SUNAYANA INVESTMENT COMPANY LTD,INDORE vs. PCIT-1, INDORE, INDORE

Per Vijay Pal Rao, JM:

This appeal by the assesse is directed against the revision

order dated 11.03.2024 of the Principal Commissioner of Income

Tax, Indore-1 passed u/s 263 of the I.T. Act for A.Y.2017-18.

ITA No.218/Ind/2024 Sunayana Investment Company Limited 2. Assessee has raised following grounds of appeal:

“1. That the order u/s 263 of the Act passed by Ld. PCIT is bad in law and is passed in contravention of prevailing law as well as facts of the case, therefore liable to be annulled. 2. That the proceedings u/s 263 of the Act initiated in the case of assessee are void-ab-initio invalid as has been initiated on the basis of recommendation of AO. 3. That the order passed by Ld. PCIT u/s 263 of the Act is further illegal and not tenable under the law as the reassessment order passed u/s 147 of the Act itself was illegal and not tenable under the law. 4. That the Ld. PCIT grossly erred in law and in facts of the case in holding the reassessment order passed by Ld. AO u/s 147 of the Act to be passed without necessary enquiries and verification and thus, to be erroneous and prejudicial to the interest of revenue. 5. That the Ld. PCIT grossly erred in facts of the case in holding that details of alleged transactions were provided to the assessee during the course of assessment proceedings whereas no such details were provided to assessee during reassessment proceedings u/s 147 of the Act thereby disabling the assessee to file objections to the reasons recorded for reopening of assessment proceedings. 6. That the assessee company seeks leave to add, alter, modify or delete any ground of appeal during the course of appellate proceedings.”

assessment was completed u/s 143(3) of the Act on 30.12.2019 and

thereafter the A.O reopened the assessment by issuing the notice

u/s 148 of the Act on 31.03.2021 to assess the escaped income on

account of accommodation entries received by the assessee from

Shri Jignesh Shah & Sanjay Shah to the tune of Rs.92,53,463/-.

The Ld. AR has submitted that during the reassessment

proceedings the assessee has explained before the A.O that the

ITA No.218/Ind/2024 Sunayana Investment Company Limited assessee has not entered into any transaction of whatsoever with

Shri Jignesh Shah & Sanjay Shah and further the transaction of

Rs.15,00,000/- was already considered by the A.O at the time of

original assessment passed u/s 143(3) of the Act on 30.12.2019

wherein the assessee explained that this was not an amount of

credit received by the assessee from M/s Haritima Infrastructure

but this was only a repayment by the said company of the amount

earlier paid by the assessee. The Ld. AR thus submitted that the

A.O after considering the reply as well as relevant record was

satisfied that there was no transaction between the assessee and

Shri Jignesh Shah & Sanjay Shah and hence no addition was made

by the A.O in the reassessment order passed u/s 147 r.w.s. 144B of

the Act. The Principal CIT has invoked the provisions of Section

263 of the Act on two issues i.e. the accommodation entries

received from Shri Jignesh Shah & Sanjay Shah as well as a new

issue regarding the accommodation entries taken by the assessee of

Rs.5,00,000/- taken from M/s Orange Mist Production Pvt. Ltd .

The AR has pointed out that the second issue as taken up by the

PCIT was not at all the subject matter of the reassessment

proceedings and further the A.O has passed separate order u/s 147

ITA No.218/Ind/2024 Sunayana Investment Company Limited of the Act on 27.03.2023 on a different PAN not belonging to the

assessee. Therefore, this issue of alleged accommodation entry of

Rs.5,00,000/- received from M/s Orange Mist Production Pvt. Ltd

was not a subject matter of reassessment proceedings and cannot

be taken up in the revision proceedings u/s 263 of the Act. The Ld.

AR has referred to the notice issued by the A.O u/s 142(1) dated

22.06.2019, 30.07.2019 and reply of the assessee dated

31.07.2019 at the time of original security assessment u/s 143(3)

of the Act and submitted that the assessee produced all the

relevant records including the balance sheet and bank account

statements of the assessee with all 3 banks which shows that there

is no alleged transaction of receipt of any accommodation entry by

the assessee of Rs.92,53,463/- from Shri Jignesh Shah & Sanjay

Shah. He has also referred to the notice issued by the A.O during

reassessment proceedings u/s 143(2) of the Act dated 12.11.2021

and reply to the said notice dated 17.12.2021, notice issued u/s

142(1) dated 17.12.2021 and reply of the assessee dated

09.03.2022 wherein the assessee has explained that the assessee

has not entered into any transaction with the alleged persons and

filed all relevant records including the books of accounts as well as

ITA No.218/Ind/2024 Sunayana Investment Company Limited bank account statements. After considering the reply of the

assessee as well as relevant record the A.O passed reassessment

order u/s 147 r.w.s. 144B of the Act without making any addition

on account of alleged accommodation entries. The Ld. AR has

submitted that the PCIT has passed the impugned order without

bringing any material on record to show that the alleged

accommodation entries were received by the assessee when the

assessee has already explained that the assessee has not received

any accommodation entry or entered into any transaction with the

alleged persons. The assessee cannot be asked to prove the

negative. He has referred to the reply of the assessee before the A.O

and submitted that the assessee has specifically demanded the

relevant record alleging the accommodation entries received by the

assessee but the same was not provided to the assessee. Thus, the

Ld. AR has submitted that the order passed by the PCIT is not

sustainable as it is not a case of lack of enquiry on the part of the

A.O so far as the alleged entries are concerned. He has relied upon

the decision of Hon’ble Supreme Court in case of CIT V/s

Alagendran Finance Ltd 293 ITR 1 as well as the decision dated

14.08.2024 of Ahmedabad Bench of the Tribunal in case of Kaivan

ITA No.218/Ind/2024 Sunayana Investment Company Limited Jitendrakumar Shah, HUF v/s PCIT in ITA No.644/Ahd/2024 and

submitted that the A.O has conducted the enquiry and was

satisfied with the reply and explanation supported by the relevant

evidences then the case does not fall in the category of order passed

by the A.O is erroneous for lack of enquiry.

submitted that in the original scrutiny assessment the case of the

assessee was taken up for limited scrutiny on the issue of

expenditure incurred on earning exempt income. In the

reassessment proceedings u/s 147 of the Act the A.O reopened the

case and initiated the proceedings on the basis of information

available at INSIGHT portal that the assessee has received

accommodation entries of Rs.92,53,463/- from Shri Jignesh Shah

& Sanjay Shah as well as Rs.15,00,000/- from Haritima

Infrastructure. The Ld. DR has further submitted that another

transaction of accommodation entry of Rs.5,00,000/- is received

from Orange Mist Production Pvt. Ltd under a different PAN of the

assessee is also reported on the said portal. Thus, the Ld. DR has

submitted that it is a case of double PAN held by the assessee for

the purpose of taking the accommodation entries. He has relied

ITA No.218/Ind/2024 Sunayana Investment Company Limited upon the impugned order of the PCIT and submitted that A.O has

not examined the issue by conducting a proper enquiry and simply

accepted the reply of the assessee. The Ld. DR has pointed out that

the A.O has passed a non speaking order u/s 147 r.w.s. 144B of

the Act which shows that the order was passed without application

of mind. Therefore, it is a case of complete lack of enquiry on the

part of the A.O which renders reassessment order dated 28.03.2022

as erroneous so far as prejudicial to the interest of revenue.

relevant material on record. Though at the time of original scrutiny

assessment u/s 143(3) of the Act the case of the assessee was

taken up for limited scrutiny on the issue of allowability of the

expenditure incurred for earning exempt income however, the

assessee produced the audited finance statements, bank account

statements before the A.O which was called for by the A.O while

issuing the notice u/s 142(1) of the Act. This reply was already

available with the A.O at the time of initiating the proceedings u/s

147 of the Act by issuing notice u/s 148 of the Act on 31.03.2021.

The assessee even in the reassessment proceedings has filed the

submissions dated 17.12.2021 placed at page No. 115 to 117 of the

ITA No.218/Ind/2024 Sunayana Investment Company Limited paper book wherein the assessee has submitted that the assessee

has not taken any accommodation entry from Shri Jignesh Shah &

Sanjay Shah. Further the assessee has submitted that the alleged

accommodation entry of Rs.15,00,000/- from M/s. Haritima

Infrastructure was an issue during the course of original

proceedings u/s 143(3) of the Act raised by the A.O vide show

cause notice dated 23.12.2019 and assessee duly replied to the

said show cause notice by giving the details that the assessee has

given an advance of Rs.15.00,000/- to M/s Haritima Infrastructure

during the financial year 2015-16 and the same was recovered

during financial year 2016-17 therefore, the assessee has not

availed any accommodation entry from the said company but the

same amount was received as recovery of advance given in the

earlier year. The A.O accepted the said reply of the assessee while

passing the scrutiny assessment order u/s 143(3) of the Act. This

fact is not disputed that the A.O has raised this issue at the time of

original scrutiny assessment u/s 143(3) of the Act. The PCIT has

issued show cause notice on 14.02.2024 placed at Page 201 to 203

as under:

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

5.1 Thus the PCIT has taken up two issues in the proceedings u/s 263 of the Act i.e. the accommodation entry of Rs.92,53,463/- received from Shri Jignesh Shah & Sanjay Shah and secondly the accommodation entry of Rs.5,00,000/- received from Orange Mist Production Pvt. Ltd . In para 5 of the show cause notice the PCIT has stated that during the proceedings neither the assessee has furnished any detail nor explained the issue involved with relevant documentary evidence. He has further observed that the submissions and details available on record was not enough to verify the reasons for reopening of the assessment. Thus, he was of the view that the A.O has not at all verified this issue and relevant facts while completing the assessment which renders the order of the A.O as erroneous so far as prejudicial to the interest of revenue. In reply to the show cause notice the assessee has taken a stand that it has not taken any alleged accommodation entry. The reply of the assessee is placed at page 208 to 210 of the paper book as under:

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

5.2 Thus, once the assessee has denied that it has not received any alleged accommodation entry then the PCIT ought to have bring some material to reflect that the assessee has actually received these accommodation entries. Neither the A.O nor the PCIT has found any entry in the books of accounts of the assessee in respect of these alleged accommodation entries nor from the bank account statements of the assessee that the assessee has received any sum from the alleged accommodation entry providers. Therefore, in the absence of any entries in the books of accounts or bank account statements indicating any transaction between the assessee and the alleged persons the invocation of the jurisdiction u/s 263 of the Act merely on suspicion is not justified. Once the assessee has

ITA No.218/Ind/2024 Sunayana Investment Company Limited stated in clear terms that it has not availed the alleged accommodation entry of Rs.92,53,463/- which is a reason for reopening of the assessment then the assessee cannot be asked to prove the negative. Further when nothing if found or detected from the books of accounts as well as bank account statement of the assessee showing any such transaction then it was incumbent upon the A.O as well as on the PCIT to bring some material on record to prime-facie manifest that the assessee has availed the alleged accommodation entry. Mere mention of information is available with the department is a very vague statement and does not constitute any incrementing tangible material to either make addition or to initiate proceedings u/s 263 of the Act. Though the Assessing Officer has not discussed in the assessment order about the reply and documents filed by the assessee however, it is a matter of record that the assessee produced all the relevant details as well as books of accounts and bank account statements to show that no such entry is reflected either in the books of accounts or in the bank account statement. Once the assessee has produced the relevant record to establish that there is nothing on record i.e. books of accounts and bank account statement to show any such alleged accommodation entries received by the assessee then the burden is shifted on the revenue to bring some tangible material on record to show that the assessee has actually received the alleged accommodation entries.

ITA No.218/Ind/2024 Sunayana Investment Company Limited

5.3 As regards the issue of accommodation entries from M/s Orange Mist Production Pvt. Ltd of Rs.5,00,000/- this issue was taken up by the Assessing Officer in the second reassessment proceedings initiated by issuing notice u/s 148 of the Act dated 20.07.2022 and the reassessment order was passed on 27.03.2023 placed at page No. 194 to 205 of the paper book, whereby the A.O has made an addition of Rs.5,00,000/- as unexplained cash credit u/s 68 of the Act in the name of the assessee but under different PAN. Therefore, the said issue was not at all subject matter of the order passed by the Assessing Officer dated 20.03.2022 but this is the issue in the order passed by the Assessing Officer dated 27.03.2023. Therefore, the PCIT cannot taken up the issue which was not a subject matter of the order passed by the Assessing Officer taken up for revision by issuing show cause notice u/s 263 of the Act. We further note that the Assessing Officer in the show cause notice dated 28.02.2023 has given the details of the issue taken up in the earlier proceedings initiated u/s 147 of the Act as well as u/s 143(3) of the Act. For ready reference the said show cause notice is reproduced as under:

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

ITA No.218/Ind/2024 Sunayana Investment Company Limited

5.4 In para 4 of the above show cause notice, the Assessing

Officer has referred the reply of the assessee wherein claimed that

this issue has already been considered in the assessment orders

issued u/s 143(3) and u/s 147 of the Act and copy of the order as

well as other documents as relied upon were attached with the

reply. The Assessing Officer further noted that on perusal of orders

and documents as relied upon by the assessee it was noticed that

ITA No.218/Ind/2024 Sunayana Investment Company Limited the issue regarding the accommodation entry of Rs.5,00,000/- from

M/s Orange Mist Production Pvt. Ltd was neither considered nor

discussed in the earlier order passed u/s 143(3) of the Act as well

as u/s 147 of the Act. This makes clear that all the relevant record,

documents and reply of the assessee were available with the

Assessing Officer at the time of passing the order u/s 143(3) as well

as u/s 147 of the Act. Hence, when nothing has been brought on

record either by Assessing Officer or by the PCIT to prime facie

indicate that the assessee has actually received the alleged

accommodation entries then invoking provisions of Section 263 of

the Act merely on suspicion is not permissible. Accordingly, in the

facts and circumstances of the case as discussed above the

impugned order passed by PCIT is set aside.

Order pronounced in the open court on 11.10.2024. Sd/- Sd/-

(B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member Indore,_ .10.2024 Dev/Sr. PS

ITA No.218/Ind/2024 Sunayana Investment Company Limited

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore