MARVELOUS CEMENT PRIVATE LIMITED ,NEW DELHI vs. NATIONAL E-ASSESSMENT CENTRE, NEW DELHI

That the Appellant craves to add, amend, alter, modify or delete any or all of the grounds of appeal before or at the time of hearing.”

Before us, in support to the ground of appeal No. 1, ld.AR submits that the case of the assessee was re-opened on the allegation that there was entry in the bank account of the assessee where the amount received from M/s. Concise Exim Pvt. Ltd. of INR 1.84 crores on 21.03.2012 which was repaid on 30.03.2012. The AO observed that in the bank account of M/s Concise Exim Pvt. Ltd., there were rotation of huge amount of funds without any genuine business and NIL asset were shown and meagre income was declared and therefore, the AO was satisfied that the amount received from M/s Concise Exim Pvt. Ltd. of INR 1.84 crores is unexplained in the hands of the assessee and is the escaped income and after getting approval, the assessment was re-opened. As per ld. AR, from the perusal of the assessment order, it could be evident that as against the income of INR 1.84 crores alleged as escaped assessment, the addition was made of INR 2,58,86,811/- being 2% commission by providing accommodation entries of INR 1,29,43,40,550/- i.e. the gross amount of credit entries appearing in the bank account of the assessee No.0490102000268 with Axis Bank. Ld.AR thus submits that no addition has been made on account of the reasons recorded and therefore, AO has no jurisdiction to make any other addition. For this, he placed reliance on the judgement of Hon’ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. vs CIT [2011] reported in 336 ITR 136 (Delhi) and in the case of CIT-II vs Jet Airways (I) Ltd. reported in [2011] 331 ITR 236 (Bom.). Ld. AR thus requested that the re- assessment order making additions of INR 2,58,87,207/- on the issues which are not the subject matter of reopening and without making additions on the issue for which reasons for reopening the assessment were recorded, is without jurisdiction and, therefore, the reassessment order deserves to be quashed.

I have perused the above information. Having perused and considered the above information, I have reason to believe that income of the assessee at least to the extent of Rs. 1,84,00,000/-- has escaped assessment as defined by Section 147 of the IT Act 1961 and the case is fit for issuing notice u/s 148 of the Act. Reason for formation to belief 5. In view of the forgoing facts, it is clear that the assessee company is rotating it own funds with M/s Concise Exim Pvt. Ltd. which is not a real independent entity but merely a paper / shell company with no real capital / investment. Thus I have no hesitation in reaching to the conclusion that the transaction of Rs.1,84,00,000/- is not genuine. Having perused and considered the above information, I have reason to believe that income of the assessee at least to the extent of Rs. 1,84,00,000/-- has escaped assessment as defined by Section 147 of the I.T. Act 1961 and the case is fit for issuing notice u/s 148 of the Income Tax Act, 1961.

In this case a return of income was filed for the year under consideration but no scrutiny assessment u/s 143(3) of the Act was made. Accordingly, in this case, the only requirement to initiate proceedings u/s 147 is reason to believe which has been recorded above in para 3. It is pertinent to mention here that in this case the assessee has filed return of Income for the year under consideration but no assessment as stipulated u/s 2(40) of the Act was made and the return of income was only processed u/s 143(1) of the Act In view of the above, the provisions of clause (b) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be case where income chargeable to tax has escaped assessment. In this case more than four years have elapsed from the end of the assessment year under consideration. Hence, necessary sanction to issue notice u/s 148 is being obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.”

From the perusal of the reasons recorded and satisfaction reached with regard to the escapement of income, it could be seen that the AO has recorded his satisfaction of the escapement of income to the extent of INR 1.84 crores received from M/s. Concise Exempt Pvt. Ltd. has escaped assessment as defined u/s 147 of the Act by holding that same as non-genuine accommodation entry. However, from the perusal of the assessment order, we find that no such addition is made with respect to the alleged accommodation entry of INR 1.84 crores being amount received from M/s. Concise Exim Pvt. Ltd. Moreover, in the reassessment order, there is no discussion with respect to such entry of INR 1.84 crores and the entire re-assessment order is contained the discussion on the gross value of debit and credit entries appearing in the bank account maintained by the assessee with Axis Bank Account No. 049010200021678 where the total credit entries were of INR 1,29,43,40,550/- and debit entries were of INR 1,29,66,90,575/-. The AO in para 7 of the reassessment order observed that the total turnover of the assessee was of INR 31,790/- and gross receipt of INR 33,761/- on profit on sale of investment and from the analysis of the bank account, it is found that huge debit and credit transactions were taken to the tune of INR 1.90 crores thus, the AO was of the opinion that the assessee was involved in providing accommodation entries by means of funds by rotation amongst various entities. Accordingly, he made total addition of INR 2,58,86,811/- being 2% as commission earned on gross credits in bank account amounting to INR 1,29,43,40,550/- by providing accommodation entries. However, no addition is made for which the reassessment proceedings were initiated by recording the reasons i.e. the receipt of INR 1.84 crores from M/s Concise Exim Pvt. Ltd. In the context, the Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. (supra) has held as under:- 18. “We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of V. Jaganmohan Rao (supra). We may also note that the heading of section 147 is "income escaping assessment" and that of section 148 "issue of notice where income escaped assessment". Section 148 is supplementary and complimentary to section 147. Sub-section (2) of section 148 mandates reasons for issuance of notice by the Assessing Officer and sub-section (1) thereof mandates service of notice to the assessee before the Assessing Officer proceeds to assess, reassess or recompute escaped income. Section 147 mandates recording of reasons to believe by the Assessing Officer that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under section 148.”

