M/s. Maa Badi Khermai Marketing Pvt. Ltd , Jabalpur V. D.C.I.T. Central Circle, Jabalpur, Jabalpur

ITA 29/JAB/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 9268 (ITAT-JABALPUR)
• Duration Of Justice: 9 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 10-08-2021
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Question of law; Competent authority; Reason to believe; Reassessment proceedings
• Section: 147; 131; 68; 148; 132; 2; 139; 143(3); 142(1); 153A; 143(1); 274; 143(2); 191; 73; 119

Judgement Text

1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL JABALPUR BENCH, JABALPUR (through web-based video conferencing platform) BEFORE SHRI SANJAY ARORA, HON‘BLE ACCOUNTANT MEMBER & SHRI MANOMOHAN DAS, HON'BLE JUDICIAL MEMBER I.T.A. Nos. 29 & 30/JAB/2021 (Asst. Years: 2014-15 & 2015-16) Appellant by : Shri Pavan Ved, Advocate Respondent by : Shri P.K. Mishra, CIT-DR Date of hearing : 09/03/2022 Date of pronouncement : 06/06/2022 O R D E R Per Sanjay Arora, AM: This is a set of two Appeals by the assessee-company, directed against the dismissal of it‘s appeals contesting it‘s assessments under section 147 read with sec. 143(3) of the Income Tax Act, 1961 ( ̳the Act‘ hereinafter) dated 13/11/2019 for two consecutive assessment years, being AYs. 2014-15 & 2015-16, by the Commissioner of Income Tax Appeals)-3, Jabalpur ( ̳CIT(A)‘ for short) vide his common order dated 22/6/2021. The appeals agitating the same issues; in fact, raising same grounds, were heard together, and are being accordingly disposed per a common order. Maa Badi Khermai Marketing Pvt. Ltd., D-24, Dixit Enclave, Bandariya Triraha, Jabalpur [PAN : AAJCS 5326 H] vs. Deputy CIT, Central Circle, Jabalpur. (Appellant) (Respondent) ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 2 | P a g e 2. The appeals raise the following, identical grounds: 1. The ld.CIT(A) erred in holding proceedings u/s. 148 as valid, the proceedings u/s. 148 is illegal and null and void ab initio for various reasons 2. The issue of notice u/s. 143(2) is illegal as it was before rejecting objection against validity of reopening. 3. The ld. CIT(A) erred in confirming the addition of loan of Rs.1,14,00,000/- (Rs. 40,00,000/-, for AY 2015-16) u/s. 68. 4. The ld. CIT(A) has wilfully not considered various submissions made by the assessee and confirmed the addition. He also did not give proper opportunity before confirming addition. Hence, the assessee deserves award of cost. 5. The assessee reserves right to add amend or alter the ground of appeal as above. In response to a query by the Bench during hearing qua Gd. 4, it was submitted by Sh. Ved, the ld. counsel for the assessee, that even as the assessee maintains denial of proper opportunity of being heard by the ld. CIT(A), yet it does not; the Grounds of Appeal being primarily legal, which could therefore be raised before the Tribunal for the first time, wish to go back to the stage of the first appellate authority. Inasmuch as an acceptance of the said Gd. would necessarily require a remission back to his file, it was made clear to Sh. Ved that an adjudication by the Tribunal on merits could only be where the assessee did not press it‘s Gd. 4. The same was accordingly not pressed, nor, consequently, responded to by the Revenue. The same is accordingly dismissed as not pressed. Further, inasmuch as the assessee‘s Gd. 1 is vaguely worded, not clarifying the specific grievance/s on which the assessment/s is being challenged thus, and which only could be adjudicated upon by the Tribunal, it was clarified by Sh. Ved that the same be so only on the specific arguments raised by him. Accordingly, this order proceeds by recording and deciding each of the specific issues raised by Sh. Ved, and on which therefore hearing took place. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 3 | P a g e Issue #1 3.1 The first and foremost objection, i.e., the ground of grievance of the assessee qua the impugned order, before us, was that the Approval/s u/s. 151 of the Act, dated 09/11/2018 for both the years under reference, by the Additional Commissioner of Income Tax, Bhopal (Addl. CIT) to the reopening of assessment in the instant cases is without application of mind and, therefore, cannot be regarded as a valid approval in law, resulting in assessment/s being bad in law, nay, void ab initio. Toward this, Shri Ved, the ld. counsel for the assesse, would seek to demonstrate as to how the approval u/s. 151 was, on facts, accorded mechanically, viz. a) at para 1 (of the approval form), there is reference to Jabalpur, while the assessee is a Kolkata based company, with its‘ registered office thereat; b). the date of furnishing the return of income for AY 2015-16 is stated as 28.11.2014, while the correct date is 27/9/2015; c) Shri Tarachand Khatri is stated in the reason recorded as the key person, while his shareholding in the assessee-company is only at 16+ per cent for the relevant year. d). The reason recorded states of the creditor company, i.e., Little Star Securities Pvt. Ltd. as a ̳shell company‘, with there being nothing on record to state so. e) para 7 bears reference to section 147(b), which provision is no longer on the statute-book; f) para 8 states of the case having been assessed u/s. 143(1). Inasmuch as the same is under law only a processing of return and not an assessment, it‘s description as ̳assessment‘ indicates non-application of mind. Similarly, the word used in para 9(b) is ̳under-assessment‘ (instead of under-processing); g) para 6 mentions the amount escaping assessment at Rs. 114 lakhs (for both the years), while the correct figure for AY 2015-16 is Rs. 40 lakhs, and the reported figure applicable only to AY 2014-15; h) there was non-observance of the procedure prescribed under the standard operating procedure (SOP) which, having been issued u/s. 119 of the Act by the Board on 10/01/2018, was operative and mandatory on the Income-tax authorities for being observed at the relevant time; ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 4 | P a g e These factual errors, it is claimed, vitiate the approval u/s. 151. Reliance was placed by Shri Ved on Sahara India Firm v. CIT [2008] 300 ITR 403 (SC)); CIT v. S. Goyanka Lime & Chemicals Ltd. [2005] 231 Taxman 73 (MP); Arjun Singh & Anr. v. ADIT [2000] 246 ITR 363 (MP) and Kalpana Shantilal Haria v. Asst. CIT (in WP (L) No. 3063 of 2017, dated 22/12/2017/Bom), making it clear though, and fairly, that the same (i.e., the decision in Kalpana Shantilal Haria (supra)) is an interim (and not a final) decision by the Hon'ble High Court, finding reference to a wrong section (s. 147(b)), no longer on the statute-book, as prima facie indicative of non-application of mind. Further, approval is accorded by subscribing the words ―Yes, I am satisfied that it is a fit case for issue of notice u/s. 148 on the reasons recorded by the AO for (specifying the assessment year)‖, which again does not satisfy the test of a valid approval and for that reason disapproved by the Hon'ble Courts. 3.2 The crux of the arguments by Shri Mishra, the ld. CIT-DR, on the other hand, was that there has been a substantial compliance of law, and the assessee is mistaking the woods for the trees. The approval u/s. 151, as clarified by the provision itself, is to be given with reference to the reason/s recorded. None of the objections pointed out by Shri Ved were, as required by law, qua the reason/s recorded, and which only would be, where so, material or relevant. In fact, the same need to be understood in the context in which they arise. True, the law stands amended w.e.f. 01/04/1989, and the two clauses, i.e., (a) and (b) to sec. 147, where-under proceedings u/s. 147 could be initiated earlier, do not obtain w.e.f. that date. So, however, the prescribed Form (required to be submitted by the assessing authority to the approving authority u/s. 151) continues to remain the same, i.e., as earlier, and mentions these two clauses, of which the AO is to choose one. The AO, obliged to fill this Form, mentions sec. 147(b), i.e., in preference to sec.147, which only obtains w.e.f. 01/04/1989. The preference thereto (vis-à-vis s.147(a)) is justified inasmuch as the same is more akin to the case/s at hand as the ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 5 | P a g e ̳assessment‘ sought to be reopened is after four years from the end of the relevant year/s and, thus, rather indicates an application of mind in choosing the correct provision out of the two, either of which had to be written. Similarly, no doubt, the registered office of the assessee-company is in Kolkata, but the question is whether the address would alter the identity of the assessee in whose case the assessment proceedings are being initiated, and for that reason approval Form u/s. 151 is being filled-up? The answer is clearly ̳no‘, for it to have any bearing on the approval per se. In fact, here, again, it needs to be appreciated that the seat of management of the company is only in Jabalpur, where the Directors reside and work at. Needless to add, the same has no bearing on the substance of the matter, i.e., the reason/s recorded (with reference to which the approval u/s. 151 is to be granted). 