Section 263 Jurisdiction not invocable when Re-Assessment was Illegal

SBS Realtors Private Limited Vs ITO (ITAT Delhi)

Learned Counsel for the Assessee submitted that since the re-assessment order is illegal and bad in Law and is covered by the Order of the Tribunal Dated 01.04.2019 in the case of assessee on the same issue, therefore, the Learned Pr. CIT cannot exercise jurisdiction under section 263 of the I.T. Act, 1961 in collateral proceedings. Therefore, the Order passed by the Learned Pr. CIT under section 263 of the I. T. Act, 1961 is invalid and bad in Law.

 On the other hand, the Ld. D.R. relied upon the impugned Order of the Learned Pr. CIT and submitted that since assessee did not challenge the reopening of the assessment, therefore, it cannot be challenged in proceedings under section 263 of the I.T. Act, 1961.

After considering the rival submissions, we are of the view that the Learned Pr. CIT has wrongly assumed the jurisdiction under section 263 of the I. T. Act, 1961. It is an admitted fact that in A.Y. 2009-2010 the A.O. has recorded similar reasons for reopening of the assessment. However, the same have been quashed by the Tribunal vide Order Dated 01.04.2019 (supra). The A.O. in the impugned re-assessment order has mentioned the information received from DIT (Inv.)-II, New Delhi that assessee has received accommodation entries of Rs.40 lakhs. However, A.O. was satisfied with the explanation of assessee and did not make any addition after examining the issue in detail vide Order Dated 30.06.2014. It would, therefore, show that A.O. has taken one of the possible view under the Law. Therefore, on the same set of facts the Learned Pr. CIT should not have taken different view by exercising powers under section 263 of the I.T. Act, 1961. Since the re-assessment proceedings are already declared illegal and bad in Law in A.Y. 2009-2010 in the case of assessee on the same reasons, therefore, in assessment year under appeal also initiation of re-assessment proceedings is illegal and bad in Law. Therefore, the same cannot be subject to proceedings under section 263 of the I.T. Act, 1961. This issue is, therefore, covered by Order of the ITAT, Delhi G-Bench, New Delhi in the case of M/s. Shahi Exports Pvt. Ltd., New Delhi vs., The Pr. CIT, Circle-1, New Delhi (supra). In view of the above, we set aside the Order of the Learned Pr. CIT-8, New Delhi and quash the Order passed under section 263 of the I.T. Act, 1961 and restore the Order of the A.O. Accordingly, appeal of the Assessee is allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

PER BHAVNESH SAINI, J.M.

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. 2008-2009.

2. We have heard the Learned Representative of both the parties and perused the material available on record.

3. Briefly the facts of the case are that return of income in this case was originally filed on 30.09.2008 declaring loss of Rs.7,817/-. In this case information received from the O/o. DIT (Inv.)-II, New Delhi that assessee has received bogus accommodation entries of Rs.40 lakhs during the F.Y. 2007-2008 relevant to A.Y. 2008-2009 under appeal. Notice under section 148 of the I.T. Act, 1961 has accordingly been issued, which was served upon the assessee. The A.O. provided copy of the reasons for reopening of the assessment to the assessee also. The A.O. issued statutory notice and called for the details which have been filed by the assessee and examined by the A.O. The A.O. noted that assessee-company is a building developer/ colonizer and dealt in all kind of immovable properties during the year under consideration. The assessee was required to furnish confirmation along with copy of ITR and bank statement of the parties. The assessee has furnished confirmation along with copy of financial statement, copy of bank statement of the parties from whom share application/ share capital money received, notice under section 133(6) of the I.T. Act was also issued and statements of the Directors were also recorded by the A.O. The A.O. was satisfied with the explanation of assessee and thus, the A.O. assessed income of assessee at NIL vide Order Dated 30.06.2014 under section 143(3)/147 of the I.T. Act, 1961.

3.1. The Learned Pr. CIT taken-up the proceedings under section 263 of the I.T. Act, 1961 and issued notice under section 263 of the I.T. Act, 1961 Dated 17.01.2017 which is reproduced in the impugned order in which the Learned Pr. CIT has mentioned that assessee has received accommodation entries of Rs.40 lakhs from M/s. Finage Leasing & Finance India Ltd., M/s. Singhal Securities Pvt. Ltd., M/s. VIP Leasing & Finance Pvt. Ltd., and M/s. Virgin Capital Services Pvt. Ltd., which are concerns of Shri S.K. Jain Group of cases. The Learned Pr. CIT has noted in the show cause notice that the documents seized shows that cash of Rs.20 lakhs was given by some Shri Rajesh Aggarwal to Shri S.K. Jain Group and also referred to the cash book etc., with regard to cash available. The Learned Pr. CIT, therefore, found that assessee has received accommodation entries and the material found during the course of search in the case of Shri S.K. Jain Group have not been considered by the A.O. The explanation of assessee was called for as to why the re-assessment order Dated 30.06.2014 cannot be set aside. The assessee submitted reply and also submitted that assessee filed documentary evidences which have been examined by the A.O. which prove that the Investors are existing parties and have creditworthiness. Shares have been allotted to them, therefore, the transaction is genuine. The assessee filed copy of share application form, resolution of Investor Companies, confirmation of Investor companies, their PAN Card, Certificate of Incorporation and Memorandum and Article of the Company, bank statements, present address of the Investor Companies, copy of Form No.2 held by the assessee-company with Registrar of Company, list of share allotment etc. The A.O. made detailed enquiry with reference to the search conducted in the case of Shri S.K. Jain Group of cases and information received from DIT (Inv.)-II, New Delhi. The Learned Pr. CIT, however, did not accept the explanation of assessee and noted that though the A.O. has referred to Appraisal Report, but, did not examine the seized material found during the course of search before making the assessment. Thus, the A.O. passed the Order without making enquiries or verification and accordingly gave relief without making enquiry. Therefore, the re-assessment order was found to be erroneous in so far as prejudicial to the interests of the Revenue. Therefore, the Learned Pr. CIT set aside the impugned assessment order with a direction to A.O. to examine the seized material and confront the same to the assessee and pass the Order accordingly.

4. Learned Counsel for the Assessee submitted that in A.Y. 2009-2010, the A.O. also reopened the assessment on identical reasons in the case of the assessee in which the matter travelled to ITAT G-Bench, New Delhi in ITA.No. 7791/Del./2018 and the Tribunal vide Order Dated 01.04.2019 quashed the re-assessment proceedings. The Order of the Tribunal Dated 01.04.2019 is reproduced as under :

“IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ’G’: NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND
MS. SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No.7791/Del/2018
Assessment Year : 2009-10

M/s SBS Realtors (P) Ltd.,
B-14/C, First Floor,
Freedom Fighters Enclave,
Neb Sarai,
New Delhi – 110 068.
PAN : AALCS5106R.

Vs.

Income Tax Officer,
Ward-22(4),
New Delhi – 110 002.

(Appellant) (Respondent)

Appellant by : Shri Kapil Goel and Shri Rajesh Jain, CAs.

Respondent by : Shri S.S. Rana, CIT-DR and

Shri Rajesh Kumar, Additional CIT.

Date of hearing : 11.03.2019
Date of pronouncement : 01.04.2019

ORDER

PER G.D. AGRAWAL, VICE PRESIDENT :-

This appeal by the assessee for the assessment year 2009-10 is directed against the order of learned CIT(A)-28, New Delhi dated 16^th November, 2018.

2. Ground No.1, 1.1 and 1.2 read as under :-

“1. That the learned Commissioner of Income Tax (Appeals), has erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, completion of assessment u/s 147/143(3) of the Act which were without jurisdiction and deserves to be quashed as such.

1.1 That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that, there was no tangible, relevant, specific and reliable material on record on the basis of which, it could be held that, there was any reason to believe with the learned Assessing Officer that income of the appellant had escaped assessment and, in view thereof, the proceedings initiated were illegal, untenable and therefore, unsustainable. The reasons as noted by the Assessing Officer were mechanical on information received from Investigation Wing. The satisfaction of the Assessing Officer was borrowed satisfaction.

1.2 That the learned Commissioner of Income Tax (Appeals) has also failed to appreciate that approval granted u/s 151 of the Act was a mechanical approval and hence initiation of proceedings u/s 147 of the Act on this ground is invalid. ”

3. At the time of hearing before us, it is stated by the learned counsel that in this case, the assessee has filed the return on 20^th September, 2009 which was processed under Section 143(1) on 17^th January, 2011. The assessment was reopened under Section 148 vide reasons recorded on 20^th September, 2015. He has taken us through the reasons recorded and stated that the assessment has been reopened for the verification of the amount received by the assessee from Shri S.K. Jain group of cases. That the assessment cannot be reopened for the purpose of verification for which there is already a specific provision under the Income-tax Act i.e., Section 143(2). If the Assessing Officer has failed to make necessary verification under Section 143(2), the same cannot be done under the garb of Section 148. He also alleged that there is no independent application of mind by the Assessing Officer. The assessment has been mechanically reopened on the basis of some information claimed to have been received from DIT(Investigation). In the reasons recorded, no reason has been given for the allegation that the amount received from Shri S.K. Jain group of cases is bogus accommodation entries. The Assessing Officer has mechanically reopened the assessment without any independent verification at his end. He, therefore, stated that the alleged reopening of assessment is not valid. He also stated that not only the reasons recorded is mechanical, even the approval given by the Additional Commissioner is mechanical and without application of any independent mind. In support of his contention, he relied upon the following decisions :-

(i) Sarthak Securities Co.P.Ltd. Vs. ITO – [2010] 329 ITR 110 (Delhi).

(ii) Signature Hotels P.Ltd. Vs. ITO – [2011] 338 ITR 51 (Delhi).

(iii) PCIT Vs. G And G Pharma India Ltd. – [2016] 384 ITR 147 (Delhi).

(iv) PCIT Vs. RMG Polyvinyl (I) Ltd. – [2017] 396 ITR 5 (Delhi).

(v) PCIT Vs. Meenakshi Overseas Pvt.Ltd. – [2017] 395 ITR 677 (Delhi).

4. Learned DR, on the other hand, stated that it is a case where the original return was accepted under Section 143(1) and there was no regular assessment under Section 143(3). The Assessing Officer had received the specific information from DIT(Investigation) that on search in the case of Shri S.K. Jain group of cases, New Delhi, it was found that they were indulging into providing accommodation entries to various assessees. Shri S.K. Jain group of cases were entry operators and on the basis of information gathered during the course of search of their premises, it was gathered that various companies of Shri S.K. Jain group have provided accommodation entries to the extent of `2,35,00,000/-. The Investigation Wing has supplied the complete information i.e., the name of the company who provided the entry, the cheque numbers, name of the bank, date of cheque and names of middlemen. The Assessing Officer has verified the above entries from the assessee’s balance sheet and thereafter has arrived at the conclusion that there is escapement o f income. Therefore, reopening of assessment by the Assessing Officer was perfectly in accordance with law and the same has rightly been upheld by the learned CIT(A). In support of his contention, he relied upon the following decisions :-

(i) PCIT Vs. Paramount Communication (P) Ltd. – 2017-TIOL-253-SC-IT.

(ii) PCIT Vs. Paramount Communication (P) Ltd. – [2017] 392 ITR 444 (Delhi).

(iii) Aradhna Estate (P) Ltd. Vs. DCIT – [2018] 91 com119 (Gujarat).

(iv) Pushpak Bullion (P) Ltd. Vs. DCIT – [2017] 85 com84 (Gujarat).

(v) Ankit Financial Services Ltd. Vs. DCIT – [2017] 78 com58 (Gujarat).

(vi) Aaspas Multimedia Ltd. Vs. DCIT – [2017] 83 com82 (Gujarat).

5. We have carefully considered the arguments of both the sides and perused the material placed before us. The reasons recorded for issue of notice under Section 148 read as under :-

“Name of the assessee : M/s SBS Realtors P.Ltd. A.Y.2009-10

PAN : AALCS5106R

Assessment Year : 2009-10

Reasons for Issue of Notice u/s 148 of the Income Tax Act, 1961

The return of income for the A.Y. 2009-10 has been filed by the assessee company on 20.09.2009 declaring NIL tota l income. The same was processed u/s 143(1) on 17.01.2011. No assessment u/s 143(3) for the A.Y. 2009-10 has been made in this case.

In this case information has been shared by DIT(Investigation)-II (letter flagged as Annexure A) on the basis of search in the case of Sh. Surendra Kr. Jain group of cases (entry operator) New Delhi that during the financial year 2008-09 the aforementioned assessees has introduced its own money by way of taking bogus accommodation entries provided by Sh. S.K. Jain group of cases (entry operator) the details o f accommodation entry amount received as beneficiary is given as under as provided by Investigation Wing :

In the light of information provided by the investigation wing, it is necessary to examine and verify the genuineness, identification and creditworthiness of the aforesaid transaction.

I have perused details of the cheques/PO received by the above company, the amount, the issuing company, the recipient company, middlemen bank etc. as tabulated below:

I have reason to belief that the income pertaining to the Asstt. Year 2009-10 has escaped assessment to the extent of Rs. 23500000/- upon receipt of the above information, I have compared the figures in the balance sheets filed by the assessee vide e-return for AYs 2008-09 & 2009-10. It is found that in AY 2009-10 issued subscribed and paid up share capital has increased by Rs.23,50,000/- and securities premium has increased by Rs.2,11,50,000/- i.e., both totalling to Rs.235,00,000/-. The same has escaped assessment on account of failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment for the AY 2009-10. In order to verify the genuineness, identification and creditworthiness of the aforesaid transaction the case needs to be reopened u/s 147 of the I.T. Act 1961.

Since more than four year have been elapsed from the end o f the relevant A.Y. i.e. 2009-10, necessary statutory approval u/s 151(2) of the I.T. Act may kindly be accord to issue notice u/s 148 for the A.Y. 2009-10 for the purpose of reopening of the case u/s 147 of the I.T. Act, 1961.

Sd/-(R.O. Bhutia) Income Tax Officer Ward-22(4), New Delhi ”

6. From a perusal of the above reasons, it is seen that the Investigation Wing has supplied certain information to the Assessing Officer with regard to receipt of cheques by the assessee from various companies who are considered to be S.K. Jain group companies by the Investigation Wing. As per the Investigation Wing, the above cheques paid by S.K. Jain group companies were accommodation entries to M/s SBS Realtors Pvt.Ltd. i.e., the assessee. However, what is the material found during the course of search of S.K. Jain group cases which had led to form the belief that all those companies are providing accommodation entries is not mentioned in the reasons recorded. It is also not mentioned whether any of the directors of the above companies have provided accommodation entries to M/s SBS Realtors Pvt.Ltd. It is also not mentioned whether any document was found which led to the belief of giving o f accommodation entries by those twelve companies to the assessee. On receipt of above information, the Assessing Officer compared the figures in the balance sheet of the assessee filed for assessment year 2009-10 and he found that the share capita l has increased by `2,35,00,000/-. After recording the above factual finding, the Assessing Officer has concluded “The same has escaped assessment on account of failure on the part of the assessee to truly and fully disclose all material facts necessary for assessment for the AY 2009-10. In order to verify the genuineness, identification and creditworthiness of the aforesaid transaction the case needs to be reopened u/s 147 of the I.T. Act 1961.” The conclusion of the Assessing Officer at the end of the reasons recorded as noted above is contradictory. In the first two lines, the Assessing Officer has recorded the finding that the sum of `2,35,00,000/- has escaped assessment but in the last two lines, he has recorded that the case is being reopened to verify the genuineness, identification and creditworthiness of the aforesaid transactions. If the case is being reopened for the purpose of verification of the genuineness, how can there by satisfaction of escapement o f income. Any satisfaction with regard to escapement of income or otherwise can be recorded only after the verification o f genuineness, identification and creditworthiness of the transaction and not earlier. Thus, we are of the opinion that the Assessing Officer has reopened the case under Section 147 for the purpose of verification of genuineness, identification and creditworthiness of the transactions mentioned in the information supplied by the DIT (Investigation) and this is what the Assessing Officer has concluded at the end of the reasons recorded for issue of notice under Section 148. Now, the question remains whether an assessment can be reopened under Section 147 for the purpose of verification o f genuineness, identification and creditworthiness of any transaction. In our opinion, the reply is clearly NO. There is Section 143(2) of the Income-tax Act under which the Assessing Officer can issue notice for the purpose of verification. The said Section reads as under :-

“143(2). Where a return has been furnished under section 139, or in response to a notice under subsection (1) of section 142, the Assessing Officer or the prescribed income-tax authority, as the case may be, if, considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not underpaid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein, either to attend the office of the Assessing Officer or to produce, or cause to be produced before the Assessing Officer any evidence on which the assessee may rely in support of the return:

Provided that no notice under this sub-section shall be served on the assessee after the expiry of six months from the end of the financial year in which the return is furnished. ”

7. Thus, if the Assessing Officer considered it necessary to ensure that the assessee has not understated the income, he can issue the notice under Section 143(2). However, proviso to above Section provides the time limit within which such notice can be issued. Once that time limit is expired, in our opinion, the Assessing Officer cannot invoke Section 148 just for the purpose of verification. Therefore, in our opinion, in the case under consideration, the reopening of assessment for the purpose of verification of genuineness, identification and creditworthiness of the transaction is not permissible under law and is liable to be quashed.

8. The learned counsel for the assessee has also mentioned that the notice has been issued mechanically without application of mind and the satisfaction by the Assessing Officer is only the borrowed satisfaction of the Investigation Wing. The Assessing Officer, without applying his mind, has simply on the basis o f information of the Investigation Wing jumped to the conclusion that there is escapement of income. From a perusal of the aforesaid reasons, we do not find any application of mind by the Assessing Officer for reaching to the conclusion that there was escapement of income except the information from the Investigation Wing. After getting the information from the Investigation Wing, the Assessing Officer compared the figures in the balance sheet and has found that the assessee has issued share capital of `2,35,00,000/-. The issue of share capital by itself is not sufficient to reach to the conclusion of escapement of income. The Investigation Wing has alleged that 12 companies who have given cheques to the assessee company were accommodation entries. However, the basis of such allegation is not mentioned in the reasons recorded. Whether such conclusion is reached by the Investigation Wing on the basis of statement of director of any company or on the basis of some material seized during the course of search of those companies, is not mentioned in the reasons recorded. Whether there was any material with the Assessing Officer while issuing notice under Section 148 is not clear. Therefore, from the reasons recorded, we do not find any basis for reaching to the conclusion that there was escapement of income by the Assessing Officer. Learned DR has relied upon the decision o f Hon’ble Jurisdictional High Court in the case of PCIT Vs. Paramount Communication Pvt.Ltd. – [2017] 392 ITR 444 (Delhi), wherein on the basis of report of the Investigation Wing, Hon’ble Jurisdictional High Court has upheld the issue of notice under Section 148. Their Lordships held as under :-

“Held, that having regard to the contents of the notice issued under section 148 of the Income-tax Act, 1961, the findings of the Appellate Tribunal were not sustainable. It constituted reference to tangible material “outside” the record which was information based upon the investigation of the Commissioner o f Central Excise. To have required the Revenue to disclose further details regarding the nature o f documents or of contents thereof would be rewriting the conditions in section 147 which merely authorised the issuance of notice to reopen with conditions. For the assessment years 2004-05 and 2005-06, the notes disclosed the source o f information, the Directorate of Revenue Intelligence, which had sent information based upon the Commissioner of Central Excise’s investigations. To add further conditions to be nature of discussions or reasons that the Officer authorizing the notice would have to discuss in the note or decision was beyond the purview of the courts and was not justified. The orders of the Appellate Tribunal could not be sustained. The Appellate Tribunal was directed to hear the Department’s appeals on their merits. ”

9. On the other hand, learned counsel for the assessee has relied upon the catena of judgment before and after the date o f above judgment of Hon’ble Delhi High Court wherein the notice under Section 148 simply on the basis of report of the Investigation Wing has been quashed. The same is as under:-

(i) Sarthak Securities Co.P.Ltd. Vs. ITO – [2010] 329 ITR 110 (Delhi).

(ii) Signature Hotels P.Ltd. Vs. ITO – [2011] 338 ITR 51 (Delhi).

(iii) PCIT Vs. G And G Pharma India Ltd. – [2016] 384 ITR 147 (Delhi).

(iv) PCIT Vs. RMG Polyvinyl (I) Ltd. – [2017] 396 ITR 5 (Delhi).

(v) PCIT Vs. Meenakshi Overseas Pvt.Ltd. – [2017] 395 ITR 677 (Delhi).

10. Learned DR has also relied upon few decisions of Hon’ble Gujarat High Court. However, when there are large number o f decisions of Hon’ble Jurisdictional High Court, the same would be binding on us. Therefore, we consider all the decisions o f Hon’ble Jurisdictional High Court relied upon by either side.

11. We find that the earlier decisions of Hon’ble Jurisdictional High Court in the case of Sarthak Securities Co.P.Ltd. (supra), Signature Hotels P.Ltd. (supra) and G And G Pharma India Ltd. (supra) were not brought to the knowledge of their Lordships while deciding the case of Paramount Communication (P) Ltd. (supra). We find that the decision in the case of RMG Polyviny l (I) Ltd. (supra) and Meenakshi Overseas Pvt.Ltd. (supra) are subsequent to the decision of Paramount Communication (P) Ltd. (supra). However, it seems that neither in the case o f Meenakshi Overseas Pvt.Ltd. (supra) nor in the case of RMG Polyvinyl (I) Ltd. (supra), the decision of Paramount Communication (P) Ltd. (supra) was brought to the knowledge of their Lordships. Thus, there are two views by the Hon’ble Jurisdictional High Court. While in the case of Paramount Communication (P) Ltd. (supra), the issue of notice on the basis of information from Intelligence Wing of the Income Tax Department has been upheld, in the case of Sarthak Securities Co.P.Ltd. (supra), Signature Hotels P.Ltd. (supra), G And G Pharma India Ltd. (supra), RMG Polyvinyl (I) Ltd. (supra) and Meenakshi Overseas Pvt.Ltd. (supra), the notice issued on the basis of DIT(Investigation) has been quashed. It is a settled law that when there are two views, the view in favour of the assessee is to be followed and moreover, there are at least two decisions subsequent to the decision of Paramount Communication (P) Ltd. (supra), wherein their Lordships have quashed the notice issued under Section 148 on the basis o f information from the Investigation Wing. The facts in the case of the assessee are almost identical to the facts in the case o f RMG Polyvinyl (I) Ltd. (supra) and Meenakshi Overseas Pvt.Ltd. (supra). Therefore, they would be squarely applicable to the case of the assessee. Consequently, we hold the notice issued under Section 148 of the Act to be invalid for two reasons :-

(i) the notice is issued for the purpose of verification of genuineness, identification and creditworthiness of the transaction, which is not permissible;

(ii) the Assessing Officer has recorded his satisfaction on the basis of mere report from the Investigation Wing. There is no crucial link between the information made available to the Assessing Officer and the formation of belief of escapement o f income. There is no basis for coming to the conclusion that the assessee received accommodation entries. The Investigation Wing alleged that the companies which issued cheques to the assessee company are companies of Shri S.K. Jain group and they are entry providers. However, the basis for such conclusion is missing. There is no mention that any document was seized from Shri S.K. Jain group or any director of the 12 companies which have given cheques to the assessee has given the statement that they have provided accommodation entries to the assessee. The Assessing Officer has simply reopened the case on the basis of information provided by the Investigation Wing without any independent application of mind. There is no tangible material which formed the basis for the belief that income has escaped assessment.

12. While taking the above view, we derive support from the latest decision of Hon’ble Jurisdictional High Court in the case of RMG Polyvinyl (I) Ltd. (supra) and Meenakshi Overseas Pvt.Ltd. (supra). In view of the above, we quash the notice issued under Section 148 of the Act and consequently, the assessment completed in pursuance thereto. Accordingly, ground Nos.1, 1.1 and 1.2 of the assessee’s appeal are allowed.

13. Since the notice issued u/s 148 is quashed, the assessment order passed in pursuance to such notice is also quashed. Once the assessment order itself has been quashed, the other grounds raised by the assessee in its appeal do not require any adjudication on merits.

14. In the result, the appeal of the assessee is allowed. ”

4.1. He has referred to copy of the reasons recorded for A.Y. 2008-2009 under appeal at pages 6 and 7 of the PB and submitted that same are identical as have been considered in A.Y. 2009-2010. He has submitted that the issue is covered in favour of the assessee and reopening of the assessment is bad in Law and is liable to be quashed. He has, therefore, submitted that the Learned Pr. CIT was not justified in setting aside the impugned re-assessment order under section 263 of the I.T. Act, 1961. He has further submitted that identical issue have been examined by ITAT, Delhi G-Bench, New Delhi in the case of M/s. Shahi Exports Pvt. Ltd., New Delhi vs., The Pr. CIT, Circle-1, New Delhi in ITA.Nos.2170 & 2171/Del./2017 for the A.Ys. 2008-09 and 2010-11 and the Tribunal vide Order Dated 24.03.2021 quashed the Order passed by the Learned Pr. CIT under section 263 of the I.T. Act, 1961. The Order of the Tribunal Dated 24.03.2021 is reproduced as under :

“IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘G’ BENCH, NEW DELHI

BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER, AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER

ITA No. 2170/DEL/2017
[Assessment Year: 2008-09]

&

ITA No. 2171/DEL/2017
[Assessment Year: 2010-11]

M/s Shahi Exports Pvt Ltd
F -88, Okhla Industrial Area
Phase – 1, New Delhi

PAN: AADCD 8448 F

[Appellant]

Vs.

The Pr. C.I.T
Circle- 1
New Delhi

Respondent]

Date of Hearing : 18.03.2021

Date of Pronouncement : 24.03.2021

Assessee by : Shri M.P. Rastogi, Adv

Shri Deepal Malik, Adv

Revenue by : Shri Amitabh Kumar Sinha, CIT- DR

ORDER

PER N.K. BILLAIYA, ACCOUNTANT MEMBER,

The above captioned two appeals by the assessee are preferred against two separate orders dated 21.03.2017 framed u/s 263 of the Income tax Act, 1961 [hereinafter referred to as ‘The Act’ for short] of the Commissioner of Income Tax [Appeals], Central -1, New Delhi pertaining to Assessment Years 2008-09 and 2010-11 respectively. Since both these appeals involve common issues, they are being disposed off by this common order for the sake of convenience and brevity.

2. In both the appeals, the assessee has raised the following additional ground of appeal in addition to the grounds taken in Form No. 36:

“That the Pr. CIT has no jurisdiction u/ s 263 of the Act to review and revise an order passed by the Assessing Officer u/s 153C/153A of the Act dated 30.03.2015 which itself was illegal and bad in law due to invalid assumption of jurisdiction as contemplated u/s 153C/ 153A of the Act.”

3. Since the additional ground goes to the root of the matter and requires no verification of any fact, the same is admitted for adjudication in light of the ratio laid down by the Hon’ble Supreme Court in the case of NTPC 229 ITR 383.

4. Since the additional ground goes to the root of the matter, the same is taken up first for adjudication.

5. Representatives of both the sides were heard at length. Case records carefully perused.

6. Assessment order dated 30.03.2015 for A.Y 2008-09 was framed u/s 153A r.w.s 153C and 143(3) of the Act for A.Y 200809 and 2010-11 separately. Assessment for A.Y 2008-09 was previously framed u/s 143(3) of the Act and assessed income was computed as under:

7. Assessment for A.Y 2010-11 was previously framed u/s 143(3) of the Act and assessed income was computed as under:

___

9. A search and seizure action u/s 132 of the Act was conducted on Shahi Exports Group of cases on 16.01.2013 and in response to notice u/s 153A and 153C of the Act, returns of income were filed. Assessment was completed u/s 153A r.w.s 153C and 143(3) of the Act for A.Ys 2008-09 and 2010-11 by making the following observations:

A.Y 2008-09

“Perusal of the submissions filed by the Assessee and information available in the record shows that the case of the Assessee for Assessment Year under consideration was taken up u/s’^s 143(3). The Addl. Commissioner of Income Tax, Range-8, New Delhi vide Order dated 20.12.2010 has assessed the income of the Assessee at Rs. 5,27,78,840/-.”

A.Y 2010-11

“Perusal of the submissions filed by the Assessee and information available in the record shows that the case of the Assessee for Assessment Year under consideration was taken up u/s’^s 143(3). The Addl. Commissioner of Income Tax, Range-8, New Delhi vide Order dated 20.12.2010 has assessed the income of the Assessee at Rs. 32,64,73,560/-.”

10. The ld. PCIT invoked the provisions of section 263 of the Act and set aside the assessment order dated 30.03.2015 holding that because after the merger of M/s Sarla Fabrics Pvt Ltd with M/s Shahi Exports Pvt Ltd, whatever additions were made in the hands of M/s Sarla Fabrics Pvt Ltd were to be assessed in the hands of M/s Shahi Exports Pvt Ltd and accordingly, order of M/s Shahi Exports Pvt Ltd, as passed by the Assessing Officer u/s 153C of the Act, amounts to erroneous and prejudicial to the interest of the Revenue.

11. As per the facts mentioned hereinabove, additions made u/s 143(3) of the Act were repeated in the assessment order framed/s 153A r.w.s 153C of the Act. This means that no additions had any link with any incriminating material found at the time of search as assessed income u/s 143(3) of the Act is the assessed income u/s 153C of the Act.

12. The Hon’ble High Court of Delhi in the case of Kabul Chawla in 380 ITR 573 has held that “if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act.”

13. The Hon’ble Supreme Court in the case of Singhad Technical Educational Society 397 ITR 344 has also held that in the absence of any incriminating material, no jurisdiction can be assumed by the Assessing Officer u/s 153C of the Act.

14. In light of the above binding decisions, assessment framed u/s 153C of the Act in A.Ys 2008-09 and 2010-11 are without jurisdiction and, therefore, bad in law and deserve to be quashed as null and void.

15. The Supreme Court in the case of Kiran Singh & Others vs Chaman Paswan & ors [1955] 1 SCR 117 has held as under:

“ It is a fundamental principle well established that a decree passed by a Court without jurisdiction is a nullity, and that its invalidity could be set up whenever and wherever it is sought to be enforced or relied upon, even at the stage of execution and even in collateral proceedings. A defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in respect of the subject-matter of the action, strikes at the very authority of the Court to pass any decree, and such a defect cannot be cured even by consent of parties. “

16. In light of the aforesaid ratio laid down by the Hon’ble Supreme Court, we are of the considered opinion that the assumption of jurisdiction u/s 263 of the Act in respect of an assessment which is non-est is also bad in law as a non-est order cannot be erroneous and prejudicial to the interest of the Revenue. An order framed u/s 263 of the Act for both the A.Ys 2008-09 and 2010-11 are accordingly quashed on the principle of Sublato Fundamento Cadit Opus, meaning thereby, that in case the foundation is removed, the super structure falls. Since the foundation, i.e. the order u/s 153C has been removed, the super structure i.e. the order u/s 263 must fall.

13. In the result, both the appeals filed by the assessee in ITA Nos. 2170 & 2071/DEL/2017 are allowed”.

4.2. Learned Counsel for the Assessee submitted that since the re-assessment order is illegal and bad in Law and is covered by the Order of the Tribunal Dated 01.04.2019 in the case of assessee on the same issue, therefore, the Learned Pr. CIT cannot exercise jurisdiction under section 263 of the I.T. Act, 1961 in collateral proceedings. Therefore, the Order passed by the Learned Pr. CIT under section 263 of the I. T. Act, 1961 is invalid and bad in Law.

5. On the other hand, the Ld. D.R. relied upon the impugned Order of the Learned Pr. CIT and submitted that since assessee did not challenge the reopening of the assessment, therefore, it cannot be challenged in proceedings under section 263 of the I.T. Act, 1961.

6. After considering the rival submissions, we are of the view that the Learned Pr. CIT has wrongly assumed the jurisdiction under section 263 of the I. T. Act, 1961. It is an admitted fact that in A.Y. 2009-2010 the A.O. has recorded similar reasons for reopening of the assessment. However, the same have been quashed by the Tribunal vide Order Dated 01.04.2019 (supra). The A.O. in the impugned re-assessment order has mentioned the information received from DIT (Inv.)-II, New Delhi that assessee has received accommodation entries of Rs.40 lakhs. However, A.O. was satisfied with the explanation of assessee and did not make any addition after examining the issue in detail vide Order Dated 30.06.2014. It would, therefore, show that A.O. has taken one of the possible view under the Law. Therefore, on the same set of facts the Learned Pr. CIT should not have taken different view by exercising powers under section 263 of the I.T. Act, 1961. Since the re-assessment proceedings are already declared illegal and bad in Law in A.Y. 2009-2010 in the case of assessee on the same reasons, therefore, in assessment year under appeal also initiation of re-assessment proceedings is illegal and bad in Law. Therefore, the same cannot be subject to proceedings under section 263 of the I.T. Act, 1961. This issue is, therefore, covered by Order of the ITAT, Delhi G-Bench, New Delhi in the case of M/s. Shahi Exports Pvt. Ltd., New Delhi vs., The Pr. CIT, Circle-1, New Delhi (supra). In view of the above, we set aside the Order of the Learned Pr. CIT-8, New Delhi and quash the Order passed under section 263 of the I.T. Act, 1961 and restore the Order of the A.O. Accordingly, appeal of the Assessee is allowed.

7. In the result, appeal of Assessee allowed.