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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
Before: SHRI C.M. GARG & SHRI L.P. SAHU
Per L.P. Sahu, Accountant Member:
This is an appeal filed by the assessee against the order of ld.CIT(A), Meerut dated 18.09.2013 for the assessment year 2003-04 on the following grounds :
“1. That the Ld.CIT(A) has erred in upholding the applicability of section 147/148. The provisions of section 147/148 being in applicable under the facts and circumstances of the case, the impugned assessment be kindly quashed.
2. That the Ld CIT(A) has erred and is not justified under the facts and circumstances of the case in rejecting/not accepting assessee's ground that the impugned assessment made on the basis of material and evidence gathered by the AO at the back of the assessee and without
making it available to him despite specific request, was untenable and unsustainable and deserve to be quashed.
That the Ld CIT(A) has overlooked assessors several substantial grounds/contentions and in particular that the action taken by the AO u/s 147/148 on the basis of 'borrowed' satisfaction of another AO and not on his own satisfaction, was untenable and unsustainable in law.
4. That alternatively, but without prejudice to other grounds as above, the Ld CIT(A) has erred and is not justified in rejecting/not accepting the assessee's contentions that even on merits of the case the impugned addition of the gift amount as unexplained credit was untenable and unsustainable under the facts and circumstances of the case.
5. That the Ld CIT(A) has erred and is not justified in rejecting assessee's ground which is without prejudice to other ground that it being a case of reassessment u/s 147/148, the penal interest u/s 234B is not chargeable, which be kindly cancelled/held as not chargeable.
6. That the Ld CIT(A) and the AO have not appreciated the assessee's contentions and evidence properly in the right perspective. The several observations as made, inference as drawn and reliance on the case laws as cited by them arc misplaced/misconceived under the facts and circumstances of the case.”
The brief facts of the case are that the assessee filed its return of income for the year under consideration on 29.09.2003 declaring an income of Rs.1,64,730/- including the income of minor son Nikhil Gupta amounting to Rs.24,544/-. The return was processed u/s. 143(1). Nikhil Gupta became major on 22-09-2004 and filed his personal return for AY: 2005-06. His assessment for A.Y: 2005-06 was completed by ITO Ward 2(1), Meerut U/s 143(3) vide order dt 30-03-2007 wherein the concerned AO had added the Gift of Rs 20,00,000/- as non-genuine, which was received by Nikhil Gupta from Shri Satish Chandra Goel, an NRI relative. Besides he has also made some observation in respect of another gift of Rs 5,00,000/- which was received by Nikhil Gupta during F.Y. 2002-03, i.e. the year under consideration, when he was minor. To this effect, the Income-tax Officer, Ward 2(1), Meerut, the AO of Nikhil Gupta informed to the ITO Ward 2(2), Meerut, the AO of assessee vide letter dated 03.03.2007. On the basis of this information, the AO of the assessee initiated proceedings u/s. 147/148 after recording the following reasons :
“The ITO, Ward 2(1), Meerut, vide his office letter F.No. Nikhil/ITO/W- 2(1)/06-07/dated 03.03.2007 informed that during the course of assessment proceedings in the case of Shri Nikhil Gupta, an NRI gift of Rs.20 lacs was added to his income as the identity and creditworthiness of donor could not be proved. The NRI donor had made gift worth more than Rs.6 crores to various non related persons. Earlier also a gift of Rs.5 lacs received by the assessee during the F.Y. 2002-03 was proved bogus as this transaction was made from the account of Shri Ajay Mittal, instead of alleged donor Shri Chetan Prakash Agarwal. Further the donor was never produced before the undersigned instead of providing several opportunities.
Since the gift of Rs.5 lacs was proved bogus, therefore, the case of the assessee was reopened u/s. 147 of I.T. Act by issuing notice u/s. 148 of I.T. Act. In response to this the assessee replied that he was minor during the F.Y. 2002-03. On this basis the reassessment proceedings in the case of assessee was filed and has requested to take action in the case of his father Shri Rajiv Kumar, 214 Ganj Bazar, Sadar, Meerut.
Since the gift received by the assessee is bogus, therefore, I have reason to believe that an income of Rs.5 lacs has escaped from assessment and the action u/s. 147/148 is to be taken.”
