DCIT-19(1), MUMBAI, MUMBAI vs. VINOD KUMAR SONS HUF, MUMBAI

"Whether on the facts and in the circumstances of the case and in law, the id CITIA) erred in quashing the reassessment order passed u/s 147 r.ws 144B merely on the ground of approval u/s 151 should be granted by PCCIT/CCIT instead of PCIT, without appreciating that the notice dated 28.06.2021 was issued under the erstwhile section 148, and the same was treated as 148A(b) notice only due to the Lion'ble Supreme Court's decision in Union of India vs. Ashish Agarwal."

Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) failed to appreciate that reopening of assessment for A.Y. 2016-17 was squarely within time as per TOLA Notification No. 20/2021 & 38/2021 and CHDT Instruction No. 01/2022, where the requirement of fresh sanction w/s 151 (post-Finance Act 2021) does not apply to "deemed notices"."

"Whether on the facts and in the circumstances of the case and in law, the Lil CMA) in deleting the addition of Rs. 2,44,85,880/- made u/s 68, treating the Long Term Capital Gain (L'I'CG) claimed as exempt under Section 10(38) on the sale of shares of Sanasa Techfeb Ltd. (earlier Jeevo Motors Finance Ltd.) as bogus/unexplained cash credit involved in price rigging, circular trading and accommodation entry operations."

"Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) erved in holding that the assessee had discharged the onus u/s 68 merely by filing paper documents, ignoring that the genuineness, creditworthiness and identity of buyers were not established, and the purchase itself was shown by antedated/off-market fabricated documents."

"Whether, on the facts and in the circumstances of the case and in law, Led. CITIA) ignored the AO's finding that the assessee received the share certificate dated 15.02.2014 even before the name change from Jeevo Motors Finance Ltd. to Sanansa Techfeb Lid (21.02.2014), clearly evidencing a pre-planned accommodation entry.

"Whether, on the facts and in the circumstances of the case and in law, the Id. CITIA) failed to appreciate the extensive findings of the vestigation Wing, SEBI reports, trade data from B5B, and financial analysis of the scrip, clearly establishing that

"Whether on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition u/s 69C of Rs. 2,44,859/- towards commission paid in cash for obtaining the bogus LTCG entry, which is the normal rate established by SEBI, Investigation Wing, and judicial precedents in penny stock cases."

"Whether on the facts and in the circumstances of the case and in law, the Ld CITIA) has erred in not considering the fact that the direct and circumstantial evidences in view of the decision of Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal [1995] 80 Taxmann. 89(SC) (1995) 2014 ITR 801 (SC)/[1995] 125 CTR 124(SC), rendered by the Supreme Court, where it was held that Hon'ble Court and Tribunal have to judge the evidences before it by applying the test of probabilities, the surrounding circumstances which exercise had been done by the Assessing Officer.

"Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has ignored the fact that in such cases, where there was a suspicious or bogus trade, the onus is on the assessee to establish the genuineness of price hike and also to prove that the price of penny stock in which was traded to claimed LTCG /STCO or loses was not manipulated. The reliance is placed on judgment of Hon'ble Calcutta High Court's decision in the case of Pr. CIT Vs Swati Bajaj (I. A. No. GA/2/2022) in ITAT No 6 of 2022, Dated. 14.06.2022.

"The appellant craves to add, alter, classify, reclassify, delete or modify any of the above grounds of appeal and requests to consider each of the above grounds without prejudice to one another."

Ground Nos. 1 and 2 raised by the Revenue are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in quashing the reassessment proceedings initiated by the AO. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

We have heard the counsel for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we noticed that admittedly in this case, notice for reassessment of the assessee was issued on 13.07.2022.

Before we proceed further, it is necessary to evaluate the orders passed by the Ld. CIT(A) and the operative portion of the order of Ld. CIT(A) is produced herein below:

Decision

Gigantic Mercantile (P) Ltd. VS Com Asst. of Income tax, 64 taxmann.com 646 (Bombay High Court, 2024)

Cipla Pharma and Life Sciences Ltd. vs Deputy Commissioner of Income Tax, 164 taxmann.com 663 (Bombay High Court, 2024)

Chitra Supekar vs ITO, 149 taxmann.com 26 (Bombay High Court, 2023)

After having considered the facts of the present case and hearing the submissions of both the parties, we noticed that in both the orders, i.e., the order passed under Section 148A(d) and the notice issued under Section 148 of the Act, the approving authority is mentioned as PCIT-19, Mumbai. Thus, the approval for reopening was accorded by the PCIT instead of the “CCIT/PCCIT”. Since jurisdictional approval from the correct “specified authority” is a mandatory condition that must have been fulfilled by the AO for issuing notice for reopening of assessment, thus, the defect goes to the root of the matter.

In this regard, we have gone through the decisions of the Hon’ble Delhi High Court in the case of Ashok Kumar Makhija vs. Union of India and the Hon’ble Bombay High Court in the case of Holiday Developers (P.) Ltd. vs ITO, wherein it was specifically held that reassessment notices issued more than three years after the relevant assessment year were invalid because the approval was granted by the Principal Commissioner instead of the legally required Principal Chief Commissioner, and therefore not by the appropriate authority.

In the case of Vamanrao Ramalingam vs ITO, the ITAT Hyderabad quashed a reassessment notice for AY 2015-16, issued on 05.04.2021, because it lacked the higher-level approval mandated under the new provisions of Section 151.

In the case of Ajit Pal Singh Choudhary vs ACIT, the ITAT Delhi held that reopening beyond three years with approval from the wrong authority in a bogus LTCG reassessment was invalid, and consequently the resultant assessment was quashed.

In the case of Dalpat Baraiya vs ITO, the ITAT Ahmedabad relied heavily on the landmark decision of the Hon’ble Supreme Court in Union of India vs Rajeev Bansal, which clarified the new reassessment regime and the roles of different sanctioning authorities. The Hon’ble Supreme Court explicitly confirmed that after 01.04.2021, if more than three years have elapsed from the end of the relevant assessment year, approval for reopening an assessment must be obtained from a higher authority such as the PCCIT or CCIT. The ITAT also relied upon the decisions of the Hon’ble Bombay High Court in Holiday Developers (P.) Ltd. vs ITO and the Hon’ble Delhi High Court in Ashok Kumar Makhija vs. Union of India, both of which held that approval from the Principal Commissioner was invalid for reopening beyond three years.

In the case of Amaan Naeem Akhtar Ansari vs ITO, the ITAT Mumbai relied upon several binding judicial precedents, primarily from the Hon’ble Bombay High Court, which had addressed identical jurisdictional defects in the reopening procedure:

Gigantic Mercantile (P.) Ltd. vs Assistant Commissioner of Income Tax 2. Cipla Pharma and Life Sciences Ltd. vs Deputy Commissioner of Income Tax 3. Chitra Supekar vs ITO

After having considered the decisions relied upon by the assessee, we noticed that all the judicial authorities have nullified reassessment proceedings where approval was obtained from the PCIT instead of the CCIT/PCCIT after expiry of three years from the relevant assessment year.

Whereas, on the contrary, no written submissions were filed by the Ld. DR despite availing opportunity to do so, nor were any contrary judgments cited rebutting the arguments of the assessee. Thus, considering the facts and circumstances of the present case, we find that the Ld. CIT(A) had rightly nullified the reassessment proceedings in the present case.

No new facts, circumstances, or documents have been placed on record by the Ld. DR in order to controvert or rebut the lawful findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the Revenue and uphold the order of the Ld. CIT(A).

Since we have already upheld the order of the Ld. CIT(A) in nullifying the reassessment proceedings in the present case, there is no need to adjudicate the other grounds raised by the Revenue, as the same have become infructuous in view of our specific findings.

In the result, appeal filed by the Department is dismissed.