Case Law Details
Harpreet Kaur Kaushik Manek Vs DCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that details relating to unexplained investment and set off loss not furnished by the assessee before AO as well as CIT(A). Hence, matter remanded back to the file of AO.
Facts- The assessee has not filed any return of income. As per the information, the reasons were recorded and subsequently the case was reopened u/s. 147 of the Income Tax Act. In response to the notice u/s. 148 of the Act, the assessee did not file any reply.
After taking cognisance of the all the submissions/reply, AO held that the margin money being unexplained by the assessee and no source of such margin money is disclosed as well as no return of income was filed by the assessee, therefore, 8% of such total turnover amounting to Rs.43,75,089/- should be taken as unaccounted and unexplained investment u/s. 68 of the Act.
CIT(A) dismissed the appeal. Being aggrieved, the present appeal is filed.
Conclusion- Held that the contention of the assessee that the reasons for reopening was vague, scanty and non-specific, the same does not sustain as the reasons mentioned in the Assessment Order categorically dealt with the transactions of National/Multi Commodity Exchange Contract and also specified the amount thereby stating that the same was made from undisclosed sources. Thus, the reasons for reopening were rightly taken into account and the contention of the assessee that there should have been more specific reason does not sustain.
Held that as regards confirming the addition of Rs.43,75,090/- as unexplained investment and the estimation of margin money at 8% as well as denying the set off loss incurred during the year under consideration, the assessee has not given the details related to relevant ledger and working of loss to the Assessing Officer as well as to the CIT(A) and, therefore, this entire issue needs verification. Therefore, we remand back this issue to the file of the Assessing Officer for proper adjudication of the issue after verifying the relevant ledger and working of loss in consonance with the assessee’s contentions as well as the documentary evidences.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the Assessee against order dated 15.06.2023 passed by the CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2011-12.
2. The assessee has raised the following grounds of appeal :-
“1. The Ld. CIT(A) has erred in law and on facts of the case in upholding order of the Ld. AO passed u/s. 147 r.w.s. 143(3) of the Act which is barred by limitation.
2. The Ld. CIT(A) has erred in law and on facts of the case in confirming addition of Rs.43, 75,090/- as unexplained investment u/s. 69 of the Act.
3. The Ld. CIT(A) has erred in law and on facts of the case in confirming addition of margin money at Rs.43, 75,090/- computed by the Ld. AO on estimated basis in total ignorance of the actual amount of margin money of Rs. 10,00,000/- utilized by the appellant to carry out the transactions of Rs.5,46,88,313/-.
4. Alternatively, and without prejudice, the Ld. CIT(A) has erred in law and on facts in upholding the estimation of margin money at 8% which is highly excessive and does not reflect the real income earned by the
5. The Ld. CIT(A) has erred in law and on facts of the case in denying set off of losses arising in commodity transactions against the margin money addition ignoring the fact that only the real income earned by the appellant can be brought to tax.
6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed.
7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C/D of the Act.
8. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying penalty u/s. 271(1)(c) of the Act.”
