TMI Blog2010 (2) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... ma-facie evidence against the assessee and the receipt can be treated to be the assessee's undisclosed income when the assessee is unable to prove and establish the nature and the genuineness of the receipt received from M/s. Kusum and Co. Thus uphold the addition only to the extent of Rs.3 lacs being credited in the assessee's bank account u/s.68/69 being unexplained money introduced in the bank account, in the present assessment year and the rest amount of Rs.4,04,340/- as introduced by the assessee in its bank account in the next financial year relevant to the A.Y. 1999-2000, which has also been remained unexplained AOdirected to make addition of Rs.4,04,340/- in the A.Y. 1999-2000 after reopening the assessment u/s.147 of the Act read with section 150 of the Act. Against assessee. - ITA No. 1392/Del/2007 - - - Dated:- 12-2-2010 - C.L. Sethi, Shamim Yahya, JJ. H.K. Lal, Sr. DR, for the Appellant Sushil Kumar Tondon, CA for the Respondent ORDER C.L. Sethi: The revenue is in appeal against the order dated 06.12.2006 passed by the ld. CIT(A) in the matter of an assessment made u/s.143(3)/148 of the Income Tax Ac, 1961 ("the Act") pertaining to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lacs allegedly on account of sale of shares. From the computation of income, it was noticed by the AO that the assessee has shown long term capital gain amounting to Rs.6,25,523/-, which was claimed exempted u/s.54F of the Act. The AO further stated in the assessment order that enquiries were conducted by the Investigation Wing about the sale of shares by the assessee and the assessee was required to give copies of bills before the Investigation Wing. The assessee filed written letter dated 09.03.2005, before the Investigation Wing that the assessee had lost the papers or no paper of brokers are traceable because it was difficult to keep lots of papers safely for about seven years from the date of sale. An affidavit dated 09.03.2005 was also filed by the assessee before the Investigation Wing to support the above contention. In the course of reassessment proceedings, the assessee was asked to adduce evidence with regard to the sale and purchase of the shares. The assessee filed a copy of bill of M/s. Rakesh Nagar and Co., a member of Jaipur Stock Exchange, for the purchase of 1200 shares of M/s. Baba Business Services Ltd. @ Rs.18.20 per share aggregating to Rs.21,840/-, this bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s was concerned, the transaction was made about ten years back i.e. in the month of July 2006. The assessee also expressed her inability to produce the other brokers i.e. M/s. CMS Securities Ltd. through whom shares were sold, by giving a reason that she was not a regular client of that broker. The assessee had also taken a plea that under the Income Tax Act and Rules, books of accounts for a period of six year only were required to be kept and, therefore, it would futile to produce the broker as the transaction of sale/purchase of shares were made more than six years ago. 8. In the light of the aforesaid facts, the AO had taken a view that sale and purchase of shares by the assessee, as alleged by her, has not been proved. The AO, therefore, treated the whole of the receipts on account of the alleged sale of shares as income of the assessee from undisclosed sources, and while doing so, the AO has also held that receipt of money by way of bank draft by the assessee in pursuance to the alleged sale of shares has also not been proved. The AO, therefore, has drawn the inferences that assessee has introduced her undisclosed income in the garb of sale of receipt of shares. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the balance of sum of Rs.4,04,340/-, which was not even credited to the account of the assessee in the year under consideration. (viii) The assessee also had taken strong objection to the initiation of proceedings u/s.147 of the Act by contending that the proceedings are bad in law in as much the report of the ADIT was vague. In support of this, several decisions were also relied upon. 11. After considering the assessee's submission and the AO's order, the CIT(A) deleted the addition by giving the following reasons:- (i) That reopening has been made merely on the basis of information received from DDIT (Inv.) and it is not the case of the AO that he had reached the conclusion based on independent enquiry carried on by him against any person including broker etc., which resulted into conclusion that income of the assessee had escaped assessment. (ii) The DIT formed his opinion purely on the basis that the assessee could not produce necessary documents though the assessee filed an affidavit giving all the particulars about the purchase and sale of shares. (iii) The CIT(A), therefore, taken a view that DDIT formed his opinion purely on suspicion and surmises an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal, Delhi Bench in the case of Rashi Aggarwal and Smt. Anu Jain in ITA no.3943/Del/2005 and 3950/Del/2009, where it was held that sale of shares was genuine in the absence of any contrary evidence brought by the AO to suggest that purchase and sale carried out by the assessee was bogus. 12. Hence, the department is in appeal before us. 13. The Ld. Sr. DR, Shri H.K. Lal has submitted that alongwith the original return of income, the assessee neither filed any balance sheet nor details of alleged capital gain earned by the assessee. There was no regular original assessment came to be made u/s.143(3) of the Act. The AO had received information from the investigation wing of the department that one demand draft of Rs.3 lacs was issued by one M/s. Kusum and Co. to the assessee towards sale consideration of the shares though no actual sale of shares had taken place. He further submitted that the fact that assessee had received Rs.3 lacs from Kusum and Co. against the sale of shares has not been proved and established. The assessee has failed to file any document before the Investigation Wing by taking a plea that all the papers were lost and as it was very difficult to keep lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar were filed by the assessee alongiwth the return of income. He, therefore, contended that the CIT(A) has not applied his mind to the facts of the present case before holding that the AO had failed to examine the return of income vis-a-vis information received from the Investigation Wing. The ld. DR, therefore, contended that the CIT(A) has mechanically taken a view that the AO has initiated reassessment proceedings purely on suspicion and conjectures. In this connection, the ld. DR relied upon the following decisions:- I. ITO vs. Purshottam Das Bangus and Another (1997) 224 ITR 362 (SC) II. Commissioner of Income-tax v. N. Kishore Settlement (1999) 236 ITR 35 (SC) III. Assistant Commissioner of Income-tax v Rajesh Jhaveri Stock Brokers (P.) Ltd. (2007) 291 ITR 500 (SC) IV. Hanuman Trading Co. v. Commissioner of Income-tax (2001) 250 ITR 365 (Del.) 14. Coming to the merit of the addition, the ld. DR submitted that the assessee has not produced any reliable evidence or material to prove the genuineness of the transaction of purchase and sale of shares. The assessee has also failed to prove the nature of receipt of money by way of bank draft from M/s. Kusum and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details and evidences field by the assessee. In support of the contention that when purchase and sale of shares were effected through share broker, and full details of transaction was furnished, and the payment was received by account payee cheque, merely because a broker failed to appear even after issuing summons, the assessee could not be punished for the default of broker, the assessee has relied upon the following decisions:- I. Commissioner of Income-tax v. Carbo Industrial Holdings Ltd. (2001) 244 ITR 422 (Cal.) II. Commissioner of Income-tax v. Emerald Commercial Ltd. (2002) 250 ITR 539 (Cal.) 17. Rival contention of both the parties have been considered and the order of the authorities below have been perused. We have carefully gone through the various documents and papers placed in the paper book filed by the assessee. We have deliberated upon the relevant provisions of law contained in that behalf and the various decision cited at the bar. 18. We shall first deal with the question as to whether reassessment proceedings initiated u/s.147 of the Act by the AO is valid? 19. Section 147 as substituted w.e.f. April 1, 1989 confers jurisdiction u/s.147 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, in the instant case had reason to believe that income has escaped assessment. 21. In the case of Jai Bharat Maruti Ltd. vs. CIT (2009) 180 Taxman 192 (Delhi), the Hon'ble Delhi High Court has held that at the stage of issuing the notice u/s.148 of the Act, only aspect to be examined is whether there was relevant material before AO, based on which a reasonable person could have formed a requisite belief that the assessee's income chargeable to tax had escaped assessment and one is not concerned at that stage whether material would conclusively prove escapement. 