Milky Way Consultants LLP, New Delhi V. ITO WARD - 37(1), New Delhi

ITA 1946/DEL/2020

AI Insights

The case involves Milky Way Consultants LLP, which appealed against the order of the CIT(A) New Delhi for the assessment year 2011-12. The primary contention was regarding the reassessment proceedings initiated by the Assessing Officer, who erroneously included six entities in the reassessment notice, three of which were non-existent at the relevant time. The Tribunal examined the objections raised by the assessee and the subsequent actions of the Assessing Officer. It was found that the Assessing Officer did not verify the actual status of the entities involved in the transactions, leading to a conclusion of non-application of mind. The Tribunal referenced the judgment of the Delhi High Court in PCIT vs. SNG Developers Ltd. to support its decision to quash the reassessment order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 122000 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: E
• Next Hearing Date: 16-05-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 10-12-2020
• Other Referred Cases: PCIT vs. SNG Developers Ltd. 404 ITR 312 (Del.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Reason to believe; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E: NEW DELHI BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER AND M.BALAGANESH, ACCOUNTANT MEMBER ITA No.1946/Del/2020 Assessment Year: 2011-12 Milky Way Consultants LLP, 591-598/1, First Floor, Opposite Seema Chai, Jheel, Khuranja Colony, East Delhi, Delhi 110051 PAN ABAFM 2733 K vs. ITO, Ward 37(1), Delhi (Appellant) (Respondent) For Assessee : Ms. Rano Jain, Adv. & Ms. Mansi Jain, Adv. For Revenue : Shri Sumit Kumar Verma, Sr. DR Date of Hearing : 17.05.2023 Date of Pronouncement : 16.06.2023 ORDER PER CHANDRA MOHAN GARG, J.M. This appeal has been filed against the order of CIT(A) New Delhi dated 28.02.2020 for AY 2011-12. 2. The ld. counsel of assessee, pressing into service ground no. 1 to 4 of assessee the ld. counsel submitted that against the of the reasons recorded by the Assessing Officer copy available at pages 15 & 16, the assessee filed objections on 12.11.2018 and requested the Assessing Officer to adjudicate the objections by passing a well reason orders. The ld. counsel submitted that at the time of recording reasons for reopening of assessment the Assessing Officer picked up amount of six entities amounting to Rs. 1,70,00,000/- whereas in fact, the assessee received unsecured loans Rs. 85 lakh from three entities i.e. M/s Royal Mirage Financial Consultants P. Ltd., M/s. Mithila Investment & Finance P. Ltd. & M/s. Softpro Technologies P. Ltd. only and other three entities noted by the Assessing Officer in the reasons were the erstwhile name of said three companies which were not in existence at the time of taking unsecured loans by the assessee during assessment year 2011-12. ITA No.1946/Del/2020 2 3. The ld. counsel submitted that even at the time of recordings of reasons the Assessing Officer was not aware about the actual nature of transaction and hence, there is no such mentioning in the reasons. The Assessing Officer has made double additions by taking names of erstwhile and non-existing entities and without making any inquiry about the actual nature of transaction therefore it is a clear case of non- application mind by the Assessing Officer therefore she submitted that in view of judgment of Hon’ble jurisdictional High Court of Delhi in the case of PCIT vs. SNG Developers Ltd. 404 ITR 312 (Del.) that the reopening of assessment has to be held as bad in law. 4. Replying to the above, the ld. Senior DR strongly supported the orders of the authorities below and submitted that at the time of recording reasons the Assessing Officer is not required to make a details inquiry on the entire material gathered by the investigation team hence non application of mind cannot be alleged to tag the reassessment order as invalid and bad in law. 5. On careful consideration of above submissions, first of all, since the assessee is alleging non application of mind by the Assessing Officer at the time of recording reasons for reopening of assessment therefore, we find it appropriate to reproduced the reason recorded by the Assessing Officer which is as follows:- ITA No.1946/Del/2020 3 6. From the copy of the objection and request of assessee vide dated 12.11.2018 for dropping the proceedings we note that the assessee at the very first instance inform the Assessing Officer about the actual facts of the case. From the reasons recorded it is clear that at the time of recording reasons the Assessing Officer in para 2 recorded the letter received from the DDIT (Inv.) -1, Noida, in para 3 he reproduced a table showing debit and credit payment to the assessee by six entities and in para 4 he jumped to a conclusion that he has reason to believe that the assessee’s income for AY 2011-12 has escaped assessment without assigning any character or mode of alleged transactions. The ld. Senior DR has not disputed a factual position a merged from pages 62 to 67 of assessee paper book that M/s. Saunak Technologies P. Ltd. is the new name of M/s. Soffpro Technologies Pvt. Ltd. which was changed with effect from 03.01.2015. M/s. Bronz Star Techsoft Pvt. Ltd. is the new name of M/s. Royal Mirage Financial Consultants Pvt. Ltd. with effect from 24.03.2015. similarly, M/s. Shulini Realty Pvt. Ltd. is the new name of M/s Mithilanchal Investment & Finance Pvt. Ltd. with effect from 09.04.2015. 7. The Assessing Officer has not made any inquiry about the character or nature of transaction and proceeded to initiate reassessment proceedings to issue notice u/s. 148 ITA No.1946/Del/2020 4 of the Act for AY 2011-12 by considering the non existing entities during said period which were came into existence during FY 2014-15 pertaining to assessment year 2015- 16, incorrectly considering the transaction twice, which clearly establish non application of mind by the Assessing Officer at the time of recording reasons. Therefore we are inclined to hold that the Assessing Officer has not given details or has not examined the character of nature of alleged transaction and even the existence of alleged entities during relevant AY 2011-12 was not examined by the Assessing Officer this shows non application of mind by the Assessing Officer. In the case of PCIT vs. SNG Developers Ltd. (supra) the Hon’ble High Court concurring the view taken by the Tribunal held that the jurisdictional mandatory requirement for reopening of assessment u/s. 147 and issuance of notice u/s 148 of the Act has to be held as not satisfied in a case where there was clear non application of mind by the Assessing Officer while recording the reasons to believe that income has escaped assessment. Respectfully following the same we hold that in the present case the reasons recorded by the Assessing Officer for reopening of assessment u/s. 147 of the Act do not meet the requirement of law and hence the same has to held as unsustainable being bad in law. Accordingly ground no. 1 to 4 of assessee are allowed and initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act and all consequent orders and proceedings are quashed. 8. Since by the earlier part of this order we have quashed reassessment order therefore other grounds of assessee on merits are not being adjudicated as neither the ld. representatives of both the sides have made any submissions thereon and nor we find it proper to adjudicate the same in absence of any submissions and thus the same are not adjudicated and left open. 9. In the result, the appeal of the assessee is partly allowed on legal grounds. Order pronounced in the open court on 16.06.2023. Sd/- Sd/- (M.BALAGANESH) (CHANDRA MOHAN GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16 th June, 2023. NV/- Copy forwarded to : 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR ITA No.1946/Del/2020 5 // By Order // Asstt. Registrar, ITAT, New Delhi