MANSUKH ARJANBHAI SUREJA,MUMBAI vs. DCIT, CIRCLE 42(1)(1), MUMBAI

ITA 4348/MUM/2023Status: DisposedITAT Mumbai23 August 2024AY 2011-127 pages

AI SummaryN/A

Facts

The assessee filed two appeals challenging reassessment proceedings for AYs 2011-12 and 2012-13, where additions were made regarding alleged fictitious capital gains from transactions in shares of a penny stock company, M/s Nivyah Infrastructure & Telecom Services Ltd. The reassessment was initiated based on information from the Investigation Wing. The assessee contended that the Assessing Officer failed to apply his mind and did not establish a live link between the material and the alleged escaped income.

Held

The Tribunal quashed the reassessment proceedings and the consequent assessment orders, declaring them bad in law. It found that the reasons recorded for reopening were factually incorrect and that the Assessing Officer acted mechanically without independent application of mind, merely relying on information from the Investigation Wing. The Tribunal emphasized that the notice under section 148 must be issued based on the AO's own satisfaction that income has escaped assessment, a condition not met in this case.

Key Issues

1. Validity of reassessment proceedings initiated under section 147/148. 2. Whether the Assessing Officer applied independent mind in recording reasons for reopening assessment.

Sections Cited

147, 148, 69C, 143(1), 2(40), 151

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, MUMBAI

Before: SHRI NARENDRA KUMAR BILLAIYA, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLE

For Appellant: Shri Hariom Tulsiyan, A/R

Hearing: 21/08/2024Pronounced: 23/08/2024

PER NARENDRA KUMAR BILLAIYA, AM : I.T.A. No. 4348 & 4347/Mum/2023, are two separate appeals by the assessee preferred against two separate orders of NFAC, Delhi, dated 19/10/2023 & 20/10/2023 pertaining to AYs 2011-12 and 2012-

13.2.

Since common grievance is involved in both the appeals they were heard together and disposed of by this common order for the sake of brevity.

For the sake of our convenience, and as per the concession of the rival representatives, we consider the facts of AY 2011-12 qua grounds of appeal, which read as under:- "

On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred by confirming the legality of the reassessment proceedings by ignoring crucial facts of the case and the manner in which the proceedings were initiated. The reassessment proceedings are bad in law; illegal and void-ab-initio for the reasons stated hereunder:

A. Even though a specific request was made to furnish a copy of the standard form used for obtaining the approval by the assessment officer from the PCIT-32 for initiating the reassessment proceedings, the learned A.O. did not provide it and pointed out that the same has been issued in the ITBA system online. B. That during the inspection granted to the assessee 12.11.2018 of the approval granted by PCIT-32, it was observed that the approval was undated and no reasons were cited by him for his satisfaction in granting the said approval. Merely the words "I am satisfied that this is a fit case for 148" were written in the said letter which shows non-application of mind and mechanical manner in which the approval was granted. C. That the Ld. Assessing officer merely acted mechanically and made fishing and roving inquires on the information supplied by the investigation wing about an alleged penny stock without applying his own mind which is evident from the fact that she relied on incorrect data for reopening the assessment alleging that the shares were quoted at Rs. 2050/- on 05/01/2011 whereas the shares were actually quoted between Rs. 201 to Rs. 207 per share on the said date. D. The assessing officer failed to establish a live link between the materials relied upon for reopening the assessment and escapement of income in the hands of the assessee which is evident from the fact that the Ld. A.O. incorrectly stated in the reasons for reopening the assessment that the assessee has not claimed any exemption in the return of income which was not the case at all. Ε. The assessing officer initiated the reassessment proceedings in relation to a company that was non-existent at that point of time by the name of Nivyah Infrastructure & Telecom services Ltd. whereas infact the shares sold by the assessee were of S.V.Electricals Ltd. F. That the assessee was never provided with an opportunity to cross- examine the so called entry operators whose statements were relied upon by him to re-open the assessment even after a specific request was made in this regard by the assessee, thereby violating the mandatory principles of natural justice. On the facts and circumstances of the case and in law, the learned CIT(A) has erred in confirming the additions made by the learned assessing officer. Following are the additions made: A. The total sale price of Rs. 11,80,95,269 - being the sale proceeds of 6,38,000 shares on the alleged ground that the capital gains bonafidely earned by the appellant on the said 6,38,000 shares were fictitious, even though the assessee had submitted documents like Letter of Allotment, Bank Statement highlighting payment, Contract Notes, etc. to prove the genuiness of the transaction. B. The assessing officer overlooked the plethora of documentary evidences submitted by the assessee establishing genuineness of the transaction and the fact that the transactions made by the assessee was through the Stock Exchange and the payments for such transactions are made through proper banking channels and there was no failure on the part of the assessee to disclose fully and truly all material facts for the purpose of assessment. C. Under section 69C of Rs. 11,80,952/- i.e namely 1% of the sale value of the shares of Rs. 11,80,95, 269 /- as commission on the basis of assumption and presumption and without an iota of evidence.