TaxTMI 
TaxTMI 
2020 (1) TMI 460
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....n 151 as statutorily required. In response to the statutory notice and questionnaire issued by the A.O, the assessee appeared from time to time before the A.O. and filed the requisite details which were examined and taken on record. The oral submissions of the assessee were also considered. The A.O. after examining the detailed evidences filed by assessee, accepted the return of income vide Order under section 147/143(3) Dated 05.12.2016. 3. The Pr. CIT, however, on examination of the record found that re-assessment order to be erroneous and prejudicial to the interests of Revenue because in the year under consideration assessee has received share capital / share premium of Rs. 70 lakhs from five parties and all these companies are managed and controlled by Shri S.K. Jain and Shri Virendra Jain who were entry operators and running dummy companies. The Pr. CIT, therefore, issued show cause notice under section 263 of the I.T. Act, 1961, calling for explanation of the assessee. 3.1. The assessee filed written submissions before the Ld. Pr. CIT which is reproduced in the impugned order in which it is explained that assessee filed necessary documents to prove the genuineness of t....
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....nt itself is invalid under section 147 of the I.T. Act, therefore, same is liable to be quashed and as such in collateral proceedings under section 263 of the I.T. Act, the Ld. Pr. CIT would not assume valid jurisdiction. He has also submitted that approval granted by Addl. CIT and Pr. CIT are invalid and bad in law. Learned Counsel for the Assessee, therefore, submitted that proceedings under section 147 are invalid and bad in law. In support of his contention he has relied upon several decisions, copies of which are filed in the paper book. 5. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that A.O. has recorded the reasons after going through the appraisal report and the documents, therefore, reopening of the assessment is justified. The Ld. D.R. also submitted that the Ld. Pr. CIT on going through the record correctly found it to be an assessment erroneous as well as prejudicial to the interests of the Revenue because A.O. has not examined the seized material found during the course of search. 6. We have considered the rival submissions. It is well settled Law that since re-assessment proceedings are invalid and bad in law, there....
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....f the unexplained cash received by S.K. Jain and Shri Virendra Jain, which routed to these companies through their dummy firms/companies. Once the funds were of these companies have been enhanced sufficiently, accommodation entries through RTGS/ Cheques in the shape of the share capital, share premium, capital gains or loan as per the specific requirement of the recipient clients were provided them in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed." As per the report, the assessee company M/s Charbhuja Marmo India Pvt. Ltd. had obtained the following accommodation entries in the form of Share application/Share premium/loan during the F.Y. 2009- 10 relevant to A.Y. 2010-2011 :- From To Bank Cheque No. Cheque Date Amount Through Annexure No. Page No. Zenith Holdings Ltd., Charbhuja Marmo India Pvt. Ltd., AXIS 310520 02.09.2009 10,00,000/- Prem Gupta A-20 41 Victory Software Pvt. Ltd., Charbhuja Marmo India Pvt. Ltd., AXIS 310921 02.09.2009 20,00,000/- Prem Gupta A-20 41 Humtum Marketing Pvt. Ltd., Charbhuja Marmo India ....
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....ncome Tax, Delhi-2, New Delhi." 6.2. The ITAT, Delhi Bench in the case of M/s. Supersonic Technologies Pvt. Ltd., Delhi vs. PCIT-8, New Delhi reported in 69 ITR 585 (Delhi) in the proceedings under section 263 of the I.T. Act held that "since re- assessment proceedings are invalid and bad in Law, therefore, such proceedings could not be revised under section 263 of the I.T. Act. The Order of the Tribunal is reproduced as under : IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES "G" : DELHI BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI PRASHANT MAHARISHI, A.M. ITA.No.2269/Del./2017 Assessment Year 2007-2008 M/s. Supersonic Technologies Pvt. Ltd., A- 104, Panchal Complex, Chand Vihar, IP Extension, Delhi - 110 092. PAN AAICS6245A vs. The PCIT-8, New Delhi. (Appellant) (Respondent) For Assessee : Shri Ved Jain, Advocate & Shri Ashish Chadha, C.A. For Revenue : Shri S.S.Rana, CIT-D.R. ITA.No.2857/Del./2017 Assessment Year 2007-2008 M/s. SPJ Hotels Private Limited, New Delhi-110017 PAN AAKCS7722C C/o. Kapil Goel, Advocate, F-26/124, Sector-7, Rohini, Delhi - 110 085. vs. The PCIT-8, Room No.297, Central Revenue Bu....
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....h the assessee, accepted the returned income and completed the re-assessment order under section 147/143(3) of the I.T. Act, 1961, on Dated 30.06.2014. 3.1. The Ld. Pr. CIT on examining the assessment record noticed that though the assessment was reopened under section 148 of the I.T. Act on the allegation of accommodation entry taken from Shri S.K. Jain group of concerns who were searched on 14.09.2010 by the Investigation Wing of the Income Tax Department, some of the A.O's did not examine the seized material in the form of cash book and books containing the details of cheques issued by such concerns seized from the premises of Shri S.K. Jain during the course of search. The Investigation Wing, Delhi, forwarded the hard copy of appraisal report to the then Commissioner, Delhi-III, which was received by him on 15.03.2013, the relevant seized material (containing many thousands of pages) was scanned and sent to the Commissioner of Income Tax in soft copy. However, while completing the assessment under section 147 r.w.s. 143 of the I.T. Act, though the A.O. referred the appraisal report but did not look into the relevant seized material in soft copy. This was one of the cas....
