AI Insights
The case involves Sumangal Techpark (P) Ltd., which appealed against the reassessment order for the Assessment Year 2010-11. The reassessment was initiated by the Income Tax Officer (ITO) based on information suggesting that the company had received accommodation entries and had not disclosed material facts during the original assessment. The Tribunal examined the legal validity of the reassessment proceedings, focusing on the application of section 147 of the Income Tax Act and the procedural adherence in granting approval for reassessment. The Tribunal found significant procedural lapses, including the invocation of a non-existent legal provision and a lack of substantive reasoning in the approval process, leading to the quashing of the reassessment order.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 115731 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 9 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-02-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
B
Next Hearing Date
18-12-2022
Assessment Year
2010-2011
Appeal Filed On
30-04-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : B : NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA No.3840/Del/2019 Assessment Year: 2010-11 Sumangal Techpark (P) Ltd., 117, Hans Bhawan, 1 BSZ Marg, New Delhi. PAN: AALCS4760R Vs. ITO, Ward-24(3), New Delhi. (Appellant) (Respondent) Assessee by : Shri S.K. Gupta, CA Revenue by : Ms Kirti Sankratyayan, Sr. DR Date of Hearing : 19.12.2022 Date of Pronouncement : 23.02.2023 ORDER PER C.M. GARG, JM: This appeal filed by the assessee is directed against the order dated 26.02.2019 of the CIT(A)-8, New Delhi, relating to Assessment Year 2010-11. 2. First of all, we have heard the arguments of both the representatives on legal ground No.1 of the assessee which reads as under:- “3. The initiation of the proceedings u/s 148 and the consequent order us 147 are bad in law as a) The initiation of proceedings u/s 148 are contrary to provisions of law ITA No.3840/Del/2019 2 b) The mandatory procedure laid down in the Act has not been followed. c) The notice issued u/s 148 is time barred as issued after 4 years from the end of the relevant assessment year where the case has already been assessed u/s 143(3). d) The approval of Addl. CIT and PCIT is bad in law and mechanical without application of mind and has been taken without bringing to their notice material facts of the case. e) The information has been collected behind the back of the assessee and the assessee was never confronted with the same nor an opportunity provided for cross-examination of Jain Brothers, alleged intermediary and the relevant seized material relied upon has not been provided to the assessee.” 3. The written submissions of the assessee on this ground reads as follows:- “a. Reliance on non-existing provisions to support reopening of assessment: From the performa submitted by the AO for obtaining approval of Pr CIT, Delhi-8, New Delhi (Obtained through RTI on 09.12.2022), Copy enclosed. It can be seen that in S.No.7, there is a question “Whether the provisions of sec 147(a)/147(b)/147(c) is applicable or both sections are applicable. The answer recorded by the Ld AO against this query is sec 147(c) implying that the AO has invoked applicability of sec 147(c) of the Act. The reopening of assessment, satisfaction of the Ld AO and the approval granted by the Ld Pr CIT is based on the applicability of provision of sec 147(c) of IT Act and the validity of the each of the above actions need be tested on the availability of such section as supporting material. Here, it is relevant to note that there has never been any provisions of sec 147(c) right from inception of Income Tax Act 1922 and replaced Act of 1961 till today, The income tax Act 1961 prior to amendment through Direct Tax Laws Amendment Act 1987 applicable from 01.04.1989, had sections 147(a)/! 47(b) and in that era prior to amendment in 1987 too, there was no sec 147(c) in the Income Tax Act. Non-application of a non-existing section shows non- application of mind by all the authorities involved in initiation of action u/s 147 and the authorities are the _d AO recording reasons, Addl CIT recommending approval and Pr CIT according approval u/s 151 of IT Act. Application of non-existing provision of law to assume ITA No.3840/Del/2019 3 jurisdiction to take action u/s 147 undermines its validity in view of the decision OF Hon'ble Bombay High Court in the case of Smt Kalpana Shantilal Haria Vs AC IT W.P.