AVON CONTAINNERS PVT. LTD.,FARIDABAD vs. ACIT, CIRCLE-1, FARIDABAD

3. That on the facts and in the circumstances of the case and in law, Ld. CIT-Appeals erred in sustaining the order passed by ld. AO u/s 147/143(3) without appreciating that "rubber stamp" reasons in present case are based on borrowed satisfaction and are without independent application of mind. Because Ld. Assessing officer has just reproduced the conclusion of investigation wing that M/s Rising Portfolio India Pvt. Ltd. and M/s To Cloud E Net Solutions Pvt. Ltd. are two different companies and assessee received share capital of Rs.30,00,000/- each from both the companies. Indeed it is "Borrowed Satisfaction", since later on during the reassessment proceedings Ld. A.O himself accepted that there is only one company (i.e., M/s Rising Portfolio India Pvt. Ltd.) and other company (i.e. M/s To Cloud E Net Solutions Pvt. Ltd.) is not separate company rather updated name of the same company and also decide not to made any addition in relation to transaction of Rs.30,00,000/- with M/s To Cloud E Net Solutions Pvt. Ltd., since he admit that he was wrong at the time of framing reasons to believe.

4. That on the facts and in the circumstances of the case and in law, Ld. CIT-Appeals erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that the Ld. Assessing officer has made the assessment without recording any failure on part of the appellant company to disclose fully and truly all material facts necessary for assessment as per the first proviso to section 147 of the Act. Rather Ld.

Avon Containners P. Ltd. A.O has wrongly/mistakenly reopened the case of the appellant since neither clause (b) nor clause (c) of Explanation 2 to Section 147 of 1.T Act, 1961 are applicable to the present facts and circumstances of the case.

5. That on the facts and in the circumstances of the case and in law, Ld. CIT-Appeals erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that assumption of jurisdiction u/s 148 was by Ld. AO was in violation of jurisdictional conditions stipulated under the Act. Since Ld. A.O reopened the case of assessee on the basis of incorrect or non-existent facts (two different figures in reasons i.e., Rs. 60,00,000/-and Rs.80,00,000/-) and "CHANGE OF OPINION" without appreciating the fact that assessee has already assessed before Id. A.O in assessment proceedings u/s 143(3) of the Act.

6. That on the facts and in the circumstances of the case and in law, Ld. CIT-A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that objection filed in response to reasons recorded were never disposed off by a speaking order before passing the final assessment order, which has invalidated the entire proceedings, since objections should be disposed off point wise properly as directed by Apex Court in GKN Driveshafts reported in 259 ITR 19.

7. That on the facts and in the circumstances of the case and in law, Ld CIT- A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that notice u/s 143(2) issued without waiting for GKN Driveshaft procedure to be exhausted is invalid. Rather Ld. AO issued notice u/s 143(2) dated 23.04.2019 on the very same day when assessee company has filed its ITR against the notice u/s 148 of the Act which makes notice u/s 143(2) as invalid and resultantly, the assessment is vitiated and is liable to be quashed. Matter is directly covered by the judgment of Hon'ble Delhi High Court in the case of Director of Income Tax Vs. Society for Worldwide Inter Bank Financial, Telecommunications in reported at 323 ITR 249.

8. That on the facts and in the circumstances of the case and in law, Ld CIT- A erred in sustaining the order passed by Ld. AO u/s 147/143(3) without appreciating that opportunity of cross examination of witness of the revenue and opportunity of confrontation of back material [as mandated on A.O as per section 142(3)] on basis of which case reopened of Avon Containners P. Ltd. appellant is not provided to the appellant company, which is in violation of Principle of Natural Justice.

Avon Containners P. Ltd. 13. Ld. AO as well as Ld. CIT(A) has erred on facts and in law in relying upon case laws without appreciating that the facts of present case are distinguished from the facts of relied upon cases. 14. The above grounds of appeal are independent and without prejudice to one another.

15. The detailed submission shall be filed at the time of hearing before your honor.

16. Your appellant craves leave to add, alter, amend, modify, rescind, supplement or alter any of the grounds of appeal stated herein above, either before or at the time of hearing of this appeal.” 2.1 The substantive issues raised in this appeal are categorized in two heads; (i) whether the reopening of assessment under section 148 of the Income Tax Act, 1961 (‘Act’) in absence of valid reasoning and approval thereof under section 151 of the Act is valid in the eyes of the law and (ii) merit of addition of Rs.55,00,000/-.

3. The relevant facts giving rise to this appeal are that the assessee filed its Income Tax Return (‘ITR’) on 30.09.2012 for the relevant year declaring income of Rs.46,06,870/-. The original ITR was picked up for scrutiny to verify share capital. The consequential original assessment was completed on 6th February 2015 at income of Rs.50,42,370/-. Later, based on the information in possession, the Ld. Assessing Officer (‘AO’) reopened the assessment of the assessee vide notice dated 29.03.2019 issued under section 148 of the Act. The consequential reopened assessment was completed, on 14.11.2019, at income of Rs.1,05,42,370/- wherein the addition of Rs.55 Lakhs was made over and above the income originally assessed as under: - Avon Containners P. Ltd. “6.1 Therefore, the findings of Search proceedings and subsequent investigations made in the case of Sh. Himanshu Verma and Sh. Anirudh Joshi, corroborate the independent findings of the undersigned and he has considered the entire material and has applied his mind independently. The copies of entire material used by him before drawing the inferences have been given to the assessee. Assessee have received bogus share capital and share premium of Rs.30,00,000 from M/s. Rising Portfolio India P. ltd. controlled and managed by Sh. Himanshu Verma and Rs.25,00,000/- from Secure Portfolios India P. ltd. controlled and managed by Sh. Anirudh Joshi. Mere proof of identity without genuineness and creditworthiness is not enough for cash credit in books of accounts and assessee failed to prove identity, genuineness and creditworthiness of above transactions. Thus Rs.55,00,000/- was its own unaccounted income routed back using above modus operandi. Hence, the shame transactions made is treated as “undisclosed Income” and Rs.55,00,000/- is accordingly added back to its Total Income under section 68 of the Income Tax Act, 1961 in the relevant year.” 3.1 Aggrieved with the reopened assessment, the assessee filed appeal before the Ld. CIT(A) who dismissed the appeal. The issue of reopening of assessment under section 148 of the Act challenged before the Ld. CIT(A) was decided by holding that the Principal Commissioner of Income Tax (‘PCIT’) had granted approval through ITBA portal on 27.03.2029 before the issuance of notice under section 148 of the Act; hence, he dismissed the appeal as under:

