SHREE SAI CITY PROMOTERS AND DEVELOPERS PVT. LTD.,DELHI vs. PR.CIT- 8, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No. 6905/Del/2017 (Assessment Year: 2007-08) Shri Sai City Promoters and Developers Vs. Pr. CIT,8 Pvt Ltd, New Delhi H. NO. 25 Block & Pockets C-3, Sector- 11, Rohini, Delhi PAN: AAJCS1878A (Appellant) (Respondent)

Assessee by : Shri S. Krishnan, CA Revenue by: Shri S.S. Rana, CIT DR ITA No. 2182/Del/2017 (Assessment Year: 2010-11) Surya Irrigation Private Limited, Vs. Pr. Commissioner of Income Tax, A-25, DB Gupta Road, Delhi-8, New Delhi Prehlad Mkt, Karol Bagh, New Delhi PAN: AAACS1979D (Appellant) (Respondent)

Assessee by : Shri Pratap Gupta, CA Revenue by: Shri S.S. Rana, CIT DR ITA No. 2544/Del/2017 (Assessment Year: 2008-09) M/s. SNB Enterprises Pvt. Ltd, Pr. CIT-8, Vs. C-16, SMA Industrial Area, New Delhi GT Karnal Road, New Delhi PAN: AABCS6288G (Appellant) (Respondent)

Assessee by : Shri S. Krishnan, CA Revenue by: Shri S.S. Rana, CIT DR

ITA No. 2841/Del/2017 (Assessment Year: 2010-11)

SSE Commodities Pvt. Ltd, Vs. Pr. CIT-8, 1108, Naurang House, CR Building, IP Estate, 21 KG Marg, New Delhi New Delhi PAN: AAKCS7804F (Appellant) (Respondent)

Assessee by : Shri Suresh Gupta CA Revenue by: Shri S.S. Rana, CIT DR Date of Hearing 15 & 16/10/2018 Date of pronouncement 14/01/2019

O R D E R PER PRASHANT MAHARISHI, A. M. 1. All these four appeals filed by the respective parties involve common issue of challenged to the order passed by the ld Commissioner of Income Tax u/s 263 of the Act. 2. The assessee i.e. Shri Sai City Promoters and Developers Pvt Ltd in ITA No. 6905/Del/2017 for the Assessment Year 2007-08 has raised the following grounds of appeal:- “1. On facts and in the circumstances of the case and in law the order of the Commissioner of Income Tax passed after invoking Section 263 of the Income Tax Act, 1961 and in setting aside the assessment order dated 19.03.2014 framed u/s 147/ 143(3) of the Act and directing a fresh assessment in lieu thereof is devoid of jurisdiction and being misconceived, erroneous, illegal and unwarranted must be quashed. 2. Additionally, on the facts and in the circumstances of the case, the Commissioner of Income-tax erred in invoking the revisionary powers u/s 263 of the Income Tax Act, 1961 despite the fact that even after a thorough examination, no specific error in the assessment order causing prejudice to the Revenue has been identified and the revision is ordered tentatively on the erroneous basis that necessary enquiries do not appear to have been made. The order being ab initio illegal and void must be quashed.” 3. The assessee i.e. Surya Irrigation Private Limited in ITA No. 2182/Del/2017 for the Assessment Year: 2010-11 has raised the following grounds of appeal:- “1. That on law and facts and circumstances of the case, the learned CIT has erred both in law and on facts in invoking the provision of section 263 without appreciating the fact that the order passed by learned Assessing Officer is neither erroneous nor prejudicial to the interest of the revenue as order under section 147/143(3) was passed by Id assessing officer after enquiry based on the same material forwarded by the Id Dl (Inv.) and on the basis of which proceedings under section 147 was initiated and therefore the finding of the Id CIT that said order was passed without making enquiries and presumption of Id CIT that seized documents forwarded by investigation wing has not been considered/verified by the Id assessing officer before passing the assessment order and accordingly order under section 263 passed by Id CIT needs to be set aside and cancelled.

2 Without prejudice to ground of appeal no. 1, the learned CIT without appreciating the correct facts of the case and examining the submissions of the appellant company during 263 proceedings is not justified on law and facts and circumstances of the case in setting aside the issue to Id assessing officer with the direction that if after verification of the seized material and explanation regarding the transfer of shares in the name of the directors or their relatives or the concerns in which directors are interested, it is found by the AO that there is nexus between the cash deposits and the cheque issued by the group companies of SK Jain or no valid explanation is given for the transfer of shares at lower price in the name of directors, relatives and the concerns in which assessee company is interested, then same may be considered as an accommodation entry and taxed accordingly as per the provisions of Income Tax Act” under the circumstances that as per provision of section 263 only Id Commissioner has the powers to enquire on the issue for which provision of section 263 is invoked. 3 Without prejudice to ground of appeal no. 1 and 2, Id CIT is not justified in law and facts and circumstances of the case in holding the proceedings initiated under section 147 of the I.T. Act as valid.” 4. The assessee i.e. M/s. SNB Enterprises Pvt. Ltd in ITA No. 2544/Del/2017 for the Assessment Year 2008-09 has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the CIT erred in initiating proceedings and framing an order u/s 263 without meeting either of the jurisdictional conditions in that regard. 2. The CIT has erred in revising assessment order, without establishing any error in the AO’s action, nor any prejudice to the revenue, since the view taken by the AO is after detailed enquiry and has not been shown to be the wrong view. 3. The CIT has erred in revising assessment order by seeking to substitute his view with the AO’s.” 5. The assessee i.e. SSE Commodities Pvt. Ltd in ITA No. 2841/Del/2017 for the Assessment Year 2010-11 has raised the following grounds of appeal:- “1. That on the facts and circumstances of the case and in law, the order passed by the Pr. Commissioner of Income-tax (CIT), u/s 263 of the I T Act 1961 ('the Act’) setting aside the assessment framed u/s 143(3) of the Act as erroneous and prejudicial to the interest of the revenue is without jurisdiction, bad in law and void ab-initio. 2. That on the facts and circumstances of the case and in law, the Pr. CIT erred in holding that the assessment order is erroneous and prejudicial to interest of revenue on the issue of accepting the explanation of the appellant u/s 68 of the Act in relation to the cash credit of Rs 7,50,000/- accepted from M/s Victory Software Pvt Ltd after conducting due enquiry on the basis of the information received from the Investigation Wing of the department. 2.1 That on the facts and circumstances of the case and in law, the Pr. CIT erred in exercising jurisdiction u/s 263 by setting aside the aforesaid issue even though the same had been discussed and scrutinized by the Assessing Officer in detail while framing the assessment u/s 143(3) of the Act. 2.2 That on the facts and circumstances of the case and in law, the Pr. CIT erred in setting aside the aforesaid issue even after recording prima facie finding on the merits of the issue in favour of the appellant by invoking Explanation 2 to Section 263 of the Act. Page | 3

