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TMI Blog2023 (10) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... y been addressed by the assessee in the course of original assessment proceedings and such reopening is only based on the change of opinion. As noticed that during the course of original assessment proceedings, the appellant had disclosed all the preliminary facts, which were necessary for completing the assessment. CIT(Appeals) further held that if at the time of original assessment proceedings, the AO has raised wrong inference from the facts disclosed by the appellant, then, appellant cannot be penalized for the wrong inference of facts and law by AO and the assessment of the appellant cannot be reopened after four years from the end of relevant A.Y. once again under section 147 of the Act. In support of this finding, reliance was placed by ld. CIT(Appeals) on the judgment of M/s. Techspan India Private Limited Another[ 2018 (4) TMI 1376 - SUPREME COURT] and M/s. Kelvinator India Limited[ 2010 (1) TMI 11 - SUPREME COURT] - Decided in favour of assessee. - Dr. Manish Borad, Accountant Member And Shri Sonjoy Sarma, Judicial Member Shri Jay Prakash Gupta, FCA, appeared on behalf of the assessee Shri N.T. Sherpa, JCIT, appeared on behalf of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /147 of the IT Act, 1961. (3) On facts and circumstances of the case, the Ld. CIT(A) erred in quashing the order passed by the AO under section 143(3)/147 of the Act holding that the order passed by the AO is illegal, void and is a nullity at law. (4) On facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law in deleting the addition of Rs.16,56,50,000/- made under section 68 of the IT Act, 1961 holding that there was no failure on the part of the assessee to disclose truly all material facts necessary for his assessment. However, the fact is that neither the Director of the assessee company nor the directors of the allotted companies appeared before the AO to verify the genuineness of transaction, identity and creditworthiness of the shareholders of the assessee-company. 5. Since the issues raised in both the appeals are similar, for the purpose of adjudication of the common grounds of appeals raised by the Revenue, we will take up the facts in the case of assessee namely M/s. Linkstar Promoters Pvt. Limited (A.Y. 2012-13) and our decision shall apply mutatis mutandis on the grounds of appeal raised in the case of M/s. Winner Dealtrade Pvt. Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s). 8. The assessee apart from raising the grounds on merit challenging the additions made by the ld. Assessing Officer also challenged the validity of the re-assessment proceedings carried out under section 147 read with section 143(3) of the Act contending them to be illegal, void and nullity in the eyes of law. It was stated by the assessee that for the same reasons, the assessee was scrutinized under section 143(3) of the Act. Further all the issues raised in the reassessment proceedings stand already raised by the ld. Assessing Officer while carrying out assessment proceeding under section 143(3), which was completed on 31.03.2015 and all the documents and evidences in support of the alleged share subscribers proving their identity and creditworthiness and genuineness of the transactions as envisaged under the provisions of section 68 of the Act, stood filed and after considering the submissions of the assessee, the ld. Assessing Officer was satisfied. Now on the very same reasons, the case of the assessee has been reopened, which is nothing but mere change of opinion of the ld. Assessing Officer and for such change of opinion, ld. Assessing Officer cannot assume jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of natural justice in the light of the judgment of the Hon ble Apex Court in the case of GKN Driveshafts (India) Ltd. vs.- ITO reported in 259 ITR 19, since the ld. Assessing Officer while rejecting the objections filed by the appellant, did not deal with the contentions raised by the appellant by speaking order. Accordingly addition under section 68 of the Act at Rs.13.06 crores was deleted. 10. Aggrieved, Revenue is now in appeal before the Tribunal. 11. Ld. D.R. vehemently argued supporting the order of ld. Assessing Officer and further stated that during the course of search at Mittal Group, Shri Madanlal Mittal admitted the fact of routing unaccounted cash of the family groups to the regular books of account of the family group of companies with the help of Kolkata based Jamakarchi Companies. The ld. D.R. also stated that all the alleged share applicants/concerns are not having sufficient net worth to invest in the company and they are merely routing the funds in order to provide accommodation entries. 12. On the other hand, ld. Counsel for the assessee vehemently argued supporting the detailed finding of the ld. CIT(Appeals) and stated that in the original assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iated and reasons were recorded for reopening and the said reasons were only to examine the amount received by the assessee-company towards share capital and share premium. The ld. D.R. failed to rebut this fact that the issues, which have been thoroughly examined by the ld. Assessing Officer during the course of original assessment proceedings, have again formed the reason for reopening of assessment proceedings. Thus for the very same issue, the assessee has been subjected to reassessment proceedings. Now under the given facts and circumstances, of the care whether such reassessment proceedings are valid, needs to be examined into in the light of various judicial pronouncements, which we notice to have been referred in detail by the ld. CIT(Appeals) in the impugned order. 14. On perusal of the impugned order, we notice that while dealing with the legal issues raised by the assessee for the wrongly assuming jurisdiction for reopening of the assessees case, gross violation of principle of natural justice since the ld. Assessing Officer did not give proper opportunity to assessee and confront with the evidence on record. So far as the issue for validity of reassessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion, by the AO. This singularly proves that the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine and it was the Department which was in complete know of the fact of raising of the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- by the Appellant. In-fact the Department had duly examined the genuineness of this very share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- in the scrutiny proceedings which took place under Section 143 of the Act. Thus, there was no failure on the part of the Appellant to disclose fully and truly all material facts necessary for his assessment during the course of the origin a I scrutiny assessment proceedings under Section 143 of the Act which culminated in the assessment order dated 31.03.2015 passed under Section 143(3) of the Act and in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. That being so, the conditions precedent for invoking the 1st Proviso to Section 147 of the Income Tax Act, 1961 for recording the reasons to believe , issuing the notice under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5, passed under