TaxTMI 
TaxTMI 
2020 (2) TMI 1336
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....nces of the case in sustaining the non-jurisdictional order passed by the AO u/s. 147 read with Section 143(3) of the Act. 4. The above grounds of appeals are independent and without prejudice to one another. 5. The appellant may be allowed to add / withdraw or amend any ground of appeal at the time of hearing. 2. The brief facts of the case are that assessee company is engaged in the business of sale and purchase of shares. The assessee filed its return of income on 30.9.2010 at NIL income. In this case, information was received from ADIT(Inv.), Unit-1(3), Ahmedabad through CD wherein it was informed that assessee company has claimed fictitious losses and profits by misusing the CCM facility in F&O segment amounting to Rs. 2,18,73,416/-. The assessment in this case was completed at an income of Rs. 2,18,73,416/- u/s. 147/143(3) of the Income Tax Act, 1961 (in short "Act") vide order dated 10.1.2017. Against the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 26.3.2019 has dismissed the appeal of the assessee. Aggrieved with the appellate order dated 26.3.2019, assessee is in appeal before the Tribunal. 3. L....
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.... 3.1 Ld. Counsel for the assessee placed the copy of reasons recorded by the AO and approval granted by the Pr. CIT, Delhi-1, New Delhi wherein, he has granted the approval by only mentioning that "I am satisfied", which shows that Ld. Pr. CIT, Delhi-1, New Delhi has not recorded proper satisfaction and without application of mind gave the approval in a mechanical manner. He further stated that this issue is squarely covered by the decision of the Hon'ble Delhi High Court in the case of United Electrical Company (P) Ltd. Vs. CIT & Ors. 258 ITR 317 (Del.). Therefore, he requested that the same ratio may be followed in the present case and appeal of the assessee may be allowed accordingly by quashing the reassessment proceedings. 3.2 Thirdly, on the merits of the case, Ld. Counsel for the assessee stated that the orders of the authorities below cannot be accepted since the AO has not pointed out any basis or material or evidence to support his findings that the assessee has received entry of fictitious losses. The AO has not spelt out in the reasons recorded as well as the assessment order as to on which scrips the assessee has taken loss entries. He submitted that the addition....
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....as provided by the AO to him. AO has blindly relied upon the Investigation Wing which itself is not based on any material against the assessee. The mere recording of reasons on the basis of information from Investigation Wing and issuing notice for initiation of reassessment proceedings does not constitute application of mind much less independent application of mind. Therefore, the proceeding is without jurisdiction. It is noted that AO has not investigated the matter himself and has not made any enquiry to corroborate the Information of the Investigation Wing on which basis the case of the assessee has been reopened, meaning thereby the AO has not applied his mind and only issued notice u/s. 148 of the Act. Thus, the AO has acted mechanically and without any independent application of mind. It is further noted that initiation of proceedings is based on non application of mind much less independent application of mind but is a case of borrowed satisfaction. Nothing is independently examined or considered by the AO which can demonstrate application of mind by him. To support our aforesaid view, we draw support from the following decisions:- i)ACIT vs. Dhariya Construction ....
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....assessment order the AO has, instead of adding a sum of 78 lakh, even going by the reasons for reopening of the assessment, added a sum of Rs. 1.13 crore. On what basis such an addition was made has not been explained. 15. For the aforementioned reasons, the Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law." iii) 395 ITR 677 (Del) Pr. CIT v. Meenakshi Overseas (P) Ltd. "36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstance....
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....ircumstances of the case. A) United Electrical Company (P) Ltd. Vs. CIT & Ors. 258 ITR 317 (Del.) In this case, approval by the Addl. CIT u/s. 151 was given in the following terms:- "Yes, I am satisfied that it is a fit case for issue of notice u/s. 148 of the Income Tax Act." Analyzing, the above satisfaction/approval, it has been held that the CIT is required to apply his mind to the proposal put up to him for approval in the light to eh material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. (Para 19). (B) Hon'ble Supreme Court of India in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) arising out of order of Hon'ble High Court of Madhya Pradesh in CIT vs. S. Goyanka Lime & Chemicals Ltd. (2015) 56 taxmann.com 390 (MP). "Section 151, read with section 148 of Income Tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commi....
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....ime. If the reply is in affirmative, please state (a) Whether any voluntary return has already Yes been filed; and (b) If so, the date of filling the said return 30/09/2010 If the answer to item 8 is in the negative please N.A. state (a) The income originally assessed (b) Whether it is a case of under assessment, assessment at too low rate, assessment which has been made the subject of excessive relief or allowing of excessive loss or depreciation 10 Whether the provisions of section 150(1) are No applicable. If the reply is in affirmative the relevant facts may be stated against item no. 11 and it may also be brought out that provisions of section 150(2) would not stand in the way of initiating proceedings u/s 147. Certified True Copy shopi 31/05/19 forest atver SHILPI CHOPDA सहायक आयकर आयà¥à¤•à¥à¤¤ वृत-3 (1), नई दिलà¥à¤²à¥€ Circle -1(1), New Delhi Asstt. Commissioner of Income Tax Document 2 11 Reasons for the belief that income has escaped As per Annexure 'A' ....
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....wed to change it between 3.30 pm and 4 pm to rectify a genuine error that may have occurred while entering the code. The facility ensures smooth functioning of the system and is to be used as an exception rather than routine. However, many brokers misused this facility of CCM for creating artificial losses/profits and providing such fictitious profits/losses to various clients by charging some commission. 4. Stock exchanges allow client code modifications but only to rectify a genuine error that may have occurred at the time of placing the order. Contrary to its motive, CCM facility was being misused and brokers transferred gains or losses from one person to another by changing the code, in the garb of correcting an error. These gain or loss-book entries were then used to evade taxes. 5. Non genuine CCM were carried out to book contrived losses. This facility was used by brokers to transfer gains or losses from one individual to another by modifying client codes in the guise of rectifying an error. It became a practice to book artificial profits or losses to impact tax liabilities. 6. Pursuant to above observations by the Finance M....
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.....G. Securities and Consultancy Ltd got fictitious loss of Rs.2,18,73,416.90 from various brokers who carried out non-genuine CCM. 8. Reason for information to belief 9. I have carefully perused and analysed the facts of the case as detailed above and the following facts emerge from the same: (i) (ii) Particulars of all brokers are found recorded in Annexure-B from whom the assessee company has received fictitious profits/loss in lieu of paying commission to the brokers. Perusal of the information in table. it clearly shows that the name of the assessee company M/s A.K.G. Securities and Consultancy Ltd appears as client who has received fictitious profits/losses from various brokers who misused the CCM facility provided by SEBI. Income chargeable to tax escaping assessment Having perused and considered the information received from the Assistant Director of Income-tax (Investigation) and examining the return filed by the assessee company, I am satisfied that the assessee company has not disclosed the transaction carried through CCM and has thus failed to disclose fully and truly all material facts necessary for assessment. The....