VINOD K.SHAH,MUMBAI vs. ITO 16(1)(1), MUMBAI

Per Jason P. Boaz, A.M.

These appeals by the assessee are directed against the orders of the CIT(A)-27, Mumbai dated 30.11.2012 for A.Y. 2003-04 and of the CIT(A)- 28, Mumbai dated 30.12.2013 for A.Y. 2004-05. Since similar issues are involved in both these appeals, they were heard together and are disposed off by way of this common order. 2. The facts of the case, briefly, are as under: - 2.1 For A.Y. 2003-04, the assessee filed the return of income on 29.03.2004 declaring total income of `1,39,286/-. The return was processed under section 143(1) of the Income Tax Act, 1961 (in short 'the Act'). Subsequently, reassessment proceedings under section 147 of the Act were initiated on the basis of information received from the DDIT (Inv) 1(4), Mumbai on 25.11.2009 that the assessee had entered into share transactions for sale/purchase of shares of M/s. Buniyad Chemicals Ltd. through a broker of the Mahasagar group of companies operated by

2 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah Mukesh Choksi, i.e. M/s. Gold Star Finvest Ltd. who was engaged in providing accommodation entries and the assessee had taken fictitious gains in such share transactions. In the statement recorded in the course of search, Sri Mukesh Choksi admitted to providing accommodation entries to various persons. In the case on hand the assessee had purchased 46000 shares of Buniyad Chemicals Ltd. in F.Y. 2001-02 through M/s. Gold Star Finvest Ltd. @60 paise per share which were delivered in physical form and subsequently sold between 12.12.2002 to 13.03.2003 resulting in capital gains of `35,17,518/- which were invested in purchase of residential flat at Jaldarshan, Malabar Hills, Mumbai and exemption under section 54F claimed thereon. After recording reasons in this regard, the Assessing Officer (AO) issued notice under section 148 of the Act to the assessee on 29.03.2010. The assessment was then completed under section 143(3) r.w.s. 147 of the Act vide order dated 27.12.2010, wherein the capital gains of `35,17,598/- on the sale of shares was treated as a bogus transaction and the exemption claimed under section 54F of the Act was denied to the assessee for the reason that it was unexplained investment. In addition thereto, 5% of the above amount was treated as commission paid to M/s. Gold Star Finvest Ltd. for providing the accommodation entries to the assessee. On appeal, the learned CIT(A), vide order dated 30.11.2012, substantially upheld the order of assessment, but allowed the assessee partial relief by reducing the commission paid to Gold Star Finvest Ltd. from 0.5% to 0.15%. 2.2 For A.Y. 2004-05, the assessee filed the return of income on 30.03.2005 declaring income of `7,38,124/-. In this year, the assessee claimed to have purchased 5500 shares of Buniyad Chemicals Ltd. on 13.04.2001 during F.Y. 2001-02, @ 60 paise per share. The shares were in physical form and were sent to the company for transfer. The shares were sold in the period between 02.05.2003 to 30.05.2003 resulting in capital gains of `6,07,034/-, which was invested in purchase of residential flat at Jaldarshan, Malabar Hills, Mumbai and in respect of which exemption under section 54F of the Act was claimed. On similar factual situation as in A.Y. 2003-04 (supra), proceedings under section 147 of the Act were

3 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah initiated and after recording reasons in this regard, notice under section 148 of the Act was issued to the assessee on 29.03.2011. The assessment was completed under section 143(3) r.w.s. 147 of the Act vide order dated 30.12.2011 wherein the AO treated the capital gains of `6,07,034/- on sale of shares as a bogus transaction and the exemption claimed by the assessee of this amount was treated as unexplained investment and exemption claimed under section 54F of the Act was denied. Further, 5% of the above amount was treated as commission paid to M/s. Gold Star Finvest Ltd. for providing the accommodation entry to the assessee and the AO also disallowed transfer fees of `3,00,000/- claimed for want of evidence. On appeal, the learned CIT(A) vide order dated 30.12.2013 substantially upheld the order of the assessment, but allowed the assessee partial relief by reducing the commission paid to Gold Star Finvest Ltd. from 0.5% to 0.15%. 3. Aggrieved by the orders of the CIT(A)-27, Mumbai dated 30.11.2012 for A.Y. 2003-04 and of the CIT(A)-28, Mumbai dated 30.12.2003 for A.Y. 2004-05, the assessee has preferred these appeals raising almost identical grounds. These appeals will be disposed off in seriatum as under. 3.1 Assessee’s appeal for A.Y. 2003-04 (ITA No. 1264/Mum/2013) In this appeal, the assessee has raised the following grounds: - “1. The LD CIT [A] has erred in law and facts in partly allowing appeal confirming addition of Rs 3517598/- as income from capital gain and reducing commission estimated 5% by A.O.to 0.15%. 2. Addition confirmed by CIT[A] which was unwarranted, arbitrary, with bias mind based on presumption , violating the principles of natural justice. 3. CIT[A] has not put before appellant to rebute notice u/s 143[2] on which CIT[A] relied upon. 4. A.O. himself mentioned in assessment order that subsequently information was received from DDIT[INV}. CIT[A] is given different finding then it is not put before appellant to rebute same. 5. CIT[a] has not disposed off grounds of appeal no 3.4.and 6 of grounds of appeal hence order of CIT{A] is not according to law 6. reason recorded are not according to law

4 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah 7. A.o. has merely relied on the information received from DDI and statement of broker. No independent enquiry has been made. 8. CIT[A] has erred in confirming partial order which is passed by violating principles of natural justice. No opportunity to appellant to cross examine as well as to rebute information collected on the back of appellant. 9. A.o. has accepted capital gain and charge tax 10% but denying exemption u/s 54F without assigning any reason. 10. appellant facts are different than what modus appending mention by A.O. 11. notice u/s 148 is not valid it was served before information received at the time of service no information in possession of A.O. 12. confession of broker and gold star is general in nature not about appellant. 13. Your appellant craves your leave to add, alter or modify these grounds of appeal.” 4. Grounds No. 2, 5, 10 & 13 4.1 At the outset of the hearing, the learned A.R. of the assessee submitted that grounds raised at S. Nos 2, 5, 10 and 13 (supra) were general in nature and no adjudication was called for thereon. In this view of the matter, these grounds are rendered infructuous and are accordingly dismissed. 5. Grounds No. 4, 6 & 11 – Validity of Reopening of assessment 5.1 In these grounds, the assessee challenges the impugned order of the learned CIT(A) in upholding the action of the AO in reopening the assessment proceedings for A.Y. 2003-04 by merely relying on information received from DDIT (Inv) I(4), Mumbai and statement of Shri Mukesh Choksi recorded on oath under section 131 of the Act. According to the learned A.R. of the assessee, no independent enquiry was made by the AO before recording the reasons for initiation of proceedings under section 147 of the Act or issue of notice under section 148 of the Act. It was contended that the learned CIT(A) has not considered the submissions put forth by the assessee and has erroneously upheld the validity of the proceedings for reopening the assessment under section 147 of the Act and issue of notice

