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TMI Blog2022 (11) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings u/s 147 however, there is no mention as to which information can prima facie lead to the conclusion that income chargeable to tax has escaped assessment in the case of the assessee. There is also no mention of any alleged transaction resulting in bogus accommodation entry in favour of the assessee. As in the present case, the nexus between the alleged material, i.e. the investigation report of the CBI, and the belief of escapement of income from assessment under section 147 of the Act is missing and thus renders the reasons to be reasons to suspect for making further investigation. Thus we are of the considered view that in the present case reasons recorded by the AO are not only vague but also lack the vital link between the alleged material and the belief that income of the assessee has escaped assessment. - Decided in favour of assessee. - ITA No.6669/Mum./2016 ITA No.6673/Mum./2016 - - - Dated:- 4-11-2022 - SHRI M. BALAGANESH , ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL , JUDICIAL MEMBER Assessee by : Shri A. K. Tibrewal a/w Shri Saurabh Gupta Revenue by : Shri P. R. Mane a/w Smt. Kanupriya Damor ORDER PER SANDEEP SINGH KARHA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accommodation entries to various persons, and its directors are operating 20 dummy concerns which have entered into bogus transactions with several concerns and provided accommodation entries. It was further alleged that the assessee is one of the beneficiaries which has received bogus accommodation entries. In response to the aforesaid notice, representation was made on behalf of the assessee, and details, as sought, were filed. The Assessing Officer ( AO ) vide order dated 30/03/2013 passed under section 143(3) r/w section 147 of the Act computed the total income of the assessee at Rs. 22,13,45,360 after making various disallowances. 6. In an appeal before the learned CIT(A), the assessee raised grounds challenging the invocation of jurisdiction under section 147 of the Act as well as various additions made by the AO. The learned CIT(A), after consideration of the remand report filed by the AO and the assessee s reply thereto, vide impugned order dated 25/08/2016 dismissed the appeal filed by the assessee on the issue of initiation of reassessment proceedings following its findings rendered in assessee s case for the assessment year 2005 06. The learned CIT(A), however, grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Successors) (P.) Ltd . [1980] 123 ITR 200 (Delhi). 10. Before proceeding further, it is relevant to note the provisions of Rule 27 of ITAT Rules, 1963, which reads as under: Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. 11. The interpretation of Rule 27 of ITAT Rules, 1963 has been the subject matter in several decisions of various Hon ble High Courts. We find that in Sanjay Sawhney vs PCIT, [2020] 273 Taxman 332 (Delhi), Hon ble Delhi High Court dealt with the facts wherein the first appellate authority had decided jurisdictional challenge to proceedings initiated under section 153C of the Act against the assessee, while on merits appeal was decided in favour of assessee. In appeal by the Revenue against the findings on merits, the assessee made the prayer under Rule 27 of ITAT Rules, 1963 before the Tribunal and challenged the findings on the jurisdictional issue. The Hon ble Delhi High Court vide its detailed judgment analysed the provisions of Rule 27 of ITAT Rules, 1963. The Hon ble High Court also dealt with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der appeal. The aforesaid -expression also suggests that recourse to Rule 27 would only be available in case the remedy of appeal is otherwise available with the Respondent, and he has elected not to avail the same. In other words, in case a Respondent would not have such a right (of filing a cross appeal or cross objection], then he would not have the option to invoke the said provision. This brings us to the more fundamental question regarding the scope of aforesaid rule at the instance of the Respondent who is invoking the same. The scope and ambit of the aforesaid provision can be gathered from the remaining part of the said rule to the effect may support the order appealed against on any of the grounds decided against him . A plain reading of the aforesaid expression indicates that a Respondent can support an impugned order on any of the grounds which were decided against him. Now, if we apply the aforesaid provision to the situation before us, we can easily discern that the Appellant-assessee- on the basis of Rule 27, was urging before the ITAT that the initiation of reassessment may be declared as invalid. Therefore, by invoking Rule 27, the assessee sought to support the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the hearing of the appeal. With this clarity, we do not find any merit in the submissions of the Revenue that the assessee had accepted order of CIT (A), or that the issue of maintainability had attained finality. We also do not find that by such an interpretation, the scope of Rule 27. is expanded or that it would be contrary to section 253 (4), or that it would render the provision relating to cross objections redundant and otiose. In Sundaram Co (supra), the High Court observed that the reason Tor such a rule [Rule 27] was that when a decision is favorable to a person and comes to be challenged by his adversary, the person must be in a position to support the decision on every ground urged before the deciding authority whether or not it found favor, else such a person would be a victim of wrong reasons if no such freedom was given. In fact, the court has further held that even if Rule 27 as under the 1946 Rules had not been enacted, scope for invocation of the principle underlying the rule would still be possible based on principles