TaxTMI 
TaxTMI 
2025 (6) TMI 1520
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....was processed u/s 143(1) of the Act. Subsequently, on the basis of information received from the Insight portal that the assessee had entered into trading in options derivative through Trade Reversal which was unexplained and which had resulted in non- genuine profit for the year under consideration, the Assessing Officer issued a notice u/s 148A(b) of the Act to the assessee, the details of which are as under: "GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE INCOME TAX OFFICER WARD 2, SATARA To, KAY POWER AND PAPER LIMITED GAT NO 454/457, GAT NO 454/457, At Post BORGAON, TAL SATARA TAL SATARA 415002, Maharashtra, India PAN Assessment Year Dated: DIN & Letter No AABCK1295P 2015-16 24/05/2022 ITBA/COM/F/17/2022-23/ 1043136092(1) Sir / Madam/ M/s. Subject: Subsequent proceedings with reference to section. 148A(b) in consequence to Hon'ble SC Order 04.05.2022 Letter Kindly refer to the Notice dated 30/06/2021 issued in your case u/s 148 of the Income Tax Act, 1961 for the A.Y. 2015-16. 2. In this regard, your attention is invited to....
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..... Kindly note that in case no response is received from your end within the time provided, it shall be presumed that you have nothing to say in the matter and accordingly, further proceedings as envisaged in Sec. 148A(d) and 148 of the Income Tax Act, 1961 shall be initiated, without affording you any further opportunity of being heard. PUTHENPARAMBIL MUKUNDAN BINU WARD 2, SATARA" 3. The assessee in response to the same vide letter dated 28.06.2022 submitted that the derivative transactions mentioned in the notice for trading in equity shares were carried out on recognized stock exchange during the financial year 2014-15. All equity shares purchased and sold during the relevant period were in derivative segment. No delivery of any shares was taken by the company and all the transactions were made through the broker named "Sun Star Securities" having office at 56/33, Site-IV, Sahibabad Industrial Area, Gaziabad, U.P. It was submitted that the company earned net profit of Rs. 3,06,33,42/- in trading in equity shares during the financial year 2014-15. The amount is duly accounted for as "Profit on trading in derivatives" in the "Other income" group in Profit and Loss Account ....
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....: AABCK1295P) is a company. In this case, a notice u/s 148 for AY 2015-16 was issued on 30/06/2021 on the basis of information in possession of the AO after following the provisions of Taxation and Other laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (hereinafter referred to as 'TOLA') and as per the CBDT Notification No.20 dated 31-03-2021 and subsequent Notification No.38 dated 27-04-2021 according to which the time limit for issue of notice u/s 146 was extended to 30-04-2021 and 30-06-2021 respectively. The above notice was issued after obtaining the prior approval of the competent Authority as per the prevailing provisions of section 151 of the IT Act, 1961. The basis for issue of notice u/s 146 was as under- i. Brief of the Assessee : - The assessee is a company and has filed return of income u/s 139(1) of the I.T. Act for AY 2015-16 on 26/09/2015 declaring total income of Rs. NIL/- ii. Brief details of information collected/received by the AO: Information has been received from the Insight Portal, regarding Tax Evasion through trading in options derivative through Trade Reversal. M/s Kay Power and Paper Ltd. has bought scrips and sam....
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.... on 28/06/2022. The assessee has submitted Annual Report for the F.Y 2014-15, Ledger A/c of SunStar Securities from 01/04/2014 to 31/03/2015, Profit on Trading in Derivative and computation of total income. "05. Finding of the AO :- The submission of the assessee is duly considered. From the material on record, it emerges that the assessee, M/s Kay Power and Paper Ltd has traded in options derivative through Trade Reversal. The assessee has bought scrips and sold same scrips immediately within few seconds at higher rate and huge profit has been booked on such transaction. On going through the transaction details, it is seen that, the sale time is earlier than time of buying As per details, it is also seen that, the assessee has purchased and sold scripts at a price which are very less as compared to the market price on that particular day. During the FY 2014-15, M/s Kay Power and Paper Ltd. has made the transactions and booked the profit of Rs. 2,67,66,250/-. During the F.Y 2014-15, M/s Kay Power and Paper Ltd has made such transactions of options derivative reversal trades making non-genuine profit of Rs. 2,67,66,250/-, It is seen from the return filed by the assessee for....