4. We have heard the parties, and perused the material on record. 4.1 The assessee‘s objection has both legal and factual aspects to it, so that our adjudication is to have regard for both. We shall begin by noting the provision itself, which is to be given effect and satisfied, i.e., both in letter and spirit. Section 151 reads as under:- Sanction for issue of notice. 151. 1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself. (emphasis, ours) That is, if the authority whom the sanction is to be applied to, is satisfied that a reassessment is necessary and proper in the circumstances and for the reasons ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 6 | P a g e recorded by the Assessing Officer (AO), he may accord the sanction, whereupon the AO may proceed to issue and serve a notice u/s.148 on the assessee concerned. The legal mandate of sec. 151 is for an approval on the reason/s recorded u/s. 148(2) prior to issue of notice u/s. 148(1). Non-application of mind, where shown to attend any action, vitiates the same, as it is performed without regard to the spirit of the law and, therefore, cannot have its approval. That is, the said action, though ostensibly so, is so only qua the form, and not in substance and, consequently, it does not serve its purpose and objective. That the law does not concern itself with trivia, but with the substance of the matter, is trite law supported by the legal maxim de minimis. Section 292B, reading as under, also seeks to convey this judicial stance legislatively, as indeed have the Hon‘ble Courts in the context of sec. 151 itself: 292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. Clearly, the purpose to have a higher authority (in the Revenue) to be equally satisfied of the proposed action u/s. 147, and one to which the law should confer approval, by requiring a higher ranking authority to be satisfied, upon applying his mind thereto, i.e., of it being a fit case for being proceeded with, i.e., approved, being in substance in accordance with intent and purposes of the Act. Nothing more, and nothing less. It is for this reason that the higher Courts of law, where of the view that the approval had been given perfunctorily, i.e., without due application of mind (to the reasons recorded) and the purpose/s informing the proposed action, held it as not valid in law, being, in fact, defeative thereof. This is also the substance of the law relied upon by the assessee, and on which there is, thus, no quarrel. Given the clear position of law, the matter reduces to and ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 7 | P a g e becomes essentially one of fact, i.e., whether it is indeed so, and the approval u/s. 151 can in the instant cases be said to suffer from want of due application of mind by the approving authority, and thus not valid. Here it may be clarified that the form of approval may or may not be relevant in arriving at the conclusion as to whether it is indeed, i.e., as a matter of fact, an approval upon due application of mind or not so, and for which, as any other finding of fact, due regard to the facts and the conspectus of the case is to be had. The assessee has before us relied on the decision in S. Goyanka Lime & Chemicals Ltd. (supra), wherein, following Arjun Singh & Anr. (supra), it stands held that the approvals under reference are not valid as the same are recorded in the words ―Yes, I am satisfied that it is a fit case for issue of notice u/s. 148 on the reasons recorded by the AO for (specifying the assessment year)‖, indicative of a mechanical approval. To begin with, the law does not provide any form for recording the said satisfaction. This plea was also taken in Phool Chand Bajrang Lal v. ITO [1977] 110 ITR 834 (All) for and on behalf of the assessee-appellant, and with reference to the decision in Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 (SC). The same was, however, not accepted by the Hon‘ble Court inasmuch as it found it to be not a correct reading of the said decision, holding as: ‘28. Lastly, it was contended by Sri Gulati that the CIT had mechanically accorded permission to the ITO to issue notice under s. 148 of the Act and that the CIT had not applied his mind and had not satisfied himself whether this was a fit case for according such permission. Sri Gulati drew our attention to the fact that the order made by the CIT on the report of the ITO merely contained the word "yes" below which he had put his signature. 29. Sri Gulati referred to the decision of the Supreme Court in Chhugamal Rajpal's case (supra). There also the CIT had just noted the word "yes" on the report of the ITO and had affixed his signature thereunder. The Supreme Court observed that the important safeguard provided by s. 151 of the Act was treated lightly by the CIT. But this observation must be read in the context of the finding by the Supreme Court earlier in the judgment that the report of the ITO did not disclose that he had any relevant material before him which could satisfy the requirement of either cl. (a) or cl. (b) of s. 147. It was in those circumstances that the Supreme Court said: ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 8 | P a g e "We are of the opinion that if only he (the CIT) had read the report (of the ITO) carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under s. 148." 30. Hence, the observations of the Supreme Court in Chhugamal Rajpal's case (supra) cannot, in our opinion, be understood as laying down that the CIT should write an elaborate order setting out the reasons for according permission to the ITO to issue notice under s. 148.‘ This decision was later, on facts, affirmed by the Apex Court per it‘s decision reported at [1993] 203 ITR 456 (SC). Nothing therefore turns per se on the form of approval, and the words ―I agree‖ or ―Yes, I am satisfied‖, etc. Why, such words, appear in most of the judgments/orders by the Division Benches of the Hon'ble Courts as well as of the various Tribunals. The manner of signifying the approval in simple, precise words, may therefore not be determinative or conclusive of the matter, or have any bearing on the question as to whether the same stand so written with or without due application of mind, which is clearly a matter of fact. Regarding it as not so would be to be rather committing the same error as being imputed to the approving authority, i.e., of according approval that conforms to the letter of the law, but not its spirit, as it cannot be, as a matter of fact, regarded as not accompanied by or upon due application of mind. It is perhaps for this reason, being conscious of the limitation of the argument being advanced, that Shri Ved would constantly, while arguing the matter, qualify it by stating that what he seeks to show or exhibit is a lack of application of mind on facts, i.e., so as to draw our attention to it being essentially a matter of fact. 4.2 We next examine each of the several ̳errors‘ pointed out by Sh. Ved in the sanctions u/s. 151, the approval forms for both the years being accompanied by identically worded statement of reasons recorded u/s. 148(2). For each of the ̳infirmities‘, the question to be asked and answered would be if the reason/s recorded, to which the approval is in effect required to be, and is, accorded, fails or, more particularly, ought not to have been given in view of the stated infirmity, i.e., if the concerned fact or circumstance stated in the reason/s recorded was ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 9 | P a g e correctly stated. Our examination qua each of the several ̳mistakes‘ noted and brought to our notice by Shri Ved, reveal it as not inflicting the approval with the infirmity of non-application of mind, i.e., which, exercising due care, ought not to be accorded to the reopening of the assessment/s. The assessee-company is not, it is said, a Jabalpur-based, but Kolkata-based; the transfer of its‘ case u/s. 127 of the Act from Kolkata to Jabalpur notwithstanding, inasmuch as the said transfer does not alter it‘s address. We find nothing in the reason/s recorded that would stand altered if, on the contrary, the Kolkata address was mentioned in the approval Form. Rather, in our view, despite the address of it‘s registered office being at Kolkata, the assessee is a Jabalpur- based firm, and the statement of it‘s address at Jabalpur is more in keeping and conformity with the facts of the case. As afore-noted, it‘s Directors reside and work at Jabalpur, so that the seat of the management is at Jabalpur. No wonder no objection was raised by the assessee to the transfer of it‘s case u/s. 127 from Kolkata to Jabalpur. Further still, an enquiry by the Bench during hearing, in the context of addition u/s. 68, made with reference to it‘s balance-sheet, it was, after seeking time to answer, admitted by Sh. Ved that the assessee-company has no assets or activity in Kolkata. Next, it is said that the date of furnishing the return of income u/s. 139 for AY 2015-16 is wrongly stated in the reason recorded, i.e., as ̳28/11/2014‘, as against the correct date of ̳27/09/2015‘. However, as pointed out at the time of hearing itself, both the proposal form (para 8(a)), as well as the reason recorded, which runs into 3 pages (PB-1, pg. 103-105), at the penultimate para thereof, record the correct date of filing the return of income, i.e., 27/09/2015. The said wrong mention in the opening sentence of the reason recorded, giving the background facts of the case, thus, would not of any moment. Sure, a more careful reading would have led to its detection. However, in context, it becomes insignificant. Then, it is said that Sh. Tarachand Khatri (TK) is not a key person, but only a Director, with a meagre shareholding of 16.4 per cent. Firstly, how one wonders is ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 10 | P a g e the status as a key person, which only indicates assumption of key managerial position/responsibility qua the relevant company, linked to his shareholding? He may not, given that a private limited company is ordinarily a family concern, albeit with limited liability, be a Director, which indicates a formal status in the company. Further, for the argument – which is incomplete without stating as to who, then, is the key person – to be valid, the assessee-company ought to show that the reason/s recorded stating of TK as the key person is incorrect, as he is not managing the affairs of the company, as indeed of the associated concerns, as well as real estate business of the group, as stated in the reason/s recorded. In fact, as again stated in the reason recorded, even the statement recorded in the search proceedings on 17.11.2015, is of TK. The argument advanced is without merit. It is, then, said that there is no basis to state of the creditor company (Little Store Securities Pvt. Ltd. ̳LSSPL‘ for short) as a shell company, as stated in the reason recorded. One wonder how the same can be regarded as lack of application of mind? That, rather, perhaps ought to be the case if it had not been so stated. The balance-sheet of the said company, reproduced in the assessment order itself, reveals it to have no real assets despite a capital base of Rs. 2763 lacs. Further, it reveals no employees; no activity, both of which were admitted during hearing; it‘s gross and net income being at Rs. 25,000 and Rs. 629 respectively. Further, the entire capital, as available with the company, i.e., other than that retained by it in cash or deployed in non-current assets, i.e., Rs. 2122 lacs, stands advanced to the assessee and the other companies of the Khatri groups of companies. What further could be proof of it being a paper-company which, in vernacular, is known as ̳jama karchi‘ company. Then, it is said that sec. 143(1) assessment is not, correctly speaking, an ̳assessment‘ in law, but only a ̳processing‘ (of the return), so that reference to the former in the s. 151 proposal form, i.e., at para 9(a), which requires the proposer to answer the question: ̳The income originally assessed:‘ ought to have been corrected inasmuch as the income was only processed and not assessed, so that it ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 11 | P a g e being regarded as having been subject to an ̳assessment‘ is wrong, and being in relation to a primary fact, indicates lack of application of mind. How, again, would that have a bearing on the reason/s recorded, which correctly states of the return of income of the assessee having been processed – we fail to understand, nor was explained during hearing. The word ̳assess‘ or ̳assessment‘ in the Act has different connotations at different places, even as explained by the Apex Court in several decisions. We refer to two such, which would bring forth that word ̳assessment‘ has different aspects to it and employed to convey different meaning depending on the context. In ITO vs. K.N. Guruswamy [1958] 34 ITR 601 (SC), it explains as under: (pg. 602) ̳In the normal sense ―to assess‖ means ―to fix the amount of tax or to determine such amount‖. The process of re-assessment is to the same purpose and is included in the connotation of the term ―assessment‖ Section 34 of the Income-tax Act contemplates different cases in which the power to assess escaped income has been given. Where there has been no assessment at all, the term ―assessment‖ may be appropriate and where there was assessment at too low a rate or with unjustified exemptions, the term ―re-assessment‖ may be appropriate, and it may have been necessary to sue the two different terms to cover with clarity the different cases deal with in the section. But this does not mean that the two terms should be treated as mutually exclusive or that the word “assessment” should be given a restricted meaning.‘ (emphasis, ours) In CIT v. Balkrishna Malhotra [1971] 81 ITR 759 (SC), it held as follows: ̳It has been stated over and over again by this Court as well as by the Judicial Committee that the words "assessment" and "assessee" are used in different places in the Act with different meanings. Therefore in finding out the true meaning of those words in any provision, we have to see to the context in which the word is used and the purpose intended to be achieved.‘ (pg. 762) Reference in this regard may also be made to the decision in Asst. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC), wherein the different contexts in which the word ̳assessment‘ is used in the Act is explained (pgs.508- 510). The word ̳assessed‘ is, to our mind, rather, apt in the given context as sec. 147 is toward assessing income chargeable to tax income having escaped ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 12 | P a g e assessment, including where it has been previously either ̳assessed‘ or ̳processed‘. Why, even sec. 148 begins with the words ̳Before making assessment, reassessment or recomputation under section 147.....‘, indicating the same being pari materia in the context of the provision. Nothing therefore turns on the use of the word ̳assessed‘ instead of ̳processed‘ – the correct description no doubt; the purport being only to convey the sub-section of sec. 143 to which the return had been subject. On the contrary, the threshold for reassessment in case of a regular assessment is much higher than for a return which stands only processed inasmuch as there is no occasion to make any verification or inquiry or seek an assessee‘s explanation in any matter that comes to notice qua the returned income. It is, then, said that ̳assessment‘ is reopened u/s. 147 and not u/s. 147(b), a provision that obtains no longer on the statute-book, as mentioned at para 7 of the proposal form. This objection, being prima facie indicative of non-application of mind, is surely impressive, but fails on scrutiny. This is for the reason that the statement of the reason recorded, annexed to the proposal form, on which approval is sought and given, clearly states of clause (b) of Explanation 2 to section 147 being applicable. True, sec. 147(b), mentioned in the proposal form, is not on the statute for it to be invoked. However, clauses (a) and (b) to s. 147, which only would make the default relevant, stand done away. That is, the default would assume significance where both clauses (a) & (b) were on the statute-book, and the AO mentions a wrong provision (even as the other provision was applicable), inasmuch as it could be indicative of non-application of mind. The legal position obtaining since 01/04/1989, is only of the reason to believe escapement of income chargeable to tax from assessment, enshrined in s. 147. In other words, the only thing relevant and material, and for decades now, is the reason/s recorded (Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), qua which the law in fact provides seeking approval. As explained by Shri Mishra, the approval Form is a standard Form, which has though remained unchanged, and does not provide the AO seeking approval to state the section, but only seeks an answer with reference to either of ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 13 | P a g e the two provisions, ss. 147(a) & 147(b), and it is to this question that the AO responded by stating s. 147 (b). That is, makes the default understandable and, besides, provides the context. Why, one