MANN FINANCE LEASING PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

The Assessee has filed the Appeal against the Order dated 19.3.2013 of the Ld. CIT(A)-6, Delhi pertaining to assessment year 2005-06 and raised the following grounds:-

1. The Assessing Authority has erred in taking action u/s. 147 of the Act as he has not applied his mind while issuing a notice u/s. 148 of the Act and Ld. CIT(A) has confirming the action of ITO, Ward 6(2).

2. The Assessing Authority has erred in making an addition of Rs. 6 lacs to the declared income from undisclosed sources. The Ld. CIT(A) is not justified in confirming the addition made of Rs. 6 lacs made by the ITO, Ward 6(2). 3. This addition made is unjustified and against law and facts of the case. The order is passed by authorities below are unjustified unwarranted and against law and facts of the case. 2. The brief facts of the case are that the return of income was filed on 28.10.2005 declaring income of Rs. 96,030/-. The case was processed u/s. 143(1) of the I.T. Act, 1961 on 27.1.2005. In this case information was received from the Directorate of Income Tax (Investigation) that M/s Mann Finance & Leasing (P) Ltd. had introduced its unaccounted money of Rs. 9 lacs in aggregate in its books of accounts with the help of entry operators. On the basis of this information, proceedings u/s 147 of the I.T. Act were initiated after recording reasons and accordingly a notice u/s 148 was issued on 19.03.2012. In response to the same, the A.R. of the assessee appeared from time to time. Thereafter, AO completed the assessment on the basis of material on record available and the information received from the Directorate of Income tax (Investigation) and assessed the income of the assessee at Rs. 6,96,030/- u/s. 147 of the I.T. Act, 1961 vide his order dated 15.1.2013.

3. Against the assessment order, assessee preferred an appeal before the Ld.CIT(A) who vide his impugned order dated 19.3.2015 has dismissed the appeal of the assessee.

4. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.

5. Ld. Counsel of the assessee has filed the Paper Book containing pages 1 to 32 attaching therewith the copy of Paper Book filed before the CIT(A); Copy of notice u/s. 148 of the I.T. Act; copy of letter dated 16.4.2012 requesting for providing reasons recorded for reopening of the case; copy of our letter dated 30.4.2012 requesting for supply of the reason recorded; and copy of reason for belief for income has escaped assessment. He stated that Ld. CIT(A) has erred in sustaining the initiation of the proceedings under section 147 of the I.T. 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. He further stated that Ld. CIT(A) also erred in sustaining the initiation of proceedings u/s. 147 of the I.T.

Act on the basis of information received from DIT(Inv.) mechanically and without independent application of mind. He further stated that the reasons recorded were mere reasons to suspect and were just to make fishing and roving enquiries, as no independent enquiry was conducted by the AO before issuing such notice u/s. 148 of the I.T.

Act and as such the proceeding initiated under section 148 was a mere pretence. To support his contention he submitted that the issue in dispute is squarely covered in favour of the assessee by the ITAT decision dated 09.1.2015 in the case of G&G Pharma India Limited vs. ITO passed in (AY 2003-04) in which the Judicial Member is the Author. He further stated that the above decision of the ITAT dated 9.1.2015 has been upheld by the Hon’ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G&G Pharma India Ltd. In this regard, he filed the copies of the aforesaid decisions before the Tribunal. In view of the above, he requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee.

“Reasons for the belief that income has escaped assessment:

In this case, information was received from the Director of Income Tax (Investigation), New Delhi that the assessee had received an amount of Rs. 9,00,000/- as follows:-

Beneficiary’s Beneficiary Beneficiary Value Date on Name of Bank Branch a/c No. name bank name bank of entry which account from of entry branch Taken entry holder of which entry giving taken entry entry giving account giving given bank account Mann PSB Tilak 300000 3.6.2004 Umesneh Keshav K.B. 625 Finance & Nagar, Securities Sehkari Leasing P New Delhi Pvt. Ltd. Ltd. Mann PSB Tilak 300000 3.6.2004 Umesneh Keshav K.B. 625 Finance Nagar Securities Sehkari Leasing Pvt. Pvt. Ltd. Ltd. Mann PSB Tilak 300000 6.7.2004 Fine Corp. K.B. 3834 Finance Nagar Finance N. Leasing Pvt. & Ltd. Leasing Pvt. Ltd.

Information so received has been gone through. The above said instruments are in the nature of 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 bona fide one. Therefore, I have reason to believe that an income of Rs. 9,00,000/- has escaped assessment in the assessment year 2005-06 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 u/s. 148 of the Income Tax Act, 1961. In this case the assessment was made u/s. 143(1), not u/s. 143(3) of the I.T. Act, 1961.

I am therefore, satisfied that the said income, on account of accommodation entry worth Rs. 9,00,000/- received by the assessee has escaped of assessment and accordingly, after recording the above said reason as laid down under the provisions of Section 148(2) of the Income Tax Act, 1961 notice u/s. 148 is being issued. Sd/-

(C.S. SARSAR) Income Tax Officer Ward 6(2), New Delhi”

Year in dispute is bad in law and deserves to be quashed. My view is fully supported by the following judgment/decision:-

Pr. CIT vs. G&G Pharma India Ltd. in ITA No.

545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon’ble Court has adjudicated the issue as under:-

“12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.