TaxTMI 
TaxTMI 
2020 (10) TMI 512
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....law the ld. CIT (A) erred in confirming the addition of Rs. 2,71,317/- made by ld. AO by disallowing the loss of Rs. 2,71,317/- incurred in F & O trading of shares treating the same as accommodation loss. 3. On the facts and in the circumstances of the case and in law the ld. CIT (A) erred in confirming the addition of Rs. 5,426/- made by ld. AO on account of alleged unaccounted commission paid for acquiring alleged accommodation loss. 4. The assessee prays for leave to add, to amend, to delete, to modify the all or any grounds of appeal on or before the hearing of appeal. Vide application dated 16.07.2020, the assessee has also raised additional grounds of appeal as under :- " 1. On the facts and in the circumstances of the case and in law the assessment order passed by AO u/s 143(3) r.w.s. 147 of Income-Tax Act dated 29/11/2016 is bad in law and perverse, void ab initio and deserves to be annulled as the ld. AO recorded his satisfaction only on the basis of information received from the DIT (I & CI) without carrying out his independent enquiries and hence he assumed jurisdiction merely on borrowed satisfaction which is impermissible in law. 2. On the facts and in the cir....
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....e without explaining the reasons as to why this ground was not raised in Form No. 36 as well as before the authorities below. The ld. D/R has objected to the admission of the additional ground. 5. We have considered the rival submissions as well as the relevant material on record. There is no dispute that the additional ground no. 2 involves the pure question of law and no new facts or material are required to be verified or examined for the purpose of adjudication of this ground. On the contrary, all the relevant facts required for adjudication of this ground are already on record and not in dispute. We further note that this is not a fresh plea raised by the assessee first time before this Tribunal, but the assessee has raised this plea before the ld. CIT (A) in support of its ground no. 1 raised before the ld. CIT (A) regarding validity of the reassessment order. The relevant part of this contention of the assessee has been recorded by the ld. CIT (A) at pages 5 & 6 of the impugned order as under :- "iv) Further the reassessment proceedings were complete without disposing off the objections raised by the assessee regarding reopening of the reassessment proceedings objected v....
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.... is bound to decide the preliminary objections to issuance of the re-assessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the re-assessment proceedings which would have entailed the liability to pay tax and interest on re-assessment and also to go ITR No. 1559 to 1562/ Bang/2010 through the gamut of appeal, second appeal before Income-tax Appellate Tribunal and then reference/tax appeal to the High Court. Viewed in this light, it appears to me that the rigour of availing of the alternative remedy before the Assessing Officer for objecting to the re-assessment notice under section 148 has been considerably softened by the Apex Court in the GKN's case (2003) 259 ITR 19 in the year 2003. In my view, therefore, the GKN's case (2003) 259 ITR 19 does not run counter to the Calcutta Discount Co. Ltd.'s case (1961) 41 ITR 191(SC) but it merely provides for challenge to the re-assessment notice in two stages, that is- (i) raising preliminary objections before the Assessin....
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....ordance with the provisions of law. This ground of appeal is dismissed." Once the assessee has raised this plea before the ld. CIT (A), then the mere not raising the same in the Memorandum of Appeal would not prohibit the assessee from raising this plea during the appellate proceedings. Accordingly, in the facts and circumstances of the case as well as following the decision of Hon'ble Supreme Court in the case of NTPC vs. CIT (supra), we admit the additional ground no. 2 for adjudication on merits. Since the additional ground no. 2 is purely legal in nature and goes to the root of the matter, therefore, first we take up this additional ground for adjudication. 6. The ld. A/R of the assessee has submitted that the assessee filed its original return of income under section 139(1) on 24.07.2009 disclosing all the relevant facts regarding the income of the assessee and particularly the income from share trading. Subsequently, the AO has reopened the assessment by issuing a notice under section 148 on 28th March, 2016 on the ground that the assessee has shown fictitious profit and loss created by some brokers by misusing Client Code Modification Facility and thereby the net total inc....
