Income Tax Appellate Tribunal - Chandigarh
The A.C.I.T., Range Vi vs Sh. Balbir Chand Maini on 28 November, 2006
Equivalent citations: (2007)111TTJ(CHD)160
ORDER
M.A. Bakshi, Vice President
1. The appeal of the Revenue for assessme n t year 1998-99 is directed against the order dated 23.3.2004 of Commissioner of Income-tax (Appeals)-II, Ludhiana The effective grounds of appeal are as under:
1. The learned Commissioner of Income-tax (Appeals)-II, Ludhiana has erred both in law as well is facts of the case while ordering the deletion of Rs. 1 2,47,500/- as rightly made by the Assossing Officer on account of bogus capital gain on sale and purchase of shares by the assessee.
2. That while ordering deletion of the addition of Rs. 12,47,500/-, the learned Commissioner of Income-tax (Appeals)-II, Ludhiana did not appreciate the well brought out findings given by the Assessing Officer in his order from which it is clearly discernible that the purchase and sales of shares of M/s. Ankur International Ltd. as transacted by the assessee were indeed bogus and not genuine.
3. That the learned Commissioner of Income-tax (Appeals)-II, Ludhiana further erred in ignoring the fact that the assessee deliberately effected the bogus capital gain of Rs. 12,47,500/- without paying any tax on it as the assessee set of its loss of Rs. 11,59,066/- from the sale of its gold jewellery against the said gain.
2. We have heard the parties and perused the record.
3. The relevant facts, briefly stated, are that the assessee had filed return of income for assessment year 1998-99 on 31.10.1998, which was processed under Section 143(1) on 26.2.1999. Subsequently notice under Section 148 was issued to the assessee on 2 9.5,2001. In response to the said notice, the assessee filed the return on 16.10.2001 declaring the same income of Rs. 7,93,140/- as shown in the original return. The Assessing Officer completed the re-assessment at an income of Rs. 20,24,602/- vide order dated 21.3.2003
4. The assessee appealed to the Commissioner of Income-tax (Appeals) and the latter vide impugned order allowed relief to the assessee against which the Revenue is in appeal before us.
5. It is also pertinent to mention that during the financial year 1997-98, the assessee had made a disclosure under VDIS of diamond jewellery valued at Rs. 29,02,395/-. In the return of income filed for assessment year 1998-99, the assessee had claimed to have sold the said jewellery for a consideration of Rs. 83,40,000/-. On the basis of the said sale, long tern capital gain of Rs. 1,40,917/- was computed. As per the declaration made under VDIS, the year of acquisition of the diamond jewellery was stated to be the financial year 19 8 2-83. For the purpose of working out long tern capital gain, the assessee estimated its value in the year 1982- 83 at Rs. 27,00,000/- as against Rs . 29,02,395/- declared under the VDIS in 1987. As per the above details, the appreciation of Rs. 2,02,395/- in the value of the diamond jewellery for the period of five years (between 1982 to 1987) was admitted. The appreciation from the year 1987 to the year of sale in .1998 has been declared at Rs. 54 lacs. The Assessing Officer was of the view that the cost of diamond jewellery shown in the year 1982-83 at Rs. 27 lacs was not reliable. According to the Assessing Officer the assessee has taken the cost of diamond jewellery keeping in view the sale consideration of diamond in the year 1997. The Assessing Officer also observed that the selling price of diamonds has been increased abnormally. The Assessing Officer pointed out that the assessee has computed, the loss on account of sale of gold and diamond jewellery at Rs. 11,59,066/- which has been set off against a matching short term capital gain of Rs, 11,75,0007-derived from sale of shares of M/s Ankur International Limited. The Assessing Officer was of the view that the cost of acquisition of diamonds in the year 1982-83 should be at Rs. 24,12,380/- and accordingly, the long tern capital gain worked out to Rs. 10,14,333/- as against Rs. 1,40,917/- disclosed by the assessee. As such, according to the Assessing, Officer, the assessee has shown the income from long tern capital gain less to the extent of Rs. 8,73,418/-.
