CHARBUJA MARMO (INDIA) PVT. LTD.,DELHI vs. PR.CIT- 2 , NEW DELHI

PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed

against the Order of the Pr. Commissioner of Income Tax-2,

New Delhi, Dated 22.03.2019 for the A.Y. 2010-2011 under

section 263 of the I.T. Act, 1961.

2 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

both the parties and perused the material on record.

company filed original return of income declaring income of

Rs.5,34,420/- which was processed under section 143(1) of

the I.T. Act, 1961. Thereafter, a notice under section 148

was issued on 23.03.2016 calling upon the assessee to file

its return of income after recording reasons under section

147 and obtaining necessary approval under section 151 as

statutorily required. In response to the statutory notice and

questionnaire issued by the A.O, the assessee appeared

from time to time before the A.O. and filed the requisite

details which were examined and taken on record. The oral

submissions of the assessee were also considered. The A.O.

after examining the detailed evidences filed by assessee,

accepted the return of income vide Order under section

147/143(3) Dated 05.12.2016.

record found that re-assessment order to be erroneous and

prejudicial to the interests of Revenue because in the year

3 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

under consideration assessee has received share capital /

share premium of Rs.70 lakhs from five parties and all these

companies are managed and controlled by Shri S.K. Jain

and Shri Virendra Jain who were entry operators and

running dummy companies. The Pr. CIT, therefore, issued

show cause notice under section 263 of the I.T. Act, 1961,

calling for explanation of the assessee.

3.1. The assessee filed written submissions before the

Ld. Pr. CIT which is reproduced in the impugned order in

which it is explained that assessee filed necessary

documents to prove the genuineness of the transaction

entered into respect of the share application money which

were provided to the A.O. along with supporting documents.

The assessee produced all the documentary evidences and

there is no failure on the part of the assessee to disclose

fully and truly all necessary facts for assessment. Since A.O.

has accepted the genuineness of the transaction after

examining the documentary evidences and material on

record, therefore, it is not a fit case of proceeding under

section 263 of the I.T. Act, 1961. The Ld. Pr. CIT, however,

4 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

did not accept the contention of assessee and noted that

during the course of search in the case of Shri S.K. Jain and

Shri Virendra Jain various incriminating documents were

found. The A.O. considered the appraisal report, but, did

not examine the relevant seized material even though the

entries in the seized material showed that assessee

company was also one of the beneficial of accommodation

entries given by these persons. The Ld. Pr. CIT, therefore,

held that A.O. passed the re-assessment order without

verification of the seized material. The re-assessment order

was set-aside and A.O. was directed to frame the

assessment afresh by conducting proper inquiries about the

source of investment, by affording reasonable opportunity of

being heard to the assessee.

the Order under section 263 of the I.T. Act on several

grounds. Learned Counsel for the Assessee initially

submitted that Ld. Pr. CIT has no jurisdiction to upset the

re-assessment order under section 263 of the I.T. Act

because the reopening of the assessment itself was invalid

5 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

and bad in law and liable to be quashed. He has submitted

that reasons recorded are based on borrowed satisfaction

and without independent application of mind which is

verifiable from the fact that on number of places in the

reasons recorded it is mentioned that same is based on

mere Investigation Wing appraisal report without anything

more brought on record in the reasons and further vague

description used in the reasons to address the transaction

in question by saying that share capital/premium/loan has

escaped assessment vitiates that so purported belief and

even details of information received, if any, are no way

narrated or described in the reasons recorded even --- filing

details etc are missing in the reasons. Since reopening of

the assessment itself is invalid under section 147 of the I.T.

Act, therefore, same is liable to be quashed and as such in

collateral proceedings under section 263 of the I.T. Act, the

Ld. Pr. CIT would not assume valid jurisdiction. He has also

submitted that approval granted by Addl. CIT and Pr. CIT

are invalid and bad in law. Learned Counsel for the

Assessee, therefore, submitted that proceedings under

6 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

section 147 are invalid and bad in law. In support of his

contention he has relied upon several decisions, copies of

which are filed in the paper book.

Orders of the authorities below and submitted that A.O. has

recorded the reasons after going through the appraisal

report and the documents, therefore, reopening of the

assessment is justified. The Ld. D.R. also submitted that the

Ld. Pr. CIT on going through the record correctly found it to

be an assessment erroneous as well as prejudicial to the

interests of the Revenue because A.O. has not examined the

seized material found during the course of search.

well settled Law that since re-assessment proceedings are

invalid and bad in law, therefore, such proceedings could

not be revised under section 263 of the I.T. Act. It is also

well settled Law that validity of the re-assessment

proceedings are to be judged on the basis of the reasons

recorded for reopening of the assessment. It is also settled

Law that while granting sanction under section 151 of the

7 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

I.T. Act to the reasons and reopening of the assessment, the

Competent Authority should apply their mind and could not

grant sanction/approval in a mechanical manner. In this

case the A.O. while reopening the assessment has recorded

the following reasons for re-assessment under section

147/148 of the I.T. Act, copy of which is filed at PB-3 of the

paper book which reads as under :

“ANNEXURE-A

Reasons recorded for initiating proceedings u/s. 147 of

the I.T. Act, 1961 in the case of M/s. Charbhuja Marmo

India Pvt. Ltd., PAN AADCC5143L for A.Y. 2010-11.

A search and seizure operation u/s 132 of I.T. Act,

1961 was conducted at the business and residential

premises of S.K. Jain group of companies, including Shri

S.K. Jain & Shri Virendra Jain and considerable

incrementing evidence in form of documents/material

was seized. During the course of post search

investigation, it emerged that Shri S.K. Jain and Shri

Virendra Jain were engaged in the business of

8 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

providing accommodation entries in lieu of cash to a

large number of beneficiaries through numerous dummy

companies, floated and controlled by them. In fact, it

was unearthed that Shri S.K. Jain and Shri Virendra

Jain were providing accommodation entries through

more than 100 companies/proprietary concerns/

partnership firms. Modus operandi of such bogus

companies, as discussed in the report, is briefly

prescribed as follows :

“Cash received from the recipient parties for providing

the accommodation entries was first deposited in the

accounts of these dummy firms/companies in the

disguise of the cash received against the bogus sales,

duly shown in the books of accounts. From there, this

cash was transferred to the different paper companies

floated by Shri S.K.Jain and Shri Virendra Jain through

a complex trail of transactions, so as to hide the actual

sources of funds of the last set of recipient companies of

Shri S.K. Jain and Shri Virendra Jain.”

9 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

In this way, the reserves & surplus and the capital

account of specific set of companies are enhanced with

the help of the unexplained cash received by S.K. Jain

and Shri Virendra Jain, which routed to these

companies through their dummy firms/companies. Once

the funds were of these companies have been enhanced

sufficiently, accommodation entries through RTGS/

Cheques in the shape of the share capital, share

premium, capital gains or loan as per the specific

requirement of the recipient clients were provided them

in lieu of the cash received from them. In this way, the

chain for providing an accommodation entry gets

completed.”

As per the report, the assessee company M/s

Charbhuja Marmo India Pvt. Ltd. had obtained the

following accommodation entries in the form of Share

application/Share premium/loan during the F.Y. 2009-

10 relevant to A.Y. 2010-2011 :-

10 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

From To Bank Cheque Cheque Amount Throug Ann Page No. Date h exur No. e No. Zenith Charbhuja Prem 41 Holdings Marmo India AXIS 310520 02.09.2009 10,00,000/- Gupta A-20 Ltd., Pvt. Ltd., Victory Charbhuja Prem 41 Software Marmo India AXIS 310921 02.09.2009 20,00,000/- Gupta A-20 Pvt. Ltd., Pvt. Ltd., Humtum Charbhuja Prem 41 Marketing Marmo India AXIS 310802 02.09.2009 10,00,000/- Gupta A-20 Pvt. Ltd., Pvt. Ltd., Sheesh Charbhuja Prem Back Capital Marmo India AXIS 310338 09.10.2009 15,00,000/- Gupta A-18 page Services Pvt. Ltd., 38 Pvt. Ltd., Apporva Charbhuja Prem Back Leasing Marmo India AXIS 353409 09.10.2009 15,00,000/- Gupta A-18 page Finance & Pvt. Ltd., 38 Investment Pvt. Ltd.,

In the appraisal report of Sh. Surendra Kumar Jain

Group prepared by the unit of Investigation wing, it has

been established that Sh. Surendra Kumar Jain and Sh.

Virendra Jain are known entry providers and are the

actual controllers of more than 100 companies/

proprietary firms/partnership firms. They control these

entities through various persons by appointing them as

directors/partners/proprietors apart from nominating

them as authorized signatories for maintaining the bank

accounts of these entities but in fact all these persons

act only as their stooges.

11 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

In view of the above mentioned facts, it is clear

that the undisclosed income of these beneficiary

company which has been introduced by them in the

form of share capital/premium/loan has escaped

taxation because the assessee has not disclosed fully

and truly all material facts before the A.O resulting In

under assessment of income of Rs. 70,00,000/-. Hence,

I have reasons to believe that income of Rs. 70,00,000/-

as per table in preceding, paragraphs has escaped

assessment in the case of assessee relevant to AY

2010-11, within the meaning of Section 147 of the I.T.

Act.”

6.1. In this case the Addl. Commissioner of Income

Tax and Pr. CIT-2, New Delhi have granted approval to the

reopening of the assessment vide Order Dated 15.03.2016,

copy of which is filed at page-2 of the paper book. The same

reads as under :

“Dated : 15.03.2016 Sd/- K. Jayant) Income Tax Officer Ward 6(1), New Delhi.

12 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Whether the Addl. Commissioner, Range-6, New Delhi is

satisfied on the reasons recorded by the I.T.O. that it is a fit

case for issue of notice under section 148.

Yes Sd/- Dev Saran Singh Addl. Commissioner of Income Tax, Range-6, New Delhi.

Whether the Pr. Commissioner of Income Tax, Delhi-2, New

Delhi is satisfied on the reasons recorded by the I.T.O. that it

is a fit case for issue of notice under section 148.

Yes Sd/- P.K. Gupta, Pr. Commissioner of Income Tax, Delhi-2, New Delhi.”

6.2. The ITAT, Delhi Bench in the case of M/s.

Supersonic Technologies Pvt. Ltd., Delhi vs. PCIT-8, New

Delhi reported in 69 ITR 585 (Delhi) in the proceedings

under section 263 of the I.T. Act held that “since re-

assessment proceedings are invalid and bad in Law,

therefore, such proceedings could not be revised under

section 263 of the I.T. Act. The Order of the Tribunal is

reproduced as under :

13 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “G” : DELHI BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI PRASHANT MAHARISHI, A.M.

ITA.No.2269/Del./2017 Assessment Year 2007-2008

M/s. Supersonic Technologies Pvt. Ltd., A- 104, Panchal Complex, The PCIT-8, vs. Chand Vihar, IP Extension, New Delhi. Delhi – 110 092. PAN AAICS6245A (Appellant) (Respondent)

For Assessee : Shri Ved Jain, Advocate & Shri Ashish Chadha, C.A. For Revenue : Shri S.S.Rana, CIT-D.R.

ITA.No.2857/Del./2017 Assessment Year 2007-2008

M/s. SPJ Hotels Private Limited, New Delhi-110017 The PCIT-8, PAN AAKCS7722C Room No.297, Central vs. C/o. Kapil Goel, Advocate, Revenue Building, IP F-26/124, Sector-7, Rohini, Estate, New Delhi. Delhi – 110 085. (Appellant) (Respondent)

For Assessee : Shri Kapil Goel, Advocate. For Revenue : Shri S.S.Rana, CIT-D.R.

ITA.No.2527/Del./2017 Assessment Year 2007-2008

14 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

M/s. Shiv Sai Infrastructure (P) Ltd., New Delhi-110048. The PCIT, PAN AAJCS5095B Delhi-8, vs. C/o. M/s. RRA Taxindia, New Delhi. D-28, South Extension, Part-I, New Delhi – 110049. (Appellant) (Respondent)

For Assessee : Shri Ashwani Taneja & Shri Somil Agarwal, Advocates For Revenue : Shri S.S.Rana, CIT-D.R.

ITA.No.3301/Del./2017 Assessment Year 2009-2010

M/s. Superior Buildwell Private Limited, A-43, The PCIT-8, Allahabad Bank, CGHS vs. New Delhi. Apartments, Mayur Vihar, Phase-III, Chilla Regulator, Delhi.PAN AALCS9413R (Appellant) (Respondent)

For Assessee : Shri Ved Jain, Advocate & Shri Ashish Chaddha, C.A. For Revenue : Shri S.S.Rana, CIT-D.R.

Date of Hearing : 15, 16 & 25.10.2018 Date of Pronouncement : 10.12.2018

ORDER

PER BHAVNESH SAINI, J.M.

15 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

This Order shall dispose of all the appeals filed by

different Assessees challenging the Orders under section 263

of the I.T. Act, 1961. Since issue is common in all the appeals,

therefore, all appeals were heard together and are decided

through this common consolidated Order.

both the parties and perused the material available on

record.

ITA.No.2269/Del./2017 – M/s. Supersonic Technologies Pvt. Ltd., Delhi.

Income in this case was filed on 20.10.2007 at NIL income.

The notice under section 148 of the Income Tax Act, was

issued on 25.03.2014 after recording the reasons and taking

prior approval from the competent authorities. The assessee

in response to the statutory notice vide letter dated

10.04.2014 submitting therein that the original return filed

may please be treated as return filed in response to the notice

under section 148 of the I.T. Act and also requested to

provide reasons recorded, which were duly provided to it. The

16 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

assessee also filled its objections which were disposed off.

The A.O. issued statutory notice which were complied by the

assessee and filed details as called for. The A.O. after

discussing the case with the assessee, accepted the returned

income and completed the re-assessment order under section

147/143(3) of the I.T. Act, 1961, on Dated 30.06.2014.

3.1. The Ld. Pr. CIT on examining the assessment

record noticed that though the assessment was reopened

under section 148 of the I.T. Act on the allegation of

accommodation entry taken from Shri S.K. Jain group of

concerns who were searched on 14.09.2010 by the

Investigation Wing of the Income Tax Department, some of the

A.O’s did not examine the seized material in the form of cash

book and books containing the details of cheques issued by

such concerns seized from the premises of Shri S.K. Jain

during the course of search. The Investigation Wing, Delhi,

forwarded the hard copy of appraisal report to the then

Commissioner, Delhi-III, which was received by him on

15.03.2013, the relevant seized material (containing many

thousands of pages) was scanned and sent to the

17 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Commissioner of Income Tax in soft copy. However, while

completing the assessment under section 147 r.w.s. 143 of

the I.T. Act, though the A.O. referred the appraisal report but

did not look into the relevant seized material in soft copy.

This was one of the case where the A.O. did not examine the

seized material. Accordingly, a show cause notice under

section 263 of the I.T. Act was issued to the assessee on

27.01.2017 which is reproduced in the impugned order. In

the show cause notice it is stated that the case was reopened

on the allegation of accommodation entry of Rs.22 lakhs on

account of share application/capital received from M/s.

Pelican Finance and Leasing Ltd., M/s. Singhal Securities

Pvt. Ltd., M/s. Hillridge Investments Ltd and M/s. S.R.

Cables Pvt. Ltd., a concern of S.K. Jain group of cases.

Search and seizure operation was carried out on 14.09.2010

at the premises of Shri Surender Jain and Shri Virender Jain.

During the course of search, cash book and bank books of the

concerns managed by Shri S.K. Jain group wherein detailed

of day-to-day receipts in cash and cheque from/to different

persons/firms/companies have been recorded, were seized.

18 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

On perusal of the re-assessment order, it is noticed that while

passing the said order, the A.O. has failed to consider the

relevant seized material pertaining to the assessee-company

which is mentioned in the Order. It is noted in the notice

under section 263 that the amounts received by assessee-

company were accommodation entry in lieu of cash given by

the assessee-company through Shri Manoj Bansal. The

relevant copies of the seized material relating to the

assessee-company were given along with show cause notice

or during the proceedings under section 263 of the I.T. Act.

The assessee-company submitted that the A.O. has

considered the seized material not only at the time of re-

assessment but also at the time of recording reasons for re-

assessment. The Learned Counsel for the Assessee referred

to the reasons recorded by the A.O. wherein there is a

mention of accommodation entries provided by the group of

Shri S.K. Jain who had floated hundreds of bogus companies

to provide accommodation entries in lieu of cash.

3.2. The assessee-company also submitted that during

the course of assessment proceedings, assessee-company

19 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

was asked to furnish income tax returns, confirmations,

financials and bank statements, which were duly complied

with by the assessee-company. The assessee-company has

proved the creditworthiness of the Investors before A.O.

Independent notices were issued under section 133(6) of the

I.T. Act to the Investor companies by the A.O. The facts were

examined based on information provided by the assessee-

company. The proceedings under section 263 would amount

to the consideration of material which has already been

considered by the A.O. during the assessment proceedings

under section 147 read with section 143 of the I.T. Act, and if

in case the documents are not available in the files of A.O,

then, there is also no scope of revision under section 263 of

the I.T. Act. The A.O. has not issued notice under section

143(2) of the I.T. Act during the re-assessment proceedings.

The assessee relied upon several decisions in support of the

contention that revision proceedings under section 263 may

be dropped.

3.3. The Ld. Pr. CIT considering the submissions of the

assessee and material on record noted in his findings that

20 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

the seized papers contains various accommodation entries

were provided by such companies to various beneficiaries.

The appraisal report was forwarded by the Investigation

Wing in the month of March, 2013 to then CIT-III, Delhi in

hard copy. The seized material contained many thousand

pages. The seized material contained consolidated day-to-

day cash transactions of all such shell companies wherein

the opening and closing balances of cash has been

mentioned. During the course of search, the entry in the cash

book was admitted to be cash and bank balances. The cash

is shown as received against the names of many

intermediaries. Against the name of some intermediatery

cheques have been shown as issued by such companies to

various beneficiaries. The details of cheques such as cheque

number, name of the bank and date, name of the issuer

company and the name of beneficiary is mentioned in these

details. It is, therefore, clear that even though the appraisal

report has summarized the transactions of the cheques given

by the shell companies to the various beneficiaries through

intermediaries in the tabular form, the details of cash

21 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

received from such intermediaries were not tabulated due to

voluminous data of day-to-day cash transactions appearing

in the seized material. Therefore, all the relevant seized

material found from the premises of Shri S.K. Jain group was

forwarded to the Commissioner in soft copy after scanning.

The assessee-company is also shown as beneficiary as

evident from the scanned copy of the seized material. Against

these entries, the name of assessee-company and the name

of Shri Manoj Bansal (Mediator) is mentioned. All the cheques

were found to be credited in the bank account of the

assessee-company. Several scanned copies are attached

from pages 9 to 19 of the impugned order. From pages 20 to

26 of the impugned order, summary of the appraisal report,

year-wise details of accommodation entries provided by Shri

S.K. Jain group to various beneficiary companies were

tabulated for the charge of CIT-8. The A.O. has made

mentioned details/table as the basis for reopening of the

assessment which is clear from the reasons recorded for

issue of notice under section 148 of the I.T. Act. From the

entry No.230, the name of the assessee-company an amount

22 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

of Rs.22 lakhs have been mentioned. It would shows that

A.O. did not verify or examine the seized material relating to

the assessee. The Ld. Pr. CIT also noted that as there is no

statutory notice under section 143(2) prescribed in the Act

and only non-statutory notice is prescribed, the purpose of

which is to intimate the assessee that the case has been

selected for scrutiny and the notices issued on dated

11.06.2014 and 19.06.2014 clearly proves that the case of

the assessee has been selected for scrutiny, such show

cause notices are nothing but notice under section 143(2). of

the I.T. Act. It is also noted by the Ld. Pr. CIT that even

though no formal notice under section 143(2) was issued by

the A.O, in the letters dated 11.06.2014 and 19.06.2014 it

was specifically mentioned that in the absence of the

requisite details the assessment would be completed under

section 144 of the I.T. Act. The A.O. has not examined this

issue in the light of seized material. Therefore, re-assessment

order was found to be erroneous in so far as prejudicial to the

interests of the Revenue because A.O. failed to look into the

seized material. The Order was set aside and restored to the

23 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

file of A.O. with a direction to examine the seized material

and confront the same to the assessee and pass the order in

accordance with law.

submissions made before the authorities below. Learned

Counsel for the Assessee submitted that in this case the

value of the share was Rs.10/- with premium of Rs.50/- per

share. No business was there in this year. However,

assessee proved the identity of the Investors, their

creditworthiness and genuineness of the transaction in the

matter, therefore, no addition can be made on the ground that

shares were issued at excess premium. He has relied upon

the decision of Hon’ble Madhya Pradesh High Court in the

case of Pr. CIT-(1), Indore vs. Chain House International (P.)

Ltd., (2018) 98 taxmann.com 47 (M.P). He has submitted that

no cash was appearing against the name of the assessee in

the seized paper and that all the papers after scanning were

attached in the impugned order and did not relate to the

assessee. He has submitted that admittedly no notice under

section 143(2) have been issued for completion of the re-

24 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

assessment proceedings, therefore, re-assessment order

dated 30.06.2014 is illegal and bad in law. He has submitted

that in proceedings under section 263 of the I.T. Act only

valid re-assessment order can be revised which should be

erroneous and prejudicial to the interests of the Revenue. It is

not necessary to record all the facts and findings in the re-

assessment order. Ld. Pr. CIT cannot sit over the Order of the

re-assessment passed by the A.O. The A.O. has taken one of

the possible views as per law. Therefore, the re-assessment

order cannot be revised under section 263 of the I.T. Act.

There is a difference between lack of enquiry and inadequate

enquiry. PB-11 is reasons recorded under sections 147/148

of the I.T. Act in which it is mentioned that

information/documents in the form of CD, appraisal report

along with relevant details has been received from the O/o.

CIT-III, New Delhi, Dated 28.03.2013 that the assessee has

received and is a beneficiary of accommodation entries

provided by the group of Shri Surendra Kumar Jain, Shri

Rakesh Gupta, Shri Vishesh Gupta, Shri Navneet Jain and

Shri Vaibhav Jain. The accommodation entries have been

25 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

provided to various assessees who were re-routing their

unaccounted cash through these accommodation entries.

Therefore, all the relevant details were before A.O. at the time

of reopening of the assessment. PB-17 to 24 are the

information called by the A.O. from all Investor Companies

under section 133(6) of the I.T. Act at re-assessment stage.

PB-25 is objections filed by assessee for reopening of the

assessment under section 148. PB 26-27 is queries raised by

the A.O. at re-assessment stage along with documents of

Investor companies. PB-35 is details of share applicant

companies filed. PB-36 is objection decided under section 148

by the A.O. PB-37 to 139 are replies with documents filed by

Investor Companies directly to the A.O. under section 133(6)

of the I.T. Act. If the CD is not considered by the A.O. at the

time of re-assessment order as per notice under section 263

of the I.T. Act, the re-assessment order is bad in law. Learned

Counsel for the Assessee relied upon the Order of ITAT, Delhi

Bench in the case of M/s. NKG Infrastructure Ltd., New Delhi

vs. Pr. CIT, Circle-3, New Delhi in ITA.No.3825 to

3827/Del./2018, Dated 05.09.2018, in which the issue was

26 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

validity of proceedings under section 147/148 of the I.T. Act.

The assessee submitted before the Tribunal that assessment

order in this case is barred by limitation is non-est in the eye

of Law. Therefore, the Pr. CIT cannot assume jurisdiction

under section 263 of the I.T. Act to revise such assessment

order which is non-est in the eye of Law and being barred by

limitation. The Tribunal held that the Order which is barred

by limitation cannot be revised under section 263 of the I.T.

Act by the Pr. CIT. The appraisal report was based on CD

and if same is not considered by the A.O, it is non-application

of mind by the A.O. to initiate re-assessment proceedings

under section 148 of the I.T. Act. Learned Counsel for the

Assessee also relied upon decision of the Hon’ble Delhi High

Court in the case of Director of Income Tax vs. Society for

Worldwide Interbank Financial Telecommunication (2010)

323 ITR 249 (Del.) in which it was held that “notice under

section 143(2) was simultaneously issued on filing of the

return of income, therefore, it is bad in law and invalid”.

Learned Counsel for the Assessee relied upon decision of

Hon’ble Supreme Court in the case of ACIT & Another vs.

27 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

M/s. Hotel Blue Moon in Civil Appeal No.1198 of 2010 arising

out of SLP (C) No.22973 of 2007, Dated 02.02.2010 in which

it was held that “issue of notice under section 143(2) is mandatory”. Learned Counsel for the Assessee relied upon

decision of Hon’ble Delhi High Court in the case of CIT vs.

Sunbeam Auto Ltd., (2011) 332 ITR 167 (Del.) in which it was

held that “if the ITO acting in accordance with Law, makes

certain assessment, the same cannot be branded as

erroneous by the Commissioner simply because, according to

him, the Order should have been written more elaborately.”

Learned Counsel for the Assessee also relied upon decision of

Hon’ble Delhi High Court in the case of ITO vs. D.G. Housing

Projects Ltd., (2012) 343 ITR 329 (Del.) in which it was held

that “the A.O. is both Investigator and Adjudicator. If the A.O.

fails to conduct enquiry, he commits error and the word

‘erroneous’ includes failure to make the enquiry. In cases,

where there is inadequate enquiry but not lack of enquiry,

again the CIT must give and record a finding that the

Order/Inquiry made is erroneous. An Order is not erroneous

and prejudicial to the interests of Revenue, unless the CIT

28 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

hold and records reasons why it is erroneous.” Learned

Counsel for the Assessee relied upon decision of Hon’ble

Delhi High Court in the case of CIT vs. New Delhi Television

Ltd., (2014) 360 ITR 44 (Del.) in which it was held that “once

the claim was considered and examined by the A.O,

Commissioner cannot set aside the Order without recording

contrary finding. This will be contrary to Section 263 of the

I.T. Act.” The CIT did not make any investigation by

examining the Investors. He has relied upon the Order of

ITAT, Delhi Bench in the case of Tirupati Infraprojects Pvt.

Ltd., vs. Pr. CIT, Central-II, New Delhi 2016-(5)-TMI-1290-

ITAT-Delhi. He has also relied upon the Judgment of Hon’ble

Delhi High Court in the case of Globus Infocom Ltd., vs. CIT-

IV, Delhi (2014) 369 ITR 14 (Del.). Learned Counsel for the

Assessee has also relied upon the Judgment of Hon’ble Delhi

High Court in the case of Pr. CIT-8 vs. Shri Jai Shiv Shankar

Traders Pvt. Ltd., 2015-(10)-TMI-1765-Delhi-High Court in

which it was held that “no notice under section 143(2) of the

I.T. Act was issued to the assessee after 16.12.2010, the

date on which the assessee informed the A.O. that the return

29 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

originally filed should be treated as return filed pursuant to

the notice under section 148 of the I.T. Act. Therefore, the

same is fatal to the Order of re-assessment.” He has

submitted that assessee produced sufficient evidences before

A.O. to prove identity of the Investors, their creditworthiness

and genuineness of the transaction in the matter. Therefore,

A.O. in the re-assessment order correctly accepted the

explanation of assessee. In support of the said contention, the

Learned Counsel for the Assessee relied upon decisions of

Hon’ble Delhi High Court in the case of Pr. CIT vs. Softline

Creations P. Ltd., (2016) 387 ITR 636 (Del.) and CIT vs. Fair

Finvest Ltd., (2013) 357 ITR 146 (Del.). Learned Counsel for

the Assessee, therefore, submitted that since re-assessment

order was bad in law because no notice under section 143(2)

have been issued to the assessee and that assessee

produced sufficient evidences to prove the conditions of

Section 68 of the I.T. Act, therefore, revision proceedings

under section 263 of the I.T. Act in such circumstances is

wholly unjustified.

30 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

of the Ld. Pr. CIT. He has submitted that appraisal report

was sent to the A.O. Pr. CIT noted that creditworthiness was

not considered by the A.O. PB-11 is reasons recorded under

section 148 of the I.T. Act which is the statement of the A.O.

The disputed question cannot be raised for the first time

before the Tribunal. The Ld. D.R. relied upon decision of

Hon’ble Delhi High Court in the case of Ashok Chaddha vs.

CIT (2011) 337 ITR 399 (Del.). The Ld. D.R. relied upon Order

of ITAT, Delhi Bench in the case of M/s. Surya Jyoti Software

Pvt. Ltd., vs. Pr. CIT, New Delhi vide ITA.No.2158/Del./2017,

Dated 25.10.2017 reported in 2017-TIOL-1775-ITAT-DEL in

which the Tribunal noted that “assessee-company has raised

the issue of no notice has been issued under section 143(2) or

served upon assessee during the course of re-assessment

proceedings. The Tribunal noted that assessee has neither

challenged this issue after passing of the re-assessment

order nor has raised this issue before Pr. CIT during the

course of revisionary proceedings under section 263 of the

I.T. Act. The assessee has raised several legal

31 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

issues/objections before Pr. CIT challenging the validity of the

re-assessment proceedings. Even before the Tribunal at the

time of filing of the appeal, this issue has neither been raised

in the grounds nor has any additional ground been raised so

that Department could have got the opportunity to object or

respond to such a plea after verifying the record in this

regard. Therefore, request of Counsel for Assessee was

rejected. It is also noted that the impugned order

demonstrated that the issue was neither enquired into nor

was verified by the A.O.” The Ld. D.R. similarly relied upon

decision of ITAT, Delhi Bench in the case of Surya Financial

Services Ltd., vs. PCIT vide ITA.No.2915/Del./2017, Dated

08.01.2018 reported in 2018-TIOL-74-ITAT-Del. The Ld. D.R.

also relied upon decision of ITAT, Delhi Bench in the case of

Shankar Tradex Pvt. Ltd., Delhi vs. Pr. CIT-8, New Delhi, vide

ITA.No.2999/Del.2017 Dated 16.04.2018 in which similar

issue was decided against the assessee. The Ld. D.R.

submitted that A.O. has not taken into consideration the

material seized during search in the case of Shri S.K. Jain.

Therefore, Explanation-2 to Section 263 of the I.T. Act is

32 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

applicable in this case. The Ld. D.R. relied upon decision of

Hon’ble Supreme Court in the case of Deniel Merchants P.

Ltd., vs. ITO & Another in SLP (C) No.23976/2017 Dated

29.11.2017 in which SLP have been dismissed where A.O.

did not make any proper enquiry while making the

assessment and accepting the explanation of assessee in so

far as receipt of share application money is concerned. The

Ld. D.R. also relied upon decision of Hon’ble Supreme Court

in the case of Rajmandir Estates (P.) Ltd., vs. PCIT (2017) 245

Taxman 127 (SC) and other decisions also on the same

proposition that if A.O. did not make any enquiry on the

issue, the proceedings under section 263 could be initiated.

The Ld. D.R. submitted that no objection was raised before

A.O. regarding the issues raised in the present appeal. The

Ld. D.R. relied upon decision of Hon’ble Delhi High Court in

the case of MAF Academy Pvt. Ltd., 361 ITR 258 and

Navodya Castle Pvt. Ltd., 367 ITR 306 which is confirmed by

the Hon'ble Supreme Court as well.

perused the material available on record. The assessee filed

33 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

original return of income on 20.10.2007. The A.O. issued

notice under section 148 of the I.T. Act on 25.03.2014 after

recording the reasons for reopening of the assessment. The

copy of reasons recorded under sections 147/148 are filed at

page 11 of the paper book. In the reasons the A.O. has

mentioned that information/documents in the form of CD

appraisal report along with relevant details have been

received from the O/o. CIT-3, New Delhi that the assessee

has received accommodation entries provided by Shri S.K.

Jain group of cases for a sum of Rs.22 lakhs. The A.O.

accordingly formed an opinion that income of Rs.22 lakhs

chargeable to tax has escaped assessment in the assessment

year under appeal. The assessee in response to the said

notice filed reply dated 10.04.2014 submitting therein that

original return filed may be treated as return filed in response

to the notice issued under section 148 of the I.T. Act and

requested for copy of the reasons which were supplied and

objections of the assessee have been disposed of separately.

The A.O. in the re-assessment order did not mention if he has

issued any notice under section 143(2) of the I.T. Act upon

34 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

assessee before completion of the assessment. This issue

was raised before Ld. Pr. CIT in the proceedings under

section 263 of the I.T. Act that A.O. has not issued notice

under section 143(2) of the I.T. Act at re-assessment

proceedings. The Ld. Pr. CIT mentioned in the impugned order

that assessee was intimated by notices dated 11.06.2014

and 19.06.2014 that in the absence of requisite details

assessment would be completed under section 144 of the I.T.

Act. The Ld. Pr. CIT treated the same notices as notice issued

under section 143(2) of the I.T. Act. The Ld. Pr. CIT, however,

admitted that no formal notice under section 143(2) have

been issued to the assessee before completion of the re-

assessment proceedings. The Hon’ble Delhi High Court in the

case of CIT vs. CPR Capital Services Ltd., (2011) 330 ITR 43

(Del.) held as under :

“The Tribunal held that no notice under section 143(2)

of the Income-tax Act, 1961 was prepared and served

upon the assessee. On appeal:

Held, dismissing the appeal, that mere noting in the

order sheet would not suffice and the copy of the notice

35 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

issued under section 143(2) of the Act was not available

on record. Since the Department had failed to produce

the copy the notice under section 143(2) of the Act there

was no option but to agree with the findings of the

Tribunal that no such notice was prepared and served

upon the assessee. In the absence of this mandatory

requirement of issuing statutory notice under section

143(2) of the Act, the Tribunal had rightly quashed the

assessment as null and void.”

6.1. The Hon’ble Delhi High Court in the case of Pr. CIT

vs. Silverline (2016) 383 ITR 455 (Del.) held that “Order of re-

assessment cannot be passed without notice under section

143(2) of the I.T. Act. The jurisdictional error cannot be cured

by Section 292BB of the I.T. Act”. It is, well settled Law that

before passing the re-assessment order, A.O. shall have to

prepare and serve notice upon assessee under section 143(2)

of the I.T. Act. The Ld. Pr. CIT, however, observed that “no

formal notice under section 143(2) have been issued to the

assessee”. Therefore, these facts clearly show that before

36 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

framing the re-assessment order under sections 147/148 of

the I.T. Act, no notice under section 143(2) have been

prepared, issued and served upon the assessee. Therefore,

re-assessment order is illegal, invalid and bad in law and is

liable to be set aside. It is well settled Law that assessee can

challenge the validity of the re-assessment proceedings in the

collateral proceedings (relating to examination of validity of

Order passed) under section 263 of the I.T. Act. We rely upon

the Order of ITAT, Mumbai Bench in the case of Westlife

Development Ltd., vs. PCIT 49 ITR (Tribu.) 406 in which it

was held “allowing the appeal (i) that jurisdiction aspect of

the Order passed in the primary proceedings can be

examined in collateral proceedings also. Thus, the assessee

could be permitted to challenge the validity of the Order

passed under section 263 on the ground that the assessment

order was non-est.” Since the re-assessment order itself is

bad in law, therefore, Learned Counsel for the Assessee,

rightly contended that the same cannot be revised under

section 263 of the I.T. Act. Only valid re-assessment order

can be revised under section 263 of the I.T. Act. On this

37 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

ground itself the proceedings under section 263 of the I.T. Act

are bad in law and liable to be quashed. We, accordingly, set

aside the Order of Ld. Pr. CIT passed under section 263 of

the I.T. Act and quash the same. In view of the above, the

remaining plea of the assessee are not required to be

adjudicated. However, we may briefly note that A.O.

examined entire seized material at the time of recording

reasons and re-assessment stage. The assessee produced

sufficient evidences at the re-assessment proceedings to

prove the identity of the creditors, their creditworthiness and

genuineness of the transaction. The A.O. also made direct

enquiry by issuing summons under section 133(6) of the I.T.

Act to the Investors who have also replied directly to the A.O.

Therefore, A.O. rightly accepted the credits as genuine. In

view of the above finding, there is no need to give a finding in

detail on merits. In view of the above, we allow the appeal of

assessee.

Assessee is allowed.

38 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

ITA.No.2857/Del./2017 – M/s. SPJ Hotels Pvt. Ltd., New

Delhi

against the Order of the Ld. Pr. CIT-8, New Delhi, Dated

22.03.2017, for the A.Y. 2007-2008 under section 263 of the

I.T. Act, 1961.

similar information about entry operators and their

beneficiaries of Delhi was received from the O/o. DIT, (Inv.)-II,

Delhi, along with detailed report giving working of entry

operators with a list of beneficiaries. After making inquiries,

the Addl. DIT, Unit-VI of Investigation in his report has

established large amount of tax evasion in the transactions

between entry operators and the beneficiaries. It was

revealed from the list that the assessee-company viz., M/s.

SPJ Hotels Private Limited during the previous year relevant

to the assessment year under appeal had taken

accommodation entries from M/s. Hillridge Investments Ltd.,

39 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

and M/s. Vogue Leasing & Finance Private Limited in a sum

of Rs.5 lakhs each on 28.03.2017. The A.O. reopened the

assessment under section 148 of the I.T. Act. Notice under

section 148 was issued on 25.03.2014 after recording the

reasons and taking prior approval of the Competent

Authority. In response thereto, assessee submitted a letter

stating therein that it was incorporated on 05.03.2007 and

filed first return of income for A.Y. 2008-2009 for the period

from 05.03.2007 to 31.03.2008 declaring NIL income. It was,

therefore, submitted that NIL return may be treated as return

having been filed for A.Y. 2007-2008 under appeal. The

assessee asked for copy of reasons for reopening of the

assessment. The assessee attended the proceedings before

A.O. time to time and filed details of share capital received

from 04 parties in a sum of Rs.5 lakhs each i.e., (1) M/s.

Hillridge Investments Ltd., (2) M/s. Vogue Leasing & Finance

Private Limited (3) M/s. Pelicon Finance & Leasing Limited,

and (4) M/s. Pitambara Securities Pvt. Ltd., A.O. disposed of

the objections of the assessee. It is noted in the reasons that

he has reason to believe that income chargeable to tax in a

40 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

sum of Rs.10 lakhs on account of accommodation entries has

escaped assessment. The A.O. after considering the

evidences and material on record made the addition of Rs.20

lakhs in respect of four corporate entities under section 68 of

the I.T. Act and made further addition of Rs.40,000/- on

account of commission expenses for taking accommodation

entries. The re-assessment order under sections 144/148

Dated 18.03.2015 was passed accordingly.

assessment order to be erroneous and prejudicial to the

interests of the Revenue and noted that Investigation Wing

has forwarded hard copy of appraisal report to show that

assessee received accommodation entries. However, A.O. has

taken it at Rs.10 lakhs only as against Rs.1 crore. Show

cause notice under section 263 of the I.T. Act was issued

stating therein that assessee has received Rs.50 lakhs each

as accommodation entries from Hillridge Investments Ltd.,

and M/s. Vogue Leasing & Finance Private Limited.

Explanation of assessee was called for because the

assessment order was erroneous in so far as it is prejudicial

41 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

to the interests of the Revenue because the A.O. has not

examined the seized material and has failed to tax the

amount of Rs.1 crore as unexplained credit in the books of

account of the assessee. The assessee filed reply in which it

was briefly explained that the A.O. in the reasons for

reopening of the assessment recorded that there is

escapement of income of Rs.10 lakhs. Therefore, entire

proceedings are based on non-application of mind by the A.O.

The assessee requested for cross-examination to the

statement of Shri S.K. Jain. The Pr. CIT noted that correct

amount of accommodation entries from both these companies

are Rs.50 lakhs each instead of Rs.5 lakhs. The Ld. Pr. CIT

also noted that A.O. failed to consider the seized material

found during the course of search in the case of Shri S.K.

Jain, therefore, A.O. passed the re-assessment order without

proper verification and enquiries. Therefore, re-assessment

order was set aside and A.O. was directed to pass the order

afresh as per law.

submissions made before the authorities below and referred

42 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

to PB-1 which is reasons recorded for reopening of the

assessment in which A.O. found that income of Rs.10 lakhs

has escaped assessment. However, the Ld. Pr. CIT noted that

amount is Rs.50 lakhs each in both the cases, therefore,

escapement of income is of Rs.1 crore. He has, therefore,

submitted that reasons recorded for reopening of the

assessment are invalid, incorrect and non-existing. Therefore,

re-assessment order is invalid and bad in law. He has

submitted that A.O. considered the seized material on record

and that it is a non-application of mind by the A.O. to frame

re-assessment order. In support of this contention, he has

relied upon the Judgments of Hon’ble Delhi High Court in the

case of CIT vs. Suren International (2013) 357 ITR 24 (Del.),

Judgment of Delhi High Court in the case of PCIT vs. RMG

Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del.) and Judgment of

Delhi High Court in the case of SNG Developers Ltd., (2018)

404 ITR 312 (Del.). He has submitted that since re-

assessment order was invalid and bad in law, therefore,

same cannot be revised under section 263 of the I.T. Act. No

cross-examination have been allowed to the statement of Shri

43 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

S.K. Jain, therefore, re-assessment order is bad in law and

cannot be reviewed. He has, therefore, submitted that

proceedings under section 263 of the I.T. Act may be

quashed.

of the Ld. Pr. CIT and submitted that figure in the reasons is

wrongly mentioned. He has filed written submissions and

relied upon some Judgments as relied in case of Supersonic

Technologies Pvt. Ltd., (supra). Therefore, Ld. Pr. CIT rightly

considered re-assessment order to be erroneous and

prejudicial to the interests of the Revenue.

perused the material available on record. It is well settled

Law that validity of re-assessment proceedings is to be

judged with reference to the reasons recorded under sections

147/148 of the I.T. Act. In the present case, A.O. has

recorded reasons for reopening of the assessment on

25.03.2014, copy of which is filed at page-1 of paper book.

Same reads as under :

44 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

“Reasons for issue of notice u/s 148 of the I.T.Act, 1961 in the

case of M/s. SPJ Hotels (PV Limited, PAN AAKCS7722C for the

A.Y. 2007-08 - Reg.

25.03.2014 : Information about entry operators and their

beneficiaries of Delhi has been received from the office of the DIT

.(Inv.)-II, New Delhi vide letter F. No. DlT(Inv)-148/2011-

12/7539 dated 21,03.2012 and F. No. DIT (Inv)-II/U/s 148/ 2012-

13/196 dated 12.03.2013 along with detailed report giving working

of entry operators with a list of beneficiaries. After making

inquiries, the Addl. Directorate of Income Tax, Unit - VI of

Investigation, in his report has established large amount of tax

evasion in the transactions between entry operators and the

beneficiaries. It is revealed from the list that the assessee company

M/s. SPJ Hotels (P) Limited (termed as beneficiary) during the

previous year 2006-2007 relevant to Assessment. Year 2007-2008

had taken accommodation entries totaling Rs.l0,00,000/- from the

persons/parties (termed as entry operators). These entries have

been investigated by the Investigation Wing and found to be given

45 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

as accommodation entries from entities operated and controlled by

Surender Kumar Jain. The details of which are mentioned below :

Beneficiary’s Amount Entry Provider Cheque/ Dated Name (Rs.) P.O.No. M/s. SPJ 5,00,000/- M/s. Hillridge 011048 28.03.2007 Hotels (P) Investments Limited Limited. M/s. SPJ 5,00,000/- M/s. Vogue 011047 28.03.2007 Hotels (P) Leasing & Limited Finance (P) Limited

I have very carefully considered the aforesaid piece of

information and the modus operandi of the entry operator Surender

Kumar Jain and its controlled entities. I find that the quantum of

amount of such entries received by the assessee company M/s. SPJ

Hotels (P) Limited as per details mentioned above is Rs.10,00,000/-

. These accommodation entries taken by M/s. SPJ Hotels (P)

Limited are earlier identified and examined by the Investigation

Wing to establish that all these entry providing entities were tools

in Surender Kumar Jain business of providing accommodation

entries in lieu of cash/cheques through which he had drawn a long

46 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

trail of bank transaction to impart a color of genuineness on these

transactions.

In view of facts stated herein above, I am of the considered

opinion & belief that the assessee company managed the above said

transactions of accommodation entries out of its income from

undisclosed sources. In this case, as per records available, the

assessee has not filed its return of income for the A.Y. 2007-08. In

view of above, I have reason to believe that income of

Rs.10,00,000/- has escaped assessment within the meanings of the

provisions of Section 147 of the Income Tax Act, 1961. Therefore, a

notice u/s. 148 of the Income Tax Act, 1961 is required to be issued

to the assessee company to assess the income escaped as stated

hereinabove. As the period to reopen the case exceeds four years

and as per records no scrutiny assessment has been done in this

case for the A.Y. 2007-08, approval from the Addl. Commissioner

of Income Tax, Range-9, New Delhi has been obtained vide letter

dated 25.03.2014 to issue notice u/s.148, as per the provisions of

Section 151(2) of the I.T. Act.

Therefore issue notice u/s. 148 of the I.T. Act.

47 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Sd/-Virender Kumar Rathee ITO, Ward 9(2), New Delhi.”

13.1. In the aforesaid reasons for reopening of the

assessment, it is mentioned that assessee company received

share capital on account of accommodation entries of Rs.5

lakhs each from M/s. Hillridge Investment Pvt. Ltd., and M/s.

Vogue Leasing & Finance Pvt. Ltd., based on information and

seized material received from Investigation Wing. However,

the assessee explained before A.O. that amount in question is

Rs.20 lakhs from four parties. The A.O. in the re-assessment

order made addition of Rs.20 lakhs on account of

unexplained credit on account of accommodation entries

received from four parties and also made addition of

Rs.40,000/- on account of Commission paid to entry

operators. On the basis of the same material, the Pr. CIT

initiated the proceedings under section 263 of the I.T. Act on

the reasons that amount in question is not Rs.10 lakhs

received from these two companies, but, it is Rs.50 lakhs

each i.e., Rs.1 crore. Thus, the facts mentioned in the reasons

for reopening of the assessment are incorrect and non-

48 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

existent. The Hon’ble Punjab & Haryana High Court in the

case of CIT vs. Atlas Cycle Industries (1989) 180 ITR 319 (P

& H) held as under :

“Held (i) that the Tribunal was right in cancelling the

reassessment as both the grounds on which the

reassessment notice was issued were not found to exist,

and, therefore, the Income-tax Officer did not get

jurisdiction to make a reassessment.”

13.2. Since the facts are totally different as A.O. had

reason to believe that Rs.10 lakhs has escaped assessment

on account of Rs.5 lakhs received from two companies

referred to above, which was ultimately found to be incorrect

and non-existent, therefore, there may not be any application

of mind on the part of the A.O. to proceed to initiate the re-

assessment proceedings. There is no other material available

on record except the information received from the

Investigation Wing. The A.O. on the basis of the information

and material received from Investigation Wing has recorded

reasons for reopening of the assessment which was

ultimately found to be incorrect and non-existent. It is well

49 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

settled law that when no new material other than examined

by the A.O originally found on record for the purpose of

initiating the re-assessment proceedings, the proceedings

under section 148 of the I.T. Act would be invalid and bad in

law. We rely upon decision of Delhi High Court in the case of

Atul Kumar Swamy 362 ITR 693, Consulting Engineers

Services India Pvt. Ltd., 378 ITR 318, Nestle India Ltd., 384

ITR 334 and Priyadesh Gupta 385 ITR 452. The Hon’ble Delhi

High Court in the case of SNG Developers Ltd., 404 ITR 312

held that when A.O. initiated the re-assessment proceedings

without application of mind, such proceedings would be

invalid. A.O. in the present case has failed to verify the

information received from Investigation Wing. Therefore, it is

non-application of mind on the part of the A.O. to record

correct facts in the reasons for reopening of the assessment.

In such circumstances, the re-assessment order could not be

treated as valid and in accordance with law. Since re-

assessment proceedings are invalid and bad in law,

therefore, such proceedings could not be revised under

section 263 of the I.T. Act. Following the reasons for decision

50 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

in the case of M/s. Supersonic Technologies Pvt. Ltd., (supra),

we set aside the order passed by the Ld. Pr. CIT under

section 263 of the I.T. Act and quash the same.

Assessee is allowed.

ITA.No.2527/Del./2017 – M/s. Shiv Sai Infrastructure (P) Ltd., New Delhi.

against the Order of the Ld. Pr. CIT-8, New Delhi, Dated

24.03.2017, for the A.Y. 2007-2008 under section 263 of the

I.T. Act, 1961.

148, dated 28.03.2014 was issued to the assessee after

recording the reasons and obtaining approval of CIT-3, New

Delhi. In compliance to the notice under section 148, the

assessee has furnished return on 01.05.2014. The assessee

stated before A.O. that the income declared in the ITR under

section 148 remain the same as declared in the original

return of income filed under section 139 of the I.T. Act Dated

51 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

30.10.2007. It was further stated that income of

Rs.33,79,596/- as declared in the return of income under

section 139 has been accepted and assessed to tax under

section 143(3) vide Order dated 27.11.2009. The A.O. after

considering the material on record and summons issued

under section 131(1) of the I.T. Act and notice under section

133(6) and other material on record, accepted the return of

income and passed the re-assessment order under section

143(3) r.w.s. 147 of the I.T. Act, Dated 30.03.2015.

to be erroneous in so far as it is prejudicial to the interests of

the Revenue. It is noted that assessment was reopened under

section 148 on the allegation of accommodation entries taken

from Shri S.K. Jain group of concerns who were searched on

14.09.2010 by the Investigation Wing of the Income Tax

Department. Some of the Assessing Officers did not examine

the seized material in the form of cash book and the books

containing the details of cheques issued by such concerns

seized from the premises of Shri S.K. Jain. Notice under

section 263 of the I.T. Act was issued to the assessee which

52 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

is reproduced in the impugned order in which it is noted that

case was reopened on the basis of the allegation of

accommodation entry on account of share capital/share

premium/share application money from M/s. Hillridge

Investments Ltd., and M/s. Vogue Leasing & Finance Pvt.

Ltd., concerns of Shri S.K. Jain group of cases. The A.O.

accepted the return of income on the basis of confirmations

from the said investors. The evidences found during the

course of search in the case of Shri S.K. Jain group of cases

have not been examined by the A.O. Reply of the assessee

was called for in which the assessee explained that the A.O.

after examining the entire details and documentary evidences

on record and making direct/independent enquiry from both

the Investors under sections 131(1) and 133(6) of the I.T. Act,

completed the assessment proceedings. The assessee filed all

the documentary evidences before A.O. i.e., confirmation

letters from both the Investors, copy of their bank accounts,

copy of ITR, copy of PAN, copy of audited balance sheet, copy

of Master Data taken from Official website of MCA and

assessment order under section 153C/153A in the case of

53 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

M/s. Hillridge Investments Ltd., The seized papers are only

rough papers and no details have been mentioned therein.

The Ld. Pr. CIT however, did not accept the contention of

assessee and noted that seized documents recovered during

the course of search in the case of Shri S.K. Jain group of

cases have not been examined and considered by the A.O.

while framing the re-assessment order. The Ld. Pr. CIT also

noted that verification of the seized documents shows the

amount in question is Rs.2.20 crores but as per the details

given in the notice under section 263 of the I.T. Act, the

amount is mentioned as Rs.2.90 crores. The contention of the

assessee that the seized material did not belong to the

assessee was rejected. The re-assessment order was set

aside and restored to the A.O. for passing the order afresh as

per law.

the Order under section 263 of the IT. Act. The assessee also

moved an application for admission of the following

additional ground.

54 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

“That having regard to the facts and circumstances

of the case, Ld. CIT ought not to have revised re-

assessment order under section 147/143(3) as the

said re-assessment order was void and bad in law

due to illegal assumption of jurisdiction.”

18.1. The Learned Counsel for the Assessee submitted

that additional ground is legal in nature and no fresh facts

are to be investigated. The additional ground goes to the root

of the matter and therefore, prayed that the same may be

admitted for disposal of the appeal. Learned Counsel for the

Assessee relied upon the decision of Hon’ble Supreme Court

in the case of NTPC Limited vs. CIT (1998) 229 ITR 383 (SC)

and CIT vs. Sinhgad Technical Education Society (2017) 397

ITR 344 (SC) and decision of Hon’ble Punjab & Haryana High

Court in the case of VMT Spinning Co. Ltd., vs. CIT, Ludhiana

and another (2016) 389 ITR 326 (P & H).

admission of additional ground of appeal.

55 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

view that additional ground is legal in nature and goes to the

root of the matter. Therefore the same shall have to be

admitted for the purpose of disposal of the appeal. We,

accordingly, admit the additional ground of appeal. Learned

Counsel for the Assessee contended that re-assessment order

in this case under section 143(3)/147 is invalid and bad in

law and as such, the same could not be revised under section

263 of the I.T. Act. He has submitted that in fact said issue

can be raised in collateral proceedings as is held in the

following judicial decisions.

(i) Classic Flour & Food Processing P. Ltd., vs. CIT, Kolkata ITA.No.764-766/Kol./2014, Dated 05.04.2017 of ITAT Kolkata Bench. (ii) Krishan Kumar Saraf vs. CIT (2016) 46 ITR 387 (ITAT) (Delhi Bench). (iii) Westlife Development Ltd., vs. Pr. CIT (2016) 49 ITR 406 (ITAT) (Mumbai Bench).

20.1. Learned Counsel for the Assessee referred to

several documents in the paper book in support of the

contention that entire documentary evidences were filed

before A.O. at the original assessment stage as well as in the

56 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

re-assessment proceedings to prove genuineness of the share

capital money received from the Investors. PB-45 is

confirmation of M/s. Hillridge Invesment Ltd. PB-46 is bank

statement. PB-49 is ITR of M/s. Hillridge Invesment Ltd. PB-

50 to 53 are Confirmation, Bank statement and ITR of M/s.

Vogue Leasing & Finance Pvt. Ltd. PB-307 is order sheet of

the A.O. All documentary evidences were filed before A.O. in

both the proceedings. PB-68 is copy of the reasons recorded

under section 148 of the I.T. Act in which the amount of

Rs.2.90 crores as accommodation entries have been

mentioned instead of Rs.2.20 crores. PB-60 is notice under

section 148 Dated 28.03.2014. PB-57 is original assessment

order under section 143(3) Dated 27.11.2009. He has,

therefore, submitted that re-assessment done after four years

and in the reasons as well as in the notice under section 148

of the I.T. Act, 1961, the A.O. has not mentioned anything if

there was any failure on the part of the assessee to disclose

fully and truly all material facts at every stage for the

purpose of assessment and re-assessment. The assessee

declared share application money received from two parties.

57 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

However, in the reasons name of none of parties have been

mentioned. In the original assessment proceedings an

amount of Rs.2.20 crores have been mentioned. Therefore, in

the reasons the facts have been wrongly mentioned. All the

facts available on record were considered in the re-

assessment proceedings, therefore, no new material has been

brought on record for reopening of the assessment. All

incorrect and non-existing facts have been mentioned in the

reasons for reopening of the assessment. The amount in

question is also wrongly mentioned in the reasons. In the

books of account of assessee, assessee has shown to have

received share application money from two Investors in a

sum of Rs.2.20 crores and not Rs.2.90 crores. Learned

Counsel for the Assessee referred to various replies filed

before A.O. at original assessment stage as well as in the re-

assessment proceedings in which it was clearly highlighted

that there is application of mind from the side of the A.O. to

frame the re-assessment order. PB-300 and 301 is report of

the Inspector to show that notice under section 133(6) have

been served upon M/s. Vogue Leasing & Finance Pvt. Ltd.

58 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

PB-319 is the report of the Investigation Wing which clarifies

that summons under section 131 and notice under section

133(6) have been issued on the Directors of the assessee-

company which have been complied with. Necessary enquiry

have been conducted by the Inspector of the Office who has

submitted his report without pointing-out any specific

discrepancy. PB-310-317 is order sheet. Learned Counsel for

the Assessee relied upon decision of Hon’ble Delhi High Court

in the case of Haryana Acrylic Manufacturing Company vs.

CIT (2009) 308 ITR 38 (Del.) in which it was held as under :

“Conclusion :

AO while making assessment under s. 143(3) having

made specific queries with regard to share application

money in response to which assessee furnished all

relevant documents and after considering this material,

AO having completed the assessment, it could not be

said that income escaped assessment on account of

failure on the part of assessee to disclose fully and truly

all material facts necessary for assessment, hence

59 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

reopening of assessment after expiry of four years from

the end of the relevant assessment year was invalid.”

20.2. In the case of Well Intertrade (P) Ltd., & Another

vs. Income Tax Officer (2009) 308 ITR 22 (Del.) (HC), the

Hon’ble Delhi High Court has held as under :

“Conclusion :

Assessee having fully and truly disclosed all the

material facts necessary for the assessment as required

by the A.O, the precondition for invoking the proviso to

Section 147 was not satisfied and therefore, A.O. acted

wholly without jurisdiction in issuing notice under

section 148 beyond the four year period mentioned in

Section 147.”

20.3. Learned Counsel for the Assessee submitted that

there is totally non-application of mind by the A.O. while

framing the re-assessment order, therefore, re-assessment is

illegal and bad in law. In support of his contention, he has

relied upon decision of Hon’ble Delhi High Court in the case of

Pr. CIT vs. RMG Polyvinyl (2017) 396 ITR 5 (Del.), Pr. CIT vs.

60 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Meenakshi Overseas Pvt. Ltd., (2017) 99-CCH-28-Del.-HC, Pr.

CIT vs. G & G Pharma India Ltd., (2016) 384 ITR 147 (Del.).

He has submitted that there is no approval for reopening of

the assessment by the Competent Authority. He has

submitted that all the seized papers were considered by the

A.O, therefore, reopening of the assessment was bad in law,

illegal and as such Ld. Pr. CIT should not assume jurisdiction

under section 263 of the I.T. Act.

submissions made in the case of M/s. Supersonic

Technologies Pvt. Ltd., Delhi. in ITA.No.2269/Del./2017

hereinabove. The Learned D.R. submitted that seized

material was not considered by the A.O. Summons under

section 131 were not complied with. All material facts were

not disclosed. A.O. took the figure of Rs.2.90 crores in the

reasons based on information received from Investigation

Wing. Therefore, Ld. Pr. CIT correctly invoked jurisdiction

under section 263 of the I.T. Act. Assessee cannot challenge

validity of re-assessment proceedings under section 263 of

the I.T. Act.

61 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

perused the material available on record. It is well settled

that the Ld. Pr. CIT while exercising power under section 263

of the I.T. Act could not revise the assessment order which

was illegal, bad in law and non-est in the eye of Law. The

assessee can challenge the validity of the re-assessment

order referred to under section 263 of the I.T. Act being non-

est and illegal. The case Laws relied upon by the Learned

Counsel for the Assessee are squarely applicable to the facts

and circumstances of the case. In the present case, A.O.

passed the original assessment order under section 143(3) of

the I.T. Act, Dated 27.11.2009. The A.O. has mentioned in the

assessment order that details have been filed by assessee

and after discussion of the case return of income have been

accepted. The assessee in this case received share

application money/premium from two parties and filed

several documents on record to prove genuine credit in the

matter which is accepted by the A.O. Thereafter, re-

assessment proceedings were initiated under section 148 of

the I.T. Act. The A.O. in the notice under section 148 as well

62 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

as in the reasons did not mention if there is any failure on the

part of the assessee to disclose fully and truly all material

facts necessary for assessment. Therefore, the decisions of

Hon’ble Delhi High Court relied upon by the Learned Counsel

for the Assessee in the cases of Haryana Acrylic

Manufacturing Co. vs. CIT & Another (supra) and Well

Intertrade (P) Ltd., and Another (supra), are squarely

applicable to the facts of the case. Therefore, the re-

assessment done after four years from the end of the relevant

assessment year would be bad in law unless the income

chargeable to tax has escaped assessment for such

assessment year by the reason of failure on the part of the

assessee to make return under section 139 or in response to

notice issued under section 142(1) or Section 148 or to

disclose fully and truly all material facts necessary for

assessment for that assessment year. In the absence of any

such details mentioned in the reasons or notice under section

148, the re-assessment order would be invalid and bad in

law. Further A.O. recorded incorrect facts in the reasons for

reopening of the assessment because the amount in question

63 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

is Rs.2.20 crores but A.O. has mentioned in the reasons the

amount of Rs.2.90 crores which escaped assessment.

Further, no names of the parties have been mentioned in

reasons under section 147 from whom the amount in question

have been received by the assessee as accommodation entry.

All the facts brought to the notice of the A.O. by the

Investigation Wing have been considered by the A.O. while

framing the re-assessment and accepted the return of income.

Therefore, there was no new material available on record to

justify reopening of the assessment or to invoke jurisdiction

under section 263 of the I.T. Act, which would also show that

there is totally non-application of mind on the part of the A.O.

to reopen the assessment in the matter. These facts are

sufficient to hold that reopening of the assessment was bad

in law, illegal and non-est, therefore, such order could not be

revised in the proceedings under section 263 of the I.T. Act.

We, accordingly set aside the Order of the Ld. Pr. CIT passed

under section 263 of the I.T. Act and quash the same. In this

view of the matter, there is no need to decide the issue on

merit. However, we may note briefly that documentary

64 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

evidences were filed before A.O. at original assessment stage

as well as at the stage of re-assessment to prove genuine

credit in the matter which have accepted by the A.O. after

considering and examining the material on record and calling

explanation from the Investors under section 133(6) of the I.T.

Act. In this view of the matter, we allow the appeal of

assessee.

Assessee is allowed.

ITA.No.3301/Del./2017 – M/s. Superior Buildwell Pvt. Ltd.,

Delhi.

against the Order of the Ld. Pr. CIT-8, New Delhi, Dated

17.03.2017, for the A.Y. 2009-2010 under section 263 of the

I.T. Act, 1961.

of income was filed on 18.09.2009 declaring NIL income. On

the basis of information received from Directorate of

Investigation Wing of Income Tax Department, it was noticed

65 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

that during the course of search in the premises of Shri

Surendra Kumar Jain group of cases, it was found that

assessee has obtained an entry of Rs.2 crores by way of

share capital/share application money. The assessment was

reopened under section 148 of the I.T. Act, 1961. Notice under

section 148 was issued on 18.10.2013. The A.O. issued

notice under section 142(1) Dated 22.05.2014 and the

assessee in reply thereto, submitted that return already filed

may be treated as return filed pursuant to notice under

section 148 of the I.T. Act. The A.O. issued notice under

section 133(6) to M/s. Supersonic Construction Ltd., and M/s.

Oriental Bank of Commerce for relevant information and

verification. The assessee was asked to file details of

addition to share capital with complete name, address, PAN

and the amount received. The assessee submitted desired

details before A.O. and also filed confirmations, audited bank

statement, ITR and return of allotment filed with ROC. The

A.O. verified the identity, creditworthiness and genuineness

of the transaction in the matter and accordingly accepted the

66 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

return of income vide order under sections 147/143(3) of the

I.T. Act, 1961 Dated 30.06.2014.

26.1. The Ld. Pr. CIT found the re-assessment order to

be erroneous in so far as it is prejudicial to the interests of the

Revenue because information was received that assessee

received accommodation entry from Shri S.K. Jain group of

concerns and all the seized documents have not been verified

by the A.O. Show cause notice was issued to the assessee

seeking explanation of credit entry of Rs.1 crores received

from Shalini Holdings Ltd. The assessee filed detailed reply

which is reproduced in the impugned order in which the

assessee submitted that complete details were filed before

A.O. and receipt of share capital money supported by the

documents and confirmations. Therefore, re-assessment order

is not erroneous in so far as prejudicial to the interests of the

Revenue. The Ld. Pr. CIT noted the submissions of the

assessee wherein the shares were originally issued to Shalini

Holdings Ltd on 25.08.2008 were transferred on 25.03.2010

in favour of Frank Merchantile Private Limited. Seized

documents are reproduced in the impugned order. The Ld. Pr.

67 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

CIT noted that as against the entry in the name of assessee,

an amount of Rs.2 crores have been mentioned. However, on

verification of the seized material, it was found that total

amount of Rs.1 crore as per details given in the show cause

notice is there and not Rs.2 crores. It would show that A.O.

did not verify and examine the seized material relating to

assessee and accepted the explanation of assessee without

examining the seized paper. The Ld. Pr. CIT, therefore, found

that the seized documents have not been examined and

verified by the A.O. Therefore, re-assessment order was set

aside and matter was restored to the A.O. for passing the

Order afresh as per provisions of Law.

Order under section 263 of the I.T. Act as well as filed an

application for admission of additional grounds which reads

as under :

7.(a) On the facts and circumstances of the case,

the learned Pr. CIT has erred, both on facts

and in law, in holding that the legality of

original assessment proceedings could not be

68 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

challenged in the 263 proceedings,

disregarding the various judicial

pronouncements cited by the assessee in this

regard.

7.(b) On the facts and circumstances of the case,

the learned Pr. CIT has erred both on facts

and in law in ignoring the fact that the order

of the AO reopening the assessment under

Section 147 of the Act, without complying

with the statutory conditions and the

procedure prescribed under the law, is bad

and liable to be quashed, and thus, the same

could not have been revised under Section

263 of the Act.

7.(c) On the facts and circumstances of the case,

the learned Pr. CIT has erred both on facts

and in law in ignoring the fact that the order

of the AO passed on the basis of reasons

recorded for reopening of the assessment,

which are incorrect on facts and bad in law,

69 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

is illegal and liable to be quashed, and thus,

the same could not have been revised under

Section 263 of the Act.

7.(d) On the facts and circumstances of the case,

the learned Pr. CIT has erred both on facts

and in law, in assessing the jurisdiction

under Section 263 of the Act, despite the fact

that the original assessment having been

made without issuing of statutory notice

under Section 143(2) of the Act, being itself

illegal, the same could not be revised under

Section 263 of the Act.”

27.1. Learned Counsel for the Assessee submitted that it

is legal ground and goes to the root of the matter and without

further investigation, same may be admitted for disposal of

the appeal.

of the additional ground of appeal and submitted that no

70 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

such ground was taken in the original proceedings and that

such ground cannot be taken in the present appeal.

group of appeal in the case of M/s. Shiv Sai Infrastructure (P)

Ltd., (supra) and additional ground have been admitted.

Following the reasons for decision of the same, we admit the

additional grounds of appeal for the purpose of disposal of

the appeal.

the submissions made before the authorities below and

submitted that no notice under section 143(2) have been

issued in the case of assessee. Copy of the order sheet of the

A.O. is filed at page 279 of the paper book to show that no

notice under section 143(2) have been issued. He has

referred to PB-20 which is reasons for reopening of the

assessment in which A.O. has mentioned wrong facts of

taking accommodation entry of Rs.2 crores. However,

assessee has received share capital/premium of Rs.1 crore

only in assessment year under appeal. No name of the

person from whom assessee received Rs.2 crores have been

71 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mentioned in the reasons. The show cause notice under

section 263 have been issued for a lesser amount of Rs. 1

crore. If reasons were incorrect for reopening of the

assessment, then, re-assessment proceedings would be

invalid and non-est, therefore, Ld. Pr. CIT has no power to

review the same under section 263 of the I.T. Act. Learned

Counsel for the Assessee referred to several replies filed

before A.O. to show all documentary evidences were

examined by the A.O. at re-assessment proceedings. There is

no co-relation of the seized documents with the assessee.

Since the A.O. recorded incorrect reasons for reopening of the

assessment and that no notice under section 143(3) have

been issued, therefore, re-assessment order is invalid and as

such, same cannot be revised under section 263 of the I.T.

Act. A.O. made enquiry of all the documents but Ld. Pr. CIT

did not make any enquiry on the documentary evidences on

record. Learned Counsel for the Assessee submitted that the

issue is same as have been considered and decided in the

cases of M/s. Supersonic Technologies Pvt. Ltd., M/s. SPJ

72 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Hotels Private Limited and M/s. Shiv Sai Infrastructure (P(

Ltd., New Delhi (supra).

submissions already made in the case of M/s. Supersonic

Technologies Pvt. Ltd., (supra) and also submitted that no

ground was taken in original proceedings for illegality in the

re-assessment proceedings. The issue of notice under section

143(2) is a disputed question and not relevant in the present

proceedings. Seized papers are not considered and examined

by the A.O. The amount in question is Rs.1 crore only.

Therefore, the Order of the A.O. is erroneous in so far as

prejudicial to the interests of the Revenue. He has, therefore,

submitted that Order under section 263 may be confirmed.

issue is same as have been considered in the above three

cases viz., M/s. Supersonic Technologies Pvt. Ltd., M/s. SPJ

Hotels Private Ltd., and M/s. Shiv Sai Infrastructure (P) Ltd.,

(supra). In the present case, no notice under section 143(2)

have been issued for completion of the re-assessment

proceedings and that incorrect facts have been recorded in

73 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

the reasons for reopening of the assessment. Therefore, the

re-assessment proceedings are invalid, bad in law and non-

est and as such, liable to be quashed. We, therefore,

following the reasons for decision in the cases of M/s.

Supersonic Technologies Pvt. Ltd., M/s. SPJ Hotel Private

Ltd., and M/s. Shiv Sai Infrastructure (P) Ltd., (supra), set

aside the impugned Order of the Ld. Pr. CIT passed under

section 263 of the I.T. Act and quash the same. Accordingly,

appeal of the assessee is allowed.

allowed.

6.3. Same view have been taken by ITAT, Delhi E-

Bench in the case of M/s. NKG Infrastructure Ltd., New

Delhi vs., Pr. CIT, Circle-3, New Delhi in ITA.Nos.3825 to

3827/Del./2018 Dated 05.09.2018 [PB-11]. Further same

view have been taken by ITAT, Kolkata Bench in the case of

M/s. Rozelle Sales & Services Pvt. Ltd., vs., ACIT, Central

74 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Circle-1(1), Kolkata in ITA.No.2030/Kol./2018, Dated

30.08.2019 [PB-35].

6.4. The ITAT, SMC Delhi Bench in the case of Agroha

Fincap Ltd., New Delhi vs., ITO, Ward-1(4), New Delhi, in

ITA.No.1063/Del./2019, Dated 17.10.2019 considering the

identical issue and approval of the Ld. Pr. CIT about his

satisfaction held as under :

“IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI

BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER

ITA No.1063/Del/2019 Assessment Year: 2010-11

Agroha Fincap Ltd., Vs. ITO, Raj Kumar & Associates, CAs, Ward-1(4), L-7A (LGF), South Extension Part-II, New Delhi. New Delhi.

