TaxTMI 
TaxTMI 
2025 (11) TMI 1906
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.... to grant appropriate relief in accordance with the law. 2.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that the assessment completed u/s 147 r.w.s 143(3) was bad in law on various technical and jurisdictional grounds. 3.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that recourse to section 147 of the Act would be unavailable in cases where the AO is empowered to proceed u/s 153C of the Act. 4.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that there was no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment for the year under consideration and hence assumption of jurisdiction u/s 147 by issuance of notice u/s 148 beyond the period of 4 years was invalid and as such, could not be sustained in law. 5.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in up....
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....llant. 11.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO u/s 147 r.w.s 143(3) of the Act without considering the fact that no incriminating material was found towards rate of commission charged in respect of accommodation entries. 11.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding addition made by the Ld. AO on account of commission income amounting to Rs. 1,45,00,360/- 1% on total debits and credits transactions amounting to Rs. 145,00,36,000/- reflected in bank statement. 11.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in treating the appellant company as an accommodation entry provider by relying on statement recorded at back of the appellant without providing an opportunity by the Ld. AO to cross examine the same. 11.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the observations of Ld. AO in respect of treating the legitimate advances received by the appellant for purchase of land as accommodation entries which were repaid during the ye....
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....es of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that reasons recorded u/s 148 of the Act do not meet the requirement of law hence completely vague and untenable. 6.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact, that the reasons to believe recorded by the Ld. AO for the initiation of reassessment proceedings u/s 147 of the Act was based on borrowed satisfaction and without application of mind. 6.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that the reasons u/s 148 were recorded merely on the basis of suspicion and assumptions/ presumptions derived from search conducted in case of M3M Group. 6.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that the material which has been made the basis of recording reasons to believe for initiation of proceedings u/s 147 of the Act has never been supplied to the a....
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....the fact that the assessment order nowhere specify the section under which the addition was made. 13.0 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal. ITA No. 1257/Del/2025 (A.Y. 2011-12) 3. Brief facts of the case are that, the Assessee being Private Limited Company, filed return of income declaring 'NIL' income for the year under consideration. The case of the Assessee was selected for reassessment under Section 147 of the Act. The A.O. completed the assessment proceedings u/s 147 r.w. Section 143(3) of the Act vide order dated 28/12/2018 by making an addition of Rs. 2,76,00,000/- as commission income. Aggrieved by the assessment order dated 28/12/2018, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 23/01/2025, dismissed the Appeal of the Assessee. As against the order of the Ld. CIT(A), dated 23/01/2025, Assessee preferred the present Appeal on the Grounds mentioned above. 4. The Ld. Counsel for the Assessee addressing on Ground No. 2.0 of the Appeal submitted that, the Ld. CIT(A) committe....
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....s the reopening of concluded assessments only in exceptional cases, where there the AO has reason to believe that Assessee's income for the relevant period has escaped assessment. It is trite law that concluded assessment should not be lightly interfered with. If the ground on which the concluded assessment is sought to be re-opened, cannot be sustained, there would be little rationale for expanding the reassessment proceedings. In our view, it would not be apposite to accept an expansive interpretation to the provision of Section147 of the Act. Given that the nature of the proceedings is to unsettle concluded assessment, a strict interpretation of the plain language of Section 147 of the Act, is warranted. We respectfully concur the view of this Court as articulated in Ranbaxy Laboratories Limited v. CIT; ATS Infrastructure Ltd. v. ACIT; and PCIT v. Jaguar BuildconPvt. Limited (supra). 18. It is also relevant to note that various courts had taken a view that the reassessment proceedings were confined under Section 147 of the Act only to the issues (reasons to believe) on the basis of which the assessments were reopened. Thus, there was no scope for making any addition oth....
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.... Ld. Counsel has also relied on following Judgments of Hon'ble High Court of Delhi and also the Tribunal and sought for allowing Ground No. 7 of the Assessee. a) Nimitaya Hotel & Resorts Ltd. vs. ACIT (109 Taxmann.com 185) (ITAT Delhi). b) Pr. CIT vs. Tupperware India (P.) Ltd. (65 Taxmann.com 17) (Delhi High Court). c) Ferrous Infrastructure vs. DCIT (63 Taxmann.com 201) (Delhi High Court). 11. Per contra, the Ld. Department's Representative relying on the findings and the conclusion of the Lower Authorities, sought for dismissal of Ground No. 7 of the Assessee. 12. We have heard both the parties and perused the material available on record. The case of the Assessee has been reopened under Section 148 of the Act. The Assessee sought for copy of reasons recorded and vide letter dated 13/11/2018 the Assessee had been made available the reasons recorded for assumption of jurisdiction u/s 147 of the Act. The Assessee filed objection to the initiation of proceedings u/s 147 of the Act vide letter dated 19/12/2018. It is the specific case of the Assessee that the objection raised against the initiation of proceedings u/s 147 of the Act vide lette....
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....hat when a notice under section 148 of the Income Tax Act is issued, the proper course of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years." 28. Honourable Gujarat High court notices that there is no time limit for performing such acts. Therefore in SahkariKhandUdyogMandal Ltd. v. Asstt. CIT [2014] 46 taxmann.com 69/225 Taxman 51 (Mag.)/[2015] 370 ITR 107 (Guj.) (para 5.2) it held as under :- "13. It can thus be seen that there are four important stages once the Assessing Officer issues notice for reopening of the assessment. Such stages are: (i) the assessee if he so wishes, may demand the reasons recorded by th....
