TaxTMI 
TaxTMI 
2023 (11) TMI 537
X X X X Extracts X X X X
X X X X Extracts X X X X
....me of the assessee at Rs. 168,572,010/- against the return of income filed on 29/9/2014 at a total income of Rs. 68 lakhs. 03. The assessee has raised several grounds of appeal as under. "A. On the facts and in the circumstances of the case and in law, the CTT(DRP-1), Mumbai, erred in holding Form 35-A dated 28.04.2022 as filed before the Dispute Resolution Panel (the Panel') to be ineligible for any directions to be issued, by it 1. Rule 4 of the Income tax (Dispute Resolution Panel) Rules 2009 merely require Form 35-A to be filed either "in person" or "through his agent". It does not stipulate as to under whose signature the said Form 35-A is to be filed. 2. Form 35-A has duly been filed "in person" or physically on 28.04.2022 before the Secretariat, as required under sub-rules (1) & (2) of Rule 4. 3. The second proviso to clause (a) to Rule 4(3) specifically provides discretion to the Panel to accept or reject objections as filed, BEFORE notice as postulated in Rule 5 is issued, given that Rule 5 permits issuance of notice to an ELIGIBLE Assessee, specifying date and place of hearing of Objections. 4. Notice u/s.142(1) was issu....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... link for online hearing was sent, as well as on 01.11.2022 when the Objections were heard in detail on every single ground, the Panel consistently proceeded on the basis the form 35A as filed had been accepted and was fit for being adjudicated upon. C. Without prejudice to contentions in Grounds A & B above, Form 35-A in the subject case is duly protected under section 292B of the Act for its regularity and validity which D. The Panel has arbitrarily ignored. On the facts and in the circumstances of the case and in law, the impugned order dated 23.01.2023 as passed u/s.144 read with section 147 of the Act, is bad in law and unsustainable, since none of the objections as raised in the 35A have been considered or adjudicated: 1. The impugned proceedings are time-barred, having been initiated on the basis of a notice u/s.148 of the Act dated 30.06.2021. A perusal of the approval memo u/s. 151 as provided to the Assessee demonstrates that Reasons Recorded have been submitted for approval by Assessing Officer from ADIT, International Tax Range 1(3), Mumbai, as well as from CIT(IT)-1, Mumbai, only on 20.04.2021, and also that approval by the said officers was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gned assessment order, is rebuttal of the charge of Odyssey being a penny stock, given that the stock price from 2011 till 2014 has ranged from Rs. 20 to almost Rs. 300; e. The comparison of the Odyssey stock price is attempted with a public sector company engaged in hydro-electric power sector, which has no correlation whatsoever; f. All conclusions formed on the basis of the stock price of Odyssey are merely speculation, and in the nature of generic ratio analysis, not based on any evidence. Neither the Investigation Wing nor the AO are experts in stock market operations and valuations, and their opinion as to the movement of a quoted scrip transacted exclusively through stock market is of no evidentiary value; g. Even the conclusions and analysis as obtaining in the impugned order, as never confronted to the Assessee, is inane and amateurish, with findings of the tenor of the following, amongst other instances: i. Page 22-There is an attempt to show that Odyssey is a bogus company for the reasoning that employee expenses have increased in two years despite operating revenue reducing; ii. Page 45 to 83-Trading pattern of two investors ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....having purchased 12,00,840 shares of Odyssey during FY 2013-14 and claimed STCL, as noted by the AO at Pages 2, 5, 84, 87 & 94 of the impugned order, while he has dutifully copy-pasted but otherwise ignored: a. Page 91-Averment as to demat account being filed before him, b. Page 91-Specific submission as to NIL purchase during FY 2013-14, c. Page 92-Transaction statement upload on 14.03.2022, and d. Page 92 Reiteration that no shares of Odyssey have been purchased by the Assessee in FY 2013-14, and therefore, there could have been no STCL. 11. The AO has erred in disallowing claim of STCL, when no STCL. was in fact incurred or claimed by the Assessee. 12. The AO has erred in holding at Page 94 of the impugned order that traders or investors in the stock market such as the Assessee are required to justify their business decisions to the income tax authorities. 13. The AO has erred in making adverse inferences in respect of the Assessee's alleged non-compliance to the requirement to file return in response to the impugned notice u/s. 148, while at the relevant time, it was the AO's portal that was dis-functional. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d from inside Portal under CRU/VRU risk cases that assessee is one of the beneficiaries of bogus long-term capital gain/short-term capital loss pertaining to financial year 2013 - 14 in script name on the Odysseys Corporation Ltd, (listed at Bombay stock exchange vide script number 531996 and falls under penny stock category in equity/ cash market segment wherein the assessee has allegedly bought 12,00,844 shares at Rs. 157,060,202 and sold the same quantity of shares at Rs. 126,182,597 resulting into a loss of Rs. 30,877,605. Thereafter, after obtaining the necessary approvals under section 151(1) of the Act, case of the assessee was reopened on 31/3/2021 by recording the reasons and issuing the notice on the same date. 07. In response to the above notice the assessee did not file any return of income. Assessee submitted its reply on 27 September 2021 stating that that assessee is making an effort to file the return of income in response to notice under section 148 of the act through e-filing portal but it is unable to file the return of income after the launch of new efiling income tax portal. Therefore assessee requested to not to take any adverse view for non-filing of incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mission on fictitious trade incurred by the assessee to be taxed under section 69C of the act as unexplained expenditure. This notice was replied by the assessee on 24/3/2022 denying all the allegations. The learned AO rejected all the arguments of the assessee and held that assessee has failed to discharged its onus, there is an ignorance of the assessee about the shares and penny stock companies, financial analysis of the penny stock companies do not support the trading by the assessee, there is an adverse order of the securities and Exchange board of India, there is a cash trial available in the accounts of the entry providers and therefore these are arranged transactions and are bogus. The learned AO thereafter held that the claim of total short-term capital loss of the assessee amounting to Rs. 30,877,605 is not allowable to be carried forward to subsequent year and the amount of Rs. 157,060,202/- paid towards the alleged bogus purchase of share is chargeable to tax under section 69 of The Income Tax Act. Further sum of Rs. 4,711,806 is an alleged commission paid at the rate of 3% on obtaining the total purchase transaction of the above company chargeable to tax under section ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erms of section 140(c) of The Income Tax Act. As the same person has not verified the form number 35A of the act and therefore the learned DRP did not deal with the objections of the assessee on merit and rejected the same. Therefore the draft assessment order became final. 013. The learned authorized representative submitted that i Objections were filed by the assessee on 27 April 2022 verified by Mr. S Krishnan, Advocate by speed post which reached the office of the learned DRP. ii In response to a notice under section 142 (1) of the Act dated 26/8/2022, assessee intimated to the ld AO that the assessee has filed objection before the learned DRP by filing form number 35A. Copy of the acknowledgement dated 28/4/2022 was also submitted. iii On 13/10/2022 the learned income tax officer headquarter to DRP - 1, Western Zone , Mumbai issued a letter by way of a notice under section 144C (11) of The Income Tax Act to the assessee stating that the objection filed with the DRP on 28/4/2022 by the assessee is fixed for hearing on 21/10/2022. Assessee was directed to furnish the written submission. The assessee was also asked to submit soft copies of the status....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the objections filed by the assessee are not maintainable. It further held that the lapse of the assessee is not a minor procedural mistake and the authorized representative cannot be considered as an agent of the assessee. The authorized representative has limited liability to the work authorised to him and therefore the authorized representative Shri S Krishnan, learned advocate who signed form number 35A, cannot be treated as an agent of the assessee. Therefore the learned dispute resolution panel held that no directions are required to be given in respect of the objection filed by the assessee as they are not maintainable in the eyes of law. viii The learned authorized representative stated that (a) The draft order was sent to the assessee on 31/3/2022 and assessee has filed objection within 30 days on 28/4/2022. Merely because the objection in form number 35A has been signed by the advocate of the assessee, the learned dispute resolution panel could not have dismissed the objections filed on this ground only. (b) He extensively referred to rule 4 of The Dispute Resolution Panel Rules stated that such rule does not postulate that it should be signed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ative submitted that the facts are identical and therefore the objections dismissed by the learned dispute resolution panel were not correct. In that case the coordinate bench directed the learned dispute resolution panel to consider the objections afresh and give necessary direction to the AO as per the provisions of the act and the rules thereon. The appeal was restored to the file of the DRP for consideration of the objections filed with it afresh. He extensively referred paragraph number 3 - 14 of that decision. 015. The learned departmental representative submitted that i Only assessee can verify Form number 35A before DRP. He referred to definition of assessee u/s 2(7) and of Person u/s 2(31) of the Act. ii In the present case Mr. S Krishnan being an authorized representative of the appellant has verified the objections in form number 35A. iii He submitted that the form of verification categorically says that it is required to be filed by the assessee, Mr. Krishnan is merely is an authorized representative of the appellant and not an assessee therefore, even otherwise the objections filed before the learned dispute resolution panel are not mainta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ons and perused the order of the learned assessing officer which is passed pursuant to the direction of the learned dispute resolution panel. Short question before us is whether the learned dispute resolution panel is correct in dismissing the objection filed in form number 35A verified by the authorized representative holding that as the directions are not verified by the assessee or its agent, the same is required to be dismissed as not maintainable without giving any direction on the merit. Admittedly in this case form number 35A was filed against the draft assessment order passed by the learned assessing officer on 31/3/2022, verified by one Mr. Krishnan, advocate, authorized representative of assessee. The letter of authority issued to Mr. S Krishnan authorizing him to file the objection before LD DRP is not produced before us. 017. Form number 35A is a form prescribed under Income Tax (Dispute Resolution Panel) Rules, 2009 (The DRP rules). This form prescribed verification as under:- I_______________ the assessee, do hereby declare that what is stated above is true to the best of my information and belief. 018. Thus from the above verification it is clear that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gible assessee'. Subsequently the hearing of objections also took place. This is in terms of rule 5 - 7 of the DRP rules. Subsequently according to rule 9, the learned dispute resolution panel further called for the written submissions of the assessee which were also filed. The personal hearing was also granted to the assessee. Therefore at every stage assessee was given an impression that its objection is being considered on merit. We note that the objections were filed by the assessee on 29/4/2022. The learned dispute resolution panel passed the direction on 29/12/2022. In response to the hearing before the learned dispute resolution panel, same advocate who verified objections, appeared and represented, case was discussed with him. But the LD DRP did not indicate at anytime even once that the objections are not maintainable as not verified in accordance with the DRP Rules. Perhaps had this been intimated to the assessee upfront, assessee could have taken a remedial action. But such an opportunity was never granted to the assessee. In the first letter dated 13/10/2022 issued by the learned dispute resolution panel fixing the date of hearing on 21/10/2022 has clearly referred to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erused the observations made by the bench in paragraph number 9, 12 and 13 however that are not the ratio decidendi of the judgment. Further, in that case, when the verification was not done by assessee, the learned dispute resolution panel gave an opportunity to the assessee to explain that why the objections filed by it should not be dismissed and thereafter considering the explanation of the assessee the learned dispute resolution panel in that case held that the form number 35A not been correctly verified. That was not the case where the assessee was not at all confronted with the view of the learned dispute resolution panel that the form is not properly verified and not maintainable. That was also not the case where the hearing took place, assessee was heard on merits and later on objections were held to be invalid, without giving any opportunity to the assessee. The coordinate bench in that decision held that an agent is permitted to file the objection, there cannot be any dispute with that proposition as that is the mandate of rule 4 (1) of the DRP rules. But there is a basic distinction between 'verification' of form number 35A and filing of the objections. We also do not s....