TaxTMI 
TaxTMI 
2022 (7) TMI 547
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing of assessment u/s.148 of the Income Tax Act, 1961 by the Assessing Officer. 2. That, the learned CIT(A) has wrongly confirmed the disallowance of loss of Rs.23,63,465/- on share trading. 3. That, the learned CIT(A) has wrongly confirmed the charging of the interest u/s.23A, 234B, 234C and 234D of the I.T. Act, 1961. 4. That, the findings of the learned Assessing Officer and CIT(A) are not justified and are bad-in-law. The appellant craves to add, alte, amend or delete any of the above grounds of appeal. 3. At the outset, we note that the learned AR at the time of hearing has not advanced any argument on the ground raised by the assessee challenging the validity of the reopening under the provisions of section 147 of the Act. Accordingly, in the absence of any argument by the learned counsel for the assessee, we dismiss the same. 4. The issue raised in ground Nos. 3 and 4 by the assessee is either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 5. The 1st issue raised by the assessee is that the learned CIT-A erred in confirming the disallowance of the loss claimed against the share trading activity which was set of against the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccording to the assessee the principles laid down by the Hon'ble Supreme Court in the case of M/s Sun Engineering Works Private Ltd reported in 198 ITR 297 are not applicable in the given set of facts. In that case the Hon'ble Supreme Court did not allow the set off of the claim pertaining to the original return of income which was claimed during the income escaping assessment. In that case, the claim pertaining to the original return of income was made in the income escaping proceedings. But it is not so in his case. 7. However, the AO was not satisfied with the contention of the assessee on the reasoning that the reassessment proceeding were initiated with respect to shipping agency business and the same was also accepted in the course of survey operation. Now, the assessee is claiming the set off of the loss of the share trading activity which is unconnected with the shipping trading business. Thus, the AO disallowed the claim of the assessee. 7.1 Besides the above, the AO noted that the loss from the share trading activity was computed under the provisions of section 44AF of the Act. Admittedly, under the provisions of section 44AF of the Act, income is calculated of an asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....admittedly undisclosed income and the unaccounted payments to Religare from the bank account. During investigations by the ADIT the assessee did not ciaim any losses or profits from the share trading. I find merit in very cogent findings of the AO that: from the sequence of events it is noticed that assessee did not claim any share trading loss in its original return. It is beyond understanding of common prudence why losses from share trading were not claimed during filing of original return. Assessee had intention to conceal his income from shipping agency. Then assessee also paid self-assessment tax of Rs 15,20,000/- suo motto based on its estimated profit from shipping business without making any set-off from its share trading losses. It is also pertinent to note that self assessment tax was paid while filing original return. Thus, it leads to a situation where if no reassessment proceedings would have been initiated against assessee then he was content with payment of his self assessment tax. It is only when the assessment were proceedings were underway that the claim of losses from share trading and issue of refund was made. Such claim is devoid of logic and prudence and Is of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment proceedings. In the decision of Hon'ble Supreme Court in CIT vs Sun Engineerings Works (P) Ltd. 198 297 (SC) (Asstyr 1960-62) it was held that the assessee cannot claim re-computation of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment that facts of his case are distinguishable from this case is devoid of any merit. The decision of apex court is squarely applicable here. The Karnataka High Court in the case of CIT Vs. Sangeetha Granites Ltd. (2010) 326 ITR 324(Kar) has held that: 11. In so far as question no.2 is concerned, having perused the judgemtn of Hon'ble supreme court in Sun Engineering works (P) Ltd. case (1992) 198 ITR 297 we have no hesitation to hold that in a reassessment proceedings which relate to the income which has escaped assessment where the assessment where the assesee would be entitle to put forward the claim for deduction of any expenditure in respect of that income (that income which is referable to escaped income) and also about the taxability of items which were sought to be taxed in the assessment proceedings only be agitated and not t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee to re-agitate, in the reassessment proceedings under section 147(a), the finally concluded assessment proceedings and to grant to him relief in respect of items not only earlier rejected, but also unconnected with the escapement of income by assuming as if the original assessment had not been concluded or was 'still open" 12. The ratio of the decision in the case of Sun Engineering Works (P) Ltd. is that once an assessment is validly reopened only the previous underassessment is set aside and not the original assessment proceedings particularly if it has acquired finality. In the reassessment proceedings it is not open to an assessee to seek a review of the concluded item, unconnected with escapement of income. 13. Hence in our opinion when excise duty amounting to Rs. 12,96,995/- which is unconnected with the escapement of income has been concluded finally against the assessee in the reassessment proceedings, it is not open to the assessee to raise a fresh claim de hors the issue in reassessment. It is obvious that the reassessment proceedings are always intended to put the Revenue in the beneficial position so as to charge any income which escaped taxation at an e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Act, the assessee cannot seek a review of concluded item, unconnected with escapement of income for purpose of computation of escaped income. In holding so, we rely on various judgments of the Hon'ble Courts including the case of CIT v. Sun Engineering Works (P.) Ltd [1992] 64 Taxman 442/198 ITR 297 (SC) where the Hon'ble Supreme Court held that in the reassessment proceedings, it was not open to the assessee to seek a review of the concluded item, unconnected with the escapement of income, for the purpose of computation of the escaped income. 14.1 Moving further, we also note that the Finance (No. 2) Act, 2009 inserted an Explanation 3 to Section147 retrospectively with effect from 01/04/1989 which reads as follows: "Explanation 3. - For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedingsunder this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148." 14.2 Under this Explanation in sectio....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., we note that the proceedings were initiated on account of escapement of income from the business of shipping agency carried on by the assessee under the name and style of M/s Prime Corporation. However, the AO during the assessment proceedings has also made the addition on account of unexplained investment of Rs. 5,83,333.00 under the provisions of section 69 of the Act. The reason of making the addition was based on the proceedings before the ADIT (Inv) as mentioned in the assessment order. The relevant extract is reproduced as under: Unexplained investment u/s.69 of the Act. During the earlier proceedings before ADIT(Inv) the assessee has accepted total profits of Rs.1,03,50,000/- for AY 2008-09 till FY 2010-11 (3 years). However, as per dissemination note. "During the period April to December, 2010, client has made total payments of Rs.1.46 crores to Religare and payout taken of Rs.25.54 lakhs. All the transactions were routed through Bank account No.909010033105496 of Axis Bank." 14.5 A perusal of the above proceedings before the ADIT investigation reveals that addition of unexplained investment relates to the share trading activities carried out by the assessee throug....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Income-tax reported in 112 TTJ 0229 wherein it was observed as under: 8. We have heard the rival submissions of the parties and also perused the documents produced by both the parties. Before dealing with the main issue regarding the existence of any PE of the appellant company in India and the question of taxability of the appellant's income in India, we would like to decide the question of admissibility of the grounds of appeal. The learned CIT(A) dismissed the grounds of appeal in its totality, presumably because the issues covered by these grounds were not -raised before the Assessing Officer. In out view, the Department's reliance on the judgment of the Hon'ble Apex Court in the case of Sun Engg. works (P.) Ltd. (supra) is misplaced on the facts and circumstances of the case. This decision pertains essentially to proceedings under section 147 of the Act and entails as to what should toe the role of the Assessing Officer and the assessee in reassessment proceed. This is exactly what the Apex Court said :- "In proceedings under section 147 of the Income-tax Act, 1961 the ITO may bring to charge items of income which had escaped assessment other than or in addit....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of items earlier rejected or claim relief in respect of items not claimed in the original assessment proceedings, unless relatable to escaped income'. Even in cases where the claims of the assessee during the course of reassessment proceedings relating to the escaped income are accepted, still the allowance of such claims has to be limited to the extent to which they reduce the income to that originally assessed. The income, for purposes of 'reassessment' cannot he reduced beyond the income originally assessed.' 14.9 In the light of above decision and after analyzing all the facts as discussed above, we find that the assessee is entitled to claim the deduction of the expenditures in respect of which the escaped income has sought to be assessed. The loss from the share trading activity has direct nexuses with respect to the unexplained investments which has been added by the AO under the provisions of section 69 of the Act. Accordingly we hold that the assessee is entitled for the deduction with respect to the loss claimed by the assessee from the share trading activities amounting to Rs. 23,63,465.00. 14.10 In addition to the above, we also note that there was si....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Rs.23,46,510/- on share trading. 3. That, the learned CIT(A) has wrongly confirmed the charging of the interest u/s.23A, 234B, 234C and 234D of the I.T. Act, 1961. 4. That, the findings of the learned Assessing Officer and CIT(A) are not justified and are bad-in-law. The appellant craves to add, alte, amend or delete any of the above grounds of appeal. 16. At the outset, we note that the learned AR at the time of hearing has not advanced any argument on the ground raised by the assessee challenging the validity of the reopening under the provisions of section 147 of the Act. Accordingly, in the absence of any argument by the learned counsel for the assessee, we dismiss the same. 17. The issue raised in ground No. 3 and 4 by the assessee is either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 18. The solitary issue raised by the assessee in ground no. 2 is that the learned CIT-A erred in confirming the disallowance of the loss claimed against the share trading activity which was set off against the profit from the shipping business. 19. At the outset, we note that the issue raised by the assessee in his ground of appeal is identical to....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2 is that the learned CITA erred in confirming the disallowance of the loss claimed of Rs. 15,70,042.00 as against the share trading activity which was set off against the profit from the shipping business. 