MAXTECH REALTY PVT. LTD(FORMERLY KNOWN AS NANDIVARDHAN CONSTRUCTION PVT. LTD,MUMBAI vs. DCIT CC-2, THANE

4. The assessment in your case was reopened us this office had received information from Deputy Commissioner of Income Tax Central Circle-4, Surat through Asst. Commissioner of Income Tax, Circle-2. Thane on 30.03 2016 that M/s Alka Diamond Ind. Ltd. M/s Vanguard

Mextech Realty Private Limited Jewels Ltd. and M/s. Yash V. Jewels Ltd. companies of Pravin Jain Group have given accommodation entries to the assessee. M/s Nandivardhan Construction Pvt. Ltd. during F.Y. 2009-10 relevant to A.Y. 2009-10 amounting to Rs. 2,00,00,00-0/- during the year under consideration. A search/survey action u/s 132/133A were carried out in the case of M/s Pravin Jain Group on 01.10.2013 wherein certain incriminating books of accounts, loose papers were found and seized. Based on the documents seized as well as the statements recorded under section 132 and 131 of promoters/directions of M/s Pravin jain Group, The Dy.CIT, CC-4, Surat through ACIT Circle-2, Thane has informed that M/s Pravin Jain Group has provided accommodation entry transaction amounting to Rs. 2 Crores to the assessee M/s Nandivardhan Constructions Pvt. Ltd. during AY. 2009-10. While filing the return of income under section 139(1) of 153A/C or during the course of assessment proceedings under section 143(3) r.w.s. 153A, you have not disclosed this transaction undertaken with Pravin Jain Group this issue also remained to be examined at the time of completion of assessment proceedings in your case for the year under consideration. As a result, you understated the income for A.Y. 2009- 10 amounting to Rs. 2 Crore which escaped assessment for failure on your part to disclose the true and correct income and remained to be added to the total income of the assessee while passing order under section 153(3) r.w.s. 153A of the I.T. Act. This resulted in escapement of income to the extent of Rs. 2 Crore for A.Y. 2009-10.

3. The assessee against the recording the reasons/reopening the assessment, vide letter dated 8th Nov. 2016 raised the following objections:-

Mextech Realty Private Limited Mextech Realty Private Limited Mextech Realty Private Limited

5. It is pertinent to note that the assessee was in receipt of income amounting to Rs. 2,00,00,000/- for the assessment year 2009-10 in the form of accommodation entry from companies/firms managed by Shri Pravin Jain. The assessee concealed this material facts while disclosing its total income either u/s 139/1) or 153A or during assessment proceedings u/s 143(3) r.w.s 153A of the Act. It was clear failure and concealment on the part of the assessee to disclose true and correct income. Therefore, it is quite clear that the assessee has not offered her true and correct income for taxation for A.Y 2009-10.

Mextech Realty Private Limited 5.1 With respect to the objection raised by the assessee, it is to be mentioned here that section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. At this stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at this stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction.

6. From the above it can be easily drawn that assessment proceedings u/s 147 for AY 2009-10 cannot be dropped as the above mentioned facts, circumstances and reasons recorded by the undersigned clearly indicate that the assessee has not disclosed its true and correct income for AY 2009-10 and income chargeable to tax amounting to Rs. 2,00,00,000/- has escaped assessment for AY 2009-10. Therefore the provisions of section 147 of the Act has been invoked in the case of the assessee on material facts being concealed by the assessee and not mere a change of opinion as raised in the objection raised by the assessee vide letter dated 08.11.2016.In view of the above facts, the objections raised by the assessee are not tenable in law and on facts.

7. In view of the above, the assessee's objection are hereby rejected and disposed off in accordance to the ratio laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. Vs. ITO &Ors. (2003) 179 CTR (SC).

Mextech Realty Private Limited 5. The AO could not found the transactions carried out by the assessee with M/s Alka Diamond Industries Ltd., M/s Vanguard Jewels Ltd. & M/s Yash V. Jewels Ltd. as genuine and acceptable for the following reasons:-

• The confirmation of M/s. Alka Diamond Industries Ltd., M/s. Vanguard Jewels Limited & M/s. Yash V Jewels Ltd could not be taken as the proof of accommodation entry received by the assessee as a genuine transaction.

• During the course of search on Praveen Jain Group, on the basis of incriminating document seized and statement recorded, it was revealed that the companies controlled by the Praveen Jain were issuing accommodation entries. • In the statement recorded u/s 131 of the Act, the persons working for Shri Praveen Jain & Group have admitted the fact that all companies managed by Praveen Jain are paper companies only providing accommodation entries. • In the statement recorded u/s 132(4) of the Income Tax Act, Shri. Praveen Jain has himself admitted the fact that all companies managed by him are paper companies only providing accommodation entries. • Praveen Jain himself is a director in few concerns only. However, through various dummy directors/proprietors, he controls, operates, and manages a large no of concerns. • All Such concerns are not carrying out any genuine business. They do not have any physical stock of goods, which they claimed to be dealing in. • All such concerns have no employed persons except the few common accountants who manage accounts and banking transactions of all such concerns. • All such concerns are indulging in the activity of providing accommodation entries only. • In view of the above findings during search on Praveen Jain Group, the confirmation given by the entry providers M/s. Alka Mextech Realty Private Limited Diamond Industries Ltd., M/s. Vanguard Jewels Limited & M/s. Yash V Jewels Ltd do not have any evidentiary value. • The confirmation given by M/s. Alka Diamond Industries Ltd., M/s. Vanguard Jewels Limited & M/s. Yash V Jewels Ltd u/s 133(6) do not have any evidentiary value in the light of fact that these entities are engaged in the business of accommodation entry. • M/s. Alka Diamond Industries Ltd., M/s. Vanguard Jewels Limited & M/s. Yash V Jewels Ltd figure in the list of companies managed by the Praveen Jain.

7. The assessee being aggrieved challenged the recording of the reasons, reopening of the assessment and issuance of notice dated 30.03.2016 u/s 148 of the Act and also the making of the additions by the AO on merit.

Mextech Realty Private Limited assessment is completed u/s 143(3) of the Act, then no reopening can be done after 4 years from the end of the assessment year, unless there is a failure on the part of the assessee to fully and truly disclose all material facts. It is necessary on the part of the AO to point out such failure in the reasons recording, but not otherwise. The assessee in support of its contention also relied on the judgments passed by the Hon’ble Jurisdictional High Court in the case of Hindustan Lever vs. R. B. Wadkar (2004) 137 taxman 479 (Bom), Gateway Leasing (Pvt. ) Ltd vs. ACIT (2020) 117 taxmann.com 442 (Bom) and Punia Capital Pvt. Ltd. vs. ACIT (2023) 149 taxmann.com 53 (Bom).

(a) (2022) 139 taxmann.com 409(Gujarat) Gujarat High Court in the Case of Pushpa Uttamchand Mehta VS ITO (5/4/2022) (b) (2022) 140 taxmann.com 336(Chattisgarh) Chattisgarh High Court in the case of Jugalkishore Paliwal vs JCIT (1/4/2022) (c) (2022) 139 Taxmann.com 404 (Allahabad) Allahabad High Court in the case of Ambuj Foods (P) Ltd. Vs PCIT (11/4/2022) (d) (2007) 18 SOT 297 (Mumbai) ACIT Central Circle 25 Mumbai vs Manubhai & Sons and Co. (11/4/2022)

10.1 At last, the Ld. DR claimed that in view of the above, it is clear that non mentioning of the fact, regarding non disclosure of fully and truly material facts in the reasons /reopening, can not vitiate the reassessment proceedings and issue of the subsequent to receipt of hitherto unknown facts do form as basis of having reasons to believe

Mextech Realty Private Limited and therefore, validity of issue of notice u/s 148 of the Act in the light of the facts of the case and the submissions made above, may be upheld.