22. In the said case, it was also held that proceedings u/s.147 cannot impinge upon items which have no connection to or relation with items of income and/or expenditure, which form basis of notice u/s.148 of the Act. 23. In the present case, the reasons recorded by the AO are as under:- "Vide letter dated 11.03.05, the Addl. DIT (Inv.), Lucknow has informed that the assessee has purchased and sold shares during the F.Y. 1997-98. The sale consideration of the shares amounting to Rs.3.00 lakh received through the broker Kusum and Co. The assessee has not been able to substantiate the transaction instead she ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat proceedings u/s.147 of the Act cannot impinge upon item which have no connection to or relation with the items of income which form the basis of a notice issued u/s.148 of the Act. In this respect, the ld. counsel for the assessee has submitted that the reasons recorded by the AO were with regard to the payment of Rs.3 lacs received from M/s. Kusum and Co. but the AO has made the addition in respect of the amount of Rs.7,04,340/-, being the sale proceeds of 1200 numbers of shares sold by the assessee through broker, namely, CMS Securities Ltd. He, therefore, contended that the addition was not at all connected to or related to an item of income in respect of which reasons were recorded u/s.148 of the Act. At this stage, it is pertinent to note that Explanation 3 to section 147 has since been inserted by the Finance Act (No.2) Act, 2009 with retrospective effect from 01.04.1989, where it has been, provided that for the purpose of assessment or reassessment u/s.147 of the Act, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings u/s.147, notwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe that income to the extent of Rs.3 lacs had escaped assessment particularly in view of the fact that no such details about the receipt of money from M/s. Kusum and Co. were furnished by the assessee in the return of income. At the stage of issuing the notice u/s.148 of the Act, the details of purchase and sale of shares were not available as the same have not been furnished by the assessee either with the return of income or before the investigation agency. It is well settled that at the stage of issuing notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether materials would conclusively prove the escapement of income is not the concern at the stage of issuing notice u/s.148 of the Act. This is so because the formation of belief by the AO is within the realm of subjective satisfaction. This is so observed and held by the Hon'ble Supreme Court in the case of Asst. Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P) Ltd. (supra). In this view of the matter, the CIT(A)'s view that before issuing the notice u/s.148 of the Act, the AO should have arrived at a final conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant information received by the AO from investigation agency. We, therefore, uphold the AO's action in issuing the notice u/s.148 of the Act against the assessee for the relevant year under consideration. 28. With regard to the assessee contention that the assessee was not confronted to the reasons recorded by the AO for issuing notice u/s.148 of the Act, we are of the considered view that this contention of the assessee must fail in as much as the assessee was given full opportunity to file objection against the reasons recorded, and the assessee in her reply dated 21.01.2005 filed before the AO has even reproduced the reasons recorded by the AO for issuing notice u/s.148 of the Act and has filed her objection by contending that the reopening of the assessment by the AO was not justified as the AO had merely acted upon the letter of the Addl. DIT (Inv.), Lucknow, ignoring all the material facts placed on record, which were duly been annexed or attached with the return of income u/s.139 for the A.Y. 1998-99. In other words, from the assessee's aforesaid letter it is established and proved that she was apprised with reasons and the copy of reason recorded by the AO u/s.148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Particulars Dr. Cr. 24/05/98 By Bill no.R-42/9771/46 24/03/98 To Demand Draft 3,00,000.00 7,04,340.00 22/04/98 To Demand Draft 1,50,000.00 25/05/98 To Demand Draft 100,000.00 05/05/98 To Demand Draft 154,340.00 7,04.340.00 7,04,340.00 Balance due to You/us Rs. Thanking You NIL for CMS Securities Limited REGD OFFICE: 14, Hotel Continental Annexe, Regal Building Cannaught Place New Delhi. 110001 Phone:3747396, 3363244, 3364567, 3348902, 3362043, 3362044, 45, 46, 47" 32. The assessee has also produced purchase bill no. R-42/9771/46 dated 24.03.1998 entered into between the assessee and CMS Securities Ltd. The assessee has also produced one contract note dated 19.03.1998 by M/s. CMS Securities Ltd. 33. In the course of assessment proceedings, the AO issued a notice to M/s. CMS Securities Ltd. to furnish necessary evidences and books of accounts to prove the genuineness of the alleged sale of shares allegedly sold by the present assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid shares were purchased through stock broker viz., Rakesh Nagar and Co. having office at Delhi as well as at Jaipur. The payment of the purchase money was not paid immediately on the date when the shares were purchased but were claimed to have been paid in cash on two dates, i.e. 02.06.1996 the sum of Rs.10,000/- was paid in cash on 02.06.1996 and then sum of Rs.11,840/- was paid in cash on 09.06.1996. It is the assessee's case that the assessee is not a regular customer of the broker. It is not understood as to how and in what circumstances the broker purchased the shares for and on behalf of the assessee without receiving the payment at the time the deal was finalized. The deal of purchase of shares was not routed through Stock Exchange but was off the market. The payment has also been made in cash, which is not verifiable from the any record of stock-broker. Further, it is the assessee's case that these shares purchased through Rakesh Nagar and Co. has subsequently been sold @ Rs.588/- per share through M/s. CMS Securities Ltd. Shares are not quoted in the Stock Exchange. No evidence has been produced in support of the prevailing market price on the date when the shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... probabilities, and merely because a paper-trail is created will not by itself make the transaction genuine. Therefore, inferences about sale of shares @ Rs.588/- in March 1998 as against purchase price of Rs.18.20 in the month of June 1996 has to be drawn on the basis of the human probabilities and surrounding circumstances availables in the instant case. Having regard to the facts of the present case where the payment has not been received even from CMS Securities Ltd. through whom the shares were claimed to have been sold, and no clarification or explanation has been given as to why the payment has been made by Kusum and Co., and where no documents or evidences have been produced that the shares were ultimately transferred from assessee's name to the ultimate buyer after the same were sold in the month of March 1998, we are unable to accept the transaction of sale of shares on its face value without the same being proved and established by cogent and adequate evidences. Therefore, on this count also, the transaction of sale as claimed by the assessee is not believable. Further, the assessee has failed to explain and establish the nature and character of receipts received from Kus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nquiry conducted by the Investigation Wing and as well as in the reasons recorded by the AO for issuing notice u/s.148 of the Act (copy of the reasons have been placed by the assessee at page 39 of the paper book), it is clear that the Rs.3 lacs received by the assessee through broker M/s. Kusum and Co. It is not the case of the assessee that the shares were sold through broker M/s. Kusum and Co. It is, thus, clear that the assessee has failed to prove any link or nexus between the amount received from M/s. Kusum and Co. and the alleged sale of shares sold through M/s. CMS Securities Ltd. The assessee has failed to establish and prove the nature of receipt received from M/s. Kusum and Co. Since the receipt has been credited in the books of accounts of the assessee, the assessee was supposed to prove and explain the nature of the receipt and as well as the genuineness of the transaction. The nature of the receipt from M/s. Kusum and Co. has not been explained nor it is supported by any document issued by CMS Securities Ltd. The CMS Securities Ltd. in the statement of accounts has just given a vague averment mentioning only date and amount of "draft" without stating further anything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what account, the payment was made by the Kusum and Co to the assessee. Therefore, the aforesaid decisions relied upon by the assessee are not applicable to the facts of the present case. Similarly, the decision of SMC Bench of Tribunal in the case of Smt. Rashi Aggarwal and Smt. Anu Jain on which reliance has been placed by the CIT(A) would not help the assessee's case. Further, the decision of ITAT Jodhpur Bench in the case ITO vs. Smt. Kusumlata (2006) 105 TTJ (Jd.) 265 is also not applicable to the assessee's case as in that case the finding has been recorded by the Tribunal that there was no evidence that the amount did not come from the sale of shares, though, in the present case, the assessee has failed to prove and establish that the amount received from Kusum and Co. represented sale proceeds of shares sold through another concern viz., CMS Securities Ltd. 38. Having said so we, therefore, hold that the amount credited by the assessee in its books of accounts against the alleged sale of shares being received from M/s. Kusum and Co. is to be held as assessee's undisclosed income. However, it is an admitted position that in the year under consideration, the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