“The appellant, in its written submission dated 17.09.2024, emphasized on ground no. 2 only that challenges the reopening notice u/s 148 of the Act and reassessment order u/s 147 of the Act on the ground that the reassessment proceedings were commenced without the approval of the specified authority i.e. Pr. CIT. In this regard, the AO (DCIT Circle-1, Faridabad) was sought clarification on the issue. The AO, vide his letter dated 01.10.2024, (reproduced below) informed that approval was obtained 3.2 The case was not heard on merit. So we are deciding the validity of assumption of jurisdiction of the reassessment only. The grounds challenging the addition of Rs. 55 Lakhs are left open for adjudication, if the need arises.

Avon Containners P. Ltd. 4. Before us, the Ld. Authorized Representative (‘AR’) argued the issue of validity of reopening of assessment under section 148 of the Act. It was argued that the Ld. AO was not having approval of the Ld. PCIT under section 151 of the Act before issuance of the notice under section 148 of the Act. The Ld. AR submitted the copy of online notice, dated 29.03.2019, issued under section 148 of the Act as under:

4.1 The Ld. AR submitted a Paper Book (‘PB’), which contained two different reasons for reopening submitted to the PCIT for granting approval for reopening the assessement; one for manual dated 22.03.2019 (Page 14-18 of PB) and another for online dated 23.03.2019 (Page 19-21 of PB) and such reasoning had different facts. The Ld. AR placed the format of approval granted under section151(2) of the Act as under:

4.2 The Ld. AR further submitted that the order-sheet details of on-line approval of the Ld. PCIT under section 151 of the Act contained inaccurate forwarding of the Range Head. The said noting of the Range Head referred to Avon Containners P. Ltd. the cash deposit of Rs.10,58,000/- in the Axis Bank saving account of the appellant assessee, which had no relevance with the facts of the case and the reason on which the case was proposed for reopening. He thus, contended that this clearly demonstrated non-application of mind by the Range Head and mechanical approval by the Ld. PCIT under section 151 of the Act. Further, the Ld. AR drew our attention to the following two different reasons recorded by the AO for reopening of assessment under section 148 of the Act:

Reasons dated 22.03.2019 (Manual copy)

Reasons dated 23.03.2019 (Electronic Copy)

4.3 The Ld. AR submitted that there were factual differences in the said two reasoning recorded by the AO. In reasons dated 23.03.2019 (electronic copy) the quantum of accommodation entry of Rs.60,00,000/- (Para 4) was mentioned as against Rs.80,00,000/- (Para 5) in reasons dated 22.03.2019 (Manual Copy). It was further submitted that the reference of Explanation 2 to section 147(b) of the Act is mentioned in reasons dated 23.03.2019 (electronic Avon Containners P. Ltd. copy) as against the reference of Explanation 2 to section 147(c) of the Act in reasons dated 22.03.2019 (Manual Copy). The reference of section 133(6) of the Act and details of information received from Investigation Wing mentioned in reasons dated 22.03.2019 (Manual Copy) are missing in reasons dated 23.03.2019 (electronic copy). Similarly, there were differences in dates of approval granted under section 151(1) of the Act by the Ld. PCIT. On such anomalies in two reasons recorded by the AO and mechanically approved under section 151(1) of the Act by the Ld. PCIT, the Ld. AR contended that none of the reasons could be held valid.

4.4 The Ld. AR contended that even if on-line approval considered to be valid for discussion only (without admitting the same), then also there could not be two reasons for reopening of assessment under section 148 of the Act. Further, there was anomaly in the forwarding of noting of the Range Head, which had also been considered by the Ld. PCIT while granting approval under section 151 of the Act. Further, the Ld. AR submitted that the response to the RTI application of the appellant assessee revealed that the Ld. AO had received approval of the Ld. PCIT under section 151 of the Act on 30.03.2019 through the letter No. 14253-54 dated 26/30.03.2019 as evident from the above extracted format of approval under section 151 of the Act, which was subsequent to the issuance of notice under section 148 of the Act. To augment his contention, the Ld. AR placed reliance on the decisions of the Hon’ble Delhi High Court in the cases of Tia Enterprises Pvt. Ltd. WP(C)

Avon Containners P. Ltd. 13903/2018 order dated 26.09.2023 (SLP dismissed by the Hon’ble Supreme Court) and Society for Worldwide Inter banking Financial in, 323 ITR 249. He also placed reliance on the decision of Tribunal in case of Rajiv Kumar Arora order dated 16.10.2024. The Ld. AR, placing reliance on the decision of the Hon’ble Bombay High Court in the case of Aroni Commercials, 362 ITR 403, contended that the Ld. AO had not disposed of the assessee’s objection on reopening of the assessment with well-reasoned order; therefore, the consequential assessment was not justified.