//Fit for Publication//
Sd/- Sd/-
A.M. J.M.
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "G" : DELHI
BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI PRASHANT MAHARISHI, A.M.
ITA.No.3216/Del./2017
Assessment Year 2009-2010
M/s. Sri Balaji Forgings (P)
Ltd., H.No.5001, Ahata The PCIT Delhi-8,
Kidara, Pahari Dheeraj, vs. New Delhi.
New Delhi 110 006.
PAN AAACS1255L
(Appellant) (Respondent)
Shri Gautam Jain,
Shri Piyush Kamal,
For Assessee : Advocates &
Shri Lalit Mohan, C.A.
For Revenue : Shri S.S.Rana, CIT-D.R.
Date of Hearing : 03.01.2019
Date of Pronouncement : 09.01.2019
ORDER
PER BHAVNESH SAINI, J.M.
This appeal by Assessee has been directed
against the Order of the Pr. CIT-8, New Delhi, Dated
27.03.2017 passed under section 263 of the I.T. Act, 1961,
for the A.Y. 2009-2010.
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
2. Briefly the facts of the case are that the assessee
filed return of income on 30.09.2009 which was processed
under section 143(1) of the I.T. Act. The case was reopened
for scrutiny under section 147 of the I.T. Act vide recording
reasons dated 29.03.2014. The assessee filed required
documents before the A.O. The assessee is engaged in the
business of manufacturing of M.S. ingots. The A.O. after
considering the explanation of assessee and material on
record, accepted the returned income and completed re-
assessment order under section 143(3) vide Order Dated
19.03.2015.
3. The Ld. Pr. CIT considering the assessment order
dated 19.03.2015 to be erroneous in so far as prejudicial to
the interests of Revenue, it is noted in the impugned order
that assessment was reopened under section 148 of the I.T.
Act on the allegation of accommodation entry taken from
S.K. Jain group of cases who were searched on 14.09.2010
by Investigation Wing of the Department, some of the
Assessing Officers did not examine the seized material in
the form of cash book and book containing the details of
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
cheques issued by such concern seized from the premises of
Shri S.K. Jain during the course of search. The Investigation
Wing, Delhi, forwarded the hard copy of appraisal report
dated 12.03.2013 which was received by him on
15.03.2013, the relevant seized material was scanned and
sent to CIT in soft copy. However, while completing the re-
assessment though the A.O. referred the appraisal report
but did not look into the relevant seized material in soft
copy. Therefore, show cause notice was issued to the
assessee as to why the re-assessment order be not revised
under section 263 of the I.T. Act. The assessee objected to
the same and submitted that there is no evidence against
the assessee. The inference drawn that alleged cash of Rs.55
lakhs was paid by the intermediary Shri A.K. Jain to Shri
S.K. Jain was enumerated from the coffers of the assessee,
is not evident from any of the documents. The A.O.
conducted independent examination and cross-verified all
the transactions and verified the genuineness of the
transaction. The A.O. verified the identity of the Investor, its
address, PAN, confirmation letter and bank statements and
4
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
was satisfied with the creditworthiness of the Investor. The
Commissioner cannot revised the order in such
circumstances. The Ld. Pr. CIT, however, held that the
seized material have not been considered by the A.O. at the
re-assessment proceedings. He has referred to the seized
material in the impugned order and set-aside the re-
assessment order to the file of A.O. with a direction to re-
decide the issue after examining the seized material and
passed the order afresh.
4. The assessee in the present appeal challenged the
Order of the Ld. Pr. CIT passed under section 263 of the I.T.
Act.
5. We have heard the Learned Representatives of
both the parties and perused the material available on
record.
6. Learned Counsel for the Assessee submitted that
information about entry operator and their beneficiaries was
received by the A.O. vide letter dated 12.03.2013. The A.O.
recorded the reasons for reopening of the assessment under
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
section 148 of the I.T. Act on 29.03.2014. The same reads
as under :
"Reasons for issue of notice u/s 148 of the I.T.Act,
1961 in the case of M/s. Sri Balaji Forgings (P) Limited,
PAN AAACS1255L for the A.Y. 2009-10 Reg.
29.03.2014 : Information about entry operators and
their beneficiaries of Delhi has been received from the
office of the DIT .(Inv.)-II, New Delhi vide letter F. No. DlT
(Inv)-II/U/s 148/2011-12/7539 dated 21.03.2012 and
F.No.DIT(Inv)-II/U/s.148/2012-13/196 dated 12.03.2013
along with detailed report giving working of entry
operators with a list of beneficiaries. After making
inquiries, the Addl. Directorate of Income Tax, Unit - VI
of Investigation, in his report has established large
amount of tax evasion in the transactions between entry
operators and the beneficiaries. It is revealed from the
list that the assessee company M/s. Sri Balaji Forgings
(P) Limited (termed as beneficiary) during the previous
year 2008-2009 relevant to the Assessment. Year 2009-
10 has taken accommodation entries of Rs.55,00,000/-
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
from the persons/parties (termed as entry operators).
These entries have been investigated by the
Investigation Wing and found to be given as
accommodation entries from the entities operated and
controlled by Sh. Surender Kumar Jain. The details of
which are mentioned below :
Beneficiary's Amount (Rs.) Entry Cheque/ Dated
Name Provider RTGS/
P.O.No.
M/s. Sri M/s. Ad 230831
Balaji 15,00,000/- Fin UTI Bank 23.04.2008
Forgings (P) Capital
Limited. Services
(P)
Limited.
M/s. Sri M/s. Ad 230845
Balaji 20,00,000/- Fin Axis 26.04.2008
Forgings (P) Capital Bank
Limited. Services
(P)
Limited.
M/s. Sri M/s. Ad 248523
Balaji 20,00,000/- Fin Axis 27.05.2008
Forgings (P) Capital Bank
Limited. Services
(P)
Limited.
I have very carefully considered the aforesaid
piece of information and the modus operandi of the
entry operator Sh. Surender Kumar Jain and its
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
controlled entities. I find that the quantum of amount of
such entries received by the assessee company M/s. Sri
Balaji Forgings (P) Limited as per details mentioned
above is Rs.55,00,000/-. These accommodation entries
taken by M/s. Sri Balaji Forgings (P) Limited are earlier
identified and examined by the Investigation Wing to
establish that all the entry providing entities were tools
in Surender Kumar Jain business of providing
accommodation entries in lieu of cash/cheques through
which he had drawn a long trail of bank transactions to
impart a color of genuineness on these transactions.
In view of the facts stated herein above, I am of
the considered opinion & belief that the assessee
company managed the above said transactions of
accommodation entries out of its income from
undisclosed sources. In this case, the assessee has filed
return of income for the A.Y. 2009-10 on 30.09.2009 at
an income of Rs.10,24,564/- which was processed on
03.11.2010 at the returned income. In view of above, I
have reason to believe that income of Rs.55,00,000/-
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
has escaped assessment within the meanings of the
provisions of Section 147 of the Income Tax Act, 1961.
Therefore, a notice u/s. 148 of the Income Tax Act, 1961
is required to be issued to the assessee company to
assess the income escaped as stated hereinabove.
Therefore issue notice u/s. 148 of the I.T. Act.
Sd/-Virender Kumar Rathee
ITO, Ward 9(2), New Delhi."
6.1. In the aforesaid reasons A.O. has referred to the
seized material and the information received from
Investigation Wing that assessee has taken accommodation
entry of Rs.55 lakhs from the entry operators controlled by
Shri S.K. Jain in the name of M/s. Ad Fin Capital Services
P. Ltd. The A.O. issued notices under section 143(2) and
142(1) of the I.T. Act, copies of which are filed in the paper
book and called for the information from assessee about the
genuineness of the amount received from the aforesaid
Investor. Assessee filed several replies before A.O. at re-
assessment proceedings and explained that it has received
9
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
genuine share application money from M/s. Ad Fin Capital
Services P. Ltd., which is supported by confirmation of
accounts, bank statement and return of income. The A.O.
also called for information from the Investor under section
133(6) of the I.T. Act which is replied by the Investor and
accepted the genuineness of investment made in assessee
company. Copy of the same is also filed in the paper book.
Copy of the assessment order for A.Y. 2009-2010 of the
Investor is also filed in the paper book under section 153C/
153A dated 28.03.2013. He has, therefore, submitted that
A.O. after due enquiry accepted the returned income vide
re-assessment order dated 19.03.2015. He has submitted
that even thereafter A.O. recorded fresh reasons for
reopening of the assessment dated 23.03.2016 and copy of
the reasons have been supplied to assessee vide letter dated
12.05.2016 (PB-178) and on the same reasoning A.O. again
reopened the assessment under sections 147/143(3) of the
I.T. Act. It may noted here that the Ld. CIT-D.R. produced
the assessment record, according to which, the A.O.
recorded reasons for reopening of the assessment on
10
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
23.03.2016 which is approved by Ld. Pr. CIT on 30.03.2016.
However, the A.O. dropped the proceedings under section
147 of the I.T. Act vide Order dated 05.12.2016. Copy of the
reasons and Order have been placed on record by the Ld.
CIT-D.R. Order of the A.O. dated 05.12.2016 dropping the
proceedings under section 147 of the I.T. Act for the second
time are reproduced as under :
"05.12.2016 : Mr. Munish Gupta, A.R. of the
assessee attended. Since the case for A.Y. 2009-
10 has already been assessed in Ward-24(2),
based on the same reasons for reopening, the
current proceedings are void ab initio. Proceedings
u/s. 148 are therefore dropped. Relevant approval
from Pr. CIT is placed on record."
6.2. Learned Counsel for the Assessee submitted that
thereafter the Ld. Pr. CIT issued show cause notice under
section 263 of the I.T. Act dated 17.01.2017. The assessee
objected to the same before the Ld. Pr. CIT. Learned
Counsel for the Assessee submitted that since at the first
re-assessment proceedings, the A.O. examined the issue in
11
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
detail and was satisfied with the genuineness of the
transaction with the Investor, therefore, Ld. Pr. CIT should
not substitute his opinion to that of the A.O. and relied
upon decision of Hon'ble Bombay High Court in the case of
CIT vs. Gabriel India Ltd., 203 ITR 108. He has submitted
that when the reasons recorded for reopening the
assessment were the very same reasons for which the Ld.
Pr. CIT had invoked jurisdiction under section 263 of the
I.T. Act, invocation of Section 263 of the Act is not tenable.
He has relied upon the decision of Hon'ble Delhi High Court
in the case of CIT vs. Vikramaditya and Associates 287 ITR
268. He has submitted that the Ld. Pr. CIT in the show
cause notice under section 263 has referred to the same
share application money which is considered in the re-
assessment proceedings. There were no material before Ld.
Pr. CIT to hold that A.O. has not considered the entire
seized material. He has submitted that since the second re-
assessment proceedings have been dropped vide Order
dated 05.12.2016, therefore, the impugned re-assessment
order dated 19.03.2015 would merge with the subsequent
12
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
re-assessment order dated 05.12.2016 dropping the re-
assessment proceedings. Therefore, the impugned Order
cannot be revised under section 263 of the I.T. Act. In
support of his contention he has relied upon decision of the
Hon'ble Supreme Court in the case of CIT vs. Alagendran
Finance Ltd., 293 ITR 1 and Judgment of Hon'ble Allahabad
High Court in the case of L.G. Electronics India Pvt. Ltd.,
388 ITR 135. He has submitted that Ld. Pr. CIT could have
revised the second re-assessment order dated 05.12.2016
whereby re-assessment was dropped. In support of his
contention he has relied upon the Order of ITAT, Indore
Bench, Third Member, in the case of Dewas Silk Mills vs.
CIT (2005) 93 ITD 31 (Indore) (TM). Learned Counsel for the
Assessee further submitted that A.O. cannot ask for
examination of source of the source. Detailed reply were
filed before A.O. at re-assessment proceedings to prove that
assessee entered into genuine transaction. Therefore, Ld. Pr.
CIT should not have invoked the jurisdiction under section
263 of the I.T. Act. Learned Counsel for the Assessee
submitted that ITAT, Delhi G-Bench in the group case of
13
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
M/s. Supersonic Technologies Pvt. Ltd., Delhi & Another vs.
The PCIT-8, New Delhi in ITA.No.2269 & 2857/Del./2017
vide Order dated 10.12.2018 has quashed the Orders under
section 263 of the I.T. Act. Copy of the Order is placed on
record.
7. The Ld. D.R. on the other hand relied upon the
impugned order and submitted that dropping of the
proceedings does not amount to order. Therefore, it cannot
be revised under section 263 of the I.T. Act. He has
submitted that A.O. has not considered the seized material
found from the premises of Shri S.K. Jain during the course
of search. The Ld. D.R. also filed written submissions in
which he has reiterated the same submissions which were
reiterated in the group cases of M/s. Supersonic
Technologies Pvt. Ltd., Delhi & Another vs. The PCIT-8, New
Delhi (supra).
8. We have considered the rival submissions and
perused the material on record. In the group cases of M/s.
Supersonic Technologies Pvt. Ltd., Delhi & Another vs. The
PCIT-8, New Delhi (supra), the Tribunal has quashed the
14
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Orders passed under section 263 of the I.T. Act under
similar circumstances. Copy of the Order is placed on
record and the entire order is reproduced as under :
"IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCHES "G" : DELHI
BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI PRASHANT MAHARISHI, A.M.
ITA.No.2269/Del./2017
Assessment Year 2007-2008
M/s. Supersonic
Technologies Pvt. Ltd., A-
104, Panchal Complex, vs. The PCIT-8,
Chand Vihar, IP Extension, New Delhi.
Delhi 110 092.
PAN AAICS6245A
(Appellant) (Respondent)
Shri Ved Jain, Advocate &
For Assessee : Shri Ashish Chadha, C.A.
For Revenue : Shri S.S.Rana, CIT-D.R.
ITA.No.2857/Del./2017
Assessment Year 2007-2008
M/s. SPJ Hotels Private
Limited, New Delhi-110017 The PCIT-8,
PAN AAKCS7722C vs. Room No.297, Central
C/o. Kapil Goel, Advocate, Revenue Building, IP
F-26/124, Sector-7, Rohini, Estate, New Delhi.
Delhi 110 085.
(Appellant) (Respondent)
For Assessee : Shri Kapil Goel, Advocate.
For Revenue : Shri S.S.Rana, CIT-D.R.
15
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
ITA.No.2527/Del./2017
Assessment Year 2007-2008
M/s. Shiv Sai Infrastructure
(P) Ltd., New Delhi-110048. The PCIT,
PAN AAJCS5095B vs. Delhi-8,
C/o. M/s. RRA Taxindia, New Delhi.
D-28, South Extension,
Part-I, New Delhi 110049.
(Appellant) (Respondent)
Shri Ashwani Taneja &
For Assessee : Shri Somil Agarwal,
Advocates
For Revenue : Shri S.S.Rana, CIT-D.R.
ITA.No.3301/Del./2017
Assessment Year 2009-2010
M/s. Superior Buildwell
Private Limited, A-43,
Allahabad Bank, CGHS The PCIT-8,
vs.
Apartments, Mayur Vihar, New Delhi.
Phase-III, Chilla Regulator,
Delhi.PAN AALCS9413R
(Appellant) (Respondent)
Shri Ved Jain, Advocate &
For Assessee :
Shri Ashish Chaddha, C.A.
For Revenue : Shri S.S.Rana, CIT-D.R.
Date of Hearing : 15, 16 & 25.10.2018
Date of Pronouncement : 10.12.2018
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
ORDER
PER BHAVNESH SAINI, J.M.
This Order shall dispose of all the appeals filed by
different Assessees challenging the Orders under
section 263 of the I.T. Act, 1961. Since issue is common
in all the appeals, therefore, all appeals were heard
together and are decided through this common
consolidated Order.
2. We have heard the Learned Representatives
of both the parties and perused the material available
on record.
ITA.No.2269/Del./2017 M/s. Supersonic Technologies
Pvt. Ltd., Delhi.
3. The facts of the case are that original return
of Income in this case was filed on 20.10.2007 at NIL
income. The notice under section 148 of the Income Tax
Act, was issued on 25.03.2014 after recording the
reasons and taking prior approval from the competent
17
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
authorities. The assessee in response to the statutory
notice vide letter dated 10.04.2014 submitting therein
that the original return filed may please be treated as
return filed in response to the notice under section 148
of the I.T. Act and also requested to provide reasons
recorded, which were duly provided to it. The assessee
also filled its objections which were disposed off. The
A.O. issued statutory notice which were complied by the
assessee and filed details as called for. The A.O. after
discussing the case with the assessee, accepted the
returned income and completed the re-assessment order
under section 147/143(3) of the I.T. Act, 1961, on Dated
30.06.2014.
3.1. The Ld. Pr. CIT on examining the assessment
record noticed that though the assessment was
reopened under section 148 of the I.T. Act on the
allegation of accommodation entry taken from Shri S.K.
Jain group of concerns who were searched on
14.09.2010 by the Investigation Wing of the Income Tax
Department, some of the A.O's did not examine the
18
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
seized material in the form of cash book and books
containing the details of cheques issued by such
concerns seized from the premises of Shri S.K. Jain
during the course of search. The Investigation Wing,
Delhi, forwarded the hard copy of appraisal report to the
then Commissioner, Delhi-III, which was received by
him on 15.03.2013, the relevant seized material
(containing many thousands of pages) was scanned
and sent to the Commissioner of Income Tax in soft
copy. However, while completing the assessment under
section 147 r.w.s. 143 of the I.T. Act, though the A.O.
referred the appraisal report but did not look into the
relevant seized material in soft copy. This was one of
the case where the A.O. did not examine the seized
material. Accordingly, a show cause notice under
section 263 of the I.T. Act was issued to the assessee on
27.01.2017 which is reproduced in the impugned order.
In the show cause notice it is stated that the case was
reopened on the allegation of accommodation entry of
Rs.22 lakhs on account of share application/capital
19
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
received from M/s. Pelican Finance and Leasing Ltd.,
M/s. Singhal Securities Pvt. Ltd., M/s. Hillridge
Investments Ltd and M/s. S.R. Cables Pvt. Ltd., a
concern of S.K. Jain group of cases. Search and seizure
operation was carried out on 14.09.2010 at the
premises of Shri Surender Jain and Shri Virender Jain.
During the course of search, cash book and bank books
of the concerns managed by Shri S.K. Jain group
wherein detailed of day-to-day receipts in cash and
cheque from/to different persons/firms/companies have
been recorded, were seized. On perusal of the re-
assessment order, it is noticed that while passing the
said order, the A.O. has failed to consider the relevant
seized material pertaining to the assessee-company
which is mentioned in the Order. It is noted in the notice
under section 263 that the amounts received by
assessee-company were accommodation entry in lieu of
cash given by the assessee-company through Shri
Manoj Bansal. The relevant copies of the seized material
relating to the assessee-company were given along with
20
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
show cause notice or during the proceedings under
section 263 of the I.T. Act. The assessee-company
submitted that the A.O. has considered the seized
material not only at the time of re-assessment but also
at the time of recording reasons for re-assessment. The
Learned Counsel for the Assessee referred to the
reasons recorded by the A.O. wherein there is a mention
of accommodation entries provided by the group of Shri
S.K. Jain who had floated hundreds of bogus
companies to provide accommodation entries in lieu of
cash.
3.2. The assessee-company also submitted that
during the course of assessment proceedings, assessee-
company was asked to furnish income tax returns,
confirmations, financials and bank statements, which
were duly complied with by the assessee-company. The
assessee-company has proved the creditworthiness of
the Investors before A.O. Independent notices were
issued under section 133(6) of the I.T. Act to the Investor
companies by the A.O. The facts were examined based
21
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
on information provided by the assessee-company. The
proceedings under section 263 would amount to the
consideration of material which has already been
considered by the A.O. during the assessment
proceedings under section 147 read with section 143 of
the I.T. Act, and if in case the documents are not
available in the files of A.O, then, there is also no scope
of revision under section 263 of the I.T. Act. The A.O.
has not issued notice under section 143(2) of the I.T. Act
during the re-assessment proceedings. The assessee
relied upon several decisions in support of the
contention that revision proceedings under section 263
may be dropped.
3.3. The Ld. Pr. CIT considering the submissions
of the assessee and material on record noted in his
findings that the seized papers contains various
accommodation entries were provided by such
companies to various beneficiaries. The appraisal report
was forwarded by the Investigation Wing in the month
of March, 2013 to then CIT-III, Delhi in hard copy. The
22
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
seized material contained many thousand pages. The
seized material contained consolidated day-to-day cash
transactions of all such shell companies wherein the
opening and closing balances of cash has been
mentioned. During the course of search, the entry in the
cash book was admitted to be cash and bank balances.
The cash is shown as received against the names of
many intermediaries. Against the name of some
intermediatery cheques have been shown as issued by
such companies to various beneficiaries. The details of
cheques such as cheque number, name of the bank and
date, name of the issuer company and the name of
beneficiary is mentioned in these details. It is, therefore,
clear that even though the appraisal report has
summarized the transactions of the cheques given by
the shell companies to the various beneficiaries through
intermediaries in the tabular form, the details of cash
received from such intermediaries were not tabulated
due to voluminous data of day-to-day cash transactions
appearing in the seized material. Therefore, all the
23
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
relevant seized material found from the premises of Shri
S.K. Jain group was forwarded to the Commissioner in
soft copy after scanning. The assessee-company is also
shown as beneficiary as evident from the scanned copy
of the seized material. Against these entries, the name
of assessee-company and the name of Shri Manoj
Bansal (Mediator) is mentioned. All the cheques were
found to be credited in the bank account of the
assessee-company. Several scanned copies are
attached from pages 9 to 19 of the impugned order.
From pages 20 to 26 of the impugned order, summary of
the appraisal report, year-wise details of
accommodation entries provided by Shri S.K. Jain group
to various beneficiary companies were tabulated for the
charge of CIT-8. The A.O. has made mentioned
details/table as the basis for reopening of the
assessment which is clear from the reasons recorded for
issue of notice under section 148 of the I.T. Act. From
the entry No.230, the name of the assessee-company an
amount of Rs.22 lakhs have been mentioned. It would
24
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
shows that A.O. did not verify or examine the seized
material relating to the assessee. The Ld. Pr. CIT also
noted that as there is no statutory notice under section
143(2) prescribed in the Act and only non-statutory
notice is prescribed, the purpose of which is to intimate
the assessee that the case has been selected for
scrutiny and the notices issued on dated 11.06.2014
and 19.06.2014 clearly proves that the case of the
assessee has been selected for scrutiny, such show
cause notices are nothing but notice under section
143(2). of the I.T. Act. It is also noted by the Ld. Pr. CIT
that even though no formal notice under section 143(2)
was issued by the A.O, in the letters dated 11.06.2014
and 19.06.2014 it was specifically mentioned that in
the absence of the requisite details the assessment
would be completed under section 144 of the I.T. Act.
The A.O. has not examined this issue in the light of
seized material. Therefore, re-assessment order was
found to be erroneous in so far as prejudicial to the
interests of the Revenue because A.O. failed to look into
25
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
the seized material. The Order was set aside and
restored to the file of A.O. with a direction to examine
the seized material and confront the same to the
assessee and pass the order in accordance with law.
4. Learned Counsel for the Assessee reiterated
the submissions made before the authorities below.
Learned Counsel for the Assessee submitted that in this
case the value of the share was Rs.10/- with premium
of Rs.50/- per share. No business was there in this
year. However, assessee proved the identity of the
Investors, their creditworthiness and genuineness of the
transaction in the matter, therefore, no addition can be
made on the ground that shares were issued at excess
premium. He has relied upon the decision of Hon'ble
Madhya Pradesh High Court in the case of Pr. CIT-(1),
Indore vs. Chain House International (P.) Ltd., (2018) 98
taxmann.com 47 (M.P). He has submitted that no cash
was appearing against the name of the assessee in the
seized paper and that all the papers after scanning
were attached in the impugned order and did not relate
26
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
to the assessee. He has submitted that admittedly no
notice under section 143(2) have been issued for
completion of the re-assessment proceedings, therefore,
re-assessment order dated 30.06.2014 is illegal and
bad in law. He has submitted that in proceedings under
section 263 of the I.T. Act only valid re-assessment
order can be revised which should be erroneous and
prejudicial to the interests of the Revenue. It is not
necessary to record all the facts and findings in the re-
assessment order. Ld. Pr. CIT cannot sit over the Order
of the re-assessment passed by the A.O. The A.O. has
taken one of the possible views as per law. Therefore,
the re-assessment order cannot be revised under section
263 of the I.T. Act. There is a difference between lack of
enquiry and inadequate enquiry. PB-11 is reasons
recorded under sections 147/148 of the I.T. Act in which
it is mentioned that information/documents in the form
of CD, appraisal report along with relevant details has
been received from the O/o. CIT-III, New Delhi, Dated
28.03.2013 that the assessee has received and is a
27
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
beneficiary of accommodation entries provided by the
group of Shri Surendra Kumar Jain, Shri Rakesh Gupta,
Shri Vishesh Gupta, Shri Navneet Jain and Shri
Vaibhav Jain. The accommodation entries have been
provided to various assessees who were re-routing their
unaccounted cash through these accommodation
entries. Therefore, all the relevant details were before
A.O. at the time of reopening of the assessment. PB-17
to 24 are the information called by the A.O. from all
Investor Companies under section 133(6) of the I.T. Act
at re-assessment stage. PB-25 is objections filed by
assessee for reopening of the assessment under section
148. PB 26-27 is queries raised by the A.O. at re-
assessment stage along with documents of Investor
companies. PB-35 is details of share applicant
companies filed. PB-36 is objection decided under
section 148 by the A.O. PB-37 to 139 are replies with
documents filed by Investor Companies directly to the
A.O. under section 133(6) of the I.T. Act. If the CD is not
considered by the A.O. at the time of re-assessment
28
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
order as per notice under section 263 of the I.T. Act, the
re-assessment order is bad in law. Learned Counsel for
the Assessee relied upon the Order of ITAT, Delhi Bench
in the case of M/s. NKG Infrastructure Ltd., New Delhi
vs. Pr. CIT, Circle-3, New Delhi in ITA.No.3825 to
3827/Del./2018, Dated 05.09.2018, in which the issue
was validity of proceedings under section 147/148 of
the I.T. Act. The assessee submitted before the Tribunal
that assessment order in this case is barred by
limitation is non-est in the eye of Law. Therefore, the Pr.
CIT cannot assume jurisdiction under section 263 of the
I.T. Act to revise such assessment order which is non-
est in the eye of Law and being barred by limitation.
The Tribunal held that the Order which is barred by
limitation cannot be revised under section 263 of the I.T.
Act by the Pr. CIT. The appraisal report was based on
CD and if same is not considered by the A.O, it is non-
application of mind by the A.O. to initiate re-assessment
proceedings under section 148 of the I.T. Act. Learned
Counsel for the Assessee also relied upon decision of
29
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
the Hon'ble Delhi High Court in the case of Director of
Income Tax vs. Society for Worldwide Interbank
Financial Telecommunication (2010) 323 ITR 249 (Del.)
in which it was held that "notice under section 143(2)
was simultaneously issued on filing of the return of
income, therefore, it is bad in law and invalid". Learned
Counsel for the Assessee relied upon decision of Hon'ble
Supreme Court in the case of ACIT & Another vs. M/s.
Hotel Blue Moon in Civil Appeal No.1198 of 2010 arising
out of SLP (C) No.22973 of 2007, Dated 02.02.2010 in
which it was held that "issue of notice under section
143(2) is mandatory". Learned Counsel for the Assessee
relied upon decision of Hon'ble Delhi High Court in the
case of CIT vs. Sunbeam Auto Ltd., (2011) 332 ITR 167
(Del.) in which it was held that "if the ITO acting in
accordance with Law, makes certain assessment, the
same cannot be branded as erroneous by the
Commissioner simply because, according to him, the
Order should have been written more elaborately."
Learned Counsel for the Assessee also relied upon
30
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
decision of Hon'ble Delhi High Court in the case of ITO
vs. D.G. Housing Projects Ltd., (2012) 343 ITR 329 (Del.)
in which it was held that "the A.O. is both Investigator
and Adjudicator. If the A.O. fails to conduct enquiry, he
commits error and the word `erroneous' includes failure
to make the enquiry. In cases, where there is
inadequate enquiry but not lack of enquiry, again the
CIT must give and record a finding that the
Order/Inquiry made is erroneous. An Order is not
erroneous and prejudicial to the interests of Revenue,
unless the CIT hold and records reasons why it is
erroneous." Learned Counsel for the Assessee relied
upon decision of Hon'ble Delhi High Court in the case of
CIT vs. New Delhi Television Ltd., (2014) 360 ITR 44
(Del.) in which it was held that "once the claim was
considered and examined by the A.O, Commissioner
cannot set aside the Order without recording contrary
finding. This will be contrary to Section 263 of the I.T.
Act." The CIT did not make any investigation by
examining the Investors. He has relied upon the Order
31
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
of ITAT, Delhi Bench in the case of Tirupati Infraprojects
Pvt. Ltd., vs. Pr. CIT, Central-II, New Delhi 2016-(5)-TMI-
1290-ITAT-Delhi. He has also relied upon the Judgment
of Hon'ble Delhi High Court in the case of Globus
Infocom Ltd., vs. CIT-IV, Delhi (2014) 369 ITR 14 (Del.).
Learned Counsel for the Assessee has also relied upon
the Judgment of Hon'ble Delhi High Court in the case of
Pr. CIT-8 vs. Shri Jai Shiv Shankar Traders Pvt. Ltd.,
2015-(10)-TMI-1765-Delhi-High Court in which it was
held that "no notice under section 143(2) of the I.T. Act
was issued to the assessee after 16.12.2010, the date
on which the assessee informed the A.O. that the return
originally filed should be treated as return filed
pursuant to the notice under section 148 of the I.T. Act.
Therefore, the same is fatal to the Order of re-
assessment." He has submitted that assessee produced
sufficient evidences before A.O. to prove identity of the
Investors, their creditworthiness and genuineness of the
transaction in the matter. Therefore, A.O. in the re-
assessment order correctly accepted the explanation of
32
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
assessee. In support of the said contention, the Learned
Counsel for the Assessee relied upon decisions of
Hon'ble Delhi High Court in the case of Pr. CIT vs.
Softline Creations P. Ltd., (2016) 387 ITR 636 (Del.) and
CIT vs. Fair Finvest Ltd., (2013) 357 ITR 146 (Del.).
Learned Counsel for the Assessee, therefore, submitted
that since re-assessment order was bad in law because
no notice under section 143(2) have been issued to the
assessee and that assessee produced sufficient
evidences to prove the conditions of Section 68 of the I.T.
Act, therefore, revision proceedings under section 263 of
the I.T. Act in such circumstances is wholly unjustified.
5. On the other hand, the Ld. D.R. relied upon
Order of the Ld. Pr. CIT. He has submitted that
appraisal report was sent to the A.O. Pr. CIT noted that
creditworthiness was not considered by the A.O. PB-11
is reasons recorded under section 148 of the I.T. Act
which is the statement of the A.O. The disputed question
cannot be raised for the first time before the Tribunal.
The Ld. D.R. relied upon decision of Hon'ble Delhi High
33
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Court in the case of Ashok Chaddha vs. CIT (2011) 337
ITR 399 (Del.). The Ld. D.R. relied upon Order of ITAT,
Delhi Bench in the case of M/s. Surya Jyoti Software
Pvt. Ltd., vs. Pr. CIT, New Delhi vide
ITA.No.2158/Del./2017, Dated 25.10.2017 reported in
2017-TIOL-1775-ITAT-DEL in which the Tribunal noted
that "assessee-company has raised the issue of no
notice has been issued under section 143(2) or served
upon assessee during the course of re-assessment
proceedings. The Tribunal noted that assessee has
neither challenged this issue after passing of the re-
assessment order nor has raised this issue before Pr.
CIT during the course of revisionary proceedings under
section 263 of the I.T. Act. The assessee has raised
several legal issues/objections before Pr. CIT
challenging the validity of the re-assessment
proceedings. Even before the Tribunal at the time of
filing of the appeal, this issue has neither been raised in
the grounds nor has any additional ground been raised
so that Department could have got the opportunity to
34
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
object or respond to such a plea after verifying the
record in this regard. Therefore, request of Counsel for
Assessee was rejected. It is also noted that the
impugned order demonstrated that the issue was
neither enquired into nor was verified by the A.O." The
Ld. D.R. similarly relied upon decision of ITAT, Delhi
Bench in the case of Surya Financial Services Ltd., vs.
PCIT vide ITA.No.2915/Del./2017, Dated 08.01.2018
reported in 2018-TIOL-74-ITAT-Del. The Ld. D.R. also
relied upon decision of ITAT, Delhi Bench in the case of
Shankar Tradex Pvt. Ltd., Delhi vs. Pr. CIT-8, New Delhi,
vide ITA.No.2999/Del.2017 Dated 16.04.2018 in which
similar issue was decided against the assessee. The Ld.
D.R. submitted that A.O. has not taken into
consideration the material seized during search in the
case of Shri S.K. Jain. Therefore, Explanation-2 to
Section 263 of the I.T. Act is applicable in this case. The
Ld. D.R. relied upon decision of Hon'ble Supreme Court
in the case of Deniel Merchants P. Ltd., vs. ITO &
Another in SLP (C) No.23976/2017 Dated 29.11.2017 in
35
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
which SLP have been dismissed where A.O. did not
make any proper enquiry while making the assessment
and accepting the explanation of assessee in so far as
receipt of share application money is concerned. The Ld.
D.R. also relied upon decision of Hon'ble Supreme Court
in the case of Rajmandir Estates (P.) Ltd., vs. PCIT
(2017) 245 Taxman 127 (SC) and other decisions also
on the same proposition that if A.O. did not make any
enquiry on the issue, the proceedings under section 263
could be initiated. The Ld. D.R. submitted that no
objection was raised before A.O. regarding the issues
raised in the present appeal. The Ld. D.R. relied upon
decision of Hon'ble Delhi High Court in the case of MAF
Academy Pvt. Ltd., 361 ITR 258 and Navodya Castle
Pvt. Ltd., 367 ITR 306 which is confirmed by the Hon'ble
Supreme Court as well.
6. We have considered the rival submissions
and perused the material available on record. The
assessee filed original return of income on 20.10.2007.
The A.O. issued notice under section 148 of the I.T. Act
36
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
on 25.03.2014 after recording the reasons for reopening
of the assessment. The copy of reasons recorded under
sections 147/148 are filed at page 11 of the paper book.
In the reasons the A.O. has mentioned that
information/documents in the form of CD appraisal
report along with relevant details have been received
from the O/o. CIT-3, New Delhi that the assessee has
received accommodation entries provided by Shri S.K.
Jain group of cases for a sum of Rs.22 lakhs. The A.O.
accordingly formed an opinion that income of Rs.22
lakhs chargeable to tax has escaped assessment in the
assessment year under appeal. The assessee in
response to the said notice filed reply dated 10.04.2014
submitting therein that original return filed may be
treated as return filed in response to the notice issued
under section 148 of the I.T. Act and requested for copy
of the reasons which were supplied and objections of
the assessee have been disposed of separately. The
A.O. in the re-assessment order did not mention if he
has issued any notice under section 143(2) of the I.T.
37
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Act upon assessee before completion of the assessment.
This issue was raised before Ld. Pr. CIT in the
proceedings under section 263 of the I.T. Act that A.O.
has not issued notice under section 143(2) of the I.T. Act
at re-assessment proceedings. The Ld. Pr. CIT
mentioned in the impugned order that assessee was
intimated by notices dated 11.06.2014 and 19.06.2014
that in the absence of requisite details assessment
would be completed under section 144 of the I.T. Act.
The Ld. Pr. CIT treated the same notices as notice
issued under section 143(2) of the I.T. Act. The Ld. Pr.
CIT, however, admitted that no formal notice under
section 143(2) have been issued to the assessee before
completion of the re-assessment proceedings. The
Hon'ble Delhi High Court in the case of CIT vs. CPR
Capital Services Ltd., (2011) 330 ITR 43 (Del.) held as
under :
38
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
"The Tribunal held that no notice under section 143(2) of
the Income-tax Act, 1961 was prepared and served upon
the assessee. On appeal:
Held, dismissing the appeal, that mere noting in the
order sheet would not suffice and the copy of the notice
issued under section 143(2) of the Act was not
available on record. Since the Department had failed
to produce the copy the notice under section 143(2) of
the Act there was no option but to agree with the
findings of the Tribunal that no such notice was
prepared and served upon the assessee. In the absence
of this mandatory requirement of issuing statutory
notice under section 143(2) of the Act, the Tribunal had
rightly quashed the assessment as null and void."
6.1. The Hon'ble Delhi High Court in the case of
Pr. CIT vs. Silverline (2016) 383 ITR 455 (Del.) held that
"Order of re-assessment cannot be passed without notice
under section 143(2) of the I.T. Act. The jurisdictional error
39
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
cannot be cured by Section 292BB of the I.T. Act". It is, well
settled Law that before passing the re-assessment
order, A.O. shall have to prepare and serve notice upon
assessee under section 143(2) of the I.T. Act. The Ld. Pr.
CIT, however, observed that "no formal notice under
section 143(2) have been issued to the assessee". Therefore,
these facts clearly show that before framing the re-
assessment order under sections 147/148 of the I.T.
Act, no notice under section 143(2) have been prepared,
issued and served upon the assessee. Therefore, re-
assessment order is illegal, invalid and bad in law and
is liable to be set aside. It is well settled Law that
assessee can challenge the validity of the re-
assessment proceedings in the collateral proceedings
(relating to examination of validity of Order passed)
under section 263 of the I.T. Act. We rely upon the Order
of ITAT, Mumbai Bench in the case of Westlife
Development Ltd., vs. PCIT 49 ITR (Tribu.) 406 in which
it was held "allowing the appeal (i) that jurisdiction aspect
of the Order passed in the primary proceedings can be
40
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
examined in collateral proceedings also. Thus, the assessee
could be permitted to challenge the validity of the Order
passed under section 263 on the ground that the assessment
order was non-est." Since the re-assessment order itself
is bad in law, therefore, Learned Counsel for the
Assessee, rightly contended that the same cannot be
revised under section 263 of the I.T. Act. Only valid re-
assessment order can be revised under section 263 of
the I.T. Act. On this ground itself the proceedings under
section 263 of the I.T. Act are bad in law and liable to
be quashed. We, accordingly, set aside the Order of Ld.
Pr. CIT passed under section 263 of the I.T. Act and
quash the same. In view of the above, the remaining
plea of the assessee are not required to be adjudicated.
However, we may briefly note that A.O. examined entire
seized material at the time of recording reasons and re-
assessment stage. The assessee produced sufficient
evidences at the re-assessment proceedings to prove the
identity of the creditors, their creditworthiness and
genuineness of the transaction. The A.O. also made
41
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
direct enquiry by issuing summons under section 133(6)
of the I.T. Act to the Investors who have also replied
directly to the A.O. Therefore, A.O. rightly accepted the
credits as genuine. In view of the above finding, there is
no need to give a finding in detail on merits. In view of
the above, we allow the appeal of assessee.
7. In the result, ITA.No.2269/Del./2017 of the
Assessee is allowed.
ITA.No.2857/Del./2017 M/s. SPJ Hotels Pvt. Ltd.,
New Delhi
8. This appeal by Assessee has been directed
against the Order of the Ld. Pr. CIT-8, New Delhi, Dated
22.03.2017, for the A.Y. 2007-2008 under section 263
of the I.T. Act, 1961.
9. Briefly the facts of the case are that in this
case similar information about entry operators and their
beneficiaries of Delhi was received from the O/o. DIT,
(Inv.)-II, Delhi, along with detailed report giving working
of entry operators with a list of beneficiaries. After
42
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
making inquiries, the Addl. DIT, Unit-VI of Investigation
in his report has established large amount of tax
evasion in the transactions between entry operators and
the beneficiaries. It was revealed from the list that the
assessee-company viz., M/s. SPJ Hotels Private Limited
during the previous year relevant to the assessment
year under appeal had taken accommodation entries
from M/s. Hillridge Investments Ltd., and M/s. Vogue
Leasing & Finance Private Limited in a sum of Rs.5
lakhs each on 28.03.2017. The A.O. reopened the
assessment under section 148 of the I.T. Act. Notice
under section 148 was issued on 25.03.2014 after
recording the reasons and taking prior approval of the
Competent Authority. In response thereto, assessee
submitted a letter stating therein that it was
incorporated on 05.03.2007 and filed first return of
income for A.Y. 2008-2009 for the period from
05.03.2007 to 31.03.2008 declaring NIL income. It was,
therefore, submitted that NIL return may be treated as
return having been filed for A.Y. 2007-2008 under
43
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
appeal. The assessee asked for copy of reasons for
reopening of the assessment. The assessee attended
the proceedings before A.O. time to time and filed
details of share capital received from 04 parties in a
sum of Rs.5 lakhs each i.e., (1) M/s. Hillridge
Investments Ltd., (2) M/s. Vogue Leasing & Finance
Private Limited (3) M/s. Pelicon Finance & Leasing
Limited, and (4) M/s. Pitambara Securities Pvt. Ltd.,
A.O. disposed of the objections of the assessee. It is
noted in the reasons that he has reason to believe that
income chargeable to tax in a sum of Rs.10 lakhs on
account of accommodation entries has escaped
assessment. The A.O. after considering the evidences
and material on record made the addition of Rs.20
lakhs in respect of four corporate entities under section
68 of the I.T. Act and made further addition of
Rs.40,000/- on account of commission expenses for
taking accommodation entries. The re-assessment order
under sections 144/148 Dated 18.03.2015 was passed
accordingly.
44
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
10. The Ld. Pr. CIT considered the aforesaid re-
assessment order to be erroneous and prejudicial to the
interests of the Revenue and noted that Investigation
Wing has forwarded hard copy of appraisal report to
show that assessee received accommodation entries.
However, A.O. has taken it at Rs.10 lakhs only as
against Rs.1 crore. Show cause notice under section 263
of the I.T. Act was issued stating therein that assessee
has received Rs.50 lakhs each as accommodation
entries from Hillridge Investments Ltd., and M/s. Vogue
Leasing & Finance Private Limited. Explanation of
assessee was called for because the assessment order
was erroneous in so far as it is prejudicial to the
interests of the Revenue because the A.O. has not
examined the seized material and has failed to tax the
amount of Rs.1 crore as unexplained credit in the books
of account of the assessee. The assessee filed reply in
which it was briefly explained that the A.O. in the
reasons for reopening of the assessment recorded that
there is escapement of income of Rs.10 lakhs. Therefore,
45
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
entire proceedings are based on non-application of mind
by the A.O. The assessee requested for cross-
examination to the statement of Shri S.K. Jain. The Pr.
CIT noted that correct amount of accommodation entries
from both these companies are Rs.50 lakhs each
instead of Rs.5 lakhs. The Ld. Pr. CIT also noted that
A.O. failed to consider the seized material found during
the course of search in the case of Shri S.K. Jain,
therefore, A.O. passed the re-assessment order without
proper verification and enquiries. Therefore, re-
assessment order was set aside and A.O. was directed
to pass the order afresh as per law.
11. Learned Counsel for the Assessee reiterated
the submissions made before the authorities below and
referred to PB-1 which is reasons recorded for reopening
of the assessment in which A.O. found that income of
Rs.10 lakhs has escaped assessment. However, the Ld.
Pr. CIT noted that amount is Rs.50 lakhs each in both
the cases, therefore, escapement of income is of Rs.1
crore. He has, therefore, submitted that reasons
46
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
recorded for reopening of the assessment are invalid,
incorrect and non-existing. Therefore, re-assessment
order is invalid and bad in law. He has submitted that
A.O. considered the seized material on record and that it
is a non-application of mind by the A.O. to frame re-
assessment order. In support of this contention, he has
relied upon the Judgments of Hon'ble Delhi High Court
in the case of CIT vs. Suren International (2013) 357 ITR
24 (Del.), Judgment of Delhi High Court in the case of
PCIT vs. RMG Polyvinyl (I) Ltd., (2017) 396 ITR 5 (Del.)
and Judgment of Delhi High Court in the case of SNG
Developers Ltd., (2018) 404 ITR 312 (Del.). He has
submitted that since re-assessment order was invalid
and bad in law, therefore, same cannot be revised
under section 263 of the I.T. Act. No cross-examination
have been allowed to the statement of Shri S.K. Jain,
therefore, re-assessment order is bad in law and cannot
be reviewed. He has, therefore, submitted that
proceedings under section 263 of the I.T. Act may be
quashed.
47
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
12. On the other hand, Ld. D.R. relied upon the
Order of the Ld. Pr. CIT and submitted that figure in the
reasons is wrongly mentioned. He has filed written
submissions and relied upon some Judgments as relied
in case of Supersonic Technologies Pvt. Ltd., (supra).
Therefore, Ld. Pr. CIT rightly considered re-assessment
order to be erroneous and prejudicial to the interests of
the Revenue.
13. We have considered the rival submissions
and perused the material available on record. It is well
settled Law that validity of re-assessment proceedings
is to be judged with reference to the reasons recorded
under sections 147/148 of the I.T. Act. In the present
case, A.O. has recorded reasons for reopening of the
assessment on 25.03.2014, copy of which is filed at
page-1 of paper book. Same reads as under :
"Reasons for issue of notice u/s 148 of the I.T.Act, 1961 in
the case of M/s. SPJ Hotels (PV Limited, PAN
AAKCS7722C for the A.Y. 2007-08 - Reg.
48
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
25.03.2014 : Information about entry operators and their
beneficiaries of Delhi has been received from the office of the
DIT .(Inv.)-II, New Delhi vide letter F. No. DlT(Inv)-
148/2011-12/7539 dated 21,03.2012 and F. No. DIT (Inv)-
II/U/s 148/ 2012-13/196 dated 12.03.2013 along with
detailed report giving working of entry operators with a list
of beneficiaries. After making inquiries, the Addl.
Directorate of Income Tax, Unit - VI of Investigation, in his
report has established large amount of tax evasion in the
transactions between entry operators and the beneficiaries.
It is revealed from the list that the assessee company M/s.
SPJ Hotels (P) Limited (termed as beneficiary) during the
previous year 2006-2007 relevant to Assessment. Year 2007-
2008 had taken accommodation entries totaling
Rs.l0,00,000/- from the persons/parties (termed as entry
operators). These entries have been investigated by the
Investigation Wing and found to be given as accommodation
entries from entities operated and controlled by Surender
Kumar Jain. The details of which are mentioned below :
49
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Beneficiary's Amount (Rs.) Entry Provider Cheque/ Dated
Name P.O.No.
M/s. SPJ M/s. Hillridge
Hotels (P) 5,00,000/- Investments 011048 28.03.2007
Limited Limited.
M/s. SPJ M/s. Vogue
Hotels (P) 5,00,000/- Leasing & 011047 28.03.2007
Limited Finance (P)
Limited
I have very carefully considered the aforesaid piece of
information and the modus operandi of the entry operator
Surender Kumar Jain and its controlled entities. I find that
the quantum of amount of such entries received by the
assessee company M/s. SPJ Hotels (P) Limited as per details
mentioned above is Rs.10,00,000/-. These accommodation
entries taken by M/s. SPJ Hotels (P) Limited are earlier
identified and examined by the Investigation Wing to
establish that all these entry providing entities were tools in
Surender Kumar Jain business of providing accommodation
entries in lieu of cash/cheques through which he had drawn
a long trail of bank transaction to impart a color of
genuineness on these transactions.
50
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
In view of facts stated herein above, I am of the
considered opinion & belief that the assessee company
managed the above said transactions of accommodation
entries out of its income from undisclosed sources. In this
case, as per records available, the assessee has not filed its
return of income for the A.Y. 2007-08. In view of above, I
have reason to believe that income of Rs.10,00,000/- has
escaped assessment within the meanings of the provisions of
Section 147 of the Income Tax Act, 1961. Therefore, a notice
u/s. 148 of the Income Tax Act, 1961 is required to be issued
to the assessee company to assess the income escaped as
stated hereinabove. As the period to reopen the case exceeds
four years and as per records no scrutiny assessment has
been done in this case for the A.Y. 2007-08, approval from
the Addl. Commissioner of Income Tax, Range-9, New Delhi
has been obtained vide letter dated 25.03.2014 to issue notice
u/s.148, as per the provisions of Section 151(2) of the I.T. Act.
Therefore issue notice u/s. 148 of the I.T. Act.
51
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Sd/-Virender Kumar Rathee
ITO, Ward 9(2), New Delhi."
13.1. In the aforesaid reasons for reopening of the
assessment, it is mentioned that assessee company
received share capital on account of accommodation
entries of Rs.5 lakhs each from M/s. Hillridge
Investment Pvt. Ltd., and M/s. Vogue Leasing & Finance
Pvt. Ltd., based on information and seized material
received from Investigation Wing. However, the
assessee explained before A.O. that amount in question
is Rs.20 lakhs from four parties. The A.O. in the re-
assessment order made addition of Rs.20 lakhs on
account of unexplained credit on account of
accommodation entries received from four parties and
also made addition of Rs.40,000/- on account of
Commission paid to entry operators. On the basis of the
same material, the Pr. CIT initiated the proceedings
under section 263 of the I.T. Act on the reasons that
amount in question is not Rs.10 lakhs received from
these two companies, but, it is Rs.50 lakhs each i.e.,
52
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Rs.1 crore. Thus, the facts mentioned in the reasons for
reopening of the assessment are incorrect and non-
existent. The Hon'ble Punjab & Haryana High Court in
the case of CIT vs. Atlas Cycle Industries (1989) 180 ITR
319 (P & H) held as under :
"Held (i) that the Tribunal was right in cancelling the
reassessment as both the grounds on which the reassessment
notice was issued were not found to exist, and, therefore, the
Income-tax Officer did not get jurisdiction to make a
reassessment."
13.2. Since the facts are totally different as A.O.
had reason to believe that Rs.10 lakhs has escaped
assessment on account of Rs.5 lakhs received from two
companies referred to above, which was ultimately
found to be incorrect and non-existent, therefore, there
may not be any application of mind on the part of the
A.O. to proceed to initiate the re-assessment
proceedings. There is no other material available on
record except the information received from the
53
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Investigation Wing. The A.O. on the basis of the
information and material received from Investigation
Wing has recorded reasons for reopening of the
assessment which was ultimately found to be incorrect
and non-existent. It is well settled law that when no
new material other than examined by the A.O originally
found on record for the purpose of initiating the re-
assessment proceedings, the proceedings under section
148 of the I.T. Act would be invalid and bad in law. We
rely upon decision of Delhi High Court in the case of Atul
Kumar Swamy 362 ITR 693, Consulting Engineers
Services India Pvt. Ltd., 378 ITR 318, Nestle India Ltd.,
384 ITR 334 and Priyadesh Gupta 385 ITR 452. The
Hon'ble Delhi High Court in the case of SNG Developers
Ltd., 404 ITR 312 held that when A.O. initiated the re-
assessment proceedings without application of mind,
such proceedings would be invalid. A.O. in the present
case has failed to verify the information received from
Investigation Wing. Therefore, it is non-application of
mind on the part of the A.O. to record correct facts in the
54
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
reasons for reopening of the assessment. In such
circumstances, the re-assessment order could not be
treated as valid and in accordance with law. Since re-
assessment proceedings are invalid and bad in law,
therefore, such proceedings could not be revised under
section 263 of the I.T. Act. Following the reasons for
decision in the case of M/s. Supersonic Technologies
Pvt. Ltd., (supra), we set aside the order passed by the
Ld. Pr. CIT under section 263 of the I.T. Act and quash
the same.
14. In the result, ITA.No.2857/Del./2017 of the
Assessee is allowed.
ITA.No.2527/Del./2017 M/s. Shiv Sai Infrastructure
(P) Ltd., New Delhi.
15. This appeal by Assessee has been directed
against the Order of the Ld. Pr. CIT-8, New Delhi, Dated
24.03.2017, for the A.Y. 2007-2008 under section 263
of the I.T. Act, 1961.
55
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
16. The facts of the case are that notice under
section 148, dated 28.03.2014 was issued to the
assessee after recording the reasons and obtaining
approval of CIT-3, New Delhi. In compliance to the notice
under section 148, the assessee has furnished return on
01.05.2014. The assessee stated before A.O. that the
income declared in the ITR under section 148 remain the
same as declared in the original return of income filed
under section 139 of the I.T. Act Dated 30.10.2007. It
was further stated that income of Rs.33,79,596/- as
declared in the return of income under section 139 has
been accepted and assessed to tax under section 143(3)
vide Order dated 27.11.2009. The A.O. after considering
the material on record and summons issued under
section 131(1) of the I.T. Act and notice under section
133(6) and other material on record, accepted the return
of income and passed the re-assessment order under
section 143(3) r.w.s. 147 of the I.T. Act, Dated
30.03.2015.
56
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
17. The Ld. Pr. CIT found the said re-assessment
order to be erroneous in so far as it is prejudicial to the
interests of the Revenue. It is noted that assessment
was reopened under section 148 on the allegation of
accommodation entries taken from Shri S.K. Jain group
of concerns who were searched on 14.09.2010 by the
Investigation Wing of the Income Tax Department. Some
of the Assessing Officers did not examine the seized
material in the form of cash book and the books
containing the details of cheques issued by such
concerns seized from the premises of Shri S.K. Jain.
Notice under section 263 of the I.T. Act was issued to
the assessee which is reproduced in the impugned order
in which it is noted that case was reopened on the basis
of the allegation of accommodation entry on account of
share capital/share premium/share application money
from M/s. Hillridge Investments Ltd., and M/s. Vogue
Leasing & Finance Pvt. Ltd., concerns of Shri S.K. Jain
group of cases. The A.O. accepted the return of income
on the basis of confirmations from the said investors.
57
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
The evidences found during the course of search in the
case of Shri S.K. Jain group of cases have not been
examined by the A.O. Reply of the assessee was called
for in which the assessee explained that the A.O. after
examining the entire details and documentary evidences
on record and making direct/independent enquiry from
both the Investors under sections 131(1) and 133(6) of
the I.T. Act, completed the assessment proceedings. The
assessee filed all the documentary evidences before
A.O. i.e., confirmation letters from both the Investors,
copy of their bank accounts, copy of ITR, copy of PAN,
copy of audited balance sheet, copy of Master Data
taken from Official website of MCA and assessment
order under section 153C/153A in the case of M/s.
Hillridge Investments Ltd., The seized papers are only
rough papers and no details have been mentioned
therein. The Ld. Pr. CIT however, did not accept the
contention of assessee and noted that seized documents
recovered during the course of search in the case of Shri
S.K. Jain group of cases have not been examined and
58
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
considered by the A.O. while framing the re-assessment
order. The Ld. Pr. CIT also noted that verification of the
seized documents shows the amount in question is
Rs.2.20 crores but as per the details given in the notice
under section 263 of the I.T. Act, the amount is
mentioned as Rs.2.90 crores. The contention of the
assessee that the seized material did not belong to the
assessee was rejected. The re-assessment order was
set aside and restored to the A.O. for passing the order
afresh as per law.
18. The assessee in the present appeal has
challenged the Order under section 263 of the IT. Act.
The assessee also moved an application for admission
of the following additional ground.
"That having regard to the facts and circumstances of
the case, Ld. CIT ought not to have revised re-
assessment order under section 147/143(3) as the said
re-assessment order was void and bad in law due to
illegal assumption of jurisdiction."
59
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
18.1. The Learned Counsel for the Assessee
submitted that additional ground is legal in nature and
no fresh facts are to be investigated. The additional
ground goes to the root of the matter and therefore,
prayed that the same may be admitted for disposal of
the appeal. Learned Counsel for the Assessee relied
upon the decision of Hon'ble Supreme Court in the case
of NTPC Limited vs. CIT (1998) 229 ITR 383 (SC) and
CIT vs. Sinhgad Technical Education Society (2017) 397
ITR 344 (SC) and decision of Hon'ble Punjab & Haryana
High Court in the case of VMT Spinning Co. Ltd., vs. CIT,
Ludhiana and another (2016) 389 ITR 326 (P & H).
19. On the other hand, Learned D.R. objected to
the admission of additional ground of appeal.
20. Considering the facts of the case, we are of
the view that additional ground is legal in nature and
goes to the root of the matter. Therefore the same shall
have to be admitted for the purpose of disposal of the
appeal. We, accordingly, admit the additional ground of
appeal. Learned Counsel for the Assessee contended
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ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
that re-assessment order in this case under section
143(3)/147 is invalid and bad in law and as such, the
same could not be revised under section 263 of the I.T.
Act. He has submitted that in fact said issue can be
raised in collateral proceedings as is held in the
following judicial decisions.
(i) Classic Flour & Food Processing P. Ltd., vs. CIT,
Kolkata ITA.No.764-766/Kol./2014, Dated 05.04.2017
of ITAT Kolkata Bench.
(ii) Krishan Kumar Saraf vs. CIT (2016) 46 ITR 387 (ITAT)
(Delhi Bench).
(iii) Westlife Development Ltd., vs. Pr. CIT (2016) 49 ITR
406 (ITAT) (Mumbai Bench).
20.1. Learned Counsel for the Assessee referred to
several documents in the paper book in support of the
contention that entire documentary evidences were filed
before A.O. at the original assessment stage as well as
in the re-assessment proceedings to prove genuineness
of the share capital money received from the Investors.
PB-45 is confirmation of M/s. Hillridge Invesment Ltd.
PB-46 is bank statement. PB-49 is ITR of M/s. Hillridge
Invesment Ltd. PB-50 to 53 are Confirmation, Bank
61
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
statement and ITR of M/s. Vogue Leasing & Finance
Pvt. Ltd. PB-307 is order sheet of the A.O. All
documentary evidences were filed before A.O. in both
the proceedings. PB-68 is copy of the reasons recorded
under section 148 of the I.T. Act in which the amount of
Rs.2.90 crores as accommodation entries have been
mentioned instead of Rs.2.20 crores. PB-60 is notice
under section 148 Dated 28.03.2014. PB-57 is original
assessment order under section 143(3) Dated
27.11.2009. He has, therefore, submitted that re-
assessment done after four years and in the reasons as
well as in the notice under section 148 of the I.T. Act,
1961, the A.O. has not mentioned anything if there was
any failure on the part of the assessee to disclose fully
and truly all material facts at every stage for the
purpose of assessment and re-assessment. The
assessee declared share application money received
from two parties. However, in the reasons name of none
of parties have been mentioned. In the original
assessment proceedings an amount of Rs.2.20 crores
62
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
have been mentioned. Therefore, in the reasons the
facts have been wrongly mentioned. All the facts
available on record were considered in the re-
assessment proceedings, therefore, no new material has
been brought on record for reopening of the assessment.
All incorrect and non-existing facts have been mentioned
in the reasons for reopening of the assessment. The
amount in question is also wrongly mentioned in the
reasons. In the books of account of assessee, assessee
has shown to have received share application money
from two Investors in a sum of Rs.2.20 crores and not
Rs.2.90 crores. Learned Counsel for the Assessee
referred to various replies filed before A.O. at original
assessment stage as well as in the re-assessment
proceedings in which it was clearly highlighted that
there is application of mind from the side of the A.O. to
frame the re-assessment order. PB-300 and 301 is
report of the Inspector to show that notice under section
133(6) have been served upon M/s. Vogue Leasing &
Finance Pvt. Ltd. PB-319 is the report of the
63
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Investigation Wing which clarifies that summons under
section 131 and notice under section 133(6) have been
issued on the Directors of the assessee-company which
have been complied with. Necessary enquiry have been
conducted by the Inspector of the Office who has
submitted his report without pointing-out any specific
discrepancy. PB-310-317 is order sheet. Learned
Counsel for the Assessee relied upon decision of Hon'ble
Delhi High Court in the case of Haryana Acrylic
Manufacturing Company vs. CIT (2009) 308 ITR 38
(Del.) in which it was held as under :
"Conclusion :
AO while making assessment under s. 143(3) having made
specific queries with regard to share application money in
response to which assessee furnished all relevant documents
and after considering this material, AO having completed
the assessment, it could not be said that income escaped
assessment on account of failure on the part of assessee to
disclose fully and truly all material facts necessary for
64
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
assessment, hence reopening of assessment after expiry of
four years from the end of the relevant assessment year was
invalid."
20.2. In the case of Well Intertrade (P) Ltd., &
Another vs. Income Tax Officer (2009) 308 ITR 22 (Del.)
(HC), the Hon'ble Delhi High Court has held as under :
"Conclusion :
Assessee having fully and truly disclosed all the
material facts necessary for the assessment as required by the
A.O, the precondition for invoking the proviso to Section 147
was not satisfied and therefore, A.O. acted wholly without
jurisdiction in issuing notice under section 148 beyond the
four year period mentioned in Section 147."
20.3. Learned Counsel for the Assessee submitted
that there is totally non-application of mind by the A.O.
while framing the re-assessment order, therefore, re-
assessment is illegal and bad in law. In support of his
contention, he has relied upon decision of Hon'ble Delhi
65
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
High Court in the case of Pr. CIT vs. RMG Polyvinyl
(2017) 396 ITR 5 (Del.), Pr. CIT vs. Meenakshi Overseas
Pvt. Ltd., (2017) 99-CCH-28-Del.-HC, Pr. CIT vs. G & G
Pharma India Ltd., (2016) 384 ITR 147 (Del.). He has
submitted that there is no approval for reopening of the
assessment by the Competent Authority. He has
submitted that all the seized papers were considered by
the A.O, therefore, reopening of the assessment was
bad in law, illegal and as such Ld. Pr. CIT should not
assume jurisdiction under section 263 of the I.T. Act.
21. On the other hand, Learned D.R. reiterated
the submissions made in the case of M/s. Supersonic
Technologies Pvt. Ltd., Delhi. in ITA.No.2269/Del./ 2017
hereinabove. The Learned D.R. submitted that seized
material was not considered by the A.O. Summons
under section 131 were not complied with. All material
facts were not disclosed. A.O. took the figure of Rs.2.90
crores in the reasons based on information received
from Investigation Wing. Therefore, Ld. Pr. CIT correctly
invoked jurisdiction under section 263 of the I.T. Act.
66
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Assessee cannot challenge validity of re-assessment
proceedings under section 263 of the I.T. Act.
22. We have considered the rival submissions
and perused the material available on record. It is well
settled that the Ld. Pr. CIT while exercising power under
section 263 of the I.T. Act could not revise the
assessment order which was illegal, bad in law and
non-est in the eye of Law. The assessee can challenge
the validity of the re-assessment order referred to under
section 263 of the I.T. Act being non-est and illegal. The
case Laws relied upon by the Learned Counsel for the
Assessee are squarely applicable to the facts and
circumstances of the case. In the present case, A.O.
passed the original assessment order under section
143(3) of the I.T. Act, Dated 27.11.2009. The A.O. has
mentioned in the assessment order that details have
been filed by assessee and after discussion of the case
return of income have been accepted. The assessee in
this case received share application money/premium
from two parties and filed several documents on record
67
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
to prove genuine credit in the matter which is accepted
by the A.O. Thereafter, re-assessment proceedings were
initiated under section 148 of the I.T. Act. The A.O. in
the notice under section 148 as well as in the reasons
did not mention if there is any failure on the part of the
assessee to disclose fully and truly all material facts
necessary for assessment. Therefore, the decisions of
Hon'ble Delhi High Court relied upon by the Learned
Counsel for the Assessee in the cases of Haryana
Acrylic Manufacturing Co. vs. CIT & Another (supra) and
Well Intertrade (P) Ltd., and Another (supra), are
squarely applicable to the facts of the case. Therefore,
the re-assessment done after four years from the end of
the relevant assessment year would be bad in law
unless the income chargeable to tax has escaped
assessment for such assessment year by the reason of
failure on the part of the assessee to make return under
section 139 or in response to notice issued under section
142(1) or Section 148 or to disclose fully and truly all
material facts necessary for assessment for that
68
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
assessment year. In the absence of any such details
mentioned in the reasons or notice under section 148,
the re-assessment order would be invalid and bad in
law. Further A.O. recorded incorrect facts in the reasons
for reopening of the assessment because the amount in
question is Rs.2.20 crores but A.O. has mentioned in the
reasons the amount of Rs.2.90 crores which escaped
assessment. Further, no names of the parties have been
mentioned in reasons under section 147 from whom the
amount in question have been received by the assessee
as accommodation entry. All the facts brought to the
notice of the A.O. by the Investigation Wing have been
considered by the A.O. while framing the re-assessment
and accepted the return of income. Therefore, there was
no new material available on record to justify reopening
of the assessment or to invoke jurisdiction under section
263 of the I.T. Act, which would also show that there is
totally non-application of mind on the part of the A.O. to
reopen the assessment in the matter. These facts are
sufficient to hold that reopening of the assessment was
69
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
bad in law, illegal and non-est, therefore, such order
could not be revised in the proceedings under section
263 of the I.T. Act. We, accordingly set aside the Order
of the Ld. Pr. CIT passed under section 263 of the I.T.
Act and quash the same. In this view of the matter,
there is no need to decide the issue on merit. However,
we may note briefly that documentary evidences were
filed before A.O. at original assessment stage as well as
at the stage of re-assessment to prove genuine credit in
the matter which have accepted by the A.O. after
considering and examining the material on record and
calling explanation from the Investors under section
133(6) of the I.T. Act. In this view of the matter, we
allow the appeal of assessee.
24. In the result, ITA.No.2527/Del./2017 of the
Assessee is allowed.
ITA.No.3301/Del./2017 M/s. Superior Buildwell Pvt.
Ltd., Delhi.
70
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
25. This appeal by Assessee has been directed
against the Order of the Ld. Pr. CIT-8, New Delhi, Dated
17.03.2017, for the A.Y. 2009-2010 under section 263
of the I.T. Act, 1961.
26. Briefly the facts of the case are that original
return of income was filed on 18.09.2009 declaring NIL
income. On the basis of information received from
Directorate of Investigation Wing of Income Tax
Department, it was noticed that during the course of
search in the premises of Shri Surendra Kumar Jain
group of cases, it was found that assessee has obtained
an entry of Rs.2 crores by way of share capital/share
application money. The assessment was reopened
under section 148 of the I.T. Act, 1961. Notice under
section 148 was issued on 18.10.2013. The A.O. issued
notice under section 142(1) Dated 22.05.2014 and the
assessee in reply thereto, submitted that return already
filed may be treated as return filed pursuant to notice
under section 148 of the I.T. Act. The A.O. issued notice
under section 133(6) to M/s. Supersonic Construction
71
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
Ltd., and M/s. Oriental Bank of Commerce for relevant
information and verification. The assessee was asked to
file details of addition to share capital with complete
name, address, PAN and the amount received. The
assessee submitted desired details before A.O. and also
filed confirmations, audited bank statement, ITR and
return of allotment filed with ROC. The A.O. verified the
identity, creditworthiness and genuineness of the
transaction in the matter and accordingly accepted the
return of income vide order under sections 147/143(3)
of the I.T. Act, 1961 Dated 30.06.2014.
26.1. The Ld. Pr. CIT found the re-assessment
order to be erroneous in so far as it is prejudicial to the
interests of the Revenue because information was
received that assessee received accommodation entry
from Shri S.K. Jain group of concerns and all the seized
documents have not been verified by the A.O. Show
cause notice was issued to the assessee seeking
explanation of credit entry of Rs.1 crores received from
Shalini Holdings Ltd. The assessee filed detailed reply
72
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
which is reproduced in the impugned order in which the
assessee submitted that complete details were filed
before A.O. and receipt of share capital money
supported by the documents and confirmations.
Therefore, re-assessment order is not erroneous in so far
as prejudicial to the interests of the Revenue. The Ld. Pr.
CIT noted the submissions of the assessee wherein the
shares were originally issued to Shalini Holdings Ltd on
25.08.2008 were transferred on 25.03.2010 in favour of
Frank Merchantile Private Limited. Seized documents
are reproduced in the impugned order. The Ld. Pr. CIT
noted that as against the entry in the name of assessee,
an amount of Rs.2 crores have been mentioned.
However, on verification of the seized material, it was
found that total amount of Rs.1 crore as per details
given in the show cause notice is there and not Rs.2
crores. It would show that A.O. did not verify and
examine the seized material relating to assessee and
accepted the explanation of assessee without examining
the seized paper. The Ld. Pr. CIT, therefore, found that
73
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
the seized documents have not been examined and
verified by the A.O. Therefore, re-assessment order was
set aside and matter was restored to the A.O. for
passing the Order afresh as per provisions of Law.
27. The assessee in the present appeal
challenged the Order under section 263 of the I.T. Act as
well as filed an application for admission of additional
grounds which reads as under :
7.(a) On the facts and circumstances of the case, the
learned Pr. CIT has erred, both on facts and in
law, in holding that the legality of original
assessment proceedings could not be challenged
in the 263 proceedings, disregarding the various
judicial pronouncements cited by the assessee in
this regard.
7.(b) On the facts and circumstances of the case, the
learned Pr. CIT has erred both on facts and in
law in ignoring the fact that the order of the AO
reopening the assessment under Section 147 of
74
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
the Act, without complying with the statutory
conditions and the procedure prescribed under
the law, is bad and liable to be quashed, and
thus, the same could not have been revised
under Section 263 of the Act.
7.(c) On the facts and circumstances of the case, the
learned Pr. CIT has erred both on facts and in
law in ignoring the fact that the order of the AO
passed on the basis of reasons recorded for
reopening of the assessment, which are incorrect
on facts and bad in law, is illegal and liable to be
quashed, and thus, the same could not have been
revised under Section 263 of the Act.
7.(d) On the facts and circumstances of the case, the
learned Pr. CIT has erred both on facts and in
law, in assessing the jurisdiction under Section
263 of the Act, despite the fact that the original
assessment having been made without issuing of
statutory notice under Section 143(2) of the Act,
75
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
being itself illegal, the same could not be revised
under Section 263 of the Act."
