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Facts
The assessee appealed against the CIT(A)'s order confirming the validity of a reassessment notice issued under Section 148 and an assessment order passed under Section 147, which included an addition under Section 68 for share application money. The assessee challenged the lack of mandatory approval for the Section 148 notice, non-issuance of Section 143(2) notice, and non-disposal of objections before assessment.
Held
The Tribunal found that the CIT(A) failed to properly examine whether the Section 148 notice had the requisite approval from the Pr. Commissioner of Income Tax and did not pass a speaking order regarding the genuineness and creditworthiness of the share application money lenders. Consequently, the Tribunal set aside the CIT(A)'s order and remanded the matter for a fresh decision on these specific issues.
Key Issues
Whether the reassessment notice under Section 148 was issued with the mandatory approval of the competent authority and with independent application of mind; and whether the addition under Section 68 for share application money was justified, considering the genuineness and creditworthiness of lenders.
Sections Cited
148, 151(2), 143(3) r.w.s. 147, 143(2), 147, 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘B’, CHANDIGARH
Before: SHRI LALIET KUMAR & SHRI KRINWANT SAHAY
आदेश/Order Per Krinwant Sahay, AM:
Appeal in this case has been filed by the assessee against the order dated 14.05.2025 passed by the Ld. Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi.
850-Chd-2025 2
The grounds raised are as under: -
1. The Id. CIT(A) is wrong in confirming the validity of notice issued u/s 148, by ignoring that the Id. A.O. Issued notice u/s 148 without taking the approval of Pr. Commissioner of Income Tax, Shimla which was mandatory as per provisions of Section 151(2) if notice u/s 148 is issued beyond 4 years. It is an admitted fact vide Para-2, Page-2 of the assessment order that Id. A.O. issued notice u/s 148 with the approval of Joint Commissioner of Income tax, whereas approval was required to be taken from Pr. Commissioner of Income Tax, Shimla, hence notice issued u/s 148 is liable to be quashed in view of the judgement of Hon'ble Delhi High Court in the case of CIT vs. Spls Siddhartha Ltd: of 2011 and Hon'ble Bombay High Court in the case of Shri. Ghanshyam K. Khabrani vs. Assistant Commissioner of Income Tax Circle-1, Thane and Ors: Writ Petition No.1246 of 2012.
2. The Id. CIT(A) is wrong in confirming the validity of assessment order passed u/s 143(3) r.w.s. 147, without appreciating the fact that before starting assessment proceedings, the Id. A.O. did not issue notice u/s 143(2) to the assessee, so passing of assessment order without issuing notice u/s 143(2) is a void-ab-initio order as per the judgment of Hon'ble SC in the case of ACIT vs Hotel Blue Moon: 321 ITR 362, therefore, assessment order passed is liable to be quashed.
850-Chd-2025 3
3. The Id. CIT(A) is wrong in confirming the validity of notice issued u/s 148, by ignoring that the Id. A.O. has issued notice u/s 148 on the basis of borrowed satisfaction, without applying his own mind as the notice u/s 148 was issued solely on the basis of third party information as stated in the reasons itself, so notice issued u/s 148 without application of mind is invalid in the eyes of law and liable to be quashed.
4. The Id. CIT(A) is wrong in confirming the validity of assessment order passed u/s 147, by ignoring that the Id. A.O. passed order u/s 147 without first disposing-off the objections filed by the assessee by passing a speaking order, so passing of assessment order u/s 147 prior to disposing-off the objection by a separate order is bad-in-law and liable to be quashed in view of SC judgment in the case of GKN driveshafts (India) Itd. vs ITO: 125 Taxman 963.
5. The Id. CIT(A) is wrong in confirming the addition of Rs. 64,14,000/- under section 68 in the hands of the assessee company on account of share application money, contravening the binding judgment of Hon'ble SC in case of CIT vs Lovely Exports (P) Ltd.: 216 CTR 195, wherein it was clearly held that if the share application money is received by the assessee company from the shareholders, then the department is free to proceed to reopen their individual assessment. Since the said judgment was applicable to the assessee for the relevant assessment year 2010-11, so 850-Chd-2025 4 question of addition under section 68 in the hands of assessee company does not arise at all.
The Id. CIT(A) is wrong in confirming the validity of notice issued u/s 148 by the Id. A.O. on the basis of fallacious assumption that share application money/share capital introduced by Dr. Hardyal Chauhan in cash is the income of the assessee company, ignoring the admitted fact recorded by the Id. A.O. himself vide Para-1 of the reasons that the said capital/ share application money was introduced by Dr. Hardyal Chauhan being an individual, so question of addition of said capital/share application money in the hands of the assessee company does not arise at all.
The Id. CIT(A) is wrong in the confirming the action of Id. A.O. for making addition of Rs. 64,14,000/-under section 68 of the Income Tax Act, 1961 in the hands of the assessee company by ignoring the revised grounds of appeal, bonafide submission and explanation provided by the assessee.
During proceedings before us, ld. Counsel for the Assessee submitted that before issuance of notice u/s 148 of the Income Tax Act, 1961 (in short 'the Act'), the Assessing Officer has not taken mandatory approval of PCIT, Shimla as per the provisions of section 151(2) of the Act, if the notice u/s 148 is to be issued beyond four
850-Chd-2025 5 years. The Ld. Counsel also argued that Ld. CIT(A) has not gone into the details filed by the Assessee regarding creditworthiness of lenders and genuineness of transactions.
Per contra, the ld. DR relied on the orders of the authorities below.
We have considered the findings given by the authorities below and the arguments of the Ld. Counsel and Ld. DR. We are of this considered view that whether the notice u/s 148 has been issued with the prior approval of Ld. PCIT or not, this aspect /issue has not been looked into by the Ld. CIT(A). Similarly, there is no speaking order on the issue of genuineness and creditworthiness of lenders in CIT(A)’s order. Therefore, we are inclined to remand it back to the Ld. CIT(A) to again look into these aspects and pass a speaking order on these issues.
6. In view of this, the impugned order of the CIT(A) is set aside and the matter is restored to the file of the CIT(A) for decision afresh. Needless to say, that the ld. CIT(A)
850-Chd-2025 6 will give proper opportunity to the Assessee to present its case and to furnish necessary evidences and details. The Assessee is also directed to present its case before the Ld. CIT(A) as and when called for and will not contribute in unnecessary delay in the hearing of the appeal.
In the result, all the appeal of the Assessee stand allowed for statistical purposes.