M/S. RAM DEV RICE PVT. LTD.,HARYANA vs. ACIT, KARNAL

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ITA 903/DEL/2017Status: DisposedITAT Delhi12 December 2019AY 2006-0741 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal dismissed the appeal filed by the assessee. Regarding the first issue, the Tribunal noted that the CIT(A) had provided detailed reasons for upholding the reopening. The Tribunal found that the notice under Section 148 was issued based on new tangible material received from departmental sources, which was specific and reliable. The Tribunal agreed with the CIT(A) that the ratio of the judgment in Phool Chand Bajrang Lal’s case was applicable, where mere disclosure does not offer immunity from reassessment if a transaction is found to be not genuine upon further information. Regarding the second issue, the Tribunal found that the CIT(A) had correctly held that the assessee had failed to discharge its onus to prove the creditworthiness of the parties and the genuineness of the transaction. The Tribunal noted that the four entities from whom share capital was received had characteristics of paper entities with negligible business activity, and there was no justification for paying a significant premium for their shares. The Tribunal relied on various judicial pronouncements, including CIT Vs. Nova Promoters & Phinlies, CIT Vs. Independent Media Taxman Delhi (2012), CIT Vs. N.R. Portfolio Pvt. Ltd., A. Govinda Rajulu Mudaliyar (34 ITR 807) (SC)(1958), and Aggarwal Coal Corporation Pvt. Ltd. Vs. ACIT, to uphold the addition of Rs. 90,00,000/-. The Tribunal declined to interfere with the CIT(A)'s order and dismissed the appeal. No issue was expressly left undecided.

What were the facts?

The assessee, M/s Ram Dev Rice Pvt. Ltd., filed an appeal before the Income Tax Appellate Tribunal (ITAT) challenging the order dated 17.11.2016 passed by the Commissioner of Income Tax (Appeals) (CIT(A)), Karnal. The assessment year in question is 2006-07. The original assessment was completed under Section 143(3) of the Income Tax Act, 1961. Subsequently, a notice under Section 148 was issued on 25.03.2013, proposing to reopen the assessment based on information received from the Director of Income Tax (Inv.)-II, New Delhi, alleging that the assessee company had obtained accommodation entries totaling Rs. 90,00,000/- in the form of bogus share capital/premium/loan from a group identified as Sh. Surender Kumar Jain Group. The assessee objected to the reopening, but the Assessing Officer (AO) disposed of the objection. The CIT(A) upheld the addition of Rs. 90,00,000/- made by the AO under Section 68 of the Act. The assessee's appeal before the ITAT was dismissed due to the absence of the assessee's representative during the hearing.

What were the issues?

1. Whether the reopening of assessment under Section 147 of the Income Tax Act, 1961, is bad in law, ab initio void, and without jurisdiction. The assessee contended that the reopening was based on a mere change of opinion, without independent inquiry, and relied on the judgment in CIT vs. Kelvinator India Ltd. (2002) 256 ITR 1. The assessee also argued that no action could be initiated under Section 148 merely on suspicion and that the share capital was disclosed in the return. The assessee further stated no association or transaction with Sh. Surinder Kumar Jain Group. The revenue, through the Sr. DR, relied on the AO's order and the CIT(A)'s order, which cited the judgment in Pal Jain vs. ITO [2004] 267 ITR 540 (P&H) and Phool Chand Bajrang Lal’s [203 ITR 456 (SC)] to argue that mere disclosure does not offer immunity from reassessment if a transaction is found to be not genuine upon further information. 2. Whether the addition of Rs. 90,00,000/- made under Section 68 of the Income Tax Act, 1961, is justified. The assessee argued that the share capital was received from Private Limited Companies and that assessments of these companies were completed under Section 143(3) without adverse inferences. The revenue contended that the four entities from whom share capital was received had characteristics of paper entities with negligible business activity, common addresses, and impressive balance sheets but no significant business activity or potential for huge profits, thus not justifying the premium paid. The revenue relied on judgments including CIT Vs. Nova Promoters & Phinlies, CIT Vs. Independent Media Taxman Delhi (2012), CIT Vs. N.R. Portfolio Pvt. Ltd., A. Govinda Rajulu Mudaliyar (34 ITR 807) (SC)(1958), and Aggarwal Coal Corporation Pvt. Ltd. Vs. ACIT.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 147,Section 148,Section 154

