TaxTMI 
TaxTMI 
2016 (11) TMI 364
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....ted the objections in his letter, dated 21/11/2013. He completed the assessment u/s. 143(3) r.w.s.147 of the Act, on 06/03/2014. Aggrieved by the order of the AO, the assessee filed an appeal before the First Appellate Authority (FAA). Before him, the assessee agitated the issue of reopening as well as challenged the addition made by the AO. The FAA upheld the reopening as well as the addition. Hence, the assessee is before us. 2. First effective ground of appeal (GOA.1-3) deals with reopening. Before the FAA, it was argued that the AO had reopened the assessment on the basis of information received, that it had entered into accommodation entries with M/s. Mahasagar Securities Group, that the action of the AO was without any sufficient and relevant material on record to prove the genuineness of the statement given by Mukesh Choksi(MC) of Mahasagar Group, that the AO did not consider the objection letter, dated 11/11/2012, that he had wrongly placed reliance on the finding of the search proceedings and statements recorded in the case of Mahasagar Securities Group, that he had wrongly considered capital gain as undisclosed income of the assessee, &nbs....
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....y the assessee, was processed by CPC and no regular assessment was completed as per the provisions of section 143(3) of the Act. The processing of return and acknowledging the income filed by the assessee by the computer is a mechanical process and it does not involve application of mind by the AO. In the case under consideration, he had received specific information and accordingly reopened the assessment. We would like to reproduce the reasons recorded by him for reopening the assessment and same reads as under: "The assessee, has filed the return of income for the A. Y 2006-07 on 26.05.2006 declaring total income of Rs. 46, 52, 348/-. A search action u/s. 132 of the Act had been conducted in the case of Mukesh Choksi and its related group Companies, which include M/s. Alliance Intermediatories & Net Work Pvt. Ltd., M/s. Gold Star Finvest Pvt. Ltd., M/s Mihir Agencies Pvt. Ltd. on 25/11/2009. The search was conducted on the basis of information received from Financial Intelligence Unit, New Delhi regarding suspicious transactions in the bank account of one M/s. Mahasagar Securities Pvt. Ltd., having address at Block-H, Shree Sadashiv C....
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....ome for the year under consideration. Since the accommodation entries are provided to account for a transaction that does not exist in rea- lity, I have reason to believe that the Purchases of Rs. 12, 66, 943/- are nongenuine and that extent income of the assessee has escaped assessment for the AY 2006-07. In view of the above, I have reason to believe that Income chargeable to tax to the tune of Rs. 12, 66, 943/- or any other income chargeable to tax which comes to my notice subsequently in the course of proceedings for re-assessment, has escaped assessment, within the meaning of provision of Sec. 147 of the Act, 1961. Therefore, I am satisfied that the assessee has failed to disclose true and complete particulars of its income for the year under consideration. Accordingly, the case is being re-opened u/s. 147 of the IT Act for Asst. Year 2006-07. Issue notice u/s. 148 of the Act. Requisite approval of the Joint CIT-Range 16(1), The decision of the Supreme Court in the case of KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 was rendered in the background of a case of reopening of an assessment which was previously framed after ....
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....89, and prior to its substitution with effect from June 1, 1999, what were permissible to be adjusted under the first proviso to section 143(1)(a) were : (i) only apparent arithmetical errors in the return, accounts or documents accompanying the return, (ii) loss carried forward, deduction, allowance or relief, which was prima facie admissible on the basis of information available in the return but not claimed in the return, and similarly (iii) those claims which were, on the basis of the information available in the return, prima facie inadmissible, and were to be rectified/allowed/dis-allowed. What was permissible was correction of errors apparent on the basis of the documents accompanying the return. The Assessing Officer had no authority to make adjustments or adjudicate upon any debatable issues. In other words, the Assessing Officer had no power to go behind the return, accounts and documents, either in allowing or in disallowing deductions, allowance or relief. Though technically the intimation issued was deemed to be a demand notice u/s. 156, that did not preclude the right....
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....r there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer." After going through the above judgments and the reasons recorded by the AO, we are of the opinion that the AO was justified in issuing the reassessment notice. He had sufficient material, at the time of issuing the notice u/s. 148 of the Act, that certain portion of income had not suffer taxation. We are of the opinion that the order of the FAA does not suffer from any legal infirmity. Therefore, confirming the same we decide the first effective ground of appeal against the assessee. 6. The second effective ground of appeal is about the addition made of Rs. 33.98 lakhs as income from undisclosed sources. During the re-assessment proceedings, the assessee had claimed that it had received genuine capital gain of the said sum from sale of shares. However, the AO had held that transactions in question were not genuine, that the assessee had ....
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.... of MC, recorded on various occasions. He issued one more letter to the assessee giving it one more opportunity to present its case with supporting document. He asked the assessee to show cause as to why the addition proposed by him vide his notice, dated 20/01/2014, should not be made to the total income. After considering the submission of the assessee dated 25/ 02/2014, the AO held that assessee had not purchased the shares of Maruti and Sundram in the de mat mode, that it had dematerialised the shares on the date of sale, that it had not furnished any supporting evidence of physical delivery of shares on the date of purchase, that the assessee had wrongly claimed that it had furnished evidence regarding purchase of shares, that the shares of Maruti and Sundram were claimed to have been purchased in the month of May and June, that it had made the payment to Alliance in the month of December just before a day or two of the date of sale, that no genuine purchase was made by the assessee in the month of May/ July, 2005. The AO also made enquiries with the NSE. After considering the available material, he held that no actual transactions were carried out by the assessee ....
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....ains was not genuine. He further held that the cases relied upon by the assessee were distinguishable on facts. He referred to the case of Sumati Dayal(214ITR801)and P Mohan Kala(291ITR278) and upheld the addition made by the AO. 8. Before us, the AR argued that . He relied upon the cases of Chamatkar Properties and Investments Private Limited (46 CCH 75 (Mum-Trib.));Kinjal A Shah(45CCH 38, Mum-Trib.);Jafferali K. Rattonsey (31 CCH 308, Mum-Trib)) and Eastern Commercial Enterprises(210 ITR 103). The DR supported the order of the AO and the FAA and referred to the case of Shameem M Bharwani(ITA/ 4906/ Mum/2011-AY.2006-07, dated 27/03/2015). 9. We have heard the rival submissions and perused the material before us. We find that the assessee had claimed capital gains of Rs. 38.98 lakhs, that the AO and FAA had rejected the claim, that it did not provide supporting evidence of purchasing of shares in physical form, that both the authorities had considered the surrounding circumstances of the transactions and the probabilities of human behaviour, while deciding the issue. 9.1. It is said that in the application of the law relating to income-tax, it is the substance and no....
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.... or evidence." Similarly, the Hon'ble Supreme Court had decided the matter of Sumati Dayal(214 ITR 801), after considering the surrounding circumstances and applying the test of human probabilities. In the matter of L.N.Dalmia the Hon'ble Calcutta High Court (207 ITR 89)had considered the surrounding circumstances to decide the issue. In the case under consideration, what the AO and the FAA have done is that instead of putting on blinkers, while looking at the documents produced before them, looked into the surrounding circumstances to find out the reality of the transaction. They could logically and successfully establish that it was a case where ingenuity was expended to avoid tax-payment by producing documents that may seem convincing prima-facie. But, behind the smoke-screen true state of affairs were hidden and they were successful in unearthing it. The AO after receiving the specific information from the investigation wing, directed the assessee to produce the proof the purchase of shares of two companies. It could not furnished any documents that could lead to establish fact that the transaction entered in to by the assessee was genuine one. It was claimed that it ....