Suraj Pulses (P) Ltd. v. Pr. CIT-8

Case snapshot

Sections / provisions: 143; 147; 148; 263

Questions before the Court / Tribunal

• The main issue before is, firstly, whether the assessee can challenge the validity of assessment order during the revisionary proceedings and also the validity of reopening u/s.147 when it was not challenged by the assessee; and secondly, whether the reopening based on the reasons recorded by the Assessing Officer itself was bad in law or not. It is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

Appellant by: S/Shri Shantanu Jain, Adv. Respondent by: Shri H.K. Choudhary, CIT-D.R. Date of hearing: 08 04 2021 Date of pronouncement: 06 07 2021

PER AMIT SHUKLA, JM :- The aforesaid Appeals have been filed by the asse ssee against impugned order dated 14.03.2017 and 17.03.2 017, passed by ld. PCIT-VIII, New Delhi u/s 263 of the I ncome Tax Act, for the Assessment Year 2007-08, 2008-09 and 2 009-10, respectively. Since the issues involved in all the appeals are common arising out of almost identical set of facts , therefore, same were heard together and are being disposed off by way of this consolidated order.

2. We will first take up the appeal in the case of Surya Pulses Pvt. Ltd. for the Assessment Year 2007-08 in ITA No.3009/Del/2017.

3. The facts of the case are that original return of Income for this year was filed on 25.10.2007 at NIL income. Th e notice under section 148 of the Income Tax Act was issued on 25.03.2014 after recording the ‘reasons’ and taking prior approval from the competent authorities. The case w as reopened on the basis of information received from the office of CIT, New Delhi vide letter dated 28.03.2013 wher ein it was stated that during the course of search conducted i n the premises of Shri Surinder Kumar Jain it was found t hat assessee has obtained an entry of Rs.25 lac during the relevant year. The assessee in response to the statutory notice vide letter dated 01.04.2014 submitted that the ori ginal

return filed may be treated as a return filed in response to the notice under section 148 of the I.T. Act; and also vide letter dated 15.04.2014 requested to provide reasons recor ded, which were duly provided. The assessee filled its o bjections which were disposed off. The A.O. the issued notice s to prove the source of credits which were duly complied by t he assessee and filed all the evidences and details as called for Assessing Officer. The assessee had furnished the d etails of the parties from whom assessee received share capit al/share application money and furnished income tax return, confirmation, financial statements, audited account s, bank statements and other related materials. Assessing O fficer then conducted independent inquiry and issued notic es u/s 133(6) to the companies who have invested and in re sponse all these parties duly replied and sent to the Asse ssing Officer. After the inquiry the Assessing Officer and after discussing the case with the assessee, he accepted the returned income and passed the re-assessment order under section 147/143(3) of the I.T. Act, 1961, on dated 27.01.2015.

Appellant / petitioner / assessee submissions

6. The Ld. Counsel for the Assessee submitted that additional grounds are legal in nature and no fresh facts are to be investigated. He also submitted that the addi tional ground goes to the root of the matter and therefore , prayed that the same may be admitted for disposal of the a ppeal. He has relied upon the decision of Hon’ble Supreme Cou rt in the case of NTPC Limited vs. CIT reported in 229 ITR 38 3 (SC) and Hon’ble High Court of Delhi in the case of CIT vs. SPL’s Siddhartha Ltd. reported in 345 ITR 223 (Delhi).

8. In rebuttal, the Ld. Counsel for the Assessee ha s submitted that the said grounds challenging the reo pening u/s 148 of the Act were raised before the Ld. Pr. C IT as evident from the impugned order but on account of a bundant caution, the same were raised again.

10. The Ld. Counsel for the Assessee contended tha t the reopening of assessment is itself invalid; as such the Ld. Pr. CIT does not have any jurisdiction to upset the re- assessment order, in proceedings under section 263 of the I.T. Act. He submitted that it is well settled principle of law that validity of the original assessment order can be challenged in the collateral proceedings. Thus, in view of the same, appellant agitates the very validity of the reassessment order u/s 147 of the Act, which was sought to be revised by the impu gned order u/s 263 of the Act. He placed reliance upon t he following judicial decisions: - Supersonic Technologies (P) Ltd. vs. PCIT in ITA No . 2269/D/2017 dated 10.12.2018 (ITAT, Delhi Bench)

“6.1…………. It is well settled Law that assessee can challenge the validity of the re-assessment proceedings in the collateral proceedings (relating to examination of validity of Order passed) under section 263 of the I.T. Act. We rely upon the Order of ITAT, Mumbai Bench in the case of Westlife Development Lt d., vs. PCIT 49 ITR (Tribu.) 406 in which it was held “allo wing the appeal (i) that jurisdiction aspect of the Order pa ssed in the primary proceedings can be examined in collateral proceedings also. Thus, the assessee could be permi tted to challenge the validity of the Order passed under section 263 on the ground that the assessment order was non-est .” Since the reassessment order itself is bad in law, therefore, Learned Counsel for the Assessee, rightl y contended that the same cannot be revised under section 263 of the I.T. Act.Only valid re-assessmen t order can be revised under section 263 of the I.T. Act. On this ground itself the proceedings under section 263 of the I.T. Act are bad in law and liable to be quashed. We, accordingly, set aside the Order of Ld. Pr. CIT passed under section 263 of the I.T. Act and qu ash the same.”

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

9. Considering the facts of the case, we are of the view that additional grounds raised are purely legal in natur e and goes to the root of the matter, which does not require a ny investigation facts and is borne out from the order s and material on record. Therefore, the same are admitte d for the purpose of disposal of the appeal. We, accordingly, admit the additional grounds of appeal.

- M/s CharbhujaMarmo (India) (P) Ltd. vs. PCIT in ITA No. 4749/D/2019 dated 31.12.2019 (ITAT, Delhi) “6. We have considered the rival submissions . It is well settled Law that since re-assessment proceedings ar e invalid and bad in law, therefore, such proceedings could not be revised under section 263 of the I.T. Act. It is also well settled Law that validity of the re -assessment proceedings are to be judged on the basis of the re asons recorded for reopening of the assessment.”

As already noted above, it is well settled t hat only the reasons recorded by the AO for initiating proce edings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they we re recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reaso ns. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order.

assessing officer in paragraph number [2] has menti oned name of the assessee itself and against the name of the assessee mentioned sum of ₹ 20 lakhs. In paragraph number [3] of the reasons it was further stated by him that he has reason to believe that assessee has conceale d its particulars of income willfully and knowingly and therefore the sum of ₹ 20 lakhs chargeable to tax has escaped assessment for assessment year 2008 –09. However when we perused assessment order of the ld AO, it has co mplete details and that is the reason that the ld AR has n ot pressed the grounds on the merits f the addition.

Further there is no reference as what nature of accommodation entries has been obtained b y the assessee, through which companies and on which date s, though which medium. May be in assessment order complete details are mentioned, and they are in fac t exhaustively mentioned, however the reasons recorded are devoid of the same. Therefore we do not have any hesitation in quashing reopening of assessment .In the result ground no [2] & [3] of the appeal are allowed.”

Act, which would also show that there is totally non-application of mind on the par t of the A.O. to reopen the assessment in the matter. These facts are sufficient to hold that reopening of the assessment was bad in law, illegal and non-est, therefore, such or der could not be revised in the proceedings under section 263 of the I.T. Act. We, accordingly set aside the Order of th e Ld. Pr. CIT passed under section 263 of the I.T. Act and qu ash the same. In this view of the matter, there is no need to decide the issue on merit. However, we may note briefly th at documentary evidences were filed before A.O. at ori ginal assessment stage as well as at the stage of re-asse ssment to prove genuine credit in the matter which have ac cepted by the A.O. after considering and examining the mat erial on record and calling explanation from the Investor s under section 133(6) of the I.T.

Operative decision and relief

263 of the I.T. Act and quash the same. Accordingly , the appeal of the assessee is allowed. 44. In the result, ITA. No. 3011/Del/2017 of the As sessee is allowed. Suraj Pulses Processors Pvt Ltd. Appeal No. 3012/D/2017 AY 2009-10

proceedings. The assessee filed all the documentary evidences before A.O. i.e., confirmation letter from Investor s, copy of their bank accounts, copy of ITR, copy of PAN, copy of audited balance sheet, copy of Master Data taken from Official website of MCA. It was submitted that the seized papers are only rough papers and no details have been mentioned the rein. rejected. As such, the re-assessment order was set aside and restored to the Ld. AO for passing the order afresh as per law.

itself points out or speaks of live link nexus with the material available on record and income escaping assessment and it should not be vague or mere pretence. The Assessing Officer should have at least perused the report and examine what is the material pertaining to assessee and what is the nature of entry and whether it is matching with records of the assessee. He should have prima facie seen what is the nature of bogus entry and from which entity assessee has received. Such vague and general observation made by the Assessing Officer in the reasons recorded does not confer any jurisdic tion to him reopen the case. As pointed out by the ld. coun sel, these reasons are similar or identical in the case of Sha nker Tradex (P) Ltd. vs. ITO in ITA No. 2200/D/2019 dated 10.11.2020 AY 2008-09 (ITAT, Delhi) (supra) wherein this Tribunal has held that such reasons recorded shows complete non-appli cation of mind by the Ld. AO and as such the reopening is invalid under the law. We thus set aside the order passed b y the Ld. Pr. CIT under section 263 of the I.T. Act and quash the same as the assessment order itself was void-ab-initio. Accordingly, the appeal of the assessee is allowed.

53. In the result, the appeals of the Assessees are allowed. Order pronounced in the open Court on 6th July, 2021.

Ratio and legal principle

The narrow proposition associated with Suraj Pulses (P) Ltd. v. Pr. CIT-8 concerns the main issue before is, firstly, whether the assessee can challenge the validity of assessment order during the revisionary proceedings and also the validity of reopening u/s.147 when it was not challenged by the assessee; and secondly, whether the reopening based on the reasons recorded by the assessing officer itself was bad in law or not. it is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. cit/pcit exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. the edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. however, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in ITA Nos. 3009 to 3012/DEL/2017.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: The main issue before is, firstly, whether the assessee can challenge the validity of assessment order during the revisionary proceedings and also the validity of reopening u/s.147 when it was not challenged by the assessee; and secondly, whether the reopening based on the reasons recorded by the Assessing Officer itself was bad in law or not. It is incontrovertible that proceedings u/s. 263 are collateral proceedings of the assessment, because ld. CIT/PCIT exercise revisionary jurisdiction u/s.263 seeking to revise the assessment order on the ground that it is erroneous in so far as it is prejudicial to the interest of revenue. The edifice of the proceedings u/s 263 is the assessment order which is the original proceedings which has come to an end. However, if the original assessment order itself was invalid or illegal in terms of jurisdiction or was not in accordance with the… Its practical value lies in the way the ITAT Delhi connected the governing provisions—143; 147; 148; 263—to the procedural posture and evidence before it.

The authority level is ITAT / Tribunal. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 143; 147; 148; 263 and the decision date 2021-07-06; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

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Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Suraj Pulses (P) Ltd. v. Pr. CIT-8, the proceeding is ITA Nos. 3009 to 3012/DEL/2017, and the decision is dated 2021-07-06. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 143; 147; 148; 263. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is RECTIFICATION_HIGH_COURT_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 143 — apply the exact version considered in the judgment.
• 147 — apply the exact version considered in the judgment.
• 148 — apply the exact version considered in the judgment.
• 263 — apply the exact version considered in the judgment.

Case network

• Late Sh.Ashok Kumar Goel through legal heir Sh.Sahil Goel vs. NFAC, Ministry of Finance, Delhi — ITAT Delhi · Quashed / set aside
• M/s. Gulshan Investment Co. Ltd. v. ITO — ITAT Delhi · Quashed / set aside
• Gaurav Kathuria v. ACIT — ITAT Delhi · Quashed / set aside
• Sunil Garg v. DCIT — ITAT Delhi · Quashed / set aside

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