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Facts
The Revenue filed an appeal against the order of the CIT(A) who quashed the reassessment proceedings. The assessee had received a significant amount as share premium, which the Assessing Officer treated as unexplained. The CIT(A) found the reassessment proceedings invalid due to improper approval.
Held
The Tribunal held that the CIT(A) was not justified in quashing the reassessment proceedings solely on the ground of improper satisfaction. The Tribunal set aside the CIT(A)'s order and restored the issue to the CIT(A) for fresh adjudication on merits.
Key Issues
Whether the reassessment proceedings were validly initiated and whether the approval obtained by the Assessing Officer was in accordance with Section 151 of the Income Tax Act, 1961.
Sections Cited
143(1), 147, 148, 151, 68, 143(3), 234B, 271(1)(c)
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Income Tax Appellate Tribunal, PUNE BENCH “B”, PUNE
Before: SHRI R. K. PANDA & SHRI VINAY BHAMORE
Parth Multitrade Pvt. Ltd. DCIT, Central Circle-1, 1-13-89, Bus Stand Road, Jalna, Aurangabad Vs. Maharashtra PAN: AALCS3668L (Cross Objector) (Respondent) Assessee by : Shri Anand Partani Department by : Shri Ajay Kumar Keshari - CIT Date of hearing : 24-02-2025 Date of pronouncement : 26-03-2025 O R D E R PER R.K. PANDA, VP :
This appeal filed by the Revenue is directed against the order dated 05.03.2024 of the Ld. CIT(A), Pune-12 relating to assessment year 2008-09. The assessee has filed the Cross Objection against the appeal filed by the Revenue. For the sake of convenience, the appeal filed by the Revenue and the Cross Objection filed by the assessee were heard together and are being disposed of by this common order.
Facts of the case, in brief, are that the assessee namely Parth Multitrade India Private Limited (formerly known as Swift Venture Private Limited) is a company incorporated under the Companies Act, 1956 (now Company Act, 2013). It filed its return of income on 23.09.2008 declaring total income of Rs.8,653/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Subsequently, the Assessing Officer reopened the case on the ground that the assessee has received an amount of Rs.22,27,00,500/- by way of share premium in the financial year 2007-08 relevant to assessment year 2008- 09. The Assessing Officer, therefore, after recording reasons as per the provisions of section 147 of the Act, reopened the assessment. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer made the addition of Rs.22,50,50,000/- to the total income of the assessee u/s 68 of the Act on the ground that the assessee could not explain the identity and creditworthiness of the share applicants and genuineness of the transactions.
Before the Ld. CIT(A), the assessee apart from challenging the addition on merit, challenged the validity of re-assessment proceedings. The Ld. CIT(A) quashed the re-assessment proceedings by observing as under: “4.4 I have considered the facts of the case, remand report and the submissions of the appellant. The main contention of the appellant is that the notice u/s 148 of the Act issued by the AO is "bad in law" as more than 4 years had elapsed from the end of the relevant assessment year i.e. 2008-09 and therefore as per proviso to Section 151(1), the specified authority for providing approval to issue of the notice u/s 148 should be either the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner. However, the AO had taken the approval of Additional Commissioner of Income Tax, 11(2), Mumbai to issue notice u/s 148 for the AY under consideration. Thus, the AO has not taken
approval of the specified authority as prescribed in law. Since the approval itself is incorrect, the mandatory condition as provided under section 151 of the Act has not been fulfilled and therefore the notice issued under section 148 of the Act without proper approval is invalid, without jurisdiction and the reassessment proceedings are therefore, liable to be quashed. 4.5 On the other hand, in the remand report, the Add. CIT has also accepted that the AO has taken the approval of Additional Commissioner of Income Tax, 11(2), Mumbai instead of specified authority as prescribed in law. 4.6 In this regard, the appellant has relied on the following judicial pronouncements wherein it is held that a notice issued u/s 148 without obtaining the prescribed sanction of the Chief CIT or CIT as laid down in sec 151 is invalid and cannot be sustained and the assessment done on the basis of such a notice deserves to be set aside i) The Hon'ble ITAT Allahabad SMC Bench in the case of Aries Marketers (P) Ltd. vs. CIT(Appeals) ii) The Hon'ble Allahabad High Court in the case of Dr. Shashi Kant Garg vs. CIT (2006) 203 CTR (All) 75 (2006) 285 ITR 158 (All) In view of the above, the notice u/s 148 of the Act issued without following proper procedure of law is liable to be quashed and set aside. 