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....he same. During the course of assessment proceedings the Assessing Officer made addition of Rs. 2,67,66,250/- u/s 68 r.w.s. 115BBE of the Act by recording as under: "4. Keeping in view the materials available on record, facts and circumstances of the case, it is inferred that the assessee has failed to furnish the proper explanation with regard to the clandestine operation of getting fictitious gain under project falcon by way of coordinated and premediated trading on stock exchange by engaging in illiquid stock options with M/s. Sunstar Securities during the financial year 2014-15 relevant Assessment Year 2015-16 being the sham transaction of Rs. 2,67,66,250/- Hence, the amount of Rs. 2,67,66.250/- (being the part of profit on trading in derivatives of Rs. 3,06,33,426/-) credited in the P&L account, just to set off the losses, is treated as unexplained credits u/s 68 of the Income Tax Act, 1961." 6. In appeal, the Ld. CIT(A) / NFAC rejecting the various explanations given by the assessee and relying on various decisions, upheld the re-assessment proceedings and sustained the addition made by the Assessing Officer. 7. Aggrieved with such order of the Ld. CIT(A) / NFA....
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.... prescribed in the Departmental instructions for which a specific request was also made to the Ld. Commissioner of Income-tax (Appeals), NFAC. 4. That the Appellant craves to add, amend, alter, modify or delete any or all of the grounds of appeal before or at the time of hearing. 8. The Ld. Counsel for the assessee referring to the provisions of section 149 of the Act as stood at that time submitted that the notice in question is barred by limitation. Referring to the provisions of section 149(b) of the Act, he submitted that the basic condition for issue of notice u/s 148 of the Act is that it can be issued within ten years provided that income chargeable to tax represented, among other things, "in the form of an asset" or an "entry or entries in the books of account" exceeds and is likely to exceed Rs. 50 lakhs. He submitted that if the above provisions are extrapolated to the given case, it reveals that while the alleged income i.e. income from derivates is not represented by any asset, the income in respect of the same has been disclosed by the assessee company as income in the Profit and Loss Account, therefore, the mandatory conditions prescribed in section 149 of....
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....rategy referred to in section 148 of the Act." The issuance of notice is not through automation but through "automated allocation". The term "automated allocation" is defined in clause 2(1)(b) of the said Scheme to mean random allocation of cases to Assessing Officers. Therefore, it is clear that the Assessing Officer are randomly selected to handle a case and it is not merely a case where notice is sought to be issued through automation. (ii) It is further erroneously stated in paragraph 3 of the Office Memorandum that "To this end, as provided in the section 148 of the Act, the Directorate of Systems randomly selects a number of cases based on the criteria of Risk Management Strategy ." The term 'randomly' is further used Gauri Gaekwad 71/87 904.WP-1778-2023.doc at numerous other places in the Office Memorandum with respect to selection of cases for consideration/issuance of notice under Section 148 of the Act. Respondent is clearly incorrect in its understanding of the said Scheme as the reference to random in the said Scheme is reference to selection of Assessing Officer at random and not selection of Section 148 cases as random. If the cases for issuance of no....
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....ion of the Scheme. Clause 2(1)(b) of the Scheme defined 'automated allocation' to mean 'an algorithm for randomised allocation of cases by using suitable technological tools, including artificial intelligence and machine learning, with a view to optimise the use of resources '. The said definition does not provide that the automated allocation of case to the Assessing Officer is based on the risk management criteria. The reference to risk management Gauri Gaekwad 73/87 904.WP-1778-2023.doc criteria in clause 3 of the Scheme is to the effect that the notice under Section 148 of the Act should be in accordance with the risk management strategy formulated by the board which is in accordance with Explanation 1 to Section 148 of the Act. In our view, the Revenue is misinterpreting the Scheme, perhaps to cover its deficiency of not following the Scheme for issuing notice under Section 148 of the Act. (iv) In paragraph 3.1 of the Office Memorandum, it is stated that the case is selected prior to issuance of notice are decided on the basis of an algorithm as per risk management strategy and are, therefore, randomly selected. It is further stated that these cases ar....
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.... JAO. Further, unlike as canvassed by Revenue that only the assessment shall be in faceless manner, the Scheme is very clear that both the issuance of notice and assessment shall be in faceless manner. (vii) In paragraph 5 of the Office Memorandum, a completely unsustainable and illogical submission has been made that Section 151A of the Act takes into account that procedures may be modified under the Act or laid out taking into account the technological feasibility at the time. Reading the said Scheme along with Section 151A of the Act makes it clear that neither the Section or the Scheme speak about the detailed specifics of the procedure to be followed therein. This argument of the Revenue is clearly contrary to the Scheme as the Scheme is very specific to provide, inter alia, that the issuance of notice under Section 148 of the Act shall be through automated location and in a faceless manner. Therefore, the Scheme is mandatory and provides the specification as to how the notice has to be issued. Further the argument of the Revenue that Section 151A of the Act takes into account that the procedure may be modified under the Act is without appreciating that if th....
