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Facts
The assessee filed its return of income, which was later revised. The original assessment was completed under Section 143(3). Subsequently, the case was reopened under Section 147 for the same assessment year. The reopening was based on information that the assessee had obtained accommodation entries.
Held
The Tribunal held that the reassessment proceedings were initiated beyond four years from the relevant assessment year. Crucially, the Assessing Officer failed to record the assessee's failure to disclose material facts fully and truly, which is a mandatory condition for reassessment beyond four years under the proviso to Section 147. The Tribunal relied on a High Court decision to quash the reassessment order.
Key Issues
Whether reassessment proceedings initiated beyond four years are valid without a specific finding of assessee's failure to disclose material facts?
Sections Cited
147, 148, 143(3), 133(6), 68, 69C, 151, 234A, 234B, 234C, 234D, 271(1)(c)
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN
(Assessment Year : 2012-13) Aashiyana Infrastructure Development vs. ITO, Ward 1 (2), Private Limited, Delhi. Plot No.830, Near Asian Hospital, Sector 21A, Faridabad – 121 001 (Haryana). (PAN : AAFCA2236A) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Salil Kapoor, Advocate Shri Sumit Lal Chandani, Advocate Shri Shivam Yadav, Advocate REVENUE BY : Shri Sanjay Kumar, Sr. DR Date of Hearing : 12.03.2025 Date of Order : 28.05.2025 O R D E R
The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 24.04.2024 for the Assessment Year 2012-13.
Brief facts of the case are, assessee filed its return of income for AY 2012-13 on 28.09.2012 declaring income of Rs.31,22,410/- which was revised on 21.09.2013 at an income of Rs.22,16,310/-. The case was selected for scrutiny and the assessment u/s 143(3) of the Income-tax Act, 1961 (for short ‘the Act’) was completed on 20.03.2015 at an assessed income of Rs.24,03,970/-. Subsequently, information received from ITO (Inv.), Faridabad. The case was reopened u/s 147 of the Act after obtaining due approval from the competent authority. Accordingly, notice u/s 148 was issue don 26.03.2019. The Assessing Officer has recorded the reasons for reopening and same was reproduced at page 2 of the assessment order based on the information that assessee has obtained accommodation entry from the accommodation entry providers. Since assessee is a beneficiary of the same he proceeded to reopen the assessment. Since there was no compliance to the notices issued to the assessee, the Assessing Officer observed from the information received from Inv. Wing that Himanshu Sharma who was admitted of providing accommodation entries by way of providing bogus bills/vouchers etc. to various beneficiaries and he observed that assessee has taken certain entries amounting to Rs.25 lacs from the two entities controlled by the accommodation entry provider. Since there was no response to the notices issued u/s 133(6) to the abovesaid entry providers, the Assessing Officer proceeded to complete the assessment making the addition u/s 68 of the Act treating the abovesaid information with those entry providers as bogus u/s 68 of the Act to the extent of Rs.25,00,000/-. Further he made addition of 2% of the abovesaid amount as commission paid for such accommodation entries and added an amount ofRs.50,000/- u/s 69C of the Act.
Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and raised jurisdictional issue of reopening of the assessment without fulfillment of the jurisdictional conditions stipulated under the Act and reopening on the basis of invalid reasons. After considering the submissions of the assessee, the ld. CIT (A) sustained the additions made by the Assessing Officer and dismissed the grounds raised
by the assessee on jurisdictional issue as well as on merit.
4. Aggrieved with the above order, assessee filed an appeal and raised following grounds of appeal :-
1. That in view of the facts and circumstances of the case and in law, the notice dated 26.03.2019 issued under section 148 of the Income Tax Act, 1961 ('the Act') and the assessment order dated 16.12.2019 passed under section 147 of the Act are illegal. ad in law without jurisdiction, without application of mind and barred by time limitation.
2. That, in view of the facts and circumstances and in law, the re- assessment proceedings are barred by time limitation in view of the first proviso to section 147 of the Act. Hence, the assessment order dated 16.12.2019 passed under section 147 of the Act is illegal, bad law without jurisdiction and deserves to be quashed.
3. That, in view of the facts and circumstances of the case and in Jaw, there is no allegation as to an)' failure on the part of the Appellant to truly and fully disclose. all material facts and as such, in the absence of such allegation, the notice issued after four years from the end of the relevant assessment year is illegal, bad in law and without jurisdiction in view of the proviso to Section 147 of the Act.
4. That the AO, being the ITO, Ward 1(2), Delhi had no jurisdiction to pass the assessment order in the case of the Appellant. The ITO Ward 1(2), Delhi was not competent to pass the assessment order in view of the CBDT instruction based on the monetary limit as such the assessment order passed by ITO. Ward 1(2), Delhi is illegal, bad in law, without jurisdiction and liable to be quashed.
5. That in view of the facts and circumstances of the case and in law, the assessment order dated 16.12.2019 passed pursuant to the notice under Section 148 of the Act is illegal, bad in law and without jurisdiction as the reopening in the instant case is only on account of change of opinion which is based on reappreciation of facts and material already on record.
That the no tic under section 148 of the Act is issued only on the basis of the alleged information received from ITO (Inv.), Faridabad without any independent application of mind by ITO, Ward 1 (2). Delhi. There is no independent application of mind and reasons have been recorded in a routine manner and are based on borrowed satisfaction.
7. That in view of the facts and circumstances of the case, the NFAC/CIT(A) has erred in upholding the reopening of Assessment under section 148 of the Act which was framed by ITO, Ward 1(2), Delhi without any application of mind. There is no formation of v belief that has income escaped assessment to assume valid jurisdiction for the reopening of assessment under section 147 of the Act.
8. That, in view of the facts and circumstances of the case and in law, the proceedings initiated under Section 147/148 of the Act arc invalid for want of jurisdiction as the initiation pre-conditions for the said proceedings as stipulated in Section 147 of the Act are not satisfied.
That no valid approval has been obtained component from authority as required under section 151 of the Act and thus the mandatory requirement of law has not been met. Hence the notice issued under section 148 of the Act is illegal, bad in law, without jurisdiction and is liable to be quashed on this ground alone.
10. That the approval under section 151 of the Act is illegal and bad in law as the same is given without application of mind and is also against the mandatory provision of the law.
That, in view of the facts and circumstances of the case and in law, additions made vide the impugned assessment order are not sustainable as it is an undisputed fact that the transaction forming the basis of such additions do not pertain to the assessment year under consideration. Therefore, the additions made are illegal. bad in law and liable to be deleted.
That, in view of the facts and circumstances of the case and in law, the necessary ingredients for invocation of Sections 68 of the Act are not present in the present case and a such the assessment framed under the said sections is illegal and bad in law and liable deserved to be deleted.
13. That, in view of the facts and circumstances of the case and in law, the addition of Rs.25.00,000/, made by ITO, Ward 1(2), Delhi under section 68 of the Act, on account of the alleged accommodation entry is erroneous, illegal, bad in law and liable to be deleted.
That, in view of the facts and circumstances of the case and in law, the necessary ingredients for invocation of Sections 69C of the Act are not present in the present case and as such the assessment framed under the said sections is illegal and bad in law.
That, in view of the facts and circumstances of the case and in law, the addition of Rs.50,000/- made by ITO, Ward 1 (2), Delhi under section 69C of the Act, on account of the alleged commission @ 2% for arranging the alleged bogus transaction is erroneous, illegal, bad in law and liable to be deleted.
That in view of the facts and circumstances of the case the addition made is liable to be deleted as no opportunity has been given to cross-examine the third parties on whose statement reliance has been placed by ITO, Ward 1(2). Delhi. Hence, the order passed is against the principles of natural justice and bad in law.
That, in view of the facts and circumstances of the case, the ITO, Ward 1(2), Delhi has erred in passing the impugned assessment order without giving the Appellant a reasonable opportunity of being heard and the same is in clear violation of principle of natural justice.
That the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the additions made are uncalled for.
That the observation and the additions made are unjust, illegal arbitrary, bad in law, highly excessive and based on surmise conjecture.
That the interest under sections 234A, 234B, 234C and 2340 of the Act has been wrongly and illegally charged and worked out.
That, the ITO, Ward 1(2) Delhi has erred in initiation of penalty proceedings under section 271 (1)( c) of the Act.”
At the time of hearing, ld. AR of the assessee challenged that the reassessment proceedings are barred by limitation in view of the provisions of section 147 of the Act, hence the assessment order dated 16.12.2019 passed under section 147 of the Act is illegal, bad in law and without jurisdiction and deserves to be quashed. Ld. AR of the assessee submitted that Assessing Officer has issued notice u/s 148 of the Act. He brought to my notice page 26 of the paper book which is the reasons recorded by the Assessing Officer. He submitted that assessment was reopened by issue of notice on 26.03.2019 and it is a fact on record that the proceedings were initiated beyond four years, therefore, provisions of section 147 are squarely applicable. He brought to my notice reasons recorded for reopening which is placed at page 51 of the paper book and brought to my notice details recorded by the Assessing Officer and also submitted that the assessment u/s 143(3) was already completed and all the information was already submitted before the Assessing Officer. As per the provisions of section 147, the Assessing Officer has not recorded the failure on the part of the assessee clearly in the reasons for reopening. In absence of the same, he submitted that Assessing Officer has no jurisdiction to reopen the same. In this regard, he relied on the decision of Hon’ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. vs. CIT (2009) 308 ITR 28 (Delhi).
6. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. I observed that it is fact on record that original assessment u/s 143(3) was 20.03.2015 and assessed the income of Rs.24,03,970/-. It is also fact that reassessment proceedings were initiated beyond four years. As per the proviso to section 147 of the Act, where assessment u/s 143(3) made, no action under this section shall be undertaken after four years unless there is escapement of income by reason of failure on the part of the assessee to file return u/s 139 or 142(1) or 148 or to disclose fully or truly all material facts necessary for his assessment for the relevant assessment year. As per the records submitted before us, I observed that the assessment was completed u/s 143(3) and the Assessing Officer has no doubt recorded the reasons for escapement of income, however failed to record the failure on the part of the assessee to disclose material facts fully and truly.
The issue under consideration is squarely covered in favour of the assessee by the decision of Hon’ble Delhi High Court in the case of Hindustan Acrylic Manufacturing Co. (supra). The relevant findings are given in para 20 which is reproduced below :- “20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147.If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade (P.) Ltd. (supra) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.”
9. Respectfully following the above decision I am inclined to quash the reassessment order passed without proper jurisdiction as per the provisions of section 147 of the Act.
Since I have quashed the reassessment order passed without proper jurisdiction, the other grounds raised
by the assessee have become infructuous and hence not adjudicated.
11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on this 28th day of May, 2025.