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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA, AM & RAM LAL NEGI, JM
O R D E R Per Shamim Yahya, A. M.:
This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals)-8, Mumbai (‘ld.CIT(A) for short) dated 27.02.2019 and pertains to the assessment year (A.Y.) 2008-09.
The grounds of appeal read as under:
1. The Learned Commissioner (Appeals) erred in upholding the action of the Assessing Officer ('AO') in reopening the assessment of the appellant u/s 147 of the Act.
2. The learned Commissioner (Appeals) failed to appreciate the fact that the reassessment proceedings are not according to the laws, rules and regulations. The AO has not issued and served notice u/s 143(2) to the assessee within the prescribed time limit and therefore the entire reassessment proceedings were bad in law. 3. The learned Commissioner (Appeals) erred in confirming the addition made by the AO amounting to Rs. 2,50,00,000 as unexplained cash credit u/s 68 in lieu of amount received as share application money. 4. The learned Commissioner (Appeals) and AO failed to follow the principles of natural justice by not granting an opportunity to cross examine / confront the person on whose confession / statement or possession of material / evidence, they presumed that the share transaction is a bogus / sham transaction. The basic principles of natural justice have not been followed.
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5. The learned Commissioner (Appeals) erred in sustaining the addition of Rs 5,00,000 u/s 69 as notional commission expenditure.
The learned Commissioner (Appeals) erred in confirming the disallowance of expenses amounting to Rs, 91,281. 3. Brief facts of the case are that the assessment in this case was reopened upon
information from the director of investigation, Mumbai that pursuant to search and seizure activity in the case of Praveen Kumar Jain (PKJ) group, it was noted that assessee company is one of the beneficiary company that procured bogus share application money amounting to Rs. 2,50,00,000/-. In assessment order the Assessing Officer gave a detailed account of the search & seizure operation conducted in the business premises of the said Praveen Kumar Jain group. The Assessing Officer noted that assessee has submitted following evidences/documents.
Share application form of the party 2. Bank statement of the said party 3. Confirmation from the party 4. Bank statement of the applicant company showing the amount received.
Financial statement of the said parties for the year ended 31 March, 2009 6. Copy of income tax return for assessment year 2009-10 7. Certificate of investment in equity shares.
The Assessing Officer rejected all the above documents on the basis of findings and evidences collected in the case of search in the case of PKJ group. The Assessing officer did not refer to any enquiry made by him in this regard against any of the parties. He also rejected the assessee’s request of cross examination. Relying solely on the findings of the search & investigation in the case of PKJ group, the Assessing Officer held that amount received was bogus accommodation entry. The Assessing Officer also added a sum of Rs. 5 Lacs as 3 2035/Mum/2019 bogus commission paid at the rate of 2% in arranging the accommodation entry under section 69C.
5. Against the above order, assessee appealed before the Ld.CIT(A), challenging both the validity of reopening as well as merits of the addition.
6. The Ld.CIT(A) first addressed the issue on merits. He referred to the assessment order. Thereafter, he referred to a catena of case laws on such searches. Thereafter, Ld.CIT(A) concluded as under:-
3.1.26 In view of the above detailed discussion, I have no hesitation in confirming the action of the AO in adding the alleged share application money of Rs.2,50,00,000/- received from alleged 13 shareholders tabulated at para 3.1.3 3.1.27 The AO has also made an addition of Rs.5,00,000/- being the estimated unaccounted payment made by the assessee for availing of accommodation entries. This amount has been estimated @2% for the total accommodation entries availed of Rs.5,00,000/- for the relevant year. As discussed in the preceding paragraphs, there is no doubt that the assesee has availed of accommodation entries in the form of share application money from the paper concerns. Shri Praveen Jain has also accepted that he was doing the business of providing accommodation entries at a price. In fact, there is no way one would be taking so much botheration, risk and headache, except for making easy profits through charging commission, etc. Therefore, the action of the AO of estimating the unaccounted expenses incurred by the assessee to avail accommodation entries @2% is held to be on a reasonable footing. Accordingly, the said addition made by the AO of Rs.5,00,000/- is also confirmed. Concludingly, thee grounds are dismissed.
As regards, the challenge to the reopening Ld.CIT(A) elaborately noted the assessee’s submission in this regard.
In the submission of the assessee in this regard reproduced in the Ld.CIT(A) order, the first challenge was to the issue of reassessment notice being time- barred. Thereafter, the issue of lack of application of independent mind by the Assessing officer on the issue of reopening was raised. Thereafter, there were issues of violation of principle of natural justice regarding not giving the opportunity to cross examine. There was also submission that section 292BB
4 2035/Mum/2019 was not applicable. Various case laws and provisions of the Act were also mentioned.
In his adjudication, the Ld.CIT(A) did not dispute the fact of the claim of the assessee that the notice issued under section 143(2) was time-bared. He referred to the decision of Hon’ble Delhi High Court in the case of CIT vs Madhya Bharat Energy Corporation Ltd. and the decision of Hon’ble Kerala High court in the case of Padinjarekara Agencies Pvt.Ltd. vs CIT for his proposition that issue of unnecessary and overhyped importance given to the notice under section 143(2) for reopened proceeding under section 147 was to be downplayed.
Referring to the decision Hon’ble Kerala High Court, the Ld.CIT(A) held that since, the assessee has been given proper opportunity of being heard hence, hearing upon a notice under section 143(2) to was not sustainable.
Thereafter, he referred to the assessee’s challenge of not giving proper opportunity to cross examine. He referred to several case laws and rejected the same.
Against the order assessee is in appeal before us.
We have heard both the parties and perused the records 14. At the outset, Ld. Counsel of the assessee submitted that reassessment notice under section 148 was issued on 24.3.2015. The assessee filed a letter dated 6.4.2015 stating that it has e-filed a return of income on 31.3.2015 in response to the notice under section 148. In this case notice u/s 143(2) was issued on 19.2.2016. The Ld. Counsel submitted that the same was clearly beyond the time limit fixed under provision of section 143(2). 15. Hence, he submitted that the assessment framed pursuant to the time-barred notice issued is illegal and not sustainable. 16. In this regard, he referred to following case laws:-
5 2035/Mum/2019 1.Hon’ble Bombay High Court in Abacus Distribution Systems(India) (P.) Ltd. [2017] 78 taxmann.com 321 2. Hon’ble Delhi High Court in Sunworld INfrastuructre (P) Ltd. vs ITO 24(3) [2015] 64 taxmann.com 471 (Delhi) 3. Hon’ble Allahabad High Court in CIT-II vs Salarpur Cold Storage(P.) Ltd. [2014] 50 taxmann.com 105( Allahabad) 4. Hon’ble Gujarat High Court in CIT-II vs Panorama Builders(P.) Ltd. [2014] 45 taxmann.com 159 (Gujarat)
The Ld. DR, on the other hand relied upon the order of the authorities below. However, he could not factually dispute the submission that notice u/s 143(2) was time barred.
We have carefully considered the submission and perused the record.
We may gainfully refer to the extant provision of section 143(2) in this connection incorporating time limit for issue of notice which read as under:-
'(2) Where a return has been furnished under section 139, or in response to a notice under subsection (1) of section 142, the Assessing Officer shall,— (i) where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and require him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim: [Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003;] (ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced, any evidence on which the assessee may rely in support of the return: a. [Provided that no notice under clause(ii) shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished.]]
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In this case is evident from the assessment order reopening notice was issued under section 148 on 24/3/2015. The assessee filed a letter dated 6/4/2015 stating that it has e- filed a return of income on 31/03/2015 in response to notice under section 148. The assessing officer has issued notice u/s. 143(2) on 19/02/2016.
