QUALITY ENABLED REMOTE SOLUTIONS (P) LTD.,NEW DELHI V. ITO, WARD-20(3), NEW DELHI

ITA 4107/DEL/2018

AI Insights

The case involves Quality Enabled Remote Solutions (P) Ltd., the appellant, contesting an assessment order for the Assessment Year 2009-10, which was upheld by the Commissioner of Income Tax (Appeals)-25, New Delhi. The primary contention was regarding the jurisdictional validity of the notice issued under section 148 of the Income Tax Act, 1961, based on alleged accommodation entries linked to the company. The Assessing Officer had reopened the assessment based on information from a search and seizure operation related to Jain Brothers, suggesting that the appellant had received accommodation entries amounting to Rs.3.7 crores. The Tribunal, after examining the submissions and evidence, concluded that the Assessing Officer's actions did not meet the legal standards for reopening an assessment, leading to the quashing of the assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 776793 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2025
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 30-05-2018
• Other Referred Cases: Ankita A. Choksey vs. ITO, Paranjape Schemes (Construction) Ltd. vs. DCIT, Shree Nagalinga Vikas Oil Mills vs. ITO, Chandrika Dhansukhlal Gandhi vs. ACIT
• Laws Referred To: Income Tax Act, 1961
• Court: TRIBUNAL
• Department Lawyers: HARPREET KAUR HANSRA
• Assessee Lawyers: S. KRISHNAN
• Keywords: Document seized; Documents seized; Reopening of assessment; Principle of natural justice; Search and seizure; Accommodation entries; Competent authority; Reason to believe
• Section: 147; 148; 234B

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE SHRIS.RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No.4107/DEL/2018 (Assessment Year: 2009-10) Quality Enabled Remote Solutions (P) Ltd., vs. ITO, Ward 20 (3), UGF – 61A, World Trade Centre, New Delhi. Babur Road, Connaught Place, New Delhi – 110 001. (PAN :AAACQ0881A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri S. Krishnan, Advocate Shri Harshit Chauhan, Advocate REVENUE BY : Ms. Harpreet Kaur Hansra, Sr. DR Date of Hearing : 09.07.2025 Date of Order : 17.09.2025 O R D E R PER S.RIFAUR RAHMAN,AM: 1. This appeal has been filed by the assessee against the order of ld. Commissioner of Income Tax (Appeals)-25, New Delhi [“ld. CIT(A)”, for short] dated 16.08.2017 for the Assessment Year 2009-10 raising following grounds of appeal :- “1. The order passed by Id. CIT(A) is wrong both on facts and in law. Printed from counselvise.com 2 ITA No.4107/DEL/2018 2. The Ld. CIT(A) erred in upholding the reasons recorded u/s 147 by the A.O., which do not confirm to the statutory provision and the decided cases. 3. The Id. CIT(A) erred in not holding that the A.O. did not assume jurisdiction to issue notice u/s 148 as per law. 4. The Ld. CIT(A) erred in not holding that the order passed without assuming the jurisdiction to issue notice as per law was bad in law. 5. In any case the Id. CIT(A) erred in upholding the assessment of income at Rs. 3.70 Crore against nil income returned by the assessee. 6. The orders passed by the Id. CIT(A) and A.O. are based on conjectures and summa rises and therefore, they deserve to be quashed. 7. The Ld. CIT(A) erred in upholding the levy of interest u/s 234A and 234B without discussing the issue in the order. 8. The order of the Ld. CIT(A) suffers from infirmity of violating principles of natural justice as it was passed without giving the assessee an opportunity to cross examined Shree Surinder Kumar Jain and others, whose statements and documents were relied upon. 9. All these grounds are without prejudice to one another.” 2. At the time of hearing, ld. AR of the assessee submitted that he is first making submission on jurisdictional issue raised by the assessee in Ground Nos.2, 3 and 4. In this regard, ld. AR of the assessee brought to our notice reasons recorded by the Assessing Officer which is placed at page 26 of the paper book and he brought to our notice that based on the information received from DIT (Inv.) vide letter dated 12.03.2013, it was Printed from counselvise.com 3 ITA No.4107/DEL/2018 intimated that Surinder Kumar Jain was providing accommodation entries through a large number of dummy companies floated by him and by his associates. Based on the above, assessee’s name was also figured in the list of beneficiaries of share capital/premium/application/loan. The above information is based on search and seizure operation conducted in the case of Jain Brothers and their group concerns on 14.09.2010. As per the above information, he brought to our notice para 3.1 of the reasons recorded as per which these dummy entities were not carried out any actual business activities other than providing accommodation entries and the relevant payments were routed through banks do not have any underlying or actual business transactions. With the above reasons recorded in the reasons, the Assessing Officer recorded and found reasons for believe in para 5 of the reasons recorded as per which, on perusal of various seized documents clearly show that the name of the assessee company appears on this document has taken accommodation entry amounting to Rs.3.7 crores from S.K. Jain group of companies. Based on that, at para 6.1 of the reasons recorded, AO observed that the assessee company has taken accommodation entries in the form of share capital/premium/ application/loan from the entry providing companies being controlled by S.K. Jain. As per the information available on record i.e. ITR filed for AY 2009-10, the full and true disclosure with regard to Printed from counselvise.com 4 ITA No.4107/DEL/2018 the above transaction was not made by the assessee as the fact that the share capital/share premium/share application/loan if being introduced through these dummy companies is nowhere disclosed by the assessee company. 3. With the above submissions, ld. AR of the assessee brought to our notice page 42 of the paper book wherein assessee has raised objections and submitted that the return filed by the assessee was accompanied by computation of income and audited accounts, Schedule 8 of the accounts is of interest in the context of the reopening of the assessment. The abovesaid schedule shows opening stock of shares at about Rs.4.56 crores, purchase of about Rs.2.86 crores, sales of about Rs.7.42 crores and closing stock of nil. It was also submitted that the reasons were recorded u/s 147 of the Act alleging that Assessing Officer has reasons to believe that the amount of at least Rs.3.4 crores has escaped assessment within the meaning of section 147. Further assessee submitted that the reasons to believe was based on the investigation carried on out of search and seizure operation in the case of S.K. Jain and how the Assessing Officer has found the reasons to believe that income has escaped assessment in the assessee’s case. Further he brought to our notice page 44 of the same letter raising the objections in which assessee submitted that the alleged accommodation entry is in fact a part of sale proceeds of Printed from counselvise.com 5 ITA No.4107/DEL/2018 shares which were purchased by the assessee in the earlier years and in this year, all such shares were sold along with other shares. Schedule 4 of the accounts shows that opening balance of stock-in-trade of Rs.4.56 crores. The purchases in this year stand at about Rs.2.87 crores. The opening stock contained the share of the value of Rs.4.56 crores which included the value of shares of Rs.2.45 crores mentioned in the reasons recorded. Further the current year purchases of such stock amounted to Rs.1.25 crores. As mentioned before, all such shares along with others were sold in this year for about Rs.7.42 crores. Further, it was submitted that it may not be out of place to mention that the transaction in such shares led to profit of Rs.19.30 lakhs although there was overall loss in the operations of Rs.55,767/-. Ld. AR submitted that the Assessing Officer has not dealt with the above objections raised by the assessee. Ld. AR brought to our notice the observations of the Assessing Officer at page 48 of the paper book wherein Assessing Officer has observed as under :- “The Assessing officer in the reasons recorded for re-opening of assessment has formed his opinion in writing that there is escapement of income. This belief has been made after due diligence and considering the fresh material evidences and facts available on the record. The belief formed in not a mere a suspicion but it is formed on the basis of genuine, confirmed, fresh, tangible evidences available on the record. The information, material, facts and evidences shows nexus between the belief formed by the assessing officer and escapement of income. Further Assessing officer while forming the belief has noticed that assessee has not disclosed full and true material facts either in the return of income or during the course of assessment proceedings. Assessing Officer has taken approval of the competent authority before issue of notice u/: 14(3 of the Income tax Act, 1961. Thus all the conditions as mentioned above Printed from counselvise.com 6 ITA No.4107/DEL/2018 has been fulfilled before issuance of notice u/s 148 of the Income tax Act, 1961. 4. Ld. AR with reference to above observation of the Assessing Officer submitted that Assessing Officer has only reasons to believe and these reasons to believe will not apply in the case of the assessee since the Assessing Officer has to form an opinion not belief before initiating proceedings of reopening of assessment. Further he brought to our notice page 13 of the assessment order wherein the Assessing Officer observed and the reply of the assessee company has been considered. It is seen that as on 31.03.2008, assessee company had stock-in-trade amounting to Rs.4.55 crores which reduced to nil as on 31.03.2009. It is also seen that as per the copies of purchase/sale deals furnished by the assessee, the assessee had sold these stock-in-trade to various parties mentioned in the assessment order during FY 2008-09 relating to AY 2009-10. He submitted that the above findings of the Assessing Officer invalidates the reasons recorded by him and he prayed that the reopening of the assessment do not conform to statutory provisions and decided cases, therefore, Assessing Officer did not assume jurisdiction to issue notice u/s 148 of the Act as per law. 5. On the other hand, ld. DR of the Revenue submitted that Assessing Officer has reason to believe that escapement of income in the case of the assessee and relied on the findings of the Assessing Officer. Printed from counselvise.com 7 ITA No.4107/DEL/2018 6. Considered the rival submissions and material placed on record. We proceed to adjudicate only the jurisdictional issue raised by the assessee and we are not dealing with other grounds of appeal raised by the assessee. At this stage, we keep all other grounds open. 7. Coming to the issue raised by the assessee reason to form an opinion to reopen the assessment in the case of the assessee and we observe that the Assessing Officer has formed an opinion based on the investigation evidence found during search and seizure operation conducted in the case of Jain Brothers as per which the Assessing Officer came to know that Jain Brothers were providing accommodation entries through dummy companies to various beneficiaries in the form of share capital/premium/application/loan. Since they have disclosed the name of the assessee as the beneficiary, the Assessing Officer proceeded to form an opinion based on the information available on record with him. We observe that Assessing Officer also formed an opinion that assessee is beneficiary of accommodation entry received through entities controlled by Jain Brothers in the form of accommodation entries to the extent of Rs.3.6 crores by way of share capital/premium/application/loan. However, the assessee has filed objections before the Assessing Officer denying the above transactions and brought to his knowledge that assessee has only sold the shares holding by it as opening stock of about Printed from counselvise.com 8 ITA No.4107/DEL/2018 Rs.4.56 crores and purchases were made during the impugned year of Rs.2.87 crores only and further intimated that current year purchases of such alleged shares amounted to Rs.1.25 crores. All the abovesaid shares along with others were sold during the current assessment year for about Rs.7.24 crores. This factual matrix brought to the notice of Assessing Officer are divergent to the reasons recorded by the Assessing Officer to form an opinion that assessee has obtained accommodation entries from Jain Brothers to the extent of Rs.3.6 crores. The above factual matrix are matching to the facts available on record and we noticed that assessee has also filed income-tax return for AY 2008-09 wherein the above factual matrix were disclosed and matching to the facts available on record. We observe that Assessing Officer has proceeded to reopen the assessment forming an opinion not the belief that assessee has obtained accommodation entries to the extent of Rs.3.6 crores from the Jain Brothers and has also not dealt with the objections raised by the assessee, has only proceeded to complete the assessment without dealing with the above objections. 8. On the above issue, Hon’ble Bombay High Court in the case of Ankita A. Choksey vs. ITO (2019) 411 ITR 207 (Bom.) held as under :- “7 Thus, we are of the view that even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, Printed from counselvise.com 9 ITA No.4107/DEL/2018 does not give the Assessing Officer a carte blanche to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief/conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the Petitioner, the Assessing Officer in its order disposing of the objection does not deal with factual position asserted by the Petitioner. Thus, it would safe to conclude that the Revenue does not dispute the facts stated by the Petitioner. On the facts as found, there could be no reason for the Assessing Officer to believe that income chargeable to tax has escaped assessment.” 9. Similar view was expressed in the following reported cases :- (i) Paranjape Schemes (Construction) Ltd. vs. DCIT (2024) 160 taxman.com 730 (Bom.); (ii) Shree Nagalinga Vikas Oil Mills vs. ITO (2023) 149 taxmann.com 249 (Mad.); (iii) Chandrika Dhansukhlal Gandhi vs. ACIT (2024) 167 taxmann.com 638 (Guj.). 10. Respectfully following the above decision, from the facts available on record, the Assessing Officer has only formed opinion not the belief to reopen the assessment. Accordingly, we quash the assessment and allow the appeal. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 17th day of September, 2025. Sd/- sd/- (SUDHIR PAREEK) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 17.09.2025 TS Printed from counselvise.com 10 ITA No.4107/DEL/2018 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "