TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 244
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.... contractual receipts of Rs. 21,58,15,974/- during the year. b) Assessee firm deposited Cash in the its bank accounts of Rs 10,83,81,420/- & Rs. 10,73,30,000/- during the year. c) TDS of Rs. 101,554/- has been deducted against contractual payment to it. 3. The Assessing Officer noticed that, assessee has opted not to file its ITR despite of having substantial financial transactions therefore, the AO recorded his satisfaction to the reason that a sum of Rs. 21,58,15,974/- is chargeable to tax during the A.Y. 2013-14 has escaped assessment within the meaning of section 147 of the Income tax Act, 1961 (in short "Act"). Accordingly, after recording the above satisfaction and obtained necessary approval from the appropriate authority and initiated the proceedings u/s 147 of the Act. Following the issue of notice u/s 148 of the Act, several other notices were issued to the assessee u/s 142(1) and 144 of the Act. Since there was no response from the assessee, the Assessing Officer proceeded to make the additions as under:- a) He estimated the net profit at the rate of 8% on contractual receipts of Rs. 21,58,15,974/- and added Rs. 1,72,65,278/- . b) F....
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.... issue back to the file of Assessing Officer to decide the issue on merits. 5. Aggrieved with the above order, assessee is in appeal before us raising following grounds of appeal:- 1. The Ld. CIT(A) on the facts and circumstances of the case erred in upholding the validity of initiation of reassessment proceedings u/s 147/148 of IT Act on non-existing entity and consequently passing of assessment order passed u/s 147 rws 144 rws 144B of the Act also in the name of non-existing entity which is void-ab-initio. 2. The impugned assessment is invalid and without jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed. 3. The authorities below has erred both in law and circumstance of the case in initiating action u/s 147 of IT Act ignoring the fact that the proceedings have been initiated without application of independent mind on the material, if any, available. In view of the above defects in the compliances the resultant reassessment proceedings are required to be set aside. 4. The aut....
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....same non-existing entity. The entity to whom notice u/s 148 was issued was a partnership firm existing until 27.02.2012 when the same was dissolved through a dissolution deed dated 27.02.2012 (PB 22-23) through which the business of the partnership was taken over by a company namely M/S Shree Jaina Rice Pvt. Ltd. w.e.f. 31.03.2012. A separate agreement dated 27.02.2012 was also executed between the above partnership and the said company (PB 23-24). The intimation of dissolution and takeover of business by the Company was duly given to the Ld AO through letters dated 09.08.2012 (PB 21)and dated 30.05.2014(PB 20). From the foregoing details, the pertinent fact emerging is that the Ld AO was aware of the firm ceasing to in existence after dissolution / take over by the Company and the living entity relevant for proceedings qua the partnership firm, initiated after 01.04.2012 is the Company namely M/S Shree Jaina Rice Pvt Ltd and the assumption of jurisdiction by issuing notice u/s 148 after the said date to the erstwhile firm is not valid in law in view of the authorities discussed hereinafter: * The Supreme Court in the case of PCIT v. Maruti Suzuki India L....
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....nd the company are separate juridical persons. Under the Income-tax Act also, they are assessed separately. Chapter IX of the Companies Act permits the conversion of the partnership firm into company and, on such conversion, the partnership firm ceases to exist and the company comes into existence. This incident has taken place on 1st March, 2006 and therefore, from 2nd March, 2006, DLF Cyber City firm is no more in existence. Notice under Section 148 was issued on 18th August, 2008, i.e., the date on which the partnership firm was not in existence. Thus, assessment in the hands of dead person would be clearly void. The above view was also upheld in the case of ACIT vs Neha Enterprises ITA No.3666/Mum/2015 dated 20.12.2017. Despite the above fact brought to knowledge of the assessing authority through objection dated 22.03.2022 (PB 17-19), still the mistake which is incurable, was perpetuated by passing of the order in the name of same non-existing entity. The above reassessment proceedings as well as reassessment order both are not sustainable in law and such defect is not curable even by taking recourse of sec 292B of IT Act as held in above decision of Parikh Marketing ....
