ACIT CIRCLE-59(1), NEW DELHI vs. NEERAJ KUMAR SINGHAL, NEW DELHI

PER PRADIP KUMAR KEDIA, A.M.:

The captioned appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-XXXVII, New Delhi [‘CIT(A)’ in short] dated 17.09.2020 arising from the assessment order dated 26.12.2016 passed by the Assessing Officer (AO) under Section 143(3) r.w. Section 147 of the Income Tax Act, 1961 (the Act) concerning AY 2009-10.

“1. On the facts and circumstances of case, the Ld. CIT(A)-37 has erred in facts & law in holding that the reassessment proceedings were barred by limitation and therefore, void-ab-initio. This in spite the facts that the sanction by the Pr. Commissioner of Income Tax, Delhi-20, for the issue of Notice was obtained as per provision of section 151(1) of the I.T. Act. The Ld. CIT(A) as per

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decision by the ITAT in the case of Prahu Dayal Aggarwal for AY 2009-10 vide order dated 29.06.2018 has erred in the facts & law by not eensidering the proviso to section 147 of the IT Act, prescribes that even after the expiry of 4 years an assessment can be reopened on fulfillment of one of the two conditions ie first there was failure on part of assessee to submit return either under section 139 or in response to a notice W/s 142(1) or 148 and second by failure to disclose fully and truly all material facts necessary for assessment. The Ld. CIT(A) has erred in appreciating the fact that the assessee has not disclosed fully and truly material facts and new information came in possession department on the basis of which case was reopened. 2. The Ld. CIT(A) has erred in facts & law in not to taking account the documentary evidence considered by the AO, specially with respect to the bogus claim of losses of Rs. 1,81,57,037/- obtained by the assessee as accommodation entries through broker namely A TO Z Stock Trade Private Limited by misusing Client Code Modification facility. Considering all the material facts which Ld. AO has brought on the record, it is clearly established that the assessee has not fully disclosed all the material facts during the assessment proceedings under section 143(3) of IT. Act, hence, the reassessment proceedings us 147 was clearly justified.” Briefly stated, the assessee in the instant case is inter alia 3. engaged in the transactions in derivative segment of the NSE. The assessee filed return of income at Rs.2,45,83,190/- for the Assessment Year 2009-10 in question. The return filed was subjected to scrutiny assessment under Section 143(3) of the Act vide order dated 27.12.2011. Thereafter, notice under Section 148 of the Act dated 31.03.2016 was issued upon the assessee seeking to reopen the completed assessment. The re-assessment order was accordingly finalized after making additions of Rs.1,81,57,037/- owing to allege shifting out of profit earned by the assessee during the Financial Year 2008-09 through Client Code Modification (CCM) route.

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CIT(A) took note of the reasons recorded for the purposes of re- assessment and referred to several judicial decisions in the context and found merit in the plea of the assessee towards absence of jurisdiction usurped under Section 147 r.w. Section 148 of the Act. Having held that the re-assessment order has been passed without jurisdiction under Section 147 of the Act, the CIT(A) quashed the re-assessment order in question.

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supported the order of the CIT(A) and submitted that the reasons recorded giving rise to the jurisdiction to the Assessing Officer neither pass the muster of main provision nor that of 1st proviso to Section 147 of the Act. Multiple defenses were peddled to assail the usurpation of jurisdiction which we shall deal with in appropriate paragraph. The ld. counsel submitted that no default has been found with the order of the CIT(A).

“7.3 Ground of Appeal No. 2. In this Ground of appeal, the appellant has contended that the notice us 148 was bad in law, without jurisdiction, barred by limitation and illegal. Thus the appellant contended that the said notice and the assessment order passed are liable to be quashed. In this ground of appeal, the appellant has challenged the validity of initiation of reassessment proceedings. The submission of the appellant is reproduced as under: It is the respectful submission of the appellant that assessment initiated under section 147 and the impugned assessment order under sections 147/143(3) of the Act is without iurisdiction, illegal and bad in law for the following reasons, which are without prejudice to the each other. I. The reassessment proceedings initiated are bad-in-law and barred by limitation. Original assessment in this case was completed w/s 143(3) and as per proviso to section 147, no action of reopening could have been taken after the expiry of 4 years from

