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Income Tax Appellate Tribunal, DELHI BENCH “H”: NEW DELHI
Before: SHRI N. K. BILLAIYA & SHRI ANUBHAV SHARMA
O R D E R PER ANUBHAV SHARMA, J. M.: 1. The appeal has been preferred by the revenue against the order dated 26.03.2019 of CIT(A)-08, New Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. „FAA‟) in appeal No. 10391/17-18 arising out of an appeal before it against the order dated 30.12.2017 passed u/s 147 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred as „the Act‟) by Assessing Officer, ITO, Ward23(3), New Delhi (hereinafter referred as the Ld. AO).
2. The facts in brief are that as per the revenue the assessment order dated 30.12.2017 was outcome of the return of income of the Assessee dated 26.03.2012 declaring total income of Rs. 500/-. The return was processed u/s 143(1) of the Act on 14.05.2012. However, subsequently, Page | 1
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) information was received from Investigation Wing, New Delhi vide Dy. Director of Income Tax(Inv), Unit 1(2), New Delhi and also from the office of CBI, New Delhi that Shri Tarun Goyal, M/s. Yogesh Trading Co and others were engaged in purchasing of existing companies and formation of new one. At least 35 companies were found operating on the same address, 13/34 WEA, 4th Floor, Main Arya Samaj Road, Karol Bagh, New Delhi. Mr. Tarun Goyal was suspected to be engaged in depositing of cash in various bank accounts and transactions were finally shown as subscription of equity in companies. The equity was mainly subscribed at high premium. The non group companies were found to be carrying out normal business activities. Some of the companies were found inducting capital/margin money to avail credit facilities from financial institution. In this process tainted money was converted into bonafide investment in equity resulting in evasion of tax. At least 35 companies along with details of 45 bank accounts were taken up by CBI for scrutiny and rest of same banks were found in facilitating money laundering activities. It was further informed that Shri Hari Das Securities and Credit Pvt. Ltd by which the present Assessee was known at that time was having a bank account No. 223010200020332 with Axis Bank Ltd, Karol Bagh, New Delhi wherein, the credit of Rs. 22,70,06,000/- was found. The assessment order mentions that it was noticed that amount either credited in cash or transferred from the entity mentioned in TEP and immediately transferred on the same day or another day to the entity mentioned in TEP.
In context to assessee it was observed that the turnover declared by the Assessee was Rs. 500 except with no other expense or income declared. Huge cash deposit during the period between 01.04.2009 to 31.03.2010 in the Assessee‟s bank account was found particularly with M/s. Priya Tissues Pvt. Ltd. Accordingly the case of the Assessee was reopened u/s 148 of the Act by obtaining due approval of the competent authority and statutory notice was issued on 31.03.2017. The Assessee
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) submitted the return filed by the Assessee on 26.03.2012 may be treated as return filed in response to notice u/s 148 of the Act. The Assessee had claimed that the scrutiny assessment in his case for Assessment Year 2010-11 has already been passed by DCIT, Central Circle-4, New Delhi already on 22.03.2013 by accepting the returned income of Rs. 500/- and reopening of the assessment u/s 148 cannot be continued. The Assessee also approached the Hon‟ble High Court vide writ petition No. 9286/2017 in which ultimately writ petition was dismissed as withdrawn. The extract of order dated 10.11.2017 of Hon‟ble High Court available in the assessment order mentioned that “ld counsel petitioner seeks permission to withdraw the present writ petition and states that he will contest the reassessment proceedings and, if, required, raise contentions in appeal”. The assessment order shows that in compliance to statutory notices u/s 148/143(2)/ 142(1) and detailed questionnaires only objection of the Assessee had taken was in respect to the reopening of the assessment u/s 148.
3.1 Primarily the ld AO had questioned the transaction of the Assessee with M/s. Priya Tissues Pvt. Ltd whose address was also 13/34 WEA, 4th Floor, Main Arya Samaj Road, Karol Bagh, New Delhi where the Assessee company is also situated. However, as no response was received from the Assessee and when the objections of reopening were disposed off by the Ld. AO as per the decision of the Hon'ble Supreme Court in case of M/s. GKA Driveshaft (I) Ltd Vs. ITO (2003) 259 ITR 19 (SC).The ld. AO proceeded to complete the assessment on the basis of information available on record. During the assessment proceeding on 11.12.2017 the ld AR of the Assessee had submitted bank statement revealing an amount of Rs. 21.70 crores has mainly been carried out by M/s. Vertex Drugs Pvt. Ltd and the amount credited in above account of the Assessee has been credited by the company and filed all documentary evidence in this respect. The ld AR of the Assessee was asked to produce the Directors of M/s. Vertex Drugs Pvt. Ltd for verification on next date of hearing. But no ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) such director was produced. The ld AO examined the bank statement of M/s. Vertex Drugs Pvt. Ltd A/c No. 223010200020323/- for the relevant period i.e. 01.04.2009 to 31.03.2010 and concluded that the amount has been received/ credited into the account from Yogesh Trading Company and subsequently transferred into the account of M/s. Shri Hari Das Securities Pvt. Ltd and subsequently into the account of M/s. Priya Tissues Pvt. Ltd i.e. These three entities were found to be situated at the same address. Accordingly, an addition u/s 68 of the Act was made for a sum of Rs. 22,70,06,000/- found credited in the books of account of the Assessee and Rs. 22,70,060/- representing commission paid @1% of the said amount.
The Assessee had challenged the assessment before the ld CIT(A) and the ld CIT(A) observed at para 4.3 as under:- “4.3 I have carefully examined the facts of the case, material on record, submissions of the appellant and the contents of the assessment order. In order to adjudicate the validity of assumption of jurisdiction, it would be appropriate to first examine the reasons recorded by the assessing recorded by the assessing officer. The contentions of the Appellant against assumption of jurisdiction u/s 147 are summarized in Para 3.2 above and are as under:- • The satisfaction recorded by the assessing officer is borrowed satisfaction and that there is non-existence of live link between formation of belief & tangible material. • There is an absence of failure on the part of the assessee in disclosing truly and fully all material facts necessary for his assessment, since the re-opening is beyond a period of 4 years. • There is non-application mind by the assessing officer while recording reasons. • It is a case of change of opinion on the part of the assessing officer in the absence of any tangible material.”
5. The ld CIT(A) observed in concluding part of para 4.8 at page No. 15 of 16 that “ “4.8 ……………………………………………..
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
Because A.O. did not appreciate that increase in share capital can be disclosed in the balance sheet only and the same was duly disclosed. There was no column in the return of income for disclosure of increase in share capital. The assessment for A.Y. 2010-11 was completed u/s 143(3) vide order dated 22.03.2013. During these assessment proceedings questionnaire dated 17.10.2012 specifically required the assessee to furnish details of increase in share capital with confirmation of parties PAN and source of funds. In response to the same, the details of increase in share capital along with copy of confirmation were duly submitted vide reply dated 29.10.2012. After examining the same, the A.O. being fully satisfied accepted the returned income and passed assessment order dated 22.03.2013. Thus, having examined the increase in share capital and being satisfied in the original assessment proceeding there cannot be said to be any failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment.”
Resultantly the ld CIT(A) found that the assessment order tainted on aforesaid ground. Now the revenue has raised the following grounds of appeal:- “1. Whether the ld CIT(A) has erred in deleting the addition of Rs. 22,92,76,060/- merely on the basis of technical grounds without discussing the merits of the case and ignoring the apparent credible information and the fact that the Assessee is a beneficiary of accommodation entry to that extent?
2. Whether, the ld CIT(A) has erred in ignoring the fact that Pr. CIT has categorically recorded that there is a failure of the Assessee to disclose material is a accommodation entries?”
Heard and perused the record.
On behalf of the revenue the ld DR submitted that the first appellate authority has fallen an error in not considering the case on wholesome basis and merely on technical ground benefitted the Assessee. It was submitted that the ld CIT(A) has failed to take note of the fact that it was not a simple case of reopening of assessment but in the back drop was the money laundering activity disclosure not of the revenue department alone but also investigated by CBI. It was submitted by Mr. Tarun Goyal, CA was ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
named in the transactions of providing false and bogus entries who converted ill get money into valid one. It was submitted on behalf of the Revenue by that there is no doubt that certain wrong facts were mentioned in the reasons recorded for the purpose of proceeding under section 148 of the Act but that does not make the whole assessment u/s 147/148 of the Act invalid. It was submitted that in any case it was subsequent information received from Investigating Agencies and if any enquiry was conducted at the time of scrutiny assessment u/s 143(3) and which escaped the scrutiny assessment the same was very much considerable in assessment u/s 147/ 148. The ld DR relied on the judgment of Hon'ble Supreme Court Raymond Wollen Mills Ltd Vs. ITO (1999) 236 ITR 34 (SC), ITO Vs. Selected Dalurband Coal Co. (P) Ltd (1996) 217 ITR 597 (SC) heavily relied on the judgment of RDS Project Ltd Vs. ACIT, New Delhi 113 taxamann.com 534 (Delhi)to contend that the fact of RDX Project Ltd case are squarely applicable where also in respect of notice 143(3) assessment being completed the Hon‟ble Delhi high Court had considered it to be a fit case which require reopening by virtue of section 148 and there was no limitation of virtue of proviso to section 147 of the Act.
8.1 He relied the Hon‟ble Delhi High court judgment in the case of PR. COMMISSIONER OF INCOME TAX -6, NEW DELHI versus NDR PROMOTERS PVT. LTD. 410ITR379(Delhi) to contend that under this case Hon‟ble High Court has set aside the order of Tribunal and found many suspicious circumstances which establish that Sh. Tarun Goyal was operating bogus entries firms. He submitted same circumstances are in present case.
8.2 The ld DR relied on the judgment of the Hon'ble Supreme Court in case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd 291 ITR 500 to contend that the word “reason” in the phrase “reason to believe” would mean cause or justification. The expression cannot be read to mean that ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) the AO should have finally ascertained the fact by legal evidence or conclusion.
8.3 He submitted that Mr. Tarun Goyal was a bogus entry operator who had made an admission before the authorities on 14.12.2010 that he was providing accommodation entry by collecting cash and issuing cheques and still he appeared as a representative of the present Assessee in the previous assessment proceeding on 29.10.2012 to 22.03.2013 and which shows that he had malafide intention to mislead the previous AO.
8.4 He submitted that the ld CIT(A) relied on certain decisions which were distinguishable and in that context he submitted that:- i. The decision of Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Ltd. v/s CIT (2009) 308 ITR 38 (Delhi) was considered and distinguished by the subsequent decision in the case of RDS Project Ltd. v/s ACIT, New Delhi 421 ITR 624 (Delhi). The Hon'ble Delhi High Court, in this case also referred to the recent decision of the Supreme Court in Pr. CIT v. NRA Iron & Steel (P.) Ltd. (2019) 412 ITR 161 and several other cases in respect of addition made u/s 68 on account of bogus share capital. ii. Also in the case of Aravali Infrapower Ltd. V DCIT [2017] 390 ITR 456(Delhi) and PCIT v Paramount Communication (P) Ltd [2017] 79 taxmann.com 409(Delhi), the decision of Haryana Acrylic Manufacturing Co(supra)has been considered and distinguished. iii. In the case of Vedanta Ltd. V ACIT in WP(c) No. 13036 of 2019, assessment was reopened on the basis of information received from the Investigation Wing regarding accommodation entry. In this case, Hon'ble Delhi High Court considered and distinguished the decision of Meenakshi Overseas Ltd(Supra) holding that there was proper application of mind and analysis of facts by the Page | 7
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
AO pursuant to information received from the Investigation Wing. Further, the Court followed the decision of RDS Projects Ltd.(supra) in Vedanta Ltd.. iv. In Rakesh Gupta v CIT [2018] 93 taxmann.com 271(P&H), decision of Meenakshi Overseas Ltd(Supra) and Pr. CITv. RMG Polyvinyl (I) Ltd. [20171 83 taxmann.com 348/249 Taxman 610/396 ITR 5 (Delhi) was considered and distinguished and reopening was treated as valid by Punjab & Haryana High Court observing that the A.O. has shown independent application of mind in respect of information received from Investigation Wing and live link between the tangible material and reason to believe was shown. And for the same reasons, the decision of the Delhi High Court in Pr. CIT v. RMG Polyvinyl (I) Ltd. [20171 83 taxmann.com 348/249 Taxman 610/396 ITR 5 (Delhi) does not carry the petitioner's case further." v. In the case of AGR Investment Ltd. v/s Addl. CIT [2011] 197 Taxman 177 (Delhi) and in Rakesh Gupta v CIT [2018] 93 taxmann.com 271(P&H), the decision of Hon'ble Delhi High Court in the case of CIT v/s SFIL Stock Broking Ltd (2010) 325ITR 285 was duly considered and distinguished.
On the other hand the ld AR had filed written submissions and also argued on the five propositions as under:- PROPOSITION - 1 Where reasons are recorded on incorrect facts without application of mind, the reassessment proceedings are required to be quashed. FACTS The reasons, in present case, have been recorded on incorrect facts without application of mind as would be discernible from the following:-
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
It has been stated in the reasons that no assessment u/s 143(3) was done in the case of the assessee company, relevant portion of the reasons recorded is reproduced herewith: "the assessment /re-assessment proceedings in this case for FY 2009-10 pertain to period beyond four years but before the expiry of six years from the date of issue of notice. In view of the same, as no assessment has been made in this case for A Y 2010-11 u/s 143(3) or u/s 147..." (para 8 page 5 of reasons) 2. Reasons state that the authorised share capital or share application money has been shown at NIL, relevant portion of the reasons recorded is reproduced herewith: " the company filed its original return of income on 26.03.2012 for the A Y 2010- 11 declaring total income of Rs. 500/-. Perusal of the return of income reveal that during the year under there is no purchase or sale or even authorised share capital or share application money has been shown at NIL... "(page 4 of reasons) 3. Reasons recorded by the AO nowhere state that income escaping assessment is on account of receipt of share capital from M/s Vertex Druga Pvt. Ltd. In fact on the contrary it has been concluded in the reasons that "at least an income of Rs. 4,54,01,200/- (approx.) i.e 20% of Rs. 22.70 crores chargeable to tax has escaped assessment for A Y2010-11 "(para 11 page 5 of the reasons). 4. Reasons state that - "copy of the bank statement has been called for from the Axis Bank and as per the above information from the Investigation Wing there are huge cash deposits to the extent of Rs. 22.70 crores during the period 1.4.2009 to 31.3.2010 of the assessee in its bank account maintained with Axis Bank, Karol Bagh, New Delhi to verify the same." (Page 4 of the reasons). Whereas, only amount of cash deposited in the above bank account during the entire year is Rs. 5,000/-.
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
PROPOSITION-2 Where specific details and particulars of transaction related to escaped income are absent from the reasons recorded, the assumption of jurisdiction to reopen the assessment is void. FACTS An examination of the reasons recorded in the present case would show that the assessing officer has failed to record the following (i) Particulars regarding nature of transaction ; (ii) Basic details of information ; (iii) Particulars with regard to name of the person with whom such transaction has been entered into. PROPOSITION-3 Where there is no whisper in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts, the reassessment proceedings are vitiated. FACTS In this case pertaining to A.Y. 2010-11, original assessment order u/s 143(3) was passed on 22.03.2013 (copy enclosed at Page 149 of P/B). The notice u/s 148 proposing reassessment is dated 31.03.2017. Therefore, the reassessment has been opened after expiry of four years form the end of the assessment year and a scrutiny assessment u/s 143(3) has been carried out. Such a case would be covered by proviso to section 147 which casts a duty on the assessing officer to establish that escapement of income is on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. An examination of the reasons recorded would show that the there is no whisper about any failure on the part of the assessee. PROPOSITION -4
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
If income which has escaped assessment which was the basis of reopening of assessment was not assessed or reassessed, the AO cannot independently assess any other income which comes to his notice subsequently in course of reopening proceedings as having escaped assessment. FACTS In the present case the escapement of income stated in the reasons is Rs. 4,54,01,200/- being 20% of Rs. 22.70 crores. Whereas the addition made is on account of unexplained share capital aggregating Rs. 22,70,06,000/- and Rs. 22,70,060/- as commission incurred on obtaining share capital. Thus, no addition has been made of the alleged escaped income as per reasons recorded. PROPOSITION-5 Where assessee had disclosed all material facts in support of transactions at time of making assessment, initiation of reassessment proceedings after expiry of four years from end of relevant assessment year merely on basis of report of investigation wing, was not sustainable. FACTS In the original assessment proceedings the assessee had furnished all material facts viz. Copy of share application form (41-43 P/B), copy of bank statement of investor company (44- 53 P/B), audited balance sheet of investor company as on 31.03.2010 (54-64 P/B), scrutiny assessment order of investor company for A.Y. 2010-11 (65- 67 P/B), ITR of investor company for A.Y. 2009-10 (74 P/B).
He also relied following judgments in support of his submissions; 1. As for first proposition he relied on the following judgments/ order; a. Pr. CIT Vs. Meenakshi Overseas Pvt. Ltd 395 ITR 677 b. Pr. CIT Vs. RMG Ployvinyl (I) Ltd 396 ITR 5
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) c. Pr. CIT Vs. G &G Pharma India Ltd 384 ITR 147 d. Karan Khurana Vs. ITO, AY 2010-11 2. As for second proposition he relied on the following judgments/ order:- a. Surani Steel Tubes Ltd Vs. ITO 136 taxmann.com 139 (Gujarat) 3. As for third proposition he relied on the following judgments/ order:- a. CIT-III Vs. Suren International (P) Ltd 35 taxmann.com 398 (Delhi) b. WelIntertrade (P) Ltd Vs. ITO 18(3) 178 taxman 27 (Delhi) c. Balasubramanian Ramachandran Vs. ITO, Ward-8, 57 Taxmann.com 36 (Delhi) d. Haryana Acrylic Manufacturing Co. Vs. CIT 175 Taxman 262 (Delhi) e. Duli Chand Singhania Vs. ACIT 136 Taxman 725 (P&H) f. McDermott International Inc. Vs. Ad. CIT 134 Taxman 39 (Uttaranchal) 4. As for Fourth proposition he relied on the following judgments/ order:- a. Yasoda Shivappa Nagangoudar Vs. Income Tax Officer 138 taxmann.com 296 b. CIT Vs. Jet Airways (I) Ltd 331 ITR 236
As for fifth proposition he relied on the following judgments/ order:- a. CIT-III Vs. Multiplex Trading & Industrial Co. Ltd 63 taxman.com 170 11. After taking into consideration the submission and appreciating the matter on record, the bench is of considered opinion that the foundation of the arguments on behalf of the Assessee, as narrated in proposition No. 1 above, are with regard to recording of incorrect facts in the reasons
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) recorded u/s 147 of the Act and that same have been recorded without application of mind. In this context the reasons recorded by the Ld. AO are available at page Nos. 155-159 of the paper book and when they are considered it appears that some facts have been recorded which are inchoate and only fact which can be said to be recorded incorrectly is that no assessment u/s 143(3), was done in the case of the Assessee company. While in fact there was a previous assessment which was concluded and assessment order was passed on 22.03.2013. The copy of which is available at page No. 149 of the paper book. But the submissions of Ld DR in this regard cannot be ignored that this mistake may have crept into the reason, out of bonafide and not due to non application of mind. Ld DR has impressed that as the Ld. AO has received information from CBI only on 28.03.2017 and the Ld. AO had to issue notice u/s 147 before 31.03.2017 i.e. within three days only and before that he had to process the information requiring statutory approval of Pr. CIT. Therefore the verification must have been done by the Ld. AO with regard to assessment completed earlier and available in ITD system and DCR and the assessment of Assessee was not updated. So Ld AO may have presumed that no previous assessment has been concluded.
11.1 The bench is of considered opinion that when such incorrect fact was recorded in the reasons then Ld. AO deserved an opportunity to explain, possible and reasonable explanation, if any, available with the Ld. AO. Then ld CIT(A) could have sought a remand report from Ld. AO as to if there was any reason for recording this fact that no assessment u/s 143(3) was done in the case of the Assessee company.
11.2 Further, when any authority is working within the time bound manner such a mistake of fact is likely to occur due to rush of work. The Assessee is under an obligation to impress the appellate authority that such mistake of fact has caused grave prejudice, which certainly is not so, in the present case in hand.
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
In regard to alleged second incorrect facts recorded in the reasons „that authorized share capital and share application money has been shown as Nil‟. The ld AR has relied a balance sheet and profit and loss account statement available at page Nos. 22 to 27 of the paper book. It has been submitted that subscribed, issued and paid up capital is mentioned and is shown to have increased from Rs. 57,80,000/- to Rs. 79,50,000/-. In this context if balance-sheet extract and companies general business profile at Para 2.12, available at page No. 26 of the paper book is considered the same is the head of Capital raised during the year. It mentions Public issue Nil; Bonus issue Nil; Rights issue Nil and Private placement 21,7000/-. Thus, there may have been some reason with the ld AO to have fallen on this information. But again, AO needed an opportunity.
Still the Bench is of considered opinion that these inchoate facts cannot be considered to be outcome of non-application of mind. There was possible explanation with Revenue. But it was not given any opportunity through the AO to explain the same. As observed above, some prejudice should be shown and recording of a inchoate fact in the reasons recorded under section 147 in itself cannot be fatal.
Coming to the alleged non application of mind in not recording that income escaping assessment is on account of reason of share capital from M/s. Vertex Drugs Pvt. Ltd and that only a cash deposit of Rs. 5,000/- was made during the relevant Financial year, while in the reasons the ld AO mentioned about “huge cash deposit to the extent of Rs. 22.70 crores”. It can be observed that at page Nos. 36 to 40 the bank statement of the relevant bank account with Axis Bank is available and same shows that there are numerous credit entries and almost 22 from M/s. Vertex Drugs Pvt. Ltd. These are credit entries based on bank transactions and not cash and there is only one cash entry of Rs. 5,000/- on 29.04.2009. However, that as such does not benefit the Assessee because if at one place AO mentioned about „cash deposits‟ then at relevant other place he also ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
mentioned of “huge deposit during the FY 2009-10.” That included cash or other credit entries of bank coming from transfer of cash.
Then it was an infant stage where primarily on the basis of information received from Investigation Wing and CBI, the Ld. AO processed the information of transactions with M/s. Vertex Drugs Pvt. Ltd in particular. The reason recorded u/s 147/148 of the Act cannot be encyclopedic nature. In Assistant Commissioner of Income tax v Rajesh Jhaveri Stock Brokers (P.) Ltd (SC) [2007] 291 ITR 500, Hon‟ble Supreme Court has held:
"16. Section 147 authorises and permits the AO to assess or reassess income chargeable to tax if he has reason to believe that income far any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification, if the AO has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot he read to mean that the AO should have finally ascertained the fact by legal evidence or conclusion”.
Thus the, final outcome of the proceeding was not relevant. In other words, at the initiation stage, what was required is "reason to believe", but not the established fact of escapement of income. The issue raised by the Ld AR in present case about mention of “cash deposit” or “ that there was only cash deposit of Rs 5000/-“ are not such as can be said to discredit the satisfaction of Ld. that there has been an escapement due to some bogus entry operator‟s involvement. How much or by what means, assessee succeeded to evade that escaped income to be considered in the assessment, were not required to be reflected exhaustively. At the stage of issue of notice, the only question was whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement was not ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction.
Now taking the discussion further, after aforesaid discussion with regard to alleged discrepancy in facts mentioned in the reasons recorded under section 147 of the Act, the Assessee cannot be out rightly benefited and the bench will approach the controversy in a cautious and comprehensive manner, to find if reopening can be said to be falling under the exception carved out of reopening of concluded assessment and time barred assessment. As from the plain phraseology of the relevant provisions of Sections 147, 148, 149 of the Act, it appears that two conditions precedent which are required to be satisfied before an Income Tax Officer can acquire jurisdiction to proceed under Clause (a) of Section 147 read with Sections 148 and 149 of the Act, beyond the period of four years but within a period of eight years, from the end of the relevant year, are: (a) that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment and (b) that the ITO must have reason to believe that such escapement or under-assessment was occasioned by reason, of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co-exist in order to confer jurisdiction on the Income Tax Officer. The Income Tax Officer is obliged, before initiating proceedings under Section 148 of the Act to record the reasons for the formation of his belief to reopen the assessment.
In this context reference can be made to Hon‟ble Madras High Court judgment dated 19/8/21, in Writ Appeal No.1616 of 2018; DCIT Versus M/s. Daimler India Commercial Vehicles Private Ltd., where following observations have been made about the manner in which similar controversy have to be approached;
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
“44. The Income Tax Officer is assessing the tax based on the returns filed by the assessee and the Officer scrutinise the returns filed by the assessee. So, to deal with the cases, where there is evasion or suppression or otherwise by the Assessee, reassessment may arise on several grounds. There is no bar to reopen the assessment and the authority has invoked that power of reopening, after giving the opportunities to the assessee. Therefore, the questions raised as to whether the same is based on the change of opinion or not, whether the reopen is based on the available materials or not and whether fresh tangible material is available or not and whether the reopening of the assessment is barred by limitation are all matters subject to facts and circumstances of each case. In all the cases, uniform method cannot be adopted. Every case is based on the facts and circumstances depending on the merits of its relevant particulars and the same has to be decided by the fact finding authority. The scope of the writ is very limited. Unless it is shown that there is violation of Fundamental Rights or infringement of rights of citizen, or the order passed is against principles of law or violation of principles of natural justice, the writ court cannot interfere in the case where there is no violation of principles of natural justice or fundamental right or non compliance of statutory requirements in any manner.”
Hon‟ble Supreme Court of India in M/S. Phool Chand Bajrang Lal And vs. Income-Tax Officer And Another AIR 1993 SC 2390, reiterated the principles in regard to reopening of concluded assessments by referring to judgment in A.LA. Firm v. CIT, 189 (1991) ITR 285, where a three Judges bench of Hon‟ble Supreme Court, after an elaborate discussion of the subject opined that the jurisdiction of the Income Tax Officer to reassess income arises if he has in consequence of specific and relevant information coming into his possession subsequent to the previous Page | 17
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) concluded assessment, reason to believe, that income chargeable to tax and had escaped assessment. It was held that even if the information be such that it could have been obtained by the I.T.O. during the previous assessment proceedings by conducting an investigation or an enquiry but was not in fact so obtained, it would not affect the jurisdiction of the Income Tax Officer to initiate reassessment proceedings, if the twin conditions prescribed under Section 147 of the Act are satisfied.
Approaching the grounds raised, on the basis of aforesaid settled principles, it can be observed that the reasons specifically mentioned the fact that on 28/3/2017 the information from Investigation wing was received and that CBI also informed that, Shri Tarun Goyal associated with the firm Yogesh Trading Co. & others were found to be providing bogus entries. His firm was apparently in association with the Assessee company, as is exhibited by the fact that all of them shared the same address and in fact more than 35 companies were found to be operating from the said address. The reasons discuss at length the modus operandi used and which was actually under investigation.
However, the ld CIT(A) concluded that it was a simple case of concluded assessment. It seems he lost sight of fact that it is not a mere case of reopening of assessment due to change of opinion by assessing officer, but a case where Assessing Officer found it to be covered by Proviso to Section 147 of the Act and where the previous Assessing Officer was devoid of actual facts by some overt and clandestine acts of Assessee and only due to some sort of investigation by expert agencies, true and new facts were unearthed and which were informed to the Assessing officer. It is exhibited from the previous assessment order u/s 143(3) as passed on 22.03.2013, the Assessee was in fact represented by none other than tainted Shri Tarun Goyal himself, as Representative and CA. That previous assessment order apparently is very summary order and it will be relevant to reproduce the same:-
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
“The assessee company had filed its e-rectum of income for the A.Y. 2010-11 on 26-03-2012 declaring taxable income of Rs.500/-.
Notice u/s 143(2) of the Income Tax Act, 1961 was issued on 10-09-2012 and was duly served upon the assessee company. Notice u/s 142(1) dated 17-10-2012 along with detailed questionnaire was issued and was duly served upon the assessee company. In response to the notices issued, Sh. Tarun Goyal, CA and authorized representative of the assessee company attended the proceedings from time to time and submitted necessary details and clarifications and the same are placed on record. After discussion with the authorized representative of the assessee company, the assessment is completed at returned income.
3. Assessed at an income of Rs. 500/-. Give credit for prepaid taxes. Issue demand notice and challan.”
The Assessee although claims that questionnaire was issued u/s 142(1) as mentioned in the proceedings recorded by the ld AO and available at page No. 147 of the PB. However, the details of the questionnaire is not available. What is made available is copy of the reply to the notice dated 17.10.2012, at page 129 to 144 of the PB. What comes up from this is that the Assessee had relied on a certificate issued by Vertex Drugs Pvt. Ltd available at page No. 131 of the PB which mentioned that an amount of Rs. 21,70,00,000/- only was invested in the form of 217000 equity shares of Rs. 10 each at a premium of Rs. 990 per share by M/s. Hari Das Securities Credit and Pvt. Ltd.
In the case in hand if the previous AO had taken these facts to be correct on its face and subsequently these facts are found to be not just suspicious but outcome of criminal activities, affecting the revenue, then certainly it is a case of failure on part of assessee to disclose fully and truly all material facts necessary for assessment, for that assessment year. It is a case where the concluded assessment proceedings u/s 143(3) were of such nature that the Assessee was able to camouflage the return with documents and evidence by means of misrepresenting facts, if not strictly calling it by way of deceit, so the bar of reopening of the assessment u/s 147/148 of the Act cannot be justified. Page | 19
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
When the judgment of Hon‟ble Jurisdictional High Court in RDS Project Ltd case (supra), as relied by Revenue, is considered it leaves no doubt, in the mind of this bench, that the present case is squarely covered on facts and law. Hon'ble Delhi High Court in this case was dealing with same set of facts of reopening. Though in that case some better particulars were available in the reasons as recorded, but substantially the back drop was same. Hon‟ble Delhi High Court had thoroughly gone into the modus operandi of Shri Tarun Goyal, CA and did not hesitate to observe for him as “ He has been judicially recognized as an accommodation entry provider.” In RDS Project Ltd case (supra)Hon'ble Delhi High Court, while dealing with the sanctity of concluded assessment observed in para 40 as follows:
“40. No doubt, on the one hand, sanctity of concluded assessment proceedings needs to be protected, and an assessee should be protected against undue harassment by the taxation authorities by resort to re-opening of the concluded assessment. However, when subsequently, it comes to light that the assessee has had financial/ monetary dealings with dubious entities/ persons – such as bogus accommodation entry providers, including of the kind noticed hereinabove, giving rise to a serious and well founded doubt about the creditworthiness of the investor and genuineness of the transaction, the endeavour of the Assessing Officer to re-open the assessment in terms of section 147/148 of the Act should normally not be thwarted by the Court, if the same is done within the limitation period, and the same is not merely a case of change of opinion on the same set of facts. A serious and well founded doubt about the genuineness of the transaction would justify formation of the reasonable belief that taxable income has escaped assessment in the light of the scheme of Section 68 of the Act, which provides that cash credits which, in the opinion of the Assessing Officer are not ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11) satisfactorily explained, would be charged to income tax as the income of the assessee. The subsequent acquisition of knowledge that the monetary transaction (including of the kind discussed above) undertaken by the assessee was with a bogus entity/ person- such as an accommodation entry provider – which knowledge was not available to the Assessing Officer at the time of completion of the scrutiny assessment, would be a material change of circumstances, and the formation of belief that taxable income has escaped assessment would not suffer from the taint of simplicitor change of opinion.”
It also refers to judgment of Hon‟ble Allahabad High Court in case of Pankaj Hospital Ltd Vs. CIT (2014) 44 taxmann.com 230 and observed in para 48 as under:- "Now, it is true that during the course of the assessment proceedings, the Assessing Officer had required the assessee to disclose information pertaining to the share applicants, the amounts and their source, the mode ii which payment was made and confirmatory letters together with PAN details. For the purpose of these proceedings, the Court must proceed on the basis of the reply furnished by the assessee to the notice under Section 142(1). The assessee had indicated the names of the companies, their addresses, the application money date of payment, mode of payment and PAN details. But it is also trite law that for such cases three important aspects have to be considered by the Assessing Officer, namely (i) the identity of the investors; (ii) the creditworthiness of the applicants; and (iii) the genuineness of the transaction. Ex-facie, the order of assessment which was passed by the Assessing Officer under Section 143(3) on 2 December 2008 does not indicate that the Assessing Officer had brought his mind to bear on either of these aspects. In fact there is nothing in the reply filed by the ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
assessee to the notice under Section 142(1) that would indicate a full disclosure of facts in regard to either the credit worthiness of the companies which made the investments or the genuineness of the transaction. A cloud was cast on the genuineness of the transaction once a search took place at the premises of the Chartered Accountant who, according to the Department, has stated that he had set up 90 bogus companies, all within his control and in which the Directors were his own employees only for the purpose of providing accommodation entries in favour of various beneficiaries. Among the beneficiaries is the petitioner to whom a payment of Rs.2.21 crores was made through the four companies which created a conduit. Whether it is actually so, is a matter of fact which would have to be determined in the course of the proceedings after the assessment is reopened. At this stage, the only issue before the Court is to whether there was reason to believe that any income chargeable to tax had escaped assessment. From the reply which was furnished by the assessee during the course of the assessment proceedings, it does not emerge that the assessee had discharged the onus of establishing the credit worthiness of the Companies which had ostensibly invested the amount or in regard to the genuineness of the transaction. Hence, though the reopening of the assessment in the present case is beyond the period of four years but the Assessing Officer was satisfied that the condition stipulated in the first proviso to Section 147 was duly fulfilled"
What is established is that in the previous assessment order the Assessee was able to withhold and did not disclose all the facts in honest manner and at that time revenue did not have any means to know, that the Assessee is dealing with companies promoted by Shri Tarun Goyal, who is engaged in the business of providing accommodation entries. Hon‟ble Delhi High court in the case of PR. COMMISSIONER OF INCOME Page | 22
ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)
TAX -6, NEW DELHI versus NDR PROMOTERS PVT. LTD. ( Supra) while considering an appeal of Revenue against order of Tribunal, observed with regard to the modus operandi of Sh Tarun Goyal, in para 13; ”In view of the aforesaid factual position, we have no hesitation in holding that the transactions in question were clearly sham and make-believe with excellent paper work to camouflage their bogus nature.” 26.1 Thus present case is not of wrong inference or failure to draw any inference of the facts by due diligence by the previous assessing officer. So to consider reopening on basis of mere change of opinion. Rather the modus operandi of assessee company in connivance of it‟s own CA and authorized representative was such that it could be unearthed only on an investigation by independent and specialized agency. The summary assessment proceedings were insufficient. In fact for that the Ld. AO observed in the impugned assessment “It is quite possible that the assessee could have succeeded in its design but for the search in the case of Jain Brothers where complete evidence of colorable mechanism used by the assessee has been seized.”So the present case is not a case where the impugned notice and reasons suffers from non application of mind or change of opinion, rather, rightly argued by Ld DR, it is the previous assessment order, which suffered from non application of mind and escapement occasioned by reason, of overt omission and failure on the part of the assessee to disclose fully and truly all material facts as were necessary for the assessment
Thus, the bench is of considered opinion that the ld CIT(A) had fallen an error in setting aside the assessment order merely by citing jurisdictional defect in recording of reasons and issuance of notice u/s 147/148 of the Act. In fact, in the present facts and circumstances, without going on the merits of the impugned assessment, it was not possible for ITO Vs Gungun Gold Infra Pvt. Ltd (A.Y. 2010-11)