TMI Blog2023 (4) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... New Delhi dated 26.12.2018. 2. The assessee has raised following grounds of appeal:- 1. The order of assessment is bad in law as the conditions for assumption of jurisdiction u/s. 147 and framing of assessment u/s. 148/143(3) of the Income Tax Act were not complied with by the AO and the Ld. CIT(A) erred in law and on facts in confirming the aforesaid action of the AO. 2. The Ld. AO erred in law and on facts in framing the assessment order u/s. 148/143(3) without issuance of any mandatory valid notice u/s. 143(2) of the Act and the Ld. CIT(A) erred in law and on facts in confirming the action of the AO and holding that issuance of notice u/s. 143 (2) was not necessary. 3. The Ld. AO erred in law and on facts in not passing a separate speaking order rejecting the objections filed by the assessee to initiation of proceedings u/s. 147 before proceeding to pass assessment order and the Ld. CIT(A) erred in law and on facts in confirming the action of the AO. The Ld. AO had passed a composite assessment order including the rejection of objections. 4. The Ld. AO erred in law and on facts in making an addition of Rs. 1000000/- to the returned income u/s. 68 of the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he reasons recorded (PB Pg. 9-10) the Ld. Assessing Officer (AO) made an allegation on the basis of some report received from the Investigation Wing, that the assessee has received Rs. 10,00,000/- from M/s. S.R. Cables Pvt. Ltd. which was an accommodation entry. The assessee filed return in pursuance of notice under Section 148 (PB Pg. 12) as on 08.09.2014. Without issuing any notice under Section 143(2) the Ld. AO proceeded with the assessment proceedings by issuing notice under Section 142(1) as on 08.09.2014 (PB Pg. 14). After considering the submissions made by the assessee the Ld. AO completed the assessment at an amount of Rs. 10,03,490/- after making an addition of Rs. 10,00,000/- received by the assessee from M/s. S.R. Cables Pvt. Ltd. holding the same to be accommodation entry in nature. Before the Ld. Commissioner of Income Tax (Appeals) [CIT(A)], the assessee challenged the order of the Ld. AO on merits as well as legality of reopening. One of the main contentions raised by the assessee was that the assessment was framed without issuing statutory notice under Section 143(2). It was also contended that the reasons recorded were without due application of mind on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. It is a fact on record that the assessment has been framed without issue of statutory notice under Section 143(2) of the Act which is invalid and bad in law. Reliance is placed on the following judgments:- Indus Towers Limited v. Dy. CIT, W.P.(C) 1560/2014, dt. 29.05.2017, Delhi High Court SLP dismissed by Supreme Court, [SLP No. 34285/2018 dt. 21.1.2019] Pro CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd., [2016] 383 ITR 448, Delhi High Court Pro CIT v. Staunch Marketing Pvt. Ltd., ITA No. 935/2015 dt. 28.04.2017 CIT v. Delhi Kalyan Samiti, ITA No. 696, 697, 699/2015 dt. 22.03.2016 Pro CIT v. Silver Line, [2016] 383 ITR 455, Delhi High Court Alpine Electronics Asia PTE Ltd. v. Director General of Income Tax Others, [2012] 341 ITR 247, Delhi High Court Pro CIT v. Paramount Biotech Industries Ltd., ITA No. 887/2017 888/2017 dt. 24.10.2017, Delhi High Court Asst. CIT v. M/s. Hotel Blue Moon, [2010] 321 ITR 362 (SC) Rajender Kumar Sehgal v. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned. The issue has also been discussed by the Delhi ITAT in the case of ACIT vs. Dimension Promoters Pvt. Ltd. ITA 1105/Del/2011, dt. 02.01.2018. Gross non-application of mind by the Ld. AO while recording reasons. A perusal of the reasons recorded placed at PB Pg. 9-10 it can be seen that the Ld. AO has relied upon the report received from the Investigation Wing and there is no independent application of mind of his own. He has merely incorporated the contents of the report of the Investigation Wring and has simply acted upon the said information. The contents of the reasons recorded by the Ld. AD for reopening the assessment are summarized as follows:- (a) In first Para the Ld. AD has made a reference to the report of some Investigation Wing, and also quoted the modus operandi of some bogus companies as discussed in the report. (b) In the second paragraph a table has been made where there is a reference of some accommodation entry received by the assessee from M/s. S.R. Cables Pvt. Ltd. (c) In the third paragraph only the facts of filing of return by the assessee has been stated and on the basis of that a conclusion has been deri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the opinion already formed by someone else. The officer who is supposed to write down his reasons to believe has to independently apply his mind. Further, and more importantly, it cannot be a mechanical reproduction of the words in the statute. When an authority judicially reviewing such a decision peruses such reasons to believe, it must be apparent to the reviewing authority that the officer penning the reasons has applied his mind to the materials available on record and has, on that basis, arrived at his reasons to believe. The process of thinking of the officer must be discernible. The reasons have to be made explicit. It is only the reasons that can enable the reviewing authority to discern how the officer formed his reasons to believe. As explained in Oriental Insurance Company v. Commissioner of Income Tax [2015] 378 ITR 421 (Delhi), the prima facie formation of belief should be rational, coherent and not ex-facie incorrect and contrary to what is on record . A rubberstamp reason can never take the character of 'reasons to believe', as explained by the Supreme Court in Union of India v. Mohan Lal Kapoor: (1973) 2 SCC 836. In Dilip N Shroff v. CIT (2007) 6 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant contents of the written submission are reproduced as under:- In the above case, it is humbly submitted that the following material facts and relevant case laws may kindly be considered with regard to issue of accommodation having been taken by the assessee from non-descript entities being operated, managed and controlled by an accommodation entry provider Mr. S K Jain. Arguments by ARJ Appellant on 15.02.2023 mainly focused on the issue related to non issue of notice u/s. 143(2) by the A.O. in response to the letter filed by the assessee company on 08.09.2014 wherein t was submitted that the assessee filed the ITR u/s. 139(1) for the A Y under consideration on 03.11.2007 and the same be treated as returned filed in response to notice issued u/s. 148 of the I.T. Act. It is humbly submitted that the decision of Coordinate Bench in ITA No. 2461/Del/2019 (A.Y. 2010-11) in the case of Rakesh Aggarwal Vs. ITO, W-48(1), New Delhi may kindly be considered by the Hon'ble Bench. Copy of this decision is enclosed Factual Matrix Background: There was a search conducted at the premises of Mr. S K Jain resulting in the seizure of large number of incriminating do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed discussion of the facts material of the case and following the decision of the Hon'ble Supreme Court in the case of Konarks Structural Engineers P Ltd. Vs DCIT [2018] 96 taxmann.com 255 [SC], Pawan Kumar M. Sanghvi Vs ITO [2018] 97 taxmann.com 398 [SC], Pee Aar Securities Ltd. DCIT [2018] taxmann.com 602 [Delhi], CIT Vs Nova Promoters Finlease P Ltd. [18 taxmann.com 602 [Delhi], 206 Taxman 207, 342 ITR 169, VIT Vs Ultra Modem Exports P Ltd. [40 taxmann.com 458 : 220 Taxman 165 [Delhi], vide para 6.1 to 6.13 [Page 7 onwards] NOTE: In the present case, in spite of several opportunities having been provided, during the assessment and appellate proceedings the assessee has failed to produce any evidence to prove that the money introduced in its books as share capital and share premium was genuine transaction in the fact and circumstances of the case. It could not produce any reliable evidence to controvert the findings of the Department which include AO's findings and evidences gathered as a result of Search and Seizure operation in S K Jain case. Hon ITAT Delhi in ITA Nos. 6991 to 6997/Del/2014 in the case of Virender Kumar Jain and ITA No. 6998/to 7004/Del/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing merely going on the basis as to what are the conditions to be fulfilled in order to reopen an assessment. The Hon'ble Supreme Court in its decision delivered on 28.03.2022 [SLP [C] No. 22921 of 2019] in the case of DCIT Vs M R Shah Logistics P Ltd. laid down the proposition that reopening of a case u/s. 147 with an objective to verify some information regarding accommodation entry or share premium and share capital is valid and sufficiency of that material cannot dictate the validity of Notice u/s. 148. Therefore, the AO had a prima-facie case on the basis of specific and credible information about the assessee to record reasons for reopening of the assessment [to quote the case specific information] The important question is........ Whether there was relevant material on which a reasonable person could have formed a belief which definitely was there in this case? Whether or not, the material would conclusively establish the escapement is not important. This aspect has to be examined subsequently in the reassessment proceedings. It is noted that the AO has applied his mind to the information available independently to arrive at the belief on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L NOS. 46536 TO 46539 46540 TO 46542 OF 2019 FEBRUARY 13, 2020, While discussing Section 151 of the Income-tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of reasons) - held that where necessary sanction to issue reopening notice under section 148 was obtained from Pro Commissioner as per provision of section 151, Pro Commissioner was not required to provide elaborate reasoning to arrive at a finding of approval when he was satisfied with reasons of reopening. [Ref. Para 42 and 43 of the said order] Hence, the AO had validly assumed jurisdiction u/s. 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s. 147 of the Act. On the issue of notice u/s. 143[2]: It is to noted that the notice u/s. 148 was issued on 6.3.2014 asking the assessee to file its return of income for the relevant A.Y. within 30 days time. However, assessee responded to the same vide letter dated 8.9.2014, much beyond 30 days, requesting the AO that the ITR filed u/s. 139[1] on 3.11.2007 may be treated as filed u/s. 148. As such there was no valid return having being filed u/s. 148 and no need to issue noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) may be treated as return filed in response to notice u/s. 148 of the Act. Thereafter, there is no whisper regarding issuance of notice u/s. 143(2) of the Act. The assessee has relied upon various judicial pronouncements to buttress the contention that the assessment so framed is invalid on account of non-issuance of notice u/s. 143(2) of the Act. The assessee has placed reliance on the following case laws:- Indus Towers Limited v. Dy. CIT, W.P.(C) 1560/2014, dt. 29.05.2017, Delhi High Court SLP dismissed by Supreme Court, [SLP No. 34285/2018 dt. 21.1.2019] Pro CIT v. Shri Jai Shiv Shankar Traders Pvt. Ltd.,: [2016] 383 ITR 448, Delhi High Court Pro CIT v. Staunch Marketing Pvt. Ltd., ITA No. 935/2015 dt. 28.04.2017 CIT v. Delhi Kalyan Samiti, ITA No. 696, 697, 699/2015 dt. 22.03.2016 Pro CIT v. Silver Line, [2016] 383 ITR 455, Delhi High Court Alpine Electronics Asia PTE Ltd. v. Director General of Income Tax Others, [2012] 341 ITR 247, Delhi High Court Pro CIT v. Paramount Biotech Industries Ltd., ITA No. 887/2017 888/2017 dt. 24.10.2017, Delhi High Court Asst. CIT v. M/s. Hotel Blue Moon, [2010] 321 ITR 362 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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