2023 (12) TMI 210 - AT - Income Tax

Validity of Revision u/s 263 - two parallel proceedings for the same assessment year - validity of proceedings initiated by notice u/s. 148 and the consequential order u/s. 147 is bad in law notice issued u/s. 148 during the pendency of set aside assessment proceeding - as per CIT AO has not examined the source of share capital and share premium properly and has failed to note that the share capital is introduced by rotating the money to dummy companies which have been created solely for this purpose - HELD THAT - Second revision order passed u/s. 263 dated 12.03.2019 has been quashed by the Coordinate Bench making the second effect giving assessment order dated 06.12.2019 as non-est. Reference made by the Ld. AO in the impugned assessment order of this proceeding and basing it to arrive at the assessed total income is not justified. From the perusal of the reasons to believe recorded by the Ld. AO and as contended by the Ld. Counsel in respect of the contents mentioned therein, we are in agreement with the facts narrated by AO never disclosed the details of layers through which alleged money has been routed into the bank account of the assessee. AO has also never shared the information in respect of documentary evidence for the alleged transactions of accommodation entry. We also do not find conduct of any examination of the allegd layering of the transaction to unearth sequencing of the flow of money alleged by the Ld. AO escaping assessment. We also find ourselves in agreement with the contention of the Ld. Counsel that there is nothing specific stated in the reasons to believe as to the nature of the transaction of accommodation entry as alleged by the Ld. AO as to whether it is an income or an expense or an allowance or share capital or loan etc. Before the Ld. AO, assessee has evidently demonstrated by furnishing its books of account and bank statement that there is no such transaction or such amount of money which has routed into the books of the assessee or into the bank account from the alleged accommodation entry provider Mr. Sandeep Roy, proprietor of M/s. Sarika Trding Co. AO has merely on a wrong belief made such an addition without conducting any verification of any sort of any material or examining the persons involved. We also take note of the approach adopted by the incumbent Ld. AO, who was already seized with an assessment proceeding pursuant to the second revisionary order even though it has been subsequently quashed by the Coordinate Bench. Until the outcome of the appeal before the Coordinate Bench, the Ld. AO had an assessment proceeding pending before him to give effect to the set aside revisionary order. However, with this pendency in hand, he initiated another proceeding by taking note of information received from the Investigation Wing to record the reasons to believe and issue notice u/s. 148. It is important to note that within a period of ten days, the same incumbent AO has passed two assessment orders, first on 06.12.2019 pursuant to revisionary order u/s. 263 and the second one which is the impugned reassessment order u/s. 147/143(3) dated 16.12.2019. Certainly such an act by the Ld. AO of having two parallel proceedings for the same assessment year is contrary to the decision taken in the cases of S. M. Overseas Pvt. Ltd. 2022 (12) TMI 702 - SC ORDER and Trustees of HEH Nizam Supplemental Family Trust 2000 (2) TMI 4 - SUPREME COURT - Accordingly, notice issued u/s. 148 during the pendency of set aside assessment proceeding and subsequent reassessment order passed is bad in law. On the merits as undisputed fact that there is no change in short term borrowings and the revenue from operations is a small/meagre amount of Rs. 1,23,960/-. Thus, the alleged amount of accommodation entry received by the assessee cannot in any way pertain to loan or revenue received by the assessee during the year. As far as share capital and share premium is concerned which has been raised during the year, elaborate detailed examination and verification exercise has already been conducted by the Ld. AO and has been accepted vide first effect giving assessment order u/s. 263/143(3). The Coordinate Bench has already taken note of factual findings given in this assessment order and remains uncontroverted. Thus, on the merits of the case also, we do not find any reason to sustain the addition made by the Ld. AO. Accordingly, the grounds taken by the assessee are allowed.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in initiating proceedings under Section 148.
2. Validity of the notice issued under Section 148.
3. Legitimacy of the reassessment proceedings initiated based on information from the Investigation Wing.
4. Simultaneous conduct of proceedings under Sections 144/263/143(3) and 147/263/144.
5. Absence of Document Identification Number (DIN) in the order.
6. Addition of Rs. 2,48,50,000/- on account of alleged transactions.
7. Interest charged under Sections 234A and 234B of the Income Tax Act.
8. Right to amend grounds at the time of hearing.

Summary:

1. Jurisdiction of the AO in Initiating Proceedings under Section 148:
The Tribunal noted that the AO initiated reassessment proceedings under Section 147 based on information received from the Investigation Wing. However, the second revision order under Section 263, which led to the reassessment proceedings, was quashed, making the reassessment order non-est. The AO's reference to the second effect giving assessment order dated 06.12.2019 was deemed unjustified.

2. Validity of the Notice Issued under Section 148:
The Tribunal found that the AO issued the notice under Section 148 during the pendency of set-aside assessment proceedings, which is contrary to the Supreme Court's decisions in S. M. Overseas Pvt. Ltd. and Trustees of HEH Nizam Supplemental Family Trust. Therefore, the reassessment proceedings were held to be bad in law.

3. Legitimacy of the Reassessment Proceedings Based on Information from the Investigation Wing:
The Tribunal observed that the AO did not provide details of the layers through which the alleged money was routed into the assessee's bank account. The AO's observations were vague, and no examination of the alleged layering of transactions was conducted. The Tribunal agreed with the assessee that the AO failed to establish a live link between the information received and the alleged escapement of income.

4. Simultaneous Conduct of Proceedings under Sections 144/263/143(3) and 147/263/144:
The Tribunal noted that the AO conducted two parallel proceedings for the same assessment year, which is contrary to legal principles. The reassessment order dated 16.12.2019 was passed within ten days of the second effect giving assessment order dated 06.12.2019, indicating an improper simultaneous conduct of proceedings.

5. Absence of Document Identification Number (DIN) in the Order:
The Tribunal did not specifically address the issue of the absence of DIN in the order.

6. Addition of Rs. 2,48,50,000/- on Account of Alleged Transactions:
The Tribunal found that the AO's addition of Rs. 2,48,50,000/- was based on unverified information and a wrong belief. The assessee demonstrated that there was no such transaction or amount routed into its bank account. The Tribunal concluded that the addition was made without conducting any verification or examination of the persons involved and thus, was liable to be deleted.

7. Interest Charged under Sections 234A and 234B:
The Tribunal did not specifically address the issue of interest charged under Sections 234A and 234B.

8. Right to Amend Grounds at the Time of Hearing:
The Tribunal allowed the assessee's appeal, implicitly recognizing the right to amend grounds at the time of hearing.

Conclusion:
The Tribunal quashed the reassessment proceedings and the consequent order under Section 147 read with Section 143(3), holding them to be bad in law. The addition of Rs. 2,48,50,000/- was also deleted. The appeal of the assessee was allowed.