P.T. ENGINEERS PVT. LTD.,NEW DELHI vs. DCIT, NEW DELHI

this consolidated order for the sake of convenience, by dealing with (AY 2006-07).

2. The grounds raised in (AY 2006-07) read as under:-

1. The assumption of jurisdiction under section 148 of the Income Tax Act, 1961 is without authority of law and is void.

2. That the ld. Assessing Officer has no valid material

to assume jurisdiction under section 147 of the Income

Tax Act, 1961 and consequentially reasons so framed is null, void and bad in law. In the absence of valid material available on record for formation of reason to believe that ther has been an escapement of income by the ld.

Assessing Officer the reopening is bad in law.

3. That there was no reason to believe as contemplated under section 147 of the Income Tax Act,

1961 that income chargeable to tax had escaped assessment and hence the assessment as framed by the ld. Assessing Officer is not valid in law and deserves to be quashed.

4. That the reasons alleged to have been recorded are not based on facts but on suspicion which cannot be the foundation for formation of reason to believe as contemplated under the provisions of section 147 of the Income Tax Act, 1961 and hence the reopening is bad in law and reassessment as framed deserves to be quashed.

5. That the addition sustained of Rs.27 ,50,000 / - under section 68 of IT Act being Share application money and addition sustained of Rs. 68,750 as estimated

commission is arbitrary, unjust and bad in law.

6. The share applicant being identifiable person duly

assessed to income tax, genuine hence the addition of Rs.27,50,000 / - being share application money, under Section 68 of IT Act and addition sustained of Rs 68,750 as estimated commission is arbitrary and bad in law.

7. The above grounds are independent and without

prejudice to one another.

8. Your appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing.

3. The grounds raised in (AY 2009-10) read as under:-

1. The assumption of jurisdiction under section 148 of the Income Tax Act, 1961 is without authority of law and is void.

to assume jurisdiction under section 147 of the Income

Tax Act, 1961 and consequentially reasons so framed is null, void and bad in law. In the absence of valid material available on record for formation of reason to believe that ther has been an escapement of income by the ld.

Assessing Officer the reopening is bad in law.

1961 that income chargeable to tax had escaped assessment and hence the assessment as framed by the ld. Assessing Officer is not valid in law and deserves to be quashed.

commission is arbitrary, unjust and bad in law.

assessed to income tax, genuine hence the addition of Rs.20,00,000 / - being share application money, under Section 68 of IT Act and addition sustained of Rs 50,000 as estimated commission is arbitrary and bad in law.

prejudice to one another.

8. Your appellant craves leave to add, alter, amend or withdraw any of the grounds of appeal at the time of hearing.

4. The brief facts of the case are that the assessee filed its return of income on 30.11.2006 declaring NIL income. Subsequently, the AO received information from the Directorate of Income Tax (Inv.) of the Income Tax Department that M/s PT Engineers Pvt. Ltd. was a beneficiary of accommodation entries during the period of FY 2005- 06 relevant to the AY 2006-07. The entries were received from established entry operators identified by the Investigation Wing on the basis of search / survey conducted on Sh. SK Jain, CA. The case was reopened u/s. 148 of the I.T. Act, 1961 and notice was issued to the appellant on 18.3.2013 which was duly served upon the assessee and in response to the same, assessee’s counsel attended the proceedings and filed the documents. Thereafter, the AO made the addition of Rs. 28,18,750/- and assessed the income of the assessee at the same amount i.e. Rs. 28,18,750/- vide his order dated 10.2.2014 passed u/s. 147/143(3) of the I.T. Act, 1961.

5. Against the Order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 7.10.2014 has dismissed the appeal of the assesseee and affirmed the action of the AO on the legal issue i.e. reopening of the case u/s. 147/148 of the I.T. Act, 1961 as well as on merits.

6. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.

7. Ld. Counsel of the assessee has filed the two Paper Books one is containing pages 1 to 30 attaching therewith the copy of letter to AO dated 6.1.2014 with its enclosures; letter to AO dated 16.1.2016 requesting the AO to issue notice under section 133(6) of the I.T. Act to Vogue Leasing and Finance Private Limited and SR Cables Private Limited; Letter to AO dated 5.2.2014 with its enclosures; letter to CIT(A) dated 25.7.2014 with its enclosures; Reasons for reopening under section 147/148 of the I.T. Act and notice of reassessment.

The another Paper Book is containing the copies of the ITAT orders and Hon’ble High Court orders in the case of G&G Pharma India Ltd. (Delhi High Court) G&G Pharma India Ltd. (Delhi Tribunal) – ITA No. 3149Del/2013; Viney Auto Pvt. Ltd. (Delhi Tribunal)- ITA No. 291/De;/2010; MKM Finsec (P) Ltd. (Delhi Tribunal) – ITA No. 5203/Del/2013 and Lavitra Technologies Pvt. Ltd. (Delhi Tribunal) – ITA No. 2912/Del/2013 and relied upon the same.

