TMI Blog2008 (4) TMI 736X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout jurisdiction and as a result of invalid service of notice. Therefore, the assessee succeeds on this limb of argument. Notice was served directly on assessee's wife without there being any effort which may be evident from any noting on the notice that any reasonable effort/attempt was made as required by law, before service of the notice to the assessee's wife. There is no evidence on record nor the wife of the assessee is legally authorised by the assessee to receive the notice. The learned CIT(A) has tried to justify the action of the AO by ignoring that the date on which it was served was the last day of limitation. So it is manifestly clear that the notice was improperly served on assessee's wife due to lack of time. Addition made by the AO in the absence of complete satisfactory documentary evidence - Income from undisclosed sources or long-term capital gains - HELD THAT:- In my considered opinion, the overwhelming evidences produced by the assessee go to prove that the assessee had purchased and sold 5,000 shares and had earned long-term capital gains as has been claimed and the same cannot be added as undisclosed income of the assessee. From the photoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the Dy. Director of IT (Inv.), Gurgaon regarding bogus claim of long-term capital gains shown from the sale/purchase of shares through bank account No. 8627 drawn on PNB, Karol Bagh, New Delhi operated by one Shri Shanker Hari Maheshwari, proprietor of M/s Maheshwari Sons, stock broker, the assessee had received a sum of ₹ 2,07,384 vide cheque/draft No.1395/390333 dt. 4th Feb., 1995 from M/s Maheshwari Sons. The said cheque was credited to the bank account of the assessee in Jammu Kashmir Bank Ltd., Hing Ki Mandi, Agra in the savings bank account No. 4241/43. On the basis of this information, the learned AO recorded reasons for initiating action under s. 148 of the Income-tax Act, 1961 ('the Act' for short), on 28th March, 2002 and a consequential notice was issued and served on the assessee calling for return of income in pursuance to the said notice. In compliance to notice issued under s. 148. the assessee did not file return of income and, as a result the AO duly completed the assessment under s. 144 of the Act. The AO obtained copy of bank account No. 4241 from Jammu Kashmir Bank Ltd., Agra under s. 133(6) of the Act on 30th Jan., 2003. From the examina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1,30,000. Now the assessee is aggrieved against the sustained addition of ₹ 2,07,384 held to be income from undisclosed source and not from long-term capital gains. The appellant/assessee has challenged the very reopening of assessment by issuance of notice under s. 148 by assailing the very assumption of jurisdiction as well as disputing the service of notice. The ground taken with regard to order passed under s. 144 was not pressed, so ground No. 1(c) is treated as dismissed as having been not pressed. 4. I have heard both the parties on the legality of notice under s. 148. Actually the assessee had challenged legality of notice from three angles. The first being that the AO has misrepresented the reasons recorded for initiating proceedings under s. 147 while obtaining sanction from learned Dy. CIT as the reasons recorded, a copy of which is placed at page No. 1 of paper book, and the letter addressed to Dy. CIT for obtaining sanction, a copy of which is reproduced again at page No. 1 in paras 1.1 and 1.2 of the paper book, are entirely different. The second prong of the contention of the assessee on this legal issue is that the AO has initiated action under s. 147 on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment for asst. yr. 1995-96. In view of the above facts and reason it is requested that sanction may kindly be awarded for initiating the proceedings under s. 147 of the IT Act. 8. When both these versions as extracted above are circumspected microscopically, I do not find any material difference between two versions except that the learned AO has used different words and phrases. It is being wrongly construed from the side of the assessee that the learned AO has written to Dy. CIT that the assessee did not file return under s. 139 of the Act. What he meant is only that the assessee failed to return bogus long-term capital gain amounting to ₹ 2,07,384 in his return so filed under s. 139 of the Act, therefore, the assessee cannot succeed on this aspect of the legal ground. 9. The second limb of assessee's legal ground is that the AO has not formed his own opinion which he required by dint of the provisions of s. 148(2) before issuance of notice under s. 148(1) of the Act. The provisions of s. 148(2) are being extracted hereinbelow for ready reference : 148 (1) ............ (2) The AO shall, before issuing any notice under this section, record his reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief. Whether this material (as materials) would conclusively prove escapement of income is not the concern at that stage. The Hon'ble Supreme Court has gone to the extent that satisfaction is a subjective satisfaction of the AO based on objective material evidence is required to have reason to believe that income escaped assessment is not the established fact of escapement of income. 11. The third prong of legal contention of the appellant is with regard to service of notice on his wife instead on himself. This is a fact that the notice was served on assessee's wife. The AO recorded reason on 28th March, 2002 and sent notice to the assessee under s. 148 on 28th March, 2002 which was served on the same day. The explanation of the Department is that the service on assessee's wife was made because the time for making assessment was getting barred. 12. After hearing rival submissions the clear-cut facts which emerge are that due to short time left for making assessment the AO was in a hurry to serve the notice. The learned CIT(A) has mentioned in his order that the notice was served on the last day of the limitation. But actually it was served on 28th March, 2002 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above para. A notice was simply sent to the house of the assessee and was served on assessee's wife without enquiring as to whether the assessee was present or not or was he likely to be available or had he any agent empowered. In this regard, all these facts are missing to satisfy all the three above-mentioned conditions which are sine qua non for service of notice on an adult member of the family living with the assessee. No doubt that family of the assessee was living with him and adult one to (sic), all the three conditions should coexist. The service of notice is to be made on the assessee and not on any adult member of the family of the assessee as per the directions of CPC. It is true that the assessee appeared before the AO on 8th Oct., 2002 after service of notice under s. 148 on his wife. Now it has to be seen as to whether the mere appearance of the assessee after improper service of notice would absolve the requirement of law or not. The Hon'ble Allahabad High Court in Full Bench mentioned in the case of Laxmi Narain Anand Prakash vs. CST 46 STC 71(All)(FB) has held that notice under s. 21 of the UP Sales-tax Act, 1948, was served on A, who had no concern wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (Inv.) it was revealed that only entries were given through this bank account to various persons who have declared capital gain from sale/purchase of shares on certain companies. The assessee Shri Pal Singh Gulati was also found one of the beneficiaries of the said bogus entry (of) capital gain. However, in the return of the year under consideration the assessee had not shown any income from capital gains. The assessee also did not declare the same in compliance of notice under s. 148 of the Act as no fresh return was filed. The AO added this amount of ₹ 2,07,384 in the absence of proper explanation of the source(s) of the said amount deposited in his bank account during the previous year relevant to assessment year under consideration. The assessee was also required to explain the source of investment appearing in his bank account No. 4241 in Jammu Kashmir Bank Ltd., Agra in the shape of deposits of ₹ 50,000 each on 27th Aug., 1994, 14th Sept., 1994 and ₹ 30,000 on 16th Sept., 1994 by clearings. When no reply was filed by the assessee, the learned AO added the total amount of ₹ 1,30,000 to the income of the assessee as income from undisclosed sources an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these shares, photocopy of all these evidences were produced before the learned CIT(A). All these evidence were sent to learned AO with a direction to submit his report. The learned CIT(A) wrote a letter No. A No. 12/CIT(A)-1/ITO 1(3)/Agra/2003-04 dt. 13th Nov., 2003 directed him as under : You are hereby authorised and directed to verify the genuineness of these documents and also make necessary enquiries as you may deem fit and then submit your comments on the genuineness of the documents and the contentions raised by the learned representative of the appellant in his submissions dt. 9th July, 2003 17. The learned AO replied that since the assessee has failed to produce the persons from whom he had purchased the shares and the person through whom he sold the shares, so he was convinced that the documents were not genuine. The learned AO also replied that a letter was sent to UP Stock Exchange Association Ltd. on 23rd Jan., 2004, who vide their letter dt. 28th Jan., 2004 informed that M/s Maheshwari Sons did not trade in shares of Prasidh Export Ltd. on 26th Sept., 1994 (the date of transaction shown in the bill issued to Shri Pal Singh Gulati). He did not believe in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 shares along with distinctive numbers and rate issued by M/s R.K. Goenka Co., stock and share brokers has been placed. This document has not been disputed by the Revenue or to say has not been disproved by the Revenue. A certificate of transfer of 5,000 shares by Prasidh Exports Ltd., Gautam Nagar, New Delhi is also placed. This document has also not been disproved by the Revenue. The other documents which are mentioned above along with the statement of accounts of the assessee in the books of M/s Maheshwari Sons (assessee's paper book p. 19) and a ready reckoner (assessee's paper book page No. 20) along with copy of the shares have been enclosed. These documents were made available to the learned AO. Without mentioning anything about these pieces of evidences the learned AO has simply twisted the reasoning and has stuck to mere non-production of the persons for examination through whom shares were purchased and sold. In my considered opinion, the overwhelming evidences produced by the assessee go to prove that the assessee had purchased and sold 5,000 shares and had earned long-term capital gains as has been claimed and the same cannot be added as undisclosed income o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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