TaxTMI 
TaxTMI 
2024 (5) TMI 1560
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.... of the case and in law, the Ld. CIT(A), NFAC was justified in not adjudicating the issue of addition of Rs.25,27,60,000/- made by the A.O u/s.68 of the Income Tax Act, 1961 on merits. 3. Any other ground that may be adduced at the time of hearing." 2. Succinctly stated, the assessee which is a public limited company engaged in the business of manufacturing and trading in sponge iron, had filed its return of income for A.Y.2012-13 on 29.09.2012 declaring an income of Rs.5,00,45,390/- and "book profit" u/s. 115JB of the Act of Rs.30,15,17,400/-. 3. Based on certain incriminating information received from the DDIT (Inv.)-1, Raipur, viz. (i) that the assessee company was a beneficiary of bogus purchase bills of Rs. 37.91 lacs (approx.) from Shri. Atish Agrwal, Proprietor: M/s Krishna Processors; and (ii) that the assessee company had received a huge amount of hare capital and premium from 7 Kolkata-based shell/ paper companies during the year under consideration, the A.O reopened the case of the assessee company u/s. 147 of the Act. Notice u/s. 148 of the Act dated 30.03.2019 was issued to the assessee company. The assessee company in response to the aforesaid notice fi....
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....eholder companies to whom shares of Banka Finance & Securties Pvt. Ltd., Sukanya Merchandise Pvt. Ltd., Bonus Dealcom Pvt. Ltd., Priority Construction Pvt. Ltd. and Shri Bajrang Ispat & Plywood Ltd. were allotted in order to raise share premium/capital also do not have any business activities. (iii) All the private limited companies involved in the process of raising share capital/premium and investment are unlisted companies. From the registered address shown these companies, it is observed that numbers of companies are using the same address. The above characters are of those found in shell companies, which are formed to provide accommodation entries to beneficiaries to bring back their unaccounted income in their books either in the form of share capital or in the form of unsecured loans. 8. It is also relevant to mention here that the investor company Shri Bajrang Ispat & Plywood Limited is already an in-house companies of the Bajrang Group, in which funds were mobilized through allotment of shares to number of bogus private limited companies." 6. On verification, it was observed by the A.O. that all the allottee companies did not have their self-o....
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.... passed by the A.O u/s. 143(3) r.w.s. 147 of the Act, dated 31.12.2019. As the assessee company had succeeded on legal grounds qua the validity of the assumption of jurisdiction by the A.O both for initiating the impugned proceedings and framing of the impugned assessment, therefore, the CIT(Appeals) refrained from adjudicating the merits of the case. 8. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 10. As the revenue has assailed before us the order of the CIT(Appeals), wherein he had quashed the reassessment for want of valid assumption of jurisdiction by the A.O, both at the stage of initiation of the reassessment proceedings as well as framing of the impugned assessment vide order passed by him u/s. 143(3) r.w.s. 147 of the Act, dated 31.01.2019, which, in our view, required consulting the assessment record, therefore, the Ld....
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.... Page-1 to 4 of Paper Book (PB)). On perusal of the reason to believe provided by the Ld.A.O, it was observed that the case of the assessee was reopened for assessment on two grounds which are as under: The assessee company has made purchases of Rs.37,91,351/- from M/s Krishna Processors (Prop. Shri Atish Agrawal). As per the information in possession of the DDIT (Inv)-1, Raipur, the firm is involved in bogus billing and the assessee company has purchased bogus bill from the said party. Considering the above facts and circumstances, it was believed by that the assessee company has inflated the expenses by Rs.37,91,351/- and therefore there is reason to believe that Rs. 37,91,351/- is the income of the assessee escaping from assessment. ii. As per the information received from DDIT (Inv)-1, Raipur it is believed that the assessee has escaped income. Rs.29,27,60,000/- by channelizing its own unaccounted fund by way of issuance of shares to various parties/shell entities and has brought it into its book as accommodation entry. That on the basis of the aforesaid information received from DDIT (Inv)-Raipur, the AO made the analysis and stated in para 3(b) in t....
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....was duly furnished Burin the course of original assessment completed u/s 143(3) of the I.T.Act, 1961. Copy of written submission filed during original assessment proceeding enclosed. (Kindly refer Annexure-2) (Refer Page-5 to 13 of PB). In such circumstances it cannot be said that the AO has received any new information after completion of assessment and upon investigation of such new information the case of the appellant has been reopened. Merely stating that 360 degree profile has been done in the case of the appellant will not absolve the AO from his primary duties which he is require to perform as per law. At this juncture it is important to bring in notice of your honor that before opening the case for reassessment the AO has never ever called for any information either from the appellant nor from any of share subscriber. These fact itself proves that the AO has not carried any independent enquiry but has merely relied upon the information received from the third party. 1 It is further to submit before your honor that as per the provision of section 147, the case of any assessee can only be reopened, if the A.O. has "Reason to Believe'' that any income chargea....
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....material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income." In the case of Neel Builders Pvt. Ltd. Vs. Income Tax Officer, (2020) 60 CCH 0335 Del Trib, it was held that "Reopening on the basis of report of investigation wing without independent application of mind by the Assessing Officer is not valid." In the case of Mohd Yameen Munna vs. Income Tax Officer [(2019) 56 CC 0004 (Delhi Tribunal)] it was held that "AO cannot reopen an assessment u/s 148 mere) based on an information revealing that there is an escapement of income on account of TCG without even verifying such information as to how much capital gains has escaped assessment." In the case of ITO vs. Lakhmani Mewal Das [(1976) 103 ITR 437 (SC)), it was held that "the words used in section 147 of the Act are 'reason to believe' and not 'reason to suspect'. Clearly, the tangible material available with the AO should be such as to reasonably lead the AO to believe that Assessee's income had escaped assessment. Even though such opinion may be his subjective opinion, nonetheless, it cannot be arbitrary or whimsical and must be one which a person c....
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....reasons recorded by AO failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment, then reassessment proceeding initiated against assessee should be quashed". In the case of ITO & Anr Vs. S.K. Caterers (P) Ltd (2018) 53 CCH 0350 it was held by Delhi Tribunal that "information received from Investigation Wing could not be said to be tangible material per se without a further inquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income had escaped assessment". 1. Further, from the reason for reopening of the case, it seems that, the Ld. A.O. had no information other than the audited financial statement of the investor companies as the entire reason have been framed based on audited financial statement of the Investor company. In the reason for reopening of the case, the Ld. A.O has not mentioned about what sort of information was received from the Investigation wing, Raipur The Ld. A.O had no conclusive evidence to evident that any income had escaped from assessment. Further, the said contention of the appellant is further s....
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....enquiry; AO having proceeded to initiate proceedings under s. 147/148 only for making enquiry and verification vis-a-vis certain investment and capital gain made by the assessee, without specifying the basis of his belief that any item of income chargeable to tax has escaped assessment, initiation of proceedings for reassessment were not legally justified. In view of above facts and circumstances, it is requested to your honour to annul the reassessment proceedings since it has been carried on the basis of reason to believe formed mechanically based on the report of investigation wing (Raipur) without any material evidence and to make roving enquiry, which is unjustified and against the spirit of the law." 13. The CIT(Appeals), had concurred with the aforesaid claim of the assessee company as regards dislodging of its concluded assessment by the A.O. by mechanically acting upon the information received from the Dy. DIT(Inv)-1, Raipur without any independent application of mind on his part, observing as under: "Ground No. 1 & 2:- Vide these grounds, the appellant has challenged the reopening by the AO being done mechanically and based on mere reports from Invest....
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....ed that specific reason to reopen is missing! in the case of the appellant. 4. The appellant has relied on the various Court decisions such as a) Akshar Builders & Developers Vs. ACIT, 104 CCH 0026 (Bom HC), wherein it was held that the AO cannot proceed mechanically to issue reopening notice merely relying upon erroneous information that might have been supplied to him. b) Aziz Rohman Faizul Rahman Vs ITO 63 CCH 0195 (Mumbai ITAT), wherein it was held that reason to believe must have rational connection with or relevant bearing on the formation of belief, i.e. there must be live links between material coming to the notice of the AO and the formation of belief regarding escapement of income. c) In the case of ITO Vs. Lakhman Mewal Del, 103 ITR 437 (SC), it was held that the word mentioned in S.147 is 'reasons to believe' and not reasons to suspect. Clearly, the tangible material available with the AO must be such as to lead the AO to believe that assessee's income had escaped d) PCIT vs. Manzil Dinesh Kumar Shah, 102 CCH 0008, (Guj. HC), wherein it was held that reopening is not permitted for fishing or roving enquiry. The appellant has demonstrated that the in....
