TaxTMI 
TaxTMI 
2025 (3) TMI 2173
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....annot be said that there was any failure on the party of the assessee to disclose truly and fully all the material facts necessary for assessment. There is no finding of concealed income. The reopening is based on third party statement (No evidentiary value). 2. Assumption of Jurisdiction on Presumption : That the learned Authorities below have grossly erred in law and facts in upholding the assumption of jurisdiction for re-assessment. The re-assessment proceedings in this case were only based on presumption/suspicion and were thus not validly initiated. 3. Re-assessment is based on borrowed satisfaction : That the learned Authorities below have grossly erred in law and facts in issuing notice u/s 148 on the basis of AIR information in respect of cash deposit in bank accounts and without verifying the correctness of the information and therefore re-assessment proceeding is absolutely bad in law and without jurisdiction and further AO not recorded his satisfaction and re-assessment is based on borrowed satisfaction which was not sufficient to confer power on the AO to initiate reassessment proceedings against the assessee. CIT vs. Shree Rajasthan....
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.... for the any previous year, and the assessee offers no explanation. (b) That the learned Authorities below have grossly erred in law and facts making addition of Rs. 93,42,332/- on account of LTCG without any conclusive evidence/material on record. Addition is based on no evidence. The assessee has furnished all possible evidence. The profit of share business is exempted u/s 10(38). 9. Addition u/s 69C : That the learned Authorities below have grossly erred in law and facts making addition of Rs. 5,76,262/- on account of commission @ 6% of LTCG on sale value of shares of M/s. Shree Nath Commercial & Finance Ltd. without any conclusive evidence/material on record. Addition is based on no evidence. The assessee has furnished all possible evidence. 10. No Opportunity of Effective Hearing : That the learned Authorities below have grossly erred in law and facts in not providing adequate opportunity of hearing to the appellant and not appreciating replies and evidences of the assessee. 11. No Show Cause Notice : That the learned Authorities below have grossly erred in law and facts making disputed additions without serving show cause notice which is mandatory a....
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.... the assessee by stating that - "5.1 I have gone through the Assessment Order and submissions of the appellant. The learned AO carried addition of Rs. 93,42,332/- by reversing exempted long term capital gain u/s 10(38) of I.T. Act. The appellant had sold shares named as M/s Shree Nath Commercial & Finance Ltd. the same were found to be penny stock. The learned AO contented that the underlined companies were bogus and without any substance and he observed that there is sudden surge in the volume traded and price is artificially rigged for these shares. The action learned AO is based on Investigation carried out by Kolkata Investigation Directorate on 84 penny stocks. These shares sold by appellant falls under such investigation. In the submissions the appellant had claimed that the contentions are genuine. However, it failed to refute the contentions raised by learned AO i.e., reason for sudden increase in trade volumes, unusual rise in price, findings of investigation wing, justification against order of SEBI wherein artificial methods are adopted for manipulating the prices, inadequate financial health of underlined company. 5.2 The reliance is placed on followin....
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....as also our arguments or submissions before your honor. 1.4 In this matter we have to further submit that the CBDT circular No.549 dated 31/10/1989 (1990) 823 CTR (SC) (1) makes it abundantly clear that once an assessee does not received a notice u/s 143(2) within the period stipulated then such an assessee "can take it that the return filed by him has become final and no scrutiny proceedings are to be started in respect of that return". The position emerges from this CBDT circular was referred to and clarified by Hon'ble Punjab and Haryana High Court in the case Vipan Khanna Vs. CIT (2002) 175 CTR (P&H) 335. The Hon'ble High Court referred the circular in this case and observed that in case where the AO chose to verify the return and frame an assessment he has to issue a notice u/s 143(3) of the Act requiring the assessee to produce his books of accounts and other material in support of his return. The High Court proceeded to observe: "Thereafter he can make an assessment order under sub-section(3) of the section 143 of the Act. Another important change incorporated in subsection (2) of section 143 of the Act is that the notice under this sub-section cannot be se....
