TaxTMI 
TaxTMI 
2022 (3) TMI 644
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....oot of the impugned reassessment order and therefore the legal issue raised by the assessee may be first examined and adjudicated. The learned Commissioner of Income-tax, Departmental representative for the Revenue does not have any objection. Therefore with the consent of both parties we are inclined to adjudicate the legal issue raised by the assessee against the assumption of reopening jurisdiction by the Assessing Officer under section 147/148 of the Income-tax Act, 1961 (hereinafter referred to as the Act) when admittedly the assessment has been reopened after four (4) years from the end of the relevant assessment year and the relevant assessment year (AY 2012-13) has undergone scrutiny assessment under section 153A read with section 143(3) of the Act dated March 31, 2016 so according to Shri S. K. Tulsiyan, the fulfilment of the additional condition precedent as laid down in the first proviso to section 147 also need to be satisfied, i. e., first proviso provides "no action of reopening shall be undertaken by the Assessing Officer after the expiry of four (4) years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such ass....
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....) erred in upholding the action of the learned Assessing Officer initiating proceedings under section 147 merely on the basis of assumptions, presumptions and surmises. 5. That on the facts and in law and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in upholding the action of the learned Assessing Officer in initiating proceedings under section 147 without jurisdiction." 4. The facts of the case as discerned from the records including the paper book as well as from a perusal of the assessment order as well as the order of the learned Commissioner of Income-tax (Appeals) is that the assessee is a private limited company engaged in manufacture and trading of craft papers and paper boards. The assessee filed its return of income on March 11, 2013 declaring nil income (refer page 1 of paper book). Later a search operation was conducted under section 132 of the Act on September 16, 2013 at the premises of the assessee and thereafter the Assessing Officer issued statutory notice under section 153A of the Act on March 19, 2014 and thereafter issued notices under section 142(1) dated December 10, 2015 which is found placed at pages 3 ....
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.... pages 6 and 7 of the paper book) and December 14, 2015 (refer pages 8 to 11 of the paper book) and submissions placed at pages 12 to 19 of the paper book. From a perusal of the reply to the show-cause notice it is seen that the assessee had filed the details regarding the share application money of Rs. 1,58,50,000, share capital and share premium of Rs. 6,34,02,000. The assessee filed the following documents (refer pages 20-39 of the paper book) to prove identity of the share subscribers, their respective creditworthiness and genuineness of the transaction in respect of share application and share premium is received from the eleven (11) companies : (i) Form for application of equity shares (ii) Copy of board resolution of the respective companies (iii) Income-tax acknowledgment copy (iv) Certificate of incorporation. (v) Copy of bank statement duly marked. (vi) Copy of balance-sheet of the company showing the amount of shares shown in the audited balance-sheet assets side. (vii) Certificate of incorporation of Registrar of Companies of each share subscribing companies which shows that they are all registered companies....
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.... the share application/capital/premium collected and so the Assessing Officer being satisfied with the nature and source of the credit entries in the form of share capital and premium, passed the reassessment order under section 153A/143(3) by order dated March 31, 2016 wherein the Assessing Officer had acknowledged that the assessee had duly complied with the notices under sections 143(2) and 142(1) of the Act and has filed replies along with documents to the requirements called for by detailed questionnaire asked by him. The Assessing Officer acknowledges that the chartered accountant of the assessee has attended the reassessment proceedings from time to time and filed details/particulars as called for as per the questionnaire and had duly noted that in course of assessment proceedings he had obtained and verified the same and thereafter has conducted the enquiry and after verification has accepted the same/return of income filed by the assessee. Moreover the Assessing Officer, (Assistant Commissioner of Income-tax, Central Circle-3, Patna) had observed in the assessment order that the order has been passed with prior approval of the Joint Commissioner of Income-tax, Central Rang....
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....ficiary PAN Ben. Account No. Bank Name Samkit Finance Pvt. Ltd. 9-4-2011 2011-12 25,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 21-6-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 29-6-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 30-6-2011 2011-12 10,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 19-8-2011 2011-12 20,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Samkit Finance Pvt. Ltd. 3-9-2011 2011-12 9,00,028 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Saphire Conclave Pvt. Ltd. 6-4-2011 2011-12 50,00,055 Shree Vishnu Vishal Paper Mills Pvt. Ltd. AAHCS8837K 291300210002505 PNB Saphire Conclave Pvt. Ltd. 17-10-2011 2011-12 30,00,055 Shree Vishnu Vishal Paper Mills Pvt.....
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....ation and evidence which are already on record/assessment folder. And the fact that the Assessing Officer after due verification and enquiry, being satisfied with the genuineness of the share transaction had accepted the nature and source of the entire credit entries to the tune of Rs. 1,58,00,000 and Rs. 6,34,02,000 and in the said scrutinised reassessment order dated March 31, 2016 under section 153A/143(3) of the Act in paras 3 and 4 has specifically observed that : "Statutory notice under sections 142(1) and 143(3) were issued to the assessee along with the detailed questionnaire. In response to which Shri Amit Kamalia, chartered accountant of the assessee attended and filed details/particulars as called for as per questionnaire and during the assessment proceedings obtained, verified and placed on record. All relevant records available have been perused and the case was discussed with the counsel of the assessee in detail. In the above circumstances, available facts in the record and after discussions made with authorised representative the return income is accepted and assessed at Rs. nil." 8. The assessee in its objection against the proposed reopening had specif....
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....has to be seen in the light of the recent judgment of the hon'ble Supreme Court in the case of Pr. CIT v. NRA Iron and Steel Pvt. Ltd. [2019] 412 ITR 161 (SC). In view of the above, your objection is overruled as because at the time of assessment under section 153A/143(3) the issues related to all the entries pertaining to share application money for the financial year 2011-12, which includes share application money received from M/s. Samkit Finance Pvt. Ltd. amounting to Rs. 1,04,00,303 and from M/s. Saphire Conclave Pvt. Ltd. amounting Rs. 1,00,00,165 was not examined with due diligence as discussed above." 9. The aforesaid action of the Assessing Officer to overrule the objection raised by the assessee as well as his jurisdiction to reopen without satisfying the essential jurisdictional fact as stipulated under section 147 of the Act and more particularly the requirement of first proviso to section 147 of the Act is under challenge before us. It is noted that the Assessing Officer after overruling the objection raised by the assessee has made an addition of Rs. 2,04,00,468 under section 68 of the Act. Aggrieved by the aforesaid action of the Assessing Officer, the assesse....
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....lief to the assessee on the merits. 11. Against the action of the learned Commissioner of Income-tax (Appeals) the Department has filed an appeal against the deletion of addition of Rs. 2,04,00,468. However, since the assessee has preferred the cross-objection by raising a legal issue challenging the very jurisdiction of the Assessing Officer to reopen the assessment for this relevant assessment year which has already undergone reassessment under section 153A/143(3) of the Act, the additional condition precedent as prescribed by the first proviso to section 147 of the Act is attracted. According to the assessee, the essential condition precedent for invoking the reopening is not met by the Assessing Officer, so if has assailed the jurisdiction of the Assessing Officer to reopen and this being a legal issue and if found valid, then it goes to the root of the impugned action of the Assessing Officer, we are examining the same first. 12. Assailing the action of the Assessing Officer to have invoked his jurisdiction to reopen the assessment under section 147 of the Act by issuing notice under section 148 of the Act based on certain Investigation Wing report, according to the lear....
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....63 of the Act to revise the action of the Assessing Officer. Further Shri S. K. Tulsiyan drew our attention to the enquiries conducted by the earlier Assessing Officer on the very same issues. According to the learned authorised representative, from a perusal of the show-cause notice issued during the 153A/143(3) proceeding which is placed at page Nos. 3 to 5 shows that the Assessing Officer at that time itself dated December 10, 2015 had clearly nursed doubts about the credit entries from these two entities M/s. Saphire Conclave and M/s. Samkit Finance Pvt. Ltd. which is evident from page 4 wherein these two companies name also has been reflected among the eleven (11) share subscribers and their addresses given and even the finding of the Investigation Wing that these two companies are found to be non-existent by them. Armed with this adverse information only the Assessing Officer in that earlier proceeding had issued the show-cause notice date December 10, 2015 which was responded to by the assessee by filing all the details pertaining to these two companies and filed the following documents to substantiate the nature and source of the credit entries from both of them : ....
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.... (iii) whether any material was enclosed with the purported information etc. According to him, a mere passing reference of information from Investigation Wing is akin to "hearsay" which cannot be termed as a tangible material for reopening the completed assessment under section 153A/ 143(3) of the Act when the earlier Assessing Officer had already conducted enquiry on it and has reached a conclusion on it. According to the learned authorised representative it is settled law that the Assessing Officer does not enjoy the power of review. According to Shri S. K. Tulsiyan, it is settled position of law that the concept of assessment is governed by the time barring rule and the assessee acquires a right as to the finality of the assessment proceeding. According to him, quietus of the completed assessment can be disturbed only when there is tangible material regarding undisclosed income or material to show escapement of income. Here according to Shri S. K. Tulsiyan not only this essential jurisdictional fact necessary for reopening as specified in section 147 of the Act, has been satisfied and since the reopening for the assessment year 2012-13 which has already undergone scrutiny under ....
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....ground and they are accommodating entry operators, therefore the present Assessing Officer has rightly issued notice under section 148 of the Act and, therefore, he does not want us to interfere in the order of the learned Commissioner of Income-tax (Appeals) upholding the action of reopening by the Assessing Officer. 15. We have heard rival submissions and gone through the facts and circumstances of the case. Before we examine the legal issue one should bear in mind that the concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments should not be disturbed which is the rule and exception to this rule is that it can be done only when there is information or evidence/material before him regarding undisclosed income or the Assessing Officer has information in his possession showing escapement of chargeable income and when Parliament allows such an action, which can be done only if the condition precedent stipulated therein is strictly satisfied. 16. Attention is sought to the provisions of section 147 of the Act which is reproduced hereunder : "If the Assessing Offi....
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....He has to speak through the reasons". Their Lordship added that "The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence. . . ". Therefore reasons are to be examined only on the basis of the reasons as recorded. 18. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment ; all that is necessary is the formation of prima facie belief that an income has escaped the assessment ; and it is not necessary the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the Assessing Officer can form the belief that an income has escapement. Merely because some further investigation have not bee....
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....as different and distinct authorities. Such different and distinct authorities have to exercise their powers given to them in specified circumstances. If power conferred on a particular authority are arrogated by another authority without mandate of law, it will create chaos in the administration of law and hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the another authority. It is trite that when a statute requires a thing to be done in a certain manner, it shall be done in that manner alone and the court would not expect its being done in some other manner. It was also held in the decision in State of Bihar v. J. A. C. Saldanha, AIR 1980 SC 326. Satisfaction recorded should be "independent" and not borrowed or dictated satisfaction. In the decisions reported in State of U. P. v. Maharaja Dharamander Prasad Singh [1995] 5 SCC 302 it was held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to his own discretion. If discretion is exercised under the direction or compliance with some higher authorities instruction, then it will be a cases of failure to exercise ....
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....f that income chargeable to tax has escaped income. In this context it must be remembered that the hon'ble Supreme Court in Ganga Saran and Sons (P.) Ltd. v. ITO [1981] 130 ITR 1 (SC) has held that the expression "reason to believe" occurring in section 147 of the Act "is stronger" than the expression "is satisfied" and such jurisdictional requirement has to be met by the Assessing Officer before he usurp the jurisdiction to reopen an assessment. 22. In the light of the settled position of law regarding the legal issue raised by the assessee challenging the jurisdiction of the present Assessing Officer (second) to reopen the reassessment dated March 31, 2016 for the assessment year 2012-13 which had undergone scrutiny under section 153A/ 143(3) earlier in the hands of the Assistant Commissioner of Income-tax (with approval of Joint Commissioner of Income-tax under section 153D), wherein the first Assessing Officer has enquired about the very same transaction of share capital and premium, inter alia, along with other eleven (11) share subscribers/companies which was also based on the adverse report of the Investigation Wing. And based on a similar Investigation Wing mat....
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....ame of the company Address Findings of the Investigation Wing 1 Samkit Finance Pvt. Ltd. 2, Lal Bazar Street, 1st floor, Kolkata-700001 Company found to be non-existent by Investigation Wing, Kolkata 2 Saphire Conclave Pvt. Ltd. 33/1, N. S. Road, 6th floor, Kolkata-700001 Company found to be nonexistent by Investigation Wing, Kolkata Further it was found in the course of search and seizure operation that the shares issued in the name of above companies were lying with the M/s Lodhal Patel Wadhwa and Co. the auditor of the assessee-company. In the course of further investigation it was found that the 20840 shares of the assessee-company were transferred to the M/s. Pioneer Commosale Pvt. Ltd. on October 8, 2010. In this manner, the shares issued by the assessee-company for Rs. 56,60,000 was finally purchased by the family company of one of the director Shri Sanjay Kumar Modi M/s. Pioneer Commosale Pvt. Ltd. for Rs. 1,19,992. The above facts clearly shows that the assessee-company was in the practice of infusing unaccounted fund from dubious sources through the accommodation entries. It further finds support from the statement given by ....
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.... nature and source of credit entry in the form of share capital and premium from both these companies, it is noted that the company in the course of assessment proceeding has already submitted details of share application money received during the year along with the name and address of the applicants. Further it is noted that in order to prove the identity, creditworthiness and genuineness of the transaction in respect to share application the assessee/share subscribers had submitted the following papers and documents : (i) Form for application of equity shares (ii) Copy of board resolution of the respective companies (iii) Income-tax acknowledgment copy (iv) Certificate of incorporation (v) Copy of bank statement duly marked (vi) Copy of balance-sheet of the company showing the amount of shares shown in the audited balance-sheet assets side. (vii) Certificate of incorporation of Registrar of Companies of each share subscribing companies which shows that they are all registered companies under the Companies Act. (viii) PANs of all the share subscribing companies were furnished (ix) And all of these sh....
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....isance of the adverse report from the same source the first Assessing Officer had issued show-cause notice dated December 10, 2015 (supra) and alleged that these two companies (M/s. Samkit Finance Pvt. Ltd. and M/s. Saphire Conclave Pvt. Ltd.) were not found to be existing. So it is noted that the first Assessing Officer (Assistant Commissioner of Income-tax) had raised serious doubt about the existence of these two companies based on the Investigation Wing report itself and after conducting enquiry and verification and after approval from Joint Commissioner of Income-tax under section 153D has passed the reassessment order dated March 31, 2016 accepting the nature and source of the credit entries from these two companies also. So we find that the first Assessing Officer has made the reassessment after discharging his duties as an investigator as well as that of an adjudicator. So the action of the Second Assessing Officer to again rake up the same issue which has undergone scrutiny by his predecessor Assessing Officer is nothing but review of the action of first Assessing Officer dated March 31, 2016, which power it is settled that the Assessing Officer (second) does not enjoy. So....