Delhi High Court
Commissioner Of Income Tax vs Narayan Securities Pvt. Ltd. on 3 June, 2011
Author: M. L. Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No. 40/2009
% Judgment reserved on : 2nd MAY, 2011
Judgment delivered on : 3rd JUNE, 2011
COMMISSIONER OF INCOME TAX ... APPELLANT
Through: Mr. M.P.Sharma, Advocate.
Versus
NARAYAN SECURITIES PVT. LTD. ... RESPONDENT
Through: Mr. Salil Aggarwal, Advocate
CORAM:
HON'BLE MR. JUSTICE A.K.SIKRI
HON'BLE MR. JUSTICE M.L.MEHTA
1. Whether the Reporters of local papers NO
be allowed to see the judgment?
2. To be referred to Reporter or not? NO
3. Whether the judgment should be NO
reported in the Digest?
M.L. MEHTA, J.
1. The present appeal filed under Section 260A of the Income tax
Act, 1981 (for short 'the Act') is directed against the order of
the Income Tax Appellate Tribunal (for short 'Tribunal') dated
25.07.2008 whereby the Tribunal held the reassessment
proceedings under Section 147 to be invalid and quashed the
assessment framed by the Assessing Officer under Section
143(3)/147.
2. The Revenue being aggrieved by the said order, is in appeal
before us. The appeal is admitted on the following substantial
question of law.
a) Whether ITAT was correct in law and in the
facts and circumstances of the case in
quashing the re-assessment order passed u/s
143(3)/147 of the Income Tax Act, 1961?
b) Whether ITAT was correct in law in holding that
no addition could be made in re-assessment if
no additions in respect of the grounds on which
the proceedings u/s 147 were initiated had
been made by the A.O.?
3. The assessee is a Member of National Stock Exchange and
had filed its return of income on 30th November, 1998 for the
assessment year 1998-99 declaring income of Rs.84,837/-.
Assessing Officer received information from the Additional
Director of Income Tax (Inv) (Unit-I, New Delhi) that during the
course of search and seizure operation under Section 132 of
the Act subsequent investigation was carried out in the case
of M/s Rakesh Nagar & Co. it was found that M/s Rakesh
Nagar & Co. had deposited huge amount of cash in bank
account and issued cheques of various amounts in favour of
the assessee. It was found that the bank account was used to
launder funds and no real transaction had taken place. It was
noted that the assessee had taken money through cheques,
which had actually been handed over to the promoters of M/s
Rakesh Nagar & Co. for an amount totaling to Rs.8294615/-. It
is on this information, after recording reasons, that a notice
under Section 148 was issued requiring the assessee to file its
true and correct statement of income. The assessee filed
reply stating that its return, originally filed, be treated in
response to notice under Section 148. In response to notice
under Section 143(2) books of accounts, vouchers and bills
were called and verified from the return filed by the assessee.
The statement of Director of the company was recorded. On
perusal of the statement of the Director, the AO had come to
the conclusion that there was real trading of shares by the
assessee on behalf of M/s Rakesh Nagar & Co. and, therefore,
no addition was made on account of the reasons recorded for
reopening the case. However, during the re-assessment
proceedings Assessing Officer found that the assessee
company had incurred losses on account of purchase and sale
of shares of Rs.17,98,761/- and also earned profit of
Rs.20,89,360/- from other allied activities. The Assessing
Officer treated this amount of Rs.17,98,761/- being loss on
trading of shares to tax by holding the same to be covered by
the explanation to Section 73 of the Act. In appeal, CIT(A)
confirmed the addition made by the Assessing Officer. The
assessee carried appeal before the Tribunal.
4. The Tribunal relied upon the case of ITO v. Smt. Darshan
Kaur of the Amritsar Bench of the Tribuanl and also the case
titled CIT v. Atlas Cycle Industries, 180 ITR 319 and CIT v.
M.P. Iron Traders 189 CTR 154, holding that the assumption
of jurisdiction to frame the assessment by invoking Section
147 of the Income Tax Act was not justifiable in this case and
consequently quashed the assessment framed under Section
143(3)/147. It is against this impugned order that the appeal
has been preferred by Revenue.
5. The present case is squarely covered by the judgment of this
Court in ITA No. 148/2008 titled as Ranbaxy Laboratories
Limited v. Commissioner of Income Tax, pronounced
today, i.e., 3rd June, 2011 by this Court.
6. In view of the same, we answer the questions in affirmative in
favour of the assessee and against the Revenue and
consequently dismiss the appeal.
M.L.MEHTA
(JUDGE)
A.K.SIKRI
(JUDGE)
JUNE 03, 2011
AK
