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Shri Parasram Industries Pvt. Ltd Vs. Income Tax Officer Ward 8(3) & Anr
December, 21st 2015
*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                      Judgment delivered on: 11.12.2015

+      W.P.(C) 9094/2014

SHRI PARASRAM INDUSTRIES PVT. LTD                              .... Petitioner

                             versus

INCOME TAX OFFICER WARD 8(3) & ANR                             .... Respondents
Advocates who appeared in this case:
For the Petitioner           : Mr Sanjeev Sabharwal, Sr Advocate with Mr Deepak
                               Sharma
For the Respondents          : Mr Rohit Madan with Mr Akash Vajpai

CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA

                                       JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1.     This writ petition pertains to the assessment year 2007-08 and seeks

the quashing of the notice dated 23.08.2014 issued by the respondent No.1

under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as

`the said Act') as also all proceedings pursuant thereto, including the order

dated 26.09.2014, passed by the respondent No.1, dismissing the objections

filed by the petitioner.




WP(C)9094/2014                                                             Page 1 of 15
2.     The main grounds raised in the writ petition are that the re-assessment

proceedings having been initiated after four years from the end of the

relevant assessment year, required certain pre-conditions to be fulfilled. One

of the pre-conditions was that there was failure on the part of the assessee to

fully and truly disclose all the material particulars necessary for the

assessment. It is contended by the learned counsel for the petitioner that

apart from there being no such failure, in fact, there is not even an allegation

in the reasons that there has been such a failure on the part of the assessee.


3.     The second ground urged on behalf of the petitioner/assessee is that

this is a case of change of opinion inasmuch as the very issue sought to be

raked up by way of the impugned notice under Section 148 of the said Act

has been considered by the Assessing Officer during the time of the original

assessment under Section 143 (3) of the said Act.


4.     The original assessment under Section 143(3) was completed on

18.12.2009. This was, however, after a questionnaire had been issued to the

assessee during the assessment proceedings on 12.06.2009. Question No. 3

of the questionnaire specifically required the assessee to give the names,

addresses and PAN numbers of the shareholders along with their

percentages/ ratios.    This was provided by the assessee.          In fact, the


WP(C)9094/2014                                                         Page 2 of 15
Assessing Officer did not stop at that and issued notices under Section

133(6) of the said Act to the individual applicants. One such letter dated

04.12.2009 was issued to M/s Sino Credits and Leasing Limited. The said

letter reads as under:-

                               "OFFICE OF THE
                    INCOME TAX OFFICER, WARD 8 (3),
        ROOM NO. 196A, C. R. BUILDING, I.P. ESTATE, NEW DELHI-110002.
                               PHONE-23705348
        NOTICE UNDER SECTION 133 (6) OF THE INCOME TAX ACT, 1961

      F. NO. ITO/ W8(3)/143(3)/2009-10/                   Dated 04-12-2009

      To
      The Principal Officer
      M/s Sino Credits And Leasing Ltd
      308, Arunachal Building,
      19, Barakhambha Road
      New Delhi -110001
      Sir/Madam,

       Sub:- Assessment proceedings u/s 143(3) of the I.T.Act, 1961 in the case of
             M/s Shri Parasram Industries P Ltd for A.Y 2007-08-reg:-
                During the course of assessment proceedings u/s 143(3) of the I.T.
      Act, 1961 for A.Y. 2007-08 in the case of the above subject-mentioned
      Assessee Company it could be seen that you have made certain kinds of
      transactions with this company.

               You are requested to give a certified copy of the Ledger Account
      maintained by you in respect of the above mentioned assessee company giving
      necessary evidence with date-wise details and nature of such transaction made
      with this company alongwith your source thereof in respect of such transaction
      with you bank statement for the relevant period and latest copy of ITR.

              The above information should reach my office by 10-12-2009 failing
      which penalty u/S 272 A of the Income Tax Act, 1961 may be initiated.




WP(C)9094/2014                                                                Page 3 of 15
                                                     Yours faithfully

                                                            Sd/-

                                                    (PIYUSH SINHA)
                                                   Income Tax Officer,
                                                   Ward-8(3), New Delhi."


5.     The response to the said letter was given by M/s Sino Credits and

Leasing Limited by issuing a confirmation letter to the following effect:-

                             "SINO CREDITS AND LEASING LIMITED
                                              STOCK AND SHRE BROKERS
                      MEMBER: NATIONAL STOCK EXCHAGNE OF INDIA LIMITED
                            : OTC EXCHANGE OF INDIA

                            CONFIRMATION LETTER

      This is to confirm that we have paid Share Application Money of
      Rs. 58,90,000/- (Fifty Eight Lac Ninety Thousand only) vide Cheque /DD
      No. 1131 drawn on HDFC Bank of Rs 5500000/- and vide Cheque /DD
      No. 1135 drawn on HDFC Bank of Rs 590000/- and vide Cheque /DD
      No. 152512 drawn on HDFC Bank of Rs 1000000/- and vide Cheque /DD
      No.152554 drawn on HDFC Bank of Rs 1000000/- to Shri Parasram
      Industries Pvt. Ltd. 334, Sunheri Bagh Apartment, Sector-13, Rohini, Delhi-
      110085.

      We are assessed to Income Tax and our PAN is AAACS 1172 N.

      The Amount has been paid out of realization from our debtors.

      For Sino Credits And Leasing Limited
      Sd/
      Director"


Similar letters were issued to all the share applicants and confirmations were

obtained from the said share applicants.




WP(C)9094/2014                                                                Page 4 of 15
6.        The summary of documents filed by the petitioner/assessee and the

confirmations received from the third parties directly by the Assessing

Officer have been set out in Annexure P-XIII, which reads as under:-





     "SUMMARY OF DOCUMENTS FILED BY THE PETITIONER/ASSESSEE AND
CONFIRMATIONS RECEIVED FROM THIRD PARTIES DIRECTLY BY THE ASSESSING OFFICER
                                                                         ANNEXURE-P-XIII
     S. No.     Name of Party      Amount     Relevant documents filed by     Confirmations/
                                              Petitioner / Assessee and       documents directly
                                              verified   by    Assessing      received by AO u/s
                                              Officer during proceedings      133(6) and duly
                                              u/s 143(3)                      verified

     1        Advantage Software   1000000    i. Confirmation Letter filed    i. Confirmation
                  Pvt. Ltd.                                                      letter recd
                                              ii. IT Return filed             ii. IT Return recd

                                                                              iii. Bank Statement
                                                                                  recd
     2        Central Gum &        4000000    Confirmation Letter filed        i. Confirmation
              Chemical Ltd.                                                         Letter recd
                                                                               ii. IT Return recd

                                                                               iii. Bank Statement
                                                                                    recd
     3        Dhamaka Trading      1000000 i. Confirmation Letter filed       i. Confirmation
              & Constructions                                                       Letter recd
                                             ii. IT Return filed              ii. IT Return recd

                                             iii. Bank Statement filed         iii. Bank Statement
                                                                                    recd
     4        Giriasho Company     1000000 i.Confirmation Letter filed       i. Confirmation
                                                                                  Letter recd
                                             ii. IT Return filed             ii. IT Return recd

                                             iii. Bank Statement filed       iii. Bank Statement
                                                                                  recd
     5        KSA Chits            2000000 i. Confirmation Letter filed      i. Confirmation
                                                                                  Letter recd
                                             ii. IT Return filed             ii. IT Return recd

                                             iii. Bank Statement filed       iii. Bank Statement
                                                                                  recd




WP(C)9094/2014                                                                      Page 5 of 15
  6       New Star            1000000 Confirmation Letter filed          i.Confirmation Letter
                                                                             recd
                                                                         ii. IT Return recd

                                                                         iii. Bank Statement
                                                                              recd
  7       Sino Credits and    2000000 i.Confirmation Letter filed        i. Confirmation
          Leasing Ltd                                                         Letter recd
                                         ii. IT Return filed             ii. IT Return recd

