TaxTMI 
TaxTMI 
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2022 (1) TMI 1496
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....ces of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that no back material, repeatedly asked was confronted/provided to assessee thus invalidating entire reopening; 1.3 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that assessment u/s 147/148 cannot be made when search was conducted u/s 132, as strictly excluded u/s 153A/153B/153C of the Income Tax Act, 1961; 1.4 That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that none of the assessee submission is appreciated while adjudicating the appeal; 1.5 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that objection filed in response to reasons recorded were never disposed off by a speaking order before passing the final assessment order, which has invalidated the entire proceedings; 1.6 That on the facts and in the circumstances of....
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....additions has been made were never provided to the assessee; 2.5 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that while making addition u/s 68 Ld. AO has not issued any formal and required show cause notice nor Ld. AO has considered detailed reply-filed by the assessee; 2.6 That on the facts and in the circumstances of the case and in law, Id CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that none of evidence filed by assessee is overruled in accordance with law; 4. That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by the Ld. AO u/s 147/143(3) without appreciating that the assessee was never provided with an opportunity of cross examination of any of officers of M/s Jagatjit Industries Ltd / other associates on the statement of Revenue / Investigation wing has relied upon and the Ld. AO has passed the impugned assessment order. 5. The on the facts and in the circumstances of the case in law, Ld. CIT (A) erred in sustaining the orders passed by the Ld. ....
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.... and seizure operation u/s 132 of the Act was carried out on assessee (all search asst quashed vide order of ITAT dated 19.01.2021) 31.03.2016 Letter dated 30.03.2016 recd. by assessee's AO from office of ADIT Inv II Faridabad (paper book pages 10 to 13) -key extract reproduced below 31.03.2016 Draft reasons u/s 148(2) recorded by assessee's AO Page 14/15 of paper book = reproduced below 31.03.2016 So called approval from PCIT Faridabad accorded to reasons drafted by AO page 14/15 of paper book reproduced below 31.03.2016 Notice u/s 148 issued by AO to assessee (recd. on 02.04.2016 at 12PM) 23.12.2016 Section 68 applied to bank credit addition of Rs 12,01,75,000 assessment completed on 23.12.2016 (no books of account maintained by assessee admittedly) 26.02.2018 Ld CIT-A dismissed assessee's appeal -------------- Hence this appeal before Hon'ble ITAT 9. Whether revenue can use section 148 of the Act for the period under consideration (AY 2009-2010) when provisions of section 153A as it stood at relevant time only enabled assessment for six specified years u/s 153A and one year in which search is conducted for mandatory scrutiny assessment in section 143(3), which rev....
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....ssee was issued mandatory Show cause notice (SCN) as per CBDT instruction and Hon'ble SC/HC/ITAT decisions on the subject ? 13. Whether invocation of section 68 in final assessment to bank credit treating bank statement as assessee's books of accounts u/s 68 of the Act read with sec 2(12A) of the Act which was also the final direction in forwarding letter of investigation wing dated 30.03.2016 is in accordance with applicable legal norms in peculiar facts as highlighted above? 14. Whether recent order of Delhi ITAT dated 19.01.2021 in assessee's own case (covering/dealing identical /same issue of addition based on same bank credit) invalidates the stand of revenue in extant case on merits of the matter? 15. On above framed six issues, we humbly submit our arguments on each of the above issue in chronological sequence. 16. First primordial issue which requires adjudication here is invocation of section 148 to subject period AY 2009-2010, where already search action on assessee u/s 132 of the Act took place on 29.12.2015 as admitted at very first page of impugned assessment order. As the provisions of section 153A which as stood at relevant time only six specified years which cou....
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.... reassessment provisions. However, the provisions that are saved are those under Section 153B and 153C, so that these three Sections 153A, 153B and 153C are intended to be a complete code for post-search assessments...." 17. We humbly rely on schematic interpretation principle (refer Hon'ble Apex court ruling in and Laksmi Machine works 290 ITR 667) and treating the entire law as integrated code of taxation (Held in case of Eli Lily 312 ITR 225: "....that the 1961 Act is an integrated code in which one cannot segregate the computation machinery from the collection and recovery machinery."), to support our above submission. Even we humbly rely on Hon'ble Supreme court observations in leading case of Manish Maheshwari 289 ITR 341 in context of erstwhile block assessment scheme (u/s 158BD/158BC) as to applicable rule of interpretation to be used while interpreting provisions of post search block assessment: "A taxing statute, as is well-known, must be construed strictly. In Sneh Enterprises v. Commissioner of Customs, New Delhi [(2006) 7 SCC 714], it was held: "While dealing with a taxing provision, the principle of 'Strict Interpretation' should be applied. The Court s....
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....sions of section 148(2) of the Act: 21. To support above proposition we place reliance on following jurisprudence: IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH "B", PUNE ITA Nos. 725 to 728/PUN/2015 Shri Tushar R. Jagtap Date of Pronouncement: 09.02.2018 28. Further, the second connected aspect is that after approval being granted, notice issued under section 148 of the Act and service upon assessee on 30.03.2012. It may be pointed out herein itself that in all the assessment orders for different assessment years in the case of different assessees, there is mention of service of notice under section 148 of the Act on 29.03.2012. We may keep the said fact on the side since the Revenue has furnished on record the evidences of recording of reasons, seeking of approval, approval being granted and the issue of notice under section 148 of the Act and its service upon the assessee. We may start with the fact that for assessment years 2005-06 and 2006-07, the said reasons were recorded on 30.03.2012, approval was sought and granted on 30.03.2012; and notice under section 148 of the Act was issued on 30.03.2012 and served upon the assessee on 30.03.2012. The approval havi....
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....'." 24. On issue of reopening on basis of half-baked information and external dictation of investigation wing we draw support from the following judgments. 25. The Hon'ble Supreme Court in the case of Anirudh Sinhji Karan Sinhji Jadeja vs. State of Gujarat reported in [1995] 5 SCC 302 as well has held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to its own discretion. If discretion is exercised under the direction or in compliance with some higher authorities instruction, then it will be a case of failure to exercise discretion altogether IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION WRIT PETITION (CIVIL) No. 89 of 2018 CHINTPURNI MEDICAL COLLEGE AND HOSPITAL & ANR JULY 03, 2018 8. Before going into the merits of the submission, it is important to note that the State Government appears to have This is obvious from the letter dated 13.07.2017 referred to above. This by itself would vitiate the withdrawal of the Essentiality Certificate by the State, vide Anirudhsinhji Karansinhji Jadeja v. State of Gujarat and Dipak Babaria v. State of Gujarat. 3 The following passage from Wade and Forsyth in Adminis....
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....ecorded - writ scope under article 226 of Indian constitution 28. Rebutting the contentions of the revenue, the ld. AR submitted as under: "To demonstrate that the formation of the belief, as discernible from the order recording reasons, was neither arbitrary nor irrational, a reference was made to the following portion of the said order: "Further, on perusal of return of income filed by the assessee for A.Y 2010-11 and A.Y 2011-12 it has been observed that the assessee has shown unsecured loans of Rs. 38,071/- and Rs. 25,57,206/- respectively. Thus there is substantial increase in the unsecured loans during A.Y. 2011-12. A careful scrutiny of information received from the investigation wing and report received from Investigation Wing. New Delhi subsequent analysis of report of investigation wing, data of transactions and verification of ITR lead to an irresistible conclusion that the assessee company has taken accommodation entry at least up to the amount of Rs. 26,93,500/- Considering the above referred credible information, and enquiries and analysis subsequent to the information. I have reason to believe that an amount at least of Rs. 26,93,500/- & Co....
