Ravi Gopal Trivedy Vs National-e-Assessment Centre Delhi (ITAT Mumbai)
ITAT Mumbai held that reopening of assessment u/s 147 without recording any specific reasons and without linking the information received from DDIT(Inv) specifically to assessee is invalid and liable to be set aside.
Facts- The assessment of the assessee was reopened by issue of notice u/s. 148 for the reason that certain information was received from DDIT(Inv), Mumbai in the course of investigation in National Stock Exchange Ltd with regard to the issue of Client Code Modification in the case of few brokers and based on a statement of Shri Chetan pitamber Bharkhada, President Anand Rathi Commodities Ltd(ARCL) who did the maximum client code modification was recorded.
AO came to the conclusion that certain losses of the assessee are speculative losses and not allowed to be set off against normal business income and that the assessee has not disclosed fully and truly all material facts in the return of income and, therefore, had a reason to believe that an income to the extent of Rs.17,40,120/- has escaped assessment. AO concluded the assessment stating that the share transaction done by the assessee are bogus in nature and not genuine. AO made the addition of Rs.17,40,120/- for this reason and also for the reason that the assessee has not furnished any details.
Aggrieved, the assessee preferred appeal before the CIT(A), however, the same was dismissed. Being aggrieved, the present appeal is filed.
Conclusion- Held that the reopening under section 147 has been done without recording any specific reasons pertaining to the assessee and without linking the information received from DDIT (Inv) specifically to the assessee. We, therefore hold that the reopening u/s. 147 is not valid and accordingly, the addition made stands deleted.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is against the order of the Commissioner of Income-tax National Faceless Appeal Centre (NFAC) [hereinafter „Ld.CIT(A)’ ] dated 13/12/2022 for the assessment year 2014-15. The assessee raised the following grounds of appeal:-
“1. Reassessment is bad in law
That on the facts and circumstances of the case and in law the Ld. National Faceless Appeal Centre (NFAC) has erred in confirming the issue of the reassessment notice and order passed by the National Faceless Assessment Centre.
1.1. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in confirming the notice under section 148 of the Act based on incorrect information and without application of mind and without providing copies of the information received and also without providing an opportunity for cross-examination.
1.2. That on the facts and circumstances of the case and in law the Ld. NFAC has failed to appreciate that the recorded reasons stated that the assessee has made a bogus loss, whereas the assessee has made a profit and offered the same to tax, as the basis of recorded reason based on wrong facts, the issue of reassessment notice and assessment order is bad in law.
1.3. That on the facts and circumstances of the case and in law the Ld. NFAC has failed to appreciate that the Ld. Assessment Centre erred in issuing a Notice under section 148 of the Act on an issue which was scrutinized during the original assessment. Therefore, no reassessment can be made based on a change of opinion.
1.4. The Ld. NFAC failed to appreciate that the case laws relied on the NFAC do not apply to the facts of the appellant and the case laws are relied on without giving an opportunity to the appellant to respond, hence the order is bad in law, ,
2. Impugned addition of Rs. 17,40,120/- under section 68 of the Act is bad in law
That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- under section 68 of the Act.
2.1. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- under .section 68 of the Act without providing copies of information received by the Department which violates Principles of Natural Justice, Audi Alteram Partem.
2.2. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- under section 68 of the Act without providing the statement of Mr. Chetan Pitamber and an opportunity for cross-examination, which violates Principles of Natural Justice, Audi Alteram Partem.
2.3. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- without providing the details of the said amount arrived by the National Faceless Assessment Centre.
2.4. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- by alleging that the same is a bogus loss/capital gain whereas the same is the gross value of transactions made by the assessee.
2.5. That on the facts and circumstances of the case and in law the Ld. NFAC has erred in making an addition of Rs. 17,40,120/- without considering the submissions and documents presented by the Assessee in the course of assessment and appeal proceedings.
2.6. The National Faceless Assessment Centre erred in making wrong facts and observations stating that the assessee has made a loss of Rs. 9,09, 787/-r which shows the non-application of mind, whereas the Ld. NFAC erred in observing that it was a typographical error and hence confirmed it.
2.7. The Ld. NFAC erred in confirming the order passed by the National Faceless Assessment Centre without passing the speaking order hence the addition confirmed by NFAC may be deleted.”
2. The assessee is an individual and filed the original return of income for the year under consideration on 26/11/2014 returning an income of Rs.18,54,807/-. The case was selected for scrutiny and the statutory notices were duly served on the assessee. During the course of assessment, the Assessing Officer called for various details including the P&L Account of the assessee. The Assessing Officer, after considering the materials on record passed an order under section 143(3) dated 05/12/2016 accepting the capital gains offered by the assessee and by making certain disallowances under section 14A.
3. Subsequently the assessment was reopened by issue of notice under section 148 dated 31/03/2021 for the reason that certain information was received from DDIT(Inv), Mumbai in the course of investigation in National Stock Exchange Ltd with regard to the issue of Client Code Modification in the case of few brokers and based on a statement of Shri Chetan pitamber Bharkhada, President Anand Rathi Commodities Ltd(ARCL) who did the maximum client code modification was recorded. The Assessing Officer came to the conclusion that certain losses of the assessee are speculative losses and not allowed to be set off against normal business income and that the assessee has not disclosed fully and truly all material facts in the return of income and, therefore, had a reason to believe that an income to the extent of Rs.17,40,120/- has escaped assessment. The Assessing Officer concluded the assessment stating that the share transaction done by the assessee are bogus in nature and not genuine. The Assessing Officer made the addition of Rs.17,40,120/- for this reason and also for the reason that the assessee has not furnished any details.
4. Aggrieved, the assessee preferred appeal before the CIT(A). The assessee, before the CIT(A) submitted that the Assessing Officer has relied on the information received from Investigation Cell and in spite of various requests, the copy of statement recorded of Chetan pitamber Bharkhada, President of M/s Anand Rathi Commodity Ltd and the information copy received from Investigation Cell was not furnished to the assessee. The assessee also submitted that the details on the basis of which the addition was made by the Assessing Officer were not clear. The assessee also submitted that all transactions with respect to the trading done by the assessee have been recorded and offered to tax already and that these incomes are non speculative in nature. The CIT(A) did not accept the submissions of the assessee and held that the reopening done by the Assessing Officer under section 147 is valid by relying on the decision of Bombay High Court in the case of Suresh vs Additional CIT (2017) 81 taxmann.com 346 (Bom). The CIT(A) also dismissed the grounds raised by the assessee on merits. Aggrieved, the assessee is in appeal before the Tribunal.
5. The Ld.AR submitted that the notice under section 148 where the reasons are recorded that the assessee has made bogus loss and had set it off against income is factually incorrect for the reason that the assessee has made only profit from non-speculative business. The ld AR further submitted that the assessee had not claimed any setoff of losses and has offered the entire gain from non-speculative business to tax. The Ld.AR drew our attention to the copy of the P&L Account (page 4 of the paper book) wherein the assessee has disclosed an income of Rs.73,510/- as being income from non speculative transactions. Further, the Ld.AR also drew our attention to the breakup of the non speculative gain declared by the assessee which has arisen out of the trading activities (pages 47 & 48 of paper book). The Ld.AR submitted that from this it is clear that the reasons recorded are done without any application of mind. The Ld.AR relied on the following decisions, in this regard:-
(1) Sharvah Multitrade Co (P) Ltd vs ITO (2022) 134 taxmann.134 (Bom)(HC)
(2) Yashoda Shivappa Nagaingoudar vs ITO (2022) 138 com296 (Bom)
6. The Ld.AR further submitted that the assessee has included all the transactions entered into by him in the statement of finance which were submitted by the assessee during the course of assessment under section 143(3) and that the Assessing Officer had raised specific queries with respect to the trading in commodities transactions entered into by the assessee. Therefore, it was submitted that there cannot be a re-assessment on the basis of change of opinion. The Ld.AR also submitted that the assessee has given full and true disclosure of all materials during the original assessment and there is no failure on the part of the assessee to disclose any material facts.
7. The Ld.AR, during the course of hearing also drew our attention to the reasons recorded (page 28 of paper book) where it was pointed out that there was no specific finding recorded by the Assessing Officer with respect to the impugned transaction and how the entire scam that happened in NSEL is related to the Accordingly, the Ld.AR submitted that the reopening is done without any application of mind and on the basis of misunderstood facts and therefore not valid.
8. The Ld.DR relied on the order of lower authorities.
9. We have heard the parties and perused the materials on record. The Assessing Officer has reopened the assessment of the assessee for the reason that that he had received certain information from Investigation Cell where Shri Chetan Pitamber Bharkhada, President of M/s Anand Rathi Commodity Ltd have given a statement that there were client code modifications of transactions in which there was no physical delivery of the goods on NSEL platform and that the said scam was investigated by DDIT(Inv). The copy of the reasons recorded is reproduced as below:-
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
INCOME TAX DEPARTMENT
OFFICE OF THE ASSISTANT
COMMISSIONER OF INCOME TAX
CIRCLE 24(1), MUMBAl
