TaxTMI 
TaxTMI 
2021 (2) TMI 172
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.... is no compliance to the statutory notices. The AO further noted that during the assessment year under appeal assessee had made transactions in commodity with Multi Commodity Exchange (MCX) amounting to Rs. 107,89,34,900/-. Further information was called from MCX u/s 133(6) of the IT Act which shows that assessee had trading in Market to Market (MTM) and result is showing loss of Rs. 16,747/-. This loss is not declared in the return of income. The AO, therefore, estimated the income of assessee at Rs. 5 lakhs for doing the business activity. The AO also observed that generally it is seen that the broker takes/uses the margin money for trading which is provided by the client for initial trading given to the broker to exposure upto ten times of the margin money. AO further observed that the first transaction of the assessee was to the tune of Rs. 1,14,90,600/-. Hence, the amount of Rs. 11,49,060/- is considered reasonable amount be given by assessee to the broker for transaction in MCX. The AO, accordingly, made the addition of Rs. 11,49,060/-. 4. The assessee challenged the reopening of the assessment as well as both the additions before Ld. CIT(A). The submission of the assessee....
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....herefore, addition of Rs. 5 lakh was deleted. The Ld. CIT(A), however, confirm the addition of Rs. 11,49,060/- because complete details of the broker have not filed. 5. Ld. Counsel for assessee reiterated the submissions made before authorities below and has referred to copy of the reasons recorded for reopening of the assessment, copy of which is filed at page 37 of the appeal paper which is reproduced as under: Name of Assessee SH. VIKAS CHOWDHARY Address of Assessee C-5/14, MODEL TOWN-III, DELHI-110 009 PAN ANHPC3520H Assessment Year 2011-12 Details of the Assessing Officer having jurisdiction over the Assessee Income Tax Officer, Ward 36(4), New Delhi. Reasons for reopening of assessment in the case of Sh. Vikas Chowdhary AY 2011-12 u/s 147 of Income Tax Act, 1961 Sh. Vikas Chowdhary S/o Sh. Surender Singh Chowdhary R/o C-5/14, Model Town, Delhi-110 009. The assessee has not filed his Income Tax Return (ITR) for AY 2011-12. 2. In this case, NMS information was pushed into the ITD system that the assessee during the FY 2010-11 had made transactions amounting to Rs. 07,89,34,990/- with National Multi Commodity Exchange. ....
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....ion 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 9. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, the matter is put up before the Pr. CIT, Delhi-12 for obtaining sanction within the meaning of section 151 of the Income Tax Act, 1961. Sd/- (Income Tax Officer) Ward 36(4), New Delhi." 6. He has submitted that AO has not mentioned any figure of amount in the reasons which has escaped assessment. AO made estimate of turnover and income only which is not based on any tangible material and ultimately the AO received the information u/s 133(6) from MCX that assessee has suffered loss of Rs. 16,747/- and, as such, there were no escapement of income in the case of the assessee. The AO recorded incorrect and non-existing facts in the reasons for reopening of the assessment. AO did not apply his mind to the information. The AO did not bring any material on record as to how much investment is made by assessee for doing MCX business. He has submitted that issue is covered by several decisions of the....
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....is fact is also incorrect and non- existing because the authorities below have accepted in the impugned orders that ultimately assessee has suffered loss of Rs. 16,747/- in MCX transaction in the assessment year under appeal. Thus, assessee was not required to file the return of income u/s 139 of the Act in respect of the loss suffered by assessee in assessment year under appeal. Section 149(1)(b) of the Act provides that "no notice u/s 148 shall be issued for relevant assessment year, -- if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to Rs. 1 lakh or more for that year". The AO in the present case, based his reasons for reopening of the assessment as per NMS information pushed into ITD system and information called u/s 133(6) from MCX. None of these information have provided if assessee has earned income of Rs. 1 lakh or more. Rather it merely provides the amount of the transaction conducted by assessee on MCX and ultimately assessee suffered loss in MCX transaction, therefore, there was no reason for the AO to believe that in....
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....me of Rs. 7,72,461/- from MCX Business. 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material available on record. 3. Briefly the facts of the case are that this is a NMS Case. Notice under section 148 of the I T Act, 1961 was issued to the assessee on 11.02.2015, after duly recording the reasons. The assessee did not file his return of income. The A.O. issued statutory notice for completion of the assessment. The assessee filed information before A.O. which were discussed by the A.O. with the Counsel for Assessee. The A.O. noted that as per information available with him, assessee had received salary on which TDS had been deducted by the employer. The assessee has also made investment of Rs. 10 lakhs in the purchase of Mutual Funds and deposited cash of Rs. 52 lakhs in his ICICI Bank account in assessment year under appeal. Further the assessee had also made contract in commodity exchange exceeding Rs. 10 lakhs. During the course of assessment proceedings the assessee furnished copy of Form No.16, Form No 26AS, statement of his bank accounts maintained with different Banks, copy of the computa....
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....nformation, which itself is also incorrect. He has referred to page-14 of the PB which is the details supplied to the assessee which may be the basis for reopening of the assessment and referred to item Nos.5, 6 and 9 which are information received from CIB Code for deposit of cash of Rs. 2 lakhs with the Bank, contract of Rs. 10 lakhs or more in commodity exchange and payment of Rs. 2 lakhs or more for purchase of units of mutual funds. He has submitted that these are incorrect information and did not relates to the assessee. He has, therefore, submitted that reopening of the assessment is illegal and bad in law and as such reopening of the assessment is liable to be quashed. He has submitted that no notice under section 142(1) or any query under section 133(6) have been issued. No letter have been delivered to the assessee. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below as regards reopening of the assessment. 6. We have considered the rival submissions and perused the material on record. It is well settled Law that validity of the re-assessment proceedings is to be judged with reference to the reasons recorded for reopening of the....
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....has not made any addition of Rs. 2 lakhs in assessment year under appeal which fact is corroborated by the net income computed by A.O. as reproduced above. It is, therefore, clear that neither assessee has made any investment of Rs. 2 lakhs for purchase of mutual fund in assessment year under appeal nor the A.O. has made any such addition in the assessment year. Therefore, such information received by A.O. was totally wrong, incorrect and non-existing and thus the fact mentioned in the reasons recorded for reopening of the assessment as regards investment made in purchase of mutual fund is wrong, non-existing and incorrect. The A.O. has recorded wrong, incorrect and non-existing reasons for reopening of the assessment which is not permissible under Law. As regards the transaction in commodity exchange contract of Rs. 10 lakhs, Learned Counsel for the Assessee referred to para-3.3 of the assessment order in which the A.O. has made addition of Rs. 7,72,461/- on account of profit on the MCX business. The A.O. has also mentioned in the same para that in the show cause notice he has mentioned such income at Rs. 11,80,571/- which is appearing at page-3 of the assessment order, b....
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....in different categories. It, therefore, appears that the information which A.O. has received as per page-14 of the PB was the details to be submitted under Rule 114E of the I.T. Rules. It may not be actual figure received by the A.O. as per NMS information. The actual figure might be different as is noted above. Therefore, such information received by the A.O. is not in accordance with Law and would not provide any information to the A.O. to record reasons for reopening of the assessment as regards escapement of income for making the investment in purchase of mutual funds or transaction of different commodity exchange contract. Thus the entirety of facts clearly show that A.O. recorded wrong, incorrect and non-existing reasons for reopening of the assessment without application of mind. It may also be noted that A.O. himself has mentioned in the reasons that whatever information he has received through NMS needs examination in the light of information in his possession, but, he did not make any examination prior to recording reasons for reopening of the assessment and totally vague, non-existing, wrong and incorrect facts have been mentioned in the reasons recorded for reopening of....
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.... for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs. 20,56,145 instead of Rs. 69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. Rs. 69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs. 20,56,145 for Rs. 69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the ....
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.... ceding illegal Income Tax Act, 1961, Sec.147, 148" 6.8. In the case of Pr. CIT vs., G And G Pharma India Ltd., [2016] 384 ITR 147 (Del.), the Hon'ble Delhi High Court held as under : "Reassessment condition precedent application of mind by assessing officer to materials prior to forming reason to believe income has escaped assessment - No independent application of mind to information received from Directorate of Investigation and no prima facie opinion formed re-assessment order invalid". 6.9. In the case of Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), the Hon'ble Delhi High Court held as under : ["No independent application of mind by the Assessing officer but acting under information from Inv. Wing - Notice U/s. 147 to be quashed". 6.10. The crux of the above Judgments had been that in case incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and A.O. failed to verify the information received due to non application of mind to information, reopening of the assessment would be unjustified and is liable to be quashed. Considering the totality of the facts and circumstances of the cas....