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Income Tax Appellate Tribunal, “I” BENCH, MUMBAI
Before: SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, JM
Assessee by: Shri M. S. Mathuria Department by: Shri Mahender Bishnoi सुनवाई क� तार�ख / Date of Hearing: 09.05.2016 घोषणा क� तार�ख /Date of Pronouncement: 12.08.2016 आदेश / O R D E R PER AMARJIT SINGH, JM:
The assessee has filed the present appeal against the order dated 05.09.2013 passed by the Commissioner of Income Tax (Appeals) 24, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y.2004-05.
ITA No.7372/M/2013 A.Y. 2004-05
The assessee has raised the following grounds:-
“1. On the facts and in law as well as in the circumstances of the Appellant’s case, the learned CIT(A) has erred in adjudicating that the impugned assessment order passed u/s.143(3) r.w.s.147 by the ITO, Ward 13(2)(1), Mumbai without legal initiation of proceedings u/s.147 and without issue / service of notice u/s.148 is valid and legal.
2. On the facts and in the law as well as in the circumstances of the Appellant’s case, the learned CIT(A) has erred in adjudicating that the impugned assessment order passed u/s.143(3) r.w.s. 147 by the ITO, Ward 13(2)(1), Mumbai without issue / service of notice u/s.143(2) is valid and legal.
3. On the facts and in law as well as in the circumstances of the Appellant’s case, the learned CIT(A) has erred in adjudicating that initiation of proceedings u/s.147 by issue of notice u/s.148 dated 28.03.2011 y non-jurisdictional officer [i.e. ITO Ward 17(3)(1)] is valid and legal.
4. On the facts and in law as well as in the circumstances of the Appellant’s case, the learned CIT(A) has erred in adjudicating that even after informing on 11.04.2011 [vide letter dated 05.04.2011] by the Appellant to the said non- jurisdictional officer that legal and valid jurisdiction lies with the ITO, Ward 13(2)(1), Mumbai, the said non- jurisdictional officer continued the proceedings between 11.04.2011 till 22.11.2011 is valid and legal even though--- [a] Appellant’s return of income for assessment year 2004-05 was not available in his charge; [b] said ITO Ward 17(3)(1) was having legal and valid jurisdiction to continue the proceedings till 17.11.2011 without transferring the proceedings to the jurisdictional ITO, Ward 13(2)(1), Mumbai.
5. On the facts and in law, the learned CIT(A) has erred in holding that “lacunae if any is covered by section 292B of the I.T.Act, 1961.
ITA No.7372/M/2013 A.Y. 2004-05
6. On the facts and in law, the learned CIT(A) has patently erred in holding that non-jurisdictional officer’s action of not providing “reason recorded” and “approval sought” to the Appellant, even though legal and valid demand was made by the Appellant vide letter dated 05.04.2011 [filed on 11.04.2011] is valid.
The jurisdictional ITO, Ward 13(2)(1), Mumbai [a] has not recorded any reason in terms of section 147 / 148(2); [b] has not obtained approval in terms of section 151(2) [c] has not issued / served legal and valid notice u/s.148--- Before issue of notice u/s.142(1) / 143(2) dated 29.11.2011 and 30.11.2011 respectively.
The jurisdictional ITO, Ward 13(2)(1), Mumbai has erred in passing impugned assessment order without providing copies of – [a] reasons recorded by him that---- [i] income chargeable to tax for assessment year : 2004-05 has escaped assessment in terms of section 147 or [ii] the appellant failed to file his return of income u/s.139 / 142(1) / 148 or [iii] the appellant failed to disclose fully and truly all material facts necessary for his assessment.
[b] report filed with jurisdictional Jt.CIT / Addl. CIT and sanctioned by the said jurisdictional Jt.CIT/Addl.CIT for issue of notice u/s.148.
[c] alleged information received from DDIT(Inv), Unit- 1(4), Mumbai;
[d] alleged statement of a person named Shri Mukesh M. Choksi
[e] orders of ITAT, Mumbai in ITA No.7372/M/2013 A.Y. 2004-05 [i] and 5000/Mum/2005 in case of Messrs Gold Star Finvest Pvt. Ltd. [ii] ITA No.4624/Mum/2005 in case of Messrs. Richmond Securities Pvt. Ltd., [iii] ITA No.4999/Mum/2005 in case of Messrs Alpha Chemie Trade Agencies Pvt. Ltd. [iv] ITA No.4912/Mum/2005 in case of Messrs. Mihir Agencies Pvt. Ltd.
The jurisdictional ITO, Ward 13(2)(1), Mumbai has erred in passing impugned assessment order without providing cross examination of the person named Shri Mukesh M. Choksi on whose alleged statement he has relied for making impugned assessment.
On the facts and in law, impugned assessment order required to be quashed being bad in law ab initio and is passed without legal and valid initiation of proceedings u/s.147 / 148; without approval of the competent authority and without providing reasons / cross examination of the Appellant 11. The above grounds of appeal are without prejudice to one another and the Appellant crave leave to add, to alter and / or amend any of the foregoing grounds and to make new or additional submissions at the hearing of the appeal as well as to submit fresh documents and information as advised.”
The brief facts of the case are that the ITO 17(1)(3), Mumbai after recording the reason for initiating proceedings u/s.147 of the Income Tax Act, 1961 ( in short “the Act”) and obtaining the sanction of Addl. CIT 17(1), Mumbai, has issued notice u/s.148 of the Act and served upon the assessee. The assessee vide letter dated 05.04.2011 has stated that his original return filed u/s.139(1) of the Act be treated
ITA No.7372/M/2013 A.Y. 2004-05 as reply to the notice as return filed against the notice issued u/s.148 of the Act in Ward 13(2)(1) on 25.10.2004 vide inward no.1321001457 and also requested to issue the reasons. Thereafter, on request of the assessee by virtue of letter dated 22.11.2011, the ITO 17(1)(3) has transferred the case record to this charge. Thereafter, notice u/s.143(2) of the Act and notice u/s.142(1) of the Act were issued and calling for details. The assessee filed the objections which were rejected by stating the following reasons:-
“This is to state that, on the basis of information received from DIT(Inv.), Unit – 1(4), Mumbai, the ITO 17(1)(3), Mumbai having territorial jurisdiction over the residential address of the assessee has correctly form an opinion and on your request transferred the case record to this charge being having return filed with this charge, you have been ask to give explanation and details vide letter dated 29.11.2011. Hence the proceedings u/s.148 has been correctly initiated and having jurisdiction over the case your request to drop the proceedings is rejected and once again you have been asked to submit the explanation & details as ask for in earlier letters and should reach to this office within 3 days of receipt of this letter. Failure to do so will be considered as no explanation to be submitted and accordingly order will be made on the basis of record available.
ITA No.7372/M/2013 A.Y. 2004-05
The assessee vide letter dated 12.12.2011 has submitted that your impugned notice u/s.142(1) and 143(2) dated: 29.11.2011, has been issued as a matter of course. It is humbly submitted that impugned notice calling for certain information is bad in law ab initio.
Any proceeding initiated against the impugned notice which is bad in law ab initio will be against the “principals of natural justice”.
The assessee received the Long Term Capital Gain from the Buniyad Chemicals to the tune of Rs.1,81,184/-. The information was received from the DDIT(Inv.) – Unit 1(4), Mumbai, that the assessee has taken bogus Long Term Capital Gain entries from M/s.Gold Star Finvest Pvt. Ltd. Shri Mukesh Choksi in his statement dated 11.12.2009 has stated that he is engaged in the business of giving (i) Speculation Profit adjustment entries, ii) Short Term Profit adjustment entries, iii) Long Term Capital Gains adjustment entries and (iv) Share application adjustment entries through various companied floated by him including M/s.Goldstram Finvest Pvt. Ltd. It was found that the assessee was beneficiary of the Mr. Mukesh Choksi therefore, the receipt of the sale of share of Buniyad Chemicals of Rs.1,81,184/- was treated from undisclosed funds and added to the income of the assessee. Feeling aggrieved the assessee filed an ITA No.7372/M/2013 A.Y. 2004-05 appeal before CIT(A) who confirmed the order, therefore the present appeal has been filed before us.
ISSUE NO.1 TO 2 & 7 TO 10:-
Under these issues the addition to the tune of Rs.1,83,768/- was challenged. Infact DDIT(Inv.) – Unit 1(4), Mumbai, informed the assessee officer that the assessee has taken the bogus long term capital gain entries from M/s. Gold Star Finvest Pvt. Ltd. Shri Mukesh Chokshi in his statement dated 11.12.2009 has stated that he was engaged in the business of giving (i) Speculation Profit adjustment entries, (ii) Short term profit adjustment entries, (iii) Long term capital gains adjustment entries and (iv) Share application adjustment entries through various companied floated by him including M/s. Goldstar Finvest Pvt. Ltd. The addition was made on the basis of the statement of Shri Mukesh Chokshi. The contention of the assessee is that the assessee acquired 1900 equity shares of Buniyad Chemicals Ltd. through share broker M/s. Mahasagar Securities Pvt. Ltd., which are registered with SEBI under registration No. INB – 230683331/23- 10777, and are sub-broker of NSE Member – ISE Securities & Services Ltd. He bought 1900 equity shares of M/s. Buniyad Chemicals Ltd. issued by the company of Shaila M. Choksi. These shares were taken from the above said broker, the company transferred the share with his name on 31.05.2002. The copies of shares certificates were attached. These shares were dematerialized
ITA No.7372/M/2013 A.Y. 2004-05 with Dena Bank. Application for dematerialization request form with extract of said Demat Account confirming dematerialization of shares are attached herewith and collectively marked as Exhibit “O”. Said 1900 shares were sold though above names share broker in Off Market to Infra Lease Financial Services Ltd. in following three lots – Date of Number of Sold to Sales Sale shares sold consideration 25.11.200 600 Infra Leas Financial Services 58,032 3 Ltd. 27.11.200 700 Infra Leas Financial Services 67,704 3 Ltd. 28.11.200 600 Infra Leas Financial Services 58,832 3 Ltd. Total 1,83,768 These sales were effected from Demat Account No.10111342 with Dena Bank. Sales consideration of Rs.1,83,768/- are deposited in appellant’s saving bank account No. HS 7310 of Central Bank of India. Copies of relevant pages of said bank account is attached herewith and marked as Exhibit ‘P’.
Now it is to be seen whether the statement of Shri Mukesh Choksi is sufficient to the addition of Rs.1,83,768/- Exceptt the statement of Shri Mukesh Choksi there is no material available to the Assessing Officer for the said addition. No opportunity of cross examination of Shri Mukesh Choksi was given to the assessee. It is ITA No.7372/M/2013 A.Y. 2004-05 not in dispute that the sales were effected from Demat Account No.10111342 with Dena Bank. Sale consideration of Rs.1,83,768/- were deposited in the appellant’s saving bank account No. HS 7310 of Central Bank of India. There is no cogent and convincing material with the Assessing Officer for the above said bogus transaction to the tune of Rs.1,83,768/-. As discussed above the statement of Shri Mukesh Choksi is not sufficient to arrive at this conclusion that the transaction with M/s. Gold Star Finvest Pvt. Ltd. is bogus specifically in the circumstances when no opportunity was given to the assessee to cross examine the Shri. Mukesh Choksi. The number of decisions have come in favour of the assessee which were based upon the statement of Shri Mukesh Choksi. In this regard we also found support of law settled in dated 29.07.2011 in case of ITO 14(3)(1) Vs. Smt. Navneeta Mehta.