could equally, i.e., had the AO stated ̳section 147‘, state of there being non-application of mind inasmuch as the question specifically seeks an answer from among the two stated choices, none of which stand selected. The competent authority, surely aware of the same, thus, did not understandably propose any change. The objection, seemingly impressive, does not survive the test of scrutiny. The objection would be valid, and even as it is trite law that reference to a wrong section or source of power is of no consequence where the action is supported by power under another section, under which it could be lawfully taken, if the reason/s recorded u/s. 148(2), with reference to which the approval is sought and given, referred to sec. 147(b), or for that matter to s. 147(a), i.e., the wrong clause, as the action may be valid in case of the other provision, and which we observe to correctly refer to sec. 147, i.e., the section as it obtains. Finally, we may advert to the wrong mention of the amount (claimed to be) escaping assessment, i.e., for AY 2015-16, which is in fact at Rs. 40 lakhs, and not Rs. 114 lakhs, as stated, which is the amount escaping assessment for AY 2014- 15, stated correctly. That is, the reason recorded and the proposal form incorrectly record the same amount for both the years, which in fact corresponds to other (of the two consecutive years for which ̳assessment‘ is simultaneously reopened) year. The basis of the amount believed to have escaped assessment, as per the reason/s recorded, is the entire sum received and, accordingly, credited (to the account of the creditor-company) in the assessee‘s accounts for the relevant year. The said amount is not in dispute or subject to any independent application of mind inasmuch as, in view of the surrounding facts and circumstances and the reasons recorded, it is, as afore-stated, the entire sum credited for which a reason to believe escapement from assessment is being entertained. It would therefore not alter, much less materially, the reason to believe as recorded – on which the law ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 14 | P a g e provides for application of mind by a senior functionary, either as to it‘s logic or rationale, which extends to the entire sum received and credited to the account of the concerned creditor. Inasmuch as the amount stated for AY 2015-16 is that obtaining for AY 2014-15, correctly stated, with both the proposals having the same set of attending facts and circumstances, being moved simultaneously, it is a case of a clerical error, which therefore has little bearing on the substance of the transaction. The amount stated is in fact at a higher sum, which therefore covers the correct amount under reference for the relevant year. Rather, and even as pointed out by Shri Mishra during hearing, in our considered view, a typing error would not undermine the reason/s recorded, which provides the necessary jurisdiction to issue a notice u/s. 148(1), initiating proceedings u/s. 147, even if recorded at a lower sum, the premise in either case being that the reason/s recorded extends to, in the facts and circumstances of the case, the entire sum received from and credited to the account of the creditor, though by mistake recorded at a different amount, which would thus have no material effect as, both on facts and in law, it is only this sum to which the reason/s recorded is to be understood as applicable, and for which the addition, on being found not satisfactorily explained, could be made u/s. 68. Further, as the amount stated is at the higher sum, there is no scope for the argument that the approval is valid only for the stated amount, which could arise in an opposite case, even if the addition u/s. 68 could not exceed the actual amount credited. We may not, we may hasten to add, be construed as not regarding it as an error or lapse, which is plain and manifest, and on the part of both the assessing and the approving authority, but only that it is not one, which, when viewed in the context of the entirety of facts and circumstances, including the proposal for reassessment for both the years being moved and approved simultaneously, with the satisfaction being, as apparent, extending to the entire sum credited during the year, vitiate the sanction u/s. 151 as invalid. 4.3 Another aspect claimed toward inferring non-application of mind by the approving authority is the non-observance of the Standard Operating Procedure ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 15 | P a g e (SOP), issued by the Board u/s. 119 of the Act, requiring the Revenue authorities to, while reopening assessments, comply therewith, i.e., prior to the issue of notice u/s. 148(1). We are unable to persuade ourselves to agree with Shri Ved, even as Sh. Mishra would emphasize upon a substantial compliance of the SOP and, therefore, the argument to be even otherwise of no moment. A SOP is in the nature of an advisory issued by the Board to the Revenue authorities so as to pre-empt the reason/s to believe recorded, or the initiation of section 147 proceedings, failing for any reason. The assumption of jurisdiction in each case though has to be tested on the validity of those reason/s and other mandatory steps to be observed, viz. approval u/s. 151; valid issue of notice u/s. 148(1), i.e., in time, etc. SOP is in the nature of a safeguard, a form of a check-list, non-observance of which makes a reopening vulnerable to be challenged on various aspects concomitant to a valid issue of notice u/s. 148(1), the jurisdictional fact. However, inferring invalidity on account of non-observance of SOP, which is the import and effect of the argument, is like putting the cart before the horse. The argument is internally inconsistent and flawed. It is, for example, one thing to say that a vehicle driven fast is prone to accident, and quite another to suggest that it shall, for that reason, meet with an accident. Rather, in our considered view, even if a Board circular were to specifically state so, it would be infirm in law, even as explained by the Apex Court in Pahwa Chemicals Pvt. Ltd. v. CCE [2005] 274 ITR 87 (SC), being in relation to s. 37B of the Central Excise Act, 1944, which is akin to s. 119 of the Act, that the power conferred on the Board is for the purposes and in furtherance of the objects of the said Act and, therefore, the Board cannot, in exercise of the powers thereunder, issue instructions contrary to or in derogation of the express provisions of the law. That being the law declared by the Apex Court, an omission to have regard of such a directive, or even if deliberately so, would not lead to the same being regarded as ̳non-application of mind‘. It would be a different matter though, we may clarify, if the law provides for a speed limit, for which the driver is liable to be fined. The legal consequences that must flow from the non- ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 16 | P a g e observance of the SOP could only flow therefrom, even as there is, as explained by Shri Mishra during hearing, substantial compliance of the SOP. 4.4 We may though, before parting with this part of the order; the assessee having relied upon decisions by the higher Courts of law, including Sahara India Firm (supra), binding on us, clarify that we have, in deciding the issue before us, had due regard of the binding judicial precedents. The question as to whether non- application of mind vitiates an action, admits of no two views, so that the issue, as also explained earlier, reduces to one of fact to be determined on the basis of the normal aspects of the matter, to which, given the factual background; the information available; and the position of law, one would, before according his approval or sanction, examine or confirm. The law itself provides the frame of reference for seeking and according approval u/s. 151, i.e., the reason/s recorded. Each of the factual ̳infirmities‘ characterising the reason/s recorded, viz. the ̳key person‘; ̳assessment u/s. 143(1)‘; mention of section 147(b); address; date of return; SOP, etc., was therefore examined from the stand-point stated, to find the same as having no or little bearing on the reason/s recorded, which entitles one to form a belief that there has been, for the said reason/s, an escapement of income chargeable to tax from assessment, i.e., of the amount ostensibly received from and credited to the account of the concerned person in the assessee‘s accounts. The cited decisions, applicable in principle, would thus be of little assistance to the assessee in the facts and circumstances of the case. As regards the issue of the manner of recording satisfaction, on which aspect there is no specific stipulation by the statute, which is to be read strictly and reasonably, i.e., purposively, to