                                                                         iii. Bank Statement
                                                                              recd
  8       V.A. Foods          1000000                    --              i. Confirmation
                                                                              Letter recd
                                                                         iii. Bank Statement
                                                                              recd
  9       Vasudeva Farms      1000000     i. Confirmation Letter filed   i.Confirmation Letter
                                                                              recd
                                          ii. IT Return filed            ii. IT Return recd

                                                                         iii. Bank Statement
                                                                              recd
  10      Vijay Conductors    5500000     i. Confirmation Letter filed   i. Confirmation
                                                                              Letter recd
                                          ii.IT Return filed             ii. IT Return recd

                                                                         iii. Bank Statement
                                                                              recd
  11      Vijay Shines         500000     Confirmation Letter filed      i. Confirmation
                                                                              Letter recd
                                                                         ii. IT Return recd

                                                                         iii. Bank Statement
                                                                              recd
  12      Vishrut Marketing    850000     i. Confirmation Letter filed     i. Confirmation
                                                                           Letter recd
                                          ii. IT Return filed              ii. IT Return recd

                                          iii. Bank Statement filed       iii. Bank Statement
                                                                          recd
  13      Zenith Estates      4000000     i. Confirmation Letter filed    i. Confirmation
                                                                          Letter recd
                                          ii. IT Return filed             ii. IT Return recd

                                          iii. Bank Statement filed       iii. Bank Statement
                                                                          recd
          Total               24850000




WP(C)9094/2014                                                                  Page 6 of 15
           Entries not in books of accounts (Reconciliation of Notice)

 Dated     Name of Party          Cheq /       Amount
                                  DD No.
10.04.2006 Vasudeva Farms         750092        900000

10.04.2006 Vasudeva Farms          750093       600000

10.04.2006 V.A. Foods              775320       600000

10.04.2006 Giriasho Company        397652       900000

27.06.2006 Omni Farms              776932       650000

             Total amount as per notice        28500000

                                                                                        "


 7.      It is only after all the above mentioned information was received by

 the Assessing Officer, that the assessment was framed under Section 143(3)

 on 18.12.2009.         In the assessment order itself, it has been specifically

 recorded as under:-

          "In response through Harish Kumar, C.A and A.R attended the
          proceedings and submitted the requisite details/ information/
          documents from time to time. Case was discussed with him."

 8.      It is clear that after the Assessing Officer examined the aspect of the

 share application money received by the assessee through the issuance of a

 questionnaire and notices under Section 133(6) of the said Act, the

 assessment under Section 143(3) of the said Act was framed on 18.12.2009.


 9.      The learned counsel for the petitioner placed reliance on the decision

 of this Court in Lahmeyer Holding GMBH v. Deputy Director of Income


 WP(C)9094/2014                                                          Page 7 of 15
Tax: [2015] 376 ITR 70 (Delhi) to submit that the re-assessment

proceedings would be invalid in case an issue or query is raised and

answered by the assessee in the original assessment and yet, the Assessing

Officer does not make any addition in the assessment order.          In such

situations, it would have to be accepted that the issue had been examined, but

the Assessing Officer did not find any ground or reason to make any addition

or reject the stand of the assessee. Relying on the said decision, it was also

submitted that when such an exercise is undertaken by the Assessing Officer,

it can be regarded as a case where the Assessing Officer forms an opinion

and that re-assessment on the very same ground would be invalid because

the Assessing Officer having once formed an opinion in the course of the

original assessment, although he did not record the reasons for the same,

cannot be permitted to change his opinion through the re-assessment

proceedings.


10.    We note that in Lahmeyer Holding GMBH (supra), a Division Bench

of this Court had placed reliance on the Full Bench decision in CIT v. Usha

International Limited: [2012] 348 ITR 485 (Delhi) (FB), wherein it was,

inter alia, held as under:-




WP(C)9094/2014                                                      Page 8 of 15
      "3.     Reassessment proceedings will be invalid in case an issue
      or query is raised and answered by the assessee in original
      assessment proceedings but thereafter the Assessing Officer does
      not make any addition in the assessment order. In such situations
      it should be accepted that the issue was examined but the
      Assessing Officer did not find any ground or reason to make
      addition or reject the stand of the assessee. He forms an opinion.
      The reassessment will be invalid because the Assessing Officer
      had formed an opinion in the original assessment, though he had
      not recorded his reasons."

