AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2022 (1) TMI 832
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 148. 3. The AO in this case received information from the Dy. Director of Incometax (Investigation)-II, Chandigarh that a survey operation u/s 133A of the Act was conducted in the case of the assessee at various places. During the course of survey and post survey enquiries, it was observed that the share capital and share premium amounting to Rs. 5,03,82,000/- was received by the assessee from two Kolkata based companies, namely, M/s Olipha Trading & Investment Pvt. Ltd. and Sopan Merchants Pvt. Ltd. It was also found that the above two companies had received share capital and huge share premium despite having no/negligible assets and negligible turnover and profits and the same share capital and premium were further invested in the group companies of the assessee. In order to verify the identity, capacity and genuineness of the above companies from whom share capital was received, a commission was issued to DDIT (Inv.), Unit-II(3), Kolkata. From the analyses of the commission, it appeared that the source of capital introduced in these companies was also doubtful. The said companies were found non-existent at their registered addresses. It was further informed by the Investigat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bank account of the investor companies showing rents towards share application money, d) Confirmation from investor companies. e) Share Application form duly filled by the investor companies f)Confirmation in respect of allotment of equity shares to the investor g) Copy of PAN card of the investor companies. h) Memorandum & Articles of Association of the investor companies clearly depicting their corporate identity number. i) Copies of share certificates issued by the assessee company A copy of the acknowledgement of the Income tax return filed for AY 2009- 10 by the investor company along with its audited financial results for the year ended 31st March, 2009. 6.2.2 The Ld. AR also submitted that identity of the investor is established by the name, address, PAN. PAN is enough to prove the identity of a person as held by the Hon'ble Delhi High Court in the case of CIT vs. Dwarkadhish Investment Pvt. Ltd., 2010) 45 DTR (Del) 281. He further emphasized that genuineness of the transactions is also fully established by the fact that the transaction is duly confirmed by the investor, the amount is duly reflected in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o is controlling M/s Sopan Merchants Pvt Ltd and Sh. Subhash Kumar Agarwal, who is controlling M/s Olipha Trading Investments Pvt Ltd. The two entry operators have been investigated by Investigation Wing, Kolkata and have admitted on oath that they are in the business of providing accommodation entries to various beneficiaries in the form of share capital or unsecured loans. 6.2.7 The Ld. AR submitted that these statements were not recorded by the investigation wing in the case of the appellant. Mr. Pankaj Aggarwal and Mr.Subhash Kumar Agarwal have nowhere mentioned the name of the appellant as the beneficiary. Copies of the statements were never provided to the appellant depriving it from the opportunity of cross examining him. Therefore, these statements have to be excluded from the assessment proceedings. The ld. AR relied on the following case laws:- KishmichandChella Ram vs. CIT, 125 ITR 713 (SC) Pr. CIT vs. M/s Rakam Money Matters Pvt. Ltd., 2015-TIOL-2521-HC-DEL CIT vs. A.L. LaLpuria Construction (P.) LtD. [2013] 32 taxmann.com 384 (Rajasthan) Sona Electric Co. vs. CIT, 152 ITR 507 (DEL) Amar Singh vs ITO, 53 TTJ (DEL) 69....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Ltd. vs. ACIT, 2017-TIOL-714-ITAT-DEL ITO Vs. R B Horticulture & Animal Projects Co Ltd., 2016-TIOL-51O-ITATKOL 6.2.12 I have gone considered the case laws relied by the Ld. AR wherein it is clearly held that low income earned by investor companies by itself is no ground to treat the share application money received by the assessee as not genuine. It has also been held by Hon'ble ITAT, Kolkata that if the share applicants do not have the means to make investment, the additional burden is on the department to show that investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated the same as undisclosed income. Therefore, low income of the investor does not result in any negative inference. The material fact for making investment is availability of funds. 6.2.13 In the assessment order, the Ld. AO mentioned that stated share application money is nothing but assessed own money from undisclosed source. Ld. AR submitted that there is no evidence that the funds from the appellant were transferred to the investors for investment. The onus is on the department to show that it is the appellant's money which has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terprises vs. ACIT; ITA No, 255,256 & 257/Mum/2010 and on another judgment from Hon'ble Delhi High Court in the case of Globus Infocom Ltd. vs. CIT, (2014) 108 DTR (Del) 363. 6.2.19 I have considered the decisions wherein it has been held that the use of word "possible" means no finding but only surmises and conjectures. Therefore, the Assessing Officer should have made the impugned addition u/s 68 of the Act on the basis of some conclusive evidences or information. Addition made just on the basis of doubt is not sustainable. After duly considering the assessment order, documents/ informations provided by the Ld. AO during appellate proceedings as well as in view of the facts and law as discussed above, the addition of Rs. 5,03,82,000/ - made by the Ld. AO u/s 68 of the IT Act, 1961 is hereby deleted and these grounds are allowed." 7. He, however, upheld the validity of the reassessment proceedings and also the assessment in absence of issue of notices u/s 143(2) of the IT Act. 8. Aggrieved with such order of the CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:- "(i) On the facts and under the circumstances of the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, when the Revenue filed an appeal before the ITAT, the Appellant herein (Respondent before the Tribunal) was entitled under law to defend the same and support the order in appeal on any of the grounds decided against it. The Respondent - assessee had taken the ground of maintainability before Commissioner (Appeals) and, therefore, in the appeal filed by the Revenue, it could rely upon Rule 27 and advance his arguments, even though it had not filed cross objections against the findings which were against him. The ITAT, therefore, committed a mistake by not permitting the assessee to support the final order of CIT (A), by assailing the findings of the CIT(A) on the issues that had been decided against him. The Appellant - assessee, as a Respondent before the ITAT was entitled to agitate the jurisdictional issue relating to the validity of the reassessment proceedings. We are, therefore, of the considered opinion that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the Appellant - assessee (Respondent before the Tribunal) to urge the grounds by way of an oral application under Rule 27. The question of law as framed is answered in favour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder Section 143(2) cannot be dispensed with; ++.... In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2), prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB.............." * Greater Noida Industrial Development Authority vs. ACIT, 2015-TIOL- 227-ITAT-DEL, order dated 09/01/2015 "7.3. The contention of the assessee is that the Assessing Officer has not issued notice u/s 143(2) for any of the impugned Assessment Years, subsequent to filing of a return by the assessee. The claim of the assessee that notice u/s 143(2) of the Act was not at all issued for all the impugned AYs, could not be factually controverted by the Revenue. During the hearing of the Stay Petition, the Revenue was specifically directed to produce the assessment record, for all these Assessment Years, during the final hearing. This was not done. During the course of final hearing the Bench has directed the Revenue to produce the assessment record within one week from the date of hearing. This is not done till date. The Revenue is silent on this factual matter till date. Hence we draw a conclusion....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e present case, the AO issued the notice u/s 148 of the Act and the assessee furnished the return of income in response to the said notice. Thereafter the AO asked the assesses to furnish certain details by issuing the questionnaire u/s 142(1) of the Act but nowhere issued the notice, u/s 143(2) of the Act. Therefore, the assumption of jurisdiction for framing the assessment was invalid. * B R Arora vs. A CIT. 2014- TIOL-491 -ITAT-DEL * Mohinder Kumar Chhabra vs. ITO, (2014) 31 ITR (Trib) 93 (Delhi) * UKT Software Technologies Pvt Ltd. vs. ITO, 2013-TIOL-83-ITATDBL * ACIT vs. Hotel Blue Moon, (2010) 321 ITR 362 (SC) 4. Therefore, assessment order u/s 147/143(3) is also illegal on the ground of non issue of notice u/s 143(2). 5.2 I have carefully considered the submissions of appellant and the facts on record. It was held by Delhi High Court in the case of PCIT Vs Mega Corporation Ltd (2017), ITA No.128/2016 that the assessee could have raised objection to jurisdiction only within a month having regard to the notification which was issued on 01.08.2007. In view of Judgment of Delhi High Court in the case of PCIT Vs Mega Corporati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. Before proceeding to decide the merit of the case as per the grounds raised by the Revenue, we would first like to deal with the ground raised by the assessee as per Rule 27 of the ITAT Rules wherein the assessee has challenged the validity of the assessment order in absence of issue of notice u/s 143(2) of the IT Act. A perusal of the assessment order as well as the order of the CIT(A) shows that no notice u/s 143(2) was ever issued to the assessee before completing the assessment u/s 143(3)/147. It is the submission of the ld. Counsel that it is mandatory to issue notice u/s 143(2) even in reassessment proceedings and non-issuance of the same makes the assessment order illegal and null. 17. We find merit in the above argument of the ld. Counsel for the assessee. The Hon'ble Delhi High Court in the case of PCIT vs. Shri Jai Shiv Shankar Traders Pvt. Ltd. (supra) has held that the failure of the AO in reassessment proceedings to issue notice u/s 143(2) prior to finalizing the reassessment order cannot be condoned ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es a deeming fiction. The deeming fiction is to the effect that once the assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under the provisions of the Act, which is required to be served on the assessee, has been duly served upon him in time in accordance with the provisions of the Act. The assessee is precluded from taking any objection in any proceeding or enquiry that the notice was (i) not served upon him; or (ii) not served upon him in time; or (iii) served upon him in an improper manner. In other words, once the deeming fiction comes into operation, the assessee is precluded from raising a challenge about the service of a notice, service within time or service in an improper manner. The proviso to Section 292 BB of the Act, however, carves out an exception to the effect that the Section shall not apply where the assessee has raised an objection before the completion of the assessment or reassessment. Section 292 BB of the Act cannot obviate the requirement of complying with a jurisdictional condition. For the Assessing Officer to make an order of assessment under Section 143 (3) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....was a waiver of right of notice to be issued u/s 143(2) of the Act." 18. As already noticed, the decision of this Court in CIT v. Vision Inc. proceeded on a different set of facts. In that case, there was a clear finding of the Court that service of the notice had been effected on the Assessee under Section 143 (2) of the Act. As already further noticed, the legal position regarding Section 292BB has already been made explicit in the aforementioned decisions of the Allahabad High Court. That provision would apply insofar as failure of "service" of notice was concerned and not with regard to failure to "issue" notice. In other words, the failure of the AO, in re-assessment proceedings, to issue notice under Section 143(2) of the Act, prior to finalising the re-assessment order, cannot be condoned by referring to Section 292BB of the Act. 19. The resultant position is that as far as the present case is concerned the failure by the AO to issue a notice to the Assessee under Section 143(2) of the Act subsequent to 16th December 2010 when the Assessee made a statement before the AO to the effect that the original return filed should be treated as a return pursuant to a....