2023 (3) TMI 268

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....ing Officer (AO) to be erroneous and prejudicial to the interests of the Revenue. 3. The background facts are that as far as the Assessee Badal Prakash Jindal, HUF is concerned, the said Assessee filed its return of income for the AY 2013-14 on 25th November, 2013 after claiming Long Term Capital Gains (LTCG) under Section 10(38) of the Act. The AO, i.e., the Income Tax Officer, Bargarh Ward, Bargarh gathered information that the Assessee had shown the LTCG out of the share transaction of a Kolkata based company, M/s. Tuni Textile Mills Ltd. (TTML) and that the price of such shares had increased by more than 768% from the cost of acquisition within a span of a little more than one year. 4. Alleging that the Assessee had taken an accommodation entry in the form of bogus LTCG and that TTML was a sham company, the AO reopened the assessment by issuing notice dated 30th March, 2018 to the Assessee under Section 148 of the Act. 5. In response thereto, the Assessee filed a return of income this time offering the net consideration from the sale of shares for taxation under the head Short-Term Capital Gains (STCG) in lieu of LTCG shown in the original return. On this basis, the AO....

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....ment with the contention of the ld. CIT-DR that the AO has only made order sheet entry on 26.03.2018 copy of the actual reasons recorded by him was supplied to the assessee which is available at pages 4-9 of the assessee's paper book. Therefore, it cannot be alleged that the reasons recorded by the AO are different from the copy of the reasons supplied to the assessee because the reasons recorded in the order sheet at page 13 clearly reveals that the AO has recorded reasons for initiation of reassessment proceedings in the first order sheet recorded on 26.03.2018 and, therefore, on the very same date, after obtaining approval of competent authority/JCIT, Range-2, Sambalpur on the very same date issued notice u/s 148. Therefore, we safely presume that the reasons recorded by the AO are different from the copy of the reasons supplied to the assessee. The ITAT, Delhi Bench in the case of Jansampark Advertising & Marketing Pvt. Ltd. (supra) decided a similar issue by referring to the order of the ITAT Delhi in the case of Wimco Seedlings Ltd. vs. JCIT, dated 2.06.2020 in ITAs No.2755, 2756, 2757/Del/2002 with the following observations and findings:- "8. A reading of the above....

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....his case was filed on November 30, 1998 declaring nil income. Assessment under section 143(3) was completed at nil income on March 7, 2001. It has come to the notice that the assessee-company has taken accommodation entries from one of the companies of Sh. Sanjay Rastogi, i.e. Hallmark Helathcare Limited, vide cheque no. 201845 dated October 17, 1997, amounting to Rs.5,00,000 during the year relevant to the assessment year 1998-99. I have reason to believe that the income to the extent of Rs. 5,00,000 has escaped assessment. As such after obtaining the approval o f CIT(C)- II to reopen the case, notice under section 148 of the Income-tax Act is issued to the assessee. (Sd)....... 29.3.2004 ACIT, CC-18, New Delhi." 28. It was further pleaded before honourable court that:- 16. Lastly, it was contended that in the counter-affidavit filed by the respondents the reasons which had been indicated for initiation of proceedings under section 147 were entirely different to the reasons which had been supplied to the petitioner. The attention of this court was drawn to paragraph 5(d) of the counter-affidavit wherein it is stated that the true copy o....

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....davit. It was urged on behalf of the respondents that the 'reasons for the belief that income has escaped assessment' at serial no. 11 of the said form clearly carries the allegation that 'there was failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries'. This being the case, it was submitted, the bar of taking action within four years would not apply and consequently, the notice under section 148 was valid. 31. This argument suffers from several infirmities. First of all, the respondents cannot be permitted to gloss over the fact that the reasons which were supplied to the petitioner were different from the reasons purportedly recorded in the said form on which they now seek to rely. If the reasons in the said form were the 'actual' reasons, why were they not communicated to the petitioner? Why was nothing said about these reasons (noted in the form) when the petitioner filed its objections to the reasons which were supplied to it? It must be remembered that in its objections, the petitioner took the specific plea that in the absence of any allegation that the petitioner had fai....

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.... 147 of the said Act by reason and substance. In fact, even section 148(2) stipulates that the Assessing Officer shall, before issuing any notice under the said section, record his reasons for doing so. The Supreme Court has only carried forward this mandatory requirement by directing that the reasons which are recorded be communicated to the assessee within a reasonable period of time so that at that stage itself the assessee may point out any objections that he may have with regard to the initiation of action under section 147 of the said Act. The requirement of recording the reasons, communicating the same to the assessee, enabling the assessee to file objections and the requirement of passing a speaking order are all designed to ensure that the Assessing Officer does not reopen assessments which have been finalized on his mere whim or fancy and that he does so only on the basis of lawful reasons. These steps are also designed to ensure complete transparency and adherence to the principles of natural justice. Thus, a deviation from these directions would entail the nullifying of the proceedings. Assuming as we have done that the 'actual' reasons were those as noted in th....