TMI Blog2024 (3) TMI 574X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings by an order dated 07.11.2016 is a non-judicious attempt of the AO to dispose the proceedings in a manner not known in law. Therefore, the reassessment proceedings are bad in law as the AO did not follow the mandatory procedure laid down in the case of GKN Driveshaft v. ITO [ 2002 (11) TMI 7 - SUPREME COURT] Valid sanction u/s. 151 or not? - It can be seen that the sanction has been granted only as per letter dated 24.03.2016 which does not bear the signature of PCIT and it is only a letter wherein ACIT is informing the AO that he is directed to communicate the approval given by the PCIT. The Performa attached with the same also does not bear the signature of PCIT. Thus, it is a case where no approval has been granted by PCIT u/s. 151 of the Act as approval should be given only after application of mind by the approving authority. It can be seen from the wording of letter the so called approval has been given subject to recording of reasons. The reasons are recorded after approval letter dated 24.03.2016. The reasons recorded and provided to the assessee also not bearing any date and there is only typed date in Performa which is 17.03.2016. No proper approval has been giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound that no valid approval u/s 151 of the Act has been granted by the PCIT as such approval was communicated to the AO by ACIT (H.Qrs.) as per letter dated 24-03-2016 and such approval is not under the self-signature of PCIT. Also, there is complete absence of recorded satisfaction by the PCIT himself under his own signatures which fact is apparent from the documents supplied in this regard to the assessee by the AO. Therefore, the impugned assessment order is bad in law on account of invalid. 5. That under the facts and circumstances of the case, Ld. NFAC has failed to appreciate that the reassessment is bad in law on the ground that the objections filed by the assessee as per letter dated 07.11.2016 have not been disposed of by a speaking order and the reassessment order is passed without considering the objections of the assessee. It is pertinent to note that letter dated 03-11-2016 is considered as objections and till that the copy of reasons was not provided to the assessee and in this very letter the assessee was asking for the copy of reasons. The Copy of reasons was provided only on 04-11-2016 and all these facts are recorded in the so-called order dated 07-11-2016 passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act was issued on 26.03.2013. However, no reassessment was completed for the notice issued u/s. 148 of the Act dated 26.03.2013. Thereafter, a fresh notice u/s. 148 of the Act was issued on 29.03.2016. The reasons recorded for issuance of the fresh notice u/s. 148 of the Act are as follows:- A search survey action was conducted by DDIT(Inv.), Unit- VI(2), New Delhi in the case of Shri. Surendra Kumar Jain and Shri.Virendra Jain on 14.09.2010. Various incriminating documents were seized and impounded. During the post search investigation of seized / impounded documents it was revealed that Shri.Surendra Kumar Jain and Shri.Virendra Jain were engaged in the business of providing accommodation entries by providing RTGS/cheque/PO/DD in lieu of cash, to a large number of beneficiary companies through various paper and dummy companies floated and controlled by them. M/s.Bharath Hi-Tech Builders P. Ltd. (PAN:AAACK8043N) is one of those beneficiaries companies who have obtained the accommodation entries from Shri.S.K.Jain Group via dummy companies named as M/s.Virgin Capital Services P.Ltd., M/s.VIP Leasing Finance P. Ltd., M/s.Zenith Automotive P.Ltd., and M/s.Lotus Realcon P.Ltd. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and share premium of Rs. 1,19,25,000. The A.O. concluded the share allotment amount and share premium amount was chargeable to tax as unexplained credit u/s. 68 of the Act. 5. Aggrieved by the order of reassessment completed u/s. 143(3) r.w.s. 147 of the Act (order dated 05.03.2017), the assessee filed appeal before the first appellate authority. Before the first appellate authority, the assessee had raised legal ground with regard to validity of reassessment. On the merit also, the assessee had raised the grounds stating that the addition made u/s. 68 is not justified since the assessee had discharged its initial onus of proving the identity and the genuineness of the transaction. It was stated that the assessee for the relevant assessment year was not obliged to prove the source of source. The CIT(A) by broadly classifying the legal grounds, rejected the contentions of the assessee. The relevant finding of the CIT(A) rejecting legal grounds reads as follows:- 6.1 The appellant in its Grounds of Appeal No. 1 to 4 assailed the AO in initiating the proceedings u/s 147 of the Act and proceedings to complete the re-assessment u/s 143(3) r.w.s 147 of the Act without appreciating the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the reasons recorded and the order disposing the objections u/s 148 of the Act and the legal position with regard to the application of the provisions of section 68 of the Act. The Hon'ble Delhi High Court in the case of Udit Kalra 220/2019 dated 08.03.2019 has dealt with the argument that the appellant was denied the right of cross examination of individuals whose statements was used by the revenue and did not find it to be relevant in view of other adverse findings of poor financial worth of the company whose shares were traded at abnormal high price. Further reliance is placed upon the decision of Hon'ble Delhi ITAT in the case of Nokia India Pvt. Ltd. vs. DCIT (2015) 59 taxmann.com 212 (Delhi). It has been held by the Hon'ble Bench in the said case that statements were duty provided to assessee during proceedings before Assessing Officer, however, assessee never asked for cross-examination, hence this plea of cross examination raised at such a later stage of proceedings was not justified. Further reliance is placed on the decisions of Hon'ble Supreme Court in the case of ITO vs. M. Pirai Choodi (2012) 20 taxmann.com 733 (SC)/(2011) 334 ITR 262 and M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of creditor does not establishes the authenticity of a huge loan transaction particularly when the ITR does not inspire such confidence. Mere submission of ID proof and the fact that the loan transactions were through the banking channel, does not establish the genuineness of transactions. Loan entries are generally masked to pump in black money into banking channels and such practices continue to plague Indian economy. In CIT Vs Empire Builtech (P.) Ltd Delhi High Court [2014] 43 taxmann.com 269 (Delhi)/[2015] 228 Taxman 346 (Delhi)(MAG.)/[2014] 366 ITR 110 (Delhi), it was held that u/s 68 it is not sufficient for assessee to merely disclose address and identities of shareholders; it has to show genuineness of such individuals or entities. In Rick Lunsford Trade Investment Ltd Vs CIT Calcutta High Court [2016] 385 ITR 399 (Cal)T it was held that when assesses failed to establish the bonafide of the shareholders unexplained share application money was rightly treated as assessee's income. Finally in Roshan Di Haiti v. CIT Supreme Court [1992] 2 SCC 378, it was held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of source u/s. 68 of the Act (amendment was applicable only from A.Y. 2013-14). It was submitted that the assessee had provided PAN of investors and all the amounts were received through banking channel. Therefore, the assessee had discharged initial onus that lay on it. It was further stated that the assessee was not provided with material relied on by the A.O. for rebutting the same and was not provided with opportunity to cross examine the persons from whom statements were recorded. 9. The learned Departmental Representative, on the other hand, submitted that post-search investigation in the case of Sri.Surendra Kumar Jain and Sri.Virendra Jain had clearly established that the assessee had taken the benefit of accommodation entries from them and share capital / share premium was introduced. It was submitted that the assessee has not proved the ingredients of section 68 of the Act. As regards the contentions raised on the validity of the reassessment, the learned DR relied on the finding of the CIT(A). 10. We have heard the rival submissions and perused the material on record. The A.O. has passed order dated 07.11.2016 (refer pages 39 to 43 of the paper book-101) purportedly d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the merits and facts of the case. 11. From the above facts, it can be seen from the reply dated 31.10.2016 of the assessee, it did not submit any objection with regard to reassessment proceedings initiated as per notice dated 29.03.2016 as by that time copy of reasons recorded in pursuance to notice dated 29.03.2016 were not supplied to the assessee. On these facts the disposal of objections for initiating reassessment proceedings by an order dated 07.11.2016 is a non-judicious attempt of the AO to dispose the proceedings in a manner not known in law. Therefore, the reassessment proceedings are bad in law as the AO did not follow the mandatory procedure laid down in the case of GKN Driveshaft v. ITO reported in (2003) 259 ITR 19 (SC). This proposition of law has also been followed by the Hon ble jurisdictional High Court in the case of Deepak Extrusions (P.) Ltd. v. DCIT reported in (2017) 80 taxmann.com 77 (Karnataka). The relevant observations are reproduced below:- 11. If the facts of the present case are examined in the light of aforesaid legal position, it is an admitted position that the reasons for re-opening of the assessment by issuing of the notice under Section 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O, Ward 22(4) (2021) 435 ITR 642 (Delhi). The relevant findings are as under:- 9.9 The provisions of Section 151(1) of the Act required respondent no.2 to satisfy himself as to whether it was a fit case in which sanction should be accorded for issuance of notice under section 148 of the Act and, thus, triggering the process of reassessment under section 147. The sanction order passed by respondent no.2 simply contains the endorsement `approved . 10. In our view, the sanction-order passed by respondent no.2 presents, metaphorically speaking `the inscrutable face of sphinx (See: Breen v. Amalgamated Engineering Union (1971) 2 QB 17500; Also see: State of H.P. v. Sardara Singh (2008) 9 SCC 392. In our view, the satisfaction arrived at by the concerned officer should be discernible from the sanction order passed under section 151 of the Act . 14. Similar view has also been held by the Hon ble jurisdictional High Court in the case of CIT v. H.M.Constructions reported in (2014) 43 taxmann.com 105 (Karnataka), wherein it has been held that provisions contained in section 151 of the Act are mandatory in nature. It was further held by the Hon ble Court that it has to be established by the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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