R.K. STOCKHOLDING PRIVATE LIMITED,MORADABAD vs. ACIT, 1, MORADABAD

These are a batch of two appeals pertaining to the same assessee and for the sake of convenience these two appeals are being disposed of through a single order.

The assessee’s cases were reopened for both the years under consideration on account of an allegation that the assessee misused securities of clients for the benefit of itself and other group entities. During the course of assessment proceedings, the AO could not access ledger accounts, bank statements and details of securities pledged by clients and thereafter he concluded that indeed the securities pledged by the clients had been misused and utilized for the purposes of obtaining loans from banks, etc. It is a matter of record that the assessee has been asking for copies of reasons recorded prior to the issue of notice u/s 148 of the Act and the Ld. AO has not obliged him with a copy of the same. It is also seen that the assessee has reported his request for reasons for reopening even before the Ld. CIT(A) but the same have not been provided at either of the two stages. Needless to say, the Ld. CIT(A) has upheld the Ld. AO’s order and dismissed the appeal of the assessee.

Before us the Ld. AR argued with the help of a detailed paper book through which he demonstrated that the Ld. AO was repeatedly asked to provide the reasons for reopening (page 9 of the PB, regarding submission dated 26.03.2022 for AY 2016-17) and submission dated 11.08.2021 for AY 2017-18 through which the reasons for reopening have been asked to be shared with the assessee. The Ld. AR pointed out that even before the Ld. CIT(A) this issue was raised but was unfortunately summarily dismissed. The Ld. AR also placed on record screenshots from ITBA Portal (pages 72 and 76 of the Paper Book) where it is clearly shown that the notices dated 31.03.2021 have been issued on 01.04.2021. It was the submission that if the notices were to be treated as valid for the years under consideration then the Ld. AO was duty bound to adopt the new procedure for reassessment. The Ld. AR relied on the case of Jaggat Talkies Distributors reported in 85 taxmann.com 189 (Del.) to canvass the point that non supplying of the reasons to the assessee would render the resultant assessment order null and void in the eyes of law. Regarding the issue of service of notice u/s 148 of the Act, the Ld. AR relied on the case of Daujee Abhushan Bhandar (P) Ltd. reported in 136 taxmann.com 246 (All.). The point brought to our notice here through this case law was that 3

We have carefully considered the submissions of Ld. AR/DR. We find that indeed the assessee has persistently asked for reasons and the same have been denied to him. Following the case of Jaggat Talkies (supra), which itself follows the mandate given by the GKN Driveshaft case reported in 259 ITR 19 (SC), we are duty bound to strike down an assessment order which does not follow this directive. We find that a similar situation arises in the present appeal and this fact itself would render both the assessment orders invalid. Secondly, the issue of notice u/s 148 of the Act, for both the years, on 01.04.2021 would tend to trigger the new system of reassessment but it is seen that the Ld. AO has persisted with the un-amended provisions. This also is an illegality, which renders the resultant assessment order null and void. For the reasons mentioned above, the assessment orders in both the cases deserve to be stuck down as illegal.

In the result, both the appeals of the assessee are allowed.