Validity of assessment on isuance of section 143(2) notice on the very same day of filing return

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Validity of assessment on isuance of section 143(2) notice on the very same day of filing return

Short Overvivew : Issuance of notice under section 143(2) on the very same day when return was filed showed non-application of mind on AO’s part in issuing section 143(2) notice and thereafter in framing assessment and therefore, all proceedings were nullity.

Assessee challenged validity of assessment order passed by AO under section 153A/143(3) for want of valid notice under section 143(2).

it is held that : As evident, return in response to notice under section 142(1) was filed on 14-3-2013 and notice under section 143(2) was issued on very same day, i.e., 14-3-2013 which showed non application of mind in issuing notice under section 143(2) and thereafter in framing assessment, accordingly all proceedings were nullity.

Decision: In assessee’s favour.

Referred: Pr. CIT v. Adamine Construction (P.) Ltd. (2018) 99 taxmann.com 45 (SC) : 2018 TaxPub(DT) 7167 (SC), Pr. CIT v. M/s. Himachal Fibers Ltd. (2018) 98 taxmann.com 173 (SC) : 2018 TaxPub(DT) 5572 (SC), Andaman Timber Industries v. CCE (2015) 127 DTR 241 (SC) : 2015 TaxPub(DT) 5186 (SC), Bhikhubhai Vithlabhai Patel & Ors. v. State of Gujarat & Anr. [C.A. 2000 of 2008, dt. 14-3-2008], National Thermal Power Company Ltd. v. CIT (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 0342 (SC), CIT v. Orissa Corporation (P) Ltd. (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC), Pr. CIT v. Oriental International Co. Pvt. Ltd. (2018) 401 ITR 83 (Del) : 2018 TaxPub(DT) 0291 (Del-HC), Pr. CIT v. Silver Line (2016) 383 ITR 455 (Del) : 2016 TaxPub(DT) 0597 (Del-HC), CIT v. M/s. Parikalpana Estate Development (P) Ltd. [Income Tax Appeal No. – 160 & 161 of 2009, dt. 11-10-2012] : 2013 TaxPub(DT) 0352 (All-HC), Manish Prakash Gupta v. CIT (2014) 259 CTR 57 (All) : 2013 TaxPub(DT) 1379 (Guj-HC), CIT v. Mukesh Kumar Agrawal (2012) 345 ITR 29 (All.) : 2012 TaxPub(DT) 2034 (All-HC), CIT v. M/s. Dataware (P) Ltd. [ITAT No. 263 of 2011 & GA No. 2856 of 2011, dt. 21-9-2011] : 2013 TaxPub(DT) 1384 (Cal-HC), DIT v. Society For Worldwide Interbank Financial (2010) 323 ITR 249 (Del) : 2010 TaxPub(DT) 1812 (Del-HC), Assam Company (India) Ltd. v. CIT (2002) 256 ITR 423 (Gau.) : 2002 TaxPub(DT) 1063 (Gau-HC), Satish Kumar v. ITO [ITA. No. 3586/Del./2018, dt. 14-1-2019] : 2019 TaxPub(DT) 2598 (Del-Trib), Ashtech Industries (P) Ltd. v. DCIT [ITA.No. 2332/Del./2018, dt. 20-12-2018] : 2019 TaxPub(DT) 0063 (Del-Trib), ITO v. Signature Build Well (P) Ltd. [ITA No. 4249/Del/2015, dt. 12-12-2018] : 2019 TaxPub(DT) 0268 (Del-Trib), M/s. SRM Securities Pvt. Ltd. v. DCIT [ITA 7825/Del/2017, dt. 11-12-2018] : 2019 TaxPub(DT) 1590 (Del-Trib), ITO v. Kautilya Monetary Services (P) Ltd. [ITA 5975/Del/2014 D Bench (30-11-2018)] : 2019 TaxPub(DT) 0134 (Del-Trib), M/s. Heat Flex Cables (P) Ltd. v. ITO [ITA: 2376/Del/2018 SMC 1-8-2018 ITAT Delhi] : 2018 TaxPub(DT) 5363 (Del-Trib), Moti Adhesives (P) Ltd. v. ITO [ITA 3133/Del/2018 SMC 25-6-2018 ITAT Delhi] : 2018 TaxPub(DT) 3829 (Del-Trib), ITO v. M/s. Alok Fintrade (P) Ltd. ITA 180/JP/2015] : 2018 TaxPub(DT) 2618 (Jp-Trib), Micron Enterprises (P) Ltd. v. ITO [ITA No. 901/DEL/2016 (Assessment Year 2006-07) Order, dated 14-5-2018] : 2018 TaxPub(DT) 2670 (Del-Trib), Shri Harsh Bhatia v. ITO [ITA Nos. 1262/& 1263/DEL/2017, dt. 17-10-2017].

IN THE ITAT, DELHI BENCH

BHAVNESH SAINI, J.M. & L.P. SAHU, A.M.

Ajay Sharma v. Dy. CIT

I.T.A. No. 3555/Del./2015

5 March, 2019

Assessee by: Kapil Goel, Advocate

Revenue by: Sanjay Goyal, CIT-D.R.

ORDER

Bhavnesh Saini, J.M.

This appeal by assessee has been directed against the order of learned Commissioner (Appeals), Ghaziabad, dated 31-3-2015 for the assessment year 2011-12.

  1. Briefly the facts of the case are that a search under section 132 of the Income Tax Act was conducted in the case of Shri Pankaj Sharma and assessee (Shri Ajay Sharma) on 11-10-2010. It was informed that cash was going to be withdrawn from A/c. xxx2277 of M/s. A.K. Traders with HDFC Bank, Ambedkar Road, Ghaziabad, source of which is not explained in the hands of the assessee, proprietor of M/s. A.K. Traders. When the team visited the Bank premises, it was found that an amount of Rs. 2.78 crores was already got transferred to account xxx16097 with Punjab National Bank, Navyug Market, Ghaziabad, standing in the name of M/s. Tushar Building Material Supplier, Gautam Budh Nagar. Bank Authorities were requested to put the balance of Rs. 1,78,35,905 standing to credit in A/c. No. xxx2277 of M/s. A.K. Traders under restraint. Meanwhile, the team immediately visited Punjab National Bank and it was found that by that time the entire amount of Rs. 2.78 crores had been withdrawn in cash. The Bank premises of HDFC, Ghaziabad in the case of Bank A/c. xxx2277 of M/s. A.K. Traders was searched on 11-10-2010 and balance standing to the credit was seized. The statement of assessee was recorded in which he has stated that he does not know about the source of the amount credited to the account and the entire affairs were being looked after by his brother in law Shri Pankaj Sharma. The assessing officer recorded that so many concerns are being operated and the amounts in the accounts have been credited by transfer through RTGS or otherwise and accommodation entries have been provided. A list showing names of beneficiaries and numerous firms who had been given accommodation entries by assessee and others are noted at pages 5 to 13 of the assessment order. The assessing officer on the basis of the search and seizure operation and enquiries conducted noted that assessee is engaged in the business of providing accommodation entries. Notice under section 153A of the Income Tax Act was issued for assessment years 2005-06 to 2010-11 on 18-9-2012 and notice under section 142(1) was issued for assessment year under appeal, i.e., 2011-12 on 18-9-2012, for filing of the return of income. The assessee filed return of income on 14-3-2013 showing income of Rs. 57,140 from salary income and other sources. The assessing officer on the same day on 14-3-2013 issued notices under section 143(2) and 142(1) of the Income Tax Act, seeking explanation of assessee. The assessing officer considered 3% commission income on the gross deposits and made addition of Rs. 1.04 crores and further made addition on protective basis on Rs. 34.67 crores. The assessing officer passed the assessment order under section 143(3) dated 31-3-2013 and computed the total income of assessee at Rs. 35,72,04,017. The learned Commissioner (Appeals) dismissed the appeal of assessee.
  2. The assessee raised several grounds in appeal challenging the above additions. The assessee also filed the following additional grounds of appeal —

“That impugned assessment order passed by learned assessing officer under section 153A/143(3) of the Act is invalid and void ab initio for want of valid notice under section 143(2) as per law as evident from fact that when return in response to notice under section 142(1) dated 14-12-2012 was admittedly filed on 14-3-2013 notice under section 143(2) is issued on very same day that is 14-3-2013 which shows non application of mind in issuing notice under section 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity.”

“That impugned assessment framed under section 143(3) on basis of notice under section 143(2) dated 14-3-2013 is invalid and void ab initio being made on basis of non est return filed under section 153A/153C on 14-3-2013 as no return was there under section 139/142 filed on 14-3-2013 to validly issue notice under section 143(2) which shows non application of mind in issuing notice under section 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity.”

“That impugned assessment framed under section 153A/143(3) is invalid and void ab initio being made without issuance of any show cause much less any show cause notice as evident from order sheet entries of case records filed in paper book “

  1. Learned Counsel for the assessee submitted that all facts are available on record and it is not in dispute that return of income was filed on 14-3-2013 and on the same day, assessing officer issued notice under section 143(2). Therefore, entire assessment order is a illegal and vitiated and is liable to be quashed. He has submitted that additional ground may be admitted for hearing. PB 35 is order sheet to show that return of income was filed on 14-3-2013 and on the same day, notice under section 143(2) have been issued to assessee. PB 24 is notice under section 143(2) dated 14-3-2013. He has a submitted that the issue is covered in favour of the assessee by the order of ITAT, Delhi A-Bench, in the case ofAshtech Industries Pvt. Ltd., Delhi v. DCIT, Circle-3(2), New Delhi, in [ITA.No. 2332/Del./2018, dt. 20-12-2018] : 2019 TaxPub(DT) 0063 (Del-Trib). He has submitted that a similar view have been taken by ITAT, Delhi SMC-Bench in the case of Satish Kumar, New Delhi v. ITO, Ward-2(3), Faridabad in [ITA. No. 3586/Del./2018, dt. 14-1-2019] : 2019 TaxPub(DT) 2598 (Del-Trib).
  2. On the other hand, learned D.R. referred to page 28 of the learned Commissioner (Appeals) order and submitted that assessee did not cooperate with the assessing officer, therefore, there was no time left with the assessing officer to issue notice under section 143(2) of the Income Tax Act. He has, therefore, submitted that additional ground may not be admitted.
  3. We have considered the rival submissions and perused the material on record. The additional ground is legal in nature and goes to the root of the matter. It is well settled Law that taxability of the income should be in accordance with law. All the material facts are available on record. Therefore, it being the legal issue, we admit the additional ground of appeal for the purpose of disposal of the appeal. We rely upon decision of Hon’ble Supreme Court in the case ofNTPC (1998) 229 ITR 383 (SC) : 1998 TaxPub(DT) 0342 (SC). We also rely upon the decision of Hon’ble Gauhati High Court in the case of Assam Company India Limited (2002) 256 ITR 423 (Gau.) : 2002 TaxPub(DT) 1063 (Gau-HC) in which it was held that “the Tribunal may consider any new ground if facts are available on record.” The additional ground is, therefore, admitted for deciding the appeal.

6.1. It is not in dispute that search was conducted in the case of the assessee and others on 11-10-2010, therefore, the assessment year under appeal, i.e., assessment year 2011-12 is the year of search. It is not in dispute that assessee filed return of income on 14-3-2013 and on the same day, notice under section 143(2) have been issued. This fact is mentioned in the assessment order. The assessee also filed copy of the notice under section 143(2) and copy of the order sheet on record, which also supports the same fact that notice under section 143(2) have been issued on the date of filing of the return of income itself.

6.2. Learned D.R. referred to page-22 of the learned Commissioner (Appeals) Order. The assessing officer in the assessment order has mentioned that notice under section 142(1) have been issued on 18-9-2012. The learned Commissioner (Appeals) noted in para 6.4 of the appellate order, as referred to by the learned D.R. that this notice issued under section 142(1) on 18-9-2012 was received un-served. Another notice under section 142(1) with questionnaire is issued on 14-12-2012 for compliance on 3-1-2013 but, there were no compliance. Summons under section 131 and show cause notice under section 276CC was issued on 6-6-2012 but, there was no compliance. The assessing officer as well as the learned Commissioner (Appeals) have nowhere mentioned in the impugned orders, if any of the above notices have been served upon the assessee? Therefore, there is no question of any non-compliance or non-cooperation on the part of the assessee as is contended by the learned D.R. The contention of the learned D.R. is, therefore, rejected. It, therefore, stands established that the assessing officer issued notice under section 143(2) on the same day when the return of income was filed by the assessee. Thus, there was no application of mind on the part of the assessing officer. The entire assessment proceedings are vitiated and are bad in the eye of Law. The issue is covered in favour of the assessee by order of the ITAT, Delhi Bench in the case of Ashtec Industries Pvt. Ltd., Delhi v. DCIT, Circle-3(2), New Delhi (supra) which is reproduced as under —

“IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH ‘A’ NEW DELHI

H.S. SIDHU, J.M. & L.P. SAHU, A.M.

I.T.A. No. 2332/Del/2018

Assessment Year: 2009-10

ASHTECH INDUSTRIES PVT. LTD., D-49, MANSAROVAR PARK, SHAHDARA, DELHI-110 032 (PAN: AAECA0120G) v. DCIT, CIRCLE 3(2), NEW DELHI
(ASSESSEE) (RESPONDENT)

Assessee by: Kapil Goel, Advocate

Revenue by: Sridhar Dora, Sr. DR.

ORDER

H.S. Sidhu, J.M.

This appeal is filed by assessee against the Order, dated 8-3-2018 passed by the learned Commissioner (Appeals), New Delhi relating to assessment year 2009-10 on the following grounds :–

  1. The initiation of proceedings under section 148 is without jurisdiction.
  2. The initiation of action under section 148 is bad in law, being based on bald allegations equating the same with tangible material.
  3. The initiation of action under section 147 on the basis of search material found during search of third party, i.e., Jain brothers, is contrary to law in view of non-obstante clause in section 153A/153C, specifically prohibiting action under section 147,inter alia.
  4. Even otherwise, the initiation of proceedings under section 148 and the consequent assessment under section 147 is contrary to law in the absence of any incriminating material to form reason to believe, as per the report of Investigation Wing & assessing officer relied on, which only directs the assessing officer to examine the details and after this examination only to determine whether there could be any justification for initiation of action under section 147. Thus, the issue of notice under section 148 and the consequent assessment under section 147 is without the authority of law and do not provide jurisdiction to the assessing officer to make re-assessment under section 147.
  5. That the assessment under section 147 is unlawful, arbitrary and without jurisdiction on account of lack of application of mind and lack of approval under section 151 from competent authority.
  6. That the assessment under section 147 is contrary to law laid down by the Hon’ble Supreme Court inGKN Driveshaftcase, without following the procedure laid down by the Hon’ble Supreme Court.
  7. That the assessment is bad in law being made without following the principles of equity and justice and denying the assessee of proper opportunity to defend, without supplying the copies of material relied on and cross examination of the witnesses whose statements have been relied upon to initiate action and complete assessment.
  8. That the learned assessing officer has erred on facts and in law in making the addition of Rs. 1,85,00,000 on account of alleged accommodation entry, merely following the investigation report, ignoring the voluminous evidence to the contrary brought on record by the assessee. The addition is made on the basis of conjectures and surmises.
  9. That the learned Commissioner (Appeals) has erred in law and on facts in confirming the order of learned assessing officer both on legal grounds and on merits.
  10. That the learned Commissioner (Appeals) has erred in law in treating the vague and general information of investigation wing and of the assessing officer of the searched party M/s. Jain Brothers as sacrosanct without examination with reference to the seized material and the facts of the assessee’s case.
  11. That the learned Commissioner (Appeals) has erred in importing approval of the higher authorities under section 151 on assumptions without existence of the Actual correspondence regarding approval and without confronting the assessee with the same.
  12. The appellant craves leave and sanction of the Hon’ble ITAT to file additional evidence, if so required for proper prosecution of the case, based on facts and circumstances, which has not been or could not be adduced or filed before lower authorities either because proper and sufficient opportunity was not provided or because it was not solicited or its need was not appreciated.
  13. The appellant craves leave to and permission of the Hon’ble ITAT to add to or alter any of the grounds of appeal at any time up to the final decision of the appeal.
  14. The assessment may please be set aside as null and void and addition of Rs. 1,85,00,000 be deleted or such other relief as your Honors may deem fit under the circumstances of the case, be allowed.
  15. The assessee has also filed the following additional ground under rule 11 of the ITAT Rules —

“That impugned assessment order passed by the assessing officer under section 147/143(3) of the Act is invalid and void ab initio for want of valid notice under section 143(2) as per law as evident from fact that when return in response to notice under section 148 was admittedly filed on 27-4-2016 notice under section 143(2) is issued on very same day that is 27-4-2016 which shows non application of mind in issuing notice under section 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity.”

  1. The brief facts of the case are that assessee filed its return of income on 29-9-2009 declaring an income of Rs. 3,39,85,750. The assessment under section 143(3)/147 of the Income Tax Act, 1961 (in short “Act) was made on 24-11-2016 at a total income of Rs. 5,24,85,750. In the assessment order, assessing officer added Rs. 1,85,00,000 on account of accommodation entries under section 68 of the Income Tax Act. Aggrieved with the addition, the assessee appealed before the learned Commissioner (Appeals), who vide its impugnedOrder, dated 8-3-2016dismissed the appeal of the assessee. Now against the impugned order, assessee is in appeal before us.
  2. Learned Counsel for the assessee has submitted that the additional ground in identical facts has been accepted and assessment under section 143(3) of the Act was passed without proper issue and service of notice under section 143(2) of the Act, which was later quashed by the ITAT and the Hon’ble High Court in the following cases :–

(i) Hon’ble Delhi ITAT in case of Micron Enterprises Pvt. Ltd. v. ITO in [ITA No. 901/DEL/2016 (Assessment Year 2006-07) Order, dated 14-5-2018] : 2018 TaxPub(DT) 2670 (Del-Trib).

