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Income Tax Appellate Tribunal, DELHI BENCH : SMC : NEW DELHI
Before: SHRI C.M. GARG
BEFORE SHRI C.M. GARG, JUDICIAL MEMBER Assessment Year: 2009-10 Parvinder Singh, Vs. ITO, 41, Old Gandhi Nagar, Ward-2(1), Ghaziabad. Ghaziabad. PAN: BIUPS9999H (Appellant) (Respondent) Assessee by : Shri Rohit Tiwari, Advocate Revenue by : Shri Om Prakash, Sr. DR Date of Hearing : 20.12.2022 Date of Pronouncement : 13.03.2023 ORDER This appeal filed by the assessee is directed against the order of the CIT(A), Ghaziabad, dated 22.08.2019, for Assessment Year 2009-10.
The assessee has raised the following grounds of appeal:- “1. The Ld. CIT-Appeals Ghaziabad has erred in the eyes of law, natural justice and other wise also on humanitarian grounds by denying to admit the opportunity to file additional evidence by virtue of Rule 46A(1)(d) of the Income Tax Rules.
2. That the Ld. CIT-Appeals Ghaziabad has erred in ignoring the terms and conditions of the collaboration agreement, which is the base of the subject matter of entire transactions between the owner of the property and the builders/co-builder, the appellant.
3. That the co- builder, the appellant had to get the rights of second floor with roof as a result of the entire transaction for the construction of the building and had not to get anything else.
4. That the Ld. CIT-Appeals Ghaziabad has erred in ignoring the submission that the consideration as mentioned in the transfer deed of the second floor with roof rights of the property constructed by the builder was mentioned only for the sake of ascertaining the stamp duty on prevalent circle rate with out which the execution of sale deed was not possible.
5. That the Ld. CIT-Appeals Ghaziabad has erred in totally ignoring the contents of the order of CIT-Appeals, Aligarh, Camp Ghaziabad which throw the light on the basic issue and subject matter of this appeal; in the matter of Mrs. Gurbachan Kaur, the owner of the said property for A.Y. 2009-10 on same and identical grounds and that the very fact that the said Mrs. Gurbachan Kaur, owner had submitted vide para 6(2) of the appellate order at page no. 5, that the appellant (Mrs. Gurbachan Kaur ) did not any consideration to the said registration of the deed in favour of said Mr. Parvinder Singh. The amount of 4150000/- by way of cheque and otherwise as mentioned in the information with the office of the Id. A.O. was NEVER given to the Appellant (Mrs. Gurbachan Kaur, owner and "seller" as per the terms of the collaboration agreement.) That the said order was in details studied by the Ld. CIT-Appeals Ghaziabad but could not find her attention and stood totally ignored and did not take the same on records neither any mention of the same has been made in the appellate order. 6. ln furtherance to avail the opportunity of producing evidence in order to get the justice delivered to the appellant, the confirmation, affidavits etc from the "seller" and the owner of the property so transferred shall also be produced before you during the course of appellate proceedings by virtue of no opportunity being so given. In view of above, in the interest of justice it is most humbly prayed that the order of the Ld. CIT-Appeals Ghaziabad is an undue hardship upon the appellant and be quashed. The appellant craves to add, altar or amend any or entire of the grounds of appeal.”
Application for admission of additional ground
The ld. Counsel of the assessee submitted that the assessee wants to raise ground No.7.2 as additional legal ground wherein the assessee has challenged the issuance of notice u/s 148 of the Act without proper application of mind and without conducting independent inquiry by the AO to have reason to believe that income has escaped assessment for the relevant assessment year. Placing reliance on the judgement of the Hon’ble Supreme Court in the case of NTPC vs. CIT, 229 ITR 383 (SC), the ld. Counsel submitted that the Hon’ble Supreme Court has held that where the issues are purely legal in nature which goes to the root of the matter and where no new facts are required to be invoked, should be admitted for adjudication being legal objection of the assessee.
Replying to the above, the ld. Sr. DR strong opposed the admission of additional ground. However, he did not controvert that ground No.7.2 of the assessee is purely legal in nature which goes to the root of the matter.
5. On careful consideration of the above rival submissions, I am of the considered view that in view of the proposition rendered by the Hon’ble Supreme Court in the case of NTPC vs. CIT (supra), the grounds /issues which are purely legal in nature and which goes to the root of the matter can be agitated first time before the Tribunal and the same should be admitted for adjudication being legal objection/ground of the assessee. Hence, the application of the assessee for adjudication of ground No.7.2 is allowed. Regarding additional ground No.7.1, the ld. Counsel of the assessee submitted that the assessee does not want to press application for admission of ground No.7.1, hence the application of the assessee is partly allowed.
