TaxTMI 
TaxTMI 
2022 (7) TMI 547
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....at, the learned CIT(A) has wrongly confirmed the reopening 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 disallowanc....
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....s should also be eligible to set off against the escaped income i.e. shipping business. Thus, according 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....
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....and income of Rs. 45,50,000/- were declared for F.Y. 2010-11.The notice u/s 148 was issued to bring to tax this 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....
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....e Income or loss of share business was never disclosed before investigation authority. A claim which was not made in original return is not allowable in reassessment 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 i....
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....essee in ITA No. 2553/Mum/2010 has held that "11. We find that in the case of Sun Engineering Works (P) Ltd. Vs. CIT it has been held as follows: "The High Court clearly fell in error by permitting the 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 assesse....
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....e Act has to be limited to the extent they reduce the income to originally assessed and as such income for the purpose of re-assessment cannot be reduced beyond the income originally assessed. Therefore, in reassessment proceedings under section 147 of 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 ....
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....re I have reason to believe that income chargeable to tax of Rs.30,50,000/- for AY 2009-10 has escaped assessment within the meaning of Section 147 and this is a fit case for issue of notice u/s.148 of the Act. 4. A copy of the reasons recorded is also enclosed herewith. 14.4 On perusal of the above reasons, 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.....
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....nsidered and the judgment of the Hon'ble Supreme Court in the case of Sun Engg. Works (P.) Ltd. (supra) only precludes such new claims by the assessee which are unconnected with the assessment of escaped income. 14.8 Similarly, we also make reference to the order of ITAT Kolkata Tribunal in the case of Van Oord Atlanta B.V. v. Assistant Director of 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 essent....
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....d be open to the assessee to put forward claims for deduction of any expenditure in respect of that income or regarding the non-taxability of the items at all, section 147, being for the benefit of the revenue and not the assessee, the assessee cannot be permitted to convert the reassessment proceedings into an appeal or revision in disguise and seek relief in respect 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 nex....
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....wed. Coming to ITA No. 96/RJT/2018, an appeal by the assessee for the assessment year 2010-11. 15. The assessee has raised the following grounds of appeal: 1. That, the learned CIT(A) has wrongly confirmed the reopening 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.23,46,510/- 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 o....
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....earing 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. 22. The issues raised in ground Nos. 6 and 7 by the assessee are either consequential or general in nature. Accordingly, we dismiss the same as not pressed. 23. The 1st issue raised by the assessee in ground No. 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....
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....year as no objection to this proposition was filed by assessee during assessment. During appellate proceedings it has been contended that working of assessing officer is merely a surmise. The assessee has contended that for availability of funds gross receipts of shipping business should be seen and not only the Profit. I do not find any arguments for turnover of assessee explaining bank deposits. His contention that turnover and the profit should be seen as source of deposits is devoid of any 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 o....
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....otal turnover is much higher and therefore the fund available with the appellant is gross receipt at that point of time and the gross receipt from shipping activity is much higher in all these 3 years. 9. The gross receipts from the shipping business is as under: A.Y. Gross Receipts Income Disclosed 2009-10 1,75,12,824 30,50,000 2010-11 1,58,79,814 27,50,000 2011-12 1,52,02,385 45,50,000 Total 4,85,95,023 1,03,50,000 10. Therefore, the gross receipts of 3 years is Rs. 4,85,95,023/-, the said amount is available for the pay-in and pay-out and therefore 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....
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....earlier assessment years 2008-09 and 2009-10 has deleted the addition made by the AO amounting to Rs. 5,83,333/- for each year but confirmed the addition for all the 3 years as discussed above amounting to Rs. 17,50,000.00. Thus the sum of Rs. 11,67,777 out of the total addition of Rs. 17,50,000 pertains to the assessment year 2008-09 which was added to the total income of the assessee including the income of the assessee under consideration. In other words the addition made by the AO for the year under consideration for Rs. 5,83,333.00 pertains to the year under consideration whereas the balance amount of addition was not subject matter of dispute in the assessment order. But the learned CIT-A has added the same in the year under 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 pa....
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.... has claimed an expense of Rs. 21 lakhs which is the difference in the value of the stock of shares and the closing value stock of shares in year under consideration. According to the AO, such difference cannot be allowed as deduction against the business profit of share trading business. Thus the AO disallowed the same and added to the total income of the assessee. 33. Aggrieved assessee preferred an appeal to the learned CIT-A who confirmed the same by observing as under: During the appellate proceeding the appellate reiterated the contention raised before the Assessing Officer and stated that the Assessing Officer wrongly consider the amount of Rs.21,00,000/- as expenses however, same is nothing but difference of opening stock and of closing 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 ....
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....he net profit, the value of opening stock and closing stock is to be taken into consideration and the same cannot be merely the difference of the sales and purchases. As some of the items of opening stocks are sold during the ear and duly included in the sales figures. Further, some of the purchases are lying as closing stock. And therefore to derive the correct opening stock and closing stock items are required to b taken into consideration. Therefore, the appellant has not claimed any expense it is merely the net effect of the opening and closing stock valuation. Therefore, considering the facts and circumstances of the case it is requested to delete the addition. 35. On the other hand the learned DR vehemently supported the order of the authorities below. 36. We have heard the rival contentions of both the parties and perused the materials available on record. As per the accounting practice, the closing stock of the shares as on the last day of the previous year is carried forward to the year under consideration which is shown as opening balance. Against such opening balance, the assessee makes the sale of the shares and the net effect is accounted as inc....