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Income Tax Appellate Tribunal, DELHI BENCH “SMC-2”, NEW DELHI
Before: SHRI H.S. SIDHU
Date of Hearing : Date of Hearing : 18 Date of Hearing : Date of Hearing : 18 18-08-201 18 201 2016 201 Date of Order : Date of Order : 05 Date of Order : Date of Order : 05 05-10 05 10 10-201 10 201 2016 201
ORDER ORDER ORDER ORDER This appeal is filed by the Assessee aggrieved with the order of the Ld. CIT(A) 28.9.2015 for the asstt. year 2005-06 on the following grounds :-
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax [CIT(A)] is bad, both in the eye of law and on the facts.
2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the proceedings under Section 147, read with Section 148, ignoring the fact that the same was bad in the eye of law as the condition and procedure prescribed under the statute have not been satisfied and complied with.
On the facts and circumstances of the case, the CIT(A) has erred both on facts and In law, in confirming the order passed by A.O as the reassessment proceedings initiated by the learned A.O. are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and are contrary to the facts.
4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the proceedings under Section 147, read with Section 148, ignoring the fact that the notice issued under Section 148 of the Act is bad in the eye of the law.
5. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the order of the AO rejecting the contention of the assessee that the reason recorded for reopening of the assessment are bad in law and as such the reopening of the assessment is illegal and liable to be quashed so.
7. On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the re-assessment order passed by the AO under section 147 is bad in the eyes of law as the same has been passed without service of notice uls 148 of the Act.
On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the order under section 147/144 of the Income Tax Act, 1961 has been passed without giving assessee an opportunity of being heard which is clear violation of the principle of natural justice.
8. (i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition made by the AO on account of share Application money received from MIs Taurus Iron & Steel Co. Pvt. Ltd. amounting Rs 10,00,000/- u/s 68 of the Income Tax Act.
(ii), That the above said addition has been confirmed despite the fact that the assessee brought all material evidences on record to prove the identity and credit worthiness of the shareholders and genuineness of the transaction.
(iii) That the learned CIT(A) has erred both on facts and in law in confirming the said addition having been made without there being any adverse material against the assessee.
On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in confirming the addition of RS.2,36,026 on account of agricultural expense.
(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in enhancing the addition to Rs.3,80,2401- from Rs.2,36,026/- made by the AO on account of expenditure incurred toward agriculture expense.
(ii) That the above said enhancement has been made arbitrarily rejecting the detailed explanations and submissions submitted by the assessee.
(i) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in enhancing the income assessed by the AO.
(ii) That the enhancement order passed by the learned CIT(A) is without following the statutory provisions of the Act is bad in law and liable to be questioned.
(iii) On the facts and circumstances of the case, learned CIT(A) has erred both on facts and in law in going beyond the scope of his power of enhancement u/s 251 of the Income Tax Act.
The appellant craves leave to add, amend or alter any of the grounds of appeal.”
2. The brief facts of the case are that the assessee filed its return of income on 29.10.2005 declaring income NIL and the same was processed u/s. 143(1) of the I.T. Act, 1961. Subsequently, proceedings u/s. 147 of the I.T. Act were initiated by recording reasons on the basis of information received from the Investigation Wing of the Department vide letter dated 31.3.2009 from Addl. DIT (Inv.) Unit-IV, New Delhi that the assessee is also a beneficiary of taking accommodation entry of Rs. 10,00,000/- in the garb of share application money/share capital/share premium from M/s Taurus Iron & Steel Co. Pvt. Ltd., an entity of Shrl Tarun Goyal, an entry provider as unveiled by the Investigation Wing of the Department. Consequently, notice u/s 148 was issued by AO on 26.03.2012 after recording the reasons u/s 147 of the Act. However, no return of income was filed by assessee in response to the said notice. Therefore, notices u/s 142(1) dated 17.09.2012 & 11.10.2012 were issued and served upon the assessee which remained un-complied with. A final show cause notice/questionnaire u/s 142(1) dated 04.02.2013 was issued to the assessee by speed post and in response to which, AR of assessee attended the assessment proceedings. Consequently, details were filed by assessee raising many objections in connection with validity of issuance and service of notices and also the reassessment proceedings. However, AO considered the submissions of assessee along with details filed and completed the assessment by making the various additions.
3. Aggrieved with the same, assessee filed the Appeal before the Ld. CIT(A) who vide impugned order dated 28.9.2015 partly allowed the appeal of the assessee.
4. Against the order of the Ld. CIT(A) dated 28.9.2015, the assessee is in appeal before the Tribunal.
5. Ld. Counsel of the assessee reiterated the contention raised in its Appeal wherein he stated that Ld. CIT(A) erred in confirming the proceedings u/s. 147 r.w.s. 148, ignoring the fact that the same was bad in the eye of law as the condition and procedure prescribed under the statute have not been satisfied and complied with. He further submitted that Ld. CIT(A) has also erred in confirming the order of the AO rejecting the contention of the assessee that the reason recorded for reopening of the assessment are bad in law and as such the reopening of the assessment is illegal and liable to be quashed so; the order u/s. 147 is bad in the eyes of law as the same has been passed without service of notice u/s. 148 of the Act; the order passed by the authorities below is passed without appreciation of information already on record, reasons of satisfaction 5 recorded for reopening, and the reassessment order passed by A.O. are all not connected with each other. He further submitted that assessee had discharged obligations and filed all necessary documents, confirmations at the time of original assessment sufficient to meet the satisfaction under section 148 proceedings when the assessing officer having accepted those confirmation and information in original assessment proceedings. To support his contention, he referred the various case laws of the Delhi High Court by which the present case of the assessee is covered including the case of Signature Hotel Pvt. Ltd. (2011) 338 ITR 51. He further relied upon the ITAT, ‘C’ Bench, Delhi in which on the similar facts and circumstances the issue in dispute has been dealt by the Tribunal in the case of Shri Govind Kripa Builders and Promoters vs. ITO passed in (AY 2008-09) vide order dated 19.12.2014 in which Hotel Signatures Pvt. Ltd. decision (supra) was followed. Later the Department went in Appeal before the Delhi High Court, in ITA No. 486/2015 in the case of Pr. CIT vs. Sh. Govind Kripa Builders Pvt. Ltd. which was dismissed on 4.8.2015 by the Hon’ble High Court of Delhi. Hence, he requested that the reassessment proceedings may be quashed.
In this case, Notice of hearing was sent to both the parties, in spite of the same, none appeared on behalf of the Revenue nor filed any application for adjournment. Keeping in view the facts and circumstances of the present case and the issue involved in the present Appeal, I am of the view that no useful purpose would be served to issue notice again and again to the Revenue, therefore, I am deciding the present appeal exparte qua Revenue, after hearing the Ld. AR and perusing the records.
I have heard Ld. Counsel of the assessee and perused the records. I find that the AO has recorded the reasons for belief that income has escaped assessment as under, the same is attached with the Paper Book filed by the assessee at page no. 17 & 18.
M/s Hasanpur Cold Storage Pvt Ltd. AY 2005 M/s Hasanpur Cold Storage Pvt Ltd. AY 2005-06 M/s Hasanpur Cold Storage Pvt Ltd. AY 2005 M/s Hasanpur Cold Storage Pvt Ltd. AY 2005 06 06 06
A search u/s. 132 of the I.T. Act was conducted at the office premises of Sh. Tarun Goyal, CA. The Addl. DIT(Inv.) Unit-IV after conducting the detailed enquiries and analyzing the bank account and the various documents seized from the premises has reported to the CIT, Delhi IV vide its letter No. Addl. DIT (Inv.)/Unit-IV/Beneficiaries /2008-09/392 dated 31.3.2009. The report is annexed as Annexure B. The main gist report are as under:-
Sh. Tarun Goyal has formed certain firms/ companies for providing accommodation entries. All these companies are operating from 13/34 WEA Karol Bagh or 203, Dhaka Chamber Naiwala, Karol Bagh.
Various bank a/c has been opened in the name of these companies with authorized signatories which are employees of Sh. Tarun Goyal. 3. Huge cash was found deposited in these bank accounts. 4. Sh. Tarun Goyal is using such concerns for giving accommodation entries to various beneficiaries after receiving cash from such beneficiaries in lieu of a certain commission.
