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Facts
The assessee filed its return of income for AY 2014-15. The case was selected for scrutiny, and the assessment was completed accepting the returned income. Subsequently, information was received regarding accommodation entries obtained from a shell company, leading to reassessment proceedings under Section 147/148.
Held
The Tribunal found that the assessee was denied a fair opportunity of hearing due to technical issues with accessing notices. Therefore, the order of the CIT(A) was set aside, and the matter was restored to the CIT(A) for adjudication after providing due opportunity to the assessee.
Key Issues
Whether the reassessment proceedings initiated under Section 147/148 were validly based on "reasons to believe" and if the assessee was denied a fair opportunity of hearing due to technical issues.
Sections Cited
147, 148, 131(1A), 143(3), 144
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Income Tax Appellate Tribunal, MUMBAI BENCH “A” MUMBAI
Before: SHRI OM PRAKASH KANT (ACCOUNTANT & SHRI RAJ KUMAR CHAUHAN
This appeal by the assessee is directed against the order dated 14.05.2024 passed by the National Faceless Appeal Centre (in short the ‘NFAC’) for AY 2014-15, raising following grounds : “
Grounds of appeal:
11. The Learned CIT(A), has erred in confirming the validity of reopening proceedings under section 147/148 of the Act whereas the notice under section 148 was of the Act whereas the notice under section 148 was of the Act whereas the notice under section 148 was issued by Learned AO without assigning any "reasons to issued by Learned AO without assigning any "reasons to issued by Learned AO without assigning any "reasons to believe". Your Appellants submits that reopening placing believe". Your Appellants submits that reopening placing believe". Your Appellants submits that reopening placing reliance on statement of unconnected person summoned reliance on statement of unconnected person summoned reliance on statement of unconnected person summoned under section 131(1A) during investigat under section 131(1A) during investigation proceedings of ion proceedings of M/s ABN Trade Link Pvt Ltd cannot be treated as 'reasons M/s ABN Trade Link Pvt Ltd cannot be treated as 'reasons M/s ABN Trade Link Pvt Ltd cannot be treated as 'reasons to believe' under section 148 of the Income Tax Act. to believe' under section 148 of the Income Tax Act. to believe' under section 148 of the Income Tax Act. It is submitted before Your Honor that reassessment was It is submitted before Your Honor that reassessment was It is submitted before Your Honor that reassessment was initiated based on conjectures and surmises and without initiated based on conjectures and surmises and without initiated based on conjectures and surmises and without any incriminati any incriminating material on record, therefore, the notice ng material on record, therefore, the notice issued under section 148 be treated as bad in law. issued under section 148 be treated as bad in law. issued under section 148 be treated as bad in law. Consequently, additions proposed towards entire amount Consequently, additions proposed towards entire amount Consequently, additions proposed towards entire amount of purchases amounting to Rs 25,40,86,231/ of purchases amounting to Rs 25,40,86,231/ of purchases amounting to Rs 25,40,86,231/- and hypothetical addition of commission amounting to Rs hypothetical addition of commission amounting to Rs hypothetical addition of commission amounting to Rs 5,08,172, this being 0.20% of purc 172, this being 0.20% of purchases, be ordered to be hases, be ordered to be deleted.” deleted.”
The brief facts, as emerging from the record, are that the The brief facts, as emerging from the record, are that the The brief facts, as emerging from the record, are that the assessee filed its return of income on 29.11.2014 declaring assessee filed its return of income on 29.11.2014 declaring assessee filed its return of income on 29.11.2014 declaring a total income of ₹2,68,210/-. The return was selected for a total income of . The return was selected for scrutiny and assessment under section 143(3) of the scrutiny and a ssessment under section 143(3) of the Income-tax Act, 1961 (“the Act”), which was completed on tax Act, 1961 (“the Act”), which was completed on tax Act, 1961 (“the Act”), which was completed on 18.12.2016 accepting the returned income. 18.12.2016 accepting the returned income.
Subsequently, information was received from the Subsequently, information was received from the Subsequently, information was received from the tax Department indicating Investigation Wing of the Income-tax Department indicating Investigation Wing of the Income that the assessee had allegedly obtained accommodation that the ass essee had allegedly obtained accommodation purchase entries amounting to ₹25,40,86,231/ purchase entries amounting to 25,40,86,231/- from a shell entity, M/s ABN Trade Link Pvt. Ltd. Relying on this shell entity, M/s ABN Trade Link Pvt. Ltd. Relying on this shell entity, M/s ABN Trade Link Pvt. Ltd. Relying on this information, the Assessing Officer (“AO”) recorded reasons information, the Assessing Officer (“AO”) recorded reasons information, the Assessing Officer (“AO”) recorded reasons to believe that income chargeable to tax had escaped to believe that income chargeable to tax h to believe that income chargeable to tax h assessment to the extent of the aforesaid amount and assessment to the extent of the aforesaid amount and assessment to the extent of the aforesaid amount and accordingly issued notice under section 148 of the Act on accordingly issued notice under section 148 of the Act on accordingly issued notice under section 148 of the Act on 31.03.2021. The assessee did not file any return in 31.03.2021. The assessee did not file any return in 31.03.2021. The assessee did not file any return in response to the notice nor complied with the subsequent response to the notice nor complied with the subsequent response to the notice nor complied with the subsequent notices issued by the AO. Consequently, the assessment notices issued by the AO. Consequently, the assessment was completed ex parte under section 144 of the Act. was completed ex parte under section 144 of the Act. was completed ex parte under section 144 of the Act.
In appeal, the assessee similarly did not respond to In appeal, the assessee similarly did not respond to In appeal, the assessee similarly did not respond to notices issued by the National Faceless Appeal Centre notices issued by the National Faceless Appeal Centre notices issued by the National Faceless Appeal Centre (NFAC) on 14.06.2023, 10.04.2024 and 18.04.2024. The (NFAC) on 14.06.2023, 10.04.2024 and 18.04.2024. The (NFAC) on 14.06.2023, 10.04.2024 and 18.04.2024. The NFAC, therefore, disposed of the appeal based on the NFAC, therefor e, disposed of the appeal based on the material available on record. material available on record.
Before us, learned counsel for the assessee submitted Before us, learned counsel for the assessee submitted Before us, learned counsel for the assessee submitted that the notices issued by the NFAC could not be accessed that the notices issued by the NFAC could not be accessed that the notices issued by the NFAC could not be accessed due to technical issues with the assessee’s e-mail account, due to technical issues with the assessee’s e due to technical issues with the assessee’s e resulting in its inability to represent the matter before the resulting in it s inability to represent the matter before the CIT(A). It was prayed that one final opportunity may be CIT(A). It was prayed that one final opportunity may be CIT(A). It was prayed that one final opportunity may be granted to enable the assessee to substantiate its claim by granted to enable the assessee to substantiate its claim by granted to enable the assessee to substantiate its claim by furnishing the requisite documents. furnishing the requisite documents.
We have heard the rival submissions and examined We have heard the rival submissions and examined We have heard the rival submissions and examined the material placed on record. The NFAC, while erial placed on record. The NFAC, while erial placed on record. The NFAC, while dismissing the appeal, has recorded detailed findings, dismissing the appeal, has recorded detailed findings, dismissing the appeal, has recorded detailed findings, inter alia, as follows:: inter alia, as follows: “7.6 In this case information was received from the 7.6 In this case information was received from the 7.6 In this case information was received from the Investigation Wing that the assessee firm had received an Investigation Wing that the assessee firm had received an Investigation Wing that the assessee firm had received an accommodation entry to the accommodation entry to the tune of Rs.25.40,86,231/ tune of Rs.25.40,86,231/- from the shell company M/s ABN Trade Link Ltd. The from the shell company M/s ABN Trade Link Ltd. The from the shell company M/s ABN Trade Link Ltd. The enquiry carried out by the Investigation Wing revealed that enquiry carried out by the Investigation Wing revealed that enquiry carried out by the Investigation Wing revealed that no such company was operating either from its registered no such company was operating either from its registered no such company was operating either from its registered address or from the address shown in the latest return address or from the address shown in the latest return address or from the address shown in the latest return filed by the assessee. Detailed enquiry lead to the by the assessee. Detailed enquiry lead to the by the assessee. Detailed enquiry lead to the conclusion that M/s. ABN Trade Link Ltd and other conclusion that M/s. ABN Trade Link Ltd and other conclusion that M/s. ABN Trade Link Ltd and other associated companies viz. M/s. Dgains Marketing N associated companies viz. M/s. Dgains Marketing N associated companies viz. M/s. Dgains Marketing N Consultancy Pvt. Ltd., M/s. Aspire Steel & Engineering Pvt. Consultancy Pvt. Ltd., M/s. Aspire Steel & Engineering Pvt. Consultancy Pvt. Ltd., M/s. Aspire Steel & Engineering Pvt. Ltd. M/s. Radiance Multitrading Pvt. Ltd and M/s. Ltd. M/s. Radiance Multitrading Pvt. Ltd and M/s. Ltd. M/s. Radiance Multitrading Pvt. Ltd and M/s. Tanishq Trading Pvt. Ltd. were used by one Shri Nirbhay Jani as Trading Pvt. Ltd. were used by one Shri Nirbhay Jani as Trading Pvt. Ltd. were used by one Shri Nirbhay Jani as conduit for providing accommodation entries in the form of conduit for providing accommodation entries in the form of conduit for providing accommodation entries in the form of both sales as well as purchase entries. The enquiries both sales as well as purchase entries. The enquiries both sales as well as purchase entries. The enquiries revealed that the entity M/s ABN Trade Link Private revealed that the entity M/s ABN Trade Link Private revealed that the entity M/s ABN Trade Link Private Limited was being handled b Limited was being handled by one CA named Shri Nirbhay y one CA named Shri Nirbhay Jani. It was further ascertained that Shri Nirbhay Jani Jani. It was further ascertained that Shri Nirbhay Jani Jani. It was further ascertained that Shri Nirbhay Jani was assisted by a person named Shri Amit Sheth and he was assisted by a person named Shri Amit Sheth and he was assisted by a person named Shri Amit Sheth and he was also untraceable. The statements were recorded by was also untraceable. The statements were recorded by was also untraceable. The statements were recorded by Investigation wing under oath and the analysis of the data Investigation wing under oath and the analysis of the data Investigation wing under oath and the analysis of the data and bank statements led to cle ank statements led to clear findings which were as ar findings which were as under:
a. The assessee M/s. AB Trade Link Private Limited was a. The assessee M/s. AB Trade Link Private Limited was a. The assessee M/s. AB Trade Link Private Limited was an accommodation entry provider and was providing both an accommodation entry provider and was providing both an accommodation entry provider and was providing both sales as well as purchase entries. sales as well as purchase entries. b. The charge / commission received by Mis. ABN b. The charge / commission received by Mis. ABN b. The charge / commission received by Mis. ABN Trade Link Private Limited for the entries provided by it was Link Private Limited for the entries provided by it was Link Private Limited for the entries provided by it was 0.2% of the value of entry. 0.2% of the value of entry. c. There were five such entities which belonged to the ABN c. There were five such entities which belonged to the ABN c. There were five such entities which belonged to the ABN group and were providing the entries. These entities were group and were providing the entries. These entities were group and were providing the entries. These entities were (1) AB Trade Link Private Limited, (ii) Dgains M (1) AB Trade Link Private Limited, (ii) Dgains M (1) AB Trade Link Private Limited, (ii) Dgains Marketing and Consultancy Private Limited, (iii) Aspire Steel and and Consultancy Private Limited, (iii) Aspire Steel and and Consultancy Private Limited, (iii) Aspire Steel and Engineering Private Limited, (iv) Radiance Multitrading Engineering Private Limited, (iv) Radiance Multitrading Engineering Private Limited, (iv) Radiance Multitrading Private Limited and (v) Tanishq Trading Private Limited Private Limited and (v) Tanishq Trading Private Limited Private Limited and (v) Tanishq Trading Private Limited d. Thus, the assessee M/s. ABN Trade Link Private d. Thus, the assessee M/s. ABN Trade Link Private d. Thus, the assessee M/s. ABN Trade Link Private Limited, along with four Limited, along with four other group entities, was an other group entities, was an accommodation entry provider and was providing both accommodation entry provider and was providing both accommodation entry provider and was providing both sales as well as purchase entries. The incriminating sales as well as purchase entries. The incriminating sales as well as purchase entries. The incriminating statements, recorded on oath during the course of statements, recorded on oath during the course of statements, recorded on oath during the course of investigation, were also relied upon by the A.O in this case investigation, were also relied upon by the A.O in this case investigation, were also relied upon by the A.O in this case and the rel and the relevant extracts have been reproduc evant extracts have been reproduced in the order. e. The bogus purchase entries led to inflated purchases in e. The bogus purchase entries led to inflated purchases in e. The bogus purchase entries led to inflated purchases in the books of the beneficiaries and consequently, evasion of the books of the beneficiaries and consequently, evasion of the books of the beneficiaries and consequently, evasion of tax. The assessee ASC Engineers was one of them tax. The assessee ASC Engineers was one of them tax. The assessee ASC Engineers was one of them 7.7 A perusal of the return of income 7.7 A perusal of the return of income filed for A.Y. 2014 filed for A.Y. 2014-15 by the A.O in the case of the assessee showed that the by the A.O in the case of the assessee showed that the by the A.O in the case of the assessee showed that the assessee assessee assessee had had had effected effected effected a a a total total total purchases purchases purchases of of of Rs.79,90,76,703/ Rs.79,90,76,703/-The name of the above assessee figured The name of the above assessee figured as one of the beneficiaries of accommodation entry as one of the beneficiaries of accommodation entry as one of the beneficiaries of accommodation entry provided through provided through ABN Group companies. The A.O ABN Group companies. The A.O established that entries amounting to Rs.25,40,86,231/ established that entries amounting to Rs.25,40,86,231/ established that entries amounting to Rs.25,40,86,231/- had been received from entry providers for detailed had been received from entry providers for detailed had been received from entry providers for detailed reasons as given in para 6 of the order which do not bear reasons as given in para 6 of the order which do not bear reasons as given in para 6 of the order which do not bear repetition. Thus on the basis of all the evidence adduced repetition. Thus on the basis of all the evidence adduced repetition. Thus on the basis of all the evidence adduced by the assess by the assessee there cannot be any doubt that the ee there cannot be any doubt that the assessee had availed of accommodation entries to the assessee had availed of accommodation entries to the assessee had availed of accommodation entries to the above above above extent extent extent since since since the the the parties parties parties from from from whom whom whom the the the purchases/sales purchases/sales purchases/sales were were were made made made were were were confirmed confirmed confirmed and and and established established established entry entry entry providers. providers. providers. The The The A.O A.O A.O also also also added added added commission @.20% of Rs 5,08 commission @.20% of Rs 5,08,172/-.
However, learned counsel has explained that non However, learned counsel has explained that non However, learned counsel has explained that non- service of notices on the correct e service of notices on the correct e-mail address service of notices on the correct e prevented the assessee from effectively participating in prevented the assessee from effectively participating in prevented the assessee from effectively participating in the appellate proceedings. It is now submitted that the the appellate proceedings. It is now submitted that the the appellate proceedings. It is now submitted that the assessee is willing to place all relevant documents and assessee is willing to place all rele vant documents and explanations on record. explanations on record.
In the interest of justice and to ensure that the In the interest of justice and to ensure that the In the interest of justice and to ensure that the assessee is not denied a fair opportunity of hearing, we assessee is not denied a fair opportunity of hearing, we assessee is not denied a fair opportunity of hearing, we consider it appropriate to set aside the order of the consider it appropriate to set aside the order of the consider it appropriate to set aside the order of the CIT(A) and restore the matter to his file. The CIT(A CIT(A) and restore the matter to his file. The CIT(A) CIT(A) and restore the matter to his file. The CIT(A shall adjudicate all grounds afresh—including the legal shall adjudicate all grounds afresh including the legal challenge challenge challenge to to to the the the validity validity validity of of of the the the reassessment reassessment reassessment proceedings as well as the additions made on merits proceedings as well as the additions made on merits— proceedings as well as the additions made on merits after affording due opportunity to the assessee. The after affording due opportunity to the assessee. The after affording due opportunity to the assessee. The assessee is directed to extend full cooperation assessee is directed to extend full cooperation and assessee is directed to extend full cooperation comply with all notices issued by the appellate comply with all notices issued by the appellate comply with all notices issued by the appellate authority without fail. authority without fail.
With these directions, the appeal of the assessee is With these directions, the appeal of the assessee is With these directions, the appeal of the assessee is allowed for statistical purposes. allowed for statistical purposes.