Case Law Details

Case Name : Nirmala Devi Vs ITO (ITAT Delhi)
Appeal Number : ITA No. 2731/DEL/2019
Date of Judgement/Order : 12/05/2020
Related Assessment Year : 2009-10
Courts : All ITAT (6762) ITAT Delhi (1552)

Nirmala Devi Vs ITO (ITAT Delhi)

In the given case, the Investigation Directorate, Ahmedabad carried out survey u/s 133(A) to examine the misuse of Client Code Modification for tax evasion. The client code of the assessee was SS 493 & as per the Assessing Officer the error by the operator could be in the form of punching Client Code as FS-493, HS-493, SS-439 or similar phonic sounds but certainly, Code was S-1. Hence, the modification, in this case, was not found genuine by the Assessing Officer as well as CIT (A). Before the Assessing Officer, the assessee has not at all proved as to why the error has incurred. In the written submissions as well, the assessee submitted that the details of trading and how the loss come across, but the same was not fully satisfied before the Assessing Officer as well as before the CIT(A) by the assessee. Therefore, tribunal state that the Assessing Officer has rightly made the addition of Rs.15, 25,782/- and the same was properly confirmed by the CIT (A). There is no need to interfere with the said finding of the CIT (A).

FULL TEXT OF THE ITAT JUDGEMENT

This appeal is filed by the assessee against the order dated 11/01/2019 passed by CIT(A)-5, Ludhiana, for Assessment Year 2009-10.

2. The grounds of appeal are as under:-

1. “That the impugned order is against facts and bad in law.

2. That on the facts and in circumstances of the case and in law, Learned A.O. grossly erred in assuming jurisdiction u/s 147/151 of the IT Act, 1961 and notice issued u/s 148 of the IT Act, 1961 was void-ab-initio on the following grounds :

i. that the reopening was based on mere ‘borrowed satisfaction’ of the investigating wing without independent application of mind by the AO and there was no intangible material to invoke section 147 of IT Act, 1961 since the recorded reasons were solely based on mere hearsay information related to broker/third party and there was not iota of material in the recorded reasons to draw adverse inference that appellant has any direct nexus or connection of alleged loss of Rs. 8,56,225 taken by misusing the client code modification facilities and the entire material related in the recorded reasons was mere hearsay material.

ii. that no effort was made by Ld. A.O. u/s 133(6)/131 of IT Act, 1961 before recording the reasons to confront the third party/ broker to establish the nexus of any involvement of appellant in the alleged diversion of income of Rs.20,24,792/- in connivance with the broker in light of ratio decided by Hon’ble Supreme Court Decision in case of Kishinchand Chellaram vs. CIT Bombay City – II reported in [1980] 125 ITR 713(SC).

iii. that it was incorrect and illegal to use the assessment proceedings for merely conducting roving enquiry which action should have been initiated under section 133(6)/131 of Income Tax Act, 1961 before recording the reasons by Ld. A.O. in the light of ratio decided by Gujarat High Court in the case of PRINCIPAL COMMISSIONER OF INCOME TAX 5 VS. MANZIL DINESHKUMAR SHAH 2018 (5) TMI 16 also SLP filed by the department in this case was dismissed by the Hon’ble Supreme Court.

iv. that approval made by Principal Commission of Income Tax was invalid based on vague feeling and there was no tangible material at all to infer diversion of income by appellant in the recorded reasons and on mere reasons to suspect such approval under section 151 of Income tax Act 1961 was mechanical and power was exercised casually and in a routine matter without application of mind in light of ratio decided by Hon’ble Supreme Court in the case of Chhugamal Rajpal vs S.P. Chaliha 79 ITR 603 (SC).

And

In the light of ratio decided by Jurisdiction Delhi High Court Principal Commissioner of Income Tax vs. Meenakashi Overseas Private Limited Reported in [2017] 395 ITR 677 [DEL]

3. That on the facts and circumstances of the case, and the legal position the appellant has responded to all notices sent by Ld. A.O. and no reasonable opportunity was given by the Ld. A.O. to cross examine the broker or the person to whom diversion of income was alleged to be made by appellant when, particularly, no supporting document at all for alleged diversion of income was confronted by Ld. A.O. in the course of reassessment proceedings.

4. That on the facts and circumstances of the case, and the legal position the learned CIT(A) has erred in confirming the addition of Rs.20,24,792/- and the same is perverse being solely based on no evidence at all and on mere hearsay information to prove that there was diversion of income by the appellant and not on iota of evidence was put on record nor third party was ever cross examined by AO or the appellant. Suspicion howsoever strong cannot be assessed as income. There must be something more than suspicion to be assessed an income. Supreme Court 26 ITR 775 Dhaneshwari Cotton mills.”

3. The assessee, Smt. Nirmala Devi filed her return of income for the assessment year 2009-10 at total income of Rs. 623010/- on 30.03.2010 with Income Tax Officer, Ward-3, Hisar. The return was processed U/s 143(1) of Income Tax Act, 1961. Subsequently the information was received through Assistant Director of Income Tax (Investigation), Unit-1(3) Ahemdabad vide letter dated 18.03.2016 regarding client code modification and it was informed that the transaction was not genuine. After recording reasons and taking approval from the appropriate authority, notice U/s 148 of the IT Act, 1961 dated 30-03-2016 was issued and served upon the assessee. The reassessment proceedings were started by the department and hearing in this case was given from time to time as per order sheet entry of the I.T.O. and the assessment in this case is finally framed U/s 143(3) of the Act ibid by the Income Tax Officer Ward-3, Hisar at a Total income of Rs. 2647802/- as against returned income of Rs. 623010/- vide his order dated 29-12-2016. The Notice of demand alongwith assessment order was served upon the assessee on 30.12.2016.

4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5. None appeared on behalf of the assessee and there is no adjournment application on behalf of the assessee. The notice has been duly served to the assessee. Therefore, we are taking up the submissions of the assessee before the CIT(A) as well as before the Assessing Officer as submissions/arguments before us.

6. The Ld. DR relied upon the assessment order and the order of the CIT(A).

7. We have heard the Ld. DR and perused the material available on record. It can be seen that the assessee earned short term capital gain amounting to Rs. 29,50,000/- on sale of plot but the same was set off against the loss from F & O Securities Transactions & other business loss. The Investigation Directorate, Ahmedabad carried out survey u/s 133(A) to examine the misuse of Client Code Modification for tax evasion. In this case, the client code of the assessee was SS 493 & as per the Assessing Officer the error by the operator could be in the form of punching Client Code as FS-493, HS-493, SS-439 or similar phonic sounds but certainly Code was S-1. Hence, the modification in this case, was not found genuine by the Assessing Officer as well as CIT (A). Before the Assessing Officer, the assessee has not at all proved as to why the error has incurred. In the written submissions as well, the assessee submitted that the details of trading and how the loss come across, but the same was not fully satisfied before the Assessing Officer as well as before the CIT(A) by the assessee. Therefore, the Assessing Officer has rightly made addition of Rs. 15,25,782/- and the same was properly confirmed by the CIT (A). There is no need to interfere with the said finding of the CIT (A). The appeal of the assessee is dismissed.

8. In result, the appeal of the assessee is dismissed.

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