TaxTMI 
TaxTMI 
2021 (4) TMI 453
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....nt order. (ii) The Learned CIT( A) has erred on facts and in law in not appreciating that if the test of looking into surrounding circumstances and applying the test of human probability as enunciated by the Hon'ble Supreme Court in the case of Sumati Dayal Vs CIT as reported in 214 ITR 801 is applied to assessee's factual matrix irresistible conclusion would be that the future and option loss requires to be disallowed. (iii). The Learned CIT( A) has erred on facts and in law, in not appreciating that the Hon'ble ITAT has upheld the action of the A.O holding that no genuine business was carried out by M/s Alliance Intermediaries & Network Pvt. Ltd through whom the assessee has shown the transaction resulting in future & option loss. 2. The Ld. CIT(A)'s order is contrary to law and on facts and deserves to be set aside. 3. The appellant craves leave to amend or alter any ground or add a new ground that may be necessary. 4. The appellant prays that the order of CIT(A)'s on the above grounds to be set aside and that of the AO restored." On the other hand the assessee is before us as a cross-objector raising the following ....
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....had figured as one of the beneficiaries that had invested in shares of different securities amounting to Rs. 12,15,62,252/- through a broker, viz. M/s Alliance Intermediaries & Network Pvt. Ltd. (an entity belonging to Mukesh Choksi group) during the financial year 2007-08. 4. In the backdrop of the aforesaid information the A.O reopened the case of the assessee under Sec. 147 of the Act. Notice under Sec. 148, dated 28.03.2013 was issued and served upon the assessee. In compliance, the assessee e-filed its return of income on 23.04.2013 declaring an income of Rs. 3,69,05,065/- [as was determined pursuant to the order of the CIT(A) w.r.t original assessment order passed under Sec. 143(3), dated 29.10.2010]. After filing the return of income the assessee requested for a copy of the "reasons to believe" on the basis of which its case was reopened under Sec. 147 of the Act. Copy of the 'reasons to believe' were made available to the assessee by the A.O on 05.08.2013. Objecting to the reasons on the basis of which the A.O had assumed jurisdiction under Sec. 147 of the Act the assessee assailed the validity of the reassessment proceedings vide its letter dated 07.10.2013. However,....
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....eries were raised in relation to various persons, viz. Mr. Kailash Kabra, Mr. Arvind Goyal, Jugal, Ajay Kedia, Anandbhai, Mr. Rajesh, Sunchan Securities, Alpha, Pradip Jain, Sumer Gulecha, Deepak Vora, ICSA Ltd, Vipul Shah, Vijay Laxmi Corporation etc. however, there was no whisper insofar the transactions of the assessee company were concerned. On the basis of the aforesaid facts, it was submitted by the assessee that as there was no reason for treating its F&O transactions as bogus transactions thus, the disallowance of the resultant loss of Rs. 11,97,47,626/- was unwarranted. Alternatively, it was submitted by the assessee that if the F&O transactions done through the aforesaid broker, viz. M/s Alliance Intermediaries & Network Pvt. Ltd. were to be treated as non-genuine or stamped as accommodation entries then a uniform approach had to be adopted and the profit of Rs. 2,25,37,840/- that was earned by it from the F&O transactions carried out through the same broker i.e M/s Alliance Intermediates & Network Pvt. Ltd. in the immediately succeeding year were also required to be rejected and reduced from its income for A.Y 2009-10 and to facilitate the same a necessary rectificati....
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.... A.O for framing the reassessment. The ld. Authorized Representative (for short 'A.R') for the assessee at the very outset assailed the validity of the jurisdiction assumed by the A.O under Sec. 147 of the Act. It was submitted by the ld. A.R that original assessment under Sec. 143(3), dated 29.10.2010 was framed in the case of the assessee, wherein the A.O after making a disallowance under Sec.14A r.w Rule 8D of Rs. 63,66,735/- had assessed the income of the assessee company at Rs. 4,14,25,800/-. It was submitted by the ld. A.R that the A.O in the course of the original assessment proceedings after deliberating at length on the assessee's claim of F&O loss and considering the supporting documentary evidence and the explanation of the assessee, had only after being satisfied with the genuineness and veracity of the transactions resulting to the aforesaid loss accepted the same. Adverting to the 'reasons to believe' on the basis of which the case of the assessee was reopened, it was stated by the ld. A.R that the very reason for reopening the case of the assessee i.e the investment made by the assessee in shares of different scripts amounting to Rs. 12,15,67,252/- through the bro....
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....lieve' further supported the fact that he had mechanically acted upon the information received from the DDIT(Inv.), Unit-1(4), Mumbai, and reopened the assessee's case without even consulting its assessment records for the year in question. On the basis of his aforesaid contention, it was the claim of the ld. A.R that reopening of a case on the basis of a borrowed satisfaction was not permissible in law. In support of his aforesaid contentions the ld. A.R relied on the following judicial pronouncements:- i. Principal CIT Vs. Shodiman Investments (P) Ltd. [93 taxmann.com 153 (Bombay)] ii. Harikrishan Sunderlal Virmani V. Dy. CIT [88 taxmann.com 548 (Gujarat)] iii. Principal CIT Vs. Meenakshi Overseas (P) Ltd. [82 taxmann.com 300 (Delhi)] iv. NuPower Renewables (P) Ltd. Vs. ACIT [104 taxmann.com 307 (Bombay)] v. South Yarra Holdings v. ITO [104 taxmann.com 216 (Bombay)] vi. CMI FPE ltd. Vs. Union of India [104 taxmann.com 308 (Bombay)] It was further submitted by the ld. A.R that the A.O while drawing adverse inferences as regards the F&O loss suffered by the assessee and dubbing the same as accommodation entry had lost sight o....
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....der passed under Sec.147 r.w.s 143(3), dated 01.11.2013. Rebutting the claim of the assessee's counsel as regards the invalid assumption of jurisdiction by the A.O for reopening the case of the assessee, it was submitted by the ld. D.R that as observed by the CIT(A) no infirmity did therein emerge. 10. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As the ld. A.R has assailed the validity of the jurisdiction assumed by the A.O for framing the reassessment, therefore, we shall first deal with the said aspect. 11. Original assessment under Sec. 143(3), dated 29.10.2010 was framed in the case of the assessee, wherein after making a disallowance under Sec.14A r.w Rule 8D of Rs. 63,66,735/- the A.O had assessed the income of the assessee company at Rs. 4,14,25,800/-. On appeal against the order passed by the A.O u/s 143(3), dated 29.10.2010, the CIT(A) had vide his order dated 05.01.2012 partly allowed the appeal and the assessed income of the a....
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..... Based on the information, it is found that the assessee has invested in shares of different scripts amounting to Rs. 12,13,67,252/- through the broker concern, M/s Alliance Intermediaries & Network Pvt. Ltd. during the F.Y 2007-08 relevant to A.Y 2008-09. In view of the above, I am satisfied that the assessee has escaped income to the extent of Rs. 12,15,67,252/- within the meaning of section 147 of the I.T Act, 1961. Sd/- (Rajni Rani Roy) Dy. Commissioner of Income Tax Circle 7(2), Mumbai." 12. On a perusal of the aforesaid 'reasons to believe', we find, that though the A.O had referred to the material/information on the basis of which the case of the assessee was sought to be reopened under Sec. 147 of the Act i.e the information received from the DDIT(Inv.), Unit-1(4), Mumbai, but then, there is nothing discernible therefrom on the basis of which it could be gathered that there was any independent formation of a bonafide belief by the A.O that the income of the assessee chargeable to tax had escaped assessment. In the 'reasons to believe' the A.O had observed that as per the information received from the DDIT(Inv.),Unit-1(4), Mumbai, the assess....
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....Mumbai on the basis of which the case of the assessee was sought to be reopened, but at the same time it is witnessed by a blatant non-application of mind and failure on the part of the A.O to arrive at an independent and a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. Although, we are not oblivious of the fact that an A.O at the stage of recording the reasons to believe is not required to conclusively establish that the income of the assessee chargeable to tax had escaped assessment, but then, in the case before us we find that the A.O had not even recorded a satisfaction that as per him a case was made out for issuing a notice under Sec. 148 of the Act. At this stage, we would not hesitate to observe that the A.O in the case before us had acted mechanically on the information supplied by the DDIT(Inv.), Unit 1(4), Mumbai that the assessee was a beneficiary of accommodation entries provided by certain companies, and dispensing with the innate obligation cast upon him of applying his own mind for arriving at a bonafide belief that the income of the assessee chargeable to tax had escaped assessment, had therein mechanically reopened the co....
