TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 1437
X X X X Extracts X X X X
X X X X Extracts X X X X
.... CIT (A) and determined and computed by the learned assessing officer and the manner in which it has been so determined or computed. 3. The learned CIT (A) has erred on facts and in law in upholding the validity of reassessment proceedings ignoring the fact that initiation of the proceedings u/s 148 and the consequent order u/s 147 are bad in law as: a. The initiation of proceedings u/s 148 are contrary to provisions of law. b. The mandatory procedure laid down in the Act has not been followed. c. The information has been collected behind the back of the assessee and the assessee was never confronted with the same nor an opportunity provided for cross-examination of Jain brothers, copies of the orders of Jain Brothers and the relevant seized material relied upon has not been provided to the assessee, which is against Law of Natural Justice. d. The assessment has been made on the basis of conjecture & surmises without any cogent evidence. 4. The learned CIT (A) has erred on facts and in law in upholding the addition of Rs. 15,00,000/- u/s. 68 on account of share capital, treating the same as an accommodation entry. 5. The learned CIT (A) has erred on facts and in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iance is placed in the decisions of Smt Kalpana Shantilal Haria Vs ACIT W.P.{L) No. 3063/2017 dated 22.12.2017 (Bom), Best Cybercity India P Ltd vs ITO (2019) 414 ITR 0385 (Del), Omkam Developers Ltd vs ITO ITA No. 6862/Del/2018 dt; 11.05.2021, M/s VRC Township P Ltd vs ITO ITA No. 1503/Del/2017 dt: 14.10.2020, M/s Maheshwari Roller Flour Mills P Ltd vs ITO ITA No. 4257 /De1/2019 dt: 17.12.2020 (SMC) and Madhu Apartments P Ltd vs ITO ITA Nos. 3869-3870/Del/2018 dt: 01.02.2021 (SMC). 2. Assuming jurisdiction to complete assessment u/s 143(3)/147 by issue of notice u/s 143(2) of IT Act before supply of reasons thereby debarring appellant to appellant to file objection to assumption to jurisdiction; From the perusal of assessment order at pages 1 - 2 in para's 1 and 3 therein, it can be seen that the Ld AO issued notice dt: 10.02.2014 (PB 10) u/s 148 of IT Act against which the appellant company submitted a return of income vide letter dt: 20.02.2014 (PB 11) and requested the copy of reason recorded. In para 3 of AO order at page 2, it is mentioned that notices dt: 19.05.2014 were issued u/s 142( 1) (PB 32) and also u/s 143(2) (PB 31). In the above no....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ying the reasons and considering petitioner objection and passing reasoned order thereon does not meet requirement of law. Such legal infirmity leads to inevitable invalidation of all the proceedings that took place pursuant to notice u/s 148. Recently. the coordinate of Hon'ble Delhi ITAT in case of Mis R N Khemka Enterprises P Lid vs ITO in ITA No. 7244/De1/2019 dt: 12.08.2021 has quashed the reassessment proceedings on similar grounds. Kindly refer para's 33 to 35 at internal page 51-53 therein. 3. No valid notice u/s 143(2) was ever issued: In the present case, the power to make assessment under section 143(3) was assumed by the AO by issue of notice u/s 143(2) (PB 32) on 19.05.2014 as mentioned in para 3 of Assessing Officer order at page 2 therein along with notice u/s 142(1) of IT Act OT: 19.05.2014 (PB 33). The above notice was issued by the AO without having return of income in its possession which fact is proved from the above notice dt: 19.05.2014 (PB 33) issued u/s. 142(1) where the AO required assessee to file return in response to notice 148 of IT Act and for which a blank return form was also enclosed. Further, copy of audited financial statement an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he connection in which it is used. It is further submitted that the above illegality cannot be cured u/s sec 292BB of IT Act as held by the jurisdictional Delhi High Court in the case PCIT v. Silver Line (2016) 383 ITR 455 (Del). In para 17 and 18 of said decision. the Hon'ble court held that the Ld AO has discretion to issue of notice u/s 143(2) of IT Act after examining the return of income filed that prima facie the Assessee has "understated the income or has "computed excessive loss" or has "underpaid the tax in any manner" .. Identical view has been held in decisions of DIT v. Society for Worldwide Interbank Financial Telecommunications 323 ITR 249 (Del) (Para 8) and CIT v. Rajeev Sharma (2011) 336 ITR 678 (All.) Therefore, it is evident from perusal of assessment order and above facts, no notice under section 143(2} of IT Act was ever issued after examination of return of income and audited financial statements as discussed above. 3. Recording of reason after taking approval under section 151 of IT Act: In para 14 of reason recorded (PB 19). there is mention of approval u/s 151 of the Act already taken from Addl, CIT, Range-8, New Delhi before issuance of notice u/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xamining..... It is seen that the facts of the present case are different from the case laws relied upon by the appellant. Since, at the stage of recording of reason, no final finding is required to be given and only prima facie belief is required to be reached by the assessing authority, the Assessing Officer was correct in initiating reassessment proceedings u/s 147 on the basis of credible and specific information made available to him. On the validity of reassessment proceedings, I am relying on the decision of Raymond Woollen Mills Ltd. Vs ITO 236 ITR 236 ITR 4 (sc; wherein it was held that the AO is not to conclusively prove the escapement of income to assume jurisdiction u/s 147 of the Act. In the case of ITO Vs Purshottam Das Bangur 224 ITR 362 the Hon'ble Apex Court, on the issue of application of mind by the Assessing Officer to information received while recording reasons, held that on the basis of facts and information contained in letter of Directorate of Investigation, the Income Tax Officer could have formed opinion that there was reason to believe that income chargeable to tax had escaped assessment and he was justified in his action and merely because not....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eve in accordance with the provisions of the Act u/s 147 of the Act and, therefore, the ground of appeal on this is deserve to be dismissed. ON GRANTING SANCTION U/S 151 So far as the contention of' the 'appellant assessee, raised as additional ground that the approval of the competent authority granted u/s 151[1] was in a mechanical manner without application of mind is concerned, the following submission may kindly be considered: 1. That there is no infirmity in the approval/sanction granted by the competent authority u/s 151[1] of the I. T. Act, 1961. 2. That the statute does not lay down any manner or format in which the approval is to be granted. 3. That the remarks of the competent authority may kindly be read with the first part of the column No. 12 which reads "Whether the pr. CIT, Hisar is satisfied on the reason recorded by the ITO that it is a fit case for the issue of Notice u/s 148" along with the remarks "Yes I am satisfied" before the signatures are there in the approval form/column. 4. That once an authority puts his/her signature [in original] he or she actually is recording his concurrence to the whole proposal of the AO along with the rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 147(b) and the provisions of section 147(b) are non-existent in the statute book for the assessment year 2010-11. Therefore, the co-ordinate bench of the Tribunal came to the conclusion that there is complete non-application of mind by in obtaining the approval from Pr. CIT and in similar manner the approval was granted by Pr. CIT. While coming to such conclusion the Tribunal referred to various decisions and held as under:- 2. First of all, I have heard the arguments of both the representatives on legal ground No. 3 of the assessee which reads as under:- "3. The Id. CIT (A) has erred on facts and in law in upholding the impugned order of the learned assessing officer which is contrary to law, passed without application of mind and without complying with the procedure and rules, is against equity and justice and facts of the assessee and material on record." 3. The written submissions of the assessee on this ground reads as follows:- "Ground No. 3 In this ground, the appellant is challenging the validity of reassessment proceedings on the following specific issues: I. Invocation of reassessment proceedings based on Non-existing provision of law and also e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eque books seized from Sh S.K. Jain whereby details of cash received from various beneficiaries companies/person through various middleman/agents in lieu of accommodation entries provided to them on various dates have been recorded. 4. There is reference to the seized records elsewhere in the reason particularly in para 18 and 18.1 page 27 and para 21 at page 31 also which led the AO to form a prima facie view of escapement of income chargeable to tax. 5. From these discussions, it is evident that the AO had no material to initiate action u/s 147 except for the material relating to the appellant found in the course of search on above named individuals. Under section 153C(1) (b) of IT Act, the power to take cognizance of the material seized from third party, need be exercised under this section only ruling out action under other provisions of the Act. With effect from scope of sec 153C was enlarged to bring in its ambit the cases where the material seized pertains to or any information contained therein relates to the person other than the person searched. Due to non-obstante clause in sec 153C(1), the authorities are bereft of the powers under other sections of the Act includ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essment proceedings. In Green World Corporation (supra) (SC) held that Notices issued pursuant to the direction by the Pr. CIT thereto would be bad in law. Further In CIT v. SPL's Siddhartha Ltd. [2012] 345 ITR 223 (Del), relying on Sheo Narain Jaiswal & Ors. Vs. ITO, 176 ITR 35 (Pat.), held: 'Where the Assessing Officer does not himself exercise his jurisdiction under Section 147 but merely acts at the behest of any superior authority, it must be held that assumption of jurisdiction was bad for non- satisfaction of the condition precedent. ' In the case of Munjal Showa Ltd vs Dy CIT & Anr WP.(C) 1707/2014 DT: 22.02.2016, the Hon'ble Delhi High Court has quashed the reassessment proceeding relying the decision on Lahmeyer Holding GMBH v. Deputy Director of Income Tax 375 UR 70 [Del) where the AO was acting on the direction of the CIT in terms of the instructions of the CBDT. IV. Assuming jurisdiction to complete assessment u/s 1143(3)/147 by issue of notice u/s 143(21 of IT Act on the date of supply of reasons thereby debarring appellant to appellant to file objection to assumption to jurisdiction: The appellant vide letter dt: 05.04.2017 (PB 15) requested the AO to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Ld Pr CIT, Delhi-8, New Delhi appears to have been ritualistic and formal rather than meaningful, which goes against the rationale of the safeguard of approval by a higher- ranking officer provided in the Act. Inconsistencies and omissions pointed in preceding para's in support of ground on nonapplication of mind are the glaring mistakes committed by the AO and non-pointing out such omissions by the approving authority and resulting non-correction of the same, before the approval was accorded, shows that the said authority have acted mechanically in granting sanction u/s 151 of the Act. Such mechanical approval was found to be fatal for validity of the reassessment proceedings as decided by the co-ordinate Hon'ble Delhi Bench in the RMP Holdings P Ltd ITA No. 7243/Del/2019 dt: 31.07.2020 wherein it was held that both AO and approving authorities have acted mechanically ignoring the glaring mistakes in the reason recorded showing non application of mind by the reason recording authority where the decision of Delhi High Court in the case of Sonia Gandhi 407 ITR 594 (Del) has been distinguished. Reliance is also placed on the decision of M/s Synfonia Trade/inks P Ltd vs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Del/2018, order dated 11.05.2021; M/s VRC Township P. Ltd. vs. ITO, ITA No. 1503/Del/2017 dated 14.10.2020; M/s Maheshwari Roller Flour Mills P. Ltd. vs. ITO, ITA No. 4257/Del/2019 dated 17.12.2020; and Madhu Apartments P. Ltd. vs. ITO, ITA Nos. 3869-3870/Del/2018, order dated 01.02.2021. Therefore, the ld. AR submitted that impugned reassessment proceedings and reassessment order may kindly be quashed as proposition rendered by above noted orders including order of coordinate Bench of ITAT Delhi in the case of Omkam Developers Ltd. (supra). 5. The ld counsel also pointed out that the AO has not assumed valid jurisdiction to pass reassessment order u/s 143(3) r.w. section 147 as the notice u/s 143(2) of the Act was issued on the very same date when the copy of the reason was supplied to the assessee, thereby debarring the assessee to file objections to assumption of jurisdiction. The ld. Counsel submitted that recently, the coordinate Bench of the ITAT in the case of M/s R.N. Khemka Enterprises P. Ltd. vs. ITO in ITA No. 7244/Del/2019, order dated 12.08.2021 has quashed the reassessment proceedings on similar grounds. Therefore, the reassessment proceedings an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Assessing Officer and relevant proforma of approval granted by the Pr. CIT are reproduced as under: "Reason for the belief that income has escaped assessment in the case of M/s, Omkam Developers Pvt. Ltd. A.Y. 2009-10 (Pan:AAACQ5036B) 1. Name & Address of the Assessee : M/s Omkam Developers Ltd, 702, Arunachal Building, 19, Barakhamba, Road, Connaught Place, New Delhi 2. Assessment Year 2009-10 3. Financial Year 2008-09 4. PAN AAACO05036B PUC is a proposal for reopening the case under section 147 of the Act for the A.Y 2009-10 in the prescribed Performa. The information received from ADIT (Inv ), Unit-3(4), Kolkata vide his letter dated ADIT/U-3(4)/FIU-IND/MJS/15-16/411 dated 22.06.2015, wherein it is mentioned that; in the suspicion transaction report of 1000010583 in the name of Manohar Jaykishan Shah was received and it was reported in the I said FIUIND-STR No. 1000010583 that there were 311 linked entities amongst whom fund transfers were made and in few accounts there were deposits also. In pursuance to the said report. Bank Statements of various entities have been obtained and on investigation, it has been noticed that Omkam Developers Pvt. Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... There were 6 Bank Accounts Belonging to 6 Companies in which funds were received from mostly entities discussed in Annexure-C, C1 and Annexure-1 and the same was swiftly transferred to the other entities (Mostly Companies). The details of 6 such companies are given in Annexure -5 V. The fund was transferred to the entities which are the real beneficiary of the funds from the companies mentioned in Annexure-S. The details of such, companies are given in Annexure -B. Modus operandi of providing accommodation entry The summons u/s 131 were issued to the individuals and entities mentioned in the STR. The field verification from the inspector was also done. In most of the cases either the summons could not he served or there was no compliance, The facts of immediate source of the beneficiaries being shell companies have already been established and recorded u/s 131 of the Income Tax Act-1961 during the investigation in other cases. The fact as also corroborated by the noncompliance to the summons as well as nonexistence of real business of most of the entities mentioned in Annexure-C, C1 and l and S. Flow Chart of Cash Flow Cash deposit in proprietorship concerns Layeri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....case as per record from ITD, return of income was filed on declaring Rs. 2,389/- income, it is noticed that the assessee company M/s Omkam Developers Ltd, received accommodation entries to the tune of Rs. 1.93, crores during the F.Y. 2008-09 relevant to assessment year 2009-10 from the entry operators as mentioned in the chart above and same was not offered for taxation. Having perused and considered the information, I have reason to believe that income of the assessment company to the extent of Rs. 193 Lakh has escaped assessment for the Assessment Year 2009-10. Therefore, proceedings under section 147 i.e. clause (b) of Explanation 2 of the provisions of section 147 of the I.T. Act, 1961 is proposed to be initiated for the Assessment Year 2009-10. As per ITD record, Return of Income has filed on 30.03.2010 at an income of Rs.2,389/- for the A.Y. 2009-10. Since four years has been expired from the end of the relevant assessment year in this case for the said assessment year, it is therefore I/requested that the reasons recorded above for the purpose of reopening of assessment is put up for kind satisfaction of Pr.CIT, Delhi-7, New Delhi in terms of proviso,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....missions, we are of the view that the issue is covered by the Order of ITAT, Delhi G-Bench, Delhi in the case of VRC Township Pvt. Ltd., Delhi (supra) in which reopening of the assessment in identical circumstances was held to be bad in law and sanction accorded by the Sanctioning Authority was also found invalid, therefore, reopening of the assessment was quashed. In the present case, the Learned Counsel for the Assessee has pointed-out that assessee has raised this issue before the Ld. CIT(A), but, he has rejected the submissions of the assessee holding that Section 147(b) as mentioned in the reason and Format is a typographical human error which is curable under section 292B of the I.T. Act, 1961. This issue is also considered in the Order of VRC Township Pvt. Ltd., (supra) following the decision of Hon'ble Bombay High Court in the case of Kalpana Shantilal Haria vs. ACIT [2017] 100 CCH 165 (Bom.). Following the same reasons for decision, we set aside the Orders of the authorities below and quash the reopening of the assessment in both the assessment years under appeals. All additions stand deleted. Accordingly, appeals of the Assessee are allowed." 10.3 In the instant ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtments India Pvt. Ltd., ITA No. 3869 & 3870/Del/2018, order dated 01.02.2021, the relevant part of which has already been reproduced in the earlier part of this order since the same was referred to and included in the relevant part of the order of the ITAT in the case of Omkam Developers Ltd. (supra). Therefore, respectfully following the order of ITAT Delhi Bench in the case of Omkam Developers Ltd. vs. ITO (supra) and Madhu Apartments P. Ltd. vs. ITO (supra), I hold that the impugned reassessment proceedings and the impugned reassessment order deserves to be quashed and I hold so." 8. On perusal of the order of the Tribunal for recording the reasons in initiating proceedings under section 148 and for obtaining the approval of the Addl. Commissioner of Income Tax which is placed at page 14 of the paper book in column 7 the provisions of section 147(b) has been mentioned as the provisions applicable for re-opening the assessment for the assessment year under consideration i.e. 2007-08. This is the identical situation even for the assessment year 2010-11. Therefore, the decision rendered by the Tribunal for assessment year 2010-11 squarely applies to the facts of the assessee....