SUNRISE PROPBUILD PVT LTD.,DELHI vs. ACIT, CENTRAL CIRCLE-2, FARIDABAD

5.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that assumption of jurisdiction by issuing notice u/s 143(2) of the Act before supplying the reasons to believe to the appellant is bad in law.

6.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that reasons recorded u/s 148 of the Act do not meet the requirement of law hence completely vague and untenable.

6.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact, that the reasons to believe recorded by the Ld. AO for the initiation of reassessment proceedings u/s 147 of the Act was based on borrowed satisfaction and without application of mind.

6.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that the reasons u/s 148 were recorded merely on the basis of suspicion and assumptions/ presumptions derived from search conducted in case of M3M Group.

6.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that the material which has been made the basis of recording reasons to believe for initiation of proceedings u/s 147 of the Act has never been supplied to the appellant.

7.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that the objections raised by the appellant was not disposed by the Ld. AO by way of speaking order.

8.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the submissions furnished by the appellant before the Ld. AO as well as Ld. CIT(A).

9.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that Ld. AO has changed his mind at each stage of assessment proceedings.

10.0. That on the facts and circumstances of the case, the Ld. CIT-(A) has erred without substantiate the fact that no approval accorded u/s 151 of the Act by the Ld. AO has been provided to the appellant.

11.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO u/s 147 r.w.s 143(3) of the Act without considering the fact that no incriminating material was found towards rate of commission charged in respect of accommodation entries.

11.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding addition made by the Ld. AO on account of commission income amounting to Rs. 1,45,00,360/- 1% on total debits and credits transactions amounting to Rs. 145,00,36,000/- reflected in bank statement.

11.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in treating the appellant company as an accommodation entry provider by relying on statement recorded at back of the appellant without providing an opportunity by the Ld. AO to cross examine the same.

11.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the observations of Ld. AO in respect of treating the legitimate advances received by the appellant for purchase of land as accommodation entries which were repaid during the year under consideration and subsequent years due to non-fulfilment of the deal.

12.0 That on the facts and circumstances of the case and without prejudice to above grounds, Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that the assessment order nowhere specify the section under which the addition was made.

13.0 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the Grounds stated here- in-above, either before or at the time of hearing of this appeal. (A.Y. 2012-13)

“1.0 That, on the facts and in the circumstances of the case, the disallowance, imposition of tax, and interest with reference thereto, as well as the quantification of taxable income and tax liability, are unjustified, erroneous, and unsustainable, and it is prayed that necessary directions be issued to the Learned Assessing Officer (Ld. AO) to grant appropriate relief in accordance with the law.

2.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that the assessment completed u/s 147 r.w.s 143(3) was bad in law on various technical and jurisdictional grounds.

3.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that recourse to section 147 of the Act would be unavailable in cases where the AO is empowered to proceed u/s 153C of the Act.

4.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO without appreciating the fact that there was no failure on the part of the appellant to disclose fully and truly all material facts necessary for the assessment for the year under consideration and hence assumption of jurisdiction u/s 147 by issuance of notice u/s 148 beyond the period of 4 years was invalid and as such, could not be sustained in law.

5.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that assumption of jurisdiction by issuing notice u/s 143(2) of the Act before supplying the reasons to believe to the appellant is bad in law.

6.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that reasons recorded u/s 148 of the Act do not meet the requirement of law hence completely vague and untenable.

6.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact, that the reasons to believe recorded by the Ld. AO for the initiation of reassessment proceedings u/s 147 of the Act was based on borrowed satisfaction and without application of mind.

6.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that the reasons u/s 148 were recorded merely on the basis of suspicion and assumptions/ presumptions derived from search conducted in case of M3M Group.

6.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that the material which has been made the basis of recording reasons to believe for initiation of proceedings u/s 147 of the Act has never been supplied to the appellant.

7.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of the Ld. AO without considering the fact that the objections raised by the appellant was not disposed by the Ld. AO by way of speaking order.

8.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the submissions furnished by the appellant before the Ld. AO as well as Ld. CIT(A).

9.0 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. A.O without considering the fact that Ld. AO has changed his mind at each stage of assessment proceedings

10.0. That on the facts and circumstances of the case, the Ld. CIT-(A) has erred without substantiate the fact that no approval accorded u/s 151 of the Act by the Ld. AO has been provided to the appellant.

11.0 That, on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the order of Ld. AO u/s 147 r.w.s 143(3) of the Act without considering the fact that no incriminating material was found towards rate of commission charged in respect of accommodation entries.

11.1 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding addition made by the Ld. AO on account of commission income amounting to Rs.

1,45,00,360/- 1% on total debits and credits transactions amounting to Rs. 145,00,36,000/- reflected in bank statement.

11.2 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in treating the appellant company as an accommodation entry provider by relying on statement recorded at back of the appellant without providing an opportunity by the Ld. AO to cross examine the same.

11.3 That on the facts and in the circumstances of the case, the Ld. CIT-(A) has erred in upholding the observations of Ld. AO in respect of treating the legitimate advances received by the appellant for purchase of land as accommodation entries which were repaid during the year under consideration and subsequent years due to non-fulfilment of the deal.

12.0 That on the facts and circumstances of the case and without prejudice to above grounds, Ld. CIT-(A) has erred in upholding the order of Ld. AO without considering the fact that the assessment order nowhere specify the section under which the addition was made.

13.0 That the appellant craves leave, to add, to amend, modify, rescind, supplement, or alter any of the Grounds stated here-in-above, either before or at the time of hearing of this appeal.

ITA No. 1257/Del/2025 (A.Y. 2011-12)

Thus, relying on the Judgments of the Hon'ble High Court of Delhi in the case of PCIT Vs. Sunlight tour and Travels Private Limited (169 taxmann.com 673) and PCIT Vs. Jaguar Buildcon (p.) Ltd. (165 taxmann.com 757) sought for allowing the Ground No. 2.0 of the Assessee.

“Explanation 3. – For the purpose of assessment or reassessmentITA 222/2022 Page 14 of 15under this section, the Assessing Officer may assess or reassess theincome in respect of any issue, which has escaped assessment, andsuch issue comes to his notice subsequently in the course of theproceedings under this section, notwithstanding that the reasons forsuch issue have not been included in the reasons recorded under sub section (2) of section 148.”

19. It is apparent from the above that the said explanation merely clarified that the AO would assess or reassess the income in respect of the issue which had escaped assessment and such other issue, which came to the notice subsequently. However, the said explanation does not control the import of the plain language of Section 147 of the Act. Explanation 3 to Section 147 of the Act, merely clarifies that the jurisdiction of the AO was not confined to assessing or reassessing of the income of an Assessee only inrespect of the issue, which formed a part of the reasons recorded for reopening the assessment. The said explanation cannot be interpreted to mean that the AO could assess other incomes of the Assessee even in cases where no addition is made on account of the reasons for which reassessmentwas initiated.”

“26. We 1st attend to the issue of the reopening of the assessment. In the present case, notice u/s 148 of the income tax act was first issued on 10/8/2010. Such notice is placed at page number 94 of the paper book. It was also received by the assessee on 10/8/2010. On receipt of such notice assessee submitted a letter dated 23/8/2010 wherein it has been stated that the return originally filed by the assessee on 22/4/2010 may kindly be treated as return filed in response to notice u/s 148 of the income tax act. Such letter is placed at page number 95 of the paper book. After filing the return of income the assessee submitted letter dated 14/10/2010, sick 10/6/2011 and 28/6/2011 for providing the copy of the reasons recorded u/s 148 (2) of the income tax act. The reasons were provided to the assessee on 10/10/2011. Thereafter the assessee submitted objections against initiation of proceedings under section 147 of the income tax act on 09/12/2011. The learned AO passed an assessment order u/s 143 (3) read with section 147 of the income tax act on 15/12/2011. Therefore, firstly, that assessee was not provided reasons for almost 13 months, when the assessment was getting time barred on 31/12/2011, shortly before that on 10/10/2011 the assessee was provided the copies of the reasons recorded. The assessee also took almost 60 days to file objections against the reasons of reopening. Assessee also filed such objections only before 21 days of the assessment order getting time barred. The AO also passed an assessment order on 15/12/2011.