(ii) Hon’ble Delhi ITAT in Harsh Bhatia case ITA Nos. 1262 & 1263/DEL/2017 [Assessment Years 2008-09 & 2009-10] Order, dated 17-10-2017.

(iii) Hon’ble Delhi High Court in the case of Director of Income Tax v. Society for Worldwide Inter Bank Financial, Telecommunications in ITA No. 441/2010, reported at (2010) 323 ITR 249 (Del) : 2010 TaxPub(DT) 1812 (Del-HC).

(iv) Delhi High Court decision in the case of Silver Line (2016) 383 ITR 455 (Del) : 2016 TaxPub(DT) 0597 (Del-HC).

  1. On the merits of the case, learned Counsel for the assessee stated that the addition made under section 68 of the Act is for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference under section 68 of the Act where those share holders are found to be existing and identified in detail as summons have been duly served on them. Mere non production of share holder companies director is argued to be no valid reason for making addition under section 68 of the Actde horsvoluminous evidences filed which has not been objectively and lawfully controverted in manner known to law, in view of following coordinate benches decisions, where similar argument in identical circumstances of additions based on S.K. Jain group search has been deleted under section 68 of the Act —

Kautilya Monetary Services Pvt. Ltd., ITA No. 5975/Del/2014 D Bench (30-11-2018) ITAT Delhi : 2019 TaxPub(DT) 0134 (Del-Trib)

Moti Adhesives (P) Ltd., ITA No. 3133/Del/2018, SMC 25-6-2018 ITAT Delhi : 2018 TaxPub(DT) 3829 (Del-Trib)

Alok Fintrade (P) Ltd., ITA No. 180/JP/2015 ITAT JAIPUR BENCH : 2018 TaxPub(DT) 2618 (Jp-Trib) 

Heat Flex Cables (P) Ltd., ITA No. 2376/Del/2018 SMC 1-8-2018 ITAT Delhi : 2018 TaxPub(DT) 5363 (Del-Trib)

Signature Buildwell Pvt. Ltd., ITAT Delhi D Bench ITA No. 4249/Del/2015, dt. 12-12-2018 : 2019 TaxPub(DT) 0268 (Del-Trib)

SRM Securities Pvt. Ltd., ITAT G Bench [ITA 7825/Del/2017, dt. 11-12-2018] : 2019 TaxPub(DT) 1590 (Del-Trib)

  1. On the contrary, learned Sr. DR vehemently opposed the request of learned counsel for the assessee and prayed for dismissal of additional ground application. However, on the merit of the case, he argued that without production of director of share holder companies, addition under section 68 may please be confirmed and accordingly, he relied upon the orders of the authorities below.
  2. We have heard both the parties and perused the records, especially the impugned order and the case laws cited by the learned Counsel for the assessee. We note that Assessee filed its return of income for the assessment year 2009-10 on 29-9-2009 declaring income of Rs. 339,85,750 and the same was processed under section 143(1) of the Act on 19-2-2011. Later on, certain information as mentioned in assessment order was received from Investigation Wing regarding search and survey action of Surender Kumar Jain and his brother Virendra Jain and it was reported by Investigation Wing to the assessing officer that they were engaged in business of providing accommodation entries allegedly through certain companies. On the basis of said Investigation Wing information, reopening was made under section 148 of the Act by the assessing officer vide notice under section 148 of the Act dated 28-3-2016. In response to the same, admittedly return was filed byLetter, dated 27-4-2016which is specifically acknowledged by assessing officer in assessment order at Para 2 of the assessment order. Notably, said return is expressly accepted by assessing officer as valid return for purposes of assessment under section 148 of the Act. As mentioned in assessment order itself, when the said return was taken on order sheet by assessing officer vide order sheet entry dated 27-4-2016, at same time, notice under section 143(2) of the Act was issued on very same date that is 27-4-2016 which is one of the major issue on which validity of the assessment is challenged before us. Copy of this return and notice under section 143(2) of the Act dated 27-4-2016 are placed on records before us. We further note that assessing officer supplied the reasons recorded (without approval) to assessee (as placed in paper book before us) which were objected before the assessing officer in detailed manner vide objection letter dated 27-4-2016 in which note worthy aspect is assessee specifically sought from assessing officer copies of back material referred in reasons including investigation wing report/letter, seized documents etc referred therein, assessing officer without confronting any back material as evident from objection disposal Order, dated 17-5-2016 rejected assessee’s objection challenging reopening action. In various letters placed in paper book and referred in written submission before us, it was specifically asked to assessing officer during assessment proceedings to confront the back material as referred in reasons recorded namely in Letters, dated 7-6-2016, 20-10-2016 which request of assessee has not been adverted to by the assessing officer is patent from objection disposal Order, dated 17-5-2016 and further Notices, dated 9-8-2016 under section 142(1) and Show Cause Notice, dated 13-10-2016. In none of these notices as placed in paper book, we could find the back material being confronted to assessee as specifically requested by assessee. We note here that the Tribunal in various decisions specially one which is referred by learned counsel for the assessee extensively in case of Moti Adhesives (ITA 3133/Del/2018) in Order, dated 25-6-2018 : 2018 TaxPub(DT) 3829 (Del-Trib) copy placed before us, has been consistently holding while taking support from Hon’ble Apex court leading decision in Andaman Timber Industries case (Civil Appeal No. 4228 of 2006) reported at (2015) 127 DTR 241 (SC) : 2015 TaxPub(DT) 5186 (SC) that violation of principle of natural justice (here withholding of back material referred in reasons which is specifically requested for repeatedly) is a serious flaw and results in nullity of the order so passed, which is squarely applicable to present case. Be that as it may, even on merits, for the companies from where assessee recd. share capital assessee placed before learned assessing officer in its reply dated 7-6-2016 all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c thus discharging its primary burden under section 68 on three ingredients of identity, creditworthiness and genuineness of share holders. Assessing officer unimpressed by the same in the only show cause notice which is placed in paper book is dated 13-10-2016 where only thing asked by assessing officer is to produce the directors of those share holder companies. For mere non production of said shareholders without anything more, as evident from pages 6 & 12 even though summon issued under section 131 have been accepted to be served on them in the assessment order adverse inference under section 68 of the Act is drawn by assessing officer to make addition of Rs. 185,00,000 which is impugned here before us. In first appeal, before learned Commissioner (Appeals) confirmed the order of the assessing officer has rejected assessee’s detailed submissions challenging reopening action under section 148 of the Act and while confirming the addition made by assessing officer it is very glaring from ld Commissioner (Appeals)’s order page 16 that primary reason which has weighed on him to confirm said addition is mere non production of share holder companies directors in person. In this background, the assessee is before us challenging the orders of the authorities below.

7.1 At the outset learned counsel for the assessee has drawn our attention to the additional ground application filed before us in terms of rule 11 of ITAT rules. In said additional ground application it is stated as under :–

“Quote

Additional ground of Appeal

That impugned assessment order passed by learned assessing officer under section 147/143(3) of the Act is invalid and void ab initio for want of valid notice under section 143(2) as per law as evident from fact that when return in response to notice under section 148 was admittedly filed on 27-4-2016 notice under section 143(2) is issued on very same day that is 27-4-2016 which shows non application of mind in issuing notice under section 143(2) and thereafter in framing the assessment and accordingly all proceedings are nullity.”

7.2 We note that the aforesaid additional ground in identical facts is accepted and assessment under section 143(3) of the Act was quashed by the ITAT and Hon’ble High Court, are mentioned herein below :–

(i) Hon’ble Delhi ITAT in case of Micron Enterprises Pvt. Ltd. v. ITO in I.T.A. No. 901/DEL/2016 (Assessment Year 2006-07) Order, dated 14-5-2018 : 2018 TaxPub(DT) 2670 (Del-Trib)

(ii) Hon’ble Delhi ITAT in Harsh Bhatia case ITA Nos. 1262 & 1263/DEL/2017 [Assessment Years 2008-09 & 2009-10] Order, dated 17-10-2017

(iii) Hon’ble Delhi High Court in the case of Director of Income Tax v. Society for Worldwide Inter Bank Financial, Telecommunications in ITA No. 441/2010, reported at (2010) 323 ITR 249 (Del) : 2010 TaxPub(DT) 1812 (Del-HC)

(iv) Section 292BB & section 143(2) are both dealt succinctly in Delhi High Court decision in case of Silver Line reported at (2016) 383 ITR 455 (Del) : 2016 TaxPub(DT) 0597 (Del-HC) wherein it has been held as under :–

“…….12. The Court first proposes to consider the question as to whether in terms of the proviso to section 292BB of the Act, the assessee was precluded, at the stage of the proceedings before the ITAT, from raising a contention regarding failure of the assessing officer to issue a notice under section 143(2) of the Act. The legal position appears to be fairly well settled that section 292BB of the Act talks of the drawing of a presumption of service of notice on an assessee and is basically a rule of evidence. In Commissioner of Income Tax v. Parikalpana Estate Development (P.) Ltd. (supra) in answering a similar question, the Court referred to its earlier decision in Commissioner of Income Tax v. Mukesh Kumar Agrawal (2012) 345 ITR 29 (All.) : 2012 TaxPub(DT) 2034 (All-HC) and pointed out that section 292BB of the Act was a rule of evidence which validated service of notice in certain circumstances. It introduces a deeming fiction that once the assessee appears in any proceeding or has cooperated in any enquiry relating to assessment or reassessment it shall be deemed that any notice under any provision of the Act that is required to be served has been duly served upon him in accordance with the provisions of the Act and the assessee in those circumstances would be precluded from objecting that a notice that was required to be served upon him under the Act was not served upon him or not served in time or was served in an improper manner. It was held that section 292BB of the Act is a rule of evidence and it has nothing to do with the mandatory requirement of giving a notice and especially a notice under section 143(2) of the Act which is a notice giving jurisdiction to the assessing officer to frame an assessment. The decision of the Allahabad High Court in Manish Prakash Gupta v. Commissioner of Income Tax (supra) is also to the same effect.”

7.3 While arguing on above additional ground application, learned counsel for the assessee has drawn our attention to written submission filed in paper book of 218 pages (from page 1 to 27) that as noted in impugned assessment order at pages 5 & 6 that notice under section 143(2) of the Act was issued on 27-4-2016 on return submitted under section 148 of the Act vide order sheet entry dated 27-4-2016, (copy of return under section 148 Letter, dated 27-4-2016 and notice under section 143(2) dated 27-4-2016 are at pages 5 & 6 with additional ground application), in view of Jurisdictional Delhi High Court decision in case of Society for worldwide reported at 323 ITR 249 followed in identical set of facts by Delhi ITAT in case of Micron Enterprises Pvt. Ltd. v. ITO in ITA 901/Del/2016, dt. 14-5-2018] : 2018 TaxPub(DT) 2670 (Del-Trib) (copies enclosed in additional ground application at pages 12 to 24) and in view of no contrary jurisdictional High Court decision, we request that extant orders of assessing officer and learned Commissioner (Appeals) may be quashed on this short count itself. The logic behind this proposition is patent non application of mind and undue haste on part of assessing officer in issuing notice at same time when return under section 143(2) of the Act is filed as admitted in order itself, which is sine qua non under section 143(2) of the Act which uses the phrase “if considers it necessary or expedient”, and on expression “considers it necessary” we draw our kind attention to Hon’ble Apex Court decision in case of Bhikubhai Patel v. State of Gujarat (4 SCC 144) relevant extract of which is reproduced below for sake of ready reference (which directly fits in extant facts to support proposition put forth) :–

“……24. Proviso opens with the words where the State Government is of opinion that substantial modifications in the draft development plan and regulations are necessary. These words are indicative of the satisfaction being subjective one but there must exist circumstances stated in the proviso which are conditions precedent for the formation of the opinion. Opinion to be formed by the State Government cannot be on imaginary grounds, wishful thinking, however, laudable that may be. Such a course is impermissible in law. The formation of the opinion, though subjective, must be based on the material disclosing that a necessity had arisen to make substantial modifications in the draft development plan.

  1. The formation of the opinion by the State Government is with reference to the necessity that may have had arisen to make substantial modifications in the draft development plan. The expression so considered necessary is again of crucial importance. The term consider means to think over; it connotes that there should be active application of the mind. In other words the term consider postulates consideration of all the relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 2005; P. Ramanatha Aiyar)
  2. The formation of the opinion by the State Government should reflect intense application of mind with reference to the material available on record that it had become necessary to propose substantial modifications to the draft development plan.”

7.4 Learned Counsel for the assessee also stated that there is no application of mind in present case what to speak of intense application of mind where notice under section 143(2) is ostensibly prepared before hand or hand in hand at same time when return under section 148 is filed on 27-4-2016, hence, he requested to quash the assessment.

7.5 On careful consideration of the entire conspectus of the case, as per Hon’ble Supreme court ruling in case of National Thermal Power Corporation Ltd. v. CIT (1998) 229 ITR 383 SC) : 1998 TaxPub(DT) 0342 (SC), we admit the additional ground raised above by the assessee being purely legal in nature on basis of material on records. Once the decks are clear from admission of purely legal additional ground, we now turn our attention to the adjudication of the same which should not detain us for long in view of Delhi ITAT decision in case of Micron Enterprises Pvt. Ltd. (supra) which has decided the identical issue in favour of assessee by relying on Hon’ble Delhi High Court in the case Society for Worldwide Inter Bank Financial, Telecommunications supra. We are reproducing the reasoning from ITAT decision in case of Micron Enterprises Pvt. Ltd. (supra) on which no contrary decision is brought to our attention :–

“Learned Counsel for the assessee submitted that assessee filed reply to the notice under section 148 of the Income Tax Act on dated 26-11-2013 which is noted in the assessment order, copy of which, is filed at page-11 of the paper book, in which, assessee explained that the return already filed under section 139(1) may be treated as return filed in response to notice under section 148 of the Income Tax Act. He has submitted that on the same day assessing officer issued notice under section 143(2), i.e., on 26-11-2013, copy of which, is filed at page-12 of the paper book. He has, therefore, submitted that the assessing officer has not validly assumed jurisdiction under section 147 and 143(3) of the Income Tax Act to pass the assessment order against the assessee. He has submitted that the issue is covered in favour of the assessee by the judgment of the Hon’ble Delhi High Court in the case of Director of Income Tax v. Society for Worldwide Interbank Financial Telecommunications (2010) 323 ITR 249 (Del.) : 2010 TaxPub(DT) 1812 (Del-HC) in which it was held as under : “Both the Commissioner (Appeals) and the Tribunal have returned a concurrent and clear finding of fact that the notice under section 143(2) was issued on 23-3-2000 and since the return was filed on 27-3-2000, the notice was not a valid one and, therefore, the assessment completed on the basis of the notice was also invalid and was consequently set aside.

It is for the first time that the counsel for the appellant contends that the notice, in fact, was issued on 27-3-2000 and not on 23-3-2000, the date which is recorded on the notice itself. No such contention was raised before the lower appellate authorities.

Consequently, the said contention cannot be raised before the Court for the first time. The appellant has stated that the return was filed by the assessee on 27-3-2000 and the notice under section 143(2) was served upon the Authorized Representative of the assessee by hand when the Authorized Representative of the assessee came and filed return. However, the date of the notice was mistakenly mentioned as 23-3-2000. Assuming the aforesaid to be true, the notice was served on the Authorized Representative simultaneously on his filing the return which clearly indicates that the notice was ready even prior to the filing of the return. The provisions of section 143(2) make it dear that the notice can only be served after the assessing officer has examined the return filed by the assessee. Whereas it is dear that when the assessee came to file the return, the notice under section 143(2) was served upon the Authorized Representative by hand. Thus, it would amount to gross violation of the scheme of section 143(2).

5.1. And the conclusion is as under : “Assessment made in pursuance of a notice under section 143(2) issued on 23-3-2000 when the return was filed on 27-3-2000 is invalid.”

  1. He has submitted that the same order have been followed by ITAT, Delhi Bench, in the case ofShri Harsh Bhatia, New Delhi v. ITO, Ward-50(3), New Delhi in ITA. No. 1262 and 1263/Del./2017, dt. 17-10-2017in which the Tribunal held as under :–

“10. It was further argued by the learned counsel for the assessee Dr. Rakesh Gupta that notice under section 143(2) of the Act, was issued on 17-9-2014 and which is the same date on which return was filed. This is apparent from the assessing officer’s order in para 3 at page 1. Therefore, the assessing officer has not applied his mind independently while issuing notice under section 148 of the Act. On this count also, the assessment deserves to be quashed. Accordingly, under the facts and circumstances of the case, the legal grounds of the assessee are allowed.”

  1. On the other hand, learned D.R. submitted that assessee did not file return under section 148 within the specified period. Therefore, this ground of appeal of assessee may be dismissed.
  2. After considering the rival submissions, I am of the view that the issue is covered in favour of the assessee by the Judgment of Hon’ble Delhi High Court in the case ofDirector of Income Tax v. Society for Worldwide Interbank Financial Telecommunications(supra) and Order of ITAT, Delhi Bench in the case of Shri Harsh Bhatia, New Delhi v. ITO, Ward-50(3), New Delhi (supra). It is an admitted fact that assessee filed reply in response to the notice under section 148 of the Income Tax Act on 26-11-2013 and submitted before assessing officer that original return filed before him may be treated as return filed in response to the notice under section 148 of the Income Tax Act. The assessing officer on the same day served notice under section 143(2) upon assessee-company whose signature tally on the said notice. Therefore, notice issued under section 143(2) is invalid and resultantly, the assessment is vitiated and is liable to be quashed. I, accordingly, set aside the orders of the authorities below and quash the reassessment proceedings in the matter. Resultantly, all additions stands deleted. In view of the above, there is no need to decide other contentions raised by learned Counsel for the assessee.
  3. In the result, appeal of assessee is allowed.”

7.6 Further we also find force in argument of learned counsel for the assessee that language of section 143(2) of the Act in so far as it uses the phrase “if considers it necessary or expedient” presupposes application of mind on part of learned assessing officer before notice under section 143(2) of the Act is issued which words have been explained by Hon’ble Apex court in case of Bhikubhai Patel v. State of Gujarat 4 SCC 144 relevant extract of which is reproduced above where it is observed by Hon’ble Apex Court that “……The expression: so considered necessary is again of crucial importance. The term consider means to think over; it connotes that there should be active application of the mind. In other words the term consider postulates consideration of all the relevant aspects of the matter. A plain reading of the relevant provision suggests that the State Government may publish the modifications only after consideration that such modifications have become necessary. The word necessary means indispensable, requisite; indispensably requisite, useful, incidental or conducive; essential; unavoidable; impossible to be otherwise; not to be avoided; inevitable. The word necessary must be construed in the connection in which it is used. (See-Advanced Law Lexicon, 3rd Edition, 2005; P. Ramanatha Aiyar).” which fits in present case fully. Guided by these felicitous observation of Hon’ble Supreme court we have no hesitation in our mind in accepting the legal plea raised by learned AR before us and thus holding that notice under section 143(2) issued at same time and date of return filing under section 148 (vide order sheet entry dated 27-4-2016) vitiates the entire exercise and accordingly all subsequent proceedings are held to be invalid in eyes of law and therefore we quash the orders passed by assessing officer and Learned Commissioner (Appeals) and allow additional ground raised by assessee.

7.7 Even otherwise, on the merit of the case, i.e., addition made under section 68 that for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference under section 68 of the Act where those share holders are found to be existing and identified in detail as summons have been duly served on them. Mere non production of share holder companies director is argued to be no valid reason for making addition under section 68 of the Act de hors voluminous evidences filed which has not been objectively and lawfully controverted in manner known to law. For this learned counsel for the assessee placed before us during the course of hearing a comprehensive chart of case laws from coordinate benches of ITAT where similar argument in identical circumstances of additions based on S.K. Jain group search has been deleted under section 68 of the Act. Our view is fortified by the following decisions :–

— Kautilya Monetary Services Pvt. Ltd. [ITA 5975/Del/2014 D Bench (30-11-2018)] : 2019 TaxPub(DT) 0134 (Del-Trib) ITAT Delhi (held in crux that “…….The assessing officer, after going through the evidences furnished by the assessee sat with folded hands and did not make any effort and not made any independent enquiry and made the addition only by relying on the report of the Investigation Wing……”)

— Moti Adhesives (P) Ltd., ITA 3133/Del/2018 SMC 25-6-2018 ITAT Delhi  : 2018 TaxPub(DT) 3829 (Del-Trib) (authored by one of us Hon’ble JM) (held in crux that “Whether once assessee places before learned assessing officer all the relevant and best documents in its possession to establish its burden under section 68 of the Act qua cash credit (here share capital received), can simply because there is no personal appearance from director of said cash creditor (share holder) as called for by learned assessing officer, adverse inference under section 68 can be drawn by learned assessing officer without discharging secondary burden lying on learned assessing officer under section 68 of the Act? In my view the answer to this issue as framed, can only be in negative as once all important and crucial documents are filed by assessee to prove its case qua share capital received under section 68 of the Act, then simply harping on non production of director in person before the assessing officer cannot be justified ground to draw adverse inference without adequate discharge of secondary burden lying on assessing officer under section 68 of the Act. Burden under section 68 of the Act as it is settled law keeps shifting.” Also held that “Even if there was any doubt if any regarding the creditworthiness of the share applicants was still subsisting, then assessing officer should have made enquiries from the assessing officer of the share subscribers as held by Hon’ble High Court in CIT v. Dataware (supra) which has not been done, so no adverse view could have been drawn.”)

— Heat Flex Cables P Ltd. ITA: 2376/Del/2018 SMC 1-8-2018 ITAT Delhi : 2018 TaxPub(DT) 5363 (Del-Trib) (Held in crux that “Since the investor companies have confirmed the transaction with the assessee-company which were conducted through banking channel and entire evidence were brought on record, thereafter, if the assessing officer was not satisfied with the documents on record and explanation of the assessee-company and the Investors, the assessing officer should have made further enquiry on the same. However, it is a case where the assessing officer has failed to conduct necessary enquiry, verification and deal with the matter in depth. Therefore, the explanation of the assessee-company should not have been disbelieved by the authorities below.”)

— Alok Fintrade (P) Ltd., ITA 180/JP/2015] : 2018 TaxPub(DT) 2618 (Jp-Trib)  ITAT Jaipur Bench (Held that “..It is thus a case where the assessing officer was in receipt of material information from the Investigation Wing, Delhi that the assessee company has received accommodation entries in form of share application/investment from two companies as divulged during the course of search and seizure operations in case of S K Jain group. In these situations, the Courts have held that the assessing officer cannot sit back with folded hands and then come forward to merely reject the explanation so made, without carrying out any verification or enquiry into the material placed before him by the assessee. If the assessing officer harbours any doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations. But if the assessing officer fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the Company.

