DHARAMPAL PREMCHAND LIMITED,DELHI V. DCIT, CENTRAL CIRCLE-29, DELHI

ITA 3492/DEL/2023

AI Insights

The case involves Dharampal Premchand Ltd, which appealed against the reassessment order for the assessment year 2014-15. The reassessment was initiated by the DCIT, Central Circle-29, based on alleged accommodation entries linked to a search on Shri Himanshu Verma. The Tribunal examined whether the reassessment was validly initiated under section 147 of the Income-tax Act, focusing on the correctness of the original assessment under section 143(3), the nature of the approval for reassessment, and the presence of new tangible material that justified reopening the case. The Tribunal concluded that the reassessment was improperly based on a change of opinion and lacked a proper mechanical process, leading to the quashing of the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314373 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Other Referred Cases: CIT Vs. S. Goyenka Lime and Chemicals Ltd, PCIT Vs. NC Cables Ltd, CIT vs Usha International Ltd, Global Signal Cables (I) Pvt Ltd vs DCIT, PCIT vs Superior Films Pvt Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: G. N. GUPTA
• Keywords: Difference of opinion; Change of opinion; Reassessment proceedings; Reopening of assessment; Accommodation entries; Competent authority; Tangible material
• Section: 147; 143(3); 142(1)

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “B”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No. 3492/Del/2023 (Assessment Year: 2014-15) Dharampal Premchand Ltd, 4873, Chandni Chowk, Delhi- 110006 Vs. DCIT, Central Circle-29, Delhi (Appellant) (Respondent) PAN:AAACD1952B Assessee by : Shri G. N. Gupta, Adv Shri Mayank Maheshwari, Adv Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 04/03/2025 Date of pronouncement 07/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.3492/Del/2023 for AY 2014-15, arises out of the order of the Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] in Appeal No. 10086/2013-14 dated 10.10.2023 against the order of assessment passed u/s 147 of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 04.03.2022 by the Assessing Officer, DCIT, Central Circle-29, New Delhi (hereinafter referred to as „ld. AO‟). 2. Though the assessee has raised several grounds of appeal before us, the preliminary ground raised is challenging the assumption of jurisdiction under section 147 of the Act by the Learned AO. We deem it fit and appropriate to address the said ground first. ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 2 3. We have heard the rival submissions and perused the materials available on record. The Assessee company is engaged in the business of manufacturing of flavoured chewing tobacco , kivam, paan masala, mouth fresheners, confectionaries, silver leaf, ayurvedic medicaments etc. under the brand name „BABA‟. The Assessee company filed its original return of income for the assessment year 2014-15 on 21-11-2014 declaring total income of Rs 36,96,45,100/-. This original return filed by the Assessee was subjected to scrutiny assessment under section 143(3) of the Act dated 23-12-2016 determining total income of the Assessee at Rs 47,73,75,770/-. Later the assessment was sought to be reopened by the Learned AO on the ground that Assessee had taken certain accommodation entries from Shri Himanshu Verma, which came to light on the conduct of search on Himanshu Verma on 13.4.2017. The reasons recorded for reopening the assessment are enclosed in pages 38-40 of the paper book. The pro forma seeking approval for reopening of assessment in terms of section 151 of the Act are enclosed in pages 36-37 of the paper book. For the sake of convenience, the proforma is reproduced hereinbelow:- ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 3 ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 4 4. On perusal of the said proforma, we find that the Learned AO had stated that original assessment was completed only under section 143(1) of the Act and not 143(3) of the Act, which is factually incorrect. Hence the ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 5 proforma submitted by the Assessee before the Learned Principal CIT (PCIT) for seeking approval through Learned Additional CIT under section 151 of the Act was based on incorrect assumption of fact. Both the authorities i.e. had not even examined this basic preliminary fact as to whether the original assessment was completed under section 143(1) or under section 143(3) of the Act. Without such