpractices engaged by the brokers since the contract the alleged malpractices engaged by the brokers since the contract the alleged malpractices engaged by the brokers since the contract notes issued by the b notes issued by the brokers do not show that the transactions in the rokers do not show that the transactions in the bills have been due to client code modification. bills have been due to client code modification. 1.12 It is interesting to know that the department has sought to tax It is interesting to know that the department has sought to tax It is interesting to know that the department has sought to tax the profit earned by the assessee due to alleged CCM and in house the profit earned by the assessee due to alleged CCM and in house the profit earned by the assessee due to alleged CCM and in house investigation done by th investigation done by the department without recourse to the assesse e department without recourse to the assesse when in fact the assessee had shown the same as its income while when in fact the assessee had shown the same as its income while when in fact the assessee had shown the same as its income while filing its Return of Income and paid taxes thereon. filing its Return of Income and paid taxes thereon.” 5.5 Thus, in view of the above submission, the Assessing Officer in view of the above submission, the Assessing Officer in view of the above submission, the Assessing Officer accepted the returned income in first reassessment proceedings. In accepted the returned income in first reassessment proceedings. In accepted the returned income in first reassessment proceedings. In second reassessment proceedings, the order has been passed by the second reassessment proceedings, the order has been passed by the second reassessment proceedings, the order has been passed by the Assessing Officer on 22.12.2017 Assessing Officer on 22.12.2017, wherein he has reproduced has reproduced the information on the basis of which he recorded reasons to believe rmation on the basis of which he recorded reasons to believe rmation on the basis of which he recorded reasons to believe that income escaped assessment that income escaped assessment. For ready reference or ready reference, said information is reproduced as under: information is reproduced as under:
"In this case, specific information was received from the Office of the "In this case, specific information was received from the Office of the "In this case, specific information was received from the Office of the DDITflnv), DDITflnv), unit-3(l), unit 3(l), Kolkata Kolkata vide vide letter letter dated dated No. No. 17 date 17/03/2017, As per DDIT(Inv)/Kol/NMCE/Report/ 2016 DDIT(Inv)/Kol/NMCE/Report/ 2016-17 date 17/03/2017, information, a survey u/s 133A was carried out by the information, a survey u/s 133A was carried out by the information, a survey u/s 133A was carried out by the Ahmedabad Investiga Ahmedabad Investigation Wing at the premises of brokers and tion Wing at the premises of brokers and few of their clients across Indiaon 23,03.2015 few of their clients across Indiaon 23,03.2015, During survey , During survey proceedings, the brokers confirmed that they have misused the facility proceedings, the brokers confirmed that they have misused the facility proceedings, the brokers confirmed that they have misused the facility of client code modification in order to createfictiious losses/'profits for of client code modification in order to createfictiious losses/'profits for of client code modification in order to createfictiious losses/'profits for their various clients. The brokers have also admitted that they various clients. The brokers have also admitted that they various clients. The brokers have also admitted that they received commission on their various clients. The brokers have also received commission on their various clients. The brokers have also received commission on their various clients. The brokers have also admitted admitted admitted that that that they they they received received received commission commission commission on on on the the the amount amount amount of of of losses/profits for transferring such losses/profits to their clients, As losses/profits for transferring such losses/profits to their clients, As losses/profits for transferring such losses/profits to their clients, As per ITD system, some of the entities/beneficiary had not filed their er ITD system, some of the entities/beneficiary had not filed their er ITD system, some of the entities/beneficiary had not filed their return of income and did not show income earned through return of income and did not show income earned through return of income and did not show income earned through commodities profit for concerned assessment year, . commodities profit for concerned assessment year, .
2. As per the information received, the assessee M/s RUKHMANI 2. As per the information received, the assessee M/s RUKHMANI 2. As per the information received, the assessee M/s RUKHMANI TRADERS, pan pan AALFT1619R is one of the beneficiaries who have AALFT1619R is one of the beneficiaries who have made the following transactions : made the following transactions : TOTAL BUYING TOTAL SELLING TOTAL SELLING P/L BOOKED UB BROKER UB BROKER 12177670 4629660 4629660 -7548010 Anjani Textile 5814000 13350320 13350320 7536320 Dignity Tie Up Dignity Tie Up 12202500 13683400 13683400 1480900 Gulistan Vanijya Vanijya 67414300 70314800 70314800 2900500 Jackson Investment Jackson Investment 15441900 16900350 16900350 1458450 Vision Enterprise Vision Enterprise 136250 NA Only buying Arman Trading Arman Trading 447500 NA Only buying Handsome Merchant Pvt Ltd. Handsome Merchant Pvt Ltd. All the above mentioned brokers have been suspended All the above mentioned brokers have been suspended All the above mentioned brokers have been suspended by National Multi Commodities Exchange as it found to be involved in National Multi Commodities Exchange as it found to be involved in National Multi Commodities Exchange as it found to be involved in creating artificial trading by misuse of National Multi Commodities creating artificial trading by misuse of National Multi Commodities creating artificial trading by misuse of National Multi Commodities Exchange platform. On the basis, it is concluded that these Exchange platform. On the basis, it is concluded that these Exchange platform. On the basis, it is concluded that these companies are dummy entities, which have booked bogus companies are dummy entities, which have booked bogus companies are dummy entities, which have booked bogus loss to facilitate profit/loss to the beneficiaries. The assessee has earned facilitate profit/loss to the beneficiaries. The assessee has earned facilitate profit/loss to the beneficiaries. The assessee has earned bogus profit of Rs.1,33,76,170/ profit of Rs.1,33,76,170/- and bogus loss of Rs.75,48,010/ and bogus loss of Rs.75,48,010/- through client code modification facility….” through client code modification facility….” 5.7 On perusal of the above On perusal of the above, it is clear that this information in it is clear that this information in second reassessment proceedings is based on the survey u/s 133A second reassessment proceedings is based on the survey u/s 133A second reassessment proceedings is based on the survey u/s 133A of the Act carried out by the Investigation Wing of the Ahmadabad of the Act carried out by the Investigation Wing of the Ahmadabad of the Act carried out by the Investigation Wing of the Ahmadabad on 23.03.2015. On perusal of the information on 23.03.2015. On perusal of the information in relation to first in relation to first reassessment proceedings also reassessment proceedings also, we find that same is also ba we find that same is also based on the survey carried out in the month of March by the Investigation the survey carried out in the month of March by the Investigation the survey carried out in the month of March by the Investigation Wing, Ahmadabad. In view of the above factual observations, it is Wing, Ahmadabad. In view of the above factual observation Wing, Ahmadabad. In view of the above factual observation evident that same information from the Investigation Wing of the evident that same information from the Investigation Wing of the evident that same information from the Investigation Wing of the Ahmadabad has been forwarded for the first time by the Ahmadabad has been forwarded for the first time by t Ahmadabad has been forwarded for the first time by t Investigation Wing, Mumbai and in second by the Investigation Investigation Wing, Mumbai and in second by the Investigation Investigation Wing, Mumbai and in second by the Investigation Wing, Kolkata. Since, the same information has already been Wing, Kolkata. Since, the same information has already been Wing, Kolkata. Since, the same information has already been examined and assessment on assessment on the basis of which was was completed by the Assessing Officer on 22.12.2016 the Assessing Officer on 22.12.2016 , therefore, reopening of the therefore, reopening of the assessment order on the sessment order on the basis of same information, is based on the ‘change of opinion’ and amounts to and amounts to ‘review’ of the assessment order the assessment order, which is not permitted under the provisions of section 147 of the is not permitted under the provisions of section 147 of the is not permitted under the provisions of section 147 of the Act. Accordingly, the second reassessment proceedings initiated by Act. Accordingly, the second reassessment proceedings initiated by Act. Accordingly, the second reassessment proceedings initiated by the Assessing Officer by way of notice u/s 148 of the Act dated the Assessing Officer by way of notice u/s 148 of the Act dated the Assessing Officer by way of notice u/s 148 of the Act dated 06.04.2017 is void-ab ab-initio and not sustainable in law. Therefo and not sustainable in law. Therefore, the reassessment order dated 22.12.2017 is accordingly quashed. the reassessment order dated 22.12.2017 is accordingly quashed. the reassessment order dated 22.12.2017 is accordingly quashed. Since, we have already quashed the reassessment order, we are not Since, we have already quashed the reassessment order Since, we have already quashed the reassessment order required to adjudicate upon merit of the addition. required to adjudicate upon merit of the addition.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.