  1. Further, being the reassessment proceedings, where the assessing officer is ceased of certain information and documents, it is incumbent upon him to confront the same to the assessee and allow the latter to file its objections and rebuttal. The additions made, merely relying on these information and documentation, without confronting the assessee cannot be accepted. Besides furnishing the reasons for reopening the assessment to the assessee company, there is nothing on record that such information/documentation was confronted to the assessee. Further, the assessing officer has relied upon the statement of third parties namely, Shri S.K. Jain, Shri V.K. Jain, Shri Assem Kumar Gupta and Shri Rajesh Agarwal, the assessee again deserves an opportunity to cross examine such persons as held by the Hon’ble Supreme Court in case ofAndaman Timber Industries(supra).

— Signature Buildwell Pvt. Ltd. ITAT Delhi D Bench [ITA No. 4249/Del/2015, dt. 12-12-2018] : 2019 TaxPub(DT) 0268 (Del-Trib) (Held in crux that “There is no dispute that the information received from the office of the DIT [INV], New Delhi triggered the proceedings and the assessing officer, taking a leaf out of the said INV report, proceeded to verify the transactions entered into by the assessee with the five companies mentioned elsewhere. It is not the case of the Revenue that cash was found to be deposited in the accounts of five companies prior to subscribing the shares of the appellant company. It is also not the case of the Revenue that the assessee has produced cheques from the five companies by giving cash. No doubt there is a contradiction in the statement of Shri Waseem Gupta, but that alone cannot be a deciding factor once the corroborative evidences in the form of bank statements have been filed by the assessee. The assessing officer did not make any effort to examine the bank statement furnished by the assessee.”)

— SRM Securities Pvt. Ltd. ITAT G Bench [ITA 7825/Del/2017, dt. 11-12-2018] : 2019 TaxPub(DT) 1590 (Del-Trib) (Held in crux that When assessee has discharged its initial burden of proving the identity, creditworthiness of the parties and genuineness of the transactions. Learned assessing officer must reach to the submission of the assessee by conducting exhaustive inquires to throw back the onus on the assessee. Further non receipt of the details under section 133(6) should be the trigger point to make further inquires; it is not the resting point. In the present case, the fact shows that the assessing officer has merely relied upon the enquiries conducted by the investigation wing of the department and has not confronted the assessee with material that he has received from the investigation wing to the assessee to rebut the same. Unless the initial onus discharged by the assessee is thrown back to the assessee by assessing officer by carrying out systematic investigation/inquiry, addition under section 68 cannot be upheld).

7.8 We find that assessee has filed all evidences like share application form, board resolution confirming investment made, confirmation of share capital raised, Share certificate, income tax particulars of share holders, bank statement of share holders and form 2 for allotment of shares along with their audited final a/c in support of share capital recd. to establish its case as stated in reply to learned assessing officer dated 7-6-2016 (paper book pages 47 to 50). We further find that no where any shareholder company was found to be fictitious or non existing rather all share holder companies are duly found to be existing as summons have been served on them. (Refer Hon’ble Supreme Court in Orissa Corporation case (1986) 159 ITR 78 (SC) : 1986 TaxPub(DT) 1425 (SC)). We further find that no cogent material is brought on records in assessment order by learned assessing officer to demolish the copious evidences furnished by assessee. We further find that learned assessing officer has no where confronted any back material to assessee as stated in facts above. We find that learned assessing officer nowhere made any independent enquiry from concerned and competent assessing officer of share holder companies etc. We find that only on basis of investigation wing report (unconfronted to assessee) acting purely on borrowed satisfaction without any independent application of mind addition has been made under section 68 by learned assessing officer. We find that no where in entire assessment order learned assessing officer framed his own independent objective and rational “opinion” on basis of material placed on record within the meaning of provision of section 68 of the Act. Further learned Commissioner (Appeals) has also simply and easily endorsed finding of learned assessing officer without making any independent efforts on enquiry on his part, which finding of learned Commissioner (Appeals) also do not objectively consider the various submissions and arguments of assessee. So we have no hesitation in accepting learned AR’s argument that for mere reason of non production of directors in person of share holder companies same cannot be a justified ground to draw adverse inference under section 68 of the Act. We are supported by decisions relied by learned AR as mentioned above. Moreover, our stated decision is supported by decision of honourable Delhi High Court against which the SLP has been dismissed by the honourable Supreme Court recently in c in Principal Commissioner of Income Tax, Central-1 v. Adamine Construction (P.) Ltd.; Honourable Supreme Court has also dismissed the Special Leave Petition of the revenue in (2018) 98 taxmann.com 173 (SC) : 2018 TaxPub(DT) 5572 (SC) Principal Commissioner of Income Tax v. Himachal Fibers Ltd.; Hon’ble Delhi High Court in the case of Oriental International Company Pvt. Ltd. (2018) 401 ITR 83 (Del) : 2018 TaxPub(DT) 0291 (Del-HC) which decisions are relied in decisions mentioned above in arguments of learned AR. We thus reverse the finding of learned assessing officer as confirmed by learned Commissioner (Appeals) in this regard. On basis of this discussion we find no merit in addition of Rs. 1,85,00,000 made under section 68 of the Act, hence, we delete the same and allow the appeal of the assessee accordingly.

  1. In the result, the appeal of the assessee is allowed.”

6.3. Similar view have been taken by ITAT, SMC Bench in the case of Shri Satish Kumar, Delhi v. ITO, Ward-2(3), Faridabad (supra). Following the above orders, we set aside the orders of the authorities below and quash the assessment order. Resultantly, all additions, stand deleted. In the result, additional ground of appeal of assessee is allowed. In this view of the matter, there is no need to decide remaining grounds on merit as the same are left with academic discussion only.

  1. In the result, appeal of assessee is allowed.

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