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Income Tax Appellate Tribunal, DELHI BENCHES “C” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI B.R.R. KUMAR
This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-35, New Delhi, Dated 01.03.2019, for the A.Y. 2009-2010, challenging the reopening of the assessment under section 143(3) r.w.s. 147 of the I.T. Act, 1961, and addition of Rs.95 lakhs on account
2 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. of unexplained share capital under section 68 of the I.T. Act, 1961 and addition of Rs.1,90,000/- on account of Commission paid under section 69C of the I.T. Act, 1961.
We have heard the Learned Representatives of both the parties through video conferencing and perused the material on record.
Briefly the facts of the case are that the assessee company had filed its return of income on 26.09.2009 declaring deemed total income of Rs.NIL under the provision of Section 115JB of the Income Tax Act, 1961. The Book Profit was declared at Rs.17,00,485/-. The assessment was completed under section 143(3) of the I.T. Act, 1961. Subsequently, certain information was received from Investigation Wing with regard to the financial transactions entered into by the assessee during the year under appeal. The A.O. recorded the reasons for reopening of the assessment and after getting approval from Pr. CIT, Delhi issued notice under section 148 of the I.T. Act to the assessee-company on 29.03.2016 proposing to assess the income of the assessee for the year under appeal. The A.O.
3 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. noted certain non-compliance on the part of the assessee. The A.O. on the basis of the analysis of the seized documents and report of the Investigation Wing found that assessee-company has taken accommodation entry amounting to Rs.20 lakhs in assessment year under appeal from Shri S.K. Jain Group of Companies i.e., Virgin Capital Services P. Ltd., Rs. 7 lakhs, VIP Leasing & Finance P. Ltd., Rs.7 lakhs and Mani Mala Delhi Pro. P. Ltd., Rs.6 lakhs. The A.O. noted that assessee has received these share capital through above broker which shall have to be added as unexplained in the hands of the assessee. The explanation of assessee was called for. The assessee explained before the A.O. that the assessee instead of receiving the share capital money from these three parties, had in fact received share application money from 11 parties in a sum of Rs.95 lakhs including the above three parties mentioned in the reasons. The details provided by the assessee are quoted in para-7 of the assessment order. The assessee has also furnished confirmation, relevant bank statements, copy of their ITR to show that assessee has 4 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. received genuine share application money. The A.O. discussed the entire evidence and material on record and investigation carried-out by him and came to the conclusion that assessee failed to explain the genuineness of the share application money received of Rs.95 lakhs and accordingly, made addition under section 68 of the I.T. Act, 1961. The A.O. also noted that since assessee has received accommodation entry on account of share capital money from entry operators, therefore, assessee has also paid Rs.1,90,000/- as Commission which was added on account of unexplained expenditure under section 69C of the I.T. Act, 1961. The A.O. completed the re-assessment order Dated 26.12.2016 under section 143(3)/147 of the I.T. Act, 1961.
3.1. The assessee challenged the reopening of the assessment as well as addition on merit before the Ld. CIT(A). The Ld. CIT(A) reproduced the explanation of assessee in the appellate order, however, dismissed the appeal of assessee.
5 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi.
The Learned Counsel for the Assessee submitted that assessment was originally completed under section 143(3) vide Order Dated 14.12.2011 [PB-53]. In the original assessment proceedings, A.O. issued notice under section 142(1) Dated 24.06.2011 [PB-54] asking the assessee to file details of share capital/share application money received along with complete address and latest income tax assessment particulars. The assessee filed reply before A.O. [PB-56] and filed complete details along with documentary evidences of all the share applicants i.e., their confirmations, bank statements and income tax returns, balance-sheet etc., The A.O. again issued notice under section 142(1) Dated 21.09.2011 [PB-59] asking the assessee to file the details of share application money received in assessment year under appeal in the particular Format. The assessee filed reply Dated 14.12.2011 furnishing the details and also furnished bank statements and ITRs of the remaining share applicant companies [PB 63-70]. He has submitted that A.O. has examined the issue of receipt of share application money from 11 parties in 6 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. detail based on evidence on record and after scrutiny, accepted the explanation of assessee and no addition on account of unexplained share application money have been made. The issue have been examined in detail after verification. He has referred to the reasons recorded by A.O. for reopening of the assessment, copy of which is filed at page-73 of the PB and has submitted that A.O. in the reasons itself has mentioned that “the case subjected to detailed scrutiny in original assessment Dated 14.12.2011 under section 143(3) and accommodation entries were verified at every stage.” The A.O. has referred to the letter of the Investigation Wing Dated 12.03.2013. The A.O. has downloaded the return of income of assessee and found that there is an increase in share application money in assessment year under appeal. The A.O. has referred to first 03 parties in the reasons despite assessee received share application money from 11 parties. The assessee has, therefore, disclosed all the primary facts at the original assessment stage which have been examined by the A.O. Thus, there is no failure on the part of assessee to disclose
7 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. truly and fully all material facts necessary for assessment. Thus, the reopening have been done merely on change of opinion which is bad in law. In support of his contention, he has relied upon Judgment of the Hon’ble Supreme Court in the case of ACIT vs., Marico Ltd., in SLP (Civil) No.7367 /2020 Dated 11.06.2020 in which it was held as under :
“Subsequently, by notice dated 27.03.2019 issued under Section 148 of the Income-Tax Act, the matter was sought to be re-opened. While accepting the challenge to the issuance of notice, the High Court in para 12 of its Judgment observed as under :
"12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017 during the assessment proceedings and the Petitioner had responded to the same by its letters dated 10 December 2017 and 21 December 2017
8 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. justifying its stand. The non-rejection of the explanation in the Assessment Order would amount to the Assessing Officer accepting the view of the assessee, thus taking a view/ forming an opinion. Therefore, in these circumstances, the reasons in support of the impugned notice proceed on a mere change of opinion and therefore would be completely without jurisdiction in the present facts. Accordingly, the impugned notice dated 27 March 2019 is quashed and set-aside.”
In the circumstances, we see no reason to interfere in the matter. This special leave petition is, accordingly, dismissed.”
4.1. Learned Counsel for the Assessee submitted that same view have been taken by ITAT Delhi Bench, Delhi in the cases of Nishit Fincap P. Ltd., vs., ITO in ITA.No.2323/ Del./2017 Dated 16.09.2020 and M/s. AST Pipes P. Ltd., in ITA.No.8312/Del./2019 Dated 27.10.2020. He has also relied upon the decision of Hon’ble Supreme Court in the 9 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. case of CIT vs., Kelvinator of India Ltd., 320 ITR 561 (SC) on the proposition that “on mere change of Opinion re- assessment cannot be done and as such it should be quashed.” He has further submitted that in the present case original assessment was completed under section 143(3) Dated 14.12.2011 and the action under section 147 have been initiated after expiry of 04 years from the end of the relevant assessment year. Therefore, the case of assessee could not have been reopened unless the escapement of income occasioned due to failure of assessee to disclose truly and fully all material facts necessary for assessment which is not present in the case of assessee. Thus, there is a total non-application of mind on the part of the A.O. to reopen the assessment. He has also submitted that assessee is required to disclose only the primary facts at the original assessment stage which assessee has correctly disclosed. He has relied upon Judgment of the Hon’ble Supreme Court in the case of NDTV vs., DCIT [2020] 424 ITR 607 (SC). He has further submitted that information have been received by the A.O. from 10 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. Investigation Wing in March, 2013 as is mentioned in the reasons for reopening of the assessment and action under section 147 have been initiated in March, 2016 after full 03 years. In the meantime, the assessments of all the 03 Investor Companies mentioned in the reasons was completed in consequence of the same search which is the basis for action under section 147. In the assessment orders passed in each case, are contrary to what was conveyed by the Investigation Wing, that respective entities being used as a conduit to provide accommodation entries by Shri S.K. Jain Group. Copies of the assessment orders under section 153A of all these three investor entities are filed in the paper book at pages 77 to 82 of the PB. In case the A.O. could have verified all the facts from the assessment records of the above, A.O. would not have reopen the assessment in the matter. He has, therefore, submitted that reopening of the assessment is wholly unjustified and void abinitio and liable to be quashed.
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that whatever
11 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. information was received by the A.O. from the Investigation Wing was the basis for reopening of the assessment which A.O. has correctly recorded in the reasons and rightly proceeded to initiate the proceedings under section 147 of the I.T. Act, 1961.
We have considered the rival submissions and perused the material on record. Section 147 of the I.T. Act, 1961 and its First proviso provides as under :
“147. Income escaping assessment : If the Assessing Officer has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re- compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this 12 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. section and in sections 148 to 153 referred to as the relevant assessment year) :
Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.”
6.1. It is well settled Law that validity of the re- assessment proceedings is to be determined with reference to the reasons recorded for reopening of the assessment. The Learned Counsel for the Assessee has filed copy of the reasons recorded for reopening of the assessment in the 13 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. paper book at pages 73 to 76. The same is reproduced as under :
14 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. 15 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. 16 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. 17 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi.
6.2. It is an admitted fact that at the original assessment proceedings the A.O. passed the assessment order under section 143(3) Dated 14.12.2011. The A.O. issued show cause notice under section 142(1) to the assessee and asked for the details of share capital/share application money along with details, complete address, amount and income tax particulars of the Investors which assessee has filed before A.O. at original assessment stage along with confirmations of the investors, their bank
18 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. statements, their income tax returns and balance-sheets. The assessee explained before the A.O. that assessee has received share application money from 11 parties. The A.O. further asked for the details of share application money so received in assessment year under appeal in a particular Format which was also supplied by the assessee. Further compliance was also made by the assessee by providing bank statements and income tax records and TDS returns etc., of the remaining parties which could not be filed initially. Thus, the A.O. examined the issue of receipt of share application money received by assessee in assessment year under appeal from 11 parties and the A.O. after verification of the same, accepted the explanation of assessee that assessee received share application money from 11 Investors including the 03 mentioned in the reasons recorded for reopening of the assessment. The Hon’ble Full Bench of jurisdictional High Court in the case of Kelvinator of India Ltd., 256 ITR 1 (FB) (Del.) held that “on mere change of opinion of A.O, cannot be a ground for re- assessment and that amendment of Section 147 w.e.f.
19 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. 01.04.1989 has not alter the position.” This decision have been confirmed by the Hon’ble Supreme Court in the case of CIT vs., Kelvinator of India Ltd., 320 ITR 561 (SC) by dismissing the Departmental Appeal. Same view have been taken by the Hon’ble Gujarat High Court in the case of Garden Silk Mills P. Ltd., 237 ITR 688 (Guj.). The Hon’ble Calcutta High Court in the case of Berger Paints India Ltd., 245 ITR 648 held that “when any particular issue has been considered by the ITO and Commissioner of Income Tax(A) and when there is no failure to disclose the facts, the re- assessment proceedings are not valid.” The Hon’ble Supreme Court in the case of Foraner France 264 ITR 566 held that “re-assessment – not on basis of mere change of opinion”. The Hon’ble Supreme Court in the case of Indian Oil Corporation 159 ITR 956 held that “no case under section 148 is made-out when the facts were known all along with the Revenue while making the original assessment.” The Hon’ble Supreme Court in the case of Associated Stone Industry 244 ITR 560 held that “assessee shall have to disclose only primary facts.”
20 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. 6.3. Considering the above discussion in the light of material on record and above Judgments and Judgments of the Hon’ble Supreme Court relied upon by Learned Counsel for the Assessee in the case of ACIT vs., Marico Ltd., (supra), we are of the view that assessee disclosed complete details of receipt of share application money in assessment year under appeal to the A.O. at the original assessment stage along with documentary evidences, which have been accepted by the A.O. Thus, on mere change of opinion, the A.O. cannot reopen the assessment. There is, thus, no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. The reopening on mere change of opinion is bad in Law and void abinitio and is liable to be quashed.
6.4. It may also be noted here that original assessment have been passed under section 143(3) on Dated 14.12.2011 and A.O. recorded the reasons for reopening of the assessment in March, 2016. Since, there is no failure on the part of assessee to disclose fully and truly all material facts necessary for assessment, therefore, action
21 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. under section 147 initiated after expiry of 04 years from the end of the relevant assessment year, the re-assessment would be bad in Law and is clearly hit by First Proviso to Section 147 of the I.T. Act, 1961. Thus, the A.O. did not apply his mind to the reasons recorded for reopening of the assessment and without verifying the record of the Investor Companies also which have been accepted in the assessments under section 153C/153A of the I.T. Act, 1961, prior to recording of the reasons clearly show that A.O. has not applied his mind to the facts already available on record. In view of the above, reopening of the assessment is clearly bad in Law and liable to be quashed. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment in the matter. Resultantly, additions stand deleted. Accordingly, appeal of the Assessee is allowed.
In the result, appeal of the Assessee allowed.
22 ITA.No.5196/Del./2019 M/s. Gaurang Products Pvt. Ltd., Delhi. Order pronounced in the open Court.