NAMAH SHIVAYA TRADING PVT LTD,NEW DELHI vs. ITO WARD WARD - 17(3), NEW DELHI

आदेश /O R D E R This appeal has been filed by the assessee against the order of Ld. Commissioner of Income Tax (Appeals)-37, New Delhi dated 30.03.2019 for AY 2008-09.

“5. The Ld.CIT(A) has erred on facts and in law in upholding the impugned order of the Ld. Assessing Officer where initiation u/s 148 & consequent 1

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proceedings are contrary to law, passed without application of mind and without complying with the procedure and rules, is against equity and justice and facts of the assessee and material on record.” 3. The Ld. AR reiterated the written submissions of assessee and

submitted that the AO did not assume valid jurisdiction to initiate

reassessment proceedings u/s 147 of the I.T. Act, 1961 (for short

‘the Act’) and to issue notice u/s 148 of the Act on following

counts:

i. The AO initiated reassessment proceedings based an incorrect facts and without application of mind while recording reasons;

ii. No independent enquiry was made by the AO on the facts of the information and alleged adverse material regarding such companies characterized as bogus entry;

iii. The Assessing Officer completed assessment proceedings and frame reassessment order u/s 143(3)/147 of the Act by issuing notice u/s 143(2) of the Act before supply of reasons thereby debarring appellant to file objection to the assumption of jurisdiction for initiation of reassessment proceedings.

since the AO did not assume valid jurisdiction to initiate the

reassessment proceedings and to issue notice u/s 148 of the Act,

therefore, initiation of reassessment proceedings and all constant

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proceedings an order including impugned reassessment order may

kindly be quashed.

orders of the authorities below and submitted that the AO did

assume valid jurisdiction for initiation of reassessment proceedings

and issuance of notice u/s 148 of the Act and, therefore, legal

contentions of assessee may kindly be dismissed.

proceed to adjudicate the first legal contention of assessee that the

AO has initiated reassessment proceedings by recording reasons

based on incorrect facts and without application of mind. From the

sake of completeness of my findings, I find it appropriate to

reproduce reasons recorded by the AO (PB pages 19-20) for

initiation of reassessment proceedings u/s 147 of the Act and

issuance of notice u/s 148 of the Act, which is as follows: -

“ANNEXURE A Reasons for the belief that Income has escaped assessment in the case of M/s. Namah Shivay Trading Private Ltd. (PAN AABCN7434R)

It is a proposal for reopening the case u/s 147 of the IT Act for the A.Y. 2008-09 in the prescribed proforma. A search and seizure action u/s 132/133A of the Income Tax Act, 1961, was conducted at the residential

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and business premises of Shri Surender Kumar Jain group of cases (entry operator). During the course of post search investigation and preparation of appraisal report it has been evidently established that Shri Surender Kumar Jain is known entry providers and is in the business of providing accommodation entries to various beneficiary companies/entities/persons through cheques through a number of paper & dummy companies in lieu of cash. These dummy companies are totally managed and controlled by Shri Surender Kumar Jain. During the course of search action vast number of incriminating documents were found and seized. These documents includes date wise and month wise hand written cheque books and cash books maintained by Shri Surender Kumar Jain over a long period of time. In these cheque books and cash books details of cheque provided to the beneficiary companies/entities/persons companies/ entities/ persons were recorded date wise. From the verification of the documents seized from the residence of Shri Surender Kumar Jain it clearly appears that the assessee company had obtained accommodation entries from various paper companies of Shri Surender Kumar Jain in lieu of cash during the financial year 2007-08 relevant to the assessment year 2008-09 for a total amount mentioned against their names. These bogus share capital and premium has cleanly escaped taxation in these assessment years therefore these amounts are required to be taxed in the hands of these companies by initiating action under section 148 of the Income Tax Act, 1961. Details of the company/ entity/ person and cheque/ pay orders issued in the name of this company/ entity/ person are reproduced below in a tabular:

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I have perused the information received from the Investigation Wing, New Delhi. The Investigation Wing of the Department has sent comprehensive details comprising inter alia the Beneficiary's Name, Value of entity Taken, Date on which Entry taken etc. In the aforesaid case return of income was filed on 09.07.2008 declaring income of Rs.7,070/-. Subsequently, after receipt of information of accommodation entries taken by the beneficiaries, it is noticed that the assessee company M/s Namah Shivay Trading Pvt. Ltd. received accommodation entries to the tune of Rs. 30,00,000/- during the F.Y. 2007-08 relevant to assessment year 2008- 09 from the entry operators as mention in the chart above. Having perused and considered the information, I have reason to believe that income of the assessee company to the extent of Rs. 30,00,000/- has escaped assessment for the A.Y. 2008-09 on account of failure on part of the assessee company to disclose fully and truly all material facts/ particulars of its income necessary for its assessment for the A.Y. 2008-09. Therefore,