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....ation :- "1) Kindly refer to copy of notice issued u/s 148 of Income Tax Act, 1961 dated 28.03.2016 which was not served to assessee and the copy of the same was taken from your office on 18.07.2016. In compliance to your notice this is to submit that the assessee has already filed its Income Tax return u/s 139(1) of Income Tax Act, 1961 on 24.07.2009 and the same may kindly be treated as filed in compliance to notice issued u/s 148 of Income Tax Act, 1961.The copy of ack. of ITR and computation of total income is enclosed herewith at Page No. 1 to 3. 2) Kindly refer to reasons record for reopening of the case of the assessee which has been provided by your honour during the course of hearing on 18.07.2016. Regarding the reasons recorded we may submit as under: - a) In the reasons recorded by your honour it has been mentioned that on some brokers and clients, survey u/s 133A of Income Tax Act, 1961 was carried out and they confirmed having misused the facility of client code modification to create fictitious losses/profits. From the reasons so recorded it is not clear that how the assessee is concerned with such survey or how the conclusion drawn as a result of such survey is....
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.... objections, it appears that the AO has disposed of the said objections without deciding it on merits and solely on the ground that as the assessee has not filed the return pursuant to the notice issued under Section 148 of the Act within a period not less than 30 days from the date of receipt of the notice under Section 148 of the Act. That while disposing of the said objections on the aforesaid ground, the AO has relied upon and considered the decision of the Division Bench of this Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra). However, on considering the directions issued by the Division Bench of this Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra), it appears that AO has misread and/or misinterpreted the directions issued by the Division Bench of this Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra). 8. In the case of Sahakari Khand Udyog Mandal Ltd. (supra) the Division Bench had an occasion to consider the various difference stages from the date of notice under Section 148 of the Act to the reassessment order and ultimately after considering the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd.....
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....has been made by the Division Bench and/or any direction is issued by the Division Bench that assessee has to file return of income in response to the notice under Section 148 of the Act within a period not less than 30 days. What is observed/directed by the Division Bench is that if the assessee when files his return of income in response to notice under Section 148 of the Act, the AO shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. The Division Bench has further observed and directed that once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons and if objections are received by the Assessing Officer from the assessee within the time permitted hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee. That the Division Bench has also further clarified that requirement and the time-frame for supplying the reasons without being demanded by the assessee would ....
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....icer is bound to dispose of the same by passing a speaking order. In the instance case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." 8.3 In a subsequent decision in the case of Garden Finance Ltd. (supra), the effect of Supreme Court decision in the case of G.K.N. Driveshaft (India) Ltd. (supra) came up for consideration and by a majority opinion it has been thus laid down by this Court as under: "What the Supreme Court has now done in the G.K.N. Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 is not to whittle down the principle laid down by the Constitution Bench of the Apex Court in Calcutta Discount Co. Ltd. v. ITO case [1961] 41 ITR 191 but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the re-assessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to chal....
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....a) impugned orders disposing of the objections without deciding the objections on merits cannot be sustained and same deserve to be quashed and set aside. The impugned orders passed by the AO disposing of the objections are absolutely on misinterpretation and/or misreading of the decision of the Division Bench in the case of Sahakari Khand Udyog Mandal Ltd. (supra). As observed herein above in the case of Sahakari Khand Udyog Mandal Ltd. (supra) the Division Bench has never provided/prescribed/stipulated any time limit for the assessee to file return of income pursuant to notice under Section 148 of the Act, more particularly within a period not less than 30 days and failure to file return of income within a period not less than 30 days, AO need not decide the objections on merits. Such interpretation by the AO is absolutely on misinterpretation and/or on misread of the decision of the Division Bench of this Court in the case of Sahakari Khand Udyog Mandal Ltd. (supra). As observed herein above, it is true that on receipt of notice under Section 148 of the Act, the assessee is required to file return of income pursuant to notice under Section 148 of the Act within the time prescr....
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....aside and quashed. Similarly, in the case of General Motors India Pvt. Ltd. vs. DCIT (supra), the Hon'ble High Court has held that disposal of the objections before passing the reassessment order is a mandatory requirement. The Hon'ble Bombay High Court in the case of Allana Cold Storage Ltd. vs. ITO (supra) after considering the judgment of Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO, 259 ITR 19 (SC) has held in para 7 & 8 as under :- "7. We have noted the submissions of both counsel. The law as laid down by the apex court is binding on this court as well as on the authorities functioning under the statute. This being the position, we fail to understand as to why the first respondent did not decide the objections separately which he is duty bound to decide. The whole idea in laying down the law in the above referred judgment of the apex court is to give an opportunity to the assessee to know as to what is the decision on his objections, which decision has also to be arrived at after giving an opportunity to the assessee. In the present case, the assessee has been denied this opportunity. Not only that but in the first three writ petitions what we find i....