4.7 Respectfully following these decisions of the Hon'ble ITAT and Hon'ble High Court as also the remand report submitted by the Assessing Officer and duly forwarded by the Addl. CIT, it is held that the re-assessment proceedings were initiated in violation of law and thereby liable to be quashed and set aside and accordingly re-assessment order u/s 143(3) r.w.s. 147 of the Act is bad in law. Hence, the AO is directed to delete the addition made in the impugned re- assessment. 4.8 Since the quantum relief has been granted in respect of additional ground no. 2 of the appeal, original grounds Nos. 1 to 5 as well as additional ground No. 1 raised by the appellant do not require separate adjudication.”
Aggrieved with such order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal by raising the following grounds:
1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) erred in law and in facts by not appreciating the facts that on the provisions of section 151(2) of the I.T. Act were not applicable in this case. The present case was selected of scrutiny first time therefore, the original provisions of section 151(2) were applicable in this case, where the prior approval of Joint Addl Commissioner of Income Tax was required.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in law and in facts by not appreciating the facts that the prior approval taken from the Addl Commissioner of Income Tax is correct as per the provisions of section 151(2) of Income Tax 1961 which were in effect at the time of reopening of the case. Hence notice issued u/s 148 was correct as per prevailing provisions of section 151 of Income Tax act 1961.
3. Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in law and in facts by holding the re-assessment order u/s 143(3) r.w.s. 147 of the Act as bad in law as all the procedure of re-assessment are followed as per prevailing provisions of the I.T. Act 1961.
4. Whether on the facts and in the circumstances of the case and in law, the Ld. CII (A) has erred in law and in facts by not appreciating the facts that the assessee had failed to prove identity, genuineness and creditworthiness of the creditor. Hence, the addition of Rs.22,50,50,000/- was correctly made as unexplained cash credit u/s 68 of the I.T. Act 1961.
5. The appellant craves leave to add, alter, modify, delete and amend any of the grounds, as per the circumstances of the case.
The assessee filed the following grounds of objection in his Cross Objection. a. On the basis of facts and the circumstances of the case and in law, the notice issued under section 148 read with section 147 is bad in law and against principal of natural justice and thus liable to be quashed. b. On the basis of facts and the circumstances of the case and in law, the Addl. Commissioner acted mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on approval form "Yes I am Satisfied" indicating approval without application of his mind. c. On the facts and in the circumstances of the case, AO has erred in making the addition of Rs.22,50,50,000/- u/s 68 of the Income Tax Act 1961 as unexplained cash credit even though the appellant provided all information to prove the identity, creditworthiness and genuineness of the shareholders. Therefore, the same may be deleted. d. The learned AO was not justified in charging interest under section 234B of the Income Tax Act, 1961.
e. The learned AO was not justified in initiating penalty proceedings under section 271(1) (c) of the Income Tax Act, 1961. f. The appellant craves leave to add, amend, and alter any or withdraw any grounds of appeal at or before the time of appeal hearing.
The Ld. DR at the outset submitted that the order of the Ld. CIT(A) is a perverse one since as per the provisions of section 151 of the Act as existed at the relevant time, the sanctioning authority was the Joint / Addl. CIT since the original assessment was completed u/s 143(1) and not u/s 143(3), and therefore the approving authority is not the PCIT or CCIT as mentioned by the Ld. CIT(A). He accordingly submitted that the order of the Ld. CIT(A) be set aside and the grounds raised by the Revenue be allowed.
The Ld. Counsel for the assessee submitted that he had taken various other grounds before the Ld. CIT(A) which he has not decided. Further, the Ld. CIT(A) has also not adjudicated the grounds on merit. He accordingly submitted that the matter may be restored to the file of the Ld. CIT(A) for adjudication of the issue afresh.
I heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) and the paper book filed by both the sides. I also considered the various decisions cited before us. It is an admitted fact that the original assessment was completed u/s 143(1) of the Act and not u/s 143(3) of the Act. We find the Assessing Officer reopened the assessment by recoding the I reasons which have been reproduced by the Ld. CIT(A) in the body of the appellate order which read as under: “In the reasons for belief recorded, at Sr No 11 by Income Tax Officer 11(2)(4) Mumbai, it was stated as follows:- “Information is received from the office of the DCIT Central Circle-1 Aurangabad in respect of the assessee that the assessee has received an amount of Rs 22,27,00,500/- by way of share premium in I 2007-08 relevant to I 2008-09. I of the companies from whom the said premium is received are paper/shell companies having address at Kolkatta or Mumbai. It is also seen that one of the operators of the said companies Shri. Jagdish Purohit has in the statement recorded u/s. 131 of the Act by the DDIT(INV)-1(3), Pune u/s. 131 given a list of companies which he has incorporated where in his employees are directors and gives accommodation entries by way of loan/advances and share application/share premium to other companies. From the list of the companies operated by him it is seen that the names of the I companies which have advanced share premium to M/s. Swift Ventures Pvt. Ltd are appearing the said list.
Sr No Name and Address of the company Amount of Share application/premium money given in I 2007-08 1 Anushka Softel Pvt Ltd 105, Sagar Rs 2,80,00,000/- Shopping Centre Andheri Mumbai 2 Motosoftel Pvt Ltd (Dhanlaxmi Rs 90,00,000 Software Pvt Ltd) 105, Sagar Shopping Centre Andheri Mumbai 3 Natraj Vinimay Private Ltd 2/E Rs 1,00,00,000 Comfiled road, Gr Floor, Kolkatta 700019 4 Kumaon Engg Pvt Ltd 14, Popat wadi, Rs 50,00,000 1st Floor, Kalbadevi Mumbai As per above referred information the assessee has obtained bogus accommodation entries from the above-mentioned parties by way of share premium during the F.Y.2008-09 relevant to A.Y.2009-10. In view of the above fact, I have reason to believe that the Income chargeable to tax, as indicated by the accommodation entries by way of share premium from aforesaid bogus companies to the tune of Rs.22,27,00,500/- have escaped assessment for the A.Y 2008-09 within the meaning of section 147 of the I.T Act, 1961. Since more than 4 years have been elapsed from end of assessment year, your kind approval is solicited for reopening the case 147 of the I.T. Act and approval may be granted under section 151(2) of the Income Tax Act.”
We find the provisions of section 151 as it stood at the relevant period while issuing notice u/s 148 of the Act and obtaining the approval read as under: “151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.” (emphasis supplied by us)
Since the Assessing Officer in the instant case has taken the approval of the JCIT / Addl. CIT, therefore, the same is in order and therefore, the Ld. CIT(A) was not justified in quashing the re-assessment proceedings on account of improper satisfaction. We, therefore, set aside the order of the Ld. CIT(A) and restore the issue to his file for fresh adjudication as he has not adjudicated the issue on merit and also on the other limbs of section 147 raised by the assessee in the submissions filed before him. The Ld. CIT(A) shall adjudicate the issue as per fact and law after providing due opportunity of being heard to the assessee. The grounds raised by the Revenue and the grounds of objection raised by the assessee in the CO are accordingly allowed for statistical purposes.
In the result, the appeal filed by the Revenue and the CO filed by the assessee are allowed for statistical purposes.
Order pronounced in the open Court on 26th March, 2025.