MALANI HOLDINGS PRIVATE LIMITED,RAIPUR vs. INCOME TAX OFFICER, WARD 4(1), RAIPUR, RAIPUR

That on the facts and circumstances of the case and in law, the notice u/s 148 of the Act dated 28/03/2021 is illegal and bad in law, as the same has been issued on the basis of borrowed satisfaction/no independent reason to believe of the assessing officer.

That on the facts and circumstances of the case and in law, the Id. CIT(A) erred in remanding the matter to the assessing officer as per proviso to section 251(1)(a) of the Act and failed to adjudicate on legal ground as well as on merits of the case as raised before him. 6. That on the facts and circumstances of the case and in law, the Id. AO as well as CIT(A) erred in making an addition of Rs. 1,20,00,000/- u/s 68 of the Act.

The appellant craves to add, alter or delete any of the above grounds of appeal during the course of appellate proceedings.

The brief facts of the case as narrated in the order of Ld. CIT(A) are culled out as under: “The appellant is a company and having its income under the head business and profession. For the AY 2013-14, the appellant has filed its return of income on 26/09/2013 declaring total income at Rs. 10,64,480/-. The case of the appellant was selected for scrutiny assessment through CASS and notice u/s 143(2) of the Act was issued.

In the aforesaid matter the appeal filed by the assessee before the First Appellate Authority has been disposed of by allowing the appeal of assessee for statistical purposes, as the same has been remitted back to the Ld. AO for fresh adjudication, being the assessment has been completed u/s 5 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur 144 of the Act. The relevant observations and findings of Ld. CIT(A) are extracted as under: Decision: 7. I have examined the appeal filed by the appellant and the order of the Ld. AO. The assessment was completed u/s. 144 read with section 147 of the Act. The appellant has filed appeal and now disputes the assessment d ne y the Ld. AO.

In this case, information revealed that the appellant had allotted 120000 nos. of shares worth 1,20,00,000/- (including premium of Rs. 90 per share) to Neuraty Agents Pvt. Ltd. Kolkata during the year under consideration. In enquiries made as sequel to information, it was observed that the appellant had taken share application money of Rs. 1,20,00,000/- during the year against allotment of 120000 shares @Rs. 100/- per shares to Neuraty Agents Pvt Ltd. On perusal of the audited balance sheet of investor companies through MCA site, it was found the financial capacity of the company were not in commensurate to the investment made by it. The financial pattern of the share investor companies showed a peculiar character viz, meagre income, high reserve and surplus in the form of share premium, high non -current investment in share application, no liability and no fixed asset which resembles as a paper company. Notices were issued but the appellant remained non-compliant. After analyzing the information and enquiry, the Ld. AO concluded that the appellant had taken share application money from a company whose identity and and creditworthiness was not established. Thus, the amount, of share application money of Rs. 1,20,00,000/- received by the appellant was unexplained money of the appellant. As a result, the Ld. AO made assessment u/s 144 r.w.s. 47 of the Act.

Under the appeal, the appellant has, inter alia, submitted that the assessing officer had issued notice u/s 148 dated 28/03/2021 which was sent on email id:mhpl.raipur@gmail.com. On the said date, the director of the appellant company namely Shri Sushil Kumar Malani who was aged 71 years was not keeping good health due to COVID infection which he was exposed first in August 2020 and thereafter again in the month of April 2021. On account of this Shri Sushil Kumar Malani director was in complete isolation for a period of 3 months from the date of detection of infection with COVID 19. Further during the month of April, 2021 the director lost his father Shri Bilas Rai Malani who die on 17/04/2021. The director was stressed and disturbed due to these continuous health issues in the family. Later in the month of November 2021 the family Malani

In the light of the fact that assessment was completed under section 144 of the Act it is important to discuss the recent amendment carried out regarding the assessment done under section 144. Recently, amendments have been carried out regarding the best judgment assessment. CIT (appeals) can now set aside the best judgment assessment made under section 144 and refer the case back to the Assessing Officer for making a fresh assessment. The background and the development are discussed below.

Section 144 of the Act provides for best judgment assessment. The relevant part of the said section has been reproduced below for ready reference.

A best judgement assessment occurs when an Assessing Officer is faced with limited or inadequate information from the taxpayer. In such situations, the Assessing Officer has to make an assessment based on the available knowledge and resources. This type of assessment is invoked when the taxpayer is uncooperative or withholds essential information. It often happens when the taxpayer does not provide the necessary cooperation during the assessment process, hindering the assessing officer's ability to make an accurate assessment. In such cases, the assessing officer resorts to making the assessment based on the information at hand.

Before resorting to a best judgement assessment, the AO must make reasonable efforts to obtain the necessary information. This includes sending notices to the taxpayer, providing sufficient response time, and offering multiple opportunities to rectify discrepancies. The best judgement assessment should be conducted prudently and reasonably. The AO must exercise caution and ensure that the assessment is based on facts, evidence, and sound reasoning. It should not be arbitrary or biassed. The assessment should rely on objective criteria rather than personal opinions or biases. The AO should consider relevant laws, regulations, precedents, and established principles while making the assessment.