PAN: AAACA8075G (Appellant) (Respondent)

Assessee by : Shri Raj Kumar, CA Revenue by : Shri S.L. Anuragi, Sr.DR

Date of Hearing : 13.08.2019 Date of Pronouncement : 17.10.2019

75 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi. ORDER

This appeal by the assessee is directed against the

order dated 19th December, 2018 of the CIT(A)-1, New Delhi,

relating to Assessment Year 2010-11.

company and had filed its return of income on 12th October,

2010 declaring the total income at Rs.9,912/-. The

Assessing Officer received information based on the search

and seizure operation conducted u/s 132 of the IT Act, 1961

in the case of Shri Surendra Kumar Jain group of cases on

14th September, 2010 that Shri Surendra Kumar Jain, through

a large number of dummy companies floated by him provided

accommodation entries to various beneficiaries. In the list of

beneficiaries so obtained, the name of the assessee also

appears. He noticed the modus operandi of the Jain brothers

was that they have received cash from the various

beneficiaries which were deposited in the bank accounts of

various entities as cash received against sales and were

immediately transferred to various dummy companies of Jain

76 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

brothers. The money is then routed through a maze of

transactions through a web of dummy concerns managed by

Jain brothers. Subsequently, cheques were given to the

beneficiaries in lieu of cash given initially from the account of

the concerns which is at the last step of money trail and in

this process, Jain brothers used to earn a certain percentage

of commission. He also referred to the assessment order in

case of S.K. Jain wherein the Assessing Officer had applied

the commission @ 1.8% on account of accommodation entries

provided by them. The order of the Assessing Officer was

confirmed by the CIT(A) and the Tribunal had also approved

the fact that Shri S.K. Jain and Shri V.K. Jain are involved in

providing accommodation entries. In view of the above, the

Assessing Officer reopened the case of the assessee u/s

147/148 of the Act after recording satisfaction and prior

approval u/s 151(1) of the Act by the PCIT, Delhi-1. In

response to notice u/s 148, the assessee filed its return of

income on 30th March, 2017 declaring an income of

Rs.9,912/-. During the course of assessment proceedings,

the Assessing Officer asked the assessee to substantiate the

77 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

amount of Rs.20 lakhs received by him towards 20000

shares of Rs.10/- each at a premium of Rs.90/- per

share. Rejecting various explanations given by the

assessee, the Assessing Officer held that the assessee failed

to discharge the onus cast on it to prove the identity and

capacity of the creditor and the genuineness of the

transaction and made an addition of Rs.20 lacs to the total

income u/s 68 of the IT Act. Similarly, the Assessing Officer

also made addition of Rs.36,000/- being commission @ 1.8%

for arranging the accommodation entries. Thus, the

Assessing Officer completed the assessment at a total income

of Rs.20,45,912/- as against the returned income of

Rs.9,912/-.

the addition on merit, challenged the validity of the

reassessment proceedings. However, the ld.CIT(A) was not

satisfied with the arguments advanced by the assessee and

upheld the action of the Assessing Officer in making the

addition of Rs.20,36,000/- and also upheld the validity of the

reassessment proceedings.

78 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

is in appeal before the Tribunal by raising the following

grounds:-

“1. That under the facts and circumstances initiation of

proceedings under section l47/148 are without

jurisdiction, on borrowed satisfaction, without application

of mind, unwarranted, mechanical and unsustainable in

law and on merits.

objections against reopening proceedings, properly, as per

law and in totality and as per the directions of Hon’ble

Supreme Court in the case of G.K.N. Drive Shafts, hence

consequential proceedings and impugned asstt. is illegal

and without jurisdiction.

approval under section l51 is fatally defective, mechanical

and without application of mind which makes the whole

proceedings without jurisdiction, illegal and unwarranted.

79 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

A.O, erred in law and on merits in making addition of

Rs,20,00,000 under section 68 of the I.T. Act.

4.1 That under the facts and circumstances, addition

of Rs. 20,00,000 under section 68 for the share capital /

share premium received from Utsav securities (P) ltd. by

holding the same as received from alleged entry operator

is illegal and unsustainable in law as well as on merits.

4.2. That the findings of A.O. are unsustainable for

addition of Rs.20,00,000 in the absence of providing the

copies of all materials used against the assessee and by

not providing cross-examination of persons whose

statements have been relied upon, thus no proper and

reasonable opportunity of hearing has been allowed and

principles of natural justice is grossly violated which

makes the impugned asstt. unsustainable in law.

Rs.36,000 as unexplained expenditure under section 69C

for alleged commission expenses @1.8 percent of

80 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Rs.20,00,000, the amt. of total sale consideration received

of both the shares, although there is no material and

evidence for the same.”

initiation of reassessment proceedings was made in a

mechanical manner, on borrowed satisfaction and without

application of mind. Referring to the copy of the reasons

supplied by the Assessing Officer, copy of which is placed at

page 225 of the paper book, he submitted that the initiation is

purely on the basis of the report received from the

Investigation Wing and the Assessing Officer before initiating

the reassessment proceedings had not conducted any inquiry

even to know and understand that the information as per the

Investigation Report is prima facie correct. He submitted that

at the time of initiation of proceedings, the Assessing Officer

was not having even the material before him on the basis of

which the Investigation Wing had sent its report. The

Assessing Officer assumed and worked only on the

satisfaction of the Investigation Wing. Relying on the

following decisions, he submitted that when the proceedings

81 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

were initiated mechanically and on borrowed satisfaction

and without application of mind, such reassessment

proceedings are a nullity:-

i. Pr. CIT vs. RMG Polyvinyl (I) ltd., 396 ITR 5 (Del);

ii. Pr. CIT vs. Meenakshi Overseas (P) Ltd., 395 ITR 677

(Del);

iii. Pr. CIT vs. G and G Pharma India Ltd., 384 ITR (2016)

(Delhi) 147; and

iv. Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del).

the assessee filed objections against the reopening vide letter

dated 16th August, 2017, copy of which is placed at page 6 to

7 of the paper book. Referring to page 8 to 10, he drew the

attention of the Bench to the disposal of the objections by the

Assessing Officer. He submitted that vide para 2 of the

objection letter dated 16th August, 2017, it was requested that

to file complete objections, the materials relied upon by the

Investigation Wing for sending the report to the Assessing

Officer and such other material including the statement of

82 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

persons recorded at the back of the assessee should be

supplied. However, the Assessing Officer had not provided

any of these documents on the ground that the relevant

material is internal documents of the Department and cannot

be shared. He accordingly submitted that the Assessing

Officer by not providing the above documents has not

disposed of the objections fully as per the law laid down by

the Hon'ble Supreme Court in the case of GKN Driveshaft.

Referring to the following decisions, he submitted that

incomplete disposal of objections makes the assessment

invalid.

i. Sabh Infrastructure Ltd. vs. ACIT, 398 ITR 198;

ii. Pr. CIT vs. Tupperware India (P) Ltd., 127 DTR 161

(Del);

iii. Scan Holding (P) Ltd. vs. ACIT, 402 ITR 290 (Del); &

iv. Goa State Copr. Bank Ltd. vs. ACIT 7 Ors., (2017) 295

CTR (Bom) 369.

approval u/s 151 is in a mechanical manner and without

application of mind. Therefore, it is fatally defective. He

83 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

submitted that the PCIT while giving approval has simply

mentioned: ‘I am satisfied that it is a fit case for issue of

notice u/s 148 of the IT Act.’ Referring to the decisions of the

Hon'ble Delhi High Court in the case of PCIT vs. NC Cables

Ltd., 391 ITR 11 (Del) and United Electrical Company Pvt. Ltd.

vs. CIT & ors, 258 ITR 317 and the decision of the Hon'ble

M.P. High Court in the case of CIT vs. S. Goyanka Lime &

Chemical Ltd. (2015) 56 taxmann.com 390, he submitted that

the courts have unequivocally held that where the

satisfaction has been given in a mechanical manner and

without application of mind for issuing notice u/s 148, such

reopening of assessment is invalid. He submitted that the

Hon'ble Supreme Court has dismissed the SLP filed by the

Revenue against the decision of the Hon'ble MP High Court in

the case of Goyanka Lime & Chemical Ltd. (supra).

submitted that to substantiate the identity and credit

worthiness of the share applicant and the genuineness of the

transaction, the assessee has filed the audited financial

statement, income-tax return, copy of bank statement, copy

84 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

and confirmation of Utsav Securities Pvt. Ltd. The assessee

also filed Form No.2 filed with ROC dated 29th June, 2010, a

copy of form No.2 filed before ROC intimating the issue of

20000 shares to Utsav Securities Pvt. Ltd. at a premium of

Rs.90/- per share. He submitted that the balance sheet of

Utsav Securities Pvt. Ltd. shows its share capital at Rs.1.26

crores and the reserves and surplus at Rs.8.66 crore. He

submitted that Utsav Securities Pvt. Ltd. has an investment of

Rs.8.92 crore and current assets, loans and advances of

Rs.1.14 crore. He submitted that the smallness of the income

cannot be a reason for not accepting the credit worthiness of

the said company. Relying on various decisions, he

submitted that when the assessee has discharged its onus

by proving the identity and credit worthiness of the investor

and the genuineness of the transaction, no addition u/s 68

can be made. The ld. counsel further submitted that the

assessee was never provided with the photo copy of page

No.2 of diary of Shri S.K. Jain and Shri V.K. Jain claimed to

have been seized on search at the residence of Shri

Jain. Despite specifically asking the Assessing Officer to

85 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

provide the documents relied by the Department for making

the addition and asking to give opportunity to cross examine,

the same were never provided. Relying on various decisions,

he submitted that since the addition is based purely on

presumptions and surmises and the relevant materials were

not provided to the assessee, therefore, the addition so made

is not sustainable. So far as the addition of Rs.36,000/-

being the commission for getting the accommodation entry is

concerned, he submitted that it is an estimated addition and

there is no basis or material or information based on which

such addition could have been made. He accordingly

submitted that the addition made by the Assessing Officer

and upheld by the CIT(A) should be deleted.

Assessing Officer, in the instant case, has duly applied his

mind and has made a thorough analysis of the documents

and after analyzing the documents has recorded his

satisfaction and reopened the assessment. The ld. Addl. CIT

had perused the note and had recorded his satisfaction that

income pertaining to assessment year 2010-11 has escaped

86 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

assessment and, hence, the case is required to be reopened

u/s 147. The Pr. CIT had given his satisfaction u/s 151

separately as mentioned at page 5 of the paper book filed by

the ld. counsel for the assessee. The Assessing Officer, in

the instant case, has disposed of the objections by passing a

speaking order, therefore, it is wrong to say that the

assessment was reopened in a mechanical manner and the

approving authorities have given the approval in a

mechanical manner without due application of mind. He

submitted that the reassessment proceedings were not

initiated in a mechanical manner or on borrowed satisfaction

and without application of mind since the perusal of the

reasons recorded clearly show that there is a thorough

application of mind by the Assessing Officer and the

approving authorities have also given valid reasons for

reopening of the case. So far as the merit of the case is

concerned, the ld. DR submitted that S.K. Jain group of cases

are known to be accommodation entry providers and the

assessee, in the instant case, has obtained the

accommodation entry of Rs.20 lacs and has failed to

87 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

discharge the onus cast on it by proving the identity and

capacity of the loan creditor and the genuineness of the loan

transaction. Therefore, the ld.CIT(A) was fully justified in

sustaining the addition of Rs.20 lacs made by the Assessing

Officer and also the addition of Rs.36,000/- added by the

Assessing Officer being commission for the accommodation

entries. He accordingly submitted that both factually and

legally the ld.CIT(A) has passed a reasoned order and,

therefore, the same should be upheld and the grounds raised

by the assessee should be dismissed.

perused the orders of the Assessing Officer and the CIT(A)

and the paper book filed on behalf of the assessee. I have

also considered various decisions cited before us. At the

outset, I deem it proper to adjudicate the legal ground raised

by the assessee challenging the validity of the reassessment

proceedings in absence of proper approval given u/s 151 of

the IT Act. A perusal of the copy of approval given u/s 151,

copy of which is placed at page 13 of the paper book, shows

that the Addl. CIT, while giving approval has simply

88 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mentioned: “Yes. I am satisfied that it is a fit case for

reopening of assessment u/s 148.” Similarly, the PCIT, while

giving approval has also simply mentioned: “I am satisfied

that it is a fit case for issue of notice u/s 148 of the IT

Act.” From the above, it is clear that none of the supervisory

authorities have applied their mind. I find, the Hon'ble Delhi

High Court in the case of CIT vs. N.C. Cables Ltd., 391 ITR

11(Del), has observed as under:-

"Reassessment-Issuance of Notice-Sanction for issue of

Notice-Assessee had in its return for A Y 2001-02

claimed that sum of Rs. 1 Crore was received towards

share application amounts and a further sum of Thirty

Five Lakhs was credited to it as an advance towards

loan-Original assessment was completed u/s 143(3)-

However, pursuant to reassessment notice, which was

dropped due to technical reasons, and later notice was

issued and assessments were taken up afresh-After

considering submissions of assessee and documents

produced in reassessment proceedings, AO added back

a sum of Rs.1,35,00,000-CIT(A) held against assessee

89 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

on legality of reassessment notice but allowed

assessee's appeal on merits holding that AO did not

conduct appropriate enquiry to conclude that share

inclusion and advances received were from bogus

entities-Tribunal allowed assessee's appeal on merits-

Revenue appealed against appellate order on merits-

Assessee's cross appeal was on correctness of reopening

of assessment- Tribunal upheld assessee's cross-

objections and dismissed Revenue's appeal holding that

there was no proper application of mind by concerned

sanctioning authority u/s Section 151 as a pre-

condition for issuing notice u/s 147/148-Held, Section

151 stipulates that CIT (A), who was competent

authority to authorize reassessment notice, had to apply

his mind and form opinion- Mere appending of

expression 'approved' says nothing-It was not as if CIT

(A) had to record elaborate reasons for agreeing with

noting put up-At same time, satisfaction had to be

recorded of given case which could be reflected in

briefest possible manner- In present case, exercise

90 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

appears to have been ritualistic and formal rather than

meaningful, which was rationale for safeguard of

approval by higher ranking officer-Revenue's appeal

dismissed."

Benches of the Tribunal in a number of cases where it has

been held that merely giving approval by mentioning, “Yes. I

am satisfied that it is a fit case for reopening of assessment”

is not a valid approval. Accordingly the reassessment

proceedings have been quashed. Since, in the instant case,

both the superior authorities have merely given their approval

in a mechanical manner without independent application of

mind, therefore, respectfully following the decision of the

jurisdictional High Court in the case of N.C. Cables (supra), I

hold that the reassessment proceedings are bad in

law. Accordingly, the same is quashed. Since the

reassessment proceedings have been quashed, the

subsequent order passed by the Assessing Officer becomes

bad in law and accordingly the same is quashed. Since the

assessee succeeds on the legal grounds, the grounds raised

91 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

by the assessee become academic and, therefore, are not

being adjudicated.

allowed.”

6.5. The ITAT, SMC Delhi Bench in the case of Mr.

Mukesh Chand Garg, New Delhi vs., ITO, Ward-49(3), New

Delhi in ITA.No.794/Del./2019 Dated 07.10.2019 took

same view. The findings of the Tribunal are reads as under :

“IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘SMC’, NEW DELHI

BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER

ITA No.794/Del/2019 Assessment Year: 2009-10

Mukesh Chand Garg ITO B-1/305, Ground Floor, Janak Vs Ward- 49 (3) Puri, New Delhi-110058 New Delhi PAN No.AEYPG7826A (APPELLANT) (RESPONDENT)

Appellant by Sh. Ved Jain, Advocate Ms. Surbhi Goyal, CA Respondent by Sh. S. L. Anuragi, Sr. DR

92 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Date of hearing: 08/08/2019 Date of Pronouncement: 07/10/2019

ORDER PER R.K. PANDA, AM:

This appeal filed by the assessee is directed against the

order dated 24.12.2018 of the CIT(A) -17, New Delhi relating

to A.Y.2009-10.

challenged the order of the Ld. CIT(A) in confirming the

addition of Rs.4,25,810/- and has also challenged the

validity of proceedings u/s. 147.

individual and filed his return of income on 24.08.2009

declaring total income of Rs.5,49,980/-. Subsequently on the

basis of information received from PCIT of the Income Tax

(Investigation), Ahemdabad that the assessee had availed

contrived loss of Rs.4,39,342/- through broker by changing

the client codes in sale and purchase orders of securities, the

case of the assessee was reopened u/s. 147 after recording

93 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

reasons. In response to notice u/s. 148 the assessee

submitted that the original return filed may be treated as

return filed in response to notice u/s. 148. The Assessing

Officer, during the course of assessment proceedings,

concluded that the assessee has purchased exempt long term

capital gain through brokers by changing client codes in sale

and purchase orders of securities and had claimed the same

as exempt. Since the assessee has earned capital gain of

Rs.4,39,342/- and claimed the same as long term capital

gain exempt from tax, the Assessing Officer held the same to

be non genuine and accordingly made addition of

Rs.4,39,342/-.

upheld the action of the Assessing Officer. Aggrieved with

such order of the CIT(A), the assessee is in appeal before the

Tribunal.

of the paper book drew the attention of the bench to column

No.12 where the PCIT had simply mentioned

94 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

“satisfied”. Referring to clause No.11 of the form he

submitted that the additional CIT has simply mentioned

“YES”, it is fit case to issue notice u/s. 148 of the IT Act”.

