M/s. Om Shanti Trade Link Pvt. Ltd., Surat V. The Income Tax Officer, Ward-2(1)(4), Surat

ITA 1116/AHD/2016

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2019 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 29-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RASESH SHAH
• Keywords: Reopening of assessment; Bogus Share capital; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 68; 148; 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.1116/AHD/2016/SRT / ASSESSMENT YEAR: 2007-08 M/S. OM SHANTI TRADE LINK PVT. LTD., 2001, SARVODAYA MARKET, NR. KAMELA DARWAJA, RING ROAD, SURAT 395 002. [PAN: AAACO 8387M] VS. INCOME TAX OFFICER, WARD-2(1)(4), SURAT. ( ' / APPELLANT) ( #$' /RESPONDENT) / ASSESSEE BY : SHRI RASESH SHAH, C.A /REVENUE BY : SHRI DILEEP KUMAR, SR. D.R /DATE OF HEARING : 08-10-2018 / DATE OF PRONOUNCEMENT : 11-10-2018 / ORDER PER C.M.GARG, JUDICIAL MEMBER: THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-II, SURAT (CI T(A) FOR SHORT) DATED 19.02.2016 FOR THE ASSESSMENT YEAR (A.Y) 2007-08. 2. THE GROUNDS RAISED BY THE ASSESSEE READ AS FOLLO WS: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN RE-OPENING ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148 OF THE IT. ACT, 1961. 2 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN MAKING ADDITION OF RS. 10,00,0 00/- ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY U/S 68 OF THE I.T. ACT, 1961. 3. IT IS THEREFORE PRAYED THAT ASSESSMENT FRAMED U/ S 143(3) R.W.S. 147 OF THE ACT MAY KINDLY BE QUASHED AND/OR THE ADDITIO N MADE BY ASSESSING OFFICER CONFIRMED BY CIT(A) MAY PLEASE BE DELETED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CA REFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE T RIBUNAL. THE LD. ASSESSEES REPRESENTATIVE (AR) SUBMITTED THAT THE L EARNED CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN RE-OPENING ASSESSMENT U/S 147 BY ISSUING NOTICE U/S 148 OF THE I.T ACT, 1961 (FOR SHORT THE ACT) ON THE FACTS AND CIRCUMSTANCES OF THE CASE. HE FURTHER SUBMITTED THAT FOR THE PRESENT AY 2007-08 THE ORIGI NAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT. REASONS FOR REOPE NING OF ASSESSMENT U/S. 147 AND NOTICE U/S. 148 OF THE ACT HAVE BEEN I SSUED ON 24.03.2014 I.E., AFTER THE EXPIRY OF FOUR YEARS, WHICH COMPLET ED ON 31.03.2010, FROM THE END OF RELEVANT ASSESSMENT YEAR I.E., AY 2007-0 8. THE LD. AR VEHEMENTLY POINTED OUT THAT THE AO DID NOT APPLY HI S MIND TO THE INTIMATION RECEIVED FROM DGIT (INVESTIGATION), MUMB AI DATED 07.03.2014 THEREFORE, HE PROCEEDED TO INITIATE REASSESSMENT PR OCEEDINGS ON THE STRENGTH OF BORROWED SATISFACTION WHICH IS NOT PERM ISSIBLE FOR ASSUMPTION OF VALID JURISDICTION FOR REOPENING OF ASSESSMENT. 3 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. 4. THE LD. AR ALSO SUBMITTED THAT AS PER REQUIREMEN T OF FIRST PROVISO OF S. 147 OF THE ACT IN THE CASES WHERE INITIATION OF REOPENING OF ASSESSMENT IS BEING MADE AFTER EXPIRY OF FOUR YEARS FROM THE E ND OF RELEVANT ASSESSMENT YEAR THEN, IT IS THE DUTY OF THE AO TO R ECALL SPECIFIC ALLEGATION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR THE SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT BUT IN THE PRESENT CASE FROM THE REASONS PLACED AT PAGE 53 OF THE ASSESSEES PAPER BOOK, IT IS CLEAR THAT NO SUCH AVERMENTS OR A LLEGATIONS HAVE BEEN MADE BY THE AO WHILE RECORDINGS REASONS FOR REOPENI NG OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. 5. PLACING RELIANCE ON THE DECISION OF HONBLE JURI SDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF PCIT VS. PANKAJ ENKA PVT. LTD. IN TAX APPEAL NO.967/2015 (GUJ.) DATED 05.01.2016 , THE LD. AR SUBMITTED THAT WHEN THE AO ONLY ON THE BASIS OF INFORMATION SUPPLIED BY THE INVESTIGATION WING THAT THE ASSESSEE HAS RECEIVED SHARE APPLICATION MO NEY FROM ONE OF THE TENTED COMPANIES ISSUED NOTICE WITHOUT FORMING A RE ASON TO BELIEVE THAT INCOME OF THE ASSESSEE AS ESCAPED ASSESSMENT THEN, THE REOPENING OF ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS IS NOT V ALID AND SUSTAINABLE. FURTHER PLACING RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS REPORTED 103 ITR 437 (SC ), THE LD. 4 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. AR SUBMITTED THAT EXPRESSION REASON TO BELIEVE DO ES NOT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF ITO IT MUS T BE HELD IN GOOD FAITH POWERS OF ITO TO REOPEN ASSESSMENT, THOUGH WIDE, AR E NOT PLENARY. THE LD. AR SUBMITTED THAT IN THE PRESENT CASE EXCEPT ST ATING ABOUT THE REPORT OF THE INVESTIGATION WING, THE AO HAS NOT APPLIED H IS MIND TO THE SAME AND HAS NOT FORMED HIS INDEPENDENT REASON TO BELIEV E THAT INCOME HAS ESCAPED ASSESSMENT THEREFORE, THE AO DID NOT ASSUME VALID JURISDICTION TO REOPEN THE ASSESSMENT AND TO ISSUE NOTICE U/S. 1 48 OF THE ACT. FURTHER PLACING RELIANCE ON THE DECISION OF HON'BLE GUJARA T HIGH COURT IN THE CASE OF HARIKISHAN SUNDERLAL VIRMANI VS. DCIT REPORTED IN 3 94 ITR 146 (GUJ.), THE LD. AR SUBMITTED THAT WITHOUT APPLICATION OF MI ND TO THE MATERIAL RECEIVED FROM THE INVESTIGATION WING AND WITHOUT AL LEGING THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING T RULY AND FULLY ALL MATERIAL FCTS NECESSARY ASSESSMENT THE ASSUMPTION OF JURISDI CTION TO REOPEN THE ASSESSMENT BEYOND PERIOD FOUR YEARS IN EXERCISE OF POWERS OF U/S. 147 OF THE ACT WAS BAD IN LAW AND CONTRARY TO THE PROVISIO N OF S. 147 OF THE ACT. THEREFORE, HE FINALLY SUBMITTED THAT INITIATION OF ASSESSMENT, NOTICE U/S. 148 OF THE ACT AND ALL CONSEQUENT PROCEEDINGS AND O RDERS DESERVE TO BE QUASHED BEING BAD IN LAW. HE ALSO PLACED RELIANCE ON THE ORDER OF ITAT, DELHI DATED 06.08.2018 IN THE CASE OF PIONEER TOWN PLANNERS PVT. LTD. VS. DCIT IN ITA NO.132/DEL/2018 (WHICH WAS AUTHORED BY ONE OF US C.M. GARG, JM) , SUBMITTED THAT THE INITIATION OF REASSESSMENT PRO CEEDINGS ON 5 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. THE STRENGTH OF BORROWED SATISFACTION IS BAD IN LAW THEREFORE, ENTIRE PROCEEDINGS INCLUDING IMPUGNED REASSESSMENT AND FIR ST APPELLATE ORDER MAY KINDLY BE QUASHED. 6. REPLYING TO THE ABOVE, THE LD. DEPARTMENTAL REPR ESENTATIVE (DR) SUBMITTED THAT THE ORIGINAL ASSESSMENT ORDER WAS PA SSED ON 22.11.2009. HE FURTHER SUBMITTED THAT IN REPLY TO THE NOTICE U/ S. 148 OF THE ACT DATED 20.04.2014 THE RETURN WAS FILED AFTER FOUR MONTHS A FTER EXPIRY OF PERIOD OF 30 DAYS FROM THE DATE OF SERVICE OF THE NOTICE THER EFORE, AS PER S. 124 OF THE ACT, THE ASSESSEE IS NOT ENTITLED TO CHALLENGE THE JURISDICTION OF THE AO CHALLENGING THE VALIDITY OF REASSESSMENT PROCEEDING S. THE LD. DR SUBMITTED THAT THE AO APPLIED HIS MIND TO THE MATER IAL RECEIVED FROM THE INVESTIGATION WING AND FORM PROPER REASON TO BELIEV E AFTER CONSIDERING ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE. THEREFO RE, REOPENING OF ASSESSMENT HAS BEEN MADE AFTER DUE APPLICATION OF M IND AND FORMING REASON TO BELIEVE ON THE BASIS OF MATERIAL BEFORE T HE AO THUS, THE ENTIRE PROCEEDINGS MAY KINDLY BE UPHELD BEING VALID IN LAW . 7. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISS IONS, FIRST OF ALL, WE MAY POINT OUT THAT UNDISPUTEDLY FOR PRESENT AY 2007 -08 REASONS WERE RECORDED ON 24.03.2014 FOR REOPENING OF ASSESSMENT AND ISSUANCE OF NOTICE U/S. 147 & 148 OF THE ACT. AS PER REQUIREME NT AND MANDATE OF PROVISO TO S. 147 OF THE ACT IN THE CASES WHERE INI TIATION OF REOPENING OF 6 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. ASSESSMENT IS BEING MADE AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR THEN, IT IS THE DUTY OF TH E AO TO RECALL SPECIFIC ALLEGATION THAT THE INCOME CHARGEABLE TO TAX HAS ES CAPED ASSESSMENT FOR THE SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. FROM THE COPY OF THE REASON RECORDED B Y THE AO PLACED AT PAGE 53 OF THE ASSESSEES PAPER BOOK, IT IS CLEAR T HAT THERE IS NO SUCH ALLEGATION THEREIN THAT THE INCOME AS ESCAPED ASSES SMENT FOR THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE PERIOD U NDER CONSIDERATION. THEREFORE, IN THE LIGHT OF RATIO OF THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF HARIKISHAN SUNDERLAL VIMANI VS. DCIT REPORTED IN 39 4 ITR 146 (GUJ.), IF THERE IS NO ALLEGATION THAT THERE WAS ANY FAILU RE ON PART OF ASSESSEE IN NOT CIRCUMSTANCES, ASSUMPTION OF JUR ISDICTION TO REOPEN ASSESSMENT BEYOND PERIOD OF FOUR YEARS IN EXERCISE OF POWERS U/S. 147 OF THE ACT WAS BAD IN LAW AND CONTRARY TO PROVISIONS O F S. 147 OF THE ACT AND IN THIS SITUATION, IMPUGNED REASSESSMENT PROCEEDING S DESERVE TO BE QUASHED. 8. RESPECTFULLY FOLLOWING THE DICTA LAID DOWN BY HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THE INITIATION OF REASSESSMENT PROCEEDINGS U/S. 147 OF THE ACT, ISSUANCE OF NOTICE U/S. 148 OF THE ACT AND ALL CONSEQUENT 7 ITA NO.1116/AHD/2016/SRT (A.Y: 2007-08) M/S. OM SHANTI TRADE LINK PVT. LTD. PROCEEDINGS AND ORDERS INCLUDING IMPUGNED REASSESSM ENT AND FIRST APPELLATE ORDER ARE BAD IN LAW BEING INITIATED AND PASSED BY THE AO WITHOUT ASSUMING VALID JURISDICTION. THEREFORE, WE REACH TO A CONCLUSION THAT ONLY ON THIS COUNT REASSESSMENT PROCEEDINGS AN D REASSESSMENT AND FIRST APPELLATE ORDER DESERVE TO BE QUASHED AND WE HOLD SO. ACCORDINGLY, LEGAL GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 9. SINCE, WE HAVE QUASHED ENTIRE REASSESSMENT PROCE EDINGS AND CONSEQUENT ORDERS THEREFORE, GROUNDS OF THE ASSESSE E ON MERITS BECOME INFRUCTUOUS AND ACADEMIC AND WE ARE NOT ADJUDICATIN G AS HAVING BECOME INFRUCTUOUS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 1 TH OCTOBER, 2018. / SURAT; DATED : 11 TH OCTOBER, 2018 EDN # & / COPY OF THE ORDER IS FORWARDED TO : 1. /THE APPELLANT; 2. /THE RESPONDENT; 3. $ ( ) /THE CONCERNED CIT(A); 4. THE CONCERNED PRL. CIT; 5. , , / DR, ITAT, SURAT; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // * / ASSISTANT REGISTRAR , / ITAT, SURAT SD/- SD/- ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) /JUDICIAL MEMBER