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....Pvt. Ltd. but had carried out F&O transactions which had resulted to a loss of Rs. 11,97,47,626/- during the year in question. In the backdrop of the aforesaid facts, we are of a strong conviction that a mere endorsement by the A.O of the information that was shared with him by the DDIT(Inv.)-Unit-1(4), Mumbai, that the assessee had invested in shares of different scripts amounting to Rs. 12,15,67,252/- through its broker viz. M/s Alliance Intermediaries & Network Pvt. Ltd., while for the fact that was clearly discernible from the records of the assessee which had earlier been subjected to scrutiny assessment u/s 143(3), dated 29.10.2010 clearly revealed that the assessee had only carried out F&O transactions through the aforesaid broker, viz. M/s Alliance Intermediaries & Network Pvt. Ltd., therein fortifies our conviction that the A.O had mechanically acted upon the information/material received from the external source i.e DDIT(Inv.),Unit- 1(4), Mumbai and had not applied his mind in the backdrop of the assessment records of the assessee, which in our considered view is a sine qua non for formation of a bonafide belief that the income of the assessee chargeable to tax had escape....
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....395 ITR 677 (Delhi). In the aforesaid case, the Hon'ble High Court observed that the A.O had proceeded to send a notice u/s 147/148 of the Act solely on the basis of information received from the DIT(Inv.). It was noticed by the High Court that after writing about the nature of the impugned accommodation entry and without mentioning the nature of transaction which was effected for alleged accommodation entry as well as dispensing with the date of recording of the reasons, the A.O, without any further verification, examination or any other exercise had jumped to the conclusion that the assessee had received accommodation entries. The Hon'ble High Court in the backdrop of the facts involved in the case before them had observed that as the crucial link between the information made available by the DIT(Investigation) to the A.O and the formation of belief was absent thus, the reassessment proceeding initiated against the assessee was rightly quashed by the Tribunal. The High Court while concluding as hereinabove observed that while the report of the Investigation Wing might constitute the material on the basis of which the A.O forms the reasons to believe, but the process of arriving a....
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....e of the assessee had escaped assessment was not discernible therefrom and accordingly the reopening of the assessment u/s 147 was to be held as bad in law. Further, in the case of CIT Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del) it was inter alia observed by the Hon'ble High Court that in the case before them the A.O had received information from the Dy. Director of IT (Inv.), Gurgaon that the assessee had raised a bogus claim of having earned long-term capital gains on account of sale/purchase of shares by obtaining entries. After deliberating on the facts, it was inter alia observed by the Hon'ble High Court that a mere reference to the information received from the Dy. Director of IT (Inv.) cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that the A.O had independently applied his mind to arrive at a belief that income has escaped assessment. Also in the case of CIT Vs. Kamdhenu Steel & Alloys Ltd. & Ors. (2014) 361 ITR 220 (Del), it was observed by the High Court that where the A.O had acted mechanically on the information supplied by the Directorate of IT(Inv.) about the alleged bogus/accommodation entries prov....
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....T Vs. Ramdas Pharmacy (1970) 77 IR 276 (Mad) therein deal with the merits of the case. On merits, it was averred by the ld. A.R that as the assessee in the course of the assessment proceedings had on the basis of supporting documentary evidence proved to the hilt the authenticity of its claim of having suffered F&O loss of Rs. 11,97,47,626/- during the year in question, the A.O, thus, was not justified in rejecting the same and treating the transactions in question as bogus and accommodation entries. As is discernible from the records, we find that it is a matter of fact borne from the record that the assessee on the basis of supporting documentary evidence i.e bills in relation to F&O loss; contract notes; ledger account of the broker in the books of account of the assessee; ledger account of the assessee in the books of account of its broker viz. M/s Alliance Intermediaries & Network Pvt. Ltd; bank statement etc. had duly substantiated the F&O transactions which had resulted to a loss of Rs. 11,97,47,626/- during the year in question. Also, as is discernible from the orders of the lower authorities, the genuineness and veracity of the aforesaid documentary evidences had not been ....
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....ediate & Network Pvt. Ltd. as regards the F&O transactions of the assessee before us i.e M/s Shradha Trade Link Pvt. Ltd. were bogus or accommodation bills. As a matter of fact borne from the records, nothing is discernible from the statement of Shri. Mukesh Choksi (supra) which would justify characterising of the F&O transactions carried out by the assessee through the aforesaid broker, viz. M/s Alliance Intermediaries & Network Pvt. Ltd. as a bogus or accommodation transactions. As can be gathered from the reassessment order, the A.O had merely acted upon the information shared by the DDIT(Inv.), Unit 1(4), Mumbai and on the said standalone basis had held the assessee as a beneficiary of the bogus or accommodation entries from M/s Alliance Intermediaries & Network Pvt. Ltd. 17. We are unable to persuade ourselves to subscribe to the view taken by the A.O, wherein adopting a predetermined approach he had discarded the documentary evidences that were furnished by the assessee in support of the authenticity of the F&O transactions, and had without giving any cogent reason held the same as bogus and accommodation transactions. As is discernible from the order of the CIT(A), we fin....
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....ppellant in support of his contention stand unrebutted by the AO. 4.1 The AO in the order has mentioned that M/s. Alliance Intermediaries Ltd. was barred from trading in 2008. In this connection the appellant duly pointed to the statement reproduced of Mr. Choksi in the assessment order that as per statement itself bills were issued as membership was in force. Further, the appellant submitted information available in public domain that M/ s. Alliance Intermediaries is actually debarred from trading w.e.f. 23/04/2009 and not in this year. The appellant has also relied on various case laws in the submission made and during assessment proceeding which was deleted by Hon'ble ITAT/High Court, wherein the AO's made addition on the basis of statement given by Shri Mukesh Choksi. Looking into the entirety of the facts of the case, I am of the opinion that, since the appellant has submitted complete evidences in support of the transactions which are not disputed/ rebutted by the AO and the addition has been made only on the basis of one general statement against specific proved transactions as per relevant documents and books of account. Therefore, the addition made by the AO canno....
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....pport of its F&O transactions which had not been disputed/rebutted by the A.O thus, the addition made on the basis of the general statement of Shri Mukesh Choksi (supra) as against the specific proved transactions cannot be sustained and had rightly been vacated by the CIT(A). Our aforesaid view that an admission of the aforementioned Shri. Mukesh Choksi, key person of Mahasagar Securities Pvt. Ltd. in his statement recorded under Sec. 132(4) of the Act that his group was engaged in providing accommodation entries would not on a standalone basis suffice for concluding that every transaction carried out through the group entities of the aforesaid person were to be held as ingenuine transaction is supported by the order of the Hon'ble High Court of Gujarat in the case of PCIT-3 Vs. Vineet Sureshchandra Agarwal [Tax Appeal No. 645 of 2017, dated 04.09.2017]. In its aforesaid order, the Hon'ble High Court had observed that as the assessee had on the basis of supporting documentary evidence substantiated the genuineness of the transactions in shares carried out through the aforesaid group entities of Shri. Mukesh Choksi (supra) thus no infirmity did arise from the order of the Tribunal.....
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.... before the CIT(A), it was submitted by the ld. A.R that information gathered from various public domain records and sites namely BSE, NSE and SEBI revealed viz. (i). that as per BSE notice no. 20090423-20, dated 23.04.2009 (which referred to SEBI order dated 23.04.2009), M/s Alliance Intermediaries and Network Pvt. Ltd. was one of the entity that was debarred from trading w.e.f 23.04.2009; (ii). that as per BSE notice No. 20090424-2, dated 24.04.2009 (being a corrigendum to notice no. 20090423-20, dated 23.04.2009 M/s Alliance Intermediaries & Network Pvt. Ltd. was debarred from trading w.e.f 23.04.2009); and (iii). NSE Circular No. NSE/Inv/2009/341, dated 27.08.2009 in the matter of Pyramid Saimira Theatre Ltd. which referred to SEBI order no. WTM/KMA/60/04/2009, dated 23.4.2009, M/s Alliance Intermediaries and Network Pvt. Ltd. was debarred from trading w.e.f 23.04.2009. On the basis of the aforesaid facts, we find substantial force in the claim of the ld. A.R that as the broker in question, viz. M/s Alliance Intermediaries & Network Pvt. Ltd. was debarred from trading only w.e.f 23.04.2009 therefore, no adverse inferences as regards its transactions carried out during the year ....