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Income Tax Appellate Tribunal, DELHI BENCH “D”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
ORDER PER H.S. SIDHU : JM
These two Appeals filed by the Assessee are directed against the separate Orders passed by the Ld. Principal Commissioner of Income Tax, Delhi-5, New Delhi u/s 263 of the Income Tax Act, 1961 (hereinafter referred as the Act) relevant for the assessment years 2008-08 to 2009-10. Since the issues involved in these appeals are common and identical, therefore, these appeals were heard together and are being disposed of by this common order for the sake of convenience, by dealing with (AY 2008-09).
2. The ground raised in (AY 2008-09) read as under:-
1. The Ld. CIT has erred both in law and on facts in assuming jurisdiction u/s. 263 of the I.T. Act ignoring the fact that the order under revision was passed by the AO u/s. 147/143(3) after conducting enquiry based on the same material forwarded by the DI (Inv.) and on the basis of which action u/s. 147 was initiated and therefore, the finding of the Ld. CIT that the said order was passed without making inquiries or verification of the same material is factually incorrect.
2. The Ld. CIT has erred both on law and on facts in assuming jurisdiction u/s. 263 of the Act without holding and giving finding that the assessment order dated 28.3.2014 is erroneous and prejudicial to the interest of revenue.
3. The impugned order u/s. 263 of the I.T. Act dated 31.3.2016 is bad in law and on facts in so far as it directs AO to conduct enquiry, post set aside of the order u/s. 147/143(3) on the share capital of Rs. 10,00,000/- accepted from the so called accommodation entry providers, is not consistent with the show cause notice dated 23.3.2016 issued for share application money of Rs. 8,50,000/- accepted from two different parties which shows lack of application of mind
by the Ld. CIT.
4. The direction to verify the share application money of Rs. 10,00,000/0 accepted during the year from two parties named in the impugned order do not exist in the record of the appellant as no share application from those parties have been accepted by the appellant during the AY under appeal.
5. The appellant craves leave to add, delete, modify/ amend the above grounds of appeal with the permission of the Hon’ble Appellate Authority.
3. The ground raised in (AY 2009-10) read as under:-
The Ld. CIT has erred both in law and on facts in assuming jurisdiction u/s. 263 of the I.T. Act ignoring the fact that the order under revision was passed by the AO u/s. 147/143(3) after conducting enquiry based on the same material forwarded by the DI (Inv.) and on the basis of which action u/s. 147 was initiated and therefore, the finding of the Ld. CIT that the said order was passed without making inquiries or verification of the same material is factually incorrect.
2. The Ld. CIT has erred both on law and on facts in assuming jurisdiction u/s. 263 of the Act without holding and giving finding that the assessment order dated 28.3.2014 is erroneous and prejudicial to the interest of revenue.
The impugned order u/s. 263 of the I.T. Act dated 31.3.2016 is bad in law and on facts in so far as it directs AO to conduct enquiry, post set aside of the order u/s. 147/143(3) on the share capital of Rs. 8,50,000/- accepted from the so called accommodation entry providers, is not consistent with the show cause notice dated 23.3.2016 issued for share application money of Rs. 10,00,000/- accepted from two different parties which shows lack of application of mind by the Ld. CIT.
4. The direction to verify the share application money of Rs. 8,50,000/- accepted during the year from two parties named in the impugned order do not exist in the record of the appellant as no share application from those parties have been accepted by the appellant during the AY under appeal.
5. The appellant craves leave to add, delete, modify/ amend the above grounds of appeal with the permission of the Hon’ble Appellate Authority.
ITA No. 2520/Del/2016 - A.Y. 2008-09
The brief facts of the case are that Return of income was finally filed on 27.9.2008 declaring NIL income being loss of Rs.10,372/-. This return was processed u/s. 143(1) of the I.T. Act. Subsequently, the case was reopened u/s. 147 of the I.T. Act on the basis of information received from the office of the DIT(Inv.II), New Delhi that the assessee had received accommodation entries amounting to Rs. 10,00,0000/- from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. Notice u/s. 148 of the Income Tax Act, 1961 was issued on 28.3.2013. The assessee has filed a letter on 10.12.2013 stating that return already filed on 27.9.2008 may be treated in response to notice u/s. 148 of the I.T. Act, 1961. Subsequently, notices u/s. 143(2) and 142(1) of the I.T. Act, 1961 alongwith letter were issued and the same were complied with by the Assessee’s AR by attending the proceedings from time to time and filed necessary details. AO observed that there was no business activities carried on by the assessee. Hence, the loss of RS. 10,372/- was not allowed and the income was taken at NIL vide order dated 29.3.2014 passed u/s. 143(3)/147 of the I.T. Act, 1961.
