MARKS CONSOLIDATED BUSINESS LTD.,,NEW DELHI vs. ITO, WARD-6(2), NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI

BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER

ITA No. 7312/Del/2018 Assessment Year : 2003-04 MARKS CONSOLIDATED Vs. ITO, WARD 6(2), BUSINESS LTD., NEW DELHI 1497, BHARDWAJ BHAWAN, WAZIR NAGAR, KOTLA , NEW DELHI (PAN: AAACM8113H)

(Appellant) (Respondent)

Assessee by : Sh. Mushtaq Ahmed Mir, CA Department by : Ms. Rinku Singh, Sr. DR.

ORDER PER H.S. SIDHU, JM This appeal filed by the assessee is directed against the order passed

by the Ld. CIT(A)-6, Delhi on 09.10.2017 in relation to the assessment year

2003-04 on the following grounds:-

144 read with section 147 of the Income Tax Act, 1961 which

is bad in law and against the facts and circumstances of the

case. The order therefore deserves to be quashed.

of the Income Tax Act, 1961 as reasons recorded and

satisfaction accorded is not within the meaning of section

151 of the Income Tax Act, 1961. The order therefore is

liable to be quashed.

93,45,714/- made by the AO by erroneously invoking

provisions of section 68 of the Income Tax Act, 1961.

any of the grounds of appeal at the time of hearing.

from the Director of Income Tax (Investigation), New Delhi that the

assessee has received an amount of Rs. 1,53,11,000/- from various parties.

On perusal of the bank statement, there is a cash deposit in the bank on the

preceding day of the day of entry given. Hence, it was presumed that the

assessee has given cash to the parties and has taken the cheques after

paying commission at prevailing rates i.e. from 1 to 2% of amount involved.

Hence, the assessee has given a commission of Rs. 1,38,114/- @ 1.5% of

amount involved. hence the assessee has given a commission of Rs.

1,38,114/- @ 1.5% of the amount involved in the entries taken from the

parties. Therefore, an amount of Rs. 93,45,714/- )Rs. 92,07,600 + Rs.

1,38,114) was considered to be the undisclosed income of the assessee

which was added back to the income of the assessee u/s. 68 of the Act and

AO completed the assessment at Rs. 94,45,720/- vided his order dated

27.12.2010 passed u/s. 147/144 of the Income Tax Act, 1961.

assessee appealed before the Ld. CIT(A) who vide his impugned order dated

9.10.2017 has affirmed the action of the AO and dismissed the appeal of the

assessee.

delay in filing the present appeal of 283 days for which the Assessee has

filed the Application for condonation of delay alongwith its affidavit. In the

said application, the assessee has submitted that the delay was occurred

due to the serious injury that the Director of the assessee suffered in his

leg. The Director was operated and was advised 14 weeks completed bed

rest followed by rehabilitation, which last till days. It was further stated in

the application that assessee is a 71 years old who got operated and his

rehabilitation and recovery took longer and soon after somehow recovery of

the assessee, the assessee has filed the present appeal before the Tribunal.

Alongwith this application, the assessee has also attached the Medical

/Sickness Certificate. In support of his contention, he relied upon the

decision of the Hon’ble Supreme Court of India in the case of N.

Balakrishnan vs. M. Krishnamurthy, AIR 1998 SC 3222; Shakuntala Devi

Jain vs. Kuntal Kumari AIR 1969 SC 575; State of West Bengal vs. the 3

Administrator, Howrah Muni Capacity, AIR 1972 SC 749 and the ITAT

Mumbai Bench decision in the case of Phoenix Mills Ltd. decided in ITA No.

6240/M/2007 in which delay of 1357 days has been condoned. In view of

the above, he requested to condone the delay of 283 days.

his order on 9.10.2017 and communicated to the assessee on 30.10.2017.

The assessee filed appeal on 8.10.2018 after a delay of 283 days. The

explanation submitted by the assessee in this regard is not satisfactory in

view of following submissions:-

i) Order of CIT(A) was received on 30.10.2007 and hence

the time limit for filing appeal to the ITAT, as per section

253(3) was till 31.12.2017. The assessee did not file

appeal during this period and there is no explanation for

this delay.

ii) The assessee has furnished a medical certificate for

explaining this delay. This certificate shows that the

assessee was operated on 18.1.2018 i.e. well after the

time for filing appeal had expired.

iii) Further, as per the same certificate, the assessee was

discharged on 21.1.2018 and advised bed rest of 14

weeks, which would have expired on 15.5.2018. Even

then the assessee did not file appeal till 8.10.2018.

