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IN THE INCOME TAX APPELLATE TRIBUNAL “ A ” BENCH, MUMBAI BEFORE SHRI PRASHANT MAHARISHI, AM AND SHRI SANDEEP SINGH KARHAIL, JM Year 575/M/2021 Appellant Respondent Arshiya Ltd The Deputy Commissioner of income tax – central circle – 6 (4) 302, level – 3, CeeJay House, Room number 1925/19 floor, Air F – Block, Shiv sagar Estate India building, Nariman point, Dr. Anne Besant Road Mumbai, 4000 21 Worli Mumbai -18 Pan AAACI2679A Appearance for appellant Shri Piyush Chhajed CA Appearance for Respondent Shri Ajay Chandra CIT DR Date of Hearing 8 November 2023 Date of pronouncement 13 November 2023 Order Per Prashant Maharishi AM
This appeal is filed by the assessee against Appellate order passed by The Commissioner Of Income Tax, Appeal – 54, Mumbai (the learned CIT – A) for assessment year 2011 – 12 on 15/3/2021 wherein the appeal filed by the assessee against the assessment order passed by The Deputy Commissioner Of Income Tax – Central Circle – 6 (4), Mumbai (the learned AO) on 30/12/2018 under section 144 read with section 147 of The Income Tax Act, 1961 (the Act) was dismissed. 02. The grievance of the assessee is challenge to the reopening of the assessment as well as the addition under section 68 of the Act of ₹ 24,126,058 along with the initiation of the penalty proceedings. 03. Brief facts of the case shows that assessee is engaged in free trade warehouse zone and special economic zone developer, supply
chain management and warehousing as well as freight forwarding rail transportation and software development. 04. It filed its return of income on 30/11/2011 at total income of ₹ 17,23,85,320/–. The assessment under section 143 (3) of the act was concluded on 20/3/2014. The total income in the original assessment was assessed at ₹ 337,003,081/–.
Subsequently survey took place under section 133A of the act on 20/1/2014 and thereafter search was conducted on 13/6/2014. The assessment order under section 153A read with section 143 (3) was made on 28/12/2016 at a total income of ₹ 238,533,197.
A search action was also carried out at residence and various premises of one Shri Sirish C Shah who was engaged in providing bogus accommodation entries such as long-term capital gain, bogus share capital and turnover loan etc. He directly and indirectly controlled more than 200 companies, which include some public limited companies also. One of such company was found to be orange Mist productions private limited. On verification of the bank statement of that company it was found that assessee has received an amount of Rs 241,26,058/– during September 2010. Therefore the AO was of the view that assessee is a beneficiary of the above transaction which is bogus for assessment year 2011 – 12.
Accordingly, the case of the assessee was reopened under section 147 of the act after recording the reasons and obtaining proper approval. Notice under section 148 was issued on 15/1/2018. Such notice was not complied by assessee. Therefore another notice under section 142 (1) of the act was issued on 3/8/2018. This was also not complied. Due to frequent non-compliance by the assessee, assessment culminated into the determination of total taxable income of ₹ 362,659,255 by an order passed under section 144 read with section 147 of The Act on 30/12/2018.
Assessee preferred an appeal before the learned CIT – A who passed appellate order on 15/3/2021. The only ground before him was with respect to the addition on the merits of the case. He dismissed the appeal of the assessee for the reason that accommodation entry provider Shri Sirish C Shah has provided this accommodation entry to the assessee and therefore the production of any records does not justify the genuineness of the transaction. Thus, he rejected the claim of the assessee that the above transaction is genuine. Therefore, assessee is aggrieved.
Before us, assessee has raised a ground in memorandum of appeal challenging the reopening of the assessment as well as the addition under section 68 on the merits of the case.
Learned authorized representative submitted a paper book containing 179 pages. He referred to page number 136 wherein the reasons for reopening are placed. He submitted that the impugned assessment year is assessment year 2011 – 12, the notice under section 148 is issued on 15/1/2018. Therefore the reopening has been made beyond four years but within six years from the end of the assessment year. He also submitted that assessee is already assessed under section 143 (3) and 153A of the act. In such a case the reopening can be made only if any income chargeable to tax has escaped assessment for assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under section 142 (1) or section 148 or to disclose fully and truly all material facts necessary for assessment for that assessment year. 11. The learned CIT DR vehemently submitted that assessee has not raised this ground of appeal before the learned CIT – A and is arising first time before ITAT. He even otherwise submitted that Page 3 of 7 reason itself shows that there is a failure on part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. Assessee did not disclose that it has transacted with the accommodation entry provider and therefore there is a failure on part of the assessee.
12. We have carefully considered the rival contention and perused the orders of the lower authorities. Admitted fact shows that assessee has filed its return of income under section 139 (1) on 30/11/2011. The assessment is completed under section 143 (3) of the act on 20/3/2014. Consequent to search assessment was completed under section 153A read with section 143 (3) on 28/12/2016. Therefore, it is apparent that assessee has already filed return u/s section 139 (1) of the act. Thus the only reason for reopening of the assessment beyond four years but within six year is failure on the part of the assessee to fully and truly disclose all material facts necessary for its assessment for assessment year 2011 – 12, which could sustain. The reasons recorded by the learned AO placed at page number 136 do not speak so.
Reasons recorded are as under:- “ A search action under section 132 of the income tax act was carried out at the residence and various premises of Shri Sirish C Shah who was engaged in providing bogus accommodation entries in the form of long-term capital gains, share capital with huge share premium, turnover, loan etc. Shri Sirish C Shah directly and indirectly controlled more than 200 companies, which include some public limited companies also.
On verification of the bank statement of orange Mist production is private limited are concerned controlled by Shri Sirish C Shah, it is seen that the assessee M/s Arshiya Ltd has received an amount of ₹ 24,126,058/– during September 2010 from orange Mist Productions private limited. Since Page 4 of 7 Orange Mist production is private limited is engaged in providing accommodation entries, the payments received by the assessee is nothing but an accommodation entry and thus I have reason to believe that income chargeable to tax amounting to ₹ 24,126,058/– has escaped assessment.”
On perusal of the reasons recorded, we do not find that there is any allegation made by the learned assessing officer with respect to failure on part of the assessee to disclose fully and truly all material facts necessary for its assessment for assessment year 2011 – 12.
First proviso to Section 147 of the Act, provided that if an assessment under sub-section (3) of Section 143 has been made for the relevant assessment year, no action shall be taken under that section after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee inter alia to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Honourable Bombay High Court in Hindustan Lever Ltd. v. R.B. Wadkar, Asstt. CIT [2004] 137 Taxman 479/268 ITR 332 (Bom.) [2004] 137 Taxman 479 (Bombay)/[2004] 268 ITR 332 (Bombay) has laid down following guidelines to test the reasons :-
i. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. ii. Reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. iii. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. Y iv. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. v. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self- explanatory and should not keep the assessee guessing for the reasons. vi. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. vii. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. viii. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons, which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.
Therefore, we do not find any allegation in the reasons were recorded that there is any failure on part of the assessee to fully and truly disclose all material facts necessary for the assessment for assessment year 2011 – 12. Therefore we do not find any reason to uphold the order passed by the learned assessing officer as it is based on reasons recorded not in accordance with the provisions of the income tax act. Therefore the assessment order stands quashed. Accordingly, ground number 1 of the appeal of the assessee is allowed.
In view of our decision on ground number 1 of the appeal, other grounds of the appeal are not required to be adjudicated. 18. In the result appeal filed by the assessee is allowed.
Order pronounced in the open court on 13 November 2023.