Loading judgment…
Facts
The assessee's original assessment for AY 2012-13 included an addition of Rs. 2 crores under section 68 for bogus share application money, which was subsequently deleted by the first appellate authority. While the Revenue's appeal against this deletion was pending before the ITAT, the Assessing Officer reopened the assessment under section 147 after more than four years, making the same addition, based on information regarding accommodation entries. The reassessment order was confirmed by the NFAC.
Held
The Tribunal held the reopening of assessment invalid on two grounds: firstly, it was initiated beyond four years without any failure to disclose material facts by the assessee being established by the AO; and secondly, the third proviso to section 147 barred reassessment on an issue already subject to appeal or decided on merits by a higher forum, which the ITAT had already done in the original assessment's appeal. The Tribunal quashed the reassessment order.
Key Issues
1. Whether reassessment proceedings initiated beyond four years are valid without the assessee's failure to disclose material facts. 2. Whether a reassessment is valid under the third proviso to section 147 if the issue is already a subject of appeal or decided on merits by a higher appellate authority. 3. Validity of addition under section 68.
Sections Cited
147, 148, 143(3), 68, 133(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI SAKTIJIT DEY, VICE- & SHRI M. BALAGANESH
PER SAKTIJIT DEY, VICE-PRESIDENT
This is an appeal by the assessee against order dated 16.02.2024 passed by National Faceless Appeal Centre (NFAC), Delhi, for the assessment year 2012-13.
In ground nos. 1, 2 and 3, the assessee has challenged the validity of reopening and completion of assessment under section 147 of the Income-tax Act, 1961 (in short ‘the Act’). Since, the issue raised in these grounds is a purely legal and jurisdictional issue, we proceed to deal with it, at the very outset.
Briefly the facts are, the assessee is a resident corporate entity. For the assessment year under dispute, the assessee filed its return of income on 29.09.2012 declaring nil income.
Assessee’s case was selected for scrutiny. Original assessment in case of the assessee was completed under section 143(3) of the Act vide order dated 26.03.2015, making addition of Rs. 2 crores under section 68 of the Act. The addition so made was on account of bogus share application money/premium received from M/s.
Omexpo Enterprises Pvt. Ltd. Contesting the said addition, the assessee filed an appeal before learned first appellate authority.
Being satisfied that the amount of Rs. 2 crores received from M/s. Omexpo Enterprises Pvt. Ltd. against share application money/premium is genuine, learned first appellate authority deleted the addition. Challenging the order of learned first appellate authority, Revenue preferred an appeal before the Income Tax Appellate Tribunal (ITAT). When the appeal before the ITAT was pending, the Assessing Officer received information from the office of ADIT (Inv.), Unit-6(3), New Delhi, intimating that in course of search and seizure operation conducted in case of Himanshu Verma Group on 29.03.2012, it was found that Sh.
Himanshu Verma was engaged in the activity of providing accommodation entries to various beneficiaries and the assessee company, which is one of the beneficiaries, had received accommodation entries of Rs.2 crores towards share application money/premium from M/s. Omexpo Enterprises Pvt. Ltd. Based on such information, the Assessing Officer reopened the assessment under section 147 of the Act by issuing a notice under section 148 of the Act on 13.03.2019.
After receiving the notice issued under section 148 of the Act, the assessee filed an objection before the Assessing Officer stating that the issue having already been examined in the original assessment proceedings and the addition having been deleted by the first appellate authority and Revenue’s appeal challenging such deletion, being pending before the ITAT, the reassessment proceeding should be kept in abeyance. The Assessing Officer, however, did not give credence to assessee’s objection and proceeded to complete the assessment under section 143(3)/147 of the Act and again made the addition of Rs.2 crores under section 68 of the Act. Though, the assessee contested the aforesaid addition before learned first appellate authority, however, the addition was confirmed.
Before us, learned counsel appearing for the assessee submitted that the issue relating to the very same addition was examined by the Assessing Officer in the original assessment proceedings and he made addition of the very same amount treating it as unexplained cash credit under section 68 of the Act.
He submitted, while considering assessee’s appeal on such addition, the Commissioner (Appeals) examined the issue on merits and having found the transaction to be genuine, deleted the addition. He submitted, even the Revenue’s appeal against the order of Commissioner (Appeals), in the meanwhile, has been dismissed on merits.
Drawing our attention to the provisions contained under section 147 of the Act, learned counsel submitted that the Assessing Officer has initiated proceedings under section 147 of the Act, after expiry of four years from the end of the assessment year. He submitted, since, the original assessment in the case of the assessee was completed under section 143(3) of the Act, assessment could have been reopened under section 147 of the Act only when there was any failure on the part of the assessee to disclose truly and correctly all material facts relating to his income. He submitted, the Assessing Officer has not established any such failure on the part of the assessee.
Without prejudice, he submitted, in terms of the third proviso to section 147 of the Act, if a particular issue has been made a subject matter of any appeal, reference or revision, no addition relating to such issue can be made in the reassessment proceedings under section 147 of the Act. In support of such contention, he relied upon the following decisions:
ITO Vs. Sh. Prakash S. Jagtap, dated 11.04.2012 2. ACIT Vs. M/s. Inland World Logistics, IT(SS)A No. 80/Kol/2019, dated 15.09.2021
Proceeding further, he submitted, on merits also, the issues stand concluded in favour of the assessee, as both learned first appellate authority and the ITAT have deleted the addition made under section 68 of the Act on merits. Thus, he submitted, under no circumstances, the very same addition could have been made in the reassessment proceedings.
Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned first appellate authority.
We have considered rival submissions in the light of the decisions relied upon and perused the materials on record.
Undisputedly, the original assessment in case of the assessee was completed under section 143(3) of the Act vide order dated 26.03.2015. Whereas, proceedings under section 147 of the Act were initiated on 30.03.2018. In other words, the reassessment proceedings were initiated after expiry of more than four years from the end of the assessment year under dispute and almost nearing expiry of six years. As per the first proviso to section 147 of the Act, reopening of assessment in a case where the original assessment has been completed under sections 143(3) or section 147 of the Act can be made only when there is failure on the part of the assessee to made full and true disclosure of all particulars of his income relating to the relevant assessment year.
In the facts of the present appeal, there is absolutely no allegation by the Assessing Officer that escapement of income is due to failure on the part of the assessee to disclose truly and correctly all material facts relating to its income. That being the factual position emerging on record, the Assessing Officer could not have initiated proceedings under section 147 of the Act. More so, when the very same issue, on which the Assessing Officer reopened the assessment was the subject matter of dispute in the original assessment proceedings and the Assessing Officer, in fact, made the addition of Rs.2 crores received towards share application money from M/s. Omexpo Enterprises Pvt. Ltd. by treating it as unexplained cash credit under section 68 of the Act.
Therefore, it is nothing but review of the earlier assessment order, which is impermissible under the provisions of the Act.
Even otherwise also, as discussed earlier, reopening of assessment has been made on the reasoning that the share application money/premium received of Rs.2 crores from M/s.
Omexpo Enterprises Pvt. Ltd. is in the nature of accommodation entries. It is a fact on record that the assessee contested the very same addition made in the original assessment order before the first appellate authority. While deciding asssessee’s appeal on merits, learned first appellate authority deleted the addition.
Challenging such order of learned first appellate authority, Revenue filed an appeal before the Tribunal. Undisputedly, during pendency of such appeal before the Tribunal, the Assessing Officer has initiated the reassessment proceedings.
At this stage, it is necessary to have a look at the third proviso to section 147 of the Act, which says that the Assessing Officer has power to assess or re-assess such income, other than the income involving maters, which are the subject matter of any appeal, reference or revision. In the facts of the present case, undoubtedly, the item of escaped income assessed by the Assessing Officer was not only the subject matter of dispute in the original assessment order, but the matter was also dealt with by the first appellate authority on merits and the addition was deleted. Thus, assessee’s case is fully covered under the third proviso to section 147 of the Act. The very same issue having been considered by learned first appellate authority and thereafter by the Tribunal could not have been made subject matter of addition in the reassessment proceedings in view of specific bar contained in the third proviso to section 147 of the Act. For this reason also, the reopening of assessment and the consequent addition is invalid.
Pertinently, while dealing with the very same issue of addition in Revenue’s appeal, being arising out of original assessment proceeding, the Tribunal in order dated 07.10.2021 has dealt with the legality of the addition on merits and has held as under:
“11. We have heard the rival submissions and also perused the relevant material placed on record in the impugned order. Here in this case, the assessee company has received share application money from three parties. Two of them were Directors and one was a corporate entity M/s Omexpo Enterprises Pvt. Ltd. In so far as the share application money received from Directors, the AO has held the genuine transaction of the subscriber stood satisfactorily explained. In the case of share application money for sums aggregating to Rs. 2,00,00,000/- received from M/s. Omexpo Enterprises Pvt. Ltd., first of all the assessee discharged its onus by filing the copy of confirmation along with documents like, PAN, bank statement of the subscriber company, copy of income tax return alongwith audited accounts, etc., statement from the MCA website showing that the company is live working company. Thereafter, the AO himself carried out inquiry from the said parties and notice u/s 133(6) was sent asking for various details to corroborate the stand of the assessee. In response, the said company replied to the said notices and in fact two times reply was sent, i.e., vide letter dated 19.1.2015 and 5.3.2015. 14 The party not only confirmed the said transaction but also explained the source of investment alongwith the set of documents as mentioned in the assessment order itself as well as in the impugned appellate order. The bank statement furnished by the said company reflected a transfer of Rs. 1,00,00,000/- of each on two occasions from its bank account with the Axis Bank to the bank account of the assessee on 10.8.2011. The company also stated that it assessed to tax income tax and duly reflected the said investment in the balance sheet. Ld. CIT (A) has also noticed that this company had sufficient source of funds in the form of share capital and reserves as per balance sheet. The figure of which has been incorporated above. Out of the said funds the investment which has been made in the assessee company was Rs. 2,00,00,000/-. Apart from that, there is a categorical finding by the Ld. CIT(A) that there is no cash deposit in the bank account of share subscriber prior to issue of funds. Further, in so far as second discrepancy in the number of shares subscribed by M/s. Omexpo
Enterprises Pvt. Ltd., the same was reconciled along with the share certificate filed before the Ld. CIT (A) which has been discussed in detail by him. Thus, in so far as assessee is concerned entire onus should discharge and even in the inquiry conducted by the AO, no adverse material has been found as the party has provided all the necessary details to prove the genuineness of the transaction. In these circumstances, we do not find any reason as to why the transaction has been doubted by the AO without any adverse material found during the course of inquiry conducted by the AO. Now simply because Director of the subscriber company did not appear personally that does not mean that all other documents sent by the said company which are mostly statutory records as well as the income tax records can make the transaction fictitious. Thus, we do not find any infirmity in the finding and observation of the Ld. CIT(A) while deleting the said addition.”
Thus, once the issue has been decided on merits by the Tribunal, being the highest fact finding authority and a categorical finding has been given regarding the genuineness of the transaction, the very same transaction cannot again be made the subject matter of reopening of assessment under section 147 of the Act. Thus, looked at from any angle, the reopening of assessment under section 147 of the Act in the present case has to be declared as invalid and wholly without jurisdiction.
Accordingly, we do so and quash the order passed under section 143/147 of the Act. Consequently, the order of learned first appellate authority is set aside. Ground nos. 1, 2 and 3 are allowed.
In view of our decision above, the other grounds, having been rendered academic, do not require adjudication.
In the result, appeal is allowed, as indicated above.
Order pronounced in the open court on 9th July, 2024