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....were examined based on information provided by the assessee-company. The proceedings under section 263 would amount to the consideration of material which has already been considered by the A.O. during the assessment proceedings under section 147 read with section 143 of the I.T. Act, and if in case the documents are not available in the files of A.O, then, there is also no scope of revision under section 263 of the I.T. Act. The A.O. has not issued notice under section 143(2) of the I.T. Act during the re-assessment proceedings. The assessee relied upon several decisions in support of the contention that revision proceedings under section 263 may be dropped. 3.3. The Ld. Pr. CIT considering the submissions of the assessee and material on record noted in his findings that the seized papers contains various accommodation entries were provided by such companies to various beneficiaries. The appraisal report was forwarded by the Investigation Wing in the month of March, 2013 to then CIT-III, Delhi in hard copy. The seized material contained many thousand pages. The seized material contained consolidated day-today cash transactions of all such shell companies wherein the openi....
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....such show cause notices are nothing but notice under section 143(2). of the I.T. Act. It is also noted by the Ld. Pr. CIT that even though no formal notice under section 143(2) was issued by the A.O, in the letters dated 11.06.2014 and 19.06.2014 it was specifically mentioned that in the absence of the requisite details the assessment would be completed under section 144 of the I.T. Act. The A.O. has not examined this issue in the light of seized material. Therefore, re-assessment order was found to be erroneous in so far as prejudicial to the interests of the Revenue because A.O. failed to look into the seized material. The Order was set aside and restored to the file of A.O. with a direction to examine the seized material and confront the same to the assessee and pass the order in accordance with law. 4. Learned Counsel for the Assessee reiterated the submissions made before the authorities below. Learned Counsel for the Assessee submitted that in this case the value of the share was Rs. 10/- with premium of Rs. 50/- per share. No business was there in this year. However, assessee proved the identity of the Investors, their creditworthiness and genuineness of the transac....
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....n 148 by the A.O. PB-37 to 139 are replies with documents filed by Investor Companies directly to the A.O. under section 133(6) of the I.T. Act. If the CD is not considered by the A.O. at the time of re-assessment order as per notice under section 263 of the I.T. Act, the re-assessment order is bad in law. Learned Counsel for the Assessee relied upon the Order of ITAT, Delhi Bench in the case of M/s. NKG Infrastructure Ltd., New Delhi vs. Pr. CIT, Circle-3, New Delhi in ITA.No.3825 to 3827/Del./2018, Dated 05.09.2018, in which the issue was validity of proceedings under section 147/148 of the I.T. Act. The assessee submitted before the Tribunal that assessment order in this case is barred by limitation is non-est in the eye of Law. Therefore, the Pr. CIT cannot assume jurisdiction under section 263 of the I.T. Act to revise such assessment order which is non-est in the eye of Law and being barred by limitation. The Tribunal held that the Order which is barred by limitation cannot be revised under section 263 of the I.T. Act by the Pr. CIT. The appraisal report was based on CD and if same is not considered by the A.O, it is non-application of mind by the A.O. to initiate re-assessme....
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....dgment of Hon'ble Delhi High Court in the case of Globus Infocom Ltd., vs. CITIV, Delhi (2014) 369 ITR 14 (Del.). Learned Counsel for the Assessee has also relied upon the Judgment of Hon'ble Delhi High Court in the case of Pr. CIT-8 vs. Shri Jai Shiv Shankar Traders Pvt. Ltd., 2015-(10)-TMI-1765-Delhi-High Court in which it was held that "no notice under section 143(2) of the I.T. Act was issued to the assessee after 16.12.2010, the date on which the assessee informed the A.O. that the return originally filed should be treated as return filed pursuant to the notice under section 148 of the I.T. Act. Therefore, the same is fatal to the Order of re-assessment." He has submitted that assessee produced sufficient evidences before A.O. to prove identity of the Investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, A.O. in the re-assessment order correctly accepted the explanation of assessee. In support of the said contention, the Learned Counsel for the Assessee relied upon decisions of Hon'ble Delhi High Court in the case of Pr. CIT vs. Softline Creations P. Ltd., (2016) 387 ITR 636 (Del.) and CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.....
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....Shankar Tradex Pvt. Ltd., Delhi vs. Pr. CIT-8, New Delhi, vide ITA.No.2999/Del.2017 Dated 16.04.2018 in which similar issue was decided against the assessee. The Ld. D.R. submitted that A.O. has not taken into consideration the material seized during search in the case of Shri S.K. Jain. Therefore, Explanation-2 to Section 263 of the I.T. Act is applicable in this case. The Ld. D.R. relied upon decision of Hon'ble Supreme Court in the case of Deniel Merchants P. Ltd., vs. ITO & Another in SLP (C) No.23976/2017 Dated 29.11.2017 in which SLP have been dismissed where A.O. did not make any proper enquiry while making the assessment and accepting the explanation of assessee in so far as receipt of share application money is concerned. The Ld. D.R. also relied upon decision of Hon'ble Supreme Court in the case of Rajmandir Estates (P.) Ltd., vs. PCIT (2017) 245 Taxman 127 (SC) and other decisions also on the same proposition that if A.O. did not make any enquiry on the issue, the proceedings under section 263 could be initiated. The Ld. D.R. submitted that no objection was raised before A.O. regarding the issues raised in the present appeal. The Ld. D.R. relied upon decision of Hon'ble ....
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....epared and served upon the assessee. On appeal: Held, dismissing the appeal, that mere noting in the order sheet would not suffice and the copy of the notice issued under section 143(2) of the Act was not available on record. Since the Department had failed to produce the copy the notice under section 143(2) of the Act there was no option but to agree with the findings of the Tribunal that no such notice was prepared and served upon the assessee. In the absence of this mandatory requirement of issuing statutory notice under section 143(2) of the Act, the Tribunal had rightly quashed the assessment as null and void." 6.1. The Hon'ble Delhi High Court in the case of Pr. CIT vs. Silverline (2016) 383 ITR 455 (Del.) held that "Order of reassessment cannot be passed without notice under section 143(2) of the I.T. Act. The jurisdictional error cannot be cured by Section 292BB of the I.T. Act". It is, well settled Law that before passing the re-assessment order, A.O. shall have to prepare and serve notice upon assessee under section 143(2) of the I.T. Act. The Ld. Pr. CIT, however, observed that "no formal notice under section 143(2) have been issued to the assessee". Th....
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....the Order of the Ld. Pr. CIT-8, New Delhi, Dated 22.03.2017, for the A.Y. 2007-2008 under section 263 of the I.T. Act, 1961. 9. Briefly the facts of the case are that in this case similar information about entry operators and their beneficiaries of Delhi was received from the O/o. DIT, (Inv.)-II, Delhi, along with detailed report giving working of entry operators with a list of beneficiaries. After making inquiries, the Addl. DIT, Unit-VI of Investigation in his report has established large amount of tax evasion in the transactions between entry operators and the beneficiaries. It was revealed from the list that the assessee-company viz., M/s. SPJ Hotels Private Limited during the previous year relevant to the assessment year under appeal had taken accommodation entries from M/s. Hillridge Investments Ltd., and M/s. Vogue Leasing & Finance Private Limited in a sum of Rs. 5 lakhs each on 28.03.2017. The A.O. reopened the assessment under section 148 of the I.T. Act. Notice under section 148 was issued on 25.03.2014 after recording the reasons and taking prior approval of the Competent Authority. In response thereto, assessee submitted a letter stating therein that it was in....
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.... The assessee requested for cross-examination to the statement of Shri S.K. Jain. The Pr. CIT noted that correct amount of accommodation entries from both these companies are Rs. 50 lakhs each instead of Rs. 5 lakhs. The Ld. Pr. CIT also noted that A.O. failed to consider the seized material found during the course of search in the case of Shri S.K. Jain, therefore, A.O. passed the re-assessment order without proper verification and enquiries. Therefore, re-assessment order was set aside and A.O. was directed to pass the order afresh as per law. 11. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to PB-1 which is reasons recorded for reopening of the assessment in which A.O. found that income of Rs. 10 lakhs has escaped assessment. However, the Ld. Pr. CIT noted that amount is Rs. 50 lakhs each in both the cases, therefore, escapement of income is of Rs. 1 crore. He has, therefore, submitted that reasons recorded for reopening of the assessment are invalid, incorrect and non-existing. Therefore, re-assessment order is invalid and bad in law. He has submitted that A.O. considered the seized material on record and th....
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.... from the list that the assessee company M/s. SPJ Hotels (P) Limited (termed as beneficiary) during the previous year 2006-2007 relevant to Assessment. Year 2007-2008 had taken accommodation entries totaling Rs.l0,00,000/- from the persons/parties (termed as entry operators). These entries have been investigated by the Investigation Wing and found to be given as accommodation entries from entities operated and controlled by Surender Kumar Jain. The details of which are mentioned below : Beneficiary's Name Amount (Rs.) Entry Provider Cheque/ P.O.No. Dated M/s. SPJ Hotels (P) Limited 5,00,000/- M/s. Hillridge Investments Limited. 011048 28.03.2007 M/s. SPJ Hotels (P) Limited 5,00,000/- M/s. Vogue Leasing & Finance (P) Limited 011047 28.03.2007 I have very carefully considered the aforesaid piece of information and the modus operandi of the entry operator Surender Kumar Jain and its controlled entities. I find that the quantum of amount of such entries received by the assessee company M/s. SPJ Hotels (P) Limited as per details mentioned above is Rs. 10,00,000/- . These accommodation entries taken by M/s. SPJ Hotels (P) Limited are ....
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....1 crore. Thus, the facts mentioned in the reasons for reopening of the assessment are incorrect and non- existent. The Hon'ble Punjab & Haryana High Court in the case of CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P & H) held as under : "Held (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment." 13.2. Since the facts are totally different as A.O. had reason to believe that Rs. 10 lakhs has escaped assessment on account of Rs. 5 lakhs received from two companies referred to above, which was ultimately found to be incorrect and non-existent, therefore, there may not be any application of mind on the part of the A.O. to proceed to initiate the reassessment proceedings. There is no other material available on record except the information received from the Investigation Wing. The A.O. on the basis of the information and material received from Investigation Wing has recorded reasons for reopening of the assessment which was ultimately found to be incorrect and non-existent. It i....
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....sidering the material on record and summons issued under section 131(1) of the I.T. Act and notice under section 133(6) and other material on record, accepted the return of income and passed the re-assessment order under section 143(3) r.w.s. 147 of the I.T. Act, Dated 30.03.2015. 17. The Ld. Pr. CIT found the said re-assessment order to be erroneous in so far as it is prejudicial to the interests of the Revenue. It is noted that assessment was reopened under section 148 on the allegation of accommodation entries taken from Shri S.K. Jain group of concerns who were searched on 14.09.2010 by the Investigation Wing of the Income Tax Department. Some of the Assessing Officers did not examine the seized material in the form of cash book and the books containing the details of cheques issued by such concerns seized from the premises of Shri S.K. Jain. Notice under section 263 of the I.T. Act was issued to the assessee which is reproduced in the impugned order in which it is noted that case was reopened on the basis of the allegation of accommodation entry on account of share capital/share premium/share application money from M/s. Hillridge Investments Ltd., and M/s. Vogue Leasi....
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.... prayed that the same may be admitted for disposal of the appeal. Learned Counsel for the Assessee relied upon the decision of Hon'ble Supreme Court in the case of NTPC Limited vs. CIT (1998) 229 ITR 383 (SC) and CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) and decision of Hon'ble Punjab & Haryana High Court in the case of VMT Spinning Co. Ltd., vs. CIT, Ludhiana and another (2016) 389 ITR 326 (P & H). 19. On the other hand, Learned D.R. objected to the admission of additional ground of appeal. 20. Considering the facts of the case, we are of the view that additional ground is legal in nature and goes to the root of the matter. Therefore the same shall have to be admitted for the purpose of disposal of the appeal. We, accordingly, admit the additional ground of appeal. Learned Counsel for the Assessee contended that re-assessment order in this case under section 143(3)/147 is invalid and bad in law and as such, the same could not be revised under section 263 of the I.T. Act. He has submitted that in fact said issue can be raised in collateral proceedings as is held in the following judicial decisions. (i) Classic Flour & Food Proces....
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....0 crores. Learned Counsel for the Assessee referred to various replies filed before A.O. at original assessment stage as well as in the reassessment proceedings in which it was clearly highlighted that there is application of mind from the side of the A.O. to frame the re-assessment order. PB-300 and 301 is report of the Inspector to show that notice under section 133(6) have been served upon M/s. Vogue Leasing & Finance Pvt. Ltd. PB-319 is the report of the Investigation Wing which clarifies that summons under section 131 and notice under section 133(6) have been issued on the Directors of the assesseecompany which have been complied with. Necessary enquiry have been conducted by the Inspector of the Office who has submitted his report without pointing-out any specific discrepancy. PB-310-317 is order sheet. Learned Counsel for the Assessee relied upon decision of Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Company vs. CIT (2009) 308 ITR 38 (Del.) in which it was held as under : "Conclusion : AO while making assessment under s. 143(3) having made specific queries with regard to share application money in response to which assessee furnis....
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.... We have considered the rival submissions and perused the material available on record. It is well settled that the Ld. Pr. CIT while exercising power under section 263 of the I.T. Act could not revise the assessment order which was illegal, bad in law and non-est in the eye of Law. The assessee can challenge the validity of the re-assessment order referred to under section 263 of the I.T. Act being nonest and illegal. The case Laws relied upon by the Learned Counsel for the Assessee are squarely applicable to the facts and circumstances of the case. In the present case, A.O. passed the original assessment order under section 143(3) of the I.T. Act, Dated 27.11.2009. The A.O. has mentioned in the assessment order that details have been filed by assessee and after discussion of the case return of income have been accepted. The assessee in this case received share application money/premium from two parties and filed several documents on record to prove genuine credit in the matter which is accepted by the A.O. Thereafter, reassessment proceedings were initiated under section 148 of the I.T. Act. The A.O. in the notice under section 148 as well as in the reasons did not mention if the....
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....sessment to prove genuine credit in the matter which have accepted by the A.O. after considering and examining the material on record and calling explanation from the Investors under section 133(6) of the I.T. Act. In this view of the matter, we allow the appeal of assessee. 24. In the result, ITA.No.2527/Del./2017 of the Assessee is allowed. ITA.No.3301/Del./2017 - M/s. Superior Buildwell Pvt. Ltd., Delhi. 25. This appeal by Assessee has been directed against the Order of the Ld. Pr. CIT-8, New Delhi, Dated 17.03.2017, for the A.Y. 2009-2010 under section 263 of the I.T. Act, 1961. 26. Briefly the facts of the case are that original return of income was filed on 18.09.2009 declaring NIL income. On the basis of information received from Directorate of Investigation Wing of Income Tax Department, it was noticed that during the course of search in the premises of Shri Surendra Kumar Jain group of cases, it was found that assessee has obtained an entry of Rs. 2 crores by way of share capital/share application money. The assessment was reopened under section 148 of the I.T. Act, 1961. Notice under section 148 was issued on 18.10.2013. The A.O. issued....
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....fore, found that the seized documents have not been examined and verified by the A.O. Therefore, re-assessment order was set aside and matter was restored to the A.O. for passing the Order afresh as per provisions of Law. 27. The assessee in the present appeal challenged the Order under section 263 of the I.T. Act as well as filed an application for admission of additional grounds which reads as under : 7.(a) On the facts and circumstances of the case, the learned Pr. CIT has erred, both on facts and in law, in holding that the legality of original assessment proceedings could not be challenged in the 263 proceedings, disregarding the various judicial pronouncements cited by the assessee in this regard. 7.(b) On the facts and circumstances of the case, the learned Pr. CIT has erred both on facts and in law in ignoring the fact that the order of the AO reopening the assessment under Section 147 of the Act, without complying with the statutory conditions and the procedure prescribed under the law, is bad and liable to be quashed, and thus, the same could not have been revised under Section 263 of the Act. 7.(c) On the facts and circumstances of the....
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....re, Ld. Pr. CIT has no power to review the same under section 263 of the I.T. Act. Learned Counsel for the Assessee referred to several replies filed before A.O. to show all documentary evidences were examined by the A.O. at re-assessment proceedings. There is no co-relation of the seized documents with the assessee. Since the A.O. recorded incorrect reasons for reopening of the assessment and that no notice under section 143(3) have been issued, therefore, re-assessment order is invalid and as such, same cannot be revised under section 263 of the I.T. Act. A.O. made enquiry of all the documents but Ld. Pr. CIT did not make any enquiry on the documentary evidences on record. Learned Counsel for the Assessee submitted that the issue is same as have been considered and decided in the cases of M/s. Supersonic Technologies Pvt. Ltd., M/s. SPJ Hotels Private Limited and M/s. Shiv Sai Infrastructure (P( Ltd., New Delhi (supra). 31. On the other hand, Learned D.R. reiterated the submissions already made in the case of M/s. Supersonic Technologies Pvt. Ltd., (supra) and also submitted that no ground was taken in original proceedings for illegality in the re-assessment proceedings.....
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.... ITO, Ward-1(4), New Delhi. (Appellant) (Respondent) Assessee by : Shri Raj Kumar, CA Revenue by : Shri S.L. Anuragi, Sr.DR Date of Hearing : 13.08.2019 Date of Pronouncement : 17.10.2019 ORDER This appeal by the assessee is directed against the order dated 19th December, 2018 of the CIT(A)-1, New Delhi, relating to Assessment Year 2010-11. 2. Facts of the case, in brief, are that the assessee is a company and had filed its return of income on 12th October, 2010 declaring the total income at Rs. 9,912/-. The Assessing Officer received information based on the search and seizure operation conducted u/s 132 of the IT Act, 1961 in the case of Shri Surendra Kumar Jain group of cases on 14th September, 2010 that Shri Surendra Kumar Jain, through a large number of dummy companies floated by him provided accommodation entries to various beneficiaries. In the list of beneficiaries so obtained, the name of the assessee also appears. He noticed the modus operandi of the Jain brothers was that they have received cash from the various beneficiaries which were deposited in the bank accounts of various entities as ....
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....ssee is in appeal before the Tribunal by raising the following grounds:- "1. That under the facts and circumstances initiation of proceedings under section l47/148 are without jurisdiction, on borrowed satisfaction, without application of mind, unwarranted, mechanical and unsustainable in law and on merits. 2. That the Ld. A.O., since failed in adjudicating all objections against reopening proceedings, properly, as per law and in totality and as per the directions of Hon'ble Supreme Court in the case of G.K.N. Drive Shafts, hence consequential proceedings and impugned asstt. is illegal and without jurisdiction. 3. That under the facts and circumstances, the approval under section l51 is fatally defective, mechanical and without application of mind which makes the whole proceedings without jurisdiction, illegal and unwarranted. 4. That under the facts and circumstances, the Ld. A.O, erred in law and on merits in making addition of Rs,20,00,000 under section 68 of the I.T. Act. 4.1 That under the facts and circumstances, addition of Rs. 20,00,000 under section 68 for the share capital / share premium received from Utsav securities (P) ltd.....
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....de letter dated 16th August, 2017, copy of which is placed at page 6 to 7 of the paper book. Referring to page 8 to 10, he drew the attention of the Bench to the disposal of the objections by the Assessing Officer. He submitted that vide para 2 of the objection letter dated 16th August, 2017, it was requested that to file complete objections, the materials relied upon by the Investigation Wing for sending the report to the Assessing Officer and such other material including the statement of persons recorded at the back of the assessee should be supplied. However, the Assessing Officer had not provided any of these documents on the ground that the relevant material is internal documents of the Department and cannot be shared. He accordingly submitted that the Assessing Officer by not providing the above documents has not disposed of the objections fully as per the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshaft. Referring to the following decisions, he submitted that incomplete disposal of objections makes the assessment invalid. i. Sabh Infrastructure Ltd. vs. ACIT, 398 ITR 198; ii. Pr. CIT vs. Tupperware India (P) Ltd., 127 DTR 161 (D....
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.... u/s 68 can be made. The ld. counsel further submitted that the assessee was never provided with the photo copy of page No.2 of diary of Shri S.K. Jain and Shri V.K. Jain claimed to have been seized on search at the residence of Shri Jain. Despite specifically asking the Assessing Officer to provide the documents relied by the Department for making the addition and asking to give opportunity to cross examine, the same were never provided. Relying on various decisions, he submitted that since the addition is based purely on presumptions and surmises and the relevant materials were not provided to the assessee, therefore, the addition so made is not sustainable. So far as the addition of Rs. 36,000/- being the commission for getting the accommodation entry is concerned, he submitted that it is an estimated addition and there is no basis or material or information based on which such addition could have been made. He accordingly submitted that the addition made by the Assessing Officer and upheld by the CIT(A) should be deleted. 9. The ld. DR, on the other hand, submitted that the Assessing Officer, in the instant case, has duly applied his mind and has made a thorough analys....
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....pproval given u/s 151, copy of which is placed at page 13 of the paper book, shows that the Addl. CIT, while giving approval has simply mentioned: "Yes. I am satisfied that it is a fit case for reopening of assessment u/s 148." Similarly, the PCIT, while giving approval has also simply mentioned: "I am satisfied that it is a fit case for issue of notice u/s 148 of the IT Act." From the above, it is clear that none of the supervisory authorities have applied their mind. I find, the Hon'ble Delhi High Court in the case of CIT vs. N.C. Cables Ltd., 391 ITR 11(Del), has observed as under:- "Reassessment-Issuance of Notice-Sanction for issue of Notice-Assessee had in its return for A Y 2001-02 claimed that sum of Rs. 1 Crore was received towards share application amounts and a further sum of Thirty Five Lakhs was credited to it as an advance towards loan-Original assessment was completed u/s 143(3)- However, pursuant to reassessment notice, which was dropped due to technical reasons, and later notice was issued and assessments were taken up afresh-After considering submissions of assessee and documents produced in reassessment proceedings, AO added back a sum of Rs. 1,35,00....
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....d Garg, New Delhi vs., ITO, Ward-49(3), New Delhi in ITA.No.794/Del./2019 Dated 07.10.2019 took same view. The findings of the Tribunal are reads as under : "IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'SMC', NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA No.794/Del/2019 Assessment Year: 2009-10 Mukesh Chand Garg B-1/305, Ground Floor, Janak Puri, New Delhi-110058 PAN No.AEYPG7826A Vs ITO Ward- 49 (3) New Delhi (APPELLANT) (RESPONDENT) Appellant by Sh. Ved Jain, Advocate Ms. Surbhi Goyal, CA Respondent by Sh. S. L. Anuragi, Sr. DR Date of hearing: 08/08/2019 Date of Pronouncement: 07/10/2019 ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 24.12.2018 of the CIT(A) -17, New Delhi relating to A.Y.2009-10. 2. The assessee in its various grounds of appeal has challenged the order of the Ld. CIT(A) in confirming the addition of Rs. 4,25,810/- and has also challenged the validity of proceedings u/s. 147. 3. Facts of the case, in brief, are that the assessee is an individual and filed his return of income on 24....
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....by the Assessing Officer is not sustainable. 6. So far as the merit of the case is concerned, the Ld. Counsel for the assessee referring to the decision of Hon'ble Bombay High Court in the case of PCIT Vs. PAT Commodity Services Private Limited reported in (2019) 2 TMI 720 submitted that the Hon'ble High court has decided the issue in favour of the assessee and the appeal filed by the revenue has been dismissed. He accordingly submitted that both legally and factually the order of the CIT(A) is not sustainable. 7. The Ld. DR on the other hand heavily relied on the order of the AO and CIT(A). 8. I have considered the rival arguments made by both the sides and perused the orders of the authorities below. I have also considered the various decisions cited before me. I find the Assessing Officer, on the basis of report of the investigation wing of the department, reopened the assessment and made addition of Rs. 4,39,342/- on account of client code modification through broker which has been upheld by the CIT(A). It is the submission of the Ld. Counsel for the assessee that the reopening was made in a mechanical manner without application of mind by the Assessi....
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.... otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commissioner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material." 8. If the case in hand is analysed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. 9. As far as explanation to Section 151, brought into force by Finance Act, 2008 is concerned, the same only pertains to issuance of notice and not with regard to the manner of recording satisfaction. That being so, the said amended provision does not help the revenue. 10. In view of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration. 11....
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....sessing Officer has added the entire amount of doubtful transactions by way of assessee's additional income, which is wholly impermissible. We do not know the fate of the individual investors in whose cases, the Revenue could have questioned the artificial losses. Be that as it may, we do not think entertaining these appeals would serve any useful purpose. 4. In the result, both the appeals are dismissed." 11. Respectfully following the decision of Hon'ble Bombay High Court cited (supra). I hold that the addition made by the Assessing Officer and sustained by the CIT(A) on account of client codes modification is not justified. The grounds raised by the assessee are accordingly allowed. 12. In the result, the appeal filed by the assessee is allowed". 6.6. The ITAT, C-Bench, Delhi in the case of M/s. Ganesh Ganga Investments Pvt. Ltd., Delhi vs., ITO, Ward- 10(1), New Delhi in ITA.No.1579/Del./2019, Dated 07.11.2019 on an identical issue held as under : "IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES "C": DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA.No.1579/Del./2019 Assess....
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....2017 which was served upon the assessee. The assessee objected to the reopening of the assessment and requested to provide copy of the approval of Competent Authority under section 151 of the I.T. Act, 1961. The Assessee also contended that whatever material was collected at the back of the assessee was not confronted and requested to supply statement of Shri Himanshu Verma, report and data complied / received from Investigation Wing, report and data complied/received by ITO, Ward-10(1), New Delhi, diaries and registers considered as incriminating material seized from Shri Himanshu Verma and any other documents which Department wanted to rely. It was further submitted that proceedings under section 147/148 of the I.T. Act, cannot be invoked for making inquiry or verification purposes. The assessee denied receipt of any accommodation entry from any such person. The A.O, however, rejected the objections of the assessee and proceeded to make assessment in the matter. The A.O. noted that in assessment year under appeal, assessee has received Rs. 11,05,00,000/- on account of share capital and share premium from 38 parties as noticed during the course of assessment proceedings. The summa....
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.... return of income filed with the Department. The A.O. has reopened the assessment by mentioning in the reasons that assessee has received entries of Rs. 2.45 crores which fact is incorrect. The initiation of reassessment have been made merely on the basis of Investigation Wing report without applying the mind. No right of cross-examination have been provided to the assessee to the statement of Shri Himanshu Verma and others. The assessee relied upon the following decisions. 3.1. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.) the Hon'ble Delhi High Court held as under: "In the present case too, the information received from the Inv. Wing cannot be said to be tangible material per se without a further enquiry being undertaken by the learned assessing officer" 3.2. In the case of Pr. CIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), the Hon'ble Delhi High Court held as under : "Reassessment notice condition precedent recording of reasons to believe that income has escaped assessment mere reproduction of investigation report in reasons recorded absence of link between tangible material and formation of ceding illegal Inc....
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....e. If the reply is in affirmative the relevant facts may be stated against Item No. 11 and 8 may also be brought out that the provisions of Sec. 150(2) would not stand in the way of initiating proceedings u/s. 147. NO 11. Reasons for the belief that the income has escaped assessment. As per annexure. Sd/- H.K. Sharma ITO, Ward-10(1), New Delhi. Dated: 29.03.2017. 12. Whether the Addl. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of notice u/s.148. In view of the facts notice u/s.148 to be issued. 13. Whether the Pr. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of notice u/s.148. Yes I am satisfied that it is a fit case for issue of notice u/s.148 of the I.T. Act, 1961. Sd/-S.K. Mittal, Pr. Commissioner of I. Tax, New Delhi." 3.6. This approval is not valid in Law because it would show that approval have been granted without application of mind. Learned Counsel for the Assessee relied upon Judgment of the Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd., vs. Commissioner of Incom....
