TMI Blog2015 (8) TMI 1347X X X X Extracts X X X X X X X X Extracts X X X X ..... information from the investigation wing of the department. The assessee thus succeeds on this contention as well to arrive at a conclusion that notice issued u/s 148 was not valid. - Decided in favour of assessee Notice against non existent company - reopening - Held that:- Notice issued under sec. 148 of the Income-tax Act, 1961 on a non-existent assessee was invalid and the assessment made in furtherance thereto inconsequence was invalid and void. The assessment in absence of issuance of mandatory notice under sec. 143(2) of the Act was also void ab-initio - Decided in favour of assessee - ITA No. 54/Del/2015, ITA Nos. 55 & 56/Del/2015 - - - Dated:- 14-8-2015 - SHRI I.C. SUDHIR AND SHRI INTURI RAMA RAO Appellant by: Shri V.K. Aggarwal, AR Respondent by: Shri Ravi Jain, CIT(DR) ORDER PER I.C. SUDHIR: JUDICIAL MEMBER In the above three appeals, ITA Nos.55 and 56/Del/2015 are related to amalgamated company Mallard Projects (P) Ltd. and ITA No. 54/Del/2015 is related to Advance India Projects Ltd., all for the same assessment year 2005-06. Their respective grounds raised by the assessee against the First Appellate Order are being reproduced while d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fy and withdraw any ground of appeal before or during the appellate proceedings. Besides the above grounds, the assessee has also moved application for admission of the following proposed additional ground: The impugned assessment order u/s. 147/143(3) dated 26.03.2013 is illegal and without proper jurisdiction as notice u/s. 143(2) was not issued and therefore, it deserves to be annulled. 2. The Learned AR submitted that the issue raised in the additional ground is legal in nature which goes to the root of the matter and adjudication of which does not require consideration of fresh material. The Learned AR submitted further that though in the ground Nos. 2 to 6, the assessee has already questioned the validity of issuance of notice under sec. 148 of the Act and the assessment framed in consequence thereto but still to avoid any technical difficulty on specific contention regarding validity of assessment in absence of notice issued under sec. 143(2) of the Act has been raised. 3. The learned CIT(DR) on the other hand objected the application. 4. Considering the above submission that the issue raised is legal in nature which goes to the root of the mater and adjudicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laced reliance on the decision of Hon'ble Bombay High Court in the case of Smt. Suman Waman Chaudhary, ITA No. 398 of 2001 judgment dated 12.2.2008 holding that the notice issued under sec. 148 was without jurisdiction for want of prior approval of the concerned authority under sec. 151(2) of the Act. He pointed out that SLP preferred by the Revenue against this decision has been rejected by the Hon'ble Supreme Court on 16.3.2009 in SLP(C) No. 6757 of 2009. 8. The Learned AR submitted further that in the reasons recorded, the Assessing Officer had not indicated that income has escaped assessment by reasons of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment which is a pre-condition as per proviso to section 147 of the Act. There is also no whisper in the purported reasons of the assessee having failed to disclose fully and truly all the material facts necessary for its assessment. The notice issued under sec. 148 of the Act was thus without jurisdiction in view of this provision as well. He placed reliance on the following decisions: i) EI Dupont India Pvt. Ltd. vs. DCIT 213- TIOL- 145- S.CDel; ii) Shiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act is illegal as notice under sec. 143(2) was never issued, which is mandatory. He cited following decisions in support: i) ACIT vs. Hotel Bluemoon (2010) 321 ITR 362 (S.C); ii) B.R. Arora vs. ACIT (2014) TIOL- 491-ITAT-Del.; iii) Mohinder Kumar Chhabra Vs. ITO (2014) 31 ITR (Trib.) 93 (Del.); iv) Gr. Noida Industrial Dev. Authority vs. ACIT (2015) TIOL 227 ITAT- (Del.); 13. The Learned DR on the other hand tried to justify the orders of the authorities below on the issue of validity of notice issued under sec. 148 of the Act and the assessment framed in furtherance thereto under sec. 147/143(3) of the Act. He submitted that statements of Mr. S.K. Gupta were recorded during the course of survey based upon which reasons to belief have been formed. Thus, it cannot be said that the information received by the Assessing Officer from the investigating wing of the department, that the income has escaped assessment, was not vague. In support, he placed reliance on the following decisions: i) OPG Metal vs. Finsec Ltd. vs. CIT (2014) 41 Taxman.com 21 (Del.); ii) Money Growth Investment Consultants (P) Ltd. vs ITO (2012)- 21 Taxman.com 438 (Del. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons recorded are being reproduced hereunder: Perusal of information received from ACIT, Central Circle- 22, vide letter no. ACIT/CC-22/2011-12/491 Dated 29.03.2012, it came to notice that the above named the assessee has received accommodation entries from Sh. S.K. Gupta. A survey u/s. 133A of the I.T.Act, was conducted by the Investigation Wing of the offices of Sh. S.K. Gupta chartered accountant and his companies on 20.11.2007. During the course of survey operation, Sh. S.K. Gupta found to have been indulged in providing accommodation entries to different parties through the bank cheques operated by him in the name of different companies, individual and others. In his statement recorded during the course of search as well as appellate proceedings Sh.S.K. Gupta had admitted on oath that he had provides accommodation entries to the beneficiaries after receiving equivalent amount of cash from them. The details of accommodation entries received by the above named assessee from Sh.S.K. Gupta is as under: S.No. Date Cheque No. Amount 1 30.03.2005 000010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the reason. There should be a link between the reasons and the material available with the Assessing Officer. The Assessing Officer will apply his own mind to the information and examine the basis of the information. He will not accept the information in a mechanical manner. In the present case before us we find that the Assessing Officer did not bother himself to verify the correctness of the information received by him but merely accepted the truth of the information in a mechanical manner. What sort of enquiry or verification of information received by him from the Investigation Wing of the Department was made by the Assessing Officer prior to issuance of notice u/s 148 and the result of such enquiry has not been made available even on the request of the assessee to the Assessing Officer vide letter dated 08.03.2013. We thus find substance in the contention of the assessee that in absence of any reference to any corroborative material in the possession of the Assessing Officer leading him to believe that the information received was based on some relevant material and the income has escaped assessment, the Assessing Officer had issued notice u/s 148 in a mechanical manner on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of mind by the Ld. A.O. as reasons recorded clearly indicate repeated entries to the extent of ₹ 40,00,000. 4. The Learned CIT(Appeals) has grossly erred on facts as well as in law in ignoring that notice u/s. 148 is ab-initio void because the Ld. A.O. had not taken the approval from JCIT u/s. 151(2) before issue of such notice though the assessment re-opened was completed u/s. 143(1). 5. The Learned CIT(Appeals) has grossly erred on facts as well as in law in confirming the addition of ₹ 2,00,00,000 on account of investment in shares of the assessee. 6. The Learned CIT(Appeals) has grossly erred on facts as well as in law in rejecting the additional documents filed before her though they were only clarificatory in nature and in public domain which do not require any application u/s.46A. 7. The Learned CIT(Appeals) has grossly erred on facts as well as in law in ignoring that cross-examination of Mr. S.K. Gupta was not provided by the Ld. A.O. inspite of the specific request vide letter dated 19.03.2013. 8. The Learned CIT(Appeals) has grossly erred on facts as well as in law in ignoring that the Ld. A.O. neither provided the statement of Sh.S.K. G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquisition of jurisdiction by the Assessing Officer to initiate reopening proceedings and validity of the assessment framed under sec. 147/143(2) of the Act. His first contention remained regarding the maintainability of the notice issued under sec. 148 of the Act on a non-existent assessee. He submitted that notice under sec. 148 of the Act was issued on 30.3.2012 on Magpie Projects Pvt. Ltd. which did not exist as it got amalgamated w.e.f. 01.04.2011 with Advance India Projects Ltd. He contended that it is now well settled proposition of law that notice on non-existent company is illegal. In support, he placed reliance on the following decisions: i) Saraswati Industrial Syndicate Ltd. Vs. CIT 2002 TIOL 1048- S.C-IT-LB; ii) Computer Engineering Services India (P) Ltd. vs. ACIT ITA No. 5874/Del/2013 order dated 29.5.2015; iii) CIT vs. Micron Steels Pvt. Ltd. 2015 TIOL S.C- DEL-IT; 26. The Learned AR submitted further that once it is found that assessment is framed in the name of non-existing entity, it does not remain a procedural irregularity of the nature which could be cured by invoking the provisions of sec. 292B of the Act. A jurisdictional defect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicated upon the basis of which it is inferred by you that the income already assessed under sec. 143(3) required reassessment order under sec. 148 after the expiry of 4 years. 