2023 (7) TMI 867

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....red to as, "SIPL"]. 2.1 Pertinently, three (3) out of the four (4) appeals disposed of by the Tribunal concerned AY 2011-12. The fourth appeal, which was preferred by the appellant named above i.e., SGCPL, concerned AY 2010-11, the remaining appeals as noticed above, related to AY 2011-12. 3. The record shows that on the very first day when the above-captioned appeal and the connected appeals came up before the coordinate bench of this court, they were admitted and a broad question of law was framed; which was modulated on 09.02.2023, after hearing the counsel for the parties. The relevant part of the order dated 09.02.2023 reads as follows: 6. Having heard the counsel for the parties, we are of the view, that the question of law, as framed by the coordinate bench, needs modulation. In fact, both counsels agree, that the following questions of law would arise for consideration: (i) Whether the Income Tax Appellate Tribunal [in short, "Tribunal"] erred in admitting and adjudicating the additional ground concerning jurisdictional defect, in the reasons recorded by the Assessing Officer, even when no such ground was raised before the first appellate authority i....

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.... 5.5 In the search and seizure action carried out on 19.03.2012, the statement of Mr Suresh Kumar Jain was recorded, which was retracted by him within seven (7) days i.e., on 26.03.2012. 5.6 It is this statement which, perhaps, led to the issuance of a notice dated 11.02.2014 under Section 148 of the Act. Via this notice, it was communicated to SGPCL by the AO that he had reasons to believe that income chargeable to tax had escaped assessment and, therefore, he proposed to assess/reassess his income. 5.7 Therefore, SGCPL was granted five (5) days from the date of service to file a return. It appears the SGPCL via response dated 17.02.2014 indicated that the ROI already placed on record should be treated as its true and fair return in response to the notice issued under 148 of the Act. 5.8 Since reasons for issuing notice under Section 148 had not been furnished, on the very same date when the reply was filed i.e., 17.02.2014, the respondent/assessee asked to be furnished a copy of the reasons recorded for triggering assessment/reassessment proceedings against it. 5.9 The AO, instead of immediately furnishing reasons recorded by him for triggering reassessment/assessme....

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....ails it can be seen that these companies are declaring income just nominal and [in] their documents relating to balance sheet statements, it is seen that these companies are just receiving funds from some private limited companies and then transferring the same to other private limited companies which gives the idea that these companies are nothing but paper companies created as conduit companies to facilitate these type of transactions. Further, these investors had shown nominal income in their returns of income which further suggested that the companies have no legitimate income in their hands. This fact also strengthened the fact that these investors are just conduit companies created on paper." 8. Being aggrieved, SGCPL carried the matter to the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"]. CIT(A), via order dated 12.12.2014, sustained the addition made by the AO. 9. SGCPL, being dissatisfied, escalated the matter to the Tribunal. In the appeal filed with the Tribunal, SGCPL not only raised arguments concerning the merits of the matter but also sought to plead an additional ground, which questioned the jurisdiction of the AO to invoke the provisions of Sectio....

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....ubmissions. (i) The Tribunal ought not to have allowed the respondent/assessee to raise the additional ground. The objection concerning jurisdiction was raised by SGCPL for the first time before the Tribunal. Given this position, the Tribunal ought not to have entertained the additional ground. (ii) The decision rendered by the Tribunal is, primarily, founded on its decision concerning the jurisdiction of the AO to commence proceedings against SGCPL under Section 148/147 of the Act. (iii) SGCPL had failed to discharge its onus concerning the genuineness, credit worthiness of the creditors. Therefore, the addition made under Section 68 of the Act ought not to have been disturbed by the Tribunal. (iv) The Tribunal, inter alia, ought not to have held that the AO had not applied his mind, merely, because there was reference to a provision which had been deleted. This was an obvious mistake which could not have invalidated the assessment/reassessment proceedings, as it fell within the scope and ambit of 292B of the Act. 17. Mr S. Krishnan refuted the submissions made by Mr Sharma. 17.1 According to Mr Krishnan, the Tribunal had got it right in e....

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....door that allows the AO to enter the arena concerning the commencement of reassessment proceedings qua an assessee. 20.1 The other keys, of course, inter alia, are related to limitation and approval. Insofar as the period in issue is concerned, after the expiry of four (4) years from the end of the relevant AY, the AO is required to form an opinion that the respondent/assessee had failed to disclose, truly and fully, all material facts necessary for his assessment for the AY in issue. The other grounds generally available to the AO for reopening are the failure of the respondent/assessee to either file a return under Section 139 or in response to a notice under Section 142(1) or 148 of the Act. 21. In this particular case, SGCPL had indicated to the AO that the return already filed should be treated as a return filed in response to the notice issued under Section 148 of the Act. Furthermore, the AO did, in a sense, pay ostensible obeisance to the provisions of Section 147 of the Act (as obtaining at the relevant point in time) by recording that SGCPL had failed to disclose, truly and fully, all material facts. 22. That said, the AO grievously erred in referring to sub-clau....

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....ned assessees information has been received that this company has raised loans from KJS Ahluwalia group mainly through Kolkata based dubious entities namely M/s Tanish Tradecom P. Ltd. M/s Puneet Oils & Chemicals P. Ltd. From the above I have reason to believe that such loans raised by M/s Spirit Global Constructions Pvt. Ltd. for the A. Y. 2010-11 has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts for his assessment and the same needs to be assessed/reassessed as per the provisions of sub-clause (i) of clause (c) to Explanation 2 to Section 147 (b) of the Act in the A. Y. 2010-11. Issue notice u/s 148 of the Act for the Assessment Year 2010-11." 25. Clearly, the reasons disclosed and placed on record do not allude to the material that was available to the AO which persuaded him to form a belief that income in the concerned AY, pertaining to SGCPL, which was otherwise chargeable to tax, had escaped assessment. 25.1 While the reasons placed on record by the AO referred to information received by the AO that SGCPL had raised a loan from KG Group, through TTPL and POCPL, there was no reference to how he had,....