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....Hence, here again, the AO has failed to bring out any clear, tangible information in his possession to conclude that the share applicant companies were bogus / paper companies. Thus, on this count again, the AO failed to show that there was clear failure on the part of appellant to make "full and true disclosure of facts" based on tangible information. Therefore, on this count also, the AO has proceeded to form "reason to believe mechanically and without proper application of mind. In view of relevant Court decisions relied on by the appellant and factual discussion hereinabove, it is apparent that the AO had received information regarding bogus purchase entry of appellant worth Rs. 37,91,351/- from M/s Krishna Processors whose proprietor had accepted to be involved in providing bogus purchase accommodation entries for various parties. However, in the final assessment order, the AO neither confronted this issue nor made any addition on this issue meaning thereby that the said information had no live link for the escapement of any income of the appellant. Also, the reasons recorded do not indicate any such linkage of this bogus purchase information to led to the AO to form ....
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.... want of valid assumption of jurisdiction by the A.O who had based on a borrowed satisfaction initiated the impugned reassessment proceedings by mechanically endorsing the information that was received from the Dy. DIT(Inv)-1, Raipur, i.e. without carrying out any verification and independently applying his mind to the material available before him. The Ld. A.R submitted that a perusal of the "reasons to believe" based on which the concluded assessment of the assessee company was reopened, reveals that the A.O had mechanically acted upon the reports of the Dy. DIT(Inv.)-1, Raipur, and had failed to carry out any verification as well as independently apply his mind to the material before dislodging the concluded assessment. The Ld. A.R. to fortify his aforesaid contention had drawn our attention to the "reasons to believe", Pages 47- 50 of APB. Elaborating further, the Ld. A.R. submitted that it was a fact borne from the record that the A.O. had summarily endorsed the information received from the Dy. DIT(Inv)-1, Raipur, and had not only failed to carry out the basic verification but had also not consulted the assessment record before forming a belief that the latter's income ch....
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.... Tax & Anr. (2024) 461 ITR 390 (Bom). 16. We have thoughtfully considered the contentions advanced by the Ld. Authorized Representatives of both the parties in the backdrop of the aforesaid orders of the lower authorities qua the aforesaid issue, based on which, the assessment had been quashed by the CIT(Appeals). At the threshold, we may herein observe that insofar the observation of the A.O in the "reasons to believe" that the assessee company was a beneficiary of certain bogus purchase bills of Rs.37,91,351/- that were procured from Shri Atish Agrawal, Proprietor of M/s. Krishna Processors is concerned, no adverse inferences on the said issue were thereafter drawn by him while framing the assessment vide his order u/s. 143(3) r.w.s. 147 of the Act, dated 31.12.2019. 17. Apropos the observation of the A.O in the "reasons to believe" that the assessee company had received share capital/premium of Rs.29,27,60,000/- from seven Kolkata-based shell/paper companies, we find that the A.O had made an addition of Rs. 25,27,60,000/- concerning the share capital/premium that was received by the assessee company from 5 companies (out of 7 companies). The Ld. D.R had stated that the ....
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....nual turnover of Rs.30 Lakh. However, he has received credits aggregating to Rs.7.93 crore via RTGS from various firms and entities with immediate cash withdrawals made by him. (b) Further, information was received from DDIT (Inv)-1, Raipur that said company has received huge amount of Share capital/premium from Kolkata based shell/ paper companies in F.Y 2011-12. 2. Analysis of information collected/received: (a) Statement of Shri Atish Agrawal was recorded on oath. Where he has stated he is proprietor of M/s. Krishna Processoers and M/s. Sarveshwari Rice Mill, both engaged in trading of rice, broken rice, rice husk etc. but there was no actual business in the firm. He was approached by one Shri Pawan Agrawal who suggested that bogus billing be done through both his firms. Since he was doing no business, Shri Atish Agrawal therefore accepted the offer of Shri Pawan Agrawal. He explained how he issued bogus bills for various parties and received payments through Cheque/RTGS in his firm's account, which he withdrew the cash by self cheque and cash was returned to various parties from whom cheque/ RTGS was received. Further he stated that A/c N....