24. At the outset, we note that the issue raised by the assessee in his ground of appeal is identical to the issue raised by the assessee in his own case bearing ITA No. 95/Rjt/2018 for the assessment year 2009-10. Therefore, the findings given in ITA No. 95/Rjt/2018 shall also be applicable for the issue raised by the assessee in the above mentioned appeal. The ground of appeal of the assessee in ITA No. 95/Rjt/2018 has been allowed by us vide paragraph Nos. 14 to 14.13 of this order. The learned DR and Ld. AR also agreed that whatever will be the findings in ITA 95/Rjt/2018 for AY 2009-10 shall also be applied to the appeal on hand i.e. ITA No. 97/Rjt/2018 for the assessment year 2011-12. Hence, the ground of appeal filed by the Assessee allowed. 25. The 2nd issue raised by the assessee in ground Nos. 3 and 4 is that the learned CIT-A erred in confirming the addition of Rs. 5,83,333.00 and Rs. 11,66,667.00 under the provisions of section 69 of the Act. 26. The AO during t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....merit. The AO as discussed earlier it is the excess of payment over receipts and the profit of shipping agency which only has been considered unexplained by AO. Considering the totality of facts and circumstances of the case, I am of the considered opinion that the assessee has failed to explain the source of excess of payments over the receipts. The A.O. has been more than reasonable in allowing set off of the profit of undisclosed shipping agency and in making addition of only the excess after giving this set off. Such excess payment of Rs. 17,50,000/- still remains unexplained. However, I do not find merits in action of A.O. in averaging out this excess payment over three years. In my considering opinion, the addition of Rs. 17,50,000/- should be made in the A.Y. 2011-12 along which is the contention of assessee as well in appeals for A.Y 2009-10 & 2010-11. Therefore the additions of Rs. 5,83,333/- each made in A.Y. 2009-10 and 2010-11 have been directed to be deleted by me in relevant appeals. However, in A.Y. 2011-12, the addition of Rs. 5,83,333/- is enhanced to Rs. 17,50,000/-. Accordingly ground of appeal is dimissed with enhancement. 28. Being aggrieved by the order o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....refore the findings of the ld. AO is incorrect. 11. Therefore, the source of investment is duly reflected in the bank accounts and therefore the same is duly explained. 12. It is therefore respectfully submitted to delete the addition, which purely made on the basis of surmises and presumption. GROUND 5:That, the learned CIT(A) has enhanced income without opportunity as provided u/s 251(2) of the I. T. Act. 1. The Ld. AO has made addition of Rs. 5,83,333/- in 3 years (AY being average of investments amounting to Rs. 17,50,000/-. 2. The Ld. CIT(A) vide para no, 3.3.4, page no, 24-25 deleted the addition made by Ld. AO in AY 2009-10 and AY 2010-11, stating that appellant has admitted that must be made in the AY 2011-12. 3. The appellant in its submission for AY 2009-10 and AY 2010-11 has only mentioned the fact that investment is made In the period of April 2010 to December 2010. Therefore, the same addition in AY 2009-10 and AY 2010-11 is not warranted. 4. In this regard it is submitted that the appellant has not made any such claim. The Ld. CIT(A) has made addition without providing the opportunity of being heard. 5. Your kind attention is invited to provisions cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der consideration. Thus, the income for the year under consideration was enhanced by the ld. CIT-A and therefore it was mandatory upon the learned CIT-A to issue the enhancements notice under the provisions of section 251 of the Act. 30.1 As far the addition of Rs. 11,67,777.00 is concerned, we note that this addition has been made in the year under consideration by enhancing the income declared by the assessee which has been elaborated in the preceding paragraph. At this juncture it is necessary to refer the relevant provisions of section 251(2) of the Act which reads as under: (2) The 56[***] 57[Commissioner (Appeals)] shall not enhance an assessment or a penalty or reduce the amount of refund unless the appellant has had a reasonable opportunity of showing cause against such enhancement or reduction. 30.2 From the above reading of the provisions of law, we note that it is mandatory for the learned CIT-A before enhancing the income that he has to provide the opportunity of being heard to the assessee. However, we find that no such opportunity has been extended to the assessee. The ld. DR has also not provided anything contrary to the arguments advanced by the ld. AR for the a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stock (Rs.2,23,88,387 - Rs.2,02,88,387). The applicant has accordingly followed generally accepted account and principle of computing profit and loss in the revised return of income and hence rightly arrived to the loss of Rs.1,12,2361-. The appellant's such argument are not in accordance in accounting principle relating to computation of capital gain/loss' The Assessing Officer has rightfully treated the appellant's transaction of shares giving rise to the capital gain and from the capital gain the difference in stock expenses amounting to Rs.21,00,000/- is not the allowable expenditure as per the income Tax Act. Therefore the appellants argument made supra are not tenable hence I confirm the action of the Assessing Officer to disallow sum of Rs.21,00,000/-- being stock difference claimed as expenses against the capital gain. The ground of appeal on this account is accordingly dismissed. 34. Being aggrieved by the order of the learned CIT-A. The assessee is in appeal before us. The learned AR before us filed a paper book running from pages 1 to 17 and contended that It is stated that the appellant has followed generally accepted accounting principles for computing....