28. Honourable Gujarat High court notices that there is no time limit for performing such acts. Therefore in SahkariKhandUdyogMandal Ltd. v. Asstt. CIT [2014] 46 taxmann.com 69/225 Taxman 51 (Mag.)/[2015] 370 ITR 107 (Guj.) (para 5.2) it held as under :- “13. It can thus be seen that there are four important stages once the Assessing Officer issues notice for reopening of the assessment. Such stages are: (i) the assessee if he so wishes, may demand the reasons recorded by the Assessing Officer after filing return in response to notice under section 148 of the Act, (ii) the Assessing Officer supplying such reasons to the assessee, (iii) the assessee raising objections to the notice for reopening and (iv) the Assessing Officer disposing of the objections raised by the assessee.

(1) Once the Assessing Officer serves to an assessee a notice of reopening of assessment under section 148 of the Income Tax Act, 1961, and within the time permitted in such notice, the assessee files his return of income in response to such notice, the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. (2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons. (3) If objections are received by the Assessing Officer from the assessee within the time permitted hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee. (4) This is being done in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided hereinabove would not apply in such cases. (5) In the communication supplying the reasons recorded by the Assessing Officer, he shall intimate to the assessee that he is expected to raise the objections within 60 days of receipt of the reasons and shall reproduce the directions contained in hereinabove giving reference to this judgment of the High Court. (6) The Chief Commissioner of Income Tax and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all the Assessing Officers for scrupulously carrying out the directions contained in this judgment.”

11. However, a disturbing aspect of the matter is that in this case the assessee had filed objections in response to the reasons recorded by the Assessing Officer. While it is true that such objections were filed belatedly after a considerable time, however, the same had been filed before the assessment order came to be framed. Once the objections had been submitted by the petitioner, in view of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra), the Assessing Officer was duty bound to decide the same by a reasoned order. In the present case, the Assessing Officer has placed reliance upon the decision of SahkariKhandUdyogMandal Ltd.'s case (supra) while holding that the objections raised by the assessee at a belated stage beyond the time framed stipulated by the court in the above decision need not to be entertained. In this regard it may be germane to refer to the following observations made by the court in the above referred decision, the relevant portion whereof reads as under: “4. This is being done in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply in such cases.

12. Thus, it is clear that the court has set out a time line for submission of objections and deciding the same. However, at the same time, the court has also clarified that it would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided therein would not apply in such cases. Thus, in case where the objections are submitted by the assessee belatedly the time prescribed by the court would not apply, however, this does not absolve the Assessing Officer from deciding the objections in the light of the decision of the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra). Therefore, the Assessing Officer was not justified in proceeding to pass the impugned order without deciding the objections raised by the petitioner. In any case, since the notice, which is the foundation for the assessment order, itself is held to be unsustainable, the assessment order would also be rendered unsustainable.”

14. In view of the above fact that the A.O. has not disposed the objection filed by the Assessee vide letter dated 19/12/2018, we find no reason to upheld the assessment order and order of the Ld. CIT(A).

Accordingly, we allow the Ground No. 7 of the Assessee.

and deleted the addition, otherGrounds of Appeal in ITA No.

1257/Del/2025 requires no adjudication.

