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Income Tax Appellate Tribunal, DELHI BENCH ‘C’, NEW DELHI
Before: N. K. ChoudharyDr. B. R. R. Kumar
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of the ld. CIT(A)-36, New Delhi dated 28.09.2018.
Following grounds have been raised by the assessee:
“1. The impugned assessment is invalid and without jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148 of the Income Tax Act therefore such assessment is void-ab-initio and liable to be quashed.
The impugned assessment order passed u/s 143(3)/147 of the Act as a result of proceeding initiated u/s 147 of the IT Act is illegal and against the provision of law as these proceedings have been initiated on the basis of the documents seized from the premises of the third party and in the circumstances, the provisions of section 153C (1) of
ITA No. 7717/Del/2018 2 Kesri Steels Ltd. the Act are applicable which excludes initiation of proceedings u/s 147 of the Act.
The Ld. CIT(A) has erred both in law and circumstances of the case in upholding the reassessment proceedings initiated u/s 147 of the IT Act ignoring the contention that initiation of proceedings by the AO was mechanical without application of mind on the material, if any, provided by the Inv. Wing of the department and also on the information/material available with him such as assessment order u/s 143(3) dated 26.12.2011 and the material furnished during the original assessment proceeding. In view of the above defects in the compliances the resultant reassessment proceedings are required to be set aside.
The Ld. CIT(A) has erred both in law and circumstances of the case in upholding the reassessment proceedings u/s 147 of the IT Act which is not properly initiated and therefore need be quashed as the appellants case is covered by proviso to section 147 of the IT Act.
4.1 On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order passed by learned A.O. is bad both in the eye of law and on facts as the same has been reopened on the basis of reasons without there being any specific allegation of the failure on part of the assessee to disclose fully and truly any particular material facts having bearing on computation of income, as per the requirement of first proviso to sec 147 as there is a gap of period of more than four years from the end of relevant assessment year and the issue of notice u/s 148.
On the facts and circumstances of the case, the learned CIT(A) has ignored the contention of the appellant that in the absence of any cogent material available with the AO, the satisfaction of the AO that income chargeable to tax has escaped assessment is based on change of opinion on the issue already
ITA No. 7717/Del/2018 3 Kesri Steels Ltd. adjudicated in the original proceedings u/s 143(3) of the Act.
On the facts and circumstances of the case, the Ld. CIT(A) has not appreciated the contention of the appellant that the reassessment proceedings have been initiated after approval by the Pr. CIT, Delhi-05, New Delhi and the said approval was mechanical and without application of mind by the above authority.
The Ld. CIT(A) has erred both in law and circumstances of the cases in upholding the addition of Rs.45,00,000/- u/s 68 of the IT Act holding the share application money of Rs.45,00,000/- as unexplained cash credit ignoring the fact that the assessee has discharged its initial onus u/s 68 of the IT Act explaining nature and source of the credits by filing requisite documents proving identity and creditworthiness of the share applicants and also to establish genuineness of the transaction during assessment proceedings.
The Ld. CIT(A) has erred both in law and circumstances of the cases in upholding action of the AO, in making addition u/s 68 of the IT Act of Rs.45,00,000/- is erroneous as the evidences filed by the appellant in support of cash credit of Rs.45,00,000/- have been rejected by the AO without conducting any enquiry thereon in discharge of onus shifting on the revenue after the initial onus discharged by the appellant.
The Ld. CIT(A) has erred both in law and in facts of the case in upholding the additions of Rs.45,00,000/- made by the AO, simply drawing adverse inference against the appellant for non- production of director of the investing companies, non-service of notices u/s 133(6) and non-compliance of summons issued u/s 131 to the investing companies ignoring the fact that appellant has no liability to produce directors of the companies.”
ITA No. 7717/Del/2018 4 Kesri Steels Ltd. 3. The assessee is engaged in the business of manufacturing of stainless steel ingots, alloys steel ingots, MS ingots and other steel/casting products. The assessee filed return of income on 26.09.2009 declaring total income of Rs.10,24,330/-. The original assessment was completed u/s 143(3) of the Income Tax Act, 1961 on 26.12.2011. The Assessing Officer on the basis of investigation report opened the case u/s 147 of the Act and recorded the reasons as under:
The assessee is a company which was incorporated on 17.12.1987 under the Company Act, 1956. During the year, the details of the directors of the assessee company are hereunder:
(a) Rishi Prakash Jain (b) Jugal Kishore Jain
The company filed its return of income on 26:09.2009 for the assessment year 2009-10 declaring income at Rs.10,24,330/- . Thereafter the return was processed under 143(1) of the I.T. Act on 09.02.2011. However, the case was not selected for scrutiny.
Subsequent to the processing of the return of income u/s. 143(1) on 09.02.2011, an information was received from Investigation Wing on 12.03.2013. After receipt of the information from the Investigation Wing, New Delhi following enquires were made
(a) Scrutiny of return of income.
The return of income of the assessee company has been downloaded from the ITD system and the same was examined in
ITA No. 7717/Del/2018 5 Kesri Steels Ltd. the light of information received from Investigation Wing. On examination of the return of income, it has been found that during the year under consideration, the share capital / loans of the assessee company have increased to the extent as provided in the information of Investigation Wing. ………………………………..
Considering the above referred to credible information, incriminating seized document u/s 132 of the Act and enquiries and investigation subsequent to the information, I have reason to believe that an amount at least of Rs 45,00,000/- has escaped assessment in case the of M/s Kesri Steels Limited, the meaning of Section 147/148 of Income-tax Act, 1961.
Prior to 1989 section 147 provided for two grounds to reopen concluded assessments:
(i) On basis of information received by the Assessing Officer assessment could be reopened. This had to be within four years. (ii) Where facts material for assessment are not disclosed in the course of assessment, whether within or beyond four years.
Supervening these two requirements in the alternative, the initial condition is that the Assessing Officer has reason to believe that there is escapement of income. The first requirement regarding information is now dropped by 1989 amendment and therefore for reopening of assessment within a period of 4 years from the end of-the assessment year the only requirement is "reason to believe". For a period beyond 4 years further requirement was the non-disclosure of material facts necessary for assessment by the assessee.
ITA No. 7717/Del/2018 6 Kesri Steels Ltd.
The assessment/re-assessment proceedings in this case for A.Y. 2009-10 pertain to period beyond four years but before the expiry of six years from the date of issue of notice. In view of the same, as no assessment has been made in this case for A.Y. 2009-10 u/s 143(3) or u/s 147, the first proviso to section 147 (as re-produced below) is not applicable to the case.
"Provided that where an assessment under sub section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this 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 the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
In other words, the assessing officer is not bound by the restriction Imposed by the proviso that no action can be taken unless any income chargeable to tax has escaped income by reason of failure as the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
ITA No. 7717/Del/2018 7 Kesri Steels Ltd. Moreover, as the case pertains to a period beyond four years from the end of relevant assessment years at the time of issue of notice, necessary sanction has to be obtained from Pr. Chief Commissioner of Income Tax or Pr. Commissioner of Income Tax or Commissioner of Income Tax, in view of the amended provision of section 151 w.e.f. 01.05.2015. The necessary sanction in this regard is being obtained separately from Pr. Commissioner of Income Tax-05, Delhi before the issue of notice u/s. 148.”
In contrast to the reasons recorded by the AO, we find that the case of the assessee has been a subject matter of assessment u/s 143(3). The order of the AO dated 26.12.2011 is as under:
INCOME TAX DEPARTMENT
Name & Address of the assessee : M/s Kesri Steels Ltd. G & JU Block, 80-A, Pitampura, New Delhi-110088 PAN : AACD0503G Ward : Ward 5(2), N. Delhi Status : Company Assessment Year : 2009-10 Previous year ending on : 31.3.09 Date(s) of hearing : As per order sheet Date of order : 26.12.2011 Section & sub-Section under Which the assessment is made : 143(3) of I.T. Act, 1961
ASSESSMENT ORDER
ITA No. 7717/Del/2018 8 Kesri Steels Ltd. Return declaring an income of Rs.10,24,330/- was filed on 26.09.2009 vide acknowledgement No. 92092330260909 through e-filing. The same was processed u/s 143(1) of the Income Tax Act, 1961. The case was selected for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961, was issued and duly served. In response to the notices, Sh. Anil Kumar Grover, Chartered Accountant attended from time to time and the case was discussed with him. The assessee is stated to be engaged in the business of Manufacturing of Stainless Steel Ingots, Alloys Steel Ingots, M.S. Steel Ingots and other Steel/Casting products. Necessary details filed by him are placed on record.
Assessed at Rs.10,24,330/-. Issue necessary forms. Charge interest as per provision of I.T. Act, 1961.
Income Tax Officer, Ward-5(2), New Delhi
The provision of Section 147 read as under:
“Income escaping assessment.
If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four
ITA No. 7717/Del/2018 9 Kesri Steels Ltd. 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 the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:
……….
Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso.
Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :—
(a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;
(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; ………….
(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed
ITA No. 7717/Del/2018 10 Kesri Steels Ltd. income-tax authority, under sub-section (2) of section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;
………………
Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.
Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.”
The provisions of Section 151 reads as under:
Sanction for issue of notice.
“151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice.
(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint
ITA No. 7717/Del/2018 11 Kesri Steels Ltd. Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. ……………”
On the background of these facts and the provisions of the Act, the only issue to be decided narrows down as to “whether the notice issued by the Assessing Officer by recording wrong reasons is valid in the eyes of law or not”.
The assessee filed original return of income on 26.09.2009. The same has been assessed u/s 143(3) vide order dated 26.12.2011. The notice u/s 148 was issued on 11.03.2016 with the approval of the Addl. CIT, Range-14 and PCIT-05, Delhi. In the reasons recorded at para 25 page no. 16, the AO categorically mentioned that no assessment has been made u/s 143(3) and the first proviso to Section 147 is not applicable which is glaringly incorrect as per the facts on record. The Assessment Order u/s 143(3) has been reproduced above. For the sake of ready reference, the relevant portion of the reasons recorded are reproduced as under:
“25. The assessment/re-assessment proceedings in this case for A.Y. 2009-10 pertain to period beyond four years but before the expiry of six years from the date of issue of notice. In view of the same, as no assessment has been made in this case for A.Y. 2009-10 u/s 143(3) or u/s 147, the first proviso to section 147 (as re-produced below) is not applicable to the case.”
Thus, we hold that the notice issued u/s 148 by recording incorrect reasons and against the provisions of Section 147 is
ITA No. 7717/Del/2018 12 Kesri Steels Ltd. invalid in the eyes of law and hence, the assessment is liable to be annulled.
In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 17/11/2022.
Sd/- Sd/- (N. K. Choudhary) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 17/11/2022 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR