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Income Tax Appellate Tribunal, DELHI
Before: SH. ANIL CHATURVEDI & SH. ANUBHAV SHARMA
This appeal has been preferred by the assessee against the order dated 25.09.2018 in appeal no. 320/17-18/2983 for the assessment year 2010-11 passed by Commissioner of Income Tax (Appeals)-30, New Delhi (here in after also referred as Ld. First Appellate Authority ) whereby the appeal preferred by assessee from the assessment order dated 28.12.2017 passed by Assessing Officer, ACIT, Central Circle-29, New Delhi u/s 143(3)/ 147 of the Income Tax Act, 1961 (hereinafter referred to as “The Act”) was dismissed and further enhancement of Rs. 1,40,000/- was made.
The brief facts are that the assessee had filed return of income declaring income of Rs. 1,10,160/-. The DIT (Investigation) intimated that Sh. Surender Kumar Jain had been providing accommodation entries through a large number of dummy companies floated by him or his associates. The name of the assessee company i.e. M/s. Home Coziness Resorts & Holidays Pvt. Ltd. also figured in the list of beneficiaries of Share Capital, Premium / Loan. The assessing Officer observed that the assessee had taken accommodation entries and an amount of Rs. 70,00,000/- represented unexplained credit u/s 68 of the Act for the assessment year 2010-11. Therefore, proceedings u/s 148 of the Act was initiated. Notice u/s 133(6) of the Act was issued to ascertain and genuineness creditworthiness of the transaction. Based upon the respondents of the assessee and the analysis of material, the Assessing Officer concluded that the amounts allegedly credited in the books of accounts of the assessee under the head ‘Share Capital and Share Premium totaling to Rs. 70,00,000/- by way of receiving afresh Share Capital/ ./2018 Home Coziness Resorts and Holidays P. Ltd. Share Premium was actually unexplained money which was pump into its business in the garb of fresh Share Capital/ Premium. Accordingly, in furtherance of provisions of Section 68 and the proviso thereto the credits appearing in the books of accounts of the assessee on account of alleged share application money / share premium amounting to Rs. 70,00,000/- was treated as assessee’s own income and added to the return income of the assessee u/s 68 of the Act.
Assessee preferred appeal and the Ld. First Appellate Authority confirmed the order of Ld. Assessing Officer and further held that once it is established that the entity has obtained bogus/ accommodation entries to the extent of Rs. 70,00,000/-. It is logically infer that the cost incurred for arranging the same should also be brought to tax as the same is out of books. Accordingly, notice was given. The Appellant had pleaded that if at all, an addition has to be made, the same should be restricted to 0.25%. Accordingly, income of the appellant was enhanced by Rs. 1,40,000/-, being 2% of Rs. 70,00,000/-.
Now before the Tribunal, assessee has raised following grounds of appeal :
1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) [CIT(A)] is bad both in the eye of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the reassessment initiated on a non-existing entity and therefore reassessment proceedings are void ab initio.
3. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO despite the fact that the reopening by the AO and consequent reassessment without complying with the statutory conditions prescribed under Section 147 read with Section 148 of the Act is bad in law.
4. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO ignoring the fact that the AO has erred both on facts and in law in making reassessment under Section 147 of the Act as the reasons recorded for reopening the assessment does not meet the requirements of Section 147 of the Act.
5. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the order passed by the AO rejecting the contention of the assessee that the reopening is bad in law as the same has been made on the basis of material collected at the back of the assessee without giving assessee an opportunity to rebut the same in violation of provisions of section 142(3) of the Act.
6. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the initiation of proceedings under section 148 of the Act as the same has been reopened on the basis of reasons without there being any whisper that the income has escaped due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as the same has been reopened after a period of four years from the end of relevant assessment year.
7. On the facts and circumstances of the case, the learned CIT(A) has erred in rejecting the contention of the assessee that the notice issued under Section 148 is barred by limitation as the same has been issued after a period of four years from the end of relevant assessment year. 8. (i) On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in sustaining the addition of an amount of Rs. 70,00,000/- made by AO on account of share capital under Section 68 of the Act. (ii) That the said addition has been confirmed rejecting the detailed explanation and evidences brought on record by the assessee to prove the identity and creditworthiness of the shareholders as well as the genuineness of the transaction.