of natural justice. This is the essence of the proceedings in appeal before the ITAT which unfortunately has been completely ignored and, ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings which were against him. The ITAT, therefore, committed a mistake by not permitting the assessee to support the final order of CIT(A), by assailing the findings of the CIT(A) on the issues that had been decided against him. The Appellant-assessee, as a Respondent before the ITAT was entitled to agitate the jurisdictional issue relating to the validity of the reassessment proceedings. We are, therefore, of the considered opinion that the impugned order passed by the ITAT suffers from perversity in so far as it refused to allow the Appellant - assessee (Respondent before the Tribunal) to urge the grounds by way of an oral application under Rule 27. The question of law as framed is answered in favour of the Appellant-assessee and resultantly the impugned order is set aside. The matter is remanded back before the ITAT with a direction to hear the matter afresh by allowing the Appellant- assessee to raise the additional grounds, under Rule 27 of the ITAT Rules, pertaining to issues relating to the assumption of jurisdiction and the validity of the reassessment proceedings under section 153C of the Act. 12. We further find that Hon ble Jurisdictional High Court in CIT vs Hazari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiating the reassessment proceedings, the Assessing Officer recorded the following reasons for reopening the assessment: ........ The ROI for A.Y.2007-08 was filed on 23-10-2007. In this case, an order u/s. 143(3) of the Act 1961 was passed on 25-08-2009 assessing its total loss at Rs. 1,89,319/-. The ADIT(In.), Unit VII-I II, Mumbai vide letter dated 28.12.2011 has intimated that the assessee company, is one of the group Companies formed by Shri Arun Harsh Dalmia and is engaged in providing accommodation entries to various persons. The report of the ADICT (Inv.) is based on the report of ACB, CBI, Mumbai where in it is reported that the CBI, ACB, Mumbai has conducted investigation in the affairs of Shri Harsh Dalmia and Shri Arun Lal Saini, who are directors of M/s. Satya Securities P. Ltd. It is reported that they operate 20 dummy concerns which have entered into bogus transactions with several concerns and provided accommodation entries. The relevant part of the scrutiny report along with the covering letter of S.P., CBI and ACB, Mumbai is as under: SP's Report: Shri Dalmia's floated 20 companies has never paid taxes to the Government sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerns, and its directors are operating 20 dummy concerns that have entered into bogus transactions with several concerns and provided accommodation entries. It was also alleged that the assessee is a beneficiary of bogus accommodation entries and the investigation carried out by the CBI prima facie established that unsecured loans appearing in the books of the assessee company are not genuine loans but were only bogus entries whose source is not genuine. 16. It is trite that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis to determine the validity of proceedings under section 147 of the Act. In this regard, it is relevant to note the following observation of Hon ble Jurisdictional High Court in Hindustan Lever Ltd vs R.B.Wadkar: [2004] 268 ITR 332 (Bom.): 20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity from which the assessee is alleged to have received the bogus accommodation entry. There is also no allegation that the 20 dummy concerns which are alleged to be operated by directors of the assessee have provided the aforesaid bogus accommodation entry to the assessee. Further, though the investigation carried out by the CBI is alleged to be the basis for initiating the reassessment proceedings under section 147 of the Act, however, there is no mention as to which information can prima facie lead to the conclusion that income chargeable to tax has escaped assessment in the case of the assessee. There is also no mention of any alleged transaction resulting in bogus accommodation entry in favour of the assessee. 18. For initiating the proceeding under section 147 of the Act, the AO is required to have reason to believe that income chargeable to tax has escaped assessment. The existence of a valid reason to believe is a sine qua non to exercise the jurisdiction under Section 147 of the Act. The expression reason to believe imports the cumulative presence of the following four elements viz. some tangible material or materials to establish that income has escaped assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its are rendered academic and therefore, are dismissed. 23. In the result, the appeal by the Revenue is dismissed, while the petition under Rule 27 of ITAT Rules, 1963, as filed by the assessee, is allowed. ITA No. 6673/Mum/2016 Assessee s Appeal - A.Y. 2008-09 24. In its appeal for the assessment year 2008-09, the Revenue has raised the following grounds: 1. Whether on the facts and circumstances and in law, the Ld.CIT(A) was right in deleting the addition of Rs.15,84,40,000/- made u/s.68 of the I.T.Act, 1961 on account of unsecured loans obtained. 2. Whether on the facts and circumstances and in law, the Ld.CIT(A) was right in deleting the addition of Rs.2,14,068/- on account of disallowance of Salary and Travelling Expenses. 3. Whether on the facts and circumstances and in law, the Ld.CIT(A) while deleting the disallowance made u/s.14A r.w.r. 8D has erred in not appreciating the fact that the amount of disallowance u/s.14A of the I.T.Act, 1961 has to be computed as per Rule 8D of I.T.Rules, 1962 when the computation of the assessee was not found to be correct and as held in the order of the Hon'ble High Court in the case of M/s. Godrej Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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