TMI Blog2006 (11) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee set of its loss of Rs. 11,59,066 from the sale of its gold jewellery against the said gain." 2. We have heard the parties and perused the record. 3. The relevant facts, briefly stated, are that the assessee had filed return of income for asst. yr. 1998-99 on 31st Oct., 1998, which was processed under s. 143(1) on 26th Feb., 1999. Subsequently notice under s. 148 was issued to the assessee on 29th May, 2001. In response to the said notice, the assessee filed the return on 16th Oct., 2001 declaring the same income of Rs. 7,93,140 as shown in the original return. The AO completed the reassessment at an income of Rs. 20,24,602 vide order dt. 21st March, 2003. 4. The assessee appealed to the CIT(A) and the latter vide impugned order allowed relief to the assessee against which the Revenue is in appeal before us. 5. It is also pertinent to mention that during the financial year 1997-98, the assessee had made a disclosure under VDIS of diamond jewellery valued at Rs. 29,02,395. In the return of income filed for asst. yr. 1998-98, the assessee had claimed to have sold the said jewellery for a consideration of Rs. 83,40,000. On the basis of the said sale, long term capital ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Sharma Co. in the month of February/March, 1998 @ Rs. 48.50 to Rs. 54.50 per share. In para 4.2 of the assessment order, the AO has pointed out that in the case of Shri Som Nath Maini, a family member of the assessee, a similar exercise of purchase of 45,000 shares and subsequent sale of 43,000 shares of M/s Ankur International Ltd., Ludhiana had been carried out. It has been pointed out by the AO that Shri Som Nath Maini too has set off the short term capital loss on the sale of gold jewellery declared under VDIS, 1997 against the capital gain on the sale of above shares. The AO has expressed surprise that in both the cases, the short term capital gain was almost matching with the long term capital loss in the case of both the family members under different circumstances. The AO had made enquiries from Ludhiana Stock Exchange during the assessment proceedings in the case of Shri Som Nath Maini and obtained the P L a/c/balance sheet of M/s Ankur International Ltd., Ludhiana for asst. yrs. 1996-97 to 1999-2000. According to the AO, the company had never declared any dividend and that it was declaring marginal profits and as per information given by Ludhiana Stock Exchange the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of cheques in the name of the assessee for purchase of shares. According to the AO the sale of shares through M/s S.K. Sharma Co. was nothing but collusive affair so as to introduce assessee's own money amounting to Rs. 12,47,500 in assessee's books of account. The AO accordingly made an addition of Rs. 12,47,500 as income from undisclosed sources. The long term capital loss was determined at Rs. 2,85,620 to be carried forward. The AO had computed the income of the assessee as under: "1. Income from house property (as shown) 76,800 2. Long term capital gains a. On sale of diamond jewellery (as 10,14,333 discussed in para 3.14 above) b. On sale of gold jewellery (as shown) (-)12,99,983 ------------ Long term capital loss to be C/f (-) 2,85,620 3. Income from other sources (as declared) 7,12,745 4. Addition on a/c of sale of shares (as 12,47,500 discussed in para 4.27 above) --------- 20,37,045 Less: Deduction under s. 80-I 12,443 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion under s. 68 as is evident from the reasons recorded by the AO for issuing the notice under s. 148. Moreover, the appellant has discharged his onus of identity, genuineness and creditworthiness of party which has been confirmed from Shri S.K. Sharma. The quotations of Jaipur Stock Exchange were placed before the AO. Also the sale was made through broker and the payment was received through cheque. This fact has not been denied by the AO. These factors proved that addition under s. 68 cannot be made as the source of the cash credit has been proved by the appellant. Hence, the addition of Rs. 12,47,500 is hereby deleted." 11. The Revenue is in appeal before us. 12. The learned Departmental Representative contended that in regard to the ground relating to loss on sale of jewellery, she relies upon the order of the AO. In regard to bogus sale of shares, the learned Departmental Representative claimed that the issue was covered in favour of the Revenue by the decision of the Tribunal in the case of Asstt. CIT vs. Som Nath Maini a family member of the assessee, in ITA No. 829/Chd/2002 for asst. yr. 1998-99 [reported at (2006) 100 TTJ (Chd) 917-Ed.]. According to the learned Depart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Som Nath Maini is not applicable in this case insofar as in that case the certificate from Jaipur Stock Exchange was produced only before the Tribunal and the same was not considered. However, in the case of the assessee, the certificate from Jaipur Stock Exchange had been filed before the AO as well as before the CIT(A) and has been considered. Inviting our attention to the letter issued by the AO during the course of reassessment proceedings and in particular to the letter placed on page Nos. 16 and 20 of the paper book, it was contended that the AO did not have a definite opinion to the effect that the sale of shares was bogus. The learned counsel for the assessee contended that the material collected by the AO was not confronted to the assessee and, therefore, the same could not be used against the assessee. Reliance was placed on the decision of the Punjab Haryana High Court in the case of CIT vs. M.P. Iron Traders (2004) 189 CTR (P H) 154 and the decision of the Tribunal in the case of Dy. CIT vs. A.G.G. Exports (P) Ltd. in ITA No. 457/Chd/2002 to support the contention that reopening of assessment made in respect of alleged bogus shares was illegal. According to the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange. It was contended that the stock exchange quotation rate of Jaipur Stock Exchange cannot be relied upon as the AO has recorded a finding of fact that the sale of about 200 shares had taken place at a. higher price to give credence to the transactions of the assessee as it was found that ultimately the shares claimed to have been sold through Jaipur Stock Exchange had been transferred back to the original owner and there was no genuine sale of shares. According to the learned Departmental Representative the sale of nominal shares at Jaipur Stock Exchange was created to serve as evidence in this case is established from facts and the circumstances coming to light after enquiry made by the AO. 17. Regarding the contentions advanced on behalf of the assessee relating to reassessment with reference to sale of shares, the learned Departmental Representative invited our attention to the language of s. 147 applicable w.e.f. 1st April, 1989. It was pointed out that as per the plain language of the section the AO is empowered not only to bring to tax the items of escaped income in respect of which notice under s. 148 was issued but also in respect of any other item which comes to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Departmental Representative the learned counsel for the assessee has relied upon the decision of the Punjab Haryana High Court in the case of Vipan Khanna vs. CIT but has omitted to read the last para of the same judgment which permits the AO to make reassessment on the basis of information gathered after the issue of notice under s. 148. 18. Responding to the contention advanced on behalf of the assessee that where no assessment under s. 143(3) has been made, the AO has no power to reopen the assessment, our attention was invited to the order of Chandigarh Bench of Tribunal in the case of Dy. CIT vs. A.G.G. Exports (P) Ltd. in ITA No. 457/Chd/2002 to the contrary. It was contended that in that case also no regular assessment was made but the reopening of assessment was held to be valid. Reliance was also placed on Full Bench decision of the Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB) to support the contention that when no regular assessment is made by the AO, he cannot be said to have expressed any opinion about any income that has escaped the assessment. Reliance was also placed on the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mond jewellery in the year 1982 as against the market value disclosed in the asst. yr. 1987-88 of Rs. 29,02,395 could not be Rs. 27 lakhs. On the basis of information received from Gem Jewellery Export Promotion Council of India the AO estimated the cost of acquisition of diamond jewellery in the year 1982-83 at Rs. 24,12,380. On the basis of the said cost of acquisition, the AO determined long term capital gain on the sale of diamond jewellery at Rs. 10,14,333 as against Rs. 1,40,917 declared by the assessee. The assessee had also disclosed long term capital loss on sale of gold jewellery of Rs. 12,99,983. This was not disturbed by the AO. So however, the long term capital gain of Rs. 10,14,333 on sale of diamond jewellery was adjusted against the loss on sale of gold jewellery of Rs. 12,99,917. The AO determined long term capital loss at Rs. 2,85,620 to be carried forward to the subsequent year(s). Notice under s. 148 was issued on the basis of belief of the AO that the income of the assessee had escaped assessment. The learned CIT(A) has held that the AO is empowered to issue notice under s. 148 if he has a bona fide belief that the income of the assessee had escaped assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CTR (P H) 258 : (2005) 279 ITR 47 (P H) wherein their Lordships held as under: "Dismissing the writ petition, that it is on the basis of facts of each case that it has to be decided whether a particular income falls under the head "Business income" or "Income from other sources". The assessee was only sent an intimation under s. 143(1) of the Act and the question of examination of the material by the AO did not arise at that stage. Thus, there was no question of change of opinion. The notice under s. 148 was valid." Therefore, on the basis of aforementioned facts and the law, we dismiss the claim of the assessee that the assessment was reopened on mere change of opinion and uphold the order of the CIT(A) in regard to validity of reopening of assessment. 22. The next issue raised before us is as to whether the AO was entitled to tackle any other income in the course of reassessment proceedings which did not form the basis for reopening of assessment. There is no dispute about the fact that the assessment of income on account of sale of shares was not the basis for reopening of assessment. During the course of reassessment proceedings the AO had raised the issue with the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to tax has been underassessed; or (ii) such income has been assessed at too low a 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. 24. It is evident from the language of s. 147 that the AO is not only empowered to assess the income which had escaped assessment on the basis of which notice under s. 148 was issued but also any other income chargeable to tax which has escaped assessment and which comes to the notice of the AO subsequently in the course of proceedings under s. 147. The sum and subst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment during that year." 25. We have to apply the above position of law to the facts of this case. As per the abovementioned position of law, the learned counsel for assessee had rightly argued that the AO is not entitled to make fishing enquiries in the course of reassessment proceedings to find out as to whether there was any other income escaping assessment. For assessing any other escaped income that comes to the notice of AO, it is necessary that the AO has material on record on the basis of which he could have a prima facie belief that the income of the assessee had escaped assessment. The said material is bound to be confronted to the assessee during reassessment proceedings and the issue decided in accordance with law. In this case, it is claimed by the Department that in the case of Shri Som Nath Maini with identical facts (and close relative of the assessee) the assessment had been reopened under s. 148 by Shri Ravi Aggarwal, Asstt. CIT, Circle-1(II) on 29th Oct., 2001 on the issue of understatement of capital gain on account of sale of jewellery. In the case of Som Nath Maini the sale of shares of M/s Ankur International Ltd. had come to the notice of the AO and he on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has a reference to the loss on sale of gold jewellery but no ground of appeal as such has been raised in regard to deleting the addition made by the CIT(A) on account of long term capital gain on sale of diamond jewellery. The issue raised by the Revenue is relating to the bogus capital gain of Rs. 12,47,500 only. The facts have been described in detail elsewhere in this order. The issue before us is as to whether the AO was justified in not accepting the sale of shares of M/s Ankur International Ltd. as genuine and in treating the amount of Rs. 12,47,500 as unaccounted income of the assessee. The assessee had purchased the shares of M/s Ankur International Ltd. through stockbroker, namely M/s Munish Arora Co. The number of shares purchased was 30,000. 10,000 shares @ Rs. 3.40 per share on 9th April, 1997, 10,000 @ Rs. 3.10 per share on 15th April, 1997 and 10,000 shares @ Rs. 2.60 per share on 18th April, 1997 were purchased. 10,000 shares have been claimed to have been sold on 9th Feb., 1998 @ Rs. 48.50 per share through M/s S.K. Sharma Co., stockbroker. Another 2,000 shares have been claimed to have been sold on 23rd Feb., 1998 @ Rs. 54.25 per share. Another 10,000 shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the transactions between the assessee and M/s S.K. Sharma Co. were not produced before the AO. The contention advanced on behalf of the assessee that M/s S.K. Sharma Co. having confirmed to have issued the cheques in the name of the assessee and the sale of shares having taken place through them, no addition could be made in the hands of the assessee for non-production of records by M/s S.K. Sharma Co. The contention advanced on behalf of the assessee appears to be attractive at first sight. So however, when all the facts and circumstances of this case are viewed in totality, the assessee cannot be said to have discharged the onus in regard to the genuineness of the transaction of sale of shares through M/s S.K. Sharma Co. The information appearing from the bank account of M/s S.K. Sharma Co. and the non-production of the records relating to transaction by M/s S.K. Sharma Co. have got to be viewed in the light of the attendant facts and material collected by the AO. On enquiry by the AO, it was found that the shares of M/s Ankur International Ltd. had not been quoted in Ludhiana Stock Exchange beyond 17th July, 1997. As on 17th July, 1997, the said shares were quo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it." It was further laid down by their Lordships: "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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