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TMI Blog2024 (12) TMI 1338X X X X Extracts X X X X X X X X Extracts X X X X ..... agendra Prasad, Judicial Member For the Assessee : Shri Suresh K Gupta, CA For the Revenue : Shri Om Prakash, Sr. DR ORDER This appeal is filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-NFAC, Delhi dated 03.06.2022 for the AY 2012-13. The assessee has raised the following grounds in his appeal: - 1. The impugned assessment is invalid and without jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed. 2. The Ld. AO has erred both in law and circumstances of the case in initiating action u/s 147 of IT Act ignoring the fact that the proceedings have been initiated without application of independent mind on the material, if any, available on Actionable Information Management System of ITD. In view of the above defects in the compliances the resultant reassessment proceedings are required to be set aside. 3. The Ld. AO has erred both in law and circumstances of the case in initiating action u/s 147 of IT Act ignoring the fact that the proceedings have been initiated by mechanical approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mt. Kalpana Shantilal Haria Vs. ACIT WP(L) No.3063/2017 dated 22.12.2017 (Bom), 2. Best Cybercity India P. Ltd. Vs. ITO (2019) 414 ITR 0385 (Del); 3. Omkam Developers Ltd. Vs. ITO ITA No.6862/Del/2018 dt 11.05.2021; 4. M/s VRC Township P. Ltd. Vs. ITO ITA No.1503/Del/2017 dt 14.10.2020; 5. M/s Maheshwari Roller Flour Mills P. Ltd. Vs. ITO ITA No.4257/Del/2019 dt 17.12.2020; 6. Madhu Apartments P. Ltd. Vs. ITO ITA Nos.3869- 3870/Del/2018 dt 01.02.2021. 4. Ld. Counsel further submits that the Assessing Officer did not supply reasons for reopening of assessment though the assessee vide letter dated 30.04.2019 requested for supply of reasons recorded for reopening of assessment. It is submitted that a reminder letter dated 09.09.2019 was also filed requesting for copy of reasons recorded but AO did not supply the reasons to the Assessee. Ld. Counsel submits that the assessee made compliance to notice issued u/s 148 by e-filling the return of income on 29.04.2019 (PB 11) and intimated the Ld. AO vide letter dated 30.04.2019 (PB 43). In the above letter, the reasons for reopening were requested to be provided. The Ld. AO vide notice u/s 142(1) dated 28.08.2019 in item No.10(2) therein in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahkari Khand Udyog Mandal Ltd ACIT 370 ITR 107 (Guj) approved in SLP (C) No.008189/2016 (SC) dt: 18.03.2016; Karan Khurana v. ITO (2021)92 ITR 114 (Delhi) (Trib.) (Copy enclosed) 6. On the other hand, the Ld. DR strongly supported the orders of the authorities below. Ld. DR further submits that no violation of law has been done in the said case. The action has been taken as per Income Tax Act. The content of the said para are not agreed to. Notice u/s 148 of the Income Tax Act, was issued to the assessee after getting the prior approval of competent authority. Further it is submitted that this office has necessary pecuniary and territorial jurisdiction to entertain the case. Further the case is well within period of limitation as per the Income Tax Act, 1961. 7. On hearing both the parties and after going through the additional grounds raised by the assessee, I am of the view that these grounds are purely legal grounds and, therefore, the same are admitted following the above decision of the Hon ble Supreme Court in the case of National Thermal Power Company Ltd. Vs. CIT (187 ITR 688). 8. Heard rival submissions, perused the orders of the authorities below. Undisputedly in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is against equity and justice and facts of the assessee and material on record. 3. The written submissions of the assessee on this ground reads as follows:- Ground No.3 In this ground, the appellant is challenging the validity of reassessment proceedings on the following specific issues: I. Invocation of reassessment proceedings based on Non-existing provision of law and also errors contained in the performa: Non application of mind is discernable from the performa (PB 18) filed by the AO to take approval from the appropriate authority u/s 151. In question in item No.7 which says Whether the provisions of section 147(a) or 147(b) are applicable or both the sections are applicable. The Assessing Officer in the reply mentions section 147(b) applicable. Here it may be appreciated that the sections 147(a)/147(b) have ceased to be in the statute book from 01.04.1989. The mentioning of these incorrect and non-existing sections is a clear case of non-application of mind by the Assessing Officer and also by the authorities providing satisfaction under section 151. Reliance is placed in the decisions of Smt Kalpana Shantilal Haria Vs ACIT W.P.(L) No.3063/2017 dated 22.12.2017 (Bom), Best Cy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fect from scope of sec 153C was enlarged to bring in its ambit the cases where the material seized pertains to or any information contained therein relates to the person other than the person searched. Due to non-obstante clause in sec 153C(1), the authorities are bereft of the powers under other sections of the Act including sec 147/148 of the Act. Recently, on the exactly identical facts where reassessment proceedings, based on the seized material from Sh S.K. Jain Group initiated u/s 147/148 of IT Act, were quashed in view of Section 153C being independent code in the decisions of M/s City Life Projects P Ltd ITA No.2668/Del/2019, M/s. Saurashtra Color Tones Pvt. Ltd. v. ITO ITA No 6276/Del/2018 dt 22.01.2020 (SMC) relying on Shri Adarsh Agrawal v. ITO 2020 ITA NO.777/DEL/2019 dt: 14.01.2020 (DB) and also the decision in Nawal Oils Containers P Ltd v ITO ITA No852/Del/2019 dated04.03.2020 (SMC). In view of these, the action taken by the u/s 147/148 is in clear violation of sec 153C of the Act. 6. The appellant has raised the above objection before Ld AO in objection to assumption to jurisdiction u/s 147 on 29.08.2017 (PB 65-70) in para 4 (PB 67-69) and same is rejected by the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g jurisdiction to complete assessment u/s 143f3V147 bv issue of notice u/s 143(21 of IT Act on the date of supply of reasons thereby debarring appellant to appellant to file objection to assumption to jurisdiction: The appellant vide letter dt: 05.04.2017 (PB 15) requested the AO to provide certified copy of the reason and the Ld AO provided the reasons along with notice dt: 23.06.2017 issued u/s 142(1)/143(2) of IT Act (PB 34). The fact of issue of notice u/s 143(2) on 23.06.2017 is mentioned in assessment order in para 2 at page 2 therein. From above facts, it is evident that the AO assumed jurisdiction by issuing notice u/s 143(2) of the Act on 23.06.2017 at the time of supplying reason which means that the AO assumed jurisdiction to make reassessment before allowing appellant to file objection to assumption to jurisdiction. Hence, assuming jurisdiction by issuing notice 143(2) before allowing appellant to file objection and subsequent disposal off the same is nothing but non-application of mind by the AO to the legal requirements of the law. It may be noted that the Hon ble Gujarat High Court has provided guidance to tax authorities in case of Sahkari Khand Udyog Mandal Ltd vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded showing non application of mind by the reason recording authority where the decision of Delhi High Court in the case of Sonia Gandhi 407 ITR 594 (Del) has been distinguished. Reliance is also placed on the decision of M/s Synfonia Trade/inks P Ltd vs ITO W.P.(C) No. 12544/2018 dt: 26.03.2021 (Del) has quashed the reassessment proceeding based on mechanical approval granted by approving authority Further, reliance is placed on the following authorities: a. Chhugamal Rajpal vs. S.P. Chaliha Ors. - 79 ITR 603 (SC); b. Arjun Singh vs Asstt. Director of Income Tax (M.P.) reported in (2000) 246 ITR 363 (MP); c. CIT vs M/s S.Goyanka Lime and Chemicals Ltd 231 Taxman 0073 Dated 15.10.2014 (MP) approved by Hon'ble Supreme Court in 64 taxmann.com 313 (SC). d. Pr. CITvs. N. C. Cables Ltd 391 ITR 11 (Del) I.T.A. No. 4908/Del/2018 AND I.T.A. No. 4907/Del/2018 22 e. Maruti Clean Coal Power Ltd Vs ACIT WP(T) No.346 of 2017 Dated 03.01.2018 (Chattisgarh High Court); f. German Remedies Ltd. vs. Dy. CIT (2006) 287 ITR 494 (Bom); g. United Electrical Company PLtd. vs. CIT Ors(2002) 258 ITR 317(Del) ; h. Central India electric Supply Co. Ltd. Vs. ITO, 333 ITR 237 (Del); VI. Assumption of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITAT in the case of M/s R.N. Khemka Enterprises P. Ltd. vs. ITO in ITA No.7244/Del/2019, order dated 12.08.2021 has quashed the reassessment proceedings on similar grounds. Therefore, the reassessment proceedings and impugned reassessment order may kindly be quashed. The ld. Counsel also submitted that the Hon ble High Court of Gujarat in the case of Sahkari Khand Udyog Mandal Ltd. vs. ACIT, 370 ITR 107 (Guj) held that the AO must provide suo moto reason to the assessee within 30 days of filing of return of income and the assessee must file objections within 60 days and, thereafter, the AO can take four months time in disposing of objections. He further informed that the SLP filed by the Department has been dismissed by the Hon ble Supreme Court against the said order of the Hon ble Gujarat High Court. 6. The ld. AR submitted that in view of the above, the issue of notice u/s 143(2) of the Act at the time of supply of reasons amounts to denial of opportunity to the appellant to take legal remedy available under the Act of filing of objection on assumption of jurisdiction for initiation of proceedings and passing reassessment order. The ld. AR has also placed reliance on the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also. In pursuance to the said report. Bank Statements of various entities have been obtained and on investigation, it has been noticed that Omkam Developers Pvt. Ltd (Pan AAACO5036B] was one of the beneficiaries during the F.Y 2008-09 relevant Assessment Year 2009-10 and the amount brought through I accommodation entries by the above mentioned company is Rs. 193.00 Lakhs. Copy of the Status Report in the case of Manohar Jay kishan Shah in connection with FIU-IND-STR No.1000010583 is reproduced below:- A. Background : One Suspicious Transaction Report was received in the month November, 2009 from FIUIND. In the said report, 31 related accounts were reported out of which 12 accounts were found to be associated, with business of Metal Trading Wherein Mr. ManoharJaykishan Shah is a Proprietor/Signatory. There are other 19 outstation Branch Accounts which are linked/connected to main 12 accounts and having non-related business/not in the same line of business accounts. During the financial year 2008-09, high, value cheques totaling around Rs. 2030 crore are deposit at outstation branches in these accounts. Subsequent to which on realisation of high value credit amount, debit internal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Annexure-C, C1 and l and S. Flow Chart of Cash Flow Cash deposit in proprietorship Layering of funds through dummy Proprietorships and Shell companies Fund transfer to Shell/Paper Company Fund to the Beneficiaries Conclusion (i) In retrospect it can be rightly conceded that, the beneficiary companies have introduced n cash in primary accounts discussed in Annexure- C and s symbolized by various companies (created for the purpose re-1, Annexure-S) operated by entry operators by entry operators, the unaccounted funds have been entered In the regular books of accounts of the beneficiary companies. (ii) in view of the above, the total amount which has been transferred to the beneficiaries or the recipient companies from the bank accounts of paper companies during F.Y. 2008- 09 is details in Annexure-8. The A.O. of the all beneficiary (Annexure-B) companies is being appraised of ] regarding accommodation entry accepted by the companies in F.Y. 2008-09. Further, A.O. of V concerns listed in Annexure-C, C-l and S is also being intimated regarding, cash deposit and credit made in different bank controlled by them for taking necessary action. It appears that assessee M/s Omkam Develope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i in terms of proviso, to Section 151 of the Income Tax and approval for issue of notice u/s 147 may kindly be accorded. 10.1 On perusal of the proforma for the approval granted by the PCIT, it is evident that in the relevant column No.13 for satisfaction of the Pr.CIT, he has only mentioned yes . No other information is available on record or provided by the ld. DR, which could establish application of mind by the CIT, while granting sanction/approval for issue of notice u/s 148 of the Act. No other evidence was produced as to substantiate that matter was ever discussed between the Assessing Officer or Addl. CIT and the Learned Pr.CIT for arriving at satisfaction of Learned Pr.CIT on the reasons recorded by the Assessing Officer. Even no evidences whether Ld PCIT examined the material relied upon by the Ld AO for reopening, was produced before us. In similar circumstances, Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) held that section 151 of the Act clearly stipulates that Learned CIT, who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The Hon'ble High Court further observed that the mere appendin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, also the Learned DR has argued that the mistake of noting section under section 147(b) of the Act for reassessment proceeding is a clerical mistake, however, the Tribunal in the above decision has rejected the said contention and quashed reassessment proceeding on the ground of non-application of mind while granting approval for reopening of the assessment under section 151 of the Act. 10.4 Respectfully, following the decision of the Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) and decision of the Tribunal in the case of Madhu Apartment Pvt. Ltd (supra), we quash the reassessment proceeding in the case of the assessee. 10.5 Since we have quashed the reassessment proceeding while adjudicating ground No.1 of the appeal of the assessee, no additions made by the Assessing Officer could be sustained. As far as other grounds of appeal of the assessee challenging validity of reassessment proceeding are concerned, same are rendered merely academic in nature and, therefore, we are not adjudicating upon those grounds. As ITA No.6862/Del./2018 7507/Del./2018 far as grounds of the parties challenging merit of the addition are concerned, same are rendered infructuous in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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