27.1. Learned Counsel for the Assessee submitted
that it is legal ground and goes to the root of the matter
and without further investigation, same may be
admitted for disposal of the appeal.
28. Learned D.R. however, objected to the
admission of the additional ground of appeal and
submitted that no such ground was taken in the original
proceedings and that such ground cannot be taken in
the present appeal.
29. Similar issue was considered by us in the
above group of appeal in the case of M/s. Shiv Sai
Infrastructure (P) Ltd., (supra) and additional ground
have been admitted. Following the reasons for decision
of the same, we admit the additional grounds of appeal
for the purpose of disposal of the appeal.
30. The Learned Counsel for the Assessee
reiterated the submissions made before the authorities
76
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
below and submitted that no notice under section 143(2)
have been issued in the case of assessee. Copy of the
order sheet of the A.O. is filed at page 279 of the paper
book to show that no notice under section 143(2) have
been issued. He has referred to PB-20 which is reasons
for reopening of the assessment in which A.O. has
mentioned wrong facts of taking accommodation entry
of Rs.2 crores. However, assessee has received share
capital/premium of Rs.1 crore only in assessment year
under appeal. No name of the person from whom
assessee received Rs.2 crores have been mentioned in
the reasons. The show cause notice under section 263
have been issued for a lesser amount of Rs. 1 crore. If
reasons were incorrect for reopening of the assessment,
then, re-assessment proceedings would be invalid and
non-est, therefore, Ld. Pr. CIT has no power to review
the same under section 263 of the I.T. Act. Learned
Counsel for the Assessee referred to several replies filed
before A.O. to show all documentary evidences were
examined by the A.O. at re-assessment proceedings.
77
ITA.No.3216/Del./2017 Sri Balaji
Forgings (P) Ltd., New Delhi.
There is no co-relation of the seized documents with the
assessee. Since the A.O. recorded incorrect reasons for
reopening of the assessment and that no notice under
section 143(3) have been issued, therefore, re-
assessment order is invalid and as such, same cannot
be revised under section 263 of the I.T. Act. A.O. made
enquiry of all the documents but Ld. Pr. CIT did not
make any enquiry on the documentary evidences on
record. Learned Counsel for the Assessee submitted
that the issue is same as have been considered and
decided in the cases of M/s. Supersonic Technologies
Pvt. Ltd., M/s. SPJ Hotels Private Limited and M/s. Shiv
Sai Infrastructure (P( Ltd., New Delhi (supra).
31. On the other hand, Learned D.R. reiterated
the submissions already made in the case of M/s.
Supersonic Technologies Pvt. Ltd., (supra) and also
submitted that no ground was taken in original
proceedings for illegality in the re-assessment
proceedings. The issue of notice under section 143(2) is
a disputed question and not relevant in the present
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proceedings. Seized papers are not considered and
examined by the A.O. The amount in question is Rs.1
crore only. Therefore, the Order of the A.O. is erroneous
in so far as prejudicial to the interests of the Revenue.
He has, therefore, submitted that Order under section
263 may be confirmed.
32. We have considered the rival submissions.
The issue is same as have been considered in the above
three cases viz., M/s. Supersonic Technologies Pvt. Ltd.,
M/s. SPJ Hotels Private Ltd., and M/s. Shiv Sai
Infrastructure (P) Ltd., (supra). In the present case, no
notice under section 143(2) have been issued for
completion of the re-assessment proceedings and that
incorrect facts have been recorded in the reasons for
reopening of the assessment. Therefore, the re-
assessment proceedings are invalid, bad in law and
non-est and as such, liable to be quashed. We,
therefore, following the reasons for decision in the cases
of M/s. Supersonic Technologies Pvt. Ltd., M/s. SPJ
Hotel Private Ltd., and M/s. Shiv Sai Infrastructure (P)
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Ltd., (supra), set aside the impugned Order of the Ld. Pr.
CIT passed under section 263 of the I.T. Act and quash
the same. Accordingly, appeal of the assessee is
allowed.
33. In the result, appeal of the Assessee is
allowed.
34. To sum-up, all the appeals of the Assessees
are allowed."
9. In this case, after considering the submissions of
both the parties and material on record, it was held that re-
assessment order cannot be revised under section 263 of
the I.T. Act because only valid re-assessment order can be
revised. It was also found that in this case A.O. conducted
the enquiries before passing the re-assessment order and on
the basis of material on record, A.O. has correctly accepted
the transaction to be genuine. It is not in dispute that
earlier A.O. reopened the assessment by recording the
reasons for reopening of the assessment under section 148
dated 29.03.2014. The reasons are reproduced above. In the
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said reasons, the A.O. has referred to the letter of DIT dated
21.03.2012, Investigation Report dated 12.03.2013. It is,
therefore, recorded in the reasons for reopening of the
assessment that assessee received accommodation entry
from M/s. Ad Fin Capital Services P. Ltd., of Rs.55 lakhs
from the concern controlled and operated by Shri S.K. Jain.
The assessee filed detailed reply before A.O. at the
assessment stage along with documentary evidences and
the A.O. called for reply from the Investor under section
133(6) of the I.T. Act which has been also responded by the
Investor. The A.O. on the basis of evidence and material on
record, accepted the returned income and thus, accepted
that assessee has received genuine share application
money. Assessing Officer, therefore, accepted the returned
income vide impugned re-assessment order dated
19.03.2015. The A.O. thereafter again recorded the reasons
for reopening of the assessment on 23.03.2016. The details
of the same have been placed on record by the Ld. CIT-D.R.
The assessee has been supplied copy of the reasons vide
letter dated 12.05.2016, copy of the reasons for reopening of
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the assessment are reproduced at page-179 of the paper
book. In the same reasons also, the A.O. has referred to the
same facts as were recorded in the reasons for reopening of
the assessment on 29.03.2014. The A.O. has referred to the
same letter of the Investigation Wing dated 12.03.2013 and
same facts. The A.O. after objection by assessee, dropped
the second re-assessment proceedings vide Order dated
05.12.2016 (supra). The ITAT, Indore Bench, Third Member
in the case of Dewas Silk Mill (supra) decided by Third
Member has considered the following questions after taking
the difference of opinion between Learned Members of the
Tribunal.
1. "As to whether the dropping of the proceedings under
section 148 served on the assessee on 8.3.2002 is
invalid and barred by time I limitation in the absence of
service within the statutory period ?
2. If answer to question No. 1 is in affirmative then as to
whether the revisional order under section 263 becomes
invalid in consequence? And
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3. As to whether under the facts and circumstances of the
case, the order passed under section 263 is bad in law
on merits of the case ?"
9.1. The Learned Third Member decided the first and
second questions against the assessee and consequently
held that the Order under section 263 of the I.T. Act would
be a valid Order. The Learned Third Member on merit,
however, decided the issue in favour of the assessee. The
findings of the learned Third Member in para-22 of the
Order is reproduced as under :
"22. In the present case also, the Assessing
Officer made inquiry and the assessee replied to each
and every query of the Assessing Officer both in the
original proceedings as well as in the re-assessment
proceedings and arrived at a conclusion for re-opening
proceedings and dropping the proceedings after the due
consideration of reply and facts submitted by the
assessee. Here also the CIT has not given any finding
that the cash credits were not genuine and that interest
paid by them was not allowable as deduction. In the
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facts and circumstances, in our opinion, CIT(A) was not
justified in invoking provisions of section 263 for
revising the order of dropping of reassessment
proceedings under section 147 of the Act, of the
Assessing Officer, which as aforesaid, were dropped by
the Assessing Officer after due and proper inquiries. The
order of the CIT(A) on merits, is therefore, not
sustainable, and accordingly requires to be vacated."
9.2. It would, therefore, prove that dropping of the
proceedings under section 148 was held to be valid Order
revisable under section 263 of the I.T. Act. Therefore, the
contention of the Ld. D.R. that the dropping of the
proceedings under section 148 of the I.T. Act does not
amount to Order is not tenable and accordingly, rejected.
These facts clearly prove that the A.O. on the basis of the
same information of receiving accommodation entry as
noted in the show cause notice under section 263 of the I.T.
Act, had earlier reopened the assessment in first round of
proceedings as well as in the second round of proceedings
on the same set of facts and ultimately, dropped the second
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re-assessment proceedings vide Order dated 05.12.2016.
Therefore, the first impugned order under section 147 of the
I.T. Act dated 19.03.2015 stood merged with the second re-
assessment order dated 05.12.2016 dropping the
proceedings under section 263 of the I.T. Act. Thus, there
were no justification for the Ld. Pr. CIT to initiate the
proceedings under section 263 of the I.T. Act against the
first re-assessment order dated 19.03.2015. Since Ld. Pr.
CIT did not assume the jurisdiction validly under section
263 of the I.T. Act against the second re-assessment order
dated 05.12.2016, therefore, the entire proceedings are
vitiated and are liable to be quashed. We may also briefly
note that assessee at the first and second round of re-
assessment proceedings produced sufficient documentary
evidences before A.O. to prove that it has received genuine
share application money, therefore, the Ld. Pr. CIT without
any justification should not have revised the re-assessment
order particularly when no proceedings under section 263 of
the Act have been initiated against the final assessment
order dated 05.12.2016. Learned Counsel for the Assessee,
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therefore, rightly contended that when the reasons recorded
for reopening of the assessment were the very same reasons
for which Ld. Pr. CIT had invoked the jurisdiction under
section 263 of the I.T. Act, invocation of Section 263 of the
Act is not tenable. In view of the above discussion and
considering the findings in the case of M/s. Supersonic
Technologies Pvt. Ltd., Delhi & Another vs. The PCIT-8, New
Delhi (supra), we set aside the impugned Order under
section 263 of the I.T. Act and quash the same.
10. In the result, appeal of Assessee is allowed.
Order pronounced in the open Court.
Sd/- Sd/-
(PRASHANT MAHARISHI) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Delhi, Dated 09th January, 2019
VBP/-
Copy to
1. The appellant
2. The respondent
3. CIT(A) concerned
4. CIT concerned
5. D.R. ITAT `G' Bench, Delhi
6. Guard File.
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Forgings (P) Ltd., New Delhi.
// BY Order //
Assistant Registrar : ITAT Delhi Benches :
Delhi.
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