9911796707
TMI Blog2023 (1) TMI 1437X X X X Extracts X X X X X X X X Extracts X X X X ..... te bench of the Tribunal came to the conclusion that there is complete non-application of mind by in obtaining the approval from Pr. CIT and in similar manner the approval was granted by Pr. CIT. The decision taken in Shyam Products Private Limited [supra] applies mutatis mutandis of the appeal of the assessee. Thus, the re-assessment order u/s 143(3) r/w/section 147 is quashed and Ground of appeal of the assessee is allowed. - Shri Challa Nagendra Prasad, Judicial Member, S.M.C. For the Assessee : Shri Suresh Kumar Gupta, C.A. For the Revenue : Shri Om Parkash, Sr. D. R. ORDER PER C. N. PRASAD, J. M. : I.T.A No. 4908/Del/2018 - Assessment Year : 2007-08 : 1. This appeal is filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals)-22 [hereafter referred to CIT (Appeals)] New Delhi, dated 09.05.2018 for assessment year 2007-08. 2. The assessee has raised the following substantive grounds of appeal:- 1. The learned CIT (A) has erred on facts and in law in upholding the impugned order of the learned assessing officer which is contrary to law, passed without application of mind and without complying with the procedure and rules, is against equity and jus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the Tribunal in assessee s own case. The ld. Counsel for the assessee also filed written submissions in so far as assumption of jurisdiction without complying with the process under section 148/151/143(2) of the Income Tax Act, 1961 (the Act) the same are as under:- The appellant in the above ground challenges the action of Ld CIT(A) upholding the reassessment proceedings which has been assumed invalidly without complying with sec 148/151/143(2) and following rules and procedures of law: 1. Invocation of reassessment proceedings based on Non-existing provision of law and also errors contained in the performa: Non application of mind is discernible from the performa (PB 14) filed by the Ld AO to take approval from the appropriate authority vls 151. Kindly refer question in item No. 7 which says Whether the provisions of sec. 147(a) or 147(b) applicable or both the sections are applicable . The AO 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing 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 Mandai Lid vs ACIT 370 ITR 107 (Guj) held that AO must provide suo moto reason to the assessee within 30 days of filling of return of income and the assessee must file objections within 60 days and thereafter the AO can take 4 months time in disposing off objection. This guidance of the Hon'ble Gujarat High Court has been approved by the Hon'ble Supreme Court wherein the SLP of the department has been dismissed. Therefore, issue of notice u/s 143(2) at the time of supply of reasons amounts to denial of opportunity to the appellant to take legal remedy available under the Act of filling of objection on assumption of jurisdiction. To support the above proposition of law, reliance is placed in the decision of Mastech Technologies Pvt Lid vs Dy CIT WP(C) 2858/2016 dt: 13.07.2017 (Del) where in para 30 of the judgment held that issuance of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: Provided that no notice under clause (ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. (Emphasis supplied) The expression Notwithstanding anything contained in clause 0). if he considers it necessary or expedient and on expression considers it necessary presupposes application of mind on part of Ld AO before notice u/s 143(2} of the Act is issued which words have been explained by Hon ble Apex court in case of Bhikubhai Patel vs State of Gujarat (4 SCC 144) wherein the expression: considered necessary is dealt implying that there should be active application of the mind. In other words the term consider postulates consideration of all the relevant aspects of the matter. The word necessary must be construed in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings u/s 147: 1. Non-identification of nature of alleged accommodation entries, modes of payments, the parties acted as entry provider entities, and identification of seized annexure: In the reason recorded (PB 15-19), the AO has although identified various possible modes of accommodation entries such as share application money or Share Capital or Share Premium or Loans or advance etc which could have been availed by the appellant and same has escaped taxation in hands of the appellant company. It is therefore clear that reasons provided nowhere communicates the description of how income escapement of Rs. 45,00,000/ is deduced and what are the components of the alleged entries to the extent of Rs. 40,00,000/- like name of share subscriber entity, amount of share subscribed, date of share subscription, mode of payment and instrument no. bank particulars, date of transaction etc. for want of which reasons have become non-communicative. 6. The ld. DR also submitted written submissions in so far as the re-opening of assessment and the mechanical of approval as under:- On the issue of validity of reopening u/s 148, Mechanical Approval, Cross examining .. It is seen that the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 of 2019] in the case of DCIT Vs. M R Shah Logistics- P. Ltd laid down the proposition that reopening of a case u/s 147 with an objective to verify some information regarding accommodation entry or share premium and share capital is valid and sufficiency of that material cannot dictate the validity of Notice under section 148. Therefore, the AO had a prima-facie case on the basis of specific and credible information about the assessee to record reasons for reopening of the assessment [to quote the case specific information] The important question is . Whether there was relevant material on which a reasonable person could have formed a belief which definitely was there in this case? Whether or not, the material would conclusively establish the escapement is not important. This aspect has to be examined subsequently in the reassessment proceedings. It is noted that the AD has applied his mind to the information available independently to arrive at the belief on the basis of material which was available with him. Hence, the AD had validly assumed jurisdiction u/s 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s 147 of the Act and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from Pr. Commissioner as per provision of section 151, Pr. Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons of reopening. [Ref. Para 42 and 43 of the said order]. Hence, the AO had validly assumed jurisdiction under section 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act under section 147 of the Act. 7. On perusal of the order of the Tribunal in assessee s own case for the assessment year 2010-11 the Tribunal after considering various judgements held that there is non-application of mind by the Assessing Officer while filling up the proforma for obtaining the approval from Commissioner under section 151 of the Act and the ld. CIT also has granted approval in a mechanical manner. The Tribunal observed that in the Form for recording the reasons for initiating proceedings under section 148 for obtaining approval of the Pr. CIT, column 7 i.e. the provisions under which the re-opening was sought for are applicable has been mentioned as section 147(b) and the provisions of section 147(b) are non-existent in the statute book for the assessment year 2010-11. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized in the course of search on Sh S.K. Jain and his brothers (PB 19-33) as per observations in the reason recorded. It is also mentioned in reason that from verification of documents seized in above search it clearly appears that assessee has taken accommodation entries from the entities of Sh S.K. Jain group in lieu of cash. This fact is evident from the following observations in the reason recorded: 1. In para 4 to 7 (PB 20-21), there is discussion of seizure of incriminating material from Sh S.K. Jain group from which it is found that the said searched group was involved in providing accommodation entries. 2. Further, there is specific reference in para 10 (PB 21-22) and para 14-15 (PB 25-26) various seized material has been discussed which includes Annexure A-150 pages 1-13 (PB 26) and other details showing amount of commission and payments to various middlemen in consideration of accommodation entries by them. 3. In para 10 sub para vi (PB 22), there is mention of daily cash book, cheque books seized from Sh S.K. Jain whereby details of cash received from various beneficiaries companies/person through various middleman/agents in lieu of accommodation entries provided to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject given in the above information, there is a clear direction to the AO which is also emphatically repeated till para 2 also. In addition to the above dictate, the CIT vide its binding direction dt: 15.03.2013 directed the AO s working in his charge to take immediate action in respect of AY 2006-07 getting time barred on 31.03.2013 as noted in the table as TB cases. Consequent to above direction of the DDIT dt: 12.03.2013 and the consequent binding instruction of CIT dt: 15.03.2013, the AO initiated action by recording undated reasons for which approval was granted on 21.03.2017. From the above discussion, it is evident that the above direction is the trigger point for initiating action u/s 148 and therefore it can be inferred that there is a satisfaction of authority other than the AO resulting into reopening of the case. This is against the provisions of sec 147 which lay down that it is the AO whose satisfaction is sine qua none for valid initiation of reassessment proceedings. In Green World Corporation (supra) (SC) held that Notices issued pursuant to the direction by the Pr. CIT thereto would be bad in law. Further In CIT v. SPL's Siddhartha Ltd. [2012] 345 ITR 223 