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Income Tax Appellate Tribunal, DELHI BENCHES “B” : DELHI
Before: SHRI BHAVNESH SAINI & SHRI L.P. SAHU
ORDER PER BHAVNESH SAINI, J.M.
This appeal by assessee has been directed against the order of the Ld. CIT(A)-XIII, New Delhi, dated 04th May, 2010, for the A.Y. 2003-2004, challenging the reopening of the assessment under section 147/148 of the I.T. Act, 1961 and addition of Rs.65 lakhs.
Briefly the facts of the case are that the assessee filed original return of income on 02nd December, 2003 declaring income
2 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. at loss of Rs.17,22,956. The return was processed under section 143(1) on 26th February, 2003 at returned loss. Further, order under section 147 was passed on 26th October, 2007 at a loss of Rs.13,22,956. Notice under section 148 was again issued to the assessee on 30th March, 2010. In the absence of any representation, the A.O. passed the ex-parte re-assessment order under section 144/147 of the I.T. Act, dated 16th December, 2010 and made the addition of Rs.65 lakhs on account of unexplained cash credit under section 68 of the I.T. Act.
2.1. The assessee challenged the re-assessment order dated 16th December, 2010 before Ld. CIT(A). The assessee challenged the reopening of the assessment as well as addition of Rs.65 lakhs under section 68 of the I.T. Act. The Ld. CIT(A) after considering the explanation of assessee, noted that reasons were recorded on the basis of information received from ADIT (Inv.) and on the basis of the statement of Shri Harish Pawar which is fresh information recorded by the Investigation wing. The reopening of the assessment was therefore, confirmed and addition on merit was also confirmed.
3 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. 3. We have heard the learned Representatives of both the parties and perused the material on record.
It is well settled law that validity of the reopening of the assessment shall have to be determined with reference to the reasons recorded under section 147/148 of the I.T. Act. It is an admitted fact that earlier the re-assessment proceedings were completed vide order dated 26th October, 2007. The copy of the reasons recorded in the first instance are filed at page No.3 of the paper book in which the A.O. recorded that the information have been received from DIT (Inv.)
New Delhi, vide letter dated 16th June, 2006 that above named company was involved in giving and taking bogus entries/ transactions in assessment year under appeal. The A.O. accordingly reopened the assessment and issued notices under section 148 of the I.T. Act. The A.O. passed the re-assessment order under section 143(3)/147 dated 26th October, 2007 and made the addition of Rs.4 lakhs on account of unexplained credit entry received from Shri Sanjeev Gupta. The assessee challenged this addition before Ld. CIT(A) who vide order dated 16th February, 2009, deleted the addition. Copy of the orders are filed in the paper book. The A.O.
4 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. again reopened the re-assessment by issuing notice under section 148 on 30th March, 2010 by recording the following reasons for reopening of the assessment under section 148 of the I.T. Act and are reproduced as under :
“M/s. Fashionage Corporation Pvt. Ltd., A.Y. 03-04
Reasons for notice u/s.148 of the I.T.Act, 1961.
As per the information received from the ADIT (Inv.), Unit-II(2), Jhandewalan, New Delhi and on verification of assessment records it has been observed that :
As per information received cheque, was made by Sh. Haerish Pawar from the account no. 00262000014524 of M/s Amrit Impex (India) proprietorship concern of Sh. Harish Panwar. He has transferred fund from his individual account in the same branch, where there have been huge cash deposit on the same date of transfer entries.
2. In his statement under oath dated 12.03.2009 he has stated that he has not maintained any bank account in HDFC Bank. In the statement he has accepted that bank account of M/s Amrit Impex (India) has been used for providing of accommodation entries.
5 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. 3. In the assessment completed u/s 147/143(3) of the IT Act, 1961, in this case dated 26.10.2007 the same has not been added back.
Based on the above facts, the amount taken by the assessee of Rs.65 lacs (in total) as Managers Cheque/cheques from Sh. Harish Pawar Is in fact accommodation entry and formed part of income of the assessee which escaped assessment for the F. V. 2002-03 i.e. A.Y. 2003-04. I have reason to believe that the Income of the assessee chargeable to tax has escaped assessment because of the failure on part of the assessee to disclose its income fully and truly.
Issue notice u/s.148 of the I.T. Act.
Dated 25.03.2010 Sd/-xxx (Neha Chaudhary) Dy. Commissioner of Income Tax Circle-11(1), New Delhi.”
4.1. In the above reasons, the A.O. has mentioned the same fact/reasons which were recorded earlier that information have been received from ADIT (Inv,) Wing, New Delhi and on verification of the assessment record, it was noticed that assessee has received accommodation entry from Shri Harish Pawar. It is also noted that earlier assessment under section 147/143(3) was completed on 26th
6 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. October, 2007 and same addition has not been added back. The A.O. therefore, had a reason to believe that income chargeable to tax has escaped assessment because of the failure on the part of assessee to disclose its income fully and truly. The reasons are recorded on 25th March, 2010. Learned Counsel for the Assessee submitted that this information was already available on record and assessee had also disclosed the receipt of the above amount in the regular books of account, on which, earlier return was processed as well as proceeding under section 147 were also conducted vide order dated 26th October, 2007 and no addition has been made. Therefore, prima facie no new information or material available to the A.O. He has also submitted that re-assessment has been reopened again after expiry of 04 years.
Therefore, reopening of the re-assessment is bad in law. The proviso to Section 147 of the I.T. Act provides as under :
“Provided that where an assessment order 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
7 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. 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.”
4.2. In the present case, the assessment year under appeal is 2003-2004 and earlier re-assessment order has been passed under section 143(3)/147 of the I.T. Act dated 26th October, 2007.
Therefore, proviso to Section 147 will be applicable to the present case. It provides that no action shall be taken under this Section after 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 return under section 139 or in response to notice under section 142 or Section 148 or to disclose fully and truly all material facts necessary for assessment for that assessment year. In this case, four years have already completed on 31st March, 2008 from the end of the relevant assessment year. There is no case of non- filing of the return of income. The A.O. recorded reasons on 8 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. verification of record on which all information were available. The A.O. in the reasons has recorded that “because of the failure on the part of the assessee to disclose its income fully and truly”. However, the requirement of the proviso to Section 147 has been that “to disclose fully and truly all material facts necessary for his assessment”. The A.O. in the reasons did not mention that assessee has not disclosed fully and truly all material facts for assessment.
The A.O. has used the word “Income” which is not provided under section 147 of the I.T. Act. As per the reasons itself, the report of ADIT (Inv.) was already with the A.O. about the receipt of accommodation entry by assessee when original re-assessment proceedings were initiated. The A.O. in para-3 of the reasons also noted that in the assessment completed under section 147/143(3) dated 26th October, 2007 the same has not been added back which would mean that the A.O. did not make addition of Rs.65 lakhs as receipt from Shri Harish Pawar in the original re-assessment order dated 26th October, 2007.
Therefore, there is no question of any failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment because of such information were already available on 9 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. record of the Department and assessee has also disclosed the receipt of Rs.65 lakhs from Shri Harish Pawar in the original return of income. The A.O. in the original reasons recorded under section 147/148 had also similarly recorded that assessee-company has failed to disclose fully and truly all material facts and source of these funds through bank account of the assessee-company (PB-3).
However, such finding of the A.O. have been negated by the Ld. CIT(A) by deleting the addition of Rs.4 lakhs vide order dated 16th February, 2009. Considering the facts of the case, it is clear that the A.O. has again recorded reasons for reopening of the assessment to correct an incorrect assessment made earlier. However, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The assessee disclosed all the relevant facts to the A.O. The assessee is required to fairly disclose what is expected by him i.e., the primary facts while filing the original return of income. It is for the A.O. to draw any inference. In the present case, the assessee disclosed all the above facts not only in the original return of income but information from DDIT was already with the A.O. at the time of recording original reasons for reopening of the 10 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. assessment. There was no other tangible material available on record for recording the reasons for reopening of the assessment that income has escaped assessment. It, therefore, appears that the A.O. wanted to correct the error in his original re-assessment order dated 26th October, 2007 and hence, recorded the present reasons for reopening of the assessment to make correction in his earlier re- assessment order, which is not permissible under the Law. The Hon’ble Bombay High Court in the case of Titanor Components Ltd., vs. ACIT and others (2012) 343 ITR 183 (Bom.) held as under :
“Where a reassessment is sought to be made after four years the power conferred by section 147 of the Income-tax Act, 1961, does not provide afresh opportunity to the Assessing Officer to correct an incorrect assessment made earlier unless the mistake in the assessment so made is the result of a failure of the assessee to fully and truly disclose all materials facts necessary for assessment. There is a difference between a wrong claim made by an assessee after disclosing all the true and material facts and a wrong claim made by the assessee by withholding the material facts fully and truly. It is only in the latter case that the Assessing Officer would be entitled to proceed ’under section 147.
11 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. Held, allowing the petition, that the Assessing Officer had not recorded the failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment year 1997-98. What was recorded was that the petitioner had wrongly claimed certain deductions which he was not entitled to. The reassessment proceedings initiated in the year 2004 were not valid.”
4.3. The Hon’ble Delhi High Court in the case of Techman Buildwell P. Ltd., vs. ACIT (2015) 370 ITR 771 (Del.) held as under :
“Held, allowing the petition, that the "reasons to believe" nowhere highlighted what, if at all, was the material which the Assessing Officer came upon or became aware of subsequent to the original assessment. In other words, what triggered the Assessing Officer's curiosity to impel him to reexamine the files and documents pertaining to a completed assessment was unknown. Nor did the materials placed in the assessment show that the assesses had unjustifiably suppressed valid or relevant information which was otherwise available. The advertence to the disallowance of a provision for an unascertained liability points to the Assessing Officer indulging in what amounted to nothing but a masked review. What appeared to have excited the Assessing Officer's mind was that the original assessment order was not framed properly as it overlooked
12 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. certain materials which led to loss of revenue. The Assessing Officer in the first instance did not perform his job properly for which the assessee could not be faulted. The Assessing Officer's omission was the sole basis for issuing the reassessment notice and, consequently, proceeding to make the demand. Therefore, the notice and the demands arising consequent to the notice were quashed.
4.4. The Hon’ble Delhi High Court in the case of Nestle India Ltd., vs. DCIT (2016) 384 ITR 334 (Del.) held as under :
“(ii) That as far as the assessment year 1994-95 was concerned the notice was issued after four years which was beyond the statutory time limit. There was nothing on record to show that there was any tangible material providing a live link to the reasons to believe that income escaped assessment. There was no failure by the assessee to fully and truly disclose material facts. Thus, the order dated March, 18,2002, recording the reasons for reassessment was not in conformity with the mandatory requirement under section 147 and was therefore Unsustainable in law.”
The Learned Counsel for the Assessee also relied upon the order of ITAT, Delhi Bench in the case of Jiten Gurnani vs. ITO, Ward-
13 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. 19(1), New Delhi dated 31st March, 2015 in ITA.No.4908/Del./2012 in which on receipt of accommodation entry from Shri Harish Pawar through account of Amrit Impex (India) the Tribunal quashed the reopening of the assessment on identical facts in the matter.
Considering the above discussion, it is clear that assessee disclosed primary facts and information regarding accommodation entry was already with the Department. Therefore, no new material was with the A.O. to form second time the reasons that income chargeable to tax has escaped assessment. There is no failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment for assessment year under appeal. Therefore, reopening of assessment after expiry of four years from the end of the relevant assessment year is clearly barred by time in this case. The A.O. therefore, did not have any valid reasons for reopening of the assessment and would not get jurisdiction to proceed against the assessee under section 147 of the I.T. Act. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act. Resultantly, the 14 ITA.No.3542/Del./2012 M/s. Fashionage Corporation (P) Ltd., New Delhi. entire addition stands deleted. There is no need to decide the addition on merits separately.
In the result, appeal of assessee is allowed.
Order pronounced in the open Court.