Subject: M/s Blue Print Securities Ltd. during the FY 2008-09 or any other year along with other details. In response to the same, the assessee submitted
Referred Sections:
Section 68 of the IT Act
Section 69B of the IT Act.
Referred Cases / Judgments :
Ankita A. Chokasi Vs. ITO vide writ petition 3344/18, order dated 10.01.2019
PCIT Vs. M/s. SNG Developers Limited vide 92/17 order dated 12.07.2017
CIT Vs. Bhaichand N. Gandhi
Smt. Madhu Raitani Vs. ACIT
Amitabh Bansal Vs. Income Tax Officer
Anjul Bansal Vs. Income Tax Officer
Raymond Woolen Mills Limited Vs. ITO reported in 236 ITR 34,
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `SMC', NEW DELHI
BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER
ITA No.1170/Del/2018
Assessment Year: 2009-10
Raakhi Agarwal Income Tax Officer
42, Janpath Vs Ward 52 (1)
New Delhi -110001 New Delhi
PAN No.AJAPA8010B
(APPELLANT) (RESPONDENT)
Appellant by Sh. R. M. Mehta, CA
Respondent by Sh. Amit Jain, Sr DR
Date of hearing: 12/03/2019
Date of Pronouncement: 10/06/2019
ORDER
PER R.K. PANDA, AM:
This appeal filed by the assessee is directed against the
order dated 28.12.2017 of the CIT(A)-18, New Delhi relating to A.
Y. 2009-10.
2. Facts of the case, in brief, are that the assessee is an
individual and filed the return of income on 28.07.2009 showing
total income of Rs. 2,59,100/-. The AO received an information
that the assessee has invested a sum of Rs. 7,29,000/- in
purchase of shares of M/s Blue Print Securities Ltd. The AO
issued letter u/s 133(6) of the Act on 23.03.2016 asking the
assessee as to whether she had purchased shares of M/s Blue
Print Securities Ltd. during the FY 2008-09 or any other year
along with other details. In response to the same, the assessee
submitted vide letter dated 28.03.2016 that she has not
purchased the said shares during the FY 2008-09 or any other
year. The AO thereafter issued notice u/s 148 of the Act on
31.03.2016 after recording reasons. The assessee vide letter
dated 15.04.2016 requested the AO to treat the return of income
already filed as the return filed in response to notice u/s. 148
and also requested for a copy of the reasons recorded for
reopening of the case. The AO vide letter dated 25.05.2016
supplied the copy of the reasons recorded. The assessee raised
objections to the reopening of the case vide letter dated
09.06.2016 and the same were disposed off by the AO by letter
dated 07.12.2016. The AO thereafter issued a show cause notice
on 16.12.2016 proposing to make addition of Rs.7,29,000/- as
unexplained investment in shares u/s 69B of the Act. The
assessee submitted the reply vide letter dated 23.12.2016 in
which it was stated that the assessee has sold the said shares
during the year for a sum of Rs.7,26,038.55 and denied having
purchased the shares during the year under consideration or any
other year. The Assessing Officer noted that the assessee had
denied the purchase of shares during the year under
consideration or any other year vide letter dated 28.03.2016 also.
The AO observed that the assessee has failed to furnish the
details regarding the purchase of these shares and has also not
shown any income under the head capital gains in the return of
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income filed by her. The AO further noted that the sum of
Rs.7,29,000/- has been received in the bank account of the
assessee and since the assessee has denied the purchase of
shares and no sale of shares is reflected in the return of income,
therefore, the source of Rs.7,29,000/- reflected in the bank
account remains unexplained. Accordingly, the Assessing Officer
made the addition of Rs.7,29,000/- as unexplained cash credit
u/s. 68 of the Act.
3. Before the CIT(A) the assessee apart from challenging the
addition on merit challenged the validity of the reassessment
proceedings. It was argued that the Assessing Officer has
reopened the assessment on the basis of the report of the DDIT
(Investigation Wing), Kolkata and there was no independent
application of mind or reference to any material. It was argued
that the reasons recorded are vague, indefinite and contradictory.
The assessee submitted that the Assessing Officer has made
allegation that the assessee has invested a sum of Rs.7,29,000/-
during the assessment year 2009-10 in scrips of Blue Print
Securities Limited which is factually incorrect. The assessee in
response to the notice u/s. 133 (6) had correctly stated that she
had not invested a sum of Rs.7,29,000/- in the scrip of the
company during the assessment year 2009-10 and no further
querry was raised by the Assessing Officer. The assessee
submitted that there was no failure on the part of the assessee to
disclose fully and truly all material facts as alleged by the
Assessing Officer and the reopening was based on incorrect and
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wrong facts. Relying on various decisions, it was argued that the
reopening was not proper. So far as the merit of the case is
concerned it was argued that the same is also not proper.
3. However, the Ld. CIT(A) was not satisfied with the
arguments advanced by the assessee. So far as the issue relating
tot eh reopening of the case is concerned, he noted that before
reopening the case and issuing notice u/s 148, the Assessing
Officer had issued a letter u/s. 133(6) to the assessee on
23.03.2016, in which it was specifically asked whether the
assessee has purchased the shares of Blue Print Securities Ltd.
during FY 2008-09 or any other year. It was submitted by the
assessee vide her letter dated 28.03.2016 that she has not
purchased any such shares during FY 2008-09 or any other year.
This according to the Ld. CIT(A) implies that the assessee had
denied purchase of shares of Blue Print Securities Ltd., whereas
the AO had received the information from the Investigation Wing
that the assessee had entered into transaction related to
purchase and sale of shares of this company which is nothing but
a paper company to facilitate booking of bogus long-term capital
gains in the form of an accommodation entry. The AO had
analysed the information received with respect the return of
income filed by the assessee and it was noticed by him that the
assessee has not shown any such transaction or income from
capital gains in the return filed. In view of this, the AO had
sufficient material to form the reasons to believe that income had
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escaped assessment and accordingly, the AO had reopened the
case u/s 147 of the Act.
5. Relying on the decision of Hon'ble Gujarat High Court in the
case of Gujarat Ambuja Export Private Limited in SCA
No.10745/16 order dated 11.09.2017 and the decision of Hon'ble
Delhi High Court in the case of Paramount Communication
Limited reported in 382 ITR 444, the Ld. CIT(A) upheld the action
of the Assessing Officer in reopening the assessment.
6. So far as the merit of the case is concerned the CIT(A) also
upheld the action of the Assessing Officer by observing as under
:-
4.3 As far as the addition made by the AO in respect of the cash
credit in the form of bank deposits amounting to Rs. 7,29,000/- is
concerned, it is contended by the AR that the AO has made the
addition without any basis. It is also submitted that the AO had
issued a show cause notice in which the proposed addition was in
respect of investment of Rs.7,29,000/ in the shares of Blue Print
Securities Ltd. and the addition has been made in respect of bank
deposits of the same amount. In this context, it is observed that the
appellant had failed to furnish any information regarding the
purchase of shares which she claimed having sold for
Rs.7,29,000/-. As the appellant had denied the purchase of shares
and it is not possible to sell shares without purchasing the same in
first place, the AO has considered the amount of Rs. 7,29,000/-
received in the bank account and claimed to be the sale proceeds of
the shares, as unexplained cash credits in the bank account. I
agree with the view taken by the AO as the appellant has failed to
produce the details of purchase and sale of shares during the
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course of assessment as well as appellate proceedings and by
doing so, it is also to be noted that the appellant has not come in
appeal with clean hands. In view of the: above facts, the AO had
no other option but to treat the bank deposits as unexplained.
Therefore, the addition made by the AO is confirmed and the
grounds of appeal are dismissed.
7. Aggrieved with such order of the CIT(A), the assessee is in
appeal before the Tribunal by raising the following grounds of
appeal :-
1. That the CIT(A) has erred both on facts and in law in upholding the illegal action
of the AO in reopening the assessment u/s 147/148 of the I.T. Act, 1961.
2. That the CIT(A) failed to appreciate that the reopening u/s 148 was not valid in
law having been based on reasons which were contradictory, factually incorrect
and which had undergone numerous changes during the course of assessment
proceedings by replacement of one section by another.
3. Without prejudice to Grounds 1 & 2, the CIT(A) failed to appreciate that the order
of the AO was passed in violation of the principles of natural justice since the final
show cause proposed an addition u/s 69-B to which a detailed reply was filed and
the ultimate addition was made u/s 68 without granting an opportunity of being
heard.
4. That the CIT(A) in upholding the reopening by the AO acted arbitrarily in
reproducing only in part the written submissions of the appellant without dealing
with the contentions raised therein both on facts and in law and choosing not to
refer to the numerous judgements relied upon including those of the jurisdictional
High court which were binding on him.
5. Without prejudice to the earlier grounds the addition of Rs.7,29,000/- u/s 68 was
not justified either on facts or in law since the AC) after having accepted as a fact
that sale of shares to this extent had taken place during assessment year 2009-10
could have at the most/only assuming but not admitting subjected the same to
treatment under the head capital gains after reducing cost thereof.
6. That the appellant reserves to itself, the right to add, alter, amend, substitute and/
or withdraw any Ground(s) of Appeal on or before the date of hearing.
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8. The Ld. Counsel for the assessee strongly challenged the
order of the CIT(A) in confirming the reassessment proceedings
initiated by the Assessing Officer.
9. Referring to the decision of Hon'ble Bombay High court in
the case of Ankita A. Chokasi Vs. ITO vide writ petition 3344/18,
order dated 10.01.2019 and the decision of Hon'ble Delhi High
Court in the case of PCIT Vs. M/s. SNG Developers Limited vide
92/17 order dated 12.07.2017 he submitted that initiation of
reassessment proceedings based on wrong facts or incorrect facts
is void-ab-initio.
10. So far as the merit of the case is concerned the Ld. Counsel
for the assessee referring to the following decisions submitted
that addition cannot be made u/s. 68 of the IT Act on the basis
of entries made in the bank pass book since such pass book is
not maintained by the assessee but issued to him by the bank :-
1. CIT Vs. Bhaichand N. Gandhi
2. Smt. Madhu Raitani Vs. ACIT
3. Amitabh Bansal Vs. Income Tax Officer
4. Anjul Bansal Vs. Income Tax Officer
He accordingly submitted that both legally and factually no
addition is called for.
11. The Ld. DR on the other hand strongly supported the order
of the CIT(A) in upholding the reassessment proceedings as well
as the addition on merit. Referring to the decision of Hon'ble
Supreme Court in the case of Raymond Woolen Mills Limited Vs.
Page | 7
ITO reported in 236 ITR 34, he submitted that the Hon'ble
Supreme Court in the said decision has held that in determining
whether commencement of reassessment proceedings was valid it
has only to be seen as to whether there was prima facie some
material on the basis of which the department could reopen the
case. The sufficiency or correctness of the material is not a thing
to be considered at this stage. He accordingly submitted that
when the Assessing officer had specific information that assessee
had received accommodation entry in the form of sale and
purchase of shares of Penny stock company and the assessee had
denied to have under taken any such transaction without
furnishing any evidence, therefore, such reassessment proceeding
is valid.
12. So far as the merit of the case is concerned he submitted
that assessee has failed to furnish any information regarding the
purchase of shares which were claimed to have been sold for
Rs.7,29,000/-. Since the assessee had denied the purchase of
shares, therefore, it is not possible as to how the assessee could
sell the shares. Therefore, the Ld. CIT(A) was fully justified in
upholding the addition made by the Assessing Officer.
13. The Ld. Counsel for the assessee in his rejoinder submitted
that you cannot keep on changing the information which were
never confronted and action can be taken only in the year of
purchase.
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14. I have considered the rival arguments made by both the
sides and perused the material available on record. I find the
Assessing Officer on the basis of information received from the
investigation wing that assessee had invested a sum sum of
Rs.7,29,000/- against purchase of scrip of one paper company
namely Blue Print Securities Limited, reopened the case by
recording reasons and issued notice u/s. 148. Since the
assessee, during the course of assessment proceedings, denied to
have purchased or sold the share of M/s. Blue Prints Securities
Limited, the Assessing Officer, invoking the provisions of section
68 of the IT Act made addition of Rs.7,29,000/-to the total
income of the assessee. I find the Ld. CIT(A) upheld the
reassessment proceedings as well as the addition made by the
Assessing Officer u/s. 68 of the IT Act. It is the submission of the
Ld. Counsel for the assessee that when the reopening is based on
wrong facts or incorrect facts then such reassessment
proceedings are void ab initio. It is also the argument of the Ld.
Counsel for the assessee that based on the entries made in the
bank pass book addition cannot be made in the hands of the
assessee u/s. 68 of the IT Act, since such pass book is not
maintained by the assessee but is supplied by the bank.
15. So far as the validity of the reassessment proceedings are
concerned it is an admitted fact that the Assessing Officer, based
on the specific information received that assessee has received
accommodation entry in the form of sale and purchase of shares
of a Penny stick company, reopened the assessment. During the
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course of assessment proceedings as well as in the letter issued
u/s. 133 (6) of the IT Act, the assessee has not come out with
clean hands as to which shares she had sold so as to receive the
amount of Rs.7,29,000/-. It is also not understood as to how
assessee could sell the shares without purchase of the same.
Therefore, without answering these vital questions the assessee
cannot get away on the basis of technicalities that the
reassessment proceedings are initiated on the basis of wrong
facts or incorrect facts especially when assessee is not coming out
with clean hands as to in which shares she had dealt with. The
Hon'ble Supreme Court in the case of Raymond Woolen Mills
(supra) while deciding the validity of reassessment proceedings
has held that in determining whether there was prima facie some
material on the basis of which the Department could reopen the
case, the sufficiency or correctness of the material is not a thing
to be considered at this stage.
16. In view of the above decision of Hon'ble Supreme Court cited
(supra) and in absence of any definite answer given by the
assessee in response to notice u/s. 133 (6) I hold that the
reassessment proceedings initiated by the Assessing Officer and
upheld by the CIT(A) are valid. The arguments of the L.d Counsel
for the assessee that the reassessment proceedings are initiated
on the basis of wrong facts or incorrect facts is not tenable in the
eyes of law since the assessee could not prove that the same is on
account of some other scrip and not on account of M/s. Blue
Page | 10
Print Securities Limited. Therefore, the ground relating to validity
of reassessment proceedings are dismissed.
16. So far s the grounds relating to addition on merit is
concerned, I find no information was furnished by the assessee
regarding the purchase of shares which she claimed to have sold
for Rs.7,29,000/-. It is the submission of the Ld. Counsel for the
assessee that in response to the notice u/s. 133 (6), the assessee
had stated that she had not invested a sum of Rs.7,29,000/- in
the scrip of the company during assessment year 2009-10.
However, no further querry was raised by the Assessing Officer on
this issue. It is the submission of the Ld. Counsel for the assessee
that in the show cause notice dated 16.12.2016, the applicability
of section 69B was racked up for the first time. The Assessing
Officer has also not obtained any information from the bank
regarding who signed the pay in slip alongwith cheque / demand
draft that was deposited and information from the company who
has issued cheque and necessity of issuing such cheque.
Considering the totality of the facts of the case and in the interest
of justice I deem it proper to restore the issue to the file of the
Assessing Officer with a direction to give one more opportunity to
the assessee to substantiate with evidence to his satisfaction
regarding the nature of deposit in the bank account i.e. sale of
which share that she had received the money, the year in which
such shares were purchased and other information that the
Assessing Officer may deem it proper for his verification. The
Assessing Officer shall decide the issue as per fact and law after
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giving due opportunity of being heard to the assessee. The
grounds relating to the addition on merit are accordingly allowed
for statistical purpose.
17. So far as the argument of the Ld. Counsel for the assessee
that addition u/s. 68 cannot be made on the basis of entries in
the bank pass book is concerned the Ld. AR himself admits in the
written synopsis filed before the CIT(A) that the Assessing Officer
had issued notice dated 16.12.2016 regarding the applicability of
section 69B of the IT Act. Further the assessee had not come out
with clean hands that the money so deposited does not belong to
her and that she has not signed the pay in slip and that it was
inadvertently deposited by the bank in her pass book. Therefore,
the various decisions relied on by the Ld. Counsel for the
assessee are not applicable to the facts of the present case.
Therefore, this argument of the assessee is rejected
18. In the result, the appeal filed by the assessee is partly
allowed for statistical purpose.
Order pronounced in the open court on 10.06.2019.
Sd/-
(R.K PANDA)
ACCOUNTANT MEMBER
*Neha*
Date:- 10.06.2019
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
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Date of dictation
Date on which the typed draft is placed before the dictating
Member
Date on which the approved draft comes to the Sr.PS/PS
Date on which the fair order is placed before the Dictating
Member for Pronouncement
Date on which the fair order comes back to the Sr. PS/ PS
Date on which the final order is uploaded on the website of 10.06.2019
ITAT
Date on which the file goes to the Bench Clerk
Date on which file goes to the Head Clerk.
The date on which file goes to the Assistant Registrar for
signature on the order
Date of dispatch of the Order
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