SMT KIRAN ANIL SHAH, MUMBAI V. PRIN. COMM OF INCOME TAX -27, MUMBAI

ITA 686/MUM/2022

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8973 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 17-04-2022
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Period of limitation; Accommodation entries; Time period of passing order; Reason to believe; Reassessment proceedings
• Section: 56; 263; 40A(3); 143(3); 142(1); 195

Judgement Text

ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 1 IN THE INCOME TAX APPELLATE TRIBUNAL “H” BENCH, MUMBAI BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA No.686/Mum/2022 (A.Y. 2012-13) Smt. Kiran Anil Shah 3 rd Floor, B-14, Plot No. 33/34, Yogakshema CHS Ltd, Nathpai Nagar, Ghatkopar- East, Mumbai – 400 077 Vs. PCIT-27, R. No. 401, 4 th Floor, Tower No. 6, Vashi Railway Station Commercial Complex, Vavhi, Navi Mumbai 400 703 स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: ANRPS9911N Appellant .. Respondent Appellant by : Vijay Mehta Respondent by : Tejinder Pal Singh Date of Hearing 29.08.2022 Date of Pronouncement 08.09.2022 आदेश / O R D E R Per Amarjit Singh (AM): The present appeal filed by the assessee is directed against the order u/s 263 passed by the ld. PCIT-27, Mumbai, which in turn arises from the order passed by the A.O u/s 143(3) r.w.s 147 of the Act for A.Y.2012-13. The assessee has raised the following grounds before us: “1. On facts and circumstances of the case and in law, learned PCIT erred in setting aside the order passed under section 143(3) r.w.s. 147 holding the order dated 16.12.2019 as erroneous in so far as it is prejudicial to the interest of the revenue ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 2 2. Without prejudice to the above on facts and circumstances of the case and in law, learned PCIT erred in setting aside the order passed under section 143(3) r.w.s 147 holding that the assessing officer has failed to conduct proper inquiries, investigation and examination. 3. Without prejudice to the above the order under section 263 holding that inquiry for expenses under section 40A(3) is not carried out is bad in law since inquiry for expenses under section 40A(3) was not the reason for reopening of the case The issue under section 40A(3) being not part of the reasons recorded, consideration of this issue under section 263 is time barred and hence bad in law. 4. Without prejudice to the above, the order under section 263 holding that inquiry for expenses under section 40A(3) is not carried out is bad in law for the reason that once there is no addition for the reason recorded for reopening then other issues could not have been considered. 5. The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.” 2. In respect of delay in filing this appeal, the assessee submitted her submission dated 20.06.2022 in response to defect Memo dated 20.05.2022. Heard both the sides regarding filing this appeal before ITAT on 18.04.2022. The assessee has placed reliance on the decision of Hon’ble Supreme Court in the case of cognizance for Extension of Limitation dated 10.01.2022, wherein held to exclude the period from 15.03.2022 to 28.02.2022 in view of the prevailing situation arising out of Covid-19 and further extension of limitation period by 90 days. In view of the directions of Hon’ble Supreme Court as referred supra the delay in filing this appeal is condoned. 3. The fact in brief is that assessment u/s 143(3) r.w.s 147 of the Act was finalized on 16.12.2019. The case was reopened by issuing of notice u/s 148 of the Act dated 30.03.2019 on the basis of information received from the DDIT(Investigation), Mumbai that Smt. Kiran Anil Shah proprietor of M/s Om Shree Enterprises was maintaining an account no. 002605004234 (ICICI Bank) and A/c no. 001912110000039 with Bank of India. It was stated that there was large value non cash transactions ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 3 in the accounts. The transaction pattern shows credit by clearing transfer and debits by transfer, clearing and huge cash withdrawal. The total credits in the bank account of the assessee during the F.Y. 2011-12 was Rs.1,70,25,993/-. It was also submitted that the credit in the accounts were only from some parties i.e M/s Ashoka Buildcon Ltd and others and immediately after credits from these entities huge cash withdrawal were reflected in these accounts. It was also stated that the transaction pattern prima facie reflects provisions of accommodation entries and the total credit appearing in the bank account remained unexplained in the hands of the assessee. Therefore the case was reopened with a reason to believe that an amount of Rs.1,70,25,993/- being total credit in the bank account during F.Y. 2011-12 had escaped assessment. In response to the notice the assessee filed detailed submission that she was proprietor of M/s Om Shree Enterprises and engaged in the business of building material supplier. The assessee also explained that the transaction with M/s Ashoka Buildcon and M/s Realcon Infrastructure were sales transactions and furnished copies of ledger account. Further, during the course of assessment proceedings the assessee submitted the copies of ledger account, loan confirmation, sample copies of bills, delivery challan for supply of material etc. Further it was explained that the purchases were made from unregistered dealers and the withdrawal of cash was for the purpose of purchase of building material as per normal business practice for last many years. The assessee has also explained that the transactions which were in the nature of loan confirmation was dully filed. The necessary ledger account, bank statement and audited books of account were duly furnished which were verified and placed on record. After due verification the A.O has accepted the income declared in the return of income at ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 4 Rs.5,62,880/- without making any addition on the issue on the basis of which the case of the assessee was reopened. 4. Thereafter the ld. Pr. CIT(A) issued show cause notice u/s 263 of the Act. The relevant part of the same has reflected at para 2.1 of the order u/s 263 is as under: “2.1 Subsequently it was noticed assessee's case was reopened on the basis of information of huge non-cash transactions and immediate cash withdrawals. As per Information received, assessce had not offered any explanation towards total credit of Rs.1,70,25,993/- During the assessment proceedings, assessee submitted that the credits reflected in her bank accounts were due to sales and the purchases of building materials from unregistered dealers in cash. Further, vide submission dated 11.12.2019 assessee said that she could not understand how the amount of Rs.1,70,25,993/- as pointed out by the department was arrived Out of total credit of Rs 2,98,09,063/ in her bank accounts, assessee shown an amount of Rs.59,41,038/- (Rs.29,32,038 Rs 30,09,000) received towards loan and Rs 38.00,000/- towards capital account. However, in the annual accounts assessee has shown loan to the extent of Rs 23,50,000/- only, Thus, assessee has shown short credit of loan amounting to Rs 35,91,038/- in annual accounts. During assessment proceedings, this issue was not reconciled.” The ld. Pr. CIT(A) further stated that the assessee has not complied with the show cause notice dated 04.03.2021 issued through ITBA. The ld. Pr.CIT(A) also mentioned in his order that in the absence of any submission from the assessee it is clear that assessee has nothing to submit on the issue of showing a short credit in the form of loans in annual account and applicability of provision of Sec. 40A(3) of the Act. Therefore, it is held that the order dated 16.12.2019 passed u/s 143(3) r.w.s 147 of the Income Tax Act 1961 was erroneous insofar as it was prejudicial to the interest of the revenue within the meaning of Sec. 263 of the Income Tax Act, 1961 and as the A.O failed to conduct proper enquiry. 5. During the course of appellate proceedings before us the ld. Counsel has referred the order u/s 143(3) r.w.s 147 of the Act and stated ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 5 that this issue has been thoroughly verified and examined by the A.O during the course of assessment made u/s 143(3) r.w.s 147 of the Act. In this regard the ld. counsel referred copy of notice u/s 148 issued on 30.03.2019 placed at page no. 10 of the paper book. The relevant reason recorded for reopening is reproduced as under: “Reason for reopening of the assessment for AY. 2011-12 u/s 147 of the I.T Act, 1961. 1. Brief details of the Assessee: The assessee has filed return of income for AY. 2012-13 declaring the total income at Rs.5,62,880/-. 2. Brief details of information collected/received by the AO: In this case information was received from DDIT(Inv.)-4(2), Mumbal vide letter No DDIT(Inv)/U-4(2)/Information/AAS/2018-19 dated 15.03.2019. Information has been received that Kiran Anil Shah, Prop. of M/s. Om Shree Enterprises is maintaining a savings account no. 002601023855 with ICICI Bank, Mumbai, Ghatkonar branch. The assessee is maintaining another bank a/c with Bank of India bearing a/c No.001902110000039 There are large value non cash transactions in SB accounts. Transactions pattern shows credits by clearing transfer and debits by transfer, clearing. Total credits in the bank accounts of Kiran Anil Shah, Prop. of M/s. Om Shree Enterprises during the F.Y.2011-12 relevant to AY2013, is Rs.1,70,25,993/-. 3. Analysis of Information collected/received During the investigation by DDR (Inv.)-4(2), Mumbai, Statements for bank accounts held by M/s Jai Bhawani Traders, Anil Amritlal Shah & Kiran Anil shah and Anil Amritlal Shah (HUF) were called for. On verification of the statements of bank accounts received it is seen that there are huge cash withdrawals from the accounts of M/s Jai Bhawani Traders and accounts held by Anil Amrutlal Shah jointly with Kiran Anil Shah. It is seen that Kiran Anil Shah is the proprietor of M/s. Om Shree Enterprises and Anil Amritlal Shah is the proprietor of M/s Jai Bhawani Traders From the transaction pattern in the accounts of M/s. Jai Bhawani Traders (A/c No. 002605004237 (ICICI Bank) and A/c No. 001920110000040 (Bank of India) and in the Individual account held Jointly by Anil Amritlal shah along with Kiran Anil Shah (A/c NO. 002601023855 ICICI Bank) and M/s. Om shree Enterprises (Prop. Kiran Anil Shah) (A/C No. 002605004234) it is seen that credits in these accounts are only from some parties i.e, M/s Ashoka Buildcon Limited, M/s RMC Ready Mix India etc. and immediately after credits from these entitles huge cash withdrawals are reflected in these accounts. There are evidently nil or negligible payments made by M/s Jai Bhawani Traders to any other parties. This transaction pattern prima facie reflects ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 6 provision of accommodation entries and no genuine business transactions are seen from these accounts. Since, Kiran Anil Shah has not offered any explanation and the above credits are not commensurate with the return of income filed by her, the total credits mentioned above remain unexplained in the hands of Kiran Anil Shah. 4. Enquires made by the AO as sequel to Information collected/received: Preliminary enquiries and investigation has been done by the DDIT(Inv.)- 4(2) Mumbai. The same were verified along with ROI filed by the assessee. From verification of ROI filed by the assessee it is seen that the assessee has shown turnover of Rs.73,57,433/- and unsecured loans of Rs.23,50,000/-. Since during the investigation proceedings, Kiran Anil Shah could not offer any explanation and the above credits are not commensurate with the return of income filed by him, the total credits mentioned above remain unexplained in the hands of the Kiran Anil Shah. During the course of assessment proceedings the assessee had made detailed submission vide letter dated 02.12.2019 and letter dated 11.12.2019 in response to notices u/s 142(1) of the Act issued by the A.O on 24.05.2019 and 16.10.2019 respectively, the assessee has also furnished copy of bank account and explained that cash withdrawal was made from the bank specifically for the purpose of making purchases of material and building material from unorganized sector. The ld. Counsel submitted that A.O did not made any addition on the basis of which the case was reopened. The assessee had fully explained all the transactions as per query raised by the A.O. The ld. Counsel further submitted that even the order u/s 147 r.w.s 263 of the Act dated 04.02.2022 in consequential to order passed u/s 263 of the Act the A.O has accepted the explanation of the assessee for the short credit of loan with its reconciliation and no adverse inference was drawn. However, the A.O has made disallowance of cash payment u/s 40A(3) of the Act. In this regard the ld. counsel submitted that once no addition has been made by the A.O on the basis of which the case of the assessee was reopened then no further addition can be made subsequently u/s 263 of the Act. In this ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 7 regard the ld. Counsel has placed reliance on the following judicial pronouncements: “i. Aishwarya Rai Bachchan Vs. PCIT (194 ITD 272) ii. Hinal Estate Pvt. Ltd. Vs. PCIT in ITA No. 7938/Mum/2019 dated 08.03.2021 iii. K.R. Construction Vs. PCIT in ITA No. 7615/Mum/2019 dated 28.02.2020 iv. Indo Enterprise Pvt. Ltd. Vs. PCIT in ITA No. 751/Pun/2019 dated 11.01.2021 v. Bombay High Court in the case of CIT Vs. Jet Airways (I) Ltd. (331 ITR 236) vi. Bombay High Court in the case of CIT Vs. Software Consultants (341 ITR 240) 6. On the other hand, the ld. D.R supported the order of lower authorities. 7. Heard both the sides and the material placed on record. Without reiterating the fact as discussed above in this order the case of the assessee was reopened on the basis of information of huge non cash transaction and immediate cash withdrawal reflected in the bank account of the proprietary concern of the assessee as elaborated supra in this order. During the course of reassessment proceedings the assessee explained the credit reflected in her bank accounts with relevant supporting materials that same was on account of sale and purchase of building material and withdrawal of cash was made to make purchases of building material from the unorganized sector. Vide reassessment order passed u/s 143(3) r.w.s 147 of the Act the A.O has fully accepted the submission of the assessee and not made any addition on the basis of which the case of the assessee was reopened. During the course of reassessment proceedings the assessee has made detailed submission vide letter dated 02.12.2019 and letter dated 11.12.2019 in respect of cash withdrawal from Bank along with purchase details and explanation ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 8 of Rs.1,70,25,993/-. Apart from this fact we have gone through the other alternative plea of the assessee that when the very basis of reasons recorded by the A.O ultimately the A.O had not made any addition, then the primary reason to believe that income of the assessee had escaped assessment failed and such reassessment cannot be treated as valid order in the eyes of the law. The ld. Counsel has referred various judicial pronouncements. With the assistance of the ld. representatives we have gone through the judicial pronouncements referred by the ld. Counsel. The relevant part of these judicial pronouncements of jurisdictional High Court and coordinate benches of the ITAT are reproduced as under: In the case of Aishwarya Rai Bachchan Vs. Pr.CIT-8, as under: i. One more excruciating fact that needs to be addressed in the instant case is that the ld. PCIT herein is only seeking to revise the order passed by the ld AO u/s 143(3) r.w.s 147 of the Act dated 12/12/2018. In the said reassessment proceedings, the Id AO had not even made any addition despite the fact that he had reason to believe that income of Rs.11,55,330/- had escaped assessment in the hands of the assessee which was sought to be taxed u/s 56 of the Act as per the reasons recorded. Hence, when the very basis of reasons recorded by the ld. AO was ultimately not added by the ld AO in the reassessment proceedings, then the primary reason to believe that income of the assessee had escaped assessment fails and such reassessment cannot be treated as a valid order in the eyes of law. The same is to be declared as void ab initio. Reliance in this regard was rightly placed on the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Jet Airways (I) Ltd [2010] 195 Taxaman 117/[2011] 331 ITR 236 (Bom) When an assessment framed by the ld. AO is unsustainable in the eyes of law, the said invalid and illegal order cannot be subject matter of section 263 proceedings. On this count also, the revision order passed by the ld. PCIT u/s 263 of the Act deserves to be quashed. In the case of M/s Hinal Estate Pvt. Ltd. Vs. Pr. CIT-10, as under: ii. In our considered view, as stated by the ld. A.R and rightly so, no when case of the assessee was reopened on a specific ground with respect to which no addition was thereafter made by the A.O while passing the reassessment order u/s Sec. 143(3) r.w.s 147, dated 13.11.2014, the Pr. CIT thereafter could not have held the said reassessment order as erroneous within the meaning of Sec. 263 of the Act, for the reason, that the AO had failed to make an addition as regards a stray issue which had never formed a basis for reopening of the ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 9 assessee's case. In fact, we find that the Hon'ble High Court of Bombay in the case of CIT Vs. Jet Airways Limited (2010) 195 taxman 117 (Bom) had observed, that if no addition is made by the A.O while framing the assessment under Sec. 147 w.r.t the issue on the basis of which the case of the assessee was taken up for reassessment then, it would not be open to him to independently assess some other income. Accordingly, now when the AO had not made any addition w.r.t the issue on the basis of which the case of the assessee was reopened under Sec. 147 of the Act, the Pr.CIT could not have held the reassessment order to be erroneous, on the ground, that he had failed to make an as regards the issue which had never formed the basis for reopening of its case, despite the fact that no addition insofar the issue forming the basis for taking up the case of the assessee for reassessment was made by the A.O. In the case of K.R. Construction VS. Pr.CIT, Central 3, as under: “13. In this factual background, if you examine revision order passed by the PCIT u/s 263 of the Act, one needs to understand, whether the exercise of powers by the Ld. PCIT is within the scope of provision of section 263 of the I.T. Act, 1961. It is a settled position of law that if, no addition is made on the issue, for which reasons were recorded for reopening, no other additions can be made with respect to issues for which no reasons were recorded. The Hon'ble Bombay High Court in the case of CIT vs Jet Airways India Ltd. (2011) 331 ITR 236 has categorically held that if, the Ld. AO accepts the contention of the assessee and holds that the income for which, he had initially formed a reason to believe that it had escaped assessment, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income and if, he intends do so, a fresh notice u/s 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee. A similar view