TaxTMI 
TaxTMI 
2026 (2) TMI 1053
X X X X Extracts X X X X
X X X X Extracts X X X X
....der section 148 of the Act dated 30.06.2021 was issued for reopening the assessment. The reopening was stated to be based on information received from the Investigation Wing, DIT (Inv.)-3(1), Mumbai, uploaded on the Insight Portal on 25.06.2021. As per such information, enquiries conducted by the Investigation Wing revealed a modus operandi adopted in certain mutual fund schemes managed by JM Financial Asset Management Ltd., particularly in JM Equity Hybrid Fund - Dividend Option. 3. According to the Assessing Officer pre-planned investments were made into the scheme prior to declaration of dividend. Substantial dividend was received. Immediately thereafter, redemption of units was undertaken resulting in short term capital loss. The short term capital loss was set off against other capital gains. The dividend income was claimed as exempt. The distributable surplus was allegedly inflated by improper classification of capital as distributable surplus, in violation of SEBI guidelines. Survey proceedings were conducted in the premises of JM Financial Asset Management Ltd. Statement of Shri Sanjay Chhabaria, Fund Manager, was recorded on oath. 4. The Assessing Officer observed th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lleged accommodation entry or sham arrangement. According to the assessee, both the dividend received and the subsequent redemption of units were genuine transactions carried out in the ordinary course of investment activity. 7. The assessee also specifically objected to the proposal of the Assessing Officer to treat the dividend amount as unexplained money within the meaning of section 69A of the Act, contending that the dividend was received from a duly registered mutual fund scheme and could not, under any circumstances, be characterized as unexplained income. 8. The Assessing Officer rejected the objections raised by the assessee and proceeded to hold that the information received from the Investigation Wing constituted fresh and tangible material justifying the reopening of the assessment. According to the Assessing Officer, the issue regarding the genuineness of the dividend received from the mutual fund scheme had not been examined during the original assessment proceedings completed under section 143(3) of the Act. It was further held that the pattern of investment, declaration of dividend and subsequent redemption of units indicated that the dividend distribution was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....formation from the Investigation Wing constituted tangible material and was not available at the time of the original assessment. The plea of change of opinion was rejected. The technical objections relating to limitation and DIN were rejected by invoking section 292B. The addition under section 68 was upheld despite reference to section 69A in the show cause notice, holding that the assessee was not prejudiced and had failed to establish genuineness. The ground relating to penalty was held to be premature. Ultimately, the appeal was dismissed. 12. Further aggrieved by the order of the CIT(A), the assessee is in appeal before us raising following grounds of appeal: 1. On the facts and circumstances of the case, the impugned Assessment Order is bad in law. Jurisdictional Errors in Reassessment Proceeding: 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in upholding the action of the Ld. AO in initiating Reassessment proceedings without meeting the prerequisite conditions for invoking jurisdiction under section 147/148 of the Act, and issued an illegal/invalid Notice of Reopening u/s 148 of the Act dt. 30.06.2021. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....had issued the Notice u/s 148A(b) of the Act and passed the Order u/s 148A(d) of the Act along with the Notice u/s 148 of the Act, which contravened the mandatory faceless procedure as per Section 151A of the Act as well as the E-Assessment Scheme dated 29.03.2022 issued by the CBDT. A Genuine Transaction cannot be considered as Fictitious 7. The Ld. AO placed the reliance on a third-party statement of Oath, the details of which were never provided during the course of assessment proceedings in spite of the appellant's request. 7.1That the Ld. CIT (A) failed to appreciate that the order passed by Ld. AO was bad in law as much as neither the details of statement of a third party relied upon by him were provided to the appellant nor any opportunity to cross examine the said party was provided. VC Hearing not provided by CIT(A) 8. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in disposing of the appeal without providing an opportunity of being heard through Video Conferencing. The appellant craves leave to add/ alter any grounds of appeal before or at the time of hearing. 13. During the c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) Ltd. (331 ITR 236) and the Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. v. Commissioner of Income-tax (336 ITR 136)where it was held that the Assessing Officer, upon forming a reason to believe and issuing notice under section 148, must assess or reassess "such income" which formed the basis of reopening, and only thereafter can he assess any other income which comes to his notice during the course of proceedings. It has been categorically held that if the income which was the foundation of the reasons recorded is not ultimately assessed or reassessed, it is not open to the Assessing Officer to independently assess some other income. 16. On merits, the learned AR submitted that the entire basis of the Assessing Officer's conclusion was factually incorrect and inapplicable to the case of the assessee. It was contended that the modus operandi referred to in paragraph 4 of the recorded reasons does not apply to the facts of the present case. The Assessing Officer had stated that a huge dividend had been received on 31.03.2015, whereas in fact no such dividend was received by the assessee on that date from JM Equity Hybrid Fund - Dividend Option. It was further submitted ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is based on erroneous facts and inapplicable information, and the conclusion that the dividend income is fictitious or represents unexplained cash credit is wholly unsustainable in law as well as on facts. 21. The learned AR placed reliance on a series of judicial precedents in support of the contention that in absence of any material demonstrating the assessee's participation in any sham or pre-arranged transaction, the dividend received from a SEBI regulated mutual fund cannot be treated as fictitious and the resultant loss cannot be disallowed. 22. Strong reliance was placed on the judgment of the Hon'ble Bombay High Court in Karan Maheshwari vs. ACIT reported in 176 taxmann.com 700, wherein reopening on identical allegations relating to dividend and short-term capital loss arising from investment in JM mutual fund schemes was quashed. The Hon'ble Court held that in absence of any material indicating that the assessee had knowingly participated in any sham transaction or illegality, the reassessment proceedings were unjustified. The Special Leave Petition filed by the Revenue against the said decision was dismissed by the Hon'ble Supreme Court as reported in 176 taxmann.c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded for reopening. It was argued that the order passed under section 148A(d), after considering the reply of the assessee and after obtaining approval from the specified authority, constitutes the final reasons for issuance of notice under section 148. Therefore, according to the learned DR, the reassessment proceedings were validly initiated in accordance with the statutory framework introduced post amendment. 28. With regard to the judicial precedents relied upon by the learned AR, particularly in the case of Karan Maheshwari (supra), the learned DR submitted that the said decision arose in writ jurisdiction and was rendered on the peculiar facts of that assessee. Referring to paragraphs 10 and 14 of the judgment, it was contended that in that case the petitioner was not furnished with complete information and the impugned order under section 148A(d) was passed without providing material relied upon by the Department. According to the learned DR, the factual matrix in the present case is distinguishable, as the assessee had been issued notices under section 148A(b), had participated in the proceedings and had acknowledged the subsequent notices. Hence, it was argued that the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....record and the judicial precedents relied upon by both sides. It is an undisputed position that the original assessment in the present case was completed under section 143(3) on 26.12.2017. The assessment records show that during the course of original scrutiny proceedings, the Assessing Officer had called for details of mutual fund transactions and dividend income. The assessee furnished complete details of investment in mutual funds including JM Balanced Fund / JM Equity Hybrid Fund as well as Birla Sunlife Cash Plus Fund. 33. The learned DR contended that only Birla Sunlife Cash Plus Fund was examined and not the JM scheme. However, from the paper book and the correspondence placed on record, it is evident that the assessee had disclosed the investment particulars, dividend income and related details of JM scheme during the original proceedings. Therefore, it cannot be said that there was total absence of enquiry. It is well settled that once a query is raised and answered during scrutiny, reopening on the same material amounts to change of opinion. The Hon'ble Bombay High Court in CIT vs. Jet Airways (I) Ltd. 331 ITR 236 (Bom) has held that where the Assessing Officer has fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....68 treating dividend of Rs. 44,24,42,395/- as fictitious, after adjusting short term capital loss of Rs. 4,70,46,776/- and making net addition of Rs. 39,53,95,619/-.The Hon'ble Bombay High Court in Jet Airways (I) Ltd. (supra) and the Hon'ble Delhi High Court in Ranbaxy Laboratories Ltd. (supra) have held that reassessment must be confined to the reasons recorded and if the original ground fails, the Assessing Officer cannot sustain reassessment on a different ground. 38. In the present case, the ground recorded was fictitious loss, whereas the addition has been made treating dividend as unexplained cash credit. The foundation and superstructure are different. Therefore, reassessment cannot survive. 39. The learned DR argued that 148A(b) is not the "reasons recorded" and that 148A(d) constitutes the final reasons. We are unable to accept this contention. Under the amended scheme, section 148A(b) requires the Assessing Officer to provide the information and material relied upon and give opportunity of being heard. The foundation of reopening must be disclosed at this stage. The Hon'ble Bombay High Court in Karan Maheshwari (supra) has held that failure to provide complete mate....