JAYANTHILAL,CHENNAI vs. ITO, CHENNAI

आदेश / O R D E R

PER CHANDRA POOJARI, ACCOUNTANT MEMBER:

1. The order of The Commissioner of Income Tax (Appeals) 5, Chennai dated 29.11.2016 in I.T.A.No.12/CIT(A)-5/2014-15 for the above mentioned Assessment Year is contrary to law, facts, and in the circumstances of the case.

2. The CIT (Appeals) erred in confirming the validity of the re-assessment’ order without assigning proper reasons and justification and ought to have appreciated that the order of re-assessment under consideration was passed out of time, invalid, passed without jurisdiction and notsustainable both on facts and in law. 3. The CIT (Appeals) went wrong in recording the findings in this regard in para 6.1 to 6.3 of the impugned order without assigning proper reasons and justification. V 4. The CIT (Appeals) erred in sustaining the disallowance of exemption claimed on Long Term Capital Gains as per section 10(38) of the Act and consequently erred in sustaining the assessment of the said capital gains of Rs.8,71,423/- in treating such sum as unexplained income without assigning proper reasons and justification. 5. The CIT (Appeals) went wrong in recording the findings in this regard in, para 7.2 to 7.4 of the impugned order without assigning proper reasons and justification. 6. The CIT (Appeals) failed to appreciate that having not examined the details independently, with regard to the purchase and sale of shares., the findings on non production of evidence with regard to the ’transaction’ of purchase and sale was wholly unjustified. 7.The CIT (Appeals) failed to appreciate that in any event the information received with regard to Maha Sagar group of cases in Mumbai which information was the foundation of the present re-assessment was not put to the appellant thereby vitiating the re-assessment completely.

3.1 During the course of search in the Mahasagar group of cases in Mumbai, Shri Mukesh Cbhoksi, Director of M/s.Mahasagar Securities Pvt. Ltd had admitted that the group concerns that the group concerns in the ‘Mahasagar group’ have issued accommodation entries to the various parties to declare speculation profit/loss, short term capital gain, long term capital gains etc. Shri Choksi has identified all such beneficiaries of accommodation entires and that the assessee is one among them.

3.2 During the course of assessment proceedings, the assessee filed a letter dated 27.12.2014 stating the reasons for accepting the genuinity of transactions and thereby on earning on exempted long term capital gains. The AO rejected the assessee’s claim of genuinity of transactions and thereby on earning on exempted long term capital gains. The AO completed the assessment u/s.143(3) r.w.s.147 of the Act on the basis of statements made by Mr.Choksi determining the income at `10,75,753/- and raising a demand of `4,04,860/- by treating the entire long term capital gains of `8,71,423/- claimed as exempted by the assessee is treated as unexplained income.

Aggrieved by the order of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) after giving sufficient opportunity of hearing to the assessee, confirmed the reopening of assessment and also the addition made by the AO.

Against the order of Ld.CIT(A), now the assessee is in appeal before us.

4.1 On the other hand, ld.D.R relied on the order of lower authorities.

5.1 In view of the admission made by Shri Choksi of Mahasagar Group of concerns, it was very clear that the receipt by way of sale of shares by the assessee was not genuine, it was only an accommodation managed/facilitated by mahisagar Grup and that the assessee had brought in to the business his own money. It was clear that the assessee had suppressed the primary facts regarding the true nature of th share transaction.

5.2 Therefore, as there was reason to believe income chargeable to tax to the tune of `3,08,423/- had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961, the assessment was reopened u/s.147 and notice u/s.148 was issued on 06.03.2014 and served on the assessee on 08.03.2014. Further, there is no dispute that the assessee has not furnished any proof to establish the genuineness of the purchase and sale of shares before the lower authorities. Hence, ld.CIT(A) relying on the judgement of Delhi High Court in the case of Pratibha Finvest (P.) Ltd., Vs. I.T.O in [2013] 29 Taxmann/.com 429(Delhi) upheld the reopening of assessment.

Hence, we do not find any infirmity in the order of Ld.CIT(A) on the issue of reopening of assessment and the same is confirmed.

6.1 Before us, ld.A.R submitted that from the information received by the Department, the AO came to a conclusion that the assessee purchases and sale of shares from the companies owned by Shri Mukesh Choksi. This information was not made available to the assessee and the AO cannot use the material collected at the back of the assessee to frame the assessment so as to take a decision against the assessee. For this purpose, he relied on the judgment of Delhi High Court in the case of PR. CIT Vs. Laxman Industrial Resoruces Ltd in of 2017 dated 14.03.2016 wherein held that placing reliance by the AO on the documents without placing the same to the assessee by the AO is inappropriate. In my opinion, whatever the material gathered by the AO for the purpose of assessment to be confronted to the assessee before using the same against the assessee.

6.2 In the present case, the Departmental Representative is not able to show that documents relied by the AO for the purpose of assessment was confronted to the assessee for his comments.

Hence, I am of the opinion that the documents relied by the AO for the purpose of assessment to deny the exemption u/s.10(38) of the Act to be furnished to the assessee for his comments, thereafter the AO shall come to conclusion in accordance with law. Accordingly, the issue in dispute relating to the merit of the addition in this case is remitted to the file of AO for his fresh consideration for giving an opportunity of hearing to the assessee.