Validation of revision under section 263 in respect of assessment order which is bad in law

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Validation of revision under section 263 in respect of assessment order which is bad in law

Overview :

ssessment order which was illegal, bad in law and non est in the eye of law could not be subject to revision under section 263.

CIT invoked jurisdiction under section 263 in respect of reassessment order passed by AO under section 147 after expiry of four years from the end of relevant assessment year in the absence of any failure on assessee’s part to disclose fully and truly all material facts.  

Itnis held that reassessment order passed by AO was bad in law in view of proviso to section 147, and such order could not be revised in under section 263.

Decision: In assessee’s favour.

Relied on: Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Del-HC) : 2009 TaxPub(DT) 1007 (Del-HC),and Well Intertrade (P.) Ltd. v. ITO (2009) 308 ITR 22 (Del-HC) : 2009 TaxPub(DT) 0733 (Del-HC).

IN THE ITAT, DELHI ‘G’ BENCH

BHAVNESH SAINI, J.M. & PRASHANT MAHARISHI, A.M.

Supersonic Technologies (P) Ltd. v. Pr. CIT

ITA Nos. 2269, 2527, 2857 & 3301 /Delhi/2017

A.Ys. 2007-08 & 2009-10

10 December, 2018

Assessee by: Ved Join, Kapil Goel, Ashwani Taneja and Somil Agarwal, Advo­cates, and Ashish Chadha, Chartered Accountant

Department by: S.S. Rana, Commissioner—Departmental Representative

ORDER

Bhavmesh Saini, J.M.

This order shall dispose of all the appeals filed by different assessees challenging the orders under section 263 of the Income Tax Act, 1961. Since the issue is common in all the appeals, therefore, all the appeals were heard together and are decided through this common consolidated order.

  1. We have heard the learned representatives of both the parties and perused the material available on record.

I.T.A. No. 2269/Delhi/2017-M/s. Supersonic Technologies (P) Ltd., Delhi.

  1. The facts of the case are that the original return of income in this case was filed on 20-10-2007 at nil income. The notice under section 148 of the Income Tax Act, was issued on March 25, 2014 after recording the reasons and taking prior approval from the competent authorities. The assessee in response to the statutory notice vide letter dated 10-4-2014 submitting therein that the original return filed may please be treated as return filed in response to the notice under section 148 of the Income Tax Act and also requested to provide reasons recorded, which were duly provided to it. The assessee also filled its objections which were disposed of. The assessing officer issued statutory notice which were complied by the assessee and filed details as called for. The assessing officer after discussing the case with the assessee, accepted the returned income and completed the reassessment order under section 147/143(3) of the Income Tax Act, 1961, on dated 30-6-2014.

3.1. The learned Principal Commissioner on examining the assessment record noticed that though the assessment was reopened under section 148 of the Income Tax Act on the allegation of accommo­dation entry taken from Shri S. K. Jain group of concerns who were searched on 14-9-2010 by the Investigation Wing of the Income Tax Department, some of the assessing officers did not examine the seized material in the form of cash book and books containing the details of cheques issued by such concerns seized from the premises of Shri S. K. Jain during the course of search. The Investigation Wing, Delhi, forwarded the hard copy of appraisal report to the then Commissioner, Delhi-Ill, which was received by him on 15-3-2013, the relevant seized material (containing many thousands of pages) was scanned and sent to the Commissioner in soft copy. However, while completing the assessment under section 147 read with section 143 of the Income Tax Act, though the assessing officer referred the appraisal report but did not look into the relevant seized material in soft copy. This was one of the cases where the assessing officer did not examine the seized material. Accord­ingly, a show-cause notice under section 263 of the Income Tax Act was issued to the assessee on 27-1-2017 which is reproduced in the impugned order. In the show-cause notice it is stated that the case was reopened on the allegation of accommodation entry of Rs. 22 lakhs on account of share application/capital received from M/s. Pelican Finance and Leasing Ltd., M/s. Singhal Securities (P) Ltd., M/s. Hillridge Investments Ltd. and M/s. S. R. Cables (P) Ltd., a concern of S. K. Jain group of cases. Search and seizure operation was carried out on 14-9-2010 at the premises of Shri Surender Jain and Shri Virender Jain. During the course of search, cash book and bank books of the concerns managed by Shri S.K. Jain group wherein detailed of day-to-day receipts in cash and cheque from/to different persons/firms/companies have been recorded, were seized. On perusal of the reassessment order, it is noticed that while pass­ing the said order, the assessing officer has failed to consider the relevant seized material pertaining to the assessee-company which is mentioned in the order. It is noted in the notice under section 263 that the amounts received by assessee-company were accommodation entry in lieu of cash given by the assessee-company through Shri Manoj Bansal. The relevant copies of the seized material relating to the assessee-company were given along with show-cause notice or during the proceedings under section 263 of the Income Tax Act. The assessee-company submitted that the assessing officer has considered the seized material not only at the time of reassessment but also at the time of recording reasons for reassessment. The learned counsel for the assessee referred to the reasons recorded by the assessing officer wherein there is a mention of accommodation entries provided by the group of Shri S. K. Jain who had floated hundreds of bogus companies to provide accommodation entries in lieu of cash.

3.2. The assessee-company also submitted that during the course of assessment proceedings, assessee-company was asked to furnish income-tax returns, confirmations, financials and bank statements, which were duly complied with by the assessee-company. The assessee-company has proved the creditworthiness of the investors before the assessing officer Independent notices were issued under section 133(6) of the Income Tax Act to the investor companies by the assessing officer The facts were examined based on the information provided by the assessee-company. The proceedings under section 263 would amount to the consideration of material which has already been considered by the assessing officer during the assessment proceedings under section 147 read with section 143 of the Income Tax Act, and if in case the documents are not available in the files of the assessing officer, then, there is also no scope of revision under section 263 of the Income Tax Act. The assessing officer has not issued notice under section 143(2) of the Income Tax Act during the reassessment proceedings. The assessee relied upon several decisions in support of the contention that revision proceedings under section 263 may be dropped.

3.3. The learned Principal Commissioner considering the submissions of the assessee and material on record noted in his find­ings that the seized papers contains various accommodation entries were provided by such companies to various beneficiaries. The appraisal report was forwarded by the Investigation Wing in the month of March, 2013 to then Commissioner-III, Delhi in hard copy. The seized material contained many thousand pages. The seized material contained consolidated day-to-day cash transactions of all such shell companies wherein the opening and closing balances of cash has been mentioned. During the course of search, the entry in the cash book was admitted to be cash and bank balances. The cash is shown as received against the names of many intermediaries. Against the name of some intermediatery cheques have been shown as issued by such companies to various beneficiaries. The details of cheques such as cheque number, name of the bank and date, name of the issuer company and the name of the beneficiary is mentioned in these detaMs. It is, therefore, clear that even though the appraisal report has summarised the transactions of the cheques given by the shell companies to the various beneficiaries through intermediaries in the tabular form, the details of cash received from such intermediaries were not tabulated due to voluminous data of day-to-day cash transactions appear­ing in the seized material. Therefore, all the relevant seized material found from the premises of Shri S. K. Jain group was forwarded to the Commissioner in soft copy after scanning. The assessee-company is also shown as beneficiary as evident from the scanned copy of the seized mate­rial. Against these entries, the name of assessee-company and the name of Shri Manoj Bansal (Mediator) is mentioned. All the cheques were found to be credited in the bank account of the assessee-company. Several scanned copies are attached from pages 9 to 19 of the impugned order. From pages 20 to 26 of the impugned order, summary of the appraisal report, year-wise details of accommodation entries provided by Shri S. K. Jain group to various beneficiary companies were tabulated for the charge of Commissioner-8. The assessing officer has made mentioned details/ table as the basis for reopening of the assessment which is clear from the reasons recorded for issue of notice under section 148 of the Income Tax Act. From the entry No. 230, the name of the assessee-company an amount of Rs. 22 lakhs have been mentioned. It would shows that the assessing officer did not verify or examine the seized material relating to the assessee. The learned Principal Commissioner also noted that as there is no statutory notice under section 143(2) prescribed in the Act and only non-statutory notice is prescribed, the purpose of which is to intimate the assessee that the case has been selected for scrutiny and the notices issued on dated 11-6-2014 and 19-6-2014 clearly proves that the case of the assessee has been selected for scrutiny, such show-cause notices are nothing but notice under section 143(2) of the Income Tax Act. It is also noted by the learned Principal Commissioner that even though no formal notice under section 143(2) was issued by the assessing officer, in the letters dated 11-6-2014 and 19-6-2014 it was specifically mentioned that in the absence of the requisite details the assessment would be completed under section 144 of the Income Tax Act. The assessing officer has not examined this issue in the light of the seized material. Therefore, the reassessment order was found to be erroneous in so far as prejudicial to the interests of the Revenue because the assessing officer failed to look into the seized material. The order was set aside and restored to the file of the assessing officer with a direction to examine the seized material and confront the same to the assessee and pass the order in accordance with law.

  1. The learned counsel for the assessee reiterated the submissions made before the authorities below. The learned counsel for the assessee submit­ted that in this case the value of the share was Rs. 10 with premium of Rs. 50 per share. No business was there in this year. However, the asses­see proved the identity of the investors, their creditworthiness and genu­ineness of the transaction in the matter, therefore, no addition can be made on the ground that shares were issued at excess premium. He has relied upon the decision of the Hon’ble Madhya Pradesh High Court in the case of Pr. CIT v. Chain House International (P.) Ltd. (2018)408 ITR 561 (MP-HC) : 2018 TaxPub(DT) 5193 (MP-HC) : (2018) 98 taxmann.com 47 (MP). He has submitted that no cash was appearing against the name of the assessee in the seized paper and that all the papers after scanning were attached in the impugned order and did not relate to the assessee. He has submitted that admittedly no notice under section 143(2) have been issued for completion of the reassessment proceedings therefore, reassessment Order, dt. 30-6-2014 is illegal and bad in law. He has submitted that in proceedings under section 263 of the Income Tax Act only a valid reassessment order can be revised which should be erroneous and prejudicial to the interests of the Revenue. It is not necessary to record all the facts and findings in the reassessment order. The learned Principal Commissioner cannot sit over the order of the reassessment passed by the assessing officer The assessing officer has taken one of the possible views as per law. Therefore, the reassessment order cannot be revised under section 263 of the Income Tax Act. There is a difference between lack of enquiry and inadequate enquiry, paper book-11 is reasons recorded under sections 147/148 of the Income Tax Act in which it is mentioned that information/documents in the form of CD, appraisal report along with relevant details has been received from the O/o. Commissioner-III, New Delhi, dated 28-6-2013 that the assessee has received and is a beneficiary of accommodation entries provided by the group of Shri Surendra Kumar Jain, Shri Rakesh Gupta, Shri Vishesh Gupta, Shri Navneet Jain and Shri Vaibhav Jain. The accommodation entries have been provided to various assessees who were re-routing their unaccounted cash through these accommodation entries. Therefore, all the relevant details were before the assessing officer at the time of reopening of the assessment. Paper book 17 to 24 are the infor­mation called by the assessing officer from all investor companies under section 133(6) of the Income Tax Act at the reassessment stage. Paper book 25 is objections filed by the assessee for reopening of the assessment under section 148. Paper book 26-27 is queries raised by the assessing officer at the reassessment stage along with the documents of investor companies. PB-35 is details of share applicant companies filed. Paper book 36 is objec­tion decided under section 148 by the assessing officer paper book 37 to 139 are replies with documents filed by the investor companies directly to the assessing officer under section 133(6) of the Income Tax Act. If the CD is not considered by the assessing officer at the time of reassessment order as per the notice under section 263 of the Income Tax Act, the reas­sessment order is bad in law. The learned counsel for the assessee relied upon the order of the Income Tax Appellate Tribunal, Delhi Bench in the case of NKG Infrastructure Ltd. v. Pr. CIT in ITA Nos. 3825 to 3827/Delhi/2018, dt. 5-9-2018, in which the issue was validity of proceedings under section 147/148 of the Income Tax Act. The assessee submitted before the Tribunal that the assessment order in this case is barred by limitation is non est in the eye of law. Therefore, the Principal Commissioner cannot assume the jurisdiction under section 263 of the Income Tax Act to revise such assessment order which is non est in the eye of law and being barred by limitation. The Tribunal held that the order which is barred by limitation cannot be revised under section 263 of the Income Tax Act by the Principal Commissioner. The appraisal report was based on CD and if the same is not considered by the assessing officer, it is non-application of mind by the assessing officer to initiate reassessment proceedings under section 148 of the Income Tax Act. The learned counsel for the assessee also relied upon the decision of the Hon’ble Delhi High Court in the case of DIT v. Society for Worldwide Inter Bank Financial Telecommunications (2010) 323 ITR 249 (Del-HC) : 2010 TaxPub(DT) 1812 (Del-HC) in which it was held that “notice under section 143(2) was simultaneously issued on filing of the return of income, therefore, it is bad in law and invalid”. The learned counsel for the assessee relied upon the decision of the Hon’ble Supreme Court in the case of Asst. CIT v. Hotel Blue Moon in Civil Appeal No. 1198 of 2010 arising out of SLP (C) No. 22973 of 2007, dt. 2-2-2010–(2010) 321 ITR 362 (SC) : 2010 TaxPub(DT) 1434 (SC) in which it was held that “issue of notice under section 143(2) is mandatory”. The learned counsel for the assessee relied upon the decision of the Hon’ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. (2011) 332 ITR 167 (Del-HC) : 2011 TaxPub(DT) 0088 (Del-HC) in which it was held that “if the Income Tax Officer acting in accordance with law, makes certain assessment, the same cannot be branded as erroneous by the Commis­sioner simply because, according to him, the order should have been writ­ten more elaborately”. The learned counsel for the assessee also relied upon the decision of the Hon’ble Delhi High Court in the case of ITO v. DG Housing Projects Ltd. (2012) 343 ITR 329 (Del-HC) : 2012 TaxPub(DT) 1727 (Del-HC) in which it was held that “the assessing officer is both investigator and adjudicator. If the assessing officer fails to conduct enquiry, he commits error and the word erroneous’ includes failure to make the enquiry. In cases, where there is inadequate enquiry but not lack of enquiry, again the Commissioner must give and record a finding that the order/inquiry made is erroneous. An order is not erroneous and prejudicial to the interests of the Revenue, unless the Commissioner hold and records reasons why it is erroneous.” The learned counsel for the assessee relied upon decision of Hon’ble Delhi High Court in the case of CIT v. New Delhi Television Ltd. (2014) 360 ITR 46 (Del-HC) : 2013 TaxPub(DT) 2697 (Del-HC) in which it was held that “once the claim was considered and examined by the assessing officer, Commissioner cannot set aside the order without recording contrary find­ing. This will be contrary to section 263 of the Income Tax Act.” The Commissioner did not make any investigation by examining the investors. He has relied upon the order of the Income Tax Appellate Tribunal, Delhi Bench in the case of Tirupati Infraprojects (P) Ltd. v. Pr. CIT. He has also relied upon the judgment of the Hon’ble Delhi High Court in the case of Globus Infocom Ltd. v. CIT-IV, Delhi (2014) 369 ITR 14 (Del-HC) : 2014 TaxPub(DT) 3778 (Del-HC). The learned counsel for the assessee has also relied upon the judgment of the Hon’ble Delhi High Court in the case of Pr. CIT v. Shri Jai Shiv Shankar Traders (P) Ltd. in which it was held that “no notice under section 143(2) of the Income Tax Act was issued to the assessee after December 16, 2010, the date on which the assessee informed the assessing officer that the return originally filed should be treated as the return filed pursuant to the notice under section 148 of the Income Tax Act. Therefore, the same is fatal to the order of reassessment”. He has submitted that the assessee produced sufficient evidences before the assessing officer to prove identity of the investors, their creditworthiness and genuineness of the transaction in the matter. Therefore, the assessing officer in the reassessment order correctly accepted the explanation of the assessee. In support of the said contention, the learned counsel for the assessee relied upon decisions of the Hon’ble Delhi High Court in the case of Pr. CIT v. Softline Creations (P) Ltd. (2016) 387 ITR 636 (Del-HC) : 2016 TaxPub(DT) 4531 (Del-HC) and CIT v. Fair Finvest Ltd. (2013) 357 ITR 146 (Del-HC) : 2013 TaxPub(DT) 0912 (Del-HC). The learned coun­sel for the assessee, therefore, submitted that since reassessment order was bad in law because no notice under section 143(2) have been issued to the assessee and that the assessee produced sufficient evidences to prove the conditions of section 68 of the Income Tax Act, therefore, revision proceedings under section 263 of the Income Tax Act in such circumstances is wholly unjustified.
  2. On the other hand, the learned Departmental Representative relied upon the order of the learned Principal Commissioner. He has submitted that appraisal report was sent to the assessing officer. The Principal Commissioner noted that the creditworthiness was not considered by the assessing officer paper book 11 is reasons recorded under section 148 of the Income Tax Act which is the statement of the assessing officer. The disputed question cannot be raised for the first time before the Tribunal. The learned Departmental Representative relied upon the decision of the Hon’ble Delhi High Court in the case of Ashok Chaddha v. ITO (2011)337 ITR 399 (Del-HC) : 2012 TaxPub(DT) 0248 (Del-HC). The learned Departmental Representative relied upon the order of the Income Tax Appellate Tribunal, Delhi Bench in the case of Surya Jyoti Software (P) Ltd. v. Pr. CITvide ITA No. 2158/Delhi/2017, dated 25-10-2017 in which the Tribunal noted that “the assessee-company has raised the issue of no notice has been issued under section 143(2) or served upon the assessee during the course of reassessment proceedings. The Tribunal noted that the assessee has neither challenged this issue after passing of the reassessment order nor has raised this issue before the Principal Commissioner during the course of revisionary proceedings under section 263 of the Income Tax Act. The assessee has raised several legal issues/objections before the Principal Commissioner challenging the validity of the reassessment proceedings. Even before the Tribunal at the time of filing of the appeal, this issue has neither been raised in the grounds nor has any additional ground been raised so that the Department could have got the opportunity to object or respond to such a plea after verifying the record in this regard. Therefore, request of counsel for the assessee was rejected. It is also noted that the impugned order demonstrated that the issue was neither enquired into nor was verified by the assessing officer” The learned Departmental Representative similarly relied upon the decision of the Income Tax Appel­late Tribunal, Delhi Bench in the case of Surya Financial Services Ltd. v. Pr. CIT vide ITA No. 2915/Delhi/2017, dt. 8-1-2018. The learned Departmental Representative also relied upon the decision of the Income Tax Appellate Tribu­nal, Delhi Bench in the case of Shankar Tradex (P) Ltd. v. Pr. CIT vide ITA No. 2999/Delhi/2017, dt. 16-4-2018 in which a similar issue was decided against the assessee. The learned Departmental Representative submitted that the assessing officer has not taken into consid­eration the material seized during search in the case of Shri S. K. Jain. Therefore, Explanation 2 to section 263 of the Income Tax Act is applicable in this case. The learned Departmental Representative relied upon the decision of the Hon’ble Supreme Court in the case of Deniel Merchants (P) Ltd. v. ITO in SLP (C) No. 23976 of 2017, dt. 29-11-2017 in which special leave petition have been dismissed where the assessing officer did not make any proper enquiry while making the assessment and accepting the explanation of the assessee in so far as the receipt of share application money is concerned. The learned Departmental Representative also relied upon the decision of the Hon’ble Supreme Court in the case of Rajmandir Estates (P.) Ltd. v. Pr. CIT (2017) 391 ITR (St.) 233 (SC); (2017) 245 Taxman 127 (SC) and other decisions also on the same proposition that if the assessing officer did not make any enquiry on the issue, the proceed­ings under section 263 could be initiated. The learned Departmental Representative submitted that no objection was raised before the assessing officer regarding the issues raised in the present appeal. The learned Departmental Representative relied upon decision of the non’ble Delhi High Court in the case of CIT v. MAP Academy (P) Ltd.(2014) 361 ITR 258 (Del-HC) : 2014 TaxPub(DT) 0087 (Del-HC) and CIT v. Navodaya Castles (P) Ltd. (2014) 367 ITR 306 (Del-HC) : 2014 TaxPub(DT) 3789 (Del-HC)which is confirmed by the Hon’ble Supreme Court as well.
  3. We have considered the rival submissions and perused the material available on record. The assessee filed original return of income on 20-10-2007. The assessing officer issued notice under section 148 of the Income Tax Act on 25-3-2014 after recording the reasons for reopening of the assessment. The copy of reasons recorded under sections 147/148 are filed at page 11 of the paper book. In the reasons the assessing officer has mentioned that information/documents in the form of CD appraisal report along with relevant details have been received from the O/o. Commissioner-3, New Delhi that the assessee has received accom­modation entries provided by Shri S. K. Jain group of cases for a sum of Rs. 22 lakhs. The assessing officer accordingly formed an opinion that income of Rs. 22 lakhs chargeable to tax has escaped assessment in the assessment year under appeal. The assessee in response to the said notice filed reply dated 10-4-2014 submitting therein that original return filed may be treated as return filed in response to the notice issued under section 148 of the Income Tax Act and requested for copy of the reasons which were supplied and objections of the assessee have been disposed of separately. The assessing officer in the reassessment order did not mention if he has issued any notice under section 143(2) of the Income Tax Act upon the assessee before completion of the assessment. This issue was raised before the learned Principal Commissioner in the proceedings under section 263 of the Income Tax Act that the assessing officer has not issued notice under section 143(2) of the Income Tax Act at reassessment proceedings. The learned Principal Commissioner mentioned in the impugned order that the assessee was intimated by notices dated 11-6-2014 and 19-6-2014 that in the absence of requisite details assessment would be completed under section 144 of the Income Tax Act. The learned Principal Commissioner treated the same notices as notice issued under section 143(2) of the Income Tax Act. The learned Principal Commissioner, however, admit­ted that no formal notice under section 143(2) have been issued to the assessee before completion of the reassessment proceedings. The Hon’ble Delhi High Court in the case of CIT v. CPR Capital Services Ltd. (2011) 330 ITR 43 (Del-HC) 2011 TaxPub(DT) 0585 (Del-HC)held as under (headnote) :–

“The Tribunal held that no notice under section 143(2) of the Income Tax Act, 1961 was prepared and served upon the assessee. On appeal :–

Held, dismissing the appeal, that mere noting in the order sheet would not suffice and the copy of the notice issued under section 143(2) of the Act was not available on record. Since the Department had failed to produce the copy the notice under section 143(2) of the Act there was no option but to agree with the findings of the Tribunal that no such notice was prepared and served upon the assessee. In the absence of this mandatory requirement of issuing statutory notice under section 143(2) of the Act, the Tribunal had rightly quashed the assessment as null and void.”

6.1. The Hon’ble Delhi High Court in the case of Pr. CIT v. Silver Line (2016) 383 ITR 455 (Del-HC) : 2016 TaxPub(DT) 0597 (Del-HC) held that “Order of reassessment cannot be passed without notice under section 143(2) of the Income Tax Act. The jurisdictional error cannot be cured by section 292BB of the Income Tax Act”. It is, well-settled law that before passing the reassess­ment order, assessing officer shall have to prepare and serve notice upon the assessee under section 143(2) of the Income Tax Act. The learned Prin­cipal Commissioner, however, observed that “no formal notice under section 143(2) have been issued to the assessee”. Therefore, these facts clearly show that before framing the reassessment order under sections 147/148 of the Income Tax Act, no notice under section 143(2) have been prepared, issued and served upon the assessee. Therefore, reas­sessment order is illegal, invalid and bad in law and is liable to be set aside. It is well-settled law that the assessee can challenge the validity of the reassessment proceedings in the collateral proceedings (relating to exam­ination of validity of order passed under section 263 of the Income Tax Act. We rely upon the order of the Income Tax Appellate Tribunal, Mumbai Bench in the case of Westlife Development Ltd. v. Pr. CIT (2016) 49 ITR (Trib) 406 (Mum-Trib) : 2016 TaxPub(DT) 4034 (Mum-Trib) in which it was held “allowing the appeal (i) that jurisdiction aspect of the order passed in the primary proceedings can be examined in collateral proceedings also. Thus, the assessee could be permitted to challenge the validity of the order passed under section 263 on the ground that the assessment order was non est.” Since the reas­sessment order itself is bad in law, therefore, the learned counsel for the assessee, rightly contended that the same cannot be revised under section 263 of the Income Tax Act. Only valid reassessment order can be revised under section 263 of the Income Tax Act. On this ground itself the proceedings under section 263 of the Income Tax Act are bad in law and liable to be quashed. We, accordingly, set aside the order of the learned Principal Commissioner passed under section 263 of the Income Tax Act and quash the same. In view of the above, the remaining plea of the assessee are not required to be adjudicated. However, we may briefly note that the assessing officer examined entire seized material at the time of recording reasons and reassessment stage. The assessee produced sufficient evidences at the reassessment proceedings to prove the identity of the creditors, their creditworthiness and genuineness of the transaction. The assessing officer also made direct enquiry by issuing summons under section 133(6) of the Income Tax Act to the investors who have also replied directly to the assessing officer Therefore, the assessing officer rightly accepted the credits as genuine. In view of the above find­ing, there is no need to give a finding in detail on the merits. In view of the above, we allow the appeal of the assessee.

  1. In the result, ITA No. 2269/Delhi/2017of the assessee is allowed. ITA No. 2857/Delhi/2017-M/s. SPJ Hotels (P) Ltd., New Delhi
  2. This appeal by the assessee has been directed against the order of the learned Principal Commissioner-8, New Delhi dated 22-3-2017, for the assessment year 2007-08 under section 263 of the Income Tax Act, 1961.
  3. Briefly the facts of the case are that in this case similar information about entry operators and their beneficiaries of Delhi was received from the O/o. Director of Income Tax, (Inv.)-H, Delhi, along with a detailed report giving working of entry operators with a list of beneficiaries. After making inquir­ies, the Additional Director of Income Tax, Unit-VI of Investigation in his report has established large amount of tax evasion in the transactions between entry operators and the beneficiaries. It was revealed from the list that the assessee-company viz., M/s. SPJ Hotels Private Limited during the previous year relevant to the assessment year under appeal had taken accommodation entries from M/s. Hillridge Investments Ltd., and M/s. Vogue Leasing and Finance (P) Ltd. in a sum of Rs. 5 lakhs each on 28-3-2017. The assessing officer reopened the assessment under section 148 of the Income Tax Act. Notice under section 148 was issued on 25-3-2014 after recording the reasons and faking prior approval of the compe­tent authority. In response thereto, the assessee submitted a letter stating therein that it was incorporated on 5-3-2007 and filed first return of income for the assessment year 2008-09 for the period from 5-3-2007 to 31-3-2008 declaring nil income. It was, therefore, submitted that nil return may be treated as return having been filed for the assessment year 2007-08 under appeal. The assessee asked for copy of reasons for reopen­ing of the assessment. The assessee attended the proceedings before the assessing officer time to time and filed details of share capital received from four parties in a sum of Rs. 5 lakhs each i.e., (1) M/s. Hillridge Invest­ments Ltd., (2) M/s. Vogue Leasing and Finance (P) Ltd., (3) M/s. Pelicon Finance and Leasing Ltd., and (4) M/s. Pitambara Securities (P) Ltd., the assessing officer disposed of the objections of the assessee. It is noted in the reasons that he has reason to believe that income chargeable to tax in a sum of Rs. 10 lakhs on account of accommodation entries has escaped assessment. The assessing officer after considering the evidences and material on record made the addition of Rs. 20 lakhs in respect of four corporate entities under section 68 of the Income Tax Act and made further addition of Rs. 40,000 on account of commission expenses for taking accommodation entries. The reassessment order under sections 144/148 dated 18-3-2015 was passed accordingly.
  4. The learned Principal Commissioner considered the aforesaid reassessment order to be erroneous and prejudicial to the inter­ests of the Revenue and noted that the Investigation Wing has forwarded hard copy of appraisal report to show that the assessee received accom­modation entries. However, the assessing officer has taken it at Rs. 10 lakhs only as against Rs. 1 crore. Show-cause notice under section 263 of the Income Tax Act was issued stating therein that assessee has received Rs. 50 lakhs each as accommodation entries from Hillridge Investments Ltd., and M/s. Vogue Leasing and Finance (P) Ltd. Explanation of the asses­see was called for because the assessment order was erroneous in so far as it is prejudicial to the interests of the Revenue because the assessing officer has not examined the seized material and has failed to tax the amount of Rs. 1 crore as unexplained credit in the books of account of the assessee. The assessee filed reply in which it was briefly explained that the assessing officer in the reasons for reopening of the assessment recorded that there is escapement of income of Rs. 10 lakhs. Therefore, entire proceedings are based on non-application of mind by the assessing officer. The assessee requested for cross-examination to the statement of Shri S. K. Jain. The Principal Commissioner noted that correct amount of accommodation entries from both these companies are Rs. 50 lakhs each instead of Rs. 5 lakhs. The learned Principal Commissioner also noted that assessing officer failed to consider the seized material found during the course of search in the case of Shri S. K. Jain, therefore, the assessing officer passed the reassessment order without proper verification and enquiries. Therefore, the reassessment order was set aside and the assessing officer was directed to pass the order afresh as per law.
  5. The learned counsel for the assessee reiterated the submissions made before the authorities below and referred to paper book 1 which is the reasons recorded for reopening of the assessment in which the assessing officer found that the income of Rs. 10 lakhs has escaped assessment. However, the learned Principal Commissioner noted that amount is Rs. 50.lakhs each in both the cases, therefore, escapement of income is of Rs. 1 crore. He has, therefore, submitted that the reasons recorded for reopening of the assessment are invalid, incorrect and non-existing. Therefore, reassessment order is invalid and bad in law. He has submitted that assessing officer considered the seized material on record and that it is a non-application of mind by the assessing officer to frame reassessment order. In support of this contention, he has relied upon the judgments of the Hon’ble Delhi High Court in the case of CIT v. Suren International (P) Ltd. (2013)357 ITR 24 (Del-HC) : 2013 TaxPub(DT) 1753 (Del-HC), judgment of Delhi High Court in the case of Pr. CIT v. RMG Polyvinyl (I.) Ltd. (2017) 396 ITR 5 (Del-HC) : 2017 TaxPub(DT) 2034 (Del-HC) and the judgment of the Delhi High Court in the case of Pr. CIT v. SNG Developers Ltd. (2018)404 ITR 312 (Del-HC) : 2018 TaxPub(DT) 3140 (Del-HC). He has submitted that since reassessment order was invalid and bad in law, there­fore, the same cannot be revised under section 263 of the Income Tax Act. No cross-examination have been allowed to the statement of Shri S. K. Jain, therefore, reassessment order is bad in law and cannot be reviewed. He has, therefore, submitted that proceedings under section 263 of the Income Tax Act may be quashed.
  6. On the other hand, the learned Departmental Representative relied upon the order of the learned Principal Commissioner and submitted that figure in the reasons is wrongly mentioned. He has filed written submissions and relied upon some judgments as relied in the case of Supersonic Technologies (P) Ltd.(supra). Therefore, the learned Principal Commissioner rightly considered reassessment order to be erroneous and prejudicial to the interests of the Revenue.
  7. We have considered the rival submissions and perused the material available on record. It is well-settled law that the validity of reassessment proceedings is to be judged with reference to the reasons recorded under sections 147/148 of the Income Tax Act. In the present case, the assessing officer has recorded reasons for reopening of the assessment on 25-3-2014, copy of which is filed at page 1 of paper book. The same reads as under :–

“Reasons for issue of notice under section 148 of the Income Tax Act, 1961 in the case of M/s. SPJ Hotels (P) Limited, PAN AAKCS7722C for the assessment year 2007-08–Regarding.

25-3-2024 : Information about entry operators and their beneficiaries of Delhi has been received from the office of the DIT (Inv.)-II, New Delhi vide Letter F. No. DIT( Inv)-148/2011-12/7539, dt. 21-3-2012 and F. No. DIT (lnv)-II/148/2012-13/196, dt. 12-3-2013 along with detailed report giving working of entry operators with a list of beneficiaries. After making inquiries, the Additional Directorate of Income Tax, Unit-VI of investigation, in his report has established a large amount of tax evasion in the transac­tions between entry operators and the beneficiaries. It is revealed from the list that the assessee-company M/s. SPJ Hotels (P.) Ltd. (termed as beneficiary) during the previous year 2006-2007 relevant to the assessment year 2007-08 had taken accommodation entries totalling Rs. 10,00,000 from the persons/parties (termed as entry operators). These entries have been investigated by the Investigation Wing and found to be given as accommodation entries from entities operated and controlled by Surender Kumar Jain. The details of which are mentioned below :–

Beneficiary’s Name Amount (Rs. ) Entry provider Cheque/ P. O. No. Dated
M/s. SPJ Hotels (P) Limited 5,00,000 M/s. HilMdge Invest­ments Limited 011048 28-3-2007
M/s. SPJ Hotels (P) Limited 5,00,000 M/s. Vogue Leasing & Finance (P) Limited 011047 28-3-2007

I have very carefully considered the aforesaid piece of information and the modus operandi of the entry operator Surender Kumar Jain and its controlled entities. I find that the quantum of amount of such entries received by the assessee-company M/s. SPJ Hotels (P) Limited as per details mentioned above is Rs. 10,00,000. These accommoda­tion entries taken by M/s. SPJ Hotels (P) Limited are earlier identified and examined by the Investigation Wing to establish that all these entry providing entities were tools in Surender Kumar Jain business of providing accommodation entries in lieu of cash/cheques through which he had drawn a long trail of bank transaction to impart a color of genuineness on these transactions.

In view of the facts stated herein above, I am of the considered opinion and belief that the assessee-company managed the above said transactions of accommodation entries out of its income from undisclosed sources. In this case, as per records available, the assessee has not filed its return of income for the assessment year 2007-08. In view of above, I have reason to believe that income of Rs. 10,00,000 has escaped assessment within the meanings of the provisions of section 147 of the Income Tax Act, 1961. Therefore, a notice under section 148 of the Income Tax Act, 1961 is required to be issued to the assessee-company to assess the income escaped as stated herein­above. As the period to reopen the case exceeds four years and as per records no scrutiny assessment has been done in this case for the assessment year 2007-08, approval from the Additional Commissioner, Range-9, New Delhi has been obtained vide letter dated 25-3-2014 to issue notice under section 148, as per the provisions of section 151(2) of the Income Tax Act.

Therefore issue notice under section 148 of the Income Tax Act.

Sd/– Virender Kumar Rathee

ITO, Ward 9(2), New Delhi.”

13.1. In the aforesaid reasons for reopening of the assessment, it is mentioned that assessee-company received share capital on account of accommodation entries of Rs. 5 lakhs each from M/s. Hillridge Investment (P) Ltd., and M/s. Vogue Leasing and Finance (P) Ltd., based on information and seized material received from the Investigation Wing. However, the assessee explained before the assessing officer that amount in question is Rs. 20 lakhs from four parties. The assessing officer in the reassessment order made addition of Rs. 20 lakhs on account of unexplained credit on account of accommodation entries received from four parties and also made addition of Rs. 40,000 on account of commission paid to the entry operators. On the basis of the same material, the Principal Commissioner initiated the proceedings under section 263 of the Income Tax Act on the reasons that the amount in question is not Rs. 10 lakhs received from these two companies, but, it is Rs. 50 lakhs each i.e., Rs. 1 crore. Thus, the facts mentioned in the reasons for reopening of the assessment are incorrect and non-existent. The Hon’ble Punjab and Haryana High Court in the case of CIT v. Atlas Cycle Industries (1989) 180 ITR 319 (P&H-HC) : 1989 TaxPub(DT) 1149 (P&H-HC)held as under :–

“Held (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income Tax Officer did not get jurisdiction to make a reassessment.”

13.2. Since the facts are totally different as assessing officer had reason to believe that Rs. 10 lakhs has escaped assessment on account of Rs. 5 lakhs received from two companies referred to above, which was ultimately found to be incorrect and non-existent, therefore, there may not be any application of mind on the part of the assessing officer to proceed to initiate the reassessment proceedings. There is no other material avail­ able on record except the information received from the Investigation Wing. The assessing officer on the basis of the information and material received from the Investigation Wing has recorded reasons for reopening of the assessment which was ultimately found to be incorrect and non­ existent. It is well-settled law that when no new material other than exam­ined by the assessing officer originally found on record for the purpose of initiating the reassessment proceedings, the proceedings under section 148 of the Income Tax Act would be invalid and bad in law. We rely upon the decision of the Delhi High Court in the case of CIT v. Atul Kumar Swami (2014) 362 ITR 693 (Del-HC) : 2014 TaxPub(DT) 2106 (Del-HC), Consulting Engineering Services (India) (P) Ltd. v. Dy. CIT (2015) 378 ITR 318 (Del-HC) : 2015 TaxPub(DT) 4549 (Del-HC), Nestle India Ltd. v. Dy. CIT (2016) 384 ITR 334 (Del-HC) : 2016 TaxPub(DT) 1958 (Del-HC) and Priya Desk Gupta v. Dy. CIT (2016) 385 ITR 452 (Del-HC) : 2016 TaxPub(DT) 2676 (Del-HC). The Hon’ble Delhi High Court in the case of SNG Developers Ltd. (2018) 404 ITR 312 (Del-HC) : 2018 TaxPub(DT) 3140 (Del-HC) held that when the assessing officer initiated the reassessment proceedings without application of mind, such proceedings would be invalid. The assessing officer in the present case has failed to verify the information received from the Investigation Wing. Therefore, if is non-application of mind on the part of the assessing officer to record correct facts in the reasons for reopening of the assess­ment. In such circumstances, the reassessment order could not be treated as valid and in accordance with law. Since reassessment proceedings are invalid and bad in law, therefore, such proceedings could not be revised under section 263 of the Income Tax Act. Following the reasons for decision in the case of Supersonic Technologies (P) Ltd. (supra), we set aside the order passed by the learned Principal Commissioner under section 263 of the Income Tax Act and quash the same.

  1. In the result, ITA No. 2857/Delhi/2017of the assessee is allowed.

ITA No. 2527/Delhi/2017-M/s. Shiv Sat Infrastructure (P.) Ltd., New Delhi.

  1. This appeal by the assessee has been directed against the order of the learned Principal Commissioner-8, New Delhi, dated 24-3-2017, for the assessment year 2007-08 under section 263 of the Income Tax Act, 1961.
  2. The facts of the case are that the notice under section 148, dated 28-3-2014 was issued to the assessee after recording the reasons and obtain­ing approval of the Commissioner-3, New Delhi. In compliance with the notice under section 148, the assessee has furnished return on 1-5-2014. The assessee stated before the assessing officer that the income declared in the ITR under section 148 remain the same as declared in the original return of income filed under section 139 of the Income Tax Act dated 30-10-2007. It was further stated that income of Rs. 33,79,596 as declared in the return of income under section 139 has been accepted and assessed to tax under section 143(3) vide Order, dt. 27-11-2009. The assessing officer after considering the material on record and summons issued under section 131(1) of the Income Tax Act and notice under section 133(6) and other material on record, accepted the return of income and passed the reassessment order under section 143(3) read with section 147 of the Income Tax Act, dated March 30, 2015.
  3. The learned Principal Commissioner found the said reas­sessment order to be erroneous in so far as it is prejudicial to the interests of the Revenue. It is noted that assessment was reopened under section 148 on the allegation of accommodation entries taken from Shri S. K. Jain group of concerns who were searched on 14-9-2010 by the Investigation Wing of the Income Tax Department. Some of the assessing officers did not examine the seized material in the form of cash book and the books containing the details of cheques issued by such concerns seized from the premises of Shri S. K. Jain. Notice under section 263 of the Income Tax Act was issued to the assessee which is reproduced in the impugned order in which it is noted that case was reopened on the basis of the allegation of accommodation entry on account of share capital/share premium/share application money from M/s. Hillridge Investments Ltd., and M/s. Vogue Leasing and Finance (P) Ltd., concerns of Shri S. K. Jain group of cases. The assessing officer accepted the return of income on the basis of confirmations from the said investors. The evidences found during the course of search in the case of Shri S. K. Jain group of cases have not been examined by the assessing officer. Reply of the assessee was called for in which the assessee explained that the assessing officer after exam­ining the entire details and documentary evidences on record and making direct/independent enquiry from both the investors under sections 131(1) and 133(6) of the Income Tax Act, completed the assessment proceedings. The assessee filed all the documentary evidences before the assessing officer i.e., confirmation letters from both the investors, copy of their bank accounts, copy of ITR, copy of PAN, copy of audited balance-sheet, copy of master data taken from official website of MCA and assessment order under section 153C/153A in the case of M/s. Hillridge Investments Ltd., The seized papers are only rough papers and no details have been mentioned therein. The learned Principal Commissioner however, did not accept the contention of assessee and noted that seized documents recovered during the course of search in the case of Shri S. K. Jain group of cases have not been examined and considered by the assessing officer while framing the reassessment order. The learned Principal Commissioner also noted that verification of the seized documents shows the amount in question is Rs. 2.20 crores but as per the details given in the notice under section 263 of the Income Tax Act, the amount is mentioned as Rs. 2.90 crores. The contention of the assessee that the seized material did not belong to the assessee was rejected. The reassessment order was set aside and restored to the assessing officer for passing the order afresh as per law.
  4. The assessee in the present appeal has challenged the order under section 263 of the Income Tax Act. The assessee also moved an application for admission of the following additional ground.

“That having regard to the facts and circumstances of the case, the learned Commissioner ought not to have revised reas­sessment order under section 147/143(3) as the said reassessment order was void and bad in law due to illegal assumption of jurisdic­tion.”

18.1. The learned counsel for the assessee submitted that additional ground is legal in nature and no fresh facts are to be investigated. The additional ground goes to the root of the matter and therefore, prayed that the same may be admitted for disposal of the appeal. The learned counsel for the assessee relied upon the decision of the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. v. CIT (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 0342 (SC) and CIT v. Sinhgad Technical Education Society (2017) 397 ITR 344 (SC) : 2017 TaxPub(DT) 3941 (SC) and the decision of the Hon’ble Punjab and Haryana High Court in the case of VMT Spinning Co. Ltd. v. CIT (2016) 389 ITR 326 (P&H-HC) : 2016 TaxPub(DT) 4428 (P&H-HC).

  1. On the other hand, the learned Departmental Representative objected to the admission of the additional ground of appeal.
  2. Considering the facts of the case, we are of the view that additional ground is legal in nature and goes to the root of the matter. Therefore the same shall have to be admitted for the purpose of disposal of the appeal. We, accordingly, admit the additional ground of appeal. The learned coun­sel for the assessee contended that reassessment order in this case under section 143(3)/147 is invalid and bad in law and as such, the same could not be revised under section 263 of the Income Tax Act. He has submitted that in fact said issue can be raised in collateral proceedings as is held in the following judicial decisions.

(i) Classic Flour and Food Processing (P) Ltd. v. CIT ITA No. 764-766/Kol./2014, dt. 5-4-2017 of the Income Tax Appellate Tribunal-Kolkata Bench,

(ii) Krishan Kumar Sarafv. CIT (2016) 46 ITR (Trib) 387 (Del-HC) : 2015 TaxPub(DT) 4416 (Del-Trib)

(iii) Westlife Development Ltd. v. Pr. CIT (2016) 49 ITR (Trib) 406 (Mum-Trib) : 2016 TaxPub(DT) 4034 (Mum-Trib)

20.1. The learned counsel for the assessee referred to several documents in the paper book in support of the contention that the entire documentary evidences were filed before the assessing officer at the original assessment stage as well as in the reassessment proceedings to prove the genuineness of the share capital money received from the inves­tors. Paper book 45 is the confirmation of M/s. Hillridge Investment Ltd. Paper book 46 is the bank statement. Paper book 49 is ITR of M/s. Hillridge Investment Ltd. Paper book 50 to 53 are confirmation, bank statement and ITR of M/s. Vogue Leasing and Finance (P) Ltd. Paper book 307 is the order-sheet of the assessing officer. All documentary evidences were filed before assessing officer in both the proceedings. Paper book 68 is copy of the reasons recorded under section 148 of the Income Tax Act in which the amount of Rs. 2.90 crores as accommodation entries have been mentioned instead of Rs. 2.20 crores. Paper book 60 is the notice under section 148 dated 28-3-2014. PB-57 is the original assessment order under section 143(3) dated 27-11-2009. He has, therefore, submitted that reassessment done after four years and in the reasons as well as in the notice under section 148 of the Income Tax Act, 1961, the assessing officer has not mentioned anything if there was any failure on the part of the assessee to disclose fully and truly all material facts at every stage for the purpose of assessment and reassessment. The assessee declared share application money received from two parties. However, in the reasons name of none of parties have been mentioned. In the original assessment proceedings an amount of Rs. 2.20 crores have been mentioned. Therefore, in the reasons the facts have been wrongly mentioned. All the facts avail­able on record were considered in the reassessment proceedings, therefore, no new material has been brought on record for reopening of the assess­ment. All incorrect and non-existing facts have been mentioned in the reasons for reopening of the assessment. The amount in question is also wrongly mentioned in the reasons. In the books of account of the assessee, the assessee has shown to have received share application money from two investors in a sum of Rs. 2.20 crores and not Rs. 2.90 crores. The learned counsel for the assessee referred to various replies filed before the assessing officer at original assessment stage as well as in the reassessment proceedings in which it was clearly highlighted that there is application of mind from the side of the assessing officer to frame the reassessment order. Paper book 300 and 301 is report of the Inspector to show that notice under section 133(6) have been served upon M/s. Vogue Leasing and Finance (P) Ltd. Paper book 319 is the report of the Investigation Wing which clarifies that summons under section 131 and notice under section 133(6) have been issued on the directors of the assessee-company which have been complied with. Necessary enquiry have been conducted by the Inspector of the Office who has submitted his report without pointing-out any specific discrepancy. Paper book 310-317 is the order-sheet. The learned counsel for the assessee relied upon the decision of the Hon’ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Del-HC) : 2009 TaxPub(DT) 1007 (Del-HC) in which it was held as under :–

“Conclusion :–

Assessing officer while making assessment under section 143(3) having made specific queries with regard to share application money in response to which the assessee furnished all relevant documents and after considering this material, the assessing officer having completed the assessment, it could not be said that income escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, hence reopening of assessment after expiry of four years from the end of the relevant assessment year was invalid.”

20.2. In the case of Well Intertrade (P.) Ltd. v. ITO (2009) 308 ITR 22 (Del-HC) : 2009 TaxPub(DT) 0733 (Del-HC), the Hon’ble Delhi High Court has held as under :–

“Conclusion :–

Assessee having fully and truly disclosed all the material facts necessary for the assessment as required by the assessing officer, the precondition for invoking the proviso to section 147 was not satisfied and therefore, the assessing officer acted wholly without jurisdiction in issuing notice under section 148 beyond the four year period mentioned in section 147.”

20.3. The learned counsel for the assessee submitted that there is totally non-application of mind by the assessing officer while framing the reassessment order, therefore, reassessment is illegal and bad in law. In support of his contention, he has relied upon the decision of the Hon’ble Delhi High Court in the case of Pr. CIT v. RMG Polyvinyl (I.) Ltd. (2017) 396 ITR 5 (Del-HC) : 2017 TaxPub(DT) 2034 (Del-HC), Pr. CIT v. Meenakshi Overseas (P) Ltd. (2017) 395 ITR 677 (Del-HC) : 2017 TaxPub(DT) 1791 (Del-HC); (2017) 99 CCH 28 Delhi, Pr. CIT v. G and G Pharma India Ltd. (2016) 384 ITR 147 (Del-HC) : 2015 TaxPub(DT) 4054 (Del-HC). He has submitted that there is no approval for reopening of the assessment by the competent authority. He has submitted that all the seized papers were considered by the assessing officer, therefore, reopening of the assessment was bad in law, illegal and as such learned Principal Commissioner should not assume jurisdiction under section 263 of the Income Tax Act.

  1. On the other hand, the learned Departmental Representative reiterated the submissions made in the case of M/s. Supersonic Technologies (P) Ltd. Delhi, in I. T. A No. 2269/Delhi/2017hereinabove. The learned Departmental Representative submitted that seized material was not considered by the assessing officer summons under section 131 were not complied with. All material facts were not disclosed. The assessing officer took the figure of Rs. 2.90 crores in the reasons based on the information received from the Investigation Wing. Therefore, the learned Principal Commissioner correctly invoked the jurisdiction under section 263 of the Income Tax Act. The assessee cannot challenge the valid­ity of reassessment proceedings under section 263 of the Income Tax Act.
  2. We have considered the rival submissions and perused the material available on record. It is well-settled that the learned Principal Commissioner while exercising power under section 263 of the Income Tax Act could not revise the assessment order which was illegal, bad in law and non estin the eye of law. The assessee can challenge the validity of the reassessment order referred to under section 263 of the Income Tax Act being non est and illegal. The case laws relied upon by the learned counsel for the assessee are squarely applicable to the facts and circumstances of the case. In the present case, the assessing officer passed the original assessment order under section 143(3) of the Income Tax Act, dated November 27, 2009. The assessing officer has mentioned in the assessment order that details have been filed by the assessee and after discussion of the case return of income have been accepted. The assessee in this case received share application money/premium from two parties and filed several documents on record to prove the genuine credit in the matter which is accepted by the assessing officer. Thereafter, reassess­ment proceedings were initiated under section 148 of the Income Tax Act. The assessing officer in the notice under section 148 as well as in the reasons did not mention if there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. There­fore, the decisions of the Hon’ble Delhi High Court relied upon by the learned counsel for the assessee in the cases of Haryana Acrylic Manu­facturing Co. v. CIT (supra) and Well Intertrade (P.) Ltd.(supra), are squarely applicable to the facts of the case. Therefore, the reassessment done after four years from the end of the relevant assessment year would be bad in law unless the income chargeable to tax has escaped assessment for such assessment year by the reason of failure on the part of the assessee to make return under section 139 or in response to notice issued under section 142(1) or section 148 or to disclose fully and truly all material facts necessary for assessment for that assessment year. In the absence of any such details mentioned in the reasons or notice under section 148, the reassessment order would be invalid and bad in law. Further the assessing officer recorded incorrect facts in the reasons for reopening of the assess­ment because the amount in question is Rs. 2.20 crores but assessing officer has mentioned in the reasons the amount of Rs. 2.90 crores which escaped assessment. Further, no names of the parties have been mentioned in reasons under section 147 from whom the amount in ques­tion have been received by the assessee as accommodation entry. All the facts brought to the notice of the assessing officer by the Investigation Wing have been considered by the assessing officer while framing the reassessment and accepted the return of income. Therefore, there was no new material available on record to justify reopening of the assessment or to invoke jurisdiction under section 263 of the Income Tax Act, which would also show that there is totally non-application of mind on the part of the assessing officer to reopen the assessment in the matter. These facts are sufficient to hold that reopening of the assessment was bad in law, illegal and non est, therefore, such order could not be revised in the proceedings under section 263 of the Income Tax Act. We, accordingly set aside the order of the learned Principal Commissioner passed under section 263 of the Income Tax Act and quash the same. In this view of the matter, there is no need to decide the issue on merit. However, we may note briefly that documentary evidences were filed before the assessing officer at original assessment stage as well as at the stage of reassessment to prove the genuine credit in the matter which have accepted by the assessing officer after considering and examining the material on record and calling explanation from the investors under section 133(6) of the Income Tax Act. In this view of the matter, we allow the appeal of the assessee.
  3. In the result, ITA No. 2527/Delhi/2017of the assessee is allowed.

ITA No. 3301/Delhi/2017-M/s. Superior Buildwell (P) Ltd., Delhi.

  1. This appeal by the assessee has been directed against the order of the learned Principal Commissioner-8, New Delhi, dated 17-3-2017, for the assessment year 2009-10 under section 263 of the Income Tax Act, 1961.
  2. Briefly the facts of the case are that the original return of income was filed on 18-9-2009 declaring nil income. On the basis of infor­mation received from the Directorate of Investigation Wing of the Income Tax Department, it was noticed that during the course of search in the premises of Shri Surendra Kumar Jain group of cases, it was found that assessee has obtained an entry of Rs. 2 crores by way of share capital/share application money. The assessment was reopened under section 148 of the Income Tax Act, 1961. Notice under section 148 was issued on 18-10-2013. The assessing officer issued notice under section 142(1) dated 22-5-2014 and the assessee in reply thereto, submitted that return already filed may be treated as return filed pursuant to notice under section 148 of the Income Tax Act. The assessing officer issued notice under section 133(6) to M/s. Supersonic Construction Ltd., and M/s. Oriental Bank of Commerce for relevant information and verification. The assessee was asked to file details of addition to share capital with complete name, address, PAN and the amount received. The assessee submitted desired details before the assessing officer and also filed confirmations, audited bank statement, ITR and the return of allotment filed with ROC. The assessing officer verified the identity, creditworthiness and genuineness of the transaction in the matter and accordingly accepted the return of income vide order under sections 147/143(3) of the Income Tax Act, 1961 dated 30-6-2014.

26.1. The learned Principal Commissioner found the reassessment order to be erroneous in so far as it is prejudicial to the inter­ests of the Revenue because the information was received that the assessee received accommodation entry from Shri S. K. Jain group of concerns and all the seized documents have not been verified by the assessing officer. Show-cause notice was issued to the assessee seeking explanation of credit entry of Rs. 1 crore received from Shalini Holdings Ltd. The assessee filed detailed reply which is reproduced in the impugned order in which the assessee submitted that complete details were filed before the assessing officer and receipt of share capital money supported by the documents and confirmations. Therefore, reassessment order is not erroneous in so far as prejudicial to the interests of the Revenue. The learned Principal Commissioner noted the submissions of the assessee wherein the shares were originally issued to Shalini Holdings Ltd. on August 25, 2008 were transferred on 25-3-2010 in favour of Frank Merchantile Private Limited. Seized documents are reproduced in the impugned order. The learned Principal Commissioner noted that as against the entry in the name of assessee, an amount of Rs. 2 crores have been mentioned. However, on verification of the seized material, it was found that total amount of Rs. 1 crore as per the details given in the show-cause notice is there and not Rs. 2 crores. It would show that assessing officer did not verify and examine the seized material relating to assessee and accepted the explanation of the assessee without examining the seized paper. The learned Principal Commissioner, therefore, found that the seized documents have not been examined and verified by the assessing officer Therefore, reassessment order was set aside and matter was restored to the assessing officer for passing the order afresh as per the provisions of law.

  1. The assessee in the present appeal challenged the order under section 263 of the Income Tax Act as well as filed an application for admission of additional grounds which reads as under :–
  2. (a) On the facts and in the circumstances of the case, the learned Principal Commissioner has erred, both on facts and in law, in holding that the legality of original assessment proceedings could not be challenged in the 263 proceedings, disregarding the various judicial pronouncements cited by the assessee in this regard. 7.(b) On the facts and in the circumstances of the case, the learned Principal Commissioner has erred both on facts and in law in ignoring the fact that the order of the assessing officer reopening the assessment under section 147 of the Act, without complying with the statutory conditions and the procedure prescribed under the law, is bad and liable to be quashed, and thus, the same could not have been revised under section 263 of the Act.

7.(c) On the facts and in the circumstances of the case, the learned Principal Commissioner has erred both on facts and in law in ignoring the fact that the order of the assessing officer passed on the basis of reasons recorded for reopening of the assessment, which are incorrect on facts and bad in law, is illegal and liable to be quashed, and thus, the same could not have been revised under section 263 of the Act.

7.(d) On the facts and in the circumstances of the case, the learned Principal Commissioner has erred both on facts and in law, in assessing the jurisdiction under section 263 of the Act, despite the fact that the original assessment having been made without issuing of statutory notice under section 143(2) of the Act, being itself illegal, the same could not be revised under section 263 of the Act.” 27.1. The learned counsel for the assessee submitted that it is legal ground and goes to the root of the matter and without further investiga­tion, same may be admitted for disposal of the appeal.

  1. The learned Departmental Representative however, objected to the admission of the additional ground of appeal and submitted that no such ground was taken in the original proceedings and that such ground cannot be taken in the present appeal.
  2. Similar issue was considered by us in the above group of appeal in the case of Shiv Sai Infrastructure (P.) Ltd.(supra) and additional ground have been admitted. Following the reasons for decision of the same, we admit the additional grounds of appeal for the purpose of disposal of the appeal.
  3. The learned counsel for the assessee reiterated the submissions made before the authorities below and submitted that no notice under section 143(2) have been issued in the case of the assessee. Copy of the order sheet of the assessing officer is filed at page 279 of the paper book to show that no notice under section 143(2) have been issued. He has referred to PB-20 which is reasons for reopening of the assessment in which the assessing officer has mentioned wrong facts of taking accommodation entry of Rs. 2 crores. However, the assessee has received share capital/premium of Rs. 1 crore only in assessment year under appeal. No name of the person from whom the assessee received Rs. 2 crores have been mentioned in the reasons. The show cause notice under section 263 have been issued for a lesser amount of Rs. 1 crore. If reasons were incorrect for reopening of the assessment, then, reassessment proceedings would be invalid and non est, therefore, the learned Principal Commissioner has no power to review the same under section 263 of the Income Tax Act. The learned counsel for the assessee referred to several replies filed before assessing officer to show all documentary evidences were examined by the assessing officer at reassessment proceedings. There is no co-relation of the seized documents with the assessee. Since the assessing officer recorded incorrect reasons for reopening of the assessment and that no notice under section 143(3) have been issued, therefore, reassessment order is invalid and as such, the same cannot be revised under section 263 of the Income Tax Act. The assessing officer made enquiry of all the documents but the learned Principal Commissioner did not make any enquiry on the documentary evidences on record. The learned counsel for the assessee submitted that the issue is the same as have been considered and decided in the cases of Supersonic Technologies (P) Ltd., SPJ Hotels (P) Ltd.and Shiv Sai Infrastructure (P.) Ltd. (supra).
  4. On the other hand, the learned Departmental Representative reiterated the submissions already made in the case of Supersonic Technologies (P) Ltd.(supra) and also submitted that no ground was taken in original proceedings for illegality in the reassessment proceedings. The issue of notice under section 143(2) is a disputed question and not relevant in the present proceedings. Seized papers are not considered and examined by the assessing officer The amount in question is Rs. 1 crore only. Therefore, the order of the assessing officer is erroneous in so far as prejudicial to the interests of the Revenue. He has, therefore, submitted that order under section 263 may be confirmed.
  5. We have considered the rival submissions. The issue is the same as have been considered in the above three cases viz., Supersonic Technologies (P) Ltd., SPJ Hotels (P) Ltd. andShiv Sai Infrastructure (P.) Ltd., New Delhi (supra). In the present case, no notice under section 143(2) have been issued for completion of the reassessment proceedings and that incorrect facts have been recorded in the reasons for reopening of the assessment. Therefore, the reassessment proceedings are invalid, bad in law and non est and as such, liable to be quashed. We, therefore, following the reasons for decision in the cases of Supersonic Technologies (P) Ltd., SPJ Hotels (P) Ltd. and Shiv Sai Infrastructure (P.) Ltd. (supra), set aside the impugned order of the learned Principal Commissioner passed under section 263 of the Income Tax Act and quash the same. Accordingly, the appeal of the assessee is allowed.
  6. In the result, the appeal of the assessee is allowed.
  7. To sum up, all the appeals of the assessees are allowed.

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