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

6. 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. AO gathered his reason to believe from the very same record as had been the subject matter of the completed assessment proceedings."

2. 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 – “(a) As per information, the appellant had entered into transactions with some companies during the FY 2012-13 and the pattern of transactions indicates the layering of funds and it leads to suspicion. (b) After taking approval from the competent authority, summon u/s 131 of the Act were issued to the bank, assessee and transacting parties as mentioned in the allegation. In response thereto, submission from the bank was received. However, no details were submitted by the appellant. Also, there was no response from the transacting parties except M/s. Interworld Limited. (c) on perusal of the details submitted by the bank, it was noted that the total credits in the bank during FY 2012-13 amounts to Rs.331,79,27,187/-. The summons was issued to the appellant on various dates. However, there was no response received from the appellant. (d) On further investigation, it was found that a search operation u/s 132 of the Act was conducted at various premises in connection with the entities related to Shri Shirish C Shah, an entry operator. During the course of search, various documents belonging to the appellant company were also found from the computer of Shri Shirish C Shah wherein it was found that the appellant company had numerous transactions with various companies of Shri Shirish C Shah. Further, it was also noted that the persons holding more than 5% of the shares of appellant company were those companies which were under the control of Shri Shirish C Shah. Further, it was seen that the appellant company Speciality Papers Limited. along with the transacting parties appear in the list of the entities managed and controlled by Shri Shirish C Shah. (e) In view of the facts, the credits amounting to Rs.331,79,27,187/- remain unexplained.”

(a) Notice under section 148 of the Act is based on the same set of facts available during the course of original assessment which is purely change of opinion on the part of the AO which is not permissible under the law. (b) Notice under section 148 of the Act (deemed to have been issued under section 148A(b) of the Act) beyond expiry of six years from the end of relevant AY which was otherwise not permissible under old law is invalid and bad-in-law. (c) Notice under section 148 of the Act (deemed to have been issued under section 148A(b) of the Act) beyond expiry of three years from the end of relevant AY without any asset escaping assessment is invalid and bad-in-law. (d) Notice issued under section 148 of the Act (deemed to have been issued under section 148A(b) of the Act) cannot be based on a suspicion to conduct fishing and roving enquiry.

4. 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. legal contentions raised by the assessee. The contentions of the assessee on merits were rejected by holding that “5. I have carefully considered the reply of the Assessee and once again perused the material available on record in order to ascertain whether the present case is a fit case for issuance of the notice under section 148 of the Act 5.1 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. 5.2 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. 5.3 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. In absence of any communication / order in this regard, the contention of the assessee that all real income has been taxed in the hands of Shri Shirish C. Shah cannot be relied upon and the same to be assesses accordingly in the hands of the assessee. 5.4 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. 5.5 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. Pvt. Ltd. M/s. Joel Infrastructure Pvt. Ltd., M/s. Longseal Machinery Pvt. Ltd., M/s. Geetanjali Gems, M/s. Meuse Garb Pvt. Ltd., M/s. Visheshinfotechnics Ltd., M/s, Interworld Digital Limited, M/s. Varad Vinayak Trading Pvt. Ltd., M/s. Lifefour Multi Trading Pvt. Ltd., M/s. Agrata Real Estate Pvt. Ltd., M/s. Nazimalmpex Pvt. Ltd. and M/s. JabeenTradelink Pvt. Ltd which are suspicious in nature. No details of any transaction with the above parties has been furnished and the same remain unexplained and unverified. Therefore, the suspicious transactions to the tune of Rs. 3,31,79,27,187/- remained unexplained even as on date and has escaped assessment in the hands of the assessee to the extent of the income.”

3. Cash flow 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.

Speciality Papers Limited.

6. 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:

“After verification of the details submitted by the assessee vide written submission mentioned above it is noticed that the assessee not furnished the reply according to the notice issued U/s 142(1) discussed above. The assessee was silent on point no.6, 7 and 8 of notice 142(1) discussed above. Further, it is noticed that the assessee has stated that they are engaged in the business of paper and paper related products but they have not produced any documents to substantiate the genuineness of their submission. Further, to give a fare opportunity to the assessee another notice is 142(1) of LT. Act.1961 was issued to the assessee vide DIN ITBAAST232023 24/1052630473(1) on 08/05/2023 the details of which are mentioned bellow: “…………… The following accounts or documents or information are sought under section 142(1) of the Income-tax Act, 1961: Please refer to this office earlier notice issued U/s142(1) of I.T. Act.1961 dated 12/01/2023. You have not furnished your reply according to the notices issued. Further, it is gathered that you have entered into transactions during the period under consideration with 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 Pvt. Ltd. M/s. Joel Infrastructure Pvt. Ltd., M/s. Longseal Machinery Pvt. Ltd., M/s. Geetanjali Gems, Mis. Meuse Garb Pvt. Ltd., M/s. Vishesh Infotechnics Ltd., M/s. Interworld Digital Limited, M/s. Varad Vinayak Trading Pvt. Ltd., M/s. Lifefour Multi Trading Pvt. Ltd., M/s. Agrata Real Estate Pvt. Ltd., M/s. Nazima Impex Pvt. Ltd. and M/s. Jabeen Tradelink Pvt.

Speciality Papers Limited. Ltd. On perusal of the details submitted by the bank it is noted that the total credits in the bank during the F.Y. 2012-13 amounts to Rs. 3,31,79,27,187. The entire pattern of transactions leads to suspicion. The business relationship, financial statement and evidential documents of the above companies are missing in your reply. You have submitted only ledger, audit report, cash balance, etc. which does not prove that the entire credit entry of Rs. 3,31,79,27,187/-is genuine in nature. Further, in your response dated 19/01/2023 you have stated that you are trading in paper and paper related products but you have not produce any documents which prove that you are doing such type of business activities i.e. bills, vouchers, GST return, transportation details, sale, purchase details, etc. This is a time barring case hence, You are Once again requested to submit your reply within scheduled date and time along with all valid and evidential documents to prove the genuineness of credit entry of Rs. 3,31,79,27,187/- The assessee electronically filed his response on 11/05/2023. Vide his submission the assessee has raised certain objection on the issue of notice U/s148 which have earlier during the course of reopening of the case the Jurisdictional Assessing Officer have already been justified vide his order U/s 148A(d), dated 28/07/2022 copy of which have already been supplied to the assessee electronically to the email ID available on record and as discussed earlier in this order. Further, the assessee relied upon some case laws mentioned in the letter but the assessee not produced any evidentiary documents which are not acceptable on the ground of discussion made above. The assessee not furnish any valid documents, business transactions details, daily stock register, transportation details, bills, vouchers, etc. to prove the genuineness of the day to day business transaction hence the entire credit entry of Rs. Rs. 3,31,79,27,187/- is hereby suspicious in nature. Further, On analysis of response submitted by the assessee it is gathered that the assessee has failed to explain the issues mentioned in the notices issued U/s 142(1) of I.T Act 1961 as discussed above. The assessee failed to give any valid reason of his business transaction with Mr. Shrish C. Shah. Hence, the reply submitted by the assessee is not tenable in the eyes of the law and hence not accepted. In absence of any valid response as discussed above and after verification of the material and information available on record it is found that the entire credit entry of Rs. 3,31,79,27,187/-is unexplained income of the assessee which have not been offered for tax and is hereby added to the total income of the assessee U/s 68 of I.T. Act. 1961. Penalty U/s 271(1)(c) of I.T. Act 1961 is hereby initiated for concealment of income.”

Speciality Papers Limited.

7. 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.

8. 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))

10. 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

11. 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. conceded by the ld AR. Ground No.5 and 6 are with regard to CIT(A) allowing the claim of the assessee that the reassessment is based on the same material obtained during the course of the search and hence based on mere change of opinion. To recapitulate the facts a search was conducted in the case of Shri Shirish C Shah and based on the incriminating materials found during the course of search that belonged to assessee, the AO completed the assessment under section 153C. The relevant part of the assessment order with regard to the materials relied on and the conclusion drawn by the AO while completing the assessment under section 153C are extracted below – 5 to 17 **** 17A. Shareholding pattern: - Speciality Papers Limited. Further it is seen that the persons holding more than 5 of the shares are those companies which were under the control of Shri Shirish C Shah only. Such holding is more than 65% of the total holding. It also establishes that the assessee company is though public limited but actually controlled by Shri Shirish C Shah only through his web of companies. As a matter of fact Shri Nemchand Gala who happened to the promoter director sold all its holding in the previous year relevant to AY 2012-13. It also proves the fact that the assessee company came under the control of Shri Shirish C Shah from AY 2011-12 onward.

Speciality Papers Limited. In AY 2011-12 the assessment had been completed u/s 144 of the Income Tax Act 1961. Therefore income is accepted as per order u/s 144 of the Income Tax Act 1961 only. 20. Subject to the above remarks, total income of the assessee is computed as under: Total income as discussed NIL"

Speciality Papers Limited. 14. 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.