AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2022 (4) TMI 618
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....sanction u/s 151 of IT Act has been obtained from inappropriate authority i.e the Addl. CIT, Range-18, New Delhi instead of correct authority i.e. Pr. CIT /Pr CCIT/ CCIT/ CIT, New Delhi and in the absence of sanction from the appropriate authority the consequent reassessment proceedings are not valid 3. The Ld. CIT(A) has erred both in law and in facts of the case in upholding the impugned reassessment proceedings ignoring the fact that the sanction u/s 151 of IT Act has been mechanically accorded by the sanctioning authority which is evident from the application of clause (b) of the Explanation 2 to section 147 of the Act initiating action u/s 147 implying that the AO failed to consider the fact that the appellant is already assessed u/s 143(3) of the Act and in such a case that the said clause has no application. 4. The Ld. CIT(A) has erred both in law and circumstances of the case in upholding the reassessment proceedings u/s 147 of the IT Act which is not properly initiated and therefore need be quashed as the appellants case is covered by proviso to section 147 of the IT Act and that being the case the AO has failed to give a finding as which material facts the appellant f....
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....icer in making an addition of Rs. 27,000/- being 1.8% of the alleged accommodation entries of Rs. 15,00,000/- is arbitrary and without basis and therefore need be quashed." 3. Facts of the case, in brief, are that the assessee is a company, which was incorporated on 20th March 1997 under the Companies Act, 1956 and is engaged in the business of sale/purchase of shares and providing finance to corporate and other parties. It has two directors namely Sh. Manoj Kumar and Sh. Anuj Gupta. It filed its return of income on 28.09.2008 declaring total income of Rs. 18,230/-. The return was selected for scrutiny and noticed u/s 143(2) and 142(1) were issued and served upon the assessee. The AO in the order passed u/s 143(3) dated 03.12.2010 completed the assessment determining the total income at Rs. 48,360/-, wherein, he made disallowance out of preliminary expenses at Rs. 17,603/-, disallowance out of general expenses at Rs. 1,060/- and disallowance u/s 14A r.w.r 8D at Rs. 11,465/-. 3.1. Subsequently, the AO reopened the case u/s 147 of the Act by recording the following reasons. "Reasons for the belief that income has escaped assessment in the case of M/s Nishit Fincan Pvt, Ltd. (PAN-....
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.... In the aforesaid case return of income was filed on 14.10.2008 declaring income of Rs. 18,230/-. Subsequently, after receipt of information of accommodation entries taken by the beneficiaries, it is noticed that the assessee company M/s Nishit Fincap Pvt. Ltd. received accommodation entries to the tune of Rs. 15,00,000/- during the F.Y. 2007-08 relevant to assessment year 2008- 09"lrom the companies of entry operators as mention in the chart above. Having perused and considered the information, I have reason to believe that income of the assessee company to the extent of Rs. 15,00,000/- has escaped assessment for the A.Y. 2008-09 on account of failure on part of the assessee company to disclose fully and truly all material facts/particulars of its income necessary for its assessment for the A.Y. 2008-09. Therefore, proceedings u/s 147 i.e. Clause (b) of explanation 2 of provisions of Sec. 147 of the I.T. Act, 1961. is proposed to be initiated for A.Y. 2008-09. Since four years have elapsed from the end of the relevant assessment year i.e. A.Y. 2008-09, approval of the Addl. Commissioner of Income Tax, Range-18, New Delhi is solicited u/s 151(1) of the I.T. Act, 1961." 4. Ac....
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....ll stand excluded in computing periods of limitation prescribed under various laws for instituting proceedings under respective laws. Relying on various decisions, he submitted that the delay in filing the present appeal of 133 days is not intentional and the same was beyond the control of the assessee and therefore the delay in filing the appeal should be condoned. 8. After hearing both the sides and considering the totality of the facts of the case, the delay in filing the appeal is condoned. 9. The ld. Counsel for the assessee, at the outset, submitted that the original assessment was completed u/s 143(3) of the Act on 03.12.2010 for AY 2008-09. The case of the assessee was reopened vide notice u/s 148 of the Act dated 18.03.2015, which is after a period of four years from the end of the relevant assessment year. Referring to the reasons recorded, he submitted that the AO has merely stated that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. However, there is no mention as to how and why there is failure on the part of the assessee to disclose fully and truly all material facts necessary fo....