11.    After hearing the submissions of the learned counsel for the petitioner

and also the submissions made by the learned counsel for the respondents,

we are of the opinion that the present case is also one of change of opinion.

This is so, because, the questionnaire and, particularly, question No. 3,

specifically raised the issue with regard to the shares. The responses were

given by the assessee from time to time and what is more important is that

the Assessing Officer had directly issued letters to all the share applicants,

who had, in turn, given their confirmations along with their PAN numbers

and bank details. After having received the said information, the Assessing

Officer did not think it fit to make an addition and that itself would amount

to forming an opinion, as indicated in CIT v. Usha International Limited

(supra) and Lahmeyer Holding GMBH (supra). Therefore, the present

exercise of issuing the notice under Section 148 of the said Act would be

nothing but one of change of opinion, which is impermissible.



WP(C)9094/2014                                                       Page 9 of 15
12.    The second point that has been urged by the learned counsel for the

petitioner/assessee is that even otherwise, the impugned notice under Section

148 and the proceedings pursuant thereto have to be set aside for the simple

reason that the clear pre-conditon of there being a failure on the part of the

assessee to fully and truly disclose all the material particulars necessary for

assessment, has not been made out. In fact, if one looks at the reasons which

have been supplied for initiating re-assessment, there is not even an

allegation that there has been such a failure on the part of the petitioner/

assessee. For the sake of convenience, the reasons are set out herein below:-

                            "Income Tax Department
      26/02/2014    Reasons for reopening the case of M/s Shri Parasram
                    Industries P. Ltd. (AABCS7930D) A.Y. 2007-08, U/s
                    147/148 of the Income Tax Act, 1961

      1.       Information /documents in the form of CD has been received
      from the office of ACIT, Central Circle 22-New Delhi wherein it was
      revealed that the above assessee, M/s Shri Parasram Industries P. Ltd.
      has received and is a beneficiary of accommodation entries provided by
      certain entry operators. The Investigation Wing of the Department had
      carried out survey u/s 133A in the case of Shri Suresh Kumar Gupta
      (S.K. Gupta) on 20.11.2007. It was gathered that Sh.S.K. Gupta who is
      having his office at 308, Arunachal Building, Barakhamba Road, New
      Delhi is a Chartered Accountant and is carrying on the business of share
      broker, financial consultancy and providing accommodation entries in
      the form of loans, advances, share application money, issuing bogus
      expenses' bills on commission basis. For this purposes, he had floated
      several companies/firm in which he and his family members as well as
      his employees were either directors or proprietors. Bank accounts were
      opened III the names of these companies/firms in which he and his
      family members as well as his employees were either directors or



WP(C)9094/2014                                                          Page 10 of 15
        proprietors. Bank accounts were open in the names of these
        companies/firm and individuals of create layer/layers before providing
        accommodation entries of the beneficiaries through bank channels to
        give the color of genuineness of these accommodation entries.

        2.       This information has been provided by the ACIT, central Circle
        22, New Delhi to the Assessing officer. In the case of the above assessee,
        the following accommodation entries have been taken:-

Date     of   Ch. No. /PO/      Conduit          Bank a/c Such Party to whom issued   Amount
entry    in   DD/   Ch.And      Companies        conduit       (beneficiaries)
books         date              through    which company
                                cheque issued

07.04.2006    Ch. No. 296100    Giriasho         OBC           Shri Parasram Indus.   10,00,000
              dt. 07.04.06      Company                        P. Ltd.

07.04.2006    Ch. No. 152554    Sino Credits     HDFC          Shri Parasram Indus.   10,00,000
              dt. 06.04.06                                     P. Ltd.

10.04.2006    Ch. No. 775319    V.A. Foods       SIB           Shri Parasram Indus.   10,00,000
              dt. 10.04.06                                     P. Ltd.

10.04.2006    Ch. No. 750090    Vasudeva Farms   SIB           Shri Parasram Indus.   10,00,000
              dt. 10.04.06                                     P. Ltd.

10.04.2006    Ch. No.775261     Vijay Shines     SIB           Shri Parasram Indus.   5,00,000
              dt. 10.04.06                                     P. Ltd.

10.04.2006    Ch. No.750092     Vasudeva Farms   SIB           Shri Parasram Indus.   9,00,000
              dt. 11.04.06                                     P. Ltd.

10.04.2006    Ch. No.750093     Vasudeva Farms   SIB           Shri Parasram Indus.   6,00,000
              dt. 10.04.06                                     P. Ltd.


10.04.2006    Ch. No.775320     V.A. Foods       SIB           Shri Parasram Indus.   6,00,000
              dt. 11.04.06                                     P. Ltd.

10.04.2006    Ch. No.793197     Central Gum      SIB           Shri Parasram Indus.   30,00,000
              dt. 17.04.06                                     P. Ltd.

10.04.2006    Ch. No.287098     Dhamaka          OBC           Shri Parasram Indus.   10,00,000
              dt. 15.04.06      Trading                        P. Ltd.

10.04.2006    Ch. No.397652     Giriasho         OBC           Shri Parasram Indus.   9,00,000
              dt. 13.04.06      Company                        P. Ltd.

20.04.2006    Ch.   No.000034   New Star         Kotak         Shri Parasram Indus.   10,00,000




WP(C)9094/2014                                                                        Page 11 of 15
             dt. 18.04.06                                P. Ltd.

20.04.2006   Ch. No.000121    Advantage          Kotak   Shri Parasram Indus.   10,00,000
             dt. 18.04.06                                P. Ltd.

20.04.2006   Ch. No.727314    Zenith Estates     IPSB    Shri Parasram Indus.   10,00,000
             dt. 18.04.06                                P. Ltd.

21.04.2006   Ch. No.786367    Central Gum        SIB     Shri Parasram Indus.   10,00,000
             dt. 18.04.06                                P. Ltd.

29.04.2005   Ch. No.141336    Vijay              HDFC    Shri Parasram Indus.   15,00,000
             dt. 27.04.06     Conductors                 P. Ltd.

29.04.2005   Ch. No.115494    Vijay              HDFC    Shri Parasram Indus.   15,00,000
             dt. 01.05.06     Conductors                 P. Ltd.

29.04.2005   Ch. No.141335    Vijay              HDFC    Shri Parasram Indus.   20,00,000
             dt. 27.04.06     Conductors                 P. Ltd.

29.04.2005   Ch. No.141337    Vijay              HDFC    Shri Parasram Indus.   5,00,000
             dt. 27.04.06     Conductors                 P. Ltd.

19.05.2006   PO. No. 016727   Zenith Estates     IPSB    Shri Parasram Indus.   10,00,000
             dt. 19.05.06                                P. Ltd.

19.05.2006   PO. No. 016727   Zenith Estates     IPSB    Shri Parasram Indus.   20,00,000
             dt. 19.05.06                                P. Ltd.

19.05.2006   PO. No. 016725   KSA Chits          IPSB    Shri Parasram Indus.   20,00,000
             dt. 19.05.06                                P. Ltd.

08.06.2006   Ch. No. 152512   Sino Credits Bus   HDFC    Shri Parasram Indus.   10,00,000
             dt. 07.06.06     A/c                        P. Ltd.

29.06.2006   Ch. No. 776932   Omni Farms         SIB     Shri Parasram Indus.   6,50,000
             dt. 27.06.06                                P. Ltd.

29.06.2006   Ch. No. 505419   Vishrut            OBC     Shri Parasram Indus.   8,50,000
             dt. 29.06.06     Marketing                  P. Ltd.




      3.      This case was completed under scrutiny assessment in the F.Y.
      2009-10 and it is observed that the said information about receipt of
      accommodation entry was not received at the time of original
      assessment. In view of the above discussed factual matrix, additional
      information/documents received from the Investigation Wing of the
      Income Tax Department and the various Judgments of the Hon'ble




WP(C)9094/2014                                                                  Page 12 of 15
      Supreme Court and Hon'ble High Courts, I have reason to believe that
      income of Rs.2,85,000/- chargeable to tax has escaped assessment for
      AY.07-08, within the meaning of section 147 of the Income tax
      Act,1961. Therefore, file is put for necessary approval of Commissioner
      of Income tax, Delhi -III, New Delhi, as required u/s 151 of the Income
      Tax Act, 1961 before issuance of notice u/s 148 of the Income tax Act,
      1961.
                                                              (Manoj Tiwari)
                                                        ITO, W-8(3), New Delhi

                                                       (Binay K.Jha)
                                                 Commissioner of Income Tax,
                                                       Delhi -III, New Delhi"

13.    It is evident from the above that there is not even an allegation that

there has been a failure on the part of the assessee to disclose fully and truly

all the material particulars necessary for assessment.


14.    This aspect is also covered by several decisions of this Court,

including Global Signal Cables (India) Private Limited v. Deputy

Commissioner of Income Tax: [2014] 368 ITR 609 (Delhi), wherein a

reference to an earlier decision in Haryana Acrylic Manufacturing

Company v. CIT: [2009] 308 ITR 38 (Delhi) was made.                    In Haryana

Acrylic (supra), this Court had observed as under:-


      "29.    In the reasons supplied to the petitioner, there is no whisper,
      what to speak of any allegation, that the petitioner had failed to disclose
      fully and truly all material facts necessary for assessment and that
      because of this failure there has been an escapement of income




WP(C)9094/2014                                                             Page 13 of 15
      chargeable to tax. Merely having a reason to believe that income had
      escaped assessment, is not sufficient to reopen assessments beyond the
      four year period indicated above. The escapement of income from
      assessment must also be occasioned by the failure on the part of the
      assessee to disclose material facts, fully and truly. This is a necessary
      condition for overcoming the bar set up by the proviso to section 147. If
      this condition is not satisfied, the bar would operate and no action under
      section 147 could be taken. We have already mentioned above that the
      reasons supplied to the petitioner does not contain any such allegation.
      Consequently, one of the conditions precedent for removing the bar
      against taking action after the said four year period remains unfulfilled.
      In our recent decision in Wel Intertrade Private Ltd. [2009] 308 ITR 22
      (Delhi) we had agreed with the view taken by the Punjab and Haryana
      High Court in the case of Duli Chand Singhania [2004] 269 ITR 192
      that, in the absence of an allegation in the reasons recorded that the
      escapement of income had occurred by reason of failure on the part of
      the assessee to disclose fully and truly all material facts necessary for his
      assessment, any action taken by the Assessing Officer under section 147
      beyond the four year period would be wholly without jurisdiction.
      Reiterating our view-point, we hold that the notice dated March 29,
      2004, under section 148 based on the recorded reasons as supplied to the
      petitioner as well as the consequent order dated March 2, 2005, are
      without jurisdiction as no action under section 147 could be taken
      beyond the four year period in the circumstances narrated above.
                                                             (underlining added)"





15.    A reference was also made to Swarovski India Limited v. Deputy

CIT: [2014] 368 ITR 601 (Delhi), wherein a notice under Section 148 of the

said Act was quashed for being issued after the expiry of four years from the

relevant assessment year, wherein there was no specific mention of which

material facts were not disclosed by the assessee in the course of its original




WP(C)9094/2014                                                               Page 14 of 15
assessment proceedings under Section 143(3) of the said Act. In the present

case also there is not even a whisper of the allegation that there has been a

failure on the part of the assessee to disclose fully and truly all material

particulars necessary for assessment.


16.    Thus, on both grounds, the petition is liable to succeed. The writ

petition is allowed. The notice under Section 148 dated 28.03.2014 and all

proceedings pursuant thereto, including the order dated 26.09.2014, are

quashed/ set aside. There shall be no order as to costs.




                                        BADAR DURREZ AHMED, J



DECEMBER 11, 2015                         SANJEEV SACHDEVA, J
SR




WP(C)9094/2014                                                     Page 15 of 15

 
 
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