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2025 (1) TMI 600 - HC - Income TaxReopening of assessment u/s 147 - notice was invalid as it had been issued to an entity that was no longer in existence - continuation of proceedings in name of the petitioner as a successor-in-interest - AO issued a notice u/s 148A (b) on the basis of the information to the effect that Tulsi was a beneficiary of accommodation entries provided by one Sh. Joginder Pal Gupta - HELD THAT -Given the nature of the proceedings u/s 148A we are unable to accept that issuance of a notice u/s 148A (b) in the name of an entity, which had since amalgamated with the petitioner, would be fatal to the AO assuming jurisdiction by issuance of notice u/s 148 of the Act in the name of the petitioner. The nature and object of the said procedure is to enable an assessee to address objections to the information available with the AO on the basis of which it is suspected that the assessee s income had escaped assessment. The decision whether to issue a notice u/s 148 and assume jurisdiction to assess / re-assess the income u/s 147 is required to be taken on the basis of the record available with the AO including the response filed by the assessee. In the present case, the response of the petitioner clearly indicated that Tulsi had merged with the petitioner and therefore, the petitioner as a successor-in-interest would be liable for any dues of Tulsi. Admittedly, the reassessment proceedings of Tulsi s income for AY 2017-18 were now required to be initiated and continued in the name of the petitioner as a successor-in-interest and in terms of the scheme of amalgamation. AO had rightly, based on the material on record, taken a decision to issue notice u/s 148 of the Act in the name of the petitioner. It is also material to note that the petitioner had responded to the information available with the AO on merits. Thus, this is not a case where the petitioner did not have the opportunity to address the information available with the AO. AO had acted on the basis of certain information that was flagged by the Directorate of Income-Tax (System) on the insight portal. Allegations being that Tulsi had received funds in its bank accounts through banking channels from eleven entities controlled by Sh. Joginder Pal Gupta and had paid cash to Sh. Joginder Pal Gupta against the said entries. As noted above, the petitioner had denied that Tulsi had received any amount in its bank accounts from the aforesaid companies and also disclosed that Tulsi s bank accounts, which were in operation during the relevant period. AO proceeded on the basis of the allegations that Tulsi has received accommodation entries from companies controlled by Sh. Joginder Pal Gupta had not been controverted. AO had no material at any time, the AO has not referred to any such information which would substantiate that any amount had been remitted by the entities (eleven in numbers) mentioned in the impugned notice and impugned order to the bank accounts of Tulsi. The information as available was accepted as correct notwithstanding the petitioner s assertion that Tulsi has received no amount in its bank accounts from any of the entities as alleged. Revenue was granted sufficient opportunities to file a counter affidavit to the present petition but had failed and neglected to do so. Even before this court, the Revenue has not produced any material to establish that Tulsi has received any amount in its bank accounts from any of the entities as mentioned in the impugned notice or the impugned order. Clearly, absent any material to establish that the petitioner had received amounts in its bank accounts the fundamental premise on which the allegation that it had received accommodation entries is founded the petitioner s assessment could not be reopened. We are unable to accept that the reassessment can be initiated on the basis of information which is contested as palpably incorrect without examining the material giving rise to the said information. The contention that the AO does not require to take any view as to the correctness of the information available with him would render the provisions of Section 148A of the Act a dead letter and the exercise of conducting an enquiry under Section 148A of the Act an exercise in futility. AO is required to ascertain whether the basic facts on which an assessment is sought to be reopened, are sustainable. An allegation that income has escaped assessment on account of accommodation entries availed by an assessee would be insufficient to reopen a closed assessment if the AO does not have material to establish that in fact there were entries in the bank accounts that could possibly support the said allegations. The AO is not required to conclusively decide whether the entries are accommodation entries. But the AO has to be reasonably certain that the alleged entries exist that could be possibly be accommodation entries. Thus the impugned notices under Sections 148 and 148A (b) of the Act and the impugned order under Section 148A (d) of the Act are set aside. 1. ISSUES PRESENTED and CONSIDERED The core legal issues considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of Notice to a Non-existent Entity
Issue 2: Non-provision of Material Evidence
Issue 3: Validity of AO's Belief that Income Escaped Assessment
Issue 4: Compliance with Section 149 of the Act
3. SIGNIFICANT HOLDINGS
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