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Assessee by : Shri Salil Aggarwal, Adv.; & Shri Shailesh Gupta, Adv.; Department by : Shri Gudrun Nehra, Sr. D. R.; Date of Hearing : 02.08.2017 Date of Pronouncement : 12.09.2017 O R D E R. PER I. C. SUDHIR, J. M. :
The assessee has questioned first appellate order on the following grounds :-
“ 1. That the learned CIT (Appeals) has erred both on facts and in law in upholding the initiation of proceedings u/s 147 of the Income Tax Act. despite the fact there was no tangible
2 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. material to form a "reason to believe” (as distinguished from, ’if the Assessing Officer believes') at the time of initiation of proceedings that, the income of the assessee had escaped assessment.
2. That the learned CIT (Appeals) has further failed to comprehend that 'reason to believe' and the 'reason to suspect are not the same thing and further the expression the ‘‘reason to believe" is far stronger than the expression “satisfied” and thus in the absence of any material, the Assessing Officer could not to be said to have a “reason to believe” within the meaning of section 147 of the Act.
3. That the learned CIT (Appeals) has erred in upholding the assumption of jurisdiction u/s 147 of the Income Tax Act in the absence of existence of tangible material for the reason to believe that the income of the assessee had escaped assessment, as he had no material other than the mere general information.
That the learned CIT (Appeals) has failed to appreciate that the learned Assessing Officer recorded reason for the believed on 30/31.03.2010 and had no material with him. other than just mere alleged information, unsupported by any material that any income of the assessee had escaped assessment and thus in the absence of any such a material, (As is required for valid initiation of proceedings), the 3 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
proceedings initiated could not have been held to have been validly initiated, since he could not be said to have a reason to believe.
That the learned C1T (Appeals) has failed to comprehend that, the Assessing Officer could not have proceeded to frame assessment, without disposing off the objections raised by the assessee in terms of the judgment of Apex Court in the case of GKN Driveshaft and had he disposed off the objection as raised before him, he had to necessarily at the time when the objections were to be disposed off, provided such material in his order which was nonexistent with him. Thus in the absence of such disposal of the objections before proceedings, further assessment proceedings contained were untenable in law being contrary to law.
That the learned CIT (Appeals) has completely overlooked that, the burden which initially lay upon the assessee stood discharged and it was for the revenue to establish that, there is an escapement of income and that the amount credited in the books of the assessee, which was received by it by way of share application money and were refunded immediately i.e. after one month, was fully explained and thus he has erred in holding the initiation as valid and that the assessee had not discharged the burden. The learned CIT (Appeals) has over-looked the judgment of jurisdictional High Court in the case of CIT vs. Pradeep Gupta reported in 303 ITR 95 at page 98, wherein it
4 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. was held that, the burden is on the revenue to establish, there is an escapement of income.
That the learned CIT (Appeals) has further overlooked the fact of the instant case, that the amount received was returned back within a period of one month and thus it could not be stated that the assessee had take an accommodation entries and assessee had not discharged its burden.
That the learned CIT (Appeals) has erred in sustaining the addition without appreciating that the learned Assessing Officer while framing the assessment had though recorded in the order of assessment that, in statement recorded of Shri Rajesh Kumar .Iha and Shri P.N. Jha, by Investigation Wing who were at one time director of M/s Aggregate Finance & Investment Pvt. Ltd. had admitted that the said company was involved in providing and received accommodation entries, such evidence was not confronted to the assessee nor was to establish that in so far as the credits appeared in the books of accounts were also appeared were merely accommodating entries.
That the learned C1T (Appeals) has erred in not appreciating the assessee's detailed written submission and the evidence rendered by the assessee in support of the fact that the credits appearing in the books of accounts were duly explained and the addition made by the Assessing Officer was unsustainable in law
5 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
9.1 That the learned CIT (Appeals) has erred in observing and concluding that "since the appellant has not been able to satisfactorily explain the source of the cash of Rs.15,00,000/- and has failed to discharge the onus of proving the identity and credit worthiness of the creditors and establishing the genuineness of the transactions as cast upon it by section 68 of the Act'.
9.2 That the learned C1T (Appeals) has also erred while ignoring the details, confirmations and evidences given by the assessee in respect of outstanding share application of Rs. 15,25,000/- which was received from M/s Rotographics (India) Limited and same could not have been from M/s. Aggregate Finance & Investment Pvt. Ltd. and M/s. Garner Finance & Securities Pvt. Ltd.. as these amounts were duly returned within one month only i.e. in August, 2003 itself.
