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Duggal Estates Pvt. Ltd. HN 1140 Nehru Colony NH 3 Faridabad Haryana vs. Income Tax Officer, Ward 1 (2) Faridabad.
May, 25th 2021

1 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH: ‘B’ NEW DELHI ]

BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER
A N D

MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
(THROUGH VIDEO CONFERENCING)

ITA. No. 3395/DEL/2019
Assessment Year: 2009-10

Duggal Estates Pvt. Ltd., Income Tax Officer,
HN–1140, Nehru Colony, Vs. Ward : 1 (2)
NH–3, Faridabad,
Haryana – 121 001. Faridabad.
PIN : AACCD1642A
APPELLANT RESPONDENT

A N D

ITA. No. 3396/DEL/2019
Assessment Year: 2009-10

Duggal & Sons Buildwell Pvt. Ltd., Income Tax Officer,
HN–1140, Nehru Colony, Vs. Ward : 1 (2)
NH–3, Faridabad,
Haryana – 121 001. Faridabad.
PIN : AACCD5891M
(APPELLANT) (RESPONDENT)

Assessee by : Shri Kapil Goel, Adv.
Department by: Ms.Nidhi Srivastava, CIT-DR

Date of Hearing 06.05.2021

Date of Pronouncement 24.05.2021

O R D E R

PER SUCHITRA KAMBLE, JM :

Both these appeals are filed by the assessee against the order dated
10/04/2019 passed by the Commissioner of Income Tax (Appeals) Faridabad,
for Assessment Year 2009-10.
2 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

2. The common grounds of appeal (except for the amount) are as under :-

’'1.That on the facts and in the circumstances of the case and in law, Ld CIT-A
erred in sustaining the order passed by Ld AO u/s 143(3) rws 147 without
appreciating that the Assessment Order is bad in law, void-ab-initio and is
liable to quashed.

2.That on the facts and in the circumstances of the case and in law, Ld CIT-A
erred in sustaining the order passed by Ld AO u/s 143(3)/147 without
appreciating that all the additions made are null and void because of no
correlation to corresponding incriminating material found during the course of
extensive search operation u/s 132 of the Income Tax Act, 1961.

3.That on the facts and in the circumstances of the case and in law, Ld CIT-A
has grossly erred and seriously committed a mistake in not declaring the
assessment as null and void as admittedly in assesse's case, provisions of Sec
147/148 can't be made applicable when search was conducted u/s 132, as
strictly excluded u/s 153A/153B/153C of the Income Tax Act, 1961.

4.That on the facts and in the circumstances of the case and in law, Ld CIT-A
has grossly erred and seriously committed a mistake in not declaring the
assessment as null and void as admittedly in assesse's case, as no application
of mind by the Ld AO and no independent enquiry was made by Ld AO while
recording the reasons u/s 147/148 of the Act.

5.That on the facts and in the circumstances of the case and in law, Ld CIT-A
has grossly erred and seriously committed a mistake in not declaring the
assessment as null and void as admittedly in assesse's case as the prescribed
procedure was not followed while framing the assessment, as the objections
filed in response to the reasons recorded were not quashed by separate
independent speaking order.

6.That on the facts and in the circumstances of the case and in law, Ld CIT-A
erred in sustaining the order passed by Ld AO u/s 143(3)/147 without
appreciating that Ld AO has erred in law and on facts of the case in making
following additions to the returned income of the assessee
Rs.100,00,000.00 as fresh share capital introduced during the year due to
which the Assessment Order is bad in law, void-ab-initio and is liable to set
aside in full.

7.That on the facts and in the circumstances of the case and in law, Ld CIT-A
erred in sustaining the order passed by Ld AO u/s 143(3)/147 without
appreciating that Ld AO has erred in law and on facts in arbitrarily approving
the unlawful addition made by Ld AO on account of Share Capital, which is in
contravention to a settled legal position that without any incriminating material
viz a viz the addition concerned, and without any material that stated share
capital is in the nature of accommodated entry and merely on the basis of
direction & dictates of Investigation Wing addition is made, relying on un-
3 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

confronted appraisal report, which is confidential document & never supplied to
the assessee.

Further, That the Ld Assessing Officer is misdirected himself in approaching
the entire issue from incorrect prospective in gross non appreciation of the facts
that Post search proceedings cannot be treated / partake the character of
incriminating material in the eyes of law.

8. That entire assessment and additions made are contrary to material on
record ie

a) Search statements recorded u/s 132(4)

b) Replies given post search to Investigation wing Faridabad

c) Replies given during the course of assessment proceedings.

9. That the Ld Assessing Officer made a serious error in making the additions by
violating the principles of audi alterm pattern ie Principles of natural justice,
because the basis of additions and reasoning thereof has never been
communicated to the assesse in the form of proper show cause notice.

10. That the Assessment order of the Ld Assessing Officer is bad in law and
facts as it is prejudicial to the interests of the appellant due to lack of principles
of natural justice or violation of principles of natural justice.

11. Benefit of telescoping in worst case : That in worst case (without prejudice)
on the facts and in the circumstances of the case of law, Ld CIT(A) erred in not
deleting the additions made by Ld AO applying principles of telescoping which is
clearly applicable in present facts to additions made by very same orders to
avoid double taxation.

12. That the Appellant prays for the grant of permission to add, alter, delete,
modify, any or all of the grounds of appeal at any time on or before or during the
time of hearing before the Hon'ble ITAT.”

3. Since, both the appeals are identical; we are taking up facts of ITA No.
3395/Del/2019. A Notice dated 31.03.2016 under Section 148 of the Income
Tax Act, 1961 was issued to the assessee company for A.Y. 2009-10 to assess
the income for the year under consideration. On 13.04.2016, the company vide
letter dated 13.04.2016 submitted that the ITR filed u/s 139 may be treated as
ITR in response to Section 148 of the Act and filed the copy of ITR as well as
the computation. The assessee also filed copy of audited balance sheet for the
year 2008-09 along with notes to accounts was also submitted before the
Assessing Officer. On 13.04.2016, the assessee requested for the copy of
4 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

reasons recorded along with satisfaction / permission of Pr. CIT as mentioned
in the referred notice. Further the inspection of the file was requested vide
letter dated 13.04.2016 by the assessee. The assessee was provided with the
copy of reasons along with form for getting approval from Pr. CIT-Faridabad.
Vide Letter dated 09.05.2016, after inspect of the file, the assessee requested
for the copy of letter dated 28.03.2016 from the office of ADIT (Investigation),
Faridabad which was not provided to the assessee. On 09.05.2016, the
assessee field objections to the reasons recorded. The same was not quashed
by a speaking order except that the same was dealt in the assessment order
dated 27.12.2016 which the assessee submitted that the same is against the
procedures laid by the Apex Court in the case of GKN Driveshaft 2002 Supp(4)
SCR 359. After various submissions to the notices issued and complied with,
the Assessing Officer made an addition of Rs. 1,00,00,000/- to the income of
the assessee under Section 68 of the Act.

4. Being aggrieved by the Assessment Order, the assessee filed appeal
before the CIT(A). The CIT (A) dismissed the appeal of the assessee.

5. The Ld. AR submitted that Ground Nos. 2 and 3 are not pressed. The Ld.
AR further submitted that there are three aspects of jurisdictional issues are
involved in the present appeal. Firstly, that of non-disposal of objections by
separate speaking order, secondly, that of reasons recorded solely based on
borrowed satisfaction and thirdly, that of approval of higher authority is
arbitrarily and mechanically given. The Ld. AR submitted that these three
jurisdictional aspects are fully covered in favour of the assessee by following
decisions:

i. Smt. Meena Gupta ITA No. 7372/Del/2019 order dated 10.09.2020
(Del.Tri.)