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....n the case of M/s. Alpine Electronics Asia PTE Ltd. V/s DGIT &ORs.,341 ITR 247(Del) considering the decision of the Hon'ble Apex Court in the case of Hotel Blue Moon (supra) at para 24 of the judgment their Lordships held that Section 143(2) was applicable to a proceedings u/s 147/148 also, since proviso to section 148 of the Act, granted certain specific liberties to the revenue, with regard to extension of time for serving such notices. The Coordinate Bench in the cases of M/s. Amit Software Technologies Pvt. Ltd, (supra) after considering the decision of the Hon'ble Madras High Court as well as Delhi High Court had held that Section 143(2) of the Act, was a mandatory requirement and not a procedural one. In completing the assessment u/s 148 of the Act, compliance of the procedure laid down u/s 143 and 143(2) is mandatory. Thus looking to the above facts, circumstances and legal position of law the assessment is also illegal and liable to be quashed. 1.7 M/s Kaizen Organics Pvt. Ltd. V/s THE ACIT, CIRCLE-3, JAIPUR- ITAT, JAIPUR Held: Reassessment order jurisdictional passed by the AO u/s 147 without issuance of statutory notice u/s 143(2) is not sustainable in l....
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....of the report submitted by the ld. DR during the course of last hearing and inspection of the assessment record and order sheet entry dt.17.10.2016 it has come to our knowledge, where it has been mentioned " written reply filled by the assessee and notice issued u/s 143(2) for dt.21.11.2016" and showing signature of the counsel. However as stated by the counsel that on dt.17.10.2016 neither he has appeared in the office of the ITO Ward 4(3) Jaipur nor he has received any notice u/s 143(2) dt.17.10.2016 on that day. As on the order sheet entry dt. 17.10.2016 name of the counsel is not appearing or mentioned, while on other entries his name and appearance are coming or mentioned i.e "Present Sh. V.K. Sharma advocate". As he stated that the ld. AO had taken his various signature on the order sheet in one sitting and he in good-faith of the AO, without reading the same signed the order sheet, but in facts on dt. 17.10.2016 neither he has appeared nor received any notice u/s 143(2) on that day. He had received notice U/s 143(2) dt. 24.11.2017 first time on dt. 08.12.2017. In support the affidavit of the counsel is enclosed. 2.1 Further in the report and in the Event chart at pa....
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....ving his approval has not applied their mind and had given approval in a mechanical manner-It has been held in various decisions that reopening of assessment on wrong set of facts makes such reopening a nullity-Even otherwise also, approval in instant case has been given in a mechanical manner on wrong facts that assessee has not filed his return of income-Similar view has been taken by coordinate Benches of Tribunal in various other decisions to proposition that when approval was given mechanically by superior authorities, assessment so framed is liable to be quashed-Notice u/s 143(2) was issued to assessee on very same day on which assessee appeared and furnished copy of ITR in response to notice u/s 148-It has been held in various decisions that when notice u/s 143(2) is issued to assessee on very same day on which assessee filed return in response to notice u/s 148 stating that return already filed may be treated as return in response to notice u/s 148, such notice issued u/s 143(2) on very same day has to be treated as invalid and assessment is vitiated due to non-application of mind by AO-Therefore, on all counts reassessment proceedings initiated by AO and upheld by CIT(A) i....
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....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." As per record, since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment, therefore, in our considered view, the reassessment order in these circumstances of the case, cannot be upheld. For reaching this conclusion, we draw strength from the decision of Hon'ble Bombay High Court in the case of CIT vs Videsh Sanchar Nigam Ltd (2012) 340 ITR 66 wherein Hon'ble Bombay High Court had categorically held that since the reasons recorded for reopening of the assessment were not furnished to the assessee till the completion of the assessment then reassessment order cannot be upheld and thus dismissed the appeal filed by the Revenue. Even in the case of CIT vs Trend Electronics reported in (2015) 379 ITR 456, Hon'ble Bombay Hig....
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....easons were not supplied to the assessee during the contemporary period before going ahead with the reassessment proceedings. Therefore, in our view, the reassessment proceedings initiated and consequential order passed by the AO and appeal order passed by the ld. CIT(A) are not justified and, therefore, we quash such reassessment order. Therefore, the ground raised by the assessee is allowed and consequential appeal of the assessee is also allowed with no order as to cost." Here also the same position. Further the Honble Raj. High Court in the case of M/s K.C. Mercantile V/s DCIT Circle-2, Jaipur in DBIT No. 292/2016 dt. 07.11.2017 it has been held: Before proceeding with the matter, it is not out of place to mention that the law declared by the Supreme Court in GKN Driveshafts (supra) clearly held that the preliminary objection is to be decided as the first, it cannot be decided subsequently. The argument which has been canvassed by the assessee is required to be considered very seriously more particularly in view of the observations made by the Supreme Court in the case of KSS Petron Private Ltd (supra) which is followed in Hotel Blue Moon (supra), the....
