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Before: SHRI G. D. AGRAWAL & SHRI CHANDRA MOHAN GARG
Appellant by Sh. Satyam Sethi, Adv Respondent by Sh. Umesh Chandra Dubey, Sr. DR Date of Hearing 29.08.2016 Date of Pronouncement 05.09.2016 ORDER PER CHANDRA MOHAN GARG, JM
This appeal is filed by the assessee against the order of the CIT(A) –XIX, New Delhi dated 14/10/2012 passed in First Appeal No. 98/2010-11 for Assessment Year 2003-04.
Application for admission of additional grounds of the assessee:
We have heard arguments of both the sides on the application of the assessee dated 16/9/2114 filed under Rule 11 of the Income Tax Appellate Tribunal Rules 1963 for admission of additional grounds.
The Ld. Counsel submitted that the ground raised along with the original appeal have not been properly wordings in as much as the grievance of the assessee cannot reopening of assessment, though referred to in the grounds is not coming out clearly. The Ld. Counsel further pointed out that in this situation the appellant seeks to raise following additional grounds.
“1. That in the facts and circumstances of the case, the CIT(A) was not justified in upholding the assumption of jurisdiction u/s 147/148 of the Act. The preconditions of Section 147 were not met.
2. That in the facts and circumstances of the case, the CIT(A) did not appreciate that perquisite conditions for assumption of jurisdiction u/s 147 of the Act wee lacking, in as much as, neither the reason o believe provide requisite nexus for the belief that income has escaped assessment nor there was any application of mind before assumption of jurisdiction.
3. That in the facts and circumstances of the case, the CIT(A) erred in upholding the addition of Rs.50,89,210/- made u/s 68 & 69C of the Act.”
The Ld. Counsel pointed out that in view of decision of Hon'ble Supreme Court in the case of NTPC Ltd. Vs. CIT 229 ITR 383 (Hon'ble Supreme Court) the Tribunal has vide powers in appearing the additional ground and if it is found that the legal position of law is in favour of the case of the assessee . The assessee is not prevented from legal issues from raising legal issue before the Tribunal and thus additional grounds of the assessee on legal issue may kindly be admitted.
Reply to the above, the Ld. DR strongly objected to admission of the additional ground and submitted that the grounds which have not been raised at the time of filing original appeal cannot be raised subsequently in the garb of Rule 11 of the Rules. However, on specific query from the fact, the Ld. Dr clearly accepted that the assessee challenged the initiation of reassessment proceeding and notice u/s 147 &148 of the Income Tax Act 1961(for short the Act) by way of raising Ground No. 1 before the CIT(A).
On careful consideration of above submissions decided from outside, we observe that in the grounds of appeal filed before the Tribunal at the time of filing of appeal the issue of challenging the noticed of initiation of re-assessment proceedings u/s 147 & 148 of the Act was not mentioned. However, from the impugned page 1, we note that the assessee challenged the initiation of re-assessment proceedings in the first round of appeal before the First Appellate Authority ie. CIT(A). In view of decision of Hon'ble Supreme Court in the case of NTPC Ltd.(Supra). The assessee can raise additional ground to challenge legality of the initiation of re-assessment proceedings and notice u/s 147 & 148 of the Act. Thus, respectfully following the same we are of the considered view that the additional grounds raised by the assessee deserve to be admitted and hence we admit the same accordingly application of the assessee for admission of additional ground is allowed.
We have heard argument of both the sides on the additional grounds as mentioned hereinabove and carefully perused the relevant material placed on record inter-alia assessment order impugned of the CIT(A) and papers submitted along with appeal including paper book filed by the assessee spread over 52 pages and brief written synopsis of the assessee.
Firstly, the Ld. AR drew our attention towards paper book page 30 and submitted that in the reasons recorded there are number of mistakes regarding facts and figures which clearly shows that the Assessing Officer had initiated re-assessment proceedings without application of mind and thus in view of decision of various decision including decision of Hon'ble High Court including decision in the case of CIT Vs. Suren International Pvt. Ltd 257 ITR 24(Del), the initiation of re-assessment proceedings and notice u/s 147 & 148 of the Act being void ab initio should be quashed.
The Ld. Counsel also pointed out that in the reasons recorded except for generation modus operandi of the alleged entry operator, there is nothing which can be said to create or provide nexus to believe that the appellant had introduced its own unaccounted income in the form of share capital. The Ld. Counsel vehemently pointed out that in the report of investigation wing there is nothing to believe that can be taken as material to prima facie show nexus between the reasons and escapement to income and there was not transactional material to justify assessment of jurisdiction for issuance of notice u/s 148 of the Act and for initiation of re- assessment proceedings u/s 147 of the Act.
The Ld. Counsel placing reliance on the decisions of Hon’ble Jurisdictional High Court of Delhi in the case of Signature Hotels Pvt. Ltd Vs. ITO 338 ITR 51(Delhi) and CIT Vs. G. G. Pharma India Ltd. order dated 8/10/2015 in submitted that the re-opening has to be quashed for the reason that such reasons cannot be based on any tangible material and while the reasons has been recorded without application of mind in mechanical manner then re-opening of assessment and initiation of proceedings u/s 147/148 of the Act deserves to be quashed. The Ld. Counsel again pointed out that in the reasons recorded, reasons to believe has been recorded that the entries of Rs.85.5 lakhs were taken by the assessee during the Financial Year 2003-04 and he initiated re- assessment proceedings for Assessment Year 2003-04 pertaining to Financial Year which shows clear non application of mind. The Ld. Counsel further pointed out that the reasons to believe states that income of Rs.85.5. lakhs has escaped assessment where as share application money received by the assessee during the Financial period was 50.33 lakhs and thus it is amply clear that the Assessing Officer recorded reasons without application of mind in a mechanical manner which cannot be sustained and held valid for issuance of notice and initiation of re-assessment proceedings u/s 147 & 148 of the Act.
The Ld. Counsel again took us through the decision of Hon'ble High Court in the case of Signature Hotels (Supra) and submitted that reason to believe did not refer to any statement of alleged entry operators implicating the assessee neither there is mention of date or receipt of report from the Investigation Wing nor there is date of recording of reasons has been stated in the reasons as per copy supplied to the assessee. Therefore, Assessing Officer initiated re-assessment proceedings in a casual and mechanical manner without application of mind and on this premise the assumption of jurisdiction u/s 147 & 148 of the Act cannot be held as valid, being bad in law and void ab initio.
Replying to the above the Ld. Dr strongly supported the action of the A.O. However, she fairly admitted that there are factual arising in the reasons recorded and present case is pertaining to Assessment Year 2003-04 whereas the Assessing Officer in Para 3 of the reasons recorded the alleged that the entries amounting to Rs.85.50 lakhs have been taken during the Financial Year 2003-04 from group of operators which is relevant to Assessment Year 2004- 05.
On careful consideration of above submissions at the very outset we note that the Assessing Officer recorded following reasons for initiation of re-assessment proceedings u/s 147 of the Act and have issuance of notice u/s 148 of the Act.
“ANNHXURE-A Reasons for the belief that income has escaped assessment in the case of M/s Touchwood
Projects P. Ltd. for A.Y 2003-04
M/s Touchwood Projects P. Ltd., assessed to tax with Ward 16(3), New Delhi. Enquiries of Investigation Wing, Delhi of the Department have unearthed huge accommodation entry racket being operated by various groups of operators. The investigation wing has compiled a report <£L data of the beneficiaries of such entries. I have gone through the report and data sent by the investigation wing. The report clearly indicates that accommodation entries have been taken to plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc and even describes the modus operandi of this scam.
The Investigation Wing’s list of Beneficiaries (of such accommodation entries), gives comprehensive details of Beneficiary’s Name, Beneficiary Bank Name, Beneficiary’s Bank Branch, Account No of Beneficiary in which entry is received (in most of the cases),Value Of Entry Taken, Instrument No. by which Entry is taken, Date on which Entry taken, Name of Account Holder of Entry giving Account, Bank from which Entry given, Branch of Entry giving Bank and A/C No. of entry giving account
This list contains the name of M/s Touchwood Projects P. Ltd. which has taken entries in its accounts in Corporation Bank. Pitampura. The entries amounting to TC85.50 lacs have been taken during the financial year 2003-04 from Group of Operators who were operating from SBP Darya ganj and SBBJ NRR and belong to group of MUKESH GUPTA ALONG WITH HIS CLOSE CONFIDANTES RAJAN JASSAL AND SURINDER PAL SINGH. Investigation Wing has made comprehensive enquiry into bank accounts of these operators and unearthed the group accounts which were used to route the unaccounted cash of beneficiaries.
Thus, the assessee has ploughed back unaccounted money of Rs85.50L.acs in its business through the channel of accommodation entry. Therefore it is failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, for the assessment year 2003-04 and has not paid paid tax on such amount. The unaccounted moneys which should have been charged to tax are being ploughed back to business without paying due tax on it. In view of the above facts, I have reasons to believe that income to the tune of Rs 85.50Lacs, of the assessee company for AY 2003-04, has escaped assessment. Since the assessment for the year has been completed u/s. 143(3) of Act therefore in accordance with the provisions of section 151 of I T Act, sanction for issue of Notice u/s 14S of the Act is being sought from the CIT, Delhi-VI, New Delhi.”
From careful reading of above, it is admitted fact that in Para 3 of the reasons recorded the A.O alleged that the entries has to Rs.85.5. lakhs have been taken during Assessment Year 2003-04 and he is intending to initiate re-assessment proceedings for Assessment Year 2003-04 which is clear non application of mind. In Para 4 also the A.O alleged that the assessee has back unaccounted money of 85.50 lakhs in its business through he accommodation entry and thus there was a failure on the part of the assessee to disclosed fully and truly all material facts necessary for its assessment for Assessment Year 2003-04 but the allegations made in Para 3 as stated above, are clearly contradictory and pertaining to Assessment Year 2003-04 relating to Assessment Year 2004-05 which cannot be taken for consideration for re-initiation of re-assessment proceedings and issuance of notice u/s 147 & 148 of the Act for Assessment Year 2003-04. On reading of the copy of the balance-sheet as on 31/3/2003 it is amply clear that the share capital on 31/3/2004 was of Rs.24,55,200/- where as share capital as on 31/3/2003 was of 74,88,200/- and thus the share capital during the Financial period relating to Assessment Year 2003-04 was 50,33,000/- and which has no relevance to the figure of 85.50 which was noted by the A.O in the reasons recorded.
In view of above noted facts and acquisition, we Assessment Year of the considered view that the A.O initiated re-assessment proceedings u/s 147 of the Act and issue notice u/s 148 of the Act in a mechanical and casual manner and by considering the irrelevant and incorrect facts and thus assumption of jurisdiction for initiation of re-assessment proceedings and issuance of notice u/s 147 and 148 of the Act cannot be held as valid and thus we are inclined to quash the same.
Consequently, additional grounds No. 1 to 3 of the assessee are allowed and initiation of re-assessment proceedings u/s 147 of the Act and notice u/s 148 of the Act is hereby quashed.
Since by the earlier part of this order, we have quashed re- assessment proceedings and issuance of notice u/s 147 and 148 of the Act. Therefore, grounds of the assessee on merits becomes academic and infructuous and be dismissed the same without any further deliberations.
In the result, the appeal of the assessee is allowed on legal grounds.