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Income Tax Appellate Tribunal, DELHI BENCHES “E”: DELHI
Before: SHRI BHAVNESH SAINI & SHRI O.P. KANT
Date of Hearing : 23.01.2020 Date of Pronouncement : 30.01.2020 ORDER PER BHAVNESH SAINI, J.M.
Both the appeals by the same Assessee are directed against the different Orders of the Ld. CIT(A)-31, New Delhi, Dated 26.03.2018, for the A.Y. 2006-2007 and Dated 20.03.2018, for the A.Y. 2007-2008.
2 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. 2. We have heard the Learned Representative of both the parties and perused the material available on record. The issues are same in both the appeals. Therefore, the appeals were heard together and are decided as under.
Assessment Year 2006-2007 :
Briefly the facts of the case are that assessee filed return of income declaring income of Rs.2,92,643/- on 04.01.2007. It was processed under section 143(1) of I.T Act.. The case was re-opened under section 148 of the I.T. Act on the basis of information received from Addl. Director of Income Tax (Inv.), Unit-V, New Delhi and after obtaining the necessary approval, notice under section 148 of the I.T. Act, 1961 was issued to the assessee on 26.03.2013. Statutory notices were issued for completion of the assessment proceedings. Whatever details were submitted by assessee were placed on record. The assessee also filed copy of the FIR stating that relevant documents have been stolen. The assessee in the assessment year under appeal derived income from business and profession only. The A.O.
3 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. noted that information received from Addl. DIT (Inv.), New Delhi, Dated 16.03.2012 revealed that assessee had deposited unaccounted cash in his bank account amounting to Rs.2,82,70,090/- during the F.Y. 2005-2006 relevant assessment year under appeal, and had made investments amounting to Rs.94 lakhs from unexplained sources. The assessee vide letter stated that original return filed may be treated as return filed in response to notice under section 148 of the I.T. Act, 1961. The A.O. on the basis of the copy of the passbook placed on record and information received from Investigation Wing found that there is cash deposit of Rs.2,82,70,090/-, for which, no explanation have been given by assessee. The A.O, accordingly, made the addition of the aforesaid amount under section 68 of the I.T. Act, 1961.
The A.O. further noted that the source of the following investments amounting to Rs.94 lakhs made by assessee during the year remain unexplained i.e., (1) Agreement Dated 08.06.2005 with Shri Gurdev Singh for property No.493, E-Block, Greater Kailash-II, New Delhi, for 4 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. a sum of Rs.48 lakhs and Agreement Dated 13.09.2005 with Shri Nilamber Rudrapal for property No.1481, C.R. Park, New Delhi, for an amount of Rs.46 lakhs, totaling to Rs.94 lakhs. The A.O. completed the re-assessment vide order dated 19.03.2014.
The assessee challenged the said additions before the Ld. CIT(A), on which, remand report was also called for. The Ld. CIT(A) allowed the appeal of assessee partly. Both these additions were confirmed, but, A.O. was directed to grant relief with regard to cheques that have returned after making due verification. The assessee in the present appeal has challenged the initiation of the re-assessment proceedings and both the above additions.
The appeal of assessee is time barred by 08 days. Learned Counsel for the Assessee submitted that this case was handled by Shri Avinash Kumar Alok, C.A. who represented the case before the authorities below. Since, he did not handled the case property, therefore, the assessee
5 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. had to change the Counsel, which took some time in between. Therefore, the nominal delay may be condoned.
After considering the rival submissions, we are of the view that the nominal delay is explained by the assessee and the explanation of assessee is supported by affidavit of the assessee. In this view of the matter, we condone the delay in filing the appeal.
7.1. Learned Counsel for the Assessee referred to PB-4 which is reasons for reopening of the assessment. PB-6 is Annexure-C supplied by the Department, which would show that the total deposit in the Bank account of the assessee was Rs.2,05,54,090/- [Whereas the A.O. has wrongly made an addition of Rs.2,82,70,090/- on account of cash deposits]. The Investigation Wing has advised the A.O. to go through the bank statements and other documents to arrive at the income escaped assessment before issuing notice under section 148. PB-8 is summary of total credits in the Bank Accounts of the assessee to show that actual cash deposited in various bank accounts of the assessee was 6 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. Rs.1,23,45,200/- which is supported by copies of the bank statements filed in the paper book. He has also highlighted that there are differences in cash deposits in various bank accounts of the assessee as per information received from Investigation Wing and actual cash deposited in the bank account of the assessee. He has referred to PB-128 which is summary of the investments in the properties. PB-138 is copy of the sale deed for Rs.48 lakhs, which assessee has sold to Shri Gurdev Singh bearing property No.493, E- Block, Greater Kailash-II, New Delhi, which assessee has purchased from Dr. Rama Nand Jain through an Agreement to Sell, copy of which is filed at page-130 of the PB. He has, therefore, submitted that sale could not be an unexplained investment. He has referred to PB-159 which is Collaboration Agreement Dated 13.09.2005 with Shri Nilambar Rudrapal to whom assessee has paid Rs.46,50,000/- through cash and banking channel for collaboration of the property. He has submitted that all the cash have been explained. The A.O. has clubbed the sale and properties together to make it as an unexplained
7 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. investment in property. Thus, the A.O. did not applied his mind to the facts of the case and did not verify the details submitted by the Investigation Wing and A.O. has also not followed the advice of the Investigation Wing. Therefore, it is not a case of reopening of the assessment. A.O. recorded incorrect and wrong reasons for reopening of the assessment. The Learned Counsel for the Assessee, in support of his contention, relied upon the Order of ITAT, F- Bench, New Delhi in the case of Shri Pankaj Sapra, New Delhi vs., ITO, Ward-23(2), New Delhi in ITA.No.5747/Del./ 2018 vide Order Dated 22.11.2019, in which, on identical facts, the reopening of the assessment have been quashed. He has also relied upon Judgment of Hon’ble Delhi High Court in the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., [2017] 396 ITR 5 (Del.) in which it was held as under :
“Where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by Assessing Officer, said information could not be said to 8 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. be tangible material per se and, thus, reassessment on said basis was not justified.”
7.2. He has also relied upon Order of ITAT, Delhi SMC-Bench, Delhi in the case of Shri Tajendra Kumar Ghai, New Delhi vs., ITO-1(5), Rudrapur in ITA.Nos.970, 917/ Del./2017, Dated 07.06.2017 in which it was held that “the deposit in the bank account per se cannot be income of the assessee. It was a mere suspicion of the A.O. based on incorrect facts and that income chargeable to tax has escaped assessment, therefore, reopening was quashed.” Learned Counsel for the Assessee, therefore, submitted that reopening of the assessment is wholly unjustified and is liable to be quashed.
On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that assessee did not produce cash book before A.O. However, bank pass book were available to the A.O. as per record which is produced during the course of hearing. The Ld. D.R. submitted that cash in hand cannot be explained in the 9 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. absence of the cash book. The Ld. D.R. submitted that there may be a calculation error in calculating the cash deposited in the bank account, for which, no adverse information should be drawn against the Revenue. The Ld. D.R, therefore, submitted that reopening of the assessment is justified in the matter.
We have considered the rival submissions. It is well settled Law that validity of the reopening of the assessment is to be determined with reference to the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee filed copy of the reasons at page No.4 of the PB which reads as under:
“Annexure: Reasons recorded for initiation proceeding u/s 148 of the I.T Act 1961 in the case of Shri S.N. Arora / Sapra (Som Nath), ARQPS5550E, ASEPS5018G
The Addl, Director Income Tax (Inv), Unit-V, New Delhi, vide his letter Addl.DIT (Inv.)/U-V/2011-
10 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. 12/251, dated 16.03.2012 had sent a report in the case of Shri S.N Arora / Sapra.
As per the investigations made, the assessee had deposited unaccounted cash in his Bank account and also made large scale investment in the assets. The details are as follows :-
Unexplained cash deposit :- A.Y. 2006-07 Rs.2,82,70,090/-
Unexplained investments :- A.Y. 2006-07 Rs. 94,00,000/-
As per the above facts, the cash deposits and unexplained investments are liable to tax u/s 68 & 69 of the Income Tax Act, 1961. The income has escaped assessment in the case of Shri S.N. Arora/Sapra for A.Y. 2006-07 to the extent of Rs.3,76,70,090/-, as per the provisions of the Income tax Act 1961. In view of the above mentioned facts, I have reason to belief that income to the tune of Rs.37670090/- has escaped assessment within the 11 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. meaning of Section 147 of the Income Tax Act, 1961. Accordingly, necessary permission / approval under section 151(2) of the Income Tax Act, 1961 may kindly be accorded for issuance of notice u/s 148 of the Income Tax Act for A.Y. 2006-07. Sd/-Umesh Kumar Income Tax Officer, Ward-23(2), New Delhi.”
9.1. The Hon’ble Punjab & Haryana High Court in the case of CIT vs., Atlas Cycle Industries [1989] 180 ITR 319 (P&H) held as under :
“Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make the reassessment.”
12 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. 9.2. The Hon’ble Delhi High Court in the case of Pr. CIT vs., SNG Developers Ltd., [2018] 404 ITR 312 (Del.) in which it was held as under :
“Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs.95,65,510. It was unacceptable that the Assessing Officer persisted with his "belief" that the amount had escaped assessment not only at the stage of rejecting the assessee’s objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee. Therefore there was non-application of 13 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law.”
9.3. The Hon’ble Delhi High Court in the case of Shamshad Khan vs., ACIT [2017] 395 ITR 265 (Del.) in which it was held as under :
“Held, allowing the petition, that the form for recording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs.28,75,000 whereas the assessee had filed returns showing income of merely Rs.20,56,145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee
14 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs.20,56,145 instead of Rs.69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. Rs.69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs.20,56,145 for Rs.69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in 15 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed.”
9.4. The Hon’ble Bombay High Court in the case of Siemens Information Systems Ltd., vs., ACIT & Others [2007] 293 ITR 548 (Bom.) held as under :
“The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had 16 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition :
Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind.
(ii) That the income derived by the assessee from an industrial undertaking to which section 10A applies could not be included in the total income of the assessee. Therefore, the 17 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. petitioner was right in filing the return by excluding the income in terms of section 10A.”
9.5. The crux of the above Judgments had been 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 is liable to be quashed. The ITAT, F- Bench, New Delhi in the case of Shri Pankaj Sapra, New Delhi vs., ITO, Ward-23(2), New Delhi (supra) in para-9 held as under :
“9. We have heard both the parties and perused all the materials available on record. The issue relating to proceedings initiated u/s 148 whether the same is valid or not, has already been decided in assessee’s own case for A.Y. 2007-08 by the Tribunal. The Tribunal held as under :
18 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. “8. I have considered the rival submissions made by both the sides and perused the orders of the authority below. I find the AO on the basis of the information received from the investigation wing of the Department that the assessee has made cash deposit of Rs.4,97,452/- reopened the assessment by issuing notice under section 148 and thereafter made addition of Rs.4,97,452/- to the total income of the assessee by invoking the provisions of Section 68 of the I.T. Act, 1961. I find the learned CIT(A) upheld the action of the AO, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned counsel for the assessee that there is complete non application of mind of the AO while recording the reasons and he has not verified the facts properly and the 19 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. reopening was made on the basis of report of the investigation wing. Further the deposits in the bank accounts are fully explained and therefore no addition is called for.
9. I find force in the above arguments advanced by the learned counsel for the assessee. A perusal of the notice issued under section 148 shows that the notice has been issued in a very casual manner, Clause 3 of the notice reads as under :-
“Notice under section 148 of the Income Tax Act, 1961.
3. This notice is being issued after obtaining the necessary satisfaction of the commissioner of Income Tax…/the Central Board of Direct Taxes. ”
Similarly, a perusal of the bank account maintained with Vijaya Bank
20 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. account no. 004427, copy of which has been placed at page no. 25 and 26 of the paper book, shows that an amount of Rs.2,50,000/- was by way of clearing of Cheque No.719443 and not cash deposit. If the same is excluded from the total deposits made during the year from the two bank accounts then there is no such cash deposit of Rs.4,97,452/ - in the two bank accounts maintained by the assessee. Therefore, I find force in the argument of learned counsel for the assessee that the reasons recorded are either vague reasons or not based on ITA.No.4253/Del./2018 & ITA.No.4254/Del. /2018 6 any application of mind. In any case, the assessee has explained the source of each deposit made both in cash as well as in cheque and therefore, even on merit also no addition is called for. I, therefore, set aside the order of the learned CIT(A) and 21 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. direct the AO to delete the addition. The ground raised by the assessee is allowed. ”
Thus the reasons given by the Assessing Officer in notice u/s 148 of the Act are merely mechanical and have not given any concrete reasons as to why the re-opening is justified. As regards Ground No. 2 relating to addition u/s 69, the assessee has given a detail of investments and the fact that the addition of the said amount is already made in the hands of the father of the assessee does not sustain in the hands of the assessee. As regards Ground No.3 relating to addition u/s 68 in respect of cash deposits, the Assessing Officer himself admitted that the cheque of Rs.10,00,000/- has been returned back which was not at all considered by the CIT(A). The reasons are mechanical as all the investment as well as the loans were demonstrated by the assessee as per the audited balance sheet itself. Therefore, the Assessing Officer was not right in 22 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. reopening the assessment which is bad in law and without any justified reasons for the additions. Thus, the appeal of the assessee is allowed.”
9.6. The A.O. in the reasons recorded that “Investigation Wing has reported that there are unaccounted cash deposit in the bank account of the assessee in a sum of Rs.2,82,70,090/-.” Admittedly the bank pass books are available at the assessment record which fact is also mentioned by the A.O. in the assessment order. However, the Annexure-C supplied by the Investigation Wing to the A.O, copy of which is filed at page-6 of the PB, reveals that in fact there is a cash deposit in the bank account of the assessee was of Rs.2,05,54,090/-. The Investigation Wing has advised the A.O. to go through the bank statements and other documents before arriving at the conclusion that there is escapement of income under section 148 of the I.T. Act. The assessee, on the other hand, has prepared a chart based on bank statements of various bank accounts to show that there is actual cash deposit of Rs.1,23,45,200/- only. Thus, there is a huge difference between the cash
23 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. deposited in the bank accounts of the assessee. In these circumstances, it was the duty of the A.O. to verify the facts before coming to the conclusion that there is escapement of income on account of cash deposited in the bank account of the assessee. The A.O. even did not verify the information received from Investigation Wing and did not even obey the directions of the Investigation Wing. It is well settled Law that mere cash deposited in the bank account of the assessee per se would not disclose escapement of the income as is held by the ITAT in the case of Shri Tejendra Kumar Ghai, New Delhi vs., ITO – 1(5), Rudrapur (supra) and Shri Abrar Ahmad Qasimi, New Dekhi vs., ITO, Ward- 46(5), New Delhi in ITA.No.3177/Del./2017, Dated 01.06.2018. The assessee further explained that there is no unaccounted investment in the properties because the deal of Rs.48 lakhs pertain to sale of the property by assessee which is supported by the Sale Deed and such property was purchased by the assessee way back in 1996. Thus, the sale could not be an unexplained investment in the case of the assessee. In respect of other property, assessee has made
24 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. Collaboration Agreement with Shri Nilambar Rudrapal and paid Rs.46 lakhs, the source of which itself is explained in the receipt. Thus, the A.O. has recorded incorrect and wrong reasons for reopening of the assessment and did not apply his mind to the facts of the case before recording reasons for reopening of the assessment. The A.O. has also failed to verify the information received from the Investigation Wing before recording the reasons for reopening of the assessment. Even the sanctioning authority has not applied its mind to the conclusion drawn by the A.O. based on specific material on record which clearly revealed that reasons recorded by the A.O. are wrong, incorrect and based on no evidence. It is, therefore, clear case of non-application of mind by the A.O. before recording reasons for reopening of the assessment. We rely upon the following decisions.
9.7. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.) the Hon’ble Delhi High Court held as under:
25 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. "In the present case too, the information received from the Inv. Wing cannot be said to be tangible material per se without a further enquiry being undertaken by the learned assessing officer"
9.8. In the case of Pr. CIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), the Hon’ble Delhi High Court held as under :
"Reassessment notice condition precedent recording of reasons to believe that income has escaped assessment mere reproduction of investigation report in reasons recorded absence of link between tangible material and formation of ceding illegal Income Tax Act, 1961, Sec.147, 148"
9.9. In the case of Pr. CIT vs., G And G Pharma India Ltd., [2016] 384 ITR 147 (Del.), the Hon’ble Delhi High Court held as under :
“Reassessment condition precedent application of mind by assessing officer to materials prior to 26 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. forming reason to believe income has escaped assessment - No independent application of mind to information received from Directorate of Investigation and no prima facie opinion formed- reassessment order invalid”.
9.10. In the case of Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), the Hon’ble Delhi High Court held as under :
[“No independent application of mind by the Assessing officer but acting under information from Inv. Wing - Notice U/s. 147 to be quashed”.
9.11. Considering the totality of the facts and circumstances of the case and in the light of material on record, we are of the view that reopening of the assessment is illegal and bad in Law and is liable to be quashed. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted.
27 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. 10. In the result, appeal of the Assessee for the A.Y. 2006-2007 is allowed.
Assessment Year 2007-2008 :
In this appeal, the assessee has similarly challenged the reopening of the assessment and addition of Rs.86,86,537/- on account of unexplained cash deposit in the bank account of the assessee.
The assessee has filed copy of the reasons at page No.4 of the PB which is similarly worded as is noted in the A.Y. 2006-2007. PB-6 is Annexure-C supplied by the Investigation Wing in which similar advice have been given to the A.O. to verify the facts. PB-8 is summary of the cash deposited by assessee in the bank accounts to show that actual deposit was of Rs.20,16,000/- only.
Learned Representatives of both the parties submitted that the issue is same as have been considered in A.Y. 2006-2007.
28 ITA.Nos.4251 & 4252/Del./2018 Shri S.N. Arora/Sapra, New Delhi. 14. This appeal is also time barred by 08 days. Following the reasons for decision in A.Y. 2006-2007, we condone the delay in filing the appeal and set aside the Orders of the authorities below and quash the reopening of the assessment under section 148 of the I.T. Act, 1961. All additions stand deleted.
In the result, appeal of the assessee for the A.Y. 2007-2008 is allowed.
To sum-up, both the appeals of the Assessee are allowed.
Order pronounced in the open Court.