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2017 (7) TMI 576 - DELHI HIGH COURT

2017 (7) TMI 576 - DELHI HIGH COURT - TMI - Reopening of assessment - reasons to believe - Held that:- For reasons which are not clear, the Revenue did not pursue the notice dated 23rd March, 2015 issued to the Petitioner under Section 148 of the Act. An attempt was made by Mr Rahul Chaudhary to suggest that since the AO who issued the said notice was replaced by another AO, the said notice was not pursued. He, however, insisted that under Section 129 of the Act it was possible to continue proce .....

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ced with the notice dated 23rd March, 2015. Annexure- A to the notice under Section 142(1) of the Act reveals what weighed with the AO when he issued the said notice dated 18th January, 2016. In this document with the sub-heading “proceedings u/s 148/147 for AY 2008-2009, show cause notice - reg.”. It is plain to understand that according to the AO, the notice dated 18th January 2016 under Section 148 of the Act was issued ‘initiating’ afresh the proceedings. It was not merely in continuation of .....

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15 issued by the AO under Section 148 of the Act was not carried to its logical end. The mere fact that the AO who issued that notice was replaced by another AO can hardly be the justification for not proceeding in the matter. On the other hand, the AO did not seek to proceed under Section 129 of the Act but to proceed de novo under Section 148 of the Act. This was a serious error which cannot be accepted to be a mere irregularity. - It is not clear why the AO did not wait for the process of .....

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the Respondent : Mr. Rahul Chaudhary, Senior Standing Counsel ORDER Dr. S. Muralidhar, J. Introduction 1. This petition by Mastech Technologies Pvt. Ltd. challenges two notices dated 23rd March, 2015 and 18th January, 2016 issued to it under Section 148 of the Income Tax Act, 1961 ( the Act ) by the Deputy Commissioner of Income Tax, Circle 16(2) [hereinafter referred to as the Assessing Officer (AO)] as well as the order dated 21st March, 2016 rejecting the objections filed by the Petitioner. .....

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t against the Petitioner making the additions as proposed. However, in terms of the interim order passed by this Court, the said order has not been given effect to. 3. It may further be mentioned that during the course of hearing of the present petition on 7th December 2016, the original file concerning the reopening of the assessment was brought before the Court by learned counsel for the Respondent. The Court recorded his statement that there are other parts of the file which are currently not .....

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eptember, 2008 declaring loss of (-) ₹ 6,10,314. The return was processed under Section 143(1) of the Act and an intimation was sent to the Petitioner. 6. Thereafter, on 18th January 2016, the AO issued a notice to the Petitioner under Section 148 of the Act in which he stated as under: Whereas I have reason to believe that your income in respect of which you are assessable to tax for the Assessment Year 2008-09, has escaped assessment within the meaning of Section 147 of the Income Tax Ac .....

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ant (CA) in which it was stated that the original return filed under Section 139 (1) of the Act should be treated as the return filed under Section 148 of the Act. A request was made to provide to the Petitioner with the 'reasons to believe' for reopening the assessment under Section 148 of the Act. 8.1 Simultaneously, on the same date i.e. 16th February 2016, two notices were sent to the Petitioner by the AO. One notice was titled as notice under Section 142(1) of the Act. By this notic .....

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Thereafter, it states that the information was received from the Investigation Wing and the return of income was scrutinized. It was found that during the year under consideration, the share capital of the loan of the Assessee had increased to the extent as provided in the information of the investigation. 8.3 In paras 6 to 10 the details of information received regarding escapement of income are set out. It essentially states that search was conducted against entry operator S.K. Jain and his g .....

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nce relating to the Assessee is set out. There is a reference to Annexure- A recovered during the search which enclosed the copies of various documents seized from the premises of S.K. Group along with the report. It was stated that the Assessee appears to have taken accommodation entry amounting to ₹ 1.35 crores credit from various companies controlled by S.K. Jain Group through intermediary (A.K. Jain).... 8.5 In paras 20 to 22, the details of the assessment proceedings and the order of .....

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st of creditworthiness of creditor since the company was dummy company and that since the entries had been created to create web of transaction to camouflage the true nature of transaction. In para 26, the Assessee was asked to show cause why the sum of ₹ 1.35 crores received by it during A.Y. 2008-2009 should not be treated as unexplained credit under Section 68 of the Act. 8.7 Further, in para 27 the Assessee was asked to show cause why ₹ 2,43,000/- representing commission paid at .....

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uld like some further information. Interestingly, this notice shows that this was a proceeding under Section 148 of the IT Act for the AY 2008-2009 The Assessee was asked to attend the office of the AO on 23rd February 2016 at 11:10 am. 10 One week later on 23rd February, 2016, the AO wrote to the Assessee with reference to the request made by its letter dated 16th February, 2016. The said letter reads as under: Kindly refer to the above mentioned subject. The reason recorded for re-opening of a .....

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ome had escaped assessment was reached. Inter alia, the Assessee pointed out as under: 1. The reason do not reflect any application of mind for reopening of assessment. There is no material mentioned on the basis of which the assessment has been sought to be reopened. Your good self has merely stated that it has been gathered that the accommodation entries of ₹ 1,35,00,000/- were received during the year under reference. How was the information gathered? What is the source of information? .....

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ged to be accommodation in nature. Who have they been received from? Is there any statement or allegation by the person who is claimed to have given accommodation entries? What are the accommodation entries and what are their particulars and how have they been treated by the assessee in its books of accounts? 12. By a letter dated 21st March, 2016, the AO informed the Assessee that its objections to the reopening of the Assessment had been rejected. Thereafter, the present writ petition was file .....

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record, the reasons for initiating proceedings under Section 148 of the Act prepared by the AO on 17th March, 2015 with the endorsement in Column No.12 of the Additional Commissioner of Income Tax granting his approval to the reopening of 19th March, 2015, no noting for this action was found on the file. This is of some significance as will be explained hereafter. 14. In Column no.11 of this form against the caption reasons for believing that income has escaped assessment it is stated as per An .....

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07 - 2008 relevant to AY 2008 - 2009. This information came to the notice of the Investigation Wing during the course of search in the case of Shri Surender Kumar Jain Group of cases (Entry Operator) which is as under: S.No. Name of the beneficiary Amount Cheque / DD No. Date Bank Detail Name of the company used for providing accommodation entry 1 Mastech Technologies Pvt. Ltd 34,00,000 080504 26.04.2007 UTI Shalini Holdings Ltd. 2 Mastech Technologies Pvt. Ltd 20,00,000 080682 07.05.2007 UTI Sh .....

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ilure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for AY 2008 - 2009 which resulted into escapement of income of ₹ 1,35,00,000/- for assessment year 2008- 2009. In view of this, I have reasons to believe that the Income of ₹ 1,35,00,000/- chargeable to tax has escaped assessment in the case of M/s Mastech Technologies Pvt. Ltd. for the AY 2008 - 2009 within the meaning of section 147 of the Income Tax Act, 1961. Therefore, I am .....

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by the AO to the Assessee, which is one single line which has been extracted hereinbefore. Submissions of counsel for the Petitioner 16. Mr. Ajay Wadhwa, learned counsel appearing for the Petitioner, made two broad submissions: (i) A second notice under Section 148(1) of the Act could not have been issued to the Petitioner when no action was taken pursuant to the first notice issued on 23rd March, 2015. Reliance was placed on the decision of High Court of Gujarat in Aditya Medisales Ltd. v. Dep .....

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under Section 148 of the Act. 17. Mr Wadhwa further pointed out that it was only after the disposal of the objections of the Petitioner to the reopening of the assessment, could the re- assessment proceedings have being continued. He submitted that notices issued on 16th February, 2016 under Section 142(1) of the Act and 143(2) of the Act by the AO, which purportedly set out the reasons for reopening of the assessment were not in fact sent pursuant to the request made by the Petitioner for being .....

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communicated to the Petitioner. Mr Wadhwa pointed out that the second reopening of the assessment under Section 148 of the Act by issuing a second notice on 18th January, 2016, was clearly without approval of the Additional CIT and was, in any event, barred by limitation. Submissions of counsel for the Revenue 18. Countering the above submissions, Mr Rahul Chaudhary, learned Senior Standing Counsel appearing for the Revenue, submitted that on the strength of Section 129 (1) of the Act, the AO ha .....

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the Additional CIT. In any event, the reopening of the assessment as on that date was time-barred. He submitted that even if the second notice dated 18th January, 2016 is treated as non est for the aforementioned reasons, the reopening of the assessment made on 23rd May, 2015 under Section 148 of the Act remained valid. It was within time and done with the approval of the Additional CIT and the reasons for reopening were clearly recorded on the file. 20. Further, according to Mr Chaudhary althou .....

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e, it was obvious that these proceedings were in continuation of the proceedings under Section 148 of the Act which commenced with the notice dated 23rd March, 2015. He submitted that mere absence of any note on the file relating to the initial reopening of the assessment by the AO who replaced the earlier AO would not affect the validity of the proceedings. He submitted that the decision of Gujarat High Court in Aditya Medisales Ltd. v. Deputy Commissioner of Income-tax, Circle (supra) was dist .....

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ection 148 of the Act. An attempt was made by Mr Rahul Chaudhary to suggest that since the AO who issued the said notice was replaced by another AO, the said notice was not pursued. He, however, insisted that under Section 129 of the Act it was possible to continue proceedings which commenced with the notice dated 23rd March, 2015 and that was in fact what was done on 18th January, 2016 when the second notice was issued by the incumbent AO. 23. A careful perusal of the notice dated 18th January, .....

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roceedings u/s 148/147 of the Act for AY 2008-2009, show cause notice - reg. the AO states as under: Please refer to re-assessment proceedings u/s. 147/148 of Income-tax Act, 1961 pending against you for A.Y. 2008-09. A notice u/s. 148 of the Act was issued initiating the proceedings vide notice dated 18.01.2016 served upon you through speed post after duly recording the reasons for reopening the same u/s. 148. The case has been re- opened u/s. 148 of the Act on account of there being a reason t .....

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2015. 25. Although the facts of the present case are different from those in the case before the Gujarat High Court in Aditya Medisales Ltd. v. Deputy Commissioner of Income-tax, Circle (supra), it is evident that the entire proceedings under Section 148 of the Act stood vitiated since even according to the AO, he initiated proceedings on 18th January, 2016 on which date such initiation was clearly time barred. Secondly, the fresh initiation did not have the approval of the Additional CIT, as r .....

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r the reasons recorded in Annexure-A to the proforma which contained the approval of the Additional CIT dated 19th March, 2015. Also, clearly, these were not the reasons for reopening of the assessment on 18th January, 2016. Perhaps for that reasons what was communicated to the Assessee on 23rd February, 2016 was a single line which did not have the approval of the Additional CIT. 28. It is not possible to accept the plea of Mr Chaudhary that the Court should proceed as if the second notice date .....

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being time barred, it should not be taken to have been issued at all, is unacceptable. 29. The Court has not been provided with any satisfactory explanation as to why the notice dated 23rd March, 2015 issued by the AO under Section 148 of the Act was not carried to its logical end. The mere fact that the AO who issued that notice was replaced by another AO can hardly be the justification for not proceeding in the matter. On the other hand, the AO did not seek to proceed under Section 129 of the .....

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