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TaxTMI 
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TaxTMI 
2026 (4) TMI 969
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....the assessee. Thereafter, the case of assessee is reopened on the basis of information supplied by the investigation wing wherein it is alleged that assessee had taken share capital of Rs. 5.00 crores from two entities, namely M/s Mithilanchal Investments and Finance Pvt Ltd. and M/s White Collar Management Pvt. Ltd. as accommodation entries based on the statements of one, Shri Himanshu Verma recorded during the course of search conducted u/s 132 of the Act in his case on 29.03.2012. The AO thereafter, proceeded to complete the reassessment proceedings and the reassessment order was passed wherein an addition of Rs. 5.00 crores was made to the total income of the assessee. 3. Against the said order, assessee filed an appeal before the Ld. CIT(A) who dismissed the appeal of the assessee on legal issues and on merits of the additions. 4. Aggrieved by the order of Ld. CIT(A), assessee preferred the present appeal before the Tribunal by taking various grounds of appeal. 5. The Grounds of appeal Nos. 2 to 4 are with respect to the legality of reopening of the assessment therefore, they are taken together for consideration. 6. Before us, the Ld. AR of the assessee submits tha....
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....n "Large Share Premium". Kindly refer to the observation of the Ld AO in the first para of the reason for reopening and also first para of reassessment order. Based on the above reason, there remains no doubt that for verification of share premium, issue of the acceptance of share capital was also to be examined as share premium is collected fresh capital only and this issue was, in fact, examined during the original assessment proceedings. Since that is the case, the Ld. AO had no jurisdiction to initiate reassessment proceedings, after expiry of four years, in view of the first proviso to section 147 of the Act, unless there is allegation made by the Ld. AO while initiating action u/s 147 of IT Act attributing failure of the assessee to disclose fully and truly all material facts for its assessment. Although in the reason recorded there is bald statement that there is a such failure on the part of the assessee in disclosing information or material regarding the activities of Sh. Himanshu Verma and usage of the companies by him for providing accommodation entries. But the Ld. AO does not dispute the fact that these transactions for which reopening has been done were duly ....
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....er of Income Tax, Delhi-IV on the above noted subject which was circulated among all AOS of the erstwhile Range- 12, New Delhi. The data made available along with the above referred letter consisted of 16 accommodation entries given by Sh. Himanshu Verma Group of company in respect of F.Y. F.Y. 28 entries for F.Y. 2010-11 and 56 entries in respect F.Y. 2011-12. The respective AOS of this Range are directed to submit the status report of the action taken by them in this regard by return of post. A copy of the above referred list of cases pertaining to this Range is again enclosed for ready reference." The above information is mentioned in Hon'ble ITAT order in case of DCIT Vs BDR Builders & Developers P Ltd in ITA No.1177/Del/2021 dated 16.03.2023 at internal pages 17-18 where matter of assessment in case of M/s GBPL passed by ITO, Ward 10(4), Delhi vide order dated 26.03.2015 was discussed. Since, the above information was part of the assessment records available to the AO at the time of passing of original order and if original order is passed without considering the above material, at best the department was entitled to invoke revisionary jurisdicti....
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....-Thus, in either eventuality, the reassessment proceedings cannot be sustained in law." From above discussion, it is evident that there is of change of opinion as the transactions in question had been duly examined and accepted by then Ld AO. The Hon'ble Apex Court in the case of ACIT vs Marico Ltd SLP No.7367/2020 dt. 11.06.2020 decided the issue whether reassessment can be initiated when the transaction was verified in the original proceedings, in favour of the appellant. The Hon'ble Court dismiss the SLP of department and upheld the Hon'ble High Court decision by holding that "The reasons in support of the s. 148 notice is the very issue in respect of which the AO had raised a query during the assessment proceedings and the Petitioner had responded justifying its stand. The non-rejection of the explanation in the Assessment Order amounts to the AO accepting the view of the assessee, thus taking a view/forming an opinion. In these circumstances, the reasons in support of the notice proceed on a mere change of opinion and would be completely without jurisdiction" Further, reliance is placed on the following authorities: - CIT vs. Usha Interna....