During the course of search operations on 15.9.2008, Sh. Tarun Goyal in his statement has accepted all the facts mentioned above.
6. M/s Tarun Iron & Steel Company Pvt. Ltd. is one of such concern used by Sh. Tarun Goyal for providing accommodation entry. The Addl. DIT (Inv.) has also forwarded the detailed list of the beneficiaries who has received accommodation entry during FY 03-04 to 2008- 09.
M/s Hasanpur Cold Storage Pvt. Ltd. (AABCH0861N) is one such concern who has received Rs. 10,00,000/- from the entry provider M/s Taurus Iron & Steel Company Pvt. Ltd.
In view of the findings of the Investigation Report, the lenders in these cases have been proved to be men/parties of no creditworthiness. The statements on oath and the letters of admission clearly show that these transactions are non genuine. Therefore the aforesaid credit entries are squarely hit by section 68 of the I.T. Act. Credit of Rs. 10,00,000/- is appearing in the books of assessee. The low cost a duty on the assesse to prove the genuineness of the transaction and creditworthiness of party giving such credit of Rs. 10,00,000/-. Though the assessee has not provided the details of the persons who has given this share capital/ share premium / share application money in its return of income, but the entry providers has categorically stated that they had provided share capital/ share premium/ share application money after receiving cash from the beneficiaries. The categorical admission of the entry provider as well as the finance statement of the assessee clearly points out the fact that the transactions entered by the assessee are not genuine. I, therefore, have reasons to believe that this amount of Rs. 10,00,000/- represents income of the assessee chargeable to tax which has escaped assessment for AY 2005-06.
The necessary approval u/s. 151(2) may kindly be accorded for issue u/s. 148 of the Income Tax Act, 1961 for AY 05-06.”
16.1 I find considerable cogency in the submissions of the Ld. Counsel of the assessee that the facts and circumstances of the present case are similar and identical to that of case of Shri Govind Kripa Builders and Promoters vs. ITO, decided by the ‘C’ Bench, ITAT, New Delhi in (AY 2008-09) vide order dated 19.12.2014 (in which one of the Judicial Member was the Party), wherein the Hotel Signatures Pvt. Ltd. (Supra) decision of the Delhi High Court was followed. Against the order dated 19.12.2014 of the Tribunal, the Department went in Appeal before the Hon’ble Delhi High Court, in ITA No. 486/2015 in the case of Pr. CIT vs. Sh. Govind Kripa Builders Pvt. Ltd. and the Hon’ble High Court of Delhi vide its order dated 04.8.2015 has observed as under:-
It is seen that the ITAT has in the impugned order dated 19th “3. December, 2014 passed in for the Assessment Year 2008-09 relied upon the judgment of this Court in Signature Hotels P. Ltd., vs. ITO [2011] 338 ITR 51 9
(Delhi) and come to the conclusion that the AO did not apply his own mind to the information and the materials forming the basis of the information.
The Court finds no legal error whatsoever in the ITAT coming to the above conclusion. In the facts and circumstances of the present case, no substantial question of law arises for determination by the Court.”
16.2 I also find that these reasons merely based on investigation wing information without surveillance of substantiation and without any statement being mentioned therein and without nature of transaction being narrated therein and without tangible material, and further without application of mind on amount of income escaping assessment, shows that the reopening is bad in law and needs to be quashed.
16.3 In the background of the aforesaid discussions, I am of the considered view that only effective ground in this appeal is reassessment proceedings u/s. 148 of the I.T. Act, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. After hearing Ld. Counsel of the assessee on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 21.7.2011 passed by the Hon’ble Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051 wherein the Hon’ble High Court has held matter as under:-
“Held, allowing the petition, that the reassessment proceeding were initiated on the basis of information received from the Director of Income Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during the financial year 2002-03 as stated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assesee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed.”
In view of above, I am of the considered view that above issue is exactly the similar to the issue involved in the present appeal and is squarely covered by the aforesaid decision of the Hon’ble High Court of Delhi delivered in Hotel Signatures Ltd. (Supra). Hence, respectfully following the above precedent, I 11 decide the legal issue in dispute in favour of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature.
In the result, the Assessee’s Appeal stands allowed.
Order pronounced in the Open Court on 05/10/2016