Therefore, even the medical certificate submitted by the

assesse does not explain the inordinate delay in filing the

appeal. In this regard, he relied upon the following case

laws:-

a) M/s Kolte Patil Developers Ltd. vs. DCIT (2016

TIOL 3158 HC-Mum-IT) wherein Hon’ble Bombay

High Court held that when there is no explanation

given for delay in filing of appeal, such delay in

filing cannot be condoned.

b) M/s Kolte Patil Developers Ltd. vs. DCIT (2017

TIOL 185-SC-IT). On appeal, the Supreme Court

condoned the delay and dismissed the petition by

upholding the decision of High Court on the issue

of condonation of delay.

HC)P&H-IT) Hon’ble Bombay High Court held that

when the explanation submitted by the assessee

does not satisfy the test of ‘sufficient cause’ as

required u/s. 5 of the Limitation Act, 1963, the delay

cannot be condoned.

Accordingly, she requested to dismiss the appeal on this ground.

perusing the medical records as well as the application for condonation and

its affidavit and the case laws cited by both the parties, we are of the

considered view that in the interest of justice as well as on the prima facie

of the merits of the case, there is a plausible reason with evidence for

condoning the delay of 283 days, hence, we condone the delay in dispute

and admit the appeal for adjudication and proceeded to decide the ground

no. 1 and 2, argued by the Ld. AR for the assessee. The case laws cited by

the Ld. AR are applicable being on identical facts and circumstances.

However, the case laws cited by the Ld. DR are distinguished on facts of the

present case.

Book containing pages 1 to 55, especially the page no. 12 in which Addl.

CIT (Range-6), New Delhi has granted the approval in a mechanical

manner, for issuing of notice u/s. 148 of the Income Tax Act, 1961, hence,

reasons recorded and satisfaction accorded is not within the meaning of

section 151 of the I.T. Act, 1961 and therefore, the reassessment needs to

be quashed. In view of above, he requested to quash the reassessment. To

support his contention, Ld. Counsel of the assessee has filed the copy of the

decision dated 11.1.2017 of the Hon’ble Delhi High Court in the case of Pr.

CIT-06 vs. M/s NC Cables Ltd. by which the issues raised by the assessee

in the present appeal are squarely covered.

and stated that record were sent for approval to the Addl. CIT on 16.3.2010

and approval was given on 19.3.2010, which was shows that the Range

head had ample time to look into the records and he has applied his mind for

satisfaction before giving approval. Hence, the reasons recorded and

satisfaction accorded is within the meaning of section 151 of the Act and

need not to be quashed.

laws and the relevant documents available on record especially the

assessment order, impugned order, reasons recorded and the as well as the

Paper Book filed by the Assessee containing pages 1 to 55 in which he has

attached the copy of written submissions; copy of reasons and satisfaction

recorded; judgment of the Hon’ble Delhi High Court in the case of NC Cables

Ltd. vs. ITO; in the case of Sarthak Securities Co. Pvt. Ltd. vs. ITO; CIT vs.

Gangeshwari Metals (P) Ltd.; CIT vs. Divine Leasing and Finance Ltd. and

CIT vs. Lovely Exports Private Limited 216 CTR 195 (SC) and the ITAT

decision dated 25.2.2015 in the case of ITO vs. Direct Sales Pvt. Ltd. ITA

No. 3545/Del/2010 (AY 2002-03) and CO No. 138/Del/2010 (AY 2002-03) in

the case of Direct Sales Pvt. Ltd. vs. ITO. We note that in this case, Reasons

for the belief that income has escaped assessment are that information has 7

been received from the Director of Income Tax, (Investigation), New Delhi

that the assessee has received an amount of Rs. 1,53,11,000/- from

various parties as follows:-

PATE BANK BENHICIARY VALUE BANK NAM1-: BHNI'JCIARY ON FROM OF BENIFIOARY'S BRANCH OF A/C NO. ENTRY BANK WHICH WHICH NAME ENTRY ENTRY GIVING GIVING BRANCH INSTRUMENT NO. NAME OE ACCOUNT BANK ACCOUNJ ENTRY ENTRY 1AKEN BY WHICH ENTRY HOLDER OF ENTRY TAKEN TAKEN GIVING ACCOUNT GIVEN HDD V 21-Jan-03 XDINANATH K Ci MARC 7(XXX)0 SBP DG 50103 MARKS OONSOKHM LUHARIWAI. SPT. B (I) BUSINESS LIB MILL HDEC MARKS / DINANATH K G MARC 700000 21-Jan-03 SBP DG 50103 CONSOLIDATED LUHARIWAL SP1. BUSINESS L I D MILL HDEC BANK ; SWL1U S TONE PV MARKS K G MARG 7Q000G 21-Jan-03 SBP DG 50106 CONSOLIDATED BUSINESS L I D HDEC BANK SWE1U S i ONE PV MARKS K G MARG 700000| 21-Jan-03 SBP DG 50106 CONSOLIDATED BUSINESS LTD HDEC MARKS yC'HIN 1PURNI K<J MARG 70CXX)0 27-Jan-03 CREDITS SBP DG 50058 CONSOLIDATED BUSINESS LTD HDFC CHIN I PURNI MARKS CREDITS K G MARG 700000 2 7-Jan-03 SBP DG 50058 CONSOLIDATED BUSINESS LTD HDFC PARTICULAR MARKS MANAGE K G MARG 70IXXX) 27-Jan-03 ' SBP DG 50050 CONSOLIDATED BUSINESS LTD TIN I .EASE P. I. ID. HDI-C PARTICULAR MARKS MANAGE K G MARG 7(XXXX) 27-Jan-03 SBP DG 50050 CONSOLIDATED BUSINESS L I D 1-INI.EASE P. LTD. HDFC II-Feb- MARKS CONSOL1D i/ NISH ANT T IN VES T 03 A1 ED BUSINESS LED P. L I D. K G MARG <>00000 SBP DG 50080' HDFC MARKS 11 -Feb NISH ANT TIN VES T P. L TD. K G MARG lXXXXX) SBP DG 50080 03 CONSOLIDATED BUSINESS 1 ID ^SHRIT. MARKS N DELHI 701050 I3-Jan-03 SBP DG CONSOLIDATED ' GUP l iSHWAR MKI. BUSINESS LTD P.I/TI). 50099 I SHREE 50099 MARKS N DELHI 701050 r 3-Jan-03 SBP DG CONSOLIDATED GUP I ISHWAR MK T. BUSINESS L I D P. L I D. MARKS NISH ANT TIN VIST P. LTD. PO-ISS 701050 13-Jan 03 SBP DG 50080 CONSOLIDATED BUSINESS L ID , MARKS NISH ANT I IN VIST P. LID. PO-LSS 701050 I3-Jan-03 SBP 1X1 50080 CONSOLIDATED BUSINESS LID HDI-C BANK SAURABH JAJLAXMI MARKS CONSOLII WEED BUSNIESS LTI) PEI KOCHEM(P) COOP 40(XXX) 5-Ocr-02 Fatehpuri 3381 EAST PATEL LTD BANK NAGAR 2/10 " 258430| HDEC BANK JAJLAXMI MARKS EAST PATEL SAURABH PL ”t?NAGAR 2/10 TROCHLM(P) TED COOP 400000 5-Oct-02 - Fatehpuri 258430 ) CONSOLIDATED BUSNIESS LTD BANK 3381 HDFC BANK JAITAXM1 EAST PATEL ACOOT INDIA i PVT. MARES NAGAR 2/10 LTD 3(XXXX) 5I647<> 5-Ocr-02 Fatehpuri 3365 COOP CONSOLIDATED BUSNIESS LTD BANK DD SBI \ SHAKUN TLA , DEVI JAII.AXM1 MARES NEW DELHI 400680 164384 3-Oct-02 I Fatehpuri) 5807 COOP CONSOLIDATED BUSNIESS I. ID BANK DDSBI vSHAKUNTI .A JAJLAXMI MARES DT;VI COOP NEW DELHI -KXI680 164384 • 3-Oct-O 2 Fatehpuri 5807 CONSOLIDA.1 ID BUSNIESS L ID BANK DDSBI SHAKUN TLA DLVJ JAJLAXMI MARES CONSOLIDA LED BUSNIESS LTD COOP NEW-DELHI 40068X) 164384 3-0 ci -02 Fatehpuri 5807 BANK DDSBI SHAKUN 11.A DEVI JA1LAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 Fatehpuri 5807 CONSOLIDATED BUSNIESS L I D BANK

DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 I Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 I Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 I- Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 I Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK DD SB] SHAKUNI LA DEVI JAJLAXMI MARES COOP NEW DELHI 400680 164384 3-Oct-02 Fatehpuri 5807 CONSOLIDATE, BUSNIESS l/ID BANK

The abovesaid instruments are in the nature of accommodation entry, which the assessee has taken after paying unaccounted cash to the accommodation entry giver, who is a known entry operator as per the report of the Investigation Wing. In view of these facts, the alleged transaction is not the bonafide one. Therefore, I have reason to believe that an Income of Rs. 1,53,11,000/- has escaped assessment in the assessment year 2003-04 due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment so far as this amount is concerned. Therefore, this case is fit for issuing notice u/s 148 of the Income Tax Act, 1961. In this case the assessment was made U/s 143(1), not U/s 143(3) of the I.T. Act, 1961. I am therefore, satisfied that the said income, on account of accommodation entry worth Rs. 1,53,11,000/- received by the assessee has escaped assessment and accordingly after recording the above said reasons as laid down under the provisions of Section 148(2) of the Income Tax Act, 1961 notice u/s 148 is being issued. Sd/- (H.C. BANTWAL) INCOME TAX OFFICER, WARD-6(2), NEW DELHI Approved.

Sd/- 19/3 Addl. CIT Range-6

22.3.2010 Notice u/s. 148 issued by Speed Post No. ED 966225783 11N

dated 22.3.2010.

Sd/- INCOME TAX OFFICER, WARD-6(2), NEW DELHI

After perusing the aforesaid reasons recorded, we find that the 9.1

satisfaction recorded and approval granted by the Addl. CIT,

Range-6/Competent Authority is a mechanical and action has been taken

mechanically because on perusing the reasons recorded, which

demonstrates that Addl. CIT Range-6 has written “Approved” which

establishes that the authority has not recorded proper satisfaction/approval,

before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has

mechanically issued notice u/s. 148 of the Act, on the basis of information

allegedly received by him from the DIT (Inv.), New Delhi. Keeping in view

of the facts and circumstances of the present case and the case law

applicable in the case of the assessee, we are of the considered view that

the reopening in the case of the assessee for the asstt. Year in dispute is bad

in law and deserves to be quashed. Our aforesaid view is fortified by the

following decisions:-

(A) Hon’ble Delhi High Court in the case of Pr. CIT vs. M/s NC Cables Ltd. in ITA No. 335/2015 has held as under:-

case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer, For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed.”

(B). Hon’ble High Court of Madhya Pradesh in the case of

CIT vs. S. Goyanka Lime & Chemicals Ltd. reported in

(2015) 56 taxmann.com 390 (MP) has held as under:-

“7. We have considered the rival contentions and we find that

while according sanction, the Joint Commissioner, Income Tax

has only recorded so “Yes, I am Satisfied”. In the case of ARjun

Singh vs. Asstt. DIT (2000) 246 ITR 363 (MP), the same

question has been considered by a Coordinate Bench of this

Court and the following principles are laid down:-

“The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction as he merely wrote on the format “Yes, I am satisfied” which indicates as if he was to sign only on the dotted line. Even otherwise also, the exercise is shown to have been performed in less than 24 hours of time which also goes to indicate that the Commisisoner did not apply his mind at all while granting sanction. The satisfaction has to be with objectivity on objective material 11

(C.) Hon’ble Supreme Court of India in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) in the Head Notes has held that “Section 151, read with section 148 of Income Tax Act, 1961 – Income escaping assessment – Sanction for issue of notice (Recording of satisfaction) – High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, Yes (in favour of the Assessee).” 9.2 In the background of the aforesaid discussions and respectfully

following the precedents, as aforesaid, we are of the considered view that

issue of notice u/s. 148 of the I.T. Act, 1961 is not in accordance with

section 151 of the I.T. Act, 1961, hence, the reopening in the case of the

assessee for the asstt. Year in dispute is bad in law and therefore, the same

is hereby quashed. Since we have already quashed the re-assessment, the

other grounds have become academic and are therefore not adjudicated

upon and accordingly, the assessee’s appeal is allowed.

Order pronounced on 11-01-2019.

Sd/- Sd/-

[PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Dated: 11-01-2019 SRBhatnagar Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.