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....wal Das [1976(3) TMI 1 - SUPREME COURT] "reasons to believe cannot be conflated with "reasons to suspect" that an assessee's income has escaped assessment. It is a settled law that concluded/closed assessments cannot be reopened merely on suspicion." 8. On the other hand, ld. Sr. DR for the Revenue vehemently supported the orders of the lower authorities and submits that assessee has failed to disclose all the material facts necessary for the assessment at the time of original assessment proceedings and therefore, the AO has rightly invoked the provisions of section 148 of the Act. Regarding the objections raised against reopening of the assessment, the ld. Sr. DR placed comments before us and the report submitted by the AO which reads as under: 9. We have heard the rival submissions and perused the material available on records. In the instant case, the assessment was originally completed u/s 143(3) wherein the AO after examining all the submissions filed by the assessee and after making independent enquiries and verification by issue summons u/s 133(6) of the Act, reached to the conclusion that the share capital received during the year, was from genuine sources. Therea....
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....duly shown in the books of accounts. From there, this cash was transferred to the different paper companies floated by Shri Himanshu Verma through a complex trail of transactions, so as to hide the actual sources of funds of the last set of recipient companies of Shri Himanshu Verma. The statement of shri Himanshu Verma recorded on 29- 03-2012 by the investigation wing wherein he has categorically admitted to be an entry operator. In this way, the reserve & surpluses and the capital account of a specific set of companies are enhanced with the help of the unexplained cash received by Himanshu Verma, which is routed to these companies through their dummy firm/companies. Once the funds of these companies have been enhanced sufficiently, accommodation entries through RTGS/Cheque in the shape of the share capital, capital gain or loans as per the specific requirement of the recipient clients were provided to them in lieu of the cash received from them and the assessee being one of the beneficiary has received accommodation entries to the tune of Rs.5 crore from the entities controlled by Himanshu verma. Enquiries made by the AO as sequel to information collected / rece....
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....n oath that he had registered large number of paper companies which are managed and controlled by him. The purpose of maintaining a number of companies was to provide accommodation entries in the shape of share application money, capital gain on shares etc. and since one of the beneficiaries is the assessee who has received benefit in the form of share capital / share premium to the extent of Rs. 5 Cr. from the above mentioned two companies controlled by Himanshu Verma group, Though the assessee has submitted the details of the companies during the assessment proceedings but subsequent to the acceptance by Sh. Himanshu Verma on oath during search proceedings, the fact which has now been discovered that the assessee has received accommodation entries in the form of share capital / share premium at least to the extent of 5 Cr. from the Himanshu Verma group. The subsequent information received strengthens th information that the income to the tune of 5 Cr has escaped assessment. Applicability of the provisions of Section 147/151 to the facts of the case: Prior to 1989 section 147 provided (for two grounds to reopen concluded assessments: (i) On the basis of ....
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.... etc. having no real business activity * The assessee being one of the beneficiaries has received accommodation entries to the extent of Rs. 5 Cr. in the form of 10. Though in the reasons recorded, the AO observed that assessee has filed all the information however, requisite full and true disclosure of material facts necessary for assessment has not been made. While observing so, the AO has made an error of fact that the information gathered by the Investigation Wing during the course of search in the case of Shri Himanshsu Varma was already available with the Assessing Officer when the original assessment order was passed. In the case of Himanshu Varma, search was conducted u/s 132 of the Act on 29.03.2012 and the list of all beneficiaries was supplied to various Range heads vide communication dated 20.02.2014. Therefore, the said information was available with the AO when the original assessment order was passed. This fact is accepted by the Co-ordinate Bench of ITAT, Delhi in the case of DCIT Vs. BDR Builders & Developers P. Ltd. in ITA No. 1177/Del/2021. The AO has failed to consider such information while completing the assessments though he has made independent i....
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....ment year. 28.2 Section 149 deals with time limit for notice under section 148. As per clause (a) of sub-section (1), no notice under section 148 shall be issued for the relevant assessment year, if four years have elapsed from the end of the relevant assessment year unless the case falls under clause (b) or clause (c). Clause (b) says that no notice shall be issued if four years have elapsed but not more than six years have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year. Clause (c) deals with a situation where limitation is extended upto sixteen years but the escaped income must relate to any asset located outside India. 29. Insofar the present case is concerned, the assessment year is 2012- 13. The assessment year ends on 31-3-2013. In this case impugned notice under section 148 of the Act was issued on 31-3-2019. Therefore, it is a case of re-opening of assessment under section 149 (1) (b) of the Act after expiry of four years but before expiry of six years. 29.1 Of course the limitation point though pleaded ....
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....pressions as noticed above, we may mention that these two expressions were examined and interpreted in great detail by the Supreme Court in Income-tax Officer v. Lakhmani Mewal Das[1976] 103 ITR 437. That was also a case where notice under section 148 of the Act was put to challenge. Though provisions of section 147 of the Act as it existed then have since been reconstructed and have undergone change, the two key expressions continue to retain their relevance in so far section 147 of the Actis concerned. It may further be noticed that in Lakhmani Mewal Das (supra), Supreme Court was considering validity of notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year. Supreme Court observed that in such a case, two conditions would have to be satisfied before an Income-tax Officer acquires jurisdiction to issue notice. These two conditions are -1. He must have reason to believe that income chargeable to tax has escaped assessment; and2. He must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee to make a return unde....
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....onal connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. But it has to be borne in mind that it is not any and every material howsoever vague and indefinite or distant, remote and far-fetched which would warrant formation of the belief relating to escapement of income. Moreover, powers of the Income-tax Officer to reopen assessment, though wide are not plenary. The words of the statute are "reason to believe" and not "reason to suspect". Reopening of assessment after the lapse of many years is a serious matter. 33. It may be mentioned here that the proposition of law enunciated in Lakhmani Mewal Das (supra) has withstood the test of time and is being consistently applied while examining challenge to a notice issued undersection 148 of the Act. 34. In Prashant S. Joshi v. ITO [2010] 189 Taxman 1/324 ITR 154, this Court observed that the basic postulate which underlines section 147 i....
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....lained whatever queries were put by the Assessing Officer with regard to the primary facts during the hearings. 37. 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. 2 could not have assumed jurisdiction and issued the impugned notice under section 148 of the Act." 12. The Hon'ble Apex Court in the case of NDTV Vs DCIT reported in 424 ITR 607 (SC) has held as under : 33. "In our view the assessee disclosed all the primary facts necessary for assessment of its case to the assessing officer. What the revenue urges is that the assessee did not make a full and true disclosure of certain other facts. We are of the view that the assessee had disclosed all primary facts before the assessing officer and it was not required to give any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference shoul....
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.... the Income Tax Act, 1961. As per the information, the assessee has received share capital from two companies of Rs. 5.00 crores which are managed by Shri Himanshu Verma. During the course of reassessment proceedings, before proceeding further, the AO recorded his reasons to believe that income has escaped assessment to the tune of Rs. 5.00 crores. The AO has simply recorded that the assesses has received accommodation entries by way of share capital. However, except so called information, there was no any reference of tangible material or any concrete or cogent material to link the allegation with the appellant with the conclusions. The reasons recorded were also found incorrect and without any application of mind. It is not sufficient for the AO to mention that he has applied his mind and formed his independent opinion. It should be reflected in the reasons recorded by bringing all the relevant tangible material and findings of independent inquiries conducted by AO on record which we believe is missing in the reasons recorded. The AO failed to establish the nexus between the tangible material available and the reason to believe that income has escaped the assessment. As observed ....
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....Principal Commissioner of Income-tax-6 vs. Meenakshi Overseas (P.) Ltd. reported in [2017] 82 taxmann.com 300 (Delhi), the Hon'ble Jurisdictional High Court has held as under: 24. "The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO t....
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....e reopening is done on mere change of opinion and the AO has also failed to establish the nexus between the tangible material available and the reason to believe that income has escaped the assessment. Accordingly, the reassessment order passed is liable to be set aside and quashed. The Ground of appeal Nos. 2 to 4 of the assessee are thus, allowed. 19. Since we have already allowed the appeal of the assessee on the issue of reopening the assessment by allowing Grounds of appeal Nos. 2 to 4 of the assessee, the remaining grounds of appeal taken by the assessee are become academic. 20. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 08.04.2026. ============= Document 1 OFFICE OF THE INCOME TAX OFFICER, WARD-10(1), ROOM NO. G11/A, GROUND FLOOR C.R. BUILDING, I.P. ESTATE, NEW DELHI-110002 E-mail id: [email protected], Dated: 11/02/2020 F. No. ITO/Ward-10(1)/ ITAT Matter/2025-26/ 471 To The Sr. Dr. "B" Bench, Income Tax Appellate Tribunal Khan Market, New Delhi. Sir, Sub: Submission of report/comments in Appeal ITA No. 6581/Del/2025 in the case of M/s GS Buildwell Private Limited (AACCG1781H) for A.Y. 201....
