INCOME TAX OFFICER, WARD-1(4), JAIPUR, STATUE CIRCLE, JAIPUR vs. CHAMBOO GUPTA, SHASTRI NAGAR, JAIPUR

ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the Revenue is directed against order of the ld. CIT(A) dated 15-06-2022, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2012-13 wherein following grounds have been raised by the Department. ‘’1. Whether on the facts and the circumstances of the case and in law the ld. CIT(A) was justified in quashing the order u/s 147/144 of the I.T. Act, 1961 passed on 8-12-2018 in the case of Smt.Chamboo Gupta on the basis of alleged order dated 25-07-2019 as per grievance of the assessee which is not an order in eye of law as 2 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR it is not accompanied by ITNS Form, Demand Notice u/s 156, Penalty show notice etc.’’

2. Whether on the facts and the circumstances of the case and in law the ld. CIT(A) was justified in quashing the order u/s 147/144 of the I.T. Act, 1961 passed on 8-12-2019 in which the interest of revenue addition of Rs.3,41,360/- has been made by the AO as unexplained investment u/s 69A of the Income Tax Act on account of purchase of shares of M/s.VMS Industries Ltd.

3. Whether on the facts and circumstances of the case and in law the ld. CIT(A) was justified in quashing the order u/s 147/144 of the I.T. Act, 1961 passed on 8-12-2019 in which the interest of revenue addition of Rs.4,59,000/- has been made by the AO as unexplained investment u/s 69A of the Income Tax Act, 1961 on account of cash deposited in bank account by the assessee’ 2.1 Brief facts of the case are that the case of the assessee was reopened by issuing notice u/s 148 of the Income Tax Act, 1961 on 30.03.2019 on the reason that the assessee had undertaken transaction in scrip namely VMS Industries which has been considered as penny stock company. Return was filed in response to the notice so issued and statutory notices u/s 143(2) and u/s 142(1) were issued. In response to it all queries were duly replied. During the assessment proceedings, it was verified by the AO that the assessee had entered into transaction in the shares of VMS Industries and it was squared up transaction (on the same day) in which the assessee had incurred a loss of Rs. 12,433 and after such verification he accepted the returned income and passed the assessment order on 25.07.2019. Thereafter there was change in incumbent and the new AO issued notice u/s 142(1)

3 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR seeking various queries. The assessee informed about passing of order by his predecessor but no cognizance of the same was taken by him and insisted for reply from the assessee to his notice u/s 142(1). Finally he had issued a show cause notice on 03.12.2019 to the assessee for which no reply was received from the assessee. Therefore, the AO assumed that the assessee did not want to say anything and in view of limitation for completing the pending scrutiny assessment, the AO passed the judgement u/s 144 of the Act on the basis of material available on record and made following additions:- i. Rs. 3,41,360 on account of investment for purchase of shares of VSM Industries. ii. Rs. 4,59,000 on account of unexplained investment u/s 69A being the cash deposit in the bank account of the assessee.

It is also noted that since the assessee already had an assessment order dated 25.07.2019 passed by the AO wherein her contentions were accepted by the AO after due verification of material on record and hence she chose not to reply to the show cause notice of the new incumbent. Hence the new AO passed order dated 08.12.2019 u/s 147/144 of the Income Tax Act, 1961 and added Rs. 3,41,360 and Rs. 4,59,000 in the returned income of the assessee respectively.

4 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR 2.2 Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A) who allowed the appeal of the assessee by observing as under:-

‘’3. Decision 3.1 The main contention reopened on the same grounds on which even one earlier assessment has been completed on 25.07.19 and that the 2nd reassessment has been initiated even when the 1st assessment was due to be completed that there was change of incumbent assessing officer and the new of assessing officer has on the similar facts reopened the assessment within few months of earlier assessment order without having any new. information to warrant any action against assessee under section 148 of Income Tax Act 1961. 3.2 The 1st assessment which itself was completed under section 147 that the section 143 of IT Act the case was reopened to look you look into assessee,s share dealings in M/s VMS Industries Ltd. company which as per the information received by the assessing officer was a penny stock. The 1st assessing officer held as under: ‘’The assessee is involved in the business of share trading. She maintains two portfolios, one for trading and the other for investment. She has carried out F&O and intraday transactions during the year. She has also earned Short term capital gain on sale of shares held as investment. Her case was reopened to tax the profit arising on sale of shares of VMS Industries Ltd., a penny stock company. On verification of the papers submitted by him, it was found that the impugned transaction related to sale and purchase of this script, stood duly accounted in the copy of ledger account. The transaction was squared off the same day, i.e. on 14.06.2011, and it resulted in a loss of Rs. 12,433/-. In view of the above facts, no adverse inference is drawn as regards the impugned transaction and the returned income of the assessee is accepted. However, as the assessee in her ITR originally filed by her, had understated her income, and concealed the particulars to that extent, she is liable to penalty under section 271(1)(c) of the Income tax Act, 1961. Assessed at an income of Rs.243,160 Tax and interest payable under provisions of IT Act, 1961 have been calculated in separate calculation sheet in ITNS-150, which is part of this order. Demand notice u's 156 of the IT-Act, 1961 is accordingly Issued today under my seal and 5 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR signature Penalty proceedings u/s 271(1)(c) for concealing the particulars of come are being a separately.’’ 3.3 The assessment was completed at the return of income without making any addition, On the very same facts the second assessing officer proceeded to reopen the assessment and not only brushed aside the objections raised by the assessee but also completed the case under section 144 lead with section 147 adding certain amount for the very same share dealing of M/s VMS Industries Ltd. which has been looked into an deliberated upon in the 1st assessment order. 3.4 From the date of the process it would be clear that 2nd assessing officer has not applied his mind to the materials at hand and had taken recourse to section 148 supposedly protect the interest of revenue when that this power was very much available under section 263 of income tax act. Both the sections of the Act operate on entirely different planes and while they have the common objective of countering leakage of revenue, action against assessee has to be taken on specific provisions as per the law whether under 263 or under 148 and these 2 sections cannot be mixed up at will of the assessing officer. 3.5 It has been held repeatedly held that when an issue has been debated. and scrutinized in any assessment order the same cannot be used reopen the assessment once again. Any mistake leading to underassessment can only be cured by resort to revision under section 263 and it is not up to the assessing officer to go ahead or reopening of the assessment based merely on a change of opinion. 3.6 On the proposal of dates and the facts as given in the appeal and even disregarding the complaint filed by the appellant, it is clear that the 2nd assessment order cannot stand the test of appeal and hence is annulled. The appeal of assessee is allowed.’’ 2.3 During the course of hearing, the ld. DR supported the order of the AO.

2.4 On the other hand, the ld. AR of the assessee supported the order of the ld. CIT(A), NFAC dated 15-06-2022 and submit his written submission as under:-

‘’Ground No. 1: Vide this ground the department has challenged the finding of the Id. CIT (A) wherein it was held that second order cannot be passed on the same footing on which earlier order had been passed and for this challenge 6 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR the department has alleged that the first order was not a valid order as it was not accompanied with ITNS form, Demand Notice u/s 156, Penalty show cause notice etc. There is no such procedure prescribed under Income Tax Law as to what would constitute an assessment order and there3 is no provision which says that whenever any assessment order is received from department the assessee must ensure whether it is accompanies with ITNS form, Demand Notice3 and Penalty Noitce etc. As assessee is not concerned about preparation of ITNS form, Demand Notice, Penalty notice etc. It may be a procedure followed by the AOS that assessment order is to accompany with ITNS, Demand Notice, Penalty notice etc. but in absence of any lapses by AO in observing the settled procedure, can not affect the rights of the assessee. Therefore the order passed by first AO was complete in itself as he had issued notice u/s 148 (APB 1), ITR was filed by the assessee (APB 2-4), Notice u/s 1423(1) was issued (APB 5-6), reply was filed by the assessee (APB 7-12), final order was passed considering all submissions of the assessee (13-14). Therefore the order so passed is a valid order. The reliance of the department is solely on the alleged lapses of the first AO in enclosing ITNS; Demand Notice, Penalty Notice etc. which is not maintainable. Your honour's kind attention is being drawn on provisions of section 2928 of the Income Tax SAct, 1961 which reads as under Return of income, etc., not to be invalid on certain grounds. 292B. No return of income, assessment, notice, summons or other proceeding. furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act As per above provisions the assessment order passed by ex AO cannot be held to invalid for non issue of ITNS, Notice of Demand and/or Penalty Notice etc. as the order so passed is otherwise in substance and effect in conformity with or according to intent and purpose of the IT Act. Such order had been passed after due verification of documents and explanations submitted by the assessee and hence was a valid order Therefore the ground of the department on the issue of invalid order passed by ex AO on 25.07.2019 is liable to be dismissed. Ground No. 2: Unexplained Investment in shares of VMS Industries The Id. CIT (A) has rightly quashed the order dated 08.12.2019 passed by the successor AO as per arguments submitted above. In this ground the department is aggrieved with the quashing of addition made by successor AO for Rs. 3,41,360 on account of unexplained investment in purchase of shares of VMS 7 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR Industries as such addition had been made by him in his order dated 08.12.2019 which stood quashed due to quashing of the order by ld. CIT (A).

Without prejudice to submissions made in ground no. 1 it is submitted that the assessee had undertaken a transaction for 10800 Nos. of shares of VMS Industries (Scrip code: 553427) on 14.06.2011. He had purchased shares for Rs. 3,41,359.92 and sold the same on the very same day for Rs. 3,28,926.96 and had incurred a loss of Rs.. 12.432.96 (Report provided by the broker is enclosed at APB 21). Consolidated report of transactions undertaken by the assessee in shares during the year under consideration is also enclosed at APB 17-20 transaction in above said scrip appears at APB 19. When a transaction of purchase of share stood squared off on the same day then there is no occasion to make investment of Rs. 3,41,360 for which addition had been made. Hence the addition made by the Id. AO is without any basis and the ground of the department on this issue may kindly be rejected. Ground No. 3: Quashing the order dated 08.12.2019 The ld. VIT(A) has rightly observed that no two orders can be issued under the same facts. The only possibility could have been either AO in possession of additional information due to which certain income escaped assessment or it can be on the directions of the PCIT by way of passing order u/s 263 on finding the order to be erroneous and prejudicial to the interest of revenue. In this instant case no defect was found by the Id. CIT (A) in the first assessment order dated 25.07.2019 and in absence of any new information he very rightly quashed the second order passed by the new AO. Your honour is therefore sincerely requested to disallow the claims made by the department in their appeal.’’ The Bench has heard both the parties and perused the materials available on 2.5 record. In this case it is noted that two assessment orders have been passed by two different AO’s vide order dated 25-07-2019 and 8-12-2019 respectively. In the first assessment order dated 25-07-2019, the contentions of the assessee were accepted by the AO after due verification of the material on record. In the second assessment order dated 8-12-2019 u/s 144/147 of the Act, the AO made additions 8 ITO, WARD 1(4), JAIPUR VS SMT. CHAMBOO GUPTA, JAIPUR of Rs.3,41,360/- and Rs.3,59,000/- and added the same in the return of the assessee for the reason that the assessee did not submit the reply to the show cause notice issued by the new incumbent. In first appeal, the ld. CIT(A) deleted the additions against the order of the AO dated 8-12-2019 by observing that ‘’it is clear that the 2nd assessment order cannot stand the test of appeal and hence is annulled. The appeal of the assessee is allowed’’. Taking into consideration the above facts and circumstances of the case, we concur with the findings of the ld. CIT(A). Thus the appeal of the Revenue is dismissed.

In the result, the appeal filed by the Revenue is dismissed. 3.0 Order pronounced in the open court on 21/12/2022

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