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TMI Blog2024 (7) TMI 1180X X X X Extracts X X X X X X X X Extracts X X X X ..... fact that the bank statement shows that the assessee has been receiving funds from Priority Exports Pvt. Ltd., a tainted / shell company as discussed in detail in assessment order. (c) The ld. CIT(A) erred in upholding genuineness of the loan transactions ignoring the fact that though the company Priority Exports Pvt. Ltd., has legal existence, but having no creditworthiness having meagre income of Rs. 265/- and existing as a pass through entity and is therefore, a shell entity as expounded by the Hon'ble Mumbai Tribunal in the case of DCIT Vs. Leena Power Tech Engineers Pvt. Ltd., [2021] 130 Taxmann.com 341 [Mumbai. Tri.] :- (i) A shell entity, by itself, is not an illegal entity, but it is their act of abetment of, and being part of, financial maneuvering to legitimize illicit monies and evade taxes, that takes it actions beyond what is legally permissible. (ii) These entities have every semblance of a genuine business- its legal ownership by persons in existence, statutory documentation as necessary for a legitimate business and a documentation trail as a legitimate transaction would normally follow. (iii) The only thing which sets it apart from a genuine business e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the approval / sanction u/s. 151 of the Act from the Principal Commissioner of Income Tax-3, was also annexed alongwith the disposal of the objection of the Assessee. The Rejection order alongwith Sanction u/s. 151 of the Act is enclosed herewith for your ready reference. h) That various Notices u/s. 142(1) of the Act to the Assessee and Notices u/s. 133(6) to Priority Exports Private Limited, the lender was issued, In response to the notice u/s. 142(1), to the Assessee and notice to Priority Exports Private Limited u/s. 133(6) various documentary evidences were filed with the learned A.O. like Income Tax Return Acknowledgment, confirmation of unsecured loans, audited financial statement, copy of bank statement. i) That the learned A.O. disregarded the documentary evidence under the pretext that the entities from which the lender i.e. Priority Exports Private Limited have received funds have not responded to the notices of the learned A.O. u/s. 133(6) and also because the nomenclature used in the books of accounts while recording the transaction with Priority Exports Private Limited wherein the Assessee has treated the same as unsecured loans and the lender Priority Exports Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Notice u/s. 142(1) dated 29.10.2019. Hence, the very reason or re-opening are based on factually incorrect fact which is impermissible in eyes of law, as it does not confer jurisdiction to the learned A.O. to re-open the completed assessment. 4.1.4 The Assess places its reliance on the following citations of the jurisdictional Hon'ble Bombay High Court for the said proposition:- i] Ankita A. Choksey vs. ITO & Ors 2019 TaxPub (DT) 0723 (Bom-HC) : (2019) 411 ITR 0207 ii] Arvind Sahdeo Gupta vs. ITO 2023 TaxPub(DT) 4810 (Bom-HC) iii] Tata Sons Ltd vs. Dy. CIT & ors. 2022 TaxPUB (DT) 1486 (Bom-HC) : (2022) 286 TAXMAN 0587 4.5 The Reasons for Re-opening are vague and based on guesswork as no nexus or live link with the Assessee is established alongwith the nature of transaction with the Assessee: 4.5.1 That the reasons are also completely silent regarding earlier regular assessment u/s. 143(3) of the Act and there is no corroboration of the said information with that of the Assessment record of the Assessee in the Original Assessment so as to attribute to the Assessee of not having disclosed all the material facts fully and truly. 4.5.2 That the Reasons for Re-opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessee in the Reasons of Re-opening. 4.8.2 During the original assessment queries were raised regarding unsecured loans and after receiving the document evidence of the Assessee the learned A.O. was satisfied regarding the nature, genuineness, creditworthiness and identity. Hence, no addition was made. 4.8.3 In this regards, the Assessee wishes to place its reliance on the following citations; a) Hindustan Lever Ltd. v. R.B. Wadkar (No. 1) 2004 TaxPub(DT) 1424 (Bom-HC): (2004) 268 ITR 0332. b) Punia Capital (P) Ltd. v. Asstt. CIT 2023 TaxPub(DT) 1203 (Bom-HC): (2023) 292 ΤΑΧΜΑΝ 0380 c) Firstsource Solutions Ltd. v. Dy. CIT & Ors. 2018 TaxPub (DT) 8132 (Bom-HC) d) Peninsula Land Ltd. v. Asstt. CIT & Ors. 2021 TaxPub(DT) 6345 (Bom-HC): (2021) 439 ITR 0582 e) Ananta Landmark (P) Ltd. v. Dy. CIT Pr. CIT UOI & Ors. 2021 TaxPub(DT) 5644 (Bom-HC): (2021) 439 ITR 0168 f) Sesa Sterlite Ltd. v. Asstt. Commissioner of Income Tax. (2019) 417 ITR 0334 4.9 Mechanical sanction: 4.9.1 The sanction U/s 151, it seeks, have been given mechanically. The concerned authority on viewing the Reasons for Re-opening have also not questioned that how the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the Assessee lied with the Asst. Commissioner of Income Tax / Dy. Commissioner of Income Tax and not with the learned A.O./ Income Tax Officer. Therefore the assessment order passed by the Income Tax Officer, Ward 4(1), Nagpur is void-ab-initio and is without pecuniary jurisdiction. 4.11.2 The Department in their grounds of Appeal have contended that in the case of Ashok Devichand Jain vs. Union of India & Ors, reported in (2023) 452 ITR 0043, the authority issuing notice had no jurisdiction in terms of CBDT INSTRUCTION NO.1/2011 [F.NO.187/12/2010-IT(A-I)], DATED 31-1-2011. Whereas in the instant case, the notice u/s. 148 was issued by the ACIT, hence the said decision of the Hon'ble Bombay High Court has no application in the instant case. 4.11.3 It is humbly submitted that the ratio laid down in said decision is that the authority which is issuing notice as well the authority which is doing assessment should have jurisdiction to assess the Income of the Assessee. Since the Income Tax Officer, Ward 4(1), had no jurisdiction to assess the income of the Assessee hence, the assessment is nullity in the eyes of law. 4.12 Non-mention of DIN on Letter disposing Objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdictional High Court, the sources of a source cannot be questioned in the Assessment Year 2012-13. The amendment to Sec 68 of the Act is prospective in nature and is applicable from Assessment Year 2023-24. 4.13.6 The Assessee places its reliance on the following citations; i) CIT v. Lovely Exports (P) Ltd. 2009 TaxPub (DT) 0261 (SC): (2009) 319 ITR 0005; ii) CIT v. Gagandeep Infrastructure (P) Ltd. 2017 TaxPub(DT) 1238 (Bom-HC): (2017) 394 ITR 0680 iii) CIT v. Veedhata Tower (P) Ltd. 2018 TaxPub(DT) 2030 (Bom-HC): (2018) 403 ITR 0415 iv) Rohini Builders v. Dy. Commissioner of Income Tax 2002 TaxPub(DT) 0125 (Ahd-Trib) : (2002) 076 TTJ 0521 4.14 Repayment of loan: 4.14.1 That it is humbly submitted that as the project of import of coal could not materialize because of stabilization of rate of coal in Vidarbha market and low grade of coal available in Indonesia. Hence, the Assessee refunded the amount to Priority Exports Private Limited in the subsequent Financial Year. The confirmation from Priority Exports Private Limited and Bank Statement of subsequent Financial Year i.e. 2012-13 are already enclosed. 4.14.2 The factum of repayment also establishes the creditwo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under section 148 of the Act is void-ab-initio - Notice was issued by the assessing officer who had no jurisdiction- Reassessment is held to be bad in law. The ITO-1 (5), Ludhiana reopened the assessment and issued notice dt. 30.03.2017 u/s 148 of the Act on the basis of reasons so recorded. In response to such notice, assessee filed return of income declaring income of 49,320/-. Thereafter, the assessment was framed by ITO-1(5), Jalandhar assessing the income at Rs. 6,71,915. The Tribunal observed that ITO-1 (5) Ludhiana issued the notice under section 148 r.w.s. 147 and thereafter the jurisdiction was transferred to ITO-1(5), Jalandhar who never issued the notice under section 148 of the Act but framed the assessment under section 143 of the Act. The Tribunal further relying on the decision of the ITAT Agra Bench in case of Jawahar Lal Agarwal v. ITO where the issue was similar held that the Assessing Officer may assess or reassess any income escaping assessment, if he has reason to believe such escapement of income. The section starts with the words 'If the Assessing Officer has reason to believe'. As per section 2(7A) of the Act, Assessing Officer means an Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases are also being transferred to your good office. Yours faithfully, Encl.: Case record(s) (Arvind R. Renge) Asstt. Commissioner of Income Tax, Circle-4, Nagpur Copy submitted to: 3. The Pr. Commissioner of Income Tax-4, Nagpur for favour of information 4. The Joint Commissioner of Income Tax, Range-4, Nagpur for kind information. Asstt. Commissioner of Income Tax, Circle-4, Nagpur 7. At this juncture, we referred to the communication dated 11th March, 2019, seeking approval for reopening u/s 147; OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-4, NAGPUR. Room No.301, Saraf Chambers, Sadar, Nagpur ------------------------------------------------------------------------------------------------------------------- F.No. ACIT, Cir.4/ Approval 147/Mittal/2018-19 Dated: 11.03.2019 To The Pr. Commissioner of Income Tax-3, Nagpur [Through Proper Channel] Respected Sir, Sub:- Approval for reopening u/s 147 in the case of M/s Mittal Energies of India [PAN: ADLPA7857K] for AY 2012-13-reg. ************* Kindly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to the ITO Ward 4(1), Nagpur. 3. The ACIT, Circle - 4, Nagpur has received an information from O/o Deputy Director of Income Tax (Inv.), Unit-4(1), Kolkata on 01.03.2019, on the basis of information received the ACIT, Circle - 4, Nagpur has recorded the reason and put up for approval for reopening u/s 147 of the Act in the case of M/s Mittal Energies of India Prop. Shri Nitin Murlidhar Agrawal (PAN : ADLPA7857K) for AY 2012-13 to the Pr. Commissioner of Income Tax 3, Nagpur on 11.03.2019. The Pr. Commissioner of Income Tax-3, Nagpur has given the approval for issuance of notice in this case vide letter dated 25.03.2019. Therefore, the case was reopened in the F.Y. 2018-19 and notice u/s 148 was issued by the ACIT, Circle - 4, Nagpur on 26.03.2019 4. Thereafter, the case was transferred from ACIT, Circle - 4, Nagpur to ITO, Ward - 4(1), Nagpur vide letter dated 28.08.2019 wherein ACIT, Circle - 4, Nagpur, since as mentioned in para 2 of the above that the last assessed income of the assessee for the A.Y. 2017-18 was Rs. 4,44,070/- i.e. below Rs. 15 lakhs. Therefore, the said case is transferred by the ACIT, Circle - 4, Nagpur to Ward - 4(1), Nagpur. The ITO, Ward - 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... since transfer of case can only be done u/s 127 of the IT Act, 1961. The defect is incurable and is not amenable to be corrected under Section 292BB also. Accordingly, we find no merit to interfere with the cogent order passed by the CIT(A). In fact, upon perusal of the judgment of Ashok Devichand Jain v. Union of India & Ors, (2023) 452 ITR 43, we find that it is in favour of the assessee. In this case the primary grounds that has been raised are; "1. That the Income Tax Officer who had issued the notice under section 148 of the Act, had no jurisdiction to issue such notice. According to the petitioner as per Instruction No. 1 of 2011, dated 31-1-2011 issued by the Central Board of Direct Taxes, where income declared/returned by any non-corporate assessee was up to Rs. 20 lakhs, then jurisdiction would be of Income Tax Officer and where income declared/returned by a non-corporate assessee was above Rs. 20 lakhs, jurisdiction would be of Deputy Commissioner/Assistant Commissioner. 2. The petitioner has filed return of income of about Rs. 64,34,663 and therefore, the jurisdiction will be that of Deputy Commissioner/Assistant Commissioner and not Income Tax Officer. Mr. Jain sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneral or Chief Commissioner or Commissioner - (a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) Where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this behalf. (3) Nothing in sub-section (1) or sub-section (2) shall be deemed to require any such opportunity to be given where the transfer is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment years 2007-2008, 2008-2009 and the earlier years as intimated in the letter/notice dated 30th July, 2009 issued by the respondent no.1 is also bad in law. The argument of the respondents that in case of intra city transfer no order is required to be passed, cannot be accepted in view of the settled position of law in Kashiram Aggarwalla (supra) and in S.L.Singhania (supra) wherein the validity of the orders were under challenge, meaning thereby an order recording transfer has to be on the records. The judgement in Subhas Chandra Bhaniramka (supra) where it has been held that in case of transfer of file under section 158BD resort has to be made to section 127 also applies in the instant case. The judgement in M.Α.Ε.Κ.