M/S. INTIME CREDIT & HOLDING PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

Assessee has filed the appeal against the Order dated 17.3.2015 passed by the Ld. Commissioner of Income Tax (Appeals)-15, New Delhi pertaining to assessment year 2001-02 on the following grounds:-

1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining imposition of penalty under section 271(1)(c) of the Income Tax Act amounting to Rs. 2,28, 744/-.

2. That the learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that, there was neither furnishing of any inaccurate particulars of income nor could it be validly held that there was any concealment of income on the facts of the case neither there was any specific. finding by learned AO regarding furnishing of inaccurate particulars or concealment of income and as such, the penalty so levied is unsustainable in law and liable 'to be deleted as such.

2.1 That the learned Commissioner of Income Tax (Appeals) has further erred in law and facts while sustaining the penalty proceedings without there being-a valid satisfaction recorded by learned AO, which is a prerequisite for initiation of penalty under section 271(1)(c) of the Act. Thus, the penalty order passed by learned AO is bad in law and is liable to be deleted as such.

3. That further the learned Commissioner of Income Tax (Appeals) has ignored the basic fact that penalty proceedings are separate and independent proceedings, thus, reliance placed by learned AO and CIT (A) solely on the order of assessment is wholly misconceived, and misplaced in law and as such, the penalty order is liable to be quashed as such.

4. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining the initiation of proceedings under section 147 of the Act and, further completion of assessment under section 143(3)/147 of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act.

That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in overlooking the basic fact that the addition of Rs. 5, 78, 365/- comprising of amounts received from three parties namely M/s Kanodia and M/s Ashish Investments during the impugned assessment year and held to be unexplained cash credit u/s 68 of the Act was wholly unsustainable in law, as the same was received against the repayment of loans and advances given in earlier assessment years to these parties by the appellant company and as such, the allegation of the learned ITO that appellant company had received accommodation entries during the impugned assessment year, has no legs to stand and as such, there was no occasion on the part Of learned ITO to impose penalty under section 271(l)(c) on the appellant company.

4.1 That further the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the fact that the assessee had filed detailed explanation, information and evidences during the assessment proceedings in order to support the loans given and received back, which was all been arbitrarily brushed aside on the basis of mere conjectures, surmises and suspicion and the learned' AO has not even made a whisper of such documents in his order and as such sustenance of penalty so levied is illegal, invalid and untenable and is liable to be deleted.

5. That the learned Commissioner of Income Tax (Appeals) has further erred in law and on facts in sustaining the aforesaid additions in the hands of assessee - appellant, without giving any fair and proper opportunity of being heard to the appellant company, thereby, violating the principles of natural justice.

2. The facts in brief are that on receipt of information from DIT(Inv.) regarding the assessee having received accommodation entries (amounting to Rs. 5,78,365/-) in its bank account from various concerns during the year under consideration, the assessment in the case was completed u/s. 143(3)/147 of the I.T. Act, 1961 on 26.12.2008. Since, during the assessment proceedings, the assessee failed to prove the creditworthiness of parties and genuineness of the transactions, the entire amount received in the bank account was added in the Assessee’s income and total income was computed at Rs. 5,85,261/- Penalty proceedings u/s. 271(1)© were also initiated against the assessee. The assessee challenged such assessment before ld. CIT(A), where the appeal was dismissed. After receiving such order, the AO proceeded to complete the penalty proceedings and statutory notice u/s. 271(1)(c) of the Act was issued to the assessee which remained unattended to. The AO thus held that the assessee had furnished inaccurate particulars of income and was liable for imposition of penalty u/s. 271(1)(c) of the Act. Thus, a minimum penalty of Rs. 2,28,744/- being 100% of the tax sought to be evaded was imposed upon the assessee vide order dated 22.3.2013.

Against the said penalty order, the assessee appealed before the Ld. CIT(A), who vide his impugned order dated 17.3.2015 has dismissed the appeal of the assessee. Aggrieved with the aforesaid impugned order, the assessee is in appeal before the Tribunal.

4. At the time of hearing, Ld. Authorised Representative of the Assessee, stated that in the quantum appeal, the re-assessment has already quashed by the ITAT in (AY 2001-02) vide Order dated 27.07.2015. In this behalf he filed the copy of the Tribunal’s Order dated 27.07.2015 in assessee’s own case and therefore, he requested that penalty in dispute may be deleted.

5. On the other hand, Ld. DR relied upon the orders of the authorities below.

“7. We have heard both the parties and perused the records, specially the impugned order passed by the Ld. First Appellate Authority alongwith documentary evidence filed by the assessee as well as the case laws cited by the Ld. Counsel of the assessee.

At the time of hearing, Ld. Counsel of the assessee only argued on the legal issue mentioned in ground no. 2 reproduced above. To adjudicate the ground raised by the assessee, we have perused the reasons recorded u/s. 148(2) for issue of Notice u/s. 148(1) of the I.T. Act, 1961, which the assessee has attached at Page No. 14 of the Paper Book which is reproduced as under:-

“1. The assessee company filed its return of income on 19/06/2001 declaring a total income of Rs.5,450/-.

Therefore, I have reasons to believe that the income amounting to RS.5,78,365/- has escaped assessment, which is required to be assessed to tax under the provisions of section 147 of the LT. Act, 1961.

(C.M. MEENA) INCOME TAX OFFICER WARD-11(4), NEW DELHI 7.1 In response to the reasons recorded, the assessee filed a reply dated 29.8.2008 to the ITO, Ward-11(4), New Delhi in which the assessee has submitted that the notice u/s. 148 was unexpectedly issued by the Department on 31.3.2008 on the last date when the proceedings were getting time barred under the Income Tax Act, 1961, after a lapse of nearly 7 years from the date of filing the original return i.e. 19.6.2001. Assessee further objected for initiation of proceedings merely on the basis of the special information received from the Directorate of Income Tax (Inv.-I), New Delhi in which it was alleged that the assessee has received amount of Rs. 5,78,365/-. 9 7.2 We have perused the reasons recorded u/s. 148(2) of the I.T. Act for issue of Notice u/s. 148(1) of the I.T. Act as well as the replies/objections dated 29.8.2008 to the issuance of notice for initiation of proceedings u/s. 148 of the I.T. Act. We are of the considered view that the reasons recorded by the AO for issuance of notice u/s. 148 of the I.T. Act are not acceptable to the law. There is no independent application of mind, AO had mechanically issued u/s. 148 of the I.T. Act, on the basis of the information allegedly received by him from the Ld. DIT(Inv.)-I, New Delhi. Even otherwise, the AO had issued notice u/s. 148 of the I.T. Act in the absence of tenable evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. Secondly, AO as well as Ld. CIT(A) has wrongly held that assessee was given sufficient opportunity to raise the objection within the specified time which he never responded and thus the Assessee cannot claim and the Rule of Natural Justice were adhered to. The finding of the revenue authorities are totally wrong and contrary to the evidence filed by the assessee. In fact the assessee has filed the reply/objection dated 29.8.2008 to the reasons recorded for issuance of notice u/s. 148 of the I.T. Act and also requested for supply of statements of any party recorded at the back of the assessee which has been used. The asseseee has also requested to the AO to give opportunity of cross examination that persons whose statements has been recorded and used against the assessee for making the addition in dispute. We have seen that the AO has not provided the same to the assessee and has not given any chance to cross examine that persons. Therefore, the proceedings u/s. 148 are illegal. To support this contention, we draw support from the following decisions:- i) United Electrical Co. (P) Ltd. vs. CIT & Others (2002) 178 CTR (Del) 192. ii) Chuharmal vs. CIT (1988) 172 ITR 250 iii) CBI vs. VC Shukla & Others (1998) 3 SCC 410. iv) NR Paper & Board Ltd. vs. DCIT (1998) 234 ITR 733 (Guj) (v) Prarthana Constructions Pvt. Ltd. vs. DCIT (2001) 70 TTJ (Ahmd.) 122. 7.3 We find that as regards the effective ground in this appeal relating to reassessment proceedings u/s. 148 of the I.T. Act is concerned, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. After hearing both the parties on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 21.7.2011 passed by the Hon’ble Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051, wherein the Hon’ble High Court has held matter as under:-

Held, allowing the petition, that the reassessment proceeding 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 lacs during the 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 assesee 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 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 lliable to be quashed.

7.4 In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present appeal and squarely covered by the aforesaid decision of the Hon’ble High Court of Delhi.

Hence, respectfully following the above precedent, we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings u/s 148 of the I.T. Act. The other issues are not dealt with as the same have become academic in nature.

6.1 Keeping in view of the facts and circumstances of the case, we find that reassessment has since been quashed by the ITAT vide order dated 27.7.2015 passed in (AY 2001-02) in assessee’s own case as aforesaid, hence, the penalty in dispute will not survive. Accordingly, we cancel the orders of the authorities below and delete the penalty in dispute by allowing the Appeal filed by the Assessee.

Order pronounced on 21/06/2018.