DEEPAK ARORA,DELHI vs. INCOME TAX OFFICER, WARD 19(1), DELHI, DELHI

Heard and perused the records. At the time of hearing primarily the contentions of both the sides were restricted to ground no. 1 and 2 by which assessee has alleged that condition for assumption of jurisdiction for reopening were not met and same has been countered by ld. DR by submitting that issue are raised for the first time and at no stage below the assessee has asserted any illegality in assumption of jurisdiction.

Assessee had filed original return of income declaring total income of Rs.6,29,420/- on 28.10.2018 and the case of assesse was selected for scrutiny through CASS and assessment was duly completed u/s 143(3) and return of income on 15.02.2021. Based on the information received from ITO (investigation) Unit -7, New Delhi. The case of assesse was reopened to examine the issue of accommodation entries of Rs.1,92,79,900/-. Assesse had filed return in response to notice u/s 148 on 28.02.2023 and subsequently, the assessment proceeding were concluded making an addition of Rs.1,64,21,644/- in respect of disallowance of bogus expenditure and the same has been sustained by the ld. CIT(A) for which assesse is in appeal and has raised following grounds: “1. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that impugned assessment is invalid 2 and without 1 jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148/151/148A/149/263 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed.

As far as the contention of ld. DR is concerned that legal issues have been raised belatedly we are of considered opinion that assumption of jurisdiction goes to the root of legality of assessment order passed if the assumption of jurisdiction is itself vitiated then all consequential proceedings and the assessment order are void ab initio. Therefore, the same can be inquired into at any stage, even if, before the Ld. Tax Authorities below, the issue was not raised or examined. The only requirement being that, at this stage, there should be no dispute with regard to the facts, and, in the present facts and circumstances, on the basis of facts on record, the legal issue as raised can very conveniently be disposed of.

On appreciating the material on record and the submissions we find tha original assessment completed was u/s 143(3) on 15.02.2021 and the copy of same at Pages PB 20-21, show that reason for selection of the case for scrutiny, was examination of "Business Expenses". Ld. Counsel has drawn our attention to the evidences of enquiry conducted during assessment u/s 143(3) and at Pg. PB 24-25, there is copy of notice u/s 142(1) of the Act with its annexure, where due enquiry for expenses as per P & L Account was made and at PB, page no. 26-28 Annexure to notice u/s 142(1) dated 10.11.2020 where specific inquiry for purchases in general and regarding purchase from M/S Global Vision, as one of the nineteen parties was. It can be seen that the details of purchases were filed vide reply copy available at PB Page no. 32. The then AO passed the order accepting the returned income after verifying the details filed, including the details of purchases from M/S Global Vision.

Now when reopening is done same is shown to be on the basis of alleged information received from the investigation wing alleging SSC has taken bogus accommodation entries of Rs. 1,92,79,900/-in the form of bogus expenses from Sherpa Kashyap. Allegation as per this SCN u/s 148A(b) available at Pages PB 3 is merely of acceptance of accommodation entry of Rs.1,92,79,000/ as bogus expenses incurredthrough payments to one Sh. SheraKashyap, however, the nature of such expenses is not identified either in the above show cause notice or in the consequential order u/s 148A(d), copy of which is available at pages 39- 51 of PB, which proves non-application of mind by Ld. AO amounting to initiation of action of reassessment based on borrowed satisfaction of escpement and vague information.

The fact of incompleteness and vagueness of information is further supported by the absence of any detail regarding the dates of payments, whether payments related to current year expense or previous year and the details of the bank account from where payments were made and received. Thus very apparently, the assessing officer, having examined all the expenses earlier, has now relied merely on the investigation wing report of bogus accommodation entries for reopening and thus it is a clear case of reopening based on change of mind and in view of the decisions in the cases of ACIT vs Marico Ltd 117 taxmann.com 244 (SC), Basic Clothing P Ltd vs ITO 464 ITR 771 (Del), CIT vs. Usha International Ltd. 348 ITR 485 (Delhi) (Full Bench), CIT v. Kelvinator of India Ltd.: 320 ITR 561 (SC), CIT vs. Foraner Franch 264 ITR 566 (SC), Indian Oil Corporation 159 ITR 956 (SC) and CIT vs. Multiplex Trading & Industrial Co. Ltd378 ITR 351 (Del.), same is not sustainable.

At the same time for the absence of vital information being part of recording reasons for reopening, the Ld. AO was in no position to form a view that income has escaped assessment. On the non-recitation of these essential details in the reason as the basis for quashing of reassessment proceedings, the reopening is vitiated and reliance is placed for this proposition on the judgment of the Hon’ble jurisdictional Delhi High Court in M/s Shiv Sai Infrastructure P. Ltd vs Dy. CIT W.P.(C) 2158/2016 Dt: 2 3.07.2018. Further, reliance is placed on the decision of M/s Superior Buildwell P Ltd 3301/Del/2017, Pr CIT vs M/s K R Pulp and Papers Ltd 479 ITR 240 (Del) and M/s RN Khemka Enterprises P Ltd vs ACIT ITA No.7244/Del/2019.

The Hon'ble Delhi High Court in the case of Well Trans Logistics India Pvt. Ltd. Versus Addl. Commissioner of Income Tax &Ors 474 ITR 131 (Del) and in Sh. Rajiv Agarwal vs ACIT 395 ITR 0255 (Del) places emphasis on the duty of the AO to take further steps, make further enquiries and garner further material and if such material indicates that the income of the assessee has escaped assessment and then form a belief that the income of the assessee has escaped assessment.

Ld. Counsel has pointed out that although the Ld. AO was informed that the assessment of the appellant was originally completed u/s 143(3), still in para 2.1 of the order u.s148A(d) of the Act, page 40 of PB, the Ld. AO persisted with the in correct factual observation that no assessment of the appellant was earlier made. The above assertion impliesthat despite the fact of prior assessment brought to the knowledge of the Ld. AO, the Ld. AO has not verified the assessment records relating to earlier assessment, which he was mandated to do in view of the decision of Best Cybercity (India) P Ltd vs ITO 414 ITR 385 (Del) and Sabh Infrastructure P Ltd vs ACIT 398 ITR 198 (Del).

Ld. Counsel has also made assertions that the Ld. AO also does not deal with the specific objection that there was no transaction of the appellant with the above-named person, there was incorrect quantification and reliance of incorrect facts, and the initiation of reassessment proceedings was without supply of materialand mechanical approval by the specified authority, as other grounds for challenging the proceedings, however, determination of these contentions further is not necessary, once we have concluded that the ld. AO has merely not exercised the assumption of jurisdiction in lawful manner but in a mechanical manner by recording the reasons relying investigation wing report and it actually is a case of reopening, based on change of opinion, consequent to investigation wing report.

Thus we are inclined to sustain the ground no. 1 and 2, leaving other grounds as academic in nature. The appeal is allowed. The impugned assessment order is quashed.