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....der of assessment Is invalid and unsustainable in law as the same has been passed by the AO without providing the reasonable time of four weeks for taking The contention is misplaced and factually incorrect. The Assessing Officer disposed of the objections raised by the assessce during the assessment proceedings by a speaking order vide letter dated 22.11.2019 and thereafter proceeded in accordance with law. The Q remedy against the order of disposal of preliminary objection against the incorrect assumption of jurisdiction by the AO u/s 147 in violation of principles enunciated by Bombay High Court in the case of Asian Paints Ltd 296 ITR 90. before the Ld. CIT(A) during the assessee was provided adequate opportunity during reassessment proceedings .. Further, the additional evidence submitted by the Assessee appellate proceeding and the same was admitted by the Ld. CIT (A). Moreover, the decision in Asian Paints Ltd. is distinguishable on facts and does not automatically invalidate reassessment in the present case. No prejudice has been demonstrated by the assessee. 2. On facts and circumstances of the case, the authorities below have erred in upholding the reassessme....
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....sment proceedings ignoring the fact that reassessment proceedings-initiated u/s 147 of the IT Act ignoring the contention of appellant that the proceedings have been initiated without making compliance to first proviso to sec 147 and it is a case of change of opinion on same facts. | Further, this is not a case of change of The ground is not tenable. The reassessment was initiated beyond four years due to failure on the part of the assessee to disclose fully and truly all material facts, as the true nature of accommodation entries was never disclosed during original assessment. opinion, as tangible material surfaced subsequently from the Investigation Wing. The Ld. CIT (A), while uploading the reassessment proceedings righty observed that in course of original assessment, the appellant claimed an amount of Rs. 5,00.00,000/- as introduction of share capital and a subsequent search and seizure action by the Investigation Wing in the case of Himanshu Verma revealed that this money of Rs. 5,00,00,000/- was introduced as a capital receipt in the form of share capital/premium by way of accommodation entries. Statement of Shri Himanshu Verma to that effect. admitting his acting a....
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....e Investigation Wing, correlated it with the assessce's financial records and thereafter recorded reasons. Thus, the reassessment is based on independent satisfaction and not borrowed satisfaction. The Ld. CIT(A) has rightly upheld the assessment proceedings. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that reassessment proceedings-initiated u/s 147 of the IT Act ignoring the contention of appellant that the proceedings have been initiated by the AO without application of independent mind on the material. if any, provided by the Inv. Wing of the department. Therefore. such reassessment is void ab initio und liable to be quashed. 4. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that sanction u/s 151 of IT Act as provided with the copy of the reason recorded shows mechanical satisfaction by the approving authority. The allegation is baseless. The sanction u/s 151 of the Act was accorded by the Ld. Principal CIT after due consideration of the reasons recorded and material available on record. The ap....
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.... u/s 68 of the IT Act holding the share application money and share premium as unaccounted money ignoring the fact that the assessee has discharged its initial onus u/s 68 of the IT Act explaining nature and source of the credits by filing requisite documents during assessment proceedings. 3 6. In view of the detailed examination of the facts and the legal position discussed above. it is submitted that the reopening u/s 147 was validly initiated after recording reasons as per law. The order of the Ld. CIT(A) is well-reasoned and supported by evidence and applicable provisions of the Income-tax Act. 1961. Accordingly, the appeal in ITA No. 6851/Del/2025 filed by the assessee deserves to be dismissed. 7. These comments are furnished after obtaining prior approval of the Ld. Principal Commissioner of Income Tax, Delhi-4. Links (Arun Kumar Sinha) Income Tax Officer, Ward-10(1), New Delhi. Document 3 25) Share Capital/ share premium from entities as mentioned above controlled by Himanshu Verma group. It is evident from the above facts that the assessee had not truly and fully disclosed material facts for his assessment for the year under consideration and second co....