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Income Tax Appellate Tribunal, DELHI BENCH ‘F’ NEW DELHI
PER CHANDRA MOHAN GARG, JUDICIAL MEMBER
This appeal has been filed by the assessee against the
order of the ld. CIT(A)- XVIII, Delhi dated 02.12.2013 in first
appeal No. 174/09-10 pertaining to A.Y 2002-03.
2 ITA No. 621/Del/2014 2. The assessee has raised the following grounds of appeal:
“1. The CIT(A) erred in law in holding that reassessment proceedings were validly initiated in the subject case, whereas it is apparent on a bare perusal of the Reasons Recorded, that the findings of the AO are erroneous, contradictory, and neither demonstrate any application of mind to the alleged information received, nor any belief that income had escaped assessment.
Without prejudice to Ground 1, the CIT(A) has erred in confirming the validity of reassessment proceedings, as challenged before him, without passing a speaking order in this regard.
The CIT(A) has erred in facts and in law, in sustaining an addition of Rs.20,00,000 under section 68 of fhe Act, in respect of share application money received from four persons, to whom the money admittedly stood refunded the next year.
The CIT(A) has erred in facts and in law, in sustaining an addition of Rs.25,00,000 under section 68 of the Act, in respect of share application money received from five persons, ignoring copious evidence led by the Assessee, simply because the Assessee was not able to produce them, before the AO.”
3 ITA No. 621/Del/2014 Ground Nos. 1 & 2
Apropos Ground No. 1, we have heard the rival contentions and
have perused the relevant material on record. The ld. AR reiterated
the written submissions dated 31.5.2016 which read as follows:
“Regarding ground of appeal Nos. 1 & 2. it is respectfully submitted that the reasons as recorded by the Assessing Officer (‘AO’) are only the information i.e. only a report received from the Office of the Addl. DIT(Inv.) which is not sufficient for the issuance of notice under section 147/148 of the Income Tax Act, (‘the Act’) as the report is too general in nature, vague, non specific and showing non application of mind by the AO to the information. First para of the report says that the assessee has taken bogus/accommodation entries, the assessee is into the business of money laundering on a very large scale and is also actually providing accommodation entries. In the second para, analysis of the table shows that all the entries except at serial no.9 i.e. Ajay Singh, every entry is appearing twice which shows non application of mind by the AO. In the third para, report stated that I am accepting bogus entries. In this report, it is not clear as to, what is my business? Finally the AO added Rs.45 lacs by treating the transactions as bogus accommodation entries.
The CIT(A) confirmed the action of the AO by observing that as the AO has followed the procedure laid down by Hon’ble Supreme Court in the case of G K N Driveshaft the reopening is valid. (Page 20, Para 6.1 and 6.2)
4 ITA No. 621/Del/2014 Our respectful submission is that the reasons as recorded are not at all sufficient to initiate proceedings. The AO is duty bound to form his own opinion by further investigation of the information. Another aspect is that the reasons were not supplied to the assessee with the notice issued. These were supplied during the assessment proceedings. This also makes the assessment order invalid as held in the case of Haryana Acrylic: 308 ITR 38(Del) that the reasons will go hand in hand with notice, followed by Delhi Tribunal in the case of Balwant Rai Wadhwa (ITA No.4806/Del/2010), Suren International (ITA No.2941/Del/2010), Shagun Impex (ITA No.2756/Del/2010) and many other ITAT judgments. There are many judgments of Hon’ble High Court and the Tribunal on the issue that merely information received in report form is not sufficient to initiate reassessment proceedings. Further, reliance is placed on the decision appended at S. No. 14 in the paper book dealing specifically with the issue at hand.
Regarding ground of anneal Nos.3 & 4, it is respectfully submitted that during the appellate and remand proceedings, the assessee provided each and every detail of all the 9 share holders, which was in his possession, to the satisfaction of the AO. The same are appended in the paper book at S. Nos.4-12. S. No.3, are the details of share applicants to whom the money stood refunded in subsequent financial year 2003-04(details are at page no.9 of the paper book). S. Nos. 4-7, are the detail of the share applicants provided to the AO regarding the applicants to whom the money stood refunded. S. Nos.8-12, are the details of the share applicants as provided to the AO to whom shares
5 ITA No. 621/Del/2014 were originally allotted. The documents procured at that time were duly provided to the AO for his satisfaction. The share applicants as at S. No.8-12 have transferred their holding to new people in the year 2006(details are at page no. 10-11 of the paper book). In other words, the original share applicants are not our share holders, as on date. During the assessment proceedings, he issued summons under section 133(6) of the Act to all the 9 share holders. All summons returned back as un- served. By this and by believing the report, he doubted the identity of the share holders, the creditworthiness of the share holders and the genuineness of the transactions and added Rs.45 lacs.
The CIT(A) confirmed the action of the AO by relying on the judgment of Hon’ble Delhi High Court in the case of N. R. Portfolio (96 DTR 0281) wherein the High Court observed that mere filing of details of incorporation of the company and by submitting that all the transactions were through banking channels is not sufficient to discharge the burden lying upon the assessee.
The facts of the case relied on by the CIT(A) are different. In this case, the respondent was a company, had received share application money from other Private Limited Companies on large scale and the Revenue Department was of the view that the respondent company is introducing his own money through the other companies. Only detail of Incorporation of the Companies and Share Application Forms provided. In para 6, it has been observed that the share application was received from the persons who had been identified as entry operators. In the
6 ITA No. 621/Del/2014 present case, no statement had ever been recorded or nothing is there to suggest that the share applicants are in into entry accommodation. In our case, all the share applicants are individuals. Four of them got their money refunded, rest five transferred their holdings to others and none of them is our shareholders as on date. Merely because summons returned un- served, it cannot be said that the identity is not proved, creditworthiness is doubtful or transaction were not genuine whereas specific details were filed.
The ld. counsel of the Revenue contended that the A.O was quite
justified in initiating reassessment proceedings and issuing notice u/s
147 & 148 of the Income-tax Act, 1961 [hereinafter referred to as 'the
Act' for short] because there was information with the A.O received
from the Investigation Wing of the department regarding bogus entries
of Rs. 85 lakhs and the assessee did not disclose its imports of metal in
its books of accounts thus the A.O was quite justified in invoking the
reassessment proceedings in this regard.
On careful consideration of the above rival submissions, first of
all, we may point out that the A.O recorded following reasons for
initiation of reassessment proceedings and issuance of notice u/s 147 &
148 of the Act:
7 ITA No. 621/Del/2014
"A report has been received from the Office of the Addl. DVT (Inv) Unit VI Delhi that the assessee has taken bogus/accommodation entries. The modus -operandi in this regard is explained by Addl DIT (Investigation) Unit ~V1, New Delhi that the assessee is actually involved in money laundering business on a very large scale & in the grab of share Capital/Share Application money, the assessee is actually providing accommodation entries in the shape of bogus share money share applicationn money/Share Capital money etc. ---- ---- In view of the definite information from Addl DIT [Inv] Unit VI. New Delhi that the assesses accepted bogus-accommodation entries I have reason to believe that at least income chargeable to tax amounting Rs. 85,00,000/- has escaped assessment in this case & the same is to be brought to tax under section 147/148 of the I.T Act. 1961.
Further information has been received from DDIT [Inv] Unit VI(3) New Delhi on 17.8.2009 that as per the order of the ld. CIT(A) the aforesaid assessee has imported the metal. --- ---
As per the order of the ld. CIT(A), metal was imported whereas M/s Gaurav Exim P. Ltd has claimed that the metal was purchased from the local market. M/s Gaurav Exim P. Ltd was not able to substantiate its claim that he above good were purchased from local market.
For the sake of completeness, reasons recorded by the A.O u/s 147 of the Act are being annexed to this order as Annexure A.
