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2022 (7) TMI 1040 - AT - Income TaxDisallowance of loss - absence of any justification to support the incurring of any genuine loss by the appellant in any business carried on in the name and style of M/s.Dindayal Associates - proprietorship firm DA where the assessee purportedly was carrying on share trading business - claim of the Revenue is that this share trading business was the benami of SG and not of the assessee and therefore denied claim of loss - HELD THAT - We uphold the order of the ld.CIT(A) that the business of share trading transactions carried on in the proprietorship concern DA was not that of the assessee but of SG and denial of claim of business loss to the tune is accordingly upheld. Ground No.1 raised by the assessee is dismissed. The appeal of the assessee is dismissed. Reopening of assessment u/s 147 - We fail to understand how the AO could now attribute escapement of income of the assessee on account of this same share trading business which as per the AO himself does not belong to the assessee at all. As on the date of recording reasons for escapement of income i.e. on 4.10.2006 the assessment order passed which was reopened under section 148 of the Act dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore this very order passed u/s 143(3) wherein the assessee was held to have not carried out any share trading transactions could not possibly have been reopened u/s 147 on account of escapement of income relating to this very share trading business only. Assumption of jurisdiction to frame reassessment u/s 147 is clearly invalid. Re-assessment framed therefore u/s 147 of the Act is set aside. The appeal of the assessee is allowed on this count. Validity of assessment order passed u/s 158BD - satisfaction note recorded by the AO of the assessee on various grounds - HELD THAT - The information against the assessee not emanating from search conducted on any person the proceedings u/s 158BD to assess undisclosed income of the assessee for the block period could not have been conducted as per law. The order passed therefore u/s 158BD of the Act is we hold invalid. The satisfaction note records confirmation of the assessment order passed in the case of MRS which event took place on 28/12/2004 which is much subsequent to the date of issuance of notice under section 158BD i.e. on 24.11.2003. This goes to show that in any case the satisfaction whatsoever was recorded by the AO after issuance of notice u/s 158BD. Thus we hold that present proceedings conducted on the assessee under section 158BD of the Act and consequent assessment order passed under section 158BD of the Act is against the law and hence invalid. The order so passed under section 158BD is therefore set aside. This ground is allowed and the appeal of the assessee is allowed. Addition of withdrawal of cash from the benami accounts - CIT-A deleted the addition - HELD THAT - Though the appeal of the Revenue is merely academic since we have already held the order passed by the AO under section 158BD in the present case in the appeal of the assessee but even on merits we find that the ld.CIT(A) thrashed the very basis of the AO for making addition of Rs.1.05 crores by noting that there was no cash withdrawal from the benami account of the proprietorship concern DA but in fact it was kept in fixed deposits in the name of proprietorship concern. The Department was unable to controvert this fact. Therefore the very basis of the AO for making addition in the hands of the assessee of Rs.1.05 crores does not survive since the Ld CIT(A) has noted the fact that no cash was actually withdrawn. In view of the same we see no reason to interfere in the order of the CIT(A) in deleting the addition.
1. ISSUES PRESENTED and CONSIDERED
The legal questions considered in the judgment include:
2. ISSUE-WISE DETAILED ANALYSIS 1. Share Trading Business and Benami Transactions Relevant legal framework and precedents: The concept of benami transactions is considered under Indian law, where a person holds property or business in the name of another, but the benefits are for the actual owner. Court's interpretation and reasoning: The Tribunal found that MRS repeatedly denied ownership of the share trading business, claiming it was conducted by SG. MRS was found to be a man of no means, incapable of conducting transactions worth Rs.384 crores. Key evidence and findings: Statements from MRS and corroborating evidence from brokers indicated SG was the actual operator of the business. MRS's personal financial status did not support the scale of transactions claimed. Application of law to facts: The Tribunal upheld the CIT(A)'s decision that the business was not genuinely conducted by MRS, but was a benami operation for SG. Treatment of competing arguments: The Tribunal rejected MRS's arguments regarding audited accounts and lack of protective addition, emphasizing the lack of evidence supporting MRS's claims. Conclusions: The Tribunal confirmed the denial of the business loss claim by MRS, as the business did not belong to him. 2. Reassessment Proceedings under Section 147 Relevant legal framework and precedents: Section 147 of the Income Tax Act allows for reassessment if income has escaped assessment. Court's interpretation and reasoning: The Tribunal found the reassessment invalid as the original assessment had already determined that MRS did not conduct the share trading business. Key evidence and findings: The reasons for reopening were based on the same share trading business previously found not to belong to MRS. Application of law to facts: The Tribunal set aside the reassessment, as it was based on an invalid premise. Conclusions: The reassessment proceedings were invalidated. 3. Proceedings under Section 158BD against SG Relevant legal framework and precedents: Section 158BD deals with undisclosed income found during a search conducted on another person. Court's interpretation and reasoning: The Tribunal found the proceedings invalid as the satisfaction note was based on information not derived from a search. Key evidence and findings: The satisfaction note was recorded after the notice under section 158BD was issued, and the information was not from a search. Application of law to facts: The Tribunal held that the proceedings under section 158BD were not legally sustainable. Conclusions: The assessment order under section 158BD was set aside as invalid. 4. Addition of Rs.1,05,00,000 to SG's Income Relevant legal framework and precedents: The addition was based on alleged cash withdrawals from benami accounts. Court's interpretation and reasoning: The Tribunal found that the amounts were not withdrawn as cash but were placed in fixed deposits. Key evidence and findings: Bank statements showed the amounts were transferred to fixed deposits, not withdrawn as cash. Application of law to facts: The Tribunal upheld the CIT(A)'s decision to delete the addition. Conclusions: The addition of Rs.1,05,00,000 was deleted. 3. SIGNIFICANT HOLDINGS Core principles established: The Tribunal emphasized the importance of factual accuracy and the necessity of deriving satisfaction for proceedings under section 158BD from search-related evidence. Final determinations on each issue:
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