The Income Tax Appellate Tribunal (ITAT), Ahmedabad set aside proceedings under Section 147 on the ground that Re assessment framed for escapement of income by a share trading business that does not belong to the assessee.
The assessee, Shri Mukesh Rasiklal Shah had filed return declaring loss of Rs.4,13,11,931/-, being loss in business of share trading transactions from a proprietary concern, M/s.Dindayal Associates (“DA” for short). During assessment proceedings, the assessee, “MRS”, denied being proprietor of this concern, stating that he was working as salaried employee only and all these transactions were being undertaken by his employer, “SG” in his name.
The AO made verification of the share transactions conducted in the said proprietorship concern, from the parties who had conducted such business, as was reflected in the books of “DA”, i.e. K.K. Investments, H.Nyalchand Financial Services Ltd. and Poojan Securities Pvt.Ltd. These parties also stated the transactions being undertaken through “SG” for the business to be carried out with the concern, “DA”. Based on all the facts of the case as revealed in the investigation, the AO held that the claim of loss in the name of “DA”, which was not actually carried on as the business of the assessee, was not the loss of the assessee and therefore, the loss claimed was assessed at NIL.
From the facts of the case that original assessment framed under section 143(3) of the Act was passed on 30.3.2004, and thereafter the case of the assessee was reopened under section 147 by issuing notice under section 148 on 4.10.2006.
The Bench consisting of held that “As on the date of recording reasons for escapement of income i.e. on 4.10.2006, the assessment order passed, which was reopened under section 148 of the Act dated 30.3.2004 had categorically held that the assessee had not carried on the share trading business. Therefore, this very order passed under section 143(3) of the Act, wherein the assessee was held to have not carried out any share trading transactions, could not possibly have been reopened under section 147 of the Act on account of escapement of income relating to this very share trading business only. Assumption of jurisdiction to frame reassessment under section 147 is clearly invalid. Re-assessment framed, therefore, under section 147 of the Act is set aside.”
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