8 ITA No. 621/Del/2014 6. As it is amply clear from the above that in the table there are 17
entries which are repeated twice. The A.O has reproduced the same
without making even a prima facie enquiry and after the table he
noted that in view of the definite information from Addl. DIT [Inv]
Unit-VI, New Delhi that he assessee has accepted bogus
accommodation entries thus he has reason to believe that the income
of the assessee amounting to Rs. 85 lakhs chargeable to tax has
escaped assessment. In the last para of assessment order, the A.O
himself observed that the contention of the assessee that there are
only five transactions totaling to Rs. 45 lakhs, appears to be correct
and he made addition of Rs. 45 lakhs only. In this scenario, we are
inclined to accept the contentions of the assessee that the report of
the Investigation Wing was general in nature, vague and non specific
about the nature of the alleged transaction and the A.O has accepted
the same as gospel truth and without verifying the same and without
application of mind he proceeded to initiate reassessment proceedings.
In the table stated in the reasons recorded eight entries have been
mentioned twice and this fact was accepted by the A.O when pointed
out by the assessee during the assessment proceedings. From the
relevant operative part of page 20 paras 6.1 and 6.2 of the order of
the ld. CIT(A), it is clear that he confirmed the action and addition by
9 ITA No. 621/Del/2014 observing that the A.O has followed the procedure laid down by the
Hon'ble Supreme Court in the case of GKN Drive Shaft Vs. ITO 259 ITR
59 [SC] wherein four principles were laid down by their Lordships for
validly ignition of proceedings u/s 147/148 of the Act.
In the present case, the A.O proceeded only on the information
received from the Investigation Wing on the issue of alleged
accommodation entries without providing due application of mind and
even without analyzing the information received from the Investigation
Wing of the department. Regarding second issue of unaccounted
import of goods, the A.O did not make any examination from the books
of accounts and from the books of accounts and from the final
statement of accounts submitted during quantum assessment
proceedings and on the basis of the remand report of the A.O this
addition was deleted being not sustainable which further shows the
non application of mind and initiation of reassessment proceedings and
issuance of notice u/s 147/148 of the Act by the A.O. Now the ratio of
the decision of the Hon'ble Supreme Court in the case of CIT Vs. Sureen
International since reported as 357 ITR 24 [Delhi] [at page 32] comes to
support the above contentions of the A.O wherein the similar set of
facts and circumstances assessment proceedings and notice u/s 148 of
10 ITA No. 621/Del/2014 the Act has been quashed when there was no application of mind by
the A.O to the information received from the Investigation Wing and
when the A.O proceeded on the basis of incorrect information without
even alleging the actual nature of transaction in a mechanical manner.
The relevant para of the order in 357 ITR 24 [Delhi][supra] reads as
under:
"13. We have heard counsel for the parties at length.
The learned counsel for the appellant contended that even though there is no specific allegation that the assessee had failed to disclose all the material facts but the same can be gleaned from the reasons itself. We are unable to accept this contention. In the first instance, we do not find the reasons as recorded by the Assessing Officer to be reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to countenance that any belief based on such statements can ever be arrived at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assessment can be stated to have been formed based on such reasons as recorded."
Hence the ratio of the of the decision of the jurisdictional High
Court of Delhi in the case of Sureen International [supra] is also
applicable to the present case. Consequently, the legal ground Nos. 1
and 2 of the assessee are allowed and the impugned notice u/s 147 of
the Act and subsequent order u/s 144 of the Act dated 29.12.2009 are
quashed.
11 ITA No. 621/Del/2014 Ground Nos. 3 and 4
Since by the earlier part of this order we have quashed the
assessment order as well as notice issued u/s 148 of the Act and
reassessment order passed u/s 144/147 of the Act, therefore, grounds
of the assessee on merits have become academic and infructuous and
accordingly we dismiss the same as having become infructuous.
In the result, appeal of the assessee is allowed on legal grounds.
Order pronounced in the open court on 05.08.2016.
Sd/- sd/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER Dated : 05th August, 2016
VL/
Copy of order forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By Order
Asstt Registrar, ITAT, New Delhi