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....essment order liable to quashed. 4. Second 148 notice dt.28.03.2017 was issued without approval of any higher authorities, without recording reason, without withdrawing first 148 notice dt. 28.09.2016 and the assessment and all the proceedings were based on the first notice as clearly appearing from the assessment order. 5. Further on perusal of the approval and assessment record it has come to know that in the satisfaction the ld. Pr.CIT has mentioned only that "Yes I am Satisfied". The ld. Pr. CIT has given the approval and satisfaction in the mechanical manner, he has not recorded his own satisfaction. As on perusal of the reason recorded and approval u/s 151 by the without competent authority it is clearly proved that they have not applied the mind on the reasons recorded they have only expressed or mentioned yes I am satisfied by the Add. CIT not by Pr. CIT on the reason forwarded. While as per decision of Pr. CIT vs. N. C. Cables Ltd.(2017) 98 CCH 0010 Del HC it has been held that Section 151 of the Act clearly stipulates that the CIT, who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere app....
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....d for initiating re-assessment proceedings, because from said remarks, it was not coming out as to which material; information; documents and which other aspects went gone through and examined by Addl. CIT for reaching to satisfaction for granting approval-Thereafter, AO had mechanically issued notice u/s 148-Reopening in assessee's case for AY in dispute was bad in law and deserved to be quashed-Approval granted by Addl. CIT was a mechanical and without application of mind, which was not valid for initiating reassessment proceedings issue of notice u/s 148 and was not in accordance with s. 151 thus, notice issued u/s 148 was invalid and accordingly, reopening in this was bad in law and therefore, same was hereby quashed-Assessee's appeal partly allowed. In the case of Gorika Investment And Export (P) LTD. vs. ITO (2018) 53 CCH 0168 Del Trib Reopening-Income escaping assessment-Validity thereof-Assessee filed return of income declaring income which was processed u/s. 143(1)-AO issued notice u/s. 148 after recording reasons that income of assessee had escaped assessment-AO framed assessment u/s. 143(3) r.w.s. 147 by making addition-CIT(A) upheld order of AO-Held, in CIT Vs ....
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....t "approved" and signed report thereby giving sanction to AO-Nowhere Commissioner had recorded satisfaction note, not even in brief after applying his mind-After expiry of four years from end of relevant assessment year, notice u/s 148 should not be issued unless Commissioner was satisfied that it was fit case for issue of such notice-Reassessment proceedings and notice being bad in law were quashed-Assessee's appeal allowed. Also refer a recent judgment of this Hon'ble ITAT in the case of Sh. Anshuman Singh v/s ACIT Circle-1 Jaipur in ITA No.733 & 739/JP/2023 dt. 10.04.2024. 6. No income escaped: Further it is submitted that the notice u/s 148 can be issued only when there is any escape of income because S. 147 provides that If the Assessing Officer has reason to believe that an income chargeable to tax has escaped assessment for any assessment year, here the assessee has not escaped any income because the assessee has never having the undisclosed or unexplained income as alleged and the same has already been included in the ITR filled originally. Which shows that there was no escapement of income by the assessee, as the assessee is having income from salary, cap....
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.... Sun Pharmaceutical Industries Ltd. Vs. DY. CIT (2016)287 CTR(Del.)621; The Impugned initiation of assessment proceedings had started by the AO on borrowed satisfaction but not their own which is mandatory condition of the law as provided for re -opening of any assessment. Section 147 of Act clearly specify. In impugned case the Ld. AO had claimed that a certain transaction of bogus LTCG on the basis of statements as recorded of third party and Ld. AO could not have been made any enquiry regarding both the facts and without conducting any enquiry/investigation re-opened the case and issued the notices which is completely based on perverse findings and deserve to be declared as null and void ab initio. Here in impugned case AO's self-satisfaction regarding escapement of income is not bringing on record which is mandatory condition of law under section 147 of Income Tax Act, 1961, it could have been come only after conducting enquiry and investigation but Ld. AO did not make such therefore complete re-assessment proceedings come under suspicious circle, various honorable courts propounded and led on this aspect and issue direction to handle such situation. ....
