BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI B.R.R. KUMAR, ACCOUNTANT MEMBER
M/s. Charbhuja Marmo (India) Pvt. Ltd., New Delhi – 110 015. PAN AADCC5143L
C/o. Shri Kapil Goel, Advocate, F-26/124, Sector-7, Rohini, Delhi – 110 085.
vs.
The Principal Commissioner of Income Tax – 2, Room No.394, C.R. Building, New Delhi.
(Appellant) (Respondent)
For Assessee : Shri Kapil Goel, Advocate
For Revenue : Ms. Nidhi Srivastava, CIT-DR
Date of Hearing : 17.12.2019
Date of Pronouncement : 31.12.2019
PER BHAVNESH SAINI, J.M.
This appeal by Assessee has been directed against the Order of the Pr. Commissioner of Income Tax-2, New Delhi, Dated 22.03.2019 for the A.Y. 2010-2011 under section 263 of the I.T. Act, 1961.
The assessee company filed original return of income declaring income of Rs.5,34,420/- which was processed under section 143(1) of the I.T. Act, 1961. Thereafter, a notice under section 148 was issued on 23.03.2016 calling upon the assessee to file its return of income after recording reasons under section 147 and obtaining necessary approval under section 151 as statutorily required. In response to the statutory notice and questionnaire issued by the A.O., the assessee appeared from time to time before the A.O. and filed the requisite details which were examined and taken on record. The oral submissions of the assessee were also considered. The A.O., after examining the detailed evidences filed by assessee, accepted the return of income vide Order under section 147/143(3) Dated 05.12.2016.
The Pr. CIT, however, on examination of the record found that re-assessment order to be erroneous and prejudicial to the interests of Revenue because in the year under consideration assessee has received share capital / share premium of Rs.70 lakhs from five parties and all these companies are managed and controlled by Shri S.K. Jain and Shri Virendra Jain who were entry operators and running dummy companies. The Pr. CIT, therefore, issued show cause notice under section 263 of the I.T. Act, 1961, calling for explanation of the assessee.
The assessee filed written submissions before the Ld. Pr. CIT which is reproduced in the impugned order in which it is explained that assessee filed necessary documents to prove the genuineness of the transaction entered into respect of the share application money which were provided to the A.O. along with supporting documents. The assessee produced all the documentary evidences and there is no failure on the part of the assessee to disclose fully and truly all necessary facts for assessment. Since A.O. has accepted the genuineness of the transaction after examining the documentary evidences and material on record, therefore, it is not a fit case of proceeding under section 263 of the I.T. Act, 1961. The Ld. Pr. CIT, however, did not accept the contention of assessee and noted that during the course of search in the case of Shri S.K. Jain and Shri Virendra Jain various incriminating documents were found. The A.O. considered the appraisal report, but, did not examine the relevant seized material even though the entries in the seized material showed that assessee company was also one of the beneficiaries of accommodation entries given by these persons. The Ld. Pr. CIT, therefore, held that A.O. passed the re-assessment order without verification of the seized material. The re-assessment order was set-aside and A.O. was directed to frame the assessment afresh by conducting proper inquiries about the source of investment, by affording reasonable opportunity of being heard to the assessee.
In the present appeal, the assessee challenged the Order under section 263 of the I.T. Act on several grounds. Learned Counsel for the Assessee initially submitted that Ld. Pr. CIT has no jurisdiction to upset the re-assessment order under section 263 of the I.T. Act because the reopening of the assessment itself was invalid and bad in law and liable to be quashed. He submitted that reasons recorded are based on borrowed satisfaction and without independent application of mind which is verifiable from the fact that on a number of places in the reasons recorded it is mentioned that the same is based on mere Investigation Wing appraisal report without anything more brought on record in the reasons and further vague description used in the reasons to address the transaction in question by saying that share capital/premium/loan has escaped assessment vitiates that so purported belief and even details of information received, if any, are no way narrated or described in the reasons recorded even — filing details etc. are missing in the reasons. Since reopening of the assessment itself is invalid under section 147 of the I.T. Act, therefore, the same is liable to be quashed and as such in collateral proceedings under section 263 of the I.T. Act, the Ld. Pr. CIT would not assume valid jurisdiction. He also submitted that approval granted by Addl. CIT and Pr. CIT are invalid and bad in law. Learned Counsel for the Assessee, therefore, submitted that proceedings under section 147 are invalid and bad in law. In support of his contention he relied upon several decisions, copies of which are filed in the paper book.
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that A.O. has recorded the reasons after going through the appraisal report and the documents, therefore, reopening of the assessment is justified. The Ld. D.R. also submitted that the Ld. Pr. CIT on going through the record correctly found it to be an assessment erroneous as well as prejudicial to the interests of the Revenue because A.O. has not examined the seized material found during the course of search.
We have considered the rival submissions. It is well settled Law that since re-assessment proceedings are invalid and bad in law, therefore, such proceedings could not be revised under section 263 of the I.T. Act. It is also well settled Law that validity of the re-assessment proceedings are to be judged on the basis of the reasons recorded for reopening of the assessment. It is also settled Law that while granting sanction under section 151 of the I.T. Act to the reasons and reopening of the assessment, the Competent Authority should apply their mind and could not grant sanction/approval in a mechanical manner. In this case the A.O. while reopening the assessment has recorded the following reasons for re-assessment under section 147/148 of the I.T. Act, copy of which is filed at PB-3 of the paper book which reads as under:
“ANNEXURE-A
Reasons recorded for initiating proceedings u/s. 147 of the I.T. Act, 1961 in the case of M/s. Charbhuja Marmo India Pvt. Ltd., PAN AADCC5143L for A.Y. 2010-11.
A search and seizure operation u/s 132 of I.T. Act, 1961 was conducted at the business and residential premises of S.K. Jain group of companies, including Shri S.K. Jain & Shri Virendra Jain and considerable incriminating evidence in form of documents/material was seized. During the course of post search investigation, it emerged that Shri S.K. Jain and Shri Virendra Jain were engaged in the business of providing accommodation entries in lieu of cash to a large number of beneficiaries through numerous dummy companies, floated and controlled by them. In fact, it was unearthed that Shri S.K. Jain and Shri Virendra Jain were providing accommodation entries of share capital/ share premium/unsecured loan, etc. to large number of beneficiaries.
2. A perusal of records revealed that during the F.Y. 2009-10 relevant to A.Y. 2010-11, the assessee company received accommodation entry in form of share capital / share premium of Rs. 70,00,000/- from following concerns managed by S.K. Jain and Virendra Jain who were known entry operators:
3. In view of the above, I have reason to believe that income of Rs. 70,00,000/- has escaped assessment for A.Y. 2010-11 within the meaning of section 147 of the I.T. Act, 1961 and it is a fit case for issue of notice u/s 148 of I.T. Act, 1961.
4. Put up the above proposal for kind perusal and necessary approval of the Addl. CIT, Range-15, New Delhi as per the provisions of section 151 of the I.T. Act, 1961.”
The approval/sanction was granted by the Competent Authority in this case in a mechanical manner because reasons recorded as reproduced above clearly show that while recording the reasons, A.O. has merely referred to the post search investigation in the case of S.K. Jain and Shri Virendra Jain that assessee has received accommodation entries, but, there is no reference to any details of the documents which were found in the search which would have implicated the assessee to have received accommodation entries. The A.O. merely referred to appraisal report and the details from the report without reference to any incriminating material against the assessee. The same are also vague because the A.O. did not mention as to what was the document found during the course of search which would connect the assessee for escapement of income. Thus, there is no independent satisfaction of the A.O. for reopening of the assessment under section 147/148 of the I.T. Act. We rely upon the decision of the Hon’ble Punjab & Haryana High Court in the case of CIT vs. Smt. Paramjit Kaur 311 ITR 38 (P&H) in which it was held as under :
“Held, dismissing the appeal, that the Tribunal had recorded a pure finding of fact that there was no material which would have led to the formation of belief that the income had escaped assessment. A search in another case, could not be the basis for forming opinion that the assessee’s income had escaped assessment and consequently initiation of proceedings under section 148 was not valid. The Tribunal was right in holding that the proceedings under section 148 were invalid and the issuance of the notice was not valid.”
Considering the totality of the facts and circumstances of the case and in the light of the above discussions, we are of the view that reopening of the assessment is bad in law and liable to be quashed. We, accordingly, set-aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act. Resultantly, the revision order under section 263 of the I.T. Act, also would not survive. We, accordingly, set-aside the orders of the authorities below and allow the appeal of assessee.
In view of the above, the appeal of assessee is allowed.
Order pronounced in the open Court.
(BHAVNESH SAINI)
JUDICIAL MEMBER
(B.R.R. KUMAR)
ACCOUNTANT MEMBER
Delhi, Dated 31st December, 2019
VBP/-
Copy to:
BY ORDER, Assistant Registrar, ITAT, Delhi Benches, Delhi.
ITA 4749/DEL/2019 – Charbuja Marmo (India) Pvt. Ltd. vs Pr.CIT-2, New Delhi
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