DEPUTY COMMISSIONER OF INCOME TAX- 4(3)(1), MUMBAI vs. SPECIALITY PAPERS LIMITED, MUMBAI

04.2021 to 30.06.2021 are deemed notices issues u/s. 148A(b) of the Act meaning thereby that these are valid notices and not barred by limitation?

Whether on the facts, in the circumstances of the case and in Law, the Ld. CIT(A) has erred in disregarding the fact that the case of Ashish Agrawal, the lead case is also of AY 2013-14 and Hon'ble Supreme Court after considering the provisions of TOLA as well as new provisions of law has given a one-time relief to the Revenue to proceed with the proceedings under Article 142 of the Constitution and did not hold AY 2013-14 as barred by limitation

Whether on the facts, in the circumstances of the case and in Law the Ld. CIT(A) has erred in not considering The Taxation And Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 dated 31st March, 2020 read with CBDT notification no. 35/2020 dated 24.06.2020, which extended the time limit for issue of notice for AY 2013-14 till 31st December 2020 and further The Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 dated 29.09.2020 read with notification no. 93/2020 dated 31st December, 2020 which further extended the time limit till 31st March 2021. This time limit has further been extended by notification no. 20 dated 31st March 2021 till 30th April which further extended the time limit till 30th June 2021 by notification No. 38/2021 dated 27.04.2021 and by only considering notification dated 31st March, 2021 whether Hon'ble High Court has erred in holding that AY 2013-14 is barred by limitation on 31st March, 2021 and the limitation has not b

Whether on the facts, in the circumstances of the case and in Law, the Ld.CIT(A) has erred in not appreciating that the CBDT's Instruction 1 of 2022 has been issued in accordance with the provisions of law and is in consonance with the Hon'ble Supreme Court's judgment in the case of UOI Vs. Ashish Agarwal?

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in allowing the ground of appeal of the appellant even though the Hon'ble Supreme Court in the case of NDTV vs ACIT in Civil Appeal No. 1008 of 2020 dated 03.04.2020 have held that the Assessing Officer has to build only prima facie view that the income has escaped from assessment."

Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) is justified in allowing the ground of appeal of the appellant without appreciating the ratio of the Bombay High Court in the case of M/s. Consolidated Photo & Finvest Ltd. vs. ACIT (2006) 151 Taxmann 41 (Delhi) wherein it is held that action under section 147 was permissible even where the Speciality Papers Limited.

The assessee is a company and filed the original return of income for AY 2013-14 on 01.10.2013 declaring a total loss of Rs. 3,56,82,943/-. Consequent to a search action under section 132 of the Act conducted in the case of Shri Shirish C Shah the assessee was issued a notice under section 153C and in response the assessee filed a return on 06.04.2015 declaring the same income as returned while filing the original return of income. The assessment was completed under section 143(3) r.w.s 153C on 28.03.2016 disallowing the business loss claimed by the assessee in the return of income. Subsequently the AO received the following information from DDIT(Inv) Unit-4(1), Mumbai dated 02.06.2020 –

Based on the above information the AO reopened the case by issue of notice under section 148 of the Act dated 12.04.2021. Subsequently pursuant to the order of the Hon'ble Supreme Court in the case of Union of India vs. Ashish Agarwal (Civil Appeal No. 3005/2022 dated 04.05.2022), the AO issued a notice dated 30.05.2022 under section 148A(b) of the Act calling on the assessee to furnish the information and the assessee in response to the said notice filed response raising objections on the following grounds:

The assessee besides the above legal contentions also submitted that the assessee has not received the impugned amount of Rs. 3,31,79,27,187/- in any of its bank account and that copy of party-wise and bank-wise details of the alleged credits may be provided to the assessee. The AO disposed of the above objections vide order dated 28.07.2022 passed under section 148(A)(d) rejecting the various Speciality Papers Limited.

1 In this case the Investigation inquiry has reported that credits amounting to Rs. 3,31,79,27,187/- remain unexplained related to the transaction done by way of accommodation entries through various entities as tabulated in para 2.1 above.

2 It is to bring on record, that in assessee's case assessments for A.Y. 2013- 14 was completed under Section 143(3) of the Income Tax Act, 1961 vide order dated 28/03/2016. From perusal of the assessment order it is noticed that while completing the assessment proceedings u/s 143(3) of the Act, the Ld. AO has duly observed that the assessee company was merely tool used for providing accommodation entries. Further, the Ld. AO has held that the real income from transactions undertaken by the assessee company is assessed in the hands of Shri Shirish C. Shah.

3 The remark in the assessment order that all real income in respect of transactions would be assessed in the hands of Shri Shirish C. Shah is not substantiated by the assessee by producing copy of the order of Shri Shirish C. Shah who reportedly controlled the affairs of the assessee company.

4 As regards the information contained in the dissemination note the assessee is non- cooperative and reluctant to furnish books of accounts and other details and has not furnished any reply. Apart from relying on the assessment, no other details have been furnished by the asseessee.

5 Further as per information the assessee has entered into accommodation entries and suspicious transaction with various entities viz. M/s. Media & Entertainment Pvt. Ltd., M/s. ABRV Trading Pvt. Ltd., M/s. Anvita Real Estate Pvt. Ltd., M/s. Vinit Enterprises, M/s. Arokya Field Developers Pvt. Ltd., M/s. Tanika Mercantile Pvt. Ltd., M/s. Ayog Infrastructure Pvt. Ltd., M/s. Saint Infrastructures Pvt. Ltd., M/s. Matulya Trading Pvt. Ltd., M/s. Aalyya Traders Pvt. Ltd., M/s. Haritima Infrastructures Pvt. Ltd., M/s. Anumita Infrastructure Speciality Papers Limited.

Subsequently the AO issued a notice under section 148 of the Act calling on the assessee to furnish the return of income and the assessee in response did not file any return of income. The AO issued a notice under section 142(1) calling on the assessee to furnish various details as listed below: “1. You are hereby requested to explain in detail the credit entries of your bank accounts of Rs. 3,31,79,27,187/- during F.Y. 2012-13 relevant to A.Y. 2013-14 along with all valid documents in support of source of investment.

Please explain the nature of business, audit report for the financial period 2011-12, 2012-13 and 2013-14. 3. Cash flow statement for the financial period 2011-12, 2012-13 and 2013-14. 4. Demat Account statement for the financial period 2011-12, 2012-13 and 2013-14. 5. Bank statements for the financial period 2011-12, 2012-13 and 2013-14. 6. Detail statement under the provision of Section 194Q of I.T. Act. 1961 if any.

Details of contract for transaction in share with various companies as mentioned above.

Details of business transactions with Mr. Shrish C. Shah

Profit and Loss A/c and Balance sheet of your company for the financial periods financial period 2011-12, 2012-13 and 2013-14.. Speciality Papers Limited.

Details of investment in share/debentures and in commodity market, market, if any, along with all details of source of investment.

Any other documents/reply you wish to submit which has not been asked above.”

In response the assessee furnished partial details complying point no. 2, 3 & 9 and sought further time for furnishing the rest of the details. Since no further details were furnished by the assessee, the AO completed the assessment under section 147 r.w.s. 144 of the Act by making an addition of Rs. 3,31,79,27,187/-. The relevant observations of the AO in this regard are extracted as under:

Aggrieved the assessee filed further appeal before the CIT(A). Before the CIT(A) the assessee raised the similar legal contentions as raised in the objections before the AO in response to notice under section 148A of the Act. The CIT(A) allowed the appeal in favour of the assessee considering the legal contention that the notice under section 148 of the Act is barred by limitation by placing reliance on the decision of the Hon'ble Bombay High Court in the case of The New India Assurance Co. Ltd. vs. ACIT [2023] 158 taxmann.com 367 (Bom.). The CIT(A) further allowed the other legal contention that the reopening is based on the same material and that the assessee was not allowed the opportunity to cross examine.

The revenue is in appeal against the order of the CIT(A). During the course of hearing before us the ld. AR for the assessee fairly conceded that grounds raised by the revenue against the findings of the CIT(A) that the notice under section 148 being barred by limitation is be held against the assessee in terms of the decision of the Hon'ble Supreme Court in the case of UOI vs Rajiv Bansal ([2024] 167 taxmann.com 70 (SC))

With regard to the contention that the AO has relied on the same material and the reopening is based on mere change of opinion, the ld. AR submitted that the AO has received the information from DDIT (Inv.) based on the search conducted in the case of Shri Sirish C. Shah and that the assessment under section 143(3) r.w.s. 153C was completed based on the same search in assessee's case vide order dated 28.03.2016. The ld. AR further submitted that the assessee was never shared with the alleged bank statements based on which the addition is made in assessee's case. The ld. AR also submitted that the addition under section 68 of the Act cannot be made merely based on the credits in the bank statements since the bank statements are not to be considered as the books of account. The ld. AR drew our attention to Speciality Papers Limited.

The ld. DR on the other hand vehemently argued that the CIT(A) while holding that the AO has reopened the assessment to change the erroneous conclusion once reached without giving any detailed finding in this regard. The ld. DR further submitted that the re-assessment proceedings are initiated based on the information received from DDIT (Inv.) and after issue of notice under section 131 of the Act to the Bank and the parties concerned. The ld. DR also argued that the AO has a reason to believe that the income has escaped assessment based on the bank statements and for the reason that the parties to whom summons were issued have not responded. The ld. DR brought to our attention that the AO while completing the assessment under section 143(3) r.w.s. 153C of the Act had formed an opinion based on the incriminating materials found during the course of search and that the present re-assessment proceedings are initiated based on new material which came to the notice of the AO. Therefore the ld. DR submitted that there is no change of opinion on the part of the AO and that the opinion formed by the AO in the assessment proceedings under section 153C was based on different set of materials. The ld. DR accordingly submitted that the present re-assessment proceedings are fresh proceedings based on fresh set of evidences and therefore cannot be quashed on the ground of change of opinion

We heard the parties and perused the material on record. With regard to Ground No.1 to 4 pertain to the issue of the notice under section 148 being time barred. These grounds are held in favour of the revenue pursuant to the decision of the Hon'ble Supreme Court in the case Rajeev Bansal (supra) as has been fairly Speciality Papers Limited.

Considering the following facts a) assessee's own affirmation b) all the turnover shown in profit apnd loss account was within group to window dressing the balance sheet and not actual business activities c) documents seized from the premises of Shri Shirish C. Shah indicating accommodation entries through web of companies including the assessee company d) more than 65% of the holding belongings to companies under the control of Shri Shirish C Shah only

Subject to the above remarks, total income of the assessee is computed as under:

From the perusal of the assessment order we notice that the assessment under section 153C is completed on 28.03.2016 based on the materials seized during the course of search conducted in the case of Shri Shirish C Shah and the AO findings of the AO is primarily on the Share Capital and the Business Activities of the assessee. On perusal of the information received from DDIT(Inv) dated 02.06.2020 we notice that with the approval of the competent authority summons under section 131 were issued to the bank, assessee and the transacting parties and submissions were received from the bank. We further notice that the assessee did not respond to the summons issued on 21.05.2018, 11.08.2018 and 17.10.2019 calling for details pertaining to the entries in the bank statement. We also notice that since the assessee did not respond to the summons and the response to the show cause was irrelevant, the said information was shared with the AO of the assessee after considering the fact that the assessee has been part of the companies operated by the entry provider Shri Shirish C Shah. In the light of the above, we will now look at the relevant findings of CIT(A) as extracted below while allowing the contention that the reassessment is based on mere change of opinion –

9 The Hon'ble Apex Court in the case of Calcutta Discount Co. Ltd v. Income Tax Officer (41 ITR 191) (SC) held that even if the conclusion drawn by the Assessing Officer from the facts disclosed by the assessee during the course of original assessment is erroneous, the Assessing Officer cannot reopen the assessment to change that erroneous conclusion once reached at.

On perusal of the above findings we notice the CIT(A) while allowing the contention of the assessee with regard to change of opinion, has not given any detailed finding but has merely recorded that the bank statements were not shared with the assessee. The Hon'ble Supreme Court in the case of Kelvinator India Ltd (supra) with regard to "change of opinion" has held that – 4. ****** We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re- opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Speciality Papers Limited.

From the above observations it is clear that in order to apply the above ratio of the Hon'ble Supreme Court it is critical to establish that the bank statement received in response to the summons under section 131 is not a new "tangible material" but has been considered as part of the assessment completed under section 153C of the Act. It is clear from the above findings of the CIT(A) that there has not been any examination on the part of the CIT(A) in this regard, before accepting the claim that reassessment is based on the review of the same materials on which the AO has had a "change of opinion". Even during the course of hearing before us, both the parties did not submit any materials in support of their respective contentions as to whether the bank statement is a new tangible material (contention of the revenue) or has been considered during proceedings u/s.153C of the Act (contention of the assessee). Therefore in our considered view, the impugned issue needs re-examination i.e. whether the reassessment is a mere change of opinion on the materials examined during the proceedings under section 153C or is based on the new tangible material being bank statement received from the bank in response to notice under section 131. Accordingly we remit the appeal back to CIT(A) for a denovo consideration of the impugned issue by calling for the required report from the AO in this regard and decide the issue in accordance with law. The CIT(A) is further directed to consider the issue on merits as may be required by calling for relevant details. The assessee is directed to submit the details as may be called for and co-operate with appellate proceedings. It is ordered accordingly. Speciality Papers Limited.

Since we are remitting the issue contended by the revenue through Ground No.5 & 6, the contentions raised by the assessee during the course of hearing are left open.

In result appeal of the revenue is partly allowed for statistical purposes.