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M/s. Yamuna Estate Pvt. Ltd. Versus Income Tax Officer, Ward - 8 (3) (4) , Mumbai

2015 (10) TMI 1514 - ITAT MUMBAI

Reopening of assessment - order of assessment passed under section 147 instead of section 153C - whether the assessment framed under section 147 is not without jurisdiction as no sanction has been taken from the authorities, as envisaged in section 151, before assuming jurisdiction? - Held that:- Hon’ble Gujarat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2010 (3) TMI 770 - Gujarat High Court) the condition precedent for issuing notice under section 153C is that the money, bullion .....

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tioner. The Hon’ble High Court, therefore, has held that under such circumstances, the condition precedent for issuance of notice under section 153C was not fulfilled and any action taken under section 153C of the Act stood vitiated. The Hon’ble Delhi High Court in the case of ‘Pepsico India Holding (P.) Ltd. vs. ACIT (2014 (8) TMI 898 - DELHI HIGH COURT) has held that the AO should not confuse the expression ‘belongs to’ with the expression ‘relates to’ or ‘refers to’. The Hon’ble High Court ha .....

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ct is concerned, we do not find any merit in the said contention. The income which the AO believed to have escaped assessment was above ₹ 1 lakh i.e. ₹ 5 lakh which is more than ₹ 1 lakh. As per the provisions of section 149, the reassessment can be done beyond the period of six years from the end of the relevant assessment year if the income chargeable to tax which has escaped assessment amounts to ₹ 1 lakh or more. Under such circumstances, this contention of the Ld. A. .....

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by the Assessee. The AO has made additions on the basis of general statement of Mr. Chokshi made before the investigation wing. The name of the assessee did not appear specifically in any of the statements of Mr. Chokshi. The assessee was not provided opportunity to confront Mr. Chokshi in relation to transactions related to the assessee. The assessee before the CIT(A) has also submitted the confirmation of Sh. Mukesh Chokshi about the share transactions done through his share broking company. T .....

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, merely because the assessee could not produce Mr. Chokshi before the AO, that itself is not a sufficient ground for the confirmation of the additions. If the AO required the presence of Mr. Chokshi before him, he could have exercised his powers under the Act to secure the presence of Mr. Chokshi before him. Even the Ld. AO, in his remand report, has not controverted the evidences filed by the assessee. Thus we hold that additions made by the AO u/s 68 are not warranted in this case and are acc .....

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Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order dated 09.02.2012 of the Commissioner of Income Tax (Appeals) [(hereinafter referred to as CIT(A)] relevant to assessment year 2003-04. The assessee through the grounds of appeal has agitated the addition of ₹ 41,25,550/- u/s. 68 of the Income Tax Act. 2. The assessee has taken the following grounds of appeal: 1. On the facts and circumstances of the case and in law the Ld. Commissioner of .....

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stances of the case and in law the Ld. Commissioner of Income Tax (Appeals) has erred in confirming the disallowance of set off of business loss by applying explanation to section 73 (4) of Income Tax Act,1961 without appreciating the facts of the case. 4. The appellant craves leave to alter, amend, modify or substitute any ground / grounds and to add any new ground or grounds on or before the appeal is disposed off. In addition to the above grounds of appeal, the assessee has also taken the add .....

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ose persons in respect of whom some material is found in search? c. Without prejudice to the above grounds, whether the assessment framed under section 147 is not without jurisdiction as no sanction has been taken from the authorities, as envisaged in section 151, before assuming jurisdiction? 3. The facts of the case as brought out from the order of the Ld. CIT(A) are that a search & seizure action u/s. 132 was undertaken in the case of M/s. Mahasagar Securities P. Ltd. and its group compan .....

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de sales and purchases of shares through M/s. Gold Star Finvest P. Ltd, which was also one of the companies which had reportedly provided the accommodation entry, therefore, the profit of Rs. ₹ 41,25,550/- on sale of shares was treated to be unexplained credit which was added by the Assessing Officer (hereinafter referred to as the AO) u/s.68 into the income of the assessee. Aggrieved by the above said additions, the assessee preferred appeal before the Ld. CIT(A). 4. Before the Ld. CIT(A) .....

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egistered member of stock exchange and having SEBI registration number and that the sale proceeds were received through cheques only. That all the documents were submitted before the AO and he was satisfied about the transactions and did not raise any query in this respect. It was therefore claimed by the assessee that the transactions were genuine transactions only. The assessee before the Ld. CIT(A) also submitted the confirmation of Sh. Mukesh Chokshi about the share transactions done through .....

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, therefore the matter be decided on merits. The Ld. CIT(A) held that since the assessee had failed to produce Mr. Chokshi before the AO, hence no reliance could be placed on the confirmation relating to the share transactions given by Mr. Chokshi. He therefore held that the transactions were not genuine and confirmed the additions made by the AO. The assessee is thus in appeal before us. 5. We have heard the rival contentions and have also gone through the record. The Ld. AR has vehemently cont .....

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ing the assessment year relevant to financial year in which the search was conducted. Thereafter, he submitted that the search year in the case of the assessee was 2010-11 and the AO could have called upon the assessee to furnish returns of income of the earlier six assessment years i.e. up to the assessment year 2004-05. However, since the assessment year in question is 2003-04, the AO could not have, even, reopened the assessment proceedings under section 153C of the Act. Hence, the AO, to ove .....

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erson. The Ld. A.R. has further contended that in the reasons recorded for reopening of the assessment, the AO has mentioned that he had reason to believe that the assessee company had created and claimed bogus losses on account of sale and purchase of shares and claimed setoff of the same against income generated. However, in the assessment proceedings, the AO had made the addition in respect of profit on sale of shares treating the same as unexplained cash credit under section 68 of the Act. T .....

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for reopening of assessment under section 147 had expired on the date the AO had sought to reopen the assessment for the year under consideration. The Ld. D.R. on the other hand, has contended that the assessment in this case has rightly been reopened under section 147 of the Act. 6. We have considered the rival contentions and have also gone through the records. So far as the first contention of the Ld. A.R. that the reopening in this case could have been done under section 153C only but not u .....

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but somehow related to the assessee as the name of the assessee had figured in the list of persons. The Hon ble Gujarat High Court in the case of Vijaybhai N. Chandrani vs. ACIT (2011) 333 ITR 436 had the occasion to deal with this legal issue. The Hon ble High Court analyzing and interpreting the provisions of section 153A, 153B and 153C has held that the provisions of section 153C are quite different from that of section 158BD. The Hon ble High Court has observed that as per the provisions of .....

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to whom search was made under section 132 or whose books of account or other documents or assets were requisitioned under section 132A, he could proceed against such other person under section 158BC. The Hon ble Gujarat High Court, therefore, has held that the condition precedent for issuing notice under section 153C is that the money, bullion, jewellery or other valuable article or thing or books of account or document seized or requisitioned should belong to such other person. If the above re .....

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ot fulfilled and any action taken under section 153C of the Act stood vitiated. The Hon ble Delhi High Court in the case of Pepsico India Holding (P.) Ltd. vs. ACIT (2015) 228 Taxman 116 (Del.) has held that the AO should not confuse the expression belongs to with the expression relates to or refers to . The Hon ble High Court has held that unless it is established that the document in question does not belong to the searched person the question of invoking section 153C does not arise. Admittedl .....

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s of the Hon ble Gujarat High Court (supra) and that of the Hon ble Delhi High Court (supra) So far as the next contention of the Ld. A.R. that in the reasons recorded, the AO had mentioned that he had believed that the assessee had claimed bogus losses whereas in the assessment proceedings, the AO had assessed profits from the sale of shares as unexplained cash credits and therefore the AO has not made the addition on the basis of reasons recorded is concerned, we find that the said contention .....

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the basis of the same issue and in relation to the transactions done by the assessee through the searched person/broker for sale and purchase of shares. Under such circumstances, the case law cited by the assessee in the case of Jet Airways (Supra) is not applicable. So far as the contention that the limitation period had expired for reopening of assessment under section 147 of the Act is concerned, we do not find any merit in the said contention. The income which the AO believed to have escaped .....

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ction has been taken from the authorities, as envisaged in section 151 for reopening of the assessment. Even from the record, we do not find that any such issue has been ever raised by the assessee before lower authorities. In the absence of any specific evidence in corroboration of the contention raised, we do not find any merit in this plea of the assessee. 7. We further find that the issue of reopening of the assessment in the circumstances as that of the case of the assessee is squarely cove .....

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d that under the circumstances the AO was having sufficient reason to believe that there was an escapement of income and accordingly he was justified in reopening the assessment under section 147 of the Act. The relevant findings of the Tribunal relating to the issue of reopening in the case of Smt. Jyoti D. Shah (supra) for the sake of convenience are reproduced as under: 3. Rival contentions have been heard and record perused. There was a search undertaken in the case of M/s Mahasagar Securiti .....

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of the subbroking companies floated by Shri Mukesh Chokshi actually did not carry out the transactions through the main' brokers for whom they were claiming to be subbrokers and all the bills raised by them were illegal, unauthorized and against the provisions of the SCRA Act, 1956. On the basis of the details obtained during the search by the investigation wing, it was noted that the assessee also had made sales and purchases of shares of M/s Buniyad Chemicals Ltd through M/s. Gold Star Fin .....

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was justified in reopening the assessment uls.147 of the Act. Hence, the ground No.1 raised by the assessee is dismissed. 8. In the case in hand, the reopening was made on the basis of information regarding receipt of accommodation entries provided by the group companies of Shri Mukesh Chokshi and further on the basis of statement of Shri Mukesh Chokshi. The facts being identical to that of the case of Smt. Jyoti D. Shah (supra) this issue is accordingly decided against the assessee. 9. So far .....

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t are as following : 1. Kataria Ketan Ishwarlal Vs. ITO - ITA No.4304/M/2007 decided on 30.04.2010. 2. ACIT Vs. Shri Ravindrakumar Toshniwal - ITA No.5302/M/2008 decided on 24.02.2010 3. ITO Vs. Truptic Shah - ITA No.1442/M/2010 decided on 29.04.2011 4. Smt. Manjulaben L. Shah Vs. ITO - ITA No.3112/M/2014 decided on 31.10.2014 5. M/s SDB Estate private ltd. vs. ITO ITA No. 584/M/2015 decided on 15.04.2015 10. We find that the facts of the above stated cases were all most identical to that of the .....

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per Book, we find the assessee has purchased 9500 shares of Kushal Software Ltd. from M/s. Handful Investors Pvt. Ltd. We find the Assessing Officer treated the sale of such shares by the assessee through M/s. Gold Star Finvest Pvt. Ltd. as bogus on the ground that Mr. Choksi and his broking company were engaged in giving false share transaction bills. However, from the copy of the statement of Mr. Choksi, a copy of which is filed in the Paper Book, we find Mr. Choksi has not specifically mentio .....

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be said that the sale of the shares is bogus. In this view of the matter, we hold that the sale transaction entered into by the assessee is genuine transaction. Since the Assessing Officer has not disputed regarding the purchase of house property and since the assessee fulfils the conditions for treating the profit on sale of such shares as long term capital gain and fulfilled the conditions for allowability of deduction u/s. 54F, therefore, we set aside the order of the CIT(A) and direct the A .....

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actions as bogus transactions on the ground that a) The sale transactions were not on the floor of the ASEL but were off market transactions; b) The address of the M/s Buniyad Chemical Ltd. and M/s Talent Infoway Ltd. was the same and the contact person for M/s Buniyad Chemical Ltd. on the floor of ASEL was Shri Mukesh Chokshi. c) Mr. Mukesh Chokshi had stated that the sale proceeds have been paid to the assessee through the funds provided by the assessee. 12. As regards point (a) above, we find .....

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same. The CIT[A] in his order has considered the said evidence and has come to the conclusion that the share transactions are genuine. However, as held by the Tribunal in the case of Rajinidevi A. Chowdhary [cited supra], which is on similar set of facts, the AO could have verified from the Registrar of companies as to whether the shares have been transferred and the names of the shareholders in whose names shares have been transferred. The decision of the Tribunal in the case of Rajinidevi A. C .....

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dence against the assessee to hold that the share transactions were not genuine. The assessee had furnished before the AO all the necessary details and evidences relating to the share transactions in question. The AO did not raise any query or doubt about the genuineness of the details and evidences submitted by the Assessee. The AO has made additions on the basis of general statement of Mr. Chokshi made before the investigation wing. The name of the assessee did not appear specifically in any o .....

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