TaxTMI 
TaxTMI 
2025 (1) TMI 600
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....ces. FACTUAL CONTEXT 2. The petitioner is a company incorporated in India. Prior to 30.09.2019, the petitioner was known as Sonali Realtech Pvt. Ltd. (hereafter Sonali). The impugned notices have been issued to initiate proceedings for re-assessment of income of M/s Tulsi Tracom Pvt. Ltd. (hereafter Tulsi). Tulsi was merged with the petitioner with effect from 01.04.2018 pursuant to an order dated 26.09.2019 passed by the National Company Law Tribunal (NCLT). As noted above, the petitioner was then known as Sonali. 3. Tulsi had filed its return of income on 30.10.2017 for the AY 2017-18 declaring an income of Rs. 12,96,130/-. The petitioner claims that it had informed respondent no.1 regarding the amalgamation of Tulsi with the petitioner company by a letter dated 24.12.2019. 4. The Assessing Officer (AO) had information, which suggested that Tulsi's income for AY 2017-18 had escaped assessment and accordingly, the AO issued a notice dated 29.06.2021 under Section 148 of the Act. As on the date of issuance of the said notice, Tulsi did not exist as an independent company as it had merged with the petitioner with effect from 01.04.2018. The notice was also served electro....
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....uance of the impugned notice under Section 148 of the Act are invalid as the initial notice under Section 148A (b) of the Act was issued in the name of Tulsi, which had ceased to exist. The learned counsel appearing for the petitioner relied on the decision of the Supreme Court in Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India) Ltd. (2020) 18 SCC 331 in support of his contention that the impugned notice issued under Section 148A (b) of the Act is void ab initio. He also contended that the AO's reliance on Section 170 of the Act is misplaced as the same is applicable only in cases where an assessee whose business is carried on by another entity, cannot be located. 10. Second, it is submitted that the AO had not supplied the necessary material on the basis of which a conclusion was drawn that the petitioner's income had escaped assessment despite the petitioner seeking the same. It is contended that failure to provide the necessary material violates the decision of the Supreme Court in Union of India v. Ashish Agarwal [2022] 444 ITR 1. 11. Third, it is submitted that issuance of the impugned notices is invalid as the AO has no reason to believe that the....
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....see to respond to the information as available with the AO in order to dissuade the AO from initiating reassessment proceedings under Section 147 of the Act. The procedure under Section 148A of the Act has been devised to eliminate any arbitrary reopening of assessments. In the present case, the petitioner had responded to the notice under Section 148A (b) of the Act and had explained that Tulsi had since merged with the petitioner and therefore, is not in existence. The AO had accepted the said response and had accordingly passed an order under Section 148A (d) in the name of the petitioner. It is material to note that the reassessment proceedings were initiated by issuance of a notice under Section 148 of the Act in the name of the petitioner. 15. In the case of Principal Commissioner of Income Tax, New Delhi v. Maruti Suzuki (India) Ltd.3, the Supreme Court rejected the Revenue's appeal against an order passed by this court upholding the decision of the Income Tax Appellate Tribunal holding that an assessment made in the name of Suzuki Powertrain India Ltd. (SPIL) for AY 2012-13 was a nullity as the said entity had merged with Maruti Suzuki (India) Ltd. (MSIL) in terms of an ....
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....20) 18 SCC 353] on 2-11-2017. The decision in Spice Enfotainment [CIT v. Spice Enfotainment Ltd., (2020) 18 SCC 353] has been followed in the case of the respondent while dismissing the special leave petition for AY 2011-2012. In doing so, this Court has relied on the decision in Spice Enfotainment [CIT v. Spice Enfotainment Ltd., (2020) 18 SCC 353]." [emphasis added] 17. As is apparent from the above, the decision of the Supreme Court rested on the fact that jurisdictional notice to commence proceedings for assuming the assessment was in the name of an entity that did not exist. In the present case, the notice to commence reassessment proceedings - notice under Section 148 of the Act - was issued in the name of the petitioner and not in the name of Tulsi which was merged with the petitioner. 18. As noted above, the nature of proceedings under Section 148A of the Act is to enable the AO to form an opinion whether it is a fit case for issuance of notice under Section 148 of the Act. Given the nature of the proceedings under Section 148A of the Act, we are unable to accept that issuance of a notice under Section 148A (b) of the Act in the name of an entity, which had s....
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....t less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,- (a) a search is ....
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....eassessment proceedings. The initiation of reassessment proceedings has adverse consequences for an assessee as it seeks to reopen a concluded assessment. Thus, obviously, the assessments cannot be reopened in a cavalier or casual manner. The opportunity for an assessee to respond to the information available with the AO is to enable the AO to take an informed decision whether to reopen the assessment on the basis of information available. In terms of Section 148A(c) of the Act, the AO is required to consider the response furnished by the assessee. 22. Clause (d) of Section 148A of the Act requires the AO to take a decision on the basis of material available on record including the reply of the assessee as to whether it is a fit case for issuance of a notice under Section 148 of the Act. The said clause also provides for an additional safeguard which requires the AO to seek prior approval of the specified authority before issuance of notice under Section 148A of the Act. 23. Whilst at the stage of passing an order under Section 148A (d) of the Act, the AO is not required to conclusively establish whether the income of the assessee has escaped assessment; however, the AO is re....