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....ank account. The above information is also allegedly gathered from Form 26AS of the appellant but the Form 26AS (PB 25) does not show any such cash deposit/information. Moreover, during assessment proceedings, the Ld AO in the show cause notice dated 20.03.2022 (PB 13-16, relevant page 14 back in para 6(iv)) did not raise any query regarding the alleged cash deposit of Rs. 10,73,30,000/- in banking company and has merely taken the deposit claimed to be made in saving account of Rs. 10,83,81,420/-. The above information also is not correct as the appellant had no saving account by virtue the appellant being partnership firm is not authorized to open a saving bank account. III. The above facts clearly show that the initiation of reassessment proceedings is based on incorrect facts without the same being verified either from the bank or from the erstwhile firm or appellant prior to the action u/s 147. Such wrong facts relied by the JAO for assuming jurisdiction leads to invalidation of reassessment proceedings, specifically dealt by the following authorities: * Shamshad Khan vs ACIT 395 ITR 265 (Del); * Pr CIT vs M/S SNG Developers Ltd404 ITR 312 (Del) appro....
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.... does not show application of mind by the AO in absence of any specific discussion on the material on the basis of which independent prima facie belief is reached that income has escaped assessment. To support the above proposition of law regarding non-application of mind by the AO on the reasons recorded, the reliance is placed on following decisions: * Pr. CIT vs. RMG Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del; * Pr. CIT v. G & G Pharma India Ltd 384 ITR 147 (Del.); * CIT vs Independent Media Pvt Ltd in ITA 108/2015 (Del); * Signature Hotels P. Ltd. Vs. ITO - [2011] 338 ITR 0051 (Del); * CIT Vs. SFIL Stock Broking Ltd. 325 ITR 285 (Del); * Sarthak Securities Co. P. Ltd. Vs. ITO 329 ITR 110 (Del); * CIT Vs. Supreme Polypropolene (P) Ltd.ITA No.266/2011 (Del); * CIT vs. Multiplex Trading & Industrial Co. Ltd 378 ITR 351 (Del.); * Hindustan Lever Ltd. Reported in [2004] 137 TAXMAN 479 (BOM.); * CIT vs. Greenworld Corporation 314 ITR 81 (SC); * M/s Synfonia Tradelinks P Ltd vs ITO W.P.(C) No.12544/2018 dt: 26.03.2021 (Del) 2. Validity of the reassessment order in absence of any ....
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.... granting sanction was mechanical and ritualistic. Had either of the authorities being alive to the above anomalies in the reason, such anomalies could have been rectified not forming part of the reason. Such a sanction by the appropriate authority which does not demonstrate the due application of mind is invalid and not sustainable. Reliance is placed on the decisions of Capital Broadways P Ltd vs ITO2024(10) TMI (Del), PCIT vs Pioneer Town Planners (P) Ltd 465 ITR 356 (Del), Pr. CIT vs. N. C. Cables Ltd ITA 335/2015 dated 11.01.2017 (Del), Chhugamal Rajpalv. S P Chaliha 5 (1971) 1 SCC 453 approved in UOI vs Rajiv Bansal 469 ITR 46 (SC) in para 31 therein, Sanjay Kumar Versus ACIT &Anr 458 ITR 548 (Del), Pr CIT vs MDLR Hotels P Ltd ITA Nos.593/2023 dated 30.07.2024 (Del), SBC Minerals vs ACIT 475 ITR 360 (Del), Dy CIT vs Sandeep Bajaj and Ors ITA No.2993/Del/2023 and Naveen Kumar Gupta vs ITO ITA No.592/Del/2020. 4. Non-Service of Jurisdictional Notice u/s 148 The common grievance of the appellant projected in the above grounds is the non-service of the jurisdictional notice issued u/s 148 of IT Act through the JAO assumed jurisdiction to reopen the assessment. ....
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....R 613 has emphasized the significance of the service of the notice u/s 148 on the appellant provided the notice is issued within the prescribed time u/s 148. But the issue of the notice at the correct address is the mandate of section 148 which cannot be violated and such violation of law vitiates the consequent assessment. The participation by the appellant in the assessment proceedings will not debar the appellant to raise the issue of non-service of the jurisdictional notice in appeal in view of the provisions of sec 292BB taking into account the objections of non-service raised before the AO. The above proposition is supported by the judgment of Chetan Gupta (supra) in para 46(vii). Further, the judgment in the case of Mayavati 321 ITR 349 (Del) relied on by the Ld CIT (AO does not lay down the proposition that the issue of notice at wrong address could satisfy the ingredients of section 148. The said judgment merely confirms the position of law that the notice need be issued with the prescribed time although service thereof may take place subsequently. Here the AO by issuing notice at the wrong address has not complied with the 282(1)(a) which requires issue of notice served b....
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....ng the same as per dictates of the Hon'ble Apex Court to be proceedings u/s 148A of IT Act. The date on which notice was first viewed by appellant on E-filing portal was to be construed as date of issuance of notice. The Hon'ble Court in the above case in para 31.6 also held that if such date of issuance is determined to be on or after 01st April, 2021, the Notices will be construed as notices issued under section 148A(b) of the Act of 1961 in accordance with judgment in Ashish Agarwal 444 ITR 1 (SC).Thus, relying on the above decision, the issue date of notice u/s 148 would be construed to be the date when the appellant came to be aware of such notice after 01.04.2021 and the department was under obligation to comply with the direction of Hon'ble Supreme Court in Ashish Agarwal case (supra). Interestingly, the impugned assessment has been completed on the basis of the notice originally issued without converting the same as per dictates of the Hon'ble Apex Court to be proceedings u/s 148A of IT Act. 5. Non-Disposal of Objection to Assumption to Jurisdiction u/s 147 of IT Act The appellant came to be aware of the initiation of reassessment proceeding through physic....
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....as held that when section 147 and 148 of the Act was resorted to, the AO must first discharge the burden of showing that income had escaped assessment and it was only thereafter that the appellant had to provide all the answers. Ground No.12 On addition of Rs. 10,88,000/- u/s 43(5) of IT Act. In this connection, it is categorically submitted that neither erstwhile firm nor the existing appellant has never maintained any demat/trading account with any broker in any manner during the year under consideration and therefore question of either of them doing any intraday trading or other trading in equity-oriented scripts, as alleged in the captioned notice does not arise. No details of broker, nature of the scripts or date of purchase/sale/settlement is not mentioned in the said notice which shows that there is no specific information to justify such addition which is proposed to be made @ 1% of total turnover of Rs. 10,88,00,000/-. The appellant has replied to above show cause notice on 23.03.2022 (PB 27-29) which has not been considered by the AA while passing the impugned order. In view of the decision of Hon'ble Delhi High Court in the case CIT Vs. Pradeep Kumar Gu....
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....ducted in the name of Mahavir Trading Company is duly reflected and interest income received by the existing company on fixed deposit are shown in P&L Account in Note Nos.20 "Other Income" therein (PB 46). It is also noted that as explained above, there cannot be saving accounts in business entities in the form of partnership firm and companies. Therefore, no addition be kindly made. The appellant has replied to above show cause notice on 23.03.2022 (PB 27-29) which has not been considered by the AA while passing the impugned order. 7. On the other hand, Ld. DR brought to our notice Form No.26AS for the relevant assessment year, wherein it is clear that, the partnership firm is still in existence and assessee is continued to utilize the Banking Services. The relevant Form 26AS is placed at page 25 of the paper book filed by the assessee and she submitted that since the PAN number as well as bank account is still in existence the claim of the assessee cannot be accepted, that the Firm is closed and non-existence. Further submitted that the decision of Maruti Suzuki (Supra) is distinguishable to the facts on record. Accordingly, relied on the detailed findings of the lower authori....
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....see is a 'AAIFM7522P', he submitted that wrong PAN number was used to get the approval. Further, he brought to our notice page 28 of the paper book which is response letter filed by the assessee to the Assessing Officer on 23.03.2022, wherein assessee has demonstrated the cash deposits made in the bank in HDFC Bank wherein the relevant PAN applied belongs to individual not to the firm or the Company. It was prayed that the above PAN belongs to some other person not to the assessee, therefore, on merit also the issues is in favour of the assessee. He further submitted that the Section 148 notice was issued to the assessee after the expiry of 8 years. 11. After considering the above facts on record, we observed that the transaction note by the Assessing Officer relates to certain transactions of some other person by mistake, the Assessing Officer has initiated the proceeding u/s 147 of the Act. Further we noticed that, as per the Form 26AS dated 23rd March 2022 there are certain transactions wherein TDS was deducted u/s 194A of the Act. No doubt, the facts in record are in favour of the assessee. 12. However, we are inclined to remit the issue to the file of Assessing Officer w....