NAVDEEP SHARMA,NEW DELHI vs. ITO(, WAQRD-71(1), NEW DELHI

The grounds raised in the memorandum of appeal are argumentative and not in accordance with Rule 8 of the Income Tax (Appellate Tribunal) Rules, 1963. When this was brought to the notice of the assessee, the assessee through his Authorized Representative on 22.08.2022 has furnished the following concise grounds:

The sanctioning authority merely put the word "yes and satisfied" as against the column of his satisfaction on the ground that certain amount of income tax for the assessment year 2010-2011 has escaped assessment under section 147 of the Act followed by notice dated 30- 03-2017 issued under section 148 to the assesse. Such exercise has been held without application of mind and deprecated by the Apex Court in number of cases.

Non-speaking order : 10. The appellate authority committed irregularity by not only relying upon judgments which are neither relevant nor applicable to the facts of the case of the assesse but went on to state that there is no legal obligation on the statutory authority / tribunal to give reasons for its decision, which is wrong and deserve to be set aside. 11. Hence, on all counts, the additions / demands of the authorities below are not sustainable and thus deserves to be set aside.

Before we proceed to decide the grounds raised by the assessee, it is necessary to deal with the relevant facts. Briefly stated, the assessee is a resident individual. For the assessment year under dispute, the assessee did not file any return of income in terms of section 139(1) of the Act. Subsequently, the Assessing Officer received information indicating that in the year under consideration, the assessee had deposited cash amounting to Rs.12,45,500/- in his savings account. Further, the assessee has invested an amount of Rs.31,55,05,414/- in shares/derivatives/ Futures & Options/Intraday transactions. Since the assessee had not filed any return of income, though, he has entered into such transaction. The Assessing Officer formed a belief that the income chargeable to tax for the year under consideration has escaped assessment. Accordingly, after recording reasons and obtaining approval/sanction of the competent authority in terms of section 151 of the Act, the Assessing Officer reopened the assessment under section 147 of the Act. In response to the notice issued under section 148 of the Act, the assessee filed a return of income declaring total income of Rs.65,780/-. In the return of income, the assessee had computed profit from business at Rs.4,50,000/- under section 44AF of the Act and against such income, the assessee has claimed loss of Rs.3,84,498/-.

In course of assessment proceeding, the Assessing Officer called upon the assessee to explain the source of cash deposit in the savings bank account. In response, the assessee submitted that the cash deposits were made out of cash received from relatives/friends and also by selling gold jewellery of wife and mother to offset the loss/liabilities incurred in course of share transaction. However, the assessee did not furnish any documentary evidence in support of such claim. When the Assessing Officer called upon the assessee to furnish supporting evidence to explain the source of cash deposit, the assessee 4 | P a g e referring to section 142(1)(iii)(a) of the Act submitted that the Assessing Officer is precluded from seeking production of any account/evidence relating to a period more than three years prior to the previous year. Further, despite seeking some more time to furnish the required details, the assessee did not furnish them.

Insofar as claim of business loss is concerned, the Assessing Officer taking note of the fact that the assessee has derived loss of Rs.1,46,272/- from intraday transaction, treated it as speculative loss and disallowed. Thus, he computed the total income at Rs.14,57,274/-. Against the assessment order so passed, the assessee preferred appeal before learned Commissioner (Appeals).

Before me, learned counsel appearing for the assessee submitted that disallowance of loss of Rs.1,46,272/- is unsustainable as such loss cannot be treated as speculative loss in terms of proviso to section 14(3)(v)(d) of the Act. As regards the addition of cash deposits in the bank account, learned counsel reiterated the stand taken before the departmental authorities. Further, he relied upon the following decisions: 1. CIT Vs. Karthik Construction Co. (ITA No.2292/Mum/2016) 2. CIT Vs. Willamson Financial Services & Ors. (AIR 2008 SCW 253)

Without prejudice, he submitted, in terms of section 142(1)(iii)(a) read with section 151(2) of the Act, the Assessing Officer is prohibited to seek production of any account relating to period of more than 3 years prior to the previous year without the prior approval of Joint Commissioner. Thus, he submitted, the Assessing Officer could not have asked the assessee to furnish supporting evidences for cash deposit after more than 3 years. Proceeding further, he submitted that while granting sanction for reopening of assessment, the competent authority has failed to apply his mind properly. In support of such contention, he relied upon the following decisions: 1. M/s. Chhugamal Rajpal Vs. S.P. Chaliha & Ors. (AIR 1971 SC 730) 2. Pr. CIT Vs. M/s. N.C. Cables Ltd. (ITA No.335 of 2015) 3. Phool Chand Vs. ITO (AIR 1993 SC 2390) 4. ITO Vs. Lakhmani Newal Das (AIR 1976 SC 1753) 5. STO Vs. Uttareshwari Rice Mills (AIR 1972 SC 2617)

We have considered rival submissions and perused the materials on record. Insofar as the legal grounds raised by the assessee challenging the validity of reopening of assessment, it is observed, though, the assessee has entered into substantial financial transactions in the year under consideration and also earned income, however, he has not filed any return of income voluntarily in terms of section 139(1) of the Act. In fact, even after issuance of notice under section 148 of the Act on 30.03.2017, the assessee did not file any return of income and after much dilly-dallying, the assessee filed return of income declaring profit from business at Rs.4,50,000/- and after setoff of loss of share transaction, offered income of Rs.65,780/-. It is further evident, the assessee has mostly remained non-cooperative and has not furnished the details called for by the Assessing Officer. Thus, from the conduct of the assessee, it appears that, he was not prepared to comply with the obligations under the Act by filing return of income and discharging his tax liability.

It is observed, the assessee in course of assessment proceeding, has not furnished any supporting evidence, either to explain the source of cash deposit in the saving bank account or share transaction, for which loss was claimed. Even, at the time of hearing before me, in response to query raised, learned counsel for the assessee repeated the stand taken before the Assessing Officer that after expiry of three years, the assessee cannot be called upon to furnish any evidence or account.

The aforesaid facts clearly reveal that the assessee does not have any case on merits and wants to take shelter behind technical issue. On perusal of record, it is observed that the Assessing Officer has reopened the assessment after complying with all legal requirements. In fact, he has also obtained approval/sanction of the competent authority before issuing notice under section 148 of the Act. Further, on perusal of the sanction granted under section 151 of the Act, I am of the view that it cannot be said that sanction granted is without proper application of mind. Therefore, the contention of learned counsel regarding improper sanction granted under section 151 of the Act is rejected.

As regards assessee’s contention that after expiry of three years from the end of the assessment year, the assessee cannot called upon to furnish any accounts/evidences, in my view, such contention is liable to be rejected at the threshold. Since, if such contention is to be accepted, then reassessment proceedings under section 147 of the Act will become redundant, as, the Assessing Officer would be powerless to call for any accounts/information/details from the assessee after expiry of three years. In my view, the contention of learned counsel in this regard is totally misconceived. Hence, are rejected.

As regards the submission of learned counsel that the first appellate authority has passed a non-speaking order without complying to the Rules of Natural Justice, I am of the view that such contention is not acceptable, as, learned Commissioner (Appeals) passed the impugned order not only after hearing the assessee, but his conclusions are backed by proper reasoning.

As regards the merits of the addition made, the assessee has not furnished any supporting evidence with regard to the source of cash deposits in the bank account, neither before the departmental authorities, nor before me. In fact, despite availing sufficient opportunity, the assessee failed to furnish any supporting evidence. On the contrary, he took a plea that the Assessing Officer cannot call for such evidence after expiry of three years. Since, the assessee failed to explain the source of cash deposits in the bank account, in my view, the addition has to be sustained.

As regards the disallowance of loss claimed in respect of Intraday trading in shares, the assessee has not furnished any documentary evidence to establish his claim coming within exceptions provided under section 43(5)(d) of the Act. That being the case, I reject assessee’s claim.

For the sake of completeness, I must observe, after analyzing the judicial precedents produced before me by learned counsel for the assessee, I am of the view, though, there cannot be any quarrel with regard to the ratio laid down in the judicial precedents, however, they cannot be considered de hors facts involved. In my view, the decisions relied upon by the assessee 10 | P a g e are not applicable to the facts involved in assessee’s case.

In the result, appeal is dismissed.