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TMI Blog2024 (11) TMI 952X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entry. Assessee during the course of hearing, submitted that even if it is assumed without admitting the same that the transaction is not a genuine transaction then also the assessment could not have been re-opened on the incriminating material found during the course of search. AO was not justified in re-opening of the assessment u/s 147 of the Act. The proper course if any, under the facts of the present case when admittedly the incriminating material which is the basis of re-opening of assessment was recovered during the course of search at the premises of the third party would be proceedings u/s 153C of the Act. The impugned order passed by the AO thus, cannot be sustained. CIT(A) failed to advert to the submissions made by the assessee and the specific grounds taken before him regarding legality of re-opening of assessment. - Shri Kul Bharat, Judicial Member For the Appellant : Shri Sandeep Goel, Adv. For the Respondent : Shri Siddharth B.S. Meena, Sr.DR ORDER PER KUL BHARAT, JM : The present appeal filed by the assessee is directed against the order passed by Ld.CIT(A), National Faceless Appeal Centre ( NFAC ), Delhi dated 14.03.2024 for the assessment year 2008-09. 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Assessment order dated 23.03.2016 passed u/s 147/143 and first appeal order dated 14.03.2024 are totally invalid and unlawful in so far as impugned addition made of Rs 25,00,000 and Rs 50,000 are considered as admittedly there is no cogent material besides the dictate of investigation wing to support the impugned addition u/s 68 of Rs 25 lacs and consequential addition of Rs 50,000; entire impugned assessment is based on mere dictate and direction of investigation wing: VIOLATION OF PRINCIPLE OF NATURAL JUSTICE 5. That Impugned Assessment order dated 23.03.2016 passed u/s 147/143 and first appeal order dated 14.03.2024 are totally invalid and unlawful in so far as impugned addition made of Re 25,00,000 and Rs 50,000 are considered as admittedly there is total violation of principle o natural justice including lack of valid SCN and lack of independent examination/cross examination is concerned; PRAYER (RELIEF SOUGHT): (A) TO QUASH THE UNDERLYING ASSESSMENT FRAMED BY LD AO FOR WANT OF VALID ASSUMPTION OF JURISDICITON U/S 148 AND SO HELD IMPUGNED FIRST APPEAL/NFAC/CIT-A ORDER U/S 250 IS ALSO INVALID. B) TO DELETE THE IMPUGNED ADDITION MADE IN IMPUGNED ASST ORDER u/s 68 (total additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Wing, Delhi. The name of the assessee company, M/s AGS Developers Pvt. Ltd. appeared in the list of beneficiaries who had taken accommodation entries. The Investigation Wing in its report had recorded that true nature of such transactions being sham transactions/accommodation entries and the entry giving entities had been shown to be mere shell companies of no means. Ld. Counsel for the assessee vehemently urged that the re-opening of assessment u/s 147 of the Act, is ex-facie, illegal and unjustified in the light of binding precedents. The assessment order so framed deserves to be quashed under the facts of the present case. He further submitted that on facts, the impugned addition has been made on the basis of conjectures and surmises. He contended that the opinion of the AO is borrowed as it has highly relied on the report of Investigation Wing without independently verifying the issue and correct facts. He placed reliance on the following case laws:- [i]. ACIT vs Shri Deepak Gambhir in ITA No.2466/Del/2023 vide order dated 08.07.2024 [Delhi Trib.]; [ii]. ITO vs Vikram Sujitkumar Bhatia 453 ITR 417/293 Taxman 4/332 CTR 1/ 224 DTR 217 (SC), Civil Appeal No.911/2022 order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in and his associates in the assessment order. In spite of sufficient opportunities having been provided the assessee could only submit mere a paper trail of the documents and failed to controvert the adverse findings confronted to it by the AO. The second addition of Rs. 50,000/- was made u/s 69C on account of undisclosed commission expense paid towards taking the above accommodation entries from the entry operator Jain. [Ref. AO Page 4] The Ld. CITI [Appeal] has also concurred with the findings of the AO and dismissed appeal of the assessee on both the issues i.e. reopening u/s 147/148 and merits of the additions. Validity of Reopening and assuming jurisdiction u/s 147/148: It is a settled legal position that at the stage of recording of reason, no final finding is required to be given and only prima facie belief is required to be reached by the assessing authority. The AO can initiate reassessment proceedings u/s 147 on the basis of credible and specific information available with him. On the validity of reassessment proceedings, I am relying on the decision of Raymond Woollen Mills Ltd. Vs ITO 236 ITR 236 ITR4 (SC) wherein it was