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TMI Blog2022 (8) TMI 1354X X X X Extracts X X X X X X X X Extracts X X X X ..... ng been reopened only on the basis of information from Investigation Wing without any tangible material or enquiry and hence the order subjected to revision was ab initio void. 2. For that the Ld. Pr. Commissioner of Income tax erred in invoking the provision of section 263 on the reassessment made by the AO when the reassessment proceedings were not valid since the reasons recorded and that reasons supplied to the assessee were different and hence the order subjected to revision was ab initio void. 3. For that the Ld. Pr. Commissioner of Income tax erred in invoking the provision of section 263 on the reassessment made by the AO when no sanction as required under the spirits of section 151 were obtained by the AO and hence the order subjected to revision was ab initio void. 4. For that the issue of notice u/s 148 was bad in law since no proper sanction was obtained and given after application of mind. 5. For that the Ld. Pr. Commissioner of Income tax erred in invoking the provision of section 263 on the reassessment made by the AO when the Hon'ble Jurisdictional ITAT had already held the transaction of shares in Tuni Textile Mills as genuine even prior to the reopening do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any tangible material and sanction u/s 151 of the Act and on the sole reason that the reasons recorded by the AO and that supplied by the AO to the assessee were different. To support the above contentions, the ld. Counsel, placed reliance on the judgment of the ITAT Kolkata Bench in the case of Classic Flour & Food Processing Pvt. Ltd. vs. CIT, order dated 05.04.2017 in ITAs No.764 to 766/Kol/2014; order of the ITAT Kolkata Bench in the case of Jaiprakash Gupta vs. ITO, in ITA No.1934/Kol/2019, order dated 18.03.2020; order of the ITAT Kolkata Bench in the case of Ganapati Developers vs. ACIT, vide ITA No.139/Kol/2020; and the order dated 02.11.2020 and order of the ITAT Delhi Benches in the case of Jansampark Advertising & Marketing Pvt. Ltd. vs. ITO, vide ITA No.3132/Del/2018, order dated 12.08.2021. 4. Replying to the above, the ld.CIT-DR vehemently submitted that the validity of reassessment order u/s 143(3) r.w. section 147 of the Act and notice issued u/s 148 of the Act cannot be challenged in the appeal filed by the assessee against the revisionary order of the ld.PCIT passed u/s 263 of the Act. The ld.CIT-DR submitted that the best option available for the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee again took us through the order of the ITAT, Kolkata Bench in the case of M/s Classic Flour & Food Processing Pvt. Ltd. (supra); order in the case of Jaiprakash Gupta vs. ITO (supra); order in the case of Ganapati Developers vs. ACIT (supra); and order of the ITAT Delhi Benches in the case of Jansampark Advertising & Marketing Pvt. Ltd. (supra) and submitted that the validity of reassessment order passed u/s 143(3) r.w.s 147 can be challenged in the appeal filed by the assessee against the revisionary order u/s 263 of the Act and the assessee is also entitled to challenge the validity of such reassessment order on various grounds available to him as per the mandate and scheme of section 147 to 151 of the Act. 7. On careful consideration of the above rival submissions, first of all, we may point out that the submissions of the ld. Counsel of the assessee challenging the impugned revisionary order u/s 263 are two-fold, viz., (i) the assessee is entitled to challenge the validity of reassessment order passed u/s 143(3) r.w. section 147 of the Act in the appeal filed by the assessee against the revisionary order u/s 263 of the Act by which such reassessment order has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree and such a defect cannot be cured even by consent of parties." 10. The ITAT Mumbai bench made a reference to another decision of the Hon'ble Supreme Court in the case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193 and the decisions in the case of Indian Bank vs Manilal Govindji Khona (2015) 3 SCC 712. The ITAT Mumbai bench also held that if order of assessment passed u/s 147 of the Act was illegal and nullity in the eyes of law then that order cannot be revised by invoking powers u/s 263 of the Act by CIT. The Mumbai Bench has in this regard placed reliance on the decision of Hon'ble Delhi bench of the Tribunal in the case of Krishna Kumar Saraf vs CIT in ITA NO.4562/Del/2007 order dated 24.09.2015 wherein it was held as follows :- "17. There is no quarrel with the proposition advanced by Id. DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been equated to primary proceedings and the proceedings u/s 263 passed equated to collateral proceedings. It has further been held based on various judicial pronouncements of the Hon'ble Supreme Court that if the primary proceedings are non-est in law or void on the ground of lack of jurisdiction then the validity of such proceedings can be challenged even in an appeal arising out of collateral proceedings. We have already set out the ratio laid down in these decisions and we do not wish to repeat the same. Suffice it to say the law is well settled that invalidity of the primary proceedings for want of proper jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding. In view of the aforesaid legal position we admit the additional grounds for adjudication." 9. In view of the above, we note that the coordinate Bench, after considering the similar legal issue, held that 'suffice it to say the law is well settled that invalidity of the primary proceedings for want of proper jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding.' Further, in the subsequent order in the case of Concord Infra Project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before issuing notice u/s 148. 13. Apropos the second contention of the ld. Counsel of the assessee challenging the validity of reassessment order i.e., no tangible material was in the hands of the AO at the time of initiating reassessment proceedings and without applying his mind to such material and without forming a valid reason to believe that income has escaped assessment, the AO has initiated reassessment proceedings and issued notice u/s 148 of the Act is concerned, the ld. Counsel of the assessee has placed vehement reliance on the judgment of the Hon'ble Supreme Court in the case of CIT vs. Odeon Builders Pvt. Ltd. (2019) 418 ITR 315 (SC) to submit that if there is no creating of third party information by the AO, then, no addition can be made in the hands of the assessee. We are in agreement with the contention of the ld.CIT-DR that this order do not pertain to a situation where the assessee had challenged the initiation of reassessment proceedings by alleging that the AO did not apply his mind to the third party information and did not form a proper reason to believe that income has escaped assessment. Per contra, from the reasons recorded by the AO in the order sheet d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .06.2020 in ITAs No.2755, 2756, 2757/Del/2002 with the following observations and findings:- "8. A reading of the above clearly establishes that the reasons supplied to the assessee are not the very same reasons recorded and found in the assessment record. Alienation of the assessee against the Revenue is that it gave few extracts of the reasons to them to defend it against the reopening of the assessment and when cornered before the higher authorities, the revenue comes out with the detailed reasons recorded by the Assessing Officer, and such furnishing of a bridge or part of reasons is deprecated by higher forums as recorded by a coordinate Bench of this Tribunal in the case of Wimco Seedlings (supra). 9. For the sake of completeness we think necessary to extract the relevant observations of the coordinate Bench in the case of Wimco Seedlings, which is an as under: - "27. On perusal of above two statements (one) the reasons supplied it to the assessee and (two) the reasons some before the High Court, it is apparent that both are altogether different. It is not denied that in context and in substance they are same but there should be same ad verbatim. It cannot be the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to paragraph 5(d) of the counter-affidavit wherein it is stated that the true copy of the reasons recorded by the Assessing Officer and the approval granted by the Commissioner of Income-tax is enclosed as annexure A. Annexure A purports to be a form for recording the reasons for initiating proceedings under section 148 and for obtaining approval of the Commissioner of Incometax. Serial No. 11 of the form pertains to " reasons for the belief that income has escaped assessment" . Under this heading, the following is recorded : ... ... ... 17. It is apparent by comparing these purported reasons with the reasons extracted earlier and which had been supplied to the petitioner that the two are different. While in the reasons supplied to the petitioner there is no mention of the allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form in annexure A to the counter-affidavit, there is a specific allegation that there was failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies of Sh. Sanjay Rastog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that the petitioner had failed to disclose fully and truly all material facts necessary for assessment, the Assessing Officer had no jurisdiction to issue the notice under section 148 and initiate action under section 147 after four years from the end of the relevant assessment year. Despite this precise objection, there is no mention of the reasons noted in the said form in the impugned order dated March 2, 2005. If the respondents had regarded the reasons noted in the said form to be the " actual" reasons, it would have been very easy for the Assessing Officer to have countered this objection by simply referring to the reasons noted in the form and saying that the allegation of failure to disclose is very much there. It is obvious that the reasons noted in the said form were never regarded as the reasons for initiating action under section 147 of the said Act. Thus, the respondents cannot now be permitted to fall back on those purported reasons noted in the said form. 32. Secondly, let us assume for the sake of argument that the " actual" reasons were those as noted in the said form. Then why did the Assessing Officer communicate a different set of reasons to the petitioner? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious that the reasons were never communicated to the petitioner and it is only for the first time in the course of the present writ petition that those " reasons" have surfaced. Therefore, if he proceeded on the assumption that the " actual" reasons were those as noted in the said form, the proper course of action as directed by the Supreme Court in G. K. N. Driveshafts [2003] 259 ITR 19 , has not been followed. It would mean that the reasons which were supplied to the petitioner were not the actual reasons and the objections which were taken by the petitioner were not to the actual reasons and the speaking order dated March 2, 2005, which was passed was also neither on the basis of the actual reasons nor the objections to the actual reasons. The entire process would be a sham and would amount to making a mockery of the law as settled by the Supreme Court. Therefore, for this reason also, the notice under section 148 as well as all proceedings subsequent thereto as also the order dated March 2, 2005, are liable to be quashed." 30. As before us also the reasons recorded by the assessing officer produced before the honourable High Court are quite different and number eight wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommunicating the same to the assessee enabling the assessee to file objections and the requirement of passing a speaking order are all designed to ensure that the AO does not reopen the assessment which has been finalized on mere whim or fancy and that he does so only on the basis of lawful reasons and since these steps are also designed to ensure complete transparency and to ensure that the principles of natural justice is followed and, therefore, any deviation from these steps would result in nullifying all the proceedings and reassessment order passed by the AO. 17. In view of the foregoing discussion, we reach to a logical conclusion that the initiation of reassessment proceedings by the AO and reassessment order passed u/s 143(3) r.w. section 147 of the Act dated 28.12.2018 was not valid. Therefore, we are compelled to hold that the initiation of reassessment proceedings in the present case was not valid as the mandatory requirement of section 147 of the Act has not been satisfied. We, therefore, hold that since the reassessment order dated 28.12.2018 was not valid, consequently, the subsequent revisionary order passed by ld. PCIT u/s 263 of the Act, dated 23.03.2021, is also ..... X X X X Extracts X X X X X X X X Extracts X X X X
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