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TMI Blog2019 (4) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... the action of AO to invoke reassessment proceedings u/s 147 of the Income Tax Act, 1961. 2. That the learned CIT (Appeals) erred in law and on facts in observing and directing the AO to take action against the assessee for infringement of Section 269SS of the IT Act, 1961 on the basis of alleged document on the basis of which assessment was made by the AO and addition of Rs. 11.25 crores was made by the AO. 3. That the ld CIT(Appeals) has exceeded his powers and jurisdiction in giving the direction to the AO to take action against assessee for infringement of Section 269SS. 4. That CIT (Appeals) has grossly erred in law and on facts in holding that the assessee company has taken or accepted a loan from Sanjeev Mahajan of Rs. 11.25 crores. 5. That the directions and observation of the CIT (Appeals) are illegal, bad in law and without jurisdiction and the same needs to be expunged." 3. The learned assessing officer has also filed the appeal in ITA No. 1717/Del/2014 for the Assessment Year 2007-08 raising following grounds:- "1. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 11,25,00,000/- made by the AO on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment records of M/s Nimitaya hotel and resorts Ltd has been produced and it is found that no such cash transactions have been shown in the books of account or in its return of income. This proves that the assessee company has failed to disclose truly and fully all material facts necessary for its assessment and in fact has concealed the true particulars of these transactions. As the assessee company owns the asset and the entire company has been taken over by the Nimitaya group addition on this account is also required to be made in the hands of the assessee company. In view of the said facts, I have reason to believe that income of Rs. 112500000 chargeable to tax has escaped assessment for the assessment year 2007 - 08 within the meaning of section 147 of the act in the case of the assessee company. Accordingly notice u/s 148 has been issued to the assessee." 5. Necessary notices u/s 143 (2) was also issued on 1/9/2010 in response to the return filed by the assessee on 23/8/2010 under section 148 of the income tax act. Subsequently on 08/12/2011 assessee filed the objection stating that the notice u/s 148 is void ab initio and the reasons recorded are illegal and beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t therefore it got converted into equity shares and thereby Mr. Sanjeev Mahajan group got majority shareholding in the appellant company. Therefore according to this transaction Mr. Sanjeev Mahajan group got control of the Hotel city Mart project which did Mr. Rama Mahar Garg earlier control through the shareholding of this company. Therefore, in total relations of the events and the documents the subscription for purchase of nonconvertible debentures made it a case of an arrangement, which was already fixed, and only the emotions were to be gone through. Accordingly, it is apparent that at the time of issue of the nonconvertible debentures it was predetermined that appellant would fail to redeem the debenture and Mr. Sanjeev Mahajan group would be granted equity shares in the assessee company, which will give control of the assessee company through the shareholding and ultimately indirect ownership of total city Mart project. Thus , Hotel city Mart owned by the assessee company was transferred between Mr. Sanjeev Mahajan and Mr. Ram Meher Garg for consideration of INR 62,50,00,000/-. However, Hotel city Mart is owned by the assessee company, however, ownership of this company was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment in the hence of this company was that that same amounts have already been added in the hands of Sri Ram Maher Garg for respective years. For assessment year 2007 - 08 the addition of INR 112,500,000, for assessment year 2008 - 09 addition of INR 53,500,000 and for assessment year 2009 - 10 addition of INR 35,000,000, totaling to INR 201,000,000 was made on protective basis in the hands of the appellant assessee company and on substantive basis in the hands of Shri Ram Mehear Garg. Consequently the assessment u/s 143 (3) read with section 147 of the income tax act was passed on 15/12/2011 making the above addition in the hands of the assessee company and assessing the company of INR 112,500,000 against the NIL return filed. Additions on the similar basis of the amount stated above for assessment year 2008 - 09 and 2009 - 10 were made on protective basis. 7. Assessee aggrieved with the order of the learned AO preferred an appeal before the learned CIT - A. Assessee challenged the issue before the learned CIT - A with respect to the reopening of the assessment. It was submitted that assessee filed objection against the reopening of the assessment on 08/12/2011, which were never ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the hands of the company. 8. The learned CIT - A passed an order dated 27/1/2014 wherein he noted the facts in brief that the assessee is engaged in the business of developing the Hotel purchased for a consideration of INR 200,000,000 under an agreement to sale dated 13/11/2006 in the year under consideration. He also noted that on the basis of the Seas annexure unaccounted cash payment of rupees 20.10 crores was made out of which for assessment year 2007 - 08 INR 112,500,000, for assessment year 2008 - 09 INR 53,500,000 and for assessment year 2009 - 10 sum of INR 35,000,000 is been paid by Sri Sanjeev Mahajan to Shri ram Meher Garg director of the assessee for purchase of hotel building and as such addition has been made both in the hands of Mr. Sanjeev Mahajan and Mr. Garg under section 153A and section 143 (3) of the act. He further noted that the addition has been made on protective basis in the hands of the assessee company and on substantive basis in the hands of Mr. Garg. 9. On the issue of the reopening of the assessment challenged before him, he confirmed the action of the learned assessing officer. He held that that the learned AO has followed all the procedur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no question of applicability of provisions of section 269SS of the act. The learned CIT - A rejected the explanation of the assessee and held that when there was a sum of INR 201,000,000 remitted in cash by the Sanjeev Mahajan which is evident from the seized paper found during the course of search which is supported by the corroborative evidences of the bank statement and the financial statements of the appellant company, coupled with the statement of Mr. Sanjeev Mahajan and provisions of section 292C, relying on the decision of the honourable Delhi High Court , he took a view that the noting is on the documents are required to be read as a whole, when cheque entries are duly found to be recorded in the appellant‟s books of accounts, cash amount reflected therein leads to the conclusion that assessee has raised cash loan. Therefore he held that the cash loan has been accepted by the assessee outside the books of accounts which is an infringement of section 269SS of the act and therefore he directed the learned assessing officer accordingly to take the necessary action. 12. Therefore ultimately he deleted the addition of INR 112,500,000 made by the learned assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the reasons recorded which were supplied to the assessee only on 10/8/2010, and therefore same are recorded on that date only. The learned authorised representative referred to the reasons recorded by the AO wherein the about it was mentioned. He therefore submitted that at the time of issue of the notice no reasons were recorded. He once again relied upon the decision of the honourable Delhi High Court in 63 taxmann.com 201. 16. The 3rd contention against the reopening was that reasons recorded do not show escapement of income and the income alleged to have been escaped assessment is already added in the hands of other assesses Sri Sanjeev Mahajan and Mr. Rama Mahar Garg. He submitted that as the income has already been taxed in the hands of these persons there is no reason that the income has escaped assessment in the hands of the assessee. It was further submitted that assessee is nowhere in the picture in the whole transaction and therefore the reasons recorded by the learned assessing officer do not show any escapement in the hands of the assessee company. 17. He further stated that reopening could not be made to assess the income in the hands of the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s merely directed the learned assessing officer to look into whether same applies to the facts of the case are not. 22. The ld AR on the merits of the addition stated that that the learned CIT - A has relying on the findings of the ld CIT -Appeal in case of Mr. Sanjeev Mahajan and hold that presumption u/s 132 (4A) and 292C is applicable in the instant case. He stated that Sanjeev Mahajan was covered under the search, where in the instant case of appellant, there was no search conducted on the assessee and therefore the presumption u/s 132 (4A) read with section 292C of the act is not available to the revenue against the assessee. Even otherwise, it was submitted that these documents have not been recovered during the course of search pertaining to the assessee or belonging to the assessee. 23. He further stated that the income has already been assessed in the hands of Mr. Sanjeev Mahajan and Shri Ram Mahar Garg and therefore addition once again cannot be made in the hands of the assessee. 24. He further submitted that the learned assessing officer has already made the addition in the instant case as unaccounted income received by the assessee against the sale of the property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of action for the notice is to file return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the notice is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years." 28. Honourable Gujarat High court notices that there is no time limit for performing such acts. Therefore in Sahkari Khand Udyog Mandal Ltd. v. Asstt. CIT [2014] 46 taxmann.com 69/225 Taxman 51 (Mag.)/[2015] 370 ITR 107 (Guj.) (para 5.2) it held as under :- "13. It can thus be seen that there are four important stages once the Assessing Officer issues notice for reopening of the assessment. Such stages are: (i) the assessee if he so wishes, may demand the reasons recorded by the Assessing Officer after filing return in response to notice under section 148 of the Act, (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Assessing Officer shall supply the reasons recorded by him for issuing such notice within 30 days of the filing of the return by the assessee without waiting for the assessee to demand such reasons. (2) Once the assessee receives such reasons, he would be expected to raise his objections, if he so desires, within 60 days of receipt of such reasons. (3) If objections are received by the Assessing Officer from the assessee within the time permitted hereinabove, the Assessing Officer would dispose of the objections, as far as possible, within four months of date of receipt of the objections filed by the assessee. (4) This is being done in order to ensure that sufficient time is available with the Assessing Officer to frame the assessment after carrying out proper scrutiny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, howev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny. The requirement and the time-frame for supplying the reasons without being demanded by the assessee would be applicable only if the assessee files his return of income within the period permitted in the notice for reopening. Likewise the time frame for the Assessing Officer to dispose of the objections would apply only if the assessee raises objections within the time provided hereinabove. This, however, would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply in such cases." 12. Thus, it is clear that the court has set out a time line for submission of objections and deciding the same. However, at the same time, the court has also clarified that it would not mean that if in either case, the assessee misses the time limit, the procedure provided by the Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) would not apply. It only means that the time frame provided therein would not apply in such cases. Thus, in case where the objections are submitted by the assessee belatedly the time prescribed by the court would not apply, however, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isposal of them by a speaking order but passes the assessment order u/s 143 (3) read with section 147 of the act. This itself shows that reassessment proceedings requires to be quashed as the neither rejection not acceptance of the objections of the assessee has prejudiced the interest of the assessee to challenge the same before the higher forum. Therefore not passing a speaking order rejecting the objections of the assessee but passing an order u/s 147 of the act making the additions based on reasons recorded has caused serious prejudiced to the interest of the assessee. In view of this respectfully following, the judicial precedent cited above 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. 32. In view of our decision on ground number 1 of the appeal of the assessee ground number 2 - 4 of the appeal are not required to be adjudicated. 33. Accordingly, appeal of the assessee in 1830/del/2014 is allowed. 34. Both the parties submitted that facts in the appeal of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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