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TMI Blog2025 (1) TMI 600X X X X Extracts X X X X X X X X Extracts X X X X ..... assume jurisdiction to assess / re-assess the income u/s 147 is required to be taken on the basis of the record available with the AO including the response filed by the assessee. In the present case, the response of the petitioner clearly indicated that Tulsi had merged with the petitioner and therefore, the petitioner as a successor-in-interest would be liable for any dues of Tulsi. Admittedly, the reassessment proceedings of Tulsi s income for AY 2017-18 were now required to be initiated and continued in the name of the petitioner as a successor-in-interest and in terms of the scheme of amalgamation. AO had rightly, based on the material on record, taken a decision to issue notice u/s 148 of the Act in the name of the petitioner. It is also material to note that the petitioner had responded to the information available with the AO on merits. Thus, this is not a case where the petitioner did not have the opportunity to address the information available with the AO. AO had acted on the basis of certain information that was flagged by the Directorate of Income-Tax (System) on the insight portal. Allegations being that Tulsi had received funds in its bank accounts through banking c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in fact there were entries in the bank accounts that could possibly support the said allegations. The AO is not required to conclusively decide whether the entries are accommodation entries. But the AO has to be reasonably certain that the alleged entries exist that could be possibly be accommodation entries. Thus the impugned notices under Sections 148 and 148A (b) of the Act and the impugned order under Section 148A (d) of the Act are set aside. - HON BLE THE ACTING CHIEF JUSTICE VIBHU BAKHRU AND HON BLE MS. JUSTICE SWARANA KANTA SHARMA Advocates who appeared in this case: For the Petitioners :Mr. C.S. Aggarwal, Senior Advocate with Mr. Ravi Pratap Mall and Mr. Uma Shankar, Advocates. For the Respondents :Mr. Sunil Agarwal, Mr. Shivansh B. Pandya, Mr. Viplav Acharya Mr. Utkarsh Tiwari, Advocates. JUDGMENT VIBHU BAKHRU, ACJ 1. The petitioner has filed the present petition impugning a notice dated 01.06.2022 issued under Section 148A (b) of the Income Tax Act, 1961 (hereafter the Act); an order dated 30.07.2022 (hereafter the impugned order) passed under Section 148A (d) of the Act; and a notice dated 30.07.2022 issued under Section 148 of the Act seeking to reopen the peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed a common order dated 25.02.2022 in a batch of petitions including W.P.(C) No. 3418/2022 preferred by the petitioner for setting aside such notices including the notice dated 29.06.2021 issued under Section 148 of the Act. 7. Subsequently, the reassessment proceedings were revived in terms of the judgment rendered by the Supreme Court in Union of India Ors. v. Ashish Agarwal [2022] 444 ITR 1 . The AO issued the impugned notice dated 01.06.2022 under Section 148A (b) of the Act in the name of Tulsi. The petitioner once again responded to the said notice clarifying that Tulsi had ceased to exist as it was amalgamated with the petitioner with effect from 01.04.2018. The petitioner also filed a detailed reply dated 09.06.2022 addressing the information set out in the impugned notice dated 01.06.2022. The petitioner also sought copies of the material on the basis of which the impugned notice under Section 148A (b) of the Act was issued. 8. The petitioner s response was rejected and the AO passed the impugned order holding that it was a fit case for issuance of a notice under Section 148 of the Act. SUBMISSIONS 9. The learned counsel for the petitioner assailed the impugned notices an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued under Section 148 of the Act are in the name of the petitioner and not in the name of a non-existent entity. Insofar as the petitioner s contention regarding the merits of the information available with the AO is concerned, he submitted that the correctness of the information cannot be gone into at the stage of issuance of notice under Section 148 of the Act as the same is required to be examined during the reassessment proceedings. He submitted that if there is, prima facie, some material which suggest that the petitioner s income had escaped assessment, the AO has the jurisdiction to issue a notice under Section 148 of the Act to reopen the assessment. REASONS CONCLUSION 14. The contention that the impugned notice issued under Section 148 of the Act is invalid as the initial notice under Section 148A (b) of the Act was issued in the name of Tulsi, is unpersuasive. The petitioner is correct that a notice under Section 148A (b) of the Act was issued in the name of Tulsi which has since merged with the petitioner and therefore, was not existing at the material time. However, the AO had noted the said objection and passed an order under Section 148A (d) of the Act in the name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment order holding that it was void ab initio as it was passed in the name of a non-existing entity. 