The Hon’ble jurisdictional High Court in the case of CIT vs Adhunik Niryat Ispat Ltd. reported in [2011] 63 DTR 212 (Delhi) has held as under: “Reassessment – Scope - Additional reason - Notice issued by AO on the ground that the assessee had accepted accommodation entries in the garb of share capital-During the reassessment proceedings additions made in respect of the credits received from some other parties additions for accommodation entries were made were not found valid and additions were deleted by the Tribunal-Additions in respect of other items which were not part of "reasons to believe" were also not sustainable.” Further the hon’ble jurisdictional high court in the case of ATS Infrastructure Ltd. vs ACIT reported in [2025] 166 taxmann.com 61 (Delhi) has that AO cannot be permitted to improve the reasons recorded which form basis for initiating action under section 148A. The relevant observations of the hon’ble high court as contained in para 29 to 32 of the order reads as under: 29. In our considered opinion, and bearing in mind the import of Explanation 3 as well as the language in which Section 147 of the Act stands couched, we find no justification to differ from the legal position which had been enunciated in Ranbaxy Laboratories Ltd. We also bear in consideration the said decision having been affirmed and approved subsequently in CIT (Exemption) v. Monarch Educational Society 2016 SCC OnLine Del 6636/[2017] 79 taxmann.com 43/387 ITR 416 (Delhi) and CIT v. Software Consultants 2012 SCC OnLine Del 316/[2012] 21 taxmann.com 155/211 Taxman 120/341 ITR 240 (Delhi). 30. We thus, come to the conclusion that the enunciation with respect to the indelible connection between Section 148A(b) and Section 148 A(d) of the Act are clearly not impacted by Explanation 3. As we read Sections 147 and 148 of the Act, we come to the firm conclusion that the subject of validity of initiation of reassessment would have to be independently evaluated and cannot be confused with the power that could ultimately be available in the hands of the AO and which could be invoked once an assessment has been validly reopened. 31. Explanation 3, or for that matter, the Explanation which presently forms part of Section 147, would come into play only once it is found that the power to reassess had been validly invoked and the formation of opinion entitled to be upheld in light of principles which are well settled. The Explanations would be applicable to issues which may come to the notice of the AO in the course of proceedings of reassessment subject to the supervening requirement of the reassessment action itself having been validly initiated.

Explanation 3, cannot consequently be read as enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions. Similarly, the Hon’ble Bombay High Court in the case of CIT vs Jet Airways (I) Ltd. (supra) has held that “it is not open to AO to independently assess some income other than the income referred in section 148 for which reason was recorded”. The relevant head note of the judgement reads as under:- “Section 147 of the Income-tax Act, 1961 Income escaping assessment - Non-disclosure of primary facts Assessment years 1994-95 and 1995-96 Whether an Explanation to a statutory provision is intended to explain its content and cannot be construed to override it or to render substance and core nugatory Held, yes Whether after insertion of Explanation 3 to section 147 by Finance (No. 2) Act, 2009, with effect from 1-4-1989, section 147 has an effect that Assessing Officer has to assess or reassess income ('such income') which escaped assessment and which was basis of 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 course of proceedings Held, yes Whether, however, if after issuing a notice under section 148, he accepts contention of assessee and holds that income, for which he had initially formed a reason to believe that it had escaped assessment, has, as a matter of fact, not escaped assessment, it is not open to him to independently assess some other income; if he intends to do so, a fresh notice under section 148 would be necessary, legality of which would be tested in event of a challenge by assessee - Held, yes Words and phrases: The words 'and also' as occurring in section 147 of the Income-tax Act, 1961.”

In view of the facts of the case as discussed above and by respectfully following the judgement of Hon’ble Delhi High Court and Hon’ble Bombay High Court, we are of the considered view that the AO in the instant case has exceeded its jurisdiction by making additions on the issue which is not forming part of the reasons recorded for re-opening the assessment when no addition was made on the issue covered in the reasons recorded. Therefore, no additions could be made dehorse the reasons recorded before issue of notice u/s 148 of the Act. Accordingly, reassessment order passed u/s 147 of the Act by making addition of INR 2,58,86,811/- as 2% profit by alleging the entire bank deposits as accommodation entries is hereby cancelled. Ground No.1 of the assessee is accordingly, allowed.

Since we have already allowed the legal issue taken by the assessee, the other grounds taken by the assessee on merit become academic on this issue and thus not adjudicated.

In the result, appeal of the assessee is allowed.

Thereafter, assessment proceedings were taken up and it is observed by the AO that the assessee has not disclosed any income under the head ‘Income from business’ and claimed expenses to the extent of INR 64,887/-. The AO further observed that there was total liability in the shape of share capital and premium against which the investments in unlisted securities were made. Accordingly, the AO asked the assessee to submit the details of investment which were provided by the assessee. Upon perusal of these details, the AO observed that there was no fresh investment made during the year under appeal and the investment was static. Thereafter, the AO has discussed the objects of the company and finally, held that expenses claimed are not in respect to the business activity and therefore, disallowed the same.

Against such order, the assessee had filed the appeal before Ld. CIT(A) who observed that the expenses were related to investment activity and not for the purposes of business and since the income from investments are exempted income, therefore, he confirmed the order of AO.

Against such order, the assessee preferred appeal before Tribunal on the strength of following grounds of appeal:- 1. “That the order dated 22.07.2024 passed u/s 250 of the "Act" by the Ld Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi is against law and facts on the file in as much as he was not justified to uphold the action of the Ld. Assessing Officer in passing the order without providing a copy of the draft assessment order to the Appellant despite a specific request made by it vide letter dated 04.09.2020 to the Ld. Assessing Officer, National e-Assessment Centre thus violating the principles of natural justice and in contravention of the Faceless e-Assessment Scheme 2019 (notified vide Notification No. 60/2020 dated

In the result, appeal filed by the assessee is allowed.