6. The Assessing Officer further noticed that besides the long tern capital, gain shown at Rs. 1,40,917/- on the sale of diamond jewellery, the assessee had declared long term capital loss of Rs. 12,99,983/- on the sale of gold jewellery. Thus there was net capital loss of Rs. 11,59,066/- disclosed by the assessee. The said net long term capital loss of Rs. 11,59,066/- was set off by the assessee against short term capital gain of Rs. 11,75,000/- on purchase and sale of shares resuming in a net capital gain of Rs. 16,034/-. The Assessing Officer further observed that the assessee had purchased 30,000 shares of M/s. Ankur International Limited, Ludhiana through a broker Munish Arora & Co. @ Rs. 2.60 to 3.40 per share in the month of April, 1997. Out of these shares 24000 shares were claimed to have been sold through a broker, namely Shri S.K. Sharma & Co. in the month of February/March, 1998 @ Rs. 48.50 to 54.50 per share. In para 4.2 of the assessment order, the Assessing Officer has pointed out that in the case of Shri Som Nath Maini, a family member of the assessee, a similar exercise of purchase of 45,000 shares and subsequent sale of 43,000 shares of M/s Ankur International Limited, Ludhiana had been carried out. It has been pointed out by the Assessing Officer that Shri Som Nath Maini too has se off the short term capital loss on the sale of gold jewellery declared under VDIS, 1997 against the capital gain on the sale of above shares. The Assessing Officer has expressed surprise that in both the cases, the short term capital gain was almost matching with the long tern capital loss in the case of both the family members under different circumstances. The Assessing Officer had made enquiries from Ludhiana Stock Exchange during the assessment proceedings in the case of Shri Som Nath Maini and obtained the Profit & Loss Account/Balance Sheet of M/s Ankur International Limited, Ludhiana for assessment years 1996-97 to 1999-2000. According to the Assessing Officer, the company had never declared any dividend and that it was declaring marginal profits and as per in-formation given by Ludhiana Stock Exchange the scripts of M/s. Ankur International Limited, Ludhiana were not quoted beyond 17.7.1997 and the maximum value of the share quoted was Rs. 17,00. The Assessing Officer made the analysis of Balance Sheet of M/s. Ankur International Limited, Ludhiana and determined the net asset value of the shares between Rs. 5.32 to Rs. 9.37 per share. He was, therefore, of the view that the value of shares could have never reached to as high as Rs.55/- per share disclosed by the assessee as sale price of such shares in February/March, 1998, The Assessing Officer had also collected information from M/s. Ankur International Limited, Ludhiana regarding the name and address of the shareholders in respect of the following distinctive numbers of the shares claimed to have been sold by the assessee:
2570601 to 2580600 2580601 to 2590600 & 2590601 The company namely M/s. Ankur International Limited, Ludhiana vide letter dated 19.12,2002 had informed the Assessing Officer that the above shares had been transferred in the name of Shri B.C. Maini (The assessee) on 4.10.1997 and that these shares were still registered in .the same name. The assessee had been confronted with the above information. In reply, the Assessing Officer was informed that the shares had been sold by the assessee through M/s. S.K. Sharma & Company, broker and the copies of purchase and sale bills were issued by the said broker. According. to the assessee the rates of shares may vary according to supply and demand. The assessee had requested the Assessing Officer to make enquiry from Shri S.K. Sharma & Company the broker. The assessee had also informed the Assessing Officer that the mere fact that there was no transaction in the stock exchange at the relevant point of time was not sufficient to hold that the assessee had not sold the shares at the rates as claimed. The Assessing Officer made enquiries from M/s. S.K. Sharma & Company the broker and recorded the statement of Shri Sharma. Shri Sharma had confirmed the sale of the shares through him by the assessee. However, when Shri Sharma was asked to specify the basis for purchasing the shares at the rate given in the purchase bill and was asked to give the copies of stock exchange quotations, he failed to furnish the complete names and addresses of the persons who had purchased the shares with the bills of distinctive numbers of shares. The Assessing Officer further came to know that in the bank account of Shri Sharrna the alleged sale proceeds of the shares had been deposited in cash before the issue of cheques in the name of the assessee for purchase of shares. According to the Assessing Officer the sale of shares through M/s. S.K. Sharrna & Company was nothing but collusive affair so as to introduce assessee's own money amounting to Rs. 12,47,500/- in assessee's books of account. The Assessing Officer accordingly made an addition of Rs. 12,47,500/- as income from undisclosed sources. The long term capital loss was determined at Rs. 2,85,620/- to be carried forward. The Assessing Officer had computed the income of the assessee as under:
1. Income from house property Rs. 76,800/-
(as shown)
2. Long Term Capital Gains a. On sale of diamond jewellery Rs. 10,14,333/-
(as discussed in para 3.14 above) b. On sale of gold jewellery (-) Rs. 12,99,983 (as shown) Long Term Capital Loss to be C/f (-) Rs. 2,85,620/-
3. Income from other sources Rs. 7,12,745/-
(as declared)
4. Addition an A/c of sale of shares Rs. 12,47,500/-
(as discussed in para 4.27 above) Rs. 20,37,045/-
Less: Deduction under Section 801, Rs. 12,443/-
Rs. 20, 24, 602/-
Rounded off Rs, 20,24,6001-
7. The assessee appealed to the Commissioner of Income-tax (Appeals) and the latter vide impugned order has rejected the ground of appeal raised by the assessee in regard to the validity of initiation of proceedings under Section 147. The Commissioner of Income-tax (Appeals) has referred W-. the decision of the Supreme Court in the case of Phool Chand Bejrang Lal v. ITO (1993) 203 ITR 455 and in the case of Ess Ess Kay Engg. Co. (P) Ltd. v. CIT 247 ITR 818 to support the finding that the law w.e.f. 1.4.1989 regarding reopening of assessment has undergone a change and that the cited decisions rendered with reference to the law prior to 1.4.1989 are no longer applicable to the facts of this case.
8. The Commissioner of Income-tax (Appeals) vide para 22 of his order held that the cost of diamond jewellery disclosed at Rs. 27,00,000/- for the year 1982 was to be accepted in view of the following factors:
i) Disclosure made In the VDIS Form.
ii) Affidavit filed by the assessee during the VDIS.
iii) Entries made In the record and filed under the VDIS Scheme.
iv) Valuation Report of 1983 by approved valuer filed during assessment proceedings valuing each item of Diamond jewellery separately.
v) The principle of Valuation of Gem & Jewellery Export Promotion Council.
a) Being average and having many shortcomings i.e. the same valuation of diamond of good quality size, cut. polish, with the inferior quality etc.
b) Confirming that valuation of Diamonds etc. normally based on individual interpretation/appraisal of jewellery.
9. The Commissioner of Income-tax (Appeals) relying upon the decision of Punjab & Haryana High Court in the case of Jaswant Rai v. CWT 107 ITR 477 (P&H) held that the value declared under VDIS Scheme was to be accepted. Accordingly the capital loss shown by the assessee has been accepted by the Commissioner of Income-tax (Appeals).
10. In regard to the alleged bogus sale of shares, the Commissioner of Income-tax (Appeals) has deleted the addition vide para 20 of the impugned order which is reproduced as under for the sake of ready reference:
20. I have carefully considered the contentions of the learned counsel as well as gone through the records. It has been noticed that case was not reopened for the purpose of making addition on account of sale of shares and making addition under Section 68 as is evident from the reasons recorded by the Assessing Officer for issuing the notice under Section 148. Moreover, the Appellant has discharged his onus of identity, genuineness and credit .worthiness of party which has been confirmed from Shri S.K. Sharma. The quotations of Jaipur Stock Exchange were placed before the Assessing Officer, Also the sale was made through broker and the payment was received through cheque. This fact has not been denied by the Assessing Officer. These factors proved that addition under Section 68 cannot be made as the source of the cash credit has been proved by the Appellant.' Hence, the addition of Rs. 12,47,500/- is hereby deleted.
11. The Revenue is in appeal before us.
12. The learned Departmental Representative contended that in regard to the ground relating to loss on sale of jewellery, she relies upon the order of the Assessing Officer. In regard to bogus sale of shares, the learned Departmental Representative claimed that the issue was covered in favour of the Revenue by the decision of the Tribunal in the case of ACIT. Range-VI v. Som Nath Maini. Ludhiana, a family member of the assessee, in I.T.A. No. 829/Chandi/2002 for assessment year 1998-99. According to the learned Departmental Representative, the statement of Shri S.K. Sharma was also considered by the Tribunal in the case of Shri Som Nath Maini and, therefore, the decision oft he Tribunal is applicable on all fours in the case of the assessee. According to the learned Departmental Representative, the Commissioner of Income-tax (Appeals) has ignored the finding of the Assessing Officer on the basis of the enquiry made and the material placed on record.
13. The learned counsel for the assesses on the other hand, contended that, apart from the decision on merits by the Commissioner of Income-tax (Appeals), the assessee was at liberty to challenge the validity of reopening of the assessment on which the Commissioner of Income-tax (Appeals) has given the decision against the assessee. If was contended that the Assessing Officer had reopened the assessment in order to assess the capital gain on the sale of jewellery etc. There was no whisper about the sale of shares of M/s Ankur International Limited, Ludhiana in the reasons recorded for re-opening of the assessment. It was contended by the learned counsel for the assessee that the Assessing Officer had reopened 'the assessment only with reference to the capital gain/capital loss on the sale of jewellery and, therefore, it was not open to him to assess the alleged bogus sale of shares in the course of re-assessment proceedings for which assessment was not reopened. It was pointed out that the return of.income filed by the assessee had been processed under Section 143(1)(a). The Assessing Officer had not issued any notice under Section 143(2) to make enquiries. According to the learned counsel for the assessee it was only in the course of re-assessment proceedings that the Assessing Officer had made fishing enquiries and based the addition on presumptions ignoring the relevant material available on record to support the genuineness of the sale of shares. It was pointed out that the assessee had sold the shares at the prevailing market rate as evidenced by the stock exchange rates at Jaipur. The assessee had sold the shares through a broker, namely Shri S.K. Sharma & Co. The statement of the broker had been recorded and he had confirmed the transaction of sale of shares through him. The payment had been received by means of cheque from the said broker. According to the learned counsel for the assessee as per the information available to him no action was taken against Shri S.K. Sharma and & Co. on account or alleged sale of bogus shares. It was contended that the decision of the Tribunal in the case of ACIT, Range-VI v. Som Nath Muini. Ludhiana (supra) is not applicable in this case in so far as in that case the certificate from Jaipur Stock Exchange was produced only before the Tribunal and the same was not considered. However, in the case of the assessee, the certificate from Jaipur Stock Exchange had been filed before the Assessing Officer as well as before the Commissioner of Income-tax (Appeals) and have been considered. Inviting our attention to the letter issued by the Assessing Officer during the course of re-assessment proceedings and in particular to the letter placed on page Nos. 16 and 20 of the Paper Book, it was contended that the Assessing Officer did not have a definite opinion to the effect that the sale of shares was bogus. The learned counsel for the assessee contended that the material collected by the Assessing Officer was not confronted to the assessee and, therefore, the same could not be used against the assessee. Reliance was placed on the decision of the Punjab & Haryana High Court in the case of CIT v. M.P. Iron Traders 189 CTR (P&H) 154 and the decision of the Tribunal in the case of DCIT v. A.G.G. Exports Private Limited in I.T.A. No. 457/Chandi/2002 to support the contention that reopening of assessment made in respect of alleged bogus shares was illegal. According to the learned counsel, there was no material with the Assessing Officer to suggest that the assesses had earned capital gains in respect of sale on diamond jewellery to the extent assessed by him.
