YASHRAJ ESTATES PVT LTD,NEW DELHI vs. ACIT CENTRAL CIRCLE-17, NEW DELHI

O R D E R

PER Ms. MADHUMITA ROY, JM:

2 The grounds raised by assessee are as under:

“1 The Hon’ble Commissioner of Income Tax (A)-31, New Delhi, has not followed the law of natural justice while confirming additions and disallowances by the Ld. A.O. 2 That the impugned Appeal Order is bad in law, illegal, and in violation of rudimentary principle of contemporary jurisprudence.

3 On the facts, law and circumstances of the case, the Ld. AO erred in issuing notice u/s 147/148 of the Act. The notice u/s 147/148 issued in this case is illegal and void accordingly the assessment order passed on the foundation of such notice is liable to be quashed.

4 That on the facts and in the circumstances of the case, the ld. AO erred in making the Re-Assessment order u/s 143(3)/147 of the Income Tax Act, 1961 as bad in law, unjust and contrary to the facts and sprit of law.

5 That the Hon’ble Commissioner of Income Tax (Appeal)-31, New Delhi, has erred in law and on facts by confirming the addition of Rs. 5,35,00,000/-. On accordingly u/s 68 on account of unexplained cash credits.

6 That the Appellant craves leave to add/alter any/all grounds of appeal before or at the time of the hearing of the appeal.”

3 The brief facts leading to the case are that the assessee company engaged in the business of real estate and has originally filed return of income on 29.09.2011 declaring as Nil income and the assessment was completed at returned net loss of Rs. 40,855/- in order of assessment dated 31.03.2014 u/s 153C read with section 143(3) of the Act. Later on, the case was reopened u/s 147 after recording reasons on receiving information from DDIT (Inv.), Unit-1(3), New Delhi, the with prior approval u/s 151 of the Act. The AO issued notice on 31.03.2018 u/s 148 of the Act. The said reassessment was finalized upon making the addition of Rs. 7,00,00,000/- held as income of the assessee from undisclosed sources as per the provisions of the Act and added the same to the taxable income of the assessee company for the year under consideration, which was partly deleted by Learned CIT(A) in appeal preferred by the assessee. Assessee has come in appeal challenging the confirmation of addition representing credit entries aggregating to Rs. 5,35,00,000/-, by Ld. CIT(A). Hence, the appeal before us.

4 The main ground raised by the assessee is this that on the facts, law and circumstances of the case, the Ld. AO erred in issuing notice u/s 147/148 of the Act. The notice u/s 147/148 issued in this case is illegal and void, accordingly the assessment order passed on the foundation of such notice is liable to be quashed.

6 From perusal of aforesaid reasons recorded running into 4 sheets comprises of 5 paras, it From perusal of aforesaid reasons recorded running into 4 sheets comprises of 5 paras, it From perusal of aforesaid reasons recorded running into 4 sheets comprises of 5 paras, it is evident that in first para ld. AO has recorded the facts that the assessee company filed return of is evident that in first para ld. AO has recorded the facts that the assessee company filed return of is evident that in first para ld. AO has recorded the facts that the assessee company filed return of income of the A.Y. 2011-12 on 29.09.2011 declaring Nil income an 12 on 29.09.2011 declaring Nil income and is engaged in business of d is engaged in business of real estate. It is relevant to note here that ld. AO has not recorded the facts that said return of real estate. It is relevant to note here that ld. AO has not recorded the facts that said return of real estate. It is relevant to note here that ld. AO has not recorded the facts that said return of income was previously assessed in order of assessment dated 31.03.2014 u/s 153C read with income was previously assessed in order of assessment dated 31.03.2014 u/s 153C read with income was previously assessed in order of assessment dated 31.03.2014 u/s 153C read with section 143(3) of the Act. Further in section 143(3) of the Act. Further in second para of reasons recorded, Ld. AO, has made second para of reasons recorded, Ld. AO, has made reference to the information received from DDIT(Inv.), Unit reference to the information received from DDIT(Inv.), Unit-1(3), New Delhi revealing that the 1(3), New Delhi revealing that the enquires were made in the case of M/s Splendid Buildtech Pvt. Ltd., observations made by the enquires were made in the case of M/s Splendid Buildtech Pvt. Ltd., observations made by the enquires were made in the case of M/s Splendid Buildtech Pvt. Ltd., observations made by the Investigation Wing, inferences drawn by the Investigation Wing, and thereafter there is one chart tabulating the aggregates credits amounting to Rs. 5,35,00,000/- and debits of Rs. 1,65,00,000/- from four entities. Thus para 2 of reasons recorded in sum and substance is reproduction of information from investigation wing. Now in para 3, Ld. AO records that he has perused the information contained in the report and the evidences gathered, the report has provided the details of the Modus operandi of the money laundering scam and also explains how the unaccounted money of the beneficiaries is ploughed back in the form of Unsecured Loan/ Share Application Money/ Share Premium/ Sale or Purchase/ Investment etc. after routing the same through the bank accounts of the four entry operators. He, thus, reached to the conclusion that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the income chargeable to tax to the extent of accommodation entries has escaped assessment within the meaning of Section 147 of the Act. It is clear that ld. AO has not examined the assessment records of the assessee company that is the reason that he fails to record the fact of assessment previously made and has recorded in vague terms about the credits in the books of assessee company as in the form of Unsecured Loan/Share Application Money/Share Premium/Sale or Purchase/ Investment etc.. He has not made any enquiry on its own and proceeded to record reasons solitary on the basis of report received from investigation wing. Thereafter in para 4 of reasons recorded he even contrary to the information received from investigation about debits of Rs. 1,65,00,000/- and credits of Rs. 7,00,00,000/- recorded that the debit transactions of Rs. 2,00,00,000/- and credit transactions of Rs. 5,35,00,000/- for the A.Y 2011-12 are accommodation entries provided to the beneficiary company. Para 5 is repetitive of para 4 of reasons recorded.

