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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI H.S. SIDHU
filed the Cross Objection which emanates from the impugned order dated 25/2/2016 passed by the Ld. Commissioner of Income Tax (Appeals)-33, New Delhi.
2. The grounds raised in the Revenue’s appeal read as under:-
On the facts and in the circumstances of the case and in law the order passed by Ld. CIT(A) is erroneous and the ld. CIT(A) has erred in annulling the order passed u/s. 147/143(3) of the Act on the grounds that no notice u/s. 143(2) of the Act was issued and thereby deleting addition of Rs. 40,00,000/- made by the AO on account of unexplained entries u/s. 68 of the Act.
2. The appellant craves, leave or reserving the right to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The grounds raised in the Assessee’s Cross Objection read as under:-
The Respondent – assessee has received notice of departmental appeal no. 2887/Del/2016 for AY 2005- 06 filed by ITO, Ward 26(3), New Delhi. The cross objections of the Respondent – assessee are being filed as per grounds of cross objections given below:- 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has decided only the ground of non-issue and non-service of notice u/s. 143(2) of the I.T. Act and has dealt with an decided the other grounds of appeal raised by the assessee before him which require to be heard and decided in accordance with law on merits.
2. On the facts and in the circumstances of the case, the order of AO dated 20.3.2013 is totally illegal and unsustainable, both on facts and in law, in view of notice u/s. 148 not having been served and no reasons recorded and the order was passed illegally u/s. 147/143(3) without complying with the statutory requirements.
3. On the facts and in the circumstances of the case, the illegal addition of Rs. 40 lacs perversely made by the AO is impermissible; both on facts and in law, and the same had been rightly annulled by CIT(A). 4. On the facts and in the circumstances of the case, the order dated 20.3.2013 u/s. 147/143(3) of the I.T. Act made by the AO is totally perverse and baseless and shows total non-application of mind by him and hence, the same was rightly vacated by the CIT(A). the allegations made by the AO in the impugned order are not proved in any manner and onus of the Revenue not having been discharged, the perverse addition was rightly deleted and does not call for interference. 5. The Respondent – assessee prays for hearing and decision of the Appeal of the Revenue and Cross objection of the assessee together.
The facts in brief are that the assessee filed its return declaring income of Rs. 38,220/- on 28.10.2005. The return was processed 3 u/s. 143(1) of the I.T. Act., 1961. Subsequently, on the basis of information received from Addl. DIT(Inv.), New Delhi that the assessee is a beneficiary of accommodation entry of Rs. 31,50,000/- The said accommodation entry is stated to have been provided by one Mr. Surendra Kumar Jain, who provided accommodation entry to various beneficiaries through a large number of shell managed by him. The said accommodation entry is stated to have been provided by Stellar Investments Ltd. amounting to Rs. 21,50,000/- and Mehul Finvest Pvt. Ltd. amounting to Rs. 10,00,000/-. Notice u/s. 148 of the Act was issued on 26.3.2002. None appeared. Again notice u/s. 142(1) was issued on 10.7.2012, 22.11.2012, 18.2.2013 and accordingly, the assessee’s AR attended and filed the details of amount received from by M/s Stellar Investments Ltd. amounting to Rs. 21,50,000/- and Mehul Finvest Pvt. Ltd. amounting to Rs. 10,00,000/- alongwith the copy of confirmation, balance sheet and affidavits of the Directors of both the companies. The details filed by the assessee were rejected by the AO due discrepancies noticed during the assessment proceedings. As per the copy of the ITR filed by the assessee for those companies also reflects that the companies does not have any creditworthiness to invest and the channel has been used to either received the cheque from other companies or cash has been deposited to provide the accommodation entry. Therefore, Rs. 21.50 lacs allegedly invested in the assessee company by the Stellar Investments Ltd and Rs. 10,00,000/- allegedly invested in the assessee company by the Mehul Finvest Pvt. Ltd. and Rs. 8.50 lacs allegedly invested in the assessee by the Adonis Financial Services Pvt. Ltd. after depositing cash in their bank accounts remains unexplained and was accordingly added to the income of the assessee as its income from undisclosed sources. Accordingly, the income was assessed at Rs. 40,38,220/- u/s. 147/143(3) of the I.T. Act, 1961 vide order dated 20.3.2013.
5. Aggrieved with the aforesaid assessment order, assessee preferred an appeal before the Ld. CIT(A), who vide his impugned Order dated 20.3.2013 has allowed the appeal of the assessee.
6. Now the Revenue is aggrieved against the impugned order and filed the present appeal before the Tribunal and Assessee has filed the Cross Objection in support of the Ld. CIT(A) order.
7. At the time of hearing Ld. DR relied upon the order of the AO and reiterated the contentions raised by the Revenue in the grounds and requested that Appeal of the Revenue may be allowed.
On the contrary, Ld. Counsel of the Assessee has relied upon the order of the Ld. CIT(A) and stated that Ld. CIT(A) has passed a well reasoned order which needs to be upheld and accordingly, the appeal of the Revenue may be dismissed and Cross Objection filed by the Assessee may be allowed.
I have heard both the parties and perused the records, especially the impugned order passed by the Ld. CIT(A). I find that Ld. CIT(A) has decided the appeal in assessee’s favour by dealing the legal issue i.e. not serving the notice u/s. 143(2) of the I.T. Act and adjudicated the issue in dispute at page no. 2 to 3 of the impugned order as under:-
3. In the first ground the appellant has challenged that the order u/s. 147 is bad in law.
3.1 The following is noted from the assessment order-
"1.The appellant is a company registered under the Companies Act, 1956. During the year under consideration, appellant company was engaged in the business of manufacturing of CRC/ERW Iron pipes, steel tubes and conduit pipes.
The assessee company has filed income tax
return for the A.Y.2005-06 on 28.10.2005 vide Ack. No. 1345 declaring a net income of Rs. 38,220 under section 115JB of the Income
Tax Act, 1961 and the same was processed under section 143(1) of the Act."
Subsequently, on the basis of information received from Addl. DIT(lnv.), Unit II, New
Delhi that the assessee is a beneficiary of accommodating entry of Rs.31,50,000/- The said accommodation entry is stated to have been provided by one Mr.Surendra Kumar
Jain, who provided accommodation entry to varies beneficiaries through a large number of shell managed by him. The said accommodation entry is stated to have been amounting to Rs.21,50,000/- and Mehul
Finvest Pvt. Ltd. amounting to Rs.10,00,000/-.
Notice u/s 148 was issued on 26.03.2012 after duly recording the reasons and prior approval of Ld. Addl. Commissioner of Income Tax,
Range-17, New Delhi.
Nobody attended nor any return has been filed by the assessee in response of Notice U/s 148 of the I.T.Act, 1961.
Notice u/s 142(1) dated 10.07.2-12 fixing the date of hearing on 23.07.2012. The same remains uncomplied with.
Notice u/s 142(1) dated 22.11.2012 fixing the date of hearing on 03.12.2012. The same remains uncomplied with.
Notice u/s 142(1) dated 18.02.2013 fixing the date of hearing on 25.02.2012. the same remains uncomplied with."
3.2. Regarding the above the appellant submitted that all these above notices were served to wrong address.
3.3. It is noticed that notice u/s 143(2) was never issued.
4. In the appellate proceedings the appellant
has submitted that since the Ld. A.O. did not issue notice u/s 143(2) of the IT Act,1961 which is a compulsory requirement of the statute, the impugned order u/s 147 deserves to be invalidated.
4.1. In this regard, the appellant relied upon the decision of Jurisdictional High Court in the case of Pr. CIT Vs. Silver line/[2016]/65
Taxmann.com 137/Del in which the Hon'ble
Court held as under:-
"With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessment orders in question were legally unsustainable."
4.2. The Hon'ble Court has given the following reasoning for this conclusion.
"The Proposal to reopen an assessment under Section 147 of the Act is to be based on reasons to be recorded by the AO. Such reasons have to be communicated to the Assessee.
However, merely because the Assessee participates in the proceedings pursuant to such notice under Section 148 of the Act, it does not obviate the mandatory requirement of the AO having to issue to the Assessee a notice under Section 143(2) of the Act before finalising the order of the reassessment."
In view of the assessee's contention
being supported by the decision of Hon'ble Jurisdictional High Court, the impugned order u/s 147 dated
20.03.2013 is not sustainable in law.
Same is annulled.
In view of the above, the remaining
grounds of appeal are not required to be adjudicated.
In the result, the appeal is allowed.”
9.1 After perusing the aforesaid findings of the Ld. CIT(A), it is noticed that notice u/s 143(2) of the I.T. was never issued. I further note that in the appellate proceedings the assessee has submitted that since the AO did not issue notice u/s 143(2) of the IT Act,1961 which is a compulsory requirement of the statute, the impugned order u/s 147 deserves to be invalidated. I further find that Ld. CIT(A) has rightly relied upon the decision of Jurisdictional High Court in the case of Pr. CIT Vs. Silver line/[2016]/65 Taxmann.com 137/Del in which the Hon'ble Court held as under:-
"With the legal position being abundantly clear that a reassessment order cannot be passed without compliance with the mandatory requirement of notice being issued by the AO to the Assessee under Section 143(2) of the Act, the ITAT was in the present case right in concluding that the reassessme++++nt orders in question were legally unsustainable."
9.2. I further find that the Hon'ble Court has given the following reasoning for this conclusion.
"The Proposal to reopen an assessment under Section 147 of the Act is to be based on reasons to be recorded by the AO. Such reasons have to be communicated to the Assessee. However, merely because the Assessee participates in the proceedings pursuant to such notice under Section 148 of the Act, it does not obviate the mandatory requirement of the AO having to issue to the Assessee a notice under Section 143(2) of the Act before finalising the order of the reassessment."
9.3 In view of the above, Ld. CIT(A) has rightly held that the impugned order u/s 147 dated 20.03.2013 is not sustainable in law and same was accordingly annulled, which does not need any interference on my part, hence, I uphold the action of the Ld. CIT(A) in annulling the order u/s. 147 dated 20.3.2013.
In the result, the appeal of the Revenue is dismissed.
With regard to Cross Objection filed by the Assessee is concerned, since I have already dismissed the appeal of the Revenue, the grounds taken by the Assessee in its Cross Objection has become infructuous, hence, the C.O. is dismissed as such.
In the result, both the Revenue’s Appeal as well as Assessee’s Cross Objection stand dismissed.
Order pronounced in the Open Court on 09/03/2017.