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....the ADIT and the report generated thereafter and its analysis formed the basis of respondent no.1's belief that the assessee's income chargeable to tax had escaped assessment. 7.7. Mr. Singh went on to state that respondent no.2 had given his approval to initiation of proceedings against the assessee only after satisfying himself that a case was made out for initiation of proceedings under the provisions of Section 147 of the Act" Significantly Hon'ble Delhi high court after taking pains has succinctly culled out following important principles on section 148 of the Act: "Analysis and Reasons: - 9. We have heard the learned counsel for the parties and perused the record. Before we proceed further, it would be helpful if we were to set forth certain well-established principles enunciated by the courts over the years vis-à-vis initiation of proceedings under Section 147 of the Act. (i) The reasons which lead to the formation of opinion or belief that the assessee's income chargeable to tax has escaped assessment should be inextricably connected. In other words, the reasons for the formation of opinion should have a rational connection with the formation of the belie....
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....lowing:..." Important inferences on basis of above principles: "9.5. Mr. Singh, in a desperate attempt to salvage the situation, drew our attention to the unsecured loans shown in the income tax returns of the assessee for AYs 2010-2011 and 2011-2012 amounting to Rs. 38,071/- and Rs. 25,57,206/- respectively. Apart from anything else, simple math would show that the cumulative total of these figures is Rs. 25,95,277/- and not Rs. 26,93,500/- which, according to respondent no. 1, is the unexplained credit in the books of accounts of the assessee and, hence, required to be added under Section 68 of the Act. Therefore, for Mr. Singh to say that these are inadvertent errors and hence should be ignored, in our opinion, is an argument that is completely misconceived. As indicated above, if the information received (from the investigation wing) was that the accommodation entries, in lieu of cash, were taken in the form of share capital and share premium they could certainly not be linked to unsecured loans received in AYs 2010-2011 and 2011-2012. 9.6 It is pertinent to note that in the objections filed by the assessee, an attempt has been made to explain the p....
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....that the approval of the ACIT was rightly taken, a bare perusal of the endorsement would show that there is no application of mind as to whether the information received by the AO had any nexus with the formation of honest belief that the assessee's taxable income had escaped. What is glaring is that the ACIT notes that income to the tune of Rs. 27,60,838/- had escaped taxation whereas, in the order recording reasons, the taxable income has been quantified as Rs. 26,93,500/-. As noted above, based on the arguments of Mr. Singh that the escaped income should be related to unsecured loans, there is in play a third figure which is Rs. 25,95,277/ 10.5. As noted above, in the instant case, because of the failure on the part of respondent no.1 to correlate the information received with the ostensible formation of belief by him, respondent no.2 attempted to connect, via her counter-affidavit, that the escaped income with the "suspicious" unsecured loan entries reflected in the assessee's returns for AY 2010-2011 and 2011-2012. As correctly argued by Mr. Kochar, the counter-affidavit and the submissions made across the bar cannot be used to sustain the impugned ac....
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....associates. The order recording reasons, merely, indicates that the formation of belief is based on these sources. Furthermore, although, there is a reference to Shri Laxman Singh Satyapal and Ms. Meera Mishra in paragraph 3.14 of the counter-affidavit, as persons, whose statements were also recorded during the search, which formed the basis of initiation of proceedings under Section 147 of the Act, there is no reference to them in the order recording reasons. 11.3. Besides this, the revenue has taken the position that not only the report of the investigation wing but also the statements of Mr. Pradeep Kumar Jindal and his aforementioned associates were furnished to the authorized representative of the assessee in the proceedings held before respondent no.1 on 12.10.2018 (See para 3.6 of the counter-affidavit). The proceedings sheet of 12.10.2018 [which is appended with the counter-affidavit] does not refer to this fact. Therefore, apart from anything else, a case could have been made out also of breach of principles of natural justice. For the reasons best known, Mr. Kochar did not press this issue. We need not elaborate any further on this aspect of the matter as our decision ....
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....erein assessment was earlier framed u/s 143(3) or section 147 of the Act, whereas subsection (2) provides for the cases, wherein no assessment was framed earlier. Under sub section (1) of section 151, if the proceedings are initiated within four years, no notice shall be issued under section 148, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice. However, the proviso to the sub-section (1) provides for the approval in the cases where notice is issued after the expiry of four years from the end of the relevant assessment year. The proviso provides that if the notice is issued beyond four years, such notice shall be issued after taking approval from the Chief Commissioner or Commissioner on the reasons recorded by the Assessing Officer. Further under subsection (2), it was provided that if no assessment was framed earlier u/s 143(3)(147, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded....
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....on for granting approval. In fact, this shows that while granting approval, he has not even examined whether the material referred in the reasons to believe is available with the AO and had he applied his mind, he would have found that even the material referred in the reasons to believe is not available with the AO. Now be that as may be, in the A.Y. 2002-03 even the reasons recorded do not clothe the AO with the jurisdiction to reopen the assessment, as he did not had the relevant material. 15.8 From the contents of aforesaid communication it is seen that ADIT (Inv.), Meerut had recommended the case of the assessee to be reopened without providing the AO any supporting material. It can thus be safely concluded and inferred that reopening proceedings had been initiated not on the basis of satisfaction of the AO, albeit on the basis of mere recommendation of ADIT (Inv.), Meerut. The 'reason to believe' has to be that of the AO who is initiating the proceedings and in absence of any independent application of mind and satisfaction of the AO the reason to believe falls in the realm of conjectures. The AO has to have tangible material with him and even if the information has come f....
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....rmed the basis for the belief that income had escaped assessment must be evident from a reading of the reasons. The reasons failed to demonstrate the link between the tangible material and the formation of the reason to believe that income had escaped assessment. The Assessing Officer had not independently considered the tangible material which formed the basis for the reasons to believe that income had escaped assessment. 94. The Hon'ble High Court of Bombay in the case Principal Commissioner of Income-tax-5 v. Shodiman Investments (P.) Ltd. reported in 422 ITR 337 holding that reopening notice on the basis of intimation from DDIT (Investigation) about a particular entity entering into suspicious transactions, was clearly in breach of the settled position of law that reopening notice has to be issued by the Assessing Officer on his own satisfaction and not on borrowed satisfaction. 31. The Hon'ble Court has pronounced as under: "12. The re-opening of an Assessment is an exercise of extraordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms o....
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....en bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. However, this belief that income has escaped assessment has to be the reasonable belief of the Assessing Officer himself and cannot be an opinion and/or belief of some other authority. On the basis of the information by itself received from another agency, there cannot be any reassessment proceedings. However, after considering the information/material received from other source, the Assessing Officer is required to consider the material on record in case of the assessee by applying his mind and thereafter is required to form an independent opinion on the basis of the material on record that the information has bearing on the income of the assessee and such income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment. It is also established principle of law that if a particular authority has been designated to record his/her satisfaction on any particular issue, then it is that authority alone who should apply his/her ....
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....ns to believe that this amount had escaped assessment within the meaning of Section 147 of the Act. 36. First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under Section 143 (3) of the Act. Thus it would appear that Petitioner had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. He had also explained whatever queries were put by the Assessing Officer with regard to the primary facts during the hearings." 32. In such circumstances, it cannot be said that Petitioner did not disclose fully and truly all material facts necessary for the assessment. Consequently, Respondent No. 2 could not have arrived at the satisfaction that he had reasons to believe that income chargeable to tax had escaped assessment. In the absence of the same, Respondent No.....
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....the formation of reason to believe that income chargeable to tax has escaped Assessment. Mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. In fact, this would be evident from the fact that in para 16 of the decision in Rajesh Jhaveri Stock Brokers Pvt. Ltd. [291 ITR 500], (supra), it is observed that the word 'reason' in the 'reason to believe" would mean cause or justification. Therefore, it can only be the basis of forming the belief However, the belief must be independently formed in the context of the material obtained that there is an escapement of income. Otherwise, no meaning is being given to the words 'to believe' as found in Section 147 of the Act. Therefore, the words 'whatever reasons' in Rajesh Jhaveri Stock Brokers Pvt. Ltd., (supra), only means whatever the material, the reasons recorded must indicate the reasons to believe that income has escaped assessment. This is so as reasons as recorded alone give the Assessing Officer power to re-open an assessment, if it reveals/ indicate, reasons to believe that income chargeable to tax has escaped assessment. 12. The re-opening of an ....
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....eopening notice has to be issued by the Assessing Office on its own satisfaction and not on borrowed satisfaction." On jurisdictional issue of validity of approval u/s 151 of the Act (I AM SATISFIED endorsed by Ld. PCIT dt. 31.03.2016), we humbly draw your honors kind attention to following chain of jurisprudence on the subject: 37. Text of section 151: Sanction for issue of notice. 151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commis....
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.... 40. The approval is a safeguard and has to be meaningful and not merely ritualistic or formal. Central India Electric Supply Co. Ltd. v. ITO (2011) 333 ITR 237 (Delhi)(HC) 41. Delhi high court in case of Sahara reported at where u/s 142(2A) on CIT's requisite approval for special audit, Hon'ble Delhi high court speaking through Hon'ble Justice S.R. Bhatt has opined as under: (399 ITR 81) ".....The requirement of previous approval of the Chief Commissioner or Commissioner, casts a heavy duty on these authorities to ensure that this requirement is not reduced to an empty formality. Before granting the approval, the Commissioner or the Chief Commissioner, must have before him the materials on the basis of which the opinion has been formed by the Assessing Officer. The approval granted by the Commissioner or the Chief Commissioner must reflect application of mind to the facts of the case. This requirement was elaborated by the Calcutta High Court in West Bengal State." 42. Co-operative Bank Ltd. vs. Joint Commissioner of Income Tax, [2004] 267 ITR 345 (Cal), where it noted that- "The Commissioner of Income Tax should not give any approval mechanically and if he finds that ther....
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.... of the concurrent findings recorded by the learned appellate authorities and the law laid down in the case of Arjun Singh (supra), we see no question of law involved in the matter, warranting reconsideration." Notably: Against the said order, the Hon'ble Apex Court dismissed the SLP filed by the Department refer : (2015) 64 taxmann.com 313 (SC)and affirmed the order of the Hon'ble M.P. High Court in the case of CIT Vs. S. Goyanka Lime & Chemicals Ltd. held as under: " that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid." 44. The Hon'ble Delhi High Court has also decided this legal issue in case cited as Pr. CIT vs. N.C. Cables Ltd. in ITA 335/2015 order dated 11.01.2017 (391 ITR 11) by returning following findings:- " Reassessment-Issuance of Notice Sanction for issue of Notice-Assessee had in its return for A Y 2001-02 claimed that sum of Rs. 1 Crore was received towards share application amounts and a further sum of Thirty Five Lakhs was credited to it as an advance towards loan- Original assessment was completed u....
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....Act, 1961 for initiation of proceeding u/s. 147 of the I.T. Act, 1961 in the case of Sri Viresh Hemani....'. There is no indication of any application of mind by the authority...." We strongly rely on this latest order of Hon'ble Orissa high court. 46. Mumbai Bench of ITAT in case of M/s SEAWOOD HOSPITALITY & REALTY PVT LTD IN ITA No. 92/Mum/2019 (Assessment Year :2010-11) vide order dated 23.11.2020 of the bench presided by and comprising of His lordship Hon'ble Justice P.P. Bhatt Hon'ble president ITAT, has in paragraph number 5.7 to 5.9 has held thus: ".....5.7. From the aforesaid proforma, it could be seen that the ld. PCIT had only mentioned for question No. 13 as under:- "Question Number 13. Whether the Pr. Commissioner is satisfied on the reasons recorded by the DCIT, that it is a fit case for the issue of a notice under section 148. Reply: Yes, it is fit case for issue of notice u/s.148." We find that the aforesaid approval granted by the ld. PCIT does not constitute proper sanction in terms of the Section 151(1) of the Act and rather it would only tantamount to mechanical approval granted by him without due application of mind. In this regard, we would l....
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....IT and hence, we hold that the approval accorded by the ld. PCIT in a mechanical way is unsustainable in law, hence, on this very jurisdictional issue, we set aside the orders of the lower authorities and allow the appeal of the assessee." 47. Further, recently Ahmadabad Bench of ITAT in recent case of Shri Tyrone Patrick Lemos dated 20/11/2020. In this order entire subject of approvals by higher authority in context of section 151 where reopening is made, is analyzed in great length, some important observations which directly has imminent bearing on present issue u/s 153D are reproduced below: "9. Adverting further, there is yet another reason to impugn the action of AO. It is an admitted position that the assessment proceedings in the instant case came into motion owing to issuance of notice under s. 148 of the Act for which certain reasons were recorded as noted earlier. The reasons so recorded were sent by AO for formation of 'satisfaction' and approval thereon by JCIT under s. 151 of the Act. We notice from the approval memo dated 25.01.2016 given by the JCIT which notes the name of the assessee alongwith many other assessees and grants a consolidated approval for action ....
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....the facts of the case, would be ousted in law to initiate the impugned re-assessment proceedings under s. 147 of the Act on the basis of consolidated approval granted by the superior authority under the umbrella of Section 151 of the Act for several assesses in a combined approval memo dated 25.01.2016 (i) when such memo is stoically silent on disseminating any 'satisfaction' whatsoever for the purposes of approval so granted and when (ii) no process for formation of purported satisfaction, if any, towards alleged 'reasons to believe' of AO qua the assessee was found discernible in such consolidated approval. 9.4 Courts have taken a nuanced view and time and again held that the satisfaction of the superior authorities are not empty formalities and such approval cannot be given mechanically or perfunctorily without application of mind to the facts and material placed before him. The Hon'ble Supreme Court in Chhugamal Rajpal vs. S. P. Chaliha (1971) 79 ITR 603 (SC) has set aside the action of the superior authority as satisfaction was found to be arrived mechanically and a mere pretense where the superior authority merely expressed his satisfaction as 'yes' on the note forwarded to h....
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....nder some duty to apply its mind to the relevancy of material before sanction of proceedings. In the light of judicial precedents noted above and many more, a summary approval by the JCIT without expressing any satisfaction on presence of underlying materials showing escapement while exercising the functions under s. 151 of the Act cannot be countenanced in law. This apart, a consolidated approval memo of multiple assessee without recording satisfaction qua each individual case raises serious doubt on plausibility of implicit satisfaction for each case as contemplated in Section 151 of the Act. A nondescript approval under S. 151 without requisite satisfaction is a nullity. The issuance of notice under S. 147 itself is thus void where the sanction is not obtained in terms of S. 151 of the Act. Hence, on this ground also, the notice under s. 147 of the Act itself gets vitiated." 49. Then we refer Delhi ITAT recent decision in case of Eminent computers Pvt. Ltd. dated 24.11.2020 in ITA No. 6372/Del./2019 (ASSESSMENT YEAR : 2010- 11) "14. First of all, ld. AR for the assessee drew our attention towards the sanction accorded by the ld. Principal CIT for reopening the assessment....
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....s sufficient to believe that income to the tune of Rs. 15,00,000/- received from M/s. Hajima Resorts Ltd. has escaped assessment nor any such notice has been given to the assessee. All these facts goes to prove that the AO has not applied his judicial mind before recording the "reasons to believe" that such and such income has escaped assessment rather proceeded to initiate the proceedings u/s 147/148 of the Act by blindly following the report of the Investigation Wing. Before according approval, ld. Principal CIT has also not examined all these facts rather accorded the approval in a mechanical manner.... 22. In view of what has been discussed above, we are of the considered view that according sanction is not a supervisory role rather it is a quasi-judicial function to be performed by the Principal CIT/CIT, as the case may be, as required u/s 151 of the Act. We fail to understand that when the Revenue Department is manned by highly qualified officers having experience of at least 20 years till reaching in the rank of Principal CIT, they are required to evolve legally sustainable "standard operating procedure" containing "self-speaking reasons" for according sanction while di....
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....ful, which was rationale for safeguard of approval by higher ranking officer-Revenue's appeal dismissed." I find the Hon'ble Madhya Pradesh High Court in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. reported in 231 taxmann 73 (MP) has held that where the Joint Commissioner recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice under section 148 of the Act, reopening of assessment was invalid. Similar view has been taken by the Hon'ble Delhi High Court in the case of Yum Restaurant Asia Pte Ltd. vs DCIT reported in 99 Taxmann.com 423 (Del). Since, the Addl. CIT in the instant case has given approval in a mechanical manner without independent application of mind, therefore, such approval given u/s 151(1) of the Act being not in accordance with law, the reassessment proceedings has to be quashed." We strongly rely on aforesaid order of Hon'ble Delhi Bench of ITAT." 51. Further very recently Chandigarh bench of ITAT in case of Tek Chand in ITA No. 255/Chd/2020 for the A.Y. 2009-10 dated 15/03/2021 on approval granted by PCIT as " Yes, satisfied, it is a fit case for issue of notice under section 148 " ....
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....in favour of the assessee and quashed the reassessment and also deleted the addition in dispute, hence there is no need to adjudicate the other grounds." 53. Finally we strongly rely on recent Hon'ble Delhi High Court decision in case of Synfonia ltd 26.03.2021 wherein relevant paragraph is again reproduced below at cost of repetition:"9.8. This apart, what is even more disconcerting is the fact that respondent no.2, who accorded sanction for triggering the process under Section 147 of the Act, simply rubber-stamped the reasons furnished by respondent no.1 for issuance of notice under Section 148 of the Act. 9.9. The provisions of Section 151(1) of the Act required respondent no.2 to satisfy himself as to whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and, thus, triggering the process of reassessment under Section 147. The sanction-order passed by respondent no.2 simply contains the endorsement 'approved'. 10. In our view, the sanction-order passed by respondent no.2 presents, metaphorically speaking 'the inscrutable face of sphinx' (See: Breen v. Amalgamated Engineering Union [1971] 2 QB 17500; Also see: State o....
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....n reasons recorded. Entire reopening is made on basis of mere credit in bank account which is already held in assessee's own case cannot be called as real income in hands of assessee by the Hon'ble ITAT (refer Hon'ble Apex court decision in Shoorji Valllabhdass 46 ITR 144). It is clearly recorded in said Hon'ble ITAT order of 19.01.2021 that revenue can't assess Jagajjeet for entire undisclosed sales/revenue how can entire amount be added in hands of assessee herein which proves entire reasons are factually erroneous and are based on non-existing grounds. 56. On basis of above four aspects we humbly submit that instant reopening is not valid in law and cannot pass legal and judicial scrutiny. Further we humbly submit that assessee's objections against reasons recorded u/s 148 dated 29.04.2016 (paper book pages 13,14 &15) are nowhere disposed off as per law. 57. On third issue that is immediate/straight issue of scrutiny /regular assessment notice u/s 143(2) and questionnaire u/s 142(1) dated 21.04.2016 on day when reasons were first supplied to assessee as per request letter dated 03.04.2016, is vitiating to entire assessment as by this Ld AO has displayed that firstly he is not ....
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.... addition made by the revenue can be held to be legally valid. b) Whether the allocation of expenses be on the basis of gross sales or on the basis of gross profit. 15. Having gone through the show-cause notice and the addition made, we find that the assessee has not been afforded an opportunity while making the addition, thus denying the principles of natural justice. It is very unfortunate that in many cases, Assessing Officers make additions under scrutiny assessments in gross violation of the principles of natural justice even without issuing a proper Show Cause Notice or without giving the taxpayer a fair opportunity to explain his point of view. This approach not only creates ill-will for the department, but also gives rise to un justified demands. Further, it makes the appeal proceedings also complex and time consuming, because the Commissioner Appeals is required to admit additional evidence or call for Remand Reports etc. "Hearing rule" states that the person or party who is affected by the decision made judicial/quasi judicial should be given a fair opportunity to express his point of view to defend himself. The principle of natural justice is a very old concept and it....
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.... of principles of natural justice is a sine qua non. 17. Keeping in view the above and the well laid down principles and keeping in view that there is substantial discrepancy between the show-cause issue and the addition made, we have come to a conclusion that this is an unambiguous case of violation of principles of natural justice and hence the action of the revenue which was concluded without affording an opportunity to the assessee is liable to be obliterated." Further reliance is placed on CBDT Instruction number 20/2015 dated 29.12.2015 paragraph 4 is relevant is highlighted below: "4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, ....
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....y step to recover from the executant of the bond any amount by way of penalty, there has to be an adjudication as regards the breach of condition(s) of the bond or the failure to produce the discharge certificate within the time mentioned in the bond on the basis of the explanation as also the material which may be adduced by the person concerned denying the liability to pay such penalty. Moreover, the penalty amount has also to be quantified before proceedings for recovery of the amount so determined are taken. In our view, therefore, if the requirement of an opportunity to show-cause is not read into the said Rule, an action thereunder would be open to challenge as violative of Article 14 of the Constitution of India on the ground that the power conferred on the competent authority under the provision is arbitrary. In Uma Nath Pandey & Others Vs. State of UP & Another: (2009) 12 SCC 40, Supreme Court, inter alia observed as under: ―Notice is the first limb of this principle. It must be precise and unambiguous. It should appraise the party determinatively the case he has to meet. Time given for the purpose should be adequate so as to enable him to make his representati....
