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TMI Blog2022 (11) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... n law, the Ld.CIT(A) was right in deleting the addition of Rs.1,86,052/- on account of disallowance of Salary and Travelling Expenses. 3. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 4. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 3. During the hearing, at the outset, the learned Authorised Representative ('learned AR') wishes to press the petition dated 14/02/2022 filed under Rule 27 of ITAT Rules, 1963, whereby the assessee has raised jurisdictional ground challenging the validity of reassessment proceedings under section 147 of the Act. The aforesaid petition was taken on record and the present appeal was heard on same. 4. The brief facts of the case as emanating from the record are: The assessee is engaged in the business of trading in shares, goods and merchandise. For the year under consideration, the assessee filed its return of income on 23/10/2007 declaring a loss of Rs. 9,80,562. The return of income filed by the assessee was processed under section 143(1) of the Act and returned income was accepted. Thereafter, assessee's case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the belief that income has escaped assessment. Further, reasons recorded by the AO are reasons to suspect and it shows that AO wanted to conduct further examination/verification. 8. On the other hand, during the hearing, the learned Departmental Representative ('learned DR') submitted that reassessment proceedings were initiated based on information received from CBI and thus were initiated based on credible information. Learned DR further submitted that as per the information received it was prime facie established that unsecured loans appearing in the books of the assessee company are not genuine loans. 9. We have considered the rival submissions and perused the material available on record. The learned DR, vide its written submission dated 24/08/2022, has objected to the admission of the petition filed by the assessee under Rule 27 of ITAT Rules, 1963. As per the learned DR, since the assessee did not file any cross-appeal or cross-objection against the impugned order passed by the learned CIT(A), therefore, the assessee cannot invoke Rule 27 of the ITAT Rules, 1963 to question the validity of the proceedings under section 147 of the Act. It is the submission of learned DR tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alidity of the proceedings goes into the root of the matter and for this reason, the assessee should not be precluded from raising a challenge to that part of the order which was decided against him by the CIT(A)......." The Hon'ble Delhi High Court further observed as under: "20. Having analyzed the judgments relied upon by the Revenue and not finding same to be of any assistance Ja the Revenue, we now proceed to examine the legal position that emerges from a plain reading of the provision in question. In fact, we feel the controversy sought to be raked up by the Revenue to deprive the Appellant | Respondent before ITAT] an option to raise jurisdictional grounds of objection is completely misplaced. If we refer to Rule 27 of ITAT Rules, 1963, a bare reading thereof manifest that a Respondent has a right to support the impugned order, without having filed any cross appeal or cross objection. This understanding emerges from the language of the said provision which begins with the words "The Respondent, though he may not have appealed." This means that the provision is to enable a Respondent to effectively defend the order appealed before the Appellate forum. The expression "thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt (in appeal), and the decision on the said issue has no bearing on the final decision of the CIT(A), then invocation of Rule 27 to challenge the correctness of the same cannot be sustained. Rule 27 and the provisions dealing with cross objections operate in separate fields, although there is certain overlap between them. Evidently, if cross objection is not filed, the Respondent would run the risk of being faced with a situation that it cannot succeed in getting anything over and above the order in appeal being confirmed. If the Respondent wants to assail an independent issue that has been decided against him in the order appealed by the Appellant, which has no bearing on the result of order impugned in appeal before the Tribunal, the appropriate remedy would lie in of filing a cross appeal or cross objection. In that event, as explained above, Rule 27 cannot be pressed into service to have the same upset or overturned. 21. Therefore, arguably Rule 27 has à limited sphere of operation, but this cannot be whittled or narrowed down to the extent, the Revenue would like us to hold. We cannot read Rule 27 in a restrictive manner to hold that the said provision can only be in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal had a bearing on the final order passed by the CIT(A), because if the said issues were to be decided in favour of the appellant herein the assessee, that would have been an additional reason to delete the additions made by the A.O. 23. ........... 24. ........... 25. ........... 26. The upshot of the above discussion is that Rule 27 embodies a fundamental principal that a Respondent who may not have been aggrieved by the final order of the Lower Authority or the Court, and therefore, has not filed an appeal against the same, is entitled to defend such an order before the Appellate forum on all grounds, including the ground which has been held against him by the Lower Authority, though the final order is in its favour In the instant case, the Assessee was not an aggrieved party, as he had succeeded before the CIT(A) in the ultimate analysis. Not having filed a cross objection, even when the appeal was preferred by the Revenue, it does not mean that an inference can be drawn that the Respondent- assessee had accepted the findings in part of the final order, that was decided against him. Therefore, when the Revenue filed an appeal before the ITAT. the Appellant herein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot based on facts which were neither alleged nor admitted nor proved and which the other side was never called upon to meet in the lower court. But, if all the facts necessary to sustain a fresh ground which he wants to urge are undisputed facts which are already on record and the contention which he wants to raise is a pure question of law, we do not see why there should be any difficulty in his way in raising the same, or any difficulty in the way of the appellate court to allow him to do so." 13. As is evident from the record, in the present case, the assessee challenged the validity of reassessment proceedings under section 147 of the Act before the learned CIT(A) and vide impugned order (at page 41) said grounds raised by the assessee were dismissed. Thus, it is not a case wherein the jurisdictional issue has been raised for the first time before us vide petition filed under Rule 27 of ITAT Rules, 1963. Therefore, in view of the aforesaid judicial pronouncements, we find no merits in the submissions of learned DR objecting to the admission of the petition under Rule 27 of ITAT Rules, 1963. Accordingly, the petition filed by the assessee under Rule 27 of ITAT Rules, 1963 is ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employees are directors. They are falsely submitting the business of purchase and sales of software in most of the companies though none of the companies are having any infrastructure or manpower of the same. (Insider Trading with listed company in a stock market) Shri Arun Dalmia and Shri Harsh Dalmia through their concern namely M/s. Basant Marketing P. Ltd. and M/s. Satya Securities Ltd. has acquired holding of 5.55% in Granules India Ltd. Without following norms of Securities and Exchange Board of India Act, 1992. They in connivance with promoter and brokers namely Mr. Mahendra Kumar Khirodwala and Mr. C. Krishna Prasad MD of M/s. GIL acquired huge quantity of shares in the name himself and his family members. SEBI has levied penalty of Rs. 10 lakh on 27.03.2009. The assessee company is one of the beneficiaries which have received bogus accommodation entries. Investigation carried out by the CBI-ACB has established prima facie that unsecured loans appearing in the books of the assessee company are not genuine loans, but were only bogus entries whose source is not genuine. Therefore, I have reason to believe that the income chargeable to tax has escaped assessment. Noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on 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 of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced." (emphasis supplied) 17. From the reasons recorded by the AO, in the present case, it is evident that reference has been made to the report of ADIT (Investigation), which is based on the investigation carried out by the CBI. In the aforesaid reasons, on one hand, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment." 20. As noted above, it is the duty of the AO to record the reasons clearly and unambiguously and no inference can be drawn therefrom. Therefore, in view of the aforesaid findings and respectfully following the aforesaid judicial pronouncements, we are of the considered view that in the present case reasons recorded by the AO are not only vague but also lack the vital link between the alleged material and the belief that income of the assessee has escaped assessment. 21. Accordingly, the impugned order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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