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the end of relevant assessment year. II. The reasons recorded under section 148 of the Act cannot be construed as "reasons to believe" that any income of the assessee had escaped assessment, which is a condition precedent for initiating reassessment proceedings. III. The reassessment proceedings are liable to be quashed as no sanction w/s 151 of the Act has been provided. The above are being elaborated as under :- 1. The reassessment proceedings initiated are bad-in-law and barred by limitation. Original assessment in this case was completed us 143(3) and as per proviso to section 147, no action of reopening could have been taken after the expiry of 4 years from the end of relevant assessment year. As per proviso to section 147, no action of reopening can be taken after the expiry of 4 years from the end of relevant assessment years in the case where an assessment had been made w/s 143(3). The proviso is reproduced as under: Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Originally, the assessment was completed w/s 143(3) on 27.12.2011. There has been no failure on the part of the assessee to furnish and disclose fully and truly all material facts necessary for the assessment. It is a settled law that where the assessee has furnished all material facts, the case cannot be reopened after the expiry of four years where the assessment has been originally completed W/s 143(3). Merely making a bald statement in the "reason" that there is a failure on the part of the assessee is not sufficient. In such a situation, the notice u/s 148 issued beyond the period of four years is clearly barred by limitation. It is a settled law that notice u/s 148 has to stand or fall on the basis of "reasons recorded.

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The Hon'ble Delhi Court in HCL Technolosies Ltd, o. Deputy Commissioner of Income Tax (W.P. (C.) 8164/2010 decided on 20/7/2017) has held as follows: "16. The AO has not made the effort of disclosing, in the reasons, what according to him constituted the failure by the Assessee to make a full and true disclosure. A mere reproduction of the language of the provision will not suffice. Also, although making such an averment either in the order rejecting the objections of the Assessee or subsequently in the counter-affidavit in the answer to a writ petition will not satisfy the requirement of the law. The reasons will have to speak for themselves. For complying with the jurisdictional requirement under the first proviso to Section 147 of the Act, the reasons would have to show in what manner the Assessee had failed to make a full and true disclosure of all the material facts necessary for the assessment. The failure to do so would not be a mere irregularity. It would render the reopening of the assessment after four years vulnerable to invalidation." (emphasis supplied) The Hon'ble Delhi High Court in the case of ORACLE INDIA PRIVATE LIMITED ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 13(1), NEW DELHI decision dated 26th July 2017 held as under :- 27. A second aspect of the matter is that the above jurisdictional requirement should be shown to have been fulfilled from the reasons for re-opening of the assessment. In other words, the reasons must speak for themselves. The mandatory jurisdictional requirement in terms of the first proviso to Section 147 of the Act will not be fulfilled if the reasons do not themselves clearly indicate that there was in fact a failure by the Assessee to make a full and true disclosure of all material facts. The reasons have to explain what the material was that was not disclosed by the Assessee which the Assessee ought to have disclosed in the first instance. This should be apparent from a reading of the reasons themselves. The reasons have to go beyond merely repeating the language of the provision regarding the failure of the Assessee to make a full and true disclosure of material facts. They should indicate in what manner was there such a failure. 28. In many of the cases, where the re-opening of an assessment is challenged, the Revenue tries to make up for the obvious defect in the reasons themselves which do not spell out the reasons by providing a justification at the stage

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of disposal of the objections or later in the counter-affidavit when the re-opening is challenged by a writ petition. This, again, is impermissible in law. Since the reasons must speak for themselves, a subsequent attempt to supply the omission at the stage of an order disposing of the objections raised by the Assessee or providing them in the counter-affidavit in reply to the writ petition or even worse, making good that defect in the course of arguments before the Court, will simply not suffice. The Hon'ble Bombay High Court in the case of Lupin Ltd. o. Assistart Commissioner of Income-tax (LTU), Mumbai [2014] 46 taxmann.com 396 (Bombay) held as under : 8. It is true that the reasons for initiating the reassessment proceedings does in fact state that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. However, merely making this bald assertion is not enough. It is now well settled that the reasons which are recorded by the Assessing Officer for re-opening the assessment, are the only reasons which can be considered. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons are the manifestation of the mind of the Assessing Officer and therefore, should be self-explanatory and should not keep the Assessee guessing for the reasons. The reasons provide the link between the conclusion and the evidence. The reasons recorded must be based on evidence so that in the event of a challenge, the Assessing Officer must be able to justify the same based on the material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the Assessee fully and truly necessary for assessment for that assessment year, so as to establish the vital link between the reasons and the evidence. This vital link is the safeguard against arbitrary reopening of a concluded assessment. In the case of Swarovski India (P) Ltd. • DCIT (2014) 50 taxmann.com 57 (Del) the Hon'ble High Court has held that in the reasons recorded, it has to be specifically indicated as to which material fact as facts was / were not disclosed by the assessee in the original assessment proceedings. The relevant finding given by court is as under : 12. It is clear that the escapement of income by itself is not sufficient for reopening the assessment in a case covered by