5 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah under section 148 of the Act, which is bad in law. The learned A.R. also reiterated the submissions put forth before the learned CIT(A). 5.2 Per contra, the learned D.R. strongly relied on the learned CIT(A)’s finding upholding the AO’s reopening of the assessment for A.Y. 2003-04. It was submitted that on similar facts, the Coordinate Bench of ITAT in assessee’s own case for A.Y. 2005-06 in ITA No. 1978 & 1979/Mum/2014 dated 07.10.2016 has upheld reopening of that assessment by the AO. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited (supra). It is seen that the learned CIT(A) dealt with this issue at paras 4 and 5 of the impugned order upholding the reopening of the assessment as under: - 4. During the proceedings before me, the AR submitted that the notice u/s. 148 is bad in law since there was no information received by the A.O. to form a reason to believe that income escaped assessment before issue of the impugned notice. According to the AR, the information was received by the A.O. after issue of the notice u/s. 148 of the Act. The AR also submitted that there was no direct link established between the information received and the facts in the appellant's case in as much as that the A.O. has not conducted any independent inquiry on his own. Secondly, the AR has taken the ground that in the notice issued u/s. 143(2) of the Act, subsequent to the reopening of the assessment, the assessment year was mentioned as A.Y. 2008-09 and not as A.Y. 2003-04. Hence, according to the AR. the assessment made u/s. 143(3) rws 147 is also bad in law. As regards the merits of the case, the AR submitted that all the relevant evidence in the form of contract notes, account statements, transfer of shares in appellant's name, the bank account extract etc. are placed before the A.O. at the time of the assessment proceedings which goes to show that the impugned transaction is genuine. It is also submitted that A.O. has not brought any evidence on record to show that appellant has paid his own money in cash in lieu of receiving cheques from M/s. Gold Star Finvest Ltd. Thus, the AR argued that the impugned assessment is bad in law and the additions made by the A.O. are to be deleted in the light of the evidence placed on record. 5. I have carefully considered the contents of the assessment order and the appellant's submissions. On perusal of the assessment records it is noted that the A.O. has recorded the reasons for reopening the assessment duly mentioning the facts as to the search conducted in the Mahasagar Group of companies and the

6 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah accommodation entries given by the said group companies, which involves the appellant's case also. The information from DDIT (Inv.) was received on 15-03-2010 and the A.O. sought to reopen the assessment on 26-03-2010, for which the sanction of the JCIT was obtained on 29-03-2010. On the same date i.e. on 29-032010, the assessment was reopened and the notice u/s. 148 was served on 30- 03-2010. In view of the above facts, I do not find any illegality in reopening the assessment u/s 147 of the Act. Accordingly, this ground is dismissed.” 5.3.2 As contended by the AO, we find that on similar facts, in respect of similar transactions, the Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2005-06 in its order in ITA No. 1978 & 1979/ Mum/2014 dated 07.10.2016 has upheld the AO’s action in reopening the assessment for that year holding as under at paras 6 to 7 thereof: - “6. In this ground ld. AR challenge the order of CIT(A) upholding the order of reopening on the ground that the AO has merely relied on information received from DDI and statement of broker which is recorded by DDI. It was submitted by ld. AR that no independent enquiry has been made therefore notice u/s 148 is bad in law. It was further submitted that CIT(A) has not consider the grounds and submissions raised by assessee and has wrongly upheld the reopening of assessment which is even otherwise bad in law. The ld. AR reiterated the same arguments which were raised before CIT(A) and the same is also mentioned in the orders of CIT(A). Ld. CIT(A) has dealt with this issue in para no. 2.4.3 onwards which is reproduced herein below: “2.4.3 Undisputedly, this is a case where original return was accepted u/s. 143(1). While dealing with the subject of scope and effect of notice u/s. 147 as substituted with effect from 01-04- 1989, the Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (SC) has held that under the substituted section of 147, existence of only the first condition i.e. 'Assessing Officer must have reason to believe that income had escaped assessment' is sufficient and 'if the Assessing Officer for whatever reason, has reason to believe that, income has escaped assessment, it confers jurisdiction to reopen the assessment'. It was further held that so long as the conditions of section 147 are fulfilled, the AO is free to initiate the proceedings u/s. 147 and failure to take steps u/s. 143(3) will not render the AO powerless to initiate reassessment proceedings, even when the intimation u/s. 143(1) has been issued. 2.4.4 Hon'ble Apex Court further observed that substantial changes have been made to section 143(1) with effect from 1-6- 1999.· Up to 31-3-1989, after a return of income was filed, the Assessing Officer could make an assessment under section 143(1)

7 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah without requiring the presence of the assessee or the production by him of any evidence in support of the return. Where the assessee objected' to such an assessment or where the officer was of the opinion that the assessment was incorrect or incomplete or the officer did not complete the assessment under section 143(1), but wanted to make an inquiry, a notice under section 143(2) was required to be issued to the assessee requiring him to produce evidence in support of his return. After considering the material and evidence produced and after making necessary inquiries, the officer had power to make assessment under section 143(3). With effect from 01-04-1989, the provisions underwent substantial and material changes. A new scheme was introduced and in the new substituted section 143(1) prior to the subsequent substitution with effect from 1-6-1999, in clause (a), a provision was made that where a return was filed under section 139 or in response to a notice under section 142(1), and any tax or refund was found due on the basis of such return after adjustment of tax deducted at source, any advance tax or any amount paid otherwise by way of tax or interest, an intimation was to be sent without prejudice to the provisions of section 143(2) to the assessee specifying the sum so payable and such intimation was deemed to be a notice of demand issued under section 156. The first proviso to section 143(1)(a) allowed the department to make certain adjustments in the income or loss declared in the return. 2.4.5 It was also seen that what were permissible under the first proviso to section 143(1)(a) to be adjusted were that, (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return and similarly (iii) those claims which were on the basis of the information available in the return, prima facie inadmissible, were to be rectified/allowed/disallowed. What was permissible was correction of errors apparent on the face of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts or documents, either in allowing or in disallowing deductions, allowance or relief. 2.4.6 The intimation under section 143(1)(a ) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from 01-04- 1989 to 31-03-1998, the second proviso to section 143(1)(a) required that where adjustments were made under the first proviso to section 143(1)(a), an intimation had to be sent to the

8 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah assessee, notwithstanding that no tax or refund was due from or to him after making such adjustments. With effect from 01-04- 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till 01-06-1999. The requirement was that an intimation was to be sent to the assessee whether or not any adjustment had been made under the first proviso to section 143(1) and notwithstanding that no tax or interest was found due from the assessee concerned. Between 01-04-1998 and 31-05-1999, sending of an intimation under section 143(1)(a) was mandatory. Thus, the legislative intent is very clear from the use of the word 'intimation' as substituted for 'assessment' that two different concepts emerged. While making an assessment, the Assessing Officer is free to make any addition after grant of opportunity to the assessee. By making adjustments under the first proviso to section 143(1)(a), no addition which is impermissible by the information given in the return could be made by the Assessing Officer. The reason is that under section 143(1)(a) no opportunity is granted to the assessee and the Assessing Officer proceeds on his opinion on the basis of the return filed by the assessee. The very fact that no opportunity of being heard is given under section 143(1)(a) indicates that the Assessing Officer has to proceed after accepting the return and making the permissible adjustments only. As a result of insertion of the Explanation to section 143 by the Finance (No.2) Act of 1991 with effect from 1-10-1991 and, subsequently, with effect from 1-6-1994, by the Finance Act, 1994, and ultimately omitted with effect from 01-06-1999, an intimation sent to the assessee under section 143(1)(a ) was deemed to be an order for the purposes of section 246 between 1-6-1994 and 31-05-1999, and under section 264 between 1-10-1991 and 31-05-1999. The expressions 'intimation' and 'assessment order' have been used at different places. The contextual difference between the two expressions has to be understood in the context the expressions are used, The assessment is used as meaning sometimes the computation of income', . sometimes "'the determination of the amount of tax payable' and sometimes 'the whole procedure laid down in the Act for imposing liability upon the tax payer'. In the scheme of things, as noted above, the intimation under section 143(1)(a) cannot be treated to be an order of assessment. The distinction is also well brought out by the statutory provisions as they stood at different points of time. Under section 143(1)(a), as it stood prior to 01-04-1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision, the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to sent. Various circulars sent by the CBDT spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. Under the first proviso to the newly

9 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah substituted section 143(1), with effect from 01-06-1999, except as provided in the provision itself, the acknowledgement of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgement is not given by any Assessing Officer, but mostly by ministerial staff. No assessment can be done by them. The intimation under section 143(1)(a) was deemed to be a notice of demand under section 156, for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissibly. And nothing more can be inferred from the deeming provision. 2.4.7 Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of-action under section 147(a) (as the provision stood at the relevant time) fulfilment of the two requisite conditions in that regards essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is "reason to believe", but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction ITO v. Selected Dalurband Coal Co. (P.) Ltd. [1996] 217 ITR 597 (SC); Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC). 2.4.8 The scope and effect of section 147 as substituted with effect from 01-04-1989, as also sections 148 to 152 are substantially different from provisions as they stood prior to such substitution. Under the old provisions of sec 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed a reassessed. To confer jurisdiction under section 147(a) two conditions were requires to be satisfied firstly the Assessing

10 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly the must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for 'his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words, if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. 2.4.9 It was thus held that so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 2.4.10 Further, It is the duty of the assessee to disclose full and true materials to the A.O. but for which the A.O. could initiate the reassessment proceedings. It has been held by the Hon'ble Supreme Court in Shri Krishna P. Ltd. 221 ITR 538, 549 that every disclosure is not and cannot be treated to be a true and full disclosure. A disclosure may be a false one or a true one. It may be a full disclosure or it may not be. The Hon'ble Supreme Court held that a partial disclosure may very often be a misleading one. Therefore, what is required is a full and true disclosure of all material facts necessary for making assessment for that year. I find from the reasons recorded by the Ld. AO. that the true nature of these transactions were not disclosed by the appellant and therefore, prima facie he had valid grounds to reopen the case. 2.4.11 It has been held in a number of cases that once the AO. records the mandatory reasons before initiating reassessment proceedings on the basis of evidence brought to his knowledge, the courts cannot step into his shoes as regards the sufficiency of the reasons recorded. The belief must be honest and of reasonable person based on reasonable grounds. The AO may act on direct or circumstantial evidence: but his belief must not be based on mere suspicion, gossip or rumour. I find from the facts of the case that the reason is based on specific facts. The Hon'ble Apex court has held that the court can always examine this aspect (Le. formation of belief) though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court.

11 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah {(Sheo Nath Singh 82 ITR 147)(SC) : Bhagwan Industrial P.Ltd. 31STC 293 (SC):} 2.4.12 Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. VS. ITO 236 ITR 34, 35 (SC) has held that for determining whether initiation of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. It further held that the sufficiency or correctness of the material is not a thing to be considered at this stage. The Hon'ble apex court in the case of Shri Krishna P. Ltd. 221 ITR 538, 549 (SC) has also held that the enquiry at the stage of examining the validity of reassessment notice is only to see whether there are reasonable grounds for the AO and not whether the omissions/failures and the escapement of the income is established. The Hon'ble Court therefore, cautioned that it was necessary to keep this distinction in mind. 2.4.13 At this juncture it would be appropriate to reproduce the Explanation to sec.147 which reads as under:- "Expln. 2 - For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (a) Where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) Where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the AO that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) . Where an assessment has been made, but- (i) Income chargeable tax has been under assessed; ;or (ii) Such income has been assessed at too Iowa rate; or (iii) Such income has been made the subject of excessive relief under this Act; or (iv) Excessive loss or depreciation allowance or any other allowance under this Act has been computed." 2.4.14 Interpreting and highlighting the significance of the said Explanation in Consolidated Photo & Finvest Ltd. vs. Asstt. CIT (2006) 200 CTR (Del) 433 : (2006)281 ITR 394 (Del) it has been held: "9. The above would show that cases falling in cl. (e) of Expln. 2 in which income chargeable to tax has been under assessed or assessed at too Iowa rate or cases in which income has been

12 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah made the subject of excessive relief under the Act or where excessive loss or depreciation allowance of any other allowance under the Act has been computed, would constitute cases of income escaping assessee. There is considerable authority for the proposition that the jurisdiction of the AO to initiate proceedings would depend upon whether he has reasons to believe that any income chargeable to tax has escaped assessment. A long string of decisions rendered by the Supreme Court have emphasized that the belief of the AO must be in good faith and must not be a mere pretence. The apex Court has further held that there must be a nexus between the material before the AO and the belief which he forms regarding the escapement of the assessee's income. A writ Court, therefore, is entitled to examine whether the AO's belief was in good faith and whether such reasons had a nexus with the action proposed to be taken." 2.4.15 The present case is not one of change of opinion as alleged by the appellant. Question of change of opinion arises when the AO forms an opinion and decides not to make an addition and holds that the appellant was correct in his stand. In the present case, no facts regarding the bogus transactions with Mukesh was ever produced by the appellant and therefore for the sake of forming a prima facie belief, the information in the possession of the Ld. AO. on the basis of investigations made, was sufficient to initiate reassessment proceedings. It will be appropriate in this regard to refer to Explanation 1 to sec.147 of the Act which reads as under:- "Expl.1 Production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of the foregoing proviso." 2.4.16 Referring to the said Explanation in Consolidated Photo & Finvest Ltd. (supra) it has been held: "8. It is clear from the above that the two critical aspects which need to be addressed in any action under s. 147 are whether the AO has 'reason to believe' that any income chargeable to tax has escapade assessment and whether the proposed reassessment is within the period of limitation prescribed under the proviso to s. 147. Expln .1 to the said provision makes it clear that production of account books or other evidence from which the AO could with due diligence discover material evidence would not necessarily amount to disclosure within the meaning of the proviso that stipulates an extended period of limitation for action in cases where the escapement arises out of the failure on the part of the assessee to disclose .fully and truly all material facts necessary for assessment. " 2.4.17 In Kantamani Venkata Naryana & Sons vs. Add!. ITO (1967) 631TR 638 (SC), the apex Court held that in proceedings

13 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah under Art.226 of the Constitution of India challenging the jurisdiction of the ITO to issue a notice for reopening the assessment, the High Court was only concerned with examining whether the conditions which invested the ITO with the powers to reopen the assessment existed. It is not, observed the Court, within the province of the High Court to record a final decision about the failure to disclose fully and truly all material facts bearing on the assessment and consequent escapement of income from assessment and tax. The Court also held that from a mere production of the books of account, it could not be inferred that there had been full disclosure of the material facts necessary for the purposes of assessment. The terms of the Explanation, declared the Court, were too plain to permit an argument that the duty of the assessee to disclose fully and truly all material facts would stand discharged when he produces the books of account or evidence which has a material bearing on the assessment. The Court observed (P.644): 'It is the duty of the assessee to bring to the notice of the ITO particular items in the books of account or portions of documents which are relevant. Even if it be assumed that from the books produced, the ITO may not on that account be precluded from exercising the power to assess income which had escaped assessment" 2.4.18 To the same effect is the decision of the Supreme Court in Malegaon Electricity Co. (P) Ltd. vs. CIT (1970) 78 ITR 466 (SC) where the Court observed (page 471) : 'It is true that if the ITO had made some investigation, particularly if he had looked into the previous assessment records, he would have been able to find out what the written down value of the assets sold was and consequently he would have been able to find out the price in excess of their written down value realized by the assessee. It can be said that the ITO if he had been diligent could have got all the necessary information from his records. But that is not the same thing as saying that the assessee had placed before the ITO truly and fully all material facts necessary for the purpose of assessment. The law casts a duty on the assessee to 'disclose fully and truly all material facts necessary for his assessment for that year'''. 2.4.19 It has been further observed in Consolidated Photo & Finvest Ltd. (supra): The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the AO proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined. It must be presumed that

14 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah those aspects were present to the mind of the AO and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the AO .. " 2.4.20 It is well settled that even an audit objection on the point of fact can be a valid ground for reopening of assessment. In the case of New Light Trading Co. vs. CIT (2001) 170 CTR (Del)138: (2002) 256 ITR 391 (Del), a Division Bench of the Court after referring to the decision of Supreme Court in CIT vs P.V.S. Beedies (P) ltd. (1999) 155 CTR (SC) 538 : (1999) 237 ITR 13 (Se) has held as under (at p.393): "In the case of CIT vs. P. V.S. Beedies (P) Ltd. (1999) 155 CTR (SC) 538: (1999) 237 ITR 13 (SC) the apex Court held that the audit party can point out a fact, which has been overlooked by the ITO in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has righty noticed, this was not a case for the AO merely acting at the behest of the audit party or on its report. It has independently examined the material collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question, therefore, in the affirmative, in favour of the Revenue and against the assessee." 2.4.21 When there is no discussion on the issue in the Assessment order and no details were called for by the AO or filed by the assessee on the issue, no finding either positive or negative can be said to have been arrived at during the course of original assessment proceedings. Hence, there is no question of change of opinion as held in the following judgements: 1. Kalyanji Mavji & Co. vs. CIT 102 ITR 287 (SC) 2. Esskay Engineering P. Ltd. vs. CIT 247 ITR 818 3. ITO vs. Purushottam Das Bangur & Anr. 224 ITR 362 (SC) In the light of the above discussion, the contention of the assessee that the present case is of change of opinion has to be rejected. 2.4.22 The second question arises for consideration is whether the appellant had made full and true disclosure of material facts. I have already reproduced above the contentions of the appellant in this regard and the objections raised. There is nothing on record and not even the stand of the appellant that details as recorded in

15 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah the "reason to believe" were either called for or furnished and examined during the course of original assessment proceedings. 2.4.23 In Writ Petn. No.9036 of 2007, Honda Siel Power Products Ltd. vs. Dy CIT & Anr. Decision dt. 14th Feb. 2011 (reported at (2011) 52 DTR (Del) 353 - Ed.) it was held: "10 The term 'failure' on the part of the assessee is not restricted only to the IT return and the columns of the IT return or the tax audit report. This is the first stage. The said expression 'failure to fully and truly disclose material facts' also relate to the stage of the assessment proceeding, the second stage. There can be omission and failure on the part. of the assessee to disclose fully and truly material facts during- the course of the assessment proceedings. This can happen when the assessee does not disclose or furnish to the AO complete and correct information and details it is required and under an obligation to disclose. Burden is on the assessee to make full and the true disclosure". 2.4.24 Formation of opinion of the AO. has to be considered on the touch stone whether there was reasonable belief that income had escaped assessment and for that purpose reliance is placed on the judgement of Hon'ble Supreme Court in Raymond Woolen Mills Ltd. vs ITO 236 ITR 34 (SC). Considering the ratio laid down by the Hon'ble Supreme Court in the above case, the question is whether the AO had prima facie reason to believe that the income had escaped assessment. I have earlier reproduced Explanation 2(c) of Sec.147. :n view of the factual and legal matrix narrated earlier, as there was no true disclosure of the material facts during the course of original proceedings, it prima facie can not be stated that there was no reason to believe. The various judgements relied upon on behalf of the appellant are distinguishable in as much as either there was no failure to disclose the full and true relevant information and/or it was merely a change of opinion in those cases. The appellant could not make out the case that no part of the relevant material have been kept out from the AO. and that it would not be unreasonable for the AO. not to draw inference from the accounts produced during the original assessment proceedings. Sustenance in this regard is also drawn from the judgement of Hon'ble jurisdictional High Court in the case of M/s.Girilal & CO. YS. ITO 300 ITR 432 (Born). 2.4.25 Any fresh information received by the AO. can entitle him to issue notice u/s.148, if on the basis of such information he has prima facie reason to believe that income has escaped assessment. So much so that it was held by the Hon'ble Supreme Court in Claggett Brachi Co.Ld. vs CIT 177 ITR 409 (SC) that an information obtained during assessment proceedings of a subsequent year can also validate the proceedings initiated u/s.147 for earlier year. Similarly, Hon'ble Bombay High Court in the case of Anusandhan Investments Ltd. vs. M.R .. Singh, DCIT,

16 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah 287 ITR 482 held that a notice issued u/s.148 based on assessment of subsequent assessment year is valid even if the appeal is pending for such assessment. Further, in the case of Piaggio Vehicles P. Ltd. YS. DCIT 290 ITR 377 (Bom), the Hon'ble Jurisdictional High Court held that in a case of reopening after 4 years subsequent to scrutiny assessments, contradiction was discovered between Tax Audit report and Return of income, it was a case of omission and/or failure on the part of the assessee to disclose fully and truly all facts for computation of its income. It is also held by Hon'ble Supreme Court in the following cases that facts which could have been found by the ITO by further probing are covered under failure to disclose fully and truly all material facts:- Indo - Aden Salt Mfg. and Trading Co. P. Ltd. YS.CIT 159 ITR 624 (SC) R.B. Bansilal Abirchand Firm vs. CIT 70 ITR 74 (SC) 2.4.26 In such circumstances, it cannot be held that there was full and true disclosure by the appellant. Accordingly, the second contention of the appellant fails. 2.4.27 In view of the above binding precedents of the Hon'ble Supreme Court, I am of the view that the Ld. AO had valid reasons to initiate reassessment proceedings which were duly recorded and communicated to the appellant and therefore, there is no merit in the arguments advanced by the Ld. AR. on this ground. Accordingly, the additional ground of appeal is dismissed.” 7. We have heard the counsels for both the parties on this ground and we have also perused the material placed on record as well as the orders passed by the revenue authorities. Ld. AR further submitted that in the case of Shri Vishal Vinod Shah who is a family member of the assessee and in his case on identical facts the Hon’ble ITAT Mumbai Bench in ITA No.4209/Mum/2014 for A.Y.2003-04 has deleted the addition made by the AO. It was also submitted that although the reopening was upheld by CIT(A) but the additions were deleted. However the revenue filed appeal against the order of CIT(A) and the Hon’ble ITAT dismissed the appeal of the revenue and upheld the order of CIT(A) deleting the addition. Even ld. CIT(A) has taken into consideration all the factual and legal position, and rightly held that the AO has rightly exercised his power of re-opening, as he had valid reasons to believe that income had escaped assessment. The AO had justification to suppose that income had escaped assessment and hence has rightly re-opened the assessment. Hence, the order of CIT(A) is well reasoned and speaking order while upholding the order of AO regarding re-opening. No new facts or circumstances have been brought before us in order to controvert or rebut the findings by the CIT(A). Therefore while maintaining judicial consistency and finding

17 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah no merit in the arguments advanced by ld. AR we uphold the order of reopening. Accordingly this ground of appeal is dismissed.” 5.3.3 On an appreciation of the facts on record and taking into account the factual and legal position of the case on hand, which we find is similar to that of A.Y. 2005-06 as laid out in the order of the Coordinate Bench of the Tribunal (supra), we are of the considered view that the AO had rightly exercised his power of reopening the assessment in proceedings under section 147/148 of the Act, as he had prima facie valid reasons to believe that income of the assessee exigible to tax for A.Y. 2003-04 had escaped assessment and had therefore correctly reopened the assessment for A.Y. 2005-06. Before us, no material evidence has been brought on record by the assessee to controvert the findings of the learned CIT(A) on this issue. In this view of the matter, while maintaining judicial consistency and finding no merit in the grounds raised or arguments put forth by the learned A.R. of the assessee, we uphold the action of the AO in reopening the assessment for A.Y. 2003-04 in the case on hand. Consequently, grounds 4, 6 & 11 of the assessee’s appeal are dismissed. 6. Grounds 1, 7, 8, 9 & 12 6.1 In these grounds, the assessee assails the impugned order of the learned CIT(A) in upholding the AO’s action in treating the capital gains on sale of shares of Buniyad Chemicals Ltd. amounting to `35,17,598/- as bogus transaction and the treatment of the investment thereof, in purchase of residential flat at Jaldarshan, Malabar Hills, Mumbai as unexplained investment; thereby denying the assessee exemption claimed thereon under section 54F of the Act. It is also contended that no independent inquiry has been made by the AO to ascertain the truth in the matter, since it is evident that he merely relied on the information received from the DDIT (Inv) and the statement of one Shri Mukesh Choksi, which is said to be general in nature and did not specifically name the assessee. The assessee further assails the impugned order of the learned CIT(A) and AO as being violative of the principles of natural justice, since no opportunity was afforded to the assessee to cross-examine Shri Mukesh Choksi and further also to rely on the same statement which was recorded

18 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah behind the back of the assessee for making/upholding findings adverse to the assessee’s claims of capital gains and to deny exemption claimed under section 54F of the Act. The learned A.R. of the assessee was heard in support of the grounds raised. It was submitted that all details of the share transactions of Buniyad Chemicals entered into by the assessee in the year under consideration is part of assessee’s paper book (pg. 1 to 62), the details of which were placed before the authorities below; i.e. copies of purchase purchase/sale bills (pg. 45 to 62); copies of physical share certificates (pg. 36 to 40); copy of Demat Account (pg. 41), etc. It was submitted that this issue is covered in favour of the assessee. In similar factual situation on this issue a Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2005-06 in ITA No. 1978 & 1979/Mum/2014 dated 07.10.2016, following the decision of, inter alia, the Mumbai ITAT in Kamlesh Mundra in ITA No. 6248/Mum/2012, has deleted similar additions/disallowances made and confirmed by the authorities below. 6.2 Per contra, the learned D.R. supported the orders of the authorities below. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. We find identical issue on similar facts has been considered and adjudicated in favour of the assessee by a Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2005-06 in ITA No. 1978 & 1979/Mum/2014 dated 07.10.2016, wherein at paras 8 to 10 thereof has held as under: - “8. Since all the grounds raised by the assessee are inter-connected and inter-related therefore we thought it fit to dispose off the same through the present common order. We have counsel for both the parties and we have also perused the material on record as well as the orders passed by revenue authorities. We have also perused the orders of coordinate bench of ITAT in the case of ITO vs. Shri Vishal Vinod Shah who is a family member of assessee and as per the ld. AR, the case of Vishal Vinod Shah was also on identical facts. The relevant para is reproduced below: “10. After hearing the counsel as well as the order passed by the revenue authorities, we have observed that the Co-ordinate Bench

19 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah of ITAT, Mumbai had already dealt with the similar issue in the case of Shri Kamlesh Mundra vs. ITO in ITA No.6248(Mum)/2012 for the assessment year 2003-04. The operative portion of the decision of the Hon’ble ITAT in the aforementioned case is as under; “6. We have heard the counsels for both the parties and we have also perused the material placed on record as well as the orders passed by the lower authorities and after considering the same, we have observed that the co-ordinate Bench of ITAT ‘Mumbai’ has already dealt with the similar issue in ITA No. 1175/Mum/2012 and ITA No. 1176/Mum/2012 where in also the assessee’s in those cases have dealt with the share transaction with the same companies. We referred the operative para of ITA No. 1175/Mum/2012 titled “Smt. Durgadevi Mudra vs. ITO” and the same is reproduced here in below: “I have heard the parties and perused the record. The Ld. Counsel submits that in respect of the 'Shares Scam' alleged to be involved by Shri Mukesh Chokshi actions were taken against many persons disallowing their claim in respect of long-term capital gain and short term capital gain. He submits that on identical set of facts the issue has been considered by the Tribunal. The Ld. Counsel filed the copies of the Tribunal decision by way of compilation as under: i) Mukesh R. Marolia vs. Addl. CIT -6 SOT 247 ii) Rajnudevi Chowdhary vs. ITO -ITA 6455/M/2007(Bom) iii) ITO vs. Truptic Shah -ITA 6455/M/2007(Bom) iv) Chandrakant Babulal Shah -ITA 6108/M/2009(Bom) v) ACIT vs. Shri Ravindrakumar Thshinwal ITA 5302/M/2008 (Bom) 5. He, therefore, pleaded for accepting the claim of the assessee in respect of long-term capital gain. I have also heard the Ld. D.R. 6. I find that in the present case, the assessee has produced the bills showing the purchase of the shares. The assessee also proved that the shares were sold through the share broker and he produced the proof for the same. The identical situation has been considered by the ITAT ‘C’ Bench, Mumbai in the case of Chandrakant Babulal Shah (supra). The operative part of the order of the Tribunal is as under: 7. We have considered the submissions of the rival parties and examined the record. The case relied upon by the learned Counsel are not directly applicable to the facts of the case as in those cases the sale proceeds are treated as undisclosed income denying the entire transaction as such, whereas, in the present case, the Assessing Officer did not treat the sale of shares as bogus. He has only examined the purchase of shares and doubted

20 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah the date of purchase. But in the computation he has given benefit to the same cost of purchase of shares and taxed the long term capital gain offered as short term capital gain only. As far as the date of purchase is concerned, the evidence on record indicate that the assessee had indeed earned speculation profit by sale of APTECH shares which the Assessing Officer has not doubted. Further the assessee also suffered speculation loss as stated above in February, 2001 and debit and credit entries pertaining to same broker were shown in the balance sheet in the return filed for the AY 2001-2002 in August, 2001. There is also a mention of purchasing of shares of the company in the return. It is also on record that the said company vide letter dated 30-6-2000 had transferred the shares in the name of the assessee with the folio No. 15021 and certificate Nos. 105744 to 105848. The Assessing Officer neither questioned the said company nor disproved the transfer of share certificates by 30/6/2000. The only basis for arriving at the conclusion that the transaction is not genuine is on the basis of the statement given by Mr. Mukesh Chokshi on 20-6- 2004/20-6-2002 before the DDIT (Inv.) with reference to certain transactions undertaken by Mr. Mukesh Chokshi and his group of companies, mainly Gold Finvest Pvt. Ltd. Richmond Securities and Alembic Securities, which are dealing in interconnected stock exchange/ NSC. Most of the enquiries pertains to the transactions in interconnected stock exchange and sale of shares In the company viz., Rashel Agro Tech Ltd. The enquiry in the said group of companies was with reference to the issuance of bogus , purchase and sale bills and accommodating various parties in earning the capital gains. However, as submitted by the learned Counsel, the assessee's name is not figuring in the transactions which were originally enquired by the DDIT (Inv.) on 26-4-2002. Even though the modus operandi was explained and stated that they were getting 0.5% commission in arranging the transactions, nothing was concluded against the assessee in the said statement. The Assessing Officer in the course of assessment again recorded the statement under section 131 on 9-11-2006 in which question No. 4 and 5 which are extracted in the assessment order itself. The main reliance is on question No. 5 which is as under: "Q.5 : Please give the details of bills of profit issued by your company as stated above. Ans: These bills numbers Bills No. CC/2000/16/12501 dt.18-4-2000 which shows that B.87610.85 payable to Shri Chandrakant D. shah. There is another Bill No. CC/2001/07/164 (N) dt.20/2/2001 in which Rs.89602 was receivable by Shri Chandrakant B. Shah. These bills are issued showing fictitious profit and therefore the purchase are not substantiated by genuine payments." "8. This statement was relied upon by the Assessing Officer to state that the purchase bills are issued showing fictitious profit.

21 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah However, the assessee was not given an opportunity to cross examine Mr. Mukesh Chokshi and when an opportunity was given and assessee was present Mr. Mukesh Chokshi was not available. The only basis for this above statement is that the payments are not made immediately but even statement itself indicate that they were capital gains earned by the assessee as speculation profits and in question No. 4 in the statement Mr. Mukesh Chokshi admits the purchase of 10500 shares of Rashel Agro Tech, Ltd. made out of adjusted share profits and therefore confirmed that this is an 'adjustment transaction). In view of this statement in question Nos. 4 and 5) we are unable to understand how the transactions becomes a bogus one. There is no evidence except this oral statement which is also not submitted for cross- examination to prove/ disprove the transaction. Whereas the assessee furnished transaction details) the bank accounts) purchase and sale of other listed companies) speculation profit and loss and also evidence in the form of balance sheet filed much before the said shares were sold. The sale of shares was undertaken in December 2001 whereas the return for AY 2001- 2002 was filed by August 2001 itself indicating the purchase of shares and outstanding amounts to M/ s. Golden Finvest Ltd in the statements. In view of the documentary evidence in favour of the assessee, we are unable to accept the contention of the Assessing Officer based on the statement which is also un supported by any other evidence to deny the benefit of purchase of shares by the assessee on 8-4-2000. Not only that the Assessing Officer has also gave credit for the same amount of purchase of shares at cost and did not treat the sale proceeds as bogus/unaccounted income. The only action taken by the Assessing Officer is to deny the assessee the benefit of long term capital gain and subsequent deduction under section 54EC of the Act as the assessee invested the capital gains in REC Bonds. We do not see any reason to agree with the findings of the' Assessing Officer and also the findings of the CIT (A). In fact, the CIT (A) has went ahead in treating the entire transaction as bogus and confirmed the action of the Assessing Officer while holding "this will be more for an unexplained receipt of money of the appellant. Hence, Assessing Officer had rightly added the amount by and the action of the Assessing Officer in making this addition is confirmed treating it as STCG)). In arriving at this conclusion, the CIT (A) presumed that assessee could have paid full payment of 16 lakhs by way of cash which was not the case of the Assessing Officer either. There is no evidence even to presume these observations of the CIT (A) as stated above. 7. The facts are identical in this case as in the case of Chandrakant Babulal shah (supra). I hold that the assessee has proved the genuineness of the share transactions and there is no justification to disallow the claim of the assessee in respect of the long-term capital gain. I, accordingly, direct the A.O. to allow the

22 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah same. Accordingly, ground no.2 is allowed. Assessee's appeal is partly allowed.” In addition we have also analyse the orders passed in ITA No. 1176/Mum/2012 titled “Shri Mahesh Mundra vs. ITO” the operative para is reproduced here in below: “I have heard the parties. In this case also the assessee has declared the long-term capital gain in respect of the sale of the shares of M/ s. Buniyad Chemicals Ltd. It was claimed that the shares were sold through M/ s. Goldstar Finvest Pvt. Ltd. There was investigation against Shri Mukesh Chokshi who was the mentor and the main person in the entire shares' 'Scam'. The facts are identical as in the case of Smt. Durgadevi Mundra in ITA No.1175/M/2012. Hence, to avoid the repetition of the facts and for the sake of brevity, I adopt the facts mentioned in the case of Smt. Durgadevi Mundra as well as the reasons. In this case also the A.O. assessed capital gain declared by the assessee as 'income from other sources'. I, therefore, following my reasons and decision in the case of Smt. Durgadevi Mundra (supra) allow ground no.2 in this appeal also and direct the A.O. to assess the long-term capital gain declared by the assessee as such and accept the same.” 7. After analyzing the afore mentioned orders, we found that the issue contained in the present case are similar to the issues of afore mentioned cases. Therefore, keeping in view the principles of judicial consistency and while respectfully following the judgements passed by the co-ordinate bench, We also hold that in the present case by virtue of independent documents as referred in paper book the assessee has proved the genuineness of the share transaction and there was no justification to disallow the claim of the assessee in respect of long term capital gain merely on the basis of information received from DDIT which is based on admission of Shri Mukesh Chokshi. Therefore accordingly, we direct the AO to assess the long term capital gain declared by assessee as such and accept the same. 11. Apart from analyzing the aforesaid order, we have also noticed in paper book at pages 11 & 12 wherein specific directions were given by the ld. CIT(A) to the AO to provide opportunity of cross examination to the assessee. But even inspite of that no opportunity of cross examination was ever granted by the AO to the assessee. During the course of argument, we have put this specific question to the ld. DR who appeared on behalf of revenue, but the ld. DR appearing on behalf of the revenue was unable to give any satisfactory reply as to why the AO has not complied with specific direction for allowing the assessee to cross examine such person as per directions given at page no.11 & 12 of paper book. After conjoint reading of the orders passed by the CIT(A) in the present case as well as the earlier orders by the

23 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah Hon’ble ITAT, Mumbai Bench in similar case and an after taking into consideration the documents relied upon by the assessee, we are of the considered view that the ld. CIT(A) has rightly pointed out that the assessment order is single page cryptic order in which the addition of Rs.43,52,980/- has been made to the returned income, which is primarily based on the solitary statement of Shri Mukesh Choksi recorded by the DDIT(Inv.)(1)(4), Mumbai. The ld. CIT(A) has also rightly considered the factual position of the present case, wherein no independent enquiry has been done by the AO to verify whether the statement of Shri Mukesh Choksi admitting to issuing bogus bills was correct in the case of assessee or not by providing an opportunity of cross examination to the assessee of such person and therefore, in such circumstances in the present case, the statement of third party i.e. Mukesh Choksi recorded at the back of the assessee cannot be used against him without giving the assessee an opportunity to cross examine and rebut the allegation. In the peculiar facts of the present case, we have also noticed that the AO has not fully complied with the directions given by the ld. CIT(A) as per page No.11 & 12 of the paper book.” 9. Apart from the afore mentioned case the ld. AR also relied upon another case of Hon’ble ITAT in the case of Shri Kamlesh Mundra vs. ITO in ITA No.6248/Mum/2012 for A.Y. 2003-04 on similar facts and in that case the additions made by the AO were also deleted by ITAT. 10. After analyzing the afore mentioned orders and keeping in view the facts and circumstances of the present case, we are of the considered view, that Hon’ble ITAT Mumbai bench in similar cases have already deleted the addition on the ground that no opportunity of “cross examination” was given to the assessee and moreover “no independent enquiry” has been done by AO to verify whether the statement of Shri Mokesh Chokshi admitting to issue bogus bills was correct in the case of the assessee or not by providing an opportunity of cross examination to the assessee of such person. Even otherwise, the statement of third party i.e. Mukesh Chokshi recorded at the back of the assessee cannot be used against him without giving the assessee an opportunity to cross examine or rebut the allegation. Therefore, keeping in view the principles of judicial consistency and while respectfully following the judgments passed by the coordinate benches and keeping in view our above findings we also hold that ld. CIT(A) erred in upholding the addition made by AO. Accordingly we set aside the order of CIT(A) and direct the AO to delete the additions.” 6.3.2 On an appreciation of the facts on record in the case on hand and the decisions of various Coordinate Benches of this Tribunal in similar cases, we find that such additions/adverse findings rendered by AO’s have been deleted/reversed on the grounds that ‘no independent enquiry’ has

