ACIT, NEW DELHI vs. SH. SURESH KUMAR GUPTA, NEW DELHI

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F”: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA No.3877 to 3880/Del/2015 (Assessment Year: 2004-05 to 2007-08) Suresh Kumar Gupta, Vs. ACIT, 308, Arunachal Building, Circle-22, New Delhi 19, Barakhamba Road, New Delhi PAN: AAHPG9563B (Appellant) (Respondent)

ITA No.4947 to 4950/Del/2015 (Assessment Year: 2004-05 to 2007-08) ACIT, Vs. Suresh Kumar Gupta, Circle-22, New Delhi 308, Arunachal Building, 19, Barakhamba Road, New Delhi PAN: AAHPG9563B (Appellant) (Respondent)

Assessee by : Shri R.S. Singhvi, CA Revenue by: Shri Sanjay Goel, CIT DR Date of Hearing 18/12/2018 Date of pronouncement 21/12/2018

O R D E R PER BENCH 1. These are the Bunch of 8 appeals filed by the assessee and the revenue for assessment year 2004 – 05 to 2007 -08 against the order of the ld Commissioner Of Income Tax (Appeals) – 18, New Delhi dated 31/3/2015 for all the assessment years. 2. The assessee has raised the following grounds of appeal in ITA NO. 3877/Del/2015 for the Assessment Year 2004-05:- “1. That there is no factual or legal basis in assuming jurisdiction u/s 148 as there is no case of any income escaping assessment or any tangible material and recording of proper satisfaction in the context of provisions of section 148. 2(i) That CIT(A) was not justified in upholding the reopening u/s 148 in absence of valid sanction u/s 151(2) of the Income Tax Act. Page | 1

(ii) That having accepted position that approval was taken from Commissioner of Income Tax whereas it was required to be taken from Joint/ Addl. CIT, there is no case of valid approval as per provisions of section 151(2) and settled legal principles. 3. That lower authorities have not even considered the correct figure of net premium as per details extracted from laptop.”

deposits on the ground that the Hon’ble Settlement Commission has held in the case of assessee for the A.Y. 2008-09 that the assessee is an entry operator completely ignoring the fact that the above finding was given by the Hon’ble Settlement Commission only for the A.Y. 2008-09 and not for the A.Y. 2006-07 and the principle of res judicata is not applicable in the income tax proceeding. 2 That the Ld. CIT(A) erred in deleting the addition of Rs. 1,13,08,52,495/- (incorrectly mentioned as Rs.79,12,95,151/- in the appellate order) without appreciating the fact that the onus of establishing the identity and creditworthiness of creditors and genuineness of transactions was on the assessee as per the provision of section 68 of the Income Tax Act irrespective of the fact whether the assessee is an entry operator” or not. 3. That the Ld. CIT(A) erred in giving the finding that the AO has made the addition Rs. 1,13,08,52,495/- (incorrectly mentioned as Rs.79,12,95,151/- in the appellate order) in disregard of the reasons recorded by him where he had mentioned the premium charged on accommodation entries is legally not tenable as the AO can assess any other income chargeable to tax which comes to his notice subsequently in the course of the proceeding as per the provision of section 147. 4. That the Ld. CIT(A) erred in giving the finding that the AO has made the addition Rs. 1,13,08,52,495/- (incorrectly mentioned as Rs.79,12,95,151/- in the appellate order) disregarding the order of the Settlement Commission passed in the case of assessee for the A.Y. 2006-07 as no such order of Settlement Commission for the A.Y. 2006- 07 has been passed. 5. That the Ld. CIT(A) erred in directing the AO to verify the details of premium charged and various claim of expenses and allow the expenses in respect of the addition of Rs.3,39,31,612/- (incorrectly mentioned as Rs.98,16,153/- in the appellate order) made by the AO on account of premium/commission received by the assessee on providing accommodation entries which tantamount to set-aside of the order which the CIT(A) has no power to make w.e.f. 01.06.2001. 6. That the grounds of appeal are without prejudice to each other. 7. The order of the CIT(A) is erroneous and is not tenable on facts and in law.” 7. The revenue has raised the following grounds of appeal in ITA NO. 4950/Del/2015 for the Assessment Year 2007-08:- “1. That the Ld. CIT(A) erred in deleting the addition of Rs. 1,23,82,07,306/- (incorrectly mentioned as Rs.79,12,95,151/- in the appellate order) made by the AO on account of unexplained cash deposits on the ground that the Hon’ble Settlement Commission has held in the case of assessee for the A.Y. 2008-09 that the assessee is an entry operator completely ignoring the fact that the above finding was given by the Hon’ble Settlement Commission only for the A.Y. 2008-09 and not for the A.Y. 2006-07 and the principle of res judicata is not applicable in the income tax proceeding. Page | 4

section 143 (3) read with section 148 of the income tax act, where the total income of the assessee was determined at INR 80 1561617/–. The learned AO made an addition of INR 7 91295151/– on account of cash deposited in the various bank account under section 68 of the income tax act. A further addition of INR 9 816153/– was also made on account of the premium received by the assessee during the year. Such assessment order was passed on 30/12/2011. 11. The above order was challenged by the assessee before the Commissioner of income tax appeals. The assessee challenged the same on the ground of jurisdiction under section 148 of the income tax act, as well as approval under section 151 of the income tax act as well as on the quantum. The learned CIT – A, upheld the action under section 148 of the income tax act vide para number 2.3 of his order. With respect to the objection to the approval of the additional Commissioner of income tax under section 151 (1) of the act, He further held that though the approval of the additional Commissioner was not taken under section 151 (1) of the act but of CIT (Central), circle –III, New Delhi is of no relevance of significance. He further stated that even though the approval is required to be obtained from additional Commissioner but the approval obtained from the Commissioner will not prejudice the case of the revenue as the existence of approval is not in dispute. Therefore, he also dismissed the ground for approval granted by the Commissioner of income tax instead of additional Commissioner of income tax. Accordingly, he held that reopening of the case, as well as the approval is in order. On the merits of the case, He deleted the addition of INR 7 91295151/– holding that various entries through conduit entities are part of accommodation entries particularly when the assessing officer himself has recorded the reasons for undisclosed income only in respect of premium charged for providing this accommodation entries. With respect to the premium charged (commission earned), He held that there is a merit in the legal objection of the appellant that the details of premium charged have been taken from the laptop of the assessee impounded during the survey operations and the benefit of various expenses as per the same laptop should be considered while working out the undisclosed income. He further referred to a chart placed on record by the appellant showing various

expenses incurred. He therefore directed the learned AO to verify the details of premium charged. In various claim of expenses and to recompute the undisclosed income. 12. Aggrieved by the order of the learned CIT – A, the assessee has challenged the orders for all these years stating that the approval has been granted by the learned Commissioner of income tax instead of additional Commissioner of income tax and therefore the orders passed are unsustainable in law. Further, the revenue is aggrieved with the direction of the learned CIT – A, on deleting the addition of cash deposit in the bank account and further the direction to the assessing officer to compute the commission earned by the assessee after granting deduction of the expenses. 13. Now we 1st come to the appeal of the assessee where the assessee has challenged by ground number 1, the reopening of the assessment and recording of the proper satisfaction. The ground number 2 is with respect to the reopening under section 148 is not justified in view of absence of valid sanction under section 151 (2) of the income tax act.The learned authorised representative submitted a paper book stating that the reasons recorded are placed at page number 1 – 4 of the paper book where as the copy of the letter communicating approval under section 151 of the income tax act is placed at page number 5 of the paper book. It was submitted that the sanction for the approval has been granted by the Commissioner of income tax (Central) –III, New Delhi vide letter dated 19/8/2010 for assessment year 2004 – 05 to 2007-08 where the original return filed was accepted under section 143 (1) of the act. He further referred to para number 2.4 of the assessment order and stated that notice under section 148 of the income tax act was issued on 25/8/2010 to the assessee after obtaining approval under section 151 (1) of the act from CIT on 19/8/2010. He further referred to the provisions of section 151 of the income tax act prevailing as on that date and submitted that where the assessment under section 143 (3) or section 147 has been made for the relevant assessment year, no notice be issued under section 148 by the assessing officer who is below the rank of assistant Commissioner of deputy Commissioner, unless the joint Commissioner is satisfied on the reasons recorded by such assessing officer that it is a fit case for the issue of such notice. He further

stated that the after the expiry of 4 years from the end of the relevant assessment year, no such notice shall be issued unless the principal Commissioner chief commissioner or principal Commissioner or commissioner satisfied, on the reasons recorded by the assessing officer aforesaid, that it is a fit case for the issue of such notice. He further stated that the learned assessing officer himself has mentioned in paragraph number 2 of the order that assessment under section 2004 – 05, 2005 – 06, 2007 – 08 and 2008 – 09 are under section 143 (1) of the act and only assessment year 2006 – 07 is assessed under section 143 (3) of the act. He therefore submitted that in any other case, the notice shall be issued after the expiry of 4 years from the end of the relevant assessment year unless the joint Commissioner is satisfied on the reasons recorded by such assessing officer that it is a fit case for the issue of such notice. Therefore, he is argument was that that for assessment year 2004 – 05, 2005-06 , 2007 – 08 and 2008 – 09 as the assessment so been completed under section 143 (1) of the act. Sanction should have been obtained from joint Commissioner of income tax, whereas same has been obtained from the Commissioner of income tax. He stated that the only assessment year is 2006 – 07 where the assessment has been made under section 143 (3) of the act. In that case to the notice has been issued within 4 years from the end of the assessment year and therefore the sanction should have also been obtained from the joint Commissioner. Therefore, he submitted that sanction obtained by the learned assessing officer is incorrect. He further relied upon the decision of the honourable Delhi High Court in case of CIT – 8 vs SoyuZ industrial resources Ltd 58 taxmann.com 336 (Delhi) for the above proposition. 14. With respect to the appeal of the revenue is submitted that for assessment year 2008 – 09 on identical facts and circumstances of the various companies operated by Sri SK Gupta, the coordinate bench has held that when there is an order of settlement commission as well as additional Commissioner of income tax under section 144A, has held that Sri. SK Gupta was providing accommodation entries, he used various companies has continued for providing accommodation entries, cash was received through mediators from the persons who wanted to avail the

accommodation entries, such case was deposited in the bank account of the conduit companies and thereafter, cheque of the similar amount was being issued to the beneficiaries, the persons who wanted to avail the accommodation entry bracket or within a day or so. The assessing officer himself in the assessment order has accepted these facts. Considering the totality of the facts and logical consequences of the order of the settlement commission as well as additional CIT under section 144A of the act, The coordinate bench has held that the addition under section 68 cannot be made in the case of the conduit companies. Such addition was deleted. He therefore submitted that even otherwise, on the merits of the case, the issue is solely covered in favour of the assessee.

Commissioner or Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself."

“2. The brief facts of the case are that for Assessment Year (AY) 2002-03, the assessee had filed its returns in a normal course on 16.10.2002. The assessment was framed under Section 143(1). Based upon information received by the Assessing Officer (AO), Page | 11

a satisfaction note was recorded sometime in early 2009 and a notice was issued in 2009 i.e. four years beyond the end of the assessment year, under proviso to Section 147(1). The re-assessment proceedings were completed on 31.12.2009. The assessee in its appeal urged that the notice under Section 147 was unsustainable for the reason it was not approved by the competent authority in accordance with Section 151 of the Act. This argument ultimately found favour with the ITAT which, inter alia, held as follows:—

'8. We have heard rival submission and perused the material on record. In the instant case admittedly, neither assessment u/s 143 (3) nor u/s 147 was completed prior to issuance of notice u/s 148 of the Act. The notice u/s 148 of the Act was issued on 25.3.2009 i.e. four years beyond the end of the assessment year. Therefore u/s 151 (2) of the Act is applicable to the facts of instant case Section 151(2) of the Act read as under :—

"(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice."

8.1. Hence the sanctioning authority as per section 151(2) of the Act for issuance of notice u/s 148 ought to have been the Joint Commissioner of Income Tax. However on perusal of the assessment records which was placed before us, it is clear that the sanction for issuance of notice u/s 148 was granted by the Commissioner of Income Tax. A copy of the reason recorded for reopening the assessment is placed at page 26 of the paper book filed by the assessee on 7.9.2010. The Ld. DR's contention is that assessee did not raise any objection before the AO on this issue. The contention of the Ld. DR is that once the assessee submits to the jurisdiction to the AO then subsequently objection with reference to jurisdiction cannot be raised. The sanction by competent authority, as mentioned in section 151 only can assign proper jurisdiction to the Assessing Officer and if such sanction was not obtained, the Assessing Officer lacked the jurisdiction to complete the reassessment proceedings. When the legislature has specifically assigned jurisdiction to a particular authority under the Act to grant sanction then, if all other conditions are fulfilled, the sanction has to be granted by that very authority. This function cannot be delegated to any other authority. It is the legal duty cast upon that authority to perform the said function. If that authority fails in performing his legal functions and the same is performed by the other authority then it goes to the very root of proper assumption or jurisdiction by the authority which was required to take that sanction. This is a purely legal issue and can be raised at any stage of proceeding.'

"151. Sanction for issue of notice.— (1) In a case where an assessment under sub- section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Assistant Commissioner or Deputy Commissioner, unless the Joint Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice :

Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice.

(2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice."

Commissioner; (ii) In the same fact situation, in case the notice is sought to be issued under Section 147 and the proviso to Section 147(1) i.e. beyond the extended four-year period, the competent authority for prior approval to the proposal would be the Principal Chief Commissioner, or Chief Commissioner or Principal Commissioner or Commissioner; (iii) In case the original assessment is completed "other than" i.e. otherwise than under Section 143(3) or during the course of reassessment proceedings, competent authority would be the Joint Commissioner.

assessing officer are not sustainable. In view of this all four appeals of the assessee are allowed accordingly. 20. As we already allowed the appeal of the assessee on the ground of incorrect sanction obtained by the learned assessing officer holding that the order passed by the learned assessing officer for all these 4 years are not sustainable in law, consequently the appeals of the learned assessing officer are also not sustainable. In view of this, all these 4 appeals of the learned assessing officer are dismissed. 21. Accordingly, appeals of the assessee are allowed and appeals of the learned AO are dismissed. -Sd/- -Sd/- (AMIT SHUKLA) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 21/12/2018 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi