ARUN KUMAR DALMIA HUF,MUMBAI vs. INCOME TAX OFFICER-12(3)(4), MUMBAI

The grounds of appeal filed by the assessee read as under:

The Ld. CIT(A) erred in upholding the action of the Assessing Officer in issuing notice u/s 148 of the Income Tax Act and thereby reopening the assessment. The Appellant contend that on the facts and in the circumstances of the case and in law, the notice issued u/s. 148 of the Act is bad in law and consequently the assessment needs to be quashed.

Briefly stated, the facts of the case are that the assessee filed his return of income for the assessment year (AY) 2006-07 on 16.01.2008 declaring total income of Rs.59,567/-. The return was processed u/s 143(1) of the Act. Thereafter, the Assessing Officer (AO) reopened the assessment by issuing notice u/s 148 dated 28.03.2013. In response to it the assessee submitted vide letter dated 08.10.2013 that the return originally filed on 16.01.2008 be Arun Kumar Dalmia HUF 148 of the Act. In response to the request by the assessee to supply the reasons for re-opening, the AO provided it on 10.01.2014. During the course of reassessment proceedings, the AO observed from the balance sheet of the assessee as on 31.03.2006 that an amount of Rs.8,06,000/- is appearing as loan from M/s Basant Marketing Pvt. Ltd. In response to a query raised by the AO, the assessee filed loan confirmation from M/s Basant Marketing Pvt. Ltd. and ledger copy of the accounts of M/s Basant Marketing Pvt. Ltd. appearing in its books of accounts. The AO observed that the loan is appearing as opening balance. Further, the AO asked the assessee to produce evidence of receipt of loan in earlier year such as Cheque number, date of cheque/demand draft, name and address of the bank and the bank statement evidencing the receipt of loan from M/s Basant Marketing Pvt. Ltd. In response to it, as recorded by the AO the assessee filed the said details. Thereafter, the AO issued notice u/s 133(6) dated 25.02.2014 to M/s Basant Marketing Pvt. Ltd. to furnish a copy of accounts of the assessee appearing in their books of accounts for the financial year 2005-06, copy of bank statement along with balance sheet for the year ended 31.03.2006. However, M/s Basant Marketing Pvt. Ltd. failed to file the details till the date of assessment dated 13.03.2014. Further, the AO observed that the Central Bureau of Investigation (CBI), during the search at the residence of Shri Arun Dalmia and Shri Harsh Dalmia found that 20 dummy companies of Shri Dalmia were engaged in money laundering and tax evasion; one of the 20 such companies was M/s Basant Marketing Pvt. Ltd., who had given loan of Rs.8,06,000/- to the assessee.

Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). In respect of the reopening of assessment u/s 148 of the Act, the Ld. CIT(A) held that (i) nowhere in the statute, it is mentioned that satisfaction of the supervisory authority should also be provided to the assessee ; this is a procedural part of the proceeding and this document is usually in the file of the Joint/Additional Commissioner, who while giving approval for reopening verify all the documents ; now raising the question whether Joint/Additional Commissioner has applied his mind is not warranted at the appellate stage, (ii) reopening done u/s 148 is valid in view of the decision in Sterlite Industries (Delhi) Ltd. v. ACIT 302 ITR 275 (Mad) and AGR Investments Ltd. v. Additional CIT 333 ITR 146 (Delhi), (iii) there was no response by M/s Basant Marketing Pvt. Ltd. to the notice u/s 133(6) issued by the AO. On the basis of the above facts, the Ld. CIT(A) confirmed the addition of Rs.8,06,000/- made by the AO u/s 68 of the Act.

Before us, the Ld. counsel for the assessee files a Paper Book containing documents and certifies that those were filed before the AO and CIT(A). Further, filing a copy of the decision of the ITAT ‘F’ Bench, Mumbai in the case of DCIT v. M/s Udaipur Properties & Finance Ltd. (ITA No. 6449/Mum/2017) for AY 2010-11, it is stated that on similar facts involving M/s Basant Marketing Pvt. Ltd., the Tribunal dismissed the appeal filed by the Revenue against the order of the CIT(A) deleting the addition of Rs.1,86,30,000/-. Thus Arun Kumar Dalmia HUF Rs.8,06,000/- made by the AO u/s 68 of the Act and subsequently confirmed by the Ld. CIT(A) be deleted.

On the other hand, the Ld. Departmental Representative (DR) explains that as per the investigation carried out by CBI, Shri Arun Dalmia through the companies floated by him was engaged in money laundering and tax evasion ; one of the 20 such entities was M/s Basant Marketing Pvt. Ltd., who had given loan of Rs.8,06,000/- to the assessee. Further, it is stated that in response to the notice u/s 133(6) issued by the AO, M/s Basant Marketing Pvt. Ltd. has not furnished any reply. Thus it is stated that the addition of Rs.8,06,000/- made by the AO u/s 68 of the Act which has been confirmed by the Ld. CIT(A) be upheld.

We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. In the instant case, the AO has reopened the assessment originally made u/s 143(1) of the Act. The basis of information is with regard to the amount of Rs.8,06,000/- appearing in the balance sheet as loan from M/s Basant Marketing Pvt. Ltd. The CBI during the course of searches at the residence of Shri Arun Dalmia and Harsh Dalmia found that through 20 dummy companies, they were engaged in money laundering and tax evasion. The Hon’ble Supreme Court in the case of ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 291 ITR 500 (SC) analyzed the distinction between the acceptance of a return u/s 143(1) and an assessment which is framed u/s 143(3) of the Act. In the former case, the AO would have much wider latitude to reopen the assessment. In the case of Avirat Star Homes Venture P. Ltd. v. ITO (2019) 411 Arun Kumar Dalmia HUF ITR 321 (Bom), the Hon’ble Bombay High Court referring to the above decision has held : “that the return had been accepted without scrutiny. The income-tax investigation had subsequently provided information about certain companies having bank accounts with a bank in Kolkata and who were involved in giving accommodation entries of various nature to several beneficiaries including the assessee. The information supplied by the Investigation Wing to the Assessing Officer formed a prima facie basis to enable the Assessing Officer to form a belief of income chargeable to tax having escaped assessment. The Assessing Officer perused the information supplied by the Investigation Wing and having formed the belief that income chargeable to tax had escaped assessment, could not be stated to have acted mechanically. Further, the mere fact that the assessee had asked for certain information from the Assessing Officer, which at this stage was not supplied, would not invalidate the reasons recorded by the Assessing Officer in issuing the notice. The notice was valid.” Thus in the instant case, the AO has rightly issued notice u/s 148 for reopening the return of income processed u/s 143(1) of the Act. Accordingly, the 1st ground of appeal is dismissed.