ii. Ferrous Infrastructure Pvt. Ltd. (W.P.(C) No. 5229/2014 & CM No.
10401/2014 order dated 21.05.2015)
5 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

iii. Haryana Acrylic 308 ITR 38 (Del. HC)

iv. M/s Admach Auto Ltd. ITA No. 9543/Del/2019 order dated 18.12.2020

v. CIT vs. M/s Pentafour Software Employees’ Welfare Foundation 418 ITR
427

vi. Shri Janak Shatilal Mehata Tax Case Appeal No. 273 of 2020 dated
16.12.2020 (Mad. HC)

vii. M/s SSG Mercantile Pvt. Ltd. ITA No. 1864/Del/2019 order dated
14.01.2021 (Del. Tri.)

viii. Eminent Computers Pvt. Ltd. ITA No. 6372/Del/2019 order dated
24.11.2020 (Del. Tri.)

ix. Kantibhai Dharamshibhai Narola Special Civil Application No. 19549 of
2018 order dated 06.01.2021 (Guj. HC)

x. Shri Hitesh Ashok Vaswani ITA No. 118 to 123/Ahd/2019 order dated
12.11.2020 (Ahmd. Tri.)

xi. M/s Shodiman Investments Pvt. Ltd. 422 ITR 437 (Bom. HC)

xii. Shri Sanjay Singhal (HUF) ITA No. 702 to 704/Chd/2018 order dated
19.06.2020 (Chd. Tri.)

xiii. National Co-operative Development Corporation vs. CIT Civil Appeal
Nos. 5105-5107 of 2009 order dated 11.09.2020.

The Ld. AR further pointed out that the reasons itself are vague as in first para
of the reasons recorded dated 29.03.2016, it is mentioned that the assessee
was engaged in providing accommodation entry and in second para observed
that the assessee received share capital and share premium from different
parties. The approval is also mechanical and does not have proper satisfaction
recorded by the competent authority. Therefore, the Assessment itself is void-
ab-intio. Therefore, the assessment should be quashed and the additions
thereof does not sustain.
6 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

6. The Ld. DR submitted that the reasons recorded was proper and as per
the provisions of the Income Tax Act, 1961. The approval and the satisfaction
of the competent authority is as per the law prescribed by the Income Tax
statute. Thus, the assessment order was just and proper and the same cannot
be called as nullity. There is only procedural lapse and the same will not make
assessment null and void. The Ld. DR relied upon the decision of the GKN
Driveshaft (supra). The Ld. DR further submitted that the objections were
disposed off in the assessment order itself. Thus, the same cannot be said that
the objections were not disposed off. The approval is also not mechanical but is
a proper approval and the same is done by the competent authority.

7. We have heard both the parties and perused all the relevant material
available on record. At the time of hearing, the Ld. AR not pressed Ground Nos.
2 and 3, hence Ground Nos. 2 and 3 are dismissed. Firstly, we are taking the
jurisdictional grounds that are Ground Nos. 1, 4 and 5. The reasons recorded
on 29.04.2016 by the Assessing Officer are as follows:

“Reasons for initiation of proceedings under section 147 of the
Income Tax Act, 1961:-

As per information received from DDIT(Inv.)-I, Faridabad vide his
office letter F.No.DDIt/Inv.-I,/FBD/2015-16/4739 dated 28.03.2016 that the
assessee has obtained accommodation entry in the form of share capital and
share premium from paper companies of Kolkata and Delhi from different
concerns for the financial year 2008-09. During the course of enquiry made
by the investigation, Faridabad it has been found that a firm M/s Duggal
Estate Private Limited Prop. Sh. Sanjay Duggal was engaged in providing
accommodation entries in the form of share capital and share premium from
paper companies to the tune of Rs. 1 Crore. The assessee has filed his income
tax for assessment year 2009-10 to the tune of Rs. 13,26,300/-.
7 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

On going through the statement of share capital and share premium
it has been found that the assessee has received share capital and share
premium from different parties concern during the financial year 2008-09
relevant to the assessment year 2009-10 to the tune of Rs. 1 Crore. So, it is
clear that the assessee has reduced his net profit by Rs. 1 Crore. I have
therefore reason to believe that the assessee has failed to disclose fully and
truly all material facts in its return of income for the assessment year 2009-
10.

Having perused and considered the above facts, undersigned has
reason to believe that income of the assessee to the tune of Rs. 1 Crore and
other income which subsequently comes to notice has escaped assessment
for the assessment year 2009-10 by reason of the failure on the part of the
assessee to disclose fully and truly all material facts necessary for computing
correct income and filing his return of income for the A.Y. 2009-10.”

From the reasons it can be seen that the Assessing Officer was not specific as
to on what basis the Assessing Officer has the reason to believe that the
income of the assessee to the tune of 1 crore has escaped assessment. In fact,
in one para the Assessing Officer is observing the assessee as accommodation
entry provider and in next, the assessee is treated as the receiver of the share
application money. But the basis for which is not elaborated and there is
contradiction in the reasons given by the Assessing Officer. Besides this the
Assessing Officer has not disposed off the objections filed by the assessee prior
to concluding of the assessment proceedings, but has given a general finding in
the Assessment order itself which is not in consonance with the provisions of
the Income Tax statute relating to disposal of the objections by the Revenue
authorities. In the present case, the Assessing Officer has not taken proper
cognizance of the direction of the Hon'ble Supreme Court in case of GKN
driveshaft India Ltd versus ITO 259 ITR 19 wherein it has been held that:-
8 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

"We see no justifiable reason to interfere with the order under challenge.
However, we clarify that when a notice under section 148 of the Income-tax
Act is issued, the proper course of action for the noticee is to file a return and
if he so desires, to seek reasons for issuing notices. The Assessing Officer is
bound to furnish reasons within a reasonable time. On receipt of reasons, the
noticee is entitled to file objections to issuance of notice and the Assessing
Officer is bound to dispose of the same by passing a speaking order. In the
instant case, as the reasons have been disclosed in these proceedings, the
Assessing Officer has to dispose of the objections, if filed, by passing a
speaking order, before proceeding with the assessment in respect of the
abovesaid five assessment years.

In so far as the appeals filed against the order of assessment before the
Commissioner (Appeals), we direct the appellate authority to dispose of the
same, expeditiously."

Thus, the assessment becomes a nullity and does not survive as the Assessing
Officer has not passed a speaking order of disposal of the objections filed by
the assessee. The assessment also becomes void-ab-intio as the reasons
recorded are also not in consonance with the actual escapement of the income
of the assessee. Thus, the assessment order itself is null and void-ab-intio as
the reassessment proceedings becomes invalid. In view of this, there is no need
of going into the merits of the case. Hence, we are not adjudicating the rest of
the grounds. Ground Nos. 1, 4 and 5 are allowed.

8. As regards to ITA No. 3396/Del/2019, the facts of this appeal is identical
to that of ITA No. 3395/Del/2019. In fact, the reasons are also identical, hence
the appeal in case of Duggal & Sons Buildwell Pvt. Ltd being ITA No.
3396/Del/2019 is allowed.
9 ITA. 3395 /Del/2019

AND ITA 3396 /Del/2019

9. In result, both the appeals of the respective assessees are allowed.
Order pronounced in the Open Court on this 24th Day of May, 2021

Sd/- Sd/-
( N. K. BILLAIYA ) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER
JUDICIAL MEMBER
Dated : 24/05/2021
*MEHTA* ASSISTANT REGISTRAR
ITAT NEW DELHI
Copy forwarded to :-

1. Appellants;
2. Respondent
3. CIT
4. CIT (Appeals)
5. DR: ITAT

Date of dictation 24/05.2021
Date on which the typed draft is placed before 24/05.2021
the dictating Member 24/05.2021
Date on which the typed draft is placed before 24/05.2021
the Other Member 24/05.2021
Date on which the approved draft comes to the 24/05.2021
Sr. PS/PS 24/05.2021
Date on which the fair order is placed before 24/05.2021
the Dictating Member for pronouncement
Date on which the fair order comes back to the
Sr. PS/PS
Date on which the final order is uploaded on
the website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
The date on which the file goes to the Assistant
Registrar for signature on the order
Date of dispatch of the Order

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