TaxTMI 
TaxTMI 
TaxTMI 
2025 (11) TMI 1052
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....ons of the Income Tax Act, as the Jurisdictional A.O, has no jurisdiction to issue a notice u/s.148A(a), after the introduction of "Faceless Jurisdiction of the Income Tax Authority Scheme 2022". 4. Without prejudice to the above grounds: 5. The Appellate Commissioner, erred in confirming the order passed by the A.O, under section 143(3) r.w.s of the Act. 6. The Appellate Commissioner erred in confirming the reopening of the assessment by the A.O, which based on the issues which examined at length during the original assessment proceeding. 7. The Appellate Commissioner erred in confirming the order of the AO in reassessing the assessment which was based purely on the basis of change of opinion. 8. The Appellate Commissioner erred in confirming the addition of Rs. 4,95,00,000/-, as added by A.O, by treating the amount received towards share capital as unexplained credit by invoking section 68 of the Act ignoring that the transaction was explained to the satisfaction of assessing officer in the original assessment proceeding and even in reassessment proceeding the transaction is substantiated with necessary documentary evidences on record.....
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....tax Act, 1961. The details of the information/ enquiry conducted on which reliance is being placed, along with supporting documents, are enclosed with this notice. 2. You are required to show-cause as to why, in view of the details contained in enclosures mentioned in point number 1 above, a notice section 148 of the Income tax Act, 1961 should not be issued. 3. You may submit your reply to this notice, along with supporting documents (if any) on the above mentioned issues on or before 05/03/2023 electronically at www.incometax.gov.in. LAXMI PAVANA GAYATHRI MUKKERA CIRCLE 1,KARIMNAGAR 10. Thereafter, the AO also passed an order u/s 148A(d) on 29.03.2023, wherein, the AO has recorded that, despite sufficient time allowed to the assessee in accordance with the provisions of section 148A(b) for compliance to the show cause notice dated 21.02.2023, there is no compliance on behalf of the assessee to the said show cause notice. The AO decided that it is a fit case for issue of notice u/s 148 of the Act and consequently notice u/s 148 was issued on 30.03.2023 as under : GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF TH....
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....48A as also under Section 148 of the Act were held to be bad with consequential reliefs on the ground of it being in violation of the provisions of Section 151A of the Act read with Notification 18/2022 dated 29.03.2022. The said judgment passed by this Court has also been subsequently followed in a large number of writ petitions which were allowed on similar terms. 12. It was further noted by the Hon'ble jurisdictional High Court that this issue has been decided against the Revenue by various High Courts and the details of all the judgements of various High Courts are given in para 5 of the said judgement as under : 5. Down the line, we find that the same issue has also been decided against the Revenue by various High Courts i.e., by the Bombay High Court in the case of Hexaware Technologies Ltd., vs. Assistant Commissioner Of Income Tax & Others [2024] 464 ITR 430 (Bom), Gauhati High Court in the case of Ram Narayan Sah vs. Union Of India [(2024) 156 taxmann.com 478 (Gauhati)], Punjab and Haryana High Court in the case of Jatinder Singh Bangu vs. Union Of India [(2024) 165 taxmann.com 115 (Punjab & Haryana)], and Telangana High Court in the case of Sri Venka....
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....ken for the whole of India, and which otherwise has to be by way of a policy decision and that too at the level of Central Board of Direct Taxes. Though the learned Standing Counsel for the Income Tax Department contended that the Delhi High Court dismissed a writ petition of similar nature, on the one hand when the High Court is struggling to reduce its pendency, such notices which are under challenge in this writ petition are forcing the assessee to knock the doors of this High Court resulting in filing of hundreds of new writ petitions which in the long run not only affects the disposal of the writ petitions but also consumes substantial time of the Bench in hearing these matters again and again on daily basis. Admittedly, in spite of the matter before the Hon'ble Supreme Court having been taken on many occasions, the Hon'ble Supreme Court which is seized of the matter has been reluctant in granting any interim protection to the Income Tax Department. Yet, the authorities concerned at the State level are not ready to accept the verdict passed by a majority of High Courts of different States on the same issue; and to make things further worse, the Income Tax Department is....
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.... of authorities higher to them in the appellate hierarchy. It cannot be too vehemently emphasized that it is of utmost importance that, in disposing of the quasijudicial issues before them, revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not "acceptable" to the department - in itself an objectionable phrase - and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws. ... .... ... 12. We have dealt with this aspect at some length, because it has been su....
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....der which, for ready reference, is reproduced hereunder: 36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent- Department is neither tenable, nor sustainable. The notices so issued and the procedure adopted being per se illegal, deserves to be and are accordingly set aside/quashed. As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent-Department pursuant to the notices issued under Section 147 and 148 would also get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically. 37. The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings. ....
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.... and in law, the Assessment. Unit/NaFAC erred by making the additions without supplying the relevant documents or tangible material to the appellant and without obtaining the bank account statement(s) relied on which the case was reopened by the JAO, as such, said proceedings and the consequent order ought to be declared null and void-ab-initio. 5. On the facts and in the circumstances of the case and in law, the Jurisdictional Assessing Officer erred in the proceedings initiated u/s 147 of the Act without following due procedure prescribed by CBDT vide Instruction NoF.No.299/10/2022- Dir(Inv,10)/647 dt., 22.08.2022 and accordingly the sald proceedings and the consequent order ought to be declared null and void ab initio. 15. In view of the facts emanating from the record, we find that the assessee has duly raised this issue before the CIT(A) and therefore, the contention raised by the Ld.DR is devoid of any merit. Accordingly, the show cause notice issued u/s 148A(b) dated 21.02.2023 as well as notice issued u/s 148 dated 30.03.2023 by the JAO are not valid and liable to be quashed. We order accordingly. 16. However, since the matter is pending adjudicat....
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.... order passed by the Assessing Officer u/s.148A(d) of the Act dt.30.03.2022 and submitted that the Assessing Officer has reiterated his stand in the said order that the assessee is a beneficiary of accommodation entries to the tune of Rs. 1.25 Crores in the form of unsecured loans. He has contended that while framing the assessment u/s.144 of the Act the Assessing Officer has not made any addition on account of unsecured loans, however, some other additions were made on account of disallowance of expenditure and therefore once the Assessing Officer has not made any addition on the issue on which the assessment was reopened then the additions made by the Assessing Officer by making the disallowances of expenditure are not sustainable in law and liable to be deleted. In support of his contention, he has relied upon the judgment of Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. 331 ITR 236 (Bom). 7. On the other hand, the Ld. DR has submitted that the Assessing Officer has followed the procedure as prescribed u/s. 148 and 148A of the Act. The Assessing Officer has reproduced the details as received from the Investigation Wing as detected in search operati....
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.... Hyderabad-4 accorded on date 11/03/2022 vide Reference No. 100000028888075. PHANI KUMAR KATRAGADDA WARD 16(1),HYDERABAD/ ANNEXURE As per informaiton in possession of the department it is found that M/s Khoobsurat Limited (AABCK0685K) is listed as Shell Company controlled and managed by well-known entry operator Shri Arun Kumar Khemka as per the database of Kolkata based shell companies maintained by the department. M/s Khoobsurat Ltd earlier raised share capital and premium which were invested in bogus unlisted equities and subsequently, investments were sold to convert these into unsecured loans and advances. These unsecured loans were provided as accommodation entries to various beneficiaries in-lieu of commission and subsequently company was also acquired by current shareholders. M/s Khoobsurat Ltd is a shell company, which has been used to bring back unaccounted income of the beneficiaries in their regular books of accounts by way of accommodation entries in the form of Unsecured Loans and sale of shares. Hence, fund trail has been identified as the assessee company M/s Pitti Holdings Put. Ltd was involved in transfer of Rs. 90,00,000/- on 06-04-2017....
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....82, Telangana India Resident/ Not Ordinarily Resident/ Non-Resident Resident Date of order 30/03/2022 Specified authority approval Name PCIT, Hyderabad-4 Reference No. 100000028888075 Date 30/03/2022 Order under clause (d) of section 148A of the Income Tax Act, 1961 1. In this case, information was flagged as per Risk Management Strategy formulated by the CBDT through ITBA software under the head NMS/ High Risk CRI/ VRU cases. As per "High Risk Transactions" data in Insight portal, for F.Y. 2017-18 relevant to the A.Y. 2018-19, the assessee is a beneficiary of accommodation entry in the form of unsecured loans and advances in-lieu of commission & sale of share with potential tax liabilities. 1.2. As per the information received, M/s. Khoobsurat Limited (AABCK0685K) is listed as Shell Company controlled and managed by well-known entry operator Shri Arun Kumar Khemka as per the database of Kolkata based shell companies maintained by the department. M/s. Khoobsurat Ltd earlier raised share capital and premium which were invested in bogus unlisted equities and subsequently, investments were sold to convert these into unsecured loans and a....
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....n the basis of the afore stated information in order to assess the transactions undertaken by the assessee. 3. Sufficient time was allowed to the assessee in accordance with the provisions of section 148A(b) for compliance to Show cause Notice dated 12.03.2022. Show cause Notice was delivered to the assessee through e-mail on 12.03.2022. In response to the show cause notice, on 19- 03-2022, the assessee furnished its online been examined and scrutinized under 143(2) scrutiny conducted for AY 2018-19. Hence the transactions are not bogus and hence no Income has escaped assessment. Copy of Assessment order is attached in Annexure 7. Therefore we hereby request you to drop the proposal to reopen case u/s 148 as there is no Income which has escaped assessment" 4. The assessee has also made various attachments as stated above. In this case the assessee filed it's return of income for the assessment year 2018-19 on 27-09-2018 and returned current year loss at Rs. 1.55,676/-. The case was selected for complete scrutiny under CASS and assessment uls 143(3) was passed on 22-01-2021 by the AD, National e- Assessment Centre, Delhi. The issue for CASS selection w....
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....g Officer after rejecting the assessee's submission has reiterated the reasons for reopening of assessment that the assessee is one of the beneficiary of accommodation entries to the tune of Rs. 1.25 Crores from M/s. Khoobsurat Limited. Thereafter, the notice u/s. 148 of the Act was issued by the Assessing Officer on 30.03.2022 and reassessment proceedings were completed on 31.03.2023 thereby the Assessing Officer has taken up an another issue of share capital received from M/s. Voltaire Leasing and Finance Limited of Rs. 4.95 crores in para nos. 13 & 14 as under : "13. In the light of the discussion in the foregoing paras and the other facts as discussed above along side the reason for reopening, it is established that the assessee failed to prove beyond doubt the credeworthiness of Mis Voltaire Leasing & Finance Ltd, therefore, the amount received from Mis Voltaire leasing and Finance Put. Ltd, to which, fund has been routed through different shell companies, as detailed in the foregoing paras, remain unexplained, thereby qualifies such amount to be treated as unexplained cash-credit, as defined u/ s 68 of the Income Tax Act, 1961. Therefore, the sum of Rs. ....
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....eedings which is not permissible under law as held by the Hon'ble Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (supra) has considered an identical issue in para Nos. 11 to 17 as under : " 11. The rival submissions which have been urged on behalf of the Revenue and the assessee can be dealt with, both as a matter of first principle, interpreting the. section as it stands and on the basis of preceder on the subject. Interpreting the provision as it stands and without adding (sic) deducting from the words used by Parliament, it is clear that upon (sic) formation of a reason to believe u/s 147 and following the issuance of a notice u/s 148, the Assessing Officer has the power assess or reassess the income which he has reason to believe had escap(sic) assessment and also any other income chargeable to tax. The words and also"" cannot be ignored. The interpretation which the Court places on the provision should not result in diluting the effect of these words or rendering any part of the language used by Parliament otiose. Parliament having used the words ""assess or reassess such income and also any other income chargeable to tax which has escaped assessmen....
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....e which he had reason to believe had escaped assessment and also any other income chargeable to tax came which came to his notice during the proceedings. In the absence of the assessment or reassessment the former, he cannot independently assess the latter. 12. In Commissioner of Income Tax Vs. M/s. Sun Engineering Works (P.) Ltd., the Supreme Court dealt with the following question of law in the course of its judgment: Where an item unconnected with the escapement of income has been concluded finally against the assessee, how far in reassessment on an escaped item of income is it open to the assessee to seek a review of the concluded item for the purpose of computation of the escaped income.? The issue which arose before the Supreme Court was whether, in the course of a reassessment on an escaped item of income could an assessee seek a review in respect of an item which stood concluded in the original order of assessment. The Supreme Court dealt with the provisions of Section 147, as they stood prior to the amendment on 1 April 1989. The Supreme. Court held that the expression "escaped assessment". Includes both "non-assessment" as well as ""under assessment"". Income is ....
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....a) This line of authority, would now cease to reflect the correct position in law, by virtue of the amendment which has been brought in by the insertion of Explanation 3 to Section 147 by Finance (No. 2) Act of 2009 The effect of the Explanation is that once an Assessing Officer has formed a reason to believe that income chargeable to tax has escaped assessment and has proceeded to issue a notice u/s 148, it is open to him to assess or reassess income in respect of any other issue though the reasons for such issue had not been included in the reasons recorded u/s 148(2). 14. The second line of precedent is reflected in a judgment of the Rajasthan High Court in Commissioner of Income Tax v. Shri Ram Singh (2008) 306 ITR 343 (Raj). The Rajasthan High Court construed the words used by Parliament in Section 147 particularly the words that the Assessing Officer ''may assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings'' u/s 147. The Rajasthan High Court held as follows. .... it is only when, in proceedings u/s 147 the Assessing Officer,....
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....ke away the basis of that decision. The view which was taken by the Rajasthan High Court was also taken in another judgment of the Punjab & Haryana High Court in Commissioner of Income Tax Vs. Atlas Cycle Industries, The decision in Atlas Cycle Industries held that the Assessing Officer did not have jurisdiction to proceed with the reassessment, once he found that the two grounds mentioned in the notice u/s 148 were incorrect or non existent. The decisions of the Punjab & Haryana High Court in Atlas Cycle Industries (supra) and of the Rajasthan High Court in Shri Ram Singh (supra) would not be affected by the amendment brought in by the insertion of Explanation 3 to Section 147. 16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment of reassessment on grounds other than those on the basis of Which a notice was issued u/s 148 setting out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessmen....
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....h (supra). Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of Section 147(1) as they stood after the amendment of 1 April 1989 continue to hold the field." 8.4. Accordingly in the facts and circumstances of the case, when the Assessing Officer has not made any addition on the issue which is the basis of the reopening of assessment then the Assessing Officer has no jurisdiction to proceed further with the reassessment proceedings and make any other addition. Hence following the judgment of Bombay High Court in the case of CIT Vs. Jet Airways (supra) on this issue, we hold that the reassessment order passed by the Assessing Officer is not valid and liable to be quashed. We order accordingly. 9. Since we have quashed the reassessment order, therefore, we do not propose to go into the merits of the other issues raised by the assessee. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 08th Oct., 2025. ============= Document 1 2. On the facts and in the circumstances of the case and in law, the Jurisdict....