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....s bills. Preliminary verifications made have shown that all the above mentioned shell companies referred to in Para 3 (b) have nominal paid-up capital, high reserves and surplus on account of receipt of huge shares premium, no dividend income, private companies as majority shareholders, low turnover and operating income, nominal expenses and minimum fixed assets, which are all key elements of shell companies. On the basis of the above discussion and on perusal of records available with this office, including Income Tax Returns, Audit Report, 360 degree profiles, I have reason to believe that the amount of atleast Rs.29,5,51,351/- chargeable to tax has escaped assessment for A.Y. 2012-13 within the meaning of Explanation 2(c) of Section 147 of the Income tax Act, 1961. Therefore, this is a fit case for issuance of notice u/s. 148 of the Income tax Act. 4. Applicability of the provisions of Section 147/151 to the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment u/s.143(3)/147 was made on 11.08.2014. Since, 4 years from the end of the relevant year has expired in this case, the requirement t....
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.... to subscribe to the claim of the Ld. AR that the A.O had mechanically recorded the "reasons to believe" without any independent application of mind and carrying out the bare minimum verification, which, thus, rendered the very initiation of proceedings in the absence of valid assumption of jurisdiction by him as invalid. In our view, the A.O. had after considering the information that was shared with him by the Dy. DIT(Inv.)-1, Raipur vide two reports/letters dated 04.03.2019 and 19.03.2019, duly analyzed the same and arrived at a bonafide belief that the income of the assessee company chargeable to tax had escapement. Apart from that, the fact that A.O. had in the "reasons to believe"(supra) categorically referred to the earlier assessment that was framed by his predecessor u/ss. 143(3)/147 of the Act, dated 11.08.2014, and had observed that the case of the assessee company was being reopened after the lapse of four years from the end of the relevant assessment year for the reason that it had failed to disclose fully and truly all material facts necessary for its assessment, further supplements the factum of due application of mind on his part to the material available before him....
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....ency, the A.O. cannot validly assume jurisdiction for reopening a concluded assessment. The Ld. AR to fortify his aforesaid claim had pressed into service certain case laws which are being dealt with by us, as under: (I). Kantibhai Dharamshibhai Narola Vs. Assistant Commissioner of Income Tax (2021) 436 ITR 302 (Guj.) 22. On a careful perusal of the aforesaid judicial pronouncement, we find that in the case before the Hon'ble High Court information was gathered by the A.O based on search proceedings conducted on M/s. K. Star Corporation that the latter had paid on-money for the purchase of a certain piece of land. As the assessee before the Hon'ble High Court was one of the partners of the seller of the land, therefore, information was shared with his A.O by the DCIT, Central Circle-4, Surat that the unaccounted cash payment made by the aforesaid purchaser of the land constituted unaccounted income of the seller. The A.O. based on the aforesaid information reopened the case of the assessee, i.e. one of the partners of the seller of the land, on the ground that he had not accounted for the on-money receipt falling to his share in his return of income for the subject ye....
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....e, the same being factually distinguishable as against those involved in the aforesaid judicial pronouncement, thus, would not carry the case of the assessee company any further. 26. We, thus, in terms of our aforesaid deliberations are of the considered view that as the A.O. in the present case after considering the information that was shared with his office by the Dy. DIT(Inv.)-1, Raipur, had duly analyzed the same and arrived at a bonafide belief that the income of the assessee company chargeable to tax had escapement, therefore, there is no substance in the contention of the Ld. AR that the A.O. had mechanically reopened its concluded assessment without independent application of mind and carrying out necessary verification on his part. Accordingly, the order passed by the CIT(Appeals) to the sasid extent is set aside. (B). Re: The A.O had reopened the concluded assessment of the assessee company based on a mere "change of opinion" 27. It transpires on a perusal of the order of the CIT(Appeals) that the assessee company had, inter alia, assailed the assumption of jurisdiction by the A.O for initiating reassessment proceedings on the ground that the same was based on a....
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....where it can be concluded that any unaccounted income of the appellant company has been brought back. It is nothing but change of opinion on same set of fact which is not permissible as held by various judicial authorities. The Ld.A.O. has only mentioned that one of share .applicant namely Banka Finance & Securities Pvt. Ltd being operated by one Sh. Nagalia and he has appointed his employee Shri Anjani Banka as director of the company and Shri Anjani Banka has recorded his statement before DM' (Inv.),Unit-3, Kolkata and has stated that the business of the company was nothing but providing accommodation entry. As regard to this the appellant has stated that Shri Anjani Banka was not the director of the said company during the year under consideration, therefore his statement is not at all relevant for the present proceeding . Further the appellant has requested to provide the copy of statement of Anjani Banka, however the statement was not provided to the appellant. Further during the assessment proceeding, the appellant has stated that as the statement was not provided, the statement should not be used against the assessee unless and until opportunity of cross examina....