3. The assessee has not filed any return of income and the letter was issued through system on 04.08.2014, which was not responded as mentioned by the Assessing Officer in the Assessment Order. As per the information, the reasons were recorded and subsequently the case was reopened under Section 147 of the Income Tax Act, 1961 after recording reasons and notice under Section 148 of the Act was issued on 28.03.2018 after taking approval from the PCIT on 27.03.2018. In response to the notice under Section 148 of the Act, the assessee did not file any reply. Notice under Section 142(1) of the Act was issued on 31.07.2018 and was served to the assessee. The assessee was also supplied copy of the reasons recorded alongwith the notices under Section 142(1) issued on 31.07.2018. Thereafter, notice under Section 142(1) of the Act was issued on 05.11.2018, 16.11.2018 and 27.11.2018 and was duly served to the assessee. The Assessing Officer also conducted enquiries under Section 133(6) of the Act for the transactions with Multi Commodity Exchange. The data received under Section 133(6) of the Act was duly confirmed and not reflected by the assessee. In response, the assessee submitted letter dated 03.12.2018 thereby stating that she had registered BPO with Ahmedabad Municipal Corporation in the name of Phoenix Technologies on 16.04.2009 and has carried out the transactions under this proprietary concern. Transactions were carried out with sub-broker Kunvarji Finstock Pvt. Ltd. The assessee did not deny the said transactions with Kunvarji Finstock Pvt. Ltd. The assessee submitted Profit & Loss account reflecting the loss. The final opportunity was granted to the assessee vide notice under Section 142(1) of the Act dated 10.12.2018 to show cause as to why the margin money invested for such transactions should not be brought to tax as the data reveals loss from the transactions. In response to the said show cause notice, the assessee filed adjournment application. The assessee did not file return of income under Section 139 of the Act and also under Section 148 of the Act as mentioned by the Assessing Officer in paragraph no.5 of the Assessment Order. After taking cognisance of the all the submissions/reply, the Assessing Officer held that the margin money being unexplained by the assessee and no source of such margin money is disclosed as well as no return of income was filed by the assessee, therefore, 8% of such total turnover amounting to Rs.43,75,089/- should be taken as unaccounted and unexplained investment under Section 68 of the Act.
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. The Ld. AR submitted that there is a delay of 161 days in filing the present appeal before the Tribunal as due to the injury to the assessee in the month of June 2023, the assessee could not file the appeal or approach the Tax Consultant within the statutory period. The reasons stated by the assessee in the affidavit dated 11th September, 2024 alongwith the Medical Report is taken on record and the assessee has genuine reason to file the appeal belatedly. Hence, the delay of 161 days in filing the appeal before the Tribunal is condoned.
5.1 As relates to ground no.1, the Ld. AR submitted that the reasons for reopening were vague, scanty and non-specific as the same do not explain/specify the nature of transactions in question, break-up of amount mentioned therein, dates of transactions in question, whether transactions are of shares/commodities, name of scrip or commodity was also not mentioned, whether transaction are of purchase/sale and how much quantity involved in the underlying transactions. Thus, the reasons for reopening are not justified. The Ld. AR relied upon the decision of Hon’ble Gujarat High Court in the case of Surani Steel Tube Limited vs. ITO (2020) 136 taxman.com 139 and Paresh Babubhai Bhalani vs. ITO (2023) 156 taxman.com 517. The Ld. AR submitted that the Assessing Officer has merely relied upon the information received from the external source and no independent application of mind was applied by the Assessing Officer. The Ld. AR submitted that the Assessing Officer does not have basic details of amount alleged to have escaped assessment. Thus, the reopening is merely on the basis of borrowed satisfaction which is not justifiable as held by the Hon’ble Gujarat High Court in the case of Paresh Babubhai Bhalani vs. ITO (supra), Harikishan S. Virmani vs. DCIT (2017) 394 ITR 146. The Ld. AR also relied upon the decision of Hon’ble Delhi High Court in case of Signature Hotels P. Limited vs. ITO (2012), 338 ITR 51. Thus, the CIT(A) was not right in upholding the order of the Assessing Officer passed under Section 147 read with Section 143(3) of the Act which is barred by limitation.