11.1 The Ld. DR emphasized that though the assessee has objected to the reopening at a very first stage of re-assessment proceedings, but this issue raised before the Hon’ble Tribunal, does not found mentioned in the objections filed before the AO and therefore, the issue raised by the assessee to the extent that since the AO has not mentioned in the reasons for reopening that income has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment year, as provided in the first proviso of section 147 of the Act, the reopening proceedings are liable to be quashed, is untenable. We have given thoughtful consideration to the rival contentions raised by the parties.

Mextech Realty Private Limited The Assessee has raised the additional issue, which admittedly is legal in nature and emanates from the facts already on record in the proceedings of the authorities below and does not require any independent facts and material for its adjudication, hence as per dictum of the Hon‟ble Apex Court in the case of NTPC Vs. CIT [229 ITR 383 (SC)] wherein it has been settled that the legal question can be raised at any time in the appellate proceedings, the objection/contention raised by the Ld. DR is rejected . Consequently we are inclined to resolve the controversy as to whether the reasons recorded are correct in the eyes of law and whether the re-assessment proceedings u/s 147 r.w.s. 148 of the Act have rightly been initiated.

11.2 We observe that in the original assessment proceedings, the previous AO, by issuing notice dated 05.12.2012 u/s 142(1) and 143(2) of the Act along with detailed questionnaire, asked the Assessee to explain the seized material and furnish the following informations:

(i) the name and address of the shareholders who were holding 10% of more shares at any time during the preceding year, (ii) furnish the details of share transferred during the year qua the promoter in case of public limited company, (iii) furnish the details of increase in share capital and source of the same, furnish the details in respect of share premium account, opening balance, reduction during the year, conversion into shares during the year, any other utilization during the year, closing balance. (iv) Further, if the company has made any public issue then furnished the following information:- a) Details of the expenditure as mentioned u/s 35D. b) copies of contracts with the lead manager, registrar to the issue and Mextech Realty Private Limited c) share application account and how the funds were used.

11.3 The Assessee in response to the said notice duly submitted the details along with annexures including details of the subscribing of the shares to M/s. Alka Diamond Industries Ltd., M/s. Vanguard Jewels Limited & M/s. Yash V Jewels Ltd. The assessee also submitted various replies to the other notices issued u/s 142(1) along with questionnaire issued by the AO.

11.4 It appears from the original assessment order that the previous AO by going through the submissions of the assessee and after discussing the case with the assessee, computed the income of the assessee by making additions of Rs. 42,000/- only as notional income from house property and made no additions on account of share capital money qua 3 entities referred to above by considering the audited balance, confirmation of their accounts qua transactions involved with the assessee and the affidavits filed by the Directors of the said entities, which goes to show that the AO on the basis of the relevant documents formed its opinion for not making any additions qua share application transactions with the said entities.

11.5 However, the succeeding AO initiated the reassessment proceedings by recording the reasons u/s 147 of the Act on the basis of information from DCIT Circle no. 4, Surat, received on 30.03.2016 to the effect that a search/survey action u/s 132/133A was carried out in the case of M/s Pravin Jain Group on 01.10.2013 wherein certain incriminating books of account and loose papers were found and seized, on the basis of which, the statements of Promoters/Directors of M/s Pravin Jain Group were recorded u/s 132 and 131 of the Act,

Mextech Realty Private Limited wherein the Promoters/Directors were involved in providing accommodation entry transactions amounting to Rs. 2 crores to the assessee during AY 2009-10. Ultimately, the AO treated the transactions of share application money of Rs. 2 crores received from M/s Alka Diamond and others as a sham transactions and accommodation entries on the basis of statement of Shri Pravin Jain recorded on dated 1st Oct 2013 u/s 132(4) of the Act, wherein he has admitted to have indulged in providing accommodation entries. At this juncture, we are not adverting to the merits of the case, as we are concerned with the recording of reasons u/s 147 of the Act and initiation/re-opening of the reassessment proceedings.

11.6 In the first proviso, there is a legal fiction that where the Assessment u/s 143(3) or 147 of the Act has been made for the relevant assessment year, then no action shall be taken under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year. The proviso further put up a rider for initiation of any action u/s 147 of the Act i.e. unless where the income chargeable to tax has escaped assessment for such 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 subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.

11.7 In the instant case admittedly, nothing appears from the reasons recorded, as to what fact or material, the assessee has failed to disclose fully and truly, which was necessary for assessment year under consideration. Hence the assessment order u/s 147 of the Act,

Mextech Realty Private Limited on this score itself is liable to be quashed, being fully covered by the judgment of the Hon’ble Jurisdictional High Court in the case of Hindustan Lever Ltd. (supra) wherein it has specifically been held that the AO must disclose in the reasons recorded u/s 147 of the Act, as to which material or facts was not disclosed fully and truly necessary for that assessment year so as to establish the vital link between the reasons and evidences where impugned notices beyond the period of 4 year from the end of the relevant assessment year and it is not complied with the requirements of proviso to section 147 of the Act, then AO has no jurisdiction to reopen the assessment proceedings, which were concluded on the basis of assessee u/s 143(3) of the Act and this short count alone, the impugned notice is liable to be quashed and set aside.

11.8 We observe that Ld. Commissioner in the impugned order relied on the judgment passed in the case of Kalsha Builders (P) Ltd. vs. Asstt. CIT (W P No. 3656 of 2018) dated 08.02.2019 (Bom), wherein the Hon’ble High Court has held as under:

“That when the entire reasons read as a whole, sufficiently demonstrates the belief of the AO that the entire assessment goes on bogus claim of share application money having received by the assessee company, therefore lack of true disclosure is writ large on the face of the reasons. Mere non- recitation of expression would not invalidate the reasons or the fact that the reasons are based on allegations of lack of true and full particulars.”

Infact, the jurisdictional High Court in Kalsha Builders (P) Ltd. vs. Asstt. CIT as well, has not waived the requirement of the Mextech Realty Private Limited first proviso of section 147 of the Act completely, but carved out exception, where the reasons when read as a whole more sufficiently demonstrate that the entire assessment goes on bogus claim of share application money and therefore, lack of true disclosures is writ large on the face of reasons, meaning thereby a lack of true disclosures should be discernable on the face of reasons. However in the instant case, in the reasons recorded, there is no whisper about the nature of material facts or documents which were necessary for the assessment year under consideration, which the assessee failed to disclose fully and truly, hence the judgment referred to is not applicable to the instant case.

11.9 Coming to the judgments relied upon by the Ld DR., we observe that the Hon’ble Gujarat High Court in the case of I. P. Patel & Co. vs. DCIT (2012) 27 taxmann.com 200 (Guj) and other cases referred to above, has clearly held ”wherein from the reading of reasons, it is possible to infer or draw a logic inference that there is a failure on the part of the assessee to disclose fully and truly all material facts, the requirement of the provision would stand satisfied.” Meaning thereby the Hon’ble High Court neither discarded nor waived the requirement of the first proviso of section 147, but infact carved out exception, which in not applicable in this case, as the previous AO specifically raised the queries, which the Assessee replied by submitting the documents as well and thereafter only, no addition was made on the issue under consideration and there is nothing appears in the reasons recorded for drawing an logic inference qua not disclosing all material facts fully and truly by the assessee.

Mextech Realty Private Limited 11.10 Hence on the above discussion and respectfully following the judgments referred to above by the Jurisdictional High Court specifically in the case of Hindustan Lever Ltd. (supra), we are of the considered opinion that as the AO while recording the reasons and initiating the reassessment proceedings u/s 147 r.w.s. 148 of the Act, has not followed the first proviso of section 147 of the Act, consequently, the assessment order itself is un-sustainable being void- ab-initio. Accordingly, the assessment order is quashed and impugned order is set aside.