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TMI Blog2016 (4) TMI 1142X X X X Extracts X X X X X X X X Extracts X X X X ..... formation allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. - Decided in favour of assessee - ITA No. 5128/Del/2015 - - - Dated:- 22-4-2016 - SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. Amit Goel, FCA For The Revenue : Sh. Amit Jain, Sr. DR ORDER PER H.S. SIDHU, J.M. The Assessee has filed the Appeal against the Order dated 26.5.2015 of the Ld. CIT(A)-2, New Delhi pertaining to assessment year 2006-07 and raised the following grounds:- 1. That having regard to fact and circumstances of the case, Ld. CIT (A) has erred in law and on facts by not accepting the assessee's submission that, in any case, and in any view of matter, the notice u/s 147 is barred by limitation and the notice I order are based on incorrect facts in violation of principal of natural justice. 2. That havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stainable on various legal and factual grounds. 9. That having regard to facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234 A, 234 B, and 234 D of Income Tax Act, 1961. 10. That having regard to facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts by stating that ( Para- 4.2.14 of the order) the Appellant is a Private Limited Company, where the money have been received through Private Placement and not through Public Issue. So being a Private Limited Company, the contributors must have been personally known to the Appellant. This is factually incorrect, since those are the Loan Creditors of the Appellant company, and not the Shareholders. Again, the amount was not received by Appellant Company through Private Placement for allotment of shares , but it was received through banking channels from the Loan Creditors of the Appellant Company. 11. That having regard to the facts circumstances of the case, the Ld. CIT(A) has not called for the remand report. Nowhere in the assessment order, the Ld. A.O has stated that these loans were not rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons given by CIT(A) for confirming the said additions are erroneous and not sustainable both on facts and in law and accordingly the addition of ₹ 3,50,00,000/- on account of alleged unexplained credits is liable to be deleted. The appellant craves leave to add one or more ground of appeal or to alter / modify the existing ground before or at the time of hearing of appeal. 3. After filing the above grounds, Ld. Counsel of the assessee requested that before proceeding on merit in the case of the assessee, first the additional legal grounds raised by the assessee may be considered and decided, because the legal grounds goes to the root of the matter and very much essential, hence he requested that the additional grounds may be admitted in the interest of justice. 4. Ld. DR did not raise any serious objection on the admission of additional grounds. 5. We have heard both parties on the admission of additional grounds, as aforesaid, we are of the view that in the interest of justice, the additional grounds raised by the assessee mentioned in para no. 2 at page no. 5 of this order are purely legal and do not require fresh facts which is to be investigated a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Banke Bihari Properties Pvt. Ltd. Tauru Finman Pvt. 15,00,000/- 9. Banke Bihari Properties Pvt. Ltd. Tejasvi Investment Pvt. Ltd. 25,00,000/- 10. Banke Bihari Properties Pvt. Ltd. Thar Steels Pvt. Ltd. 15,00,000/- 11. Banke Bihari Properties Pvt. Ltd. Unique Capital Pvt. Ltd. 25,00,000/- 2,90,00,000/- Accordingly, notice u/s. 148 of the I.T. Act, 1961 was issued and the assessee was supposed to file the return of income within 30 days in compliance to notice u/s. 148. In compliance to notice u/s. 148, the AR of the assessee has filed a letter dated 22.5.2013 alongwith a photocopy of e-filed return without any stamp/ receipt of the relevant Ward/Circle. The declared income / loss was shown at ₹ 11,172/-. The assessee also requested a copy of reasons vide the above letter. The reasons were provided to the assessee vide letter dated 16.7.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... To support his contention he submitted that the issue in dispute is squarely covered in favour of the assessee by the ITAT decision dated 09.1.2015 in the case of G G Pharma India Limited vs. ITO passed in ITA No. 3149/Del/2013 (AY 2003-04) in which the Judicial Member is the Author. He further stated that the above decision of the ITAT dated 9.1.2015 has been upheld by the Hon ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G G Pharma India Ltd. In this behalf, he filed the copy of the order dated 9.1.2015 of the ITAT, Delhi Bench passed in the case of G G Pharma India Ltd vs. ITO (Supra) and referred the page nos. 21-39 of his another Paper Book i.e. Compilation of case laws. He further draw our attention towards the page no. 39-56, and relied upon the ITAT decision dated 22.10.2014 in the case ITO vs. NC Cables Ltd. He further relied upon the decision of the ITAT, Mumbai Bench in the case Amar Lal Bajaj vs. ACIT (2013) 37 Taxmann.com 7 (Mumbai) Trib. (copy thereof at page no. 67-71 of the Paper Book) and also referred the M.P. High Court decision in the case of CIT vs. M/s S. Goyanka Lime and Chemicals ltd. in whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6. The quantum of income which has escaped assessment. ₹ 2,90,00,000/- 7. Whether the provisions of Section 147(a), 147(b) or 147(c) are applicable or all the Sections are applicable. Yes 8. Whether the assessment is proposed to be made for the first time. If the reply is in affirmative please state. Yes Whether any voluntary return had already been filed. No If so, date of filing the said return. NA 9. If the answer to item 8 is in negative please state The income originally assessed .. Whether it is a case of under assessment, assessment at too low a rate, assessment which has been made the subject of excessive relief or allowing of excessive loss or depreciation. Yes 10. Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perator cannot be established. I therefore, have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year, the income chargeable to tax amounting to ₹ 2,90,00,000/- has escaped assessment within the meaning of section 147 of the Act. Since four years has expired from the end of the relevant assessment year, and the assessee has not filed any return of income, the reasons recorded above for the purpose of opening of assessment is up for kind satisfaction of the Addl CIT, Range-2, New Delhi in terms of the provisions to section 151(2) of the IT Act, 1961. Dated: 22.03.2013 Sd/- (PAWAN MEENA) ITO, WARD 2(3), NEW DELHI 12. Whether the Addl. CIT/CIT/CBDT is satisfied on the reasons recorded by the AO that it is a fit case for the issue of notice u/s. 148. Approved Dated: Sd/- (25.03.2013) (P.V. Gupta) Addl. CIT, Range-2, New Delhi 8. After going through the reasons recorded by the Assessing Officer/DCIT, Circl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation allegedly received by him from the Directorate of Investigation, Jhandewalan, New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon ble High Court of Delhi in the following cases:- (i) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: (i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The Assessing Officer must have reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The AO had clearly substituted form for substance and therefore the action of the AO was not sustainable. 9. In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present appeal and is squarely covered by the aforesaid decisions of the Hon ble High Court of Delhi. Hence, respectfully following the above precedent, we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 10. In the result, the Appeal filed by the Assessee stands allowed. (B). Pr. CIT vs. G G Pharma India Ltd. in ITA No. 545/2015 dated 8.10.2015 of the Delhi High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity . 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed. (C) ITAT, E Bench, New Delhi in the case of ITO vs. M/s NC Cables Ltd. in ITA No. 4122/Del/2009 (AY 2001-02) and in Cross Objection No. 388/Del/2009 in the matter of M/s NC Cables Ltd. vs. ITO, vide order dated 22.10.2014, the Tribunal has held as under:- 10.2. The Mumbai E Bench of the Tribunal in ITA 611/Mum/2004 Amarlal Bajaj (supra) order dt. 24.7.2013 has considered the legal position and held as follows. 5. We have considered the rival submissions and carefully perused the orders of the lower authorities and also the material evidences brought on 8 record from both sides. We have also the benefit of perusing the order sheet entries by which the Ld. CIT has granted sanction. Let us first consider the relevant part of the provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 148 merely noted Yes and affixed his signature there under. On these facts, the Hon'bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the 9 Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO. Intimation has been received from DCIT-24(2), Mumbai vide his letters dt. 22nd February, 2002 that one Shri Nitin 1. Rugmani assessed in his charge had arranged Hawala entries in arranging loans, expenses, gifts. During the year Shri Amar G. Bajaj, Prop. Of Mohan Brothers, 712, Linking Road, Khar (W), Mumbai-52 was the beneficiary of such loans, expenses and gifts. The modus-operandi was to collect cash from the parties to whom loans were given an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n (1) of section 151of the 10 Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some inbuilts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment . The Hon'ble High Court further observed that what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.] [Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.] 6. A simple reading of the provisions of Sec. 151( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of ₹ 8,00,000/-, 11,21,243/- and 9,64,739/- respectively. The assessment was completed u/s. 143(3) of the I.T. Act on 31st March, 1998 by DCIT-Spl. Rg. 40, Mumbai. It is seen from records that the aforesaid points have not been verified in the assessment. I have therefore reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income has escaped assessment within the meaning of proviso to Sec. 147 and explanation 2 (c)(i) of the income-tax Act, 1961. 7. In the light of the above mentioned reasons, in our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned approved to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis- -vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee s appeal is allowed. 10. As we have held that the reassessment is bad in law, we do not find it necessary to decide other issues which are on merits of the case. (E). Hon ble High Court of Madhya Pradesh in the case of CIT vs. S. Goyanka Lime Chemicals Ltd. reported in (2015) 56 taxmann.com 390 (MP) has held as under:- 7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so Yes, I am Satisfied . In the case of ARjun Singh vs. Asstt. DIT (2000) 246 ITR 363 (MP), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- The Commissioner acted, of course, mechanica ..... X X X X Extracts X X X X X X X X Extracts X X X X
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