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.... to enable the Assessing Officer to reopen the final decision made against the Revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not the legal position, it would result in placing an unrestricted power in the hands of the assessing authorities. Thus, where the reasons recorded by the Assessing Officer disclose no more than mere change of opinion, the reassessment proceedings are liable to be quashed. * In the case of Pawan Sood vs. Income Tax Officer: (2019) 104 CCH 0102 (Allahabad HC) it was said that "Mere change of opinion while perusing same material could not be a "reason to believe " that a case of escaped assessment exists requiring assessment proceedings to be reopened." 1. In view of above facts, circumstances and various judicial pronouncements, reopening of the present case deserves to be annulled since reason to believe formed for the reopening is merely a change opinion on the same sets of facts which is against the spirit of law." 28. We find that the CIT(Appeals) had concurred with the claim of the assessee company that the A.O had grossly erred in law and facts of the case by reopening its case....
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....how cause notice that Shri Anjani Banka's statement was irrelevant for current assessment year when share capital was raised as he was Director in F.Y. 2010-11 only. The AO did not controvert this reply of the appellant. After going through the reasons recorded as well as findings in the assessment order, it is noted that the A.O had only once specific information from the DDIT (inv)-1 Raipur regards bogus purchase bills worth Rs.37,91,351/- pertaining to appellant but this information did not lead the A.O to conclude about bogus nature of share capital inclusive of premiums raised. In fact, the A.O did not make any addition of Rs.37,91,351/- in the current assessment order which further aggravates the issue of reasons to believe on the part of the A.O. Thus, it is clear that the reopening was made by the A.O based on vague information which could lead to mere reasons to suspect and also on mere change of opinion. Thus, Grounds No.3 & 4 are also allowed in favour of the appellant." 29. We have heard the Ld. Authorized Representatives of both the parties on the aforesaid issue in the backdrop of the orders of the lower authorities, as well as considered the judicial ....
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....10) 320 ITR 561 (SC)]. 32. We have heard the Ld. Authorized Representatives on the aforesaid issue, i.e. validity of the jurisdiction assumed by the A.O for reopening the concluded assessment of the assessee company based on a mere "change of opinion" [as claimed by the assessee company and approved by the CIT(Appeals]. We principally concur with the Ld. AR that as the legislature had not conferred any power on the A.O. to review his order, therefore, he cannot take recourse to proceedings u/s. 147 of the Act for seeking a review of his earlier order. In other words, a mere fresh application of mind by the A.O. to the same set of facts as were there in the course of the original assessment proceedings would not justify reopening of the concluded assessment based on a mere "change of opinion". The Hon'ble High Court of Delhi in the case of CIT Vs. Kelvinator of India Ltd. 256 ITR 1 (Del) [which had been approved by the Hon'ble Apex Court in the case of CIT Vs. Kelvinator of India Pvt. Ltd. (2010) 320 ITR 561 (SC)], had observed that the department cannot take recourse to the provisions of Sec. 147 of the Act for the failure of the A.O to apply his mind in the original ass....
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.... s. 148". 33. Also, the observation of the Hon'ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom), wherein as observed by us hereinabove a similar view had been taken, is culled out as under: "7. We have heard the learned counsel appearing for both sides. We have also gone through the judgments on which reliance was placed by the learned counsel appearing for both sides. 8. In the order rejecting the objection filed by the petitioner to the notice under section 148, respondent No. 1 has observed "verification of assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is a change of opinion." According to respondent No. 1, thus, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. The question is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation....
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...., amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator [2002] 256 ITR1 referred to above, has taken a clear view that reopening of assessment under section 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under section 148. 11. In the result, therefore, petition succeeds and is allowed. Rule is made absolute in terms of prayer clause (a) with no order as to costs." (emphasis supplied by us) 34. Although we concur with the claim of the Ld. A.R. that the reopening of a concluded assessment based on a mere "change of opinion" of the A.O. is not permissible, but are afraid that the facts involved in the case before us do not fall within the realm of the aforesaid mandate of law. As observed by the Hon'ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (supra), it is where between the date of order of original assessment sought to be reopened and the date of formation of the opinion by the A.O, nothing new has happened....
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....ssessee company was based on a mere "change of opinion" and thus, had, inter alia, quashed the reassessment for want of valid assumption of jurisdiction by the A.O. We, thus, not being able to persuade ourselves to subscribe to the aforesaid observations of the CIT(Appeals) set-aside his order to the said extent. (C). Re: A.O. had reopened the case based on a reason to suspect. 35. Ostensibly, the CIT(Appeals) had approved the claim of the assessee company that the A.O had assumed jurisdiction and reopened the concluded assessment of the assessee company based on a suspicion, and not a bonafide belief that its income chargeable to tax had escaped assessment. 36. The Ld. D.R. rebutted the aforesaid observation of the CIT(Appeals). Elaborating on his contention, it was submitted by him that as the A.O. had after analyzing the information that was shared by the Dy. DIT(Inv)-1, Raipur arrived at a bonafide belief that the income of the assessee company chargeable to tax had escaped assessment, therefore, the view arrived at by the CIT(Appeals) that the case was reopened on a suspicion being a perverse observation cannot be sustained and is liable to be vacated. 37. Per cont....
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.... the concluded assessment based on a reason to suspect and, thus, had vacated the reassessment order on the said count. (D). Re: A.O had traversed beyond the scope of his jurisdiction by reopening the concluded assessment of the assessee in violation of the "1st proviso" to Section 147 of the Act 39. We find on a perusal of the order of the CIT(Appeals) that the assessee company had, inter alia, assailed the validity of the jurisdiction assumed by the A.O for initiating the reassessment proceedings on the ground that now when the assessment in its case was originally framed vide order u/s. 143(3) of the Act, dated 11.08.2014, therefore, in the absence of any failure on its part to fully and truly disclose all material facts necessary for its assessment, the concluded assessment could not have been reopened beyond the period of four years from the end of the relevant assessment year, i.e. A.Y.2012-13. The assessee had submitted before the CIT(Appeals) on the aforesaid issue, as under: "Ground No.3 "On the facts and circumstances of the case, the Ld. AO has erred in reopening of the case u/s.148 irrespective of the fact that the case of the assessee was alread....
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....y Refer Annexure-2(Refer Page-5 to 13 of PB). After due verification the then A.O. has assessed the income of the appellant company by passing order u/s 143(3) dated 11.08.2014 by treating the sham capital as genuine. Copy of assessment order is enclosed herewith. Kindly Refer Annexure-3 (Refer Page-14 to 34 of PB). 1. That from the above mentioned facts it is evident that the appellant had duly disclosed all the details along with the desired documents related to the fresh issue of shares to share subscriber companies, at the time of the original proceedings. Hence, there was no failure on the part of the appellant to disclose fully and truly all material facts necessary for assessment. It was for the AO at this stage to decide what inference should be drawn from the facts of the case. In the present case the AO based on the facts disclosed to him did nut doubt the genuineness of the transaction of issue of fresh share capital. The AO, while forming the reason to believe, has not bought any single evidence as to what is the failure on the part of the appellant during the course of original assessment proceedings. The assessee had fully and truly disclosed all material fac....
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....lose all the material facts. 1. In view of above facts and circumstances of the case it is to submit that the re-assessment proceeding is not sustainable if there is no failure on part of appellant to disclose fully and truly all material facts as contemplated under first proviso to S.147. Therefore the entire reassessment proceedings deserved to be annulled." 40. As is discernible from the order of the CIT(Appeals), we find that he found substance in the claim of the Ld. AR that the reopening of its concluded assessment beyond the stipulated period of four years from the end of the assessment year, which lapsed on 31.03.2017, in the absence of any failure of the assessee company to fully and truly disclose all necessary facts for framing of its assessment was violative of the "1st proviso" to Sec. 147 of the Act, observing as under: " Ground No. 3 & 4 Vide these grounds, the appellant contended that there was no failure on its part to disclose fully and truly all material facts during the course of assessment proceedings u/s.143(3) of the Act and hence, reopening was void ab initio. Relevant Court decisions were relied by the appellant to support its case and ....
