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Income Tax Appellate Tribunal, DELHI BENCH, ‘SMC’: NEW DELHI
Before: SHRI C.N. PRASAD
ORDER PER C.N. PRASAD, JM, These two appeals are filed by the assessee are preferred against different orders of the Ld.Commissioner of Income Tax (Appeals)/NFAC, Delhi [herein after referred as “CIT(A)”] for the A.Y. 2015-16 and 2016-17. 2. First we take up the appeal of the assessee for the A.Y.2015-16. 3. The assessee raised following grounds of appeal :-
1. 1. 1. 1. That the CIT(A) has erred in law in sustaining the order of the Ld. AO without appreciating the fact proceedings u/s 148 were wrongly initiated particularly when the impugned information on the basis of which the notice u/s 148 was issued was not related with the appellant.
That no valid notice u/s 143(2) was issued by the National Faceless Assessment Unit rather it has been issued by the Ld. ITO Ward-1, Hisar who was not having jurisdiction to issue notice u/s 143(2), hence, the proceedings are vitiated in nature and liable to be quashed.
That Ld. CIT(A) has committed legal error in sustaining order of Ld. AO ignoring the fact that no proper and valid sanctions u/s 151 were obtained by the Ld. AO from the higher authorities as it has been obtained on incomplete and false facts which is illegal and as such assessment proceedings are bad in law and liable to be quashed.
4. That the Ld. CIT(A) has wrongly dismissed the appeal ignoring the fact that the Ld. AO had acted arbitrarily in not providing the copy of the reasons recorded despite of specific request made by the appellant and such reasons were provided at the fag end of the proceedings which is bad in law and required to be set aside.
5. That the Ld. CIT(A) has failed to appreciate the fact that the Ld. AO had made additions of Rs. 39,52,500/- ignoring the reply of the appellant filed on 25/03/2022 which is arbitrary, illegal and erroneous in nature and required to be quashed.
6. That the Ld. CIT(A) has mechanically sustained the order of the Ld. AO ignoring that no material was brought on record which substantiates the allegation of receipt of accommodation entry of Rs. 38,75,000/- and payment of commission of Rs. 77,500/- by the appellant and as such impugned additions are vague and required to be set aside.
7. That the Ld. CIT(A) has dismissed the appeal of the appellant without providing any proper opportunity of hearing which is in violation of the principles of natural justice and as such order is required to be set aside.
The Ld. Counsel for the assessee at the outset referring to ground No.1 submitted that in the assessee’s case the assessment was reopened based only on the report of the Investigation Wing on the ground that certain accommodation entries were obtained by the assessee. The Ld. Counsel stated that during the A.Y.2015-16 the assessee had not received/obtained any accommodation entries. It is, therefore, submitted that reopening of assessment u/s.147 of the Act without making any enquiry and framing the assessment is bad in law. The Ld. Counsel stated that the assessee had not entered into any transaction with the party namely Anil Kumar Soni and Vipin Garg as alleged by the assessee in the reasons recorded by the Assessing Officer. It is the contention of the assessee that it is a mistaken identity by Assessing Officer as the assessee never entered into any transactions with the said person.
Heard rival submissions. It is observed that based on the Investigation report from the Director of Investigation, Chandigarh that Anil Kumar Soni and Vipin Garg provided accommodation entries through various companies to various parties and assessee is one of them, the AO issued notice u/s.148 of the Act for reopening of assessment and accordingly assessment was framed making an addition of Rs.38,75,000/-, alleging that assessee had obtained accommodation entry. It is the submission of the Ld. Counsel that the assessee had not entered into any transaction with the said alleged parties and there is no such entry in its bank account. It is the submission of the Assessee that it is only Page | 3 mistaken identity and the assessee never entered into any transaction.
In view of the above submissions, I am of the view that the matter should be verified by the AO in the light of the submissions made by the assessee. The AO shall verify whether the assessee had received any accommodation entry, either recorded in the bank statements or in the books of account and as claimed by the assessee that no such transaction was entered into and recorded in the bank statement/books. The AO is directed to delete if no such entry is found in the bank account or in the books of account recorded by the Assessee for A.Y.2015-16. With the above observations the issue is restore to the file of the AO for passing appropriate order. Ground No.1 is allowed for statistical purpose and all other grounds are left open.
Coming to A.Y. 2016-17 the Ld. Counsel for the assessee at the outset referring to ground No. 4, submitted that the AO while issuing notice u/s148 of the Act dated 29.07.2022, obtained prior approval from Principal Commissioner of Income Tax instead of Principal Chief Commissioner of Income Tax since the reopening of assessment sought is for A.Y.2016- 17 which is beyond a period of three years. Ld. Counsel submitted that the competent authority for giving approval for reopening of assessment beyond period of three years is the Principal Chief Commissioner of Income Tax and not Principal Commissioner of Income Tax as provided in Section 151 of the Act. The Ld. Counsel placed reliance on the decision of the Twilight Hon’ble Delhi High Court in the case of Infrastructure Pvt Ltd. and others reported in 463 ITR 702 for the above said proposition.
Heard rival contentions and perused the orders of the authorities below. In this case notice u/s.148 of the Act for the A.Y.2016-17 was issued on 29.07.2022 by the AO after obtaining approval from Principal Commissioner of Income Tax for reopening of assessment. As per the provisions of Section 151 of the Act no notice u/s.148 of the Act shall be issued for the relevant assessment year if three years but not more than ten years have elapsed from the end of the relevant assessment year without prior approval of Principal Chief Commission of Income Tax for reopening the assessment. In the case of the assessee since notice u/s. 148 of the Act was issued on 29.07.2022 which is beyond a period of three years from the end of the relevant A.Y. 2016-17, the AO shall obtain approval from the Principal Chief Commissioner of Income Tax for reopening the assessment. However, the AO obtained prior approval from PCIT for reopening assessment for A.Y.2016-17 which is not in accordance with Section 151 of the Act.
It is noticed that the Jurisdictional High Court in the case of Twilight Infrastructure Pvt. Ltd. and Others (supra) held as under :- “6.1. For the sake of convenience, the provisions of Sections 148, 149 and 151, before and after amendment are extracted hereafter. Prior to Finance Act 2021 "148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub- section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said subsection by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case - (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice..... 149. (1) No notice under section 148 shall be issued for the relevant assessment year- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) or clause (c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; (c) if four years, but not more than sixteen years, have elapsed from the end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment..... 151. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself." Post Finance Act 2021 "148. Before making the assessment, reassessment or recomputation under section 147. and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he Page | 7 is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139. Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice... 149. (1) No notice under section 148 shall be issued for the relevant assessment year (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year...
Specified authority for the purposes of section 148 and section 148A shall be,- (i) Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year, (ii) Principal Chief Commissioner or Principal Director General or where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year..." (Emphasis is ours] 7. A careful perusal of the above extract would show that after amendment, Section 151 has been split and the part which enjoins that the approval of the specified authority is mandatory stands embedded in the first proviso to Section 148. 7.1. The concerned specified authorities, depending on the applicable timeframe, are adverted to in Section 151 of the Act.
8. The first proviso to Section 148 and Section 151, when read conjointly, demonstrate the untenability of the submission made on behalf of the revenue.
9. We may also note that in Ganesh Dass Khanna, we were considering the provision of Section 149 of the Act and have taken the view that since the escaped income was less than Rs. 50,00,000/-, the time limit as prescribed in Section 149(1)(a) of the Act would apply.
10. As indicated above, the specified authority changes depending on the time limit prescribed in Section 151 of the Act. It is on this account that there is linkage between ruling rendered in Ganesh Dass Khanna and the instant matters.
11. It may also be noted that in Ganesh Dass Khanna, we had recorded the stand of the revenue that the issue concerning limitation and the specified authority are "intertwined". For convenience, the relevant part of the judgement is extracted hereafter: "24. On behalf of the revenue, the following broad submissions were made:.... ...(viii) Both under the unamended 1961 Act and amended 1961 Act, the issue concerning limitation is inextricably intertwined with two aspects: (a) First, the rank of the authority granting approval/sanction for triggering reassessment proceedings. (b) Second, the quantum of income which has escaped assessment." [Emphasis is ours) 12. Clearly, the revenue advanced the argument of interlinkage between limitation and the ascertainment of the specified authority due to the plain language of the amended Section 151 of the Act. Section 151, when read alongside the first proviso to Section 148, brings the aspect of inextricable linkage to the fore. 12.1. Clauses (1) and (ii) of Section 151 of the amended Act (which has been extracted hereinabove) clearly specify the authority whose approval can trigger the reassessment proceedings. Thus, if three (3) years or less have elapsed from the end of the relevant AY, the specified authority who would grant approval for initiation of reassessment proceedings will be the Principal Commissioner or Principal Director or Commissioner or Director. However, if more than three (3) years from the end of the relevant AY have elapsed, the specified authority for according approval for reassessment shall be the Principal Chief Commissioner or Principal Director General or, where there is no Principal Chief Commissioner or Principal Director General, Chief Commissioner or Director General. 12.2. That the approval is mandatory is plainly evident on perusal of the first proviso appended to Section 148 of the Act. the said proviso, at the risk of repetition, reads as follows: "...Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice...." 12.3. In these cases, there is no dispute that although three (3) years had elapsed from of the end of the relevant AY, the approval was sought from authorities specified in clause (i), as against clause (ii) of Section 151. 12.4. Before us, the counsel for the revenue continue to hold this position. The only liberty that they seek is that if, based on the judgement in Ganesh Dass Khanna, the impugned orders and notices are set aside, liberty be given to the revenue to commence reassessment proceedings afresh.
Therefore, having regard to the aforesaid, the impugned notices and orders in each of the above- captioned writ petitions are quashed on the ground that there is no approval of the specified authority, as indicated in Section 151(ii) of the Act. The direction is issued with the caveat that the revenue will have liberty to take steps, if deemed necessary, albeit as per law.”
The decision of the Hon’ble Delhi High Court squarely applies to the facts of the assessee’s case. Thus, respectfully following the said decision I hold that the assessment framed pursuant to notice u/s. 148 of the Act dated 29.07.2022 for A.Y. 2016-17 is bad in law and consequently the same is hereby quashed. Ground No. 4 is allowed.
In the result, the appeal filed by the assessee for A.Y. 2015-16 is partly allowed for statistical purpose and appeal for A.Y.2016-17 is allowed.