SHYAM MAHIMA COLONISERS PRIVATE LIMITED,JAIPUR V. INCOME TAX OFFICER 2(2), JAIPUR

ITA 930/JPR/2024

AI Insights

The case involves M/s. Shyam Mahima Colonisers Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi, concerning reassessment proceedings under section 148 of the Income Tax Act, 1961. The reassessment was based on information from a search and seizure operation in the case of Shri Praveen Agarwal, which allegedly implicated the assessee in receiving accommodation entries. The Tribunal examined whether the reassessment was conducted following the legal requirements, particularly focusing on the adequacy of the reasons provided for reopening the assessment and the handling of the assessee's objections. The Tribunal concluded that the procedures were not properly followed, leading to the setting aside of the reassessment order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314184 (ITAT-JAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: GKN Driveshaft (India) Ltd. v. ITO, Commissioner of Income Tax v. Kelvinator of India Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANITA RINES H; LD
• Assessee Lawyers: S. B. NATANI; LD
• Keywords: Opportunity of being heard; Principle of natural justice; Search and seizure; Reason to believe; Audi alteram partem
• Section: 147; 148; 143(3); 68; 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH “A”, JAIPUR BEFORE SHRI GAGAN GOYAL, ACCOUNTANT MEMBER AND SHRI NARINDER KUMAR, JUDICIAL MEMBER ITA No. 930/JPR/2024 (A.Y. 2012-13) M/s. Shyam Mahima Colonisers Pvt. Ltd., 502, Ruby Tower, Somdutta Apartment, Hawa Sarak, Jaipur - 302006. PAN No. AAQCS 3093Q ...... Appellant Vs. ITO, Ward-2(2), Jaipur. …...Respondent Appellant by : Mr. S.B. Natani, C.A., Ld. AR Respondent by : Mrs. Anita Rinesh, JCIT, Ld. DR Date of hearing : 08/05/2025 Date of pronouncement : 08/05/2025 O R D E R PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of NFAC, Delhi dated 06.05.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: - 1. That in the facts and circumstances of the case and in law the initiation of proceedings under section 148 is ab initio void as the proceedings were required under section 153A/153C, since the information emanated on account of search conducted on 13.09.2012 in the case of Shri Praveen Agarwal. The learned CIT (A) should have quashed the assessment order being based on unlawful proceedings. 2. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in not quashing the assessment order completed by the learned Assessing officer under section 147/143(3) of the Income Tax Act 1961 which is ab initio Void as the learned AO did not settle the objection raised by the assessee on the issuance of notice under section 148 before completion of the assessment. (SC decision in (GKN Driveshaft (India) Ltd. (2003) 259 ITR 19 (SC)}. 3. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in confirming the action of the learned AO in issuing notice under section 148 on the basis of reason to doubt and without having any reason to believe 4. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in confirming the addition made by the learned Assessing Officer of Rs. 65, 00,000/- on account of accommodation entry without specifying the nature of the same and also the person from whom such entry is alleged to have been received. 5. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in confirming the action of the learned Assessing Officer in making the addition of Rs. 65, 00,000/-under section 68 of the Income Tax Act. 6. That in the facts and circumstances of the case and in law the learned CIT (A) has erred in confirming the additions of Rs. 65, 00,000/- as income simply on suspicion guess work and conjectures. 7. That on the facts and circumstances of the case and in law the learned CIT A has erred in, confirming the addition of commission of Rs. 16,250/- made under section 69C of the income tax act 1961 on presumption and assumption. 8. That the appellant craves to add/alter/amend the Grounds of appeal before the final hearing is completed. 2. The brief facts of the case are that the assessee company filed its return of income on 24.09.2012 at Rs. NIL. A search and seizure action was carried out by the Investigation Wing of the department at Kolkata in the case of Sh. Praveen Agarwal and his group companies on 13.09.2012. During the course of search and seizure proceedings Sh. Praveen Kumar Agarwal admitted that he is indulged into accommodation entry providing business. Some other brokers such as Sh. Pramod Ramdin Sharma and Sh. Neeraj Kedia were also examined and they have also admitted the same facts. On examination and verification of the documents it has been seen that the assessee under consideration has also obtained entry in the form of accommodation entry from various companies floated by Sh. Praveen Agarwal amounting to Rs. 65 Lacs. 3. In view of the above, a notice u/s. 148 of the Act was issued vide dated: 28.03.2019. The assessee has filed return in response to the notice issued u/s. 148 of the Act vide dated: 28.11.2019 declaring income at Rs. NIL and asked for the reasons for reopening of the matter. The same were supplied to the assessee. Ultimately, after a detailed deliberation between the assessee and the AO the case of the assessee was assessed after making an addition of Rs. 65 Lacs u/s. 68 of the Act plus Rs. 16,250/- as commission paid on the same u/s. 69A of the Act. The assessee being aggrieved with the same filed an appeal before the Ld. CIT (A), who in turn dismissed the appeal of the assessee and confirmed the order of the AO. The assessee being further aggrieved with the same preferred the present appeal before us. 4. We have gone through the order of the AO passed u/s. 147 r.w.s. 143(3) of the Act, order of the Ld. CIT (A) passed u/s. 250 of the Act and the submissions of the assessee alongwith the grounds taken before us. It is observed that the AO reproduced vide reply to question no. 8 and 9 to Sh. Praveen Agarwal mentioned the names of the companies/proprietorship firms managed and controlled by him on page no. 3 and 4 of the assessment order (Total entities 42). Throughout the assessment order the name of the entity from whom the assessee took the accommodation entry was not specified despite of a specific request and objection raised by the assessee. Again, in para 3.3 of the assessment order, the AO narrated that “the assessee had taken fictitious profit by misusing the Client Code Modification facility on NMCE platform through broker Mr. Ratan Lal Somani and the assessee has rotated unaccounted money of Rs. 1,02,08,250/- in its bank account through these entities. Therefore, the department had sufficient material to form necessary belief.” 5. It is observed that the assessee under consideration received Share capital (Face Value of Rs. 10/- each) with a premium of Rs. 240/- each from M/s. Lizard Trading Pvt. Ltd. amounting to Rs. 20 Lacs, M/s. Adirel Venture Pvt. Ltd. Amounting to Rs. 20 Lacs and M/s. Cyperus Multitrade Pvt. Ltd. Rs. 25 Lacs. None of these names are appearing in the list of companies as mentioned in the assessment order vide reply to question no. 8 and 9 to Sh. Praveen Agarwal mentioned the names of the companies/proprietorship firms managed and controlled by him on page no. 3 and 4 of the assessment order (Total entities 42).It is also observed that the assessee is entitled to know the nature of the entry in question, date of the transaction and the entities involved in providing alleged accommodation entry. On this issue the rights and obligations of the assessee has already been clearly defined by the Hon’ble Apex Court in the case of GKN Driveshaft (India) Ltd. [2003] 259 ITR (SC) as under: “There was no justifiable reason to interfere with the order under challenge. However, it was clarified that when a notice under section 148 is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons had been disclosed in the proceedings, the Assessing Officer had to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment.” 6. In view of the above directions of the Hon’ble Apex Court, there is no room for any confusion for both the parties. In the instant case, neither proper reasons with relevant contents, i.e. nature of the entry in question, Date of the transaction and the entities involved in providing alleged accommodation entry were supplied to the assessee nor the objections raised by the assessee has been disposed of. It is further observed that the shareholder entities mentioned (supra), i.e. M/s. Lizard Trading Pvt. Ltd., M/s. Adirel Venture Pvt. Ltd. and M/s. Cyperus Multitrade Pvt. Ltd. are still the shareholders of the assessee as demonstrated through the audited Balance-Sheet. It is further observed that the shareholder entities are still active vide MCA master data furnished before us vide paper book page nos. 10-15. 7. In view of the above it is observed that the AO and Ld. CIT(A) erred in appreciating and following the law as pronounced by the Hon’ble Apex Court on the case of GKN Driveshaft (India) Ltd. (supra) and the conditions to be followed before proceeding u/s. 147 of the Act has been grossly violated. The impugned order is vitiated by errors apparent on the face of the record, warranting the same to be nullified. It is a cardinal tenet of the principle of natural justice that no party should suffer adverse consequences without being afforded an opportunity of being heard on the allegations against him. In the instant case, the assessee was not duly apprised of the facts and allegations against it. Such type of blind communication/reopening exercise effectively deprived the assessee of its right to submit a response, thereby constituting a violation to the principle of audi alteram partem. These material discrepancies constitute manifest errors on the face of the record, justifying the set-aside of the assessment order and appeal order passed by the Ld. CIT (A). 8. We further relied on the decision of the Full Bench of the Delhi High Court in the case of Commissioner of Income Tax v. Kelvinator of India Ltd 256 ITR 1, where it was held that one of the preconditions for reopening is that the Assessing Officer must have reason to believe that the income chargeable to tax has escaped assessment. Since, the Ld. DR. also admits that the objections were not settled before the completion of the assessment order then it is a clear-cut case of “reason to doubt” and not “reason to believe”. It is observed that till completion of the assessment the AO was not certain about the material facts/contents as required. 9. In view of the above discussion on the facts and law as pronounced by the superior courts time to time, we are of the firm view that the action of the AO is bad in law and the same is not sustainable. Resultantly, the orders of the authorities below are set-aside and additions of Rs. 65 Lacs plus expenses of Rs. 16,250/- are directed to be deleted and effective ground nos. 2 to 7 are allowed. 10. In the result, the appeal of the assessee is allowed. The Order is pronounced in the open court on the 8th day of May 2025. Sd/- Sd/- (NARINDER KUMAR) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Jaipur,\u0001दनांक/Dated: 08/05/2025 Copy of the Order forwarded to: 1. अपीलाथ /The Appellant , 2. \u000eतवाद\u0011/ The Respondent. 3. आयकरआयु\u0016त CIT 4. \u0017 वभागीय \u000eत\u000eन \u001aध, आय.अपी.अ \u001aध., Sr.DR., ITAT, 5. गाड फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar) ITAT, Jaipur Details Date Initials Designation 1 Draft dictated on PC on 08.05.2025 Sr.PS/PS 2 Draft Placed before author 08.05.2025 Sr.PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk 9 Date of Dispatch of order "