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....on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under Section 148 of the IT Act; and (v) the AO is required to pass a specific order within the time stipulated. 20. Therefore, all safeguards are provided before notice under Section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per Section 148-A (a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under Section 148-A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. 21. Substituted Section 149 is the provision governing the time-limit for issuance of notice under Section 148 of the IT Act. The substituted Section 149 of the IT Act has red....
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.... 26. In the facts of the present case, it is apparent that the impugned order passed under Section 148A (d) of the Act is unsustainable. 27. The AO issued a notice dated 01.06.2022 under Section 148A (b) of the Act on the basis of the information to the effect that Tulsi was a beneficiary of accommodation entries provided by one Sh. Joginder Pal Gupta. The impugned notice setting out the information available with the AO is reproduced below: "To, TULSI TRACOM PRIVATE LIMITED B-222 2ND FLOOR, OKHLA INDUSTRIAL AREA PHASE-1 NEW DELH 110020, Delhi PAN: AACCT6121A Assessment Year: 2017-18 Dated: 01/06/2022 DIN & Letter No. ITBA/COM/F/17/2022-23/1043292968(1) Sir/ Madam/ M/s, Subject: Subsequent proceedings with reference to section 148A (b) in consequence to Hon'ble SC Order dated 04.05.2022- Letter Please refer to notice u/s 148 of the IT Act, 1961 issued in your case for AY2017-18 dated 29/06/2021. 2. In reference to the above subject, please be informed that notice issued u/s 148 of the IT Act, 1961 in between the period 01/04/2021 to 30/06/2021 has been held to be a show cause notice u/s 148A (b) of....
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....accommodation entries from certain entities during the financial year 2016-17. 29. As noted above, the petitioner had furnished a reply to the said notice raising a grievance that notice under Section 148A (b) of the Act merely alleged that Tulsi had availed of accommodation entries without providing any detailed information or material to the said effect. The petitioner submitted that the document "Enquiry Report" regarding the beneficiaries of Sh. Joginder Pal Gupta was illegible. The petitioner had sought material on the basis of which the said allegation was made. However, admittedly the said material was not furnished to the petitioner. 30. Insofar as the entries are concerned, the petitioner had in unambiguous terms claimed that no sum was received by Tulsi from any of the companies as referred to in the impugned notice dated 01.06.2022. The petitioner had also claimed that no amount had been credited to the bank account of Tulsi from the said companies. The relevant extract of the petitioner's response on merits of the allegation is reproduced below: "8. There is no escapement of income and the notice has been issued on incorrect facts: It is submitted that in....
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....ENTRAL BANK OF INDIA FROM 01.04.2016 TO 31.03.2017 MONTH DEPOSIT AMT MONTH DEPOSIT AMT APRIL - APRIL 23750000 MAY - MAY - JUNE 365579.00 JUNE - JULY - JULY - AUG - AUG - SEPT 2500000.00 SEPT - OCT - OCT 309830 NOV 1100000.00 NOV 100000 DEC - DEC 225000 JAN - JAN 17420000 FEB 1779089.00 FEB 3937761 MARCH 16943578.00 MARCH 100000.00 TOTAL 22688246.00 TOTAL 45842591.00" 31. In view of the above, the AO was required to decide whether it is a fit case for issuance of a notice under Section 148 of the Act after taking into account the material available on record including the petitioner's response to the notice issued under Section 148A (b) of the Act. However, the AO proceeded on a palpably erroneous assumption that the petitioner did not have any explanation as to the merits of the case. The AO proceeded on the basis that petitioner had availed of accommodation entries from companies controlled by Sh. Joginder Pal Gupta. It is relevant to refer to the following extract form the impugned order passed under Section 148....
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.... 2016-17 Others Rs. 7,50,000/- Beneficiary ** ** ** ** 8.2 The assessee company has not made any explanation on the merits of the case, so the issue is being decided on the basis of material available on record. 8.3 As per credible information disseminated by the Investigation Wing of Income Tax Department through Insight Portal, Sh. Joginder Pal Gupta is found being an accommodation entry provider. Sh. Joginder Pal Gupta, an accommodation entry provider who works on commission basis to route unaccounted cash of beneficiaries into their books through banking channels in the form of bogus unsecured loan/share premium and generate unaccounted cash for beneficiaries by providing bogus purchase bill entries. Similarly, when the beneficiaries are in need of cash for out of books transaction, they transfer money to JP's entities which then close the loan account and gives back the cash to beneficiaries. 8.4 On the basis of analysis made above after dealing with all the issues raised by the assessee on legality/technicality, it is concluded that order u/s 148A (d) of the Income-tax Act, 1961 is being passed in the case of successor company i.e.....