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TMI Blog2024 (5) TMI 1560X X X X Extracts X X X X X X X X Extracts X X X X ..... ified in not adjudicating the issue of addition of Rs.25,27,60,000/- made by the A.O u/s.68 of the Income Tax Act, 1961 on merits. 3. Any other ground that may be adduced at the time of hearing." 2. Succinctly stated, the assessee which is a public limited company engaged in the business of manufacturing and trading in sponge iron, had filed its return of income for A.Y.2012-13 on 29.09.2012 declaring an income of Rs.5,00,45,390/- and "book profit" u/s. 115JB of the Act of Rs.30,15,17,400/-. 3. Based on certain incriminating information received from the DDIT (Inv.)-1, Raipur, viz. (i) that the assessee company was a beneficiary of bogus purchase bills of Rs. 37.91 lacs (approx.) from Shri. Atish Agrwal, Proprietor: M/s Krishna Processors; and (ii) that the assessee company had received a huge amount of hare capital and premium from 7 Kolkata-based shell/ paper companies during the year under consideration, the A.O reopened the case of the assessee company u/s. 147 of the Act. Notice u/s. 148 of the Act dated 30.03.2019 was issued to the assessee company. The assessee company in response to the aforesaid notice filed its return of income on 23.04.2019 declaring the same income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od Ltd. were allotted in order to raise share premium/capital also do not have any business activities. (iii) All the private limited companies involved in the process of raising share capital/premium and investment are unlisted companies. From the registered address shown these companies, it is observed that numbers of companies are using the same address. The above characters are of those found in shell companies, which are formed to provide accommodation entries to beneficiaries to bring back their unaccounted income in their books either in the form of share capital or in the form of unsecured loans. 8. It is also relevant to mention here that the investor company Shri Bajrang Ispat & Plywood Limited is already an in-house companies of the Bajrang Group, in which funds were mobilized through allotment of shares to number of bogus private limited companies." 6. On verification, it was observed by the A.O. that all the allottee companies did not have their self-owned funds to invest in the shares of the assessee company. The A.O. was of the view that "Bajrang Group" had brought back its unaccounted income in its books of account by issuing shares to the aforementioned inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, therefore, the CIT(Appeals) refrained from adjudicating the merits of the case. 8. The revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us. 9. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 10. As the revenue has assailed before us the order of the CIT(Appeals), wherein he had quashed the reassessment for want of valid assumption of jurisdiction by the A.O, both at the stage of initiation of the reassessment proceedings as well as framing of the impugned assessment vide order passed by him u/s. 143(3) r.w.s. 147 of the Act, dated 31.01.2019, which, in our view, required consulting the assessment record, therefore, the Ld. Departmental Representative (for short, 'DR') was directed to produce the same. 11. The Ld. D.R. on the next date of hearing of the appeal produced before us the assessment record. As the CIT(Appeals) had found favor with the multi-facet contentions of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agrawal). As per the information in possession of the DDIT (Inv)-1, Raipur, the firm is involved in bogus billing and the assessee company has purchased bogus bill from the said party. Considering the above facts and circumstances, it was believed by that the assessee company has inflated the expenses by Rs.37,91,351/- and therefore there is reason to believe that Rs. 37,91,351/- is the income of the assessee escaping from assessment. ii. As per the information received from DDIT (Inv)-1, Raipur it is believed that the assessee has escaped income. Rs.29,27,60,000/- by channelizing its own unaccounted fund by way of issuance of shares to various parties/shell entities and has brought it into its book as accommodation entry. That on the basis of the aforesaid information received from DDIT (Inv)-Raipur, the AO made the analysis and stated in para 3(b) in the letter of reason to believe provided for reopening of the case, that " preliminary verification made have shown that all the above mentioned shell companies referred to in Para 3(b) have nominal paid-up capital, high reserves and surplus on account of receipt of huge share premium, no dividend income, private companies as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment and upon investigation of such new information the case of the appellant has been reopened. Merely stating that 360 degree profile has been done in the case of the appellant will not absolve the AO from his primary duties which he is require to perform as per law. At this juncture it is important to bring in notice of your honor that before opening the case for reassessment the AO has never ever called for any information either from the appellant nor from any of share subscriber. These fact itself proves that the AO has not carried any independent enquiry but has merely relied upon the information received from the third party. 1 It is further to submit before your honor that as per the provision of section 147, the case of any assessee can only be reopened, if the A.O. has "Reason to Believe'' that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or re-assess such income. From the above mentioned extract, it is clear that A.O. must have "reason to believe" in order to open the case u/s 148. But in the present case, the A.O. has re-opened the case only on the basis of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mohd Yameen Munna vs. Income Tax Officer [(2019) 56 CC 0004 (Delhi Tribunal)] it was held that "AO cannot reopen an assessment u/s 148 mere) based on an information revealing that there is an escapement of income on account of TCG without even verifying such information as to how much capital gains has escaped assessment." In the case of ITO vs. Lakhmani Mewal Das [(1976) 103 ITR 437 (SC)), it was held that "the words used in section 147 of the Act are 'reason to believe' and not 'reason to suspect'. Clearly, the tangible material available with the AO should be such as to reasonably lead the AO to believe that Assessee's income had escaped assessment. Even though such opinion may be his subjective opinion, nonetheless, it cannot be arbitrary or whimsical and must be one which a person could reasonably form on the basis of some tangible material." In the case of PCIT vs. Rajan N. Aswani (2018) 403 ITR 0030 it was held by Mumbai HC that `Where reasons recorded by AO for reassessment were not his own reasons therefore, reopening notice issued u/s 148 on basis of such reasons were without jurisdiction". In the case Mumbai HC of Nupower Renewables Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible material per se without a further inquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income had escaped assessment". 1. Further, from the reason for reopening of the case, it seems that, the Ld. A.O. had no information other than the audited financial statement of the investor companies as the entire reason have been framed based on audited financial statement of the Investor company. In the reason for reopening of the case, the Ld. A.O has not mentioned about what sort of information was received from the Investigation wing, Raipur The Ld. A.O had no conclusive evidence to evident that any income had escaped from assessment. Further, the said contention of the appellant is further strengthened by the assessment order passed u/s.148, where the Ld. A.O. has made the addition only on the basis of Audited financial statement of the Investor company which were already available at the time of original assessment proceeding. Further the Ld.A.O. had some informatic relating to only one share applicant company namely Banka Finance & securities P' Ltd (refer para 9.1 of the order) which was al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o annul the reassessment proceedings since it has been carried on the basis of reason to believe formed mechanically based on the report of investigation wing (Raipur) without any material evidence and to make roving enquiry, which is unjustified and against the spirit of the law." 13. The CIT(Appeals), had concurred with the aforesaid claim of the assessee company as regards dislodging of its concluded assessment by the A.O. by mechanically acting upon the information received from the Dy. DIT(Inv)-1, Raipur without any independent application of mind on his part, observing as under: "Ground No. 1 & 2:- Vide these grounds, the appellant has challenged the reopening by the AO being done mechanically and based on mere reports from Investigation wing, Raipur. It was contended that the reopening was based on mere reason to suspect and not on the basis of "reason to believe" and sought the reopening to be cancelled. After considering the reason recorded by the AO, findings in the assessment order and appellant's submissions, following issues emerge: 1. After referring to the reasons recorded by the AO for reopening, the appellant contended that the AO's 'reasons to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve must have rational connection with or relevant bearing on the formation of belief, i.e. there must be live links between material coming to the notice of the AO and the formation of belief regarding escapement of income. c) In the case of ITO Vs. Lakhman Mewal Del, 103 ITR 437 (SC), it was held that the word mentioned in S.147 is 'reasons to believe' and not reasons to suspect. Clearly, the tangible material available with the AO must be such as to lead the AO to believe that assessee's income had escaped d) PCIT vs. Manzil Dinesh Kumar Shah, 102 CCH 0008, (Guj. HC), wherein it was held that reopening is not permitted for fishing or roving enquiry. The appellant has demonstrated that the information available with the AO as noted in the reasons recorded clearly showed no live connect between the said information and conclusion about escapement of income. 