Referring to the decision of the Hon’ble Delhi High Court in

the case of PCIT Vs. M/s. N. C. Cables Limited reported in

391 ITR 11 and the decision of the Hon’ble M. P. High Court

in the case of CIT Vs. S. Goenka Lime and Chemicals Limited

reported in (2015) 56 taxman.com 390 and various other

decisions filed in the paper book, he submitted that the courts

have held that the reopening is not sustainable where

approval / sanction given by the authority is without

recording satisfaction. Referring to various other decision he

submitted that the Assessing Officer, not having jurisdiction

over the assessee, cannot issue notice u/s. 148 of the IT Act.

The Assessing Officer in the instant case has not applied his

mind and initiated action u/s. 147 on the basis of report of

the investigation wing Therefore, the reassessment

proceedings initiated by the Assessing Officer is not

sustainable.

95 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Counsel for the assessee referring to the decision of Hon’ble

Bombay High Court in the case of PCIT Vs. PAT Commodity

Services Private Limited reported in (2019) 2 TMI 720

submitted that the Hon’ble High court has decided the issue

in favour of the assessee and the appeal filed by the revenue

has been dismissed. He accordingly submitted that both

legally and factually the order of the CIT(A) is not

sustainable.

the AO and CIT(A).

the sides and perused the orders of the authorities below. I

have also considered the various decisions cited before me. I

find the Assessing Officer, on the basis of report of the

investigation wing of the department, reopened the

assessment and made addition of Rs.4,39,342/- on account

of client code modification through broker which has been

upheld by the CIT(A). It is the submission of the Ld. Counsel

96 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

for the assessee that the reopening was made in a

mechanical manner without application of mind by the

Assessing Officer and on borrowed satisfaction. Further the

approving authorities have also given the approval in a

mechanical manner and the assessee was never given any

opportunity of cross-examination. It is also his submission

that in view of the decision of Hon’ble Bombay High Court in

the case of PCIT Vs. PAT Commodity Services Private Limited

(supra) the addition on account of client code modification is

not sustainable.

u/s. 148, copy of which is placed at page 12 of the paper

book shows that as per clause 12 of the proforma, the PCIT

while giving approval has simply mentioned

“satisfied”. Similarly as per clause 11, the Addl. CIT has

simply mentioned “Yes”, it is a fit case to issue notice u/s.

148 of the IT Act, 1961.

9.1 The Hon’ble Delhi High Court in the case of PCIT Vs.

N. C. Cables Ltd. (supra) has held as under :-

97 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

“11. Section 151 of the Act clearly stipulates that

the CIT(A), who is the competent authority to

authorize the reassessment notice, has to apply his

mind and form an opinion. The mere appending of

the expression 'approved' says nothing. It is not as if

the CIT (A) has to record elaborate reasons for

agreeing with the noting put up. At the same time,

satisfaction has to be recorded of the given case

which can be reflected in the briefest possible

manner. In the present case, the exercise appears to

have been ritualistic and formal rather than

meaningful, which is the rationale for the safeguard

of an approval by a higher ranking officer. For these

reasons, the Court is satisfied that the findings by

the ITAT cannot be disturbed.”

9.2 The Hon’ble M. P. High court in the case of CIT Vs. S.

Goyanka Lime & Chemicals Ltd. (supra) has held as under :-

“7. We have considered the rival contentions and

we find that while according sanction, the Joint

98 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Commissioner, Income Tax has only recorded so

“Yes, I am satisfied”. In the case of Arjun Singh

(supra), the same question has been considered by

a Coordinate Bench of this Court and the following

principles are laid down:-

“The Commissioner acted, of course, mechanically

in order to discharge his statutory obligation

properly in the matter of recording sanction as he

merely wrote on the format “Yes, I am satisfied”

which indicates as if he was to sign only on the

dotted line. Even otherwise also, the exercise is

shown to have been performed in less than 24

hours of time which also goes to indicate that the

Commissioner did not apply his mind at all while

granting sanction. The satisfaction has to be with

objectivity on objective material.”

the aforesaid principle, the mechanical way of

recording satisfaction by the Joint Commissioner,

99 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

which accords sanction for issuing notice under

section 148, is clearly unsustainable and we find

that on such consideration both the appellate

authorities have interfered into the matter. In doing

so, no error has been committed warranting

reconsideration.

into force by Finance Act, 2008 is concerned, the

same only pertains to issuance of notice and not

with regard to the manner of recording satisfaction.

That being so, the said amended provision does not

help the revenue.

by the learned appellate authorities and the law

laid down in the case of Arjun Singh (supra), we see

no question of law involved in the matter,

warranting reconsideration.

100 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

9.3 Since in the instant case also both the approving

authorities have given the approval in a mechanical manner,

therefore, in the light of the ratio laid down by the decisions

cited (supra) and the other decisions filed in the case law

compilation, the reassessment proceedings in my opinion are

not in accordance with law. Therefore, the same is liable to

be quashed. I, therefore, quash the reassessment

proceedings.

on account of client code modification is concerned I find the

Hon’ble Bombay High Court in the case of PAT Commodity

Services (supra) has observed as under :-

“3. The respondent assessee is a private limited

company engaged in the Business of providing

Commodity services to its clients. In the return of income

filed by the assessee for the Assessment Year 200607,

the Assessing Officer noticed that there were instances

of client code modifications. The Assessing Officer

believed that the same was done to indulge in circular

101 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

trading to pass on profits or losses to the clients of the

assessee company as per requirements. After hearing

the assessee, the Assessing Officer made additions in

the income of the assessee on such basis. The issue

eventually reached to the Tribunal. The Tribunal did

accept the Revenue's theory of misuse of clients code

modification facility. However, the Tribunal accepted the

assessee's explanation and discarded the Revenue's

theory that profit of the assessee's company were

passed on to the clients. It was also noticed that the

Revenue has not contended that the client code

modification facility is often misused by the assessee to

pass on losses to the investors, who may have sizable

profit arising out of commodity trading against which

such losses can be set off. The Revenue normally points

out number of such instances of client code

modifications as well as nature of errors in filling of the

client code. At any rate, what can be taxed in the hands

of the present assessee is the income escaping

assessment. Even if the Revenue's theory of the

102 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

assessee having enabled the clients to claim contrived

losses, the Revenue had to bring on record some

evidence of the income earned by the assessee in the

process, be it in the nature of commission or otherwise.

In the present case, the Assessing Officer has added the

entire amount of doubtful transactions by way of

assessee's additional income, which is wholly

impermissible. We do not know the fate of the individual

investors in whose cases, the Revenue could have

questioned the artificial losses. Be that as it may, we do

not think entertaining these appeals would serve any

useful purpose.

High Court cited (supra). I hold that the addition made by

the Assessing Officer and sustained by the CIT(A) on account

of client codes modification is not justified. The grounds

raised by the assessee are accordingly allowed.

103 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

allowed”.

6.6. The ITAT, C-Bench, Delhi in the case of M/s.

Ganesh Ganga Investments Pvt. Ltd., Delhi vs., ITO, Ward-

10(1), New Delhi in ITA.No.1579/Del./2019, Dated

07.11.2019 on an identical issue held as under :

“IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES “C”: DELHI

BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

ITA.No.1579/Del./2019 Assessment Year 2010-2011

M/s. Ganesh Ganga The Income Tax Officer, Investments Pvt. Ltd., Ward – 10 (1), Room A-52, Top Floor, Street vs., No.206A, C.R. Building, I.P. No.1, Gurunanakpura, Estate, New Delhi. Laxmi Nagar, Delhi–110 092. PIN – 110 002. PAN AAACG2710J (Appellant) (Respondent)

Shri Raj Kumar, C.A. And For Assessee : Shri Rajeev Ahuja, Advocate Shri Sumit Goel, C.A. For Revenue : Ms. Parmit M. Biswas, CIT-DR

Date of Hearing : 10.10.2019 Date of Pronouncement : 07.11.2019

104 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

ORDER

PER BHAVNESH SAINI, J.M.

This appeal by Assessee has been directed

against the Order of the Ld. CIT(A)-4, New Delhi, Dated

26.12.2018, for the A.Y. 2010-2011.

company filed its return of income on 04.02.2011 for the A.Y.

2010-2011 declaring loss of Rs.9,616/- which was processed

under section 143(1) of the I.T. Act, 1961. The assessee

declared income from brokerage and commission, interest on

loan and profit on sale of investment also.

2.1. An information was received from the O/o. CIT,

Central-2, New Delhi, vide letter Dated 14.02.2014

mentioning therein that a search/survey operation under

section 132/133A of the Income Tax Act, 1961 was

conducted by the Investigation Wing at the business and

residential premises of Shri Himanshu Verma and his Group

on 29.03.2012 wherein after intensive and extensive inquiry

and examination of documents seized during the course of

105 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

search, it has been gathered that the said persons are

involved in providing accommodation entries to the persons

who were named in the report. During the course of inquiry

made by the Investigation Wing, it also came to the notice

that Shri Himanshu Verma was engaged in the business of

providing accommodation entries through cheques/PO/DD in

lieu of cash to large number of beneficiary companies through

various paper and dummy companies floated and controlled

by him. The cash received from the parties for providing

accommodation entries was first deposited in the account of

these dummy firms/companies in the guise of cash received

against the bogus sales duly shown in the books of account.

On the basis of the material available on record, the A.O.

after recording reasons for reopening of the assessment,

issued notice under section 148 to the assessee on

31.03.2017 which was served upon the assessee. The

assessee objected to the reopening of the assessment and

requested to provide copy of the approval of Competent

Authority under section 151 of the I.T. Act, 1961. The

Assessee also contended that whatever material was

106 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

collected at the back of the assessee was not confronted and

requested to supply statement of Shri Himanshu Verma,

report and data complied / received from Investigation Wing,

report and data complied/received by ITO, Ward-10(1), New

Delhi, diaries and registers considered as incriminating

material seized from Shri Himanshu Verma and any other

documents which Department wanted to rely. It was further

submitted that proceedings under section 147/148 of the I.T.

Act, cannot be invoked for making inquiry or verification

purposes. The assessee denied receipt of any accommodation

entry from any such person. The A.O, however, rejected the

objections of the assessee and proceeded to make

assessment in the matter. The A.O. noted that in assessment

year under appeal, assessee has received Rs.11,05,00,000/-

on account of share capital and share premium from 38

parties as noticed during the course of assessment

proceedings. The summary of the same is reproduced in the

assessment order. The assessee was asked to file complete

postal address, PAN and other details of these 38 parties.

The A.O. also issued notice under section 133(6) to all 38

107 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

share subscriber companies and asked for the details from

them. The A.O. received replies from 26 companies. In 06

cases, although notice issued under section 133(6) of the I.T.

Act were issued as per new name as well as old name of the

company, but, the same were returned back un-served by the

Postal Authorities. In the remaining 06 cases, no replies have

been received. The A.O. noted that replies received from 26

parties under section 133(6) have been analysed and these

companies furnished copy of the acknowledgment of ITR,

balance sheet as on 31.03.2010, P & L A/c, copy of the bank

statement. The A.O. however, did not accept the replies filed

by the 26 investor companies on the reasons that replies

have been received in bunch for similar style of envelopes

and posted from three post offices. The A.O. also noted that

none of the parties explained as to why high premium was

paid and parties have not explained source of the investment.

The A.O. also noted that 26 parties filed copy of the ITR,

balance sheet, P & L A/c and bank statement, but, it shows

that their income shown is very meagre in the return of

income. The assessee was asked to produce the

108 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

persons/Principal Officers of these entities for verification.

However, assessee did not produce the same. The A.O. also

analysed the statement of Shri Himanshu Verma through

whom amount have been received and the A.O. ultimately

rejected the explanation of assessee on genuine share

application money received from 38 parties and made

addition of Rs.11.05 crores. The A.O. further noted that

assessee has paid commission in cash for arranging these

entries, on which, addition was made of Rs.22,10,000/- i.e.,

@ 2% of the amount in question which was also added to the

returned income.

assessment as well as additions on merit before the Ld.

CIT(A). It was contended that assessment framed on the

basis of material / documents / information received from

third party and without application of mind by the A.O,

therefore, whole assessment is invalid and bad in law. It was

further submitted that assessee has shown all the amounts

in his books of account and return of income filed with the

Department. The A.O. has reopened the assessment by

109 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mentioning in the reasons that assessee has received entries

of Rs.2.45 crores which fact is incorrect. The initiation of re-

assessment have been made merely on the basis of

Investigation Wing report without applying the mind. No right

of cross-examination have been provided to the assessee to

the statement of Shri Himanshu Verma and others. The

assessee relied upon the following decisions.

3.1. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd.,

396 ITR 5 (Del.) the Hon’ble Delhi High Court held as under:

"In the present case too, the information received

from the Inv. Wing cannot be said to be tangible

material per se without a further enquiry being

undertaken by the learned assessing officer"

3.2. In the case of Pr. CIT vs., Meenakshi Overseas (P)

Ltd., 395 ITR 677 (Del.), the Hon’ble Delhi High Court held as

under :

"Reassessment notice condition precedent

recording of reasons to believe that income has

escaped assessment mere reproduction of

110 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

investigation report in reasons recorded absence of

link between tangible material and formation of

ceding illegal Income Tax Act, 1961, Sec.147, 148"

3.3. In the case of Pr. CIT vs., G And G Pharma India

Ltd., [2016] 384 ITR 147 (Del.), the Hon’ble Delhi High Court

held as under :

“Reassessment condition precedent application of

mind by assessing officer to materials prior to

forming reason to believe income has escaped

assessment - No independent application of mind

to information received from Directorate of

Investigation and no prima facie opinion formed-

reassessment order invalid”.

3.4. In the case of Sarthak Securities Co. (P) Ltd., 329

ITR 110 (Del.), the Hon’ble Delhi High Court held as under :

“No independent application of mind by the

Assessing officer but acting under information

from Inv. Wing - Notice U/s. 147 to be quashed”.

111 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

3.5. The assessee also submitted that assessment is

barred by time. The assessee further submitted that approval

under section 151 have been granted in a most mechanical

manner without applying independent mind by the Pr.

Commissioner of Income Tax. He has submitted that Pr.

Commissioner of Income Tax has recorded in the approval as

under :

“Form for recording the reasons for initiating proceedings u/s

147 and for obtaining the approval of the Ad CIT/CIT/CBDT

M/s. Ganesh Ganga Investment 1. Name and address of the P. Ltd., A-52, Top assessee Floor Street No.l, Guru Nanak Pura, Laxmi Nagar, Delhi 110092 2. PAN AAACG2710J 3. Status Company 4. Ward/Circle Ward-10(1) 5. Asstt. Year in respect of which it 2010-11. is proposed to issue notice u/s 148 6. The quantum of income which has Rs.2,45,00,000/- escaped assessment 7. Whether the provisions of section

112 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

147(a) or 147(b) are applicable or 147(b) both the sections are applicable. 8. Whether the assessment is proposed to be made for the first Yes time. If the reply is affirmative, please state (a) Whether any voluntary Yes return has already been filed. (b) If so, the date of filing of 04.02.2011 return

113 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

proceedings u/s. 147. 11. Reasons for the belief that the As per annexure. income has escaped assessment.

Sd/- H.K. Sharma Dated: 29.03.2017. ITO, Ward-10(1), New Delhi.

Whether the Addl. Commissioner of I. Tax is satisfied on the In view of the facts 12. reasons recorded by the ITO that notice u/s.148 to it is a fit case for the issue of be issued. notice u/s.148.

Sd/-S.K. Mittal, Pr. Commissioner of I. Tax, New Delhi.”

3.6. This approval is not valid in Law because it would

show that approval have been granted without application of

mind. Learned Counsel for the Assessee relied upon

Judgment of the Hon’ble Delhi High Court in the case of

United Electrical Co. Pvt. Ltd., vs. Commissioner of Income

114 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Tax 258 ITR 317 in which approval by Addl. Commissioner of

Income Tax under section 151 was given in the following

terms – “Yes” I am satisfied that it is a fit case for issue of

notice under section 148 of the I.T. Act.” The Hon’ble Delhi

High Court considering the similarly worded approval did not

approve the same and held that “in the present case, there

has been no application of mind by Addl. Commissioner of

Income Tax before granting the approval.” The assessee also

relied upon Judgment of Hon’ble Supreme Court in the case of

Commissioner of Income Tax vs., S. Goyanka Lime &

Chemical Ltd., [2015] 64 taxmann.com 313 (SC) approving

the Judgment of Hon’ble Madhya Pradesh High Court in the

case of Commissioner of Income Tax, Jabalpur vs., S.

Goyanka Lime & Chemical Ltd., [2015] 56 taxmann.com 390

(M.P.) in which the Departmental SLP has been dismissed on

the same reason because the Joint Commissioner of Income

Tax recorded satisfaction in a mechanical manner and

without application of mind. The assessee also relied upon

Judgment of Hon’ble Madhya Pradesh High Court in the case

of Arjun Singh vs., ADIT [2000] 246 ITR 363 (M.P.) in which

115 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

also similarly worded sanction under section 148 was not

found valid. The assessee also relied upon Judgment of

Hon’ble Delhi High Court in the case of Pr. Commissioner of

Income Tax vs., N.C. Cables Ltd., [2017] 88 taxmann.com 649

(Del.) in which also on similarly worded sanction, it was held

that re-assessment was not valid. The assessee also

submitted that since no right of cross-examination have been

allowed to the statement of Shri Himanshu Verma, therefore,

such statement cannot be read in evidence against the

assessee. He has relied upon Judgment of Hon’ble Supreme

Court in the case of M/s. Andaman Timber Industries vs.,

Commissioner of Central Excise, Kolkata-II reported in 281

CTR 241.

contention of assessee and confirmed the reopening of the

assessment. The assessee also made submissions on merit

to show that addition is wholly unjustified. However, the Ld.

CIT(A) did not accept the contention of assessee and upheld

the addition on merit as well. The appeal of assessee was

accordingly dismissed.

116 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

reopening of the assessment under section 147/148 of the

I.T. Act, 1961, on several grounds, addition of Rs.11.05

crores under section 68 of the I.T. Act and addition of

Rs.22,10,000/- on account of commission.

both the parties. Learned Counsel for the Assessee reiterated

the submissions made before the authorities below and

referred to reasons recorded in this case for reopening of the

assessment, copy of which is filed at page-15 of the PB. PB-

29 is approval/sanction granted by the Pr. Commissioner of

Income Tax, New Delhi. PB-6 is balance-sheet to show that in

preceding assessment year the share capital was of Rs.3.01

crores and in assessment year in increased to Rs.14.06

crores. Thus, about Rs.11 crores have increased and this fact

was also disclosed to the Revenue Department. Such details

are filed in the return of income. No verification could be

allowed in the garb of proceedings under section 148 of the

Income Tax Act, 1961. The name of M/s. Management

Services Pvt. Ltd., in the reason from whom alleged entry

117 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

have been taken by the assessee do not figure in the

appellate order because such party does not exist. M/s.

Shubh Propbuild Pvt. Ltd., has been mentioned in the reasons

do not belong to Shri Himanshu Verma. In assessment order

name of M/s. Management Services Pvt. Ltd., do not appear.

PB-13 of the assessment order referred to the statement of

Shri Himanshu Verma in which name of M/s. Shubh

Propbuild Pvt. Ltd., does not appear. The A.O, therefore,

recorded incorrect reasons and did not apply his mind to the

material on record. The A.O. has not gone through the record

and the balance Company do not belong to the assessee. The

statement of Shri Himanshu Verma was not subjected to

cross-examination on behalf of assessee, despite making a

request to the A.O. [PB-19]. In the statement of Shri

Himanshu Verma filed on record, no such companies have

been mentioned, therefore, no adverse inference could be

drawn against the assessee. The assessee did not receive

any notice for production of the parties before A.O. There is

no evidence on record of any payment of commission paid by

assessee for arranging share capital. Learned Counsel for the

118 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Assessee relied upon Order of the ITAT, Delhi Bench in the

case of Pioneer Town Planners Pvt. Ltd., vs. DCIT

ITA.No.132/Del./2018 Dated 06.08.2018 in which in similar

circumstances the re-assessment have been quashed which

case also relates to entry provided by Shri Himanshu Verma.

Learned Counsel for the Assessee submitted that the A.O.

issued notices to all the parties under section 133(6) of the

I.T. Act. In response to the same, 26 parties filed reply

supported by documentary evidences to prove genuine share

application money have been received. The A.O. did not take

help of any handwriting export before forming any opinion. If

replies were not in order, assessee should have been

confronted with the material so that assessee could rebut the

same. Therefore, such fact could not be taken adversely

against the assessee. The assessee never received notice

Dated 11.12.2017 for production of the parties for

examination. In reasons 06 parties are mentioned which

belong to Shri Himanshu Verma, but, in his statement he

says 08 parties, but, the A.O. made addition for 38 parties.

A.O. made the addition only on the statement of Shri

119 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Himanshu Verma, but, the parties did not belong to him.

Learned Counsel for the Assessee submitted that since

approval is not in accordance with Law, therefore, reopening

of the assessment is bad in Law and relied upon the same

Judgments as were relied upon before Ld. CIT(A). He has

submitted that A.O. did not apply his mind to the reasons

and recorded incorrect facts and approval is also given on

incorrect facts. The initiation and approval on the basis of

wrong facts is not legally valid. He has relied upon Judgment

of Hon’ble Delhi High Court in the case of Commissioner of

Income Tax vs., Kamdhenu Steel & Alloys Ltd., 248 CTR 33

and other decisions as was relied upon before the authorities

below. The amount received from 30 companies is Rs.8.13

crores only out of total amount of Rs.11.05 crores. Therefore,

there is no other material on record to justify the addition. He

has submitted that A.O. cannot ask to explain source of the

source. Learned Counsel for the Assessee, therefore,

submitted that reopening of the assessment is invalid and no

addition could be made against the assessee even on merits.

120 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Orders of the authorities below and submitted that A.O. dealt

with the objections of the assessee, but, for re-assessment

proceedings no manner is provided as to how sanction is to

be granted. A.O. recorded details in the reasons on which Pr.

Commissioner of Income Tax was satisfied. Therefore,

reopening of the assessment is valid because information

was received from Investigation Wing that assessee has

received accommodation entries. The name of assessee was

appearing. Sufficiency of reasons is not required at this stage

of formation of re-assessment proceedings. The A.O. cannot

do any roving enquiry at initial stage. The assessee failed to

prove creditworthiness of the Investor Companies as they

were having meagre income. The assessee did not prove

genuineness of the transaction in the matter. The A.O. made

enquiry from Investors and assessee did not produce parties

before A.O. Even a premium have been charged for allotment

of shares for which no reasons have been explained. The

companies are having meagre income only. Apart from

statement of Shri Himanshu Verma, there is enough material

121 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

to justify the addition on merit. The assessee also did not

prove identity and creditworthiness of the Investors even if no

cross-examination to the statement of Shri Himanshu Verma

have been allowed. The Ld. D.R. relied upon Judgment of

Hon’ble Supreme Court in the case of Raymond Woollen Mills

236 ITR 34 (SC). He has submitted that information is prima

facie relevant and there is sufficient material on record to

justify the initiation of re-assessment proceedings. The

assessee failed to prove that no notice Dated 11.12.2017

have been received. The Ld. D.R. relied upon the following

decisions.

122 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

well settled Law that validity of re-assessment proceedings is

to be examined with reference to the reasons recorded for

reopening of the assessment. The Counsel for Assessee has

filed copy of the reasons recorded for reopening of the

assessment at Page-15 of the Paper Book which reads as

under :

“M/s. Ganesh Ganga Investments Pvt. Ltd.,

PAN AAACG2710J A.Y. 2010-11

The assessee filed return of income for the A.Y.

2010-11 on 04.02.2011 declaring loss of Rs.(-)

14,162/-. The return was processed u/s 143(1).

Information was forwarded to this office through

the Addl.CIT, Range-10, New Delhi that search &

seizure action was conducted by Inv. Wing at the office

of Sh. Himanshu Verma where various incriminating

123 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

documents/materials were seized during the course of

search. During the post search investigation and

perusal of seized documents it was observed that Sh.

Himanshu Verma was engaged in the business of

providing accommodation-' entries by providing

cheques/PO/DD in lieu of cash to a large number of

beneficiary companies thorough various paper and

dummy companies floated and controlled by them. It

was also evidently established by the Investigation

Wing that Sh Himanshu Verma is known entry

providers and is the actual controller of more than 100

companies/proprietary firms/partnership firms. They

control these entities through various persons by

appointing them as directors/partners/proprietors

apart from nominating them as authorized signatories

for maintaining the bank accounts of these entities but

in fact all these persons act only as their stooges. The

cash received from the recipient parties for providing

the accommodation entries was first deposited in the

accounts of these dummy firms/companies in the

124 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

disguise of the cash received against the bogus sales,

duly shown in the books of accounts. From there, this

cash was transferred to the different paper companies

floated by Sh. Himanshu Verma through a complex

trail of transactions, so as to hide the actual sources of

funds of the last set of recipient companies of Sh.

Himanshu Verma

In this way, the reserve & surpluses and the

capital account of a specific set of companies are

enhanced with the help of the unexplained cash

received by Himanshu Verma, which is routed to these

companies through their dummy firm/companies. Once

the funds of these companies have been enhanced

sufficiently, accommodation entries through RTGS/

Cheque in the shape of the share capital, capital gains

or loans as per the specific requirement of the recipient

clients were provided to them in lieu of the cash

received from them. In this way, the chain for providing

an accommodation entry gets completed.

125 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

It is noticed from the list of entries that the

assessee M/s Ganesh Ganga Investment P. Ltd. has

taken following accommodation entries during the

financial year 2009-10 :-

S.No. Amount Conduit companies through which cheque issued. 1. 4000000 Shubh Propbuild P Ltd., 2. 4000000 Jaguar Softech P. Ltd., 3. 4000000 Join Fashion P. Ltd., 4. 4500000 Management Services P. Ltd., 5. 4000000 Greenvision Construction P. Ltd., 6. 4000000 USK Exim P. Ltd., TOTAL 2,45,00,000/-

On the basis of the reports received from the

Investigation Wing, I have downloaded the return from

the ITD portal and verified the records and it is clear

that the assessee company has not disclosed fully and

truly all material facts necessary for its assessment for

the assessment year under consideration as it emerges

that transactions shown in the return are not genuine.

Apart from the above the assessee company is not

doing any real business and keeping in view the huge

investments, disallowances u/s 14A read with rule 8D

also applicable in the case. The statement given by

126 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Shri Himanshu Verma also establishes the link with

the self-confessed "accommodation entry providers",

whose business is to help assessees bring back their

unaccounted money into their books of account. Thus,

there is a direct link between the information/available

with the department and the income escaping

assessment.

I have, therefore, reasons to believe that income

to the extent of Rs.2,45,00,000/- has escaped

assessment relevant to A.Y.2010-11. Thus, the same is

to be brought to tax under section 147/148 of the I.T.

Act 1961.

Moreover, as the case pertains to a period beyond four years from the end of relevant assessment year, for issuing the notice u/s 148, necessary approval / sanction may kindly be accorded by the Pr. Commissioner of Income Tax, Delhi-4, New Delhi in view of the amended provision of section 151 w.e.f 01.06.2015. Sd/- H.K. Sharma, Dated : 27.03.2017. ITO, Ward-10(1), New Delhi.”

127 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

8.1. PB-29 is the sanction granted by Pr. Commissioner

of Income Tax for reopening of the assessment in which it is

mentioned as under :

Whether the Pr. Commissioner of I. Yes I am satisfied Tax is satisfied on the reasons that it is a fit case 13. recorded by the ITO that it is a fit for issue of notice case for the issue of notice u/s.148 of the I.T. u/s.148. Act, 1961.

Sd/-S.K. Mittal, Pr. Commissioner of I. Tax, New Delhi.”

8.2. Learned Counsel for the Assessee relied upon

Judgment of Hon’ble Delhi High Court in the case of United

Electricals Company (supra) in which the Addl. Commissioner

of Income Tax similarly recorded the approval “Yes” I am

satisfied that it is a fit case for issue of notice under section

148 of the I.T. Act.” In this case the Hon’ble Delhi High Court

held as under :

“On a careful perusal of the statement made by V'

it was found that facts mentioned in reasons were

de hors the facts available on record. It was

128 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

evident that the said statement was too general. It

did not mention any name much less the name of

the assessee. It was not the stand of the revenue

that a list of the creditors, which included the

name of the assessees, was furnished by V'

subsequently and the same was forwarded to the

Assessing Officer of the assessee. Applying the

aforenoted settled principles governing an action

under section 147, there could be no hesitation in

holding that there was no information on record

which could provide foundation for the Assessing

Officer's belief that the assessee’s transaction with

‘V’ Ltd. was not genuine and its income had

escaped assessment on that account. Therefore,

the impugned action of the Assessing Officer could

not be sustained. Even the Addl Commissioner

had accorded his approval for action under section

147 mechanically. If the Addl. Commissioner had

cared to go through the statement of said V

’perhaps he would not have granted his approval,

129 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

which is mandatory in terms of proviso to sub-

section (1) of section 151 as the action under

section 147 was being initiated after the expiry of

four years from the end of the relevant assessment

year. The Legislature has provided certain

safeguards to prevent arbitrary exercise of powers

by an Assessing Officer particularly after a lapse

of substantial time from completion of assessment.

The power vested in the Commissioner to grant or

not to grant the approval is coupled with a duty.

The Commissioner is required to apply his mind to

the proposal put up to him for approval in the light

of the material relied upon by the Assessing

Officer. The said power cannot be exercised

casually and in a routine manner. In the instant

case, there had been no application of mind by the

Addl. Commissioner before granting the approval.

The petition was, thus, allowed and impugned

notice was quashed.”

130 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

8.3. The Hon’ble Supreme Court approving the

Judgment of Hon’ble Madhya Pradesh High Court in the case

of Commissioner of Income Tax, Jabalpur (MP) vs., S.

Goyanka Lime & Chemicals Ltd., [2015] 46 taxmann.com 313

held as under :

“SLP dismissed against High Court’s ruling that

where Joint Commissioner recorded satisfaction in

mechanical manner and without application of

mind to accord sanction for issuing notice under

section 148, reopening of assessment was

invalid.”

8.4. Similar view have been taken by Hon’ble Madhya

Pradesh High Court in the case of Mr. Arjun Singh vs., Asst.

Director of Income Tax [2000] 246 ITR 363 (MP) (supra), copy

of which is filed at page-97 of the paper book. The ITAT, Delhi

Bench in the case of M/s. Pioneer Town Planners Pvt. Ltd.,

vs., DCIT (supra) in paras 7 to 22 on similar facts relating to

entry provider Shri Himanshu Verma held as under :

131 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

“7. Apropos these legal grounds , we have heard the

arguments of both sides and carefully perused the

relevant material placed on the record of the

Tribunal. As agreed by both the parties, we have

heard argument of both the sides on these legal

grounds of the assessee, wherein the assessee

has challenged to the initiation of reassessment

proceedings and reopening of assessment u/s.

147/148 of the Act. The ld. AR submitted that the

impugned order of assessment is invalid and

unsustainable in law as the same has been

passed by the AO without providing the

reasonable time of four weeks for taking remedy

against the order of disposal of preliminary

objection against the incorrect assumption of

jurisdiction by the AO u/s. 147 of the Act in

violation of principles enunciated by Bombay High

Court in the case of Asian Paints Ltd. 296 ITR 90.

He further submitted that the Impugned orders of

authorities below need be set aside as the

132 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

reassessment proceedings have been initiated

without obtaining a subjective satisfaction by the

Pr. CIT Delhi-7, New Delhi as the approval u/s 151

is mechanical and without application of mind.

reassessment proceedings initiated by the Ld. AO

is based on the information received from

investigation wing and there was no material

before him to substantiate the allegation contained

in the information and therefore initiation of

proceedings is bad in law. He also contended that

the order under appeal is bad in law as the

assessing officer has passed the order of

assessment u/s 143(3) r/w. s. 147 of the Act

without issuing notice u/s 143(2) of the IT Act.

proforma of obtaining approval u/s. 151 of the Act

along with reasons recorded, which are placed at

pgs. 16-18 of the assessee’s paper book,

submitted that in column 12 Addl. CIT has granted

133 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

approval without application of mind by writing

only ‘Yes, I am satisfied’. The ld. AR submitted

that as per decision of Hon Madhya Pradesh High

Court in the case of CIT vs. M/s. S. Goyanka Lime

and Chemicals Ltd. 231 Taxman 0073 (MP), where

the Joint Commissioner recorded satisfaction in

mechanical manner and without application of

mind to accord sanction for issuing notice u/s. 148

of the Act and has only recorded so “Yes, I am

satisfied” then, the reopening assessment has to

be held as invalid. The ld. AR also placed reliance

on the decision of ITAT, Delhi in the case of ITO vs.

Virat Credit & Holdings Pvt. Ltd. in ITA

No.89/Del/2012 dated 09.02.2018. The ld. AR

submitted that as per decision of Hon'ble High

Court of Bombay in WP (L) No.3063/2017 in the

case of Smt. Kalpana Shantilal Haria vs. ACIT

dated 22.12.2017, sanction for issuing a reopening

notice cannot be mechanical but has to be on due

application of mind. Sanction accorded despite

134 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mention of non-existent section in the notice is

prima facie evidence of non-application of mind on

the part of the sanctioning authority. Their

lordship in this judgment categorically held that

such defect cannot be cured u/s. 292B of the Act.

Hon'ble High Court of Delhi dated 31.08.2017 in

WP(C) No. 614/2014 in the case of Yum

Restaurants Asia Pte Ltd. vs. DDIT it was held that

the glaring mistakes in the proforma for approval

is the valid ground for quashing the assessment on

the premise of non-application of mind by all the

authorities involved in the process of recording

reasons and providing satisfaction/s. 151 of the

Act. Further placed reliance on the decision of

ITAT, Mumbai in the case of GTL Ltd. vs. ACIT

reported in 37 ITR (Trib.) 0376 (Mum.), notice u/s.

148 of the Act does not mention the fact that the

same is issued after the satisfaction of the

authority u/s. 151 of the Act, such non-mentioning

135 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

of this fact renders the consequent assessment

invalid in law, Relied on the judgment of DSJ

Communication vs. DCIT 222 Taxman 129 (Bom.).

reassessment proceedings u/s. 147 of the Act the

ld. AR also pointed out that as per ratio of the

decision of Hon'ble Bombay High Court in the case

of Asian Paints Ltd. 296 ITR 90 (Bom), the AO to

wait for four weeks to begin assessment after

disposing of the objection and non-compliance of

the same renders assessment proceedings void.

He submitted that in the present case the

objections of the assessee vide dated 29.11.2016

filed before the AO were disposed of/dismissed by

the AO by the order dated 12.12.2016 and he

passed impugned reassessment order u/s. 143(3)

r/w s. 147 of the Act on 22.12.2016 which is clear

violation of directions given by Hon'ble High Court

in the case of Asian Paints (supra) and on this

count also reassessment proceedings and

136 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

consequent orders are void and thus, bad in law.

This view was again approved by Hon'ble High

Court of Bombay itself in the subsequent decision

in the case of Aroni Commercials Ltd. vs. DCIT

reported in 362 ITR 403 (Bom) and followed by

ITAT, Bombay in the case of Shri Hirachand

Kanuga vs. DCIT in ITA No.4261 & 4262/2012

dated 27.02.2015.

controvert the facts that the AO disposed of

objections of the assessee by way of passing order

on 12.12.2016 and impugned reassessment order

u/s. 143(3) r/w s. 147 of the Act was passed only

after 10 days of disposal of objections. These

facts trigger the ratio of the decision of Hon'ble

Bombay High Court in the case of Asian paints

(supra), wherein their lordship directed that the AO

to wait for four weeks to begin assessment after

disposing of the objections of the assessee and

non-compliance the same renders assessment

137 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

proceedings void and bad in law. Present

impugned reassessment order cannot be held

sustainable and valid as the AO has passed the

same immediately after 10 days of disposal

of/dismissal of objection of the assessee which is

clear violation of direction of Hon'ble High Court of

Bombay in the case of Asian paints (supra) and

legal contention of the assessee on this issue are

found to be acceptable and we hold so.

recorded and submitted that there is no date in the

reasons recorded which shows casual approach of

the AO while recording the reasons. The ld. AR

submitted that as per decision of Hon’ble

Jurisdictional High Court of Delhi in the case of

PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677

(Del) if the reasons failed to demonstrate the link

between the tangible material and formation of the

reasons to believe that the income has escaped

assessment then, it would amount to borrowed

138 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

satisfaction and it has to be presumed that there is

no independent application of mind by the AO to

the tangible material which forms the basis of the

reason to believe that income has escaped

assessment. The ld. AR submitted that from the

three pages of reasons recorded, it is discernable

that in first four paras the AO has noted facts of

the information received from DDIT (investigation),

Faridabad, in para 6 modus operandi of entry

providers has been noted thereafter, in para 7 & 8,

it has been arisen that either during survey or post

survey proceedings the assessee company has not

submitted satisfactory explanation to prove

identity, genuineness and creditworthiness of

share capital/premium introducers and thus, the

same is from paper companies of entry operator

and then, he recorded satisfaction that the

assessee company taken bogus/ accommodation

entries. The ld. AR vehemently pointed out that

thereafter in last para 9 & 10, the AO, without

139 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

applying mind to the information received from the

Investigation Wing, recorded that he has reason to

believe that the an income has escaped

assessment which clearly shows that the AO

proceeded to initiate initiatory assessment

proceedings and reopening of assessment without

having any valid satisfaction on the basis of

borrowed satisfaction as there was no

independent application of mind to the tangible

material received from Investigation Wing, which

could form the basis reason to believe that income

has escaped assessment.

High Court of Delhi in the case of PCIT vs. G&G

Pharma India Ltd. reported in 384 ITR 147 (Del),

the ld. AR submitted that reopening of assessment

by an AO based on the information received from

the Director of Investigation without making any

effort to discuss the materials on the basis on

which he formed a prima facie opinion that income

140 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

had escaped assessment. The Court held that the

basic requirement of s. 147 of the Act that AO

should apply independent mind in order to form

reasons to believe that income had escaped

assessment had not been fulfilled.

decision of Hon'ble High Court of Delhi in the case

of PCIT vs. RMG Polyvinyl (I) Ltd. reported in 396

ITR 5 (Del), where information was received from

investigation wing that assessee was beneficiary

of accommodation entries but no further inquiry

was undertaken by AO, said information could not

be said to be tangible material as per se and, thus,

reassessment on said basis was not justified.

Finally, the ld. AR submitted that the impugned

initiation of reassessment proceedings, notice and

all consequent proceedings and orders are not

valid and bad in law therefore, the same may

kindly be quashed.

141 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

the copy of proforma for obtaining approval u/s.

151 of the Act and reasons recorded by the AO are

the internal departmental communication between

the PCIT and ACIT and the PCIT being

administrative head and senior to the ACIT has

power to peruse the approval u/s. 151 of the Act

and his sings thereon does not make the same as

mechanical and without application of mind and

the same cannot be termed or alleged as invalid or

bad in law. The ld. DR submitted that in column

12 of approval the ACIT Shri Sarabjeet Singh has

granted valid approval by noting that “Yes, I am

satisfied” which is sufficient to comply with the

provisions of s. 151 of the Act. He also submitted

that if there is any defect therein the same is

rectifiable u/s. 292B of the Act and thus, the

reassessment proceedings and orders cannot be

challenged on this count. The ld. DR further

submitted that the format/proforma for granting

142 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

approval u/s. 151 of the Act has been designed by

the Department and there is no role of AO in

framing and designing the same and the allegation

of non-application of mind on the basis of such

proforma or words used by the approving authority

cannot be made.

officers work under the supervision and guidance

of PCIT and the Department is very careful about

the compliance of the provision of the Act as well

as directions of Hon'ble Supreme Court, Hon'ble

High Court and CBDT Circulars and also towards

working of the Revenue Officers in the cases of

initiation of reassessment proceedings and

framing of reassessment orders. The ld. DR

submitted that the proforma of approval u/s. 151

of the Act is being followed all over India and the

ACIT applied his mind to the all material placed

before him by the AO prior to granting approval

u/s. 151 of the Act in column 12 of the proforma.

143 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Therefore, allegations made by the ld. AR are not

sustainable and tenable and the same may kindly

be dismissed.

that in the reasons para 6 the information of DDIT

(Investigation) has been given and reference of

various entry providers such as Shri Himanshu

Verma, Shri Praveen Aggarwal etc. who are

engaged in providing accommodation entries

through dummy companies with dummy directors.

The ld. AR submitted that in the table given in

para 3 is taken along with para 6 of the reasons

recorded then, it is clear that the names of

companies are 13 and above named two persons

at serial No. 11 & 12 have been noted and there is

no name of entry provider in the other 11 columns

and there is no link in the reasons recorded with

regard to these 11 companies. The ld. AR

submitted that these facts clearly show that the

AO has acted on suspicion only and not on any

144 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

credible input available to him through DDIT

(investigation) information or otherwise on the

basis of any exercise or application of mind by

himself. Therefore, the reassessment proceedings

and all consequent orders are not sustainable and

bad in law. Reiterating his earlier arguments, the

ld. AR vehemently pointed out that the

approval/sanction given in para 12 of the

proforma is not a valid sanction as per ratio of the

various decisions including decision of Hon'ble

High Court of Madhya Pradesh in the case of S.

Goyanka Lime and chemicals Ltd. (supra), which

has been upheld by Hon'ble Supreme Court by

dismissing SLP of the Revenue reported in 237

Taxman 378 (SC) therefore, initiation of

reassessment proceedings u/s. 147 of the Act,

notice u/s. 148 of the Act, reassessment

proceedings and all consequent orders may kindly

be quashed.

145 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

submissions, first of all, we may point out that

from the proforma of approval u/s. 151 of the Act

placed at pgs. 16-17 of the assessee paper book, it

is clear that in column 12 the ACIT has granted

approval for the issue of notice u/s. 148 of the Act

by writing that “Yes, I am satisfied” which is not

sufficient to comply with the requirement of s. 151

of the Act. As per ratio of the decision of High

Court of Madhya Pradesh in the case of CIT v.

M/s. S. Goyanka Lime and Chemical Ltd. (supra),

where the JCIT/ACIT has only recorded “Yes, I am

satisfied” then, it has to be held that the approving

authority has recorded satisfaction in a

mechanical manner and without application of

mind to accord sanction for issuing notice u/s. 148

of the Act for reopening of assessment and in this

situation initiation of reassessment proceedings

and reopening of assessment has to be held as

invalid and bad in law. Therefore, we are inclined

146 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

to hold that the reopening of assessment and

notice u/s. 148 of the Act are bad in law and

consequently all subsequent proceedings in

pursuant thereto are also bad in law and the same

cannot be held as valid and sustainable.

the assessee regarding non-application of mind by

the AO, while recording reasons for reopening of

assessment, is concerned from careful perusal and

reading of the three pages of reasons recorded, we

observe that in first four paras the AO has noted

facts of the information received from DDIT

(Investigation), Faridabad, further, in para 6

modus operandi of entry providers has been noted

thereafter, in para 7 & 8, it has been arisen that

either during survey or post survey proceedings

the assessee company has not submitted

satisfactory explanation to prove identity,

genuineness and creditworthiness of share

capital/premium introducers and thus, the same is

147 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

from paper companies of entry operator and then,

he recorded satisfaction that the assessee

company taken bogus/accommodation entries.

Thereafter, the AO in last para 9 & 10, without

applying mind to the information received from the

Investigation Wing states/writes that he has

reason to believe that the income has escaped

assessment. The text and words used by the AO

in the reasons recorded for reopening of

assessment clearly show that the AO proceeded to

initiatory assessment proceedings and reopening

of assessment without having any valid

satisfaction and only on the basis of borrowed

satisfaction as there was no independent

application of mind by the AO to the tangible

material received from Investigation Wing which

could form the valid basis and reason to believe

that income has escaped assessment.

in the cases of PCIT vs. Meenakshi Oversaes

148 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

(supra), PCIT vs. G&G Pharma (I) Ltd. (supra) and

decision in the case of PCIT vs. RMG Polyviny (I)

Ltd. (supra), where information was received from

investigation wing that assessee was beneficiary

of accommodation entries but no further inquiry

was undertaken by AO, said information could not

be said to be tangible material per se and, thus,

reassessment on said basis was not justified. In

the case of Meenakshi Overseas (supra), their

lordship speaking for the Hon'ble Jurisdictional

High Court held that where the reasons recorded

by the AO failed to demonstrate the link between

the tangible material and the formation of the

reasons to believe that income has escaped

assessment then, indeed it is a borrowed

satisfaction and the conclusion of the AO based on

reproduction of conclusion drawn in the

investigation report cannot be held as valid reason

to believe after application of mind. In this

judgment their lordship also held that where

149 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

nothing from the report of investigation wing is set

out to enable the reader to appreciate how the

conclusions flow there from then there is no

independent application of mind by the AO to the

tangible material which form the basis of the

reasons to believe that income has escaped

assessment.

conclusion recorded by the AO in para 9 & 10 of

the reasons is based on the information received

from the director of investigation wing and the AO

without making any effort to examine and discuss

the material received from the Investigation Wing

and without application of the mind to the same

formed a reason to believe that income had

escaped assessment. This shows that the AO

proceeded to initiate reassessment proceedings on

the basis of borrowed satisfaction without any

application of mind and exercise on the information

received from the Investigation Wing of the

150 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Department. Therefore, we have no hesitation to

hold that the AO proceeded to initiate

reassessment proceedings u/s. 147 of the Act and

to issue notice u/s. 148 of the Act on the basis of

borrowed satisfaction and without any application

of mind and examination of the so called material

and information received from the investigation

wing to establish any nexus, even prima facie,

with the such information. Therefore, in our

considered opinion the initiation of reassessment

proceedings u/s. 147 of the Act, notice u/s. 148 of

the Act, reassessment proceedings and all

consequent proceeding and orders, including

impugned reassessment and first appellate order,

are bad in law and thus, not sustainable and we

hold so. Accordingly, on the basis of foregoing

discussion, grounds No.2, 3, 4 and additional

ground of the assessee are allowed and impugned

proceedings, notice u/s. 148 of the Act and all

consequent orders are quashed.”

151 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

8.5. The statement of Shri Himanshu Verma is also

filed on record which did not find mention if M/s. Shubh

Propbuild Pvt. Ltd., as mentioned in the reasons belong to

Shri Himanshu Verma. There is no investor exist in the name

of M/s. Management Services Pvt. Ltd., and no addition in

respect of the same company have been made by the A.O.

The A.O, therefore, recorded incorrect facts in the reasons for

reopening of the assessment. Thus the same cannot be

approved under the Law. It is well settled Law if wrong facts

and wrong reasons are recorded for reopening of the

assessment, reopening of the assessment would be invalid

and bad in Law. We rely upon Judgment of Hon’ble Punjab &

Haryana High Court in the case of Atlas Cycle Industries 180

ITR 319 (P&H). It is well settled Law that note already filed

with return disclosing nature of capital receipt and no other

tangible material found, therefore, reopening of the

assessment under section 148 was quashed. We rely upon

Judgment of Hon’ble Delhi High Court in the case of CIT vs.,

Atul Kumar Swami [2014] 362 ITR 693 (Del.) and Judgment

of Hon’ble Allahabad High Court in the case of Kanpur Texel

152 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

P. Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs.,

Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon’ble

Rajasthan High Court has held that “reasons must be based

on new and tangible materials. Notice based on documents

already on record, 148 not valid.” In the instant case under

appeal, the A.O. has reproduced the information received

from Investigation Wing and reproduced the same in the

reasons recorded under section 148 of the I.T. Act. This

information shows that assessee has received the amount of

credit from 06 parties, but, one of the party i.e., M/s.

Management Services Pvt. Ltd., do not exist and that M/s.

Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu

Verma. It, therefore, appears that A.O. has not gone through

the details of the information and has not even applied his

mind and merely concluded that he has reason to believe that

income chargeable to tax has escaped assessment. In the

reasons A.O. has recorded that assessee has received

accommodation entry of Rs.2.45 crores, but, ultimately made

an addition of Rs.11.05 crores without bringing any material

against the assessee. The reasons to believe are, therefore,

153 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

not in fact reasons, but, only conclusion of the A.O. In the

case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the

reasons has even mentioned that he has gone through the

information received which is lacking in the present case. The

A.O. being a quasi-judicial authority is expected to arrive at

subjective satisfaction independently on his own. The A.O.

however, merely repeated the report of the Investigation Wing

in the reasons and formed his belief that income chargeable

to tax has escaped assessment without arriving at his

satisfaction. Thus, there is no independent application of

mind by the A.O. to the report of Investigation Wing to form

the basis for recording the reasons. The reasons recorded by

the A.O. are also incorrect as noted above. The reasons failed

to demonstrate the link between the alleged tangible material

and the formation of reasons to believe that income

chargeable to tax has escaped assessment. The decisions

relied upon by the Learned Counsel for the Assessee in the

cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl

(I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs.,

Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr.

154 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Commissioner of Income Tax vs., G and G Pharma India Ltd.,

384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329

ITR 110 (Del.), clearly apply to the facts and circumstances of

the case. Learned Counsel for the Assessee also relied upon

Order of ITAT, Delhi Bench in the case of Pioneer Town

Planners Pvt. Ltd., (supra) in which on identical facts

reopening of the assessment have been quashed. The Ld.

D.R. relied upon certain decisions in support of the contention

that reopening of the assessment is justified, but, the same

are distinguishable on facts of the present case. Considering

the facts and circumstances of the case in the light of above

discussion and decisions referred to in the Order, we are of

the view that reopening of the assessment is bad in law and

that sanction/approval granted by Pr. Commissioner of

Income Tax is also invalid. We may also note that vide Order

sheet Dated 23.08.2019 the case was re-fixed for hearing

because the Ld. D.R. argued that approval have been granted

by Commissioner of Income Tax after due discussion of the

matter and perusal of the relevant information and thereafter

approval in prescribed proforma sent to the A.O. and he has

155 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mentioned that I am satisfied. However, no record was

produced. Therefore, this case was re-fixed for fresh hearing.

However, on the date of hearing no such record have been

produced for the inspection of the Bench. Therefore,

satisfaction recorded by the Pr. Commissioner of Income Tax

is invalid and without application of mind. Therefore, the

reopening of the assessment is invalid and bad in Law and

cannot be sustained in Law. We, accordingly, set aside the

Orders of the authorities below and quash the reopening of

the assessment under section 147/148 of the I.T. Act, 1961.

Resultantly, all additions stands deleted. Since we have

quashed the reopening of the assessment, therefore, there is

no need to decide the addition on merit which is left with

academic discussion only.

6.7. Considering the issue involved in the present

appeal in the light of above decisions, it is clear that the

Addl. CIT and Ld. Pr. CIT while granting approval for

reopening of the assessment under section 147/148 of the

I.T. Act merely stated “Yes”, which would show that they

156 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

have not applied their independent mind and merely

accorded sanction without going through any material on

record. The issue is thus covered against the Revenue by

the aforecited decisions in which even on more facts the

approval was not found valid. Therefore, the issue is covered

by the above decisions of the Tribunal in which even on

better footing the re-assessment order was quashed and

ultimately it was held that such proceedings could not be

reopened in collateral proceedings under section 263 of the

I.T. Act, 1961. The Learned Counsel for the Assessee has

pointed-out several inconsistencies in the reasons which

also show that the reasons are recorded just by reproducing

the report of the Investigation Wing without application of

mind. The issue is, therefore, covered in favour of the

assessee by the above Orders of the Tribunal. Following the

same we hold that reopening of the assessment in this case

is invalid, bad in law and therefore, such re-assessment

proceedings could not be reopened under section 263 of the

I.T. Act, 1961. It may also be briefly noted that the A.O. in

the reasons recorded in the assessment order has

157 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

mentioned that assessee has received accommodation

entries in assessment year under appeal from five parties in

a sum of Rs.70 lakhs and after reopening of the assessment,

A.O. called for the details and documents from the assessee

and was satisfied with the explanation of assessee,

therefore, the of proceedings under section 263 of the I.T.

Act by the Ld. Pr. CIT could not have substituted the view

taken by the A.O. In view of these facts and circumstances,

we are of the view that initiation of proceedings under

section 263 of the I.T. Act are not justified. The same are

bad in law and invalid. We, accordingly, set aside the Order

of the Ld. Pr. CIT passed under section 263 of the I.T. Act

and quash the same. Resultantly, the re-assessment order

Dated 05.12.2016 under section 147/143(3) of the I.T. Act,

1961 by the A.O. is restored. Appeal of assessee is

accordingly allowed.

158 ITA.No.4749/Del./2019 M/s. Charbuja Marmo (India) Pvt. Ltd., Delhi.

Order pronounced in the open Court.

Sd/- Sd/- (B.R.R. KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Delhi, Dated31st December, 2019

VBP/-

Copy to 1. The appellant 2. The respondent 3. CIT(A) concerned 4. CIT concerned 5. D.R. ITAT “B” Bench 6. Guard File // BY Order //

Asst. Registrar : ITAT Delhi Benches : Delhi.