17. Assessee filed return of income declaring loss of Rs. 24,450/- for the year under consideration. The case of the Assessee was selected for re-assessment under Section 147 of the Act. The A.O. completed the assessment proceedings u/s 147 r.w. Section 143(3) of the Act vide order dated 24/12/2019 by making an addition of Rs. 1,45,00,360/- on account of commission income. Aggrieved by the assessment order dated 24/12/2019, Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 23/01/2025, dismissed the Appeal of the Assessee. As against the order of the Ld. CIT(A), dated 23/01/2025, Assessee preferred the present Appeal on the Grounds mentioned above.

18. The Ld. Counsel for the Assessee addressing on Ground No. 6.1 and 6.2 of the Appeal submitted that, the Ld. CIT(A) committed error in upholding the assessment order without considering the fact that the reasons recorded u/s 148 of the Act do not meet the requirement of law, further submitted that the reasons to believe recorded by the A.O. for the initiation of re-assessment proceedings u/s 147 of the Act was based on the borrowed satisfaction and without application of mind. The Ld. Counsel also submitted that there exists no tangible material or live nexus between the reasons recorded and the addition made, further submitted that the A.O. has not conducted any independent enquiry or verification and the A.O. merely reproduced the alleged information received in the reasons to believe and made the addition. Accordingly, Ld. Assessee's Representative sought for allowing Ground No. 6.1 and 6.2 of the Assessee. The Ld. Counsel has relied on following judicial precedents in support of his contentions:- a) PCIT vs. Meenakshi Overseas (395 ITR 677). b) PCIT Vs. K. R. Pulp and Papers Ltd. (175 taxmann.com 278.) c) Shri MukutBehari Agarwal Vs. DCIt (ITA No. 1067/JP/2024). d) PCIT vs. G & G Pharma India Ltd. (384 ITR 147).

“36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.

37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law.”

“31. In the present case, the AO did not have any tangible material at the stage of issuance of the notice under Section 148 of the Act. His reasons for issuing the notice was based on certain information from Investigation Wing. The AO did not have any specific details regarding the income that was alleged to have escaped assessment. The AO also did not undertake any enquiries to ascertain the facts that lead to form the reasons to believe that the Assessee's income had escaped assessment. It is also material to note that no incriminating material was found during the search conducted under Section 132 of the Act in the case of the Assessee and its related entities. The only information stated to have been found during the search was that the Assessee had issued shares at a premium during the previous year relevant to AY 2009-10.

―27.7 Apart from the above the assumption of jurisdiction u/s 147 of the Act is stated to be based on the enquiries conducted by Inspectors of the Investigation Wing at Delhi and Kolkata to form an opinion albeit prima-facie that appellant company has received share capital with exorbitant premium from large number of non descriptcompanies mainly based in Kolkatta and Delhi from the period between 1.4.2008 to 31.3.2009. It is a matter of record that such enquiries had not been confronted to the appellant during the course of assessment proceedings through specifically requested vide replies dated 10.11.2016 and 29.12.2016 by the appellant company. In such circumstances all such enquiries cannot mechanically be made a basis to assume jurisdiction. The appellant has highlighted the following aspects in respect of the reasons recorded: i) That the reasons recorded do not contain name of any single entity which was inquired by the Investigation Wing, the reasons only mention that during pre and post search proceedings it was found that the group companies have received share capital with exorbitant premium from large number of non descript companies mainly based in Kolkata and Delhi from the period between 1.4.2008 to 31.03.2009. ii) Further the reasons just mention that share capital with exorbitant premium was received from large number of non descript companies, but no definite / specific amount of premium has been mentioned in the reasons. iii) Further it has been mentioned in the reasons that enquiries were also conducted by the Inspectors of the Investigation Wing at Delhi and Kolkata; but no date of report of such inquiry has been mentioned and further no list of entities were mentioned which were subject to such inquiries. iv) Further only a generic statement was mentioned that most of the entry providing companies were not found existing at the given offices in Kolkata; the reasons nowhere mention the name of the entities nor the address on which such inquiry was conducted, even so the date of such inquiry has not been mentioned. v) Also it is mentioned that all entry giving companies have been covered under various searches conducted by Kolkata Investigation Wing and all the companies were found bogus and non-existent but hereto a vague statement has been mentioned without any definite details in terms of number of companies on which search was conducted, the period of search etc. vi) Also the reasons refer to statement of entry providers along with bogus directors, wherein it has been admitted that they are in the business of providing accommodation entries and the assessee company is one of them which has received shares capital at exorbitant premium from large numbers of these non- descript companies mainly based in Delhi and Kolkata amounting. The reasons do not mention the name of the entry provider who confirmed that assessee company had received accommodation entries. Further no date of such statement has been mentioned, nor have the modes of such receipt or any details in terms of cheque number of bank been mentioned. vii) Further the reasons do not mention the modus operandi of alleged routing of unaccounted money of the assessee through shareholder companies. It was highlighted that reasons recorded suffer following factual infirmities and errors which prove that the reasons have been drafted without application of mind: ―During the year under consideration assessee has issued share capital including share premium to the tune of Rs.36,64,35,000/- to various parties, out of which Rs.11,32,00,000/- was received in the immediately preceding previous year i.e. during the financial year 2007- 08, detail of Share Application Money was already submitted during the course of assessment proceedings vide submission dated 05.08.2011. However, the Ld. AO has mentioned that assessee has received Rs.36,64,35,000/- as share application money during the year and issued the shares at exorbitant premium. Further the table contains the detail of share issued by the assessee company during the year under consideration and not the amount received by the assessee company as mentioned in the reasons. During the year under consideration assessee has received share application of only Rs.25,32,35000/- and Rs.11,32,00,000/- was received during the financial year 2007-08 relevant to assessment year 2008-09.