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....at no such exercise has been done by the AO and he has simply relied on the information from the Investigation Wing to invoke section 147 of the Act. 10.1. Referring to the decision of the Hon'ble Delhi High Court in the case of CIT vs Viniyas Finance & Investment Pvt. Ltd. in ITA No.271/2012 (Del.) dated 11.02.2013, the ld. Counsel for the assessee submitted that under identical situation the reassessment proceedings were quashed. Referring to the decision of the Hon'ble Supreme Court in the case of NDTV vs DCIT, reported in 424 ITR 607 (2020) (SC), he submitted that the reassessment proceedings were quashed for not mentioning first proviso in the reason recorded. He submitted that the above identical fact is also present in the instant case. He submitted that similar view has been taken in following cases and the reassessment proceedings were quashed. i. CIT vs DCM Ltd. 24 DTR 72 (Del.), ii. Haryana Acrylic Manufacturing Co. Vs CIT and Anr., 308 ITR 38 (Del.), iii. Wel Intertrade (P) Ltd. & Anr. Vs ITO 308 ITR 22 (Del.) iv. CIT vs Purolator India Limited 343 ITR 0155 (Del.) and v. Atma Ram Properties Pvt. Ltd. vs DCIT 203 Taxman 0408 (Del.) 11. Referring to the decisi....
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....section is not intended to cure complete absence of notice itself. Referring to the following decisions, he submitted that non-issuance of notice u/s 143(2) makes the earlier assessment proceedings a nullity. i. ACIT vs. Hotel Blue Moon (2010) 321 ITR 362 (SC); ii. Pr. CIT vs. Shri Jai Shiv Shankar Traders Pvt. Ltd. ITA No.519 of 2015, Dated 14/10/2015(Del); iii. Pr CIT vs M/s Paramount Biotech Industries Ltd In ITA No.887, 888/2017 Dated 24.10.2017 (Del); iv. DIT v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del); v. PCIT v. Silver Line (2016) 383 ITR 455 (Delhi) (HC) vi. Pr CIT vs Staunch Marketing Pvt Ltd 404 ITR 299 (Del) vii. Alpine Electronics Asia Pvt. Ltd. Vs. DCIT 341 ITR 247 (Del) 13. The ld. Counsel for the assessee in his another plank of argument submitted that the jurisdiction u/s 147 was assumed on the basis of various incriminating documents found in the search on Sh. S.K. Jain and his brothers, which is evident from the reasons recorded. It has also been mentioned in the reasons that from verification of documents seized in above search it clearly appears that assessee has taken accommodation entries from the ent....
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....the Investigation Wing, according to which, during the search and seizure operations u/s 132/133A in the case of Mr. Surender Kumar Jain and group of cases and post search enquiries/verification, it is established that the Sh. S.K. Jain, who is known entry provider and also in the business of providing accommodation entries to various beneficiaries companies, had given accommodation entry of Rs. 15 lakhs from his company namely M/s Shalini Holdings Ltd. to the assessee. Accordingly, the case of the assessee was reopened by recording reasons which have been already reproduced in the preceding paragraph. A perusal of the reasons so recorded shows that the AO has reopened the assessment by invoking the provision of clause (b) of Explanation-2 of section 147 of the Act. Before proceeding further, it is necessary to reproduce the clause (b) of explanation 2 of section 147, which reads as under:- "Explanation2. For the purposes of this section, the following shall also be deemed 10be cases where income chargeable lo tax has escaped assessment, namely (a) where no retain of income has been furnished by the assessee although his total income or the total income of any other person in r....
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....tiation of proceedings by invoking clause (b) of Explanation-2 of section 147 renders the reassessment proceedings invalid and consequently, such reassessment proceedings have to be quashed on account of non-application of mind before reopening of the assessment. 18. Even otherwise also, we find the AO after analyzing the various details filed by the assessee, passed the order u/s 143(3) of the Act without drawing any adverse inference in respect of amount of Rs. 15 lakhs brought from M/s Shalini Holdings Ltd. I find the AO in the reasons recorded had merely stated that there is failure to disclose fully and truly all material facts necessary for the completion of the assessment for the AY 2008-09, However, he has not specifically mentioned which particular has not been disclosed by the assessee. This in my opinion does not satisfy the statutory pre-conditions provided in section 147 of the Act. It has been held in various decisions that the reasons must indicate how and why the assessee has failed to make the full and true disclosure of all material facts necessary for completion of assessment and mere repetition or quoting the language of the proviso is not sufficient. The basis....