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....ion entries in lieu of commission. This company has share capital and premium to the tune of Rs.18,30,45,000/- and was purchased by one of the group companies of the appellant at only Rs.2 per share. This led to conclusion by the AO that the whole capital build up of M/s. Banka Finance & Securities Pvt. Ltd. was bogus and therefore, investment of Rs.30,85,000/- by the Banka Finance, was bogus as it lacked creditworthiness and genuineness. The appellant has contended that this piece of information was not mentioned in the reasons 4corded nor confronted to the appellant. Thus, it was contended that the addition of share capital was made without proper opportunity of being heard. l through the contents of reasons recorded by the AO and find that not mentioned about this piece of evidence at the time of formation have gone the AO had of "reasons to believe". Hence, the appellant's contention of reopening being based on mere change of opinion cannot be brushed aside. As regards the information about the Banka Finance & Securities Pvt. Ltd., I find that the appellant had stated in response to show cause notice that Shri Anjani Banka's statement was irrelevant for current assessme....
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....y vide Query No.18 was called upon to furnish the list of the shareholders whose number of shares had increased in the earlier years a/w. details from whom the shares were purchased. The assessee company vide its reply dated 19.08.2014, Pages 740-744 of APB, had inter alia, submitted before the A.O that it had during the subject year issued 5,85,520 shares at Rs.500/- per share, i.e at face value (FV) Rs.10/- and premium of Rs.490/- per share and had furnished complete list of the shareholders to whom the said shares were issued. For the sake of clarity, the aforesaid reply of the assessee company dated 19.08.2014 - Sr. No. 14 (of the reply) is culled out as under: "18.) During the year under consideration there is a fresh issue of 5,85,520 shares, issued at Rs.500/- per share (face value of Rs.10/- & premium of Rs.490/-). List of shareholders to whom fresh issue of shares have been made is enclosed herewith. Also, Form no. 2 and share application form is enclosed herewith. Further, party wise details of share application money received & shares allotted along with copy of bank statement reflecting the amount received are enclosed herewith. (A-8)." Once again, the asses....
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....0,000 2,64,60,000 2,70,00,000 - 2,70,00,000 2,70,00,000 - 5,85,520 58,55,200 28,69,04,800 29,27,60,000 2,66,30,000 29,76,30,000 32,42,60,000 3,15,00,000 44. Ostensibly, the assessee company in the course of the original assessment proceedings had made a full and true disclosure of all material facts pertaining to the allotment of 5,85,520 equity shares to the aforementioned seven share subscriber companies under consideration. As the A.O after necessary vetting and deliberations, had found the aforesaid details filed by the assessee company in order, therefore, he had accepted the same and not drawn any adverse inferences. We are of the considered view that now when the assessee company had disclosed fully and truly all material facts regarding the 5,85,520 equity shares that were issued during the subject year to the aforementioned seven share applicant companies at Rs.500/- per share, i.e. face value (F.V) of Rs.10/- per share and premium of Rs.490/- per share, therefore, as stated by the Ld. AR, and rightly so, the concluded assessment of the assessee company that was originally framed vide orde....
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....or in response to a notice issued under sub-section (1) of section 142 or section 148, therefore, the first condition contemplated in the "1st proviso" to Sec. 147 is not satisfied by the assessee company. 48. We may herein observe that the Hon'ble Supreme Court in the case of New Delhi Television Ltd. vs. Deputy Commissioner of Income Tax (2020) 116 Taxmann.com 151 (SC), had, inter alia, held that though the assessee is obligated to disclose the "primary facts" but it is neither required to disclose the "secondary facts" nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was observed by the Hon'ble Apex Court that the extended period of limitation for initiating proceedings under the "1st proviso" of Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for its assessment. Now, in the case before us, we are unable to comprehend what facts the assessee company had failed to disclose which would have otherwise justified bringing its case within the realm of the extended period co....
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....es arise on the basis of the perusal of the record of the assessment year in question. Clearly, therefore, there is no material alien to the record which the Assessing Officer has referred to for issuing the impugned notice. Further, almost for every ground which is part of various sub-paragraphs of Paragraph No. 3, he has referred to either scrutiny or verification of the case records. In clear terms, therefore, the Assessing Officer was acting on the information available from the record of the assessment. 6. As is well known, in an instance where the Assessing Officer exercises power of reassessment beyond the period of four years from the end of relevant assessment year, an essential requirement is that the escapement of income chargeable to tax is due to the failure on the part of the assessee to disclose truly and fully all material facts. This is part of section 147 of the Act itself and is on number of occasions by various judgments of High Court and Supreme Court held to be mandatory pre-requirement. In view of such settled law, it is not necessary to refer to any judgment. Revenue is unable to bring to our notice any aspect or element which did not form part of t....
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....d by the A.O beyond the period of four years without establishing the assessee's failure to disclose fully and truly all material facts necessary for assessment, the same, thus, on the said count also cannot be sustained. Our aforesaid view is supported by the judgments of the Hon'ble High Court of Delhi in the case of Pr. CIT Vs. Prabhu Dayal Aggrawal (2022) 115 CCH 349 (Del HC) and CIT Vs. Suren International Pvt. Ltd. (2013) 85 CCH 40 ( Del HC). Also, we may herein observe that though the A.O in the "reasons to believe" had stated that the assessee had not fully and truly disclosed the material facts necessary for its assessment for the subject year but the said observation would not suffice the requirement contemplated under the "1st proviso" to Section 147 of the Act. The A.O. in our considered view is obligated to arrive at a conclusion about the failure on the part of the assessee to disclose necessary facts for assessment after applying his mind and verification of the facts, which we find he had failed to do in the present case. Accordingly, we approve the view taken by the CIT(Appeals), wherein he had observed that the A.O. had exceeded his jurisdiction and reopen....
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.... 5 :- Vide this ground, the appellant has challenged the reopening as null and void on the ground that the objection against reopening was not dealt with by the AO and reopened assessment order was finalized without passing speaking orders, against the objection to the reopening. The appellant referred to the decision of Hon'ble Supreme Court in the case of GKV Driveshaft India Ltd., 70 CCH 12641 (SC). wherein it was held that the AO had to dispose of objections passing speaking order before proceeding with the assessment. I have gone through the current reopened assessment order and do not find any mention by the AO about objection to reopening and any speaking order passed by the AO against such objection. The appellant has enclosed copy of letter dated 16.06.2019 whereby detailed submission on facts as well as law was made against the reopening of the assessment. As the AO has not mentioned about any such order gassed against the objection to reopening, there is clear cut failure on the part of the AO in terms of Apex Court decision in the case of GKV Driveshaft and the AO was prohibited to proceed with the re-assessment proceeding without passing speaking ....
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....led on 16.06.2019 (supra) by the assessee company against the reopening of its case. Also, in support thereof, a copy of the e-proceedings sheet had been placed on record by the assessee company. 60. Admittedly, it is a matter of fact borne from the record that the assessee company had in the course of the reassessment proceedings, vide its letter dated 16.06.2019 (filed with the A.O on 19.06.2019), Pages 51 to 57 of APB filed its objections to the reopening of its case u/s. 147 of the Act. Also, we find that the assessee company had thereafter vide its letter dated 25.09.2019 (uploaded on 28.09.2019), Pages 209-213 of APB, reminded the A.O about its objection to the reopening of its case that was earlier filed before him. However, as observed by us hereinabove, the A.O. had without disposing of the objections of the assessee company proceeded with and framed the reassessment vide his order u/s. 143(3) r.w.s. 147 of the Act, 31.12.2019. As stated by the Ld. AR, and rightly so, the framing of the reassessment by the A.O without disposing off the objections to the reopening of the case as were filed by the assessee company militates against the mandate of law. The Hon'ble Apex....
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....Mercantile (presently known as Genus Innovation Limited), Jaipur Vs. DCIT, Circle-2, Jaipur, ITA No.292/2016 dated 07.11.2017, had observed, that in a case where the A.O had acted in defiance of the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors (supra.) and had framed the assessment without disposing of the objections, then there would be no justification in restoring the matter to the file of the A.O as the period of limitation would have already expired and the authority concerned would get extended time of limitation which would not conform with the object of the Income Tax Act. Accordingly, the Hon'ble High Court in the aforesaid case after relying on a host of judicial pronouncements had set aside the remanding of the matter by the Tribunal, and had quashed the reassessment proceedings. For the sake of clarity, the observations of the Hon'ble High Court of Rajasthan in the aforesaid case are culled out as under: "8. Before proceeding with the matter, it is not out of place to mention that the law declared by the Supreme Court in GKN Driveshafts (supra) clearly held that the preliminary objection is to be de....
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....ourt in GKN Driveshafts (supra) has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on re-opening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters. 9 In fact, to ensure that re-opening notices are disposed of, expeditiously the parliament itself has provided in Section 153(2) of the Act a period of limitation within which the Assessing Officer must pass an order on the notice of re-opening i.e. within one year from the end of the financial year in which the notice was issued. In fact, Section 153 (2A) of the Act as in force at the relevant time itself provides that an order of fresh Assessment, consequent to the order of Tribunal under Section 254 of the Act, would have to be passed within one year from the end of the financial year ....