& 1258/Del/2025 Sunrise Propbuild Pvt. Ltd. Vs. ACIT The column of total amount of the table as produced in the reason works out to Rs.15,43,75,000/- as against Rs.36,64,35,000/- mentioned in the reasons recorded, hence it could not be understood that why the total amount of Rs.36,64,35,000/- be treated as income which escaped assessment in the reasons. In the table produced in the reasons at S. No.1 the total amount is mentioned as Rs.3,62,00,000/- and the security premium as Rs.27,00,000/-, however the security premium should be Rs.2,89,60,000/-, further at S. No. 31, 36 and 40 the total amount mentioned is Rs.10,00,000/- and security premium Rs.80,00,000/-, it is also not written correctly.‖ 27.8 In essence it is apparent reasons contain scanty, general, vague observations and not refer to any objective, tangible relevant material. Further even the figures adopted are factually incorrect and do not pertain to the instant year. No specific evidence has been highlighted to arrive at an opinion that either the companies are bogus and non existent or the money received represented unaccounted income. Though the reasons refer to the search but do not refer to any incriminating material detected as a result of search so as to form a prima facie opinion contrary to the claim made in the original return and accepted in the original assessment u/s 143(3) of the Act. Drawing of list of shareholders based on a Investigation wing report has not been judicially accepted as a foundation for assuming jurisdiction u/s 147 of the Act.‖ 33. It is also not in dispute that during the original proceedings, the AO had issued a questionnaire dated 21.06.2011, whereby the AO called upon the Assessee to submit the details of subscribers, paid up capital and also the details of shares allotted during the year under consideration. The Assessee had furnished the response to the said questionnaire and had submitted the share application money, share application form, proof of identity, copy of PAN and copy of ITR as well as the bank statements of the share applicants. Thus, the identity as well as the creditworthiness of the applicants was duly scrutinized. The copy of the ITR of the share applicants would reflect their capacity to subscribe to the shares. Thus, the income declared by the companies could not furnish any reasons for the AO to believe that the Assessee's income had escaped assessment.

Accordingly, Ground No. 7.0 of the Assessee is allowed.

27. Since we have allowed the Grounds No. 6.1, 6.2 and Ground No. 7.0 of the Assessee and deleted the addition, other Grounds of Appeal requires no adjudication.