5. The reasons recorded by the AO has two parts, one stating that the appellant company had made purchase of Rs.37,91,351/- from M/s. Krishna Processors (Prop. Atish Agrawal) and this concern was found by the DDIT (Inv.)-1, Raipur to be engaged in the bogus billing and second part stating that as per information fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant Court decisions relied on by the appellant and factual discussion hereinabove, it is apparent that the AO had received information regarding bogus purchase entry of appellant worth Rs. 37,91,351/- from M/s Krishna Processors whose proprietor had accepted to be involved in providing bogus purchase accommodation entries for various parties. However, in the final assessment order, the AO neither confronted this issue nor made any addition on this issue meaning thereby that the said information had no live link for the escapement of any income of the appellant. Also, the reasons recorded do not indicate any such linkage of this bogus purchase information to led to the AO to form reasons to believe that income escaped by way of share capital and premiums raised during the year. In fact that the A.O had mentioned the facts from the financial statements of subscriber companies and 360 degree enquires without making specific findings to form reason to believe regarding escapement of income through share capital raised. This is a case of reopening beyond 4 years from the relevant AY and the imaginal assessment proceedings carried out enquiry on the share capital issue inclusive of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.O had mechanically acted upon the reports of the Dy. DIT(Inv.)-1, Raipur, and had failed to carry out any verification as well as independently apply his mind to the material before dislodging the concluded assessment. The Ld. A.R. to fortify his aforesaid contention had drawn our attention to the "reasons to believe", Pages 47- 50 of APB. Elaborating further, the Ld. A.R. submitted that it was a fact borne from the record that the A.O. had summarily endorsed the information received from the Dy. DIT(Inv)-1, Raipur, and had not only failed to carry out the basic verification but had also not consulted the assessment record before forming a belief that the latter's income chargeable to tax had escaped assessment. The Ld. A.R to fortify his aforesaid contention submitted that the assessee company during the course of the original assessment proceedings had submitted before the A.O that out of a total amount of Rs. 29.27 crore (approx.). received against fresh issue of share capital Rs. 2.46 crore was received from two companies, viz. (i). Sukanya Merchandise (P) Ltd.: Rs. 2,20,00,000/-; and (ii). Banka Finance & Securities (P) Ltd.: Rs. 26,30,000/- in FY 2010-11 and not during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,351/- that were procured from Shri Atish Agrawal, Proprietor of M/s. Krishna Processors is concerned, no adverse inferences on the said issue were thereafter drawn by him while framing the assessment vide his order u/s. 143(3) r.w.s. 147 of the Act, dated 31.12.2019. 17. Apropos the observation of the A.O in the "reasons to believe" that the assessee company had received share capital/premium of Rs.29,27,60,000/- from seven Kolkata-based shell/paper companies, we find that the A.O had made an addition of Rs. 25,27,60,000/- concerning the share capital/premium that was received by the assessee company from 5 companies (out of 7 companies). The Ld. D.R had stated that the CIT(Appeals) based on his perverse and misconceived observations had wrongly held that as the A.O had acted mechanically on the report of the Dy. DIT(Inv.)-1, Raipur and reopened the concluded assessment of the assessee company, therefore, the assessment framed by him was liable to be vacated for want of valid assumption of jurisdiction on his part. Rebutting the aforesaid claim of the department, the Ld. AR supported the order of the CIT(appeals), and vehemently averred that as the A.O. had mechanically acted u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sarveshwari Rice Mill, both engaged in trading of rice, broken rice, rice husk etc. but there was no actual business in the firm. He was approached by one Shri Pawan Agrawal who suggested that bogus billing be done through both his firms. Since he was doing no business, Shri Atish Agrawal therefore accepted the offer of Shri Pawan Agrawal. He explained how he issued bogus bills for various parties and received payments through Cheque/RTGS in his firm's account, which he withdrew the cash by self cheque and cash was returned to various parties from whom cheque/ RTGS was received. Further he stated that A/c No. 0047xxxxxxxx733 of M/s Krishna Processers at YES bank was used by him for banking transactions and cash withdrawals. On analysis of bank statement of above bank a/c, there were various beneficiaries from whom fund were received through cheque/RIGS and subsequently cash has been withdrawn and returned to the beneficiaries, details of whom are given below: Shri Bajrang Power and Ispat Limited Sr.No. Date Amount (Rs.) 1. 12.05.2011 16,02,000/- 2. 18.05.2011 20,00,000/- 3. 25.05.2011 1,89,351/- Grand Total 37,91,351/- Similar transactions were found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Income tax Act, 1961. Therefore, this is a fit case for issuance of notice u/s. 148 of the Income tax Act. 4. Applicability of the provisions of Section 147/151 to the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment u/s.143(3)/147 was made on 11.08.2014. Since, 4 years from the end of the relevant year has expired in this case, the requirement to initiate proceedings u/s.147 are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration. It is pertinent to mention here that reasons to believe that income has escaped assessment for the year under consideration have been recorded above (refer paragraph 3). I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the assessment/reassessment proceedings and have noted that the assessee as not fully and truly disclosed the following material facts necessary for his assessment for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 143(3)/147 of the Act, dated 11.08.2014, and had observed that the case of the assessee company was being reopened after the lapse of four years from the end of the relevant assessment year for the reason that it had failed to disclose fully and truly all material facts necessary for its assessment, further supplements the factum of due application of mind on his part to the material available before him, i.e the reports of the Dy. DIT (Inv.)-1, Raipur, dated 04.03.2019 and 19.03.2019, based on which, he had arrived at a bonafide belief that the income of the assessee company chargeable to tax had escapement. 20. At this stage, we may herein observe that what is required for validly initiating proceedings u/s.147 of the Act is the availability of some material based on which the department could reopen the case, and the sufficiency or correctness of the material is not a thing to be considered at the stage of reopening of the case. The A.O. at the stage of reopening the concluded assessment is not required to conclusively establish that the income of the assessee chargeable to tax had escaped assessment, but what is required is the existence of a bonafide belief about escapemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cle-4, Surat that the unaccounted cash payment made by the aforesaid purchaser of the land constituted unaccounted income of the seller. The A.O. based on the aforesaid information reopened the case of the assessee, i.e. one of the partners of the seller of the land, on the ground that he had not accounted for the on-money receipt falling to his share in his return of income for the subject year. 23. The Hon'ble High Court observed that the A.O. had failed to consider the "material" on record by applying his mind for arriving at an independent opinion that the income of the assessee chargeable to tax had escaped assessment. Accordingly, the Hon'ble High Court observed that as the A.O. had reopened the assessment not based on any independent finding but on a borrowed/dictated satisfaction of his counterpart, thus, quashed the assessment on the said count. 24. We have thoughtfully perused the aforesaid judicial pronouncement and are of the considered view that as the same is distinguishable on facts, therefore, the same would not assist the case of the assessee company before us. As observed hereinabove, the A.O. in the present case before us had reopened the concluded assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asid extent is set aside. (B). Re: The A.O had reopened the concluded assessment of the assessee company based on a mere "change of opinion" 27. It transpires on a perusal of the order of the CIT(Appeals) that the assessee company had, inter alia, assailed the assumption of jurisdiction by the A.O for initiating reassessment proceedings on the ground that the same was based on a mere "change of opinion" which was not permissible as per the mandate of law. The assessee company had before the CIT(Appeals) assailed the validity of the jurisdiction assumed by the A.O on the aforesaid count based on its submissions, which reads as under: " 1. Ground No. 4: "On the fact and circumstances of the case, the Ld. A.O. has erred in reopening of the case u/s 148 merely on the basis of change.pf opinion as the A.O. has duly enquired and verified the genuineness of share application Money received during the year under consideration and after due verification the share application received from the said companies are accepted as genuine. Thus, reopening of the case based on change of opinion is unjustified, unwarranted and uncalled for ". 1. That as has already been discussed in earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding . Further the appellant has requested to provide the copy of statement of Anjani Banka, however the statement was not provided to the appellant. Further during the assessment proceeding, the appellant has stated that as the statement was not provided, the statement should not be used against the assessee unless and until opportunity of cross examination provided to the assessee. In view of this as the statement was not provided and opportunity of cross examine `son was not given and moreover the statement is not at all relevant for the assessee as the same was not given by any authorized person, the said statement cannot be treated as a admissible evidence. At this juncture it is important to bring in notice of your honor that even in the assessment order passed u/s 147 r.w.s. 143(3) the addition has been made entirely on the basis of the contents of the audited financial statements of the share subscribers. There is no nexus in the addition made and the information received. Hence it is evident that the case of the appellant has been reopened on the basis of change in opinion on the same material which was already available in the records of the AO. Reopening of the case me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the reopening is merely a change opinion on the same sets of facts which is against the spirit of law." 28. We find that the CIT(Appeals) had concurred with the claim of the assessee company that the A.O had grossly erred in law and facts of the case by reopening its case based on a mere "change of opinion and, thus, exceeded the scope of the jurisdiction that was vested with him u/s. 147 of the Act. For the sake of clarity, the observation of the CIT(Appeals) on the aforesaid issue is culled out as under: "2. The appellant contended that the current reopening can be considered as based on mere change of opinion. The appellant had demonstrated that on the basis of evidence of investor companies, the then A.O did not make any addition in the order u/s. 143(3) of the Act whereas on the basis of same facts and without any tangible material to disprove the earlier evidences of investor companies, the latter AO proceeded to reopen the assessment and made additions in the reopened assessment order. The reasons recorded by the AO don't mention any relevant information to discredit the evidences of investor companies filed in the original assessment proceeding. Only in para 9.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. Thus, Grounds No.3 & 4 are also allowed in favour of the appellant." 29. We have heard the Ld. Authorized Representatives of both the parties on the aforesaid issue in the backdrop of the orders of the lower authorities, as well as considered the judicial pronouncements that have been pressed into service by them to support their respective contentions. 30. The Ld. DR at the threshold submitted that as the A.O. at the stage of framing the original assessment vide his order u/s. 143(3) of the Act, dated 11.08.2014 had no occasion to consider the aforesaid material aspects, viz. (i). receipt of share capital/premium by the assessee company from paper/shell companies; and (ii). procuring of bogus purchase bills as a beneficiary by the assessee company, which facts were brought to his notice only pursuant to the information that was shared by the Dy. DIT (Inv.)-1, Raipur vide his letters dated 04.03.2019 and 19.03.2019, which in turn were based on certain investigations carried out by the department post original assessment framed in the case of the assessee company, therefore, observation of the CIT(Appeals) that the A.O had assumed jurisdiction for reopening the concluded asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Apex Court in the case of CIT Vs. Kelvinator of India Pvt. Ltd. (2010) 320 ITR 561 (SC)], had observed that the department cannot take recourse to the provisions of Sec. 147 of the Act for the failure of the A.O to apply his mind in the original assessment proceedings to the material which according to him, is relevant and was available on record. The Hon'ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom) had, by drawing support from the judgment of the Hon'ble High Court of Delhi in the case of CIT Vs. Kelvinator of India Ltd. (supra), had observed that where according to the A.O he had failed to apply his mind to the relevant material in making the assessment order, he cannot take advantage of his own wrong and reopen the assessment by taking recourse to the provisions of Sec. 147. The Hon'ble High Court had further observed that fresh application of mind by the A.O to the same set of facts for the reason that some material that was available on record while framing the original assessment was inadvertently excluded from consideration would not justify reopening of the assessment u/s 147 of the Act. For the sake of clarity, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 and the Full Bench has observed thus (page 19) : "The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Asian Paints Ltd. Vs. DCIT (supra), it is where between the date of order of original assessment sought to be reopened and the date of formation of the opinion by the A.O, nothing new has happened, i.e, no new material has come on record, no new information has been received, then reopening of the concluded assessment will fall within the meaning of a mere fresh application of mind by the A.O to the same set of facts, which would be nothing but the reopening of the case based on a mere "change of opinion". However, in the case before us, after framing of the original assessment vide order u/s. 143(3) of the Act, dated 11.08.2014, the A.O was in receipt of letters dated 04.03.2019 (supra) and 19.03.2019 (supra) from the office of the Dy. DIT (Inv.)-1, Raipur, wherein, it was shared with the A.O that the assessee company, viz. (i). was a beneficiary of certain bogus purchase transactions; and (ii). received share capital/premium from seven shell/paper companies. It would be incorrect to say that after framing the original assessment vide order u/s. 143(3) of the Act dated 11.08.2014, no new information was received by the A.O. As the A.O. after the culmination of the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, therefore, the view arrived at by the CIT(Appeals) that the case was reopened on a suspicion being a perverse observation cannot be sustained and is liable to be vacated. 37. Per contra, the Ld. A.R relied on the order of the CIT(Appeals). It was submitted by him that as the A.O had reopened the concluded assessment of the assessee company not based on any bonafide belief that its income chargeable to tax had escaped assessment, but on a mere pretence and suspicion for making fishing and roving inquiries, therefore, the CIT(Appeals) had on the said count rightly vacated the reassessment order. 38. We have heard the Ld. Authorized Representatives of both the parties on the aforesaid issue in the backdrop of the observations of the lower authorities. We have given thoughtful consideration to the aforesaid observation of the CIT(Appeals) and are unable to persuade ourselves to subscribe to the same. As observed by us hereinabove, the case of the assessee company was reopened by the A.O. based on information shared with him by the Dy. DIT (Inv.)-1, Raipur vide his letters dated 04.03.2019 and 19.03.2019 a/w. supporting annexures. In our view, the aforesaid information received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.3 "On the facts and circumstances of the case, the Ld. AO has erred in reopening of the case u/s.148 irrespective of the fact that the case of the assessee was already assessed u/s 143(3) of I.T. Act, 1961. Further, the assessee has disclosed all material fact during the course of assessment proceeding u/s 143(3) of the Act. Thus, where there is no failure on the part of the assessee, the reopening is against the 1st proviso to section 147 and thus is invalid and void ab-initio ". 1. That the Ld. AO has reopened the case of the appellant by invoking the first proviso of section 147 of the I.T.Act, 1961 since the case of the appellant was already assessed u/s 143(3) of the Income Tax Act, 1961 and four year from the end of the relevant assessment year i.e. A.Y.2012-13 was expired on 31.03.2017 where as the case was reopened on 30.03.2019 i.e. after expiry of four years. The relevant provision of the first proviso of section 147 is produced as under:- Provided that where an assessment under sub-section (3) of section 143 or this section been made for the relevant assessment year, no action shall be taken under this on after the expiry of four years from the end of the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on the part of the appellant during the course of original assessment proceedings. The assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of 6 years. Further, the reopening has been made based on the audited financial statements of the share applicant company and is evident from the reason it self. . Further, no allegation ever framed by the Ld. A.O. with any material evidence that the reopening has been made due to this particular failure on the part of the appellant to truly disclose any material facts at time of assessment .The entire reason have been framed out of the assessment record, therefore the question of failure on the part of appellant does not arise. In such circumstances no case can be re-opened by invoking first proviso of section 147 after expiry of four years from the end of the relevant assessment year. As has been held in the recent judgment of Hon'ble Supreme Court in the case of New Delhi Television Ltd Vs. DCIT (SC) (2020) 424 ITR 0607 that The revenue cannot take benefit of the extended period of limitation of 6 years if it is found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng was void ab initio. Relevant Court decisions were relied by the appellant to support its case and those decisions are reproduced in the appellant's submissions. It was also contended by the appellant that the reopening was based on mere `Change of opinion' which is not permissible under the Act and referred to relevant Court decisions to support i s contentions. The gist of appellant's contentions on these grounds of appeal can be summarized as under :- 1. The appellant referred to submission made in the course of original assessment u/s.143(3) of the Act in response to specific query raised on the issue of share capital and premium thereon. The appellant contended that not a single evidence was brought in the reasons recorded to show that there was failure on the part of the appellant to furnish full and true material facts during original assessment proceedings. It was contended that the reasons recorded were based on the audited financial reports of investor companies and without any mention of tangible information to make the said information as false or untrue. Reference to the decision of Hon'ble Supreme Court in the case of NDTV Vs. DCIT, 424 ITR 0607 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause notice that Shri Anjani Banka's statement was irrelevant for current assessment year when share capital was raised as he was Director in F.Y. 2010-11 only. The AO did not controvert this reply of the appellant. After going through the reasons recorded as well as findings in the assessment order, it is noted that the A.O had only once specific information from the DDIT (inv)-1 Raipur regards bogus purchase bills worth Rs.37,91,351/- pertaining to appellant but this information did not lead the A.O to conclude about bogus nature of share capital inclusive of premiums raised. In fact, the A.O did not make any addition of Rs.37,91,351/- in the current assessment order which further aggravates the issue of reasons to believe on the part of the A.O. Thus, it is clear that the reopening was made by the A.O based on vague information which could lead to mere reasons to suspect and also on mere change of opinion. Thus, Grounds No.3 & 4 are also allowed in favour of the appellant." 41. We have heard the Ld. Authorized Representatives of both the parties on the aforesaid issue, i.e. validity of the jurisdiction assumed by the A.O. for reopening the concluded assessment of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt received are enclosed herewith. (A-8)." Once again, the assessee company vide its reply/submissions filed before the A.O on 07.07.2014, Pages 745 - 748 of APB. had submitted that it had issued 5,85,520 fresh equity shares at Rs.500/- with a face value (F.V) of Rs.10/- per share and premium of Rs.490/- per share a/w. list of the shareholders to whom the shares were issued. Also, we find that the assessee company vide its reply filed on 28.07.2014, Page 749-754 of APB had at Sr. No. 4 submitted before the A.O working of the share application money received and shares allotted during the year under consideration. For the sake of clarity, the reply of the assessee company a/w. relevant extract that was filed with the A.O in the course of the original assessment proceedings is culled out as under: "4. Your honour has asked to furnish the working of share application money received and share allotted during the year under consideration. The same is enclosed herewith." SHRI BAJRANG POWER & ISPAT LIMITED Statement showing party-wise Detail of share Application money received and share allotted during the FY 2011-12 Name of the party No of shares Face value Premium Total Openi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pos the information shared by the Dy. DIT (Inv)-1, Raipur vide his letter dated 04.03.2019 (supra) with the A.O. that the assessee company was a beneficiary of bogus purchase bills of Rs. 37,91,351/- from Shri. Atish Aggarwal, Proprietor: M/s Krishna Processors, the fact that the A.O had not drawn any adverse inference based on the aforesaid information while framing the reassessment in the case of the assessee company, thus, in itself proves that no failure could be attributed to the assessee company for coming up with a full and true disclosure on the aforesaid issue. 45. As the A.O. in the present case had reopened the concluded assessment of the assessee company vide notice u/s. 148 of the Act, dated 30.03.2019, i.e. beyond the prescribed time limit contemplated in the "1st proviso" to Section 147 of the Act, therefore, it can safely be concluded that he had exceeded his jurisdiction and initiated the impugned reassessment proceedings. 46. Admittedly, as stated by the Ld. A.R and, rightly so, in a case where an assessment had earlier been made under Section 143(3) of the Act, and action thereafter is sought to be taken for the reopening of the case u/s.147 after the expiry of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of details as regards the 5,85,520 equity shares that were issued to the aforementioned seven share subscriber companies at Rs.500/- per share (face value Rs.10/- per share & premium of Rs.490/- per share) as was necessary for its assessment for the year under consideration, i.e., AY 2012-13; therefore, it could by no means be held to be in default to bring it within the sweep of "1st proviso" of Section 147 of the Act. 49. Analyzing the scope of the "1st proviso" to Sec. 147 of the Act, which contemplates that where assessment in the assessee's case had been framed u/s 143(3) of the Act, then no action under Sec. 147 shall be taken in its case after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax had escaped assessment for such assessment year for failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, the Hon'ble Supreme Court had dismissed the Special Leave Petition (SLP) filed by the revenue in ACIT Vs. Marico Limited, 117 taxmann.com 244 (SC), and impliedly approved the decision of the Hon'ble High Court of Bombay in the case of Marico Limited Vs. ACIT, WP NO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, there was no failure on the part of the assessee to disclose truly and fully all material facts. 7. Counsel for the revenue however submitted that one of the issues raised by the Assessing Officer is that the activity carried on by the assessee does not amount to manufacturing activity. In the present petition, it is not necessary for us to comment on this aspect of the matter. What is important however is such belief also the Assessing Officer has formed on the basis of material already on record. Looked from any angle, the Assessing Officer cannot justify issuing the notice of reopening of assessment beyond the period of four years from the end of relevant assessment year. 8. Under the circumstances, impugned notice is quashed. Petition allowed and disposed of accordingly." We are of the considered view that as in the case before the Hon'ble Apex Court in Marico Limited (supra), the concluded assessment in the case of the present assessee company before us for the year under consideration, i.e., A.Y 2012-13 had been reopened vide notice u/s 148, dated 30.03.2019, i.e., beyond 4 years from the end of the relevant assessment year, without there being any failure on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13. (E). Re: A.O had grossly erred in law and proceeded with and framed the assessment vide his order u/s. 143(3) r.w.s. 147 of the Act dated 31.12.2019 without passing an order rebutting the objections filed by the assessee company as regards the validity of the reassessment proceedings. 52. We find on a perusal of the order of the CIT(Appeals) that the assessee company had, inter alia, assailed the validity of the order passed by the A.O u/s. 143(3) r.w.s. 147 of the Act, dated 31.12.2019 for the reason that he had failed to dispose of the objections that were raised by the assessee during the assessment proceedings, Pages 51-57 of APB. 53. The Ld. AR submitted that though the assessee company had filed with the A.O. objections to the reopening of its case u/s. 147 of the Act vide its letter dated 16.06.2019 (filed on 19.06.2019), but the A.O. without disposing of the said objections had proceeded with and framed the assessment vide his order u/s. 143(3) r.w.s 147 of the Act, dated 30.03.2019. Elaborating further, the Ld. AR submitted that though the assessee company had vide its letter dated 25.09.2019, Pages 209-213 of APB (uploaded on 28.09.2019) had once again submitted b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment is not sustainable, and hence, this reassessment order is hereby quashed as null and void and not as per the provisions of the Act." 56. The Ld. D.R. supported the order of the A.O. on the aforesaid issue. 57. Per contra, the Ld. AR submitted that as the A.O had proceeded with and framed the assessment without disposing of the objections to the reopening of its case that were filed by the assessee company vide its letter dated 16.06.2019 (supra), thus, the same being in contradiction of the judgment of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO & Ors. (2022) 70 CCH 1264 (SC) could not be sustained and was liable to be struck down. The Ld. AR also relied upon the judgment of the Hon'ble High Court of Rajasthan in the case of M/s. K.C Mercantile (presently known as Genus Innovation Limited), Jaipur Vs. DCIT, Circle-2, Jaipur, ITA No.292/2016. Also, support was drawn from the order of the ITAT, Jaipur in the case of Paresh Kumar Jain Vs. ITO (2020) 58 CCH 267 (Jaipur Trib) and ITAT, Delhi in the case of the Nimitaya Hotel and Resorts Ltd. & Anr Vs. ACIT, (2019) 71 ITR (Trib) 313 (Delhi). 58. We have thoughtfully considered the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, which the A.O is bound to dispose of by passing a speaking order before proceeding with the assessment. For the sake of clarity, the observations of the Hon'ble Apex Court are culled out as under: "5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years." (emphasis supplied by us) As the A.O. in the present case before us had failed to dispose of the objections to the reopening of the case as were filed by the assessee company befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed in Hotel Blue Moon (supra), the law declared by the Supreme Court is taken in true spirit whether it will open a second inning in his own. Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme court, in that view of the matter, the issues which are raised in the matter, the Tribunal ought not to have remitted back for reassessment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act. 9. In that view of the matter, on issue No. 1 and 2, the order of reassessment passed by the Tribunal is declared null and void. The questions are answered in favour of assessee and against the Department. 10. The appeal of the assessee is allowed." (emphasis supplied by us) 62. Also, we find that a similar view had been arrived at by the Hon'ble High Court of Bombay in the case of KSS Petron Private Ltd. Vs. The ACIT, ITA No.224/2014 03.10.2016, wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by adopting a similar view had quashed the reassessment proceedings for the reason that the A.O had failed to pass a speaking order disposing of the objections before proceeding with the assessment, observing as under: "8. We may also point out that the second issue raised by the learned counsel for the petitioners also deserves some consideration. In GKN Driveshafts (supra), the Supreme Court had directed as under:- "However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." (underlining added) 8. On going through the s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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