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Income Tax Appellate Tribunal, H BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI SHRI PRAMOD KUMAR, VICE PRESIDENT SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 6451/MUM/2018 (ASSESSMENT YEAR: 2009-10) Income Tax Officer 10(1)(3), Mumbai, Room No. 25B, Ground Floor, Aayakar Bhavan, Mumbai - 400020 ……………… Appellant Vs M/s Kailashnath Mercantile Pvt. Ltd., C/o Jayesh Sanghrajka & Co. LLP, 405-408, Hind Rajasthan Center, DS Phalke Road, Dadar (East), Mumbai- 400014 [PAN: AADCK5285F] …………….… Respondent
Appearances For the Appellant/Department : Shri Tejinder Pal Singh Anand (DR) For the Respondent/ Assessee Shri Margav Shukla (AR)
Date of conclusion of hearing : 15.02.2022 Date of pronouncement of order : 30.03.2022
O R D E R Per Rahul Chaudhary, Judicial Member:
By way of the present appeal the Appellant/Department has challenged the order, dated 16.08.2018, passed by the Commissioner of Income Tax (Appeals)-51, Mumbai [hereinafter referred as „CIT(A)‟], in appeal [CIT(A)-17/IT-36/15-16] for the Assessment Year 2009-10, filed by the Assessee against the assessment order, dated 31.03.2015, passed under section 143(3) read with section 147 of the Act.
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10 2. The Revenue has raised the following grounds of appeal:
“1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in reaching the conclusion that notice u/s 148 of the I.T. Act, 1961 was issued without compliance of requirements of the provisions of the Section 147 of the Income Tax Act, 1961.
2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that reassessment proceedings has not been initiated by following relevant provisions of the Act.
3) The appellant prays that the order of the CIT(Appeals) on the above ground be set aside and that of the Assessing Officer be restored.”
All the grounds raised are connected and challenge the order of CIT(A) whereby the CIT(A) was pleased to allow the appeal of the Assessee holding that the reassessment proceedings are bad in law as the same have been initiated without complying with the provisions of Section 148 of the Act. Accordingly, all the grounds are being taken up and disposed together.
The brief facts relevant to the issue under consideration are that Assessee filed original return of income under Section 139(1) of the Act on 26.09.2009 declaring „Nil‟ income after claiming loss of INR 13,321/- which was processed under section 143(1) of the Act. The case of the Assessee was reopened as notice under Section 148 of the Act was issued on 30.03.2014. At the request of the Assessee, copy of the reasons recorded in writing for initiating reassessment proceedings were furnished to him by the AO vide letter, dated 02.02.2015. The Assessee filed objections to the reopening of the assessment vide letter 05.02.2015 which were rejected by the AO vide order/letter, 27.02.2015. Subsequently, re-assessment proceedings were concluded
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10 under Section 148 read with Section 143(3) of the Act vide order dated 31.03.2015, and an addition of INR.2,48,05,000/- was made by the AO under Section 68 of the Act holding that the transaction of receipt of share application money of INR.2,48,05,000/- was not genuine transaction.
The Assessee being aggrieved, preferred appeal before the CIT(A) challenging the validity of re-assessment proceedings as well as additions made on merits. The CIT(A) vide order impugned in the present appeal granted relief to the Assessee by holding as under:
“5.3 Ground No. 1 and 2 relates to claim of reopening on the instruction of CCIT. As per grievances related to reassessment proceedings are concerned let us examine the reasons which has been recorded for reopening. Even at the cost of repetition the same is quoted below:
“Reason for Selection The return of income was filed on 26/09/2009 with E-filing acknowledgement no. 9185911026092009 declaring total income is NIL. The return was processed u/s 143(1) as per IT Act on 31/10/2010. A letter has been issued by office of the Chief Commissioner of income Tax, Mumbai vide letter No. MUM/CCIT/COORD/U-III/SHARE PREMIUM/2013-14/1701 dated 13.03.2014regarding issue of equity shares on huge premium by private company as under: Sr. ROC Face Total No. of Total income No. Sr. No. Value Share premium received in in Rs. issued Cash 568 3703 10 121000 23595000 In view of the aforesaid facts, I hereby propose to reopen the case u/s 147 for verification of high rate of share premium and cash received. As per directions of CCIT same is required to be examined.
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10
Issue notice u/s 148 as per I.T. Act, 1961.”
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As discussed in the earlier para, the remand report from the AO has been received on 20.12.2017, which is quoted under the discussion under Remand Report. From the perusal of the copy of the reasons recorded, objections raised by appellant before AO, its multiple petitions for directions u/s 144A, multiple orders u/s 144A and remand report, it can be seen that AO has recorded the reasons for reopening and referred that reopening was made under the directions from the CCIT to examine the premium at which shares were issued. Remand report on this issue is evasive and does not address the objection of the appellant. As has been seen from the catena of judgments relied by the AR, reopening of assessment as per the provisions of the law requires that satisfaction should be that of the AO and not of the any other authority, apart from that reopening cannot be made merely for making verification as has been done by the Assessing Officer in this case.
5.4. Apart from that, there is no allegation at all of the income statement. Assessing officer has recorded that since the assessee has issued shared at premium and such transactions has been directed to be examined by the Hon. CCIT, he is initiating the reassessment. While reopening the assessment it is sine qua non that assessing officer is satisfied that the income has escaped assessment and therefore the case is required to be reopened. However, as can be seen from the above, discussing officer has not recorded any such satisfaction of income escapement at all and therefore the reopening is also not valid on this account as well as apart from the one stated above. 4
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10 5.5. It has been held by the Hon. Bombay High Court in the case of Nimi Trading Limited (Supra) that there has to be specific recording of reasons that income has escaped the assessment and it should not merely record the details it intends to verify and the reasons must be found on satisfaction of assessing officer that income has escaped assessment once that is not found then it is not possible to sustain the said notice” (Emphasis Supplied)
We have heard the parties, perused the records and considered the legal position. We agree with the first appellate authority that in the present case, the AO has failed to record satisfaction that income has escaped assessment. Perusal of reasons recorded for re-opening assessment makes it clear that this is a case of borrowed satisfaction where reassessment proceedings have been initiated under the directions of superiors for verification of the transaction without forming any belief that the income has escaped assessment.
The Hon‟ble Bombay High Court in the case of Nimi Trading Limited Vs UOI : 375 ITR 308 (Bombay), relied upon by CIT(A) while granting relief to the Assessee, has observed as under:
“25. We are not in agreement with Mr. Gupta because the clear language of section 147 of the IT Act reveals that if the Assessing Officer has reason to believe that any income has escaped assessment, then, he can resort to such power. While it is true, as Mr. Gupta argued, that sub-section (1) of section 148 of the IT Act enables issuance of notice before the assessment, reassessment or re-computation under section 147 of the IT Act, but that is dealing with the service of the notice. The principal condition for issuance of notice is to be found in section 147 of the IT Act and that is on the reason to belief that any income chargeable to tax has escaped assessment for any assessment year, then, the
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10 Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be. In the present case, the Respondents do not state that any income chargeable to tax has escaped assessment. All that the Revenue desires is verification of certain details and pertaining to the gift. That is not founded on the belief that any income which is chargeable to tax has escaped assessment and hence, such verification is necessary. That belief is not recorded and which alone would enable the Assessing Officer to proceed. Thus, the reasons must be founded on the satisfaction of the Assessing Officer that income chargeable to tax has escaped assessment. Once that is not to be found, then, we are not in a position to sustain the impugned notice. Having reproduced the same and contents thereof being clear, it is not possible to agree with Mr. Gupta that this Court should not interfere at the threshold. …….” (emphasis supplied)
In view of the above, we do not find any merit in the grounds raised. The present appeal by the Revenue is dismissed.
Order pronounced on 30.03.2022.
Sd/- Sd/- (Pramod Kumar) (Rahul Chaudhary) Vice President Judicial Member
म ुंबई Mumbai; दिन ुंक Dated : 30/03/2022 Alindra, PS
ITA. No. 6451/Mum/2018 Assessment Year: 2009-10 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai