GDR FINANCE AND LEASING P. LTD,DELHI vs. INCOME TAX OFFICER, DELHI

Against the order dated 22.03.2023 of the ld. AO, the appellant-assessee filed appeal before the ld.CIT(A) which was dismissed vide order dated 23.01.2025. 4. Being aggrieved, the appellant-assessee preferred the present appeal with the following grounds:- “1. That the learned CIT(A) has erred both on facts and in law when he has confirmed the addition made by the Assessment Unit, Income Tax Department of Rs. 47,65,476/-.

That the learned CIT(A) has failed to appreciate that the proceedings u/s 148 of the Income Tax Act had been initiated on an 3

That the learned CIT(A) has further failed to appreciate that the instant proceedings under section 148 and 148A(d) of the Act had been initialed by '‘juri ictional assessing officer” and not by “faceless assessing officer”, which is against the mandate of section 151A of the Act and also, the E Assessment Scheme, 2022. Thus as such, the impugned proceedings and assessment thereto made were without juri iction and untenable in law.

That the findings of the learned CIT(A) in order in para 5.1, 5.2, & 5.3 are not only perverse but overlooks the fact that the assessee had paid the interest on the sum genuinely borrowed by it and utilized by it for its business and that said sum borrowed had not been held to be undisclosed income of the assessee.

That the learned CIT(A) has failed to appreciate that, in response to the notice u/s 133(6) of the Act of M/s K.G. Finvest Pvt. Ltd. had re- confirmed the loan and also the amount paid by the assessee as interest and as such the findings that the assessee had failed to establish the genuineness of the transaction i.e. identity, genuineness and creditworthiness, is not only erroneous but is based on no material and has no connection with the addition made.

That the further finding of the learned CIT(A) that the disallowance of interest had been made on the basis of the specific information with the AO, that the loan transactions were in the shape of accommodation entry is wholly unsupported by any material, as no such information has ever been confronted to the assessee company for its rebuttal.

The assessee craves to leave add, alter, and modify any other ground of appeal at the time of hearing.”

The learned Authorised Representative for the appellant-assessee submitted that the assessee furnished return of income on 31.10.2018 along with financial statements and other documents (Page 1-33 of the Paper Book). The 4

1. In satisfaction note, it is alleged that credible information has been received from ld. DDIT (Inv.) Unit - 2(4) New Delhi that the appellant had taken accommodation entries of Rs. 47,65,476/- through M/s KG Finvest Pvt. Ltd. It had further been stated that as a result of search carried out in Filatex Group on 01.09.2021, in which an entry operator named Shri Ankit Bhageria was also covered and that Shri Ankit Bhageria who controlled several shell companies had provided accommodation entries to beneficiaries. It has been alleged that such entries when analyzed Shri Ankit Bhageria had admitted during the statement on oath that M/s KG Finvest Pvt. Ltd. is a shell company.

2. The appellant thus on receipt of the notice u/s 148A(b) of the Act filed its objections on 28.03.2022 (Pg. 80 -81 of PB). The appellant had specifically stated in its objections that it did not receive any sum from M/s KG Finvest Pvt. Ltd. and no sum is credited during the year under consideration and as such the initiation of the proceedings in the case of the appellant is unsustainable in law. The appellant-further requested that it be provided with: 5

3. The alleged information received was that the assessee had taken accommodation entry. This information was completely incorrect information and was based on no material, and before proceeding to issue notice, the learned AO has made no enquiry or verification of such alleged information nor even while passing the order u/s 148A(d) of the Act or order of assessment. It is settled law that if the proceedings u/s 147 of the Act are initiated on the basis of wrong fact, assumption of juri iction is bad in law. Reliance is placed on the following judicial pronouncements: 6 12316/2022 dated 10.01.2025. “33. The Revenue was granted sufficient opportunities to file a counter affidavit to the present petition but had failed and neglected to do so. Even before this court, the Revenue has not produced any material to establish that Tulsi has received any amount in its bank accounts from any of the entities as mentioned in the impugned notice or the impugned order. Clearly, absent any material to establish that the petitioner had received amounts in its bank accounts - the fundamental premise on which the allegation that it had received accommodation entries is founded - the petitioner’s assessment could not be reopened. We are unable to accept that the reassessment can be initiated on the basis of information which is contested as palpably incorrect without examining the material giving rise to the said information. The contention that the AO does not require to take any view as to the correctness of the information available with him would render the provisions of Section 148A of the Act a dead letter and the exercise of conducting an enquiry under Section 148A of the Act an exercise in futility. The AO is required to ascertain whether the basic facts on which an assessment is sought to be reopened, are sustainable. An allegation that income has escaped assessment on account of accommodation entries availed by an assessee would be insufficient to reopen a closed assessment if the AO does not have material to establish that in fact there were entries in the bank accounts that could possibly support the said allegations. The AO is not required to conclusively decide whether the entries are accommodation entries. But the AO has to be reasonably certain that the alleged entries exist that could be possibly be accommodation entries.

1 Regarding Ground No.3, Learned Authorised Representative for Department submitted that Section 151A of the Act empowers the Central Board of Direct Taxes (CBDT) to make a scheme for faceless assessment, reassessment, or recomputation, “to impart greater efficiency, transparency, and accountability.” However, the said provision does not create a bar on juri ictional Assessing Officers to initiate or conduct proceedings in cases where such functions are not routed through faceless units or where administrative exigencies require action by juri ictional officers. The E- Assessment Scheme, 2022 notified under Section 151A is procedural in nature and intended to facilitate the conduct of proceedings in a faceless environment. It does not divest juri iction conferred upon the Assessing Officer under Sections 147, 148, and 148A of the Act. In the instant case, the assessee was duly issued notice u/s 148A(b), provided opportunity to file its reply, and the 9

From examination of the record in the light of the aforesaid rival contentions, it is crystal clear that the appellant-assessee is a private limited company duly registered as a non-banking finance company carrying on financing business. The assessee received notice dated 21.03.2022 u/s 148A(b) of the Act, copy of which placed at pages 78-79 of the paper book, mentioning:

1 The reasons in the satisfaction note referred to credible information received from ld.DDIT that the assessee had taken accommodation entry of Rs.47,65,476/- through M/s K.G. Finvest Pvt. Ltd. Notice u/s 148A(b) of the ld. AO rejected the objections without any information or material.

2 A coordinate Bench in ITA No.7771/Del/2019 held in paras 4 and 5 as under:- “4. 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:

Issued Subscribed and Paid up Capital 6,00,000 6,00,000 Nil 3. Security Premium Account 25,00,000 25,00,000 Nil

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 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.”

3 In view of the above material facts, by respectfully following the judicial precedent, it is held that the ld. AO, in the satisfaction note, in the ‘reasons to believe’ has not stated either facts or illegality. Therefore, the order of the Ld. AO is illegal in the absence of valid reasons. Accordingly, the grounds of appeal No.1 to 3 are allowed.

Ground Nos.4 to 7 being academic are left open.

In the result, the appeal of the assessee is allowed.