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proceedings u/s 147 i.e. Clause(b) of explanation 2 of provisions of Section 147 of the I.T. Act, 1961 is proposed to be initiated for A.Y. 2008-09. Since four years have elapsed from the end of the relevant assessment year i.e. A.Y. 2008-09, approval of the Addl. Commissioner of Income Tax, Range-17, New Delhi is solicited u/s 151(2) of the I.T. Act, 1961. Sd/- ITO Ward 17(3), New Delhi.” 6.1 The name of present assessee is M/s Namah Shivaya Trading

Pvt. Ltd. and copy of the reasons recorded by the AO available at

pages 19-20 (supra) reveals that the AO has drawn a table in the

reasons, wherein five entries has been mentioned and detail of such

entries show that the first four entries pertains to M/s Namah

Shivaya Marketing Pvt. Ltd. and only fifth entry dated 14.01.2008

pertains to present assessee i.e. M/s Namah Shivaya Trading Pvt.

Ltd. From the copy of the objection raised by the assessee before

the AO against initiation of reassessment proceedings vide dated

13.07.2015 which were rejected by the Assessing Officer and in the

said rejection order dated 05.08.2015 the Assessing Officer

reframed the table by changing names of first four entries from

Namah Shivah Marketing Pvt. Ltd. to M/s Namah Shivah Trading Pvt.

Ltd. i.e. the assessee which clearly shows that the AO himself

noticed mistake crept in the reasons recorded by him. The above

noted facts and conclusion clearly show that the initiation of

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reassessment proceedings are based on incorrect facts taken from

the information supplied by the Investigation Wing without the

same being verified either from the bank or from the assessee prior

to initiation of reassessment proceedings u/s 147 of the Act and

issuance of notice u/s 148 of the Act. Therefore, I am inclined to

hold that the AO recorded reasons based on incorrect facts which

clearly show non-application of mind and such perverse action of

the AO for assuming jurisdiction leads to invalidation of

reassessment proceedings.

various judgments and orders including recent judgment of Hon’ble

Jurisdictional High Court of Delhi in the case of Shamshad Khan Vs.

ACIT (395 ITR 265) and PCIT Vs. SNG Developers Ltd. (404 ITR 312)

(Del.) approved by the Hon’ble Supreme Court by dismissing SLP of

Revenue No.42379/2017 dated 09.02.2018.

not made any enquiry on the factual information received by

Investigation Wing is concerned. From the copy of reasons recorded

placed at pages 19-20 of the assessee’s paper book. I note that at

the first page upto second page the AO mentioned information

received from Investigation Wing, New Delhi. Thereafter, on top 7

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and second para at page 2 noted that he has perused the

information received from Investigation Wing and noted that after

receipt of information of accommodation entries taken by the

beneficiaries, it is noticed that the assessee company received

accommodated entries to the tune of Rs.30 lakhs during FY 2007-08

relevant to AY 2008-09 from the entry operators as mentioned in

the table/chart noted above. Thereafter, in third para at page 2

the AO directly jumped to record a conclusion that he has reason to

believe that income of the assessee company to the extent of Rs.30

lakhs has escaped assessment for AY 2008-09 on account of failure

on the part of assessee company to disclose fully and truly all

material facts/particulars of its income necessary for its assessment

for AY 2008-09. I am unable to see any independent enquiry on the

facts mentioned in the information received from the Investigation

Wing and without making any enquiry and the AO directly jumped to

a conclusion that he has reason to believe that income for AY 2008-

09 has escaped assessment.

ITA No.7244/Del/2019 dated 12.08.2021 ITAT of Delhi Bench on

identical facts quashed the reassessment proceedings notice u/s 148

of the Act and impugned reassessment order on the ground of non-

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verification of information received from Investigation Wing by the

AO. Therefore, the action of AO in assuming jurisdiction to initiate

reassessment proceedings also fails on the touch stone of second

legal contention of assessee.

the AO issued notice dated 17.03.2015 u/s 148 of the Act against

which the appellant company submitted return of income vide

letter dated 20.03.2015 and requested the AO to supply copy of the

reasons recorded. The AO issued notices u/s 143(2)/142(1) of the

Act on 19.05.2015 and the reasons were supplied to the AO on

05.06.2015. After narrating the above facts the Ld. AR submitted

that the for framing reassessment order the AO is mandatorily

required to issue notice u/s 143(2) of the Act only after providing

copy of the reasons recorded to the assessee but in the present case

the AO issued said notice u/s 143(2) of the Act on 19.05.2015 before

supplying reasons which means that the AO proceeded to assume

jurisdiction to make reassessment before allowing appellant to file

objection for assumption of jurisdiction as on 05.06.2015 i.e.

subsequent to the issuance of notice u/s 143(2) of the Act. Hence,

issuing notice u/s 143(2) of the Act before allowing appellant to file

objection and subsequent disposal of the same is nothing but gross

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non-compliance at mandatory requirement of law and thus, non-

application of mind by the AO is vivid.

Jurisdictional High Court of Delhi in the case of Mastech

Technologies Pvt. Ltd. Vs. DCIT WP(c) 2858/2016 dated13.07.2017,

wherein para 30 of judgment, it was held that the issuance of

notice u/s 142(1)/143(2) of the Act before supplying the reasons to

the assessee and considering the petition of objection and passing

reasoned order thereon does not meet requirement of law and such

legal infirmity leads to inevitable invalidation of all proceedings

that took place in pursuant to notice u/s 148 of the Act. Ld. AR has

also placed reliance on the order of ITAT Delhi Bench in the case of

M/s R N Khemka Enterprises P. Ltd. Vs. ITO in ITA No.

7244/Del/2019 dated 12.08.2021.

below but did not controvert the factual position that the AO issued

notice u/s 143(2) of the Act on 19.05.2015 and subsequent to that

provided copy of the reasons recorded by him for initiation of

reassessment proceedings to the assessee on 05.06.2015.

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in favour of the assessee by the judgment of Jurisdictional High

Court of Delhi in the case of M/s Mastech Technologies Pvt. Ltd.

(supra), wherein under identical circumstances their lordships

speaking for jurisdictional High Court held that the issuance of

notice u/s 143(2) of the Act before supplying the reasons for

initiation of reassessment proceedings and considering the petition

of objection and passing reasoned order thereon does not meet

requirement of law and such legal infirmity leads to inevitable

invalidation of all proceedings including impugned reassessment

order passed in pursuance to the notice u/s 148 of the Act.

logical analysis of the contents of reasons recorded by the AO

clearly reveals that before drawing conclusion and reason to believe

that income has escaped assessment the AO has not made any

factual verification of the information received from the

Investigation Wing, therefore, the initiation of reassessment

proceedings and all constant proceedings and orders including

reassessment proceedings and order has to be quashed. In view of

proposition rendered by coordinate bench of ITAT Delhi in the case

of M/s R N Khemka Enterprises P. Ltd. Vs. ITO (supra).

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copy of the reasons recorded available at pages 19-20 of the PB

(reproduced supra) clearly reveals that the AO initiated

reassessment proceedings by recording reasons based on incorrect

facts and without application of mind to the factually incorrect

report of Investigation Wing, therefore, the initiation of

reassessment proceedings also fails in view of various judgments

particularly judgment of Hon’ble Jurisdictional High Court of Delhi

in the case of M/s Synfonia Tradelinks P. Ltd. (supra).

that the AO initiated reassessment proceedings without assuming

valid jurisdiction and without complying with the mandatory

requirements envisaged in section 147 and 148 of the Act.

Therefore, I am inclined to allow legal ground no.5 of assessee and

consequently initiation of reassessment proceedings u/s 147 of the

Act notice u/s 148 of the Act and impugned reassessment order

dated 21.03.2016 for AY 2008-09 are quashed.

impugned reassessment order and Ld. Representatives of both the

sides have not placed any arguments on the other grounds of

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assessee, therefore, in absence of any submissions from the parties,

I do not deem it proper to adjudicate the other grounds of assessee.

as indicated above.

Order pronounced in the open court on 29/09/2023 Sd/- (C.M. GARG) JUDICIAL MEMBER Dated: 29.09.2023 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order

Assistant Registrar, ITAT: Delhi Benches-Delhi