14. The learned counsel for the assessee pointed out that the return of income filed by the asses see had been processed tinder Section 143(1)(a). No notice was issued to the assessee. The Assessing Officer was, therefore, not entitled to reopen the assessment for making enquiries in regard to the sale of shares. Reliance was placed on the decision of Punjab & Haryana High Court in the case of Vipan Khanna v. CIT . The learned counsel further contended that Shri S.K, S harm a & Co. had confirmed the payment to the assessee by cheque. The assessee was not bound to establish the source of source. If the broker had deposited the money in cash, the assessee was not required to explain the source of cash deposits made by the broker in his bank account. To support the contention that the assessee is not bound to establish the source of source, reliance was placed on the following decisions:
i)Murlidhar Lahorimal v. CIT. 280 ITR 512(Guj)
ii) CIT v. Pragati Co-operative Bank Ltd. 278 ITR 170 (Guj)
iii) Sarogi Credit Croporation v. CIT 103 ITR 344 (Pat) It was accordingly pleaded that the appeal of the Revenue may be dismissed.
15. The learned counsel for the assessee further contended that the Tribunal may consider that the statement of the assessee in this case was not recorded at all and the statement of Shri S.K. Sharma was not provided to the assessee. Therefore, the addition made by the Assessing Officer was not warranted.
16. In counter reply, the learned Departmental Representative contended that the statement of Shri S.K. Sharma was not used against the assessee. Shri Sharma had simply confirmed the transactions. Therefore, the statement of Shri Sharma was not given to the assessee. Whatever other material was collected by the Assessing Officer had been confronted to the assessee. It was further contended that the Assessing Officer has established from the facts on record that the sale of shares could not have taken place @ Rs. 54/- per share as claimed by the assessee. Our attention was also invited to the enquiry made by the Assessing Officer from Ludhiana Stock Exchange as well as from Jaipur Stock Exchange. It was contended that the stock exchange quotation rate of Jaipur Stock Exchange cannot be relied upon as the Assessing Officer has recorded a finding of fact that the sale of about 200 shares had taken place at a higher price to give credence to the transactions of the assessee as it was found that ultimately the shares claimed to have been sold through Jaipur Stock Exchange had been transferred back to the original owner and there was no genuine sale of shares. According to the learned Departmental Representative the sale of nominal shares at Jaipur Stock Exchange was created to serve as evidence in this case is established from facts and the circumstances coming to light after enquiry made by the Assessing Officer.
17. Regarding the contentions advanced on behalf of the assessee relating to re-assessment with reference to sale of shares, the learned Departmental Representative invited our attention to the language of Section 147 applicable w.e.f. 1.4.1989. It was pointed out that as per the plain language of the section the Assessing Officer is empowered not only to bring to tax the items of escaped income in respect of which notice under Section 148 was issued but also in respect of any other item which comes to the notice of the Assessing Officer after reopening of assessment. 'Relying upon the decision of the Supreme Court in the- case of Phool Chand Bajrang Lal and Anr. v. ITO and Anr. 203 ITR 456, it was contended that whereas the Assessing Officer should have reasons to believe that the income of the assessee had escaped assessment the adequacy of the reasons cannot be questioned in the court of law. Responding to the contention advanced on behalf of the assessee that the Assessing Officer did not have any information about the alleged bogus sales, the learned Departmental Representative invited our attention to the reasons recorded by the Assessing Officer on 29.5.2001. It was pointed out that at the time of recording the reasons the Assessing Officer did not have any information about the enquiry made in the-case of ACIT Range-VI v. Som Nath Maini Ludhiana (supra). It was pointed out that the ACIT-1(II) had recorded the reasons for reopening in the case of the assessee to be on account of sale of jewellery. However, the assessment in the case of ACIT Range-VI v. Som Nath Maini Ludhiana (supra) was made by different Assessing Officer namely Smt. Mamta Bansal, ACIT-1(III) on 26.3.2001. In the case of the assessee the reasons for reopening of assessment were recorded by different Assessing Officer namely Shri Ravi Aggarwal on the issue of understatement of capital gain on sale of diamond jewellery. Thereafter re-structuring took place in the Income-tax department consequent to which Shri M.S. Minhas was posted as ACIT, Range-VI. He had now jurisdiction on both Shri Balbir Chand Maini the assessee and Shri Som Nath Maini Anr. member of the family. The case of Shri Som Nath Maini had been decided by the Commissioner of Income-tax (Appeals) and Shri M.S. Minhas ACIT in that case filed the second appeal to the Tribunal, Shri M.S. Minhas took up the re-assessment o' the assessee and during the course of re-assessment proceedings the information which was available with Shri M.S. Minhas, the Assessing Officer on the.basis of the enquiry in the case of ACIT, Range-VI v. Som Nath Maini, Ludhiana (supra) was confronted to the assessee. The learned Departmental Representative contended that the contention advanced on behalf of the assessee that the Assessing Officer had started making fishing enquiries without any information is contrary to the facts on record. Our attention was invited to para 42 of the assessment order wherein the Assessing Officer has specifically mentioned about the assessment made in the case of ACIT, Range-VI v. Som Nath Maini, Ludhiana (supra) and the enquiry made therein. According to the learned Departmental Representative the learned counsel for the assessee has relied upon the decision of the Punjab & Haryana High Court in the case of Vipan Khanna v. CIT (supra) but has omitted to read the last para of the same judgment which permits the Assessing Officer to make reassessment on the basis of information gathered after the issue of notice under Section 148.
18. Responding to the contention advanced on behalf of the assessee that where no assessment under Section 143(3) has been made, the Assessing Officer has no power to reopen the assessment, our attention was invited to the order of Chandigarh Bench of I.T.A.T. in the case of DCIT v. A.G.G. Exports Private Limited in I.T.A. No. 457/Chandi/200 to the contrary. It was con tended that in that case also no regular assessment was made but the reopening of assessment was held to be valid. Reliance was also placed on Full Bench decision of the of Delhi High Court in the case of CIT Vs. Kelvinator of India Ltd., 256 ITR 1 to support the contention that when no regular assessment is made by the Assessing Officer, he cannot be said to have expressed any opinion about any income that has escaped the assessment. Reliance was also placed on the decision of Punjab & Haryana High Court in the case of Gurera Gas Cylinders Pvt. Ltd. v. CIT & Anr. 258 ITR 170 to support the contention that reopening of assessment in this case is valid and the assessment on account of bogus sale of shares was justified.
19. We have given our careful consideration to rival contentions and the material on record. As pointed out earlier, the Commissioner of Income-tax (Appeals) has upheld the validity of reopening of assessment in this case. So however, additions made by the Assessing Officer have been deleted by him. The asses see has not filed any appeal against the decision of the Commissioner of Income-tax (Appeals) holding that the proceedings for reassessment had been validly initiate). Even cross objection has not been filed by the assessee, However, during the course of hearing, the learned counsel for assessee contended that the assessee has a right to contest on the issues decided against him by the Commissioner of Income-tax (Appeals). In our considered view, the stand taken by the assessee's counsel is correct in the light of Rule 27 of Income-tax Appellate Tribunal Rules, 1963 which is quoted hereunder:
27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.
20. Since the issue relating to the validity of reopening was decided against the assessee, in the light of Rule 27 of the Income-tax Appellate Tribunal Rules, 1963, quoted above, we hold that the assessee is entitled to contest the issue in defence of the appeal of the Revenue. We, therefore, first deal with the validity of reopening of assessment.
21. In this case, the assessee had filed the return of income on 31.10.1998 declaring an income of Rs. 7,93,140/-. The said return had been processed Under Section 143(1) on 26.2.1999. The assessee had disclosed long term capital gain of Rs. 1,40,917/- in respect of diamond jewellery sold for Rs. 83,40,000/-. The assessee had made a voluntary disclosure in the financial year 1987-88 under Voluntary Disclosure of Income Scheme in which the cost of diamonds in the year 1987 was disclosed at Rs. 29,02,395/-. While declaring long term capital gain at Rs. 1,41,917/- in respect of the sale of diamond jewellery, the assessee had adopted the cost of acquisition of the jewellery in the year 1982-83 at Rs. 27 lacs. The Assessing Officer on the basis of enquiries made from Gem & Jewellery Export Promotion Council of India was on the view that the cost of acquisition of diamond jewellery in the year 1982 as against the market value disclosed in the assessment year 1987-88 of Rs. 29,02,395/- could not be Rs. 27 lakhs. On the basis of information received from Gem & Jewellery Export Promotion Council of India the Assessing Officer estimated the cost of acquisition of diamond jewellery in the year 1982-83 at Rs. 24,12,380/-. On the basis of the said cost of acquisition, the Assessing Officer determined long term capital gain on the sale of diamond jewellery at Rs. 10,14,333/- as against Rs. 1,40,917/- declared by the assessee. The assessee had also disclosed long term capital loss on sale of gold jewellery of Rs. 12,99,983. This was not disturbed by the Assessing Officer. So however, the long term capital gain of Rs. 10,14,333/- on sale of diamond jewellery was adjusted against the loss o n sale of gold jewellery of Rs 12,99,917/-. The Assessing Officer determined long term capital loss at Rs. 2,85,620/- to be carried forward to the subsequent year(s). Notice Under Section 148 was issue d on the basis of belief of the Assessing Officer that the income of the assessee had escaped assessment. The learned Commissioner of Income-tax (Appeals) has held that the Assessing Officer is empowered to issue notice Under Section 148 if he has a bona fide belief that the income of the assessee had escaped assessment. The belief of the Assessing Officer has got to be honest belief. So however, it is not necessary that at the time of issue of notice Under Section 148 the Assessing Officer should have conclusive evidence that the income of the assessee had escaped assessment. Their Lordships of Supreme Court in the case of Phool Chand Bajrang La v. ITO (supra) held that for the purpose of issue of notice Under Section 148 the Assessing Officer should have belief that the income had escaped assessment. Once it is found on the basis of material on record that the Assessing Officer could have a reasonable belief that the income of the assessee had escaped assessment, it was not open to the court to judge the sufficiency of the reasons for the belief. In our considered view, on the basis of material on record, mainly the information collected from Gem & Jewellery Export Promotion Council of India, the Assessing Officer could have formed a reasonable belief that the income of the assessee had escaped assessment. We, therefore, concur with the finding of the Commissioner of Income-tax (Appeals) that in this case that the Assessing Officer had validly initiated the reassessment proceedings by issue of notice Under Section 148. It maybe pertinent to mention that in this case assessment had not been made Under Section 143(3) earlier. The return of income had simply been processed without-scrutiny and enquiry. Notice Under Section 148 was issued within the period of 4 years. The Assessing Officer had not expressed any opinion earlier as no regular assessment had been made in this case. The law is now well-settled that even after the amendment in Section 147 w.e.f. 1.4.1989, assessment can not be re-opened on mere change of opinion. The principle has been t ho roughly discussed by the Hon'ble Delhi High Court in the case of CIT v. Kelvinator of India Ltd. (supra). This view has been affirmed by, the Hon'ble Supreme Court in the case of CIT & Anr. v. Former France . So however, it will depend on the facts of each case as to whether the Assessing Officer has reopened the assessment on mere change of opinion. Where assessment Under Section 143(3) has not been made and the return had merely been processed Under Section 143(1) it cannot be said that the Assessing Officer had expressed my opinion in regard to the escaped income as the Assessing Officer under that section has no power to express any opinion while processing the return. It would be relevant to refer to the decision of the Punjab & Haryana High Court in the case of Aditya & Co. v. CIT & Anr. 279 ITR 47 wherein their Lordships held as under:
Dismissing the writ petition, that is on the basis of facts of each case that it has to be decided whether a particular-income falls under the head "Business income" or "Income from other sources". The assessee was only sent on intimation under Section 143(1) of the Act and the question of examination of the material by the Assessing Officer did net arise at that stage. Thus, there was no question of change of opinion. The notice under Section 148 was valid.
Therefore, on the basis of aforementioned facts and the law, we dismiss the claim of the assesses that the assessment was reopened on mere change of opinion and uphold the order of the Commissioner of Income-tax (Appeals) in regard to validity of reopening of assessment.
22. The next issue raised before us is as to whether the Assessing Officer was entitled to tackle any other income in the course of re-assessment proceedings which did not form the basis for reopening of assessment. There is no dispute about the fact that the assessment of income on account o; sale of shares was not the basis for reopening of assessment. During the course of re-assessment proceedings the Assessee Officer had raised the issue with the assessee giving sufficient opportunity and thereafter the addition of Rs. 12,47,5007- Under Section 68 for the reasons recorded in para 4.27 of the assessment order was made. It is nobody's case that the reasonable opportunity of being heard was not allowed to the assessee in regard to the said addition. So however, whether the Assessing Officer is entitled to assess any other income in the course of reassessment proceedings when that income did not form the basis for reopening of the assessment, has got to be dealt with.
23. The law relating to reopening of assessment has undergone a change w.e.f. 1.4.1989. Section 147 and other provisions relating to reopening of assessment have undergone a change. Section 147 as it exists from 1.4.1989 reads as under:
147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which conies to his notice subsequently in tin: course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the Assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year):
Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to lax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
Explanation1.--Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation2.--For the purposes of this section, the following shall also be deemed to be cases, where income chargeable to tax has escaped assessment, namely:
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax;
(b) Where a return of income has been furnished by the assessee but no assessment Has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return:
(e) where an assessment has been made, but
(i) income chargeable to lax has been under assessed ; or
(ii) such income has been assessed at too low a rate; or
(iii) such income has been made the subject of excessive relief under this Act; or
(iv) excessive loss or depreciation allowance or any other allowance under this' Act has been computed.]
24. It is evident from the language of Section 147 that the Assessing Officer is not only empowered to assess the income which had escaped assessment on the basis of which notice Under Section 148 was issued but also any other income chargeable to tax which has escaped assessment and which comes to the notice of the Assessing Officer subsequently in the course of proceedings Under Section 147. The sum and substance of Section 147 is that once there is valid initiation of proceedings Under Section i47, the Assessing Officer is entitled to assess the escaped income for which proceedings has been taken by him by issue of notice Under Section 147 and also to assess such income which had escaped assessment and which had come to the notice of the Assessing Officer in the course of re-assessment proceedings. It would be relevant to refer to the decision of the Hon'ble Punjab & Haryana High Court which is the Jurisdictional High Court in this case in the cases of Vipan Khanna v. CIT and Anr. 255 ITR 220 at page 235. Their Lordships of while holding that the Assessing Officer is not permitted to make fishing enquiries in the course of re-assessment proceedings have clarified as under:
For the sake of clarification we may repeat that nothing observed by us in this case would debar the Assessing Officer to bring to tax any other item of income which may have escaped assessment and which comes to his notice during the course of the proceedings under Section 147 of the Act. However, for this purpose, he cannot be allowed to make fishing inquiries to probe if any other income had escaped assessment or not. Such inquiries can only be permitted if in. the first, instance some material comes to his notice to suggest that some other item of income may have escaped assessment or had been under assessed. In that event, he would be-, perfectly justified in requiring the petitioner to furnish the requisite information on such other issue as well.
In the case of V. Jagmohan Rao and Ors. v. CIT , their Lordships of the Supreme Court held as under:
On co proceedings under Section 34 are validly initiated the jurisdiction of the ITO is not restricted to the portion of the income that escapes assessment. Section 34 in terms says In at once the ITO decides to re-open the assessment he could do so within the period prescribed by serving on the person, liable to pay tax a notice containing all or any of the requirements which may be included in a notice under Section 22(2) and may proceed to assess or re-assess such income, profits or gains. Therefore, once assessment is re-opened by issuing a notice under Sub-section (2) of the Section 22 the previous under assessment is set aside and the whole assessment proceedings start afresh. Once valid proceedings are started Linger Section 34(1)(b) the ITO not only had the jurisdiction but it was his duly to levy lax on the en lire income that had escaped assessment during that year
25. We have to apply the above position of law to the facts of this case. As per the above mentioned position of law, the learned counsel for assessee had rightly argued that the Assessing Officer is not entitled to make fishing enquiries in the course of reassessment proceedings to find out as to whether there was any other income escaping assessment. For assessing any other escaped income that comes to the notice of Assessing Officer, it is necessary that the Assessing Office has material on record on the basis of which he could have a prima facie belief that the income of the assessee had escaped assessment. The said material is bound to be confronted to the assessee during re-assessment proceedings and the issue decided in accordance with law. In this case, it is claimed by the department that in the case of Shri Som Nath Maini with identical facts (and close relatives of the assessee) the assessment had been reopened Under Section 148 by Shri Ravi Aggarwal ACIT Circle-1(II) on 29.10.2.001 on the issue of under-statement of capital gain on account of sale of jewellery. In the case of Shri Som Nath Maini (supra) the sale of shares of M/s. Ankur International Limited had come to the notice of the Assessing Officer and he on the basis of enquity treated the profit shown on sale of such shares as bogus. On restructuring in the Income-tax department, Shri M.S. Minhas ACIT was posted in Range-VI and he was holding the jurisdiction of Balbir Singh Maini, the assessee as well as Shri Som Nath Maini Shri M.S. Manhas had recommended 2nd appeal in the case of Shri Som Nath Maini and came to know of the enquiry in regard to the sale of shares of M/s. Ankur International Limited. On the basis of enquiry in the case of Shri Som Nath Maini the information available with Shri M.S. Minhas (A.O.), an opinion was formed that the income of the assessee had escaped assessment. The assessee was confronted with the information collected in regard to the sale of shares of M/s. Ankur international Limited. It is, therefore, evident that the Assessing Officer in the case of the assessee did not embark upon the fishing enquiries but took cognizance of the material collected in similar case on identical facts which came to his notice while filing second appeal in the case of Shri Som Nath Maini on 19.12.2002. The reassessment in the case of the assessee has been made by the same Assessing Officer, namely Shri M.S. Minhas on 31.3.2003 and the questionnaire) issued to the assessee in regard to the sale of shares is dated 6.1.2003 i.e. after 19.12.2002 when Shri M.S. Minhas processed tho documents for filing second appeal in the case of Shri Som Nath Maini. We are, therefore, of the considered view that there is no infirmity in the order of the Assessing Officer relating to the assessment relating to the sale of shares in reassessment proceedings. The action of the Assessing Officer in this regard is in accordance with the parameters permissible under law. We accordingly hold that there is no merit in the objection raised by the assessee's representative relating to validity of re-opening of assessment and subsequently dealing with the sale of shares of M/s Ankur International Limited inre-assessment proceedings. The decision of the Commissioner of Income-tax (Appeals) on this issue is reversed.
26. We now proceed to consider the issue on merits. As pointed out earlier, the Assessing Officer had reopened the assessment on account; of capital gain in respect of sale of diamond jewellery. The Commissioner of Income-tax (Appeals) has found reopening of assessment validly initiated. So however, on merits, he has not found justification for enhancing the capital gain on sale of diamond jewellery. The ground of appeal raised by the Revenue has a reference to the loss on sale of gold jewellery but no ground of appeal as such has been raised in regard to deleting the addition made by the Commissioner of Income-tax (Appeals) on account of long terim capital gain on sale of diamond jewellery. The issue raised by the Revenue is relating to the bogus capital gain of Rs. 12,47,500/- only, The facts have been described in detail elsewhere in this order. The issue before us is as to whether the Assessing Officer was justified in not accepting the sale of shares of M/s Ankur International Limited as genuine and in treating the amount of Rs. 12,47,5 007- as unaccounted income of the assessee. The assessee had purchased the shares of M/s Ankur International Limited through stock broker, namely M/s Munish Arora and Co. The member of shares purchased was 30000. 10000 shares @ 3.40 per share on 9.4,1997, 10000, @ 3.10 per share on 15.4,1997 and 10000; share @ 2.60 per share on 18,4.1997 were purchased, 100001 shares have been claimed to have been sold on 9.2.1998 @ 48,50 per share through M/s S.K. Sharma & Co. stock broker. Anr. 2000 shares have been claimed to have been sold on 23,2,1998 @ 54.25 per share. Anr. 10000 shares and 2000 shares have been claimed to have been sold @ 54.50 per share on 23.3.1-998. All the transactions are claimed to have been conducted through M/s S.K. Sharma & Co. The Assessing Officer found that in the case of a family member of the company, Shri Som Nath Maini a similar exercise of purchase of 45,000 shares and subsequent sale of 43,000/- shares of M/s Ankur International Limited had been carried out under identical facts. In the case of Shri Som Nath Maini also the short term capital gain on shares was adjusted again sit the long term capital loss on the sale of gold jewellery declared under Voluntary Disclosure of Income Scheme, 1997, In the case of Shri Som Nath Maini the Commissioner of Income-tax (Appeals) had deleted the addition of Rs. 20,36,700/-. However, on further appeal the Income-tax Appellate Tribunal, Chandigarh Bench 'A' in I.T.A. No. 879/Chandi/2002 for assessment year 1998-99 has restored the addition. Therefore the issue is covered by the decision of the Chandigarh Bench in the case of another member of family, namely Shri Som Nath Maini (supra). We respectfully following the same, uphold the addition made by the Assessing Officer on account of bogus sr.le of shares of M/s Ankur International Limited.
27. We would also like to refer to certain material on the basis of which the finding of fact has been arrived at by the Assessing Officer and confirmed by the Tribunal. The assessee had furnished evidence in regard to sale of shares through M/s S.K, Sharma & Co. and the formal confirmation from the broker. The Assessing Officer had recorded the statement of Shri S.K. Sharma of M/s S.K Sharma & Co. and demanded details about the sale of shares. Though M/s S.K. Sharma admitted to have been purchased the shares of M/s Ankur International Limited from the assessee, yet it was found by the Assessing Officer that he failed to produce the books of account and other relevant documents. It was also found by the Assessing Officer that the alleged sale of shares had not taken place through any stock exchange. On scrutiny of the books of account of M/s S.K. Sharma & Co., it was found by the Assessing Officer that there were cash deposits in their bank account preceding the issue of cheques in the name of the assessee for purchase of shares claimed to be the sale proceeds of the same shares received in advance. M/s S.K. Sharma & Co. could not give the details of the purchaser of the shares. As pointed out earlier, the books of account of M/s S.K. Sharma & Co. were not produced. Other relevant data which could show the genuineness of the transactions between the assessee and M/s S.K. Sharma & Co. were not produced before the Assessing Officer. The contention advanced on behalf of the assesse that M/s S.K. Sharma & Co. having (Confirmed to have issued the cheques in the name of the assess and the sale of shares having taken place through them, no addi.ion could be made in the rounds of the assessee for non-production of records by M/s S.K. Sharma & Co. The contention advance on behalf of the assessee to pears to be attractive, at first sight Co. however, when all the facts and circumstances of this case are viewed in totality, the assessee cannot be said to have discharged the onus in regard to the genuineness of the transaction of sale of shares through M/s S.K. Sharma & Co. The information appearing from the bank account of M/s S.K. Sharma & Co. and the non-production of the records relating to transaction by M/s S.K. Sharma & Co. have got to be viewed in the light of the attendant facts arid material collected by the Assessing Officer. On enquiry by the Assessing Officer, it was found that the shares of M/s Ankur International Limited had not been quoted in Ludhiana Stock Exchange boyond 17,7,1997. As on 17.7.1997, the said shares were quoted at Rs. 17/- per share. Thereafter the shares were not quoted at all, As per Ludhiana Stock Exchange records, there was no trading of shares of M/s Ankur International Limited after 17,7,1997. This is one aspect of the matter. The other aspect of the matter is that the assessee had furnished evidence to establish that the shares of M/s Ankur International Limited had been sold by one Shri Rajinder Bansal to Shri Anurag Rastogi on 9.2,1998 @ Rs. 55/- per share through Jaipur Stock Exchange. On enquiry, it was found by the Assessing Officer that in the Jaipur Stock Exchange, 200 shares of M/s Ankur International Limited had been sold by Shri Rajinder Bansal to Shri Anurag Rastogi and latter sold the same to Shri Sunil Baliwal on the same date who in turn again sold back (he same shares to the original allottee Shri Rajinder Bansal on the same date i.e. 9.2.1998. The Assessing Officer accordingly held that it was a close circuit transaction and clearly a structured one. Other two transactions of 100 each were also held to be structured transactions.- It was also found by the Assessing Officer that the shares claimed to have been sold through M/s S.K. Sharma & Co. had not been transferred even at the lime of making the enquiry by the Assessing Officer. The said shares continued to be registered in the name of the assessee.
28. The Assessing Officer had also determined the value of shares of M/s Ankur International Limited on the basis of the financial data collected by him and worked out the value of shares not to be more that Rs. 9.37 per share by adopting two methods for calculation of N.A.V.(net asset value)
29. In the light of the above facts and circumstances of this case, we are of the view that the Assessing Officer was justified in not relying upon the confirmation given by M/s S.K. Sharma & Co. in regard to the sale of shares claimed by the assessee. It may be pertinent to refer to the decision of he Hon'ble Supreme Court in the case of CIT, West Bengal-II v. Durga Prasad More, 82 ITR 540 at page 545. In this case, their Lordships of the Supreme Court in regard to the appreciation of evidence laid down the following principles of law:
It is true that an apparent must be considered real until it is shown that there a re reasons to believe that the apparent is not the real. In a case of the present kind a party who relies a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have so me recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents.
Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it.
It was further laid down by their Lordships:
Science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal, Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive by law.
30. The above principles of law have been reiterated by the Hon'ble Supreme Court in the case of Sumiti Dayal v. CIT 214 ITR 801 (SC). In this case, the Assessing Officer had made enquiries through various sources on the basis of which the confirmation given by Shri M/s S.K. Sharma & Co. was highly improbable Except confirmation by Shri S.K. Sharma Ors. evidence collected by the Assessing Officer placed a very strong burden upon the assessee to establish the genuineness of the claim of salt of shares. Apart from other facts discussed earlier, the fact that shares of M/s Ankui International Limited continued to be registered in the name of the assesses was n strong factor Io support the view of the Revenue.
31. Taking the totality of the facts and circumstances of this case into consideration, we are of the considered view that the Assessing Officer was justified in holding that the sale of shares of M/s Ankur International Limited claimed by the assessee was not established to be genuine, We accordingly set aside the order of the Commissioner of Income-tax (Appeals) in this regard and restore that of the Assessing Officer.
32. In the result, the appeal of the Revenue is allowed.
Order pronounced on 28.11.06