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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’ NEW DELHI
Before: SHRI B.P. JAIN
ORDER This appeal of the assessee arises from the order of learned CIT(A)- 12, New Delhi, vide order dated 17.02.2017 for the assessment year 2007- 08. 2. The assessee has raised as many thirteen grounds of appeal. Ground No.1 and 2 are with the regard to initiation of re-assessment proceedings u/s.147 of the Act and rest of the grounds are with regard to the addition on account of alleged purchases of bogus material amounting to Rs.39,74,698/- and payment of commission amounting to Rs.19,873/-.
3. Learned counsel for the assessee, at the outset, argued that the search in the case of Shri Vaibhav Jain and Navneet Jain were made u/s.132 of the Act who have been indulging in profiting accommodation entries through their thirty seven paper entries and charging commission from the beneficiary on the accommodation entries provided. He argued that provisions of Section 153C provides that person relating to whom some material is found in search of some other person is also be assessed u/s.153C of the Act and in the present case as alleged by the AO and the learned CIT(A) that a search u/s.132 was conducted on Shri Vaibhav Jain and Shri Navneet Jain then on the basis of some information, the assessment u/s.153C should have been made on the assessee by issuing necessary notices, which in fact has not been done but the re-assessment proceedings u/s.147 of the Act were initiated by issuing notices u/s.148 of the Act. Accordingly, learned counsel for the assessee relied upon the decision of various courts of law in this regard.
Moreover, the learned counsel also argued on merit that the same parties have been providing the materials for the assessment year 2006-07 in the preceding year as well as in the following year and their copy of account and the copy of assessment are on record, and therefore, rule of consistency should be applicable in view of the decision of Hon’ble Jurisdictional High Court in the case of CIT vs. Neo Poly Pack (P) Ltd., dated 19th April, 2000, reported in (2000) 112 taxman 363 (Delhi).
Learned DR relied upon the orders of the authorities below.
I have heard the rival contentions and perused the facts of the case. The finding of the AO with respect to the reasons which are at pages 1 and 2 of the AO’s order are reproduced hereinbelow:
“Consequent upon receipt of information from Addl. Commissioner of Income Tax, Central 'Range-4, New Delhi, that Shri Vaibhav Jain & Shri Navneet Jain have indulged in providing accommodation entries through their thirty seven paper entities and charging commission from the beneficiaries on the accommodation entries provided assessee being one such beneficiary as per the information received, notice u/s 148 was issued on 20.03.2014, with the prior approval of the erstwhile Joint Commissioner Income Tax, Range-20 (Now Range 36), New Delhi. The A.R., of the assessee vide letter dated NIL filed at dak counter on 09.06.2014 stated that the return of income filed 31.10.2007 declaring taxable income of R5.2,72,996/- may be treated as return filed response to notice u/s 148. The A.R., of the assessee vide letter filed on 09.072014 raised objections against the issue of notice u/s 148 which were disposed off vide letter No.ITO/Ward 20(4)/2014-15/207 dated 28.07.2014. Notice u/s 143(2) and 142(1) was issued on 28.07.2014. In compliance to the notices issued Shri A.K. Aggarwal, appeared and furnished the details.
Fact leading the initiation of proceeding u/s. 148 are that during the course of Search and Seizure and assessment proceedings u/s 153A for the A. Y. 2005-06 to 2011- 12, Shri Vaibhav Jain S/o Shri Navneet Jain has given statement on oath u/s 131 that he has given accommodation entries through thirty seven paper entities. The list of firms giving accommodation entries and the list of accommodation entry recipients have been provided. Shri Vaibhav Jain and Shri Navneet Jain had admitted to be engaged in the business of providing paper/accommodation entry without any delivery of goods. It is also submitted on oath that the sale bills (accommodation/paper bills) were destroyed, no sooner the transaction related to the respective bills were over. No books of accounts were maintained for the accommodation transaction. It is also admitted by him that the respective transaction of receipt of consideration in lieu of accommodation bills i.e. cheque by the beneficiary parities (to whom the cash was repaid before encashment of cheque) were duly credited in bank statement of paper concerns. The assessee i.e. M/s. Chhabra Metals is one of the beneficiary who has availed accommodation entriesof Rs.3,29,51,2101- as per the details provided by Shri Vaibhav Jain.
These in fact are the reasons and the learned DR in fact could not bring the reasons otherwise than as reproduced hereinabove, and therefore, in the circumstances and facts of the case, the assessment proceedings in the case of Vaibhav Jain and Navneet Jain have been initiated u/s.153C of the Act, and therefore, if in view of the department the information so received is considered as a material, the assessment in the present case should have been made u/s.153C and accordingly proceeded u/s.153A to 153C which should have been initiated in the present case but the proceedings u/s.147/148 of the Act has been initiated which itself is bad in law and the reliance is placed in the case of Rajat Subhra Chaterjee, reported in (2016) 47 CCH 0135 (Del Tri) and the relevant findings at pages 3 and 4 of the order are reproduced hereinbelow: “5. The Learned AR submitted further that the reasons recorded are neither signed nor is there any date on which these were recorded. He contended that the action taken by the Assessing Officer under sec. 147 is also not tenable for the simple reason that provisions of sec. 153C of the Act are applicable in this case and not the provisions laid down under sec. 147 of the Act. He submitted that it is an admitted position of the fact as it is also evident from the assessment order that the Assessing Officer has initiated reassessment proceedings in the present case on the basis of information received based on the material found during the course of search from the premises of RLH. The Learned AR contended that provisions of sec. 153C provides that persons relating to whom some material is found in search of some other person should be assessed under sec. 153C of the Act. The provisions of section 153C are non obstantive provisions and specially excludes the operation of sec. 147 of the Act, therefore, the Assessing Officer in the present case has erred in invoking the provisions of sec. 147, instead of 153C of the Act. If action under sec. 147 is permitted on the basis of material found in the course of search, then the provision's of sec. 153 would be redundant. In this regard, he placed reliance on the following decisions to support his above contentions that no action under sec. 147 is permissible on the basis of material found in search: i) ACIT vs. Arun Kapur - 140 ITJ 249 (Amritsar); ii ) Cargo Clearing Agency vs. JClT - 307 ITR l{Guj.); 6. The Learned Senior DR on the other hand tried to justify the action of the Assessing Officer in initiating reopening proceedings. He submitted that the Assessing Officer was in possession of specific information that sweat equity shares in the hands of the assessee was taxable under section 28(iv) of the Act. The Assessing Officer had recorded his reasons to belief on perusal of letter of DDIT and records of the assessee that income to the extent of Rs.z lacs has escaped assessment.
7. On having gone through the decisions cited above especially the decision of Amritsar Bench in the case of ITO vs. Arun Kumar Kapoor (supra), we find that in that case as in the present case before us, reassessment was initiated on the basis of incriminating material found in search of third party and the validity of the same was challenged by the assessee before the Learned CIT(Appeals) and the Learned CI'I'(Appeals) vitiated the proceedings. The same was questioned by the Revenue before the ITAT and the ITAT after discussing the cases of the parties and the relevant provisions in details has come to the conclusion that in the above situation, provisions of sec. 153C were applicable which excludes the application of sections 147 and 148.of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void ab initio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT(Appeals). In the present case before us, it is an admitted fact, as also evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax (Inv.) on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Co-ordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur - 140 TTJ 249 (Amritsar) hold that provisions of sec. 153C of the Act were applicable in the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143(3) of the Act are void ab initio. The reassessment in question is accordingly quashed. The ground No.1 is accordingly allowed.
8. Ground No.2 to 5: In these grounds, the validity of addition of Rs.21acs sustained by the Learned CIT(Appeals) made under the provisions of section 28(iv) has been questioned. These grounds do not need any adjudication as the same have become infructuous and academic in view of the above finding that reassessment was void ab initio. These grounds are accordingly disposed off.” 7.1 And also the decision of SMC Bench of ITAT in dated 22.03.2017 wherein the said decision has been relied upon in the case of Rajat Subhra Chaterjee, reported in (2016) 47 CCH 0135 (Del Tri). In the circumstances and facts of the case, the proceedings initiated u/s.148 of the Act are ab initio and are directed to be quashed. Accordingly, grounds no.1 and 2 of the assessee being the legal grounds are allowed.
7.2 Since the assessee succeeds on the legal grounds, therefore, the grounds on merit become infructuous and are of academic in nature and do not require any adjudication.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this day 21st April, 2017