2024 (8) TMI 527

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....inafter referred to as "the Act") initiated on the basis of factually incorrect reasons. (b) Without prejudice, the Ld. NFAC erred law and facts in upholding the validity of assessment order u/s. 143(3) r.w.s. 147 of the Act dated 30.03.2016 without appreciating the fact that the Ld. Assessing Officer had made additions on altogether different ground without making any additions on the actual reasons for which the case was reopened. 2. The Ld. NFAC erred in law and facts in adding a sum of Rs. 21,82,003/-, being 3% of Rs. 7,27,33,427/- as unexplained expenditure paid by the appellant without appreciating the facts of the case and merely on surmises and conjectures. 3. All the above grounds are independent and without prejudice to each other. 4. The Appellant craves leave to add, amend, delete and modify the above grounds of appeal". 3. The relevant facts in brief are that the Appellant is an Indian Company engaged in the business of providing share and stock broking and depository participant services. The Appellant filed return of income for the Assessment Year 2010-11 on 28/09/2010 declaring total income of INR 8,27,20,450/-. The case of the Appellant was selected f....

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....inaccurate particulars of income and concealment of income." 5. Being aggrieved, the Appellant preferred appeal before CIT(A) against the order dated, 30/03/2016, passed under Section 147 read with Section 143(3) of the Act challenging the initiation of reassessment proceedings as well as the addition made on merits. However, the CIT(A) upheld the action of the Assessing Officer of initiating reassessment proceedings under Section 147 of the Act and declined to grant any relief on merits. Thus, confirming the addition of INR 21,82,003/- made by the Assessing Officer on merits vide order, dated 30/03/2016. 6. Being aggrieved, the Appellant has now carried the issue in appeal before the Tribunal. Ground No. 1(a)&(b) are challenge the validity of the reassessment proceedings while Ground No. 2 is directed against the addition of INR 21,82,003/- on merits. 7. We would first take up Ground No. 1 raised by the Appellant which challenges the validity of the reassessment proceedings since the same goes to the root of the matter. 8. During the appellate proceedings before us it was, inter alia, contended on behalf of the Appellant that the reasons recorded were vague and non-existent. ....

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....s and profits. These losses and profits were given to different clients/beneficiaries accordingly to their requirement. The clients had taken fictitious losses to set off against their profits with a view to reduce their tax liability. Some of the clients also took fictitious profits to cover up their undisclosed income or to set off these profits against huge losses. The brokers have earned commission income by indulging/misusing the client code facility, as far as commission charged by the broker on transferring the entries of fictitious loss/profits is concerned, it actually varies between 3% to 6% although the brokers in their statements have admitted receipt of commission upto 2%. only before DDIT. Remedial action has been initiated on the following issues:- i) The clients have used the fictitious losses for the purpose of reducing their taxable income, the claim of losses needs to be disallowed and the payment of commission also needs to be included in their income. ii) As regard entries of profits obtained by clients, the return of income has to be examined to ascertain whether profits have been obtained to adjust the losses in their return of income or to cover up the....

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....rliament, when it enacted the Explanation (3) to section 147 by the Finance (No. 2) Act, 2009 clearly had before it both the lines of precedent on the subject. The precedent dealt with two separate questions. When it effected the amendment by bringing in Explanation 3 to section 147, Parliament stepped in to correct what it regarded as an interpretational error in the view which was taken by certain courts that the Assessing Officer has to restrict the assessment or reassessment proceedings only to the issues in respect of which reasons were recorded for reopening the assessment. The corrective exercise embarked upon by "Parliament in the form of Explanation 3 consequently provides that the Assessing Officer may assess or reassess the income in respect of any issue which comes to his notice subsequently in the course of the proceedings though the reasons for such issue were not included in the notice under section 148(2). The decisions of the Kerala High Court in Travancore Cements Ltd.'s case (supra) and of the Punjab & Haryana High Court in Vipan Khanna's case (supra) would, therefore, no longer hold the field. However, insofar as the second line of authority is concerned....