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Income Tax Appellate Tribunal, DELHI BENCH - ‘SMC’ NEW DELHI
Before: SHRI BHAVNESH SAINI
Both the appeals by assessee are directed against different orders of Ld. CIT IX New Delhi dated 13th September, 2016 for assessment year 2008-09 and 2010-11.
Ld. Representative of both the parties mainly argued in assessment year 2008-09 and submitted that the issue is same in subsequent assessment year 2010-11, order in the case of assessment year 2008-09 may be followed in assessment year 2010-11. Page 1 of 10 , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO
For the purpose of disposal of both the parties, I decide the appeal for assessment year 2008-09 as under :-
Assessment year 2008-09
Briefly the facts of the case are that the Assessing Officer reopened the assessment and issued notice u/s 148 which was served upon assessee. In response to notice issued, the assessee filed return of income declaring an income of Rs. NIL. The Assessing Officer issued questionnaire to the assessee and the assessee responded to the same.
In this case inquiries of investigation wing New Delhi of the department have unearthed huge accommodation entry racket being operated by accommodation entry provider Shri Aseem Kumar Gupta.
The investigation wing conducted search and survey operations at the office of Shri Aseem Kumar Gupta when confronted with the evidences gathered, Shri Aseem Kumar Gupta admitted to have provided accommodation entries to several beneficiaries. The investigation wing has complied a report and date of the beneficiaries of such entries along with the modus operandi of Shri Aseem Kumar Gupta. The Assessing Officer has gone through the report and data sent by investigation wing which clearly indicated that accommodation entries have been provided and his various companies are used for this purpose. The list contained the name of the assessee company which has taken accommodation entries of Rs. 5 lacs each on 12th February, 2008 and 22nd February, 2008 through banking channel from M/s. Ganpati Fincap Services Pvt. Ltd. and S.G. Portfolio Pvt. Ltd. The Assessing Officer therefore noted , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO that the assessee has ploughed back unaccounted money of Rs. 10 lacs in its business through the channel of accommodation entries. The Assessing Officer accordingly made addition of Rs. 10 lacs.
The assessee challenged the reopening of the assessment as well as addition on merit before Ld. CIT(A). It was submitted by assessee that recorded reasons must have live link with formation of belief. In the case of assessee there exist no link between reasons recorded by the Assessing Officer and we belief that income has escaped assessment. Therefore with the non existence of belief for escaped assessment, Assessing Officer’s action stands invalid. The Assessing Officer has reopened assessment u/s 147 of the Act by making an allegation that assessee has taken accommodation entries in the form of unsecured loans. The allegation was made on the basis of report of investigation wing, New Delhi. The reasons recorded do not show any application of mind nor the same show any belief independently arrived at by the Assessing Officer. The assessee relied upon several decisions in support of its contention. Ld. CIT(A) however noted that there is tangible material to reopen the assessment and found that investigation wing has clearly provided that Shri Aseem Kumar Gupta admitted to have provided accommodation entries to the assessee and details are brought on record to prove assessee has taken accommodation entry for adjusting unaccounted money. The Assessing Officer has reason to believe income chargeable to tax has escaped assessment. Therefore reopening was held to be justified because it discloses prima facie case , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO for reopening of the assessment. Ld. CIT(A) relied upon decision of the Supreme Court in the case of M/s. Raymond Woolen Mills vs ITO 236 ITR 34 (Supreme Court), decisions of Delhi High Court in the cases of Rajat Export Import India Pvt. Ltd. vs. ITO 18 taxman.com 311 and in the case of AGR Investment vs. ACIT 333 ITR 146. Ld. CIT therefore confirmed the reopening of the assessment and dismissed this ground of appeal of assessee.
Ld. CIT(A) on merit also considered the submissions of assessee that there is no application of mind to the report of investigation wing and cross examination to the statement of Shri Aseem Kumar Gupta. Ld. CIT(A) however noted that assessee never asked for cross examination before Assessing Officer. Therefore this ground was dismissed. Ld. CIT(A) on merit also considered that assessee filed copy of income tax return, bank statement and confirmation of lender company but in view of the incriminating material found and seized during the course of search operation in the case of Shri Aseem Kumar Gupta confirmed the addition on merit and dismiss this ground of appeal of assessee. Ld. CIT(A) followed several decisions of the High Court in support of his findings.
Ld. Counsel for assessee submitted that Assessing Officer has not applied his mind to the information received from investigation wing and has not perused the record. On the other hand Ld. DR submitted that return was originally processed u/s 143(1) only and Assessing Officer has seen all the records before recording the reasons for reopening of , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO assessment. There is a live nexus between reasons and belief formed by the Assessing Officer. Therefore prime facie case is made out for reopening of the assessment. Ld. DR submitted that at this stage of reopening of assessment the sufficiency or correctness of the material is not a thing to be considered.
I have considered rival submissions. The assessee has filed copy of the reasons for reopening of assessment at page 10 of the paper book which reads as under :-
“M/s. UV Associates (P.) Ltd. A.Y. 2008-09 Reasons for the belief that income has escaped
M/s UV Associates (P) Ltd. is assessed to tax with Ward 18(2), New Delhi. Enquiries of Investigation Wing, New Delhi of the Department have unearthed huge accommodation entry racket being operated by accommodation entry operator Sh. Aseem Kumar Gupta. The investigation Wing conducted search & survey operations at office premises of Aseem Kumar Gupta. When confronted with the evidences gathered Sh. Aseem Kumar Gupta admitted to have provided accommodation entries to several beneficiaries. The investigation wing has compiled a report & date of the beneficiaries of such entries along with the modus operandi of Sh. Aseem Kumar Gupta. I have gone through the report and data sent by Investigation Wing. The report clearly indicates that accommodation entries have been provided and his various companies are used for this purpose. The Investigation Wing’s list of beneficiaries (of such accommodation entries), gives comprehensive details of Beneficiary’s Name and even the person from which such entry is received. This list contains the name of M/s. UV Associates (P) Ltd. which has taken such accommodation entries as below :
, 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO S.No. Name of PAN NO. OF AMOUNT CHEQUE/DD DATE BEANK NAME OF THE Beneficiary BENEFICIARY (Rs.) DETAIL COMPANY USED FOR PROVIDING ACCOMMODATION ENTRY 1. UV AAACU89168 500000/- 324762 12.02.2008 CORP GANPATI FINCAP Associates P BANK SERVICES P LTD. Ltd. CP NEW DELHI 2. UV AAACU8916E 500000/- 42461 22.02.2008 CORP SG PORTFOLIO Associates BANK PVT. LTD. P. Ltd. CP NEW DELHI Thus, the assessee has ploughed back total unaccounted money of Rs. 10,00,000/- in its business through the channel of accommodation entry. Therefore, it is failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, for the assessment year 2008-09 and has not paid tax on such amount. The unaccounted moneys which should have been charged to tax are being ploughed back to business without paying due tax on it. In view of the above facts, I have reasons to believe that income to the tune of Rs. 1000000/- of the assessee. Company for the A.Y. 2008-09 has escaped assessment. Therefore, in accordance with the provisions of section 151(1) of I.T. Act, sanction for issue of Notice u/s 148 of the Act is being sought.
Sd/- Date 26.7.2013 Income Tax Officer Ward 18(2) New Delhi”
The reasons recorded by Assessing Officer are based on the information received from investigation wing that Shri Aseem Kumar Gupta provided accommodation entries to the assessee through the company floated by him. There is no denial by the assessee during the course of assessment that the amount in question has been received by the assessee through two companies which have been floated by Shri Aseem Kumar Gupta. Thus a specific information was available to the Assessing Officer on record to prime facie belief that there is an escapement of income in the case of assessee. The information so , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO provided also discovered the bogus loans taken by assessee. It is well settled law that validity of reassessment proceedings to be determined with reference to the reasons recorded by Assessing Officer. In this case earlier return was only processed u/s 143(1) as contended by the Ld. DR. The Assessing Officer in the reasons has specifically mentioned that he has gone through the report and data sent by investigation wing which indicated that accommodation entry has been received by assessee. Therefore Assessing Officer has applied his mind independently to the information provided by the investigation wing.
Assessing Officer after going through information and material on record formed his belief that income chargeable to tax has escaped assessment. Thus there was a specific tangible material and information was available on record of assessment that income chargeable to tax has escaped assessment. Therefore there was a prima facie case made out for reopening of the assessment. The sufficiency or correctness of the material is not a thing to be considered at the stage of reopening of the assessment. The decisions relied upon by Ld. CIT(A) support his findings. I therefore do not find any infirmity in the orders of the authorities below in reopening the assessment in the matter. This ground of appeal of assessee is accordingly dismissed.
11. Ld. Counsel for assessee on merit submitted that the report of investigation wing and statement of Shri Aseem Kumar Gupta was not provided to the assessee. He has submitted that assessee claimed before Ld. CIT(A) that no cross examination to the statement of Shri , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO Aseem Kumar Gupta has been provided at reassessment stage. He has submitted that assessee produced sufficient evidence on record to prove that assessee received genuine loan in the matter through banking channel. On the other hand Ld. DR submitted that assessee never made a request for supplying the copy of report of the investigation wing as well as to provide copy of statement of Shri Aseem Kumar Gupta at any stage. Therefore there is no question of providing cross examination to his statement. Ld. DR therefore submitted that addition on merit has been correctly made.
12. After considering rival submissions, I am of the view that the matter requires reconsideration at the level of the Assessing Officer. The assessee claimed that sufficient documentary evidences were filed before Assessing Officer to prove that assessee company took genuine loan from both the above said companies and in support of the explanation assessee filed their ITR, bank statement and confirmation.
However, AO has not discussed anything in the assessment order with regard to filing of these documentary evidences in support of explaining genuine loans. The Assessing Officer has not mentioned anywhere if the report of investigation wing or copy of statement of Shri Aseem Kumar Gupta was provided to the assessee at reassessment stage. Similarly there is no mention if the assessee also asked for the copies of the same or requested the Assessing Officer to produce Shri Aseem Kumar Gupta for cross examination on his behalf. The assessee however made such statement before Ld. CIT(A) that documentary evidences were filed and , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO assessee has not been afforded to cross examine the statement of Shri Aseem Kumar Gupta Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT 125 ITR 713 held that when any incriminating material collected at the back of the assessee, the same cannot be read in evidence against the assessee unless same is confronted to assessee and right to cross examination have been provided to the assessee. In the absence of any details mentioned in the assessment order and that no finding to that effect have been given, therefore, in my view the matter requires reconsideration at the level of the Assessing Officer. I accordingly set aside the orders of authorities below on merit with regard to addition of Rs. 10 lacs and restore this issue to the file of Assessing Officer with direction to redecide this issue afresh strictly on merits by giving a reasonable sufficient opportunity of being heard to the assessee. Assessing Officer is directed to supply copy of the report of the investigation wing and copy of statement of Shri Aseem Kumar Gupta to the assessee. In case assessee may ask for cross examination to statement of Shri Aseem Kumar Gupta. Assessing Officer will take steps accordingly. The Assessing Officer shall pass a reasoned order discussing the material on record and evidences furnished by assessee on record in support of claim of genuine loans received from above two companies.
This ground of appeal of assessee is allowed for statistical purposes.
In the result the appeal of assessee is partly allowed for statistical purpose.
Assessment year 2010-11 , 6337/Del/2016 UV Associates Pvt. Ltd. vs. ITO
In this appeal also assessee challenged the reopening of assessment u/s 147 of the I.T. Act and addition of Rs. 25 lacs on account of accommodation entries. Following the reasons for decision for assessment year 2008-09 (supra) I confirm the orders of authorities below in reopening the assessment in the matter. However the addition on merit is restored to the file of Assessing Officer as is directed in assessment year 2008-09 above.
In the result appeal of assessee is partly allowed for statistical purpose.
Both the appeals of the assessee are partly allowed for statistical purpose.
Pronounced in the Open Court.