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt to take legal remedy available under the Act of filling of objection on assumption of jurisdiction. To support the above proposition of law, reliance is placed in the decision of Mastech Technologies Pvt Ltd vs Dy CIT WP(C) 2858/2016 dt: 13.07.2017 (Del) where in para 30 of the judgment held that issuance of notice u/s 142(1) 1143(2} before supplying the reasons and considering petitioner objection and passing reasoned order thereon does not meet requirement of law. Such legal infirmity leads to inevitable invalidation of all the proceedings that took place pursuant to notice u/s. 148. Recently, the co-ordinate of Hon ble Delhi ITAT in case of M/s R N Khemka Enterprises P Ltd vs ITO in ITA No. 7244/Del/2019 dt: 12.08.2021 has quashed the reassessment proceedings on similar grounds. Kindly refer para s 33 to 35 at internal page 51-53 therein. V. Mechanical Approval Granted by Pr CIT The exercise of approval u/s 151(1) of IT Act by the Ld Pr CIT, Delhi-8, New Delhi appears to have been ritualistic and formal rather than meaningful, which goes against the rationale of the safeguard of approval by a higher- ranking officer provided in the Act. Inconsistencies and omissions pointed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad High Court in the case of Madan Lai Agrawal Vs. CIT reported at 144 ITR 745 [All]. On similar facts, mentioned in the reason recorded, the Hon'ble ITAT in Shree Balkishan Aggarwal Glass Industries P Ltd in ITA No. 1523/Del/2014 in para 22 at page 18 has quashed the reassessment proceeding 4. Briefly reiterating the written submissions of the assessee, the ld. AR submitted that the invocation of reassessment proceedings based on non-existing provisions of the law clearly shows that it is a clear case of non-application of mind by the AO and also by the authorities provided the approval u/s 151 of the Act. Reliance in this regard has been placed on the decisions of Smt. Kalpana Shantilal Haria vs. ACIT W.P (L) No. 3063/2017, order dated 22.12.2017 (Bom); Best Cybercity India P. Ltd. vs. ITO (2019) 414 ITR 385 (Del); Omkam Developers Ltd. vs. ITO, ITA No. 6862/Del/2018, order dated 11.05.2021; M/s VRC Township P. Ltd. vs. ITO, ITA No. 1503/Del/2017 dated 14.10.2020; M/s Maheshwari Roller Flour Mills P. Ltd. vs. ITO, ITA No. 4257/Del/2019 dated 17.12.2020; and Madhu Apartments P. Ltd. vs. ITO, ITA Nos. 3869-3870/Del/2018, order dated 01.02.2021. Therefore, the ld. AR submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92B of the Act. 8. On careful consideration of the rival submissions, from the order of the coordinate Bench of ITAT in the case of Omkam Developers Ltd. (supra), I observe that in the similar set of facts and circumstances, similar legal contention was placed before the E Bench which was adjudicated as follows:- 10. We have heard rival submission of the parties on the issue in dispute raised in the cross appeals. As far as ground No. 1 of the appeal of the assessee is concerned, the assessee has challenged the validity of the reassessment proceeding on the ground that approval for issue of the notice under section 148 of the Act was granted by the Learned Pr. CIT in a mechanical manner and without application of mind and, therefore, reassessment proceeding must be quashed. For adjudicating this issue, the reasons recorded by the Assessing Officer and relevant proforma of approval granted by the Pr. CIT are reproduced as under: Reason for the belief that income has escaped assessment in the case of M/s, Omkam Developers Pvt. Ltd. A.Y. 2009-10 (Pan:AAACQ5036B) 1. Name Address of the Assessee : M/s Omkam Developers Ltd, 702, Arunachal Building, 19, Barakhamba, Road, Connaught Place, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts belonging to 6 entities in which cash of Rs. 15.26 crore was deposited in the F.Y.-2008-09: The cash deposited were swiftly Transferred to other entities through Cheques/RTGS. These-6 entities are proprietorships. The detail is given as per Annexure-C. The funds from other entities through Cheques/RTGS were also received in these accounts. The details of another 21 proprietorships given are STR is as per Annexure-C1. II. The find from the entities mentioned in Annexure-C and C1 were transferred to a number of entities which are mostly entities already identified as the companies controlled by the entry operators, few of them have been listed in Annexure-1. III. The fund was rotated among the entities detailed in Annexure-C, C1 and Annexure-1 IV. There were 6 Bank Accounts Belonging to 6 Companies in which funds were received from mostly entities discussed in Annexure-C, C1 and Annexure-1 and the same was swiftly transferred to the other entities (Mostly Companies). The details of 6 such companies are given in Annexure -5 V. The fund was transferred to the entities which are the real beneficiary of the funds from the companies mentioned in Annexure-S. The details of such, compani ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to believe that an amount of Rs. 1.93 crores has escaped from the Assessment for the A.Y. 2009-10 which was chargeable to tax. I am also satisfied that on account of failure on the part of the assessee to I disclose truly and fully all the material facts necessary for assessment for the j above assessment year, the income chargeable to tax to the tune of Rs. 193.00 Lakh as escaped assessment with the meaning of Section 147 of the IT Act 1961 I have perused the information received from the Investigation Wing, Kolkata The Investigation Wing of the Department has sent comprehensive detail comprising inter alia the beneficiary's name, value of entry taken etc. In the aforesaid case as per record from ITD, return of income was filed on declaring Rs. 2,389/- income, it is noticed that the assessee company M/s Omkam Developers Ltd, received accommodation entries to the tune of Rs. 1.93, crores during the F.Y. 2008-09 relevant to assessment year 2009-10 from the entry operators as mentioned in the chart above and same was not offered for taxation. Having perused and considered the information, I have reason to believe that income of the assessment company to the extent of Rs. 193 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for approval, without any other evidence of application of the mind, amounts to mechanical approval by the Learned Pr.CIT. 10.2 Further in Column No. 7 of the proforma, the section for invoking reassessment has been recorded as 147(b) of the Act. During the relevant period, section 147(b) was no longer in existence. This shows that the Ld. AO has filed the Proforma in mechanically manner and Ld. CIT has also approved the same mechanically. In the case of Madhu Apartment Private Limited vs. ITO, ITA.Nos.3869 3870/Del./2018 wherein the Tribunal, Delhi Bench, vide order dated 01/02/2021 held as under: 7. After considering the rival submissions, we are of the view that the issue is covered by the Order of ITAT, Delhi G-Bench, Delhi in the case of VRC Township Pvt. Ltd., Delhi (supra) in which reopening of the assessment in identical circumstances was held to be bad in law and sanction accorded by the Sanctioning Authority was also found invalid, therefore, reopening of the assessment was quashed. In the present case, the Learned Counsel for the Assessee has pointed-out that assessee has raised this issue before the Ld. CIT(A), but, he has rejected the submissions of the assessee holdin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid format is being reproduced below:- 10. Therefore, it is clear that the AO, in the first page of reasons (supra) mentioned in column 7 that provisions of section 147(b) is applicable which is non-existent in the statute book for AY 2010-11. This apparently shows non-application of mind by the AO while filling proforma in a mechanical manner and the ld. ACIT and Ld. PCIT also approved the same in a mechanical manner. So far as the contention of the ld. Sr. DR that this defect is curable u/s 292B of the Act is concerned, this contention was decided by the ITAT Delhi Bench in the case of Madhu Apartments India Pvt. Ltd., ITA No. 3869 3870/Del/2018, order dated 01.02.2021, the relevant part of which has already been reproduced in the earlier part of this order since the same was referred to and included in the relevant part of the order of the ITAT in the case of Omkam Developers Ltd. (supra). Therefore, respectfully following the order of ITAT Delhi Bench in the case of Omkam Developers Ltd. vs. ITO (supra) and Madhu Apartments P. Ltd. vs. ITO (supra), I hold that the impugned reassessment proceedings and the impugned reassessment order deserves to be quashed and I hold so. 8. On p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or cross-examination of Jain brothers, copies of the orders of Jain Brothers and the relevant seized material relied upon has not been provided to the assessee, which is against Law of Natural Justice. d. The assessment has been made on the basis of conjecture surmises without any cogent evidence. 4. The learned CIT (A) has erred on facts and in law in upholding the addition of Rs. 35,00,000/- u/s. 68 on account of share capital, treating the same as an accommodation entry. 5. The learned CIT (A) has erred on facts and in law in upholding the addition of Rs. 70,000/- u/s 69C as alleged commission paid for obtaining accommodation entries. 6. The learned CIT (A) has erred on facts and in law by not adjudicating ground of initiation of penalty proceedings u/s 271(l)(c) without any material on record. 12. Facts in this case are identical to the facts in the case of Shyam Products Private Limited. Therefore, the decision taken in Shyam Products Private Limited applies mutatis mutandis of the appeal of the assessee. Thus, the re-assessment order under section 143(3) read with section 147 of the Act dated 28.03.2016 is quashed and Ground No. 1 of grounds of appeal of the assessee is allow ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
