TaxTMI 
TaxTMI 
TaxTMI 
2024 (10) TMI 1718
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....ng the reassessment order under section 143 (3) read with section 147 of The Income Tax Act. ii. The reassessment under section 147 is ab initio void and bad in law as the same was initiated at the satisfaction/instance of the other authority is without any independent evaluation by the learned AO. iii. The learned AO erred in completing the assessment without furnishing copies of the statement or information relied upon by him at the time of issuance of notice under section 148. This was requested for several occasions during the entire reassessment proceedings. No certified copies of the statement were furnished in completion of the reassessment and no opportunity was afforded for cross examination/verification of records and third parties. 2. The learned AO erred in making the impugned addition of Rs. 40,159,405/- purely and solely on the basis of suspicion, surmises, conjectures and preponderance of the probability is submitted disregarding the submission based on concrete evidences. 3. The learned AO having accepted the purchase of the said shares order in making the addition of Rs. 393,88,583/- on sale of those shares on recognised stock ex....
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....s as also the amount of premium paid by them and further, in spite of the fact that the provisions to that effect that no deduction in respect of any expenditure or allowance shall be allowed in computing income referred to in section 68 came into effect from 1/4/2013 only and hence not applicable to the year under appeal. 11. The learned CIT - A erred in adjudicating the issue involved in this appeal on the basis of some of the submissions erroneously attributed to have been made by the appellant which are in fact not made by the appellant. Thus, some Sr relating to some other case, copied and pasted in the appellate order without application of mind. 12. The learned CIT(A) order in sustaining the addition of Rs. 787,772/- being alleged commission paid to the entry provider without understanding the facts correctly. 3. Though on appreciation of the grounds of appeal, it is apparent that these are argumentative in nature and are elaborate which are against the provisions of The Income Tax Appellate Tribunal Rules 1963, however, the grievance of the assessee is with respect to the (i) reopening of the assessment, (ii) addition under section 68 and (iii) denial o....
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.... no means and they do not carry on actual business. iii. summons under section 131 of the income tax act were issued to several exit providers and their statements were recorded. iv. Securities And Exchange Board Of India has also passed the penalty order dated 27 April 2018 for irregularity in the trading in the same script in violation of the provisions of the SEBI Act, 1992. 8. Based on the above finding of SEBI and Investigation wing the ld AO held that M/S Banas Finance Limited is already proved to be a penny stock in nature and SEBI has done substantial amount of investigation of these Persons. The price rise and fall patterns and the statement recorded of the syndicate members reinforces this premises. 9. Based on the above information he also noted that assessee was allotted 1,00,000 shares at the rate of Rs. 20 on 30/12/2010 and sold the same at a sale consideration of Rs. 39,388,583/- in financial year 2011-12 earning the long-term capital gain of Rs. 37,388,583/-. Therefore, a final show cause notice was given to the assessee by issuance of the show cause notice dated 7/12/2019. Assessee submitted a reply on 12/12/2019 submitting several details w....
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....tted that same applies only where no return of income has been furnished by the assessee but despite recording the fact in paragraph 1 of the reasons of the reopening of the assessment that assessee has already filed return of income, the above mentioned of the section is incorrect. v. Ld. AO stated that assessee has traded in the above script of Banas Finance Limited and earned long-term capital gain of Rs 272,18,541/- . vi. On sanction under section 151 of the act and relied on the decision of honourable Delhi High Court in case of the restaurant ACIT tea Ltd versus DCIT (2017) 397 ITR 665 (Delhi) and also of the honourable Bombay High Court in case of punk it jokes versus ITO (2019) 411 ITR 207. vii. The learned assessing officer has not carried out any enquiry before initiating reassessment proceedings. He submits that the reopening has been made on the completely borrowed satisfaction which is not permitted under the law. For this proposition he referred to several judicial precedents. viii. approval granted by the principal Commissioner of income tax - 19, Mumbai on 22/3/2019 was only mentioning 'yes I am satisfied' is not proper satisfacti....
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.... authorities on reopening of the assessment as well as on the issue of the addition on its own merits. It was submitted that the i. script in which the assessee has earned long-term capital gain is found to be a penny stock after the detailed investigation made by the SEBI and the DIT investigation wing Kolkata and based on this it was found that the assessee has indulged in obtaining bogus long-term capital gain. ii. statement of Mr Ramesh H Shah recorded by the investigation Wing where in the whereabouts of the acquisition could not be answered. iii. investigation wing has also made an enquiry with the Bombay stock exchange and National stock exchange. iv. Exit providers are examined and their statement recorded, they were found to be persons of no means. v. Based on this prima facie opinion was to be formed by the ld. AO and no conclusive findings are required. vi. On the merits the addition is correct as claim of long-term capital gain is false. 17. Therefore, Ld. DR submitted that there is no infirmity in the reopening of the assessment as well as confirming the addition on the merits of the case. 18. We have carefull....
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....ch could later be sold by her for booking accommodation entry of bogus LTCG/STCG in the garb of sale proceeds on sale of shares. Further, a statement recorded under section 131 of the IT act in about case along with the detail's investigation report of Banas Finance Limited has been sent for your kind information and necessary action as per IT Act.' 20. Based on the above information, the learned assessing officer recorded reasons for reopening of the assessment under section 147 read with section 148 of the act on 19/3/2019 as under:- Reasons for of reopening of the assessment under section 147 read with section 148. 1. The assessee has filed the return of income for assessment year 2012-13 on 29/07/2012 declaring total income at Rs. Nil. The return was processed under section 143 (1) of the act at income of Rs. Nil. 2. Information is received from the DDIT (INV.), unit 8 (2), Mumbai vide letter number DDIT (INV) U - 8 (2)/REPORTS/SRS/2018 - 19 dated 18/3/2019 that M/S Banas finance limited is a penny stock and the price movement of the scrip on stock exchange has been manipulated. The above-mentioned assessee has traded in the script during financ....
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....of the act was made and the return of income was only processed under section 143 (1) of the act. In view of the above, provisions of clause (b) of explanation 2 to section 147 are applicable to the facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 7. In this case more than four years seven lapsed from the end of assessment year under consideration. Hence necessary sanction is from the Pr. CIT - 19, Mumbai to issue notice under section 148 of the IT act 1961 is hereby sought as per the provisions of section 151 of the act. Put up for kind perusal and sanction please.' 21. Based on the above reasons recorded approval was granted by the principal Commissioner of income tax - 19, Mumbai on 22/3/2019 stating that 'yes I am satisfied.' 22. Therefore, it is apparent that the notice under section 148 of the issued by the learned assessing officer based on the information dated 18th/3/2019 by recording reasons in 19/3/2019 wherein the complete reproduction of the letter dated 18th/3/2019 was made. There is no enquiry made by the learned assessing officer independently on his own to ver....
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....t material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even do not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from the DDIT (Inv.) This is clearly in breach of the settled position in law that re- opening notice has to be issued by the Assessing Office on his own satisfaction and not on borrowed satisfaction. 25. Based on the above judicial precedents as well as on the facts of the case we are unable to find better example of a borrowed satisfaction by the learned assessing officer reopening of the ....
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....er or Commissioner or Principal Commissioner or Commissioner is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of such notice. In the present case, since reopening was beyond the period of four years, it was for the PCIT to record satisfaction for reopening the assessment. In the case of SBC Minerals Pvt. Ltd. vs. Assistant Commissioner of Income Tax Circle 22(2), Delhi, WP (C) 7885/2023, we had clearly held that prescribed authority referred to in Section 151 must be "satisfied" on the reasons recorded by the Assessing Officer that it is a fit case for the issuance of such notice and therefore the satisfaction of the prescribed authority is a sine qua non for a valid approval. We had also held that the competent authority must apply its mind independently on the basis of material placed before it before grant of the sanction. 11. While dealing with the scope and requirement under Section 151 of the Act for initiating proceedings under Section 147 read with 148 of the Act, this Court in the case of Yum! Restaurants Asia Pt. Ltd v. Deputy Director of Income Tax (2017) 397 ITR 665, held as under: - "11. The purpose of ....
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....istic and formal rather than meaningful, which should be the rationale for the safeguard of an approval by a high ranking official. Reasons are the link between material placed on record and the conclusion reached by the authority in respect of an issue, since they help in discerning the manner in which the conclusion is reached by the concerned authority. 15. This Court in the case of The Principal Commissioner of Income Tax-7 vs. Pioneer Town Planners Pvt. Ltd. (2024) SCC OnLine Del 1685, while dealing with an identical challenge of approval, having been accorded mechanically, had held as under:- "13. The primary grievance raised in the instant appeal relates to the manner of recording the approval granted by the prescribed authority under Section 151 of the Act for reopening of assessment proceedings as per Section 148 of the Act. xxxx xxxx xxxx 17. Thus, the incidental question which emanates at this juncture is whether simply penning down "Yes" would suffice requisite satisfaction as per Section 151 of the Act. Reference can be drawn from the decision of this Court in N. C. Cables Ltd., wherein, the usage of the expression "approved" w....
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....ns. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the apex court in Union of India v. M. L. Capoor, AIR 1974 SC 87, 97 wherein it was observed as under: "27.... We find considerable force in the submission made on behalf of the respondents that the 'rubber stamp' reason given mechanically for the supersession of each officer does not amount to 'reasons for the proposed supersession'. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. 28.... If that had been done, facts on service records of officers considered by the Selection Committee would have been correlated to the conclusions reached. Reasons are the links between the materials on which certain conclusions are based and the actual conclusions. They disclose how the mind is applied to the subjectmatter for a decision whether it is purely administrative or quasi-judicial. They should reveal....
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....mechanical manner as it acts as a linkage between the facts considered and conclusion reached. In the instant case, merely appending the phrase "Yes" does not appropriately align with the mandate of Section 151 of the Act as it fails to set out any degree of satisfaction, much less an unassailable satisfaction, for the said purpose. 22. So far as the decision relied upon the Revenue in the case of Meenakshi Overseas Pvt. Ltd. is concerned, the same was a case where the satisfaction was specifically appended in the proforma in "Yes, I am satisfied". Moreover, paragraph 16 ofterms of the phrase the said decision distinguishes the approval granted using the expression "Yes" by citing Central India Electric Supply, which has already been discussed above. The decision in the case of Experion Developers P. Ltd. would also not come to the rescue of the Revenue as the same does not deal with the expression used in the instant appeal at the time of granting of approval. 23. Therefore, it is seen that the PCIT has failed to satisfactorily record its concurrence. By no prudent stretch of imagination, the expression "Yes" could be considered to be a valid approval. In....
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....se also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material. 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration." 19. The SLP challenging the decision rendered by the Madhya Pradesh High Court was dismissed by the Supreme Court [(2015) 64 Taxman.com 313 (SC)]. 20. As explained in the above cases, mere repeating of the words of the statute, mere rubber stamping of the letter seeking sanction or using similar words like "Yes, I am satisfied" will not satisfy the requirement of law. Hence, we are of the firm view that PCIT has failed to satisfactorily record his concurrence. The mere use of expression "Yes, I am satisfi....