ACIT, NEW DELHI vs. M/S. KAD HOUSING PVT. LTD., DELHI

The grievance of the revenue read :- 1. “The order of Ld. CIT(A) is not correct in law and facts. 2. On the facts and circumstances of the case, the CIT(A) has erred in quashing the order u/s 147 on the ground that it was mere change of opinion.

On the facts and circumstances of the case, the CIT(A) has erred in ignoring the fact that fresh evidence in the form of survey report of the investigation Wing was available for formation of belief that the assessee has introduced its own money in the form of share application money through proper companies. 4. On the facts and circumstances of the case, the CIT(A) has erred in quashing the order u/s 147 and thereby deleting the addition of Rs.1.85 crores on account of unexplained share application money. 5. On the facts and circumstances of the case, the CIT(A) has erred in quashing order u/s 147 and thereby deleting the addition of Rs.3.33 lacs on account of unexplained expenditure in form of commission paid to the entry operators. 6. The appellant craves leave to add, amend any/ all the grounds of appeal before or during the course of hearing of the appeal.”

Briefly stated that facts of the case are that original assessment was framed u/s 143 (3) of the Act vide order dated 24.12.2009. The search seizure action was conducted in the case of KM group of cases including the assessee on 27.06.2013. During the course of pre search investigation it was found that the assessee had taken accommodation entries in the form of share premium / share capital.

Pursuant to the search the Assessing Officer recorded the reasons and issued notice u/s 148 of the Act on 27.03.2014. The reasons so recorded read as under :-

The assessee was asked to furnish its return of income. The assessee in response to the notice u/s 148 filed a letter dated 17.06.2014 stating that the return filed u/s 139 may be treated as compliance to the notice u/s 148 of the Act. Thereafter the Assessing Officer issued statutory notice u/s 142 (1) and 143 (2) of the Act alongwith a questionnaire.

On perusal of the balancesheet of the assessee, the Assessing Officer found that the assessee has raised share capital and / or allotted to the following companies and received amounts mentioned each:-

During the course of the assessment proceedings information u/s 133 (6) of the Act was called for from the companies from whom the assessee claimed to have received share application money. These companies were requested to furnish the copies of accounts of loan and advances, to produce books of accounts, to furnish copies of bank accounts, state nature of their business and copies of Balance Sheet and P & L A/c for the year relevant to A. Y. 2007-08. Replies were received from these companies and the details received are as under :-

The Assessing Officer examined these details and came to the conclusion that the amount received by the assessee company is nothing but it is own unaccounted money introduced in its books of accounts in the form of share application money and added the entire amount u/s 68 of the Act as unexplained credits.

The assessee agitated the matter before the CIT(A) strongly contending that the reassessment is bad in law in as much as in the original assessment proceedings all the details were filed before the Assessing Officer which were examined by the Assessing Officer and there is no failure on the part of the assessee to disclose fully and truly all material facts.

After considering the facts and the submissions and the reasons recorded by the Assessing Officer for reopening the assessment the CIT(A) found that the completed assessment has been reopened after four years and therefore, proviso to section 147 squarely apply. The CIT(A) further observed that in the assessment order there is no indication of how the income has escaped assessment by reason of failure on the part of the assessee fully and truly all material facts necessary for the assessment. The CIT(A) accordingly deleted the entire addition by annulling the assessment order framed u/s. 147 of the Act.

Before us the DR vehemently stated that reopening is valid since in the original assessment proceedings the Assessing Officer has not examined the facts which were unearthed by a search and seizure operation. It is the say of the DR that since the accommodation entries taken by the assessee were not examined by the Assessing Officer, therefore, the Assessing Officer had new tangible material evidence for reopening the complete assessment and therefore the notice issued u/s 148 of the Act is valid in law. The DR further pointed out that the Assessing Officer has nowhere mentioned that he has called for the relevant details examined and found in order. The DR continued stating that a mention of fact cannot be constituted as verified and examined. The DR vehemently stated that the CIT(A) has not examined the issues on merits and as simply analysed the assessment.

Per contra the counsel for the assessee reiterated what has been stated before the CIT(A).

We have given a thoughtfully consideration to the orders of the authorities below. A perusal of the reasons recorded as mentioned elsewhere clearly shows that there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly of material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 of the Act after a period of four years from end of assessment year in case where assessment has been framed u/s 147/143 (3) of the Act is illegal and invalid and the notice u/s 148 of the Act deserves to be set aside. Our view is fortified by the decision of the Hon’ble Delhi High Court in the case of CIT Vs. Viniyas Finance and Investment (P) Ltd. wherein the Hon’ble High Court held as under :- "7. On going through the purported reasons we find that there is no mention of the respondent-assessee not having made a full and true disclosure of the material facts necessary for assessment. On the contrary the purported reasons indicate that the amounts mentioned therein had been shown in the books of accounts as receipts from the companies mentioned therein. We also note that at serial No.5 of the list of companies from which amounts have been allegedly received, the name of the assessee has been shown. This means that the assessee received the received money from itself, which can hardly be an allegation in this case. 8. For the foregoing reasons we feel that the Tribunal has approached the matter in the correct perspective and has held the issuance of the notice under Section 148 dated 30.7.2007 to be bad in law and so, too, all the proceedings pursuant thereto. There is no reason for us to interfere with the impugned order inasmuch as no substantial question of law arises for our consideration."

We find that during the course of the original assessment proceedings the assessee was specifically asked to discharge its onus u/s 68 of the Act for any fresh loans taken during the year and share application money received.

We further find that the FFA has also called for a remand report from the Assessing Officer to submit copies of the reply of the assessee filed during the course of the original assessment proceedings and related documents submitted by the assessee. We find that the following documents were submitted by the assessee to the Assessing Officer :- i. Application of shares ii. Affidavit iii. Income Tax returns filed by the share applicants iv. Audited balance sheet filed by the share applicants v. Bank statement of the share applicants. vi. Form-2 filed by the appellant in respect of allotment of shares to the share applicants.

The aforestated details clearly show that during the course of original assessment proceedings the Assessing Officer had made elaborate enquiry to examine the share application money in the light of section 68 of the Act and after satisfying himself he accepted the same as genuine. Therefore, in our considered opinion in the light of the proviso to section 147 of the Act there is no failure on the part of the assessee to disclosed fully and truly all material facts relating to the assessment.

The contention of the DR that the Assessing Officer has not mentioned anything in his assessment order does not hold any water because when the Assessing Officer is satisfied with a query he leaves that query and move on to make additions in respect of the queries which are not satisfactorily replied.

The DR has relied upon various judicial decision in her written synopsis. We have carefully considered each decision and find that they are misplaced in as much as in none of the decision the proviso to section 147 was considered when there is no failure on the part of the assessee to make true and complete disclosure of the decision relate to the information received by the Assessing Officer in respect of accommodation entries received by the assessee which were considered as new tangible material to validate the reopening of the assessment.

As mentioned elsewhere in the case in hand the share application money examined by the Assessing Officer raising a specific querry which was duly replied by the assessee. Moreover the documents collected by the Assessing Officer in response to the notice u/s 133 (6) of the Act are the same documents which were filed by the assessee during the course of the original assessment proceedings.

Considering the reasons recorded for reopening the assessment as mentioned elsewhere and considering the facts in totality in the light of the relevant provisions of the Act we are of the considered opinion that the notice issued u/s 148 of the Act is bad in law and therefore the assessment framed u/s 147 of the Act has been rightly quashed by the CIT(A). No interference is called for ground No.2 and 3 are dismissed. The other grounds become otiose.

In the result, appeal filed by the revenue is dismissed. Co. No.180/Del/2017 The cross objection of the assessee is late by 596 days. In its request for condonation of delay the assessee has filed the affidavit of the director stating that counsel did not advise the assessee to file cross objection after receiving the intimation that the revenue has filed an appeal against the order of the CIT(A).

We find that the reason of delay as cited by the assessee is flimsy. Moreover, the regular counsel who did not advise the assessee to file the cross objection has not come up with any affidavit. Not finding the reasons convincing the delay is not condoned and the cross objection are accordingly dismissed. Order pronounced in the open court on 02.01.2019.