TaxTMI 
TaxTMI 
TaxTMI 
2022 (7) TMI 1040
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....lal Shah ("MRS" for short) losses claimed by him on account of an alleged proprietary concern of his,by indulging in share trading transaction, was disallowed by the Revenue on the ground that the same was benami of one Shri Sureshbhai Gadecha ("SG" for short),the other assessee before us, and accordingly this business of share trading was assessed in the hands of "SG". In the case of "MRS" initially regular assessment was framed under section 143(3) of the Act denying benefit of losses and order for the Asst.Year 2001-02, 2002-03 and 2003-04 was accordingly passed, which denial of claim of loss was upheld by the Ld. CIT(A) against which the assessee has come up before us in ITA No.736/Ahd/2005, ITA No. 3487 and ITA No. 3488/Ahd/2007 pertaining to Asst.Year 2001-02, 2002-03 and 2003-04 respectively. 3. Further in the case of "MRS", for Asst.Year 2001-02 ,reassessment was made under section 147 of the Act vide order dated 31.12.2007 which was further rectified by the AO vide order passed under section 154 of the Act dated 12.2.2008. Both these orders of the AO were upheld by the CIT(A), against which the assessee has come up in appeal before us in ITANo.2043/Ahd/2010 and ITA No. 33....
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....rn, stating that he was working as salaried employee only and all these transactions were being undertaken by his employer, "SG" in his name. The AO made verification of the share transactions conducted in the said proprietorship concern ,from the parties who had conducted such business, as was reflected in the books of "DA", i.e. K.K. Investments, H.Nyalchand Financial Services Ltd. and Poojan Securities Pvt.Ltd. These parties also stated the transactions being undertaken through "SG" for the business to be carried out with the concern, "DA". Based on all the facts of the case as revealed in the investigation, the AO held that the claim of loss in the name of "DA", which was not actually carried on as the business of the assessee, was not the loss of the assessee and therefore, the loss claimed was assessed at NIL. 9. The assessee carried the matter in appeal before the ld.CIT(A) wherein he challenged the disallowance of loss and claimed on the contrary that the business was actually carried out by him and loss was incurred in the same. He contended that the accounts of the business of the assessee were maintained and duly audited. He further contended before the Ld.CIT(A) that n....
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....s not carrying on any such business of dealing in shares and that he was totally unaware of the conduct of any such business. He had also clearly stated that he had merely signed the return of income or on bank transactions at the behest of his employer Shri Sureshbhai Gadecha from whom he was in respect of salary of less than Rs.5000/- p.m. It can therefore, not be said that from the date of filing of return i.e. 14th August, 2001 and upto the 3rd statement recorded on 8th October,2003 that the appellant was not given adequate opportunity to make submissions in support of his return of income and admitted to be signed by him. After making such categorical denial of conduct of business from the date of being first administered oath before recording of statement on 20th Oct., 2003, the appellant cannot claim that the AO has not given adequate opportunity to make submissions in support of the return of income filed. In fact the letters submitted dtd.18th Feb.2004. 2nd March,2004, 10th March,2004, 13th March,04 And 24th March,04 besides last letter dtd.29th March,04 which have been perused by me from the paper book tiled, clearly show that the appellant has not given any valid reason ....
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.... this is but an attempt to side track the crux of the issue which is that appellant is a man of no means and he does not have knowledge or the capacity to carry on the alleged business of M/s.Dindayal Associates. The appellant's own personal bank account as per letter dtd.5/3/04 was S.B.A/c.No.3196 with Manek Chowk Co.op.Bank, Ghatlodia, Ahmedabad, which had a very few transactions and after 31.3.99, he claimed to have not prepared any personal profit & loss account and balance sheet because there were no transactions in individual capacity which crossed the minimum taxable limit. Further the appellant's claim that he was not crossed the minimum taxable limit. Further, the appellant's claim that he was not given opportunity to cross examine Shri K.K.Kabra, Dhiren H.Vora & Shri Kunal Thakkar is found to be yet another attempt to side track the issue of his categorical denial of having conducted any such business in the name and style of M/s.Dindayal Associates. The AO has made the assessment based on the appellant's own statements and has only taken support from the statements of these three persons. As such there was no necessity for cross examination of these parties by th....
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....to have come to the finding that business of share trading was carried on by the alleged benami "SG" and not the assessee. He further contended that finding that the business was not actually that of the assessee but of the "SG", the Revenue ought to have made protective addition in the hands of the assessee, which was not done. He therefore contended that the finding of the Revenue authorities that no share trading business was being carried on by the assessee in the proprietorship firm, "DA" was not in accordance with facts and circumstances of the case and the denial of claim of loss, therefore of Rs.4,13,11,931/- was also not correct. The ld.counsel for the assessee relied on the following case laws in support of his contentions: i) Manoharlal v. Income-tax Officer, 37 ITD 96 (Jp) ii) Prakash Narain vs.Commissioner of Income-tax And Wealth-tax, 6 Taxman 159 (ALL) iii) CIT Vs. Shakti Industries, 217 taxmann 77 12. Alternatively, the ld.counsel for the assessee pleaded that necessary direction be given for assessing the loss in the hands "SG" whose benami business it was found to be by the Revenue, being run in the name of the proprietorship firm, "DA". 13. On the other h....