30. The Learned AR submitted that the action of the Assessing Officer in not providing any information/document as mentioned above clearly proves that he did not have any corroborative evidence. He submitted that a perusal of reasons indicates that notice under sec. 148 has been issued in a mechanical manner on the basis of vague information from ACIT, Central Circle-22. The Assessing Officer did not dwell upon the veracity and the basis of information received. As per reasons recorded, ACIT, Central Circle-22 received certain information from Investigation Wing which was passed on to him. The information is so vague that it does not even mention the names and addresses of the entities providing the so called accommodation entries and the purpose for which they were provided, i.e. loan, gift, investment etc. There is no reference to any corroborative material in the suggestion of A.O. He has not mentioned any material, which has led him to believe that information received, is based on some relevant mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in the affair of accommodation entries on the basis of statement of Shri S.K. Aggarwal recorded during the course of survey. Thus, there was sufficient material to form reasons to believe on the part of the Assessing Officer to initiate reopening proceedings. In support, he placed reliance on the following decisions: i) OPG Metal vs. Finsec Ltd. vs. CIT (2014) 41 Taxman.com 21 (Del.); ii) Money Growth Investment Consultants (P) Ltd. vs ITO (2012)- 21 Taxman.com 438 (Del.); iii) AGR Investment Ltd. vs. Addl. CIT (2011) 333 ITR 146 (Del.); 35. Considering the above submissions in view orders of the authorities below, material available on record and the decisions relied upon, we find substance in the above contentions of the Learned AR that notice issued under sec. 148 of the Act on non-existent company was illegal. The submissions of the fact in this regard by the Learned AR that Magpie Projects Pvt. Ltd. was amalgamated w.e.f. 01.04.2011 with Advance India Projects Ltd. has not been rebutted, hence we hold that notice under sec. 148 of the Act issued on 30.3.2012 on Magpie Projects Pvt. Ltd., a non-existent company was invalid. The Hon'ble Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablished proposition of law that such defect in the exemption of jurisdiction by the Assessing Officer cannot be cured by taking recourse to the deeming fiction under sec. 292BB of the Act. 37. In view of the above findings, we hold that notice issued under sec. 148 of the Income-tax Act, 1961 on a non-existent assessee was invalid and the assessment made in furtherance thereto inconsequence was invalid and void. The assessment in absence of issuance of mandatory notice under sec. 143(2) of the Act was also void ab-initio. In view of this finding, the remaining contentions on the issue of validity of notice issued under sec. 148 of the Act, reasons recorded, etc. raised by the Learned AR have become infructuous and thus do not need adjudication. The ground Nos. 2 to 4 and additional ground to the above extent are thus allowed. 38. In view of the above findings holding the assessment in question itself void, the issues raised in the remaining ground Nos. 5 to 8 have become infructuous and thus do not need any adjudication. 39. In result, the appeal is allowed. 40. The assessee has impugned First Appellate Order on the following grounds: 1. Under the facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dity of issuance of notice under sec. 148 of the Act and the assessment framed in consequence thereto but still to avoid any technical difficulty on specific contention regarding validity of assessment in absence of notices issued under sec. 148 as well as sec. 143(2) of the Act has been raised. 42. The learned CIT(DR) on the other hand objected the application. 43. Considering the above submission that the issue raised is legal in nature which goes to the root of the mater and adjudication of issue raised in the additional ground does not require consideration of fresh material outside the record, we allow the application and in result additional ground is admitted for our adjudication. We will deal with it along with ground Nos. 2 to 4 in the succeeding paragraphs. 44. Similar grounds involving identical issues as raised hereinabove in ITA No. 55/Del/2015 have been raised and similar arguments have been advanced by the parties to support their respective cases. 45. Following the decisions taken by us in ITA No. 55/Del/2015 on identical issues, we hold that the issuance of notice under sec. 148 of the Act on a non-existent assessee was invalid and the assessment framed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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