16. In Principal Commissioner of Income Tax v. Maruti Suzuki (India) Ltd., the AO had assumed the jurisdiction by issuance of notices in the name of a non-existent company and the assessment was also framed in the name of a non-existent company. The decision of the Supreme Court rested on the fact that jurisdictional notices had been issued by the AO in the name of the non-existent entity. The relevant extract of the said decision is set out below: 36. In the present case, despite the fact that the assessing officer was informed of the amalgamating company having ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued only in its name. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist upon the approved scheme of amalgamation. Participation in the proceedings by the appellant in the circumstances cannot operate as an estoppel against law. This position now holds the field in view of the judgment of a coordinate Bench of two learned Judges which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the material on record, taken a decision to issue notice under Section 148 of the Act in the name of the petitioner. It is also material to note that the petitioner had responded to the information available with the AO on merits. Thus, this is not a case where the petitioner did not have the opportunity to address the information available with the AO. 19. The principal question to be addressed is whether the assumption of jurisdiction by the AO to initiate reassessment proceedings by issuance of impugned notice under Section 148 of the Act can be sustained on the basis of the record as available. 20. It is relevant to construe the import of Section 148A of the Act. Section 148A of the Act is set out below: 148A. Conducting inquiry, providing opportunity before issue of notice under section 148. - The Assessing Officer shall, before issuing any notice under section 148, (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority means the specified authority referred to in section 151. 21. It is apparent from the scheme of Section 148A of the Act that it prescribes a procedure for enabling the AO to take an informed decision whether to issue a notice under Section 148 of the Act for assessing/reassessing an assessee s income under Section 147 of the Act. At the first stage [Refer to clause (a) of Section 148A of the Act] , the AO is required to conduct an enquiry with respect to the information that suggests income of the assessee chargeable to tax has escaped assessment. By its very nature, the said enquiry is a preliminary enquiry and it is not necessary that the said enquiry yields any conclusive result as to whether the assessee s income has escaped assessment. The limited threshold of the enquiry is to ascertain whether there is any information suggestive of the income escaping assessment. Once the AO has information, which suggests that an assessee s income has escaped assessment, it is necessary for the AO to provide an opportunity to the assessee to be heard by serving a show cause notice. This is an essential step to eliminate arbitrariness in initiating reassessment proceedings. The initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied by introducing Section 148A of the Act. The relevant extract of the said judgment is set out below: 18. But prior to pre-Finance Act, 2021, while reopening an assessment, the procedure of giving the reasons for reopening and an opportunity to the assessee and the decision of the objectives were required to be followed as per the judgment of this Court in GKN Driveshafts (India) [GKN Driveshafts (India) Ltd. v. ITO, (2003) 1 SCC 72]. 19. However, by way of Section 148-A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under Section 148, the assessing officer shall: (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and credible. As is clear from the plain language of Section 148A (d) of the Act, the AO has to decide whether it is a fit case for issuance of notice under Section 148 of the Act. This decision would require the AO to take a view in respect of the material available and form an opinion whether there are grounds to believe that the assessee s income has escaped assessment. As observed earlier, the entire purpose of establishing the procedure under Section 148 of the Act is to ensure that assessments are not reopened whimsically or arbitrarily. The decision to reopen the assessment must be based on cogent material that can lead to the conclusion that the assessee s income has escaped assessment. The question whether the assessee s income had in fact escaped assessment is a matter that would require to be determined in the reassessment proceedings, however, the question whether there is sufficient material that warrants reopening of the assessment is required to be examined at the stage of passing an order under Section 148A (d) of the Act. 26. In the facts of the present case, it is apparent that the impugned order passed under Section 148A (d) of the Act is unsustainable. 27. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of taxation. 4. In accordance with the aforesaid judgement, you are required to furnish the desired reply regarding why reassessment u/s 147 of the IT Act, 1961 shall not be made in your case, within 2 weeks i.e. by 15/06/2022 through your e-filing module of the Income Tax Department. 5. If you fail to submit reply within time allowed, it will be presumed that you have nothing to say in this regard and necessary proceedings as per Income Tax Act,1961 shall be initiated. CHHUTTAN LAL MEENA CIRCLE 25(1), DELHI 28. It is apparent from the above that the AO had information to the effect that Tulsi had availed of accommodation entries from certain entities during the financial year 2016-17. 29. As noted above, the petitioner had furnished a reply to the said notice raising a grievance that notice under Section 148A (b) of the Act merely alleged that Tulsi had availed of accommodation entries without providing any detailed information or material to the said effect. The petitioner submitted that the document Enquiry Report regarding the beneficiaries of Sh. Joginder Pal Gupta was illegible. The petitioner had sought material on the basis of which the said allegation was made. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l of the aforesaid bank accounts, it would be seen that no such amount was credited in the aforesaid two bank accounts from any of the aforesaid 11 concerns as has been tabulated in the notice. 8.3 In fact, assessee is also providing month wise total deposits made in the aforesaid two bank accounts in the following table: ICICI BANK LTD A/C N0-63000508989 Central Bank Of lndia A/C No: 3073064162 DETAIL OF MONTH WISE DEPOSITIN ICICI BANK FROM 01.04.2016 TO 31.03.2017 DETAIL OF MONTH WISE DEPOSITIN CENTRAL BANK OF INDIA FROM 01.04.2016 TO 31.03.2017 MONTH DEPOSIT AMT MONTH DEPOSIT AMT APRIL - APRIL 23750000 MAY - MAY - JUNE 365579.00 JUNE - JULY - JULY - AUG - AUG - SEPT 2500000.00 SEPT - OCT - OCT 309830 NOV 1100000.00 NOV 100000 DEC - DEC 225000 JAN - JAN 17420000 FEB 1779089.00 FEB 3937761 MARCH 16943578.00 MARCH 100000.00 TOTAL 22688246.00 TOTAL 45842591.00 31. In view of the above, the AO was required to decide whether it is a fit case for issuance of a notice under Section 148 of the Act after taking into account the material available on record including the petitioner s response to the notice issued under Section 148A (b) of the Act. However, the AO proceeded on a palpably er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others Rs. 6,75,000/- Beneficiary 11. AAACE0766E RSKM Traders Pvt Ltd 2016-17 Others Rs. 7,50,000/- Beneficiary ** ** ** ** 8.2 The assessee company has not made any explanation on the merits of the case, so the issue is being decided on the basis of material available on record. 8.3 As per credible information disseminated by the Investigation Wing of Income Tax Department through Insight Portal, Sh. Joginder Pal Gupta is found being an accommodation entry provider. Sh. Joginder Pal Gupta, an accommodation entry provider who works on commission basis to route unaccounted cash of beneficiaries into their books through banking channels in the form of bogus unsecured loan/share premium and generate unaccounted cash for beneficiaries by providing bogus purchase bill entries. Similarly, when the beneficiaries are in need of cash for out of books transaction, they transfer money to JP's entities which then close the loan account and gives back the cash to beneficiaries. 8.4 On the basis of analysis made above after dealing with all the issues raised by the assessee on legality/technicality, it is concluded that order u/s 148A (d) of the Income-tax Act, 1961 is being passed in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount in its bank accounts from any of the entities as mentioned in the impugned notice or the impugned order. Clearly, absent any material to establish that the petitioner had received amounts in its bank accounts the fundamental premise on which the allegation that it had received accommodation entries is founded the petitioner s assessment could not be reopened. We are unable to accept that the reassessment can be initiated on the basis of information which is contested as palpably incorrect without examining the material giving rise to the said information. The contention that the AO does not require to take any view as to the correctness of the information available with him would render the provisions of Section 148A of the Act a dead letter and the exercise of conducting an enquiry under Section 148A of the Act an exercise in futility. The AO is required to ascertain whether the basic facts on which an assessment is sought to be reopened, are sustainable. An allegation that income has escaped assessment on account of accommodation entries availed by an assessee would be insufficient to reopen a closed assessment if the AO does not have material to establish that in fact ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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