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Income Tax Appellate Tribunal, BANGALORE BENCH ‘A’, BANGALORE
Before: SHRI A.K.GARODIA, AM (SMC)
This is assessee’s appeal directed against the order of ld. CIT(A)-II, Bangalore dated 12-08-2014 for the assessment year 2008-09.
2. The assessee has raised the following grounds: “1 The orders of the CIT (A) in so far as they are against the appellant are opposed to law, equity and weight of evidence, probabilities, facts and circumstances of the appellant's case.
2. The appellant denies to be assessed to total income at Rs.30,59,47S/- as against returned income of Rs.27,35,317/- on the facts and circumstances of the case.
3. The learned CIT(A) is not justified in confirming the action of the assessing officer to re-open the assessment when the assessing officer had not assumed proper jurisdiction to re-open the assessment since notice under section 148 of the Act was never served on the assessee on the facts and circumstances of the case.
4.The learned CIT(A) failed to appreciate that the impugned proceedings are bad in law as no action can be taken beyond 4 years from the date of the close of the assessment year i.e., 31/03/2013 and the impugned proceedings are hence not sustainable in law.
5. The learned CIT(A) is also not justified in confirming the action of the assessing officer to re-open the assessment since the assessing officer did not have 'reason to believe' that income has escaped assessment for the A.Y. 2008-09 but could only have had a reason to suspect on the facts and circumstances of the case.
6 The learned CIT(A) erred in confirming the assessment order passed by the assessing officer without providing to the assessee all the details relied upon by the assessing officer so as to enable the assessee to defend his case and hence in violation of principles of natural justice.
7. Without prejudice, the CIT(A) is not justified in confirming the action of the AO in bringing to tax the income of Rs. 29,29,090/- as income from other sources as against Rs. 26,04,932/- returned by the assessee as short term capital gain on the facts and circumstances of the case.
The authorities below are not justified in ignoring the evidence in the form of demat accounts which are conclusive evidence of the transactions and making additions under the head Other Sources purely on suspicion and surmises devoid of any evidence and thus the treatment of Rs.29,29,090/- as income from other sources is required to be deleted.
9. The additions made are bad in law as the Appellant has not been put to notice of the collection of information and the same is in violation of principles of natural justice and thus bad in law on the facts and circumstances of the case.
10. Without prejudice to the right to seek waiver with the Hon'ble Chief Commissioner of Income Tax/Director General of Income Tax under the provisions of the Act and as confirmed by the CBDT Circular No. 400/234/95-IT (B) dated 23/05/1996, the Appellant Company denies itself liable to be charged to interest under section 234A, 234B and 234C of the Act which under the facts and circumstances of the case deserves to be cancelled. The calculation of interest under section 234A, 234B and 234C is not in accordance with law as the rate, amount and method for calculating interest is not discernible from the order of assessment.
11. The authorities below are not justified in levying interest under Sec. 234C contrary to the express provisions of Section 234B(2) of the Act. Reliance is placed on the decision of the jurisdictional High Court in the case of Vijay Kumar Saboo & others 340 ITR Page 382.
Appellant also wishes to raise the following grounds, which do not involve any investigation of any facts otherwise on the record of the department, for the adjudication by this Hon'ble Bench of the Tribunal. It is submitted that it is within the rights of the Appellant to raise these fresh grounds of appeal not previously raised before the learned Commissioner of Income Tax (Appeals). Reliance is placed on judgment of the Hon'ble Supreme Court in the case of National Thermal Power Corporation vs. CIT, 1998 229 ITR 383 sc.
12. The learned Assessing Officer is not justified in concluding the reassessment proceedings by assessing the Appellant under the status of individual instead of HUF and the order of the Assessing Officer is hence bad in law and requires to be quashed in toto on the facts and circumstances of the case.
13 The Appellant craves leave to add, alter, modify, delete or substitute any of the grounds urged above and to file a paper book at the time of hearing of the appeal.
14 In view of the above and other grounds that may be urged at the time of hearing the appeal, the Appellant prays that the appeal may be allowed in the interest of justice and equity.
The assessee has also raised additional grounds which are as under;
1.The assessment order passed by the learned Assessing Officer under section 143(3) r.w.s 147 of the Act passed on 17/02/2014 was effaced on reopening of the reassessment order and making a fresh order of assessment under section 143(3) r.w.s 147 of the Act, on 22/03/2016 on the facts and circumstances of the case.
The entire proceedings by invoking the provisions of section 148 of the Act is not in accordance with law on the facts of the case. The learned Assessing Officer ought to have initiated proceedings by issue of notice under section 153C of the Act when certain incriminating material found in search conducted under section 132 of the Act, in the case of Mahasagar group of cases and the reopening is based on the material found during the search and consequently the reopening initiated and assessment proceeding concluded under section 143(3) r.w.s 147 of the Act is bad in law on the facts and circumstances of the case.
3 Without prejudice, the notice under section 148 of the Act, served on one Sri Banshi Ram as referred in the order of the learned CIT(A) vide para 3.1, is not proper service of notice on the appellant and consequently the reassessment order passed under section 143(3) r.w.s.147, without serving notice on the appellant is bad in law on the facts and circumstances of the case.
4 .Without prejudice, the authorities below ought to have appreciated that the notice issued under section 148 of the Act, was based on a change of opinion of the learned Assessing Officer on the facts and circumstances of the case.
5. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal.
6. For the above and other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeal may be allowed and justice rendered”.
4. Regarding all these additional grounds, only one contention was raised by the ld. AR of the assessee that first assessment order assed by the AO is not u/s 147 of the IT Act and therefore, if the same income is added in the first order and second order also then the first order becomes infructuous. Thereafter, he submitted that the reasons recorded by the AO for re-opening are available on pages 1 & 2 of the paper book
The ld. DR of the revenue supported the orders of the authorities below.
I have considered the rival submissions. From the reasons recorded by the AO as available on page no.1 & 2 of the paper book, it is seen that as per the reasons recorded by the AO, it is seen that the assessee got the benefit through accommodation entries to the extent of Rs.29,29,090/- during the present year and in course of search conducted u/s 132 on 25-11-2009 in the case of M/s Mahasagar Group case, the key person of the group Sri Mukesh Choksi has admitted in the sworn statement that he and his group were engaged in fraudulent billing activities and in giving accommodation entries in order to enable the clients to declare speculation profit/loss, short term capital gain, long term capital gain, profit/loss on account of commodity trading, introduce share application money or introduce money in the form of gift and also identified the beneficiaries. It is also noted that the present assessee is one of such beneficiaries. It is seen from the reasons recorded by the AO that it is very categorically noted that the assessee is one of the beneficiaries to the extent of Rs.29,29,090/- and it is also noted that the assessee has not offered this income in the return of income filed by the assessee for the present year on 09-02-2009. Under these facts, in my considered opinion, re-opening is valid.
Regarding the second aspect as has been stated by the ld. AR of the assessee in the course of argument before me, it is submitted by him that if an income is added in the first assessment order and also in the second assessment order then the first assessment order does not survive. I find that the first assessment order is dated 19-11-2010 passed by the AO u/s 143(3) of the IT Act. Copy of which is available on page no.7 & 8 of the paper book.
8. In this assessment order, the assessment was completed at the income as per the return of income at Rs.27,35,320/-. The later assessment order is u/s 143 (3) r.w.s 147 of the Act dated 17-02-2014.
It is seen that in this assessment order also, it is noted by the AO that the assessee has filed return of income for the present year declaring an income of Rs.27,35,320/- comprising short term capital gain of Rs.26,04,932/- and income from other sources Rs.1.30,385/-. On page- 5 of the assessment order, the income was computed at Rs.30,59,475/- comprising of income from other sources as per return of income of Rs.1.30,385/- and income from short term capital gain treated as income from other sources of Rs.29,29,090/-. In the light of these facts, I find no merit in the contention of the ld. AR of the assessee that the same income is added in the original assessment as well as in the assessment u/s 143(3) of the Act r.w.s 147 of the IT Act, 1961.
In the first assessment order, the income was computed as per return of income filed by the assessee which comprises of income from other sources of Rs.1,30,385/- and income from short term capital gain of Rs.26,04,932/- and the total assessed income is Rs.27,35,320/- ,whereas in the later assessment order u/s 143(3) r.w.s.147 of the of Act, an addition has been made to the extent of Rs.29,29,090/- and income from other sources and the amount of short term capital gain offered by the assessee of Rs.26,04,932/- was not added in the second assessment order u/s 143(3) r.w.s 147 of the Act. Hence, on this aspect also, there is no merit in the contention of the ld. AR of the assessee and therefore, the same is rejected. Accordingly, the additional grounds raised by the assessee are rejected
Regarding the main grounds of appeal, it was submitted by the ld. AR of the assessee that ground no.1 is general and needs no specific adjudication. For Ground no.2, reliance was placed by the ld. AR of the assessee on the Tribunal order rendered in the case of Rajat Shubra Chatterji Vs ACIT in dated 20-05-2016. Copy submitted and kept on record.
The ld. DR of the revenue supported the order of the revenue authorities and submitted that this Tribunal order is not applicable in the present case.
I have considered the rival submissions. In that case, the AO has initiated re-assessment proceedings on the basis of information received based on material found during the course of search. Under these facts, it was the submission of the assessee in that case that provisions of sec.153C are applicable which excludes operation of sec.147 of the IT Act, 1961. In the present case, re-opening is not on the basis of any material found in search carried out in a different case but on the basis of statement of key person of the group Mr. Mukesh Choksi, where search took place u/s 132 of the IT ACT, 1961 and since the action of the AO u/s 147 of the Act is not on the basis of any material found in the course of search u/s 132 of the IT Act in the case of third party, but it is on the basis of a statement of a person who was searched, sec.153C is not applicable in the present case and therefore, this judgment is not applicable in the present case. No other argument was raised by the ld., AR of the assessee on this issue and therefore, ground no.2 of the assessee is rejected.
Regarding ground no.3,4 & other grounds, it was the submission of the ld. AR of the assessee that this is the claim of the assessee that notice u/s 148 was served on one Mr. Banshi Ram, not connected with the assessee and not authorized by the assessee to receive notice on behalf of the assessee. He submitted that this contention was also raised before the ld.CITA), but there is no decision of the ld. CIT(A) on this aspect and therefore, this matter should be restored back to the file of the CIT(A) for deciding this aspect.
The ld. DR of the revenue supported the order of the ld CIT(A).
At this juncture, the Bench asked the ld. DR of the revenue to find out the service of notice u/s 148 of the IT Act on the assessee and in reply, it was submitted by him that the matter may be restored back to the file of the ld. CIT(A) for deciding this aspect.
I have considered the rival submissions. Considering these facts as discussed above, I set aside the order of the ld. CIT(A) on this issue and restore the matter back to the file of the ld. CIT(A) for fresh decision on this aspect that whether notice u/s 148 was properly served on the assessee or not after providing an opportunity of being heard to both sides.
In view of this decision, no decision is called for regarding any other issues at this stage and if it is found by the ld. CIT(A) that notice was properly served then, he should decide the issue on merit afresh but if it is found by him that notice u/s 148 was not properly served on the assesee then the assessment order itself will be void and as a result, no other issue will survive.
In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on the date mentioned in caption page.