R N Khemka Enterprises (P) Ltd. Vs ITO (ITAT Delhi)
Co-ordinate Benches of the Tribunal are taking the consistent view that when there is non-application of mind by the AO to the report of the Investigation Wing, such reassessment proceedings are not in accordance with law and such reopening proceedings have been quashed. Since, in the instant case, the AO has not applied his mind as there is non-identification of the deponents, non-mentioning of middleman if any, absence of details in the form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the considered opinion that there is complete non- application of mind by the AO to the information received from the Investigation Wing. Therefore, in view of the decision of the Hon’ble Delhi High court in the case of Pr. CIT vs Meenkashi Overseas Pvt. Ltd. (supra), the reassessment proceedings are not in accordance with law.
We further find the Hon’ble Delhi High Court in the case of Sh Rajiv Agarwal vs ACIT, reported in 395 ITR 0255 (Del) has held that even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment.
We further find in the instant case, the assessee in response to notice u/s 148 of the Act vide letter dated 12.04.2018 (Paper book page 77) stated that return of income filed u/s 139 of the Act be treated as return of income filed in response to notice u/s 148 and also requested for supply of the copy of reasons. We find the AO after more than four months vide letter dated 07.08.2018 (Paper book 73), directed the assessee to e-file the return of income which was done on 13.10.2018. We find the AO thereafter issued notice dated 16.10.2018 u/s 143(2)/142(1) of the Act (Paper book 74-76) and supplied reasons recorded on 22.10.2018 (Paper book 45) against which the assessee submitted objection to assumption to jurisdiction on 05.11.2018 and same were disposed of by AO on 09.11.2018. From the above facts, it is evident that the AO assumed jurisdiction to make assessment by issuing notice u/s 143(2) of the Act on 16.10.2018 before supplying reason which means that the AO assumed jurisdiction before allowing assessee to file objection to assumption to jurisdiction.
We find the Hon’ble Delhi High Court in the case of Mastech Technologies Pvt Ltd. vs DCIT reported in 407 ITR 242(Del.) at para 30 of the order has observed as under:-
“30. As regards the non-communication of the reasons as contained in Annexure-A to the proforma on which the approval dated 19th March, 2015 was granted by the Additional CIT, there is again no satisfactory explanation. The fact remains that what was communicated to the Petitioner on 23rd February, 2016 was only one line without any supporting material. There appears to be also no clarity of how the case had to be proceeded with by the Revenue, On one date i.e. 16th February 2016, the AO was issuing notice both under Section 142(1) of the Act as well as notice under Section 143(2) of the Act when on that very date the Petitioner had asked for the reasons for reopening by notice dated 18th January, 2016. Again, it is not clear why the AO did not wait for the process of supplying reasons to the Petitioner, considering the Petitioner’s objections thereto and passing a reasoned order thereon to be completed before issuing the notice under Section 142(1) and 143(2) of the Act. There appears to be non-application of mind.”
In view of the above discussion, we are of the considered opinion that reassessment proceeding initiated by the AO in the instant case and upheld by the learned CIT(A) is not in accordance with law. Therefore, we quash the reassessment proceeding. Since, the assessee succeeds on this legal ground, therefore, the other plank of arguments challenging the validity of reassessment proceeding and the arguments challenging the validity on merit are not being adjudicated.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order dated 07.08.2019 of the learned CIT(A)-7, New Delhi, relating to Assessment Year 2011-12.
2. Facts of the case, in brief, are that the assessee is engaged in the business of finance and filed its return of income on 12.09.2011, declaring total income of Rs.30,460/-. The return was processed u/s 143(1) of the Act. Subsequently, information was received regarding the search & seizure operation in the case of entry provider Mr. Anand Kumar Jain and Mr. Naresh Kumar Jain (the Jain Brothers) according to which the assessee is a beneficiary of Rs.92,00,110/-. Reasons were recorded for reopening u/s 147 of the Act and a notice u/s 148 of the Income Tax Act, 1961 was issued on 26.03.2018 after obtaining prior approval of the Pr. CIT-7, New Delhi. The notice was duly served on the assessee. In response to the same, the assessee filed a letter stating that the return already filed u/s 139 of the Act may be treated as return filed in response to notice u/s 148 of the Act.
2.1. Subsequently, the AO issued another letter to the assessee requesting him to file the return in response to notice u/s 148 of the Act. Ultimately, the assessee filed his return of income on 13.10.2018 declaring income of Rs.30,460/-. Thereafter, the AO issued notice u/s 143(2) and 142(1) of the Act and the copies of the reasons recorded were also handed over to the assessee. The assessee filed objections in response to notice u/s 142(1) of the Act vide letter dated 05.11.2018 and the AO vice order dated 09.11.2011 disposed off such objection by passing a speaking order.
3. During the course of assessment proceedings, the AO noted that the assessee has received accommodation entries to the tune of Rs.92,00,110/- from the companies controlled by Mr. Anand Kumar Jain and Mr. Naresh Kumar Jain which are as under:-
