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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI MANOJ KUMAR AGGARWAL
Captioned appeal at the instance of the assessee is directed against the order dated 27th July 2015, passed by the learned Commissioner (Appeals)–9, Mumbai, for the assessment year 2007– 08. Assessee has raised following effective grounds:–
“1. The learned CIT(A) has erred in law and in facts in confirming the impugned order under section 143(3) r/w section 147 which is contrary to the provisions of the Act. 2. The learned CIT(A) has erred in law and in fact in affirming the action of Assessing Officer and computing the total income of ` 43,60,929 as against the returned income of ` 1,04,420.
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3. The learned CIT(A) has erred in law in fact in confirming the addition of ` 42,55,550 (sale consideration amount by the appellant) under section 68 of the Act as unexplained cash credit, without passing a speaking order.”
Ground no.1, being a legal issue, we propose to deal with it at the very outset.
Brief facts are, the assessee a company is basically engaged in trading and investment in shares. For the assessment year under consideration, assessee filed its return of income on 10th October 2007, declaring income from short term capital gain of ` 1,04,420 and book profit of ` 2,03,143. Assessment in the case of assessee was completed under section 143(3) of the Act on 24th December 2009. A search and seizure operation was undertaken in case of Mahasagar Securities Pvt. Ltd. and its group companies. On 25th November 2009. In the course of search and seizure operation, a statement was recorded from one Shri Mukesh Choksi, promoter of the company and on the basis of information obtained, it came to the knowledge of the Department that these companies were only providing accommodation bills in respect of share transactions without actually entering into such transactions. On the basis of information so obtained, the Assessing Officer re–opened the assessment of the assessee for the impugned assessment year by issuing a notice under section 148 of the Act on 28th March 2013. In the course of assessment proceedings, the 3 Ajay Multi Projects Ltd.
Assessing Officer on the basis of information obtained from the investigation wing, alleged that the assessee had accepted accommodation entry to the tune of ` 42,52,550. Though, the assessee objected to the allegation of the Assessing Officer and made submissions to prove the genuineness of the share transactions with supporting evidence, however, the Assessing Officer rejecting the submissions of the assessee treated the share transaction amounting to ` 42,55,550 as unexplained cash credit under section 68 of the Act and added back to the income of the assessee. Being aggrieved of such addition, though, the assessee preferred appeal before the first appellate authority, however, he also confirmed the addition.
Learned Authorised Representative submitted before us that there being no failure on the part of the assessee to disclose fully and truly all material facts required for its assessment, the re–opening of assessment after expiry of four years from the end of relevant assessment year is invalid in law. To prove such facts, the learned Authorised Representative submitted, in the course of the original assessment proceedings, the assessee in response to the query raised by the Assessing Officer in letter dated 10th August 2009, had submitted part–wise details of purchase and sales of shares above ` 1 lakh. Referring to the party–wise details of purchase of shares, the learned Authorised Representative submitted, the share purchases
4 Ajay Multi Projects Ltd. disputed by the Assessing Officer were actually made from M.R. Share Broking Pvt. Ltd., Mumbai, and diamant Investments and Fin Ltd., Mumbai, and not form Alliance Intermediaries and Network Pvt. Ltd. as alleged by the Assessing Officer in the reasons recorded. He submitted, the shares were sold to Kaycee Share Broking Pvt. Ltd. for an amount of ` 42,54,028. He submitted all details relating to the purchase of shares by the assessee were submitted before the Assessing Officer during the original assessment proceedings and the Assessing Officer after examining the same has completed the assessment. Therefore, re–opening of assessment on the basis of very same material and there being no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the re–opening is invalid. He submitted, there is no fresh tangible material before the Assessing Officer at the time of re–opening other than what was already available on record and considered by the Assessing Officer at the time of original assessment. Therefore, the re– opening on the basis of very same material on a mere change of opinion, is invalid. He, therefore, submitted, the assessment order should be quashed. In support of such contention, learned Authorised Representative relied upon the following decisions:– i) Mr. Badruddin P. Hirani v/s ACIT, ITA no.4188/Mum./2012, dated 2.7.2015;
5 Ajay Multi Projects Ltd. ii) M/s. Golden Tobacco Ltd. v/s JCIT, & 5859/Mum./ 2012 dated 28.10.2015; iii) Shaf Broadcast Pvt. Ltd. v/s ACIT, ITA no.1819/Mum./2012, order dated 17.4.2013; and iv) Titanor Components Ltd. v/s ACIT & Ors., [2012] 343 ITR 183 (Bom.).
Learned Departmental Representative raising a preliminary objection submitted, the assessee has not raised the validity of re– opening before the first appellate authority. Therefore, at this stage, it cannot raise such issue. Without prejudice to the aforesaid argument, learned Departmental Representative submitted that on the basis of information obtained as a result of search and seizure operation conducted in the case of Shri Mukesh Choksi group of companies, incriminating material indicating bogus purchase and sale of shares came into possession of the Department. Therefore, re–opening of assessment on the basis of such material is valid
We have considered the submissions of the parties and perused the material available on record in the light of the decisions relied upon. At the outset, we will deal with the preliminary objection of the learned Departmental Representative on the admissibility of the aforesaid ground raised by the assessee on the plea that it was not raised before the learned Commissioner (Appeals). On a perusal of the ground of appeal raised before the learned Commissioner (Appeals),
6 Ajay Multi Projects Ltd. though, it appears that the assessee in ground no.1 had challenged the re–opening of assessment, however, as it appears, no specific argument on the issue was advanced before the learned Commissioner (Appeals). Be that as it may, there is no dispute that ground on which the assessee has questioned the validity of re–assessment is a purely legal and jurisdictional issue which could be decided on the basis of facts and materials available on record. As the issue raised by the assessee being a jurisdictional issue going to the root of the matter, we are inclined to entertain the ground raised by the assessee. Having held so, it is necessary to deal with certain important factual aspect of the issue. Undisputedly, original assessment in case of the assessee was completed under section 143(3). It is also not in dispute that the re–opening of assessment was after the expiry of four years from the end of the relevant assessment year and that being the case, the proviso to section 147 applies. The pre–condition imposed under the aforesaid proviso is to the effect that in a case where the assessee has filed a return of income under section 139(1) and in response to notice issued under section 142(1) r/w section 148 and where assessment has already been made under section 143(3) and section 147 of the Act, no action us/ 147 can be initiated after expiry of four years from the end of the relevant assessment year, unless there is failure on the part of the assessee to disclose fully and truly all facts necessary for 7 Ajay Multi Projects Ltd. his assessment. On a perusal of the reasons recorded for re–opening of assessment, a copy of which was placed at Page–1 of the paper book it is evident that the assessment was re–opened on the allegation that the assessee had obtained accommodation entries of ` 42,55,550 from Alliance Intermediaries and Network Pvt. Ltd. in the assessment year 2006–07 towards purchase of scrips of Lok Housing and Construction Ltd. It is further evident from the reasons recorded that the assessee had submitted the details relating to the aforesaid share transactions before the Assessing Officer on 10th October 2009, as per Annexure–23. Thus, couple of facts which arise out of the reasons recorded are firstly; the assessee had availed accommodation entry of ` 42,55,550 from Alliance Intermediaries and Network Pvt. Ltd. for purchase of shares of Lok Housing and Construction Ltd., and secondly details relating to such share transaction was submitted before the Assessing Officer during the original assessment proceedings. On going through the documentary evidences submitted before the Assessing Officer in course of original assessment proceedings, the details of which are at Page–7 of the paper book vide Annexure–5, we have noted that 16,000 shares of Lok Housing and Construction Ltd., were purchased by the assessee from two share brokers viz. M.R. Share Broking Pvt. Ltd., having Permanent Account Number AACCM9277C and Diamant Investment and Fin Ltd. having
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PAN AAACD2168B. In fact, from the details of party–wise shares purchases, it is evident that during the relevant financial year the assessee had not purchased even a single share from Alliance Intermediaries and Network Pvt. Ltd. Therefore, the very basis of the allegation of accommodation entries on which the assessment was re– opened falls flat. In fact, the learned Commissioner (Appeals) in Para– 2 of his order has also accepted the fact that 16,000 shares of Lok Housing and Construction Ltd., were purchased from the aforesaid two parties and were subsequently sold on 22nd February 2007 to M/s. Kaycee Share Broking Pvt. Ltd. Moreover, it is evident on record that during the original assessment proceedings, the assessee had furnished full and complete details of share transactions (both purchase and sale) including the share transaction relating to Lok Housing and Construction Ltd. In fact, in the reasons record for re– opening of the assessment, the Assessing Officer himself has referred to such information submitted by the assessee. That being the case, the assessee cannot be accused of not disclosing fully and truly all material facts relevant for assessment. On the contrary, material on record demonstrates that the assessee has disclosed fully and truly all material facts relating to all his share transaction made during the relevant financial year. Therefore, in our considered opinion, the conditions imposed under the proviso to section 147 have not been 9 Ajay Multi Projects Ltd. fulfilled to enable the Assessing Officer to re–open the assessment beyond expiry of four years from the end of relevant assessment year. Moreover, it is evident that the assessee during the relevant previous year had not entered into any transactions with Alliance Intermediaries and Network Pvt. Ltd. Therefore, the formation of belief has no rational nexus with the material available on record. Lastly, it has been successfully demonstrated before us by the assessee that during the original assessment proceedings, all materials relating to the share transaction including that of Lok Housing and Construction Ltd., was submitted before the Assessing Officer and the Assessing Officer after verifying the same had completed the assessment. That being the case, re–opening of assessment on the basis of very same material considered at the time of original assessment by treating the share transactions as bogus is nothing but a mere change of opinion which is not permissible under the Act. The decisions relied upon by the learned Authorised Representative also support this view. In the aforesaid view of the matter, we are of the opinion that the re–opening of assessment in the facts and circumstances of the present case is in violation of statutory provision, hence is invalid. Accordingly, we quash the assessment order passed under section 143(3) r/w section 147 of the Act. The impugned order of the learned Commissioner (Appeals) is hereby set aside.
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In view of our decision on the legal issue, the other grounds raised by the assessee on merit have become academic, hence, not required to be adjudicated upon.
In the result, appeal is allowed. Order pronounced in the open Court on 28.10.2016