has been expressed by the Hon'ble Rajasthan High court in case of shri Ram Singh (306 ITR 343) and Punjab & Haryana High Court in case of Allas Cycle Industries (180 ITR 319). The Hon'be Delhi High Court in case of Software Consultants (21 Taxmann.com 155) held that where the AO did not make any additions on issues in respect of which reasons were recorded for issue of notice u/s 148, a general inference is that the AO could not have made addition on account new issue and, thus Commissioner could not have exercised revisional jurisdiction. The sum and substance of ratios laid down by Hon'ble High Courts is that if, reasons recorded for reopening of assessment on a particular issue and in reassessment proceedings, no addition is made on this count, then the Ld AO is debarred from making any other additions, which he come across during reassessment proceedings. If you apply above legal principles to revision proceedings, the obvious inference is that when AO could not have made any additions other than the issues for which reopening is made, then the CIT could also have interefered with hose issues which are not subject matter of reassessment proceedings.” Hon’ble High Court of Bombay in the case of CIT-5, Vs. Jet Airways (I) Ltd. as under: “16. Explanation 3 lifts the embargo, which was inserted by judicial interpretation, on the making of an assessment or reassessment on grounds other than those on the basis of which a notice was Issued under section 148 setting ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 10 out the reasons for the belief that income had escaped assessment. Those judicial decisions had held that when the assessment was sought to be reopened on the ground that income had escaped assessment on a certain issue, the Assessing Officer could not make an assessment or reassessment on another issue which came to his notice the proceedings. This interpretation will no longer hold the field after the insertion of Explanation 3 by the Finance Act (No. 2) of 2009. However, Explanation 3 does not and cannot override the necessity of fulfilling the conditions set out in the substantive part of section 147 An Explanation to a statutory provision is intended to explain its contents and cannot be construed to override it or render the substance and core nugatory. Section 147 has this effect that the Assessing Officer has to assess or reassess the income ("such income") which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which, comes to his notice during the course of the proceedings However, if after issuing a notice under section 148, he accepted the contention of the assessee and holds that the income which he has initially formed a reason to believe had escaped assessment, has as a matter of fact not escaped assessment, it is not open to him independently to assess some other income. If he intends to do so, a fresh notice under section 148 would be necessary, the legality of which would be tested in the event of a challenge by the assessee.” Hon’ble High Court of Delhi in the case of CIT-II Vs. Software Consultants as under: 14. For exercise of power under Section 263 of the Act, it is mandatory that the order passed by the Assessing Officer should be erroneous and prejudicial to the interest of the Revenue In the present case the Assessing Officer did not make any addition for the reasons recorded at the time of issue of notice under Section 148 of the Act. This position is not disputed and disturbed by the Commissioner of Income Tax in his order under Section 263 of the Act Sequitur is that the Assessing Officer could not have made an addition on account of share application money in the assessment proceedings under Section 147/148. Accordingly, the assessment order is not erroneous. Thus, the Commissioner of Income Tax could not have exercised jurisdiction under Section 263 of the Act After following the ratio of judicial pronouncements as elaborated supra in the case of the assessee during the course of reassessment made u/s 143(3) r.w.s. 147 of the Act, when no addition was made regarding the item in respect of which reason were recorded for reopening of the assessment the Pr. CIT could not exercised his jurisdiction u/s 263 of the Act in order to bring other items of addition, therefore, we consider that the order passed u/s 263 of the Act is not justified. Accordingly, we allowed the appeal of the assessee. ITA No.686/Mum/2022 A.Y. 2012-13 Smt. Kiran Anil Shah Vs. PCIT-27 11 8. In the result, the appeal of the assesse is allowed. Order pronounced in the open court on 08.09.2022 Sd/- Sd/- (PAVAN KUMAR GADALE) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 08.09.2022 PS: Rohit आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT 5. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, अहमदाबाद / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// (Asst. Registrar) ITAT, Mumbai