held that the AO is not to conclusively prove th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l assessment, impugned reopening was justified. Hon'ble Supreme Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers P Ltd [2007] 161 500 [SC] [2007] 210 CIT 30 [SC] has held that Section 147 authorizes Taxman 316 [SC] [2007] ITR and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' will mean cause or justification. If the AO has cause or justification to know or suppose that income has escaped assessment, it can be said to have 'reason to believe' that an income has escaped assessment. The said expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the AO is to administer the statute with solicitude for the public exchequer with an in-built idea of fairness to taxpayers. The Hon'ble Supreme Court in its decision delivered on 28.03.2022 [SLP [C] No.22921 of 2019] in the case of DCIT Vs MR Shah Logistics P. Ltd [2022] 136 taxmann.com 373 (SC) laid down the proposition that reopening of a case u/s 147 wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee at the initial stage of the reassessment proceedings. In CIT III Vs Shri Shyam Sunder Infrastructure (P) Ltd DOJ 04.02.2015 Hon'ble Delhi High Court has held as under: 5. Learned counsel for the assessee contended that the ITAT possessed jurisdiction to return a finding on whether the AOs order was a nullity, and can give the verdict that such adjudication cannot go into the merits of such proceedings. Facially, Section 124(3) stipulates a bar to any contention about lack of jurisdiction of an AO. It is not as if the provisions of the Act disable an assessee form contending that in the given circumstances the AO lacks jurisdiction, rather Section 124(3) limits the availability of those options at the threshold. The assessee upon receipt of notice of the kind mentioned in Clause (a) and (b) of sub-section 3 has the option to urge the question of jurisdiction; the expressed tenor and terms of the provisions clarify that such objections are to be articulated at the threshold or at the earlier points of time. The two points of time specifled in Section 124(3) (a) are as under: (i) Within one month from the date of service of notice or; (ii) After completion of assessment-w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in subsection (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person: Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... secondly, the seized documents/assets are handed over to the AO having jurisdiction over that person, that is, the person other than the one searched and to whom the seized documents/assets are said to belong. The relevant extract of the said decision is quoted below:- 6. On a plain reading of section 153C, it is evident that the Assessing Officer of the searched person must be 'satisfied' that, inter alia, any document seized or requisitioned 'belongs to a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of section 1534. Therefore, before a notice under section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153C. The above reference to the case of Pepsi Foods (P) Ltd has also been discussed in that order. It is held by the Hon'ble Court: 18. It, plainly, follows that the recording of a satisfaction that the assets/documents seized belong to a person other than the person searched is necessarily the first step towards initiation of proceedings under Section 153C of the Act. In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched. 19. The Allahabad High Court in the case of CIT v. Gopi Apartments [2014] 365 ITR 411/46 taxmann.com 280 has also expressed a similar view in the following words:- 25. A bare perusal of the provision contained in Section 153C of the IT. Act leaves no doubt that, as is provided under Section 158BD, where the Assessing Officer, while proceeding under Section 153A against a person who has been subjected to search and seizure under Section 132(1) or has been proceeded under Section 132A, is satisfied that any money, bull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory, In the case present before this Hon'ble Bench none of the conditions discussed as above exist. Therefore, the AO in this case could not have assumed jurisdiction under section 153C and only course left with the AO to deal with the information and fact material was to make a reassessment under section 147. Hon'ble Delhi High Court in CIT Vs RRJ securities Ltd [2015] taxmann.com391 has discussed in detail as to when the AO assumes jurisdiction under section 153C. Though that decision has been rendered in a different context but lays down clear guidelines for the AOs to proceed under section 153C. Further CASE LAWS on merits: There are various case laws which support the Revenue on this issue some of these are: Hon ble Jurisdictional High Court Delhi CIT vs Nova Promoters and Finlease P.ltd. [2012] 342 ITR 169 [Delhi] The ratio of a decision is to be understood and appreciated in the background of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on details, PAN Nos. or fact that third person or company had filed income tax details in case of private limited company may not be sufficient when surrounding and attending facts predicate a cover up. These facts reflect and indicate proper paper work or documentation but genuineness, creditworthiness, identity are deeper and obtrusive. Hon ble SC Panipat Wollen and General Mills [1976] 103 ITR 66, 74 Hon ble SC Gosalia Shipping P Ltd [1978] 113 ITR 307, 311 Hon ble SC Aloke Mitra [1980] 126 ITR, 599, 611 Hon ble SC MB Kharwar [1969] 72 ITR 603 Hon ble Bombay HC Kolha Hirdagarh Co. Ltd [1949] 17 ITR 545, 555 Hon ble SC Juggilal Kamlapat [1969] 73 ITR 702 Hon ble SC McDowell Co [1985] 154 TTR 148 Hon ble SC CIT Vs Durga Prasad More [1971] 082 ITR 0540 SC Hon ble SC CIT Vs Sumati Dayal [1995] 214 ITR 80 Hon ble Jurisdictional High Court Delhi Pr. CIT-6, New Delhi Vs NDR Promoters P. Ltd in ITA49/2018 dated 17.01.2019. A case involving make-believe paper work to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68 Hon ble High Court of Delhi CIT Vs Focus Exports P Ltd [228 Taxman 88] Where the assessee failed to offer a reasonable and accepta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income than the amounts invested. Hon ble Jurisdictional High Court of Delhi Independent Media P Ltd [25 Taxmann.com 276] [Delhi] For addition u/s 68 AO need not establish money coming from assessee's coffers. For making addition u/s 68 it is not incumbent upon AO to establish that money had come from assessee's coffers. Hon ble Jurisdictional High Court of Delhi CIT Vs Nipun Builders and Developers P Ltd [2013] 350 ITR 407 [Delhi] The point at which the initial onus on the assessee to prove the unexplained credit would stand discharged depends upon the facts and circumstances of each case. Hon ble Supreme Court Charan Singh Vs Chander Bhan Singh 1988 SC 637 Section 101, 102 of Indian Evidence Act, make it clear that initial onus is on person who substantially asserts a claim. If the onus is discharged by him and a case is made out, the onus shifts on the deponent. Hon ble Supreme Court State of J K Vs Bakshi Gulam Mohd. AIR 1967 [SC] 122 Right to cross examine is not an absolute right and it depends not only on the circumstances of the case but also on the statue concerned. Hon ble Madras High Court T. Devasahaya Nadar Vs CIT [1965] 51 ITR 20 [Mad] It is not an universal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be said that onus on assessee to establish credit worthiness of investor companies stood discharged. Hon ble ITAT Delhi Bench Virender Jain Surender Kumar Jain [ITA Nos. 6991 to 6997/Del/ 2014 ITA Nos. 6998 to 7004/ Del/2014] ITAT, Delhi, Order dated 03.02.2016 The ITAT in the second paragraph of the order itself has summarized the findings of the CIT(A) that Suffice to say that Shri Surender Kumar Jain and Shri Virender Kumar Jain were involved in providing accommodation entries. Then the ITAT has decided to set aside the order to the AO asking him to assess Jain Brothers in light of certain judicial pronouncements all of which pertain to assessing accommodation entry operators on the basis of their commission income. In the nutshell, ITAT has not inferred with the findings of the department that Jain Brothers are accommodation entry providers. It is also clear from the perusal of assessment order that the findings of Investigation Wing have been confirmed by assessment unit that Jain Brothers are engaged in the business of providing accommodation entries in view of commission. This finding has also been upheld by learned CIT(A) Hon'ble ITAT. Hon ble SMC Bench ITAT Delhi San ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act and not u/s 147 of the Act. This has been rightly addressed by the ld CIT(A) while deleting the addition in the hands of the assessee. Further, we find that the issue in dispute is squarely covered by the decision of the Hon ble Karnataka High Court in the case of Sri Dinakara Suvarna v. Dy. CIT reported in 454 ITR 21 (Kar.) dated 08.07.2022 wherein it was held that the provisions of section 153C of the Act are pari materia with Section 158BD of the Act (erstwhile block assessment proceedings under Chapter XIVB of the Act). Hence, the ratio laid down by the Hon'ble Supreme Court in the case of Manish Maheshwari Vs. ACIT reported in 289 ITR 341(SC) referred in the context of section 158BD proceedings shall apply mutatis mutandis to Section 153C proceedings also. In the facts of the case before the Hon ble Karnataka High Court, the ld AO in his order dated 24.12.2010 for assessment year 2005 06 had held in para 4.2 that reasons formed to reopen the assessment on the basis of assessee s voluntary depositions and seized materials are in order and further that assessee s objection on that aspect has been rejected by his order dated 07.06.2010. Admittedly, no proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X
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