Κ. Verma (supra) relied on by the Revenue is not applicable as it dealt with the question whether in case of intra city transfer notice is required to be served and whether separate orders of transfer are required under Wealth Tax Act, 1957 and Gift Tax Act, 1956. Therefore, since it has been held in this judgement that it is imperative on part of the respondents to issue order under section 127(3), the letters/notices under challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e in a case where the transfer of case is from any Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) and the offices of all such officers are situated in the same city, locality or place, but it does not dispenses with the statutory requirement of recording of the reasons for doing so by the concerned authority. As such, in the case before me, where jurisdiction over the case of the assessee had been transferred to ITO-2(1), Bhilai from ITO-1(4), Bhilai, i.e. within the same city, though no requirement of affording a reasonable opportunity of being heard to the assessee was required, but the pre-condition contemplated under sub section (1) of Section 127 of the Act, i.e., recording of reasons for doing so by the appropriate authority could not have been done away with. 12. My aforesaid view that the requirement of recording reasons u/s. 127(1) of the Act for transferring of a case from one A.O to another is mandatorily required, is supported by the judgment of the Hon'ble Supreme Court in the case of Ajanta Industries Vs. Central Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him. (2) Where the Assessing Officer or Assessing Officers from whom the case is to be transferred and the Assessing Officer or Assessing Officers to whom the case is to be transferred are not subordinate to the same Director General or Chief Commissioner or Commissioner - (a) where the Directors General or Chief Commissioners or Commissioners to whom such Assessing Officers are subordinate are in agreement, then the Director General or Chief Commissioner or Commissioner from whose jurisdiction the case is to be transferred may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, pass the order; (b) Where the Directors General or Chief Commissioners or Commissioners aforesaid are not in agreement, the order transferring the case may, similarly, be passed by the Board or any such Director General or Chief Commissioner or Commissioner as the Board may, by notification in the Official Gazette, authorise in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etter/notice dated 21st October, 2009 is patently illegal since it has been held in this judgement that in case of transfer within the same city, locality or place although the opportunity of hearing as postulated in section 127(1) and (2) has been dispensed with, other statutory formalities which includes issuing an order are required to be complied with. Similarly transfer of files for the assessment years 2007-2008, 2008-2009 and the earlier years as intimated in the letter/notice dated 30th July, 2009 issued by the respondent no.1 is also bad in law. The argument of the respondents that in case of intra city transfer no order is required to be passed, cannot be accepted in view of the settled position of law in Kashiram Aggarwalla (supra) and in S.L.Singhania (supra) wherein the validity of the orders were under challenge, meaning thereby an order recording transfer has to be on the records. The judgement in Subhas Chandra Bhaniramka (supra) where it has been held that in case of transfer of file under section 158BD resort has to be made to section 127 also applies in the instant case. The judgement in Μ.Α.Ε.Κ.Κ. Verma (supra) relied on by the Reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at ITO, Wd-34(2), Kolkata did not enjoy the jurisdiction over the assessee company by virtue of both the earlier Notification No.228/2001 dated 31.07.2001 (CBDT) as well as the latest Notification No.50/2014 dated 22.10.2014 of CBDT as discussed above. Therefore, the assessment completed by ITO, Wd-6(1), Kolkata on the strength of the notice issued u/s. 143(2) of the Act by ITO, Wd-34(2), Kolkata (who did not enjoy jurisdiction) is non-est in law and, therefore, is bad in law and consequently null in the eyes of law. Moreover, we also take note that Pr. CIT/CIT-12, Kolkata under whom ITO, Ward-34(2), Kolkata functioned has not issued any order of transfer of the jurisdiction as contemplated u/s. 127 of the Act to ITO, Wd-6(1), Kolkata. The Hon'ble jurisdictional High Court in Kusum Goyal (2010) 329 ITR 283 (Cal) has clearly spelt out that the ITO on its own cannot transfer the jurisdiction without order from the competent authority. In this case, we note that there is no mention in the assessment order of any transfer order passed by the concerned CIT-12, therefore, the contention of the ITO, Ward-6(1), Kolkata that the jurisdiction has been transferred from ITO, Wd-34(2) to IT ..... X X X X Extracts X X X X X X X X Extracts X X X X
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