M/S SURYAMUKHI VINTRADE PVT. LTD.,KOLKATA vs. DCIT, C.C.-2(2), KOLKATA

The assessee has challenged the order of the ld. CIT(A) on the ground that the ld. CIT(A) has confirmed the reopening u/s 147 of the Act.

The facts in brief are that the assessee filed its return of income on 29/09/2008 declaring total income of Rs.73,978/-. The case of the assessee was selected for scrutiny and assessment was accordingly framed u/s 143(3) vide order dt. 31/12/2010 on total income of Rs.78,980/-. Thereafter, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 24/02/2015 which was duly served upon the assessee. The Assessing Officer recorded reasons u/s 148 of the Act for reopening the assessment copy of which is Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 2 filed at page no. 12 of the paper book and finally the assessment was framed u/s 143(3) r.w.s. 147 of the Act dt. 30/03/2016 by making an addition of Rs.25,00,000/- u/s 68 of the Act on account of unexplained cash credit whereas in the reasons recorded, the Assessing Officer noted that the income of the assessee to the extent of Rs.1,80,00,000/- has escaped assessment in terms of provision of Section 147 of the Act qua money received from four companies which were stated to be jamakharchi/shell companies.

The ld. CIT(A) in the appellate proceedings, simply dismissed the appeal of the assessee by holding that the reopening of the assessment u/s 147 of the Act on the issue of non-disposal of objection filed by the assessee to the proceedings u/s 147 of the Act. The assessee has taken up objections before the ld. CIT(A) that the objections were disposed off in the assessment order itself whereas the objection filed by the assessee u/s 147 of the Act are required to be disposed off well before framing of the assessment order.

The ld. A/R, vehemently submitted before us that the reopening of proceedings u/s 147 of the Act are bad in law and therefore nullity. The case of the assessee relates to assessment year 2008-09 where the assessment u/s 143(3) of the Act was framed on 31/12/2010. The ld. Assessing Officer referred to the reasons recorded by the Assessing Officer, a copy of which filed at page no. 12 of the paper book and submitted that nowhere the Assessing Officer has noted that the escarpment of income has taken place on account of failure assessee to disclose any material fact in the return of income or during the assessment proceedings which is an essential requisite for reopening of assessment after the end of four years from the end of relevant assessment year in terms of first proviso to Section 147 of the Act. The ld. A/R vehemently argued that since the Assessing Officer has failed to point out any failure on the part of the assessee to disclose any material fact as stated above and therefore the assessment framed by the AO in invalid and nullity The counsle of the assessee relied on the following decisions in defense of his arguments:- Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 3  Ceebuild Company Pvt. Ltd. vs. DCIT [ITA No. 1266/Kol/2019] dt. 05.01.2022 (ITAT Kolkata)  DCIT vs. BCH Electric Ltd. [ITA No. 634/Kol/2013] dt. 07/09/2016 (ITAT Kolkata)  Tantia Construction Co. Ltd. vs. DCIT [257 ITR 84]  Peerless Hospitex Hospital and Research Centre vs. PCIT [137 Taxmann.com 359]  Titanor Components Ltd. vs. ACIT [343 ITR 183]

Om the second plea , the ld. A/R contended that the objections filed by the assessee in respect of the assessment u/s 147 of the Act were not disposed off by the Assessing Officer before passing the assessment order but the same were disposed off in the assessment order itself which is bad in law and against the various judicial precedents by various judicial forums. The ld. A/R submitted that when the assessee has challenged the reopening by way of filing objections before the Assessing Officer, the Assessing Officer is under obligation to dispose off those objections first by passing a speaking order dealing therein each and every ground raised by the assessee failing which the order passed by the Assessing Officer is rendered null, void and bad in eyes in law. For this proposition, the ld. A/R relied on the following decisions:  Fomento Resorts & Hotels Ltd. vs. ACIT [ITA No.63 of 2007] dated 30/08/2019  Hardware Trading Corporation vs. ACIT [ITA No. 1993/Kol/2014] dated 03/11/2017

Lastly, the ld. A/R argued that the assumption of juri iction u/s 147 r.w.s. 148 of the Act is bad and so is the assessment framed by the Assessing Officer. The ld AR argued that return of income is filed in response to notice issued u/s 148 of the Act and the Assessing Officer has failed to issue a juri ictional statutory notice as provided u/s 143(2) of the Act, whereby the Assessing Officer assumes juri iction to examine the case of the assessee. The ld. A/R also pointed out that the bench during the last hearing has directed the DR to produce the assessment records in order to verify whether any notice u/s 143(2) of the Act was ever issued to the assessee. The ld. A/R submitted that the said file has been examined and was gone through including the order sheets Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 4 entries wherein nowhere even an iota of evidence existed to show that the said notice was ever issued to the assesse . The ld. A/R submitted that in absence notice u/s 143(2) of the Act, the assessment order framed by the Assessing Officer is invalid and nullity in the eyes of law.

Finally, the ld. A/R prayed that the appeal of the assessee be allowed on legal and juri ictional issue by allowing Ground No. 1 and quashing the assessment framed by the Assessing Officer.

Per contra, the ld. D/R relied heavily on the orders of the authorities below and submitted that reasons were duly recorded u/s 148(2) of the Act which has been referred to by the ld. A/R and filed at page no. 12 of the paper book. The ld. D/R contended that the satisfaction of the condition of failure on the part of the assessee to disclose fully and truly all the material facts which has led to escapement of income, has been duly discussed by the Assessing Officer in the assessment though the same did not find place in the reasons recorded u/s 148(2) of the Act.Making accompanying arguments on the second issue qua separate disposal of objections raised by the assessee, the ld. D/R submitted that these were properly dealt with and disposed off in the assessment order itself. In respect of the third argument of the ld AR on the issuance of notice u/s 143(2) of the Act, the ld. D/R submitted that, this was a proceeding u/s 147 of the Act wherein there is no such requirement of notice to be issued u/s 143(2) of the Act before framing the assessment.

It was candidly accepted by the ld. D/R that neither in the assessment records nor in the order sheet entries , there was any mention of issuance of notice nor any physical copy was found of the said notice in the file which was issued u/s 143(2) of the Act.

After hearing both the parties and perusing the material available on record, I note that in this case, the original assessment was framed u/s 143(3) of the Act vide order dt. 31/12/2010. The instant assessment year under consideration is Assessment Year 2008-09 and apparently, the case was reopened on 24.02.2015. The case can be reopened after expiry of four years from the end of Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 5 the relevant Assessment Year only subject to the satisfaction of the condition as envisaged under first proviso u/s 147 of the Act which stipulates that the reopening can only be made if there is a failure on the part of the assessee to disclose all material facts in the return of income or during the original assessment proceedings u/s 143(3) of the Act which has led to escapement of income. We have perused the reasons recorded u/s 148(2) of the Act and find that nowhere the Assessing Officer has stated that there is failure on the part of the assessee to disclose any material fact. The reasons recorded are extracted for the sake of ready reference:- “No. DCIT/CC-2(2)/Kol/AAECS0373H/2015-16/630 Date:30/11/2015 To, The Principal Officer, M/s Suryamukhi vintrade Pvt. Ltd. 37/2,Chinar Park, New Town Road, Kolkata -700157 Sir / Madam Sub: Reason for issue of notice u/s 148 of the lncome Tax Act, 1961, for the A.Y. 2008-09- matter regarding Ref: Your letter dated 09.03.2015 & 07.04.2015. Please refer to the above. As requested the recorded reason as per records for issue of notice u/s 148 for the A.Y. 2008-09 is as under: In this case the assessee company had filed its return on 29/09/2008 showing total was income of Rs. 73,978/-Assessment u/s 143/3) was completed on 31/12/2010 and the total income assessee oat Rs. 78,980/ A Survey action was conducted in the case of Braj BNinani Group on 24/09/2014 and during the survey and post survey investigation, it was revealed that the assessee company M/s Suryamukhi Vintrade Pvt. Ltd. is a group company of Braj Binani Group and the assessee company allotted 3.00,000 shares on 19/01/2008 to M/s Anges Trade & Commerce Pvt Ltd, Ms Bhumi Vyapoar Pvt Ltd, M/s Induja Traders Pvt Ltd and M/s Vanquish Investment Pvt Ltd and all these companies are jamakharchi/paper company at face value of Rs. 1/-and premium of Rs.59/-. During Survey action, statement of entry operators/dummy directors were duly recorded where they admitted that they have arranged share capital and premium for Braj NBinani Group through their Jamakharchi/paper companies.

It is apparent from the reasons that there is no satisfaction or mention of any failure on the part of the assessee. Therefore, on this count itself, the order passed by the Assessing Officer u/s 147/143(3) of the Act is liable to be quashed as the same is nullity in the eyes of law. The case of the assessee finds strength from the decisions relied upon by the assessee (supra) in defense of his arguments, few of which are discussed as under:- a) in the case of “Ceebuild Company Pvt. Ltd. vs. DCIT (supra) the coordinate bench has held as under: From a plain reading of Section 147 and First proviso it is manifest that the AO can reopen the assessment provided he had reasons to believe escapement of income. Reasons to believe postulates a foundation based on information and belief based on reason. After a foundation based on information is made there still must be some reason which should warrant the holding of a belief that income chargeable to tax as escaped assessment. Information adverse may trigger “reason to suspect” and not ‘reasons to believe’. When there is “reason to suspect” then AO to make a reasonable enquiry and collect material which would make him belief, that there is in fact an escapement of income. It is settled by the Hon’ble Supreme Court in Ganga Saran and Sons P. Ltd. v. ITO, [1981] 130 ITR 1 (SC) that the expression “reason to believe” the expression in section 147 ‘is stronger” then the expression “is satisfied”. Therefore the AO has to record his reason to believe escapement of income and if he intends to reopen an assessment which has been framed earlier u/s 143(3) after the expiry of four (4) years from the end of the relevant assessment year, then he has to clearly record the additional condition precedent in the reasons recorded that the escapement of chargeable income was due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. And it is settled that when there is challenge to the validity of the reasons recorded in the AO to usurp the juri iction, then the reasons recorded by the AO should be read as it is i.e, on a standalone basis. No addition or deletion is allowed in the reason recorded. In the light of the aforesaid discussion, a plain reading of the impugned reasons recorded by the AO to reopen (supra) it nowhere mentions that there has been any failure on the part of the assessee to disclose fully and truly all material facts for assessment. Therefore relying on ratio decidendi of the Calcutta High Court and other High Courts (supra) we find force in the contention of the Ld. A.R that the essential juri ictional fact as necessary for usurpation of juri iction u/s 147 first proviso is absent, without which the AO does not enjoy the juri iction to reopen the assessment which has been framed originally u/s 143(3) of the Act. Therefore the assessee succeeds in its challenge in respect of usurpation of juri iction without satisfying the first proviso to Section 147 of the Act in the facts and circumstances of the case. Therefore we are inclined to quash the notice of the AO issued u/s 148 dated 10.03.2016 . Therefore all consequential actions fall being non-est in the eyes of law.” Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 7

The proviso to the said section shows that where an assessment under Sub- section (3) of Section 143 has been made for the relevant assessment year, no action shall be taken under the said section after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, when in the present case there was an assessment under Section 143(3) and admittedly four years have passed after the end of the relevant assessment year, when the impugned notices were issued, two requirements were to be satisfied, i.e., escapement of some income chargeable to tax and failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.

But, in the present case, the reasons disclosed with the affidavit-in-oppo-sition admittedly only show escapement of assessment and that too according to the explanation of the law by the apex court subsequent to the assessment. There is no material that the second requirement of failure on the part of the petitioner to disclose fully and truly any material fact, has even been alleged. Learned counsel for the respondents relied on the law as decided by the apex court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 for showing that this court, at this stage of issuance of notice, is not to assess the correctness or sufficiency of materials. But this contention cannot be accepted as at this stage not the correctness or sufficiency of the materials but the very existence of the allegation is being considered and that is within the power of the court when the notice is challenged.

In respect of the case of Geo Miller and Co. Ltd. and Simplex Concrete Piles (India) Pvt. Ltd. , the learned single judge of this court decided the writ petitions and learned counsel for the respondents states that the reasons in those two cases are identical to the reasons disclosed in the present case, viz., the explanation of law by the apex court in the case of N. C. Budharaja and Co. [1993] 204 ITR 412. But on a perusal of the said judgments, it appears that in the case of Geo Miller and Co. Ltd. , no finding has been arrived at that the second requirement as discussed hereinabove is in the alternative. In the case of Sim-plex Concrete Piles (India) Pvt. Ltd. , the same learned judge came to a finding that both the conditions contained in Section 147 for issuance of notice under Section 148 have been satisfied therein. Therefore, it is apparent that the learned judge has accepted that both the said conditions are to be satisfied for issuance of notice under Section 148. But in the present case the respondents have failed to show that the second condition was satisfied at all. Therefore, in such circumstances, I am of the opinion that in the absence of satisfaction of one of the statutory requirements as contained in Section 147, the notices impugned under Section 148 cannot be held to be valid as they were issued after the expiry of four years from the last date of the concerned assessment year and there was an assessment under Section 143(3) in respect of the assessee. Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 8

Therefore, the notices are barred by time in view of the provision of law as discussed hereinabove. The writ petition is allowed. The impugned notices at annexure "F" to the writ petition are hereby quashed.”

In the case of Peerless Hospitex and Research Center Ltd. vs. PCIT [2022] 137 taxmann.com 359 (Calcutta), the Hon’ble Calcutta High Court has held as under:- “27. The second issue is about the legality and validity of initiation of impugned proceeding for reopening of assessment under section 147 and issuance of notices under section 148 of the Income-tax Act, 1961, admittedly after expiry of four years from the end of relevant assessment year on the self same material facts which were already available before the assessing officer at the time of regular assessment and without recording of any omission or failure on the part of the petitioner to disclose fully and truly any material fact necessary for assessment before the assessing officer in course of regular assessment proceeding. I am of the considered opinion that in the facts and circumstances of the case initiation of the impugned proceeding under section147 of the Income-tax Act, 1961, is bad and not sustainable in law and is liable to be quashed for the following reasons: (i) It is admitted position as substantiated by record that the impugned notices under section 148 of the Act were issued after the expiry of four years from the end of the relevant assessment years. (ii) Nowhere the assessing officer has recorded either in the impugned notices under section 148 of the Act or in the recorded reason for reopening of assessment in question that in course of regular assessment there was any omission or failure on the part of the assessee/petitioner in disclosing fully and truly all material facts necessary for its assessment relating to the relevant assessment years or that any new material/information other than those which were already available at the time of regular assessment has come to his knowledge. In view of these admitted factual position I am of the considered opinion that criteria for reopening of assessment under section 147 of the Income-tax Act, 1961, has not been fulfilled in this case. Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 9

Considering the facts and circumstances of the case as appears from record and discussion made herein, I am inclined to hold that since condition precedent for invoking section 147 of the Income-tax Act, 1961, for reopening of assessments after expiry of four years from the end of relevant assessment years has not been fulfilled and the impugned reopening of assessment is on mere change of opinion, the impugned notices dated 27th July, 2018 under section 148 of the Income-tax Act, 1961 in both the Writ Petitions relating to assessment years 2011-12 and 2012-13 are held as bad and not sustainable in law and the said impugned notices under section 148 of the Income-tax Act, 1961 and all subsequent proceedings on the basis of the aforesaid impugned notices under section 148 of the Income-tax Act, 1961, are quashed.

Similar issue has been decided in the other decisions referred to by the assessee. Since the facts of the assessee’s case are squarely covered by the ratio of law laid down in the above case-laws, we are inclined to quash the assessment order framed by the Assessing Officer u/s 147 r.w.s. 143(3) of the Act .

Since the appeal of the assesse is allowed on the legal issue , the other pleas raised in this appeal on quantum are left open to be adjudicated in future if need arise for the same.

In the result, appeal of the assessee is allowed. Order pronounced in the Court on 28th November, 2022 at Kolkata. (RAJESH KUMAR) ACCOUNTANT MEMBER Kolkata, Dated 28/11/2022 *SC SrPs Assessment Year: 2008-09 M/s. Suryamukhi Vintrade Pvt. Ltd. 10

""यथ" / The Respondent 3. संबंिधत आयकर आयु" / Concerned Pr. CIT 4. आयकर आयु" अपील / The CIT(A)- ( ) 5. िवभागीय "ितिनिध अिधकरण अपीलीय आयकर कोलकाता/DR,ITAT, Kolkata, , , 6. गाड" फाईल /Guard file.