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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI G. D. AGRAWAL & SHRI AMIT SHUKLA
PER BENCH:
The aforesaid appeal has been filed by the assessee against impugned order dated 17/3/2017, passed by Ld. Pr. CIT- 8, New Delhi under section 263 of the Income Tax Act, 1961, for the assessment year 2009-10. In the grounds of appeal, the assessee has raised the following grounds:- 1. The impugned order of the learned Pr. CIT-8 passed u/s.263 setting aside the Assessment Order passed by ITO Ward-9(4), New Delhi u/s.147/143(3), is bad in law, is devoid of jurisdiction, without the authority of law and is against the principles of natural justice, inter alia, because: a. The initiation of proceedings u/s. 263 are contrary to law
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b. Part of the seized material now relied on by the Id. Pr. CIT was not forwarded to the AO for issue of notice u/s. 148. c. The order passed by the Id. AO u/s. 147 is itself bad in law and without jurisdiction and no proceeding u/s.263 can be initiated against an invalid order. d. S.153A & 153C have non obstante clause, which excludes any proceedings u/s.147/148 where any search has taken place. e. Both the Id. AO and the Id. Pr. CIT have ignored that regular assessment u/s. 143(3) had been made by jurisdictional ITO Ward 9(4) New Delhi on 30/11/2011. f. The order u/s.147 which is impugned by the Id. Pr. CIT had been passed after considering the entire seized material as was available with him at the relevant time. 2. The order is against the provisions of the Act and the appellant denies his liability to tax as directed to be made and the manner in which it has been so directed to make fresh assessment, by the learned Pr. CIT. 3. The learned Pr. CIT has erred in law and on the facts and circumstances of the case in suggesting and directing the AO to make fresh investigation into omnibus material found and seized during search of S.K. Jain bros. who have been assessed u/s.153A.
The brief facts and background of the case are that the assessee is a company which had filed its return of income showing loss of Rs.1,93,992/- on 17/8/2009, which was later on revised on 14/9/2010, at a loss of Rs.2,46,797/-. The original return of income was subjected to scrutiny and assessment order dated 30/11/2011 was passed under section 143(3), whereby the original returned income of Rs.1,93,992/- was accepted. Post
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completion of the said assessment, assessee’s case was reopened under section 147 by issuance of notice under section 148 dated 18/10/2013 which from the records before us shows that the said notice was withdrawn and another notice under section 148 was issued on 25/3/2014. The the ‘reasons to believe’ for reopening the case under section 147 was based on the information received from the office of the CIT-III, New Delhi, that the assessee was one of the beneficiaries of accommodation entries provided by the group concerns of Surendra Kumar Jain, Shri Rakesh Gupta; Shri Vishesh Gupta and others through their hundreds of bogus companies. It was found from the search and seizure action in S.K. Jain group of cases that the assessee was also one of the beneficiaries of accommodation entries for a sum of Rs.1 crore. The relevant portion of the “reasons recorded” by the Assessing Officer for reopening the assessment are as under:- “Information/documents in the form of CD, appraisal report alongwith relevant details has been received from the office of the CIT-III, New Delhi vide letter F.No. CIT- lll/Confidential/2012-13 dated 28.03.2013 that the above assessee, M/S SURYA JYOTI SOFTWARE PRIVATE LIMITED has received and is a beneficiary of accommodation entries provided by the group of Sh. Surendra Kumar Jain, Sh. Rakesh Gupta & Sh. Vishesh Gupta and sh. Navneet Jain & Vaibhav Jain and hundreds of bogus companies of his group and many other related entry providers. These search and seizure operations unearthed the modus operandi of these entry operators. The various companies which do not have any business were being used for providing accommodation entries to various assessees who were rerouting their unaccounted cash through these accommodation entries. The assessees would pay cash to the entry providers. This cash would then be
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deposited in the accounts of various bogus companies and the transactions would be routed through many bank accounts to cover the trail. Then the assessee would be given cheque from one of the many account which would be given the colour of share application money or share capital or share premium or loans or advance etc. In the process, the entry operator would earn certain commission. The searches by the Investigation Wing against the entry operators resulted in unearthing of large number of pass books, cheque books, computer hard disks, signed blank cheques, share transfer certificates and many other blank signed documents. This information has been provided by the Investigation Wing of the Income Tax Department to the Assessing Officer. In the case of the above assessee, the following accommodation entries have been taken:- 3. 4. Name of the Beneficiary A.Y. Amount
2009-2010 Rs.1,00,00,000/ M/S SURYA JYOTI SOFTWARE - PRIVATE LIMITED
In response to notice under section 148, assessee filed letter dated 29/4/2014, stating that the original return filed be treated as return filed in response to notice under section 148 and after getting the ‘reasons recorded’ from the AO, the assessee filed its detailed objections which have been disposed of separately by the Assessing Officer. Thereafter, he completed the assessment u/s 143(3)/147 at ‘Nil’ income after making disallowance of unabsorbed depreciation of Rs.2,46,797/-, vide order dated 30/6/2014. However, no addition was made on account of alleged accommodation entry of Rs. 1 crore.
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Later on, Ld. Pr. CIT in his revisionary jurisdiction under section 263 from the examination of records before him, noted that though the assessment was reopened under section 148 on the allegation of accommodation entry taken from S.K. Jain group of concerns who were subjected to search on 14/9/2010 by the Investigation Wing, however, the Assessing Officer had not examined the seized material in the form of cash book and books containing details of cheques issued by such concern seized from the premises of S.K. Jain during the course of search, which indicated accommodation entry pertaining to assessee also. He further observed that an appraisal report along with scanned copy of seized material sent by the Investigation Wing to all the Assessing Officers through their respective CITs, have neither been looked upon by the Assessing Officer nor has been examined by him during the course of reassessment proceedings. Accordingly, he issued a show cause notice under section 263, the contents of which have been incorporated by him at pages 2 and 3 of the impugned order, wherein he has specifically brought out that the Assessing Officer has failed to consider the relevant seized material pertaining to the assessee-company, which was evident from ‘Annexure A-27’ of the seized material, wherein there is a categorical mention of an amount of Rs.1 crore taken through cheque No.244595, dated 29/1/2009; and there was also a corresponding entry in the cash book on 27/1/2009 seized in the case of S.K. Jain showing that cash was given by the same person to S.K. Jain group. The relevant portion of the said show cause notice having a bearing on the present case is reproduced herein below for the sake of ready reference:-
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“A search and seizure operation was carried out u/s 132 of the Act on 14/09/2010 at the premises of Shri Surender Jain and Shri Virender Jain. During the course of search cash book and books of the concerns managed by SK Jain group wherein detailed day to day receipts in cash and cheque from/to different persons/firms/companies have been recorded, were seized. On the perusal of the reassessment order, it is noticed that while passing the said order, the AO has failed to consider the relevant seized material pertaining to your company as is evident from the following facts. 2.1 It is seen from annexure A-27 back page 40 that on 28.01.2009 against the name of one Gupta Ji the following narration is appearing: Y.K. Gupta Ji Shalini Axis to Surya Jyoti Software Private Ltd. Ch.no.244595 dtd. 29/01/09, Rs. 1,00,00,000/-. 2.2. The corresponding entry in the cash book on 27.01.2009 seized as per annexure 22 shows that cash of Rs.1 Cr. was given by the same Y.K. Gupta to SK Jain group. Other Cash receipts from various persons including Satish Goel of Rs.62.50 lakhs, Rajan Aggarwal Rs.1.50 etc. including Y.K. Gupta Ji of Rs.l,00,00,000/-is shown in this page. Further opening balance of Rs. 1,64,07,441/-and closing balance of Rs.71,13,744/- has also been shown at this page. This balance of Rs. 71,13,744/- has been shown as opening balance on 28/1/2009 at page 23 backside of Ann. A-27. On perusal of bank statement of your company it has been observed that the same cheque no. issued by Shalini from Axis Bank for Rs. l Cr. has been deposited and cleared on 29.01.2009 in your bank account no.110611011001125 maintained Andhra Bank, Sector-19, Noida.
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2.3. Incidentally Y.K. Gupta & Company is a chartered accountant who had represented your case before the AO. 3. From the above, it is clear that the amount of Rs. 1 Cr. brought in the books of your company through above mentioned cheque in the name of M/s Shalini Holdings Ltd. was nothing but an accommodation entry in lieu of cash of Rs. 1 Cr. given by you through Y.K. Gupta Ji. The AO has failed to examine this point during 148 proceedings for assessment year 2009-10.”
The Ld. Pr. CIT further observed that the relevant copies of the seized material relating to the assessee, were not only given to the assessee along with the show cause notice but was also confronted during the course of proceedings under section 263. In response to the show cause notice, detailed objections and reply were filed on behalf of the assessee stating that in the original assessment proceedings completed under section 143(3), details of squared up loans/accounts were verified by the Assessing Officer, wherein the name of M/s Shalini Holdings Ltd. was also included. The assessee further vehemently objected to the revisionary proceedings under section 263 on the ground that the assessment order u/s 143(3)/147 which has been sought to be revised, itself is erroneous in law, because the said assessment order should have been passed under section 153C and not under section 147 and, therefore, the assessment order which is subject of revision is non-est. It was further submitted that during the course of reassessment proceedings ,the assessee was required to furnish income-tax returns, confirmations, financial & bank statements to the Assessing Officer which was duly complied with and only that, notice under section 133(6) was issued to the investor companies by the Assessing Officer
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and, therefore, the material which has already been considered by the Assessing Officer during the course of assessment proceedings under section 147, cannot be considered within the scope of revision under section 263. In support, various judicial decisions were also referred and relied upon, which has been incorporated at page 4 (para 3) of the impugned order.
The Ld. Pr. CIT after considering the entire gamut of facts, material on record as well as the submissions made by the assessee, first of all noted that, many incriminating documents were found during the course of investigation and search & seizure action in the case of S.K. Jain group which was seized during the course of search by the Investigation Wing on 14/9/2010. He further noted that these seized papers clearly reveal various accommodation entries provided by such companies to various beneficiaries. The appraisal report was forwarded by the Investigation Wing in the month of March, 2013 to the then CIT-III in hard copy and various other seized materials running into 1000 pages were scanned and soft copies of the relevant seized materials were sent to the Commissioners and then to the Assessing Officers. The relevant extract of certain seized documents has also been scanned by him including the one marked as “Annexure A-27 (back page 40)” pertaining to the accommodation entry relating to the assessee, which has been noted by him from the seized documents scanned at pages 7 & 8 of the impugned order. The relevant observation with regard to these seized material by the Pr. CIT, for the sake of ready reference, is reproduced hereunder:-
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“7. It is important to note that the assessee is also shown as beneficiary as evident from the scanned copy of the seized material namely Annexure number A-27 backpage-40 showing that the cheque number 244595 dated 29.01.2009 for Rs.1,00,00,000/- was issued by Shalini from their account with Axis Bank in favour of Surya Jyoti Software Private Limited through the intermediary Shri Y.K. Gupta. On the perusal of the seized cash book namely back page number 22 of Annexure A-27 which is reproduced below, it is seen that on 27.01.2009 cash of Rs. 1,00,00,000/- was received by the companies of Sri SK Jain group through the same intermediary Shri Y.K. Gupta. Incidentally, Shri Y K Gupta was the Authorised Representative of the assessee company during the original assessment proceedings before the Assessing Officer.”
After taking note of the entire list of various beneficiary companies, which also included the name of the assessee- company, he rebutted the contention raised by the assessee that the name of M/s Shalini Holdings Ltd. does not appear in the seized material, is incorrect and is borne out from the material confronted by him to the assessee.
Regarding assessee’s challenge that proceedings should have been initiated under section 153C and not under section 147, because if any material has been found from the possession of the ‘person searched’, then the right recourse would have been that the proceedings should have been initiated under section 153C, the Pr. CIT rejected the said contention on the ground that during the course of search proceedings in the case of S.K. Jain group many documents showing the names of cheque issued and consolidated cash book of various companies controlled by S.K.
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Jain group were seized and in such documents the details of cheques issued in favour of beneficiaries including assessee- company as well as details of cash deposit through intermediates on various dates were found to be noted. He held that the entries in the books of S.K. Jain group did not belong to the assessee- company and, therefore, it cannot be held that any document of the assessee-company has been found in the course of search of S.K. Jain group, albeit it was in the books of account of S.K. Jain group that these entries were appearing, hence it could not have been a case under section 153C. He further noted from the perusal and examination of record that it is an admitted fact that no specific query was raised by the Assessing Officer regarding the seized material relating to M/s Shalini Holdings Ltd and this point he even confronted to the assessee in his show cause notice. The assessee only clarified before the Pr. CIT that there is no share capital/share application money from M/s Shalini Holdings Ltd. albeit there was only loan transaction which was done with M/s Shalini Holdings Ltd. It was stated by the assessee that it had advanced loan of Rs.2 crores, i.e., Rs.1 crore each on 12/6/2008; which was returned by M/s Shalini Holdings Ltd. on 2/8/2008 and another sum of Rs.50 lakhs each on 5/8/2008 and 29/1/2009. The sum of Rs.1 crore as mentioned in the show-cause notice represents repayment of loan given by the assessee-company to M/s Shalini Holdings Ltd. during the same financial year. The Ld. Pr. CIT observes that this fact and contention of the assessee has not been even verified or examined by the Assessing Officer from the seized material relating to the assessee. Thereafter, from the perusal of the seized documents, he makes the following observations:-
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“8. The perusal of the above mentioned seized backpage-22 of Annexure A-27 dated 27.01.2009 shows an opening cash balance of Rs. 1,64,07,441/-. Cash of Rs. l crore is shown as received from Y.K. Gupta along with cash of Rs. 62.50 Lakh from Satish Goel, Rs. 1.50 Crore from Rajan Aggarwal, Rs.l3 lakh A.K Jain, Rs.l lakh towards commission account of A.K .Jain, Rs.50 lakh from P.K. Aggarwal and Rs.l4 lakh from Rajan Aggarwal etc. Against these deposits, certain payments are shown in favour of various persons leaving balance of Rs. 71,13,744/-. This closing balance of Rs. 71,13,744/- has been carried forward as opening balance on 28/1/2009. This clearly shows that the transactions of receipt and payment of cash have been meticulously recorded by SK Jain group.”
On the aforesaid reasons and background, the Ld. Pr. CIT held that the Assessing Officer did not examine the relevant seized material despite the fact that entries in the seized material showed that assessee was also one of the beneficiaries of the accommodation entries given by the concerns of S.K. Jain group. The Assessing Officer was mainly trying to verify the existence of the parties, rather than to make enquiries regarding the genuineness of the transactions whether cheque was issued in lieu of cash or not as was appearing in the seized material. Lastly, he held that from the perusal of the case records of the assessee for the relevant assessment year, there is nothing on record to show that the Assessing Officer has ever confronted the assessee on such seized documents and had the Assessing Officer examined the seized material, he should have made some noting either in the order sheet or in the questionnaire issued to the assessee or any kind of reference would have been made in
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the submissions made by the assessee before the Assessing Officer. Therefore, the decisions and the case laws relied upon by the assessee would not be applicable that the Assessing Officer had formed an opinion on the relevant seized material. Accordingly, he set aside the re-assessment order on the ground that the Assessing Officer has not made any proper verification/enquiries and, therefore, the said assessment order is deemed to be erroneous and insofar as prejudicial to the interest of the Revenue in terms of amended provisions inserted in section 263 by way of Explanation 2. Thus, the order of the Assessing Officer was set aside with the direction to examine the seized material and confront the assessee and if the Assessing Officer find that there is any nexus between the cash deposits and the cheques issued by the group companies of SK Jain, then the same may be taxed accordingly.
Before us the ld. counsel for the assessee, Shri K.P. Garg first of all, challenged the very validity of impugned order passed under section 263 mainly on the ground that the re-assessment proceedings under section 147 and consequently the assessment order passed under section 147 read with section 143(3) vide order dated 30/6/2014, itself was bad in law. Such a validity of reopening under section 147, he submitted that can be challenged in the course of revisionary proceedings under section 263; and in support he relied upon catena of decisions including that of ITAT Mumbai Bench in the case of West Life Development Limited vs. DCIT in ITA No.688/Mum/2016, wherein the Tribunal after discussing various judgments and case laws, has held that validity of reopening under section 147 can be challenged in the proceedings under section 263 and if
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the impugned assessment order passed under section 143(3) r.w.s. 147 is found to be illegal or nullity in the eyes of law, then the CIT does not have a valid jurisdiction to pass order under section 263 so as to revise a non-est /illegal assessment order. He submitted that here in this case proceedings under section 147 is invalid, because information has been received from the Investigation Wing in the course of search of a third party and therefore proceedings which could have been initiated in the case of the assessee would be under section 153C and not under section 147. In support, he strongly referred to the decision of ITAT Kolkata Bench in the case of Classic Flour and Food Processing vs. CIT in I.T.A. No 764 to 766/2014, dated 5/4/2017.
His next line of argument before us was that, there is no material to form ‘reason to believe’ that income chargeable to tax has escaped assessment, because the same is based on information and material obtained from some other third party, on which the Assessing Officer has not applied his mind after verifying the records of the assessee.
Another contention raised by the Ld. Counsel was that the assessment framed under section 143(3) read with 147 is invalid also for the reason that no notice under section 143(2) has been served upon the assessee, hence the entire assessment order is bad in law and consequently, such an order could not be subject matter of revision under section 263 and for this proposition also he reiterated the same set of decisions. On the issue of non- service of notice under section 143(2), he made his elaborate
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submissions and also filed a separate synopsis along with reliance placed on various decisions.
Lastly, he submitted that the order under section 147, which has been sought to be revised by the Ld. Pr. CIT, had been passed after considering some of the new material facts brought on record subsequently which has been referred and relied upon by him in the show cause notice as well as in the impugned order. These material facts neither does form part of the “reasons recorded”, nor was available with the Assessing Officer at the time of issuance of notice under section 148. No new material can be relied upon in revisionary proceedings as the revision under section 263 cannot be invoked to improve the case by providing fresh material. Again in support of this contention he relied upon the decision of ITAT Kolkata Bench in the case of Classic Flour and Food Processing vs. CIT (supra).
On the other hand, the ld. CIT (DR), after explaining the entire facts and material on record, which has been discussed by the Pr. CIT in the impugned order, submitted that here in this case there is absolutely no dispute that the Assessing Officer has not made any enquiry regarding the accommodation entry pertaining to the assessee specifically which was found during the course of search and investigation in S.K. Jain group as highlighted by the Pr. CIT. Once adequate or proper enquiry has not been done, then in terms of Explanation 2 inserted in section 263 by the Finance Act, 2015, w.e.f. 1/6/2015, the assessment order is deemed to be erroneous insofar as it is prejudicial to the interest of the Revenue. The said amendment he submitted that would be clearly applicable as the proceedings and order u/s 263
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has been passed post 1/07/2015. Apart from that, he relied upon the following judgments:-
Malabar Industrial Co. Ltd. Vs CIT [2000] 109 243 ITR 83 (SC).
Rajmandir Estates (P.) Ltd. Vs PCIT [2016] 386 ITR 162
Rajmandir Estates (P.) Ltd. Vs PCIT [2017] 245 Taxman 127 (SC)
Shree Maniunathesware Packing Products & Camphor Works Vs CIT [1998] 96 231 ITR 53 (SC).
Regarding challenging the validity of reopening under section 147 by the assessee, on the ground that the proceedings should have been initiated under section 153C, he submitted that the Pr. CIT has dealt with this issue at page 16 of his order and so far as the contention that information from the third party or material recovered from other persons cannot be treated as tangible material for reopening the assessment, he relied upon the following judgments:-
Yoqendrakumar Gupta Vs 1TO [2014] 227 Taxman 374 (SC)
Ankit Financial Services Ltd. Vs DCIT [2017]78 taxmann.com 58 (Guiarat)
PCIT Vs Paramount Communication (P.) Ltd. [2017- TIOL-253-SC-IT]
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PCIT Vs Paramount Communication (P.) Ltd. [2017] 392 ITR 444 (Delhi)
Thus, he strongly relied upon the order of the Pr. CIT.
