TaxTMI 
TaxTMI 
2011 (5) TMI 1088
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....n this reassessment, the Assessing Officer took the view that the assessee had created and claimed a bogus loss of ₹ 12,88,237/- on account of purchase and sale of mutual funds and has purchased bogus short term capital gain of ₹ 6,63,093/- on account of purchase and sale of shares from M/s Richmond Securities Pvt. Ltd. and M/s Alembic Securities Pvt. Ltd. After recording reasons under section 148, he reopened the assessment and in the reassessment order dated 29.03.2006 disallowed the loss of ₹ 12,88,237/- claimed on account of sale of mutual funds and treated the short term capital gain of ₹ 6,63,093/- as unexplained expenditure within the meaning of section 69C of the Act. He also rejected the assessee's claim for set off of the loss of ₹ 5,58,230/-. 3. Aggrieved by the reassessment order passed as above, the assessee filed an appeal before the CIT(A), who disposed of the appeal by order dated 26.06.2007. In this order he deleted the addition of ₹ 6,63,093/- made under section 69C of the Act, ignoring the claim that it represented short term capital gains. The department did not file any appeal to the Tribunal against the order of the CIT(A).....
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....expenditure of the assessee. 5. In the meantime search and seizure proceedings under section 132 of the Act were taken against the assessee as part of the group of six cases on 28.06.2006. The basis of the search was that there was information in the possession of the department that these six parties were booking profits by making bogus claims of capital gains on purchase and sale of shares of penny stock companies, of which a company by name Bolton Properties Ltd. was one. Consequent to the search, assessments were made on the assessee on 11.12.2008 under section 143(3) read with section 153A for both the assessment years. The present appeals arise out of these assessment orders. In respect of the assessment year 2001-02, the Assessing Officer computed the total income at ₹ 14,07,356/- in the following manner: - Amount (Rs.) Amount (Rs.) Income determined as per original order u/s. 143(3) r.w.s. 147 dated 29.03.2006 1475980 Less: Relief given by CIT(A) vide his order dated 26.06.2007: - 1. Addition u/s. 69C in respect of STCG shown on sale of shares. 663093 2. Loss on Byaj Badla Transactions 50320 3. Expenses related to service charges & legal fees 14588 4. Exp....
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....nly as accommodation entries and no shares were given delivery or taken delivery. He also stated that the cheques issued were simply differential cheques and were issued on the receipt of equivalent funds from the entry seekers. 7. In the course of the assessment proceedings, in addition to the aforesaid statement, Shri Mukesh Choksi also filed an affidavit dated 04/05.12.2008. It should be mentioned here that in the course of the earlier reassessment proceedings he had filed an affidavit on 27.02.2006 confirming the genuineness of the transactions with the assessee herein. By the affidavit dated 04/05.12.2008 filed the present proceedings, the earlier affidavit filed on 27.02.2006 was withdrawn by Shri Mukesh Choksi. The affidavit filed in the present proceedings is referred to at paragraph 10 of the assessment order. In this affidavit he reiterated what he stated in the statement recorded on oath from him. Thus the statement recorded by the Assessing Officer and the affidavit formed the basis of the addition of ₹ 6,63,093/-. 8. For the assessment year 2002-03 also the Assessing Officer relied on the reasons given by the Assessing Officer in the earlier reassessment procee....
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....onfirmed by his affidavit dated 04/05.12.2008. After noticing the fresh fact, the CIT(A) observed that the parties mentioned in the statement of Shri Mukesh Choksi in answer to Question No:3 are not the parties with whom the assessee had any dealings. The CIT(A) noted that even according to Shri Mukesh Choksi there were three companies and Mukesh Choksi himself as individual who were receiving cash / cheques from the entry seekers. However, no cash or cheque was found to have been paid by the assessee to any of the three companies or to Shri Mukesh Choksi as individual. According to the CIT(A), if this is the factual position, it would indicate that the assessee was not one of the entry seekers and this in turn also brings to light the inconsistency in the statement of Shri Mukesh Choksi. He held that the Assessing Officer cannot make any addition in the assessee's hands despite the assessee not having made any payment to the entities mentioned by Shri Mukesh Choksi, whose statement is being relied upon by him. The CIT(A) also noted that Shri Mukesh Choksi has been vacillating right through and has given different versions at different stages of the proceedings and therefore his ev....
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....l and the assessee was prevented by sufficient cause in filing the cross objections in time. We accordingly condone the delay and admit the cross objections. 15. The argument of the learned counsel for the assessee is that : - (a) there is no incriminating material found during the search on the assessee on the basis of which the additions under section 69C of the Act could have been made and therefore the assessments were invalid; and (b) in any case the assessments are invalid because there was no undisclosed income which could be brought to assessment, and the additions made under section 69C cannot be considered as undisclosed income because those very additions had been made in the reassessment orders dated 29.03.2006, which additions were deleted by the CIT(A), whose decision was accepted by the revenue and in these circumstances it cannot be said that the additions represented undisclosed income of the assessee. 16. We are in agreement with the contention (b). It can possibly be argued, as was held by the CIT(A), that even where there is a search it is not necessary that some incriminating material should have been found in the course of the search justifying the additio....
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....rosanct and has been so recognized by the Courts. The judicial committee of the Privy Council in CIT vs. Khemchand Ramdas (1938) 6 ITR 414 (PC) held that after a final assessment is made, the Income Tax Officer cannot go on making fresh computations and issuing fresh notices of demand to the end of all time and it can be reopened only in the circumstances detailed in sections 34 and 35 of the 1922 Act and within the time limited by those sections. The Privy Council again in CIT vs. Tribune Trust, Lahore (1948) 16 ITR 214 (PC) reaffirmed the position and held that assessments once made would be valid and effective until they were set aside in the manner prescribed by the Act and if they are not so set aside, they are final. These decisions were approvingly cited by the Supreme Court in CIT vs. Rao Thakur Narayan Singh (1965) 56 ITR 234 (SC). In this case a decision of the Tribunal was sought to be circumvented by the Income Tax Officer by initiating proceedings for reopening the assessment despite the finding of the Tribunal. Commenting on the action of the Assessing Officer the Supreme Court held that since the finding of the Tribunal is binding on the Income Tax Officer, he cannot....
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....nt's appeals on merits. The only evidence relied upon by the Assessing Officer in the assessment orders is the statement and affidavit of Shri Mukesh Choksi taken in the course of the present proceedings. This evidence only reiterates what Shri Mukesh Choksi stated in the course of the original assessment proceedings, as can be seen from paragraph 5.1 of the reassessment orders passed on 29.03.2006, which has been reproduced in paragraph 7.1 of the assessment order for the assessment year 2001-02. In paragraph 5.1 of the reassessment orders passed earlier, the Assessing Officer has referred to the search and seizure operation on Shri Mukesh Choksi, who was the Director of the broker companies. In the course of the earlier reassessment proceedings the assessee was confronted with the statement of Shri Mukesh Choksi. The assessee asked for cross examination of Shri Mukesh Choksi. Before the request could be considered, the assessee filed an affidavit from Shri Mukesh Choksi in his capacity as Managing Director of M/s Richmond Securities Pvt. Ltd., stating that during the year under consideration the company had done dealings on behalf of the assessee and the transactions were duly re....
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....s 183 to 210 of the assessee's paper book. We have already seen that in the case Mr Sandeep R Shorewala, HUF and Smt Varunadevi Shorewala the Tribunal has placed reliance on the order in the case of Mukesh R Marolia (supra) and deleted the addition. A perusal of paragraph 9 of the Tribunal's order dated 26.02.2009 in the case of Mr Sandeep R Shorewala, HUF (supra) shows that even in that case heavy reliance had been placed by the Assessing Officer on the statements given by Shri Mukesh Choksi during the search and seizure operations in his case. The Tribunal also noted that the Assessing Officer had made enquiries with the NSE by notices issued under section 133(6) for verifying the transactions shown by the assessee and based on the replies submitted by NSE, had come to a conclusion that the transactions were not verifiable. In paragraph 9 the Tribunal has also noted the assessee's contention that the share transactions could never be traced through NSE since they were all off market deals and such off market deals were not unlawful. The Tribunal has further noted the affidavit of Shri Mukesh Choksi, in which he confirmed the transactions carried out for the assessee in that case.....