4.1 The AO has made a proposal u/s. 263 of the I.T. Act, for revising assessment order dated 28.3.2014 stating that 5 certain facts have emerged, which were not available on record at the time of assessment u/.s 147 of the I.T. Act. The AO has held the order as erroneous and prejudicial to the interest of revenue. The grounds of proposal taken by the AO is that enquiries of Investigation Wing, Delhi of the Department have unearthed huge accommodation entry racket being operated by accommodation entry operator Jain Brothers by way of more than 100 companies/ firms etc. the investigation wing has complied a report and date of the beneficiaries of such entries. The name of the assessee company figures in the list of beneficiaries of Share Capital Premium / Loan. The perusal of cheque book written by Jain Brothers for 28.3.2009 at Page No. 52 of the seized annexure, A-25, entry is found recorded showing pay orders/ cheques issued in the name of M/s Lakshya Corporate Solutions Private Limited, through Jain Group Company M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. The assessment u/s. 147 in this case has been made not taking into account the above facts that Jain Brothers have provided the accommodation entries in lieu of certain commission charged from the beneficiary parties from various companies / firms, which are being controlled by Jain Brothers.
4.2 The examination of the assessment record reveals that the assessment order passed u/s. 143(3)/147 of the Act on 6 28.3.2014 by the AO is found erroneous in so far as it is prejudicial to the interest of the revenue due to the following reasons:-
On the basis of the information received from O/o
DIT(Inv.)-II, New Delhi that the assessee had received accommodation entries amounting to Rs. 10,00,000/- from the following party as detailed below, case was taken up for scrutiny u/s. 147:-
Cheque From To Nam Cheque Cheque Amount Book Company Company e of No. date (Rs.) Date Name name the issuin g Bank 28/03/ Humtum M/s Axis 012006 28/03/ 5,00,000 2009 Marketing Lakshya 2009 Pvt. Ltd. Corporat e Solutions Pvt. Ltd. 28/03/ Attractive M/s Axis 012833 28/03/ 5,00,000 2009 Finlease Pvt. Lakshya 2009 Ltd. Corporat e Solutions Pvt. Ltd. 4.3 Assessment u/s. 147 was completed on 28.3.2014 without making above addition, as assessee claimed to have received Share Application Money from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. for Rs. 10,00,000/- on above dates, which was confirmed by M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. Ld. Principal CIT, New Delhi has observed that while passing the assessment order u/s. 147, AO failed to apply his mind to the case in all perspective and fact that the flow of money is from company of a proved accommodation entry provider, which is not normal business transaction. AO failed to understand collusion of assessee company with the entry provider that these entries are actually accommodation entry and not genuine transaction and the order passed by him was erroneous.
4.4 Based on the proposal of the AO a Show Cause notice under section 263 of Income Tax Act, 1961 was issued on 23-03-2016 for attendance on 30-03-2016. Assessee company filed reply of the notice on 23.03.2016 vide letter dated 30/03/2016 the assessee company has requested to drop proceedings u/s 263 on various ground that the assessment was done after proper enquiry, however it is seen that order was passed without making inquiries or verification which should have been made thus order passed by him was erroneous, the error of judgment of the A.O can be gauzed from the fact that flow of fund from various entities of accommodation entry provider, Income-tax Officer failed to apply his mind to the case in all perspective and the order passed by him was erroneous, reply of assessee considered and cannot be accepted as department has proved conclusively beyond doubt by conducting detailed investigations, trailing the 8 funds that these funds have been brought by the way of accommodation entries in a orchestrated, coordinated. synchronized, collusive manner. After considering the all facts and circumstances, the assessment order passed u/s 147/143(3) dated 28/03/2014 by the Income Tax officer of Ward-15(1) (erstwhile Ward4(3), New Delhi is being set aside. The AO was directed to re-examine the issue as proposed u/s. 263 of the IT Act and pass the necessary order after giving due opportunity of hearing to the assessee vide his order dated 31.3.2016.
Against the aforesaid order of the Ld. CIT passed u/s. 263 of the Act dated 31.3.2016, assessee is in appeal before the Tribunal.
Ld. Authorised Representative of the assessee has stated 6. Ld. CIT has erred both in law and on facts in assuming jurisdiction u/s. 263 of the I.T. Act ignoring the fact that the order under revision was passed by the AO u/s. 147/143(3) after conducting enquiry based on the same material forwarded by the DI(Inv.) and on the basis of which action u/s. 147 was initiated and therefore, the finding of the Ld. CIT that the said order was passed without making inquiries or verification of the same material is factually incorrect. He further stated that Ld. CIT has erred both on law and on facts in assuming jurisdiction u/s. 263 of the Act without holding and giving finding that the assessment order dated 28.3.2014 is erroneous and prejudicial to the interest of revenue. Hence, he stated that the impugned order u/s. 263 of the I.T. Act dated 31.3.2016 is bad in law and on facts in so far as it directs AO to conduct enquiry, post set aside of the order u/s. 147/143(3) on the share capital of Rs. 10,00,000/- accepted from the so called accommodation entry providers, is not consistent with the show cause notice dated 23.3.2016 issued for share application money of Rs. 8,50,000/- accepted from two different parties which shows lack of application of mind by the Ld. CIT. The direction to verify the share application money of Rs. 10,00,000/- accepted during the year from two parties named in the impugned order do not exist in the record of the appellant as no share application from those parties have been accepted by the assessee during the AY under appeal. To support his contention, he filed the Paper Book containing pages 1 to 116 having various details and information of the assessment and appellate stage. In view of the above, he requested that the assessment may be quashed and also the impugned order passed by the ld. CIT(A) may be cancelled.
On the other Ld. D.R. relied upon the order of the Ld. CIT passed u/s. 263 and stated that the order passed by the AO is without making inquiries or verification which should have been made thus order by the AO was erroneous. He also stated that AO 10 also failed to apply his mind to the case in all perspective and the order passed by him was erroneous, reply of assessee considered and cannot be accepted as Department has proved conclusively beyond doubt by conducting detailed investigations, trailing the funds that these funds have been brought by the way of accommodation entries in a orchestrated, coordinated, synchronized, collusive manner. Hence, he stated that the impugned order may be upheld. To support his contention, he relied upon the judgment dated 02.12.1997 in the case of CIT vs. Shree Manjunathesware Packing Products & Camphor Works reported in [1998] 96 Taxman 1 (SC).
I have heard both the parties and perused the records. I note that in this case return was finally filed on 27.9.2008 declaring NIL income being loss of Rs. 10,372/-. Notice u/s. 148 of the I.T. Act, 1961 was issued on 28.3.2013. The assessee has filed a letter on 10.12.2013 stating that return already filed on 27.9.2008 may be treated in response to notice u/s. 148 of the I.T. Act, 1961.
Subsequently, notices u/s. 143(2) & 142(1) of the I.T. Act, alongwith letter were issued and the same were complied with. The AR of the assessee attended the proceedings from time to time and filed necessary details which were examined by the AO. AO observed that during the year, there were no business activities carried on by the assessee. Therefore, the loss of Rs. 10,372/- was not allowed by the AO and the income was assessed at NIL.
However, the Ld. CIT on the examination of the assessment record observed that the assessment order passed u/s. 143(3)/147 of the Act on 28.3.2014 by the AO is found erroneous in so far as it is prejudicial to the interest of the revenue due to the following reasons:-
“On the basis of the information received from O/o
DIT(Inv.)-II, New Delhi that the assessee had received accommodation entries amounting to Rs. 10,00,000/- from the following party as detailed below, case was taken up for scrutiny u/s. 147:-
Cheque From To Nam Cheque Cheque Amount Book Company Company e of No. date (Rs.) Date Name name the issuin g Bank 28/03/ Humtum M/s Axis 012006 28/03/ 5,00,000 2009 Marketing Lakshya 2009 Pvt. Ltd. Corporat e Solutions Pvt. Ltd. 28/03/ Attractive M/s Axis 012833 28/03/ 5,00,000 2009 Finlease Pvt. Lakshya 2009 Ltd. Corporat e Solutions Pvt. Ltd.
