B K Educational Services Pvt Ltd vs ITO Ward 4 (1)

PERSHRI ANUBHAV SHARMA, JUDICIAL MEMBER:

These appeals are preferred by the Assessee against the order of the Ld. National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 147 r.w.s 144 of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under: -

The two cases were heard together as they involved common question of facts and law and are accordingly disposed off by this common order. At the outset, we find that there is delay of 87 days in filing the appeals and for which assesse has filed an application for condonation of delay asserting the fact of lack of communication between the staff and assesse accordingly. Considering the delay is not of substantial period the same is condoned and appeals are admitted for hearing.

Admittedly, in both assessment years involved the case of assesse was reopened by way of notice u/s 148 of the Act. It is the assumption of jurisdiction on the basis of reasons as recorded for reopening and consequent approval given by the competent authority u/s 151 of the Act, the assessee challenges the impugned orders. Ld. DR though relied the impugned proceedings.

We find from the material on record that consequent to the reopening of the assessment, Assessing Officer had made addition of Rs.4,00,00,000/- in AY: 2016-17 on account of receipt from one Sunita Agarwal and in AY: 2019-20 addition was made of Rs.2,52,00,000/- on account of receipt from Mukesh Agarwal. The impugned assessment order are passed u/s 144 of the Act and before ld. CIT(A) also assesse had failed to appear though ld. AR submitted no notices were served, in fact assessee had filed submissions ld. CIT(A) has dismissed the appeals on merits. The assesse is in appeal against the same.

As with regard to AY: 2016-17, we find from the copy of notice u/s 148A(b) of the Act available at page No. 1-2 of the paper book that based on annexure attached to the notice dated 23.03.2023 the case of assesse was reopened and there is allegation of escapement of income of Rs.4,00,00,000/-and the Ld. AO alleges that loan amount was received from one Sunita Agarwal which are sourceed from another entity i.e. Shiv Shakti Promoters Pvt. Ltd. and the source of the information is mentioned as inquiry report of TEP filed. However, what is material is that AO mentioned that the case of assesse is of ‘non-filer’. Further, as we go through the contents in this annexure we find that quantum of transaction undertaken is alleged to be “bank/in cash”.

In regard to AY: 2019-20 we find that we find that the ITO Ward 4(1) Delhi had issued a notice dt.17.03.2023 u/s 148A(b), requiring the assessee to show cause as to why a notice u/s 148 should not be issued to it while fixing the compliance date for 25.03.2023. In the table of the ANNEXURE (found attached with the said notice dt.17.03.2023), the learned AO had mentioned the amount of Rs. 65,2,00,000/- with the description of information, "The assessee has evaded huge amount of income tax on amounts which it had given to different parties as without taking said transactions into books of account". In the next para thereof, the learned AO had mentioned that "Further, the quantum of the transaction undertaken in the bank/in cash clearly indicates that the assessee has failed to disclose his income correctly".

The information apparently is vague, in as much as neither the date of transaction(s) of Rs.6,52,00,000/- nor the amount wise or party wise details are mentioned therein.

Then learned AO had mentioned that "The assessee has evaded huge amount of income tax on amounts which it had given to different parties as without taking said transactions into books of account". It is pointed out by ld. AR that the learned AO had taken into consideration the amounts given by it and not the amounts received by it. Thus it cannot be said that income of Rs. 6,52,00,000/- has escaped assessment, particularly when the entire transactions were routed through the assessee's bank account and no cash was involved.

Ld. AR has shown that at a later stage, the learned AO had himself observed that the amount of Rs.65200000/- did not pertain to AY 2019-20. The learned AO had found that the assessee had received Rs.25200000/- from Sh.Mukesh Aggarwal in FY 2018-19. Thus if the learned AO had applied mind and carefully examined the information with the bank account of the assessee, he would not have used the terms 'given' and 'Cash'.

Thus there is substance in contention that these are clear-cut case of non-application of mind on the part of the learned AO. The very foundation and soul of the notice u/s 148(b) was faulty and factually incorrect. The learned Pr.CIT-1 Delhi seems to have also not applied its mind and looked into the records available on portal to see if facts of non filer in AY 2016-17 or reasons to scale down income escaping amount of Rs.6,52,00,000/- to Rs.2,52,00,000/-, has some foundation.

In regard to aforesaid state of affairs, we are of the considered view that opening of reassessment and recording of reasons of such incorrect facts in AY: 2016-17 and discrepancy in quantum of escapement of income in the initial notice and order u/s 148A(d) of the Act are apparently case of non application of mind, in recording reasons as well as grant of approval.

In the case before, the mechanical recording of reasons or blindly relying the reasons to reopen, is reflected by a peculiar error committed by ld. AO, as from reasons in AY; 2019-20, it appears that the escapement of Rs.6,52,000/- in the annexure from the notice under clause (b) of Section 148A was mentioned relying the information. It appears that Rs.4,00,00,000/- escapement of income of AY: 2016-17 as reflected in order dated 31.03.2023 under clause (d) of Section 148A of the Act for AY: 2016-17 and the amount of Rs.2, 52,00,000/-shown to be escapement of income for AY: 2019-20 in the order dated 28.03.2023 under clause (d) of Section 148A of the Act, were taken together while issuing notice dated 17.03.2023 for AY: 2019-20. While subsequently when notice under clause (b) of Section 148A was issued for AY: 2016-17 on 23.03.2023 reference was made of amount of Rs.4,00,00,000/- only.

As for such instances the legal proposition laid in decision of Hon’ble Bombay High Court in the case of Narender Kumar Shah Vs. ACIT Writ Petition No. 2558 of 2023 order dated 10.10.2023 and decision of Hon’ble Delhi High Court in Tarlochan Lal Goel Vs. ACIT in W.P.(C) No. 13342 of 2018 order dated 17.08.2023, as relied by Coordinate Bench in ITA No. 3415/Del/2024 order dated 25.02.2026 in Ram Chandra Vs. ITO, Ward 2(1) Moradabad and the decision of Hon’ble Bombay High Court in Vodafone India Ltd. Vs. DCIT & Others (2024) 464 ITR 385 (Bombay) wherein Hon’ble Bombay High Court has held that such discrepancy shown non application of mind by all those persons who had endorsed their approval for issuance of notice u/s 148 of the Act, benefit the case of assessee. Hon’ble Bombay High Court in Vodafone India Ltd. (Supra) had also set aside the reopening as there was discrepancy in quantum of escapement of income in the order in initial notice and order have issued all notices.

In the light of aforesaid discussion we sustain corresponding grounds No. 1 to 3 in both the appeals. The impugned notices and consequent orders thereupon are liable to be quashed. In aforesaid terms the appeals are allowed with consequence to follow as directed.