TaxTMI 
TaxTMI 
2026 (6) TMI 143
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....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 and liable to be quashed. 3. 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. 4. The Ld. CIT(A) has erred both in law and circumstances of the cases in upholding the addition of Rs. 8,15,05,000/- u/s 68 of the IT Act holding the share application money of Rs. 8,15,05,000/- as unexplained cash credit 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." 2. Brief facts of the case are, the assessee filed....
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....AAGCA3662F 10 40 1,70,000 17,00,000 85,00,000 5 EURO ASIA P L AABCE7522P 10 40 1,50,000 15,00,000 75,00,000 6 HUM TUM MKTG L AABCH6626F 10 40 1,30,000 13,00,000 65,00,000 7 KARISHMA INDS L AACCK3760C 10 40 1,50,000 15,00,000 75,00,000 8 KUNAL CHANANA AAEPC8344H 10 40 100 1000 5,000 9 MEGA TOP PROMOTERS P L AAECM3788Q 10 40 1,50,000 15,00,000 75,00,000 10 SHALINI HOLDINGS LTD AAACS0913M 10 40 2,00,000 20,00,000 1,00,00,000 11 SUNNY CAST& FORGE LTD AAICS1775M 10 40 2,40,000 24,00,000 1,20,00,000 12 VICTORY SOFTWARE P L AACCV4613R 10 40 50,000 5,00,000 25,00,000 13 ZENITH AUTOMOTIVE P L AAACZ0283B 10 40 50,000 5,00,000 25,00,000 TOTAL 16,30,100 1,63,01,000 8,15,05,000/- 5. Based on the above details, the notices u/s. 133(6) were issued to all the 13 parties and some of the parties responded to the above notice. AO recorded the details of the replies of the parties in the chart at pages 5 to 7 of his orde....
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....f litigation before the Hon'ble ITAT, the legal grounds have not been adjudicated implying that those grounds are open for adjudication in present appeal proceedings in second round. Kindly refer para 41- 45 at pages 50-55. I. Invocation of non-existing provision of sec 147 of IT Act Non application of mind is discernible from the above performa filed for approval u/s 151 of the Act. InitemNo.7(PB 104) which says "Whether the provisions of sec. 147(a), 147(b) are applicable or all the sections are applicable", the AO in the reply mentions applicable provision being section 147(b). Here it may be appreciated that the sections 147(a)/147(b) have ceased to be in the statute book from 01.04.1989. The mentioning of these incorrect and non-existing sections is a clear case of non-application of mind by the AO and also by the authorities providing satisfaction u/s 151. Reliance is placed in the decisions of Smt Kalpana Shantilal Haria Vs ACIT W.P.(L) No.3063/2017 dated 22.12.2017 (Bom), Best Cybercity India P Ltd vs ITO(2019) 414 ITR 0385 (Del), Yum! Restaurants Asia Pte Ltd VS DDIT in WP(C) No. 614/2014 dated 31.08.2017 (Del). The identical errors in the following decis....
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....re Credit Securities P Ltd vs ITO ITA No.5318/Del/2016 dated 24.12.2021 in para 12.4 therein. 2 Sunny Cast & Forge Ltd Rs.1,20,00,000/- Copy of assessment order u/s 153C/153A is at page 166-167 and also in ITAT order in case of More Credit Securities P Ltd vs ITO ITA No.5318/Del/2016 dated 24.12.2021 in para 12.4 therein. 3 Attractive Finlease P Ltd Rs.85,00,000/- Copy of assessment order u/s 153C/153A is at page 168-169 and also in ITAT order in case of More Credit Securities P Ltd vs ITO ITA No.5318/Del/2016 dated 24.12.2021 in para 12.4 therein. 4 Aasheesh Capital Services P Ltd Rs.75,00,000/- Copy of assessment order u/s 153C/153A is at page 175-176 and also in ITAT order in case of More Credit Securities P Ltd vs ITO ITA No.5318/Del/2016 dated 24.12.2021 in para 12.4 therein. 5 Apoorva Leasing Finance & Investment P Ltd Rs.50,00,000/- Copy of assessment order u/s 153C/153A is at page 170-171 and also in ITAT order in case of More Credit Securities P Ltd vs ITO ITA No.5318/Del/2016 dated 24.12.2021 in para 12.4 therein. 6 Hum Tum Marketing P Rs.65,00,000/- Copy of assessment Ltd order u/s 153C/153A is at page 172-173 a....
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.... &Ors 474 ITR 131 (Del) which places emphasis on the duty of the AO to take further steps, make further enquiries and garner further material and if such material indicate that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment. Reliance is also placed in Sh Rajiv Agarwal vs ACIT 395 ITR 0255 (Del) held that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment." The co-ordinate Bench of Hon'ble ITAT in decision of appellant's own case in ITA No.7244/Del/2019 dt: 12.08.2021in para 32 at page 51 therein on identical facts has quashed the reassessment proceedings on ground of Non-verification of unverified information received from investigation relying on decision of Sh Rajiv Aggarwal vs ACIT (supra). III. Initiation of act....
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....aving the noticee clueless of the background of satisfaction in the reason that the transactions in question are being accommodation entries. In the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del), it was held that reproduction of information without showing how the material referred in therein 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.....
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....hich approval is taken without recording any reasons for recording and without any recommendation by the Addl CIT as projected in the above portion of reason recorded at page 123. Your kind attention is invited to the decision of coordinate Bench in the case of Shri Prahalad Singh vs ITO ITA No.3375/Del/2017 dated 11.05.2018 approved by Hon'ble Punjab and Haryana High Court in ITA No.91 of 2019 dated 27.02.2020 wherein it was held that mere presence of reasons on file does not validate the reassessment process if those reasons are unsigned and undated. The action under Section 147 is quasi judicial and, to meet statutory and procedural accountability, the reasons must bear the signature of the officer recording them; absent a signature the document is an anonymous paper to which no credence can be given. Further, because the reasons were undated, they failed to establish that they were recorded prior to the issuance of the notice under Section 148. Allowing reassessment to proceed on unsigned or undated reasons would permit initiation of quasi-judicial action without attributable responsibility and could lead to misuse or substitution of documents, defeating procedural safeguards. ....
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....mpleteness of facts and verification of above submission, the complete chart of companies involved in appellant case and the case of RMP are detailed hereunder: Name of share applicant Amount accepted by Appellant Amount accepted by RMP Karishma Industries P Ltd (Earlier known as Karishma Industries Ltd) Rs.75,00,000/- Rs.45,00,000/- (2 entries) Zenith Automotive P Ltd Rs.25,00,000/- Rs.25,00,000/- Victory Software P Ltd Rs.25,00,000/- Rs.25,00,000/- Sunny Cast & Forge Ltd Rs.1,20,00,000/- Rs.15,00,000/- Attractive Finlease P Ltd Rs.85,00,000/- Rs.50,00,000/- (2 entries) Aasheesh Capital Services P Ltd Rs.75,00,000/- Rs.50,00,000/-(2 entries) Apoorva Leasing Finance & Investment P Ltd Rs.50,00,000/- Rs.1,25,00,000/- (4 entries) Ad-Fin Capital Services P Ltd Rs.45,00,000/- Rs.25,00,000/- Euro Asia Mercantile P Ltd Rs.75,00,000/- Rs.50,00,000/- (2 entries) Hum Tum Marketing P Ltd Rs.65,00,000/- Rs.25,00,000/- Alstone Textiles (India) Limited (formerly known as M/s Shalini Holdings Ltd) Rs.1,00,00,000/- Rs.25,00,000/- Mega Top Promoters P Ltd Rs.75,00,000/- Rs.25,00,000....
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....7-506. The fact that regular income of the investor companies is not matching with the investment made and that is the reason for doubting the creditworthiness of share applicant. Our most humble submission is that there is no logic that it is the current year income which can be utilized for making investment by any entity. This is faulty presumption. The investor can invest its surplus funds which are available to him as part of past accumulations and such accumulation are legitimate source of an investor for making investment in any enterprise. On the issue of current year income being the only criteria based on current year income, reliance is placed on the decision of jurisdictional Delhi High Court in the case of Pr. CIT vs. Goodview Trading Pvt. Ltd. 97 CCH 0381 (Del) approved by supreme court in 103 CCH 0304 (SC), ITO vs. Computer Home Information Plus Pvt. Ltd. ITA No.5680/Del/2016 dated 24.05.2019, Addl. CIT vsPrayagPolytechPvt Ltd ITA No.5970/Del/2017 dt: 18.06.2019 and M/s WelIntertrade P Ltd vs ACIT ITA No.7166/Del/2018 dt: 03.06.2019. To prove the creditworthiness of the investors, the following compilation will show that each investor companies had more than....
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....be verified by the AO of the shareholder and not by the AO making addition u/s 68 in the hands of the investee assessee. The Court went to extent that in case return of income of the shareholder is not rejected by his AO, the assessing officer of the investee assessee is bound to accept the same as genuine where identity of shareholder and genuineness of the transaction stands established. It is submitted that since the share application money has been remitted through banking channel and no adverse findings is given by their AO's in their assessment order then in the absence of any adverse material on record the genuineness of the share application money cannot be questioned. Reliance is placed in the decision of PCIT v. Adamine Construction (P.) Ltd. (2018) 264 taxman 280 (Del) SLP of revenue is dismissed by Apex Court in. (2018) 264 Taxman 279 wherein it was held that "No addition can be made u/s 68 of the IT Act when AO went by only the report received and did not make the necessary further enquiries such as into the bank accounts or other particulars available with him but rather received the entire findings on the report, which cannot be considered as primary material. The as....
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....Hon'ble ITAT as no addition was made and therefore not contested before Hon'ble ITAT. Therefore, the above addition needs to be deleted as same has been made without authority. Regarding doubting of genuineness of transaction and verification of share premium as per para 3.1.3(g) of the AO order at page 17 therein (PB 9), it is submitted that the both are outside the scope as per direction of the Hon'ble ITAT which has been explained in preceding para. There is no objection raised by Ld AO in respect of the identity of the investors, however each of the investors has done the investment through banking channels and from there bank accounts which shows that the investing entity is existing entity and in nine cases are assessed by the department in post search assessment as discussed hereinbefore. Furthermore, each of the investor entities being corporate body is compliant of the ROC submissions as required under companies Act as evident from master data downloaded. No reason is given that the evidences furnished are not implausible and in that case the evidences furnished are deemed to be accepted. To support the above view, reliance is placed in the decision of Bo....
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....placed on record by the assessee. Since both the parties had made detailed submissions only on the technical issues raised in the grounds 1 to 3, we are restricting ourselves to adjudicate only this issue. Rests are not adjudicated at this stage and kept them open. 11. At the time of hearing, it is specifically brought to our notice point no.7 of proforma for sanction/approval u/s 151 of the Act, wherein the provisions of section 147(b) were referred which was omitted and which is no longer applicable. It was submitted that this provision was mechanically applied by the Revenue. Non application of mind is discernible from the above performa filed for approval u/s 151 of the Act. In item No.7(PB 104) which says "Whether the provisions of sec. 147(a), 147(b) are applicable or all the sections are applicable", the AO in the reply mentions applicable provision being section 147(b). We observed that sections 147(a)/147(b) have ceased to be in the statute book from 01.04.1989. The mentioning of these incorrect and non-existing sections is a clear case of non-application of mind by the AO and also by the authorities providing satisfaction u/s 151. 12. With regard to other issue rais....
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....are applicable or both the sections are applicable" and the answer is "Only 147(b)". We find that the provisions of Section 147(b) have been deleted long bank. 9. On identical set of facts, the Co-ordinate Bench in ITA Nos. 92- 94/Mum/2019, dated 28/10/2020, had the occasion to consider an identical approval and held as under:- "5.3. We find that the reopening in the instant case has been made beyond four years from the end of the relevant assessment year which requires sanction of approval from the ld. PCIT u/s. 151(1) of the Act. We find from page 1 of the Case Law Paper book filed by the assessee before us containing proforma in the prescribed format seeking sanction of approval u/s. 151(1) of the Act, that the said proforma was sent by the ld. AO to the ld. PCIT through proper channel i.e. Additional CIT on 08/01/2016. For the sake of convenience, the entire proforma is reproduced herein:- ........... 5.4. From the aforesaid proforma, it could be seen that question No.7 specifically mandate the ld. AO to mention whether the provisions of Section 147(a) or 147 (b) or both the sections are applicable. In response thereto, the ld. AO had mention....
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....CIT has sanctioned the same without application of mind and it is only a mechanical approval. In the case of ACIT vs. Vikas Strips Pvt. Ltd. in ITA No.2811/Del/2024 dated 17.04.2025, the coordinate Bench has held as under:- "5. The assessee is engaged in the business of manufacturing and trading of iron and steel i.e. C.R. sheet and H.R strips. The assessee filed a letter dated 24-04-2015 stating that the return originally filed by it on 7-8-2008 may be treated as a return in response to notice under section 148 of the Act. Thereafter, the assessee sought the copy of reasons recorded for reopening the assessment, which were duly furnished to the assessee on 9-11-2015. During the course of hearing, the approval papers under section 151 of the Act granted by the Learned JCIT, Range- 26, New Delhi was placed on record. On perusal of the proforma seeking approval u/s 151 of the Act, we find that the learned JCIT had merely stated that 'Yes, it's a fit case for issue of notice u/s 148' for reopening. This sort of approval granted u/s 151 of the Act was held to be approval granted without application of mind and construed as mechanical by the Hon'ble Madhya Pradesh High Court in....