24 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah been conducted by the AO to ascertain/prove that information received was true and also since no opportunity of cross examination’ was afforded to the assessee in order to verify whether the statement/deposition given by Shri Mukesh Choksi admitting to the issue of bogus bills was correct in the case of the assessee, before the AO could have used the same against the assessee. In this factual matrix of the case on hand, as discussed above, following judicial consistency and the decisions of the Coordinate Benches , inter alia, in the assessee’s own case for A.Y. 2005-06 in ITA No. 1978 & 1979/Mum/2014 dated 07.10.2016, we hold that the learned CIT(A) erred in upholding the AO’s action in treating the capital gains on sale of shares amounting to `35,17,598/- as a bogus transaction, charging commission thereon and denying the assessee’s claim for exemption under section 54F of the Act. We accordingly set aside the orders of the authorities below on these issues. Since it appears that the authorities below have denied the assessee’s claim for exemption under section 54F of the Act summarily, without examining the facts of the claim and computation thereof, the AO is directed to do so while giving effect to this order. We hold and direct accordingly. Consequently, grounds 1, 7, 8, 9 and 12 are allowed/disposed off as indicated above. 7. Ground No. 3 – Issue of Notice under section 143(2) 7.1 In this ground, the assessee challenges the service of notice under section 143(2) of the Act dated 20.05.2010 which the learned CIT(A) has referred to in the impugned order. The Bench called for the concerned records of assessment which reportedly were not traceable. The learned CIT(A) addressed this issue at para 6 of the impugned order as under: - “6. As regards the notice u/s. 143(2) of the Act, I note that the first notice in this regard was issued on 20-05-2010 by ITO, 16(1)(1), Mumbai and was received by the appellant on 25-05-2010. It is also noted that on the said notice the assessment year was mentioned as A.Y. 2003-04 correctly. Thus, the notice required to be issued within the statutory time was properly issued. Secondly, the notice u/s. 143(2) of the Act dated 02-11-2010 issued by the subsequent incumbent officer in which the assessment year was mentioned as 2008-09, which is relied upon by the AR, is of no consequence since the first notice required to be issued within the statutory time was issued in a proper manner. It is also noted that in the subsequent notices issued u/s. 142(1) of the Act also the

25 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah assessment year was wrongly mentioned as A.Y. 2008-09. However, considering the fact that appellant has participated in the assessment proceedings and did not raise any objection before the A.O., the mistake in mentioning the assessment year as 2008-09 in the notice u/s. 142(1) of the Act is of no consequence and the impugned notice issued is deemed to be valid u/s. 292BB of the Act. Therefore, I do not find any merit in the appellant's argument on this ground. Accordingly, the same is dismissed.” However, since in the appellate proceedings except for raising this ground, the assessee did not challenge the issue of the said notice under section 143(2) of the Act and in the light of the factual finding rendered by the learned CIT(A) (supra), we dismiss this ground raised by the assessee. 8. In the result, the assessee’s appeal for A.Y. 2003-04 is partly allowed as indicated above. Assessee’s appeal for A.Y. 200405 (ITA No. 1736/Mum/2014) 9. In this appeal the assessee has raised the following grounds: - “1. CIT (A) has erred in law and facts confirming order of A.O. ignoring submission made by appellant. Appellant was prevented by sufficient cause for not attending on appointed date. 2. CIT[A] has erred in confirming addition on the basis appellant own case confirm in A.Y. 2003-04 by CIT[A] 27 without appreciating fact that appeals of ground are different and each year assessment is independent asst year. 3. CIT[A] had wrongly mentioned that the appellant has also raised similar contentions / grounds of appeal. Contention and grounds of appeal both are different in both appeal. 4. CIT[A] has not disposed off all grounds of appeal no observation on action u/s 147 reason recorded are not relevant to escapement of income which are challenge by appellant. 5. CIT[A] has not made any observation on the capital gain added to income. 6. Reopening u/s 147 is bad in law, notice u/s 148 is bad in law no application of mind by A.O. No independent enquiry were made by A.O. 7. CIT[A] has confirm order passed by A.O. by violating principle of natural justice. 8. CIT[A] has ignore fact that appellant purchase physical shares which were duly transfer in his name than send for demate. The sold shares has been debited in demate account.

26 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah 9. A.o. has mentioned that bogus income if it is bogus income how it can be taxes as undisclosed income 10. Notice under section 148 issued after 4 year so in reason recorded A.O. had come to conclusion that there is a failure on the part of the assessee to disclose material facts in the return. 11. A.O. has not proved nexus. 12. CIT[A] has erred in retaining .15% commission on transaction value. 13. CIT [A] has erred in disallowing transfer fee of Rs 300000/- 14. Appellant craves your leave to add alter and modify these grounds of appeal.” 10. Grounds No. 2, 3 & 4 10.1 These grounds are general in nature and do not call for adjudication thereon. Not being urged before us, these ground are rendered infructuous and are accordingly dismissed. 11. Ground No. 13 – Disallowance of Transfer fee 11.1 At the outset of the hearing, the learned A.R. of the assessee submitted that this ground is not being pressed in this appeal. This ground is therefore rendered infructuous and is accordingly dismissed. 12. Grounds No. 4, 6, & 10 – Validity of Reopening of assessment 12.1 The issue raised in these grounds, on the validity of reopening the assessment for A.Y. 2004-05 are factually/legally similar to those raised in the assessee’s own case for A.Y. 2003-04. We have addressed the same at paras 5.1 to 5.3.3 of this order in ITA No. 1264/Mum/2013 (supra) and dismissed the assessee’s pleas. Following this decision of ours and in order to maintain judicial consistency, the same finding mutatis mutandis applies in the assessee’s case for A.Y. 2004-05 also and we therefore finding no merits in these grounds raised by the assessee at S. Nos 4, 6 & 10 dismiss them. 13. Grounds No. 1, 5, 7, 8, 9 & 12 13.1 The issues raised in these grounds for A.Y. 2004-05 are factually similar on identical issues, as those raised in the assessee’s own case for A.Y. 2003-04. We have addressed the same at paras 6.1 to 6.3.2 of this order in ITA No. 1264/Mum/2013 (supra) and decided those issues in

27 ITA Nos. 1736&1264/Mum/2013 Shri Vinod K. Shah favour of the assessee to the extent indicated therein. Following this decision of ours and in order to maintain judicial consistency, the same findings mutatis mutandis applies in the assessee’s case for A.Y. 2004-05 also. We hold and direct accordingly. 14. In the result, the assessee’s appeal for A.Y. 2004-05 is partly allowed as indicated above. 15. To sum up, the assessee’s appeals for both assessment years 2003-04 and 2004-05 are partly allowed as indicated above. Order pronounced in the open court on 14th December, 2016. Sd/- Sd/- (Sandeep Gosain) (Jason P. Boaz) Judicial Member Accountant Member

Mumbai, Dated: 14th December, 2016

Copy to: 1. The Appellant 2. The Respondent 3. The CIT(A) -27/28, Mumbai 4. The CIT - 16, Mumbai 5. The DR, “F” Bench, ITAT, Mumbai By Order

//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.