She stated that Ld. CIT(A) has erred in confirming the action of the AO in assuming jurisdiction u/s. 147 and that too without complying with the mandatory conditions as prescribed under section 147 to 151 of the I.T. Act, 1961 and the reasons recorded are invalid and contrary to law and facts and there is no satisfaction as per law u/s. 151 of the Act. She further draw our attention towards the copy of reasons for reopening the case u/s. 148 and stated that no proper reasons were recorded; no nexus between the materials relied upon and the belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148; no independent conclusion that there was escapement of income. It was further stated that the case was reopened only on the basis of Investigation Wing information which suffers with serious debility and lacks definiteness, without describing the basic aspects of alleged transaction and in the absence of the same, whole action of the AO gets vitiated. To support her contention she submitted that the issue in dispute is squarely covered in favour of the assessee by the ITAT decision dated 09.1.2015 in the case of G&G Pharma India Limited vs. ITO passed in (AY 2003-04) in which the Judicial Member is the Author. She further stated that the above decision of the ITAT dated 9.1.2015 has been upheld by the Hon’ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G&G Pharma India Ltd. In view of the above, she requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee.

“Reasons for Re-opening the case U/S 147/148 in the case of M/s P T Engineers Pvt. Ltd.

(PAN: AADCP4222B) A. Y. 2006-07 In this case, the return income was on 30.112006 and showing total income of Rs. “Nil" which was processed/assessed uls 143(1) on 24.03.2008. Subsequently, information has been received from the Directorate of Income Tax (Investigation) of the Income Tax Department that MIs P T Engineers Pvt. Ltd. is a beneficiary of accommodation entries during the period of F. Y. 2005-06 relevant to the A.Y.2006-07 received from established, entry-operators identified by the Investigation Wing on the basis of Search/Survey conducted by it on Shri S.K. Jain, CA. A comprehensive investigation was carried out by the Investigation Wing in this regard and on the basis of investigation carried out and evidences collected, examination made a report has been forwarded which shows that the above named person floated a number of concerns Pvt ltd. companies for providing accommodation entries to various desirous persons. These concerns/companies were found to be only paper entities providing accommodation entries and not doing any other real business. All these persons were controlling various concerns/companies/entities through which they had been providing accommodation entries to several persons/companies/entities. The assessee is one of the beneficiaries of accommodation entries. They have been doing the business of providing accommodation entries through these concerns by giving cheques/PO/DD in lieu of cash with/without the help of some agents/mediators by charging certain commission for providing these entries which usually varied from 1.5% to 3.5%.

A perusal/examination of report/related documents/related records show that M/s P.T. Engineers Pvt. Ltd. being assessed with Circle- 14(1), New Delhi has also received a sum of Rs.27,50,OOO/- as accommodation entries by way of share capital share premium from the following S.K. Jain Group companies:-

S.No. Date Information/Entry Provider Amount

Perusal/examination of report / documents /records show that the entire transactions are lack ingredients of genuineness of transactions. identity of directors of company and creditworthiness within meaning of provisions of Section 68 of the Act. It is therefore, held that the amount introduced as share capital! share application money/share premium is unaccounted money of assessee company introduced in its account books through conduits after routing through the group companies of Sh. S.K. Jain.

Further enquiries were conducted by this office uls 131 in many other cases during assessment proceeding for A Y. 2005-06, to examine genuineness of transaction, to verify identity of share subscribers and their creditworthiness in respect of entities/companies floated/controlled by Sh. S.K. Jain, CA It has been revealed that all these entities are paper entities and could not stand for verification under provisions Section 68 of the Income Tax Act. 1961 regarding a:edits in the books of assessee company.

The entities named above have been found to be non-existent at the addresses as reported on independent enquiry conducted by this office.

In view of the above recorded reasons, I have reason to believe that the assessee company has been benefited on account of bogus/accommodation entries to the tune of Rs. 27,50,000/- during the period 01-04-05 to 31-03-06 relevant to the A.Y. 2006-07.

Therefore, income to the extent of Rs. 27,50,000/- has escaped assessment being unaccounted income of the assessee company.

Apart from this, as mentioned above, commission paid outside the books of account also escaped assessment. Therefore, income to the extent of commission as Rs. 27,50,000/- has also escaped assessment being failure on the part of assessee to disclose fully and truly all material facts necessary for assessment for A.Y. 2006- 07.

Accordingly, action uls 147 is proposed to be taken as provided under law. Necessary approval to issue notice uls 148 is solicited from the CIT, Delhi- V, New Delhi as provided in sub-section of Section 151 of the Act. Notice uls 148 is to be issued to bring this escaped income and also any other income chargeable to tax which has escaped assessment and which comes to notice subsequently in the course of proceedings.

Submitted for kind perusal and approval please.