Ld. CIT observed that Assessment u/s. 147 was completed on 28.3.2014 without making above addition, as assessee claimed to have received Share Application Money from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. for Rs. 10,00,000/- on above dates, which was confirmed by M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. Ld. Principal CIT, New Delhi has observed that while passing the assessment order u/s. 147, AO failed to apply his mind to the case in all perspective and fact that the flow of money is from company of a proved accommodation entry provider, which is not normal business transaction. AO failed to understand collusion of assessee company with the entry provider that these entries are actually accommodation entry and not genuine transaction and the order passed by him was erroneous. Ld. CIT further observed that the assessment order passed by the AO was without making inquiries or verification which should have been made thus order passed by him was erroneous. I find considerable cogency in the assessee’s counsel contention that Ld. CIT has erred in assuming jurisdiction u/s. 263 of the Act ignoring the fact the order under revision was passed by the AO u/s. 147/143(3) of the Act after conducting enquiry based on the same material forwarded by the DI(Inv.) and on the basis of which action u/s. 147 was initiated and therefore, the finding of the Ld. CIT that the said order was passed without making inquiries or verification of the same material is factually incorrect. I am also in agreement with the contention of the Ld. Counsel of the assessee that Ld. CIT erred in assuming jurisdiction u/s. 263 of the Act without holding and giving the finding that the assessment order dated 28.3.2014 is erroneous and prejudicial to the interest of revenue. I also find that Ld. CIT in his impugned order has wrongly directed the AO to conduct enquiry, post set aside of the order u/s. 147/143(3) of the Act on the share capital of Rs. 10,00,000/- accepted from the so called accommodation entry providers, is not consistent with the show cause notice dated 23.3.2016 issued for share application money of Rs. 8,50,000/- accepted from two different parties which clearly establishes the lack of application of mind by the Ld. CIT and not of that AO. I also find that in the reasons recorded u/s. 147 of the I.T. Act, 1961 the share application money was Rs. 8,50,000/-, however, in the impugned order passed by the Ld. CIT the share application money mentioned was Rs. 10,00,000/-. I am also not in agreement with the observation of the Ld. CIT made at page no. 2 that assessment u/s. 147 was completed on 28.3.2014 without making above addition, as assessee claimed to have received share application money from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. for Rs. 10,00,000/- on above dates, which was confirmed by M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. but following facts have emerged, which were not available on record at the time of assessment u/s.
Because the AO issued notice u/s. 148 of the Act on 28.3.2013 alongwith reasons recorded dated 28.3.2013 and thereafter passed the assessment order dated 28.3.2014 which establishes that the AO was having the record available at the time of assessment u/s. 147 of the Act. For the sake of convenience, I am reproducing herewith the relevant para of the Show Cause Notice dated 23.3.2016 and the relevant para of the impugned order dated 31.3.2016 passed u/s. 263 of the I.T. Act, 1961 as under:-
RELEVANT PORTION OF NOTICE DATED 23.3.2016 ISSUED BY THE LD. CIT U/S. 263 OF THE I.T. ACT. “To The Principal Officer, M/s Lakshya Corporate Solutions Pvt Ltd 19, 2 nd Floor, K.K Business Centre, Veer Savarkar Block, Shakarpur, New Delhi- 110092 Sir, Subject:- Show cause notice u/s 263 for A.Y 2008-09- regarding The examination of the assessment record in your case for the said assessment year reveals that the assessment order passed u/s 143(3)/147 on 28/03/2014 by the Income Tax officer of Ward-lS( ) (erstwhile Ward-4(3)) New Delhi is found 15 erroneous in so far as it is prejudicial to the interest of the revenue due to the following reasons:-
On the basis of the information received from % DIT(lnv.)-II, New Delhi that the assessee had received accommodation entries amounting to Rs. 8,50,000/- from the following party as detailed below, case was taken up for scrutiny u/s 147.”
Cheque From To Nam Cheque Cheque Amount Book Company Company e of No. date (Rs.) Date Name name the issuin g Bank 03/11/ Finage Lease M/s Axis 098415 3.11. 4,50,000 2007 & Finance Lakshya 2007 India Ltd. Corporat e Solutions Pvt. Ltd. 03/11/ Shalini M/s Axis 081342 3.11. 4,00,000 2007 Holdings Ltd. Lakshya 2007 Corporat e Solutions Pvt. Ltd. Assessment u/s 147 was completed on 28/03/2014 without making above addition, as assessee claimed to have received Share Application Money from M/s Finage Lease & Finance India Ltd and Shalinl Holdings Ltd for Rs 8,50,000/- on above dates, which was confirmed by M/s Finage Lease & Finance India Ltd and Shalini Holdings Ltd, but following facts have emerged, which were not available on record at the time of assessment u/s 147.”……… RELEVANT PORTION OF IMPUGNED ORDER DATED 31.3.2016 OF THE LD. CIT U/S. 263 OF THE I.T. ACT. “….ORDER U/S. 263 OF INCOME TAX ACT, 1961
Assessee Company filed its original return of income for the AY 2008-09 on 27.9.2008 declaring loss of Rs. 10,372/-. This return was processed u/s. 143(1) of the I.T. Act. Subsequently, the case was reopened u/s. 147 of the Act on the basis of information received from Office of the DIT (Inv.)-II, New Delhi that the assessee had received accommodation entries amounting to Rs. 10,00,000/- from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. The case was completed u/s. 147/143(3) of the I.T. Act, on 28.3.2014 at assessed loss of Rs. 10,372/-.
The AO has made a proposal u/s. 263 of the I.T. Act, for revising assessment order dated 28.3.2014 stating that certain facts have emerged, which were not available on record at the time of assessment u/.s 147 of the I.T. Act. The AO has held the order as erroneous and prejudicial to the interest of revenue. The grounds of proposal taken by the AO is that enquiries of Investigation Wing, Delhi of the Department have unearthed huge accommodation entry racket being operated by accommodation entry operator Jain Brothers by way of more than 100 companies/ firms etc. the investigation wing has complied a report and date of the beneficiaries of such entries. The name of the assessee company figures in the list of beneficiaries of Share Capital Premium / Loan. The perusal of cheque book written by Jain Brothers for 28.3.2009 at Page No. 52 of the seized annexure, A-25, entry is found recorded showing pay orders/ cheques issued
in the name of M/s Lakshya Corporate Solutions Private Limited, through Jain Group Company M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. The assessment u/s. 147 in this case has been made not taking into account the above facts that Jain Brothers have provided the accommodation entries in lieu of certain commission charged from the beneficiary parties from various companies / firms, which are being controlled by Jain Brothers.
The examination of the assessment record reveals that the assessment order passed u/s. 143(3)/147 of the Act on 28.3.2014 by the AO is found erroneous in so far as it is prejudicial to the interest of the revenue due to the following reasons:-
On the basis of the information received from O/o DIT(Inv.)-II, New Delhi that the assessee had received accommodation entries amounting to Rs. 10,00,000/- from the following party as detailed below, case was taken up for scrutiny u/s. 147:-
Cheque From To Nam Cheque Cheque Amount Book Company Company e of No. date (Rs.) Date Name name the issuin g Bank 28/03/ Humtum M/s Axis 012006 28/03/ 5,00,000 2009 Marketing Lakshya 2009 Pvt. Ltd. Corporat e Solutions Pvt. Ltd. 28/03/ Attractive M/s Axis 012833 28/03/ 5,00,000 2009 Finlease Pvt. Lakshya 2009 Ltd. Corporat e Solutions
Assessment u/s. 147 was completed on 28.3.2014 without making above addition, as assessee claimed to have received Share Application Money from M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. for Rs. 10,00,000/- on above dates, which was confirmed by M/s Humtum Marketing Pvt. Ltd. and Attractive Finlease Pvt. Ltd. Ld. Principal CIT, New Delhi has observed that while passing the assessment order u/s. 147.”…..
8.1 After perusing the aforesaid relevant portion of the notice dated 23.3.2016 issued u/s. 263 of the I.T. Act and the impugned order dated 31.3.2016 passed by the Ld. CIT u/s. 263 of the I.T. Act and keeping in view facts and circumstance of the case, we are of the view that Ld. CIT is itself contradictory, because while assuming jurisdiction u/s. 263 of the I.T. Act, 1961 he ignored the fact that the order under revision was passed by the AO u/s. 147/143(3) of the I.T. Act after conducting enquiry based on the same material forwarded by the DI (Inv.) and on the basis of which action u/s. 147 of the Act was initiated and therefore the finding of the Ld. CIT that the assessment was passed without making inquiries or verification of the same material is factually incorrect and needs to be quashed on this count. I further find that Ld. CIT is also not correct in directing the AO to conduct the enquiry, post set aside of the order u/s. 147/143(3) of the Act on the share capital of Rs. 10,00,000/- accepted from the so called accommodation entry providers, is not consistent with the show cause notice dated 23.3.2016 issued for share application money of Rs. 8,50,000/- accepted from two different parties which shows lack of application of mind by the Ld. CIT. I further note that the direction to verify the share application money of Rs. 10,00,000/- accepted during the year from two parties named in the impugned order do not exist in the record of the assessee as no share application from those parties have been accepted by the assessee during the AY 2008-09. Since we are allowing the appeal of the assessee on legal ground, hence, the case law cited by the Ld. DR is not relevant to the present case. In view of the order passed u/s. 263 of the I.T. Act, 1961 is hereby cancelled and the appeal of the Assessee for the assessment year 2008-09 is allowed. 8.2 As regards (AY 2009-10) is concerned, following consistent view taken in ITA No. 2520/Del/2016 (AY 2008-09) as aforesaid, being the similar and identical facts and circumstances, the Appeal No. 2521/Del/2016 (AY 2009-10) is also allowed in the aforesaid manner.
In the result, both the appeals filed by the Assessee stand allowed. Order pronounced in the Open Court on 13/01/2017.