Sheela Foam Ltd. Vs DCIT (ITAT Delhi)
The issue under consideration is whether the re-opening of assessment is valid even if there is no addition on subject-matter being basis for issuing notice under section 148, rather AO made addition on other counts?
ITAT states that, applying the principle laid down by the Hon’ble Bombay High Court in Jet Airways (I) Ltd.(supra) and Hon’ble Delhi High Court in Ranbaxy Laboratories Ltd. vs CIT (supra), they hold that in the facts and circumstances of the case where the basis for issuing the notice u/s 148 of the Act was, on account of reasons recorded for re-opening the reassessment u/s 147 of the Act, i.e. share application money received from VPC Financial Services Ltd. of Rs.10 Lakhs and no addition on this account has been made in the hands of the assessee, then any other addition made in the case of the assessee would not survive. Accordingly, ITAT hold so. Thus, ITAT decide the preliminary issue raised before us i.e. one of the aspect of the preliminary issue raised before us, where no addition has been made on account of the reasons recorded for re-opening the assessment under the provisions of section 147/148 of the Act, then no addition can be made in the hands of the assessee on any other account. Hence, the order passed u/s 147 r.w.s. 143(3) of the Act is invalid. Accordingly, in the result, the appeal of the assessee is allowed.
FULL TEXT OF THE ITAT JUDGEMENT
The present appeal filed by assessee is against order of CIT(A)-28, New Delhi dated 28.03.2018 relating to assessment year 2005-06 against the order passed under section 147 r.w.s 143(3) of the Income-tax Act, 1961 (in short ‘the Act’).
2. The assessee has raised following grounds of appeal:-
1. “That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in upholding validity of re-assessment proceeding initiated under section 147 through issuance of notice under section 148 of the Income Tax Act, 1961 (‘the Act’) and not quashing the same on the ground of being illegal, bad in law and void-ab-initio.
1.1 That the CIT(A) erred on facts and in law in holding that reliance by the assessing officer on the report from investigation wing alleging share application money of Rs. 10,00,000 received by the appellant from VPC Financial Services Pvt. Ltd., company belonging to search party, i.e., Sh. S.K. Jain Group as an accommodation entry, without any independent verification / satisfaction of the assessing officer, constituted valid “reason to believe” to assume jurisdiction under section 147 of the Act.
1.2 That the CIT(A) erred on facts and in law in holding that the assessing officer applied independent mind on the investigation report before forming ‘reason to believe’ and issuing notice under section 148 of the Act.
1.3 That the C1T(A) erred on facts and in law in not adjudicating and not quashing the impugned reassessment order passed under section 147 on the ground of being barred by limitation, having been initiated after the expiry of four years from the end of the relevant assessment year in terms of first proviso to section 147 in the absence of any failure on the part of the appellant to disclose fully and truly all material facts in relation to the receipt of share application money from VPC during original assessment.
1.4 That the CIT(A) erred on facts and in law in not adjudicating and not quashing the impugned reassessment order under section 147 on the ground of being initiated merely on the basis of change of opinion formed at the time of original assessment.
Merits
1.5 Without prejudice to the above, that the CIT(A) erred on facts and in law in holding that share application money of Rs. 10,00,000/-received from VPC Financial Services Pvt. Ltd constituted unexplained cash credit under section 68 of the Act.
1.6 Without prejudice to the above, that the CIT(A) erred on facts and in law in upholding the addition of Rs.2,02,05,424 (out of total addition Rs.3,22,09,048 made by the assessing officer) under section 68 of the Act, comprising of Rs. 1,77,00,000 on account of inter corporate deposits and Rs.25,05,424 on account of interest accrued thereon, holding that the appellant failed to establish identity, creditworthiness of the lenders as also genuineness of the transaction(s) without any adverse material being found by the assessing officer in relation to said transactions, failing to appreciate that onus placed on the appellant was satisfactorily discharged, which was even accepted by the assessing officer after thorough examination in original assessment completed under section 143(3) of the Act.
1.7 Without prejudice to the above, the CIT(A) erred on facts and in law in adding the interest accrued on inter-corporate deposits aggregating to Rs.25,05,424 without appreciating that out of the aforesaid, only an amount of Rs.6,83,903 pertained to fresh additions made during the year and the balance amount of Rs. 18,21,521 pertained to the opening balances of deposits, which were never treated as unexplained cash credits in assessment(s) completed for the preceding assessment year(s).”
3. The preliminary issue raised in the present appeal is agaisnt the validity of re-assessment proceedings initiated u/s 147/148 of the Act. The assessee has raised an additional ground of appeal which reads as under:-
1. “That the reassessment order dated 28.03.2013 passed under section 147 r. w.s 143(3) of the Income Tax Act, 1961 (“the Act”) is beyond jurisdiction, bad in law and void-ab initio in as much as same has been passed without issuing and serving the jurisdictional notice under section 143(2) of the Act.”
4. The Ld.AR for the assessee pointed out that the additional ground raised by it is purely legal in nature and does not require any adjudication of facts and the same be admitted for adjudication.
5. Briefly in the facts and circumstances of the case the assessment has been initiated u/s 147 of the Act by recording reasons for re-opening the assessment on the basis of certain information received consequent to search and seizure operations carried out at the residential and business premises of Sh.Surendra Kumar Jain and Sh. Virendra Jain on 14.09.2010. The Assessing Officer recorded the reasons for re-opening the assessment and thereafter, issued notice u/s 148 of the Act. Though, several additions have been made in the hands of the assessee, which stand confirmed by the order of CIT(A; but the preliminary issue which need to be adjudicated first is against the reopening of the assessment u/s 147/148 of the Act.
6. The Ld.AR referred to the reasons recorded for re-opening the assessment u/s 147 of the Act, which are placed at pages 188 & 189 of the Paper Book and pointed out that the reasons are only in respect of the accommodation entry received of Rs.10 Lakhs only. He then referred to the letter dated 16.11.2012 wherein the Assessing Officer talks of notice issued u/s 142(1) of the Act; but do not talk of any notice issued u/s 143(2) of the Act. He stressed that in the absence of any notice issued u/s 143(2) of the Act, the assessment completed u/s 147 r.w.s. 143(3) of the Act is not valid.
7. Coming to the second plea with regard to the reassessment proceedings, the Ld.AR for the assessee stressed that the initiation of reassessment proceedings were on account of addition of Rs.10 Lakhs, which has not been added in the hands of the assessee. Our attention was drawn to chart filed during the course of hearing wherein it was pointed out that the addition u/s 68 of the Act was initiated on account of following amounts:-
