2021 (7) TMI 1135 - AT - Income Tax

Validity of Assessment u/s 153C - Reopening of assessment u/s 147 - assessee is part of group of persons who are engaged in providing bogus entries by supplying bogus bills of steel to various concerns - HELD THAT - Addition has been made on account of cash deposits in various bank accounts held by M/s. Rishav Trading Company, whose proprietor was Mr. Manoj Kumar Jain the appellant in this case. CIT (Appeals) has correctly held that there is no seizure of any document and the only asset found was the cash deposited in the bank account and there is no satisfaction that any money belongs to the assessee. The satisfaction recorded by the Assessing Officer mention that assessee is involved in providing accommodation entries. On this basis the jurisdiction assumed by the ld AO under Section 153C of the Act was held to be invalid. CIT A issued direction to the learned assessing officer to initiate action u/s 147 148 of the income tax act. Consequently he also did not decide any other grounds of appeal and dismiss them as the order of the assessment was passed u/s 153C of the act itself. Magnitude of the accommodation entry racket operated by the assessee in connivance with other persons. The bank account of M/s. Rishav Trading Company shows a mammoth credit for which the assessee has no explanation. The addition has been made in the hands of assessee on protective basis. No doubt on legal ground the orders u/s 153C of the Act were quashed by the ld. CIT (Appeals). In view of such glaring fact covering huge racket of providing accommodation entries of issuing bogus bills, the ld. CIT (Appeals)being conscious of his powers and his authority in directing the ld. Assessing Officer to issue notice under Section 147 / 148 CIT A in guiding the AO giving a direction to proceed u/s 147 148 of the act are in conformity with the income tax act, the direction itself does not prohibit or curtail upon any power of the assessing officer mentioned in those sections, it is in conformity with the provisions of the law and by merely giving this directions the assessee is not aggrieved at all as he has all the rights vested in the income tax act to challenge such action of the assessing officer as and when taken. When such a glaring facts of money laundering racket run by assessee are found by the income tax department, income tax authority is duty-bound to correct any procedure or other lapses in the assessment order by guiding its subordinate authorities to correct the same and proceed in accordance with the law. There is nothing illegal and improper in such directions. Even the case before us clearly shows that huge bogus bills of several hundred crores were issued by this group of persons, only one of them is before us. There cannot be two opinions on the issue that such practices must be curbed and must be tested on the strictest provisions of the law. In fact in this case the learned assessing officer has made addition on protective basis in the hands of the assessee but we do not know where the substantive additions have been made in the hence of the beneficiaries or not. No infirmity in the order of the ld. CIT (Appeals) in giving direction to the Assessing Officer for issuing notices under Section 151 of the Act. It was not the case that Assessing Officer has already issued notice to the assessee and assessee did not have any opportunity to defend him before the ld. Assessing Officer. In view of this, ground No. 1 of the appeal is dismissed.

Summary

Issues Involved:
1. Validity of jurisdiction assumed under Section 153C of the Income Tax Act, 1961.
2. Direction to initiate action under Section 147/148 of the Income Tax Act, 1961.
3. Non-adjudication of other grounds of appeal on merits by CIT (Appeals).

Issue-wise Detailed Analysis:

1. Validity of Jurisdiction Assumed Under Section 153C:
The CIT (Appeals) quashed the orders passed by the Assessing Officer under Section 153C of the Income Tax Act for the assessment years 2005-06 to 2008-09. The CIT (Appeals) held that the action of the Assessing Officer in assuming jurisdiction under Section 153C was not valid. The basis for this decision was that there was no seizure of any document, and the only asset found was the cash deposited in the bank account. The satisfaction recorded by the Assessing Officer merely mentioned that the assessee was involved in providing accommodation entries, which was insufficient to assume jurisdiction under Section 153C.

2. Direction to Initiate Action Under Section 147/148:
The CIT (Appeals) directed the Assessing Officer to take action under Section 147/148 of the Act. The CIT (Appeals) found that the correct action should have been the reopening of the assessment under these sections. The CIT (Appeals) has the power under Section 251(1)(i) to consider and decide any matter arising out of the proceedings, even if it was not raised by the assessee. The direction to initiate action under Section 147/148 was seen as a correction of the error made by the Assessing Officer in initiating proceedings under Section 153C. The Tribunal upheld this direction, noting that it does not prejudice the assessee as the Assessing Officer would still need to follow the provisions of law and provide an opportunity for hearing.

3. Non-adjudication of Other Grounds of Appeal on Merits:
The CIT (Appeals) did not adjudicate on the other grounds of appeal related to the merits of the addition, stating that these grounds do not survive for adjudication since the proceedings under Section 153C were quashed. The Tribunal found no force in the assessee's grievance on this issue, noting that the CIT (Appeals) had given relief by quashing the Section 153C proceedings. The Tribunal emphasized that the CIT (Appeals) has the authority to correct errors and provide appropriate directions, and the assessee retains the right to challenge any subsequent actions by the Assessing Officer.

Conclusion:
The Tribunal dismissed all four appeals, upholding the CIT (Appeals)'s decision to quash the Section 153C proceedings and direct action under Section 147/148. The Tribunal found no infirmity in the CIT (Appeals)'s order and emphasized the importance of addressing the money laundering racket involving bogus bills. The Tribunal also noted that the assessee has the right to challenge any future actions by the Assessing Officer under the provisions of the Income Tax Act.