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Facts
The assessee's appeal arises from an order concerning assessment year 2013-2014. A search and seizure operation led to the issuance of a notice under section 148 for alleged receipt of bogus share application money. The original assessment was completed under section 143(3) after scrutinizing share application money and issuance of shares.
Held
The Tribunal quashed the notice issued under section 148 and the consequential assessment order. It found significant factual inconsistencies and errors in the reasons recorded for reopening, rendering them unsustainable. The Tribunal noted that the original assessment had already examined the issue of share application money.
Key Issues
Validity of reopening of assessment under section 147/148 based on erroneous reasons recorded; whether the AO conducted independent investigation before recording reasons.
Sections Cited
147, 148, 143(3), 156, 142(1), 131
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Income Tax Appellate Tribunal, RANCHI BENCH, RANCHI
Before: SHRI GEORGE MATHAN, JM & SHRI RATNESH NANDAN SAHAY, AM
O R D E R Per Bench : This is an appeal filed by the assessee against the order passed by the ld.CIT(A), Patna-3, dated 04.07.2025 for the assessment year 2013- 2014.
It was submitted by the ld. AR that there was a search and seizure operation in the group of companies on 14.12.2022. As a consequence to the search notice u/s.148 came to be issued on 21.07.2023. It was the submission that the issue of reopening was in regard to the share application money received by the assessee during the assessment year 2013-2014 to an extent of Rs.3,72,15,000/-. It was the submission that the original assessment order in the case of the assessee came to be passed u/s.143(3) of the Act on 18.02.2015. Ld. AR drew our attention to the assessment order for the impugned assessment year passed u/s.143(3) of the Act at pages 23 to 25 of the paper book and submitted that the
It was the submission that the assessment order dated is mentioned as 18.02.2015 however, the actual date is 28.03.2016 as is evident from the demand notice u/s.156 of the Act. It was the submission that for the purpose of the assessment u/s.143(3) of the Act, a notice u/s.142(1) had been issued on 03.09.2015 wherein the issue of share application money received and the shares allotted has also been questioned. Ld. AR drew our attention to page 27 of the paper book which is the copy of notice issued u/s.142(1) of the Act, which reads as follows :-
It was the further submission that summons u/s.131 of the Act had been issued to the director of Riddhi Sidhi Investment Consultants Pvt.
It was submitted that the director had also appeared. It was the submission that Riddhi Siddhi Investment Consultants Pvt. Ltd. was a company taken over by the assessee group somewhere in 2010. It was the submission that the directors of Riddhi Shddhi Investment Consultants Pvt. Ltd. were also the directors of the assessee company. It was the submission that subsequent to the search operation, reasons were
It was the submission that in the reasons recorded the AO recorded the names of the companies in the first page as Riddhi Siddhi Investment Pvt. Ltd., M/s Shivam Financial Consultants Pvt. Ltd. and M/s Ganeev Associates. It was the submission that the assessee had received share application money from Riddhi Siddhi Consultant Pvt. Ltd. to an extent of Rs.1,16,15,000/- and from Ganeev Associates to an extent of Rs.2.56 crores. It was the submission that the assessee has not received any share application money from Riddhi Siddhi Investments Pvt. Ltd. nor from M/s Shivam Financial Consultants Pvt. Ltd.. It was the submission that the company namely Riddhi Siddhi Investment Pvt. Ltd. is a completely different entity from Riddhi Siddhi Investment Consultants Pvt. Ltd. and to prove this the ld.AR drew our attention to pages 40 & 41 of the paper book which is the company information in respect of both the companies, which read as follows :-
It was the submission that Riddhi Siddhi Investment Consultants Pvt. Ltd. is a group concern. Ganeev Associate is a partnership firm wherein some of the directors with the assessee company are also partners. Ld. AR submitted that in the reasons recorded the AO has alleged that the share applicants are bogus company and that Ganeev Associates does not appear in the list of shareholders reported in Ministry of Corporate Affairs as well as in the schedule of shareholding reported in the ITR of the assessee company. Ld.AR drew our attention to page 11 & 14 of the paper book which is a copy of the list of share applicants and note forming part of the financial statement, which reads as follows :-
It was the submission that the said Ganeev Associates has been categorically shown as shareholders holding more than 5% share holding in the company. It was the submission that clearly the reason recorded are without any basis and is unsupported by any factual connection with the assessee.
Ld.AR further drew our attention to the alleged income escaping assessment as mentioned by the AO which is said to be Rs.9,61,95,000/-. It was the submission that the assessee never received such huge share application money. The assessment order itself shows an addition of Rs.3,72,15,000/-. It was the submission that the assessee had also issued the shares to an extent of 7,84,300 shares having a face value of Rs.10/- at a premium of Rs.40/- from which the assessee received total money of Rs. 3,92,15,000/- against which the AO has made addition of Rs. 3,72,15,000/-. It was the submission that the shares have been issued to group concerns and the AO has in the reasons recorded blindly extracted the investigation report of the DDIT(Investigation). It was the submission that there was no live link between the reasons recorded and the factual position insofar as the share applicants mentioned are wrong and for this the AR drew our attention to the decision of jurisdictional High Court in the case of Naveen Kumar Jaiswal reported in 2022 SCC Online Jhar 189. The share application money received is mentioned wrongly and the persons who have not given share application money have also been considered as share applicants. It was the submission that in the first page of the reasons recorded the AO mentioned that the addresses have been verified in respect of Riddhi Siddhi Investment Pvt. Ltd. whereas the share applicant and the shareholders in the assessee company is Riddhi Siddhi Investment Consultants Pvt. Ltd.
It was the submission that the reasons recorded are liable to be quashed as there is no live link much less any link to the actual facts of the assessee’s case. Ld. AR also placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Pasari Castings and Rolling Mills (P.) Ltd., reported in 463 ITR 469 wherein the Hon’ble Jurisdictional High Court has categorically held in para 18 as follows :- 18. As stated herein above that the recorded reason/impugned Assessment Order is silent under which provision of the Act the additions are sought to be made. It is well settled that the reasons cannot be supplemented by assessment Order or Affidavit. The recorded reason is totally silent whether the amount sought to be taxed is 'income of the Petitioner and whether the addition is sought to be made on account of Cash Credit (Section 68), Unexplained Investments (Section 69), Unexplained Money (Section 69A), Amount of Investment, etc. not fully disclosed in books of account (Section 698), Unexplained Expenditure, etc. (Section 69C). The requirement of each of the aforesaid sections are different and the rules of evidence and burden of proof are also different, hence, unless the Petitioner to put the notice as to the exact contravention or provisions of law under which assessment or additions are sought to be made, the Petitioner cannot defend his case. In the case of Oryx Fisheries (P) Lad. v. UOI [2010] 13 SCC 427, it is held by the Hon'ble Supreme Court that the show cause notice should give the noticee a reasonable opportunity of making objections against proposed charges indicated in the notice and the person proceeded against must be told the charges against him so that he can make his defense and prove his innocence. In the entire course of the proceeding, at no stage the Petitioner is made aware of the provisions of law which have been contravened and/or under which the additions are sought to be made which is in gross violation of the principles of natural justice and the procedure adopted by the Department is not fair or proper. In the case of New Delhi Television Ltd. v. Dy. CIT [2020] 116 taxmann.com 151/271 Taxman 1/424 ITR 607 (SC). it is held by the Hon'ble Apex Court that the Assessee must be put to notice of all the provisions on which the Department relies.
It was the submission that the issue of notice u/s.148 of the Act is liable to be quashed insofar as the reopening was invalid.
In reply, ld.CIT-DR submitted that in the course of search on the assessee the premises mentioned in the reasons recorded have also been examined and the companies were found to be non-existence at the given addresses. It was further submitted that the actual facts remains that the assessee had received bogus share application money and that has been brought out clearly in the assessment order. It was the submission that slight discrepancy in the reasons recorded should not invalidate the reasons. It was the submission that the fact remains that the assessee has received bogus share application money an the same is liable to be upheld.
We have considered the rival submissions. A perusal of the reasons recorded clearly shows that the reasons recorded are not containing slight errors. The first page of the reasons recorded itself shows that wrong addresses have been examined. The directors as mentioned are no way connected with the directors nor the share applicant company which has actually made the share application money. The reasons also referred to a company which has no connection whatsoever with the assessee company during the year. One of the group concerns which is a partnership firm and an existing shareholder has also been brought into question without examining even the accounts of the assessee company. Page 2 of the reasons recorded shows that the director of the assessee company has been questioned by the DDIT(Investigation) and the directors have not responded to those summons issued by the DDIT(Inv.) and the non- response has been treated as the inability of the assessee to offer cogent explanation. Obviously the director of the assessee’s company would not be able to response to question in respect of company which are not share applicant of the company.
In page 3 reason recorded, the AO refers to the quantum of investment by this alleged share applicants. Here, the AO refers to correct name of the share applicant in respect of Riddhi Siddhi Investment Consultants Pvt. Ltd. whereas when coming to the verification of the address he goes to Riddhi Siddhi Investment Pvt. Ltd. Thus, clearly these are not minor errors but these are factual inconsistencies which make reasons recorded unsubstantial very foundation for the reopening is reasonable belief. The reasonable belief must emanate out of correct facts and when the basic facts itself are erroneous then the reasons that emanate from such erroneous facts would be totally erroneous. This clearly shows that no independent investigation has been done by the AO before recording the reasons for the purpose of the reopening, even otherwise the original assessment in the case of assessee was done under scrutiny u/s.143(3) of the Act and the share application money and the issuance of the shares had been examined by the AO. Though the Ld.AR has brought to our attention that there is “note not for the assessee” where the same AO has recorded his finding, however is in regard to Ganeev Associates. It must be mentioned here that summons had also been issued to the directors of Riddhi Siddhi Investment Consultants Pvt. Ltd. in the course of