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Income Tax Appellate Tribunal, DELHI BENCH: ‘F’ NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal by the Revenue is directed against the order dated 01/01/2014 of learned Commissioner of Income-tax (Appeals)-XVIII, New Delhi for assessment year 2004-05 raising the following grounds: i. On the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs. 45,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act ignoring the fact that as per the information received from the Investigation Wing of the department, the said entities are doing no business except to provide accommodation entries on commission basis. ii. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal.
2. At the outset, the learned Authorized Representative of the assessee submitted that in the impugned order, the learned Commissioner of Income-tax (Appeals) has allowed the legal ground of the assessee challenging the jurisdiction in initiating the reassessment proceedings in case of the assessee and did not adjudicate on merits, whereas the revenue in its appeal has agitated only the deletion of the addition and neither taken ground challenging the legal ground allowed to the assessee, nor amended the grounds till date and thus the appeal of the revenue is not maintainable.
3. Learned Senior Departmental Representative, on the other hand, relied on the order of the Assessing Officer but could not controvert the fact that Revenue has not challenged the reassessment proceedings held as void and not in accordance to law, by the learned Commissioner of Income-tax( Appeals). 4. We have heard the rival submissions and perused the material on record. We find that in the case of the assessee the reassessment proceedings under section 147 of the Income tax-Act, 1961 (in short ‘the Act’) were completed on 23/12/2011, making addition of Rs. 45 lakh under section 68 of the Act. Aggrieved, the assessee challenged the reassessment as without jurisdiction before the learned Commissioner of Income Tax (Appeals). It was contended by the assessee that in the reasons recorded for reopening of the assessment, it was mentioned that the assessee had taken accommodation entries of Rs. 11,61,425/- from two parties, namely, M/s Prakash Puneet Comm & Co. (Rs. 7,10,750/-) and M/s Venus Enterprise (Rs. 4,50,675/-), however, the assessee did not receive any money during the year under consideration from these parties and, therefore, the reassessment proceeding initiated against the assessee were illegal. Further, the assessee submitted before the learned Commissioner of Income-tax (Appeals) that in the reassessment completed, addition of Rs. 45 lakh has been made in respect of following parties: (i) Sino Credit & Leasing Rs. 14,00,000 Pvt. Ltd. (ii) Champ Finvest Pvt. Rs. 4,75,000 Ltd. (iii) Omni Farms Pvt. Ltd. Rs. 14,00,000 (iv) Vasudeva Farms Pvt. Rs. 12,25,000 Ltd. Total Rs. 45,00,000
The assessee submitted before the Learned Commissioner of Income-tax (Appeals) that the Assessing Officer has not made any addition on account of the alleged accommodation entries received from the parties as alleged in the reasons recorded and, therefore, the Assessing Officer did not continue to possess the jurisdiction to tax any other income, which came to the notice subsequently in the course of reassessment proceeding. In support of the contention, the assessee relied on the decision of Hon’ble Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. reported in 336 ITR 136 and decision of the Hon’ble Bombay High Court in the case of CIT Vs. Jet Airways(I) Ltd. reported in 331 ITR 236. In view of the submissions of the assessee, the learned Commissioner of Income-tax (Appeals) has decided the issue of jurisdiction in reassessment from paras 5.5 to 5.8 of the impugned order. The relevant paragraphs are reproduced as under: “5.5 In this regard, I have perused all 4 judgements and I find that out of 4 judgments relied upon by the appellant, 2 judgements belongs to Jurisdictional High Court i.e. Hon'ble Delhi High Court and it has also been submitted by the Ld. AR of the appellant that no other High Court has given contrary judgement on the issue that no addition has been made on the basis of reasons recorded by AO. In this regard, factual position of the matter has been discussed by Delhi High Court in the case of Ranbaxy Laboratories Ltd., wherein while deciding the issue in relevant paragraph No. 20, Hon'ble Delhi High Court has observed as under:- The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the Assessing Officer proceeded to reduce the claim of deduction u/s 80 HH and 80-1 which as per our discussion was not permissible. Had the Assessing Officer proceeded to make disallowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per Explanation 3 to reduce the claim of deduction under sections 80HH and 80-1 as well. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in the affirmative in favour of the Revenue and the second part of the question against the Revenue. 5.6 From the above reading of the judgement of Hon'ble High Court, it is apparent that there are 2 situations as under:- (i) AO can make additions on the basis of reasons recorded, thereafter he can made further additions. Thus, this issue has been decided in favour of the Revenue. (ii) AO cannot make the addition if no addition has been made on the issue of reopening. Thus, this issue has been decided against the Revenue. 5.7 In the instant case falls under the second category, wherein no addition has been made on the basis of reopening has been made as is apparent from above discussion. I have considered all the case laws and relevant materials provided by ld. AR of the appellant in this regard. I found that AO has reopened the assessment by observing that there are 3 entries, 2 entries of Prakash Puneet Company amounting to Rs. 7,10,750/- and 1 entry from M/s. Venus Enterprises of Rs. 4,50,675/- aggregating to Rs. 11,61,425/-. However, while concluding the assessment, he has made addition of Rs. 45 lacs under section 68 of the Income Tax Act, 1961 pertaining to following 4 parties:- (i) Sino Credit & Leasing Pvt. Ltd. Rs. 14,00,000 (ii) Champ Finvest Pvt. Ltd. Rs. 4,75,000 (iii) Omni Farms Pvt. Ltd. Rs. 14,00,000 (iv) Vasudeva Farms Pvt. Ltd. Rs. 12,25,000 Total Rs. 45,00,000 5.8 In this regard, Ld. AR of the appellant has put his reliance on the judgement of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT vs. 336 ITR 136, wherein Hon'ble Delhi High Court has addressed similar issue in para 20 of the order which has already been discussed in earlier paragraphs. Similarly, his reliance on other judgements viz. in case of CIT vs. Jet Airways 331 ITR 236 (Bom); CIT vs. Shri Ram Singh 306 ITR 343 (Raj); and Software Consultants 341 ITR 240 (Del) also supports the case. In the instant case, AO has reopened the assessment pertaining to 3 entries totalling to Rs. 11,61,425/- which has been found to be as explained by him but he has made addition of Rs. 45 lacs on 4 other entries. In view of the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories as discussed above, action of Assessing Officer making addition on this account is found to be misconceived. Ground of appeal No. 1 is allowed in favour of the appellant.”
Thereafter, the learned Commissioner of Income-tax (Appeals) allowed the ground of appeal
of the assessee challenging the addition on merit, holding that the Assessing Officer was not justified in making additions, other than grounds taken in 148 proceedings, and therefore he did not adjudicate on merit of the addition of Rs. 45 lakh.
7. It is evident that in the impugned order the learned Commissioner of Income-tax (Appeals) has held the Assessing Officer was not justified in making addition other than the grounds taken in reasons recorded in proceedings under section 147 of the Act, thus, the reassessment proceeding has been held as invalid. We find from the grounds of appeal taken by the Revenue in form No. 36 that the invalidity of reassessment proceedings has not been challenged by the Revenue before the Tribunal and the Revenue has only agitated the addition of on merit. We find that the appeal was filed by the Revenue on 21st of April 2014, however, till date, neither the Revenue has amended the grounds of appeal, nor any request made before us during the hearing. In such circumstances, in our opinion, the appeal of the Revenue is not maintainable, and hence rejected.
8. In the result, the appeal of the Revenue is dismissed. The decision is pronounced in the open court on 16th August, 2016.