Income Tax Appellate Tribunal - Chandigarh
G.J. Holding Pvt. Ltd., Ludhiana vs Acit, C-2, Ludhiana on 30 January, 2024
आयकर अपीलीय अिधकरण,च डीगढ़ यायपीठ,च डीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, "A" CHANDIGARH
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No.1171/CHANDI/2019
िनधारण वष / Assessment Year : 2011-12
G.J. Holding Pvt. Ltd. बनाम ACIT, Central Circle-II,
Ludhiana
C/o G.S. Auto International
Limited, G.S. Estate, G.T.
Road, Ludhiana.
थायी लेखा सं./PAN NO: AAACG6664K
अपीलाथ /Appellant यथ /Respondent
िनधा रती क ओर से/Assessee by : Shri P.K. Goel & Sunil Arora, C.As
राज व क ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. DR
सुनवाई क तारीख/Date of Hearing : 18.12.2023
उदघोषणा क तारीख/Date of Pronouncement : 30.01.2024
आदेश/ORDER
Per Sanjay Garg, Judicial Mem ber:
Th e pre se nt app e a l ha s be e n p r e f er r ed by the assessee agai nst the or der date d 0 4 . 07.20 19 of the Co m m issi oner of I nc o me Ta x ( Appeal s)- 5, L udhi ana[hereinafter referred to as the 'CIT(A)'] pa sse d u/s 25 0 o f the I nco m e Ta x Act ( herei naf t er r ef err ed t o as the 'Act ').
2. Th e as s ess e e i n t his a ppeal ha s take n the f oll ow ing gro und s of app e al :
" 1 . T hat th e L d. C IT ( A ) whil e su s ta i n i n g ad d i ti on of ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 2 of 26
Rs. 2 ,0 0 , 90 ,0 00 / - ha s g r o ssly er r ed on f a ct s a nd i n l a w b y ig n o r in g th e f ac t th a t t he r eop en in g of a s se s s men t U / s 1 4 8 b y the L d .A . 0 . i s bad in l a w.
2 . T h at the L d. C KT ( A ) has e r r ed b o th o n f ac ts an d in l a w i n no t adj u dic at in g the g r o und s N o .2 , 4 an d5 of th e ap pe al f il e d bef or e h im by t he app ell a n t c o mp a ny wh ile c o nf ir m in g th e ad d i ti o n m ad e b y t h e L d . A .0 .
3 . T h at th e L d. C IT ( A ) has er r ed bo th in l a w a n d o n f ac ts in c onf ir m i ng th e ad d it i on m ad e b y th e L d . A . 0 . by ig n o r in g th e f ac t th a t the Ld . A . 0 . h a s c o mp le t e d t he as se ss me n tp r oce e din g s) wi thou t f ul l y d i sp o s in g of f a l l the obj e c t i o n s f il ed by th e app el l an t co mp an y ag a in s t t he r eo p en ing of asses smen t i n u t te r viol a t io n of l a w a s l a i d d o wn by t he H on'bl eSu pr eme C our t in G K N D r iv e sh af t ( In d i a ) L i m i t ed V s. IT O ( 200 3) 2 59 IT R 1 9 a n d v ar i o u so t he r ju d i c i al p r on oun c emen ts.
4 . T h at t he L d. C IT A) h as er r ed bo th i n l a w a n d on f ac ts in su stai n ing ad d i ti o n by ig n o r in g the d o cu men ts/v ar io us ju d i c i al pr on ounc eme n ts su b m i t te d by th e ap pe ll ant whic h pr o ve d th e id e n t i t y an d c r e di t wo r th ine ss of th e inve sto r s and g e nu in e ne s s of the tr an s ac ti o n sr equ i r ed u nd er l aw.
5 . T h at eac h g r o und of ap peal i s a se p ar a te g r o u n d an d wi t ho u t pr e j ud ic e t o e ac h o th er .
6 . T h at th e appe ll ant c r ave s per m i s s i o n to a dd / a l te r or to ta ke f r esh gr ou nd s of ap peal e i t he r b ef o r e or d u r i ng th e co ur se of h ear i ng. "
3. A per usal of t he abov e g r ounds of appea l w oul d r eveal that th e asse ss ee ap ar t f r om c hal l engi ng the ad di ti on of R s. 2, 00, 90 ,00 0/ - of shar e a ppl ic ati on m oney tr ea ted by t he Ass e ssi ng O f fi cer a s u nexp l aine d i nco me of t he asses see, has a l so assai led t he va li d ity of t he r eopeni ng of the asse s sm ent o n the g r o und tha t the As sessing O f f i cer has not di s pose d of the o bj e ct ions fi le d by the assessee ag ainst ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 3 of 26the r eo peni ng of the asse s sm e nt .
4. Th e ld. Co unse l f or t he asse s see ha s addres sed hi s arg uments m a inl y on G r o und No.3 rel a ti ng to the vali di ty o f the r eopeni ng of the a sses s ment f r a med u/s 147 r . w .s 14 8 o f the Act.
5. B ef ore procee di ng f ur ther, i t wil l b e r elevant her e t o r epro duce t he r easo ns r ecord e d b y the Assessi ng Of fi cer for r eop ening of the a sse ssm e nt as und e r :
" 1. A s p e r d ep ar tmen ta l E -f il i ng por t al th e a s se s s e e h a s f il ed r e tu r n U /s1 39 of I. T . A c t f or th e A. Y . 20 1 1 - 1 2 o n 30 . 0 9. 2 0 11 sho w ing a l o ss of Rs. 2, 9 18 / -. T h e r e tu r n , was p r o c e s se d U / s1 4 3( 1) of IT . A c t.
2. A se ar c h & se i zu r e oper ati on U /s1 32 of In c o m e T ax A ct, 19 6 1 wa s c ond uc ted on the G . S . G r o u p in cl u d in g i t s p r o mo t e r s/ d ir ec t or s on 0 3. 12 .2 014 . O n e o f th e a l l e g a t io n s ag ain st th e gr o up was th a t t hi s gr ou p i s e n g ag e d i n l ay er in g and p l ac emen t of u nac c oun ted m o n e y i n th e f o r m of sh ar e c ap i tal and sh ar e pr e m ium b y u s in g p a pe r e n ti ti e s spe c if ic al l y f l oate d f o r th i s p ur po se .
3. A su r v ey U / s 133A of the I. T . Ac t, 19 6 1 wa s c o n d u c te d on 0 3. 1 2 . 2 01 4 at the r eg i ster ed of f i c e of M / s G . J . H o l d in g . P v t. L td . i. e. 13 04, Pad m a T o we r - 1, R aje n d r a Pl ac e , N e w D e l h i. M an y of th e c omp an ie s shar e a c o m mo n a dd r e s s i. e . 13 0 4 , Pad m a T owe r - 1, R aje nd r a Pl ace , N e w D e l h i. T h e g r o u p c o mp any M / s G . J. H ol d i ng P v t. L td. h a s c h an g e d f o ur r eg i s t er ed of f ic es f r om 2 006 -0 7 to 20 13 i . e . E- 2 35 , G . K -1 , N e w D e l h i, 13 04 , Padm a T o wer -1 , N e w D e l h i , C -3 1 , Vik as P u r i, Ne w De lh i and pr e sen tl y A -2 2, T a g o r e M ar k e t, K ir t i N ag ar , N e w D el hi. A t the abov e men ti on e d a dd r e s s Sh . S at is h M o ng a, C . A . i s r unn ing a f ir m M / s S a ti s h M o n g a & As s o c i a te s. H i s sta t e me n t wa s r ec o r de d u /s 1 33 A of IT . Ac t, 19 6 1. Sh . Sati sh M o ng a is ad m it ted h an dl in g t he b u s in e ss of p lac emen t a nd l ayer i n g of u n ac c o un te d in c o me of G. S . G r oup comp an ie s and r e- in tr odu c t i o n t h e s a me i n ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 4 of 26
th e gr ou p comp anie s. T he se tr an sac ti on s ar e in th e n a t ur e of ac c om mod ati on en tr ie s th r o ug h du m my c o mp a n ie s un de r ta ke n by S h. Sa ti sh M ong a at t he in s ta nc e o f S h . N ee r a j T u l i, C FO of G . S . A uto Gr o up. T he g r o u p c o mp an y i. e . M / s G . J H o l d i ng P r iv a te L i m i ted wa s f o u nd; to be r ec e iv ed in v e stm en t s f r o m pap er c omp an i e s h av in g d o u b tf ul c r e di t wo r th ine ss an d gen uin eness, thereby g iv i ng in d i c a ti o n th at the se i nv e stm e n ts ar e n o th in g b u t i ts un ac co u n ted inc o me s. It h as be e n r e v e ale d t h a t t he f r o m th e f o l l o wing p aper en ti ti e s/p e r son s t he a s se s se e h a s r ec e iv ed b ac k i ts o wn un ac c ou nt e d mo ne y i n th e g ar b of sh a r e C a pi ta l an d sh ar e pr e m i um du r in g th e F in an c i al Y e ar 20 1 0 -1 1 r e l evan t to th e asse ssmen t ye a r 2 0 1 1 - 12 .
