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INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
B.R.R. Kumar, Vice-President, T.R. Senthil Kumar, Judicial Member
Care Stock Broking Services – Appellant
Versus
The Income Tax Officer, Ward-1(3)(1) – Respondent
I.T.A. No.1472/Ahd/2024
(A) Income-tax Act, 1961 - Sections 68, 143(3), 144B, 147, 148, 151, 151A, 250 - Reassessment proceedings - Validity of reopening u/s 147 - Requirement of 'reason to believe' - Reopening based on borrowed satisfaction from information on Insight Portal without independent application of mind by Assessing Officer - Mere reference to third-party search findings without independent examination of applicability to assessee's specific transactions does not satisfy statutory requirement of 'reason to believe'. (Paras 10, 11)
(B) Income-tax Act, 1961 - Section 147 - Reassessment - Reopening beyond four years - Original assessment completed u/s 143(3) - Requirement of failure to disclose fully and truly all material facts - Reopening amounts to change of opinion when there is no fresh tangible material. (Paras 6, 11)
(C) Income-tax Act, 1961 - Section 151A - Faceless Assessment - Notice u/s 148 issued by Jurisdictional Assessing Officer - Validity under faceless regime - Challenge raised regarding authority of JAO to issue notice under faceless regime. (Para 6)
(D) Income-tax Act, 1961 - Section 144B - Violation of principles of natural justice - Failure to provide opportunity of personal hearing through video conferencing due to technical glitches - Failure to furnish copies of statements and provide opportunity of cross-examination. (Paras 2, 6)
Facts of the case:
The assessee, a partnership firm engaged as a SEBI-registered sub-broker, originally filed its return of income for AY 2016-17 declaring total income of Rs. 2,10,850/-. The assessment was completed u/s 143(3) on 22.12.2018 accepting the returned income. Subsequently, notice u/s 148 dated 30.03.2021 was issued based on information alleging that the assessee had obtained accommodation entries amounting to Rs. 89,28,079/- from entry operators Sanjay Shah and Jignesh Shah. The assessee objected to the reopening on grounds including lack of proper reasons, absence of sanction u/s 151, and non-application of mind. The objections were rejected, and the Assessing Officer completed the reassessment u/s 147 r.w.s. 144B on 30.03.2022, adding Rs. 89,28,079/- u/s 68 of the Act. The CIT(A) confirmed the addition, holding that the assessee failed to discharge the onus and did not furnish corroborative evidence.
Findings of Court:
The reasons recorded for reopening merely proceeded on a general premise that the assessee is 'one of the beneficiaries' without demonstrating how and what alleged accommodation entry was routed to the assessee. The Tribunal found no specific transaction, specific entry, or direct documentary linkage brought on record by the Assessing Officer to establish that the assessee had obtained accommodation entries. The reasoning was that at the stage of reopening, there must exist at least some prima facie evidence between the material relied upon and the formation of belief of escapement of income. The Revenue Authorities failed to bring even the primary evidence on record, and the findings of the search conducted at the premises of third parties could not be rightly processed by the Assessment Division, leading to a loose superstructure devoid of any basis.
Issues: The main issues were the validity of reassessment proceedings initiated u/s 147 of the Act on the grounds that reopening was based on borrowed satisfaction without independent application of mind, absence of tangible material linking the assessee to the alleged accommodation entries, and violation of principles of natural justice.
Ratio Decidendi: The court ruled that mere reference to third-party search findings, without independent examination of its applicability to the assessee's specific transactions, does not satisfy the statutory requirement of 'reason to believe' u/s 147 of the Act. At the stage of reopening, there must exist at least some prima facie evidence between the material relied upon and the formation of belief of escapement of income.
Result: The appeal of the assessee is allowed. The reassessment proceedings and the consequent addition are invalidated due to lack of proper reason to believe. (Para 12) (Appellant: Care Stock Broking Services; Respondent: The Income Tax Officer, Ward-1(3)(1), Ahmedabad.) No dissenting opinions were expressed as the decision was unanimous by the bench comprising Dr. B.R.R. Kumar (Vice-President) and Shri TR Senthil Kumar (Judicial Member). (Para 1)
| Table of Content |
|---|
| 1. clerical details and case introduction (Para 1) |
| 2. grounds of appeal raised by assessee (Para 2) |
| 3. factual history of assessment and reassessment (Para 3) |
| 4. cit(a)'s order and reasoning (Para 4) |
| 5. arguments of parties before tribunal (Para 5 , 6 , 7) |
| 6. tribunal's analysis and decision on reassessment validity (Para 8 , 9 , 10 , 11 , 12) |
ORDER
PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-
This appeal by the assessee is directed against the order dated 25.07.2024 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the CIT(A)”] under section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2016–17.
2. The assessee has raised the following grounds of appeal:
“I. Violation of Principle of natural justice and equity.
1. The learned CIT(A) has grievously erred in law and on facts in not adjudicating the ground raised by the appellant firm for violation of the cardinal principles of natural justice and equity on part of the AO by not providing another opportunity of personal hearing through video conferencing after the same could not be held due to technical glitches. Thus, the AO having not followed the fundamental aspect of the assessment process, ensuring a fair and reasoned conclusion contrary to the provisions of Section 144B(9) of the Act, the learned CIT(A) ought to have quashed the impugned order as held by various courts of law including the Hon'ble Gujarat High Court.
2. The learned CIT(A) further erred in not appreciating the fact that the AO had also grievously erred in not furnishing the copy of statements of Sanjay Shah/Jignesh Shah along with an opportunity of their cross examination as asked for as well as by not furnishing the material/evidences found/seized from their possession relevant to the appellant firm before making the alleged addition. The Impugned order thus deserves to be quashed as void-ab-initio.
II. Assessment u/s 147 of the Act.
1. The learned CIT(A) has grievously erred in law and on facts in not adjudicating the grounds raised by the appellant firm challenging the assessment u/s 147 of the Act vide notice issued u/s 148 of the Act.
2. The learned CIT(A) has grievously erred in law and on facts in not appreciating the fact that no transactions have been carried out by the appellant firm as alleged and mentioned in the reasons recorded. Hence, notice issued u/s. 148 of the Act and the assessment order passed by the AO pursuant to such notice, both are bad in law and requires to be quashed.
3. The learned CIT(A) has grievously erred in law and on facts in not appreciating the fact that the proceedings u/s 147 of the Act Initiated by the AO is merely on borrowed satisfaction, without carrying out independent enquiry and applying his own mind on such information independently and thus the amended provisions of Section 148 of the Act have not been properly followed by the AO.
4. The learned CIT(A) has grievously erred in law and on facts in failing to consider the fact that original assessment for the year in question has been completed u/s. 143(3) of the Act and therefore the re-assessment proceedings initiated by the AO is nothing but re-verification and re- examination of the details already available on record and is thus based on change of opinion which is not permissible and valid as per the settled legal principles and therefore deserves to be quashed.
5. The appellant states that as per Section 151A , only Faceless Assessing Officers have the authority to issue notices u/s.148 of the Act. That since in the instant case, the notice u/s.148 having been issued by Jurisdictional Assessing Officer, the said notice and subsequent assessment order requires to be quashed since JAO is not empowered to Issue such notice under the Faceless Regime as per Section 151A of the Income Tax Act, 1961 as held by various courts of law. The Impugned notice and reassessment order thus requires to be
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