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Facts
The appeal challenged the CIT(A)'s order which upheld the initiation of reassessment proceedings under sections 147/148 of the Income Tax Act and an addition of Rs.1,65,00,000/-. The Assessing Officer had recorded reasons to believe that the assessee failed to disclose material facts regarding share capital and share premium introduced through 'dummy companies' for the Assessment Year 2010-11.
Held
The Tribunal found that, based on the balance sheet particulars, the assessee had received neither any share capital nor share premium during the relevant year, contrary to the allegations made in the AO's 'reasons to believe'. Since the 'reasons to believe' as contemplated by the Income Tax Act were not met on facts or legality, the order of the Assessing Officer was treated as void ab initio.
Key Issues
Whether the initiation of reassessment proceedings under Section 147/148 was valid when the 'reasons to believe' recorded by the AO were not supported by facts regarding the introduction of share capital or share premium.
Sections Cited
147, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: Sh. C. N. PrasadDr. B. R. R. Kumar
Asstt. Year : 2010-11 Fresh Facility Maintenance Pvt. Ltd. Vs. Income Tax Officer, (Formerly known as Dreamland Ward-9(3), Buildcone Pvt. Ltd.), Flat No. 1010, New Delhi-110002 Faiz Road, Karol Bagh, New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AACCD0236A Assessee by : Sh. C. S. Aggarwal, Sr. Adv. & Sh. Ravi Pratap Mall, Adv. Revenue by : Sh. Vivek Kumar Upadhyay, Sr. DR Date of Hearing: 29.07.2024 Date of Pronouncement: 02.09.2024 ORDER
Per Dr. B. R. R. Kumar, Accountant Member:
The present appeal has been filed by the assessee against the order of ld. CIT(A)-34, New Delhi dated 25.07.2019.
The relevant grounds are as under:
“1. That the learned CIT(A) has erred both on facts and in law in upholding the legality and validity of proceedings initiated u/s 148 of the Income Tax Act and has further erred in confirming an addition made by the learned AO of Rs.1,65,00,000/-.
2. That the learned CIT(A) has erred in sustaining the order of assessment in the absence of a notice u/s 148 of the Act having been served on the assessee company.
3. That the learned CIT(A) has failed to appreciate that no valid sanction had been obtained by the learned AO from the concerned CIT and the purported sanction granted, if any, was mechanical.
2 Fresh Facility Maintenance Pvt. Ltd.
4. That the learned CIT(A) has erred in sustaining the validity of initiation of proceedings u/s 147 of the Act by misconceiving the facts. The pre-requisites of section 147 of the Act have not been satisfied in accordance with law and as such, no valid proceedings could have been initiated against the assessee.
That the learned CIT(A) has failed to appreciate that in the instant case addition had been made on a purported ground of unexplained introduction of credit in the garb of sale of shares; whereas there was no material in respect thereof.”
At the outset, the ld. AR argued and brought to our notice the reasons recorded by the AO at para no. 6 which reads:
As per information available on record i.e. ITR filed for A.Y. 2010- 11, the full and true disclosure with regard to the above transactions have not been made by the assessee company as the fact that the share capital and share premium is being introduced through these dummy company is nowhere disclosed by the assessee company. Hence, it is a failure on the part of the assessee to disclose material fact which attracts provisions of Section 147/148 of the Income Tax Act, 1961.
On perusal of the particulars, it is found that the assessee has received neither any share capital nor any share premium during the year. The balance sheet particulars which are as per the records are under:
S. No. Particulars A.Y. 2009-10 A.Y. 2010-11 Increase (+)/ Decrease (-) 1. Authorized Share 50,00,000 50,00,000 Nil Capital 2. Issued Subscribed 6,00,000 6,00,000 Nil and Paid up Capital 3. Security Premium 25,00,000 25,00,000 Nil Account 5. Thus, it is clearly proves that there was no amount has been received or introduced on account of either share capital or share premium as alleged by the Assessing Officer in his satisfaction note and hence, the “reasons to believe” as 3 Fresh Facility Maintenance Pvt. Ltd. contemplated as per the provisions of the Income Tax Act, 1961 have not been met by the Assessing Officer either on facts or legality. Hence, the order of the Assessing Officer is treated as void ab inito, in the absence of any valid reasons recorded.