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....f Rs. 11.05 crores under section 68 of the I.T. Act and addition of Rs. 22,10,000/- on account of commission. 6. We have heard the Learned Representatives of both the parties. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to reasons recorded in this case for reopening of the assessment, copy of which is filed at page-15 of the PB. PB- 29 is approval/sanction granted by the Pr. Commissioner of Income Tax, New Delhi. PB-6 is balance-sheet to show that in preceding assessment year the share capital was of Rs. 3.01 crores and in assessment year in increased to Rs. 14.06 crores. Thus, about Rs. 11 crores have increased and this fact was also disclosed to the Revenue Department. Such details are filed in the return of income. No verification could be allowed in the garb of proceedings under section 148 of the Income Tax Act, 1961. The name of M/s. Management Services Pvt. Ltd., in the reason from whom alleged entry have been taken by the assessee do not figure in the appellate order because such party does not exist. M/s. Shubh Propbuild Pvt. Ltd., has been mentioned in the reasons do not belong to Shri Himanshu Verma.....
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....apply his mind to the reasons and recorded incorrect facts and approval is also given on incorrect facts. The initiation and approval on the basis of wrong facts is not legally valid. He has relied upon Judgment of Hon'ble Delhi High Court in the case of Commissioner of Income Tax vs., Kamdhenu Steel & Alloys Ltd., 248 CTR 33 and other decisions as was relied upon before the authorities below. The amount received from 30 companies is Rs. 8.13 crores only out of total amount of Rs. 11.05 crores. Therefore, there is no other material on record to justify the addition. He has submitted that A.O. cannot ask to explain source of the source. Learned Counsel for the Assessee, therefore, submitted that reopening of the assessment is invalid and no addition could be made against the assessee even on merits. 7. The Ld. D.R. on the other hand relied upon the Orders of the authorities below and submitted that A.O. dealt with the objections of the assessee, but, for re-assessment proceedings no manner is provided as to how sanction is to be granted. A.O. recorded details in the reasons on which Pr. Commissioner of Income Tax was satisfied. Therefore, reopening of the assessment is vali....
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....ch reads as under : "M/s. Ganesh Ganga Investments Pvt. Ltd., PAN AAACG2710J A.Y. 2010-11 The assessee filed return of income for the A.Y. 2010-11 on 04.02.2011 declaring loss of Rs.(-) 14,162/-. The return was processed u/s 143(1). Information was forwarded to this office through the Addl.CIT, Range-10, New Delhi that search & seizure action was conducted by Inv. Wing at the office of Sh. Himanshu Verma where various incriminating documents/materials were seized during the course of search. During the post search investigation and perusal of seized documents it was observed that Sh. Himanshu Verma was engaged in the business of providing accommodation-' entries by providing cheques/PO/DD in lieu of cash to a large number of beneficiary companies thorough various paper and dummy companies floated and controlled by them. It was also evidently established by the Investigation Wing that Sh Himanshu Verma is known entry providers and is the actual controller of more than 100 companies/proprietary firms/partnership firms. They control these entities through various persons by appointing them as directors/partners/proprietors apart from nominating ....
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....Shri Himanshu Verma also establishes the link with the self-confessed "accommodation entry providers", whose business is to help assessees bring back their unaccounted money into their books of account. Thus, there is a direct link between the information/available with the department and the income escaping assessment. I have, therefore, reasons to believe that income to the extent of Rs. 2,45,00,000/- has escaped assessment relevant to A.Y.2010-11. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act 1961. Moreover, as the case pertains to a period beyond four years from the end of relevant assessment year, for issuing the notice u/s 148, necessary approval / sanction may kindly be accorded by the Pr. Commissioner of Income Tax, Delhi-4, New Delhi in view of the amended provision of section 151 w.e.f 01.06.2015. Sd/- H.K. Sharma, ITO, Ward-10(1), New Delhi." Dated : 27.03.2017. 8.1. PB-29 is the sanction granted by Pr. Commissioner of Income Tax for reopening of the assessment in which it is mentioned as under : 13. Whether the Pr. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it....
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....ed casually and in a routine manner. In the instant case, there had been no application of mind by the Addl. Commissioner before granting the approval. The petition was, thus, allowed and impugned notice was quashed." 8.3. The Hon'ble Supreme Court approving the Judgment of Hon'ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur (MP) vs., S. Goyanka Lime & Chemicals Ltd., [2015] 46 taxmann.com 313 held as under : "SLP dismissed against High Court's ruling that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid." 8.4. Similar view have been taken by Hon'ble Madhya Pradesh High Court in the case of Mr. Arjun Singh vs., Asst. Director of Income Tax [2000] 246 ITR 363 (MP) (supra), copy of which is filed at page-97 of the paper book. The ITAT, Delhi Bench in the case of M/s. Pioneer Town Planners Pvt. Ltd., vs., DCIT (supra) in paras 7 to 22 on similar facts relating to entry provider Shri Himanshu Verma held as under : "7. Apropos these legal grounds , we have heard the a....