(L) No.3063/2017 dated 22.12.2017 where easement proceedings were quashed on identical reason and also held that same is incurable u/s 292B/292BB of IT Act. The jurisdictional Delhi High Court in Yum! Restaurants Asia Pte Ltd VS DDIT in WP(C) No. 614/2014 dated 31.08.2017 has also considered the glaring mistakes in the performa for approval as the valid ground for quashing the assessment on the premise of non- application of mind by all the authorities involved in the process of recording reasons and providing satisfaction u/s 151. Reliance is also placed on the recent judgment of Hon’ble Delhi High Court in the case of Best Cybercity India P Ltd vs ITO WP(C) 12360/2018 td: 21.05.2019 in para 23. Further, the Hon'ble Bench of Delhi ITAT in the following cases has quashed the reassessment proceedings for initiation of proceeding by invoking repealed provision of sec 147(b) of IT Act: • M/s VRC Township P Ltd ITA No. 1503/Del/2017 dt: 14.10.2020; • M/s Maheshwari Roller Flour Mills P Ltd vs ITO ITA No.4257/Del/2019 dt: 17.12.2020; • Shyam Products P Ltd vs ITO ITA No,1932/Del/2019 (authored by Hon’ble JM) • ACIT vs Shree Balkrishan Agarwal Glass Industries Ltd ITA No.5821/Del/2017 (authored by Hon’ble JM) b. Mechanical Approval by Pr CIT Inconsistencies and omissions pointed out in support of ground on nonapplication of mind are the glaring mistakes committed as discussed in preceding para by the AO and non-pointing out such omissions by the approving authority and resulting non-correction of the same, before the approval was accorded, shows that the said authority have acted mechanically in granting sanction u/s 151 of the Act. Such mechanical approval was found to be fatal for validity of the reassessment proceedings as decided by the co-ordinate Hon’ble Delhi Bench in the RMP Holdings P Ltd ITA No.7243/Del/2019 dt: 31.07.2020 wherein it was held that both AO and approving authorities have acted mechanically ignoring the glaring mistakes in the reason recorded showing non application of mind by the reason ITA No.3840/Del/2019 4 recording authority where the decision of Delhi High Court in the case of Sonia Gandhi 407 ITR 594 (Del) has been distinguished. Reliance is also placed on the decision of M/s Synfonia Tradelinks P Ltd vs ITO W.P.(C) No.l2544/2018 dt: 26.03.2021 (Del) has quashed the reassessment proceeding based on mechanical approval granted by approving authority. Further, reliance is placed on the following authorities: a. Chhugamal Rajpal vs. S.P. Chaliha & Ors. - 79 ITR 603 (SC); b. Arjun Singh vs Asstt. Director of Income Tax (M.P.) reported in (2000) 246 ITR 363 (MP); c. CIT vs M/s S.Goyanka Lime and Chemicals Ltd 231 Taxman 0073 Dated 15.10.2014 (MP) approved by Hon'ble Supreme Court in 64 taxmann.com 313 (SC). d. Pr. CIT vs. N. C. Cables Ltd 391 ITR 11 (Del) e. Maruti Clean Coal& Power Ltd Vs ACIT WP(T) No.346 of 2017 Dated 03.01.2018 (Chattisgarh High Court); f. German Remedies Ltd. vs. Dy. CIT (2006) 287 ITR 494 (Bom); g. United Electrical Company PLtd. vs. CIT & Ors[2002) 258 ITR 317(Del)"; h. Central India electric Supply Co. Ltd. Vs .ITO, 333 ITR 237 (Del).” ............................................................................................. ............................................................................................. “d. Non-Compliance of First Proviso to sec 147 I. In view of the assessment completed u/s 143(3) dt: 30.11.2012 (PB 181) and the action u/s 147 initiated after expiry of four years from the end of assessment year, the appellant’s case could not have been reopened unless the escapement of income occasioned due to failure of assessee to disclose truly & fully all material facts necessary for assessment. There is no specific allegation in reason recorded attributable to the assessee appellant although there is a bald statement in para no.23 (PB 15) but there is no identification of specific material facts not disclosed by the appellant in assessment ITA No.3840/Del/2019 5 proceedings. The entire reason is silent on the fact whether original assessment was completed u/s 143(3) or not and if yes what were the materials produced by the appellant in those proceedings on the basis of which the allegation as covered by first proviso to sec 147 could be established. This issue was highlighted by the appellant before the AO in objection (PB 63-64) but Ld AO skipped the above legal issue raised while disposing off the objection of appellant (PB 55-62). II. It is a case of bald assertion of the fact of non-disclosure of all material facts fully and truly which is the case as per reason recorded, such bald assertion does not meet the mandatory requirement of above proviso in view of the following decisions: • BPTP Limited vs. PCIT 185 DTR 0372 (Del); • Anand Developers vs. ACIT (Bom) W P No. 17 of 2020 dt: 18.02.2020; • Best Cybercity (India) Pvt Ltd (2019) 414 ITR 0385 (Del); • M/s Swarovski India Pvt. Ltd v. Deputy Commissioner of Income Tax, W.P.(C) 1909/2013 decided on 08.08.2014 (Del); • Global Signal Cables (India) Pvt. Ltd. vs. Dy. CIT [2014] 368 ITR 609 (Del); • HCL Technologies Ltd. v. Dy CIT W.P.