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Income Tax Appellate Tribunal, DELHI BENCHES “SMC-1” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
ORDER PER BENCH :
All the appeals by different Assessees are directed against the different Orders of the Ld. CIT(A), Faridabad, Dated 16.07.2019, for the A.Y. 2011-2012.
We have heard the Learned Representatives of both the parties through video conferencing and perused the material on record.
4 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. 3. Both the parties mainly argued in ITA.No.7376/Del./2019 [Shri Hanuman Prasad Agarwal] and have submitted that the issue is same in the remaining appeals and Order in this case may be followed in other appeals. Since common issues are involved in all the appeals, therefore, the appeals were heard together and are disposed of by a common consolidated Order.
ITA.No.7376/Del./2019 - Shri Hanuman Prasad Agarwal :
Briefly the facts of the case that the assessee has originally filed his return of income on 22.07.2011 declaring income of Rs.4,07,280/- after claiming deduction of Rs.1,15,000/- under Chapter-VIA of the Income Tax Act. The return filed by the assessee reveals that assessee has declared income from salary at Rs.4,80,000/- and income from other sources at Rs.42,277/-. There being information with the Department that assessee has obtained accommodation entry of Rs.15 lacs from Shri Pradeep Kumar Jindal, through his proprietary concern M/s. Timon Infrastructure Pvt. Ltd. Proceedings under section 147 of 5 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. the Income Tax Act were initiated and notice under section 148 of the Income Tax Act was issued on 31.03.2018. In response, a letter was received from assessee asking for reasons to believe for issue of the notice under section 148 of the I.T. Act. With this letter, copy of the ITR filed on 22.07.2011 was enclosed. Thereafter, statutory notices were issued under section 142(1) and 143(3) of the Income Tax Act time to time. The assessee filed copy of the ITR, Bank Account Statement etc., before A.O. The A.O. issued show cause notice to the assessee seeking explanation of assessee with regard to accommodation entries for Rs.15 lakhs received from Shri Pradeep Kumar Jindal + commission of Rs.37,500/- paid on the accommodation entry for the purpose of making the addition.
4.1. In reply, the assessee briefly contended that reasons recorded for reopening of assessment were merely on information received from Investigation Wing and there is a presumption of accommodation entry. The data received by the A.O. was prepared on the basis of search and seizure action carried-out by Investigation Wing of the Department,
6 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. New Delhi on Shri Pradeep Kumar Jindal on 18.11.2015. The reasons recorded by the A.O. shows that assessee has received accommodation entry from Shri Pradeep Kumar Jindal for Rs.15 lakhs and he has admitted to have provided accommodation entry. The assessee submitted that the material relied upon by the A.O. was not supplied to the assessee along with the reasons. However, the A.O. has noted that this issue have been raised by the assessee only after issue of the show cause notice and assessee could have requested for supply of the material at any time. The A.O, however, accepted that there is an entry of Rs.5 lakhs only as against entry of Rs.15 lakhs noted in the reasons. The A.O. considering the explanation of assessee, made addition of Rs.5 lakhs on account of unexplained accommodation entry which was considered as the money received by the assessee without consideration and made addition under section 56(2) of the Income Tax Act. The A.O. also made addition of Rs.12,500/- on account of commission paid by the assessee for taking accommodation entry in cash @ 2.5 % of the total consideration. Thus, total
7 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. addition was made at Rs.5,12,500/-. The A.O. passed the reassessment order Dated 24.12.2018 under section 143(3) /147 of the Income Tax Act, 1961.
5. The assessee challenged the addition as well as reopening of assessment before the Ld. CIT(A). Detailed written submissions of the assessee were reproduced in the appellate order, in which, the assessee briefly explained that reasons in this case were asked as early as in April 2018. The return under section 148 was filed in July 2018. However, the case was taken-up by the A.O. in October 2018, only when the reasons were supplied when the letter was submitted to the A.O. i.e., on 31.10.2018. Thereafter, on consideration of the reasons, the objections were raised on 29.11.2018. It was submitted that the objections raised by the assessee against the reopening of assessment were never disposed of. Therefore, reassessment proceedings are bad in law. It was also submitted that reasons were recorded by the A.O. on the basis of the report received from Investigation Wing and there were no verification made by the A.O. and no material was supplied to the assessee on 8 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. the basis which, the reasons for reopening were recorded. Therefore, it is a clear case of non-application of mind on the part of A.O. Since, the objections of the assessee have not been disposed of, therefore, reopening of assessment is bad in law. The Ld. CIT(A) while rejecting the objections of the assessee noted in his findings that objections raised by the assessee have been dealt with by the A.O. in assessment order by passing a composite order, therefore, no merit was found in the submissions of assessee that A.O. has not disposed of the objections against notice under section 148 of the Income Tax Act. The Ld. CIT(A) in his findings also recorded that statement of Shri Pradeep Kumar Jindal has been corroborated from the statement of Smt. Meena Mishra recorded during the course of search operation. The Investigation Wing has conducted the detailed enquiries and made analysis on the seized documents and made list of beneficiaries. Thus, there were sufficient material on record to initiate the reassessment proceedings. It was also held that A.O. has not commented any irregularity by not allowing cross-examination to the statement of Shri Pradeep
9 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. Kumar Jindal. Thus, all the objections of the assessee were found incorrect and addition was confirmed of Rs.5 lakhs + Rs.12,500/- under section 69A of the Income Tax Act. The appeal of the assessee were dismissed.
6. The assessee in the present appeal has challenged the reopening of the assessment under section 147/148 of the I.T. Act, 1961 and addition of Rs.5,12,500/- on merits on various grounds of appeal. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and submitted that there is a factual error in the reasons recorded by the A.O. for reopening of the assessment in four cases of Assessees i.e., Smt. Meena Gupta, Shri Narender Kumar Gupta, Shri Hanuman Prasad Aggarwal, and Shri Sourav Jindal. In the case of Shri Hanuman Prasad Aggarwal and Shri Narender Kumar Gupta, the A.O. has recorded in the reasons that assessee has received accommodation entries of Rs.15 lakhs and ultimately, it was found that entry was of Rs.5 lakhs and Rs.10 lakhs only. In the case of other assessees viz., Smt. Meena Gupta, Shri Sourav Jindal, the A.O. has recorded in 10 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. the reasons that assessee has received bogus entry of purchases, but, later on it was found that it was a loan. Therefore, in these four cases, A.O. has recorded factually incorrect and non-existing reasons for reopening of the assessment and as such, the same are liable to be quashed. In support of this contention, the Learned Counsel for the Assessee has relied upon Judgment of the Hon’ble Punjab & Haryana High court in the case of Pr. CIT vs., Atlas Cycle Industries 180 ITR 319 (P&H), Judgment of Hon’ble Delhi High Court in the case of Pr. CIT vs., SNG Developers Ltd., 404 ITR 312 and Order of ITAT, SMC-Bench in the case of Shri S.N.Arora/ Sapra in ITA.Nos.4251 & 4252/Del./2018 pronounced on 30.01.2020 in which it was held that “in case incorrect, wrong and non-existing reasons are recorded by the A.O. for reopening of the assessment and that A.O. failed to verify the information received from Investigation Wing, the reopening of the assessment would be unjustified and liable to be quashed.” He has submitted that information received from Investigation Wing per se would not disclose any material to initiate re-assessment
11 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. proceedings without further enquiry being undertaken by A.O. and such material relied upon by Investigation Wing or the A.O. have not been supplied to the assessee. Therefore, there is a total non-application of mind on the part of the A.O. to reopen the assessment. In support of his contention, he has relied upon Judgments of the Hon’ble Delhi High court in the cases of RNG Polyvinyle (I) Ltd., 396 ITR 5 (Del.), Meenakshi Overseas Pvt. Ltd., 395 ITR 677 (Del.) and GNG Pharma India 384 ITR 147 (Del.). He has submitted that since A.O. has admittedly did not confront any material supplied by the Investigation Wing to assessee, despite assessee made a specific request and also requested to allow cross-examination of statement of Shri Pramod Kumar Jindal and others, therefore, such material cannot be used in evidence against the assessee. He has relied upon recent decision of the Hon’ble Apex Court in the case of NDTV 424 ITR 607 (SC). He has, therefore, submitted that principles of natural justice is violated in the case of assessee and no addition could be made against the assessee. Learned Counsel for the Assessee further submitted that apparently
12 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. from the Orders of the authorities below, all the objections filed by the assessee against the reopening of the assessment under section 148 have been disposed of in the final assessment order which is a serious violation of Judgment of the Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd., vs. ITO & Ors [2003] 259 ITR 19 (SC) and same leads to nullification of the entire re- assessment proceedings. In support of this contention, he has also relied upon Judgment of Hon’ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. vs., CIT [2009] 308 ITR 38 (Del.), Judgment of Hon’ble Bombay High Court in the case of Fomento Resorts & Hotels Ltd., in Tax Appeal No.63 of 2007 Dated 30.08.2019, Judgment of Hon’ble Madras High Court in the case of CIT vs., M/s. Pentafour Software Employees Welfare Foundation [2019] 418 ITR 427 (Mad.). He has also relied upon Judgment of ITAT, Delhi Bench in the case of Shri Suresh Chandra vs., ITO in ITA.No.3061/Del./2012 Dated 13.03.2015 in which it was held that “it is not open to the A.O. to decide the objections raised against notice under section 148 by 13 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. composite assessment order ----- Thus, we hold the impugned assessment order Dated 03.10.2008 as not valid and same is held as void abinitio.” Learned Counsel for the Assessee also relied upon Judgment of Hon’ble Delhi High Court in the case of Ferrous Infrastructure Pvt. Ltd., in W.P.(C) No.5229/2014 & CM No.10401/2014 Dated 21.05.2015, in which, in para-8 it was held as under :
“8. On going through the same, it is evident that the A.O. has to pass a speaking order disposing of the objections “before proceeding with the assessment.” In the present case, a separate speaking order has not been passed and the objections have been dealt with, if at all, in the re- assessment order itself. On this ground also, the petitioner is liable to succeed.”
6.1. Learned Counsel for the Assessee also placed on record the objections filed by the assessee before A.O. against the reopening of the assessment dated 27/28/29/30.11.2018 in all the cases of the assessees in 14 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. which the assessees have asked for copies of all the material collected by the Investigation Wing and supplied to the A.O. with the request that the same may be supplied to the assessee and all the parties may be produced for cross- examination whose statement may be relied upon by the A.O. The assessee also prayed that re-assessment proceedings may be dropped. Learned Counsel for the Assessee, therefore, submitted that the reopening of the assessment is bad in Law and is liable to be quashed. Learned Counsel for the Assessee also placed on record the detailed written submissions supported by case Law and the documents.
7. On the other hand Ld. D.R. relied upon the Orders of the authorities below and have also filed written submissions which is taken on record. The Ld. D.R. submitted that since assessee has taken accommodation entries and information was examined by the Investigation Wing and supplied to the A.O, therefore, initiation of re- assessment proceedings is justified in the matter and addition was correctly made by the authorities below.
15 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others.
We have considered the rival submissions and perused the material on record. It is well settled Law that validity of the re-assessment proceedings is to be judged with reference to the reasons recorded for reopening of the assessment. In the case of the present assessee, the A.O. has recorded the reasons under section 148 of the I.T. Act, copy of which is filed in the appeal papers. The same is reads as under :
Shri Hanuman Prasad Name and address of the Aggarwal, H.No.1106, Sector 9, Faridabad. assessee Email: itreturnsonline@srsparivar.com PAN ADUPA1670P Asstt. Year 2011-12 Status Individual Date of recording reasons 28.03.2018.
“Reasons for issuance of notice under section 148 of the Income Tax Act, 1961
The assessee filed on 22.07.2011 his return of income declaring income Rs.5,22,277/- from salaries and income from other sources. No scrutiny assessment has taken place in the case earlier.
16 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others.
2. Information was received from the O/o Addl. Commissioner of Income Tax, Range-1, Faridabad vide letter dated 23.03.2018 (F.No. Addl. CIT/R- I/FBD/2017-18/3553). The information was received in this office on 24.03.2018. The said letter of Addl. Commissioner of Income Tax, Range-1, Faridabad enclosed information from ADIT(Inv.) Unit-2(1), New Delhi, dated 14.03.2018 and was seen by Pr. Commissioner of Income Tax, Faridabad on 20.03.2018. The subject of the said information was – “Information of beneficiaries of accommodation entries from Sh. Pradeep Kumar Jindal (entry operator) for reopening of assessment proceedings for AY 2011-12 relevant to FY 2010-11”. The report from ADIT(Inv.), Unit-2(1), New Delhi, informed that search and seizure action was carried out on 18.11.2015 on entry provider Sh. Pradeep Kumar Jindal, House No.H-1/1A, Model Town, New Delhi. The said entry operator was involved in providing various type of accommodation entries, in lieu of cash to a large number of beneficiaries 17 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. through front/non-descript companies managed and controlled by him with the help of dummy Director. The accommodation entries given by him were of nature of share capital and share premium and unsecured loans to a large number of beneficiaries. The information prepared by the Investigation Wing, relied upon on admission made by Sh. Pradeep Kumar Jindal and other dummy directors in this regard. The information also relied upon certain incriminating documents, found during the course of search at the premises belonging to Sh. Pradeep Kumar Jindal.
The information (extracted from Annexure-A annexed to the letter) pertaining beneficiary of this charge i.e. assessee, is as follows:
S.No. Name & Amount Date of Entry provided address of (Rs.) entry by the beneficiary (as per ITD) Sh. H.P. M/s Timon 1. Aggarwal 5,00,000 19.08.2010 Inrastructure (P) Ltd. M/s Timon Sh. H.P. 2. 5,00,000 19.08.2010 Infrastructure Aggarwal (P) Ltd.
18 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. M/s Timon Sh. H.P. 3. 5,00,000 19.08.2010 Infrastructure Aggarwal (P) Ltd. Total 15,00,000 4. The data available with ITD system was analyzed in this case and on analyzing data, it has been transpired that there are accommodation entry remained unsubstantiated as the nature of income declared by the assessee does not commensurate with the transaction/investment of property.
From the above information, it is clear that the assessee has accommodation entry from his unexplained sources of income, and the same is liable to be treated unexplained income of the assessee from undisclosed sources. Furthermore, it is evident that there is a “Live Link” between the material available on record and escaped income, as mentioned above.
In this case has income declared by the assessee in his return of income is from his Salaries and income from other sources and does not commensurate with accommodation entry of the assessee for the year under consideration and assessment was made and the only requirement to initiate
19 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. proceedings u/s 147 reason to believe which has been recorded in this case.
In view of the above, the provisions of clause (b) of Explanation 2 of section 147 applicable to facts of the case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment.
Keeping in view the statutory provisions, legal principles, and factual matrix, accommodation entry remained unexplained. Therefore, I have reason to believe that the income to the extent of Rs.15,00,000/- chargeable to tax, has escaped assessment for the AY 2011-12 within the meaning of section 147 of the Income Tax Act, 1961. In order to assess the above income or any other income which comes to notice subsequently in the course of assessment proceedings u/s 147, I proceed to initiate proceedings u/s 147 of the I.T. Act, 1961 in the case for AY 2011-12.
8. In this case more than four years have lapsed from the end of assessment year under consideration. Hence
20 ITA.Nos.7372 to 7378/Del./2019 Shri Hanuman Prasad Agarwal, Faridabad & Others. necessary sanction to issue notice u/s 148 is being obtained separately from Principal Commissioner of Income Tax as per the provisions of section 151 of the Act.