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Facts
The appellant challenged a reassessment order for AY 2009-10, where proceedings were initiated and an order passed against a company (Satyam Home Appliances Pvt. Ltd.) that had ceased to exist and was struck off by the MCA before the Section 148 notice. The reassessment was based on search material from third parties (Jain Brothers), leading to additions of Rs. 20,00,000 under Section 68 for unexplained share capital and Rs. 36,000 for unexplained investment/commission.
Held
The tribunal noted that the assessee had previously withdrawn the appeal before the CIT(A), which led to its dismissal. However, the assessee now wished to pursue the appeal. In the interest of justice, the tribunal remitted the entire issue back to the CIT(A) for fresh consideration after providing the assessee an opportunity of being heard.
Key Issues
Validity of reassessment against a non-existent entity; proper procedure (Section 147 vs 153C) for reassessment based on third-party search material; validity of reassessment without new tangible information and proper sanction; and merits of additions under Section 68 and for unexplained investment.
Sections Cited
143(3), 147, 148, 153C, 151, 68, 234B, 234D
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ : NEW DELHI
Before: SHRI SHAMIM YAHYA
This appeal by the assessee is directed against the order of the ld. CIT (Appeals)-28, New Delhi dated 30.10.2018 for the assessment year 2009-10.
2. Various grounds of appeal raised by the assessee read as under :-
“1. That on the facts and circumstance of the case and in law, the impugned reassessment order dated 29.03.2016 passed under section 143(3) read with section 147 of the Income Tax Act, 1961 (''the Act") is beyond jurisdiction, illegal and bad in law. 1.1 That the impugned reassessment order is beyond jurisdiction and bad in law, since the proceedings under section 147 of the Act have been conducted and the order has been passed in the name of erstwhile Mis. Sat yam Home Appliances Pvt. Ltd. which already stood ceased to exist and its name had been struck-off by the Ministry of Corporate Affairs on 25.06.2014 (i.e. much before issuance of notice under section 148 of the Act).
1.2 That the assessing officer ("AO") erred on facts and in law in not dropping the reassessment proceedings initiated in the case of erstwhile company even when the jurisdictional notice under section 148 of the Act was served on a non-existent entity.
Without Prejudice
That on the facts and circumstance of the case and in law, the very initiation of proceedings under section 148 of the Act is illegal and bad in law since the proceedings have been initiated on the basis of search material found and seized from the premises of person searched (i.e. Sh. Surender Kumar Jain and Sh. Virender Kumar Jain), and thus, the cognizance of the material could have been taken only by initiation of proceedings under Section 153C of the Act.
2.1 That the assessing officer failed to appreciate that the provisions of section 153C of the Act are non-obstante in cases where assessment is to be initiated on the basis of material seized during the course of search from the premises of third party.
Without prejudice to Ground No.2, the reassessment proceedings under section 147 of the Act have been initiated without any new tangible information/material available with the assessing officer and hence, the impugned order is illegal and bad in law.
3.1 That on the facts and circumstances of the case and in law, the reassessment proceedings under section 147 of the Act, having been initiated for the purpose of scrutinizing/investigating the details of the appellant, is illegal and bad in law.
3.2 That on the facts and circumstances of the case and in law, the reassessment proceedings having been initiated without proper sanction under section 151 of the Act, are illegal and bad in law.
4. That the assessing officer erred on facts and in law in making addition of Rs.20,00,000 under section 68 of the Act on account of alleged unexplained share capital received during the year from 4 parties (AD Fin Capital Services Pvt. Ltd., Lotus Realcon Pvt. Ltd, Humtum Marketing Pvt. Ltd. and Shalini Holding Ltd.) holding that the assessee had failed the test of genuineness as per section 68 of the Act.
4.1 That on the facts and circumstances of the case and in law, the assessing officer erred in making the addition while completely ignoring the documentary evidences filed by the appellant fulfilling the ingredients of the provisions of section 68 of the Act.
4.2 That the assessing officer erred on facts and in law in completing the reassessment and making addition without granting any opportunity to the appellant to cross examine the Jain Brothers, in gross violation of the settled principles of natural justice.
That the assessing officer erred on facts and in law in making addition of Rs.36,000 treating the same unexplained investment on the ground that it represented commission paid to obtain accommodation entries.
That the assessing officer erred on facts and in law in charging interest under section 234B/234D of the Act.”
3. At the outset, we note that in this case, upon assessee’s appeal, ld. CIT(A) has noted that assessee has sought withdrawal of the appeal, hence the grounds were dismissed by the ld. CIT (A). Now, the assessee has taken about-turn and wanted to pursue the appeal. In our considered opinion, interest of justice will be served if an opportunity is granted to the assessee.
Hence, we remit the issue to the file of ld. CIT (A). Ld. CIT (A) is directed to consider the issue afresh after providing an opportunity of being heard to the assessee.
In the result, the assessee’s appeal is allowed for statistical purposes. Order pronounced in the open court on this 16th day of February, 2024.