S l. No . N a me of the p ape r e n t it ie s A mo u n ts r e c e iv e d A .
Y . 20 1 1- 1 2 1 Ja sbir S ingh Ry ai t 5 8 .5 0 L ac .
2 R i tu M er c an t il e Pv t. L td , A - 1 1 0. 9 0 L ac .
14 7, D ef e nc e 3 S amb h av an C o m mer c ial 1 0 .0 0 L ac 4 S har m an E s ta te P v t. L td . 8 0 .0 0 L ac .
30 7, 5, Pu sa Ro ad , K ar o l B ag h, N e w D e lh T otal 2 5 9. 4 0 L ac .
In v e s ti g a ti on m ad e by th e Inve sti g a ti o n W in g of the D e pa r tm e n t h as f oun d th at asse ssee i s a b e ne f ic i ar y of ta k ing th e af or esaid ac c o m mod at i o n en tr i e s.
4. I h av e al so p er used v ar i ou s m ater i a l s an d r e p o r t f r o m In v e s ti g a ti on W i n g an d on th a t b a si s i t i s ob se r v e d th a t t he as se ss e e c o m pa ny ha s in tr o du c ed i ts o wn u n a cc o u n te d mo n e y in i t ban k ac c o un t. by way of a bo v e ac c o m mo d a ti o n en tr i e s. O n p er u sal of the d oc ume n t s o n r e c o r d a s we l l a s th e inf or ma ti on r e ceived i n th e c ase of Ass e s se e C o mp an y ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 5 of 26
th e i nc o m e am o un tin g to R s. 2 59. 4 0 L a c s h a s e s c ap e d as se ss me n t. T h e esc ap e men t of i nc om e h as b ee n cl e ar l y o n ac c o un t of f ail ur e on th e p ar t of the a s se s se e c o mp an y to tr u l y an d f u l ly de f ur n ish th e all m ater i a l s f ac t s n e ce s s a r y f or as se s sme n t. T h us, i t i s f it c a se f o r i ni ti a ti n g f or p r o c e e di n g s U /s 14 7 of th e Inc o me T ax A c t, 1 9 6 1 .
5. T h e p e r usal of the B al an ce Shee t a v a il ab le wi th t he D e pa r tm e n t, r ef lec ts th at t he au tho r iz e d c ap i ta l of the as se ss e e c o m pan y i s R s. 5 C r . f or F. Y . e n d i n g 31 . 03 . 2 0 1 1 r el e va n t to A :Y . 2011 -1 2 , ou t of wh ic h Is s u e d , S u bs c r ib e d an d P a id up c ap it a l i s R s. 55, 25 , 7 80 /- o n l y. In th e ca se , i t ha s be e n n o ti ce d ther e i s n o tr ad i n g tr an s ac ti o n t h a t i s of p u r ch ase and sal e, n o ac c u m ul at ed pr o f its in th e c ap i ta l r ese r v e d to ju st if y su ch h uge sh ar e ap pl i c a ti o n m o n e y . I t i s al s o n o ti c ed t he sai d sh ar e ap p l ic at io n in c r e a se d to R s. 5, 5 7 ,2 6 , 0 0 0/- dur i ng t he F. Y. 2010- 11 r e l e v an t to A .Y . 20 1 1 -1 2 a nd n o al l o tm e n t of shar e s we r e m a de n e i t he r d ur in g F . Y . 20 09 - 1 0 nor F. Y . 201 0- 11:
6. I h av e r e ason s to bel ieve t ha t u nac c o u n te d m o ne y of R s. 2, 5 9 ,4 0 , 0 0 0/- ha s be en in tr o du ce d un de r th e g ar b of sh ar e ap pl i c a ti o n mone y in the bo ok s of ac c o un t of th e as s e s se e c o mp an y whi ch has be en p as sed on to v ar io u s c o mp an ie s of G .S A u to G r ou p as un e ar thed d ur ing t he c o u r s e of se ar c h an d se izu r e o per a t ion in G . S G r ou p of c o mp an ie s.
O n th e b as i s of the f ac ts as s ta te d ab ov e . I h a ve r e a so n s to b el ie v e th at in c o me c har ge ab l e to tax a mo u n ti ng to R s . 2, 5 9 ,4 0 , 0 0 0/- has e sc ap ed a sse ssm en t . H e nc e , a n o ti ce U /s 1 48 r e ad wi t h sec t i on 147 f o r r eope n ing of as s e s s me n t i s r eq ui r e d t o be i ssued in h i s c ase .
8. In th i s c ase a r e tur n of i nc om e was f ile d f o r t h e y e ar un de r c o ns i der a ti on bu t n o sc r u ti n y as se s s me n t U / s 1 4 3( 3 ) of th e A c t wa s m ad e. A c c or d in g l y , in t h i s c a se , th e o n l y r eq u ir e me n t, t o i ni ti at e pr o ceed in gs U / s1 4 7 i s r e a so n to b el ie v e wh i c h h as been r e c or d ed above.
9. It i s per t in en t to men ti on h er e th a t in th i s c as e t he as se ss e e h a s f i l ed r e tur n of inc ome f o r th e ye a r u n de r c o ns id er a ti on but no a sse ss men t as s ti pu l at e d U / s 2 ( 4 0 ) of th e A c t was m ade and the r e tu r n of in c o me wa s o n l y p r o c e s se d U / s14 3( 1) of the A c t. In v i e w of th e a bo v e , ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 6 of 26p r o v i s io n s of c l au se (b) of exp lan ati on 2 to S e c t io n 1 4 7 ar e ap pl i c ab l e to f act s of th i s c a se a nd the as se s s m e n t y e ar un de r c on sid er at ion i s deem ed to be a c ase wh e r e in c o me c har ge ab l e to t ax has e sc ape d as sessme n t .
10 . In th i s c a se m or e t h a n f ou r y ear s h av e l ap se d f r o m t he en d of asse s smen t y e ar u nd er c on s id e r a ti o n . H e n c e , ne c e s s ar y sa nc ti on to i ssue no t ic e U / s 1 4 8 h a s b e e n ob ta i ne d sep ar at el y f r o m the P r i nc i p al C o m m i s s i o n e r of In c o me T a x a s pe r the pr o v i si ons o f sec tio n 1 5 1 o f t he A c t. "
6. Th e asse ss e e fi l e d the f oll ow ing ob j ect ions a git ati ng agai nst the r eope ni ng of the asses sme nt a s u nd er :
" Ref . No . PG SK A /201 8- 2019 / D a te d : 2 3. 1 0. 2 0 1 8 T h e A ss t t . C o m m i ssion er of Inc o me T ax C en tr a l C ir c l e - II K i tc h lu N ag ar M a r ke t, L u dh ian a S u b: - R eply t o no t ic e U / s 1 4 2( 1 ) a n d O b je c ti o n r eg a r di n g r eopen ing of asse s sme n t U / s 1 4 7 / 1 4 8 o f th e In c o me T ax A c t, 1 961 on the b as is of R e aso n s r e c o r d e d f or th e s a me f or the A ss t t. Y e ar 2 011 - 2012 - M /s G . J . H ol d in g s P r i v at e L i m it ed, A - 22. T agor e M ar ke t , K ir ti N a g ar , N e w D e l h i - PA N : A AA C G66 64 K .
S ir , Kin dl y r ef er to you r no t ic e U / s 1 42 ( 1) d at e d 15 .1 0 . 2 0 1 8 . In t hi s co nnec ti on, It is r e s pe c tf ul l y s u bm i t t e d t h a t the r e a son s t o bel i eve r e c or d ed by th e th e n L d . As se s sin g of f ic er ar e f ac tu all y i n c or r e c t an d m e r e l y b as e d on c o n jec t ur e s an d sur m i se s. T h ere i s n o c o g e n t m at e r i al o n r ec o r d to f or m the b el ief tha t any inc o me h a d e s c a p e d as se s sme n t.
T h e the n L d . A. O . h as men ti one d at S r . N o . 4 o f th e r ea so n s r e c or ded th at " I h av e al so p er u sed v ar i ou s m ate r i a l s an d r e p o r t f r o m In v e s ti g a ti on W in g an d on th at b as is it i s o b se r v e d th a t t he ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 7 of 26
as se s se e c o mp any h as i nt r odu c ed i s o wn un a c c o u n te d mo ne y i n i t bank ac c o un t by way of ab o v e a cc o m mo d at i o n en tr i e s" .
F r o m the ab ove , it i s evi den t th at t h e th e n L d . A. O . h as no t m ade any ind ep enden t en qui r y /inve s ti g a ti o n to f or m th e b el ief th a t in co m e had e sc aped asse ssme n t b u t r e li e d u p o n t he all e ge d in ve s ti g at io n m ade by t he Inv e s ti g at i o n wi n g .
F r o m the per u s al of the ab ove r e a so n s r e c o r d e d , i t i s c le ar th a t i t i s bor r o we d be l i e f /sati sf ac tio n e x c l u s iv e l y b a se d up o n th e al le ge d inve sti g ati on r e po r t/ m a te r i al wh i c h i s no t p e r m iss ib l e un der s ec t ion 14 8 .
T h e r e ar e ser io us f ac tu al er r or s in a s mu c h a s Sh . J a sb ir Sin gh R yai t, wh o is p r o mo te r / d ir e c t o r of the c o mp any a nd ar e bei ng asse ssed to In co m e T ax un d e r y o ur ju r is d ic ti o n and wh o al so m ad e an ap pl i c a ti o n U /s 2 4 5 C b ef o r e S e t tl e me n t C om m i ssion f or th e A s s t t. Y e a r s 2 0 09 - 20 10 to 2 01 5- 2 0 16 i s d e sc r ibe d as p ap e r e n ti ty h a v ing d o u btf ul , cr ed i t wor thin e ss and ge nui ne ne s s in t h e r e a so n s r ec o r de d.
T h e then L d. A sse s sing of f i ce r ha s me n t io n e d in the r ea so n s r e c or ded th at R s. 2 59 .4 0 L ac s h a s b e e n r e c e iv e d by wa y of sh ar e ap pl ic a ti on mon ey wh er e a s ac t u a l a mo u n t of sh a r e ap pl ic at i on mon ey r ece ived i s R s. 26 4 . 4 0 L ac s.
F u r th e r , as per r ea son s r ec or de d b y th e th e n L d . A . O . , i t h a s b e en men ti on ed th a t t he r e ar e no ac c u mu l at e d p r of its t o j u s tif y hu ge app lic at io n money wher e a s a s p e r A u d it e d B al an c e Sh ee t, A c c u mu l at ed p r o f it s ( R e se r v e & S ur pl us ) we r e R s . 1. 73, 36, 52 5/ - as o n 3 1. 0 3 . 2 01 0 an d R s . 1, 7 3 ,3 3 , 6 0 7/- as on 3 1. 03 .2 0 1 1. F ur the r , th e a s s e s se e c o mp any is an i nve stm e n t c o mp any a n d e a r n in c o me by wa y of d iv id end an d d ur ing th e y ear end e d 31 . 3. 2 0 1 0 an d 31 .3 .2 0 1 1, di v id end inc o me wa s R s. 5 3 3 50 0 /- an d R S . 12 78 9 5/ - r e sp. a s pe r aud i te d pr of it an d l o s s a cc o u n t an d he n ce to f or m be l ief th a t in co me h ad e s c ap e d as s e s s me n t on the b as i s of no tr ad ing tr ans ac ti on s i.e . p u r c h a se an d sal e as men ti on ed in r eason s r ec or d e d i s wr o n g an d f ac tu al l y i nc or r e c t. T he asse sse e comp an y h a s al l o tt e d sh a r e s of f ace value of R s. 3 07 62 00 /- ( 3 0 7 6 20 S h ar e s @ Rs . 1 0 /- e ach ) du r in g th e FY 2 0 09- 2 0 10 a s p e r au d it e d ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 8 of 26
b al a nc e shee t wh e r e as as pe r r ea so n s r e co r d e d n o al lo t m e n t of shar es was m ad e d ur ing th e f in a n c i al ye ar 20 09 -2 0 10 and 2 01 0- 20 11 wh ic h is ag a i n w r o n g an d c o n tr ar y to t he r e c or ds.
M or eo ver , th e asse ssee h as t r ul y d i sc l o se d t h e r e c e ip t of sh ar e ap pl i c ati on money a s we l l as sh ar e a ll o tm e n t in i ts b al a nc e shee t and al so f u ll y and t r ul y d i s c lo se d a l l m a te r i al f ac t s a nd no th ing h a s been c o n c e al e d an d h en c e t he r e i s n o v al id ba si s f or r easo ns to b e l ie v e th a t in co m e ha s e sc ap ed assess men t and h en c e n o ti c e i s s ue d U / s 1 4 8 on the b as i s of suc h v ag ue r e aso n s / bo r r o we d s a t i sf ac t io n m ay b e wi th dr a wn.
H e n c e , in v ie w of the abov e, i t is r e q ue s t e d th a t p r o c e e d in g s as in it ia t ed m ay k ind l y b e d r o p pe d .
T h an kin g y ou"
7. H o w eve r , the Ass es si ng O ff i cer r ej ect ed t he af or esai d o bj ecti o ns of the a sses se e vi d e or der da ted 20. 11.2018, the co nt e nts of t he or der r ef uti ng the ob jec ti ons r ai sed by t he asse s see, ar e r e prod uced a s u nder:
"T h e a sse ssee c o mp an y i s an inve s tm en t co mp a n y an d ear n in c o me b y the wa y of d ivid end in c o me . T h e c o p y of r ea so n s f or r eopen ing the c ase wa s p r o v id e d to t h e as se s se e by l e t t e r d at ed 31 .0 8. 2018 . T he as se s se e f i l ed wr i tt en o b j ec ti on s ag ain st the r eo pen ing of th e c a s e v id e h i s l e tt e r d a te d 23 . 1 0. 20 18 T h e asse ssee h as r a i sed f o ll o wi ng o b j ec ti o n s:
1 . A s per A sse ssee , the L d . A . O ha s n o t m ad e an y in dep e nd e n t e nq ui r y/ i nve st ig a ti o n to f o r m th e b e l ief th a t in co me h ad e sc ap ed as se ssme nt bu t r el i e d u p o n t h e al l e g e d in v e s ti g a ti on m ad e by the In ve sti gati on win g .
2 . "T her e ar e ser io u s f ac tu al e r r or s in a s mu ch a s Sh .
J a sb ir Sin gh R yai t, wh o is p r o mo te r / d ir e c t o r of the c o mp any an d i s bein g as se s sed t o i nc o me T ax u nd e r yo ur ju r is d ic ti o n and wh o al so m ad e an ap pl i c a ti o n U /s 2 4 5 C ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 9 of 26b ef o r e S ett le m en t C o m m i ss ion f or the A s s t , Y e ar s 2 0 09 - 20 10 to 2 01 5- 2 0 16 i s d e sc r ibe d as p ap e r e n ti ty h a v ing d o u btf ul , cr ed i t wor thin e ss and ge nui ne ne s s in t h e r e a so n s r ec o r de d. "
3 . T h e asse ssee h as po i nt ed o u t t h a t th e th e n L d , As se s sin g of f ic er h as men ti on ed in th e r e a so n r e co r d e d th a t Rs 2 59 .4 0 L ac s ha s been r ece iv ed b y way o f s har e ap p l i c a t io n mo n ey wh er e as ac tu al a mo u n t of sh ar e ap p l i c a t io n mone y r ec eived i s R s. 26 4. 40 L ac s.
4 . F u r ther the a sse sse e ha s po i n te d o u t th a t in the r ea so n s r ec or de d by the th en L d . A . 0 . , it h a s be e n me n t io n ed t ha t t her e ar e n o ac c u mu l a te d pr o f it s to ju s t if y hu g e ap pl ic at i on mon ey wh er e as as p e r A u di te d B a l an c e S he e t, A cc um ul a ted P r of i ts (R eser ve & S u r p l u s) we r e R s. 1, 7 3 ,3 6 , 5 2 5/- as on 3 1. 0 3 .2 01 0 and R s. 1 , 7 3 , 33 , 6 0 7 /- a s on 3 1 . 0 3. 2 01 1. " T h e as se sse e C o mp an y is an in v e s tm e n t c o mp any an d e ar n inc o me by way of di v id e nd a n d d u r ing t he y e ar e nd ed 3 1 ,3. 20 10 and 31. 3. 2 01 1 , d iv id e n d in c o me wa s R s. 5 335 00/- and R s. 127 8 95/ - r e sp. a s p e r au d it e d p r of i t an d l oss ac c ou nt an d hen c e t o f or m b e l i ef th a t in c o me ha d e sc aped asse ssmen t on t h e ba s i s of no tr ad ing t r an s ac ti o ns i. e. p ur c hase an d sal e wa s m e n ti o n e d in r ea so n s r e c or de d i s wr on g and f ac tu al l y in co r r e c t. T h e as se s se e c o mpan y ha s all o t t ed sh ar e s of f ac e v alu e of R s. 30 76 2 00 / - ( 307 620 sh ar e s @ R s. 10/- e ac h ) du r in g th e F. Y 20 09 -2 0 10 as p er au d i ted b al an c e she e t wh e r e a s a s p e r r ea so n s r e c or ded no all o t m en t of sh ar e s wa s m ad e du r ing t he f i nan c i al ye ar 2 009 - 20 10 and 20 1 0 - . 2 0 11 wh i c h i s ag a in wr o n g and c on tr ar y to r eco r d s"
5 . T h e ob jec ti o ns r ai sed by the as s e s se e h av e be e n p er u se d an d th e c l ai m s m ade by the a s se s se e in t he obj e c ti o n s f il ed have been c hec ked f r o m the r e c o r d .
a) r e g ar d ing the o bjec ti on of the a s se s se e a t Sr N o 1, i t i s su b m i t ted t h at the A .O thor ou ghl y ch e c ke d th e r e c o r d an d mo r eo v e r in th i s c ase spec if ic i nf or ma ti on was av a il a ble f r o m th e i nve sti ga ti on wi ng. So ob jec t io n r a i se d b y t h e as se s se e is n o t t enable .
b) R e gar d i ng the ob jec t i on of th e as se s se e a t Sr . N o 2 , 3 an d 4 , Al l th e se ar e the f ac t s and woul d b e c he c k e d d u r ing ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 10 of 26
t he r e a sse ssm e n t pr oce ed in g s af ter g iv in g o p p o r tu n i ty to t he as se s see . T he r eopen ing i s base d o n th e t an g i ble m ar ti al o n r eco r d pr o vid ed by in v esti g at io n wi ng , th u s t he in f o r mati o n and enq u ir y f r o m r ec or d ar e p r i m a f a ci e suf f ic ien t t o r e op e n th e c ase. M or e o ver r e l i an c e i s pl ac e d o n f oll o wi ng c a se l aws.
" T h e ju dgme n t o f Ho n'bl e S upr eme C o u r t - R a y m o n d W o ol l e n M il l s L id . v IT O( 19 99 ) 2 36 IT R 3 4 ( S C ) "in de t er m in in g wh e th er c o m me n c e m e n t of r ea sse s smen t pr o c eedin g s wa s v al id i t h a s o nl y to be se e n wh e t h er th er e wa s p r im af ac i e so m e m a te r i al o n t he ba s is of wh i ch th e de p ar t me nt co ul d r eop e n the c a se . T h e suf f ic ie n c y or cor r e c tne ss of the m ate r i al i s n o t a th in g to b e co n s id e r e d at th i s s ta ge.
i i . T h e j ud gmen t of Ho n'bl e S upreme C o u r t - A C IT v s . Ra j e sh Jh aver i S toc k B r oke r s( P) L t d. ( 20 0 7 ) r e po r t e d i n 2 9 1 IT R 5 0 0 " A s per t he dec i sion r end er e d b y th e H o n ' bl e S up r e m e Cou r t in th isc ase at the s ta g e o f in i ti a ti o n of r ea sse s smen t p r o c eed ing s und er sec ti on 14 7 of th e A c t, i t i s no t r e qu ir e d t o be c onc l u sivel y p r ov e n th a t i n c o m e h a s ac t u a l l y e sc aped a sse ssm ent . T he onl y r e q u ir e m e n t is th a t wh e t h er th e r e was any r el ev an t m a ter i al o n wh ic h a r ea so n ab le per so n c an f r o mbeli ef th a t t ax a bl e i n c o me h a s es c ape d a s se ssm e nt."
i i i. T h e de c i sion of jur i sd i c t ion H ig h C ou r t of Pu n j a b an d H ar y an a in the c ase of A r u nK u m ar G o y al V s. C I T ( 2 01 3 ) 81 D T R 12 3 ( P & H) .
" O n c e ther e ar e r ea son s f or th e a s se s s in g of f ic er to b el ie v e, whe t he r Su ch r easons or ig in at e ou t of th e r e c o r d al r e ad y sc r u ti n i zed o r o th er wi s e, he sh al l b e wi th in h i s C om pe te n ce to in i t ia te the r e- a sse s sme n t p r o ce e d in g s . T h e f or mati o n of b el ief b y the asse ssi ng of f ic e r mu s t a l wa ys 0 e t e n t at i v e an d no t a f ir m o r f in al c onc lus i o n a s th e l a t te r wi l l ne g ate th e v er y o bj ec t of g i vi ng an oppo r tu n i ty of h e ar i ng to t he a s se s see.R e as se ssme nt b ased on ag r e e m e n t to se l l wh i ch wa s si gne d b y b o thp ar ti e s i s hel d to be v al i d. "ITA No.1171/CHANDI/2019
Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 11 of 26iv . T he de c ision of H on'bl e S upr eme C o u r t in th e c a se of IT O v Sel ec te d B al ur b an dC o al C o. P v t. L td . ( 1 9 9 6 ) 2 1 7 IT R 5 9 7 ( SC ) .
" A le tte r was wr i t t en by th e C h ief M in i n g Of f ic e r to t he In c o me- ta x O f f i c er inf or ming him t h at in sp e c ti o n of a s s e s se e 's co l l ie r y sho we d, tha t tm er e v a s un der - r e po r tin g o f r ai s ing f igu r e s to t he ex tent in di c a te d in th e l e t te r , H e l d : T h e In c o me- ta x Of f i c er co ul d f or m a b el ief o n the b a s i s of th e l e tt e r th a t in c o me had be en un d er - asse s s e d o r h ad e s c a p e d as se s sme n t. H e nc e th e no ti c e i ssu ed u n d e r se c t io n 1 4 8 r ead wi th sec t i on 14 7( a) O n t he b as i s of th e l e t t e r wa s v a l id . "
v . Pr ati bh aF inv e st (P ) L td. v IT O ( 20 1 3 ) 2 0 1 5 ta x m a n 47 0 ( D el ) .
" R e a s se ssm en t o n the bas is of th e i n v e s ti g a ti on r e po r t wa s h el d t o be ju s ti f ied in r e spec t of c as h cr e d it s ( S ec t io n 68 ): R e op enin g o f asse s smen ton t he bas i s of in ve s ti g at i o n r ep o r t was j u stif ied . Al so, th e ad di ti on m ad e was ju s t if ie d ev e n th r o ugh t he same d id n o t f or m p a r t of ' r e as o n t o be l i ev e ' t o r eo pen asse ssmen t. C ash C r e d i ts a n d b a n k d e po s i ts wh i ch the a sse ssee co ul d no t su b s t a n ti a te wi t h su p p or ti n g doc u men tar y ev i den ce c oul d b e ad de d t o in c o m e . "
A f te r app l yi ng t he above ju d ic ial p r e c e d e n ts t o t he f ac ts of th e c a se, th e objec t io n sc anvasse d by th e a s s e s se e ag a in st th e in i ti a ti on of r e- as se ssme n t pr o c e e d i n g s ar e no tt en abl e . A c c or di ng l y, the und er s ig n ed is of th e c o n sid er ed op in i on th at ther e i sad e q u a te an d r e le v an t m a te r i al f o r f o r mi ng a r e ason ab l e bel i ef th a t ta x a b l e in c o me ha s e s c ap ed assessm en t an d, th er ef o r e , th e in i ti a ti o n of r ea sse s smen t pr o c e edi ng s by i ssu e of n o tic e u nd e r se c t i o n 14 8 of th e Ac t f or A . Y 2 01 1- 12 i s i n o r d e r . D u r in g t h e c o u r se o f r e- as se ssme n t pr oce ed in g s a d e q u a te o pp o r tu n i t y wi l l be af f or d ed to expla in th e c ase and th e r e sul ta n t o r de r wi l l be p assed a s per l a w on an ob je c t i ve ap pr a i s al of a l l t he f ac ts and the evid enc e s av ai l abl e. "
8. Ag a inst t he sai d rej ecti on pa sse d by the Assessi ng O f fice r , the as s ess e e f il ed a l e t te r d at ed 26. 11. 20 18 st ati ng ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 12 of 26
the r ei n that t he act i on of the As ses si ng O f ficer i n r ej ecti ng the ob j ecti ons fi l ed by t he a s ses se e w a s not as per t he l aw :
" R e f . N 0 . : P G K S A /20 18- 201 9\ D a te d : 2 6- 1 1 - 2 0 1 8 T h e D y. C omm i ssion e r of In co m e T ax Ce n tr al C ir c l e - II Ki t c h l u N ag ar M a r ke t, L u dh ian a S u b: - Asse ss men t p r oc eed in g s r el a ti n g to A s s t t. Y e ar 20 11 -2 0 12 - M /s G. J. H ol d in g s Pr i v a te L i m i te d , C - 3 1 , V ik asPu r i, N e w D e lh i- 1 1 001 8 PA N : A A A C G 66 6 4K - yo ur q u e r ie s r e g ar d ing S ir , Kin dl y r ef er to you r no t ic e U / s 1 43 ( 2) d at e d 20 .1 1 . 2 0 1 8 al ong wi thc o m mu n ic ati on no. A C IT / C C- I/ L a h/ Ref u ti ng O r d er /201819 /954 d at e d 2 0 .1 1. 2 0 1 8 v ide wh i ch y ou r go od- self hav e r ejec te d the o b je c ti on s r a i se d to r eo pen in g U / s 1 4 8of the Inc o me T ax Ac t wh i c h i s n o t a s p e r l a w.
R ef er :
T h e H on 'b le H igh C o ur t of D el hi d a te d 3 1 . 0 8. 2 0 1 7 i n W P(C) N o . 61 4/2 01 4i n the c ase o f Y um! R e s ta ur a n ts A s i a P te L td . v s . D D IT , hel d th at " the gl ar i ng m i st ak e s in t he pr of o r m a f o r a p pr o v al i s t he v al id gr o un d f or quash ing th e asse ssme n t o n t h e pr e m i se of no n - ap p l ic ati o n of mind by al l t he au th o r i ti e s in v o lv e d i n t he pr oc e ss of r ec or d ing r e a son s and p r o v id in g s a t i sf ac t io n U /s. 1 5 1 of the A c t" .
S i m il ar p o si ti on o f l a w has been u phe l d by H o n 'b le IT A T D el hi i n Pio nee r T o wn Pl anner s Pv t. L td . V s. D y . C om m i s si one r of In c o me in IT A N o. 13 2/ D e l / 2 0 1 8 d ec id e d ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 13 of 26
on 06 . 0 8 . 20 18.
H o n ' bl e IT AT Ag r a in c ase of Dheeraj H o sp i t al P L i m i ted V s. IT O he ld th at " If th e r eop en ing is b ased on inf orm a ti o n r e c e iv e d f r o m t he in ve s ti g a ti on depar tm e nt , th e r ea so n s m u s t s h o w t h a t t he A . O . in d epen den tl y ap pl i ed h i s m ind to th e in f o r m at i o n an d f o r med h i s o wn op in ion . If th e r e o pe n in g i s d o n eme c h an ic al l y, i t is vo id " .
H on 'b l e D el h i H C i n P r, C I T Vs . M e e n ak s h i O v e r s e as P v t Li m i t ed 39 5 I T R 67 7 h el d t h a t " M e r e r el ianc e o n the inf or mati o n r e c e iv e d wi th o u t ha v in g ac t ed th e r eo n bef or e r ecor d in g t he r e aso n s, sh o wi ng no n ap pl ic ati on o f mi nd o n th e p ar t of A . 0 . , i su n s u s t a in a bl e in l a w.
H on 'b l e D el h i H C i n P C I T Vs . G & G P h ar m a 3 84 I T R 147 h el d " th a t r eo pen ing o f asse ssme nt by a n A O b a se d o n t he in f o r mati o n r ec e ivedf r om the D ir ec to r of In v e s ti g at i o n wi t h ou t m ak ing an y ef f o r t to d i sc uss t h e m a te r i al s o n t he b a s i s o n wh i ch h e f or med a p r im a f aci e o p in io n th a t in c o me ha d e sc aped asse s s ment . T he Cour t he l d t h a t t h e ba s ic r eq u ir e me n t of s. 147 of the A c t sho ul d a pp ly ind e pe n de n t m in d in o r d er t o f or m r eason s t o bel ie v e th a t in c o me h ad es c ape d a s se ssm e nt h ad n o t be en f ulf i ll e d " .
H on 'b l e D el h i H C i n P CI T Vs . R M G P ol y v i ny l 3 96 I T R 5 he l d th a t " wh e r e i nf or m ati on was r ec e ived f r o m i nv e s ti g a t i o n wi n g th at ass e ssee wa sb en ef ic i ar y of a cc o m mo d at i o n en tr i e s b u t n o f ur the r in qu ir y wa s un de r t a ke nb y A O , s a id in f o r mati o n c oul d n o t be sa id to b e tan g ibl e m at e r i al a s p e r se an d, th u s, r e asse ssm en t o n said basi s wa s n o t ju s ti f i e d" .
A ls o R ef er :
Jo h r i L al HU F V S . C IT 88 IT R 439 ( S C ) ;
S h e o N at h S ingh V s. AA C 8 2 IT R 14 7 (S C ) ;ITA No.1171/CHANDI/2019
Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 14 of 26
G a g an S ar an & S ons P L i m it ed V s. IT O 1 3 0 IT R ( S C ) IT O V s. L akh m an i M a wal D a ss 10 3 IT R 4 3 7 ( S C ) H e n c e , in v ie w of th e above l eg al p o s i ti o n , r e o pe n i n g i s b ad in l a w.
H o we ver , r e pl y to the qu er ie s r a is e d / d e ta i l s a s r eq u ir e d in r e sp onse tono t ic e U /s 1 4 2 ( 1 ) ar e u n de r c o mp il ati o n and wi l l be sub m it te d y ou o n th e n e x t d at eof he a r in g. It is, th er ef or e, r e ques t you to ad jo u r n t h e da te f ixe d f or to d ay to so me o t her d ate pr ef e r a bl y in t h e f i r s t we e k of D e c ember , 2 018 .
T h an kin g y ou, Y o ur s s in c e r e ly FO R G . J. HO L D IN G P VT . L IM IT ED
9. Th e ld. Counse l f or the assess e e i nvi ting our att enti on to th e r eason s r ecord e d by t he As se ssi ng O ff icer has subm it ted t hat t he A ss essi ng O f fi cer hasbased his r easo ni ng f or re openi ng o f the a s sessm ent o nly on the basi s of r e port of t he I n ve s ti g ati o n Wi ng. H e, f ur ther in v it in g our at tent ion to th e rea so ns r e corded, has subm it ted that t he onl y info r m a tio n received by t he Ass e ssi ng O f f ice r fr om the I nves ti g ati on W i ng w as that the asse s see had r e c eiv ed s ha r e ap pl ica tio n m oney f r om paper co nc er n s w hi c h w as in the nat ur e of accom mo dati on ent r ie s, by w hi c h t he a s se ssee intr oduced his ow n unac co unted i nc ome. T he Asses si ng O ff i cer , ther eaf ter , note d cert ain f a cts ab o ut t he aut hor i zed ca pi tal of the asse s see com pa ny , pai d up c api ta l o f the assessee company and also it was not i ced tha t there w as no t r adi ng ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 15 of 26
tr ansa ct io ns of p urcha se a nd s a l e, no a c cumul ated pr of its in the ca pi tal r e serve d to jus ti f y such huge shar e appl ica t ion mone y . It was a l so not i ced that share appl ica t ion had i ncrea se d to Rs. 5, 57, 26,000/- dur i ng the F. Y. 2010- 11 r e lev ant t o A.Y . 2 01 1- 12 and no al lot m ent of shar es w er e m ade nei ther dur i ng F.Y . 2009- 10 nor dur i ng F. Y. 2010- 1 1. T he As se ss ing O f fi cer , ther ef or e, concl uded that h e ha d r ea sons t o bel i e ve t ha t una c co unt ed money of R s. 2, 59, 40 ,00 0/ - had been i ntr oduc ed u nder the g arb of shar e ap pli ca ti on m oney i n t he b o oks of account of t he asse s see c ompa ny, w hi ch ha s bee n p assed on to vari ous co m pa ni es of G . S Auto G r oup, as unear thed dur ing the co ur se of sea rc h and sei z ure op e ra ti on i n G. S G r oup of co m pa ni es. Th e Ass e ssing O f fic er , t he ref or e, r eop ened t he asse s sm ent.
9. 2 H o w eve r , i n hi s o bj ec tio ns, t he a ssessee ha d stated that th e Asse s sing O f fi cer di d not have an y cogent or tang ibl e mat eri a l to f o r m beli ef t hat t he a ssessee had in t ro duce d un ac counted i ncom e in t he g rab of share appl ica t ion mone y . That the Ass ess i ng O f fi cer has sim ply r el ie d upo n t he r eport of the inve s tig ati on w ing w hi ch w as a b or r ow ed sat i sf a cti o n of the As ses s ing O ff i cer , wi thout in depe n de nt ap pl icat ion of mi nd to the facts of t he case. I t w as poi nted out t hat t her e we r e se ri ous f act ual er ro r s in the r e a s ons reco rdedb y the As se s si ng O f fi cer. It w as po i nted o ut t hat Sh. J asb i r Si ng h Ryai t, w ho is ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 16 of 26
pr om o t er/ di r ector o f t he a ss e ss ee com pany bei ng a ssessed to I nco m e Ta x a nd he ha d als o ma de an appl i cat ion U /s 24 5C befo r e Sett lem e nt Com m i ssi o n and ther efor e, his id enti ty and c r edi tw or thiness wa s not doubted. Ho wever, the Asse s sing Of fi cer in the r ea sons r eco rded has m enti oned hi m as a pa per e nti t y. I t w a s al so poi nted that act ual fi g ur e of shar e a ppl ica tion m o ney received w as R s. 26 4. 40 Lacs , w here as , in the r ea sons recor ded t he fi gure w as m enti oned as 25 9. 40 la c s. Furt her , i t w as al so po i nted o ut t ha t i n the r easo ns r ec ord ed, i t w as o bser ved that t here w as no acc um ula t ed p r ofi ts to just if y huge share appl ica t ion mone y , whe r eas, as p er a ud ited bal ance she et, accum ul ated pr ofi ts of the a sses s ee w ere at Rs.
1. 7 3, 36, 52 5/- as on 31. 03. 20 1 0 and Rs. 1,73, 33, 607/- as o n 31 . 03.201 1. I t w a s a l so point ed out that the assessee co m pa ny w a sa n i nve stm e nt c o mpany and ear n inco me by w ay of di vide nd a nd d ur ing the y e ar end ed 31. 3.2010 and 31 . 3. 2011, di vi dend incom e was Rs .533500 /- a nd RS. 12 78 95/ - r esp ect ive l y as per a udi t ed prof i t and l oss acco un t. I t w a s al so c o ntend e d that the obser vati on of the Ass e ssi ng O f fi c er that incom e had escaped a ssessm ent beca us e t her e w as no t radi ng trans acti ons i .e. pur chase and s al e as m enti oned i n r ea s ons r eco rded w as w r ong and fa ctual ly i ncor rect. I t w as al so poi nted ou t the assessee that th e asse s se e comp any had a l lo tt ed shar es of f ace val ue o f Rs. 3076 200 /- (30 762 0 S ha res @ R s. 10/- each) dur i ng the FY 200 9- 2010 as p er a udi t ed ba lance sheet. The ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 17 of 26
Ass e ssi ng Of f i cer ha d noted t hat no al lo tm ent of shares w as m a de d ur ing the f ina nc ial ye ar 20 09- 2010 and 2010- 20 11 . The asse s see, ther ef or e, p le a ded t hat f act uall y w r ong o bse r vat i ons w er e made by t he As s essi ng O ff icer in the r easo ns r ec or ded and , ther ef or e, t he for mat ion of bel i ef that t he in c om e of the asse ss ee ha s e scaped a ssessment w as bas ed on f actua ll y w ro ng r easons. H e, ther efor e, has subm it ted th at r e openi ng of t he a s ses sment w as bad i n la w.
10 . H o w eve r , a per usa l of t he or der r ejecti ng t he o bj ecti o ns r a i sed by t he asses se e w ould show t hat the Ass e ssi ng O f fi cer has onl y note d that he has a ppli ed his m i nd t o the f acts o f the ca s e f or f or m ation of beli ef of esc apem ent of i ncom e. H ow ev e r, r el a ting t o the f actua l det ail s, the Ass es si ng O f fi c er ha s m enti oned t hat al l these w er e fac ts t ha t woul d be che ck e d d uri ng t he rea ssessment pr oc eedi ngs. Thi s me an s t hat t he As s es si ng O ff icer di d not appl y hi s m ind to the actua l f a cts of the case t o fo rm beli ef o f esc ape m e nt o f i ncom e f or the pur pos e of r eopeni ng of the asse s sm ent. The l d. C ounsel for the assessee in thi s r es pect has m ad e the f ol l ow i ng sub mi ssi o ns:
"b) Regarding the objections of the assessee at Sr. No. 2,3, & 4, All these are the facts and would be checked during the reassessment proceedings after giving opportunity to the assessee."
Sir, from the perusal of the above comments of the Ld. AO at Sr. No. 5 b), it is clearly evident that the Ld. AO has not disposed off objections to the issue of the notice u/s 148 for reopening of ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 18 of 26assessment meaning thereby that the Ld. AO has himself admitted that objections to the issue of notice u/s 148 against reopening of assessment has not been disposed off by him which is against the law and various judicial pronouncements on the issue. In fact, no jurisdiction is conferred to the Ld. AO to proceed with the reassessment proceedings without disposing off all the objections by speaking order. Even, the appellant vide letter dated 26.11.2018, again brought to the notice of the Ld. AO that objections has not been disposed off as per law referring the various judicial pronouncements on the issue and hence, reopening is bad in law.
REFER:
Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO &Ors.
"We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the above said five assessment years."
Hon'ble Bombay High Court in Tata Capital Financial Services Ltd. vs. ACIT "8. In the circumstances, the Revenue is directed to adhere to the following:
a) While communicating the reasons for re-opening the assessment, a copy of the standard form/request sent by the Assessing Officer for obtaining approval of the Superior Officer should itself be provided to the assessee. This would contain comment or endorsement of the Superior Officer with his name, ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 19 of 26
designation and date. The Assessing Officer shall not merely state the reasons in the letter addressed to the assessee.
(b) If the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Such a portion as it does not bear reference to the assessee concerned could be redacted.
(c) The order disposing of the objections should deal with each objection and give proper reasons for the conclusion.
(emphasis given)
(d) A personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted.
(e) If the Assessing Officer is going to rely on any judgment/order of any Tribunal or Court reference/ citation of these judgments/orders shall be provided along with notice for personal hearing so that the assessee will be able to deal with/distinguish these judgments/ orders.
9. A copy of the Order to be placed before the CBDT to issue guidelines to all its officers based on these directions with clear instructions that they shall be strictly followed. We only hope that, this will reduce the same errors being repeated by the concerned revenue authorities and will not drive the assessee to rush to the court. Thereby, the burden on the Court will also get reduced."
Hon'ble Delhi High Court in the case of SABH Infrastructure Ltd. vs. ACIT "19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments:
ITA No.1171/CHANDI/2019Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 20 of 26
(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided;
(ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment -
especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;
(iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons;
(iv) the exercise of considering the Assessee's objections to the reopening of assessment is not a mechanical ritual. It is a quasi- judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed." (Emphasis given).
Hon'ble ITAT Delhi in Archana Garg vs. ITO in 2916/Del/2018 dated 18.12.2018
11. I find that the Hon'ble Delhi High Court in the case of Multiplex Trading & Industrial Co. Ltd. (supra) has held as under
:
"32. There is yet another safeguard provided to the Assessee which was sought to be side-stepped by the AO. The Supreme Court in the case of G.K.N Driveshafts (India) Ltd. v. ITO: (2003) 259 ITR 19 (SC); (2003) 1 SCC 72 had held that if an Assessee if so desirous, could seek reasons for issuance of notice under Section 148 of the Act and the AO would be bound to furnish the same within a reasonable time. The Court further held that that ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.Page 21 of 26
the noticee would be entitled to file objections against the issuance of the notice and the AO would be bound to dispose of the same by passing a speaking order.
33. In the present case, the Assessee filed its objections by a letter dated 12th December, 2008 and requested the AO to drop the proceedings. The Assessee by its letter dated 18th December, 2008 6 ITA NO. 2916/Del/2018 (Archana Garg) sent in response to another notice, also provided its response in respect of the alleged accommodation entries, which were reported by the Investigation Wing. However, the objections filed by the Assessee were not disposed of by the AO and he proceeded to frame the assessment. This Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (supra) had observed that the requirements regarding recording the reasons to believe; communicating the same to the Assessee; permitting the Assessee to file the objections; and passing a speaking order disposing of the objections are all designed to ensure that the AO does not reopen assessments, which have been finalized, on his mere whim and fancy and that he does so only on the basis of lawful reasons. It was further held that a deviation from the directions issued by the Supreme Court in G.K.N Driveshafts (India) Ltd.(supra) would entail nullifying the proceedings. Although the AO is required to provide reasons, receive objections and pass a speaking order thereon, only after the notice under Section 148 of the Act has been issued; these requirements are an integral part of the safeguards which have been inbuilt for ensuring that the assessments are reopened only for lawful reasons and in a transparent manner. If the said safeguards are flouted, it would invalidate the exercise of jurisdiction under Section 147 and 148 of the Act."
Hon'ble ITAT Cuttack in case of Soumya Ranjan Mohanty vs. ITO in ITA No. 420 & 421/CTK/2017 "23. Thus, respectfully following the above well settled position of law, I find that it was mandatory for the Assessing Officer to dispose of the objections filed by the assessee against the issuance of notice u/s 148 of the Act by passing a speaking order and thereafter to wait for a reasonable time before proceeding with reassessment which the AO has failed to do. Consequently, the impugned reassessment orders for both the assessment years under consideration i.e. AY 2007-08 & 2009-10 are bad in law and are liable to be quashed. I accordingly quash the same ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 22 of 26and allow this ground of appeal of the assessee for both the assessment years under consideration."
Hon'ble Delhi High Court in the case of Scan Holidng Pvt. Ltd. vs. ACIT "15. In the facts of the present matter, we feel that the Assessing Officer has merely observed and recorded that the objections raised by the assessee were untenable and wrong, without elucidating and dealing with the contentions and issues raised in the objection letter dated 10th June, 2015. The Assessing Officer has not applied his mind to the assertions and contentions raised by the petitioner and the core issue to be examined and considered."
Hon'ble ITAT, Jaipur in case of Girraj Prasad Gilara HUF vs. ITO in ITA No. 354/JP/2019 "Thus the requirement of disposing off the objections against the notice issued under section 148 by a separate and speaking order is a mandatory requirement in view of the judgment of the Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (supra), the failure of the AO to dispose off the objections renders the reassessment order not sustainable in law. In the case in hand there is complete failure on the part of the AO to dispose off the objections against notice u/s 148 of the Act and not merely a procedural irregularity of separate and speaking order. Accordingly, in the facts and circumstances of the case and specifically involving the issue of addition of Rs. 2,71,317/-, we find that in this case the AO does not deserve a second inning. Accordingly, without remitting the matter to the record of the AO, the reassessment order passed by the AO is set aside being invalid."
Hon'ble ITAT, Delhi in ITO(E), Dehradun vs. M/s Icfai University, Dehradun on 23rd May, 2019 "10. We have carefully considered the orders of the authorities below. There is no dispute that the Assessing Officer has not dismissed the objections of the assessee by any speaking order. This is clearly the violation of the ratio laid down by the Hon'ble Supreme Court in the case of M/s GKN Driveshafts (supra) wherein the Hon'ble Supreme Court clearly laid down that where the notice u/s 148 was issued and the assessee filed objections.
ITA No.1171/CHANDI/2019Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 23 of 26The Assessing officer was bound to dispose of the same by a speaking order."
Hon'ble ITAT, Bangalore in Lakhsmana, Bangalore vs. The Income Tax Officer "9. We have given a careful consideration to the rival submissions. The facts are undisputed that the assessee raised objections with regard to validity of initiation of proceedings under section 147 of the Act by his letters dated 03.10.2016 and 24.10.2016 after filing the return of income. The admitted position is the AO has not disposed off the objections by a speaking order. Under the circumstances, it is clear that the mandatory procedure of disposal of objection by the AO before proceeding with the assessment has not been followed and therefore the order of assessment ITA No.382/Bang/2018 cannot be sustained and has to be quashed. The decision of the Hon'ble Karnataka High Court which is the jurisdictional High Court as far as this Tribunal is concerned in the case of Deepak Extrusions Pvt. Ltd., (supra) supports the case of the assessee. The other decisions of the Hon'ble Gujarat High Court and the Hon'ble Madras High Court referred to in the order of the CIT(A) being the decisions of the non-jurisdictional High Courts, are not binding in the light of the decision of the Hon'ble jurisdictional High Court. Consequently, we uphold the grievances projected by the assessee in ground No.3 n) and hold that the order of assessment passed is vitiated and liable to be annulled. In view of the above conclusion, we are of the view that the other issue raised by the assessee in its appeal does not require examination."
Hon'ble Delhi High Court in the case of Pr. CIT vs. Tupperware India Pvt. Ltd.
"6. The Court is of the considered view that after having correctly understood the decision of the Supreme Court in G.K.N. Driveshafts (India) Ltd. (supra) as mandatorily requiring the AO to comply with the procedure laid down therein and to dispose of the objections to the reopening order with a speaking order, the CIT (A) committed an error in not quashing the reopening order and the consequent assessment."
Besides, the above judgments, the appellant has also relied upon the following judgments.
ITA No.1171/CHANDI/2019Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 24 of 26- Hon'ble Gujrat High Court in case of Arvind Mills Ltd. vs. Assistant Commissioner of Wealth Tax
- Hon'ble Karnataka High Court in case of Deepak Extrusions Pvt. Ltd. vs. The Deputy Commissioner of Income Tax
- Hon'ble Bombay High Court in case of Asian Paints Ltd. 296 ITR 90
- Hon'ble Delhi High Court in case of Haryana Acrylic vs. The commissioner of Income Tax
- Hon'ble ITAT Delhi in case of DCIT vs. Multiplex Trading & Industrial Co . Ltd.
Copy of all judgments as mentioned above and relied upon by the appellant are enclosed herewith.
Sir, from the position as explained above, it is evident that the reassessment made by the Ld. AO without first disposing off the objections against issuance of notice u/s 148 for reopening of assessment by passing speaking order is against the law and deserves to be quashed.
11 . Fr o m the above d iscus si on, i t is ev ident that onl y the in f orm a ti o n be for e the Ass essi ng O f fic er w as the report of the i nv e sti ga ti on w i ng that u na ccount ed i nco me has been in t ro duce d t hroug h la y er i ng of g ro up com pa nies o f G .S. G r oup. Furt h er , the Asse ss i ng O f fi c er has not ed i n par a 6 o f the reas on s r e corded t ha t t he a fo resa i d m oney has been fur ther pa sse d on to v ar i ous co mpa ni es of G. S. Auto G r oup as unea rt hed dur ing t he co ur se of sear ch operat ion. H o w ever , t he a ssess e e has p roduc e d on fi le a cha rt to show that the as ses s ee had m ade i nve st me nt of maj or amount o ut of s har e ap pl ic a ti on mo ney i n R eli ance m ut ual funds and H D FC mut ual f unds. T he Ass essi ng O ff icer has not po i nted out t he nam e o f t he pa pe r com pani es of G . S. Aut o G r oup i n w hic h the ass es s ee had m ove d the unaccounte d funds b y w a y of l ay er i ng . T he l d. C ounse l has f ur t her ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 25 of 26subm it ted tha t t he onl y i nform at ion to t he Assessi ng O f fice r f r om i nves ti g at i on wi ng w as reg ardi ng the fa ct um of r ec eipt of shar e app l i cati on m oney . H ow ever , the reasoni ng gi ven by the As sessi ng O f f ice r f or form ati on of bel ief that the sai d m one y w a s out of unac c ounted i ncom e of the asse s see, w a s fac tual l y inc orre ct. The assessee has not o nl y poi nted out tha t th e a m ount ment i oned w as w r ong but al so th e o ther ob ser va ti o ns of the Assessi ng O ffi cer r egar di n g the accum ul at ed pr of i ts of t he asse sseea nd al so r egar di n g the all otm ent of share s of the assessee company dur i ng F. Y 200 9- 10 , w ere n ot cor r ect. The Asses sing O ff i cer al so fail ed t o ta ke not e of the f act t hat t he as sessee co m pa ny w as an i nvestm ent co m p any. The Assessi ng O f fice r has ba s e d hi s r ea soni ng s f or for m ation of bel ief r egar di n g the esc a pem ent of incom e on such f acts a nd o bse r vat i ons w hi ch we r e f a ct ual l y i ncor rect. Even w hen t he asse s see f il ed obje cti o ns a g ainst t he afor esai d incor rect fa cts re cor ded by t he As se s si ng O ffi cer , the A ssessi ng O f fice r r ef ute d t he sa m e b y ob s e rvi ng tha t t he sa me w ill be see n d uri ng t he r eas ses sme nt p r oceedi ngs. I t has bee n hel d ti m e and a gain by va rious cour ts of l aw that t he r eopeni ng o f the ass es sm e nt ca nno t b e do ne by the Assessi ng O ff i cer to make fi shi ng a nd r ovi ng e nq ui r ies . W hen th e Assessi ng O f fice r r ecei ve s inf or m a tion ab out t he escapem ent of in c om e ,he i s s uppos e d to c o rr el a te t he sa m e w i th t he asse s sm ent r e c or ds and a ft er veri fyi ng t he f acts, i f ther e is fo und ta ngi ble m ate ri al to f or m r easo ns to bel i eve tha t ITA No.1171/CHANDI/2019 Assessment Year : 2011-12 G.J. Holding Pvt. Ltd.
Page 26 of 26in c om e o f the a s ses se e has escap e m ent , onl y then t he r ec our se t o pr ov isi ons of sect i o n 1 47 r . w .s. 148 ca n be m ade. I n the case i n ha nd, t he asse ssee has str ongly r ef uted t he f act s note d i n t he r e aso ns r ecor ded, ho wever, the As s es si ng O f fi cer d id no t c onsi der the sam e a nd r ej ect ed object i ons of the as se s see in a m echan i cal m anner. Th e b el i ef form ed by the Ass es s ing O ffi cer on the basi s of suc h w r on g fa ct s, ther e fo re, w as not a val i d bel ief jus ti f yi n g the r eop ening of the a s se s sm ent. I n vi ew of var i ous j udi ci al pro no uncem e nts on t hi s i ssue, t he r eop ening of t he a ss e ssm e nt c annot be hel d vali d i n law. Th er efo r e, the r ea sse ssm e nt o rd er passed by t he Assessi ng O f fice r i s no t sust ai nab l e i n the ey es of l aw and the same is hereby q ua s hed a nd t he c o nsequ e nt ial addi tio ns are, acco r di ng ly, st and del et ed.
12 . In t he resul t, t he a pp eal of t he assessee stands al low ed.
O rde r p r on ou nced i n t h e O pe n C ou r t on 30 t h Ja n ua r y , 2 0 2 4.
Sd/- Sd
( VIKRAM SINGH YADAV) ( SANJAY GARG)
लेखा सद य/ Accountant Member याियक सद य/ Judicial Member
Dated: 30.01.2024.
RS