IN THE INCOME TAX APPELLATE TRIBUNAL
`A' : NEW DELHI
DELHI BENCH `A
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
VARKEY, JUDICIAL MEMBER
SHRI ABY T. VARKEY,
Nos.272/Del/2010 & 2233/Del/2004
ITA Nos
1999-2000
Assessment Year : 1999-
Shri Ashok Mahindru, Vs. Income Tax Officer,
511/2/1, Rajokri, Ward-3,
Ward-
New Delhi 110 038. Gurgaon.
PAN : ABHPM8364M.
(Appellant) (Respondent)
No.326/Del/2010
ITA No.326/Del/2010
1999-2000
Assessment Year : 1999-
Income Tax Officer, Vs. Shri Ashok Mahindru,
Ward-
Ward-2(2), Jacubpura,
351/15, Jacubpura,
New Delhi. Gurgaon,
Haryana.
PAN : ABHPM8364M.
(Appellant) (Respondent)
Assessee by : Shri B.B. Bhagat, Advocate.
Revenue by : Ms. Y. Kakkar, Sr.DR.
ORDER
PER G.D. AGRAWAL, VP :
:-
ITA No.2233/Del/2004 Assessee's appeal :-
This appeal by the assessee is directed against the order of
learned CIT(A), Panchkula dated 24th March, 2004 for the AY 1999-
2000.
2. Since the grounds of appeal raised by the assessee were
argumentative, the assessee filed concise grounds of appeal.
3. Ground No.1 of the concise grounds of appeal reads as under:-
2 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
"That on facts and circumstances of the case the learned
CIT(Appeals) has erred in holding that notice issued u/s
148 was a valid notice."
4. We have heard the arguments of both the sides and perused
relevant material placed before us. The reasons recorded for
reopening of assessment read as under:-
"Reasons for the belief that income has escaped assessment in the
case of Shri Ashok Mahendru, 351/15, Jacubpura, Gurgaon Asstt. year
1999-2000
1. Computation of assessable income as on 31.3.1999 as worked
out by the assessee is as under:-
Income from Salary :
Remuneration income from :
Advance Finvest (P) Ltd. 75,000.00
Advance Detergents Ltd. 75,000.00
Advance Coal Mgnt. & Mkt. Ltd. 75,000.00
Advance Design & Engg.Ltd. 75,000.00 3,00,000.00
Less : Standard Deduction 20,000.00 2,80,000.00
Income from Business :
Commission Recd.
Interest Recd. From :
Advance Entertainment Network Ltd. 1,23,006.00
Advance Coal Mgmt. & Mkt.Ltd. 6,600.00
Aureola Chemicals Ltd. 7,39,703.00
Advance Detergents Ltd. 1,07,685.00
Advance Finvest (P) Ltd. 5,96,574.00
Bank Interest 2,993.24 15,76,561.24
33,79,021.24
Less : Interest paid to Depositors 32,44,070.50
Gross Total Income 1,34,950.74
Less : Deduction under 80-L 2,993.24
Net Assessable Income 1,31,957.50
Rounded off to Rs. 1,31,960.00
3 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
Gross Tax due 15,392.00
Less : Tax rebate u/s 88 20% of LIP of Rs.27106.10 5,421.00
Net tax due
9,971.00
Less : TDS paid 1,57,355.00
Refund due 1,47,384.00
2. It has been noticed that besides the above, the assessee has
dividend income of Rs.17,62,200/- which has been claimed exempt u/s
10(33) of the Act. A further perusal of the opening account reveals
that the amounts invested in the shares of various companies from
which dividend income of Rs.17,62,200/- has been shown is of the
order of Rs.2 crore i.e. to be exact Rs.1,97,95,340/-.
3. From the computation of income, it is noticed that the assessee
has claimed to have paid an interest of Rs.32,44,070/- to his creditors.
It is further noticed that the major portion of the interest has been paid
on the unsecured loans raised for making investment in the purchase
of shares. If this is properly examined, I am of the view that the
interest attributable to the investment in shares which has resulted in
exempted income of Rs.17,62,200/- will be much higher than the
income declared on account of dividend. The possibility of there being
a net loss of a few lacs under the head dividend is not ruled out. As
the dividend income being exempt is not includible in the total income,
similarly the loss arising therefrom cannot also be set off against the
income under the heads salary, commission, interest etc. Dividend
income being exempted u/s 10(33) of the Income tax act with effect
from asstt. year 1998-99, neither any income from dividends can be
included in the total income nor any loss therefrom can be adjusted or
set off or carry forward against any income under any heads of
income.
4. During the year the assessee has also sold jewellery worth
Rs.62,09,189/- on which Long Term Capital Loss of Rs.8,18,972/- has
been claimed. The genuineness of this loss also needs to be
examined. Moreover, the jewellery seems to be declared under VDIS
1997. He is also having a plot worth Rs.2 lacs. The above facts create
a suspicion that a man who earns an income of Rs.92,26,329/- is
spending a sum of Rs.6,950/- as his personal expenses and he is also
4 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
not repaying back the unsecured loans. The household expenses are
so low that it requires verification/scrutiny.
Sd/-
(R.A. Mittal)
Income Tax Officer
Ward-1, Gurgaon."
5. From a perusal of the above reasons, it is evident that paragraph
1 is only the reproduction of the computation of assessable income
furnished by the assessee. In paragraph 2 & 3, the Assessing Officer
has pointed out that since the dividend income is exempt under
Section 10(33), the proper working of dividend income is required and
possibility of there being net loss under the head dividend is not ruled
out. Such loss cannot be adjusted against the other income because
dividend income is exempt. In paragraph 4, the Assessing Officer
observed that the long term capital gains shown by the assessee
require verification and the household expenses disclosed by the
assessee also require verification. That the preliminary requirement
for reopening under Section 147 is the satisfaction of the Assessing
Officer with regard to escapement of income chargeable to tax. In the
reasons recorded, except in the heading mentioning that the "reason
for the belief that income has escaped assessment", there is no finding
in the reasons recorded for escapement of income. The entire finding
is with regard to requirement of verification and reworking of dividend
income, verification and reworking of capital loss and the verification of
household expenses. In our opinion, Section 148 cannot be invoked
only for the purpose of verification of certain income or expenses.
Section 143(2) reads as under:-
"[(2) Where a return has been furnished under section 139,
or in response to a notice under sub-section (1) of section
142, the Assessing Officer shall,--
(i) where he has reason to believe that any claim of loss,
exemption, deduction, allowance or relief made in the
5 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
return is inadmissible, serve on the assessee a notice
specifying particulars of such claim of loss, exemption,
deduction, allowance or relief and require him, on a date to
be specified therein to produce, or cause to be produced,
any evidence or particulars specified therein or on which
the assessee may rely, in support of such claim:
Provided that no notice under this clause shall be served
[Provided
on the assessee on or after the 1st day of June, 2003;]
(ii) notwithstanding anything contained in clause (i), if he
considers it necessary or expedient to ensure that the
assessee has not understated the income or has not
computed excessive loss or has not under-paid the tax in
any manner, serve on the assessee a notice requiring him,
on a date to be specified therein, either to attend his office
or to produce, or cause to be produced, any evidence on
which the assessee may rely in support of the return:
Provided that no notice under clause (ii) shall be served on
[Provided
the assessee after the expiry of six months from the end of
the financial year in which the return is furnished.]]."
6. From the above, it is evident that the Income-tax Act empowers
the Assessing Officer to issue notice under Section 143(2) to verify the
correctness of the income or loss disclosed by the assessee. The
Assessing Officer has to issue the notice under Section 143(2) within
the time limit specified in the said Section. If the Assessing Officer
failed to issue the notice under Section 143(2) within the time limit
specified in that Section, he cannot issue the notice under Section 148
just for the purpose of ensuring the correctness of the income
disclosed or the loss disclosed or to scrutinize certain income or
expenses. In view of the above, we are of the opinion that reopening
of assessment by the Assessing Officer for the purpose of scrutiny of
dividend income, capital loss or household expenses is not permissible.
Therefore, the notice issued under Section 148 is quashed and
consequentially, the assessment order framed in pursuance to the
notice under Section 148 is also quashed.
6 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
7. Since we have quashed the impugned assessment order, the
other grounds of appeal which are with regard to additions made under
various heads do not survive and therefore, do not require any
separate adjudication.
:-
ITA Nos.326/Del/2010 & 272/Del/2010 :-
8. These cross appeals are against the levy of penalty under
Section 271(1)(c) of the act which was partly sustained by the learned
CIT(A). The assessee is in appeal against the penalty sustained while
the Revenue is in appeal against the relief allowed by the learned
CIT(A).
9. Since, while deciding the assessee's appeal in ITA
No.2233/Del/2004, we have quashed the assessment order dated 31st
March, 2003 passed under Section 143(3)/148, any penalty levied on
the basis of the addition made in that assessment order does not
survive because the addition itself does not survive. Therefore, the
assessee's appeal against the penalty sustained by the CIT(A) is
allowed and Revenue's appeal against the penalty deleted by the
CIT(A) is dismissed.
10. In the result, assessee's appeals vide ITA No.2233/Del/2004 &
272/Del/2010 are allowed and Revenue's appeal vide ITA
No.326/Del/2010 is dismissed.
Decision pronounced in the open Court on 22nd August, 2014.
Sd/- Sd/-
VARKEY)
(ABY T. VARKEY) AGRAWAL)
(G.D. AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 22.08.2014
VK.
7 ITA-272/D/2010, 2233/D/2004 &
326/D/2010
Copy forwarded to: -
1. Appellant Shri Ashok Mahindru,
: Shri
351/15, Jacubpura,
Gurgaon, Haryana.
2. Respondent : Income Tax Officer,
Ward-
Ward-2(2), New Delhi.
3. CIT
4. CIT(A)
5. DR, ITAT
Assistant Registrar
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