SH. YUGAL KISHOR AGARWAL,AGRA vs DCIT, CIRCLE 4(3)(1), ETAH

Income Tax Appellate Tribunal, AGRA (SMC

Before: SHRI RAMIT KOCHAR

For Appellant: Ms. Prarthana Jalan, C.A

Hearing: 12.12.2024Pronounced: 15.01.2025

This appeal in ITA No.03/Agr/2023 for the assessment year 2012-13 has arisen from the appellate order dated 15.11.2022[DIN & Order No. ITBA/NFAC/S/250/2022-23/1047331531(1)], passed by learned Commissioner of Income-tax (Appeals), NFAC, Delhi, which, in turn, has

arisen from the assessment order dated 24.10.2019 passed by Assessing Officer u/s. 143(3) r.w.s. 147 of the Income-tax Act, 1961 vide DIN ITBA/AST/M/147/2019-20/1019376913(1).

Grounds of appeal raised by assessee in memo of this appeal filed with the Tribunal read as under :

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

“1) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts in sustaining the order of Learned Assessing Officer passed u/s 143(3)/147 of the Income Tax Act, 1961. 2) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts in sustaining the re-assessment order passed u/s 147/143(3) of the I.T Act, 1961 even when no addition has been made on the issue which was recorded in reasons to believe for initiating re- assessment proceedings by the Learned Assessing Officer. 3) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts in not appreciating that the order passed by Deputy Commissioner of Income Tax Circle 4(3)(1) is void ab intio as the Learned Assessing officer was not having any jurisdiction on the appellant. 4) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts in sustaining the disallowance of expenses of Rs 12,15,413/- 5) That the National Faceless Appeal Centre (NFAC), Delhi has erred in law and on facts in sustaining the disallowance of loss of Rs 56,407/- The appellant craves leave to add, alter or vary the grounds of appeal before or at the time of hearing.”

Brief facts of the case are that the assessee filed return of income on

11.07.2012, declaring total income of Rs.8,16,230/-. Case of the assessee

was reopened by the Revenue for framing reassessment by invoking

provisions of section 147 of the 1961 Act. Notice u/s. 148 dated 26.03.2019

was issued by the Assessing Officer to the assessee. The assessee

submitted before the Assessing Officer that return of income originally filed

on 11.07.2012 be treated as return of income filed in response to notice

u/s. 148 of the Act. Thereafter, statutory notices u/s. 143(2) and 142(1)

were issued by the Assessing Officer to the assessee. The assessee

participated in the reassessment proceedings, and furnished most of the

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information and replies during the course of reassessment proceedings.

The assessee was having income from salary, income from house property,

Remuneration and interest from Partnership firm and income from other

sources. While framing reassessment order u/s 147 read with Section

143(3) dated 24.10.2019, the Assessing Officer made two additions –

firstly, disallowance of Rs.12,15,413/- claimed by the assessee as

expenditure against income from other sources by invoking provision of

Section 57(iii) of the Act as the assessee could not furnish any evidences in

respect of these expenses , and secondly disallowance of speculation loss

of Rs.56,407/- under the head income from business or profession claimed

as deduction from interest and remuneration from Partnership Firm as

claimed by the assessee in the return of income filed with the Revenue, as

the assessee could not furnish any evidences in respect of this loss.

Aggrieved, the assessee filed first appeal with ld. CIT(Appeals) and

the appeal was dismissed by the ld. CIT(Appeals) vide appellate order

dated 15.11.2022.

Aggrieved, the assessee has filed second appeal with the Tribunal

and at the outset, ld. Counsel for the assessee drew my attention to ground

No. 2 raised by the assessee in memo of appeal filed with ITAT raising

legal issue, wherein it was submitted that the Assessing Officer has not

made any addition on the grounds/issues , on which the case of the 3 | P a g e

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

assessee was reopened by the AO by invoking provisions of Section 147 ,

and it was submitted that since no addition has been made by the AO on

the ground/issue based on which the case of the assessee was reopened

u/s. 147 on the belief that income has escaped assessment, thus the other

additions as were made by the AO could not have be made by the

Assessing Officer and as such the same could not be confirmed/sustained

by the ld. CIT(Appeals). The assessee has filed copy of the reasons

recorded by the Revenue on the belief that income of the assessee has

escaped assessment while invoking provisions of Section 147, which are

placed on record in the paper book, which are reproduced hereunder :

Reason for the As per the information in the possession of this office, the assessee has belief that income purchased shares of Rs. 1,37,45,896/-, during the FY 2011-12 has escaped corresponding to AY 2012-13. assessment The assessee has purchased shares of Rs. 1,37,45,896/-, during the FY 2011-12 corresponding to AY 2012-13. During the course of preliminary verification notices u/s 133(6) were issued to the assessee on 26.02.2019 and 08.03.2019. In response to these notices, the assessee has not submitted any reply. The assessee has not provided any document to substantiate the source of the investment of Rs. 1,37,45,896/- in the share transactions despite given opportunities In view of the facts discussed as above it is very evident that the assessee did not explain the sources of investment of Rs.1,37,45,896/- in the share transactions despite given opportunities. Therefore, I have reason to believe that income of Rs. 1.37,45,896/- as mentioned above has escaped assessment within meaning of Sec 147 of the IT Act, 1961. In this case, a ROI was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded above. It is pertinent to mention here that in this case the assessee has filed ROI 4 | P a g e

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

for the year under consideration but no assessment as stipulated u/s. 2(40) of the Act was made and the return of income was only processed u/s. 143(1) of the Act. In view of the above, the provisions of clause (b) of Explanation 2 to Sec. 147 are applicable to the facts of this case and the A.Y. under consideration is deemed to be a case where income chargeable to tax has escaped assessment. Sd/- 16/03/19 Asstt. Commissioner of Income Tax, Circle 3(1), Etah

5.2. Thus, ld. Counsel for the assessee submitted that the case of the

assessee was reopened on the ground that the assessee has not provided

any documents to substantiate the source of investment of

Rs.1,37,45,896/- in the share transactions which forms the belief that the

income to that extent has allegedly escaped assessment as per the

Revenue , and the case of the assessee was reopened for framing

reassessment u/s 147. My attention was drawn to page 3 of PB filed by the

assessee, wherein the AO issued notice dated 08.03.2019 u/s 133(6)(PB

/Page 3) seeking information/evidences about the sources of transactions

towards purchase of shares to the tune of Rs. 1,37,45,896/- alongwith bank

statement and copy of ITR along with all annexures viz. P&L Account,

Balance Sheet , Audit Report etc. It was submitted that the assessee duly

explained before the AO vide reply dated 15.03.2019 filed on

18.03.2019(PB/Page 4-5) that the assessee has entered into transactions

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ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

in futures and options wherein contracts were settled/squared, and no

investment of Rs. 1,37,45,896/- was made by the assessee in the shares.

The profit/loss on F&O were offered for taxation. The assessee also drew

my attention to the reply dated 16.08.2019 filed during reassessment

proceedings(Page 8/PB). My attention was drawn to the re-assessment

order and it was submitted that no addition has been made by the AO with

respect to the issue of sources of alleged investment in shares to the tune

Rs. 1,37,45,896/- which became the reasons for belief of the Revenue that

the income has escaped assessment. There are two additions made by the

Assessing Officer. One is on account of disallowance of expenses of

Rs.12,15,413/- by invoking the provisions of section 57(iii) and other

disallowance is of Rs.56,407/- being speculation loss. Learned counsel

relied upon the following judgments :

1 Hon’ble Bombay High Court – CIT v/s Jet Airways (I) Ltd in IT Appeal Nos 1526 of 2008 & 1714 of 2009 2. Hon’ble Delhi High Court – Pr. CIT v/s Sunlight Tour & Travels Pvt Ltd in ITA No 222/2022 3. Hon’ble Agra ITAT- Anugrah Varshney v/s Income Tax Officer in ITA No 134/Ag/2014 4. Hon’ble Agra ITAT – Vacmet India Ltd v/s DCIT in ITA No 334/AGR/2019 5. Hon’ble Mumbai ITAT- Sandeep Kumar Hissaria v/s ITO in ITA No 1571/Mum/2012 6. Hon’ble Mumbai ITAT- Aditya Logistics (I) Pvt Ltd v/s ACIT in ITA No 2408/Mum/2012

5.3. These judgments are filed in the form of legal paper book, carrying 59

pages, which is placed on record in file. Ld. Counsel for the assessee

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submitted that the additions could not be sustained as were made by the

Assessing Officer because on the basis of reasons recorded for reopening

of assessment by invoking provisions of Section 147 which forms the belief

that income to the tune of Rs. 1,37,45,896/- has escaped assessment

being alleged investment in purchase of shares , no additions have been

made on that ground. It was submitted that the AO rightly did not made any

addition on account of alleged investments in share purchase, as the

assessee never made such investment rather the assessee dealt in F&O in

shares wherein the contracts were squared/settled periodically without

making any investment.

Learned Sr. DR relied upon the orders of authorities below.

I have considered the contentions of both the parties and perused the

material on record. I have observed that the assessee filed return of income

on 11.07.2012 u/s 139(1), declaring total income of Rs.8,16,230. Case of

the assessee was reopened by the Revenue for framing reassessment by

invoking provisions of section 147. Notice u/s. 148 dated 26.03.2019 was

issued by the Assessing Officer to the assessee. The assessee submitted

that return of income originally filed be treated as return of income filed in

response to notice u/s. 148 of the Act. Statutory notices u/s. 143(2) and

142(1) were issued by the Assessing Officer to the assessee in

reassessment proceedings. The assessee participated in the reassessment 7 | P a g e

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

proceedings. The assessee is drawing income from salary, income from

house property , Remuneration and Interest from Partnership, and income

from other sources. I have observed that the case of the assessee was

reopened by Revenue by invoking provisions of Section 147 on the belief

that income to the tune of Rs.1,37,45,896/- has escaped assessment with

respect to investment made by the assessee in the purchase of shares,

source of which could not be explained by the assessee during the course

of preliminary verification u/s. 133(6) carried on by the Assessing officer.

The assessee has placed on record the said reply , dated 15.03.2019 filed

before the AO on 18.03.2019. The assessee has explained that the

assessee dealt in Futures and Options(F&O) contracts in shares, which

were squared/settled. No investment was made in the shares. The

Profit/loss is offered for taxation. The assessee also disclosed the bank

accounts maintained by the assessee. Further, the Assessing Officer had

observed that originally return of income was not processed u/s. 143(3)

read with section 143(2) of the Act. Case of the assessee was reopened

after expiry of four years, but before six years from the end of the

assessment year. I have observed that no addition has been made by the

AO with respect to the reasons recorded for reopening of the concluded

assessee which formed the belief of the AO that income has escaped

assessment to the tune of Rs. 1,37,45,896/- towards purchase of shares, 8 | P a g e

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

for which case of the assessee was reopened with respect to the alleged

investment of Rs.1,37,45,896/- made by the assessee in the share

transactions. Before me, it is explained by ld. Counsel for the assessee that

the assessee has not made any investment in the shares, but rather the

assessee has entered into the transactions in Futures and Options(F&O),

and contracts are squared up in settlement wherein profits/loss was offered

for taxation. In any case, it is observed that no additions has been made in

reassessment proceedings by the AO with respect to the alleged sources of

investment made by the assessee to the tune of Rs.1,37,45,896/- in

shares, as was claimed by the Revenue in the reasons recorded for

reopening of the concluded assessment by invoking provision of Section

147 which formed the belief for reopening of the concluded assessment.

The assessee’s contention that no investment was made in the share

purchase, and rather transactions in F&O in shares were carried out, and

contracts were squared/settled without any investment/purchase of shares.

The AO accepted the contentions of the assessee/The assessee has

raised specific ground No. 2 before ITAT wherein the assessee has

challenged on legal ground the sustainability of re-assessment order u/s.

147 when no addition has been made on the issue with respect to which

the case of the assessee was reopened at the time of initiation of

reassessment proceedings u/s 147. I have observed that the assessee has 9 | P a g e

ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

relied upon following judgments and orders, wherein re-assessments were

quashed on the ground that once no addition has been made with respect

to the reasons recorded for reopening of the concluded assessment which

formed the belief of the AO that income has escaped assessment, re-

assessment order cannot be upheld/sustained if the additions are made on

the other issues while no additions have been made on the issue on the

basis of which the concluded assessment were reopened u/s 147 and

which formed the belief of the Revenue that income has escaped

assessment:

7.2. It is also observed that I was part of the division Bench in ITA No.

1571/Mum/2012 dated 04.03.2016 in case of Sandeep Kumar Hissaria v.

ITO as well as in ITA No. 2408/Mum/2012 order dated 08.09.2016 in Aditya

Logistics (I) Pvt. Ltd. v. ACIT, which pronounced the orders in which it was

held that when no additions have been made on the grounds/issues on the

basis of which assessment was reopened u/s. 147 and which formed the

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ITA No. 03/Agr/2023 Asst Year: 2012-13 Yugal Kishor Agarwal

belief that the income has escaped assessment, then Assessing Officer

cannot make addition on other grounds/issues. The assessee also relied

upon a leading decision of Hon’ble Bombay High Court in case of CIT v. Jet

Airways (I) Ltd. in ITA No. 1714 of 2009 dated 12.04.2010. Respectfully

following the aforesaid decisions relied upon by the assessee, I quash the

reassessment order passed by the Assessing Officer and as sustained by

the ld. CIT(Appeals). Accordingly, appeal of the assessee stands allowed

on this legal ground. Since the reassessment order has been quashed on

this legal aspect as above, I am not proceeding to decide the merits of

additions as were made by the Assessing Officer and sustained by the ld.

CIT(A). The assessee succeeds in this appeal. I order accordingly.

In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 15/01/2025.

Sd/-

(RAMIT KOCHAR) ACCOUNTANT MEMBER Dated: 15/01/2025 *aks/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Agra

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SH. YUGAL KISHOR AGARWAL,AGRA vs. DCIT, CIRCLE 4(3)(1), ETAH