(C) 8164/2020 (Del); • M/s Sabh Infrastructure Ltd vs ACIT398 ITR 0198 (Del). III. The compliance of proviso solely depends on verification of facts/material disclosed in the course of assessment proceedings. From the perusal of reason recorded, the Ld AO did not discuss anything on the evidences furnished during original assessment proceedings. In absence of such exercise being undertaken, the AO could not have recorded satisfaction on such failure of the assessee. The purpose of proviso is to provide safeguard against the arbitrary misuse of provisions of reassessment and this mandatory condition is introduced through proviso to put the AO under obligation to identify the particular facts not disclosed by the assessee. ITA No.3840/Del/2019 6 IV. In the case of Gateway Leasing P ltd vs ACIT W.P.(C) 2518 of 2019 dt: 11.03.2020 (Bom) held that the Dept's argument that though the assessee disclosed details of the transactions pertaining to purchase and sale of shares, it did not disclose the real colour / true character of the transactions and, therefore, did not make a full and true disclosure of all material facts which was also overlooked by the AO, is not correct. The assessee disclosed the primary facts to the AO & also explained the queries put by the AO. It cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment. Further, the Hon’ble Apex Court in the case of NDTV vs DCIT 424 ITR 607 (2020) (SC) has been very categorical that the duty of the assessee is only to declare primary facts and the secondary facts needed be discovered by the AO through necessary enquiry. V. The co-ordinate Bench of Delhi ITAT, in the cases of Peethambra Buildcon Ltd vs ITO IT A No.637/Del/2018 dt: 23.10.2018, M/s AST Pipe P Ltd (supra) and M/s Gaurang Products P Ltd (supra) and ITO vs Rukmini Iron P Ltd ITA No.550/Del/2018 df: 20.09.2022 (authored by Hon’ble JM) has quashed the reassessment proceedings on the identical facts and particularly having credits from Sh S.K. Jain Group. VI. If the case of the AO was that the original assessment order was passed on the basis of incomplete information provided, then only option for the department was action u/s 263 of the IT Act. The absence of such action by the department shows that the information provided in the course of original proceeding were adequate and assessment proceeding were completed after due enquiry. In such a case, the action u/s 148 could not have been be taken in view of decision of Dushyant Kumar Jain vs Dy CIT 381 ITR 0428 (Del) (Para 16) and CIT vs Usha International Ltd 348 ITR 0485 (Del) (FB) (Para 14 & 15). The Co-ordinate Bench of ITAT in M/s A.S.T Pipes P Ltd ITA No.8312/Del/2019 df: 27.10.2020 in para 13 pages 16-21 has quashed the reassessment proceedings accepting the above contention of the appellant.” ITA No.3840/Del/2019 7 4. Briefly reiterating the written submissions of the assessee, the ld. AR submitted that assessee obtained copy of the proforma submitted by the AO obtaining approval of ld.PCIT, through RTI which was resubmitted on 09.12.2022 clearly show that the invocation of reassessment proceedings based on non-existing provisions of the law, i.e., 147(C) of the Act clearly shows that it is a clear case of non-application of mind by the AO and also by the authorities provided the approval u/s 151 of the Act. Reliance in this regard has been placed on the decisions of Smt. Kalpana Shantilal Haria vs. ACIT W.P (L) No.3063/2017, order dated 22.12.2017 (Bom); Best Cybercity India P. Ltd. vs. ITO (2019) 414 ITR 385 (Del); Omkam Developers Ltd. vs. ITO, ITA No.6862/Del/2018, order dated 11.05.2021; M/s VRC Township P. Ltd. vs. ITO, ITA No.1503/Del/2017 dated 14.10.2020; M/s Maheshwari Roller Flour Mills P. Ltd. vs. ITO, ITA No.4257/Del/2019 dated 17.12.2020; and Madhu Apartments P. Ltd. vs. ITO, ITA Nos.3869-3870/Del/2018, order dated 01.02.2021. Therefore, the ld. AR submitted that impugned reassessment proceedings and reassessment order may kindly be quashed as proposition rendered by above noted orders including order of coordinate Bench of ITAT Delhi in the case of Omkam Developers Ltd. (supra). 5. The ld. Sr. DR supported the impugned reassessment order as well as first appellate order and submitted that the mention of non-existent provision of section 147(C) of the Act is a clerical mistake which is curable u/s 292B of the Act. ITA No.3840/Del/2019 8 6. On careful consideration of the rival submissions, from the order of the coordinate Bench of ITAT in the case of Omkam Developers Ltd. (supra), I observe that in the similar set of facts and circumstances, similar legal contention was placed before the ‘E’ Bench which was adjudicated as follows:- “10. We have heard rival submission of the parties on the issue in dispute raised in the cross appeals. As far as ground No. 1 of the appeal of the assessee is concerned, the assessee has challenged the validity of the reassessment proceeding on the ground that approval for issue of the notice under section 148 of the Act was granted by the LearnedPr.CIT in a mechanical manner and without application of mind and, therefore, reassessment proceeding must be quashed. For adjudicating this issue, the reasons recorded by the Assessing Officer and relevant proforma of approval granted by the Pr. CIT are reproduced as under: "Reason for the belief that income has escaped assessment in the case of M/s, Omkam Developers Pvt. Ltd. A.Y. 2009-10 (Pan:AAACQ5036B) 1. Name & Address of the Assessee : M/s Omkam Developers Ltd, 702, Arunachal Building, 19, Barakhamba, Road, Connaught Place, New Delhi 2. Assessment Year 2009-10 3. Financial Year 2008-09 4. PAN AAACO05036B PUC is a proposal for reopening the case u/s 147 of the Act for the A.Y 2009- 10 in the prescribed Performa. The information received from ADIT (Inv ), Unit-3(4), Kolkata vide his letter dated ADIT/U-3(4)/FIU-IND/MJS/15-16/4l1 dated 22.06.2015.wherein it is mentioned that; in the suspicion transaction report of 1000010583 in the name of Manohar Jaykishan Shah was received and it was reported in the I said FIU-IND-STR No. 1000010583 that there were 311 linked entities amongst whom fund transfers were made and in few accounts there were deposits also. ITA No.3840/Del/2019 9 In pursuance to the said report. Bank Statements of various entities have been obtained and on investigation, it has been noticed that Omkam Developers Pvt. Ltd (Pan AAACO5036B] was one of the beneficiaries during the F.Y 2008-09 relevant A.Y.2009-10 and the amount brought through I accommodation entries by the above mentioned company is Rs. 193.00 Lakhs. Copy of the Status Report in the case of Manohar Jay kishan Shah in connection with FIU-IND-STR No.1000010583 is reproduced below:- A. Background: • One Suspicious Transaction Report was received in the month November, 2009 from FIU-IND. In the said report, 31 related accounts were reported out of which 12 accounts were found to be associated, with business of Metal Trading Wherein Mr. ManoharJaykishan Shah is a Proprietor/Signatory. There are other 19 outstation Branch Accounts which are linked/connected to main 12 accounts and having non-related business/not in the same line of business accounts. During the financial year 2008-09, high, value cheques totaling around Rs. 2030 crore are deposit at outstation branches in these accounts. Subsequent to which on realisation of high value credit amount, debit internal transfertransaction of large value and in round figures has been, transacted within connected group/linked accounts. The cumulative turnover In 31 accounts discussed was reported tobe 673 crores. B. VERIFICATION OF FACTS AND INVESTIGATIONS DONE: To verify in the STR, the Bank Accounts of all 31 accounts mentioned in the STR were requisitioned from the Bank and scrutinized. The 31 Bank accounts- were opened atdifferent, branches of the Development Credit Bank. The following, facts emerged from the scrutiny of Bank Accounts: I. There were 7 Bank Accounts belonging to 6 entities in which cash of Rs. 15.26 crore was deposited in the F.Y.-2008-09: The cash deposited were swiftly Transferred to other entities through Cheques/RTGS. These-6 entities are proprietorships. The detail is given as per Annexure-C. The funds from other entities through Cheques/RTGS were also received in these accounts. The details of another 21proprietorships given are STR is as per Annexure-C1. ITA No.3840/Del/2019 10 II. The find from the entities mentioned in Annexure-C and C1 were transferred to a number of entities which are mostly entities already identified as the companies controlled by the entry operators, few of them have been listed in Annexure-1. III. The fund was rotated among the entities detailed in Annexure-C, C1 and Annexure-1 IV. There were 6 Bank Accounts Belonging to 6 Companies in which funds were received from mostly entities discussed in Annexure-C, C1 and Annexure-1 and the same was swiftly transferred to the other entities (Mostly Companies). The details of 6 such companies are given in Annexure -5 V. The fund was transferred to the entities which are the real beneficiary of the funds from the companies mentioned in Annexure-S. The details of such, companies are given in Annexure -B. Modus operandi of providing accommodaton entry The summons u/s 131 were issued to the individuals and entities mentioned in the STR. The field verification from the inspector was also done. In most of the cases either the summons could not he served or there was no compliance, The facts of immediate source of the beneficiaries being shell companies have already been established and recorded u/s 131 of the Income Tax Act-1961 during the investigation in other cases. The fact as also corroborated by the non- compliance to the summons as well as non-existence of real business of most of the entities mentioned in Annexure-C, C1 and l and S. Flow Chart of Cash Flow Cash deposit in proprietorship concerns Layering of funds through dummy Proprietorships and Shell companies Fund transfer to Shell/Paper Company ITA No.3840/Del/2019 11 Fund to the Beneficiaries Conclusion (i) In retrospect it can be rightly conceded that, the beneficiary companies have introduced n cash in primary accounts discussed in Annexure-C and s symbolized by various companies (created for the purpose re-1, Annexure-S) operated by entry operators by entry operators, the unaccounted funds have been entered In the regular books of accounts of the beneficiary companies. (ii) in view of the above, the total amount which has been transferred to the beneficiaries or the recipient companies from the bank accounts of paper companies during F.Y. 2008-09 is details in Annexure-8. The A.O. of the all beneficiary (Annexure-B) companies is being appraised of ] regarding accommodation entry accepted by the companies in F.Y. 2008-09. Further, A.O. of V concerns listed in Annexure-C, C-l and S is also being intimated regarding, cash deposit and credit made in different bank controlled by them for taking necessary action. It appears that assessee M/s Omkam Developers Ltd. has received 'I bogus share capital/premium to the tune of Rs.1.93 Crores. The Income Tax | Returns of the assessee were also examined and noticed that the share premium; of assesses was increased to Rs.81,28,52,000/- in the relevant year from Rs. 17,69,50,000/-in the preceding year. As discussed in earlier paras, the assessee has obtained such entries through above mentioned modus-operandi, it is actually assessee's own money (cash) which was rotated through such channel. This cash was out ofhis unaccounted income. I have reasons to believe that an amount of Rs.1.93 crores has escaped from the Assessment for the A.Y. 2009-10 which was chargeable to tax. I am also satisfied that on account of failure on the part of the assessee to I disclose truly and fully all the material facts necessary for assessment for the j above assessment year, the income chargeable to tax to the tune of Rs.193.00 Lakh as escaped assessment with the meaning of Section 147 of the IT Act 1961 I have perused the information received from the Investigation Wing,Kolkata The Investigation Wing of the Department has sent ITA No.3840/Del/2019 12 comprehensive detail comprising inter alia the beneficiary's name, value of entry taken etc. In the aforesaid case as per record from ITD, return of income was filed on declaring Rs.2,389/- income, it is noticed that the assessee company M/s Omkam Developers Ltd, received accommodation entries to the tune of Rs.1.93,crores during the F.Y. 2008-09 relevant to assessment year 2009-10 from the entry operators as mentioned in the chart above and same was not offered for taxation. Having perused and considered the information, I have reason to believe that income of the assessment company to the extent of Rs.193 Lakh has escaped assessment for the A.Y. 2009-10. Therefore, proceedings u/s 147 i.e. clause (b) of Explanation 2 of the provisions of section 147 of the I.T. Act, 1961 is proposed to be initiated for the A.Y. 2009-10. As per ITD record, Return of Income has filed on 30.03.2010 at an income of'Rs.2,389/- for the A.Y. 2009-10. Since four years has been expired from the end of the relevant assessment year in this case for the said assessment year, it is therefore I/requested that the reasons recorded above for the purpose of reopening of assessment is put up for kind satisfaction of Pr.CIT, Delhi-7, New Delhi in terms of proviso, to Section 151 of the Income Tax and approval for issue of notice u/s 147 may kindly be accorded." ITA No.3840/Del/2019 13 10.1 On perusal of the proforma for the approval granted by the PCIT, it is evident that in the relevant column No.13 for satisfaction of the Pr.CIT, he has only mentioned "yes". No other information is available on record or provided by the ld. DR, which could establish application of mind by the CIT, while granting sanction/approval for issue of notice u/s 148 of the Act. No other evidence was produced as to substantiate that matter was ever discussed between the Assessing Officer or Addl. CIT and the Learned Pr.CIT for arriving at satisfaction of Learned Pr.CIT on the reasons recorded by the Assessing Officer. Even no evidences whether Ld PCIT examined the material relied upon by the Ld AO for reopening, was produced before us. In similar circumstances, Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) held that section 151 of the Act clearly stipulates that Learned CIT, who is the competent authority to ITA No.3840/Del/2019 14 authorize the reassessment notice, has to apply his mind and form an opinion. The Hon'ble High Court further observed that the mere appending of the expression 'approved' says nothing. It is not as if the CIT has to record elaborate reasons for agreeing with the noting put up but at the same time, satisfaction has to be recorded of the given case, which can be reflected in the briefest possible manner. The Hon'ble High Court further observed that in that case the exercise appeared to have been the ritualistic and formal rather than meaningful, which is the rationale for safeguard of an approval by a high-ranking officer. Thus, in the instant case, mere mentioning of "yes' for approval, without any other evidence of application of the mind, amounts to mechanical approval by the LearnedPr.CIT. 10.2 Further in Column No. 7 of the proforma, the section for invoking reassessment has been recorded as 147(b) of the Act. During the relevant period, section 147(b) was no longer in existence. This shows that the Ld. AO has filed the Proforma in mechanically manner and Ld. CIT has also approved the same mechanically. In the case of Madhu Apartment Private Limited vs. ITO, ITA.Nos.3869 & 3870/Del./2018 wherein the Tribunal, Delhi Bench, vide order dated 01/02/2021 held as under: "7. After considering the rival submissions, we are of the view that the issue is covered by the Order of ITAT, Delhi G-Bench, Delhi in the case of VRC Township Pvt. Ltd., Delhi (supra) in which reopening of the assessment in identical circumstances was held to be bad in law and sanction accorded by the Sanctioning Authority was also found invalid, therefore, reopening of the assessment was quashed. In the present case, the Learned Counsel for the Assessee has pointed-out that assessee has raised this issue before the Ld. CIT(A), but, he has rejected the submissions of the assessee holding that Section 147(b) as mentioned in the reason and Format is a typographical human error which is curable under section 292B of the I.T. Act, 1961. This issue is also considered in the Order of VRC Township Pvt. Ltd., (supra) following the decision of Hon'ble Bombay High Court in the case of Kalpana Shantilal Haria vs. ACIT [2017] 100 CCH 165 (Bom.). Following the same reasons for decision, we set aside the Orders of the authorities below and quash the reopening of the assessment in both the assessment years under appeals. All additions stand deleted. Accordingly, appeals of the Assessee are allowed." 10.3 In the instant case before us, also the Learned DR has argued that the mistake of noting section under section 147(b) of the Act for reassessment proceeding is a clerical mistake, however, the Tribunal ITA No.3840/Del/2019 15 in the above decision has rejected the said contention and quashed reassessment proceeding on the ground of non-application of mind while granting approval for reopening of the assessment under section 151 of the Act. 10.4 Respectfully, following the decision of the Hon'ble Delhi High Court in the case of NC Cable Ltd (supra) and decision of the Tribunal in the case of Madhu Apartment Pvt. Ltd (supra), we quash the reassessment proceeding in the case of the assessee. 10.5 Since we have quashed the reassessment proceeding while adjudicating ground No.1 of the appeal of the assessee, no additions made by the Assessing Officer could be sustained. As far as other grounds of appeal of the assessee challenging validity of reassessment proceeding are concerned, same are rendered merely academic in nature and, therefore, we are not adjudicating upon those grounds. As ITA No.6862/Del./2018 & 7507/Del./2018 far as grounds of the parties challenging merit of the addition are concerned, same are rendered infructuous in view of the reassessment proceeding already quashed by us. 11. In the result, the appeal of the assessee is allowed, whereas appeal of the Revenue is dismissed.” 7. In the present case, the copy of the form for recording the reason for initiation of proceedings u/s 147 of the Act and for obtaining the approval u/s 151 of the Act, which was obtained by the assessee through RTI on 09.12.2022 submitted along with written submission of assessee, the ld. Sr. DR did not dispute that in the column No.7, the AO mentioned that the provision of section 147(C) of the Act is applicable. For the sake of completeness, the said format is being reproduced below:- ITA No.3840/Del/2019 16 ITA No.3840/Del/2019 17 8. Therefore, it is clear that the AO, in the first page of reasons (supra) mentioned in column 7 that provisions of section 147(C) is applicable which is non-existent in the statute book for AY 2010-11. This apparently shows non- application of mind by the AO while filling proforma in a mechanical manner and the ld. ACIT and Ld. PCIT also approved the same in a mechanical manner. So far as the contention of the ld. Sr. DR that this defect is curable u/s 292B of the Act is concerned, this contention was decided by the ITAT Delhi Bench in the case of Madhu Apartments India Pvt. Ltd., ITA No.3869 & 3870/Del/2018, order dated 01.02.2021, the relevant part of which has already been reproduced in the earlier part of this order since the same was referred to and included in the relevant part of the order of the ITAT in the case of Omkam Developers Ltd. (supra). Therefore, respectfully following the order of ITAT Delhi Bench in the case of Omkam Developers Ltd. vs. ITO (supra) and Madhu Apartments P. Ltd. vs. ITO (supra), we hold that the impugned reassessment proceedings and the impugned reassessment order deserves to be quashed and we hold so. 9. The next ground is challenging the validity of initiation of reassessment proceedings u/s 147 of the Act. The ld. AR, drawing our attention to assessee’s paper book page 181 submitted that the original assessment proceedings for AY 2010-11 were completed u/s 143(3) of the Act by passing scrutiny assessment order on 30.11.2012. Subsequently, reassessment proceedings were initiated for present AY 2010-11 on 26.03.2017, i.e., after expiry of four years from the end of relevant assessment year. The ld. AR submitted that the assessee’s case ITA No.3840/Del/2019 18 should not have been reopened u/s 147 of the Act unless the escapement of income occasioned due to failure of the assessee to disclose truly and fully all material facts necessary for the assessment. He, further drawing our attention to assessee’s paper book page 15 para 23, which are the reasons recorded submitted that there is no identification of specific material facts not disclosed fully and truly by the assessee during the assessment proceedings. He further contended that the entire reasons is silent on the fact whether original assessment was completed u/s 143(3) or not and if yes, what was the material produced by the assessee yet or what was the material not produced by the assessee in those original assessment proceedings on the basis of which the allegation as per requirement of first proviso to section 147 of the Act could be established. 10. The ld. AR pointed out that at the very initial state, the assessee filed objection to the initiation of reassessment proceedings beyond four years, copy of which is placed at pages 63-64 of the paper book, but, the AO skipped to adjudicate the said legal issue while disposing of the objections and the assessee by order dated 04.10.2017, copy of which is placed at pages 55-62 of the assessment order. The ld. AR submitted that the compliance of proviso to section 147 of the Act solely depends on the verification of facts/material disclosed in the course of assessment proceedings and without complying with this mandatory condition introduced, through the proviso to section 147 of the Act, to put the AO under obligation to identify the facts not fully and truly disclosed by the assessee. ITA No.3840/Del/2019 19 The ld. AR, placing reliance on the various judgements including the judgement of the Hon’ble Supreme Court in the case of NDTV vs. DCIT, 424 ITR 607, judgements of the Hon’ble High Court of Delhi in the case of Dushyant Kumar Jain vs. DCIT, 381 ITR 428 (Del) (para 16) and CIT vs. Usha International ltd., 348 ITR 485 (Del) (FB) and the order of the coordinate Bench of ITAT Delhi in the case of M/s AST Pipes Pvt. Ltd., order dated 27.10.2020 in ITA No.8312/Del/2019, submitted that in such a situation, when the AO has not complied with the mandatory provisions of proviso to section 147, the initiation of reassessment proceedings has to be quashed. 11. Replying to the above, the ld. Sr. DR supported the action of the AO. 12. First of all, we may point out that at page 15 of the reasons recorded, in paras 22 and 23, and at the concluding para, the AO has made the following observations/allegations against the assessee and for initiation of reassessment proceedings:- “22. Considering the above referred credible information, incriminating seized document u/s 132 of the Act and enquiries and investigation subsequent to the information, I have reason to believe that an amount at least of Rs. 1,53,45.000 & commission of Rs 2,76,210 has escaped assessment in case the of M/s Sumangal Techpark Pvt. Ltd. for the A.Y 2010-11 within the meaning of Section 147/148 of income-tax Act, 1961. 23. Since more than 4 years of the relevant years have passed and the information received from the investigation wing is that transactions are in the nature of accommodation entries, are non disclosure: of material facts pertaining to such transactions which has not been disclosed by the assessee in the return of income or during the ITA No.3840/Del/2019 20 assessment proceedings of this relevant year. Thus, this specific condition for reopening is hereby fully filled in the instant case as assessee has failed to disclose such material facts on its own earlier. The case is squarely covered under provisions of section 147 of income- tax Act. 1961. Moreover, as the case pertains to a period beyond four years from the end of relevant assessment years at the time of issue of notice, necessary sanction has to be obtained from Pr. Chief Commissioner of Income Tax or Pr, Commissioner of Income Tax or Commissioner of Income Tax, in view of the amended provision of section 151 w.e.f 01.06.2015. The necessary sanction in this regard is being obtained separately from Pr. Commissioner of Income Tax-08, Delhi before the issue of notice u/s 148 for reopening of assessment under section 147 in the case of assessee company” 13. From the above, it is clear that there is no observation or allegation by the AO that there was failure on the part of the assessee in disclosing fully and truly all material facts relevant for its assessment during the original assessment proceedings. Now, we proceed to adjudicate the legal ground of the assessee in this regard. 14. On careful consideration of the rival submissions, we are of the view that the ld. Sr. DR has not controverted some undisputable facts that the original assessment proceedings were completed u/s 143(3) of the Act and scrutiny assessment order was passed on 30.11.2012 for AY 2011-12. It is also not in dispute that the AO initiated reassessment proceedings u/s 147 by issuing notice by recording reasons and issuing notice u/s 148 of the Act on 26.03.2017 i.e., beyond four years from the end of relevant assessment year. Therefore, as per requirement of mandatory provisions i.e., proviso to section 147, the AO is ITA No.3840/Del/2019 21 required to make specific allegation to identify the particular facts not fully and truly disclosed by the assessee and compliance of the said mandatory provision solely depends on verification of facts/material disclosed by the assessee in the course of assessment proceedings and from perusal of the reasons recorded. In a case the AO did not disclose anything on the evidences furnished during the original assessment proceedings and failed to identify the particular facts or material which were not fully and truly disclosed by the assessee, then, the initiation of reassessment proceedings beyond the period of four years from end of relevant assessment year has to be held as void ab initio and bad in law as per various judgements including the judgement of the Hon’ble jurisdictional High Court of Delhi in the case of Dushyant Kumar Jain (supra) and in the case of CIT vs. Usha International Ltd. (supra). Our conclusion also gets support from the judgement of the coordinate Bench of the ITAT in the case of M/s AST Pipe Pvt. Ltd. (supra) as there is no allegation by the AO in the relevant and concluding part of the reasons recorded available at page 15 of the reasons. Therefore, we conclude that the initiation of reassessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act is void ab initio and bad in law being initiated without complying with the mandatory provisions of first proviso to section 147 of the Act. 15. Since, by the earlier part of this order, we have quashed the reassessment proceedings and reassessment order while adjudicating the legal ground No.3 of ITA No.3840/Del/2019 22 the assessee, no additions made by the AO could be held as sustainable. Therefore, other grounds of appeal of the assessee challenging the validity of reassessment proceedings are rendered academic in nature and, therefore, we are not adjudicating upon those legal contentions of the assessee. The ld. Sr. DR has filed written submissions on merits. So far as the grounds of the assessee on merits are concerned, since the reassessment proceedings have already been quashed in the earlier part of this order, therefore, the other grounds of assessee on merits are not being adjudicated as having become academic only. 16. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in the open court on 23.02.2023. Sd/- Sd/- (ANIL CHATURVEDI) (C.M. GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.02.2023. dk Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi
Other Referred Cases
Smt Kalpana Shantilal Haria Vs AC IT W.P.(L) No.3063/2017, Yum! Restaurants Asia Pte Ltd VS DDIT in WP(C) No. 614/2014, Best Cybercity India P Ltd vs ITO WP(C) 12360/2018, M/s VRC Township P Ltd ITA No. 1503/Del/2017, M/s Maheshwari Roller Flour Mills P Ltd vs ITO ITA No.4257/Del/2019, Shyam Products P Ltd vs ITO ITA No,1932/Del/2019, ACIT vs Shree Balkrishan Agarwal Glass Industries Ltd ITA No.5821/Del/2017, Chhugamal Rajpal vs. S.P. Chaliha & Ors. - 79 ITR 603 (SC), Arjun Singh vs Asstt. Director of Income Tax (M.P.) reported in (2000) 246 ITR 363 (MP), CIT vs M/s S.Goyanka Lime and Chemicals Ltd 231 Taxman 0073 Dated 15.10.2014 (MP), Pr. CIT vs. N. C. Cables Ltd 391 ITR 11 (Del), Maruti Clean Coal& Power Ltd Vs ACIT WP(T) No.346 of 2017 Dated 03.01.2018 (Chattisgarh High Court), German Remedies Ltd. vs. Dy. CIT (2006) 287 ITR 494 (Bom), United Electrical Company PLtd. vs. CIT & Ors[2002) 258 ITR 317(Del), Central India electric Supply Co. Ltd. Vs .ITO, 333 ITR 237 (Del), NDTV vs DCIT 424 ITR 607 (2020) (SC), Dushyant Kumar Jain vs Dy CIT 381 ITR 0428 (Del), CIT vs Usha International Ltd 348 ITR 0485 (Del) (FB), M/s A.S.T Pipes P Ltd ITA No.8312/Del/2019, Peethambra Buildcon Ltd vs ITO ITA No.637/Del/2018, M/s Gaurang Products P Ltd vs ITO ITA No.550/Del/2018
Laws Referred To
Income Tax Act 1961
1:1 Consultation on Business Development
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Tax Holiday Secrets for Startups
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1:1 Consultation on FEMA Compliance
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Declaration of Gift
Mehul₹500
Convertible Note Agreement
Mehul₹5000
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