suggest, as Shri Ved does, that recording thereof as ̳yes‘ or the like (even as the same is surely more elaborate than that in the instant case), would be fatal, cannot be accepted. It would, as afore-stated, be to commit the same mistake as being imputed to the sanctioning authority, i.e., that he thereby complies with law only in letter and not in substance. It would convert ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 17 | P a g e what is principally matter of fact (i.e., whether there has been an application of mind by the competent authority in granting approval) into one purely of law. The principle of law in the matter stands laid down by the Apex Court in Chhuggamal Rajpal v. S.P. Chaliah (supra), even as noted in Phool Chand Bhajrang Lal (supra), i.e., ̳where it can be said that the competent authority would not have given the approval for reopening had he read report carefully‘. This, it may be noted, retains the essential factual character of the matter, i.e., application of mind and is, thus, in agreement with the intent and purposes of the Act. It is only in such circumstances that the manner of recording becomes relevant, and indicative of mechanical approval, where not accompanied by reasons. It is this factual analysis/finding that provides the basis for stating so by the Apex Court in Chhuggamal’s case, as noted by the jurisdictional High Court in Arjun Singh (supra). If, therefore, the application of mind is demonstrable from the material on record or emerges from the perusal of the reason recorded and the details furnished, the manner of recording approval, which is in answer to a specific question in proposal form, becomes secondary and of little consequence, and would not render the reasons recorded as invalid. We have, as afore-noted, examined the approval on the anvil of this test, finding it to survive each of the infirmities pointed out by Shri Ved, giving reasons for the same. In S. Goyanka Lime & Chemicals Ltd. (supra), the Hon'ble High Court, as we observe, has not issued any statement of law. It has also not, upon interpreting the provision, and/or review of judicial precedents, expressed any opinion on any substantial question of law, for us to be able to discern it‘s ratio decidendi, which only is binding. The Hon'ble Court has, given the concurrent findings by the lower authorities, followed it‘s earlier decision in Arjun Singh (supra), wherein it has been clearly stated that it has to be an objective satisfaction based on objective material. It is this test, which is wholly in agreement with that afore-stated with reference to the decision in Chhuggamal’s case, that the Hon'ble Court found as not met in that case. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 18 | P a g e 4.5 The assessee‘s challenge on the ground of non-application of mind, for the reasons afore-stated, fails. Issue # 2 5. Shri Ved would next argue that as the information was available with the AO at the time of original assessment, i.e., when section 143(2) notice could be issued in response to return u/s. 139, the reassessment proceedings could not be initiated. The issue is not res-integra, having been abundantly clarified by the Apex Court in CIT (Asst.) vs. Rajesh Jhaveri Stock Brokers (P) Ltd. [2007] 291 ITR 500 (SC). The only question at the stage of issue of notice u/s. 148(1), it explained, is whether there is relevant material on which a reasonable person could have formed the requisite belief. This is the only condition precedent, except where the case falls under the proviso to s.148, i.e., the reassessment being initiated after 4 years, so that the incident of an omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for assessment for the relevant year, would also have to be satisfied. The Hon'ble Court held that the AO is free to initiate proceedings u/s. 147, and failure to take steps u/s. 143(3) will not render the AO powerless to initiate reassessment proceedings where the intimation u/s. 143(1) had been issued. Where, then, one wonders, is there any scope for the argument as being advanced, placing reliance on the decision of Tanmac India Ltd. vs. Dy. CIT [2017] 78 taxman.com 155 (Mad). There is nothing in the language of the provision which treats a regular assessment on a different footing, to support the contention being raised, and neither was any pointed out to us during hearing, even as the decision in Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), even otherwise binding, is consistent and in harmony with the clear, unambiguous language of the provision. Why, even in concluded assessments, where the AO has, on the basis of materials before him and upon verification deemed it proper and considered certain loan (or claim by the assessee) as genuine and accepted the same, if, on the basis of subsequent information that may come to his possession, he acquires a ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 19 | P a g e reason/s to believe that income has escaped assessment, he can initiate reassessment proceedings. The only caveat is that where the reassessment is being initiated beyond four years (from the end of the relevant assessment year), the additional condition of absence of true and full disclosure by the assessee would also require being met. This has been clear position of law, explained time and again by the Apex Court, to some leading cases by which reference is being hereby made for the sake of completeness of the discussion, viz. Calcutta Discount Company v. ITO [1961] 41 ITR 191 (SC); Ts. Pl. P. Chidambaram Chettiar vs. CIT [1971] 80 ITR 467 (SC); A.L.A. Firm v. CIT [1991] 189 ITR 285 (SC); Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC). The Hon‘ble Court Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287, as indeed in ALA Firm (supra), clarified that the information or material may be external to or a part of the record. It was further explained that the information though must come in the possession of the A.O. after the assessment, but even if it is such that it could have been obtained during the assessment itself, i.e., from an investigation of the materials on record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the assessing authority is not affected. A taxpayer, it was clarified, could not be allowed to take advantage of a mistake or oversight by the taxing authority, and the word ̳information‘, which was on the statute book (prior to 01/04/1989) had to be given widest amplitude and as comprehending a variety of factors. True, one could argue that the word ̳information‘ is absent in the extant law, but then the law has been thus only further relaxed and, in any case, the interpretation accorded by the Hon‘ble Court, which itself represents a continuum, signifies the purposive manner in which it reads the provision. Now, when even concluded assessments could be subject to reopening on the satisfaction of the condition precedent, it stands to reason, if not axiomatic, that it could be where there has been no assessment initially. As pointed out in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), the Hon'ble Gujarat High Court had failed ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 20 | P a g e to consider the conceptual difference between s. 143(1) (wherein even no prima- facie adjustment could be made after 01/6/1999, and even after substitution by Finance Act, 2008, only defined adjustments, which admit of no dispute, could be made, and is in fact carried out by ministerial staff (as noted by the Hon‘ble Court), and now electronically. We are of the considered view that the matter is squarely covered by the decision in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra). In fact, the reference to an assessment u/s. 143(3) by us is made only for the reason that the Hon'ble Court in Tanmac India Ltd. (supra) has stated that no distinction between s. 143(3) and s. 143(1) could be made on the basis of language of s.147. We have already noted uniformity and continnum in the pronouncements by the Apex Court, so that the law is well-settled. Apart from this conceptual difference, the reference to the decisions in ALA Firm (supra) and Kalyanji Mavji & Co. (supra) leave no room for any doubt in the matter. The information that may come to the notice of the AO could even be from materials already on record or derived from the discovery of important and relevant facts, not found earlier. That these facts or information could be discovered earlier by the AO, was an aspect specifically considered by the Apex Court. We, accordingly, have no hesitation in upholding the validity of notice u/s. 148(1), assailed for want of issue of notice u/s. 143(2) earlier. We are not, we may clarify, getting into the question of whether the AO in the instant case had material with him to issue notice u/s. 143(2) at the time when the said notice could be issued (which position may well be different for the two years under reference), as was the case in Tanmac India Ltd. (supra), as we consider the same to be, in view of the decision in Rajesh Jhaveri Stock Brokers (supra) and other decisions by the Apex Court, irrelevant. We decide accordingly. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 21 | P a g e Issue #3 6. The third issue on which the assessment stands assailed in the instant case is that the notices u/s. 143(2) stand issued on 17/01/2019, i.e., prior to the receipt by the AO of the objections to the issue of notice u/s. 148(1) on 18/02/2019. As clarified by the Apex Court in GKN Driveshafts (India) Ltd. v. ITO [2003] 259 ITR 19 (SC), it is only upon meeting the assessee‘s said objection/s per a speaking order, that the AO could proceed to make an assessment. Inasmuch as therefore the notice/s u/s. 143(2) stands issued earlier, and not succeeded by the issue of another notice u/s. 143(2) on or after 20/2/2019 (i.e., after the date of passing of the order disposing the assessee‘s objections/s), the assessment is bad in law for want of compliance with the procedure mandated by GKN Driveshafts (India) Ltd. (supra). Reliance stands also placed by Shri Ved on Asian Paints Ltd. (supra) and Sahkari Khand Udyog Mandal Ltd. v. Asst. CIT [2014] 46 taxmann.com 69 (Guj). 7.1 To begin with, Shri Ved could not, on being asked by the Bench, state as to what prejudice stood caused to the assessee by the issue of notice u/s. 143(2) on 17/01/2019, instead of (on or after) 20/2/2019, or even followed by another such notice on or after that, latter, date. The assessee could have moved the Hon‘ble High Court under it‘s writ jurisdiction, which Sh. Ved explained as the principal reason for the said prescription by the Apex Court in G.K.N. Driveshafts (I) Ltd. (supra), in any case after 20/2/2019 (i.e, irrespective of the notice u/s. 143(2)), on which date, or reasonably thereafter, the AO could, as per him, issue notice/s u/s. 143(2). To no answer by Sh. Ved. We have already indicated that the law is concerned with the substance of the matter. As such, even assuming that the notice/s u/s. 143(2) was pre-mature, it caused no prejudice to the assessee, infringing none of the rights conferred by the procedure laid down in GKN Driveshafts (I) Ltd. (supra), so that it could be then said of the proceedings being to that extent procedural deficient. Rather, even where so, the matter would necessarily have to go back to the stage where the irregularity had intervened. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 22 | P a g e 7.2 There has been, however, in our considered opinion, no breach of the procedure mandated by the Apex Court in GKN Driveshafts (I) Ltd. (supra). Shri Ved could not also answer the question by the Bench about the section (i.e. provision of law) where-under the speaking order, meeting (or even accepting) the assessee‘s objections is to be passed by the AO before proceeding with the assessment. The said order is only an order u/s. 143(3), albeit interlocutory. It is only a notice u/s. 143(2) that would enable the AO to have regard to the assessee‘s objections. Why, the same may contain reference to the fact and figures, which would require being vetted or verified by the AO, even as explained by the Bench during hearing, so as to properly consider the assessee‘s objections – which process is not an empty formality, with reference to the material on record, including the assessee‘s return, or even outside it (bringing or causing to bring the same on record), and which could only be where notice u/s. 143(2) stands issued. That is, the same is a part of the assessment proceedings. It needs to be appreciated that this is integral to hearing the assessee, though only with reference to the reason/s recorded insofar as they have been objected to. It is only ̳hearing‘, which process includes raising claims and furnishing explanations by the assessee, and meeting or considering the same, that qualifies the consequent order to be an order of assessment, as against an intimation, which follows merely processing of the return u/s. 143(1) (refer: Rajesh Jhaveri Share Brokers Pvt. Ltd. (supra)). The only difference that the decision in GKN Driveshafts (I) Ltd. (supra) introduces is to provide for the assessee being specifically heard thereon, prior to framing the assessment, toward which the AO issued notice/s u/s. 142(1) on 18/4/2019. In the facts of the case, the AO proceeded with completing the assessment only after disposing the assessee’s objections vide his order dated 20/2/2019. There has, thus, been an observance of the procedure laid down in GKN Driveshafts (I) Ltd. (supra), both in law and in spirit. The decisions in Asian Paints Ltd. (supra) and Sahkari Khand Udyog Mandal Ltd. (supra), even as explained therein, specify the gaps in the said procedure. None have been observed, or even claimed before us in ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 23 | P a g e the instant case, apart from the issue of notice/s u/s. 143(2) being prior to disposing the assessee‘s objection/s, which we have found to be, rather, in agreement with the law; the AO, further, proceeding to frame the assessment only after disposing the assessee‘s objections, so that there has been, on the contrary, due compliance of the procedure laid down in GKN Driveshafts’s case. The assessee was entitled to, where so advised, move the Hon‘ble High Court under its‘ writ jurisdiction, at this stage, for which it therefore had a near two month window. No prejudice stands either caused, or shown to be. Further still, even a deficiency in following the prescribed procedure, where so, as afore-stated, would not, as claimed, annul the assessment, but qualify as an irregularity, necessitating, as afore-stated, restoration of the proceedings to the stage where it had occurred, as explained time and again by the Apex Court, as in Guduthur Brothers v. ITO [1960] 40 ITR 298 (SC); Suptd., CE v. Dr. Pratap Rai [1978] 114 ITR 231(SC); ITO v. M. Pirai Choodi [2011] 334 ITR 262 (SC); Pr. CIT v. S.G. Holdings (I) Pvt. Ltd. (CA No. 6144 of 2019 (SLP(C) No. 12126/2019, dtd. 13/8/2019)), to cite some. 7.3 The assessee‘s objection, whichever way one may look at it, is without merit. We decide accordingly. Issue #4 8.1 The next issue raised by Shri Ved is again with reference to the umbrella Gd. 1. It is said that inasmuch as material pertaining the assessee was seized during search at the residence of Shri Tarachand on 17/11/2015, the proper course for the AO was to issue notice u/s. 153A r/w s. 153C, and recourse to sec. 147 could not be made in view of overriding nature of the former provisions. The Revenue‘s case, on the other hand, is that the assessee is deliberately and without basis trying to link the instant assessment proceedings with the search, even as there is nothing on record to so suggest, and it is not the Department‘s case that the proceedings were initiated in pursuance to the said search. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 24 | P a g e 8.2 There being reference to material with the AO in the assessee‘s argument, the same has both factual and legal aspects to it. We begin by reproducing the section: Assessment of income of any other person. 153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person : Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 25 | P a g e year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A. (emphasis, ours) 8.3 A taxing statute, and more particularly a charging provision thereof – inasmuch as s.153C delineates the procedure for bringing to charge income disclosed per the materials or assets seized during search, is to be strictly construed; the assessee being thereby, disturbing the finality of the concluded proceedings, subject to the rigor of fresh assessment proceedings (and for as far back as six preceding years), even abating the on-going proceedings. The jurisdictional fact, as apparent from a mere browse of the provision, is the satisfaction of the AO in case of person searched, arrived at on the basis of the materials or assets seized, to the effect that they have a bearing on the income of other person (assessee) for the relevant year/s. This satisfaction note, which thus forms the basis of the initiation of proceedings u/s. 153C, is conspicuous by it‘s absence in the instant case/s. The details of the seized material appears at PB-1 (pgs. 71-89) (and also at pgs. 117-136), none of which pertain to AY 2015-16 and, two, have been relied upon by the AO in assessing income for AY 2014-15; the assessment for both of which years proceeds in parallel and de hors the said material. Shri Ved, when asked by the Bench about such material; there being no whisper, much less reference, to any such either in the assessment order or even the reason/s recorded, would state of rough balance-sheet of the assessee being found during search, and which therefore ought to be regarded as ̳incriminating‘. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 26 | P a g e Why, we fail to understand? Does it not agree with or drawn from the assessee‘s regular books of account, which perhaps only would lead one to infer of it being incriminating? To no answer. In fact, there is no reference to this ̳rough‘ balance- sheet, inasmuch as it does not appear in the list of the seized material afore-noted. We do not consider it necessary, in absence of reference to any material, dwell further in the matter; the argument advanced being presumptuous and de hors the material on record. Suffice, rather, that there is no satisfaction note, which we have stated as the condition precedent, representing a jurisdictional fact. Rather, it could be that an assessee, in a particular case, contends, despite the satisfaction note, of the material not bearing any income and, thus, of absence of jurisdictional fact, i.e., disputes on facts as to whether satisfaction could be drawn on the basis of materials seized. Shri Ved was during hearing required to make his submissions and answer the queries by the Bench qua this issue with reference to the decision in CIT vs. Sinhgad Technical Education Society [2017] 397 ITR 344 (SC), which abundantly clarifies the conditions precedent for initiation of proceedings u/s. 153A r/w s. 153C, inasmuch as none, clearly, are satisfied in the instant case. To no answer by him. The Revenue, by taking recourse to s. 147, places itself in a more difficult position, being required to meet the condition precedent of ̳reason to believe‘. It could not, however, possibly thrust jurisdiction upon itself, where the condition/s precedent is not met. The assessee relies on the decision in Karti P. Chidambaram v. Pr.DIT (Inv.) [2021] 436 ITR 340 (Mad). However, as a mere browse of the judgment would show, it is completely distinguishable on facts. In that case the seized documents, upon receipt by the AO, were proceeded with by him by recording his satisfaction and, further, issuing notice u/s. 153C. The assessee‘s entire case is without any substance and, accordingly, fails. ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 27 | P a g e Issue #5 9. Next, we may discuss the assessee‘s case on the merits of the addition u/s. 68. It would be necessary to recount the background facts of the case. The assessee is stated to be in the business of real-estate development. Shri Tarachand Khatri (TK), the patriarch of the family and the key person of the group (Khatri group of the companies), it is stated, would frequent Kolkata in connection with the readymade garment business, being undertaken by a group concern, Ambika Traders, the proprietary concern of Shri Ganshyam Katri (as explained by Shri Ved during hearing), his son. Thereat he happened to meet Shri Sanjay Jha, one of the Directors of the creditor-company, an investment company in search of investment opportunities outside Kolkata, whereat the business potential, due to high land prices, was stated to be depressed/low, i.e., in comparison with comparatively small (B category) towns, as Jabalpur. This led to a business partnership, explaining the investment in the assessee-company, after being approved by the Board of Directors of the creditor (investor) company. The explanation, though strange, inasmuch as a private investment/finance company in Kolkata seeks to invest in another private, nondescript, Jabalpur based company, is plausible, so that where backed and corroborated by facts and circumstances, ought to find acceptance. So however, an examination shows little correspondence between the narrative afore-stated and the obtaining facts and circumstances of the case, with the variance (between the two) unexplainable and, rather, disproving the assessee‘s case, when viewed in the conspectus of the case. The explanation afore- noted, stands furnished by Shri Sanjay Jha, Director in the investor-company, who, vide his statement u/s. 131 on 27/12/2016, however, admits to have become a director of the said company only on 26/10/2015, i.e., much after the investment by the said company, which starting on 07/3/2014, ended on 07/4/2014. His statement clearly stating (per his statement on oath u/s. 131 on 27/12/2016) him to have personally met TK, whom he came to know through a personal friend, whereat the proposal of investment by his company was mooted and discussed ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 28 | P a g e between the two, and then seeking approval of the Board of Directors to the said proposal, clearly establishes the untruth of the said statement, removing the very edifice or the basis of the assessee‘s explanation. Sh. Ved, on being posed this question, pointing to the falsity of the explanation furnished, and even that if Sh. Jha was, prior to his appointment as the Director of the ̳investor‘ company, associated with it in any capacity, could not, despite seeking and being allowed time to respond/answer, provide any, stating that this could be answered only by Sh. Jha. If so, what, one may ask, then, is the assessee’s explanation? Is it not the assessee‘s explanation, or does the assessee deny the same? Even as observed by the Bench upon hearing Sh. Ved‘s evasive reply, he was the assessee‘s witness and his statement could not therefore, except at it‘s peril, be disowned by it. In fact, Shri Khatri, vide his statement on 19/11/2015 (PB-1, pgs. 144-151), himself admits to having obtained ̳advance loan‘ (whatever that may mean) in fy 2013-14 from LSSPL after showing it the project site (in answer to Q. Nos. 17 & 18), which was in relation to another group company (i.e., Shri Kalyanika Infra Mega Venture), through the medium of friends and acquaintances, unspecified though. It, therefore, to our mind, became even more incumbent on the part of the assessee to state who those ̳friends and acquaintances‘ were through the medium of whom the funds were arranged. This, as in view of Shri Jha‘s statement, the explanation furnished by the assessee is rendered false. Sh. Khatri, though, did not respond when the same question was asked in respect of the assessee-company, stating that he would need to consult the documents, as indeed when questioned about the huge, inexplicable share premium being reflected in the assessee‘s books (Q. 20). This itself is incomprehensible as, as afore-noted, LSSPL had funded not one, but as many as six companies of the Khatri group, to the extent of 2122 lacs, exhausting its entire capital (including reserves), i.e., other than that held in cash or cash equivalents and as non-current assets (Rs. 640 lacs), with he being the principal person handling the financial affairs of the companies, and one, who is stated to have transacted and dealt with LSSPL. Needless to add, no follow up ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 29 | P a g e clarification upon consulting documents was furnished by Shri Khatri. Here it may also be pertinent to state that Shri Kamal Agrawal, a Director of the company (as appearing on the MCA portal at the time of assessment proceedings were on) was issued summons u/s. 131 by the AO during assessment proceedings. He did not, however, attend the same and, instead, furnished copy of the balance-sheet, bank account statement and the ITR of LSSPL (para 10.4 of the assessment order). The assessee‘s balance-sheet even as at 31/3/2015 (PB-2, pgs. 1-24) does not reflect any ongoing projects. There are in fact no current assets, and the only ̳tangible assets‘ are fixed assets, which include lands, characterized as ̳agricultural lands‘, and it‘s only source of income is ̳shop rent‘, and against which it has incurred statutory liabilities, including toward compliances. Now, could that, by any sense of the term, be regarded as genuine, i.e., of it being a genuine investment-company in search for a real-estate projects outside Kolkata for better results, without of course putting blinkers on one‘s eyes, as warned by the Apex Court in Durga Prasad’s (infra)? There is, in fact, nothing on record to corroborate or substantiate what is being stated or held out to be the case, which explanation is sans any material, and no more than a bald, albeit fantastic, story, in the realm of explanations to be furnished to the authorities under the Act. Real estate investment, as indeed financing, is much more complex, entailing an understanding of the underlying business and the various variables impinging thereon as well. A genuine investor would examine both the industry and company profile, viz. what is the track record of the company; it‘s core competencies, including human resources; the profitability; the industry – which is