5.2 As regards to ground nos.2, 3, 4 & 5 relating to the merits regarding unexplained investment under Section 69 of the Act, the Ld. AR submitted that the Assessing Officer made addition in respect of investment of margin money but such addition has been made under Section 68 of the Act. The Ld. AR submitted that Section 68 of the Act contemplates addition in respect of credits in books of account. Thus, the addition in respect of investment cannot be made under Section 68 of the Act. The Ld. AR further submitted that there is no basis of the sum of Rs.5,46,88,613/- i.e. the amount mentioned in reasons for reopening and considered while making the impugned addition by the Assessing Officer as the assessee had carried out the commodity transactions through M/s. Kunvarji Finstock Pvt. Ltd. in the name and style of M/s Phoenix Technologies and deposited Rs.10,00,000/- with the broker on 05.05.2010. The Ld. AR submitted that the Assessing Officer totally ignored the fact that the assessee incurred loss of Rs.2,77,725/- from equity transaction and loss of Rs.74,364/- from F&O transactions. The Ld. AR submitted that the assessee has given all the documentary evidences such as Equity Ledger, MCX ledger, Equity Profit & Loss and MCX Profit and Loss for the relevant Assessment Years. The Assessing Officer as well as the CIT(A) has not pointed out any fault with the said documentary evidences and there was no basis of the sum of Rs.5,46,88,61 3/- as mentioned in the reasons. Thus, the margin money addition made at 8% of the said amount does not have any basis and cannot be confirmed. The Ld. AR submitted that the assessee at no point of time invested any margin money and it is only on assumption the Assessing Officer made the addition. The Ld. AR also given the alternative submissions regarding the margin money rate which should have been reasonable and not that of 8% which is on higher side. The Ld. AR further submitted that the set off of loss of Rs.3,52,089/- incurred by the assessee during the year under question has not been granted. In order to determine the real income, set off of loss has to be granted as mentioned in the case of Godhra Electricity Co. Limited vs CIT (1997) 225 ITR 746 (SC). The Ld. AR further submitted that it is well settled that the additional claim can be raised before the Appellate Authorities as held by the Hon’ble Apex Corut in case of Jute Corporation of India vs. CIT, 187 ITR 688 (SC) and National Thermal Power Corporation vs. CIT, 229 ITR 383 (SC). The Ld. AR also relied upon the Hon’ble Gujrat High Court’s decision in the case of S.R. koshti vs CIT (2005) 276 ITR 165, CIT vs Mitesh Impex (2014) 367 ITR 85 and PCIT vs UTI Bank (2017) 398 ITR 514.
6. The Ld. DR submitted that the Assessing Officer has not disputed as to what exactly the money in respect of margin as the same was not explained by the assessee and the Assessing Officer, despite asking for the documentary evidence, was not given the ledger to explain the concept of the transactions and the incurrence of loss. The Ld. DR submitted that the Assessing Officer as well as the CIT(A) has rightly confirmed the addition. Besides this, the Ld. DR submitted that the reopening was properly justifiable as the Department has received the information in respect of transactions of National/Multi Commodity Exchange Contract in respect of the assessee which was not part of the return of income as the assessee has not filed any return of income under Section 139 of the Act as well as under Section 148 of the Act. Thus, the Ld. DR relied upon the Assessment Order and the Order of the CIT(A)
7. We have heard both the parties and perused all the relevant material available on record. As regards the contention of the Ld. AR that the reasons for reopening was vague, scanty and non-specific, the same does not sustain as the reasons mentioned in the Assessment Order categorically dealt with the transactions of National/Multi Commodity Exchange Contract and also specified the amount thereby stating that the same was made from undisclosed sources. Thus, the reasons for reopening were rightly taken into account and the contention of the Ld. AR that there should have been more specific reason does not sustain. Thus, ground no.1 is dismissed. Further in respect of ground no.1, the decisions of Hon’ble jurisdictional High Court will not be applicable in the assessee’s case as the reasons has specifically mentioned the assessee’s transaction of National/Multi Commodity Exchange Contract and as the assessee has not field any return of income, the information which was gathered by the Assessing Officer required to be verified at the stage of assessment proceedings for which the reopening of the assessee’s case is must for the component of the specific contract amount mentioned in the reasons for reopening. Thus, the Assessing Officer has rightly reopened the assessee’s case.
7.1 As regards confirming the addition of Rs.43,75,090/- as unexplained investment and the estimation of margin money at 8% as well as denying the set off loss incurred during the year under consideration, the assessee has not given the details related to relevant ledger and working of loss to the Assessing Officer as well as to the CIT(A) and, therefore, this entire issue needs verification. Therefore, we remand back this issue to the file of the Assessing Officer for proper adjudication of the issue after verifying the relevant ledger and working of loss in consonance with the assessee’s contentions as well as the documentary evidences. Needless to say, the assessee be given opportunity of hearing by following the principles of natural justice. The Assessing Officer, after verifying all the relevant documents/evidences filed by the assessee before us, will adjudicate the matter as per law.
8. In the result, appeal filed by the assessee is partly allowed for statistical purpose.
Order pronounced in the open Court on this 12th November, 2024.
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