6. Placing reliance on the judgement of the Hon’ble jurisdictional High Court of Delhi in the case PCIT vs. RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del), the ld. Counsel submitted that where the information was received from Investigation Wing that the assessee was beneficiary of accommodation entries, but, no further inquiry was undertaken by the AO, the said information could not have been said to be tangible material per se and, thus, reassessment on said basis is not justified. Further drawing our attention to pages 76 and 77 of the assessee’s paper book, he submitted that in column 8(a), the AO noted ‘No’ against the query whether any voluntary return had already been filed whereas the AO himself in para 1 of the assessment order noted that the assessee did file the return for AY 2009-10 on 24.02.2010 along with copy of purchase deed and documents relating to the loan and stated that return already filed may be treated to have been filed in compliance to notice u/s 148 of the Act. Further, drawing our attention to copy of the reasons recorded by the AO which is available at page 77 of the assessee’s paper book, dated 01.02.2016, the ld. Counsel submitted that except mentioning the AIR information, the AO did not note that the assessee has not filed return of income for AY 2009-10. Therefore, he has reason to believe that the amount of Rs.41,50,000/- chargeable to tax has escaped assessment within the meaning of section 147 of the Act. Placing reliance on the order of the coordinate Bench of ITAT Delhi dated 11.06.2020, in for AY 2009-10 in the case of Shri Omvir Singh vs. ITO, the ld. Counsel submitted that the issue is squarely covered by the said order of the coordinate Bench of the ITAT wherein the Tribunal, relying on the judgement of the Hon’ble jurisdictional High Court of Delhi in the case of RMG Polyvinyl (I) Ltd. (supra) has held that the AO has wrongly assumed the jurisdiction and, accordingly, notice u/s 148 of the Act and consequent reassessment order u/s 143(3)/147 of the Act have been quashed.
Replying to the above, the ld. Sr. DR submitted that on receipt of AIR information the AO issued notice to the assessee which was delivered on 04.11.2015, but, the assessee did not make any compliance of the said letter. Therefore, the AO was right in having reason to believe that income has escaped assessment for AY 4 2009-10 and, thus, he assumed valid jurisdiction to issue notice u/s 148 of the Act and to initiate reassessment proceedings.
8. On careful consideration of the above rival submissions, first of all, from the copy of return of income filed by the assessee, I clearly note that the assessee did file return of income for AY 2008-09 on 24.02.2010 showing the total income at Rs.1,49,990/-. Therefore, the AO grossly erred in mentioning in the column No.8(a) of the format pertaining to approval of the ld.PCIT, Ghaziabad by mentioning that no return has been filed by the assessee. It is pertinent to mention that the copy of the return reveals that the assessee did file the return with ITO-2(1), Ghaziabad and reason has been recorded by the very Income-tax Officer which shows clear non- application of mind by the AO. Furthermore, the reasons recorded by the AO read as follows:-
9. From the reasons reproduced hereinabove, I clearly note that in the first part the AO noted the details of AIR information and, thereafter, mentioned the delivery of compliance letter to the assessee. Thereafter, the AO noted that the assessee has not filed return of income for AY 2009-10 and finally without any further inquiry he proceeded to hold that he has reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act.
The Hon’ble jurisdictional High Court of Delhi in the case of RMG Polyvinyl (I) Ltd. (supra) rendered a proposition which reads as follows:-
"4. Notice under Section 147 of the Act was issued by the AO to the Assessee on 25th March, 2011. The following reasons for the re- opening were furnished to the Assessee for reopening the assessment: 11. Reasons for the belief Information has been received from the that Information has income has escaped Investigation Wing of been received from the the Income-tax assessment. Department income has escaped that M/s Pine View Construction & Traders Investigation Wing of Pvt. Ltd. is a beneficiary of accommodation the Income-tax entries received from certain established assessment. entry operators identified by the Investigation Wing during the period relevant to A. Y 2004-05. A comprehensive investigation was carried out by the Investigation Wing for identification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a detailed report has been forwarded. In the instant case, the assessee is found to be the beneficiary of accommodation entry from such entry operators as per the transaction mentioned in the enclosed Annexure-'A' of Rs.1,56,00,000. The accommodation entry provider; have given accommodation entries in the grab of share application money/ expenses/gift/purchase of shares etc. They have worked for commission. The assessee is a company incorporated on 11.09.1998. It is noticed that there is no return of come is available in the AST database of Income-tax Department. Therefore. it is clear that the assessee has not filed return of income for the A. Y. 2004-05 and consequently has not offered any income for taxation.
Sources of the transactions are not explained. I, therefore, have reason to believe that on account failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the extent of accommodation entry of Rs. 1,56,00,000 has escaped assessment within the meaning of section 147 of I.T. Act. 1961. To bring to tax the income which has escaped assessment, I proposed to issue notice u/s. 148 of the I.T. Act. 1961. Since, four years has expired from the end of the relevant assessment year, and no scrutiny assessment was completed under Section 143(3) in this case for the said assessment year, the reasons recorded above for the purpose of reopening of assessment is put up kind satisfaction of Addl. Commissioner of Income Tax, Range-14, New Delhi in terms of the proviso of Section 151(2) of the I.T. Act, 1961.
As it transpired subsequently there were at least two glaring errors in the above reasons. The first error was that the AO proceeded on the basis that "no return of income is available in the AST database of Income-tax Department. Therefore, it is clear that the assessee has not filed return of income for the A. Y. 2004-05 and consequently has not offered any income for taxation." In the assessment order dated 30th December, 2011 passed consequent upon the reopening of the assessment, the very first line states that "the Assessee had filed return declaring income of Rs.4,38,958 on 31/10/2004 which was processed under Section 143(1) of the Act on 04.01.2005."
The second glaring error in the reasons was that the total of the accommodation entries was set out as Rs.1.56 crore. In the same assessment order dated 30th December 2011 in para 2.3 it is stated as under: "2.3 It is pertinent to mention here that in the reasons recorded there was some clerical error as certain single transactions were appearing in multiple and this resulted in working of the escaped income to the extent of Rs.1,56,00,000/-. However, the same has now been considered and stands corrected for the purposes of completion of proceedings."
7. In para 3.1 of the above assessment order, the AO has set out the information received from the Investigation Wing regarding the alleged bogus accommodation entries pertaining to 16 entities which sum in the aggregate works out to Rs. 78 lakhs.
Mr. Ruchir Bhatia, learned Senior Standing Counsel for the Revenue, relied on the decisions in Income-Tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd. (1996) 217 ITR 597 and ITO v. Purushottam Das Bangur (1997) 224 ITR 362 to urge that at the stage of reopening of the assessment, the AO is not expected to undertake any detailed inquiry; it 7 was sufficient if on the basis of the information received he was prima facie satisfied that a case was made out for reopening the assessment as income had escaped assessment.
However, in neither of the above cases are the facts similar to those in the present case. The two glaring errors in the reasons in the present case are, in fact, unusual. What the AO might have done if he was aware, even at the stage of consideration of reopening of the assessment that a return had in fact been filed by the Assessee and that the extent of the accommodation entries was to the tune of Rs.78 lakh and not Rs.1.56 crore would be a matter of pure speculation at this stage. He may or may not have come to the same conclusion. But that is not the point. The question is of application of mind by the AO to the material available with him before deciding to reopen the assessment under Section 147 of the Act. ------- ------- 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had."
In view of the above, I respectfully note that their lordships, speaking for the jurisdictional High Court, held that when the AO has proceeded to initiate reassessment proceedings on the wrong premise that the assessee has not filed return of income for relevant assessment year and, in fact, the assessee did file the return of income, then, this is a clear case of non-application of mind and non- consideration of relevant material by the AO. Secondly, when the AO has not created any link between tangible material and the formation of reason to believe that income had escaped assessment, then, the information received from Investigation Wing cannot be said to be tangible material per se without further inquiry being undertaken by the AO. In the present case also the AO initiated reassessment proceedings on the wrong premise that the assessee has not filed return of income for AY 2009-10 and the AO, without verifying and creating a link between the information received from the Investigation Wing and the formation of reason to believe that income has escaped assessment, initiated reassessment proceedings u/s 147 of the Act and issued notice u/s 148 of the Act and, therefore, the issue is squarely covered in favour of the assessee by the judgement of Hon’ble jurisdictional High Court in the case of . Accordingly, ground No.7.2 of the assessee is allowed and initiation of reassessment proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act and all consequent proceedings and orders are hereby quashed. Since we have granted relief to the assessee by allowing legal ground No.7.2, therefore, grounds of the assessee on merits are not being adjudicated as having become academic.