7 Now, approval obtained u/s 151 of the Act placed in paper book filed by assessee is reproduced hereunder:

8 It is evident from perusal of aforesaid extract that at Sr. No. 5 of Form, learned AO has It is evident from perusal of aforesaid extract that at Sr. No. 5 of Form, learned AO has It is evident from perusal of aforesaid extract that at Sr. No. 5 of Form, learned AO has recorded the quantum of income which has escaped assessment is Rs. 34,24,50,000/ recorded the quantum of income which has escaped assessment is Rs. 34,24,50,000/- which is recorded the quantum of income which has escaped assessment is Rs. 34,24,50,000/ contrary to the reasons recorded (supra), support the contention of assessee that there was non ns recorded (supra), support the contention of assessee that there was non ns recorded (supra), support the contention of assessee that there was non application of mind on the part of AO while recorded the reasons to believe. Likewise in Sr. No. application of mind on the part of AO while recorded the reasons to believe. Likewise in Sr. No. application of mind on the part of AO while recorded the reasons to believe. Likewise in Sr. No. 8, Ld. AO states that the return of income was processed u/s 143(1) of the Act, on t 8, Ld. AO states that the return of income was processed u/s 143(1) of the Act, on the contrary to 8, Ld. AO states that the return of income was processed u/s 143(1) of the Act, on t the facts that previously return of income was assessed in order of assessment u/s 153C/143(3) of the facts that previously return of income was assessed in order of assessment u/s 153C/143(3) of the facts that previously return of income was assessed in order of assessment u/s 153C/143(3) of the Act, thus neither the ld. AO nor approving authorities perused the assessment record of the the Act, thus neither the ld. AO nor approving authorities perused the assessment record of the the Act, thus neither the ld. AO nor approving authorities perused the assessment record of the assessee company before initiating reassessment proceedings. Therefore even the Sr. No, 9 and 10 are also consequentially incorrect. However contrary to the information filled in Sr. No. 8 to 10 that the return of income processed u/s 143(1) of the Act, Ld. AO in para 14 of form states that the Proviso to section 147 applicable and in consequential Sr. No. 15(b) he states that material facts as per reasons to belief were not disclosed in the said return. Lastly the approving authority has granted the approval to the facts recorded contrary to each others in the Form seeking approval, factually incorrect reasons recorded based on the borrowed satisfaction from investigation wing report, without examining the assessment record of the assessee company. It is pertinent to add here that though the approving authority while granted the approval has taken care of figure of income escaped from assessment and has changed it from Rs. 34,24,50,000/- as per Sr. No. 5 of form to Rs. 5.35 crore + 2 Crores, by stating that from 4 parties as tabulated by the AO, however, here too he has also recorded wrong figures in comparison to tabulation as per reasons recorded i.e. Rs. 5.35 Crores and Rs. 1.65 Crores.

9 Ld. AR of the assessee challenged the initiation of reassessment proceedings on the basis that reassessment proceedings on the factually incorrect basis is not in accordance with law. On the other hand, the Ld. DR relied upon the order passed by the authorities below.

10 We have heard the rival submissions made by the respected parties and we have also perused the available materials available including paper books filed by appellant. The year under consideration is assessment year 2011-12 and the action under section 148 of the Act has been taken after the expiry of four years from the end of the relevant assessment year, in 2018. Admittedly an assessment has been made for the relevant assessment year u/s 143(3) of the Act read with section 153C of the Act vide order dated 31.03.2014. Thus in the facts of the assessee company first proviso to section 148 of the Act applies, which as is reproduced hereunder: “Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:

11 It is evident from aforesaid extract of First proviso to Section 148 of the Act as applicable at the relevant period, where an assessment under sub-section (3) of section 143 or 148 has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Thus if two conditions, first assessment has been made u/s 143(3)/148 of the Act and second, four years from the relevant assessment year expired then action u/s 148 can be taken only on failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Now in the instant case four years has been expired and an assessment has been made u/s 143(3) read with section 153C of the Act, thus action u/s 148 can be taken if there is failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Thus, it is very much indeed that Learned Assessing Officer has to go through the assessment record of the assessee company and to establish that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. However as stated above, Ld. AO even fails to record that there was assessment u/s 143(3) read with section 153C of the Act, according to reasons recorded the return was processed u/s 143(1) of the Act only. Thus, we are of the view, in the facts of the case, action u/s 148 of the Act is invalid in view of the First Proviso to section 148 of the Act itself. Apart thereof on para wise analysis of reasons recorded, we are inclined to accept the contention of assessee that the action u/s 148 of the Act is void as the reasons recorded are based on borrowed satisfaction from report of investigation wing, without any enquiry on his own and even return of income and assessment records has not been perused.

12 Thus, upon careful consideration of the factual matrix, in our considered view assumption of jurisdiction by the Ld. AO to reopen the relevant assessment year is invalid and is, therefore, set aside. Consequently, the order of assessment is quashed. Hence, the Ground no. 3 raised as stated above by the Assessee is allowed in the aforesaid manner. Since we have decided the aforesaid legal issues in favour of the assessee, there is no need to adjudicate the other grounds raised by the assessee in Appeal.

Order pronounced in open court on 08.05.2025.