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Income Tax Appellate Tribunal, DELHI BENCHES “D”: DELHI
Before: SHRI BHAVNESH SAINI & SHRI PRASHANT MAHARISHI
ORDER PER BHAVNESH SAINI, J.M.
The aforesaid Departmental Appeals and Cross Objections by two different Assessees are directed against the different Orders of the Ld. CIT(A), Rohtak, Dated 9th March, 2015 for the assessment year 2007 2008.
We have heard the Learned Representatives of both the parties and perused the material made available by both parties on record. The appeals are decided as under.
3 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
ITA.No.2846/Del./2015 & CO.No.333/Del./2015 M/s. KLF Food (India) Ltd., - A.Y. 2007-2008 :
Briefly the facts of the case are that on the basis of information received by Assessing Officer from DIT (Inv.)- II, New Delhi, Dated 15th March, 2013 that the assessee has taken accommodation entries amounting to Rs 1.50 crore in the shape of share capital from various companies, in order to verify the genuineness of the said investors, notice under section 148 was issued on 28th March, 2013. The Assessing Officer asked the assessee to explain the share capital received from 07 Investors. The Assessing Officer after considering the material on record, in the light of report of Investigation Wing, made the addition of Rs.1.50 crores on account of unexplained credit.
3.1. The assessee challenged the addition before the the Ld. CIT(A). Ld. CIT(A) noted that all the investor companies are assessed to tax under section 153C/153A of the Income Tax Act, 1961 and nothing adverse was found against the assessee during the course of assessment. Therefore, addition was deleted.
4 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
3.2. The Revenue is in appeal challenging the deletion of addition of Rs.1.50 crores and assessee in the cross-objection challenged initiation of re-assessment proceedings under section 147/148 of the Income Tax Act, 1961.
3.3. Before considering the issue on merit, we proceed to decide the legal issue i.e., reopening of assessment in the matter. Learned Counsel for the Assessee submitted that validity of the reassessment proceedings is to be determined with reference to the reasons recorded under section 147/148 of the Income Tax Act, 1961. He has referred to PB 23, which is reasons for reopening of assessment. PB-44 is assessment order passed under section 143(3), Dated 8th December, 2009 for assessment year under appeal i.e., 2007-2008, in which the Assessing Officer has examined the impugned issue of share capital and share premium. He has submitted that the reasons recorded are vague and the Assessing Officer did not verify the return of income, in which all the particulars on account of share capital/ premium have been disclosed by the assessee to the 5 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
Revenue Authorities. The Assessing Officer did not apply his mind and that the Assessing Officer recorded the reasons on borrowed satisfaction. There is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment under section 147 of the Income Tax Act. Therefore, notice issued under section 148 of the I.T. Act after a period of four years from the end of the relevant assessment year, in case where the original assessment has been framed under section 143(3) of the Act is illegal and invalid. He has relied upon Judgment in the case of Viniyas Finance and Investment (P) Ltd., 357 ITR 646 and Order of ITAT, Delhi Bench in the case of M/s. Shiv Sai Infrastructure (P) Ltd., vs. Pr. CIT ITA.No.2527/Del./2017. He has submitted that since initiation of reassessment proceedings are based on non- application of mind and reasons are recorded on borrowed satisfaction, therefore, reassessment is invalid. In support of this proposition, he has relied upon the decisions of the Delhi High Court in the case of G & G Pharma India Limited 384 ITR 147 (Del.) and 6 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
PCIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.) and PCIT vs., RMG Poly vinyl 396 ITR 5 (Del.). He has submitted that the reasons recorded are vague and no particulars of credit have been mentioned in the reasons. The reasons also did not say if assessment have already been framed under section 143(3). Even the nature of the credit is not mentioned in the reasons. No particulars of accommodation entries have been mentioned. He has relied upon decision of Delhi High Court in the case of Signature Hotels (P) Ltd., 338 ITR 51 (Del.) He has submitted that reassessment is initiated on mere suspicion only. He has referred to page-1 of the paper book filed by the Departmental Representative in which the ACIT of the Investigation Wing has directed to issue notice under section 147/148 of the Income Tax Act, 1961 after recording reasons. He has submitted that all the Investors are assessed to tax and no material found during the course of search have been supplied to the assessee. He has submitted that proceedings are initiated on mere suspicion which is not reason to believe and based on no tangible
7 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. material. He has submitted that reopening of assessment may be quashed.
On the other hand, Learned Departmental Representative relied upon order of the Assessing Officer and referred to information received from Investigation Wing, copy of which, is filed at Page-1 of the paper book of the Department, which is supported by letter of the DIT (Inv.)-II, Wing, New Delhi, Dated 15th March, 2013, which is referred to in the reasons for reopening of the assessment. The Learned Departmental Representative referred to the report of the Investigation Wing in detail and submitted that there was sufficient material available on record to justify the reopening of assessment and that Investigation Wing after detailed enquiry came to know that Jain Group has provided accommodation entries. So, there is application of mind on the part of the Assessing Officer to reopen the assessment. PB-52 is the list of the Investors. The assessee did not disclose all material facts necessary for the assessment. The report of the Investigation Wing is tangible material, therefore, on that basis reopening of the 8 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
assessment is justified. The Learned Departmental Representative however submitted that report of the Investigation Wing was never supplied to the assessee being confidential in nature.
We have considered the rival submissions and perused the material available on record. It is well settled Law that validity of reassessment proceedings is to be determined with reference to the reasons recorded for belief. We, rely upon the decision of the Hon’ble Bombay High Court in the case of Indivest PTE Ltd., vs. Addl. CIT (2013) 350 ITR 120 (Bom.). The assessee has filed copy of the reasons recorded for reopening of assessment at Page-23 of the Paper Book, which reads as under :
“Office of the Assistant Commissioner of Income-tax, Circle, Rohtak.
1. Name and address of the M/s. KFA Foods (India) assessee Ltd., 2. Status Pvt. Ltd., Company 3. Assessment Year 2007-2008. Reasons in brief for reopening the case under section 147 of the Income-tax Act, 1961 :
9 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
In this case, information was received from DIT (Inv.)-II, New Delhi, vide letter F.No.DIT (Inv.)-II under section 148/2012-13 dated 15.03.2013. On the basis of search in the cases of Shri Surendra Kumar Jain group of cases (entry operator) and further enquiries the DDIT (Inv.) has suggested the notice under section 148 in following cases for the A.Y. 2007-08 is required to be issued to bring to tax the undisclosed income regarding the accommodation entries obtained by the companies.
2. After going through entries it is revealed that M/s. KLA Foods (India) Ltd., who is assessed with this Circle, has availed the following accommodation book entries :-
Sr.No. Name of the Company PAN F.Y. 2006-07 Amount (Rs.) 1. M/s. KLA Foods AACCK8299G 1,50,00,000/- (India) Ltd., Therefore, I have reason to believe that income to the tune of Rs.1,50,00,000/- has escaped assessment.
Issue Notice under section 148 of the Income-tax Act, 1961 for the assessment year 2007-2008.
10 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
Dated : 25th March, 2013 Sd/- S. Dayal Assistant Commissioner of Income-tax, Rohtak Circle, Rohtak”.
5.1. The relevant provision of Section 147 of the Income Tax Act provides as under :
“147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any 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 section and in sections 148 to 153 referred to as the relevant assessment year):
11 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
“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 the 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.”
5.2. In the aforesaid reasons, the Assessing Officer on the basis of the report of Investigation Wing recorded that the enquiries conducted by Investigation Wing suggested notice under section 148 is required to be issued. Similarly, Learned Counsel for the Assessee referred to page-1 of the Department Paper Book, in which, ACIT has required the Assessing Officer to issue notice under section 148 of the 12 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
Income Tax Act after recording reasons. These facts clearly suggested that the Assessing Officer merely acted on the advice of the Investigation Wing. Though the report of the Investigation Wing is tangible material, but, Assessing Officer did not mention any details or particulars of credits in the reasons as to how he came to the conclusion that there is escapement of income in this case. No details as to what information was received have been mentioned in the reasons. In what manner share capital/premium have been received have not been mentioned in the reasons. No details of accommodation entry and accommodation provider have been mentioned in the reasons. It is not mentioned in the reasons, if there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment under section 147/148 of the Income Tax Act. It is an admitted fact that assessee prior to the reopening of assessment has already been assessed for the same year i.e., 2007-2008 under section 143(3) of the I.T. Act, 1961 vide order dated 8th December, 2009. Copy of the assessment order is filed Page-44 of the Paper Book in 13 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. which it is mentioned that assessee filed original return of income on 8th November, 2007. The Assessing Officer examined the issue of share capital and charging of share premium and ultimately assessed the income at NET LOSS, without making any addition on account of share capital/share premium. The Assessing Officer did not mention in the reasons if assessee filed original return of income and whether assessee has been assessed under section 143(3) of the Income Tax Act. The Investigation Wing has required the Assessing Officer to reopen the assessment. It, therefore, appears that re-assessment proceedings are initiated on mere suspicion and that reason to suspect is not the same thing as “reason to believe”. The A.O. recorded vague reasons based on no evidence at the dictate of Investigation Wing only. Thus, there is totally non- application of mind on the part of the Assessing Officer to record reasons for reopening of the assessment. The Assessing Officer did not mention any material facts in the reasons, therefore, reopening of assessment is clearly illegal and bad in law. In the case of Signature Hotels P. Ltd., vs.,
14 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
Income Tax Officer And Another (2011) 338 ITR 51 (Del.) the Hon’ble Delhi High Court held as under :
“Held allowing the petition, that the reassessment proceedings were initiated on the basis of information received from the Director of Income- tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not 15 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed”.
5.3. The Hon’ble Madras High Court in the case of Sri Sakthi Textiles Ltd., vs. JCIT and Another (2012) 340 ITR 144 (Mad.) held that “reasons for notice must specify that there was failure to disclose material facts necessary for assessment.”
5.4. The Hon’ble Madras High Court in the case of Karti P. Chidambaram & Others vs. ACIT (2018) 402 ITR 488 (Mad.) observed that “When original assessment passed after scrutiny, granting exemption - Notice after four years on the ground that claim for exemption was not examined
16 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. properly - No failure to disclose material facts necessary for assessment.”
5.5. The Hon’ble Delhi High Court in the case of Avtec Ltd., vs. DCIT (2017) 395 ITR 434 (Del.) noted that “In case of notice after four years, the conditions precedent for reassessment is that in what manner assessee failed to disclose material facts fully and fresh or tangible material must be disclosed in reasons.”
5.6. Considering the facts of the case, in the light of reasons recorded above and discussion, it is clear that the Assessing Officer did not mention any material facts in the reasons. The Assessing Officer did not mention that assessee was already assessed under section 143(3) in the original assessment, in which, Assessing Officer has already examined the issue of share capital/premium and what was the material produced before him regarding accommodation entry. The Assessing Officer did not record as to who has provided accommodation entry to assessee in the reasons. Thus, there was no failure on the part of the assessee to 17 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. disclose fully and truly all material facts necessary for assessment under section 147 of the Income Tax Act, 1961.
5.7. In view of the above, it is clear that in the instant case the Assessing Officer reopened the assessment after 04 years from the end of the assessment year and Assessing Officer has failed to specify if there is any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment under section 147 of the Income Tax Act, therefore, conditions of Section 147 of the Income Tax Act are not satisfied in this case. Further, the reasons are vague and do not disclose any incriminating material against the assessee. The decisions relied upon by Learned Counsel for the Assessee squarely apply to facts of case. Therefore, reopening of the assessment is wholly unjustified in the matter. We are, therefore, of the view that assumption of jurisdiction under section 147/148 of the Income Tax Act is clearly illegal and bad in Law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the Income Tax Act, 1961. Resultantly, all additions stand deleted. The 18 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. cross-objections of the assessee is allowed. In view of these findings, there is no need to decide the Departmental Appeal on merits, in which, Ld. CIT(A) has already deleted the addition.
In the result, Cross Objection of the assessee is allowed and Departmental Appeal is dismissed.
ITA.No.2845/Del./2015 & C.O.No.372/Del./2015 Param Exim Limited – Assessment Year – 2007-2008.
In this case also Assessing Officer received information from DIT (Inv.)-II, New Delhi vide letter dated 15th March, 2013 that assessee has taken accommodation entry of Rs.3.20 crores in the shape of share capital from various companies. The Assessing Officer issued notice under section 148 of the Income-Tax Act on 28th March, 2013. The Assessing Officer examined the issue with reference to 08 Investors made investments in assessee company and made the addition of Rs.3.20 crores against the assessee. The Ld. CIT(A) on the same reasoning as given
19 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi. in the case of M/s. KLF Food (India) Ltd., deleted the addition on merit.
The Revenue is in appeal challenging the deletion of addition of Rs.3.20 crores and Assessee is in cross objection challenging the reopening of the assessment in the matter. Learned Representatives of both the parties submitted that the issue is same as have been considered in the case of M/s. KLF Food (India) Ltd., except that in this case the return was processed under section 143(1) of the Income Tax Act, 1961.
Learned Counsel for the Assessee referred to reasons recorded for reopening of assessment, copy of which is filed at Page-20 of the paper book which reads as under :
“Office of the Assistant Commissioner of Income-tax, Circle, Rohtak.
Name and address of the M/s. Param Exim Ltd., assessee 2. Status Pvt. Ltd., Company 3. Assessment Year 2007-2008. Reasons in brief for reopening the case under section 147 of the Income-tax Act, 1961 :
20 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.
In this case, information was received from DIT (Inv.)-II, New Delhi, vide letter F.No.DIT (Inv.)-II under section 148/2012-13 dated 15.03.2013. On the basis of search in the cases of Shri Surendra Kumar Jain group of cases (entry operator) and further enquiries the DDIT (Inv.) has suggested the notice under section 148 in following cases for the A.Y. 2007-08 is required to be issued to bring to tax the undisclosed income regarding the accommodation entries obtained by the companies.
2. After going through entries it is revealed that M/s. Param Exim Ltd., who is assessed with this Circle, has availed the following accommodation book entries :-
Sr.No. Name of the Company PAN F.Y. 2007-08 Amount (Rs.) 1. M/s. Param Exim AACCP9669B 3,20,00,000/- Ltd., Therefore, I have reason to believe that income to the tune of Rs.3,20,00,000/- has escaped assessment.
Issue Notice under section 148 of the Income-tax Act, 1961 for the assessment year 2007-2008.
21 ITA.No.2846/D/2015 & CO.No.333/D/2015 M/s. KLA Food (India) Ltd., New Delhi ITA.No.2845/D/2015 & CO.No.372/D/2015 M/s. Param Exim Ltd., New Delhi.