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....ried on, also corroborated the statement of the assessee that the business actually belonged to "SG"; all the three parties claimed that it was "SG" with whom they had interacted. This fact nails the case against the assessee completely, and we are in complete agreement with the ld.CIT(A) therefore that business carried on in "DA" of share trading transaction, did not relate to the assessee, as per his own admission, corroborated with the statement of three brokers with whom he had worked, and also set out from the financial status of the assessee as reflected from the meager volume of transactions in his personal bank account. 17. The argument of the ld.counsel for the assessee that his books of accounts were duly audited, and all depositors were duly verified during assessment proceedings, we find that this contention is neither here nor there and in fact does not in any way support the case of the assessee. As we have noted above, the balance sheet of the assessee does not give any picture that the business was being run by the assessee himself, i.e. "MRS". The capital of proprietor is shown as only Rs.15,000/- ,out of total balance sheet value of Rs.6.68 crores. The majority o....
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.... impugned year and against the order of the Ld.CIT(A) in the said year, both the assessee and Revenue are in appeal before us in IT(SS) No.113 & 118/A/2007.No interference therefore is called for on this account. 21. The case laws relied upon by the Ld.Counsel for the assessee are all distinguishable on facts and our decision disallowing losses are based entirely on the facts before us clearly leading to the inescapable finding that the assessee had not carried on any business but in fact it was the benami of "SG" 22. In view of the above, we uphold the order of the ld.CIT(A) that the business of share trading transactions carried on in the proprietorship concern, "DA" was not that of the assessee, but of "SG" and denial of claim of business loss to the tune of Rs.4,13,11,931/- is accordingly upheld. Ground No.1 raised by the assessee is dismissed. The appeal of the assessee is dismissed. 23. Since issue, facts and circumstances of the present case are identical to other cases in ITA No.3487 and 3488/Ahd/2007, our above decision shall apply mutatis mutandis to these appeals as well. Thus, they stand dismissed. 24. Now we take up the assessee's appeals against reassessment proce....
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....profit & loss account. 27. The entire income believed by the AO to have escaped assessment pertained to the share trading business carried on by the assessee in its proprietary concern, "DA". Interestingly, in the order passed under section 143(3) for the impugned year on 30.3.2004 the AO had found the share trading business as not being carried out by the assessee at all, and the entire claim of loss in the same, amounting to Rs.4 crores was denied by the AO in the assessment order. Having so found, we fail to understand how the AO could now attribute escapement of income of the assessee on account of this same share trading business, which as per the AO himself ,does not belong to the assessee at all. As on the date of recording reasons for escapement of income i.e. on 4.10.2006, the assessment order passed, which was reopened under section 148 of the Act ,dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore, this very order passed under section 143(3) of the Act, wherein the assessee was held to have not carried out any share trading transactions, could not possibly have been reopened under section 147 of the Act on a....
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....hese amounts were added to the income of the assessee, as its undisclosed income. Thus, the undisclosed income of the assessee was for the block period, was assessed at Rs.1,05,00,000/- as opposed to NIL returned by the assessee. 30. Before the ld.CIT(A), the assessee had raised legal grounds challenging the validity of the order passed under section 158BD of the Act,as also grounds on the merits of the case.The Ld.CIT(A) dismissed the legal grounds while on merits he allowed the same. Aggrieved by the order of the CIT(A), both the assessee and the Revenue have come up before us. 31. We shall first take up the appeal of assessee in IT(SS)A.No.113/Ahd/2007. 28. The assessee has challenged validity of assessment order passed under section 158BD of the Act raising the following grounds: Initiation of 158BD proceedings and passing the order u/s.158BD r.w.s. 158BC r.w.s. 143(3) of the I.T.Act 1961 and treating the firm M/s.Dindayal Associates as a concern of appellant. 1. The ld.CIT(A) has erred in law and on facts in dismissing the appeal filed by the appellant in respect of initiating the 158BD proceedings and passing the order u/s.158BD r.w.s. 158BC r.w.s. 143(3) of the Act." ....