We have heard the rival submissions, perused the relevant finding and observations appearing in the impugned order as well as the material referred to before us. Here in this case, the original assessment was completed under section 143(3) vide order dated 30/11/2011, wherein admittedly the issue of loan or money received from M/s Shalini Holdings Ltd. was neither examined nor was enquired by the AO during the course of assessment proceedings, at least nothing has been brought on record before us by the assessee in the detailed paper book filed before us that any query or reply on this issue was raised by the Assessing Officer in the course of assessment proceedings. Even the assessment order merely speaks about accepting of the original return of income, when admittedly assessee had filed revised return of income on 14/9/2010. This shows completely lack of application of mind by the AO at the time of passing of original assessment order. Later on, assessee’s case was reopened under section 147 by issuance of notice under section 148 dated 18/10/2013, which from the records before us shows that the said notice was withdrawn due to some technical reason and another notice under section 148 was issued on 25/3/2014. The “reasons” for reopening the assessment under section 147 and issuance of notice under section 148 has already been incorporated above. From the perusal of the same, it is seen that the core reason for reopening the assessment was that there was a definite information and document along with appraisal report
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received from the office of the CIT-III, New Delhi, that the assessee has rotated its money in cash for a Cheque and is a beneficiary of accommodation entry provided by the group of S.K. Jain and others through his various bogus companies. A search and seizure action was carried out in the case of S.K. Jain and his group of companies wherein modus operandi of accommodation entries were unearthed and was found that many parties were re-routing their unaccounted cash through these accommodation entries. The assessee was also found to be one of the beneficiaries of such accommodation entry in the assessment year 2009-10, wherein it had taken an entry of Rs.1 crore. The Assessing Officer, after having received such an information and based on such tangible material has entertained his “reason to believe” for reopening the case under section 147, then he was required to carry out detailed enquiry and verification, not only on the information pertaining to assessee being one of the beneficiary of accommodation entry, but also should have enquired about the genuineness of the transaction as a whole. In the impugned assessment order u/s 143(3)/147, there is no whisper about any enquiry or verification done by the Assessing Officer in this regard. Though in his order disposing of the assessee’s objection on validity of proceedings under section 147, it is seen that he has passed a very detailed order justifying the assumption of jurisdiction under section 147 precisely on this ground that assessee has received entries from many parties and information and document in the form of CD, appraisal report has been received wherein assessee has been found to be one of the beneficiaries. However such a finding remained confined to justify the reopening under section 147 and was not taken to logical conclusion by further probing into the matter.
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Here in this case, one important aspect which needs to be kept in mind that the reopening has been done within four years from the end of the relevant assessment year, because the impugned notice u/s 148, which is the basis for reopening and consequently passing of the re-assessment order, is dated 25/3/2014. Thus, the law contained in proviso to section 147 will not apply whereby ascribing of failure on part of the assessee by the AO is sine-qua-non to acquire the jurisdiction beyond the period of 4 years where assessments have been completed under section 143(3) or 147. Post acquiring of jurisdiction under section 147, it is nowhere borne out from the records that the Assessing Officer has verified the genuineness of the transaction based on the information received, specifically on the Annexures and the information as elaborately discussed by the Ld. Pr. CIT in the impugned order, which has been stated to be available to the Assessing Officer also at the time of re-assessment proceedings. There is no rebuttal of the categorical observation of the Ld. Pr. CIT that “it is admitted by the ld. counsel for the assessee that no specific query was raised by the Assessing Officer regarding the seized material relating to M/s Shalini Holdings Pvt. Ltd. as mentioned in the show cause notice” (para 7.3 of the impugned order). The Ld. Pr. CIT has further observed that he has perused the case records of the assessee for the relevant Assessment Year and has found that there is nothing on the record to show that the Assessing Officer has ever confronted the assessee on such seized documents. Had the AO examined the seized material, there should have been some noting either in the order sheet or in the questionnaires issued to the assessee by the AO or in the submissions of the assessee before the AO. He had further observed that the situation would
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have been different had the AO examined the seized material and after examination of the seized material the AO had taken a view, then probably the revision proceedings under section 263 could not have been initiated as it would have amounted to the ‘change of opinion’ or adequate enquiries has been carried out as held by various courts. On the basis of such uncontroverted facts he has come to a conclusion that the order passed by the AO in this case is without considering the relevant seized material which shows that the cheques have been issued in lieu of the cash received, is not only erroneous but also prejudicial to the interest of the revenue as the amount of Rs 1 crore prima facie remained untaxed in the Assessment Year 2009-10. There is no rebuttal to such a finding recorded in the order or any material has been brought on record by the assessee before us that these observations and findings of the Pr. CIT are contrary to the facts. The observations and findings recorded by him ostensibly goes to show that the Assessing Officer has not made any proper or adequate enquiry on this issue, which at the outset renders the assessment order erroneous and prejudicial to the interest of the revenue.
Now coming to the one of the main contention raised by the ld. counsel of the assessee that the proceedings under section 147 was itself bad in law and therefore, proceedings u/s 263 could not have been invoked. The reasons given for this proposition is that, here in this case, material on the basis of which proceedings for reopening the assessment has been sought to be initiated u/s 147 has been found from the search conducted at the premises of third party and if material found from the premises of the searched person is being utilized, then
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in such a situation the law provides that proceedings should have been initiated under section 153C, which has not been done and, therefore, the entire proceedings under section 147 gets vitiated and is bad in law. In support of this proposition Ld. Counsel, has relied upon certain decisions, firstly on the point that validity of reassessment or assessment order can be challenged in the revisionary proceeding under section 263; and secondly, if any material has been found pertaining to the assessee in the case of person searched or covered u/s 153A, then only recourse was to initiate proceedings under section 153C and not under section 147. At the outset, we do not find any quarrel to the proposition that the validity of assessment or reassessment cannot be challenged in the revisionary proceedings u/s 263, however, on the facts of the present case, the ratio laid down in such judgments would not be applicable at all, because here in this case no document or material belonging to the assessee was found in the course of search proceedings in the case of S.K. Jain group, albeit assessee’s name appears as one of the beneficiaries of accommodation entries in the books of account maintained by one of the concern of S.K. Jain group. The entries in the books of account of S.K. Jain group cannot be reckoned as any material or document belonging to the assessee so as to constitute document or asset seized or requisitioned in the case of person searched in terms of scope of section 153C. If certain documents or asset or books of account belonging to the assessee would have been found during the course of search proceedings of S.K. Jain and his group concerns, then perhaps it would have been held that the provisions of section 153C would have been invoked. But here in this case what has been found, is the regular entries in the books of account of the concerns of S.K.
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Jain group, in which name of the assessee is appearing. Such entries in the cash books depicting the details of cheques issued in favour of the assessee as well as cash deposit through intermediates on various dates cannot be reckoned as document or books of account of the assessee. This fact has been noted by the Pr. CIT in the impugned order right from pages 7 to 15, wherein one of the entries pertains to the assessee for a sum of Rs.1 crore. Thus, the contention raised by the ld. counsel on this point is out rightly rejected that the proceedings under section 153C should have been initiated instead of under section147.
As regards the contention that material or information found during the course of search in the case of S.K. Jain group cannot be held to be a tangible material pertaining to the assessee, we are unable to accept such a contention for the reason that, firstly, there was a categorical information and material coming on record post passing of the original assessment order under section 143(3) that assessee was one of the beneficiaries of accommodation entries provided by one of the group concern of S.K. Jain and not only that, a specific amount (of Rs. 1 Crore) has been mentioned which prima-facie pertained to the assessee. This definitely constitutes a tangible and definite material having live-link nexus with the income chargeable to tax escaping assessment. The judgments relied upon by the ld. CIT D.R. on this point, specifically the judgment of Hon'ble Delhi High Court in the case of PCIT Vs Paramount Communication (P.) Ltd. (supra) is squarely applicable, as in that case also the information regarding bogus purchase by the assessee was received vide DRI from CCE which was passed on to Revenue authorities and was held to be tangible material outside record to
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initiate valid re-assessment proceedings. Here in this case, as reiterated several times there was a definite information and material found qua the assessee which at least needed verification and examination and hence, in our opinion such a material and information does constitute a tangible and relevant material sufficient enough to form ‘reason to believe’ that income chargeable to tax has escaped assessment. Apart from that, it is seen from the records that the assessee had raised similar objections after the receipt of “reasons recorded” before the Assessing Officer during the course of re-assessment proceedings, which have been amply dealt with and discussed by the Assessing Officer inn detail vide his separate order, copy of which has been placed in the paper book. Against the said order, assessee has not sought for any remedy nor has it challenged this issue in appeal after the passing of the assessment order. In any case, we have already held Assessing Officer has rightly acquired jurisdiction under section 147 based on the information/material referred to in the “reasons recorded”. Accordingly, this contention raised by the ld. Counsel is also rejected.
So far as the contention of the ld. counsel that no notice under section 143(2) has been issued or served upon the assessee during the course of re-assessment proceedings, we find that assessee has neither challenged this issue after the passing of the re-assessment order nor has raised this issue before the Pr. CIT during the course of revisionary proceedings under section 263, wherein the assessee had raised several legal issues/ objections before the Pr. CIT challenging the validity of the reassessment proceedings. Even before the Tribunal at the
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time of filing of appeal, this issue has neither been raised in the grounds nor has any additional ground been raised so that department could have got the opportunity to object or respond to such a plea after verifying the record in this regard. Thus, such an oral plea at a last moment not arising from the impugned order and without any verification of record cannot be entertained. If it was such a vital plea, then right recourse would have been that assessee should have moved a petition for additional ground with a copy to the ld. D.R. in advance or would have sought permission from the Tribunal for raking up this issue under rule 27 of ITAT Rules. There is no material fact on record to decide this issue as it has been raised at the last moment at the time of hearing. Accordingly, we are rejecting this plea of the ld. counsel at the threshold.
Lastly on merits, as discussed in the foregoing paragraphs, the Pr. CIT has amply demonstrated in his impugned order that this issue was neither enquired into nor was verified by the Assessing Officer once the information and the material in hard copy and in form of CD was made available to him. AO should have verified the genuineness of the transaction and also should have carried out adequate enquiry to come to a logical conclusion that either there is no accommodation entry and the contents found qua the assessee being one of the beneficiary of the accommodation entry in the books of account of the concerns of S.K. Jain group are false or bogus; or assessee had amply demonstrated and substantiated before the AO regarding the genuineness of the transaction of the accommodation entry. In absence of such a mandate which was cast upon the AO, we are of the opinion that the assessment order is not only erroneous
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but also prejudicial to the interest of revenue, as this matter definitely requires proper enquiry and verification by the AO. Thus, we hold that the Ld. Pr. CIT has rightly exercised his jurisdiction under section 263 in setting aside the order of the Assessing Officer being erroneous in so far it is prejudicial to the interest of the Revenue. Accordingly, we confirm the order of the Pr. CIT and dismiss the grounds raised by the assessee before us.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open Court on 25th October, 2017.
Sd/- Sd/- [G.D. AGRAWAL] [AMIT SHUKLA] PRESIDENT JUDICIAL MEMBER DATED:25th October, 2017 JJ:1710 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR
Assistant Registrar
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Date 1. Draft dictated on 2. Draft placed before author 3. Draft proposed & placed before the second member
Draft discussed/approved by Second Member. 5. Approved Draft comes to the Sr.PS/PS 6. Kept for pronouncement on 7. File comes back to PS/Sr. PS 8. Uploaded on 9. File sent to the Bench Clerk 10. Date on which file goes to the AR 11. Date on which file goes to the Head Clerk. 12. Date of dispatch of Order.