Section 143(3) of the Act and in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. If, at the time of original round of assessment proceedings, the AO had raised wrong legal or factual inferences from the facts disclosed by the Appellant, then the Appellant cannot be penalized for the wrong inferences of facts and law by the AO and the assessment of the Appellant cannot be re-opened once again thereafter under Section 147 of the Act. Thus, in this case, the AO was not entitled, on a mere change of opinion, to commence proceedings for reassessment of the income of the Appellant. It is settled law that proceedings for reassessment of the income of an assessee under Section 147 of the Act cannot be commenced on a mere change of opinion. In support of my conclusion above, I derive strength from the judicial pronouncements cited below. In the case of Income Tax Officer Ward No. 16 (2) vs. M/s. Techspan India Private Ltd. Another [2018 (4) TMI 1376 - Supreme Court], it was held, as follows, by the Hon'ble Supreme Court: The language of Section 147 makes it clear that the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostlst April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power tore-open, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. (12) Before interfering with the proposed re-opening of the assessment on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for any interference. The appeal is accordingly dismissed with no order as to costs. In the case of Commissioner of Income Tax, Delhi vs. M/s. Kelvinator India Limited [2010 (1) TMI 11 - Supreme Court of India], it was held, as follows, by the Hon'ble Supreme Court: 5. After the Amending Act, 1989, Section 147 reads as under: Income escaping assessment.147:- If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). 6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their substitution by the opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. 7. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs 15. Further, we find that there is not failure on the part of the appellant to disclose fully and truly all material facts necessary for his assessment and, therefore, as provided in the first proviso to section 147 of the Act, where an assessment under section 143(3) or 147 has been made for the relevant assessment year and where the assessee disclosed fully and truly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs. Thus, as far as the disclosure of material facts by the Appellant in the original round of assessment proceedings is concerned, I find the disclosure by the Appellant as a true and full disclosure of all primary material facts before the AO. As seen above, in this case, during the course of the original assessment proceedings, the Appellant had disclosed, before the AO, all the primary facts which were necessary for his full and true assessment. The Assessing Officer had been apprised, by the Appellant, of all the primary facts necessary for the assessment of the Appellant in the first or original round of assessment proceedings which culminated in the assessment order, dated 31.03.2015, passed under Section 143(3) of the Act and in which the share capital of Rs. 98,42,000/- and the share premium of Rs. 12,07,58,000/- was accepted by the AO as genuine. If, at the time of original round of assessment proceedings, the AO had raised wrong legal or factual inferences from the facts disclosed by the Appellant, then the Appellant cannot be penalized for the wrong inferences of facts and law by the AO and the assessment of the Appellant cannot be re-opened at the whims of the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons to believe , recorded by the AO, the notice issued by the AO under Section 148 of the Act and the re-assessment order, dated 31.12.2019, passed by the AO re-assessing the income of the Appellant under Section 147 of the Income tax Act, 1961 are without jurisdiction and nullities at law. Thus, as per the provisions of the Statute and the settled law for invoking the 1st Proviso to Section 147 of the Income Tax Act, 1961 for issue of notice under section 148 of the Act, the 3 (three) conditions i.e. (a) Income chargeable to tax should have escaped assessment for such assessment year; (b) Four years should have expired from the end of the relevant assessment year for which re-assessment proceedings are to be undertaken by way of issue of notice under Section 148 and (c) Income chargeable to tax for that assessment year should have escaped assessment for by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, be satisfied. These conditions were not satisfied in the case of the Appellant and, hence, the subsequent reasons to believe , recorded by the AO, the notice under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, one of the intervening days between 23.12.2019 (day of issue of show-cause notice) and 26.12.2019 (day of hearing) i.e. 25.12.2019 was a holiday, being the festival day of Christmas. Another glaring aberration in the way enquiry was conducted by the AO even at the fag end of the assessment proceedings is that the notices under Section 133(6) to various share- capital subscribers [i.e. M/s. Amity Sales P. Ltd. and 10 other share-capital subscribers], notice under Section 131 to various Directors of the Appellant and the show-cause to the Appellant have all been given simultaneously on 23.12.2019. The mere factum that the show-cause for addition of the share capital of Rs.98,42,000/- and the share premium of Rs.12,07,58,000/- to the Appellant was simultaneously given on 23.12.2019 along-with the notices under Section 133(6) to various share-capital subscribers and notice under Section 131 to various Directors of the Appellant singularly proves that the AO had already (even prior to the result of the enquiry) made up his/her mind to add the aforesaid share capital of Rs.98,42,000/- and the share premium of Rs.12,07,58,000/-. If at all there was an intention on the part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relevant to the reasons to believe for which the reassessment proceedings have been carried out and lastly the assessee was not provided sufficient opportunity at the time of reassessment proceedings, which was the gross violation of principle of natural justice. Though the assessee has filed complete details before the ld. CIT(Appeals) in order to prove that even on merit also, assessee deserves to succeed but since we have already confirmed the finding of ld. CIT(Appeals) quashing the assessment proceedings on the legal ground as discussed in the preceding paragraph, we find it merely academic to deal with the merits of the case. Accordingly the grounds raised by the Revenue challenging the finding of ld. CIT(Appeals) on the legal ground raised in Grounds No. 1 3 are hereby dismissed and the remaining grounds being on merit of the assessee need no adjudication since we have already held that ld. CIT(Appeals) has rightly quashed the reassessment proceedings being illegal, bad-in-law and nullities in the eyes of law. Thus no interference is called for in the finding of ld. CIT(Appeals) and accordingly Revenue s appeal in the case of M/s. Linkstar Promoters Pvt. Limited is h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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