TMI Blog2019 (4) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... udiced to the interest of the assessee. The reopening of the assessment is quashed. Therefore, the learned CIT A was not correct in holding that the reopening has been done in accordance with the law by the assessing officer. Accordingly, ground number 1 of the appeal of the assessee is allowed. - ITA No. 1830, 1831, & 1832/Del/2014, ITA No. 1717, 1718, And 1719/Del/2014 - - - Dated:- 1-4-2019 - SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Shri Salil Kapoor, Adv. And Ms. Soumya Singh, Adv For The Revenue : Ms Pramita M. Biswas, CIT DR ORDER PER PRASHANT MAHARISHI, A. M. 1. This is the bunch of six appeals of Nimitaya Hotel Resorts Ltd for three assessment years i.e. Assessment Year 2007 08, 2008 09, and 2009 10 filed by the assessee as well as the learned assessing officer involving identical issue, therefore we have heard them together and disposed of by this common order. 2. First we deal with the appeal for assessment year 2007 08 in ITA number 1830/del/2014 filed by the assessee against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the ld CIT (A) is erroneous and is not tenable on facts and in law. 4. Brief facts of case shows that search and seizure action u/s 132 of The Income Tax Act { The Act} was carried out on 6/11/2008 on Nimitaya group‟ of cases. During search at the residence of Sri Sanjeev Mahajan, certain loose papers containing details of payment made in cash and cheque was found. On the basis of the findings of search, it was found that unaccounted cash payment of INR 201,000,000 were made by Mr. Sanjeev Mahajan to Mr. Ram Maher Garg, director of the company M/s Nimitaya Hotels Resorts limited, for purchase of hotel building. Therefore, case of the assessee was reopened u/s 148 of the income tax act. The learned assessing officer recorded the following reasons:- In the Nimitaya group of cases search u/s 132 was carried out on 6/11/2008 at the various premises of the group concern as well as residential premises of directors. During the course of search at the residence of Sri Sanjeev Mahajan, loose papers containing details of payment made in cash and cheque was found which has been annexurised as page 35 and 37 of annexure A 6. On the basi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnot be used against the assessee company in absence of any documentary evidence. The assessee also objected that the statement of Sri Sanjeev Mahajan has been recorded and therefore such a statement be given to the assessee as well as cross-examination of the gentleman be afforded before proceeding in this matter. 6. The issue is that the project named Hotel city Mart was initially developed by Ninex developers Ltd a company controlled and owned by Mr. R. M. Garg and his associates. Subsequently Shri R.M. Garg and his associate incorporated the appellant company on 27/9/2006. Thereafter on 6/11/2006 Hotel city Ninex developers Ltd sold Mart to the assessee for INR 200,000,000. Thus, the assessee became owner of Hotel city Mart. Later on the appellant issued debentures of INR 425,200,000 in assessment year 2007 08 to assessment year 2009 10 in favour of four different entities such as Nimitaya properties private limited, Nimitaya promoter‟s Private Ltd, Mrs. Anita Rani and Express Earthmovers and equipments private limited. The amount received through cheque from all these four persons were found in annexure A 6 seized from Mr. Sanjeev Mahajan. There was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mr. Garg has entered into the transaction which shows the deal value of INR 625,000,000 which was to be paid at various stages. They have shown only part payment by cheque and balance in cash, which has not been shown. Thus, the cash payment of INR 201,000,000 is not shown. It was also noted by the learned assessing officer that the payment shown to have been made by Mr. Sanjeev Mahajan to Mr. Garg in page number 37 is linked with the schedule given in page number 35. He also noted that the content of the page number 37 are correct and it proves that the cash payment given in this page are made outside the books of accounts. Based on this finding the learned assessing officer confronted the same to Mr. Sanjeev Mahajan on the date of search as well as during the post search enquiries. However MR. Mahajan stated that handwriting on page number 37 is not of him and belongs to some of his staff members or somebody else but not known to him. Though he admitted that the page contains some rough calculation, however he stated that the paper does not pertain to his business transactions. He further stated that the number of cheque payment could not be corroborated with payments made by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . It was further argued that assessment is framed without dealing with the objection even in the assessment order therefore the assessment is invalid. On the merits of the issue, it was argued that the addition has already been made originally on substantive basis in the hands of Shri Ram Mehar Garg and therefore it cannot be made in the hands of the assessee company. The assessee also contested that the above income added by the learned assessing officer cannot be falling under any of the specific head of income and therefore it cannot be taxed. It was also prayed that there is no transaction with Sri Sanjeev Mahajan of the assessee and therefore addition on that basis cannot be made. The assessee also objected that the copies of the statement or explanation of Sri Sanjeev of March and was not confronted to the assessee. Assessee also objected to the arbitrary interpretation of the seized document made by the assessing officer. It was further argued that seized documents does not belong to the assessee company but is pertaining to somebody else and therefore no addition in the hands of the assessee could be made. The assessee also extensively relied on the order of the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rything put together on the date of reopening the AO had genuine belief to infer that the income has escaped assessment. He even otherwise held that there is no prejudice caused to the assessee by providing reasons of reopening recorded by the assessing officer and therefore there is no infirmity in the order of the learned assessing officer for reopening of the assessment. Accordingly, he rejected the ground against reopening of assessment. 10. With respect to the addition of INR 112,500,000 , in paragraph number 8 of his order he noted that arrangement with respect to the issue of nonconvertible debenture by the appellant company in favour of Mr. Sanjeev Mahajan resulting into subsequent allotment of shares, he noted that when the appellant company has received the cheques which are duly recorded in the books of the appellant company the sums received in cash have not been recorded therefore he held that INR 201,000,000 which is received by the appellant company outside the books of the account. He further noted that as Hotel Metro continues to be the property of the appellant company, the conclusion that this sum was received towards the sale of property is not j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Ground number 4 is challenged the finding of the learned CIT A that assessee company has taken/ accepted a loan from Sanjeev Mahajan of INR 112,500,000. Therefore the only grievance of the assessee is with respect to reopening of the assessment as well as on the issue of powers of the learned CIT A giving direction to the AO and applicability of section 269SS of the act to the whole transaction. 14. On the issue of reopening the assessee stated that the assessment order u/s 143 (3 read with section 147 has been passed without disposing of the objections filed by the assessee against the issuance of notice u/s 148 and the reasons recorded for reopening. The claim of the assessee is that that assessee has filed objections before the learned assessing officer against the reopening wide letter dated 8/12/2011 which have never been disposed of by the assessing officer and therefore it is violated the law laid down by the honourable Supreme Court in case of GKN Driveshafts (India) Ltd vs. Income tax Officer 259 ITR 19. He further stated that such an action is fatal to the reassessment proceedings and the consequent reassessment order. To support his contention he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section merely on the basis of the presumption regarding loan, which is otherwise not supported by any material on record or any entry in the books of accounts of the assessee. The revenue has held that it is the unaccounted income of Shri Rama Mahar Garg being sale proceeds of the property. Even otherwise stated that the allegation of the learned CIT A violation of provisions of section 269SS is wholly unfounded and is not even the case of the learned assessing officer therefore it cannot be sustained. 19. Even otherwise, he stated that as per the provisions of section 251 (1) of the act, the CIT appeal does not have any power to give such a direction to the learned assessing officer. 20. In view of this he submitted that the learned CIT A has wrongly upheld reopening of the proceedings for reassessment under section 147 of the act as valid and also exceeding is jurisdictional power in direction to the learned assessing officer to initiate action u/s 269SS of the act. 21. The learned departmental representative vehemently supported the order of the learned assessing officer and the learned CIT A on the issue of reopening of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. We have also considered the various judicial precedents relied up on by both the parties. 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer. Cases referred above are only few out of many cases where similar situation has arisen. It is not necessary to refer to all such cases since we have referred to some cases which would represent the cross-section. Stages (i) and (iii) mentioned above are in the hands of the assessee while stages (ii) and (iv) are in the hands of the Assessing Officer. With a view to streamlining this procedure, and to ensure, as far as possible, the Assessing Officer is not faced with the unenviable task of completing the assessment proceedings in a few days left before the same became time barred, we would like to give certain directions of general implication which, we would expect, are followed by all concerned. While doing so, we are conscious that these stages are provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) and we would be giving directions only to the extent the said judgment already does not provide for. We have noticed that considerably long time is consumed sometimes by the assessee demanding the reasons recorded by the Assessing Officer and sometimes the Assessing Officer complying with such a request of the assessee. It is an accepted proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub para 1 to 4 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. 29. Honourable Gujarat High Court once again the objections were belatedly filed by the assessee in Bharatmaiya Memorial Foundation v. Deputy Commissioner of Income-tax (Exemption)-2, Ahmedabad [2018] 91 taxmann.com 25 (Gujarat) the objections raised by the assessee were filed even after hundred days of the receipt of reasons recorded, has held as under:- 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 Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme 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. 30. Honourable Delhi High court in 2013] 40 taxmann.com 299 (Delhi)/[2015] 228 Taxman 32 (Delhi)(MAG.)/[2014] 362 ITR 460 (Delhi) has laid down the importance of filing objections and its treatment by ld AO as under :- 7. In order to protect the interest of the petitioner, as some apprehension has been expressed that the Assessing Officer may directly pass the re-assessment order, we are inclined to pass directions. It is directed that the petitioner will file objections before the Assessing Officer within a period of two weeks from today. The petitioner through their authorised representative will appear before the Assessing Officer on 28th November, 2013, when a date of hearing will be fixed for addressing arguments on the said objections. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for assessment year 2008 09 and 2009 10 in ITA number 1831 and 1832/del/2014 are identical. They also stated that their arguments are also similar. 35. We have carefully considered the rival contentions and perused the orders of the lower authorities. For assessment year 2008 9 the notice u/s 148 of the income tax act was issued on 10/8/2010, assessee submitted a letter dated 23/8/2010 stating that the return or originally filed may be treated as return in response to the notice. The reasons were provided to the assessee on 10/10/2011 despite request dated 14/10/2010, 10/6/2011, and 28/6/2011. The assessee filed objection on 09/12/2011. The learned AO passed the assessment order without passing a speaking order on the objections of the assessee. Therefore, for the similar reasons as stated by us for assessment year 2007 at we crash the reassessment proceedings initiated by the AO for assessment year 2008 09. Accordingly, ground number 1 of the appeal of 1831/del/2014 is allowed. 36. Not all other grounds in that appeal are required to be adjudicated in view of our decision in ground number 1 of the appeal of the assessee. 37 ..... 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