The assessee must be given an opportunity to be heard before the initiation of assessment procedures. If the assessee requests additional time for the submission of relevant documents or faces complications, the request must be judiciously considered rather than abruptly rejected. Bias, prejudice, and unfair treatment should be avoided in taxation. The assessee has the right to a fair and impartial assessment of their returns. The assessing officer must comply with the rules and standards expected of their position, ensuring that the process is conducted honestly and transparently.

The Finance Act, 2024 made significant changes to the powers of the Commissioner (Appeals) under Section 251 of the Income-tax Act. The existing provisions of section 251 of the Act specify the powers of the Commissioner (Appeals). Further, sub-section (1) of the said section provides that Commissioner (Appeals) shall have, inter-alia, the following powers in disposing of an appeal:

Further, sub-section (4) of section 250 of the Act prescribes that Commissioner (Appeals) may seek the report from the Assessing Officer after making further inquiry, before disposing any appeal.

It has been found that in the best judgement cases, taxpayers remain non responsive to the letters or notices issued by the Faceless Assessing 'officer. However, they directly file the appeal to Commissioner (Appeals) against the relevant assessment order.

Considering the huge pendency of appeals and disputed tax demands at the Commissioner (Appeals) stage, the section has been amended to provide that where assessment order was passed as best judgement case under section 144 of the Act, Commissioner (Appeals) shall be empowered to set aside the assessment and refer the case back to the Assessing Officer for making a fresh assessment.

This amendment will take effect from the 1st day of October 2024. It will be applicable to appellate orders passed by the Commissioner (Appeals) on or after 01.10.2024. 20. Considering the aforementioned amendment and discussion, and the fact that the director of the company who was responsible for replying to the notices was facing health issues and lost his father during that time and therefore could not participate during assessment proceedings and now the appellant is willing to submit the details and wishes for an opportunity to present the same, it would be 9 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur appropriate to set aside the order passed under Section 144 and remand the case to the Assessing Officer (AO) for fresh adjudication. The appellant shall submit all the relevant details to the Id. AO, who will examine them on their merits. Accordingly, the case is remanded back for a fresh assessment.

In the result the appeal is allowed for statistical purposes.

Aggrieved with the aforesaid order of Ld. CIT(A), assessee preferred an appeal before us.

At the outset, Ld. AR on behalf of the assessee submitted that though the issues raised by the assesse in appeal before the First Appellate Authority are set aside to the file of Ld. AO, however, the legal grounds raised by the assessee which could have been decided are not adjudicated by the Ld. CIT(A), whereas such issues needs to be looked into, as the facts are available before the First Appellate Authority. It is further submitted that such legal contentions are to challenge the validity of the assessment done u/s 144 r.w.s. 147 dated. 28.03.2022, which was an illegal and bad in law order, for the reason that the notice u/s 148 dated 28.03.2021, through which the process of reopening was initiated, itself is illegal and bad in law as per First Proviso to Section 147 of the Act. It was the submission that such information was very much available before the Ld. CIT(A) however, he did not bother to looked into such facts and had very conveniently restore the matter to the file of Ld. AO following the provisions of section 251(1) of the Act. Under such 10 Malani Holdings Private Limited vs. ITO, Ward-4(1), Raipur circumstances, the order of Ld. CIT(A) is bad in law and liable to the set aside and the plea of assessee on legal contentions are requested to be adjudicated, thereby the order of Ld. AO being framed on the foundation of an illegal notice issued u/s 148 of the Act, qualifies to struck down.

Per contra, Dr. Priyanka Patel, Ld. Sr. DR representing the revenue vehemently supported the orders of revenue authorities.

We have considered the rival submissions, perused the material available on record. Admittedly, in the present case, the assessee could not furnish the necessary information / evidenced before the Ld. AO having genuine reason that the director of the company had infected with Covid-19 and was under isolation in accordance with government guidelines, and therefore, such taxation compliances before the Ld. AO could not be fulfilled. In view of such circumstances, Ld. CIT(A) has observed that there are sufficient reasons beyond the control of appellant by which the assessee was prevented and accordingly failed to make necessary compliances before Ld. AO. Ld. CIT(A) also observed that on account of non-compliance by the assessee the Ld. AO had rightly completed the assessment following the provisions of section 144 on best judgment assessment. Ld. CIT(A) further elaborated his powers to set aside the assessment which is culminated in the manner provided u/s 144 on best judgment basis and, therefore, the entire

In backdrop of the aforesaid facts, circumstances and the observations, we do not find any infirmity in the order of Ld. CIT(A) to interfere with. Consequently, we uphold the order of Ld. CIT(A).