witnessing transformative changes – prospects, particularly in the region, including the supply and demand position. A project feasibility report would rather be the starting point for any such negotiation, with the very fact of lack of institutional support itself raising doubts, or require being addressed, as financing, required to be sustained over a period, is critical, with the investor company having itself deployed it‘s entire capital. The creditor company itself does not, or at least not shown to, have ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 30 | P a g e the requisite expertise or wherewithal or experience for the same, with there being even no agreement, or even a MOU, delineating the respective rights and liabilities of the parties, i.e., there is no semblance of any reality. The ̳proposal‘ referred to is bereft of any details. The Directors of the investor/financer company, whose qualifications are not specified; the company having no employees, have little income, as observed in the assessment order. It itself is not shown to have undertaken any real estate business, even at any time in the past, or even it‘s directors shown to have proven experience in the said trade. LSSPL, as per its profile (reproduced at page 6 of the assessment order), is in the business of financial intermediation, which would render it as a non-banking financial company, leveraging on the cost differential, i.e., between the sourcing and deployment of funds. As we observe, neither, however, is at a cost, removing the very basis of a business. In short, there is nothing to show of it being in this or, rather, any business, much less investment in real estate projects. Further, it, given the mandate under which it is registered, could not therefore undertake any joint venture or otherwise partner with the assessee company in any of it‘s projects, and which it does substantially, ̳investing‘ in fact the entire of it‘s investible resources, putting all it‘s eggs, as it were, in a period of one month, in one basket, an anathema in business parlance, while businesses seek to diversify and reduce risk, i.e., across markets, businesses, investees, et. al., only to, then, forget all about it. It is only, where so, i.e., with demonstrable investment or project experience and, thus, an understanding of the trade, that it could be said of seeking better opportunities outside Kolkata. Why, it does not indicate, even stipulate any interest on its loans, i.e. presuming so, or otherwise, or in addition, seek to secure itself, i.e., the safety of it‘s capital. That is, there is nothing to back up the story or to show the impugned credits are toward specific projects, as it‘s contribution thereto. Not only it invests in or lend to the assessee-company, it does so without even as much as an agreement! Only a senile perhaps would do it, and it would be fatuous and facile to even suggest or even accept the same, i.e., of it being an investment in ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 31 | P a g e any project being undertaken jointly or even for it‘s financing, and which, again, assuming so, is without its terms being settled or agreed upon. How could that be? That, rather, would be the first thing that a person of normal prudence, much less a businessmen looking for better returns, would do, i.e., settle the terms prior to the release of capital. In fact, each of the considerations afore-stated (which is again not exhaustive), that would be of concern for an investing company, would equally apply to a financing company, interested as it is in the safety as well as return of it‘s capital and a reasonable return on it‘s capital (both of which could only be out of the profits of the business financed). Be it investment or financing, both require expertise, which we observe as completely absent with the creditor company. Whichever way one may look at it, the so-called loans are anything but genuine transactions, and the creditor-company no more than a paper company; rather, a classical example of one. Why, Shri Ved could not, despite being allowed time for the same, explain it‘s address, mentioned variously at different places, viz. i) 4/1, Water Loo Street, Kokata, WB (pg. 6 of the assessment order) ii) 2 Lal Bazar Street, Kolkata (Confirmation, at PB-2, pgs. 25-26) iii) 14-C, MD Road, Kolkata (Statement of Sh. Jha/ PB-1, pg.140) It is then said that the fact that monies given to the assessee came partly from that lent earlier, recalling the same, which establishes their genuineness. If the monies had been genuinely lent, they would not be available on tap, to be given to the assessee (or other group company) as and when it requires. That, if anything, is indicative of it being an accommodation entry; one being exchanged for the other. Real time transactions come with a fixed tenors inasmuch as the funds are actually deployed toward some economic activity or investment. Under section 68 the capacity and the genuineness of the credit is to be established despite the entries to that effect in the accounts of the assessee (CIT v. S. Kamaraja Pandian [1984] 150 ITR 703 (Mad)). Merely, therefore, as the receipt of money is accounted in books would not, for that reason, make it genuine. It is also said that the absence of stipulation of interest be not regarded as indicative of non-genuineness, citing the ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 32 | P a g e decision in CIT vs. Bedi & Co. Pvt. Ltd. [1998] 230 ITR 580 (SC). Sure, interest is one of the factors, and an important one at that in case of loans and, consequently, bearing relevance, which is to be though considered in the conspectus of the case; the matter being essentially one of fact. As such, nothing turns per se on the non- provision of interest being, in the facts of a particular case, regarded as not relevant or material toward genuineness. The transaction in that case was not a financial transaction but one of purchase of machinery. Cases abound of the same being regarded as a relevant factor, as was in Pr. CIT vs. Bikram Singh [2017] 399 ITR 407 (Del), as indeed found by us in the facts and circumstances of the instant case, wherein no reason for non-charge of interest on the loan/s has been advanced. It was also enquired by the Bench if any steps had been initiated by LSSPL toward recovery of its ̳loans‘, as it seems to have, despite it‘s investment lying dormant for years now, ̳forgotten‘ to recall them. There is no evidence of any recall or of any steps having been initiated for recovery, even considering the truth of the explanation of the money, strangely for all the projects, having been stuck, as the projects could not take off due to, as stated, legal problems, which again is completely unevidenced, and at any stage. Such would be the case only if the money had been actually lent! Rather, a creditor would, apart from other legal remedies, seek to secure by a charge on the underlying assets. All in all, there is not an iota of evidence to support the assessee‘s case, which is, thus, wholly unproved; with that furnished being found false. Rather, as we observe, a classical case of an accommodation entry/s. For reliance on case law, we cite some of the leading decisions by the Apex Court and the Hon‘ble jurisdictional High Court, each of which is required to be read in the fact setting in which it stands rendered, demonstrating, apart from the principle of law, as to how the same gets applied in the given facts of the case, and are being relied upon: Govindarajalu Mudaliar (A.)v. CIT [1958] 34 ITR 807 (SC) Seth Kalekhan Mohammed Hanif vs. CIT [1968] 34 ITR 669 (MP) (affirmeded in Kalekhan Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC) CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) ITA Nos. 29 & 30/JAB/2021 (AYs. 2014-15 & 2015-16) Maa Badi Khermai Marketing P. Ltd. v. Dy. CIT 33 | P a g e Sumati Dayal vs. CIT [1995] 214 ITR 801 (SC) CIT vs. Mohankala (P.) [2007] 291 ITR 278 (SC) Vijay Kr. Talwar v. CIT [2011] 330 ITR 1 (SC) CIT v. Shiv Shakti Timbers [1998] 229 ITR 505 (MP) We have, in view of the foregoing, no hesitation in upholding the invocation of section 68 in the facts of the case; the impugned credits being wholly unproved and, rather, disproved. We decide accordingly. 10. In the result, the assessee‘s appeals are dismissed. Order pronounced in open Court on June 06, 2022 Sd/- Sd/- (Manomohan Das) (Sanjay Arora) Judicial Member Accountant Member Dated: 06/06/2022 vr/- Copy to: 1. The Appellant: Maa Badi Khermai Marketing Pvt. Ltd., D-24, Dixit Enclave, Bandariya Triraha, Jabalpur. 2. The Respondent: Deputy CIT, Central Circle, Jabalpur 3. The Principal CI T, Central, Bhopal. 4. The CI T( A)-3, Bh opal (MP) 5. The CI T D.R., I TAT, Jabalpur 6. Guard File. By order (VUKKEM RAMBABU) Sr. Private Secretary, ITAT, Jabalpur.