That the learned CIT (Appeals) has further erred in upholding the addition of Rs. 30,000/- on account of purported commission, which were based on surmises and conjecture and based on no material. It is well settled rule of law that the suspicion howsoever strong does not take a character of evidence or proof.
That the learned C1T (Appeals) has grossly erred both in law and on facts in sustaining the aforesaid additions, overlooking the fact that no fair, reasonable, proper opportunity
6 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. has been granted by the Assessing Officer and has thus arbitrarily brushed aside the detailed evidences, information and material furnished by the assessee in order to support the genuineness of the transaction. The learned Assessing Officer has further erred while disposing of Ground Nos. 14 and 15 as general in nature and without going into merits and detailed written submissions of the assessee in this regard.
That the CIT (Appeals) appeal order dated 24.08.2012 is itself defective as it is based upon the remand report of the Assessing Officer (As referred in para 4.4 and para 6.3) which has not been shown to the assessee for its rebuttal and the quantum appeal order has been passed without providing any opportunity to the assessee to for its rebuttal.
That the learned CIT (Appeals) has further erred in upholding the initiation of proceedings, the addition made and the interest levied. ”
2. Heard and considered the arguments advanced by the parties in view of orders of the authorities below, material available on record and the decisions relied upon.
3. In support of the above grounds, the ld. AR has furnished following submissions :-
7 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
“ 1. The initiation of proceedings u/s 148 of the Act by a notice dated 30/31.03.2011, beyond a period of four years is bad in law as the instant proceedings under section 147 of the Act were initiated on the basis of mere an alleged information alleged to have been received from the Director of income Tax Investigation (Delhi). The learned Assessing Officer had no material to form his opinion for a reason to believe that there was an escapement of income. In other words, there was no material other than the purported information. In such circumstances, it has been held that the information unsupported by any other material is insufficient to assume jurisdiction under section 147 of the Act :-
ITO vs. Smt. Arti Khattar (i) (ITA No. 2395/De/2012 dated 22.08.2014). ITO vs. Mrs. Maya Gupta (ii) (ITA No. 3435/Del/2013 dated 13.12.2013) M/s Laureate Educational Vs. Income Tax Officer (iii) (ITA No.l945/Del/2012 Assessment Year : 2004-05 dated 31.12.2013) Signature Hotels (P.) Ltd. vs. Income-tax Officer (iv) reported in 338 ITR 51 Sarthak Securities Co.P.Ltd. Vs. ITO (v)
8 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. reported in [2010] 329 ITR 110 (Delhi) CIT vs. Kamadhenu Steel & Alloys Ltd. [2012] (vi) 206 Taxman 254 (DELHI) CIT vs. Atul Jain, (vii) 299 ITR 383 (Del); (viii) CIT vs. SFIL Stock Broking Ltd., 325 ITR 285 (Del)
Proceedings under section 147 of the Act cannot be initiated on the basis of the stale information (Rasalika Trading and Investment Co. Pvt. Ltd versus Deputy Commissioner Of Income Tax (W.P.(C) 1608/2013 & CM Appl. 3024/2013 dated 14.02.2014).
Unless there is fresh material, as distinguished from mere allegation in the form of information, recourse under section 147 of the Act cannot be resorted:
Commissioner of Income-tax vs. M/s Orient Craft i) Limited reported in 354 ITR 536 (SLP filed by the revenue has been dismissed by the Apex Court) ii) COMMISSIONER OF INCOME TAX Vs. SHRI ATUL KUMAR SWAMI (ITA No. 112/2014 dated 18.03.2014);
9 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
MOHAN GUPTA (HUF) vs. CIT (W.P.(C) 7660/2012 dated iii. 28.01.2014) HC (Delhi) following Orient Craft.
Bapalal & Co. Exports vs. JCIT iv. 289 ITR 37 (Mad)
CIT vs Trimurti Builders v. 246 CTR 308 HC Madhya Pradesh Puri Brothers vs CIT vi. 252 CTR 316 Inductotherm (India) Pvt. Ltd. vs. CIT SCA vii. 858 of 2006) HC (Gujarat) Telco Dadajee Dhackjee Ltd. vs DCIT, viii. 12 May 2010 Third Member Jay Bharat Maruti Ltd. vs CIT ix. 324 ITR 289 Delhi High Court Shipra Srivastava vs ACIT x. 319 ITR 221 Delhi High Court CIT vs Batra Bhatta Co. xi. 174 Taxman 444 Delhi High Court Prashant S. Joshi and Dattaram Shridhar Bhosale vs xii. ITO and UOI 324 ITR 154 Bombay High Court ACIT vs O.P. Chawla xiii. 114 ITD 69 ITAT Third Member Dy.CIT Vs. M/s SPA Enterprises Limited xiv.
10 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
(ITA No.496/Del/2010 dated 2nd August, 2013) Sh. Gopi G Nambiar vs. JCIT xv. (ITA no. 1083/Del/2010 dated 26th July, 2013) Sri Sushil Kr. Chopra Vs. Dy. Commissioner of Income-tax xvi. (I.T.A. Nos. No. 1862/Kol/2009 dated 12th April, 2013) Income-tax Officer, Wd.-4(3), Kolkata Vs. M/s. A. M. Udyog xvii. Ltd. (I.T.A No. 1947/Kol/2010 dated 15th July, 2013)
That the alleged information of the investigation wing can alone be a reason to suspect however, in the absence of any other material, same cannot be tangible material for the formation of the belief :-
CIT vs. Indian Oil Corporation a) 159 ITR 956 (SC) CIT vs. Gupta Abhushan (P.) Ltd. [2009] b) 312 ITR 166 (Delhi) SMCC Construction India Ltd vs. ACIT [2014] c) 220 Taxman 354 (Delhi) CIT vs Paramjit Kaur d) 311 ITR 38 (P&H)
“Reason to believe” entertained by the Assessing Officer must not be arbitrary or irrational and are stronger words “is satisfied” (Ganga Saran & Sons Pvt. Ltd. vs. ITO reported in 130 ITR 1).
11 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
That both the share applicants from whom the assessee had received the sum along with the application to allot shares were assessed to tax and the amount paid was through account payee cheques. It is submitted that where a payment is made by cheque, genuineness of cannot be disputed.
Both the share applicants have independently confirmed the investment made in the appellant company in response to the notice issued under section 131 of the Act and assessee has also furnished complete documentary evidence to substantiate the identity and creditworthiness of the share applicants and genuineness of the transaction and hence the burden which lay upon the assessee under section 68 of the Act stood discharged, (at pages 23-36 of PB and pages 6-102 of PB) :-
CIT vs. Lovely Export i. 216 CTR 195 CIT vs. Kamdhenu Steel and Alloys Ltd. ii. reported in 248 CTR 33 CIT vs. vs. Nipuan Auto Pvt. Ltd. iii. in ITA 225/2013 dated 30.04.2013 Commissioner of Income-tax iv. Vs. Supertech Diamond Tools (P.) Ltd [2014] 44 taxmann.com 460 (Rajasthan)
Commissioner of Income-tax (Central) v. 12 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. Vs. Vacmet Packaging (India) (P.) Ltd [2014] 45 taxmann.com 204 (Allahabad)
Commissioner of Income-tax vi. Vs. Peoples General Hospital Ltd. [2013] 35 taxmann.com 444 ITA 298/2012 Dated: 16.05.2012 in the case of vii. Dalmia Bros Pvt. Ltd. ITA 212/2012 Dated: 11.04.2012 in the case of viii. CIT Vs. Goel Sons Golden Estate (P) Ltd. ITA 284/2012 Dated: 27.04.2012 in the case of ix. CIT vs. Ceylon Biscuits India (P) Ltd. ITA 232/2012 dated 22.11.2012 (Del. HC) in the case of x. CIT vs. Fair Finvest Ltd. I.T.A .NO. 871/Del/2012 dated 25.05.2012 ITAT Delhi xi. ITO Vs. M/s. Excellance Town Planner P. Ltd. dated 25.05.2012). ITAT Delhi xii. Income Tax Officer Vs. M/s Champa Commercials Pvt. Ltd ITA No. 4210/Del/2010) ITAT Delhi xiii. DCIT Vs. M/s Global Buildwell (India) Ltd. The share application money received by the appellant on 16.07.2003 (at page 23 of PB) had duly been refunded in the immediately next
13 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. month in August, 2003 by account payee cheques and hence it is beyond the comprehension that the share application money received was in the nature of the accommodation entry, as had this been the assessee’s own funds, assessee would not refund the same.
There is no evidence to establish that any money originated from the coffers of the assessee.
CIT vs Value Capital Services (P) Ltd. i. reported in 307 ITR 334 CIT v Real Time Marketing (P) Ltd. ii. reported in 306 ITR 35 The share applicant to whom the summons were served and replies were also filed, addition is liable to be deleted (Commissioner of Income-tax Vs. Empire Buildtech (P.) Ltd reported in [2014] 43 taxmann.com 269 (Delhi).
Reliance placed by the revenue on the statements of Shri. Rajesh Kumar Jha and Shri. P.N. Jha without providing the copies of statements of the aforesaid persons and without confronting the cross examination, despite assessee’s request made and thus have no evidentiary value and has to be excluded :-
14 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
Kishnichand Chellarain Vs. CIT i. reported in 125 ITR 713 R.B. Shreeram Durga Prasad & Fatehchand ii. Nursing Das Vs. Settlement Commission reported in 176 ITR 169 at page 174.
Commissioner of Income-tax v. Ashwani Gupta iii. 322 ITR 396 (Del); J.T. (India) Exports Vs. Union of India iv. 262 ITR 269 (Del) (FB)
CIT vs Dharam Pal Prem Chand Ltd. v. 295 ITR 105(Del)
CIT Vs Pradeep Kumar Gupta vi. 207 CTR 115. ”
3.1 The ld. AR also referred page Nos. 15 to 22, 37 and 38, 40 to 66, 103 to 146 of the paper book, which are copies of letter from Income Tax Officer communicating reasons recorded for initiating proceedings under section 147, objections raised to the reasons, the order of the Assessing Officer disposing off objections of the assessee,
15 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. reply filed by M/s. Aggregate Finance & Investment Pvt. Ltd. and Garner Finance & Securities Pvt. Ltd. and submissions made before the ld. CIT (Appeals).
3.2 The ld. Sr. DR, on the other hand, placed reliance on the orders of the authorities below. He submitted that information was received from Investigation Wing of the Department that the assessee had received accommodation entry amounting to Rs.15,00,000/- from some named companies, hence there was specific information to form reasons to believe on the part of the Assessing Officer to proceed for initiation of reopening proceedings. Since the proceedings were initiated after expiry of four years, approval was taken from the competent authority. Summons issued to the parties were not responded, hence the Assessing Officer was justified in making the addition in question. He submitted further that original return was processed under section 143(1) of the Act, hence, there was no question of change of opinion on the part of the Assessing Officer while initiating the reopening proceedings.
I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005.
3.3 When we go through the reasons to believe recorded by the Assessing Officer, reproduced hereunder, we concur with the contention of the ld. AR that it is vague as the reasons to belief has been formed solely on the basis of information received from the Investigating Wing of the Department :-
“ Reasons for the belief that income has escaped assessment :
In this case, information has been received from the Director of Income Tax, (Investigation) New Delhi that the assessee has received an amount of Rs. 15,00,000/- as follows :-
BENEFICI- BENEFICIAR BENEFICIAR VALUE INSTRUMEN DATE NAME OF BANK BRANC A/C.NO. ARY’S Y Y OF T NO. BY ON ACCOUNT FROM H OF ENTRY NAME BANK BANK ENTRY WHICH WHIC HOLDER OF WHICH ENTRY GIVING NAME BRANCH TAKEN. ENTRY H ENTRY ENTRY GIVING ACCOUN . TAKEN. ENTRY GIVING TAKEN BANK. T TAKEN ACCOUNT. . MEDITRONIC BANK OF BARA 500000 2900 11 AGRFEEGAT RATNAKAR KAROL 52 S INDIA NOVA KHAMBA JULY, E FINANCE R BAGH P. LTD. SCOTIA ROAD 2003 & INVES. MEDITRONIC BANK OF BARA 500000 10372 11 AGRFEEGAT SHB KAROL 50029 S INDIA NOVA KHAMBA JULY, E FINANCE BAGH P. LTD. SCOTIA ROAD 2003 & INVES. MEDITRONIC BANK OF BARA 500000 16419 11 AGRFEEGAT RATNAKAR KAROL 52 S INDIA NOVA KHAMBA JULY, E FINANCE BAGH P. LTD. SCOTIA ROAD 2003 & INVES.
Information so received has been gone through. The above said instruments are in the nature of 17 I. T. Appeal No. 6251/Del/2012 Assessment Year : 2004-2005. 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. 15,00,000/- has escaped assessment in the assessment year 2004-05 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 under section 148 of the Income Tax Act, 1961. In this case the assessment was made under section 143(1), not u/s. 143(3) of the I.T. Act, 1961.
I am therefore, satisfied that the said income, on Rs.15,00,000/- account of accommodation entry worth 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.