verification, they had granted their approval in a mechanical manner. Now the short point that arises for our consideration is whether approval under section 151 of the Act granted in a mechanical manner for reopening the assessment would become fatal to the reassessment proceedings or not. This question is no longer res integra in view of the decision of Hon‟ble Madhya Pradesh High Court in the case of CIT Vs. S. Goyenka Lime and Chemicals Ltd reported in 56 taxmann.com 390 (MP HC). The Special Leave Petition (SLP) filed by the revenue against this decision was dismissed by the Hon'ble Supreme Court reported in 64 taxmann.com 313. Further, we find that the Hon‟ble Jurisdictional High court in the case of PCIT Vs. NC Cables Ltd reported in 391 ITR 11 (Del) had also held the same, wherein, the approving authority had merely stated “approved” in the proforma while granting approval in terms of section 151 of the Act. This approval was held by the Hon‟ble Jurisdictional High court to be a mechanical approval. The relevant observation of the Hon‟ble Jurisdictional High Court in this regard are reproduced herein:- “11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 6 12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed.” 5. Further we find that on perusal of the reasons recorded for reopening the assessment, there is absolutely no mention of the failure on the part of the Assessee Company to furnish full and true disclosure of material facts relevant for the purpose of assessment. Admittedly, the unsecured loans received by the Assessee were sought to be examined by the Learned AO in the original scrutiny assessment proceedings vide notice under section 142(1) of the Act dated 17-11-2016 which are enclosed in Pages 1 to 4 of the paper book dated 23-2-2024. The assessee had filed its reply vide letter dated 12- 12-2016 which is enclosed in Page 6 para 5 of the paper book by furnishing the list of parties from whom unsecured loans have been received together with the confirmation. The Learned AO was duly satisfied with the same and did not proceed to make any addition in the assessment. Hence the Learned AO had indeed formed his opinion on the same. The said opinion is being sought to be disturbed in the reassessment proceedings by the Learned AO, which in our considered opinion, tantamount to change of opinion. It is trite law that no reassessment could be made based on change of opinion. Reliance in this regard is placed on the Full Bench decision of Hon‟ble Jurisdictional High Court in the case of CIT vs Usha International Ltd reported in 348 ITR 485 (Del) (FB). Though we hold that information gathered during the course of search of Himanshu Verma qua the transactions with the assessee could be construed as tangible material warranting reopening, but still another facet of the reopening also need to be fulfilled, namely the principle of change of opinion. In the instant case, there is a clear case of change of opinion as the Learned AO had duly examined the aspect of unsecured loans in the original scrutiny assessment proceedings itself. 6. Admittedly, for the year under consideration, the reopening was made beyond the period of 4 years from the end of the relevant assessment year. ITA No. 3492/Del/2023 Dharampal Premchand Ltd Page | 7 We find that non-mentioning of the failure on the part of the Assessee to make full and true disclosure of all material facts relevant for the purpose of assessment by the Learned AO in the reasons recorded, would become fatal to the entire re-assessment proceedings per se. Reliance in this regard is rightly placed on the decision of the Hon‟ble Jurisdicational High Court in the case of Global Signal Cables (I) Pvt Ltd vs DCIT reported in 368 ITR 609 (Del) and PCIT vs Superior Films Pvt Ltd reported in 437 ITR 230 (Del). 7. In view of the aforesaid observations and respectfully following the aforesaid decisions, we hold that the reopening has been made in the instant case deserves to be quashed for more than one reason and is accordingly quashed. Hence the legal grounds challenging the validity of assumption of jurisdiction u/s 147 of the Act is allowed in the above mentioned terms. Since the reassessment is quashed, the other grounds raised by the Assessee on merits need not be adjudicated and they are left open. 8. In the result, the appeal of the Assessee is allowed. Order pronounced in the open court on 07/05/2025. -Sd/- -Sd/- (VIMAL KUMAR) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 07/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "