NAVIN KUMAR AGARWAL,MUMBAI vs. ITO WARD 22(2)(1), MUMBAI

The Learned CIT(A) erred in upholding the order of JAO under section 148A(d) and consequent notice u/s 148 although allegation as per show cause notice u/s 148A(b) is that appellant is a beneficiary of funds received from one company whereas order U/s 148A(d) records that the funds were received by appellant from a different company which makes the order inconsistent with the SCN.

Learned CIT (Appeals) erred in upholding order u/s 148A(d) by not appreciating the fact that what learned JAO had in his possession was only a letter from D.C.I.T., Central Circle 5, Delhi without the attachments (Annexure A and Annexure B) referred therein and which are germane to the issue under consideration and are relied upon by him (DCIT, CC 5 Delhi) while suggesting to JAO that it is safe to conclude that appellant is a beneficiary of transactions referred in his letter and thus JAO, without himself having adequate germane material or document to support order u/s 148A(d), acted only on the basis of opinion, advise and suggestion of DCIT, CC 5, Delhi contained in his letter.

Learned CIT (Appeals) erred in upholding order u/s 148A(d) in spite of agreeing that Annexure A and Annexure B, referred in the letter written by DCIT, CC 5, Delhi to JAO were not provided to appellant rendering the order bad in law.

Learned CIT (Appeals) erred in upholding the order u/s 148A(d) and notice u/s 148 which is issued in contravention of the provisions of section 149(1)(b) of the I.T. Act, 1961, as JAO at the time of passing order u/s 148A(d) was not having in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of an asset, amounting to or likely to amount to fifty lacs or more has escaped assessment.

On facts and in the circumstances of the case and in law earned CIT(A) erred in upholding reopening of assessment and addition which are unsustainable.

On facts and in the circumstances of the case learned CIT(A) erred in rejecting the contention of the appellant that sanction was given by specified authority without carefully perusing the underlying record

On facts and in law learned CIT (Appeals) erred in upholding the addition of Rs 69715000/-which addition is claimed by A.O. to be based on the reply of or denial by Morya Infraconstruct Private Limited and report of DCIT, Central Circle 5, Delhi, although A.O. himself was not in possession of any reply or denial from Morya Infraconstruct Private Limited stating that appellant was beneficiary of these funds or that the transactions were not genuine.

On facts and in law addition made u/s 69A is required to be deleted as the same is contrary to law.

On facts and in the circumstances of the case and in law learned CIT (Appeals) erred in upholding addition of Rs 69715000/- which is required to be deleted for the reason that receipts were in realization of debt and were explained by appellant in detail by submitting various supporting documents.

Briefly stated facts as per the assessment order show that the assessee filed return of income for the relevant assessment year declaring a total income at Nil. Subsequently, the reassessment proceedings were initiated against the assessee u/s 147 of the Act based on certain information that he had received funds of Rs.1,67,00,000/- from one M/s. Morya Infrastructure Pvt. Ltd.(MIPL), which had denied having done any business activity with the assessee. Further, it was also admitted by MIPL before the Investigation Wing that it was not aware of the nature of such transactions and funds had been transferred on the instructions of one Shri S. K. Agarwal. Therefore, these transaction were not treated as business transaction i.e. sale of the assessee as shown in P a g e | 4 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai the books of account as the party had already denied having taken any business activity with the assessee. Thus, genuineness of transaction was not established. It was concluded by the AO that the funds received by the assessee from MIPL were unexplained. Consequently, the assessment was completed u/s 147 read with Section 148 of the Act at total income of Rs.6,97,15,000/-, after making addition of Rs 6,97,15,000/- on account of unexplained credits u/s 69A of the Act.

Aggrieved, the assessee filed appeal before the ld.CIT(A) contesting the addition both on legal grounds as also on merits. It was claimed that the notice u/s 148 of the Act was barred by limitation u/s 149 of the Act on the premise that as per the time limitation provided under erstwhile provisions of Section 149 of the Act, notice u/s 148 of the Act could have been issued in his case pertaining to AY 2013-14 by 31.03.2020 and since, the initial notice u/s 148 was issued in his case on 23.04.2021 being beyond 31.03.2020, the consequential notice u/s 148A dated 27.05.2022 was time barred. The assessee placed reliance on the decision of jurisdictional Bombay High Court in the case of Siemens Financial Services Pvt. Ltd. [Writ Petition No 4888 of 2022] decided on 25.08.2023. P a g e | 5 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai

1 The ld.CIT(A) observed that it was correct that for the AY 2013-14, as per the erstwhile provisions of Section 149 of the Act, the time limit for issuance of notice u/s 148 was 31.03.2020. However, in the meanwhile, as per the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (in short “TOLA”) primarily enacted due to the COVID-19 pandemic, provided an extension for time limits that were originally set to expire between March 20, 2020, and March 31, 2021 and the final extended deadline for completion of these actions was June 30, 2021. Further, during the pendency and aftermath of the Ashish Agarwal case (2022) before the Hon’ble Supreme Court, the reassessment proceedings under Section 147/148 were put on hold pending decision. In view of this, it was thus evident that initial notice u/s 148 issued on 23.04.2021 was well within the prescribed limit in view of the erstwhile 149 provisions in combination of the extension provided by TOLA and thus, the later notice dated 27.05.2022 was also within the prescribed limit in view of the decision of the Hon’ble Supreme Court in Ashish Agarawal (supra). Therefore, there was no fallacy in the assumption of jurisdiction by the AO in issuance of notice u/s 148 in this case and accordingly, the contention raised in this regard was rejected.

2 The asssessee had also taken the ground before the ld.CIT(A) that the order dated 21/07/2022, passed u/s 148A (d) of the Act arrived at and made substantially incorrect findings and conclusion and hence the jurisdiction to make reassessment was vitiated. As per the submissions, the appellant mainly contended that in the show cause notice u/s 148A(b) of the Act dated 27.05.2022, there was no allegation regarding the transaction with MIPL whereas order u/s 148A(d) concluded and recorded that assessee had undertaken transactions with it although it is a company different from the company with which assessee had transacted business. In view of this, it was alleged that the order u/s 148A(d) was inconsistent with the allegation or contents of the show cause notice u/s 148A(b) and therefore, order u/s 148A(d)was bad in law and needed to be quashed, and also that Section 292B of the Act was of no help as was claimed by the AO.

3 The ld.CIT(A) observed that as per the laid down procedure, the show cause notice to an assessee was issued on the basis of information available on record through the Departmental System in the case. Though, in the present case, as argued by the appellant, there was no allegation in the show cause notice regarding the transactions with P a g e | 7 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai M/s. Morya Infrastructure Pvt. Ltd. (later on corrected as M/s. Morya Infraconstruct Pvt. Ltd.), however, it could not be said that the AO had issued the notice without having any information in his possession regarding the alleged transaction. In view of this, there being no force in the contention, the same was rejected. Hence, the ground of appeal was dismissed.

4 The assessee before the ld.CIT(A) had also taken the plea that the order dated 21.07.2022, passed u/s 148A(d) of the Act arrived at and made substantially incorrect findings and conclusion and hence. the jurisdiction to make reassessment is vitiated. In this regard, it was seen that the appellant’s main contentions are that the AO had rejected his submissions made during the course of assessment proceedings by reciting in para 4.5.1 of order u/s148A (d), what DCIT, Central Circle5, New Delhi said in his letter bearing No. DCIT/CC-05/Misc/2019- 20/1891 dated 24/02/2020. This letter itself is incomplete. This letter refers to Annexure A and Annexure B which are claimed to be responses of Morya Infraconstruct Pvt. Ltd. and SK Agarwal respectively. Among other things these responses were germane to the issue under consideration. However, they were not available to JAO or to appellant.

5 The ld.CIT(A) in this regard observed that the assessee had failed to give his rebuttal regarding the material facts available on record relating to the issuance of bills by M/s. N. Kumar Traders to M/s. Maurya Infraconstruct Pvt. Ltd. for M. S. Scrap & Gold Bar, which were not found to be reliable being notactual bills and hence, the explanation was rejected by the AO. Therefore, there was no force in the contention of the appellant that the order u/s 148A(d) of the Act was passed on surmises & conjectures.Hence, the ground of appeal was dismissed.

6 The assessee had taken another plea before the ld.CIT(A) that in view of provisions of section 149(1)(b) of the Act, 1961, assumption of jurisdiction u/s 147 r.w.s 148 and 148A was vitiated as JAO at the time of passing order u/s 148A(d) was not in possession of books of account or other documents or evidence which reveal that the P a g e | 9 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai income chargeable to tax, represented in the form of an asset, amounting to or likely to amount to fifty lacs or more had escaped assessment. The ld.CIT(A) observed that the AO was having information relating to the transaction of credit entries in the bank account of the assessee for the relevant period to the extent of Rs. 1.67 cr., which was much more than the threshold of Rs.50 lakhs, which prompted the AO to initiate reassessment proceedings. Accordingly, the contentions made by the appellant were rejected.

7 The assessee also challenged the sanction given by the specified authority given without carefully perusing the underlying record, information vis-a-vis draft order and hence, the sanction given without application of mind rendered the order u/s 148A of the Act bad in law. The ld.CIT(A) noted that the reassessment proceedings were initiated on the basis of having found unexplained credit entries in the bank account of the appellant for the relevant period involving quantum of more than fifty lakh rupees. Thus, on the given facts, the specified authority was seen to have made due application of mind while according sanction for initiation of reassessment proceedings in this P a g e | 10 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai case. Therefore, the vague contention raised by the appellant was rejected.

8 The assessee further pleaded to delete the addition of Rs.6,97,15,000/-, being unjustified and that the reasons for receipts were explained by assessee in detail by submitting various documents like copy of account in the books of accounts, copies of bank statements, balance sheet of N Kumar Traders as at 31/03/2012 and 31/03/2013, P & L account, audit report, copy of reply submitted by Morya Infraconstruct Private Limited in response to notice u/s 133(6) which included copies of account confirmation, details of transactions, invoices etc. It also pleaded to delete the addition, since he had explained the receipts in detail and provided the requisite reply alongwith relevant details/documents. The contentions were not found to be acceptable since on the other grounds of appeal relating to legal and factual issues, adjudicated elsewhere in the order, had been dismissed.

9 As regard the merits of the addition, it was observed that there was information in possession of the Department that the assessee had received funds of Rs.1,67,00,000/- from M/s. Maurya Infrastructure Pvt. Ltd. (Lateron correct as M/s. Maurya Infraconstruct Pvt. Ltd.)

Before us the ld.AR made a detailed submission and also filed Paper Books inter alia claimed alongwith the notice u/s 148A(d) of the Act, supporting details were not given to the assessee by the AO. It was also submitted that no cross examination was allowed to him and also the statements of MIPL were not provided. Referring to the Balance

The ld.DR on the other hand relied on the findings and observations of the authorities below.

We have carefully considered the relevant facts of the case, heard the rival submissions and perused the records. The assessee has raised several grounds of appeal contesting the addition on legal grounds as also on merits. It has been pointed that there was inconsistency in the reasons recorded u/s 148A(d) of the Act in mentioning the name of the lender. Moreover, the AO did not have in possession any material or document in hand before taking the action u/s 148A(d) and he mainly relied on the information from the DCIT,CC-5 ,Delhi as he had in his possession was only a letter from D.C.I.T., Central Circle 5, Delhi without the attachments (Annexure A and Annexure B) referred therein Thus, he acted only on the basis of opinion, advise and suggestion of P a g e | 14 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai DCIT, CC 5, Delhi contained in his letter. The relevant annexures were also not provided to the assessee on which the AO relied upon. Moreover, the AO was not having in his possession books of account or other documents or evidence which revealed that the income chargeable to tax, represented in the form of an asset, amounting to or likely to amount to fifty lacs or more has escaped assessment. It was also claimed that no cross examination was granted to the assessee as also the statement on which the AO relied upon. Even on merits of the addition, it is claimed that the impugned sum represented only realization of debt which were explained by assessee in detail by submitting various supporting documents.

1 On the other hand, the ld.CIT(A) inter alia observed that the assessee, though filed certain replies to the queries raised by the AO, he could not satisfactorily explain the nature and source of the credit entries in his bank account. Besides, examination of the bills furnished revealed that in the description on the bills, the appellant claims to be a specialist supplier of Copper, Bras Sheet, Coils, Plate Stripes, Brass Road, Wires, Sections, Forging, Profiles as per Customer Drawing and Specification etc. but does not mention being a supplier of Gold in any P a g e | 15 A.Y. 2013-14 Navin Kumar Agarwal, Mumbai form. Therefore, how he had supplied such a huge quantity of Gold Bars to this one specific concern was highly questionable. Further, the assessee had supplied bills for only a small part of the total amount of sales. Thus, the assessee had failed to discharge the burden of proving the nature and source of the transactions relating to credit entries in his bank account.

2 On careful consideration of the entire matrix of the case, we are of the considered opinion that the lower authorities have not taken due cognizance of the materials on record and the detailed submissions made by the assessee. The evidences placed before us do not appear to have been taken into account in correct perspective. Besides, the assessee’s contentions regarding denial of cross examination, non providing the statements and other materials relied upon deserved a better appreciation by the lower authorities which is palpably missing in the impugned orders. Therefore, considering the totality of the facts and the circumstances of the case, we deem it appropriate to set aside the appellate order and restore all issues in hand to the file of the Assessing Officer with a direction to pass de novo assessment order after allowing reasonable opportunity of hearing to the assessee who, in turn, would

In the result, appeal of the assessee is allowed for statistical purposes.