TaxTMI 
TaxTMI 
2026 (1) TMI 1479
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....g and is registered with SEBI, BSE and NSE. The assessee filed its returns of income for the respective assessment years under section 139(1), which were processed under section 143(1) of the Act. Subsequently, for all the years under consideration, the assessments were reopened by issuance of notices dated 31.03.2021, under section 148 of the Act. The reassessment proceedings culminated in orders passed under section 143(3) read with section 147 and section 144B of the Act by the National Faceless Assessment Centre [hereinafter referred to as "Assessing Officer or AO"]. 2.2. The reopening for all the years was based on information received from the Investigation Wing, emanating from a survey conducted under section 133A in the case of M/s Swastik Corporation, a proprietary concern. As per the Assessing Officer, the proprietor of M/s Swastik Corporation, during survey proceedings, had allegedly admitted to issuing accommodation entries / bogus bills of gold without actual delivery of goods. Based on the said information, the Assessing Officer formed a belief that the assessee had made bogus purchases of gold from M/s Swastik Corporation during the relevant previous years. The pu....
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....levy of interest. The CIT(A) upheld the action of the Assessing Officer by holding that: * the reopening was based on tangible material received from the Investigation Wing; * the assessee failed to conclusively prove the genuineness of purchases; * the Assessing Officer was justified in relying on survey findings in the case of M/s Swastik Corporation; * the disallowance under section 37(1) was correctly made. Accordingly, the CIT(A) confirmed the additions and interest for all the years. In Assessment Year 2016-17, the CIT(A) also upheld the taxation of dividend income and the consequential reduction of business loss. 2.6. For the sake of clarity, the details of assessment are tabulated below: Particulars A.Y. 2014-15 A.Y. 2015-16 A.Y. 2016-17 A.Y. 2017-18 Date of filing original return of income u/s 139(1) 27.09.2014 12.09.2015 02.09.2016 11.10.2017 Returned income (Rs.) Rs. 22,72,400/- Rs. 28,33,400/- Rs. 7,34,380/- Rs. 2,70,780/- Date of AO's order 20.03.2022 22.03.2022 27.03.2022 22.03.2022 Nature of main addition Alleged bogus purchase of gold from M/s Swastik Corporation....
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....Swastik Corporation which were used for business promotion / staff welfare. 10. Having regard to the facts of the case, the Appellant submits the AO be directed to delete the disallowance of Rs. 3,25,500/- made on the allegation that the said purchase was a bogus purchase. 11. Both the lower authorities erred in not granting credit for Rs. 4,00,000/- paid by way of advance tax, although appearing in Form 26AS and granted credit for in the intimation under section 143(1). 12. Both the lower authorities erred in not granting credit for Rs. 3,22,006/- paid by way of TDS, although appearing in Form 26AS and granted credit for in the intimation under section 143(1). 13. The AO erred in levying interest under section 234A of Rs. 11,055/- and CIT(A) erred in confirming the same. 14. The AO erred in levying interest under section 234B of Rs. 96,480/- and under section 234D of Rs. 7,238/- and CIT(A) erred in confirming the same. In appeal No. ITA No. 8362/MUM/2025 for A.Y. 2015-16 1. The Appellant submits the Assessing Officer (AO) erred assuming jurisdiction under section 147 of the Act and the learned Commissioner (Appeals) (C....
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....f Rs. 6,423/- and CIT(A) erred in confirming the same. In appeal No. ITA No. 8363/MUM/2025 for A.Y. 2016-17 1. The Appellant submits the Assessing Officer (AO) erred assuming jurisdiction under section 147 of the Act and the learned Commissioner (Appeals) (CIT(A) erred in confirming his action, when the jurisdictional conditions under section 147 were not satisfied. 2. The learned CIT(A) / NFAC erred in confirming the order of AO, which was passed without valid service of notice under section 148. 3. Both the lower authorities failed to consider that the AO could not have had „reason to believe‟, that income chargeable to tax had escaped assessment. 4. Both the lower authorities erred in neither furnishing the statement recorded of the proprietor of "Swastik Corporation" nor in granting cross examination of the said proprietor. 5. The appellant submits that the reopening under section 147 was without jurisdiction, as the AO resorted to section 147 on the basis of borrowed satisfaction. 6. The learned CIT(A) / NFAC erred in ignoring the retraction issued by the sole proprietor of M/s Swastik Corporation, and ....
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.... AO, which was passed without valid service of notice under section 148. 3. Both the lower authorities failed to consider that the AO could not have had „reason to believe‟, that income chargeable to tax had escaped assessment. 4. Both the lower authorities erred in neither furnishing the statement recorded of the proprietor of "Swastik Corporation" nor in granting cross examination of the said proprietor. 5. The appellant submits that the reopening under section 147 was without jurisdiction, as the AO resorted to section 147 on the basis of borrowed satisfaction. 6. The learned CIT(A) / NFAC erred in ignoring the retraction issued by the sole proprietor of M/s Swastik Corporation, and which was relied on by the Tribunal in the proprietor's own case. 7. Having regard to the facts and circumstances of the case, the Appellant submits that the reassessment under section 147 is invalid, and requires to be cancelled. 8. The learned CIT(A) / NFAC erred in ignoring the additional evidence submitted vide letter dated 4th December, 2023 and relied upon in the written submissions before CIT(A) / NFAC. 9. The NFAC / CI....
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....followed by the Tribunal in Mr. Bijal Shah's own cases for Assessment Years 2011-12, 2012-13 and 2013-14 vide order dated 22.06.2021, and again for Assessment Year 2017-18 vide order dated 23.11.2021. It was emphasised that in none of the years has any addition ultimately survived in the hands of the seller, M/s Swastik Corporation, and the transactions have been accepted as genuine. 3.3. The AR submitted that, despite the above factual and legal position, notice under section 148 was issued to the assessee on 31.03.2021, i.e. more than four years after the alleged statement recorded during survey. It was contended that, on the date of reopening, the very foundation of the so-called "reason to believe" no longer existed, as the statement had already been retracted and the Tribunal had accepted such retraction in the case of the seller. Therefore, there was no tangible material available with the Assessing Officer to assume jurisdiction under section 147, and the reopening was based entirely on borrowed satisfaction. 3.4. On merits, the AR submitted that the purchases of gold coins were genuine and supported by cogent documentary evidence. Reliance was placed on the purchase b....
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....ceived specific, credible and actionable information from the Investigation Wing regarding the alleged accommodation entry transaction involving the assessee and M/s Swastik Corporation. It was contended that, at the stage of reopening, the Assessing Officer is only required to form a prima facie belief that income chargeable to tax has escaped assessment, and not to conclusively establish escapement of income. Accordingly, the learned DR submitted that the reassessment proceedings were validly initiated and the additions made by the Assessing Officer, as confirmed by the CIT(A), deserve to be upheld. 5. We have carefully considered the rival submissions, perused the material placed on record and examined the orders of the lower authorities. The issue for consideration is whether the expenditure incurred by the assessee towards purchase of gold coins from M/s Swastik Corporation, claimed as business promotion and staff welfare expenditure, could be disallowed under section 37(1) of the Act by treating the purchases as bogus. It is an undisputed fact that the assessee is engaged in the business of stock broking and is not a trader in gold or jewellery. The consistent case of the ....
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....ase. 5.3. The objection of the Assessing Officer regarding non-maintenance of a stock register also does not advance the Revenue's case. The assessee is not a dealer in gold, the gold coins were not held as stock-in-trade and were admittedly distributed immediately (list of persons to whom gold coins were distributed for business promotion with quantity of gold distributed and identity of each recipient of gold coin was placed before CIT(A)). In such circumstances, the absence of a stock register cannot be a determinative factor to hold the purchases as bogus. 5.4. In our considered view, the Assessing Officer has failed to discharge the burden of establishing that the expenditure was not incurred wholly and exclusively for the purposes of business. The CIT(A) also erred in confirming the disallowance by ignoring the binding Tribunal orders in the case of the seller and by placing undue reliance on a retracted statement without independent corroboration. 5.5. Accordingly, the disallowance made under section 37(1) on account of purchase of gold coins for all the assessment years under consideration cannot be sustained on merits and is liable to be deleted. 5.6. Before co....
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.... account of purchase of gold coins is unsustainable. 10. Accordingly, the disallowance made under section 37(1) is deleted for all the assessment years under appeal, as under: i. Assessment Year 2014-15: Rs. 3,25,500/- ii. Assessment Year 2015-16: Rs. 3,83,822/- iii. Assessment Year 2016-17: Rs. 3,91,304/- iv. Assessment Year 2017-18: Rs. 3,91,403/- The corresponding grounds raised by the assessee in all the four appeals are allowed. Ground relating to taxation of dividend income(Assessment Year 2016-17) 11. We now take up the ground raised by the assessee in Assessment Year 2016-17 relating to the taxation of dividend income of Rs. 14,70,796/-, which was claimed as exempt under section 10(34) of the Act. 12. It is an undisputed fact, as reiterated by the learned AR, that during the previous year relevant to Assessment Year 2016-17, the assessee earned dividend income of Rs. 14,70,796/-. The said dividend income was credited to the Profit and Loss Account and was disclosed under the head "Other Income"(as per Note "O" - paper book page No,14 for the A.Y. 2016-17). Since the dividend income was exempt under section 10(34) of the Act....
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.... assessment order and the computation sheet, the findings recorded in the assessment order must prevail. An addition cannot be sustained merely on the basis of a computational adjustment, in the absence of any discussion or finding by the Assessing Officer justifying such addition. 19. Thirdly, even otherwise, once the dividend income is exempt under section 10(34), the same cannot be brought to tax indirectly by reducing the business loss, without any statutory sanction. The action of the Assessing Officer amounts to taxing exempt income through the back door, which is impermissible in law. 20. In our considered view, the addition of dividend income of Rs. 14,70,796/- made in the computation sheet is patently erroneous and unsustainable. The CIT(A) erred in confirming the same without appreciating that no such addition was made in the reassessment order itself and that the income was admittedly exempt. 21. Accordingly, the Assessing Officer is directed to delete the addition of dividend income of Rs. 14,70,796/- made in the computation sheet for Assessment Year 2016-17. The ground raised by the assessee on this issue is allowed. Grounds relating to validity of reassess....