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....that entire assessment is based on direction and dictate of investigation wing as it is clear that sec. 68 is applied to case where assessee is neither maintaining books of account u/s 2(12A) nor there is any requirement on part of assessee to do so u/s 44AA which is vindicated from fact that revenue has not initiated any penalty u/s 271A for non-maintenance of books of account we rely on following chain and long line of precedents to argue that sans books of accounts being positively maintained by assessee, scope of applicability of section 68 gets ousted: ⮚ Delhi ITAT F bench decision in Vijay Kumar Prop V.K. Medical Hall order dated 27.11.2918 ⮚ Delhi ITAT B bench decision in Inder Singh case order dated 05.12.2018 ⮚ Mumbai C bench ITAT decision in case of Palimar Gopal Shetty order dated 26.8.2020 ⮚ Bombay high court decision in case of Manisha M Shah order dated 27.06.2016 ITA 2432/2013- referring Bhai chand Gandhi 141 ITR 67, Baladin Ram 71 ITR 427 ⮚ Mumbai bench E ITAT decision in case of Ekta Housing Pvt. Ltd. para 30 of the decision order dated 24.05.2021 (Sec 2(12A) analysed in detail ⮚ Chennai bench D ITAT decision in....
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.... In worst case scenario, without prejudice to above, Further we draw support from Latest Gujarat high court decision in case of 430 ITR 253 in case of PCIT VS Shitalben Saurabh Vora order dated 19.09.2020. Adding 2% income on undisclosed business receipts related deposits made in unaccounted bank account. 64. Summary of our arguments before this Hon'ble Tribunal: That impugned assessment framed u/s 147/148 is made in violation to operative statutory scheme and design of search based assessment u/s 153A which is restricted to sic specified years only and cant indirectly allow revenue to take recourse to sec. 148 for additional one year which is supported from subsequent amendment made in law of sec. 153A by finance act 2017; We rely on Hon'ble Delhi high court decision reported in 393 ITR 1 and strong non obstante clause referred in sec. 153A of the Act. 65. That impugned assessment framed u/s 147/148 is based on direction and dictate of investigation wing when all facts I) investigation wing forwarding letter received in office of AO on 31.03.2016 II) reasons drafted on 31.03.2016 and iii) PCIT approval (I AM Satisfied) given on 31.03.2016 iv) notice u/s 148 issued on 31.03.20....
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....ve argued eloquently relying on the record of the ADIT(Inv.), JCIT, Range, PCIT, the Assessing Officer and the order of the First Appellate Authority. The sum and substances of the arguments have been submitted in writing which are as under: Written Submission-I dated 01.07.2021 It is submitted that a search and seizure operation was conducted on 29.12.2015 against the Talwar & Duggal Group of which Sh. Arun Duggal is a member. 2. The main issue in this search was that huge money was deposited in the bank accounts of M/s Alfa India (which is a proprietary concern of Shri Arun Duggal. The huge amounts were transferred from M/s Alfa India to family members of Talwar & Duggal group. 3. Thereafter the case of this assessee for AY 2009-10 was reopened under section 148 by DCIT-Central Circle-I, Faridabad. The Assessing Officer after detailed inquiry and opportunity completed assessments by making additions u/s 68 of IT Act 1961. 4. In this regard the following assessment year wise breakup of the cases in ITAT of Arun Duggal is submitted regarding the case of assessee for A.Y. 2009-10 in ITA No. 3075/Del/2018: Date of search 29.12.2015 S. No. ITA Nos. A.Y....
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....nformation about cash deposits, supported by statement of witnesses, there were reason to believe that income of assessee had escaped assessment and, thus, justifying reopening of assessment under section 147. Hon'ble Court also held in favour of revenue that since genuineness of donors could not be established, donations were to be treated as bogus, and additions made under section 68 were justified. 8. Hon'ble HIGH COURT OF GUJARAT in the case of Garvit Diamonds Pvt. Ltd. vs Income Tax Officer in [2021] 127 taxmans.com 2Sf Gujarat) has held that Assessing Officer is entitled to initiate reassessment proceedings on basis of tangible material which comes in his hand, which tends to expose untruthfulness of entry of purchase made in books of accounts. Further, Competent Authority had given satisfaction in writing and had expressed his satisfaction with regard to reasons recorded and accorded sanction to issue impugned notice. Therefore, approval for reassessment was granted on date on which impugned notice were issued. 9. Hon'ble Gujarat High Court in the case of Nisha Diamonds (P.) Ltd. vs. Income Tax Officer, Ward-1(1)(4) in [2021] 127 taxmann.com 689 (Gujarat). 10. Hon'ble ....
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....ay kindly be incorporated into the body of the order. Written Submission-II dated 14.07.2021 Ground no. 1 1.1 The assessee is arguing about the rubber stamp reasons which are based on borrowed satisfaction and lack of independent application of mind. In this regard, I would like to say that Assessing Officer after application of independent mind has recorded reasons to believe for escapement of income and has moved the proposal for reopening of assessment and the proposal was duly approved by Pr. CIT after independent application of mind. It has been argued that the Assessing Officer has reopened assessment proceedings on the basis of borrowed satisfaction and without independent application of mind. A. In this regard, I would like to rely on the decision of Hon'ble Delhi High Court in Brijbasi Education and Welfare Society vs. Principal Commissioner of Income Tax Central III, New Delhi in [2021] 125 taxmann.com 95 (Delhi) dated 22.12.2020, where it was held that Assessee was an educational trust. Assessing Officer received information from DDIT (Investigation), based on a report of Central Bureau of Investigation (CBI) that chairman of assessee-trust had made huge cash....
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....t where competent authority had given satisfaction in writing and accorded sanction under section 151 to issue impugned notice for reopening assessment, contention of assessee that valid sanction had not been obtained could not be accepted. D. Hon'ble Delhi High Court in the case of Experion Developers (P.) Ltd. vs. Assistant Commissioner of Income Tax in [2020] 115 taxmann.com 338 (Delhi) has held that where necessary sanction to issue notice under section 148 was obtained from Pr. Commissioner as per provision of section 151, Pr. Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons recorded by Assessing Officer. 1.2 Assessee has raised a ground that no back material was confronted/provided to the assessee. However as seen from Assessment record, assessee has requested for certified copies of reason recorded and certified copies of reasons recorded under section 148(2) were given t:o assessee on 21.04.2016. Also, Inspection of file was also undertaken b}/ Assessee AR on 21.04.2016. 1.3 In this regard, it is submitted that this ground of appeal was also taken by assessee before Ld. CIT(A). Kind refe....
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....argued about having no valid basis of addition. However CIT (A) despite assessee not filing its submission has adjudicated the appeal on merit and confirmed the addition after discussing all the facts in para 4.1. Ld. CIT (A) has clearly mention in para 4.1 (viii) that no explanation has been given by assessee with regard to credits in his bank account inspite of various opportunities given with regard to the sources of the two bank accounts operated by assessee during the year under consideration. 2.3 Assessee has argued about no meaningful enquiry by AO however as can be seen from Assessment order, order has been passed after giving assessee many opportunities to justify the credits in his bank accounts. 2.4 Assessee has argued about not providing bank statements on the basis of which additions have been made. I would like to say that assessee has inspected the records on 21.04.2016 and it has mentioned in its letter dated 29.04.2016 that it had inspected the file on 21.04.2016 and also seen the letter of ADIT(Inv)- 11 Faridabad on the basis of which reasons have been recorded. Also, during the assessment proceedings, assessee never asked for copies of bank statements therefo....
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....icer may require. Thereafter, vide Notice u/s 142(1) dated 26.09.2016 issued by DOT, Central Circle-1, Faridabad, assessee was again asked to file information as already called for and case was fixed for 06.10.2016. Subsequently, vide Notice u/s 142(1) dated 29.11.2016 issued by DOT, Central Circle-1, Faridabad, assessee was again asked to furnish the copies of all bank accounts maintained by it and explain all credit entries with documentary evidence vide point (iv) and assessee was also asked to justify the credit entry amounting to Rs. 12,81,75,000/- received from M/s Alfa India during the year vide point (v).(Copy of notice enclosed). Assessee was afforded many opportunities to explain the source of credits in his bank account and Assessing Officer has passed the assessment order after taking into consideration reply of the assessee. Assessing Officer has discussed the reply of assessee in Assessment order on page no. 2 &3 and also reproduced assessee's reply in assessment order. Assessee's contention regarding overruling of evidence filed by it also become infructuous as it has neither filed submissions before Assessing Officer nor before CIT (A) in support of its cl....
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....en her approval in her own hand writing after going through the reasons recorded and the information received from the Investigation Wing, which include the statement of Sh. Arun Duggal recorded on 29.12.2015 and copy of bank statement of Alfa India maintained with South Indian Bank bearing account no. 0419073000000213 at Plot no. 97, SCO, Sec.-31 Main Road Gurgaon and 035807300000243 at Door no. B-103, Ground Floor, Chittranjan Park, New Delhi, of which Sh. Arun Duggal is the proprietor. (ii) Assessee is arguing about the rubber stamp reasons which are based on borrowed satisfaction and lack of independent application of mind. In this regard, I would like to say that Assessing Officer after application of independent mind has recorded reasons to believe for escapement of income and has moved the proposal for reopening of assessment and the proposal was duly approved by Pr. CIT after independent application of mind. (iii) It has been argued that the Assessing Officer has reopened assessment proceedings on the basis of borrowed satisfaction and without independent application of mind. In. this regard, I would like to rely on the decision of Hon'ble Delhi High Court in Brijbasi E....
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....ld that where assessee was aware that transaction with company 'A' was not business transaction but in form of bogus purchase, however, failed to disclose true and correct facts at relevant time, Assessing Officer was entitled to initiate reassessment proceedings on basis of tangible material which, came into his hands through investigation wing. It was also held that where competent authority had given satisfaction in writing and accorded sanction under section 151 to issue impugned notice for reopening assessment, contention of assessee that valid sanction had not been obtained could not be accepted. Hon'ble Delhi High Court in the case of Experion Developers (P.) Ltd., vs. Assistant Commissioner of Income Tax in [2020] 115 taxmann.com 338 (Delhi) has held that where necessary sanction to issue notice under section 148 was obtained from Pr. Commissioner as per provision of section 151, Pr. Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons recorded by Assessing Officer. 5.3 Whether from order sheet noting dated 21/04/2016 (copy placed on case records) stating that "Present Sh. Vijay Singla....
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....s Alfa India? Answer-1 am in no way associated with M/s Alfa India. I am hearing this name for the first time. I do not have any kind of interest in M/s Alfa India. Even my family members are not associated with this concern. (iv) It is pertinent to mention that even though Sh. Arun Duggal is proprietor of M/s Alfa India yet he denied any knowledge of his own firm in his statement. (v) Statement of Sh. Sanjay Duggal was recorded during post-search proceedings on 24.02.2016 at the office of ADIT Faridabad, during which he was confronted with his reply during statement recorded during the course of search between 29th to 31st December, 2015.... "In relating to M/s Alfa India you gave variable response while under oath. The response varied from- a) used for promotional activities through gift distribution in the nature of brand promotion on behalf of firms like Discovery Asia b) funds received in account of M/s Alfa India on account of unaccounted sales made by M/s JIL c) under reporting/sales suppression by M/s JIL by receiving payments in the account of M/s Alfa India." 5.4 Whether addition made in impugned assessment dated 23.12.2016 immediately after issue of quest....
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....f all bank accounts maintained by you and explain all credit entries with documentary evidence v. Please justify the credit entry amounting to Rs. 12,81,75,000/ - received from M/s Alfa India during the year. Thus, it is clear that Assessee was afforded many opportunities to explain the source of credits in his bank account and Assessing Officer has passed the assessment order after taking into consideration the reply of the assessee. Assessing Officer has discussed the reply of assessee in Assessment order on page no. 2 & 3 and also reproduced assessee's reply in assessment order. Assessee's contention regarding overruling of evidence filed by it has also become infructuous as it has neither filed submissions before Assessing Officer nor before CIT (A) in support of its claim, thus no evidence was produced by assessee at any time during case proceedings. 5.5 Whether invocation of section 68 in final assessment to bank credit treating bank statement as assessee's books of accounts u/s 68 of the Act read with sec 2(12A) of the Act which was also the final direction in forwarding letter of investigation wing dated 30.03.2016 is in accordance with applicable legal norms i....
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....taining details of opening balance and its source thereof. Under Section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and where the assessee fails to prove to the satisfaction of the Assessing Officer, the source and nature of the amount of cash credits, he is entitled to draw an inference that the credit entries represent income taxable in the hands of the assessee. It is not the duty of the Assessing Officer to locate the exact source of the cash credits. The burden to identify the source lies upon the assessee and he is required to explain the genuineness of the credit entry. Provisions of section 68 apply to all credit entries in the cases where credit entry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries. The language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party as held in the case of Gumani Ram Siri Ram v. CIT [1975] 98 ITR 337 (Punj. & Har.). The section has applicability even in the cases of....
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....ies given with regard to assessee to explain the sources of the two bank accounts operated by him during the year under consideration, he refused to cooperate with the Assessing Officer during the Assessment proceedings and do not give any explanation for the credit entries in the bank account of M/s Alfa India during the financial year relevant to this Assessment year. 3. During the course of search & seizure, statement of Sh. Arun Duggal was recorded on 29.12.2015 u/s 133A regarding his proprietary concern M / s Alfa India which is reproduced below- Question no. 9 at page 5- Please tell how are you related with M/s Alfa India? Answer- I am in no way associated with M/s Alfa India. I am hearing this name for the first time. I do not have any kind of interest in M/s Alfa India. Even my family members are not associated with this concern. 4. Regarding this claim of assessee, Assessing Officer has submitted copies of Bank account opening Form & KYC of M/s Alfa India for the bank account no. 0419073000000213 South Indian Bank Gurgaon and 035873000002431 at South Indian Bank Chittaranjan Park, New Delhi. Copies of the same are furnished before the Hon'ble Bench. These have be....
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....ssing Officer at page-51 of the Assessment record shows that the approval for issue of notice u/s 148 of the Act was given by Pr. CIT Faridabad after perusing the reasons recorded by the Assessing Officer which was forwarded to Pr. CIT Faridabad by the Addl. CIT Faridabad. 9. Copy of proforma seeking approved for reopening the assessment along with reason recorded by Assessing Officer at page-44 & 45 of the Assessment record shows that the Assessing Officer followed due process of law as per the I.T. Act prior to seeking approval for reopening the assessment u/s 148. 9. Perusal of the Assessment record which is being furnished before the Hon'ble Bench will hopefully bring more clarity. Written Submission-IV dated 06.10.2021 1.1 I would like to draw your Honour's kind attention to page no. 58 of Revenue's written submission dated 17.08.2021 which is a copy of approval letter dated 31.03.2016 from ITO(Technical) O/o Pr. CIT Faridabad to Assessing Officer i.e. ITO, Ward-1(1), Faridabad. It can be seen that para 2 of letter which states-" In this regard, I am directed to return the following files alongwith the approval of Worthy Principal Commissioner of Income tax, Faridabad....
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....tiny assessment and, thus, there was no tangible material to reopen assessment. Whether since disputed facts could not be gone into by High Court in a writ proceeding under article 226, which was to be done with reference to documents as well as evidences made available before competent authority and reasons furnished for reopening of assessment as well as findings made in order disposing of objections were candid and convincing, reopening of assessment was justified - Held, yes 3. In Aircel Cellular Ltd. vs. Deputy Commissioner of Income- tax, Company Circle-I(l), Chennai [2021] 127 taxmann.com 164 (Madras) HIGH COURT OF MADRAS Petitioner-company was engaged in business of providing telecommunication services. In its return of income for relevant year, petitioner/assessee claimed deduction under section 80-IA which was allowed accordingly. Thereafter, Assessing Officer noticed that assessee commenced operation in year 1996-97 but it started claiming section 80-IA deduction from year 2005-06 and he observed that since assessee had no option to choose initial assessment year in terms of provisions of section 80-IA as existed in assessment year 1996-97, it could claim deduction onl....
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....n claimed by assessee needed to be disallowed and it was a fit case for issue of notice under section 148. Assessee filed writ petition and sought to quash section 148 notice. It was found that fact about higher claim of section 10B deduction came to knowledge of department only when a survey was conducted and this information was not available earlier when assessment orders were passed. Whether if accounts were cast to distort income to show higher profit from EOU operation to claim deduction under section 10B, revenue would be justified in reopening assessment under section 147 and, thus, reopening of assessment appeared to be in order - Held, yes [Paras 17 and 18] [In favour of revenue] 5. In Nishant Vilaskumar Parekh vs. Income-tax Officer, Ward 1(3) [2021] 129 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT- Assessee company sold 40,000 shares of a company held by it and earned long-term capital gain (LTCG) of certain amount and claimed same as exempt income under section 10(38) - Same was allowed and an assessment order was passed - An information was received from AIMS module that shares sold by assessee were of penny stock. On basis of same, Assessing Officer issued a reo....
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....ations from investor companies to show that entire amount had been paid through normal banking channels, and hence discharged initial onus under section 68 for establishing credibility and identity of shareholders. Tribunal as well as High Court confirmed order passed by Commissioner(Appeals). However, it was found that Authorities below did not even advert to field enquiry conducted by Assessing Officer which revealed that in several cases investor companies were found to be nonexistent, and onus to establish identity of investor companies, was not discharged by assessee. Entire transaction seemed bogus, and lacked credibility. Merely because assessee company had filed all primary evidence, it could not be said that onus on assessee to establish creditworthiness of investor companies stood discharged. Whether therefore, Assessing Officer was justified in passing assessment order making additions under section 68 for share capital/premium received by assessee company - Held, yes [Paras 8.2, 8.3, 13 and 15][In favour of revenue]. 8. In NDR Promoters (P.) Ltd. vs. Principal Commissioner of Income-tax [2019] 109 taxmann.com 53 (SC) SUPREME COURT- The Apex Court decided the issue of ....
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..... For the sake of ready reference, snapshot of said judgment is reproduced below: "The conundrum before this Court concerns the liability of an assessee to pay interest on short payment of advance tax due to default of the payer in not deducting tax at the time of payment, under the provisions of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). The facts giving rise to Civil Appeal No. 1262 of 2016 are referred to herein, for the sake of convenience. 2. Notice was issued to the Respondent-Assessee under Section 143 (2) of the Act on 12.10.2004. The Assessing Officer passed an assessment order on 24.03.2006 for the assessment years 1998-99 to 2004-05. The Assessee is a non-resident company incorporated in Japan, with operations in India. In spite of resistance from the Assessee, it was held by the Department that a portion of the Assessee's income was attributable to its activities in India and was therefore liable to be taxed in India, under Articles 4, 5 and 6 of the Double Taxation Avoidance Agreement between India and Japan, read with the provisions of the Act. The Respondent-Assessee filed appeals against the assessment order dated 24.03.2006 before th....
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....ses where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made [and for the relevant assessment year or years]: [Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless- (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.- For the purposes ....
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....ting material was unearthed during the search, no additions could be made to the income already assessed. Any material which is not found in the case of the search cannot be utilized in the assessments passed u/s 153A. Similarly, the provisions of Section 153C are very specific with regard to the seized material belonging to a person other than the person referred in Section 153A. The provisions of Section 153A, Section 153C and Section 148 are very specific and cannot fall into each other or can be interpolated nor can be invoked against the mandate of each section. 77. The Hon'ble jurisdictional High court in the case of Kabul Chawla held that: "On conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six A.Ys immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the ....
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....income has escaped assessment. 148. (1) Before making the assessment, reassessment or re-computation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under subsection (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said subsection by the Financ....
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....sing Officer should have some kind of concrete evidence that suggests the Assessee in question has evaded assessment of income tax return for the relevant year of assessment. Without any proof, the officer can't produce a notice based on mere suspicion. * A reasonable link must be presented linking the material presented to the assessing officer with a reason to believe that the assessee has tried to evade assessment for the particular year in question. * The information provided to the assessing officer should be of utmost relevance to the particular and not be based on any superficial reasoning and understanding. * Before issuing the notice, the assessing officer must provide in writing as to why he/she thinks that the assessee in question has tried to evade the assessment of income. * Simply stating and doubting that the assessee is hoarding a large sum of money without providing proof, reason, and information to back up the claim will not be considered as a valid reason to issue a notice under Section 148. * Unless any new information or reason is presented to the assessing officer, he or she can't issue a notice to the assessee purely based on a difference of underst....
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....live link nexus with the income escaping assessment for a particular assessment year to which information/material pertains to. This material difference has to be kept in mind. Here, in this case material information was received to the Assessing Officer who after due application of his mind has entertain reasons to believe that the deposits in the bank account of the assessee is unexplained and to that extant income chargeable to tax had escaped assessment. 82. The ld. AR has also raised as to whether four incidents of receipt of investigation wing information on 31.03.2016, drafting reasons on 31.03.2016, taking mechanical approval on 31.03.2016 and issuing notice u/s 148 on 31.03.2016 on dotted lines, itself shows non application of mind on part of Ld. AO and Ld. PCIT who respectively recorded satisfaction and gave sanction to reasons recorded? - We strongly rely on Hon'ble Mumbai bench 1TAT decision in case of Bajaj Hindustan Ltd (30.08.2021) decision on identical facts apart from two recent Hon'ble jurisdictional Delhi high court two decisions reported at 437 ITR 1 & 435 ITR 642. 83. The ld. AR raised the issue as to whether reasons recorded dated 31.03.2016 can pass test of....
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....der: 88. After recording of the reasons, the Assessing Officer has sent the request for approval u/s 151(1) of the IT Act, 1961 to issue notice to the assessee u/s 148. The said requisition of the Assessing Officer is as under: 89. The approval given by the ld. PCIT in accordance with the provisions of Section 151 are as reproduced below. For the sake of ready reference, the provisions of Section 151 of the IT Act are enumerated hereunder: "Section 151. Sanction for issue of notice. 151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of s....
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....has duly recorded reasons for initiation of proceedings u/s 147 of the IT Act, 1961. We have gone through the reasons which indicates two accounts have received credit from Liquor distributors from Haryana it also mentions about the statement of the assessee which was recorded by the ITO(Inv.), Headquarter Gurgaon on 30.12.2015 in which he has stated that he was no way associated with M/s Alfa India and was hearing the name for the first time. The AO has also recorded that the credit into bank accounts of M/s Alfa India remain unexplained. The Assessing Officer has also recorded about the income shown by the assessee for the relevant assessment year. The AO has examined the return for the assessment year which was filed on 14.07.2009 and also examined different heads of income offered by the assessee to tax authorities. The Assessing Officer was in custody of the information with regard to the credits in the bank account as deciphered by the certified copy of the bank statement. We find these are all stark facts recorded by the Assessing Officer. In the entire information received or the reasons recorded there have been no theories, surmises or suspicion. The information gathered w....
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....ing prompt decision must not be taken as non-application of mind nor mechanical action by the authorities. Urgent needs invite urgent action. The need to take a prompt, immediate decision which is rationale and judicious is always preceded by pressing reasons in various situations. In the instant case, the information received from the investigation being has been acted upon in a judicious way and the same has been rolled up by the revenue authorities. Such action cannot be faulted with. The action can be said to be borrowed, mechanical, nonapplication of mind based on the facts of each case. In the instant case, ongoing through the entire records, we find that there were no theoretical postulates involved in the information or the reasoning recorded by the revenue authorities. Not only that, we have also gone through the satisfaction recorded by the ld. PCIT. The record clearly proves that the entire information has been sent to the ld. PCIT and the ld. PCIT after perusal of the record has accorded the approval and the records have been duly returned. The ld. CIT (A) has sufficient material before him to arrive at a conclusion to accord statutory approval u/s 151(1). The action of....
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....ncidence and, thus, reassessment was initiated. On writ, assessee submitted that said issues were examined by Assessing Officer during scrutiny assessment and, thus, there was no tangible material to reopen assessment. Whether since disputed facts could not be gone into by High Court in a writ proceeding under article 226, which was to be done with reference to documents as well as evidences made available before competent authority and reasons furnished for reopening of assessment as well as findings made in order disposing of objections were candid and convincing, reopening of assessment was justified. 97. Similarly, in the case of DCIT Vs. Leena PowerTech Engineers India Ltd. 130 Taxman 341, the co-ordinate Bench of Mumbai Tribunal held that reopening based on the information from investigation wing with regard to receipt of monies that the assessee is held to be valid. The facts are akin to the facts in the instant case. 98. Hon'ble Gujarat High Court in the case of Nisha Diamonds (P.) Ltd. vs. Income Tax Officer, Ward-1(1)(4) in [2021] 127 taxmann.com 689 (Gujarat) has held that where assessee was aware that transaction with company 'A' was not business transaction b....
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....ower under article 226 of the Constitution of India cannot go into the sufficiency or adequacy of the materials. After all the Assessing Officer alone is entrusted to administer the impugned Act and if there is prima facie material at the disposal of the Assessing Officer that the income chargeable to income-tax escaped assessment this court in exercise of power under article 226 of the Constitution of India should refrain from exercising the power. In the instant also, the case of the petitioner was fairly considered and thereafter the above decision is taken." (emphasis supplied). 102. In Phool Chand Bajrang Lal vs. ITO [1993] 203 ITR 456, Hon'ble apex court has held as under: "From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must; record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary f....
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....ade Links Pvt. Ltd. - Deals with invalid approval - In the instant case reasons are discernable and rationale neither arbitrary nor illogical. 108. G&G Pharma 384 ITR 147 (Del.) - No independent application of mind and no prima facie opinion, in the instant case, there is prima facie case with regard to undisclosed bank account and the AO has verified the return wherein the banks accounts have not been disclosed indicating verification of the facts as well as the application of mind. 109. Sodhiman Investments Pvt. Ltd. 422 ITR 437 - Reasons to believe means cause or justification - There is a reason to reopening and justification to issue notice. 110. Johari Lal HUF 88 ITR 439 - Dealt with mechanical approval in the instant case, the record proves that there is an independent decision of the ld. PCIT. 111. At the time of reopening what is required is reasons to believe with regard to escapement of income, the Assessing Officer is not required to establish escapement of income. Establishing escapement of income is the culmination of examination of material and investigation of the facts following the due procedure as envisaged in the Income Tax Act. What is necessary to reopen a....
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.... which were supplied to the assessee on 21.04.2016. The assessee filed a reply on 13.04.2016 stating that the return filed u/s 139(1) on 14.07.2009 may be treated as ITR filed in response to the notice u/s 148. Notices u/s 143(2) and Section 142(1) have been duly issued, the assessee was asked to justify a credit entry amounting to Rs. 12,81,75,000/- by the Assessing Officer. The assessee sought adjournment on 05.06.2016 which was duly granted. The assessee has duly furnished reply on 16.12.2016. The assessee has also replied to the query No. 5 in the notice which is as under: "The assessee has received nothing from the Alfa India or from Alpine Enterprises during the year under consideration. Actually the account of Alfa India along with other account of mine or my family members to which transfers were made to withdraw the cash was maintained/operated at the instruction of M/s Jagatjit Industries Ltd, the then employer of Mr. Sanjay Duggal (Real Brother of mine). Even during the search proceedings and post search proceedings, the assessee along with other concerned was subject to statement on oath. Every time the assessee has clarified that the account of Alfa India along ....
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.... 3. Copy of the declaration given to the bank dated 18.12.2016 4. The assessee declared to the bank that he is carrying business under the name and style of Alfa India 5. He has declared that he is the sole proprietor 6. He has submitted that the signature as the sole proprietor to be honored 7. The Election Commission of India identity card no. HR/06/51/072179 bears the name of the assessee and photograph 8. The address given on ECI Card also matches with the assessee 9. The account has been introduced by Rajnish Talwar to whom certain amounts have been transferred 10. There is no dispute on the signatures of the assessee on this documents. 118. For the sake of ready reference, the said documents are scanned and placed below: 119. We find that the revenue department has been conducted enquiries with the bank as to the transactions of the account. The assessee has vehemently argued that entire reopening and assessment is made on the basis of mere credit in the bank account and the credit cannot be called as real income in the hands of the assessee. The ld. AR argued referring to the decision of Hon'ble Apex Court in the case Shoorji Vallabh Dass 46 ITR 144....
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....(not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and (b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:" 122. As per the provisions of the Act, since the assessee failed to prove the source of sum of money found in the bank account of the assessee they have been rightly taxed by the revenue u/s 68 of the Income Tax Act. Onus of providing the source of a sum of money found to have been received by an assessee is on him. When the nature and source of a receipt, whether it be a money or other property, cannot be satisfactorily explained by the assessee, it is open to the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from ....
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....e is absolutory no dispute on this issue. 127. The order of the Co-ordinate Bench of ITAT dated 19.01.2021 has been perused and we find that the said order not dealt on the merits of the issue and the appeal of the assessee was allowed on technicalities of approval u/s 153D. 128. The ld. Counsel has also tried to canvass before us that the entire deposits in the bank account of the assessee did not belong to him and therefore, there is no real income accrued or received to the assessee. We are unable to accept such a contention for the reason that, firstly, there are actual deposit in the bank account of the assessee for which no explanation about the nature and the source was explained which has led to addition u/s 68. Secondly, Section 68 is a deeming provision wherein the statute provides that if the assessee is unable to explain the nature and source of the credits, then it is deemed to be income of the assessee as undisclosed sources and is taxed accordingly. Provisions of section 68 apply to all credit entries in the cases including where credit entry has been made in the bank account of the assessee, if the assessee fails to offer any explanation fully corroborated and sub....