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Income Tax Appellate Tribunal, DELHI BENCH “SMC-3”, NEW DELHI
Before: SHRI H.S. SIDHU
Date of Hearing : Date of Hearing : 15 Date of Hearing : Date of Hearing : 15 15-06-201 15 201 2016 201 Date of Order : Date of Order : 15-06-201 Date of Order : Date of Order : 201 2016 201
ORDER ORDER ORDER ORDER PER H.S. SIDHU PER H.S. SIDHU : : : : JM PER PER H.S. SIDHU H.S. SIDHU The Appeal filed by the Assessee emanate out of the Order dated 31.10.2012 passed by the Ld. CIT(A)-XVII, New Delhi relevant to assessment year 2003-04
The following grounds have been raised in the Assessee’s Appeal:-
That the impugned order is bad in law and deserves to be quashed, as it has been passed even considering, much less discussing, the submissions made in writing by the assessee in support of grounds no. 1, 2 and 7 raised before the CIT(A).
2. That the learned CIT(A) erred in law in upholding the validity of initiation of proceedings u/s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act') as the reasons recorded by the AO did not lead to any belief that the assessee's income had escaped assessment.
3. That the learned CIT(A) erred in upholding the validity of a vague and stereotyped notice u/s. 148 of the Act, which manifestly showed non application of mind.
4. That the learned CIT(A) erred in law in confirming the addition made By the AO to t e tune of Rs.2,00,000/- to the returned income of the assessee, despite the fact that the assessee had discharged the initial onus placed on it as per section 68 of the Act.
5. The learned CIT(A) erred in confirming the addition of Rs.2,00,000 to he returned income of the assessee, without giving any regard to the fact that the assessee was not earning any income, being of just 21 years of age, having just passed out of the college.
Additional ground The appellant respectfully prays for being granted leave to urge and be heard on the following legal ground which requires no investigation of facts and can be decided on the basis of material already on record:
"6. That the assessment order dt. 14.11.2008 is void ab initio, having been passed in pursuance of an invalid notice dt. 14.10.2008 issued u/s 143(2) of the Act."
The brief facts of the case are that the assessee was not assessed to tax and no return of income was filed for the relevant assessment year. The return of income was filed for the first time in response to notice u/s. 148. Based on the information received from the Investigation Wing that the assessee has received accommodation entry of Rs. 2,00,000/- from Pawan Kumar Changia from his bank account with State Bank of Patiala, Darya Ganj Branch, the AO issued notice u/s. 148 on 03.1.2008. The assessment was completed u/s. 144/147 on 14.11.2008 after adding this amount of Rs. 2,00,000/- as accommodation entry received during the year.
Aggrieved by the order dated 14.11.2008, Assessee filed an Appeal before the Ld. CIT(A), who vide impugned order dated 31.10.2012 dismissed the appeal of the assessee.
4.1 Aggrieved by the impugned order dated 31.10.2012, assessee filed the Appeal before the Tribunal.
Ld. Counsel of the assessee has submitted that notice u/s. 148 has been issued in a mechanical manner on the basis of vague information received from DIT (Inv.) and also stated that the reasons recorded by the AO did not lead to any belief that the assessee’s income had escaped assessment. He stated that the lower authorities has wrongly issued the notice u/s. 148 which manifestly showed non-application of mind. He further stated that the AO has simply filled up a proforma mentioning the information received, hence, the notice u/s. 148 is patently illegal. In this regard, he placed reliance of the various decisions of Hon’ble Delhi High Court including the decision in the case of Signatures Hotels (P) Ltd. vs. ITO & Anr. (2011) 338 ITR 51 (Del.) and stated that the present case is covered by the aforesaid decision of the Hon’ble Delhi High Court, hence, the reopening is required to be quashed.
On the other hand, Ld. DR controverted the contentions raised by the Ld. Counsel of the assessee and stated that the lower authorities have passed the well reasoned order which does not need any interference on the part of the Tribunal, therefore, the orders of the revenue authorities may be upheld.
I have heard both the counsel and perused the records. I find that in the present case the reasons recorded by the AO for initiation of proceedings read as under:-
“An information was received from Directorate of Inspection (Inv.) that Sh. Gurmeet Singh resident of J-10/20, Rajouri Garden, New Delhi has received Rs. 2,00,000/- through cheque dated 7.12.2002 issued by Pawan Kumar Gupta Changia from his/her Bank account no. 6944 with State Bank of Patiala, Darya Ganj, New Delhi. The said cheque has been credited in his / her bank account no. 15863 with Punjab & Singh bank, Janakpurei, Delhi.
Hence, I have reason to believe that an income of Rs. 2,00,000/- chargeable to tax for the asstt. Year 2003-04 relevant to FY 2002-03 has escaped assessment within the meaning of Section 147 of the I.T. Act, 1961.”
7.1 On perusal of the aforesaid reasons indicates that notice uls 148 has been issued in a mechanical manner on the basis of vague information from Directorate of Inspection (Inv.). The AO did not dwell upon the veracity and the basis of information received. He has not mentioned any material which has led him to believe that the amount deposited in the bank account represented accommodation entry which has escaped assessment. He has simply filled up a proforma mentioning the information received. Therefore, the notice u/s. 148 is patently illegal. I also note that the facts and circumstances of the present case
Signature Hotels (P) Ltd. vs. ITO & Anr. (2011) 338 ITR 51 (Del.) decided by the Hon’ble Delhi High Court. In the said case during the assessment proceedings similar reasons were recorded by the AO which reads as under:-
"7. In the present case the undated reasons recorded by the AO for initiation of proceedings; read as under:
Information received from the office of the Director of IT (Inv.)- VI, New Delhi revealed that Mls Signature Hotels (P) Ltd. has introduced unaccounted money in its books of account during financial year 2002-03 through accommodation entry from Mls Swetu Stone PV for Rs. 5lacs.
In view of the above, I have reasons to believe that taxable income to the tune of Rs. 5 lac has escaped assessment within the meaning of s. 147 of the IT Act, 1961.”
7.2 From reading of the above, it is crystal clear that the aforesaid reasons do not satisfy the requirements of s. 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement. Further, it is apparent that the AO did not apply his own mind to the information and examine the basis and material of the information. The AO accepted the plea on the basis of vague information in a mechanical manner. The reasons recorded reflect that the AO did not independently apply his mind to the information received from the DIT (Inv.) and arrive at a belief whether or not any income had escaped assessment. I further find considerable cogency in the assessee’s submission that the present case is squarely covered by the Order of the Hon’ble Delhi High Court dated 21.7.2011 passed in the case of Signature
Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051, wherein the Hon’ble Court has held 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 the background of the aforesaid discussions, I am of the considered opinion that the facts and circumstances of the present case are similar to that of 6
Signature’s Hotel case which was decided by the Hon’ble Delhi High Court, as aforesaid, therefore, respectfully following the same reasoning, I decide the legal issue in dispute in favor 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 appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 15.06.2016.