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.... case laws said to be supporting his contention. However, bare perusal of the record available with this office clearly shows that notice u/s 143(2) was issued on 17.10.2016 fixing date of hearing on 21.11.2016 (Copy enclosed as annexure-1). The representative of the assessee has also acknowledged the same as his signature are present on the order sheet.(copy enclosed as annexure-2) The same is also established from the fact that representative of the assessee had furnished a reply on 27.09.2017 where the following is mentioned in the subject : " Sub- Your notice in case of M/s. Mahendra Kumar Sharma, Jaipur PAN : CIJPS0428K, AY 2011-12. Notice u/s 143(2)/148 of the Act." The above clearly implies that the assessee has received the notice u/s 143(2) and has clearly acknowledged the same. Hence, raising the ground that no notice was issued u/s 143(2) before 30.09.2017 is a futile attempt to mislead the proceedings. Therefore, this ground deserves to be quashed. 2. In this point the assessee has stated the following : 2. On perusal of the report submitted by the ld. DR during the course of last hearing and inspection of the assessment reco....
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.... dated 28.03.2017 was issued in the case of the assessee. 5. In points no. 5, 6, 7, the assessee has once again questioned the reasons for reopening of the assessment and claimed that no income has been escaped. These issues have already been discussed at length in the assessment order and it can be said that the issue raised by the assessee are baseless and deserve no attention. Thus, it is concluded that the contentions raised by the assessee are without any basis and the assessee is just raising new grounds in order to mislead the proceedings. This is submitted herewith for your kind perusal and consideration." 5. To counter the above submissions, the ld. A/R of the assesseevide his letter dated 08.10.2024 submitted his comments and written submission on the report filed by the ld. D/R, which are reproduced as under :- "1. Your honor earlier we had filed our WS and paper book on the same the ld. DR has filled its report of AO. In this report the AO has stated that the notice u/s 143(2) was issued on dt. 17.10.2016 fixing the date of hearing on 21.11.2016 and produced the order sheet, the ld. AO has also filed a letter dt. 27.09.2017 and alleged that....
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....onble bench. Thus the ld. AO/DR has misleaded the matter by producing the notice dt. 17.10.2016 and incomplete letter dt.27.09.2017. Further on perusal of the order sheet from 28.09.2016 to 15.09.2017 in which it is clear that the hearing has also been taken place between these days time to time. Further in the order sheets entries there is some gape but in the entries dated 21.11.2016 to 15.09.2017 there is no gape and one entries put up by inserting later time. 3. Regarding the copy of reasons recorded not supplied nor objection decided. The ld. AO/DR has stated that "as per order sheet entry dated 17.11.2017, it is amply clear that assessee was provided complete information in soft copy regarding the information received from Investigation wing, on the basis of which, the case was reopened". In this regard it is submitted that on the reply of the same it is very clear that the ld. AO/DR has admitted that no reason recorded has been provided to the assessee because the ld. AO had supplied "the information received from Investigation wing" not reasons recorded because the Investigation Wing has neither recorded reasons nor the law has given the power to ....
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.... of the notice u/s 148 or not before or attached with the notice u/s 148 and may reach in the office of the AO after 31.03.2016. Thus, in our view, approval u/s 151 cannot be given of all the 56 assessee's in a single documents, as all assessee's are the independent and separate also the reason recorded are different in each case and it is not possible that there shall be same reasons. Looking to these facts and record it is also held that the procedures and way of approval and satisfaction is not proper. Here AO initiated proceedings u/s. 147 r.w.s. 148 on basis of information furnished and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore the reopening was not sustainable as per above judicial pronouncements and irregularities noted. There were clear irregularities and violation of the provision of Sec. 151 of the Act and very foundation of the issuance of the notice u/s 148 was not as per law. Then in that eventuality, we are of the view that the issuance notice 148 of the Act and all the consequent proceedings and assessment order passed was n....
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.... soft copy (copy enclosed). Further, the case was reopened after obtaining the approval of competent authority (copy enclosed). 5. Reply of point no. 4:- The approval has been given by Pr.CIT-2, Jaipur letter dated 27.09.2016. Though it has been signed by ITO (T&J), it is clearly mentioned in the letter that the proposal for taking remedial action u/s 147/148 of the I.TR. Act, 1961, 1961 in the above mentioned case has been approved u/s 151 of the I.T. Act, 1961 by the Pr. CIT-2, Jaipur (copy enclosed). Further, the contention of the assessee regarding consolidated approval of 6 assessee's through one letter is in vain as individual approval has been obtained in the form for obtaining sanction of the Pr.CIT-2, Jaipur for issue of notice u/s 148 of the I.T. Act, 1961 (copy enclosed). The Report is being submitted for your kind consideration and necessary action at your end." 7. We have heard the rival submissions, perused the orders of the lower authorities and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by learned Counsels of both the sides. It is noted from the assessment order that the asses....
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....High Court referred the circular in this case and observed that in case where the AO chose to verify the return and frame an assessment, he has to issue a notice u/s 143(2) of the Act requiring the assessee to produce his books of accounts and other material in support of his return. The Hon'ble Supreme Court in the case of ACIT &Anr vs. Hotel Blue Moon (2010) 229 CTR (SC) 219 has discussed in detail in respect of issue of notice u/s 143(2) as under :- "An analysis of this subsection indicates that, after the return is filed, this clause enables the Assessing Officer to complete the assessment by following the procedure like issue of notice under section 143(2)/142 and complete the assessment under section 143(3). This section does not provide for accepting the return as provided under section 143(1)(a). The Assessing Officer has to complete the assessment under section 143(3) only. In case of default in not filing the return or not complying with the notice under section 143(2)/142, the Assessing Officer is authorized to complete the assessment ex parte under section 144. Clause (b) of section 158BC by referring to section 143(2) and (3) would appear to imply that the ....
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.... demanding the reasons recorded and in this regard the reply dated 27-11-2017 (PBP 53-54) of the assessee written to the ITO, wherein the assessee had specifically asked and demanded the AO to provide the reasons for issuance of Notice u/s 148 of the Act to the assessee. However, the AO did not provide the same. In appeal before the ld. CIT(A), the assessee had categorically raised the specific ground that the reasons recorded for reopening of the assessment was never supplied / provided to the assessee. However, the ld. CIT(A) had ignored the said ground of the assessee and also did not deal with the specific ground raised by the assessee. In our view, the AO was bound to furnish reasons recorded by him within a reasonable time as has been held by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. vs ITO (supra) wherein the Hon'ble Court held as under:- "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice u/s 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and he so desires, to seek reasons for issuing notices. The Assessing Officer is boun....
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....ken in true spirit whether it will open a second inning in his own. Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme Court, in that view of the matter, the issues which are raised in the matter, the Tribunal ought not to have remitted back for reassessment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act. In that view of the matter, on issue No. 1 and 2, the order of reassessment passed by the Tribunal is declared null and void. The questions are answered in favour of assessee and against the Department." Thus on the above legal position of law the notice under section 148 or proceedings under section 147/148 and consequent assessment order liable to be quashed. 7.3 Further, a perusal of the approval given by the Joint Commissioner shows that he has given approval by observing as under as per clause 12 of the proforma:- ....
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.... the notice u/s 148 or not before or attached with the notice u/s 148 and may reach in the office of the AO after 31.03.2016. Thus, in our view, approval u/s 151 cannot be given of all the 56 assessee's in a single documents, as all assessee's are the independent and separate also the reason recorded are different in each case and it is not possible that there shall be same reasons. Looking to these facts and record it is also held that the procedures and way of approval and satisfaction is not proper. Here AO initiated proceedings u/s. 147 r.w.s. 148 on basis of information furnished and CIT gave approval without applying his mind in slipshod manner. As approval/sanction given by CIT was without recording his own independent satisfaction as noted above, therefore the reopening was not sustainable as per above judicial pronouncements and irregularities noted. There were clear irregularities and violation of the provision of Sec. 151 of the Act and very foundation of the issuance of the notice u/s 148 was not as per law. Then in that eventuality, we are of the view that the issuance notice 148 of the Act and all the consequent proceedings and assessment order passed was not ....