3. The Assessing Officer in the reassessment proceedings, required the assessee to produce the donor and its bank account, which he failed to do. The AO, therefore, relying upon the inference of ITO 2(1) Meerut that gift of Rs.5 lacs received by the assessee during the F.Y. 2002-03 was proved bogus as this transaction was made from the account of Shri Ajay Mittal, instead of alleged donor Shri Chetan Prakash Agarwal, made an addition of Rs.5,00,000/- to the total income of assessee as bogus gift. The assessee carried the matter before the ld. CIT(A), wherein he challenged the validity of reassessment proceedings as well as merits of the addition. However, the ld. CIT(A) after considering various submissions of the assessee and different case laws, dismissed the appeal of the assessee vide impugned order. Aggrieved, the assessee is in appeal before the Tribunal.
Referring to grounds Nos. 1, 2 & 3, challenging validity of action u/s. 147/148, the ld. AR of the assessee submitted that the initiation of reassessment proceedings is not sustainable, having been initiated on borrowed satisfaction of another AO, i.e., ITO ward 2(1), Meerut having jurisdiction over Nikhil Gupta in the course of his assessment proceedings for A.Y. 2005-06. This fact is evident from the reasons recorded as well as admission of AO in the remand report that “the action u/s. 147 was initiated by the AO on the basis of belief entertained by the another AO Ward 2(1), Meerut who made assessment of Nikhil Gupta”. Therefore, the action u/s. 147/148 is not sustainable in law in view of the following decisions :
(i). CIT vs. Shree Rajasthan Syntex Ltd 313 ITR 231 (Raj.) (ii). ACIT vs. Radheyshyam Mohanlal Maheshwari, 50 SOT 75 (Ahd).
It was submitted that the addition of Rs.20,00,000/- made in A.Y. 2005- 06 in the case of Nikhil Gupta stood deleted in appeal by the ld.CIT(A) vide order dated 15.11.2010 and the departmental appeal filed before the Tribunal stood dismissed due to low tax effect. It was submitted that the reasons recorded are vague as the information regarding the inference about bogus gift of Rs.5 lacs, was communicated to the AO Ward 2(2) vide letter dated 03.03.2007 whereas the assessment order for A.Y. 2005-06, on the basis of which such inference was drawn, was passed on subsequent date on 30.03.2007. No material was confronted to the assessee which was read against him. Also, there is no date on the reasons recorded. It was submitted that the AO in the reasons recorded has made a mere reference to the information received from ITO Ward 2(1) Meerut without applying his mind independently and therefore, the reasons being vague vitiate, the proceedings u/s. 147 of the Act. Reliance is placed on the decision of ITAT Delhi Bench in Meenakshi Overseas Pvt. Ltd. vs. ITO (ITA No. 3148/Del./2013 dated 22.03.2016).
The ld. DR, on the other hand, relied on the order of the lower authorities and submitted that the ld. CIT(A) has made good order, which needs no interference.
We have considered the rival submissions and have gone through the entire material on record and we find considerable substance in the contentions of the assessee. It is notable that the present proceedings u/s. 147/148 have been initiated merely on the basis of information, inferences and enquiries made by other Assessing Officer, i.e., ITO 2(1) Meerut having jurisdiction over Nikhil Gupta, that too with respect to A.Y. 2005-06. The reasons recorded contain only the reference of the inferences drawn by other ITO as communicated vide letter dated 03.03.2007 whereas the assessment order for A.Y. 2005-06, on the basis of which such inferences were drawn by the said ITO, was passed on subsequent date on 30.03.2007. The reasons recorded do not contain even the date of its recording. The AO in the instant case has acted solely on the satisfaction of other Assessing Officer without recording his own satisfaction or without having any independent material to form a belief of escapement of income. Therefore, in view of the decisions in the cases of Shree Rajasthan Syntex Ltd. (supra), Radheyshyam Mohan Lal Maheshwari (supra) and Meenakshi Overseas Pvt. Ltd., the initiation of proceedings u/s. 147/148 are vitiated, being based on borrowed satisfaction which is not sustainable in the eye of law. It is further notable that even the material on the basis of which the other Assessing Officer drew inferences against the assessee and communicated to the assessee’s Assessing Officer, were not confronted to the assessee for rebuttal despite the assessee made specific request for the same. Therefore, the action of the AO cannot be sustained in the eye of law in view of the decision of Hon’ble Supreme Court in Kishanchand Chellaram vs. CIT, 125 ITR 713 (SC) and of Allahabad High Court in Kanhaiya Lal (HUF) vs. CIT, 247 ITR 686. We, therefore, quash the re- assessment proceedings on this legal aspect of the case. Since the proceedings u/s. 147 have been quashed being bad in law, we need not to enter into the merits of addition.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 25.11.2016.