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Facts
The assessee, Aquakiosk India Pvt Ltd, had two PANs and inadvertently used one (AADCA5448C) for investments while its return was filed under the other (AACCA8913H). The Assessing Officer initiated reassessment proceedings under section 148, treating the assessee as a non-filer, and made an addition of Rs. 14,03,321/- for unexplained investments.
Held
The Tribunal held that the reassessment proceedings were invalid because the reasons for issuing the notice u/s 148 were not provided to the assessee, which is against settled law. Furthermore, the addition made on merits was incorrect as the investments were duly disclosed in the financial statements and declared in the ITR, and the AO failed to consider that the investments were switch-outs, not fresh investments.
Key Issues
Whether reassessment proceedings under Section 148 were validly initiated without providing reasons to the assessee? Whether the addition for unexplained investment was justified when investments were disclosed and switch-outs were not considered?
Sections Cited
147, 148, 69B, 142(1), 144, 143(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “A’’ : NEW DELHI
Before: SHRI MAHAVIR SINGH
ORDER PER MAHAVIR SINGH, VP: This appeal has been filed by the Assessee against the order dated 08.02.2024 passed by the NFAC, Delhi for the assessment year 2012-13 on the following grounds:-
1) That on the facts and in the circumstances of the case, the learned Assessing Officer as erred in law in initiating the proceedings u/s 148 treating it as non-filer of ITR ignoring the facts that ITR of the Appellant is already on record of Department.
2) That on the facts and in the circumstances of the case, the learned Assessing Officer has erred in law in making an addition of Rs. 14,03,321/- by invoking the provisions of section 69B of the Act with a view that the Appellant has a malafide intention in using another PAN in making investments ignoring the fact that the Appellant was having only one bank account all transactions were made from the said Bank and duly disclosed in Financial Statements of the Appellant and the said details were in the ITR filed with the Department 3) That on the facts and in the circumstances of the case, the learned Assessing Officer has erred in law making addition of Rs14,03,321/-towards unexplained investment without considering the details/documents filed as evidences that the investments made during the year were out of the switch outs from other schemes of same Mutual Fund and there is no fresh investment in Mutual Fund during the year. 4) That the applicant craves leave to add, amend, alter or delete any ground of appeal at later stage, if necessary.
2. Heard both the parties at length and perused the relevant records.
Brief facts of the case are that the assessee had been allotted two different PANs viz. AADCA5448C and AACCA8913H and assessee has not filed its income tax return using its PAN AADCA5448C but investing in mutual fund exceeding 2 lakhs or more during the year under consideration. Subsequently, assessee’s case was selected for reassessment by issuing notice u/s. 148 of the Act. Various notices u/s. 142(1) issued to the appellant and thereafter assessment u/s. 144 /147 of the Act was completed on 27.11.2019 at an income of Rs. 14,03,320/-. Aggrieved, assessee preferred the appeal before the Ld. CIT(A), who vide his impugned order has dismissed the appeal of the assessee. Against the aforesaid findings, Assessee is in appeal before us.
Ld. AR for the assessee submitted that Assessing Officer as erred in law in initiating the proceedings u/s 148 treating it as non-filer of ITR ignoring the facts that ITR of the Appellant is already on record of Department and also erred in making an addition of Rs. 14,03,321/- by invoking the provisions of section 69B of the Act with a view that the Appellant has a malafide intention in using another PAN in making investments ignoring the fact that the Appellant was having only one bank account all transactions were made from the said Bank and duly disclosed in Financial Statements of the Appellant and the said details were in the ITR filed with the Department. It was further submitted that Assessing Officer has also erred in law in making addition of Rs.14,03,321/- towards unexplained investment without considering the details/documents filed as evidences that the investments made during the year were out of the switch outs from other schemes of same Mutual Fund and there is no fresh investment in Mutual Fund during the year.
4.1 Ld. DR relied upon the order of the authorities below.
We have heard the rival contentions and perused the records. We find that the assessee Aquakiosk India Pvt Ltd. is Pvt. Ltd. Company incorporated on the PAN AACCA8913H. The return of income for the assessment year 2012-13 3 was filed on 28/09/2012 at an income of Rs.68176/- and the ITR was processed u/s 143(1) as per order dated 24.12.2013. The Appellant was allotted two PANs i.e AACCA8913H and PAN AADCA5448C and inadvertently PAN AADCA5448C used for investments in Mutual funds/Bank. Investments made were duly disclosed in the financial Statements and Capital Gain/Loss was declared in the ITR. Further the Appellant was maintaining only one Bank Account and investments were from said Bank A/c only. During the course of 147 proceedings, a request was also made to provide the reasons for issuing notice u/s 148 so that the specific reply could be furnished. Inspite of specific request for the reasons for issue of notice u/s 148 the same were not provided and first time the same have been reproduced in the Assessment order. In response to request for reasons the Assessing Officer even without providing the reasons has drawn a conclusion that the objections to assessment is disposed off. It was noted that the AO vide letter dated 23.5.2019, a copy of which is placed in the APB at pages 32 on the subject “Disposal of Objection raised u/s. 148” wherein it was stated that “In this regard you are hereby that reasons for opening the case u/s. 148 were duly recorded and approval was obtained from the complete authority before opening your assessment case. Still, if you want to make any submission regarding your case you are required to first e-file your ITR in the prescribed form in response to notice u/s. 148 issued by this office and submit copy of the same as per the mandate in the case of GKN Driveshaft (India) Ltd. Vs. ITO (259 ITR 19). Further, as assessment in your case is to be made under e-assessment, you are required to make submissions through E-filing portal only.” However, the reasons for opening the case u/s. 148 was never given to the appellant. It transpires that assessee company was incorporated on 4.11.1999 and has been regularly filing the return of income with the department under the PAN AACCA8913H and in the instant year the return of income was filed on 28.9.2012, a copy thereof has been placed on record, but inadvertently PAN No. AADCA5448C was used for investments in Mutual funds / Bank and the investments were duly disclosed in the financial statements and capital gain/ loss was declared in the ITR and it is undisputed fact that assessee was maintaining only one bank account and investments were from said bank account only. In view of above, it is established that copy of reasons was not provided to the assessee which is against the settled law, hence, on this point the assessment is quashed and accordingly the legal ground is allowed in favour of the assessee.
5.1 On merits of the case, after perusing the records filed by the assessee in the shape of paper book, it is abundant clear that that the investment in mutual funds is duly disclosed in the financials filed along with return filed under PAN AACCA8913H and copy of the financials were also furnished with the Assessing Officer. In the reasons stated in the assessment order one can gather that the only reason for issue of notice was that the Appellant Company made investment in the mutual funds and the same not disclosed in the financial statements. The same is apparently incorrect as all investments were duly stated in Financial Statements. The Assessing Officer while passing the order based his judgment on the information received that the Assessee invested Rs. 1810112/- (paid Rs. 2,00,000/- or more for purchase of units of mutual funds) and disclosed only Rs. 4,06,791/- in the financial statements as such there is an unexplained investment of Rs. 14,03,321/- by the Appellant company as such added to income. The addition has been made based on part information received; > All these were switch out during the year. > It does not consider of investment less than Rs. 200000/- made by the Appellant. 5.2 It is seems to be correct that the assessee company made investment in ICICI Prudential Mutual Fund however apart from Rs. 1810112/- there was an another investment of Rs. 149273/- however not considered in reporting as apparently less than Rs. 200000/- Further, all investments, made during the year were switched out which has not been considered. Net investment held as on 31.03.2012 correctly shown at Rs. 406791/- in the financial statements.
There was no under reporting or misreporting on the part of the Assessee company and the facts have not been correctly considered by the Assessing Officer while passing an exparte order. Hence, the addition in dispute made by the AO and subsequently sustained by the Ld. CIT(A) is not sustainable in the eyes of law, therefore, the same is deleted as such and accordingly, the grounds on merits of the case are also allowed. However, the AO is directed to verify both the PAN nos. and incorporate the correct one in the assessee’s records, in accordance with law and assessee through his Ld. AR is also directed not to repeat the mistake of using of two PAN Nos. in future.