TaxTMI 
TaxTMI 
2026 (1) TMI 538
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....unjustified, erroneous, and unsustainable, and it is prayed that necessary directions be issued to the Learned Assessing Officer (Ld. AO) 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.ws 144 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,....
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.....0 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that the appellant has discharged onus laid down u/s 68 of the Act and hence addition made was baseless and invalid. 10.1 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 on account on unexplained cash credits amounting to Rs. 47 crores without considering the facts and reply filed by the appellant. 10.2 That on the facts and circumstances of the case, the Ld. CIT-(A) has erred in upholding the addition made by the Ld. AO u/s 68 since bank statement cannot be construed to be books maintained by the assessee for the purpose of section 68 of the Act. 11.0 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 recipient by relying on statement recorded at back of the appellant without providing an opportunity by the Ld. AO to cross examine the same." ITA No. 1269/Del/2025 (A.Y. 2012-13) "1.0 That, on the facts and in the circumstances of the case....
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....holding the order of Ld. AO 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 appellant. 7.0 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 Ld. AO has changed his mind at each stage of assessment proceedings. 8.0. That on the facts and circumstances of the case, the Ld. CIT-(A) has erred without substantiate the fact that no approval accorded u/s 151 of the Act by the Ld. AO has been provided to the appellant. 9.0 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 objections raised by the appellant was not....
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....s selected for re-assessment under Section 147 of the Act. The A.O. completed the assessment proceedings u/s 147 r.w. Section 144 of the Act vide order dated 28/12/2018 by making an addition of Rs. 47,00,00,000/- on account of unexplained cash credit u/s 68 of the Act. 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 27/01/2025, dismissed the Appeal of the Assessee. As against the order of the Ld. CIT(A), dated 27/01/2025, Assessee preferred the present Appeal on the Grounds mentioned above. 4. The Ld. Counsel for the Assessee addressing on Ground No. 6.0 and 6.1 of the Appeal submitted that, the Ld. CIT(A) committed error in upholding the assessment order without considering the fact that the reasons recorded u/s 148 of the Act do not made the requirement of law, further submitted that the reasons to believe recorded by the A.O. for the initiation of re-assessment proceedings u/s 147 of the Act was based on the borrowed satisfaction and without application of mind. The Ld. Counsel also submitted that there exists no tangible material or live nexus between the reasons recorded and the addition....
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....ons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law." 9. The Jurisdictional High Court in the case of K. R. Pulp and Papers Ltd. (supra) held as under:- "31. In the present case, the AO did not have any tangible material at the stage of issuance of the notice under Section 148 of the Act. His reasons for issuing the notice was based on certain information from Invest....
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....n the reasons. iii) Further it has been mentioned in the reasons that enquiries were also conducted by the Inspectors of the Investigation Wing at Delhi and Kolkata; but no date of report of such inquiry has been mentioned and further no list of entities were mentioned which were subject to such inquiries. iv) Further only a generic statement was mentioned that most of the entry providing companies were not found existing at the given offices in Kolkata; the reasons nowhere mention the name of the entities nor the address on which such inquiry was conducted, even so the date of such inquiry has not been mentioned. v) Also it is mentioned that all entry giving companies have been covered under various searches conducted by Kolkata Investigation Wing and all the companies were found bogus and non-existent but hereto a vague statement has been mentioned without any definite details in terms of number of companies on which search was conducted, the period of search etc. vi) Also the reasons refer to statement of entry providers along with bogus directors, wherein it has been admitted that they are in the business of providing accommodation entries an....
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....ecurity premium Rs.80,00,000/-, it is also not written correctly. 27.8 In essence it is apparent reasons contain scanty, general, vague observations and not refer to any objective, tangible relevant material. Further even the figures adopted are factually incorrect and do not pertain to the instant year. No specific evidence has been highlighted to arrive at an opinion that either the companies are bogus and non existent or the money received represented unaccounted income. Though the reasons refer to the search but do not refer to any incriminating material detected as a result of search so as to form a prima facie opinion contrary to the claim made in the original return and accepted in the original assessment u/s 143(3) of the Act. Drawing of list of shareholders based on a Investigation wing report has not been judicially accepted as a foundation for assuming jurisdiction u/s 147 of the Act. 33. It is also not in dispute that during the original proceedings, the AO had issued a questionnaire dated 21.06.2011, whereby the AO called upon the Assessee to submit the details of subscribers, paid up capital and also the details of shares allotted during the....