Admittedly the statutory notice under section 143(2) has been issued beyond the time provided under the sanguine provisions of the act. This factual aspect is undisputed. The learned CIT(A) has held that the importance of time-limit in this connection is overhyped and needs to be downplayed. However we find that honorable jurisdictional High Court and other High Court have held otherwise. We may gainfully referred to these case laws as under :- • Sunworld Infrastructure (P.) Ltd. v. ITO (64 taxmann.com 471) : Hon’ble Delhi High Court Section 143 of the Income-tax Act, 1961 -Assessment - Issue of notice (Time limit) - Assessment year 2012-13 - Whether where assessee filed its return of income on 14- 9-2012, notice under section 143(2) could have been issued on or before 30-9-2013, impugned notice dated 24-12-2014 issued under section 143(2) was barred by time - Held, yes -Whether further, notice under section 143(2) issued on 10-9-2013 by Assessing Officer having no jurisdiction over assessee was one without jurisdiction and could not be regarded as a valid notice - Held, yes. • Commissioner of Income Vs. Salarpur Cold Storage (P) Ltd.(50 taxmann.com 105): Hon’ble Allahabad High Court Section 143, read with section 292BB, of the Income-tax Act, 1961 - Assessment (Notice u/s 143(2)) Assessment year 2008-09 - Whether where Assessing Officer fails to issue a notice within period of six months as spelt out in proviso to clause (ii) of section 143(2), assumption of jurisdiction under section 143(3) would be invalid and this defect cannot be cured by taking recourse to deeming fiction under section 292BB - Held, yes. • CIT Vs. Panorama Builders (P) Ltd. (224 Taxman 203) : Hon’ble Gujarat High Court Section 292BB, read with section 143, of the Income-tax Act, 1961 - Notice - Deemed to valid in certain circumstances (Conditions precedent) - Block assessment period 1-4-1997 to 25-7-2012 - Assessee furnished its return on 6-10- 2004 - Notice under proviso to section 143(2) was issued on 6-7-2006, beyond period of 12 months from end of month in which return was filed - Whether section 292BB, inserted by Finance Act, 2008, has no retrospective effect and is to 7 2035/Mum/2019 be construed prospectively - Held, yes - Whether section 292BB is only confined to service of notice and does not apply to issuance of notice, neither it cures defect or enlarges statutory period where a mandatory notice under section 143(2) is required to be issued within limitation fixed under Act - Held, yes.
In the case of CIT versus Abacus Distribution Systems India Private Limited (78 taxman.com 321). Honourable jurisdictional Bombay High Court held that the impugned order of the Tribunal renders a finding of fact that the notice under section 143(2) has not been served at the correct address on or before the 30 November 2007 which is not shown to be incorrect. It follows that assessment proceedings concluded on the basis of such invalid notice is void.
We find that learned CIT(A) has duly noted this case law and despite that he has not given any consideration to the same whatsoever. Thus it is evident from the above that the issue of notice under section 143(2) beyond the time mandated under the law is fatal and renders the assessment null and avoid.
Here we note section 292BB also doesn't come to the rescue of the revenue in as much as it provides that the provisions of the section shall not apply where the assessee has raised such objection before the completion of such assessment or reassessment. In the present case assessee has duly submitted that by the letter dated 7/10/2015 assessee has raised objection of validity of assessment on non-issuance of the notice under section 143(2). Factual aspect of this submission has also remained unrebutted. Moreover, as held in case laws above, section 292BB cannot cure the fatal mistake of time barred issue of notice u/s 143(2)
Accordingly in the background of aforesaid discussion and precedents, we hold that assessment order is not sustainable in as much as the statutory notice under section 143(2) is time barred.
Since we have held that the reassessment is without jurisdiction and hence in- valid, the adjudication of other issues is only of academic interest. We are not engaging into the same.
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In the result, the appeal is partly allowed. Order pronounced in the open court on 25.05.2021