should have been some noting either in the order sheet or the in the questionnaires issued to the assessee or in the submission before the ld AO. In para No. 11 the ld CIT further held that the seized material clearly indicate that cheques were issued against the receipt of cash through some the intermediaries and the consequent issue of cheque details clearly matches with the credit of those cheques in the bank account of the assessee. The ld CIT further held that w.e.f 01.06.2015 there is an amendment in the provisions of section 263 of the Act, which provides that if the order is passed without making enquiries or verification, which the ld AO should have made, make the order clearly erroneous and prejudicial to the interest of revenue. Further, the ld AO held that the reassessment order was passed without making proper verification and enquiries and therefore, it is deemed erroneous in so far as the it is prejudicial to the interest of revenue. consequently, order u/s 263 of the Act was passed on 17.03.2017 held that reassessment order passed by the ld AO on 19.03.2015 for the AY 2007-08 is erroneous and prejudicial to the interest of the revenue and it was set aside with a direction to the ld AO to examine the seized material and confront the same to the assessee. It was further directed that if after verification of the seized material it is found by the ld AO that there is a nexus between the cash deposit and cheque issued by the group companies of S,K. Jain, and then it may be considered as an accommodation entry and taxed accordingly. Against this order the assessee is aggrieved and has preferred this appeal. 8. The ld Authorised Representative submitted a paper book submitted that during the course of assessment proceedings the assessee submitted a reply dated 02.07.2014, wherein the ledger account, confirmation, income tax returns, bank statement and list of directors and application form of all the three share holders were submitted before the ld Assessing Officer. Further, on 133.09.2014 the copy of the bank statement and audit report was also submitted. Further, he also referred to the reply sent by these three-share holders u/s 133(6) of the Act to the Assessing Officer. in the end it was stated that the directors of the company were also produced u/s 131 of the Act before the ld Assessing Officer whose statement was recorded and the ld AO is satisfied about the identity, creditworthiness, and genuineness of the transaction. Therefore, all the due enquiries, which could have been made by the ld AO, has been made and therefore, such order cannot be held to be an order passed without making adequate enquiries. 9. The ld Departmental Representative vehemently submitted that the ld Assessing Officer has neither confronted the seized material to the assessee nor he himself considers them while making the assessment. The ld DR stated that this issue is squarely covered on the identical facts and circumstances against the assessee by the decision of the coordinate bench in Surya Financial Pvt Ltd where coordinate bench has held that AO failed to consider the seized Page | 5

material during the course of search of SK Jain Group, the order was held to be erroneous and prejudicial to the interest of revenue. the ld DR further stated that issue is squarely covered in favour of the revenue by the decision of the Hon'ble Supreme Court in case of Daniel Merchant Pvt. Ltd. He submitted that amendment to the provisions of section 263 w.e.f 01.06.2015 also covers the issue in favor of the revenue. 10. We have carefully considered the rival contentions and perused the orders of the ld Assessing Officer as well as the order of the ld CIT passed u/s 263 of the Act. The finding of the ld CIT clearly shows that Assessing Officer despite being in possession of the seized material found during the course of search on SK Jain Group of entities where it is clearly evident that the share capital introduced by the assessee is an accommodation entry. The ld Assessing Officer neither confronted the assessee with the seized material nor obtained any explanation either from the assessee or from the directors of the share applicant who were examined by him u/s 131 of the Act. On the identical facts and circumstances of the case the coordinate bench in ITA No. 2915/Del/2017 for AY 2011-12 has decided this issue holding that issue is covered against the assessee by the decision of the another coordinate bench in ITA NO. 2158/Del/2017 reported in 2017-TIOL-1775-ITAT-DEL and there is no infirmity in the order of the ld CIT in invoking the jurisdiction and passing order u/s 263 of the Act. the coordinate bench has held as under :- “6. We have heard the rival submissions, perused the relevant finding and observations appearing in the impugned order as well as the material referred to before us. We find that Ld. Pr. CIT in his revisionary jurisdiction under section 263 of the Act from the examination of records before him, noted that though the assessment was reopened under section 148 of the Act on the allegation of accommodation entry taken from S.K. Jain group of concerns who were subjected to search on 14/9/2010 by the Investigation Wing, however, the Assessing Officer had not examined 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 S.K. Jain during the course of search, which indicated accommodation entry pertaining to assessee also. We further find that an appraisal report along with scanned copy of seized material sent by the Investigation Wing to all the Assessing Officers through their respective CITs, have neither been looked upon by the Assessing Officer nor has been examined by him during the course of reassessment proceedings. Accordingly, Ld. Pr. CIT issued a show cause notice under section 263 of the Act, the contents of which have been incorporated by him at pages 2 and 3 of the impugned order, wherein he has specifically brought out that the Assessing Officer has failed to consider the relevant seized material pertaining to the assessee-company, which was evident from Page | 6

‘Annexure A-13 back page 38 of the seized material, wherein there is a categorical 18 mention of an amount of Rs.25 lacs was taken by the through cheque No.369817 dt. 18.3.2010 of Rs. 5 lacs; cheque no. 378628 dated 18.3.2010 of Rs. 10 lacs and cheque no. 029630 dated 18.3.2010 of Rs. 10 lacs 244595, dated 29/1/2009; and there was also a corresponding entry in the cash book on 18/3/2010 seized as per Annexure A- 13/Page15 shows that cash of Rs. 25 lacs was given by the same Goyal Sahab to SK Jain Group. We note that the relevant copies of the seized material relating to the assessee, were not only given to the assessee along with the show cause notice but was also confronted during the course of proceedings under section 263 of the Act. Assessee’s AR in his submissions has stated that the AO on the basis of the information / documents available on record had made independent and proper enquiry. The AO directed the Assessee to furnish the desired information and the assessee had furnished all information that has been called for by him during the course of reassessment proceedings. Further the AO had made independent and proper enquiry and verification directly from the share applicants. Moreover, the AO had issued summons for personal appearance of the share applicants and had recorded their statement on oath. It was further stated that it would be incorrect to hold that the AO did not consider a particular seized material on record during the course of reassessment proceedings and any revision proceedings under section 263 in such case is unsustainable. In support, various judicial decisions were also referred and relied upon, which has been incorporated at page 4 (para 2) of the impugned order. We find that Ld. Pr. CIT after 19 considering the entire gamut of facts, material on record as well as the submissions made by the assessee, first of all noted that, many incriminating documents were found during the course of investigation and search & seizure action in the case of S.K. Jain group which was seized during the course of search by the Investigation Wing on 14/9/2010. He further noted that these seized papers clearly reveal various accommodation entries provided by such companies to various beneficiaries. The appraisal report was forwarded by the Investigation Wing in the month of March, 2013 to the then CIT-III in hard copy and various other seized materials running into 1000 pages were scanned and soft copies of the relevant seized materials were sent to the Commissioners and then to the Assessing Officers. The relevant extract of certain seized documents has also been scanned by him including the one marked as “Annexure A-13 (back page 38)” pertaining to the accommodation entry relating to the assessee, which has been noted by him from the seized documents scanned at pages 7 & 8 of the impugned order. The relevant observation

with regard to these seized material by the Pr. CIT, for the sake of ready reference, is reproduced hereunder:- “It is important to note that the assessee is also shown as beneficiary as evident from the scanned copy of the seized material namely Annexure number A-13 backpage-38 showing that 03 cheque number 369817 dated 18.3.2010 for Rs. 5 Lakhs were issued by Zenith from Axis Bank in favour of 20 Surya Financial Services Ltd, cheque no. 378628 dated 18.3.2010 for Rs. 10 lacs was issued by Shalini Holding From Axis Bank and cheque no. 029630 dated 18.3.2010 for Rs. 10 lacs by Apoorva from Axis Bank in favour of the assessee company. In other words, on 18.3.2010 total cheques of Rs. 25 lacs were issued by three companies as mentioned above in favour of the assessee company. All the three cheques have been credited in the account of the assessee, therefore, authenticity of the seized pages cannot be doubted. On perusal of the cash book as on 18.3.2010 which has been scanned as page no. 15 of Annexure A-13 and reproduced as above, it was seen that cash of Rs. 25 lacs has been received from same Goyal Sahab on 18.3.2010 itself. This prima facie shows that the entry of Rs. 25 lacs was received against the payment of cash of Rs. 25 lakhs.” 6.1 We further note that similarly, in the Appraisal Report the year wise details of accommodation entries provided by SK Jain Group to various beneficiary companies was tabulated for the Charge of CIT-8 as mentioned at page no. 9 to 16 of the impugned order, which shows that the AO made the table on the basis of reopening the assessment as it clear from the reasons recorded for the issue of notice under section 148 of the Income Tax Act. As can be seen from the entry number 240 against the name of Surya Financial Services Private Limited amount of Rs. 25 is mentioned. In this case, even though the AO has considered the appraisal 21 report, he did not examine any of the relevant seized material. Since, the entries in the seized material showed that the assessee was also one of the beneficiary of the accommodation entries give by the concerns of SK Jain and others, it cannot be stated that such seized material belonged to the assessee and therefore, there was no need to proceed under section 153C of the Income Tax Act. It was further observed that in this case the AO merely tried to verify the existence and the creditworthiness of the parties investing in the shares of the assessee company. They failed to make enquiries regarding the genuineness of the transaction – whether the cheque was issued in lieu of Page | 8

cash as was appearing in the seized material. It was further noted that there is nothing on the record to show that the AO has ever confronted the assessee on such seized documents. Had the AO examined the seized material, there should have been some nothings either in the order sheet or in the questionnaire issued to the assessee by the AO or in the submission of the assessee before the AO. In this case, the seized material clearly indicate the cheques issued against the receipt of cash through some intermediaries and the details of cheque number, bank name, date, amount and the name of the issuing party clearly matches with the cheques credited in the bank account of the assessee. Keeping in views of the facts and circumstances, we are of the considered opinion that Assessing Officer did not examine the relevant seized material despite the fact that entries in the seized material showed that assessee was also one of the beneficiaries of the accommodation entries given by the concerns of S.K. Jain group. The Assessing Officer 22 was mainly trying to verify the existence of the parties, rather than to make enquiries regarding the genuineness of the transactions whether cheque was issued in lieu of cash or not as was appearing in the seized material. From the perusal of the case records of the assessee for the relevant assessment year, there is nothing on record to show that the Assessing Officer has ever confronted the assessee on such seized documents and had the Assessing Officer examined the seized material, he should have made some noting either in the order sheet or in the questionnaire issued to the assessee or any kind of reference would have been made in the submissions made by the assessee before the Assessing Officer. Therefore, the decisions and the case laws relied upon by the assessee’s counsel would not be applicable that the Assessing Officer had formed an opinion on the relevant seized material. Accordingly, Ld. Pr. CIT has rightly set aside the re-assessment order on the ground that the Assessing Officer has not made any proper verification/enquiries and, therefore, the said assessment order is deemed to be erroneous and insofar as prejudicial to the interest of the Revenue in terms of amended provisions inserted in section 263 of the Act by way of Explanation 2. Thus, the order of the Assessing Officer was set aside with the direction to examine the seized material and confront the assessee and if the Assessing Officer find that there is any nexus between the cash deposits and the cheques issued by the group companies of SK Jain, then the same may be taxed accordingly. Page | 9

6.2 Now coming to the one of the main contention raised by the ld. counsel of the assessee that the proceedings under section 147 of the Act was itself bad in law and therefore, proceedings u/s 263 of the Act could not have been invoked. The reasons given for this proposition is that, here in this case, material on the basis of which proceedings for reopening the assessment has been sought to be initiated u/s 147 of the Act has been found from the search conducted at the premises of third party and if material found from the premises of the searched person is being utilized, then in such a situation the law provides that proceedings should have been initiated under section 153C of the Act, which has not been done and, therefore, the entire proceedings under section 147 of the Act gets vitiated and is bad in law. In support of this proposition Ld. Counsel, has relied upon certain decisions, firstly on the point that validity of reassessment or assessment order can be challenged in the revisionary proceeding under section 263; and secondly, if any material has been found pertaining to the assessee in the case of person searched or covered u/s 153A of the Act, then only recourse was to initiate proceedings under section 153C of the Act and not under section 147 of the Act. At the outset, we do not find any quarrel to the proposition that the validity of assessment or reassessment cannot be challenged in the revisionary proceedings u/s 263, however, on the facts of the present case, the ratio laid down in such judgments would not be applicable at all, because here in this 24 case no document or material belonging to the assessee was found in the course of search proceedings in the case of S.K. Jain group, albeit assessee’s name appears as one of the beneficiaries of accommodation entries in the books of account maintained by one of the concern of S.K. Jain group. The entries in the books of account of S.K. Jain group cannot be reckoned as any material or document belonging to the assessee so as to constitute document or asset seized or requisitioned in the case of person searched in terms of scope of section 153C of the Act. If certain documents or asset or books of account belonging to the assessee would have been found during the course of search proceedings of S.K. Jain and his group concerns, then perhaps it would have been held that the provisions of section 153C of the Act would have been invoked. But here in this case what has been found, is the regular entries in the books of account of the concerns of S.K. Jain group, in which name of the assessee is appearing. Such entries in the cash books depicting the details of cheques Page | 10

issued in favour of the assessee as well as cash deposit through intermediates on various dates cannot be reckoned as document or books of account of the assessee. This fact has been noted by the Pr. CIT in the impugned order, wherein the entries pertains to the assessee for a sum of Rs.25 lacs. Thus, the contention raised by the ld. counsel on this point is out rightly rejected that the 25 proceedings under section 153C of the Act should have been initiated instead of under section147 of the Act. 6.3 As regards the contention that material or information found during the course of search in the case of S.K. Jain group cannot be held to be a tangible material pertaining to the assessee, we are unable to accept such a contention for the reason that, firstly, there was a categorical information and material coming on record, that assessee was one of the beneficiaries of accommodation entries provided by one of the group concern of S.K. Jain and not only that, a specific amount (of Rs. 25 lacs ) has been mentioned which prima-facie pertained to the assessee. This definitely constitutes a tangible and definite material having live-link nexus with the income chargeable to tax escaping assessment. The judgments relied upon by the ld. CIT D.R. on this point, specifically the judgment of Hon'ble Delhi High Court in the case of PCIT Vs Paramount Communication (P.) Ltd. (supra) is squarely applicable, as in that case also the information regarding bogus purchase by the assessee was received vide DRI from CCE which was passed on to Revenue authorities and was held to be tangible material outside record to initiate valid re-assessment proceedings. Here in this case, as reiterated several times there was a definite information and material found qua the assessee which at least needed verification and examination and hence, in our opinion 26 such a material and information does constitute a tangible and relevant material sufficient enough to form ‘reason to believe’ that income chargeable to tax has escaped assessment. Apart from that, it is seen from the records that the assessee had raised similar objections after the receipt of “reasons recorded” before the Assessing Officer during the course of re-assessment proceedings, which have been amply dealt with and discussed by the Assessing Officer inn detail vide his separate order, copy of which has been placed in the paper book. Against the said order, assessee has not sought for any remedy nor has it challenged this issue in appeal after the passing of the assessment order. In any case, we have already held Assessing Officer has rightly acquired jurisdiction under section 147 of the Page | 11

Act based on the information/material referred to in the “reasons recorded”. Accordingly, this contention raised by the ld. Counsel of the assessee is also rejected. 6.4 Lastly on merits, as discussed in the foregoing paragraphs, the Pr. CIT has amply demonstrated in his impugned order that this issue was neither enquired into nor was verified by the Assessing Officer once the information and the material in hard copy and in form of CD was made available to him. AO should have verified the genuineness of the transaction and also should have carried out adequate enquiry to come to a logical conclusion that either there is no accommodation entry and the contents found qua the assessee being one of the beneficiary of the accommodation entry in the books of account of the concerns of S.K. Jain group are false or bogus; or assessee had amply demonstrated and 27 substantiated before the AO regarding the genuineness of the transaction of the accommodation entry. In absence of such a mandate which was cast upon the AO, we are of the opinion that the assessment order is not only erroneous but also prejudicial to the interest of revenue, as this matter definitely requires proper enquiry and verification by the AO. 6.5 In view of above, there is absolutely no dispute that the AO has not made any enquiry regarding the accommodation entry pertaining to the assessee specifically which was found during the course of search and investigation in SK Jain Group as highlighted by the Pr. CIT. Once adequate or proper enquiry has not been done, then in terms of Explanation 2 inserted in section 263 of the Act by the Finance Act, 2015, w.e.f. 1.6.2015, the assessement order is deemed to be erroneous in so far as it is prejudicial to the interest of Revenue. Hence, the present case is squarely covered by the decision of the ITAT, ‘G’ Bench, passed in ITA No. 2158/Del/2017 (AY 2009-10) in the case of Surya Jyoti Software Pvt. Ltd. vd. Pr. CIT, because in both these cases the order u/s. 263 of the Act has been passed by the Ld. Pr. CIT-8, New Delhi; information was received from Investigation Wing that the assessee has received accommodation entries from Sh. SK Jain; assessments were reopened u/s. 147 of the Income Tax Act, 1961 on the basis of above information and assessment completed without making any addition on account of accommodation entry taken and the Ld. Pr. CIT’s order u/s. 263 of the Act on account of the fact that the AO had not taken into consideration the material seized during search in the case of Sh. SK Jain. We Page | 12

further find that the present is also covered by the decision of the Hon’ble Supreme Court of India in the case of Deniel Merchants Pvt. Ltd. vs. ITO (Appeal No. 2396/2017) dated 29.11.2017, wherein the Hon’ble Supreme Court of India has dismissed the SLPs in cases where AO did not make any proper inquiry while making the assessment and accepting the explanation of the assessee(s) insofar as receipt of share application money is concerned. On that basis the Commissioner of Income Tax had, 28 after setting aside the order of the AO, simply directed the AO to carry thorough and detailed inquiry. 6.6 In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we hold that the Ld. Pr. CIT has rightly exercised his jurisdiction under section 263 of the Act in setting aside the order of the Assessing Officer being erroneous in so far it is prejudicial to the interest of the Revenue. Accordingly, we confirm the order of the Ld. Pr. CIT and dismiss the grounds raised by the assessee before us. 7. In the result, appeal of the assessee is dismissed.” 11. Further on the identical facts in case of the accommodation entries received from Mr. S K jain, the coordinate bench has upheld the revisionary proceedings u/s 263 of the act when in reopened proceedings ld AO failed to confront the seized material to the assessee and also failed to consider it . The Coordinate bench held as under :- “17. We have heard the rival submissions, perused the relevant finding and observations appearing in the impugned order as well as the material referred to before us. Here in this case, the original assessment was completed under section 143(3) vide order dated 30/11/2011, wherein admittedly the issue of loan or money received from M/s Shalini Holdings Ltd. was neither examined nor was enquired by the AO during the course of assessment proceedings, at least nothing has been brought on record before us by the assessee in the detailed paper book filed before us that any query or reply on this issue was raised by the Assessing Officer in the course of assessment proceedings. Even the assessment order merely speaks about accepting of the original return of income, when admittedly assessee had filed revised return of income on 14/9/2010. This shows completely lack of application of mind by the AO at the time of passing of original assessment order. Later on, assessee’s case was reopened under section 147 by issuance of notice under section 148 dated 18/10/2013, which from the records before us shows that the said notice was withdrawn due to some technical reason and another notice under section 148 was issued on 25/3/2014. The “reasons” for reopening the assessment under section 147 and issuance of notice under section 148 has already been incorporated above. Page | 13

From the perusal of the same, it is seen that the core reason for reopening the assessment was that there was a definite information and document along with appraisal report received from the office of the CIT-III, New Delhi, that the assessee has rotated its money in cash for a Cheque and is a beneficiary of accommodation entry provided by the group of S.K. Jain and others through his various bogus companies. A search and seizure action was carried out in the case of S.K. Jain and his group of companies wherein modus operandi of accommodation entries were unearthed and was found that many parties were re-routing their unaccounted cash through these accommodation entries. The assessee was also found to be one of the beneficiaries of such accommodation entry in the assessment year 2009-10, wherein it had taken an entry of Rs.1 crore. The Assessing Officer, after having received such an information and based on such tangible material has entertained his “reason to believe” for reopening the case under section 147, then he was required to carry out detailed enquiry and verification, not only on the information pertaining to assessee being one of the beneficiary of accommodation entry, but also should have enquired about the genuineness of the transaction as a whole. In the impugned assessment order u/s 143(3)/147, there is no whisper about any enquiry or verification done by the Assessing Officer in this regard. Though in his order disposing of the assessee’s objection on validity of proceedings under section 147, it is seen that he has passed a very detailed order justifying the assumption of jurisdiction under section 147 precisely on this ground that assessee has received entries from many parties and information and document in the form of CD, appraisal report has been received wherein assessee has been found to be one of the beneficiaries. However such a finding remained confined to justify the reopening under section 147 and was not taken to logical conclusion by further probing into the matter. 18. Here in this case, one important aspect which needs to be kept in mind that the reopening has been done within four years from the end of the relevant assessment year, because the impugned notice u/s 148, which is the basis for reopening and consequently passing of the re-assessment order, is dated 25/3/2014. Thus, the law contained in proviso to section 147 will not apply whereby ascribing of failure on part of the assessee by the AO is sine-qua-non to acquire the jurisdiction beyond the period of 4 years where assessments have been completed under section 143(3) or 147. Post acquiring of jurisdiction under section 147, it is nowhere borne out from the records that the Assessing Officer has verified the genuineness of the transaction based on the information received, specifically on the Annexures and the information as elaborately discussed by the Ld. Pr. CIT in the impugned order, which has been Page | 14

stated to be available to the Assessing Officer also at the time of re-assessment proceedings. There is no rebuttal of the categorical observation of the Ld. Pr. CIT that “it is admitted by the ld. counsel for the assessee that no specific query was raised by the Assessing Officer regarding the seized material relating to M/s Shalini Holdings Pvt. Ltd. as mentioned in the show cause notice” (para 7.3 of the impugned order). The Ld. Pr. CIT has further observed that he has perused the case records of the assessee for the relevant Assessment Year and has found that there is nothing on the record to show that the Assessing Officer has ever confronted the assessee on such seized documents. Had the AO examined the seized material, there should have been some noting either in the order sheet or in the questionnaires issued to the assessee by the AO or in the submissions of the assessee before the AO. He had further observed that the situation would have been different had the AO examined the seized material and after examination of the seized material the AO had taken a view, then probably the revision proceedings under section 263 could not have been initiated as it would have amounted to the ‘change of opinion’ or adequate enquiries has been carried out as held by various courts. On the basis of such uncontroverted facts he has come to a conclusion that the order passed by the AO in this case is without considering the relevant seized material which shows that the cheques have been issued in lieu of the cash received, is not only erroneous but also prejudicial to the interest of the revenue as the amount of Rs 1 crore prima facie remained untaxed in the Assessment Year 2009-10. There is no rebuttal to such a finding recorded in the order or any material has been brought on record by the assessee before us that these observations and findings of the Pr. CIT are contrary to the facts. The observations and findings recorded by him ostensibly goes to show that the Assessing Officer has not made any proper or adequate enquiry on this issue, which at the outset renders the assessment order erroneous and prejudicial to the interest of the revenue. 19. Now coming to the one of the main contention raised by the ld. counsel of the assessee that the proceedings under section 147 was itself bad in law and therefore, proceedings u/s 263 could not have been invoked. The reasons given for this proposition is that, here in this case, material on the basis of which proceedings for reopening the assessment has been sought to be initiated u/s 147 has been found from the search conducted at the premises of third party and if material found from the premises of the searched person is being utilized, then in such a situation the law provides that proceedings should have been initiated under section 153C, which has not been done and, therefore, the entire proceedings under section 147 gets vitiated Page | 15

and is bad in law. In support of this proposition Ld. Counsel, has relied upon certain decisions, firstly on the point that validity of reassessment or assessment order can be challenged in the revisionary proceeding under section 263; and secondly, if any material has been found pertaining to the assessee in the case of person searched or covered u/s 153A, then only recourse was to initiate proceedings under section 153C and not under section 147. At the outset, we do not find any quarrel to the proposition that the validity of assessment or reassessment cannot be challenged in the revisionary proceedings u/s 263, however, on the facts of the present case, the ratio laid down in such judgments would not be applicable at all, because here in this case no document or material belonging to the assessee was found in the course of search proceedings in the case of S.K. Jain group, albeit assessee’s name appears as one of the beneficiaries of accommodation entries in the books of account maintained by one of the concern of S.K. Jain group. The entries in the books of account of S.K. Jain group cannot be reckoned as any material or document belonging to the assessee so as to constitute document or asset seized or requisitioned in the case of person searched in terms of scope of section 153C. If certain documents or asset or books of account belonging to the assessee would have been found during the course of search proceedings of S.K. Jain and his group concerns, then perhaps it would have been held that the provisions of section 153C would have been invoked. But here in this case what has been found, is the regular entries in the books of account of the concerns of S.K. Jain group, in which name of the assessee is appearing. Such entries in the cash books depicting the details of cheques issued in favour of the assessee as well as cash deposit through intermediates on various dates cannot be reckoned as document or books of account of the assessee. This fact has been noted by the Pr. CIT in the impugned order right from pages 7 to 15, wherein one of the entries pertains to the assessee for a sum of Rs.1 crore. Thus, the contention raised by the ld. counsel on this point is out rightly rejected that the proceedings under section 153C should have been initiated instead of under section147. 20. As regards the contention that material or information found during the course of search in the case of S.K. Jain group cannot be held to be a tangible material pertaining to the assessee, we are unable to accept such a contention for the reason that, firstly, there was a categorical information and material coming on record post passing of the original assessment order under section 143(3) that assessee was one of the beneficiaries of accommodation entries provided by one of the group concern of S.K. Jain and not only that, a specific amount (of Rs. 1 Crore) has been mentioned Page | 16