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....initiated and conducted under section 158BD of the Act; (ii) that the satisfaction of the AO of the assessee was recorded subsequent to the issuance of notice under section 158BD of the Act to the assessee. In this regard, he pointed out that while notice under section 158BD of the Act was issued to the assessee on 24.11.2003, in the satisfaction note placed before us at page no.174, the AO recorded the fact of assessment order for Asst.Year 2001- 02 passed in the case of "MRS" holding that share trading transaction in the proprietory concern, "DA" belonged to the assessee, "SG" which was dated 30.3.2004.That thus, while notice under section 158BD was issued on 24.11.2003 the satisfaction note by the AO of the assessee was recorded subsequent to 30.3.2004; (iii) that the satisfaction note recorded that information during the assessment proceedings under section 158BD in the case of Mukesh Shah revealed business of the assessee being carried on in the name of "MRS". The ld.counsel for the assessee contended that proceedings under section 158BD of the Act could not be conducted on the basis of information procured in the proceedings under section 158BD of the Act on any other ass....
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....ollected from Classic Co-operative Bank, in which Appellant was working as Chairman having full control over all the transactions of the Bank. The copies of the statements recorded were given the Appellant on 05.11.2003 after confronting the statements of all four persons and recording his statement in the Office of the A.O. and once again twice on 28.11.2003 for rebuttal. Hence, there was no requirement to cross examine the persons as statements as well as material likely to be used by the AO against the Appellant was already provided well in advance. On perusal of records, it has been noticed that the Appellant had appeared before AO only on 21.11.2005 and requested for cross examination of witnesses on 24.11.2005. Thereafter, summons were issued by the Assessing Officer. In response to summons, only Shri Dhiren Vora of H.Nyalchand Financial Services Ltd. appeared and he stated during cross examination that all the transactions of IWs Dindayal Associates were made by Shri Suresh Gadhecha and not by Shri Mukesh R Shah as claimed by the Appellant. The Appellant had never co-operated before the A.O. as he appeared only on 21.11.2005 and never owned up the transactions in the name M/....
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....eized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed under section 158BC against such other person and the provisions of this Chapter shall apply accordingly. 38. As is evident from a literal reading of the section , it provides for assessment of undisclosed income for block period as prescribed in cases where search action is undertaken, u/s 158BC of the Act, in certain cases where no search is conducted . The circumstance warranting framing of such assessment is incriminating material relating to them being found in search conducted on other persons. Having said so, we note from the satisfaction note of the AO of the AO of the assessee for initiating proceedings u/s 158BD of the Act in the present case, that he notes information being revealed during assessment proceedings under section 158BD in the case of Mukesh Shah, relating to the assessee to the effect that the alleged proprietary concern of Mukesh Shah of "DA" was actually benami of the assessee. The satisfaction note further talks about bank account and seized material of "DA" and statement recorded of Mukesh R. Shah, Kun....
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....under section 158BC of the Act in the case of "MRS". On the contrary, order u/s 158BD of the Act is passed in the case of "MRS" and as per the AO's satisfaction note, the information was derived in the course of assessment proceedings u/s 158BD of the Act in the case of "MRS". Therefore, clearly there was no search conducted on "MRS" or on his alleged proprietorship concern, "DA". Information against the assessee clearly does not emanate from search proceedings. Ld.DR was unable to controvert any of the above. He was unable to produce any documents before us to controvert the fact that information recorded in the satisfaction note of the AO emanated during assessment proceedings conducted on "MRS". Nor was he able to demonstrate that the present proceedings were initiated on the basis of any incriminating material relating to the assessee found during search action on any third person .This despite more than sufficient opportunity available with the Revenue to do so considering the period of almost 17 years since the appeal was pending before us ,having been filed way back in 2005. 41. In view of the same therefore, the information against the assessee not emanating from search c....
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....ntioned as 'Yourself in Bank Account No.FO-140 was a transfer entry for placing Fixed Deposit with The Classic Cooperative Bank Ltd. in the name of M/s Dindayal Associates. Hence, the Appellant had not withdrawn these two amounts from the Bank Account for himself. The Assessing Officer has not given comments in this regard. Keeping in view of above facts end circumstances of the case, the addition of Rs.1,05,00,000/- is hereby deleted. Therefore, the second ground of appeal is allowed." 47. The ld.DR was unable to controvert the factual finding of the ld.CIT(A) though he heavily relied on the order of the AO at para-4 of the assessment order. It reads as under: "4. Unaccounted income: On verification of bank account No.FO 140 and CD 2252 I the name of Dindayal Associates, it is noticed that on 19.01.01 Rs.5,00,000/- has been withdrawn from the A/c.No.2252 & on 24.01.01 Rs.1,00,00,000/- has been withdrawn for self from the A/c.No.FO 140. Assessee has simply disowned the all the transactions in the name of Dindayal Associates and proprietor of which was shown as Mukesh R. Shah but actually owned, controlled and operated by Shri Suresh U. Gadhecha. Basically these are the ben....