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....Sun Star Securities, a broker registered in the Bombay Stock Exchange and are duly supported by contract notes and are fully compliant with the regulatory and other applicable regulations / procedures. All the transactions were entered into through its account maintained with the IDBI Bank. Therefore, once the income, which is alleged to have escaped from being assessed to tax, has been duly recorded in the books of account and has been disclosed in the return of income filed u/s 139 of the I.T. Act, 1961, it cannot be said that the income has escaped assessment or even that there are circumstances that income has escaped assessment. He submitted that the Ld. CIT(A) / NFAC and the Assessing Officer have also not controverted / dealt with the issue of how income can be said to have escaped assessment particularly when the same has already been disclosed in the income tax return and offered for tax. 12. So far as the applicability of section 68 r.w.s. 115BBE of the Act is concerned, he submitted that the said amount is not a 'cash credit' since it reflects income in the ordinary course of its business activities although from a new / different source i.e. trading in option....
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....ether initiation of reassessment of proceedings during time-limit extended by TOLA are barred by limitation 4 Sahjeevan Cooperative Housing Society Ltd vs PCIT [(2023) 149 taxmann.com 244 (Bombay)] Reassessment was initiated in respect of income escaping assessment which had not been disclosed in the return of income. 5 Lakshman Prasad Agarwal vs Union of India [(2022) 140 taxmann.com 15(Calcutta)] Deals with the issue of legality of reassessment proceedings in a case where an assessee did not file objections. It nowhere talks about mere suspicion as being sufficient for a belief that income has, allegedly, escaped assessment. 15. So far as the decision of the Hon'ble Supreme Court in the case of McDowell & Co. Ltd. relied on by the Ld. CIT(A) / NFAC is concerned, the Ld. Counsel for the assessee submitted that the Hon'ble Supreme Court in a subsequent judgment in the case of Union of India vs. Azadi Bachao Andolan (2003) 132 Taxmann 373 (SC) has observed as under: (i) If the Court finds that notwithstanding a series of legal steps taken by an Appellant, the intended legal result has not been achieved, the court might be justified in over....
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....e- assessment proceedings for escapement of income of Rs. 2,67,66,750/-. The so called information / letter / intimation received from the Investigation Wing which was relied upon by the Assessing Officer, does not clearly show as to whether (i) it contained any tangible material / information to suggest that income of the assessee company had escaped assessment or (ii) merely contained information / intimation or was in the nature of a direction issued for reopening of assessment. He submitted that although in the assessment order the Assessing Officer has relied upon the findings of SEBI and statement recorded during the course of survey u/s 133(1A) of M/s. Sunstar Securities, however, there is no whisper of the same in the notice issued u/s 148. No such order of SEBI or statement of M/s. Sunstar Securities was ever provided to the assessee along with the notice u/s 148. He submitted that it is entirely in complete violation of the ratio laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. ITO (2003) 259 ITR 19 (SC) wherein it has been held that non-providing to an assessee of complete reasons recorded (including sanction, documents relied up....
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....se of Splice Biotech Pvt. Ltd. (supra) are completely different from the facts of the present case. In that case, the assessee had claimed deduction u/s 10(38) of the Act, whereas the assessee in the instant case has not claimed any such exemption and rather has offered the income to tax. 22. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of both sides. We have also considered the various decisions cited before us by both sides. We find the Assessing Officer in the instant case reopened the assessment on the ground that the assessee has bought scrips and sold the same scrips immediately within few seconds at a higher rate and huge profit has been booked on such transactions which according to the Assessing Officer is non- genuine profit to the extent of Rs. 2,67,66,250/- out of the profit of Rs. 3,06,33,426/-. Since the assessee did not submit any satisfactory explanation during the course of assessment proceedings, the Assessing Officer made addition of the same to the total income of the assessee u/s 68 r.w.s. 115BBE of the Act. We find the Ld. CIT(A) / NFAC upheld t....
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.... lakh rupees or more: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021: ............... ........................................................................................" 24. It is an admitted fact that in the instant case, the notice u/s 148 has been issued after a period of 3 years from the relevant assessment year. A perusal of the provisions of section 149 shows that the basic condition for the limitation for issue of notice u/s 148 of the Act to be extended beyond three years till ten years is that the Assessing Officer must have in his possession "books of account or other documents or evidence", which reveal that income represented in the form of "an asset", "expenditure in respect of a trans....