which prima-facie pertained to the assessee. This definitely constitutes a tangible and definite material having live-link nexus with the income chargeable to tax escaping assessment. The judgments relied upon by the ld. CIT D.R. on this point, specifically the judgment of Hon'ble Delhi High Court in the case of PCIT Vs Paramount Communication (P.) Ltd. (supra) is squarely applicable, as in that case also the information regarding bogus purchase by the assessee was received vide DRI from CCE which was passed on to Revenue authorities and was held to be tangible material outside record to initiate valid re-assessment proceedings. Here in this case, as reiterated several times there was a definite information and material found qua the assessee which at least needed verification and examination and hence, in our opinion such a material and information does constitute a tangible and relevant material sufficient enough to form ‘reason to believe’ that income chargeable to tax has escaped assessment. Apart from that, it is seen from the records that the assessee had raised similar objections after the receipt of “reasons recorded” before the Assessing Officer during the course of re-assessment proceedings, which have been amply dealt with and discussed by the Assessing Officer inn detail vide his separate order, copy of which has been placed in the paper book. Against the said order, assessee has not sought for any remedy nor has it challenged this issue in appeal after the passing of the assessment order. In any case, we have already held Assessing Officer has rightly acquired jurisdiction under section 147 based on the information/material referred to in the “reasons recorded”. Accordingly, this contention raised by the ld. Counsel is also rejected. 21. So far as the contention of the ld. counsel that no notice under section 143(2) has been issued or served upon the assessee during the course of re-assessment proceedings, we find that assessee has neither challenged this issue after the passing of the re-assessment order nor has raised this issue before the Pr. CIT during the course of revisionary proceedings under section 263, wherein the assessee had raised several legal issues/ objections before the Pr. CIT challenging the validity of the reassessment proceedings. Even before the Tribunal at the time of filing of 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. Thus, such an oral plea at a last moment not arising from the impugned order and without any verification of record cannot be entertained. If it was such a vital plea, then right recourse would have been that assessee should have moved a petition for additional ground with a copy to the ld. D.R. in advance or would have sought permission from Page | 17

the Tribunal for raking up this issue under rule 27 of ITAT Rules. There is no material fact on record to decide this issue as it has been raised at the last moment at the time of hearing. Accordingly, we are rejecting this plea of the ld. counsel at the threshold. 22. Lastly on merits, as discussed in the foregoing paragraphs, the Pr. CIT has amply demonstrated in his impugned order that this issue was neither enquired into nor was verified by the Assessing Officer once the information and the material in hard copy and in form of CD was made available to him. AO should have verified the genuineness of the transaction and also should have carried out adequate enquiry to come to a logical conclusion that either there is no accommodation entry and the contents found qua the assessee being one of the beneficiary of the accommodation entry in the books of account of the concerns of S.K. Jain group are false or bogus; or assessee had amply demonstrated and substantiated before the AO regarding the genuineness of the transaction of the accommodation entry. In absence of such a mandate which was cast upon the AO, we are of the opinion that the assessment order is not only erroneous but also prejudicial to the interest of revenue, as this matter definitely requires proper enquiry and verification by the AO. Thus, we hold that the Ld. Pr. CIT has rightly exercised his jurisdiction under section 263 in setting aside the order of the Assessing Officer being erroneous in so far it is prejudicial to the interest of the Revenue. Accordingly, we confirm the order of the Pr. CIT and dismiss the grounds raised by the assessee before us.” 12. Further, the Hon'ble Supreme Court has also in Daniel Merchants Pvt. Ltd Vs. ITO in Appeal No. 2396/2017 dated 29.11.2017 has dismissed an SLP against the decision of the Hon’ble Calcutta High Court wherein, the assessee challenged the order of the Calcutta High Court upholding the order of the ld CIT u/s 263 of the Act. Further, the Hon'ble Calcutta High Court in Raj Mandir Estates Pvt. Ltd Vs. 386 ITR 162 has also upheld the action of the ld CIT in invoking jurisdiction u/s 263 of the Act. Further, in the another decision of the Hon'ble Calcutta High Court in Pragati Financial Management Ltd 2017 (3) TMI-1242 dated 07.03.2017 has held that 263 is valid when the ld AO has not conducted proper enquiries. In that decision in para no. 7 the Hon'ble High Court has also quoted the decision of Subhalaxmi Vanijya Ltd 43 ITR (trib) 48 ( ITAT) ( Kol) of the coordinate bench wherein, it has been held that proviso inserted u/s 68 of the Act was retrospective in nature and upheld it. It is also interesting to note that even a. without having any seized material in any of the searches b. Without having the explanation 2 of section 263 as amended wef 16-2015.

in those decisions the Hon'ble High Court has upheld the action of the ld CIT u/s 263 of the Act where the ld AO has not made proper enquiry. Before us there is a startling fact that seized material found during the course of search on the premises of the accommodation entry provider which shows that the credit in the books of account of the assessee are accommodation entries and such an important piece of evidence was the main reason of the opening of the assessment by issuing notice u/s 148 of the Act was not at all considered by the ld Assessing Officer while making assessment u/s 147 of the Act. It was not at all confronted to the assessee as well as to the Directors of the depositor companies u/s 131 of the Act. It is further noted that all these decisions are not concerned with the amendment made to the provision of section 263 of the Act w.e.f. 01.06.2015 by the Finance Act 2015 wherein, the explanation 2 is inserted which even otherwise makes the order passed without making enquiries or verification which should have been made by the Assessing Officer are deemed to be erroneous insofar as it is prejudicial to the interest of the revenue. The impugned order passed by the ld CIT u/s 263 of the Act on 17.03.2017 also gets a statutory support from the above amendment. 13. In view of the above facts ground No. 1 and 2 of the appeal of the assessee are dismissed and we do not find any infirmity in the order of the ld Pr. CIT in passing order u/s 263 of the Act. Accordingly, appeal of the assessee is dismissed. 14. Hence ITA No ITA No. 2182/Del/2017 for AY 2010-11 15. Now we come to the appeal of the assessee i.e. Surya Irrigation Private Limited in ITA No. 2182/Del/2017 for the Assessment Year: 2010-11, wherein, the challenge has made to the order u/s 263 of the Act dated 17.03.2017 passed by the Pr. CIT-8, New Delhi holding that the order passed by the ld Assessing Officer ITO, Ward-24(4), New Delhi on 30.06.2014 /s 147 read with Section 143(3) of the Act is erroneous sofar as the it is prejudicial to the interest of the revenue. the grounds raised in this appeal are similar ITA No. 6945/Del/2017 for AY 2007-08 in case of Sri Sai City Promoters and Land Developers Pvt. Ltd. 16. The facts of the case shows that the notice u/s 148 of the Act was issued on 18.10.2013 on the basis of the information received from DIT that assessee is beneficiary of accommodation entries on the basis of search conducted on Surender Kumar Jain Group . During the course of assessment proceedings the ld Assessing Officer examined the details and issued notice u/s 133(6) of the Act to the company from whom alleged accommodation entries were received. Consequently, the assessment u/s 143(3) read with Section 147 of the Act was passed on 30.06.2014 accepting the return income of the assessee. The ld CIT passed an order u/s 263 of the Act on 17.03.2017 holding that the ld Assessing Officer has not Page | 19

examined the seized documents, which proves that the assessee is beneficiary of the accommodation entry. The documents were also not confronted to the assessee. Hence, the impugned assessment order passed by the ld Assessing Officer is erroneous so far as the prejudicial to the interest of the revenue. This order is under challenge before us. 17. The ld counsel raised all those argument, which were raised in earlier appeal. Over and above it was further stated that reopening is based on borrowed satisfaction and therefore the reopening is itself invalid. He relied upon the decision of Hon'ble Delhi High Court in Pr. CIT Vs. Meenakshi Overseas Ltd. He further stated that it is a borrowed satisfaction. 18. The ld Departmental Representative reiterated his submission made in the earlier appeal. With respect to the reopening he submitted that reopening has been made on the basis of specific information after recording proper reasons and therefore, same cannot be invalid. It was further stated that now at this stage it cannot be challenged. 19. With respect to the revision of the assessment proceedings we have given our detailed reasoning above in appeal No. 6945/Del/2018 and therefore, for the same reasons we upheld the action of the ld Pr. CIT in upholding the assessment order passed by the ld AO as erroneous and prejudicial to the interest of the revenue. 20. Now we come to the issue, which has been raised in this appeal that the reopening has been made on the basis of borrowed satisfaction. 21. The ld AR relied upon the decision of the Hon'ble Delhi High Court in case of Meenakshi Oversees Ltd (supra). We have carefully considered the facts before us in the present appeal as well as the facts before the Hon'ble Delhi High Court. In the present case the Investigation Wing has found the documents along with the cash back where the assessee was found to be the beneficiary and the name of one intermediary was mentioned. Such facts were not before the Hon'ble Delhi High Court and in that case it was merely an intimation from the Investigation Wing. In the present case the seized material along with the information of the Investigation Wing clearly shows nexus of the accommodation entry and the relevant cashbook pages where the cash received was also shown from Mr. Satish Goel and Mr. Neeraj are specifically mentioned. In view of this we find no infirmity in the reopening of the assessment. In the result ground No. 1 to 3 of the appeal are dismissed. Accordingly, 2182/Del/2017 for the AY 2010-11 is dismissed. 22. Now we come to ITA No. 2544/Del/2017 which is against the order of the ld Pr. CIT-8, New Delhi passed u/s 263 of the Income Tax Act on 20.03.2007 holding that order passed by the ld Assessing Officer u/s 147 read with section 143(3) dated 30.06.2014 is erroneous and prejudicial to the interest of the revenue.

to the interest of the revenue as it was passed without confronting the assessee with the seized material showing the nexus between cash paid and the amount of cheque received by the assessee. 30. The ld AR submitted that during the year assessee has submitted the confirmation, audited balance sheet, bank statement, assessment order, board resolution, and affidavit of the director of the above share applicant company confirming the share application with the appellant. The 133(6) notices issued to the shareholder were also responded confirming the transaction. Therefore, the ld Assessing Officer has carried out the complete enquiries and after that has accepted the genuineness of the above share capital of Rs. 750,000/-. He therefore, submitted that as there is a detailed enquiry by the ld Assessing Officer the order cannot be said to be erroneous and prejudicial to the revenue. 31. The ld CIT DR reiterated his submissions made in the earlier appeals. 32. We have carefully considered the rival contentions and perused the orders of the AO and ld Pr. CIT. On identical facts and circumstances we have already held that when the ld Assessing Officer has failed to consider the seized material found during the course of search of Shri SK Jain which shows that assessee is one of the beneficiary of the accommodation entry obtained through him, the order is erroneous so far as prejudicial to the interest of the revenue. Therefore, for the similar reason we also hold that in the present case the ld CIT has correctly assume the jurisdiction u/s 263 of the Act and the impugned order passed by the ld Assessing Officer u/s 147 read with Section 143(3) of the Act is erroneous and prejudicial to the interest of the revenue. Accordingly, ground No. 1 to 3 of the appeal of the assessee are dismissed. 33. In the result ITA No. 2841/Del/2017 is dismissed. Order pronounced in the open court on 14/01/2019. -Sd/- -Sd/- (BHAVNESH SAINI) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14/01/2019 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Page | 22

Date of dictation Date on which the typed draft is placed before the dictating member Date on which the typed draft is placed before the other member Date on which the approved draft comes to the Sr. PS/ PS Date on which the fair order is placed before the dictating member for pronouncement Date on which the fair order comes back to the Sr. PS/ PS Date on which the final order is uploaded on the website of ITAT date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the order