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2020 (1) TMI 856 - AT - Income TaxReopening of assessment u/s 147 - Jurisdiction of ITO Ward 4(1), Jaipur in issuing the notice - legal entity holding two PAN - as per assessee assessment order has been passed in wrong name and address and there is non-application of mind by the Assessing officer while recording reasons before issuance of notice u/s 148 - change in name of company - Addition u/s 68 - HELD THAT - There has been only a change in name of the entity and besides that, there is no change in the corporate identity of the assessee company. It is therefore not a case where the assessee company ceases to exist and/or amalgamated with any other existing/new entity. Therefore, it is not a case where the notice u/s 148 has been issued and assessment u/s 143(3) r/w 147 has been completed in the name of non- existent entity. Notice u/s 148 dated 27.03.2015 has been issued in name of Shree Silica Products Private Limited (PAN No. AACCS4046D) and the assessee company had earlier filed its return of income for A.Y 2009-10 on 30.03.2010 in name of Badaya Ispat Private Limited (PAN No. AADCB4084H). Therefore, it is a strange to note that the same legal entity has been holding two PAN numbers though in two different names and both continue to exist in Income Tax Department database as on the date of issuance of notice u/s 148 and passing of the assessment order u/s 143(3) r/w 147 of the Act. Under section 139A of the Act, it has been provided that No person who has already been allotted a permanent account number under the new series shall apply, obtain or possess another permanent account number. Therefore, where the assessee is prohibited from applying for a new PAN where a PAN has already been issued to it, the fact that such a new PAN has been applied and thereafter issued, to our mind, the new PAN and filing of return of income doesn t confer any jurisdiction to the Assessing officer over such matter with such new PAN and the Assessing officer with earlier PAN continues to exercise jurisdiction over the assessee company. In the present case, therefore, the ITO Ward 4(1), Jaipur continues to exercise jurisdiction over the assessee company and not ITO Ward 1(1), Jaipur. Therefore, we donot find any infirmity in the action of ITO Ward 4(1), Jaipur in issuing the notice u/s 148 and completing the assessment u/s 143(3) r/w 147 of the Act. It is a case where no return of income has been originally filed by the assessee company and on perusal of reasons, we find that the Assessing officer has received tangible information from Investigation wing that the assessee has obtained accommodation entries basis which he has come to believe that income to the extent of ₹ 45 lacs has escaped assessment. There is a linkage between the material and formation of belief that income has escaped assessment. At the stage of recording reasons, the Assessing officer has to record his prima facie opinion that the income has escaped assessment. It is not the case of the assessee company that the details of the transaction recorded by the Assessing officer was not correct or false in terms of name of entity, nature of transaction and the amount involved. In the instant case, where the Assessing officer has received information that the assessee has obtained accommodation entries, the same constitute a tangible material and basis examination thereof, where he has held that income has escaped assessment, we donot see any infirmity in the action of the Assessing officer in exercising jurisdiction u/s 148 Addition u/s 68 - Communication received from DIT (Inv.)-II, New Delhi wherein the certain details have been given regarding bogus accommodation entries obtained by the assessee company BUT by the time of issuance of notice u/s 148 on 28.03.2015, the assessment in case of all these three entities were already completed on 28.03.2013 and in the assessment so completed, there is no finding that these entities have provided any accommodation entries to the assessee company. Investment made by these three entities in the assessee company was accepted as genuine investments. Therefore, once the assessee company has furnished necessary documentation as we noted above and the assessment in case of these share holder entities have been completed whereby there is no finding recorded by the Assessing Officer that they have provided accommodation entries to the assessee company and investment thus made have been accepted as genuine investment, we find that no adverse view can be taken in the hands of the investee assessee company u/s 68 Assessing Officer has stated in the assessment order that the assessee has introduced its unaccounted cash in the form of share capital through racket of entry providers operated in New Delhi, however the said finding has not been corroborated by any material on record and therefore, the said finding recorded by the Assessing Officer cannot be accepted in absence of clear linkage/nexus established by the Revenue that the money belonging to the assessee company has been advanced and routed back in the form of share capital. Addition so made by the Assessing Officer u/s 68 of the Act is hereby directed to be deleted - Decided in favour of assessee.
Issues Involved:
1. Validity of the order passed by the Assessing Officer (AO) under section 147 of the Income Tax Act, 1961. 2. Confirmation of an addition of ?45 lakhs under section 68 by treating the share capital money received as unexplained. Issue-Wise Detailed Analysis: 1. Validity of the Order Passed by AO under Section 147: The assessee challenged the validity of the order passed by the AO under section 147, arguing that the notice under section 148 was issued in the name of a non-existent entity and at an incorrect address. The AO issued a notice under section 148 on 27.03.2015 to reopen the assessment for AY 2008-09. The notice was issued to "M/s Shree Silica Products Pvt. Ltd." despite the company having changed its name to "M/s Rajshree Alloys India Ltd." The assessee argued that the AO did not verify the current name and address before issuing the notice, making it void ab initio. The Tribunal referred to the binding decision of the Rajasthan High Court in CIT v. Poonam Chand Surana [2014] 221 Taxman 0151 (Raj.) and the Supreme Court decision in Principal Commissioner of Income-Tax v. Maruti Suzuki India Ltd. [2019] 107 taxmann.com 375 (SC), which held that issuing a notice and passing an assessment order in the name of a non-existent company is a substantive illegality and not a procedural violation. However, the Tribunal found that the PAN No. AACCS4046D with the name "Shree Silica Products Pvt. Ltd." continued to exist in the Income Tax Department database, and the assessee company had been allotted a fresh PAN No. AADCB4084H with the name "Badaya Ispat Private Limited." The Tribunal concluded that the ITO Ward 4(1), Jaipur, continued to exercise jurisdiction over the assessee company, and there was no infirmity in the action of issuing the notice under section 148 and completing the assessment. The Tribunal also addressed the second contention regarding non-application of mind by the AO while recording reasons before issuing the notice under section 148. The AO received tangible information from the Investigation Wing that the assessee had obtained accommodation entries, which constituted a tangible material for forming a belief that income had escaped assessment. The Tribunal found no infirmity in the AO's action in exercising jurisdiction under section 148. 2. Confirmation of Addition of ?45 Lakhs under Section 68: The AO made an addition of ?45 lakhs under section 68, treating the share capital money received from VIP Leasing & Finance Pvt. Ltd., Singhal Securities Pvt. Ltd., and Finage Lease & Finance India Ltd. as unexplained cash credit. The assessee submitted various documents, including Share Application Forms, Confirmation of Accounts, ITR Acknowledgments, Financial Statements, List of Directors, Bank Statements, and assessment orders for AY 2005-06 to 2011-12 passed under sections 153C/153A. The Tribunal found that in the assessment orders passed for these entities for AY 2008-09, there was no finding recorded by the AO that the companies were involved in providing accommodation entries. The investments made by these entities in the assessee company were accepted as genuine investments. The Tribunal concluded that once the assessee had furnished necessary documentation and the investments were accepted as genuine in the assessments of the shareholder entities, no adverse view could be taken in the hands of the investee assessee company under section 68. The Tribunal also noted that the AO's finding that the assessee had introduced its unaccounted cash in the form of share capital was not corroborated by any material on record. The Tribunal referred to the decision in M/s Layak Fabrics Pvt. Ltd., where similar findings were recorded, and the reopening of the assessment was quashed due to lack of material evidence. Conclusion: The Tribunal dismissed the ground challenging the validity of the order passed under section 147 but allowed the ground challenging the addition of ?45 lakhs under section 68. The addition made by the AO was directed to be deleted, and the appeal of the assessee was allowed.
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