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....f ITAT, Delhi in the case of ITO vs. Virat Credit & Holdings Pvt. Ltd. in ITA No.89/Del/2012 dated 09.02.2018. The ld. AR submitted that as per decision of Hon'ble High Court of Bombay in WP (L) No.3063/2017 in the case of Smt. Kalpana Shantilal Haria vs. ACIT dated 22.12.2017, sanction for issuing a reopening notice cannot be mechanical but has to be on due application of mind. Sanction accorded despite mention of non-existent section in the notice is prima facie evidence of non-application of mind on the part of the sanctioning authority. Their lordship in this judgment categorically held that such defect cannot be cured u/s. 292B of the Act. 10. The ld. AR placed reliance on the decision of Hon'ble High Court of Delhi dated 31.08.2017 in WP(C) No. 614/2014 in the case of Yum Restaurants Asia Pte Ltd. vs. DDIT it was held that the glaring mistakes in the proforma for approval is the valid ground for quashing the assessment on the premise of non-application of mind by all the authorities involved in the process of recording reasons and providing satisfaction/s. 151 of the Act. Further placed reliance on the decision of ITAT, Mumbai in the case of GTL Ltd. vs. ACIT....
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....the case of Asian paints (supra) and legal contention of the assessee on this issue are found to be acceptable and we hold so. 13. The ld. AR drew our attention towards reasons recorded and submitted that there is no date in the reasons recorded which shows casual approach of the AO while recording the reasons. The ld. AR submitted that as per decision of Hon'ble Jurisdictional High Court of Delhi in the case of PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677 (Del) if the reasons failed to demonstrate the link between the tangible material and formation of the reasons to believe that the income has escaped assessment then, it would amount to borrowed satisfaction and it has to be presumed that there is no independent application of mind by the AO to the tangible material which forms the basis of the reason to believe that income has escaped assessment. The ld. AR submitted that from the three pages of reasons recorded, it is discernable that in first four paras the AO has noted facts of the information received from DDIT (investigation), Faridabad, in para 6 modus operandi of entry providers has been noted thereafter, in para 7 & 8, it has been arisen that either during su....
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....recorded by the AO are the internal departmental communication between the PCIT and ACIT and the PCIT being administrative head and senior to the ACIT has power to peruse the approval u/s. 151 of the Act and his sings thereon does not make the same as mechanical and without application of mind and the same cannot be termed or alleged as invalid or bad in law. The ld. DR submitted that in column 12 of approval the ACIT Shri Sarabjeet Singh has granted valid approval by noting that "Yes, I am satisfied" which is sufficient to comply with the provisions of s. 151 of the Act. He also submitted that if there is any defect therein the same is rectifiable u/s. 292B of the Act and thus, the reassessment proceedings and orders cannot be challenged on this count. The ld. DR further submitted that the format/proforma for granting approval u/s. 151 of the Act has been designed by the Department and there is no role of AO in framing and designing the same and the allegation of non-application of mind on the basis of such proforma or words used by the approving authority cannot be made. 17. The ld. DR submitted that the team of Revenue officers work under the supervision and guidance of....
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....on of above rival submissions, first of all, we may point out that from the proforma of approval u/s. 151 of the Act placed at pgs. 16-17 of the assessee paper book, it is clear that in column 12 the ACIT has granted approval for the issue of notice u/s. 148 of the Act by writing that "Yes, I am satisfied" which is not sufficient to comply with the requirement of s. 151 of the Act. As per ratio of the decision of High Court of Madhya Pradesh in the case of CIT v. M/s. S. Goyanka Lime and Chemical Ltd. (supra), where the JCIT/ACIT has only recorded "Yes, I am satisfied" then, it has to be held that the approving authority has recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice u/s. 148 of the Act for reopening of assessment and in this situation initiation of reassessment proceedings and reopening of assessment has to be held as invalid and bad in law. Therefore, we are inclined to hold that the reopening of assessment and notice u/s. 148 of the Act are bad in law and consequently all subsequent proceedings in pursuant thereto are also bad in law and the same cannot be held as valid and sustainable. 20. So far a....
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....sed on reproduction of conclusion drawn in the investigation report cannot be held as valid reason to believe after application of mind. In this judgment their lordship also held that where nothing from the report of investigation wing is set out to enable the reader to appreciate how the conclusions flow there from then there is no independent application of mind by the AO to the tangible material which form the basis of the reasons to believe that income has escaped assessment. 22. In the present case, as we have noted above, the conclusion recorded by the AO in para 9 & 10 of the reasons is based on the information received from the director of investigation wing and the AO without making any effort to examine and discuss the material received from the Investigation Wing and without application of the mind to the same formed a reason to believe that income had escaped assessment. This shows that the AO proceeded to initiate reassessment proceedings on the basis of borrowed satisfaction without any application of mind and exercise on the information received from the Investigation Wing of the Department. Therefore, we have no hesitation to hold that the AO proceeded to i....
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....g and reproduced the same in the reasons recorded under section 148 of the I.T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the party i.e., M/s. Management Services Pvt. Ltd., do not exist and that M/s. Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of the information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of Rs. 2.45 crores, but, ultimately made an addition of Rs. 11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of....
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....d in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide the addition on merit which is left with academic discussion only. 9. In the result, appeal of Assessee allowed." 6.7. Considering the issue involved in the present appeal in the light of above decisions, it is clear that the Addl. CIT and Ld. Pr. CIT while granting approval for reopening of the assessment under section 147/148 of the I.T. Act merely stated "Yes", which would show that they have not applied their independent mind and merely accorded sanction without going through any material on record. The issue is thus covered against the Revenue by the aforecited decisions in which even on more facts the approval was not found valid. Therefore, the issue is covered by the above decisions of the Tribunal in which even on better footing the re-assessment order was quashed and ultimately it was held that such proceedings could not be reopened in collateral proceedings under secti....