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....issued on mere suspicion. In order for the AO to form reasons to believe, it is necessary for the AO to examine the information and satisfy himself regarding the same. 37. In the present case, the reasons recorded by the AO did not specify the names of any particular share applicants, the details of the cheques or the amount paid. It is also necessary to note that issue of share capital, and the details of various share holders had already been examined during the assessment proceedings. Therefore, the AO was required to have some additional information, beyond what had already been examined, in order to form reasons to believe that the Assessee's income had escaped assessment." 10. In the present case, the reasons recorded fail to establish a direct nexus between the alleged discrepancies in the transactions and the escapement of income. In our opinion, without a clear and direct connection between the facts and the alleged escapement of income, the reasons recorded remains speculative, therefore, the reopening cannot be justified. Further, the re-assessment proceedings were initiated u/s 147 of the Act on alleged purchase of land, however, the additions made by th....
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....ssue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub- section (2) of section 148." 19. It is apparent from the above that the said explanation merely clarified that the AO would assess or reassess the income in respect of the issue which had escaped assessment and such other issue, which came to the notice subsequently. However, the said explanation does not control the import of the plain language of Section 147 of the Act. Explanation 3 to Section 147 of the Act, merely clarifies that the jurisdiction of the AO was not confined to assessing or reassessing of the income of an Assessee only in respect of the issue, which formed a part of the reasons recorded for reopening the assessment. The said explanation cannot be interpreted to mean that the AO could assess other incomes of the Assessee even in cases where no addition is made on account of the reasons for which reassessment was initiated." 12. In view of the above discussions and by relying on the judicial precedents referred above, we find merit in the Ground No. 6.0 and 6.....
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....272 of Addl. PB 60,00,000/- 25-03-2015 272 of Addl. PB 16. Further, in order to prove the identity, creditworthiness and genuineness of the parties, the Assessee along with the reply filed before the A.O., produced the financial statement, Axis Bank statement, ITR acknowledgement and Axis bank ledger account in the books of the Assessee. Those documents are placed before us by the Assessee in the additional paper book at page No. 260 to 268 and 269 to 273. 17. The Co-ordinate Bench of the Tribunal in the case of Dazzling constructions (P.) Ltd. Vs. ITO in ITA No. 3771/Del/2023 order dated 26/03/ 2025 reported in [2025]172 taxmann.com 860 (Delhi-Trib), while deleting the addition on the similar facts and circumstances, held as under:- "9. On perusal of the para 5 of the first appellate order, we observe that the CIT(A) has acknowledged the factum of production of documentary evidences and subsequent repayment of loan to the creditors in FY 2013-14. The fact of independent enquiry carried out by the AO under s. 133(6) was also noticed by the CIT(A). The CIT(A) however, declined to grant relief to the assessee mainly in the light o....
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....ake of peculiar facts subsisting in the present case, the additions towards unexplained credit under s. 68 and estimated addition under s. 69C is wholly unjustified. 9.5. The Hon'ble Gujarat High Court in the cases of CIT Vs. Ayachi Chandrasekhar Narsangji, 42 Taxmann.com 251 (Guj) and CIT Vs. Mahavir Crimpers, 95 Taxman.com 323 (Guj) have held that when the Department has accepted the factum of repayment, the additions under Section 68 is not sustainable in law. Similar view has been expressed in CIT Vs. Karaj Singh (2011) 15 Taxmann.com 70 (P&H) &Panna Devi Chowdhary Vs. CIT, 208 ITR 849 (Bom). 10. In the light of the view expressed on merits in favour of the assessee, we are not inclined to examine the nuances of challenge to the jurisdiction assumed under s. 147 of the Act, approval granted under s. 151 of the Act, invocation of s. 147 instead of s. 153C and absence of DIN on the body of the assessment order. 11. In conclusion, the order of the CIT(A) is set aside and the additions made by the AO are reversed and cancelled." 18. Considering the fact that the Assessee not only produced cogent documents in order to discharge the onus cast upon u/s 68....
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....erused 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 vide letter dated 16/11/2019 and vide letter dated 05/12/2019 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 17/12/2019. It is the specific case of the Assessee that the objection raised against the initiation of proceedings u/s 147 of the Act vide letter dated 17/12/2019 has not been disposed off as per the ratio laid down by the Hon'ble Supreme Court in the case of G.K. N Driveshafts (India) Ltd. (supra). The Revenue neither disputed the above said claim of the Assessee nor produced any material to show that the objection dated 17/12/2019 filed by the Assessee has been indeed disposed off as per the ratio laid down by the Hon'ble Supreme Court in the case of G.K.N Driveshafts (India) Ltd. (supra). 25. In an identical situation, the Co-ordinate Bench of the Tribunal in the case of Nimitaya Hotel and Resorts Ltd. (supra), quashed the assessment order in....
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....roceeding 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 Sahkari Khand Udyog Mandal 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 the Assessing Officer after filing return in response to notice under section 148 of the Act, (ii) the Assessing Officer supplying such reasons to the assessee, (iii) the assessee raising objections to the notice for reopening and (iv) the Assessing Officer disposing of the objections raised by the assessee. 14. In various cases referred to above, at different stages, unduly long time is consumed either by the assessee or by the Assessing Officer. Cases referred above are only few out of many cases where similar situation has arisen. It is not necessary to refer to al....
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....d 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 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. It only means that the time frame provided hereinabove would not apply in such cases. (5) In the communication supplying the reasons recorded by the Assessing Officer, he shall intimate to the assessee that he is expected to raise the objections within 6....
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....ther 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 such cases. Thus, in case where the objections are submitted by the assessee belatedly the time prescribed by the court would not apply, however, this does not absolve the Assessing Officer from deciding the objections in the light of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra). Therefore, the Assessing Officer was not justified in proceeding to pass the impugned order without deciding the objections raised by the petitioner. In any case, since the notice, which is the foundation for the assessment order, itself is held to be unsusta....
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....ng 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." 26. In view of the above fact that the A.O. has not disposed of the objection filed by the Assessee vide letter dated 17/12/2019, we find no reason to upheld the assessment order and order of the Ld. CIT(A). Accordingly, we allow the Ground No. 2 of the Assessee. 27. Addressing on the Ground No. 11, 11.1 of the Assessee, Ld. Assessee's Representative submitted that the A.O. passed the reassessment without considering the detailed reply and documents furnished by the Assessee such as audited financial statements, ITR acknowledgments, Bank statements, confirmation letter from M/s Sunrise Pvt. Ltd. The Ld. Assessee's Representative fur....
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....the creditors in FY 2013-14. The fact of independent enquiry carried out by the AO under s. 133(6) was also noticed by the CIT(A). The CIT(A) however, declined to grant relief to the assessee mainly in the light of judgement rendered by the Hon'ble Apex Court in the case of PCIT vs NRA Iron & Steel Pvt. Ltd. [2019] 412 ITR 161 (SC). 9.1. It is evident from the record that the assessee, on its part, has filed clinching documentary evidences to support the source of loan received. No legal obligation is prescribed upon the assessee in law to prove the creditworthiness of 'source of source' of receipts obtained by the assessee in view of firstly, the prospective insertion to proviso to section 68 of the Act from AY 2013-14 foisting such obligation and secondly, such proviso is limited in its scope and attributable to receipt of share application money, share capital, share premium etc. and does not extend to loan transactions. The legal propositions are derived from the judgement rendered in the case of Mod. Creations Pvt. Ltd. (supra); CIT vs Shiv Dhooti Pearls & Investments Ltd.(supra) and CIT vs Gagandeep Infrastructure P.Ltd. 80 taxmann.com 272 (Bom.). 9.2. It is....