9. On the facts and circumstances of the case, the learned CIT(A) has erred in confirming the action of the Ld. AO merely relying on the report of the investigation wing and without application of his own mind. 10. (i) On the facts and circumstances of the case the learned CIT(A) has erred both on facts and in law in confirming the addition made by AO despite the same having been made on the basis of material collected at the back of the assessee without giving it an opportunity to rebut the same. (ii) That the abovesaid addition has been confirmed despite the same having been made on the basis of statement recorded without giving assessee an opportunity to cross examine.
11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the income by Rs. 1,40,000/- made by the AO as unexplained expenditure on account of commission paid @2% arbitrarily on the above alleged amount of Rs. 70,00,000/- 12. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in enhancing the income of the assessee by Rs.1,40,000/- without following due procedure as prescribed under the law.
13. The appellant craves leave to add, amend or alter any of the grounds ofappeal.
./2018 Home Coziness Resorts and Holidays P. Ltd.
Arguments were heard and Ld. Counsel for the assessee restricted his arguments to ground no. 2 alone submitting that as the reassessment was initiated and assessment order passed against non-existing entity the proceedings are void ab initio. Ld. Counsel for the assessee relied catena of judgments in support of his arguments that the framing of assessment against non-existing entity goes to the root of the matter and is jurisdictional defect.
5.1 On the other hand, Ld. DR contended that the assessee had not raised this issue at relevant stage of assessment or even before Ld. CIT(A). it was also submitted that
Appreciating the arguments and on consideration of the matter on record it can be observed that the original return of income for assessment year 2010-11 was filed by the assessee on 05.01.2011. On analysis of certain information and having reason to believe that income chargeable to tax has escaped assessment notice was issued on 25.08.2014 u/s 148 of the Act. The assessee vide letter dated 29.05.2015 raised objections to the reopening of assessment which were disposed of on 01.06.2015.
6.1 Then on page no. 18 of the paper book there is a letter dated 14.09.2014 on behalf of the appellant informing the Ld. AO regarding amalgamation of M/s. Home Coziness Resorts & Holidays pvt. Ltd. with M/s. TTJ Impex Pvt. Ltd. The letter disclosed that with effect from 01.04.2013 being appointed date vide High Court order dated 26.05.2014, the amalgamation came into effect. The letter also mentions that company wished to surrender its PAN. At page no. 19 and 20 of the Paper Book Form No. INC-28 under the Companies Act has been placed giving details of the amalgamation and mentioning that appointed date of amalgamation was 01.04.2013. Appellant has also placed on record at page no. 25 of the Paper ./2018 Home Coziness Resorts and Holidays P. Ltd. Book the order of Hon’ble Delhi High Court in the matter of Company petition no. 644 of 2013 u/s 391 and 394 of the Companies Act, 1956 regarding the Scheme of amalgamation of as many as ten companies including the appellant with TTJ Impex Pvt. Ltd.
It appears that in spite of the intimation of amalgamation being given to the ld. Assessing officer he failed to consider the same and passed the assessment order on 28.12.2017. It also establishes that there is no force in the contention of the Ld DR, that assessee had not taken the plea at the appropriate stage. Thus, what can be concluded is that at the time of issuance of notice u/s 148 on 25.08.2014, the company petition for scheme of amalgamation was pending before Hon’ble Delhi High Court and after issuance of the notice on 25.08.2014 the assessee by letter dated 14.09.2014 had intimated of the amalgamation which was effective from 01.04.2013.
7.1 Hon’ble Delhi High Court in the case of Spice Enfotainment Ltd. vs. CIT 2011 (8) TMT 544 has held that the framing of assessment against non-existing entity / person goes to the root of the matter which is not a procedural irregularity but jurisdictional defect. This order has been upheld by the Hon’ble Supreme Court of India in CIT, New Delhi vs. Spice Infotainment Ltd. 2017 (12) TMI 754-SC.
7.2 As a matter of fact, in a case reported in 2018(3)TMI1879, with regard to an assessee company M/s. Nirvana Lifestyle Pvt. Ltd., which had also merged with TTJ Impex Pvt. Ltd and was one of the Co petitioner of present assessee in the Company petition no 644 of 2013, a Co- ordinate Bench of ITAT, Delhi had set aside re-assessment and assessment holding them to be in the name of non-existing entity. ./2018 Home Coziness Resorts and Holidays P. Ltd. 8 In the light of aforesaid, the ground no. 2 deserves to be sustained as the assessment was void ab initio arising out of jurisdictional defect. Consequently, the other grounds raised in the appeal do not require determination. The appeal is allowed and the impugned order of Ld. Assessing Officer and Ld. CIT(A) are set aside.
Order pronounced and signed in open court on this 15th day of March, 2022.