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....within the time permitted in such notice, the assessee files his return of income in response to such notice, the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. (2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons. (3) If objections are received by the Assessing Officer from the assessee within the time permitted hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee. (4) This is being done in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to ....
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....e in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply in such cases." 12. Thus, it is clear that the court has set out a time line for submission of objections and deciding the same. However, at the same time, the court has also clarified that it would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided therein would not apply in suc....
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....or furnishing the reasons recorded for reopening of the case did not provide the reasons even before 13 months of the 1st request and when assessee files objection to such reasons within 60 days, he does not disposal of them by a speaking order but passes the assessment order u/s 143 (3) read with section 147 of the act. This itself shows that reassessment proceedings requires to be quashed as the neither rejection not acceptance of the objections of the assessee has prejudiced the interest of the assessee to challenge the same before the higher forum. Therefore not passing a speaking order rejecting the objections of the assessee but passing an order u/s 147 of the act making the additions based on reasons recorded has caused serious prejudiced to the interest of the assessee. In view of this respectfully following, the judicial precedent cited above the reopening of the assessment is quashed. Therefore, the learned CIT - A was not correct in holding that the reopening has been done in accordance with the law by the assessing officer. Accordingly, ground number 1 of the appeal of the assessee is allowed." 14. In view of the above fact that the A.O. has not disposed the objectio....
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.... G & G Pharma India Ltd. (384 ITR 147). 19. Per contra, the Ld. Department's Representative submitted that the case of the Assessee has been reopened in accordance with law and the addition has been made on its merits. The Ld. Department's Representative taken us through the findings and the conclusions of the Lower Authorities and sought for dismissal of Ground No. 6.1 and 6.2 of the Assessee. 20. We have heard both the parties and perused the material available on record. The A.O. received information from DCIT, Ld. CIT(A) vide letter dated 13/03/2018, that a search and seizure action was conducted u/s 132 of the Act on M3M India Group of cases and as per appraisal report it has been noted that the Assessee has purchased lands during the relevant assessment year at discounted price below the circle rate. However, A.O. has not conducted any independent enquiry or verification to substantiate the claims made in the said letter of DCIT and reproduced the said information in the reasons to believe recorded. The reasons recorded failed to establish a direct nexus between the alleged discrepancies in the transaction and in the escapement of income without clear and direct....
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....t for issuance of the notice. The CIT(A) accepted the Assessee's contention in this regard. The relevant extract of the CIT(A) reasoning is set out below:- "27.7 Apart from the above the assumption of jurisdiction u/s 147 of the Act is stated to be based on the enquiries conducted by Inspectors of the Investigation Wing at Delhi and Kolkata to form an opinion albeit prima-facie that appellant company has received share capital with exorbitant premium from large number of non descript companies mainly based in Kolkatta and Delhi from the period between 1.4.2008 to 31.3.2009. It is a matter of record that such enquiries had not been confronted to the appellant during the course of assessment proceedings through specifically requested vide replies dated 10.11.2016 and 29.12.2016 by the appellant company. In such circumstances all such enquiries cannot mechanically be made a basis to assume jurisdiction. The appellant has highlighted the following aspects in respect of the reasons recorded: i) That the reasons recorded do not contain name of any single entity which was inquired by the Investigation Wing, the reasons only mention that during pre and post search pro....
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....een drafted without application of mind: "During the year under consideration assessee has issued share capital including share premium to the tune of Rs. 36,64,35,000/- to various parties, out of which Rs. 11,32,00,000/- was received in the immediately preceding previous year i.e. during the financial year 2007- 08, detail of Share Application Money was already submitted during the course of assessment proceedings vide submission dated 05.08.2011. However, the Ld. AO has mentioned that assessee has received Rs. 36,64,35,000/- as share application money during the year and issued the shares at exorbitant premium. Further the table contains the detail of share issued by the assessee company during the year under consideration and not the amount received by the assessee company as mentioned in the reasons. During the year under consideration assessee has received share application of only Rs. 25,32,35000/- and Rs. 11,32,00,000/- was received during the financial year 2007-08 relevant to assessment year 2008-09. The column of total amount of the table as produced in the reason works out to Rs. 15,43,75,000/- as against Rs. 36,64,35,000/- mentioned in the rea....
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....tigation Wing without examining the foundation and accuracy of such material. 35. We also consider it apposite to refer to paragraphs 27.18 and 27.19 of the order passed by the CIT (A) and is reproduced below:- "27.18 The AO in the order of disposing of objection dated 26.8.2016 has observed that after search and seizure operation, new facts shows that assessee has taken bogus share premium. He has also stated that AO is fully authorized to see all the issues in light of facts and findings from search and seizure operation and other information and take necessary action. All require procedure followed by AO. However from the reasons recorded it is apparent that no material much less incriminating material was detected as result of search on the appellant or gathered during the assessment proceedings to allege, observe or assume that the same has taken bogus share capital. The reference to inquiries is vitiated for being vague and general and non specific, apart from the fact they have not been confronted to the appellant. 27.19 In nutshell, the AO did not apply his own mind to the information and examine the foundation / accuracy of such material of the i....