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the first proviso to Section 147 of the said Act unless and until there is failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. In the present case, it has not been specifically indicated as to which material fact or facts was/were not disclosed by the petitioner in the course of its original assessment under Section 143(3) of the said Act….. In the case of Global Signal Cables (India) Pot. Ltd. > DCIT (2015) 54 taxmann.com 114 (Del) the Hon'ble High Court has again held that where it was not specified in the reasons as to what was the material facts not disclosed by assessee, the notice w/s 148 was held to be invalid. In the case of Calcutta Discount Co. Ltd. us ITO (1961) 41 ITR 191 (SC), the Apex Court held that once the assessee has disclosed all primary facts, his duty ends and it is for the assessing officer to draw the proper conclusions from it. If the wrong conclusion was drawn, then it is no ground for reopening an assessment. Because the assessing authority previously held another opinion as to the legal effect of certain primary facts, and the assessing authority later on took a different view, there does not exist any ground for such reopening. In a recent decision of Delhi ITAT in the case of PRABHU DAYAL AGGARWAL VERSUS ACIT, 2018 (7) TMI 59 - ITAT DELHI the reopening was held to be barred by limitation where the original assessment was completed w/s 143(3) and case was reopened after the expiry of 4 years from the end of the relevant assessment years. In this case also the reopening was done on the basis of loss due to alleged client code modification. In view of the above, it is submitted that notice issued w/s 148 of the Act is barred by limitation. II. The reasons recorded under section 148 of the Act cannot be construed as "reasons to believe" that any income of the assessee had escaped assessment, which is a condition precedent for initiating reassessment proceedings. It is the respectful submission of the appellant that assessment initiated under section 147 and the impugned assessment order under sections 147/143(3) of the Act is without jurisdiction, illegal and bad in law. Section 147 of the Act authorizes and permits an assessing officer to assess or reassess income chargeable to tax if and only if he has reason to believe' that any income for any assessment year has escaped assessment. Section 147 of the Act empowers the assessing officer to initiate proceedings under that section to assess or reassess any income of

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the assessee that escapes assessment. The powers to initiate proceedings under section 147 of the Act are, however, not unfettered and unrestricted. In order to initiate proceedings under section 147, the assessing officer has to comply with the provisions of section 148 to 153 of the Act. Under the scheme of the Act, the assessing officer can initiate proceedings under section 147 of the Act only if he has "reasons to believe" that any income of the assessee has escaped assessment. In terms of section 148 of the Act, the assessing officer is required to record the reasons on the basis of which proceedings under section 147 of the Act are initiated. The reasons recorded must show application of mind by the assessing officer to come to the belief that any income of the assessee had escaped assessment, and thus acts as the stepping stone in initiation of proceedings under section 147 of the Act. The validity or otherwise of the proceedings initiated under section 147 is adjudged on the basis of such reasons recorded. The reasons recorded must, therefore, show application of mind by the assessing officer. If the reasons recorded are vague or ambiguous, the proceedings initiated under section 147 of the Act are liable to be held as invalid and bad in law. Your honour's kind attention in this regard is invited to the following decisions explaining the meaning of 'reasons to believe The Supreme Court in the case She Nath Singh vs. ACIT: 82 IT 148, construing the expression reason to believe', observed: "There can be no manner of doubt that the words "reason to believe" suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the court." (emphasis supplied) In Ganga Saran & Sons (P) Ltd us. ITO: 130 ITR 1, 11, Their Lordships of the apex Court observed: "The important words under s. 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied" The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or suficiency of the reasons which have weighed with the ITO in coming to the belief, but the court

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can certainly examine whether the reasons are relevant and have a hearing on the matters in regard to which he is required to entertain the belief before he can issue notice under S. 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the ITO could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid." (emphasis supplied) The Gujarat High Court in the case of Birla VXL us. ACIT: 217 ITR 1 held that the reasons recorded should clearly reflect the reasoning of the assessing officer to arrive at a belief, observing as under: "Another requirement which is necessary for assuming jurisdiction is that the Assessing Officer shall record his reasons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds the belief that income has escaped assessment. "Why for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance income has escaped assessment, the reasons recorded bu the Assessing Officer must disclose by what process of reasoning he holds such a belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that excessive loss or depreciation allowance has been computed without disclosing the reasons which led the assessing authority to hold such a belief, in our opinion, does not confer jurisdiction on the Assessing Officer to take action under sections 147 and 148 of the Act. .... (emphasis supplied) From the "reason" recorded for the issued of notice w/s 148, it is evident that the same cannot be constructed as "reasons to believe". The reasons recorded by the A.O. are merely suspicion, conjecture and surmises. There is difference between "reason to believe" and "reasons to suspect" and the case cannot be reopened on the basis of The Horble Delhi High Court in the case of Sabh Infrastructure Ltd. Versus Asst. Commissioner of Income Tax its decision dated 25/09/2917 has held as under: (ii) the reasons to believe ought to spell out all the reasons and

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grounds available with the AQ for re-opening the assessment especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and or relevant portions of such report should be enclosed along with the reasons; In a recent case of Pr. CIT v. Meenakshi Overseas Pvt. Ltd. (2017)(5) TMI 1428, Delhi, reopening w/s 148 was made on the basis of information received form investigation wing. The Hon’ble High Court held that such reopening which was based merely on the information received from Investigation. Wing without independent application of mind by A.O. amounted to "borrowed satisfaction" and such reopening was liable to be quashed. In the case of Coronation Agro Industries Ltd. vs DCIT (W.P. No, 2627/2016), having similar facts and circumstances the Bombay High Court vide its decision dated 28.11.2016 has held that, reopening w/s 148 was not justified merely because there was loss incurred due to client modification code. III. The reassessment proceedings are liable to be quashed as no sanction us 151 of the Act has been provided. Conclusion For the reasons discussed hereinabove, it is respectfully prayed that the assessment order passed by the assessing officer under sections 147/144 of the Act calls for being quashed. 7.4 Finding of Ground of Appeal No.2: a) I have carefully considered the facts of the case, reasons recorded by AO for issue of notice u/s. 148 of the Act, observations of the A.O. made in the assessment order, the submission of the appellant and the case laws relied upon by the appellant. Here it will be relevant to reproduce the reasons recorded by the A.O for issue of notice u/s 148 of the Act, which are as under:- "Reasons for the belief that the income hag escaped assessment in the case Of Shri Neerai Kumar Singhal Prop M/s. Systems & Equipment Maintenance Co. PAN AATPS3546G for A. Y. 2009-10 The department is in possession of information that some brokers had misused client code modification facility (in short "CCM") to transfer loss and profits on account of share transactions from one

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client to the other. The losses profits were shifted to reduce the tax liability in the hands of either the original client or modified client. The information received in the cage of the assessee is as under:

PAN of Name of the Address of Name of FY. 2008-09 Beneficiary Beneficiary Beneficiary Brooker Client Client When When Net Original Modified reduction in Client Client Income due (Ascertain (Ascertained to CCM (in ed Profit Profit Rs.) Shifted Shifted Out)(in Rs Out)(in Rs AATPS3546G System & 131-AGCR A To Z 10390230 -7766807.5 -18157037.5 Equipment Enclave Stock maintainanc Delhi- Trade e Co. (Prop. 110092 Private Neeraj Limited Kumar Singhal)

The information received was examined with reference to the return of income filed bu the assessee. On perusal of the IT filed by the assessee and from the examination of the above information, it is evident that through client code modification, a net reduction of income to the tune of Rs. 1,81,57,037.5/- has taken place in the case of the assessee, reducing tax liability in FY 2008-09.

In view of the above mentioned facts and evidences gathered, I have reasons to believe that income to the tune of Rs 1,81,57,037.5/- chargeable to tax has escaped assessment and this income needs to be assessed/reassessed u/s. 147 of the Act. If approved, notice u/ s 148 of the Act may be issued.

Submitted for kind approval please"

(b) The undisputed fact is that the original assessment in the case of appellant was completed us 143(3) of the Act on 27/12/2011, Neither in the reasons recorded nor in the impugned assessment order us 147/143(3), there is reference to the aforesaid order passed u/s 143(3) of the Act. In the reasons recorded, there is no allegation by the A.O that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

It is seen that Hon ble ITAT Delhi Bench has decided a case based on identical facts in Prabhu Dayal Aggarwal Vs. ACIT, Circle- 59(1), Delhi (2018) (7) TMI 59 (IT AT Delhi) dated 29.06.2018(In the said case the reopening was done on basis of information received from the Investigation Wing about client code

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modification. The Hon'ble ITAT held that reopening to be barred by time limitation where original assessment was completed us 143(3) and case was reopened after expiry of 4 years from the end of relevant AY. It was held that there is no allegation of any failure on part of the assessee to disclose fully and truly all material facts necessary for completion of assessment for which income has escaped assessment.

d) The AO in the present case and in the case of Prabhu Dayal Aggarwal (as outlined in para 7.4 c above) was same ie. ACIT, Circle-59(1), New Delhi. The reasons recorded in the present case and in the case of Prabhu Dayal Aggarwal were recorded by the same AO. The reasons recorded in the present case and in the case of Prabhu Dayal Aggarwal are identical in fact verbatim except for the name and figures as outlined in paras 7.4(a) and 7.4 (e) of this order. The AY involved in both the cases is same i.e. AY 2009-10. In both the cases the original assessment was completed u/s. 143(3) of the Act and in both the cases the AO has not mentioned anything about such order passed in the reasons recorded to reopen the case us 147/148 nor in the order passed u/s 143(3) r.w.s 147. These facts show that the facts of the present case and the case of Prabhu Dayal Aggarwal are identical.

e) The reasons recorded in the present case and in case of Prabhu Dayal Aggarwal were recorded by the same AO ie. ACIT, Circle- 59(1), New Delhi reasons recorded in both cases are identical in fact verbatim except for the name and figure. The reasons recorded in present case are outlined in Para 7.4 (a) of this order. The reasons recorded in the case of Prabhu Dayal Aggarwal are reproduced as under:-

"The department is in possession of information that some brokers had misused client code modification facility (in short "CCM") to transfer loss and profits on account of share transactions from one client to the other. The losses/ profits were shifted to reduce the tax liability in the hands of either the original client or modified client. The information received in the case of the assessee is as under:

PAN of Name of the Address of Name of FY. 2008-09 Beneficiary Beneficiary Beneficiary Brooker Client Client When When Net Original Modified reduction in Client Client Income due (Ascertain (Ascertained to CCM (in ed Profit Profit Rs.) Shifted Shifted Out)(in Rs Out)(in Rs ACBPA0069J Prabhu G-47, Preet Amrapali 1,37,86,29 -24,89,527.5 1,62,75,825 Dayal Vihar, Aadya 8.4 Aggarwal Delhi- Trending 110092 &Invest ment

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Pvt. Ltd.

The information received was examined with reference to the return of income filed by the assessee. On perusal of the IT filed by the assessee and from the examination of the above information, it is evident that through client code modification, a net reduction of income to the tune of Rs. 1,62, 75,826/- has taken place in the case of the assessee, reducing tax liability in FY 2008-09. In view of the above mentioned facts and evidences gathered, 'have reasons to believe that income to the tune of Rs 1,62, 75,826/- chargeable to tax has escaped assessment and this income needs to be assessed/reassessed w/s 147 of the Act. If approved, notice w/ s 148 of the Act may be issued. Submitted for kind approval please." f) Perusal of above facts show that the reasons recorded in the present case and the reasons recorded in case of Prabhu Dayal Aggarwal were identical in fact verbatim (except name and figure) and both were recorded by the same AO i.e. ACIT, Circle-59(1), Delhi. The Ground of appeal in the case of Prabhu Dayal Aggarwal was "Initiating proceedings u/s 147 / 148 of IT Act without there being cogent material leading to the belief of escapement of income". This Ground of appeal is similar to the Ground of appeal No. 2 raised in the present appeal. The How'ble ITAT Delhi in the case of Prabhu Dayal Aggarwal for AY. 2009-10 vide order dated 29.06.2018 held as under: "30.We have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the original assessment in the instant case was completed w/s 143(3) on 24.12.2011 copy of which is placed at page 43 of the Paper Book, wherein the Assessing Officer had accepted the returned income of Rs. 1,16,37,353/-. However, it is very strange to note that the Assessing Officer for reasons best known to him has not mentioned anything about such order passed u/s 143(3) of the 1.T. Act either in the notice issued u/s 148 or in the order passed u/s. 143(3) 147. We find during the course of original assessment proceedings, the assessee vide his letter dated 07.12.2011 in Clause No.- 4 had submitted the copy of client ledger with settlement details from the share broker M/s. Aditya Trading & Investment (P) Ltd. highlighting the portion of settlement which clearly shows that loss of Rs.1,82,10,431.54 shown in the Profit & Loss Account. A copy of the same is placed at page 39 to 41 of Paper Book. After considering the elaborate submission filed on 07.12.2011, the Assessing Officer had completed the assessment u/s. 143(3)

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accepting the returned income. A perusal of the reasons recorded on 29.03.2016 show that there is no allegation by the Assessing Officer of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Therefore, in view of the proviso to section 147 of the I.T. Act where the original assessment was completed u/s. 143(3), no action shall be taken under this section after the expiry of 4 years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment on account of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. However, in the instant case, the notice u/s 148 has been issued on 31.03.2016 which is beyond a period of 4 years from the end of the relevant assessment year i.e. AY. 2009-10. As mentioned earlier, in the instant case the assessment was completed w/s 143(3) on 24.12.2011 and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment for which income has escaped assessment. Therefore, the proviso to section 147 is clearly applicable to the facts of the present case. Since, the Id. CIT(A) has not addressed the case of the assessee from this angle, therefore, his finding on the issue of validity of reassessment proceedings is incorrect and not in accordance with law. We, therefore, hold that the reassessment proceedings initiated after a period of 4 years from the end of the relevant assessment year where the original assessment was completed u/s. 143(3) is barred by limitation and, therefore, void abinitio. We, therefore, hold that such reassessment proceedings initiated by the Assessing Officer is bad in law and void ab-initio. Accordingly, the same is quashed. Since, we are quashing the reassessment proceedings on account of being barred by limitation, therefore, other arguments advanced by the counsel for the ssessee challenging the addition on merit become academic in nature and therefore are not being adjudicated. The grounds raised by the assessee are accordingly allowed." In the present case also the assessment was completed u/s 143(3) vide order dated 27.12.2011. In the said order, the AD has made disallowances out of Car expenses, Business Promotion Expenses, Telephone Expenses and Travelling Expenses. The AO has not mentioned anything about such order passed us 143(3) neither in the reasons recorded to reopen the case of appellant u/s 147/148 of the Act nor in the order passed u/s 143(3) r.w.s 147. Perusal of reasons recorded show that there is no allegation by AO of any failure on part of appellant to disclose fully and truly all material facts necessary for completion of assessment. Thus, by placing reliance on the judgment of Hon' ble Jurisdictional ITAT, Delhi in the case of Prabhu Dayal Aggarwal Vs. ACIT, 59 (1), Delhi for AY. 2009-10 dated 26.09.2018 based on identical facts it is hereby held

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that in view of proviso to Section 147 of the IT Act where the original assessment was completed u/s 143(3), no action shall be taken u/s 147 after expiry of 4 years from end of relevant AY unless any income chargeable, to tax has escaped assessment on account of failure on part of the appellant to disclose fully and truly all material facts necessary for completion of assessment In the present case (notice u/s 148 was issued on 31.03.2016 which is beyond period of 4 years from end of relevant AY i.e. AY. 2009-10. In the instant case, the assessment was completed u/s 143(3) on 27.12.2011 and there is no allegation of any failure on part of appellant to disclose fully and truly all material facts necessary for completion of assessment for which income has escaped assessment in the reasons recorded by the AO. Relying on the judgment of Hon'ble Jurisdictional ITAT Delhi in the case of Prabhu Dayal Aggarwal based on identical facts it is hereby held that reassessment proceedings initiated after a period of 4 years from the end of relevant AY where original assessment was completed us 143(3) is barred by limitation and, therefore, void ab initio. In view of the judicial discipline and binding precedents the reopening made by the AO us 147/148 of the Act is held to be not as per law in view of the judgment of Hon'ble Jurisdictional ITAT, Delhi in case of Prabhu Dayal Aggarwal and various other court judgments including that of Hon'ble Delhi High Court as relied upon in the appellants submission. Reopening of assessment u/s 147 / 148 cannot be made after expiry of 4 years from end of relevant AY where original assessment has been made us 143(3) of the Act where there is no allegation by the AO in reasons recorded that there was a failure on part of the appellant to disclose fully and truly all material facts necessary for completion of assessment. Relying on the judgment of Hon'ble Jurisdictional ITAT Delhi Bench on identical facts in case of Prabhu Dayal Aggarwal Vs. ACIT, Circle-59(1), Delhi ( In view of judicial discipline and binding precedents), it is held that such reassessment proceedings initiated by the AO is bad in law and void ab initio, therefore, the same is quashed.” 10. The genesis of the controversy towards jurisdiction in the present case are the reasons recorded under Section 148(2) of the Act therefore, it may be relevant to reproduce the reasons recorded for ready reference.

“Reasons for the belief that the income has escaped assessment in the case of Shri Neeraj Kumar Singhal Prop M/s Systems & Equipment Maintenance Co., PAN AATPS3546G fof A.Y. 2009:10 The department is in possession of information that some brokers had misused client code modification facility (in short

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"CCM") to transfer loss and profits on account of share transactions from one client to the other. The losses/ profits were shifted to reduce the tax liability in the hands of either the original client or modified client. The information received in the case of the assessee is as under:

PAN of Name of the Address of Name of FY. 2008-09 Beneficiary Beneficiary Beneficiary Brooker Client Client When When Net Original Modified reduction in Client Client Income due (Ascertain (Ascertained to CCM (in ed Profit Profit Rs.) Shifted Shifted Out)(in Rs Out)(in Rs AATPS3546G Systems & 131-AGCR A to Z 10390230 -7766807.5 -18157037.5 Equipment Enclave --- Stock Maintenance Delhi- Trade Co. (Prop. 110092 Private Neeraj Ltd. Kumar Singhal)

The information received was examined with reference to the return of income filed by the assessee. On perusal of the IT filed by the assessee and from the examination of the above, information, it is evident that through client code modification, a net reduction of income to the tune of Rs.1,81,57,037.5/- has taken place in the case of the assessee, reducing tax liability in FY 2008-09.

In view of the above mentioned facts and evidences gathered, I have reasons to believe that income to the tune of Rs. 1,81,57,037.5/- chargeable to tax has escaped assessment and this income needs to be assessed/reassessed u/s. 147 of the Act. If approved, notice u/s. 148 of the Act may be issued. Submitted for kind approval please.”

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the Act and the additional embargo placed by the 1st proviso to Section 147 are clearly not lifted when the notice under Section 148 to assume the jurisdiction are clearly time barred.

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disclose any material fact relevant for the assessment. The re- assessment order passed under Section 147 also does not portray any concern of the Assessing Officer on this aspect either. Ostensibly, the condition stipulated under First Proviso to Section 147 is not complied with at the threshold. In such event provision of section 147 of the Act could not have been triggered.

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Foramer France, reported in 264 ITR 556 (SC); Dr. Willmar Schwabe India Pvt. Ltd. vs. ACIT & Ors., in W.P.(C) 13380/2018 judgment dated 17.05.2023 (Del); Pr.CIT vs. Prabhu Dayal Aggarwal, ITA No. 1374/2018 order dated 09.12.2022 (Del); JSRS Udyog Ltd. and Ors. vs. ITO, reported in 313 ITR 321 (Del).

In the result, the appeal of the Revenue is dismissed. 17. Order pronounced in the open Court on 13/09/2023 Sd/- Sd/- [SAKTIJIT DEY] [PRADIP KUMAR KEDIA] VICE PRESIDENT ACCOUNTANT MEMBER DATED: /09/2023 Prabhat