TaxTMI 
TaxTMI 
2017 (11) TMI 1588
X X X X Extracts X X X X
X X X X Extracts X X X X
....issue of notice u/s. 148. c. The order passed by the Id. AO u/s. 147 is itself bad in law and without jurisdiction and no proceeding u/s.263 can be initiated against an invalid order. d. S.153A & 153C have non obstante clause, which excludes any proceedings u/s.147/148 where any search has taken place. e. Both the Id. AO and the Id. Pr. CIT have ignored that regular assessment u/s. 143(3) had been made by jurisdictional ITO Ward 9(4) New Delhi on 30/11/2011. f. The order u/s.147 which is impugned by the Id. Pr. CIT had been passed after considering the entire seized material as was available with him at the relevant time. 2. The order is against the provisions of the Act and the appellant denies his liability to tax as directed to be made and the manner in which it has been so directed to make fresh assessment, by the learned Pr. CIT. 3. The learned Pr. CIT has erred in law and on the facts and circumstances of the case in suggesting and directing the AO to make fresh investigation into omnibus material found and seized during search of S.K. Jain bros. who have been assessed u/s.153A. 2. The brief facts and background of the case are tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... would be given cheque from one of the many account which would be given the colour of share application money or share capital or share premium or loans or advance etc. In the process, the entry operator would earn certain commission. The searches by the Investigation Wing against the entry operators resulted in unearthing of large number of pass books, cheque books, computer hard disks, signed blank cheques, share transfer certificates and many other blank signed documents. This information has been provided by the Investigation Wing of the Income Tax Department to the Assessing Officer. In the case of the above assessee, the following accommodation entries have been taken:- Name of the Beneficiary A.Y. Amount M/S SURYA JYOTI SOFTWARE PRIVATE LIMITED 2009-2010 Rs.1,00,00,000/- 5. In response to notice under section 148, assessee filed letter dated 29/4/2014, stating that the original return filed be treated as return filed in response to notice under section 148 and after getting the 'reasons recorded' from the AO, the assessee filed its detailed objections which have been disposed of separately by the Assessing Officer. Thereafter, he completed the assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... passing the said order, the AO has failed to consider the relevant seized material pertaining to your company as is evident from the following facts. 2.1 It is seen from annexure A-27 back page 40 that on 28.01.2009 against the name of one Gupta Ji the following narration is appearing: Y.K. Gupta Ji Shalini Axis to Surya Jyoti Software Private Ltd. Ch.no.244595 dtd. 29/01/09, Rs. 1,00,00,000/-. 2.2. The corresponding entry in the cash book on 27.01.2009 seized as per annexure 22 shows that cash of Rs. 1 Cr. was given by the same Y.K. Gupta to SK Jain group. Other Cash receipts from various persons including Satish Goel of Rs. 62.50 lakhs, Rajan Aggarwal Rs. 1.50 etc. including Y.K. Gupta Ji of Rs.l,00,00,000/-is shown in this page. Further opening balance of Rs. 1,64,07,441/-and closing balance of Rs. 71,13,744/- has also been shown at this page. This balance of Rs. 71,13,744/- has been shown as opening balance on 28/1/2009 at page 23 backside of Ann. A-27. On perusal of bank statement of your company it has been observed that the same cheque no. issued by Shalini from Axis Bank for Rs. l Cr. has been deposited and cleared on 29.01.2009 in your bank acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
....many incriminating documents were found during the course of investigation and search & seizure action in the case of S.K. Jain group which was seized during the course of search by the Investigation Wing on 14/9/2010. He further noted that these seized papers clearly reveal various accommodation entries provided by such companies to various beneficiaries. The appraisal report was forwarded by the Investigation Wing in the month of March, 2013 to the then CIT-III in hard copy and various other seized materials running into 1000 pages were scanned and soft copies of the relevant seized materials were sent to the Commissioners and then to the Assessing Officers. The relevant extract of certain seized documents has also been scanned by him including the one marked as "Annexure A-27 (back page 40)" pertaining to the accommodation entry relating to the assessee, which has been noted by him from the seized documents scanned at pages 7 & 8 of the impugned order. The relevant observation with regard to these seized material by the Pr. CIT, for the sake of ready reference, is reproduced hereunder:- "7. It is important to note that the assessee is also shown as beneficiary as eviden....
X X X X Extracts X X X X
X X X X Extracts X X X X
....egarding the seized material relating to M/s Shalini Holdings Ltd and this point he even confronted to the assessee in his show cause notice. The assessee only clarified before the Pr. CIT that there is no share capital/share application money from M/s Shalini Holdings Ltd. albeit there was only loan transaction which was done with M/s Shalini Holdings Ltd. It was stated by the assessee that it had advanced loan of Rs. 2 crores, i.e., Rs. 1 crore each on 12/6/2008; which was returned by M/s Shalini Holdings Ltd. on 2/8/2008 and another sum of Rs. 50 lakhs each on 5/8/2008 and 29/1/2009. The sum of Rs. 1 crore as mentioned in the show-cause notice represents repayment of loan given by the assessee-company to M/s Shalini Holdings Ltd. during the same financial year. The Ld. Pr. CIT observes that this fact and contention of the assessee has not been even verified or examined by the Assessing Officer from the seized material relating to the assessee. Thereafter, from the perusal of the seized documents, he makes the following observations:- "8. The perusal of the above mentioned seized backpage-22 of Annexure A-27 dated 27.01.2009 shows an opening cash balance of Rs. 1,64,07,4....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re is any nexus between the cash deposits and the cheques issued by the group companies of SK Jain, then the same may be taxed accordingly. 11. Before us the ld. counsel for the assessee, Shri K.P. Garg first of all, challenged the very validity of impugned order passed under section 263 mainly on the ground that the re-assessment proceedings under section 147 and consequently the assessment order passed under section 147 read with section 143(3) vide order dated 30/6/2014, itself was bad in law. Such a validity of reopening under section 147, he submitted that can be challenged in the course of revisionary proceedings under section 263; and in support he relied upon catena of decisions including that of ITAT Mumbai Bench in the case of West Life Development Limited vs. DCIT in ITA No.688/Mum/2016, wherein the Tribunal after discussing various judgments and case laws, has held that validity of reopening under section 147 can be challenged in the proceedings under section 263 and if the impugned assessment order passed under section 143(3) r.w.s. 147 is found to be illegal or nullity in the eyes of law, then the CIT does not have a valid jurisdiction to pass order under section 2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erial on record, which has been discussed by the Pr. CIT in the impugned order, submitted that here in this case there is absolutely no dispute that the Assessing Officer has not made any enquiry regarding the accommodation entry pertaining to the assessee specifically which was found during the course of search and investigation in S.K. Jain group as highlighted by the Pr. CIT. Once adequate or proper enquiry has not been done, then in terms of Explanation 2 inserted in section 263 by the Finance Act, 2015, w.e.f. 1/6/2015, the assessment order is deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. The said amendment he submitted that would be clearly applicable as the proceedings and order u/s 263 has been passed post 1/07/2015. Apart from that, he relied upon the following judgments:- 1. Malabar Industrial Co. Ltd. Vs CIT [2000] 109 243 ITR 83 (SC). 3. Rajmandir Estates (P.) Ltd. Vs PCIT [2016] 386 ITR 162 4. Rajmandir Estates (P.) Ltd. Vs PCIT [2017] 245 Taxman 127 (SC) 5. Shree Maniunathesware Packing Products & Camphor Works Vs CIT [1998] 96 231 ITR 53 (SC). 16. Regarding challenging the validity of reopen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessee has rotated its money in cash for a Cheque and is a beneficiary of accommodation entry provided by the group of S.K. Jain and others through his various bogus companies. A search and seizure action was carried out in the case of S.K. Jain and his group of companies wherein modus operandi of accommodation entries were unearthed and was found that many parties were re-routing their unaccounted cash through these accommodation entries. The assessee was also found to be one of the beneficiaries of such accommodation entry in the assessment year 2009-10, wherein it had taken an entry of Rs. 1 crore. The Assessing Officer, after having received such an information and based on such tangible material has entertained his "reason to believe" for reopening the case under section 147, then he was required to carry out detailed enquiry and verification, not only on the information pertaining to assessee being one of the beneficiary of accommodation entry, but also should have enquired about the genuineness of the transaction as a whole. In the impugned assessment order u/s 143(3)/147, there is no whisper about any enquiry or verification done by the Assessing Officer in this regard. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee before the AO. He had further observed that the situation would have been different had the AO examined the seized material and after examination of the seized material the AO had taken a view, then probably the revision proceedings under section 263 could not have been initiated as it would have amounted to the 'change of opinion' or adequate enquiries has been carried out as held by various courts. On the basis of such uncontroverted facts he has come to a conclusion that the order passed by the AO in this case is without considering the relevant seized material which shows that the cheques have been issued in lieu of the cash received, is not only erroneous but also prejudicial to the interest of the revenue as the amount of Rs. 1 crore prima facie remained untaxed in the Assessment Year 2009-10. There is no rebuttal to such a finding recorded in the order or any material has been brought on record by the assessee before us that these observations and findings of the Pr. CIT are contrary to the facts. The observations and findings recorded by him ostensibly goes to show that the Assessing Officer has not made any proper or adequate enquiry on this issue, which at the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3C would have been invoked. But here in this case what has been found, is the regular entries in the books of account of the concerns of S.K. Jain group, in which name of the assessee is appearing. Such entries in the cash books depicting the details of cheques issued in favour of the assessee as well as cash deposit through intermediates on various dates cannot be reckoned as document or books of account of the assessee. This fact has been noted by the Pr. CIT in the impugned order right from pages 7 to 15, wherein one of the entries pertains to the assessee for a sum of Rs. 1 crore. Thus, the contention raised by the ld. counsel on this point is out rightly rejected that the proceedings under section 153C should have been initiated instead of under section147. 20. As regards the contention that material or information found during the course of search in the case of S.K. Jain group cannot be held to be a tangible material pertaining to the assessee, we are unable to accept such a contention for the reason that, firstly, there was a categorical information and material coming on record post passing of the original assessment order under section 143(3) that assessee was one of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....before the Pr. CIT challenging the validity of the reassessment proceedings. Even before the Tribunal at the time of filing of appeal, this issue has neither been raised in the grounds nor has any additional ground been raised so that department could have got the opportunity to object or respond to such a plea after verifying the record in this regard. Thus, such an oral plea at a last moment not arising from the impugned order and without any verification of record cannot be entertained. If it was such a vital plea, then right recourse would have been that assessee should have moved a petition for additional ground with a copy to the ld. D.R. in advance or would have sought permission from the Tribunal for raking up this issue under rule 27 of ITAT Rules. There is no material fact on record to decide this issue as it has been raised at the last moment at the time of hearing. Accordingly, we are rejecting this plea of the ld. counsel at the threshold. 22. Lastly on merits, as discussed in the foregoing paragraphs, the Pr. CIT has amply demonstrated in his impugned order that this issue was neither enquired into nor was verified by the Assessing Officer once the information and ....