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH: ‘F’: NEW DELHI

Before: SHRI AMIT SHUKLA & SHRI ANADEE NATH MISSHRA

[A] This appeal has been filed by the assessee against the impugned appellate order dated 17.11.2016 passed by Learned Commissioner of Income Tax (Appeals), Karnal, [in short, “Ld.CIT(A)”] pertaining to Assessment Year 2006-07. The Assessee has raised following grounds of appeal:-

“1. On the facts and in the circumstances of the case as well as in the law the re-opening of Assessment is bad in law, ab initio void and without jurisdiction.

2.

On the facts and circumstances of the case as well as in the law the Ld. Commissioner of Income Tax Appeals grossly erred in upholding addition of Rs. 90,00,000/- made U/s 68 of the Income Tax Act, 1961. Page 1 of 41 ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd.

3.

The appellant crave leave to add/ delete/ alter or modify any or all grounds of appeal. These action of Ld. Income Tax Authorities below being arbitrary, unjust and invalid in the law liable to the quashed and it is prayed to Your honor that they please be quashed and / or any other relief just deem fit and proper please be directed. Appellant pray accordingly.”

[B] Vide Assessment Order dated 31.03.2014 passed under Section 143(3) / 147 of the Income Tax Act, 1961 (in short “the Act”). The relevant portion of the Assessment Order dated 31.03.2014 is reproduced as under:-

ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. [C] The Assessee filed appeal before the Ld. CIT(A). Vide impugned appellate order dated 17.11.2016, the Ld. CIT(A) dismissed the assessee’s appeal. The relevant portion of the order dated 17.11.2016 of the Ld. CIT(A) is reproduced as under:

ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd.

”

[D] This present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 17.11.2016 of the Ld. CIT(A). At the time of hearing, Revenue was represented by Shri Surender Pal, the learned Senior Departmental Representative (“Ld. Sr. DR”, for short). However, none was present from the assessee’s side. In the absence of any representation from assessee’s side, at the time of hearing before us, we heard the Ld. Sr. DR; who relied upon the order dated 31.03.2014 of the Assessing Officer and the aforesaid impugned order dated 17.11.2016 of the Ld. CIT(A). After perusal of the materials on record, including the order of the AO and the aforesaid impugned order dated 17.11.2016 of the Ld. CIT(A), we find that the Ld. CIT(A) has passed speaking order on merits. Relevant portion of the impugned order of the Ld. CIT(A) has already been reproduced in foregoing paragraph [C] of this order. We find that the Ld. CIT(A) has given detailed reasons for his decision on merits in the aforesaid impugned appellate order dated 17.11.2016 of ITA No.- 903/Del/2017. Ramdev Rice Pvt. Ltd. Ld. CIT(A). During appellate proceedings in Income Tax Appellate Tribunal (“ITAT”, for short) no material has been brought for our consideration to persuade us to take a view different from the view taken by the Ld. CIT(A) in the impugned order on merit. After hearing the Ld. Sr. DR and after perusal of materials on record, and further, in view of the foregoing discussion, we decline to interfere with the aforesaid impugned appellate order dated 17.11.2016 of Ld. CIT(A), and accordingly, this appeal is dismissed.

[E] Before we part; we explicitly clarify that the assessee will be at liberty to approach ITAT for restoration of the appeal in accordance with Proviso to Rule 24 of Income Tax (Appellate Tribunal), Rules, 1963. If the assessee does approach ITAT for restoration of the appeals in ITAT, the matter will be considered in accordance with law having regard to the facts and circumstances.

[F] In the result, appeal filed by Assessee is dismissed.

Order pronounced in the open court on 12/12/2019.

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