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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-II’ : NEW DELHI
Before: SHRI H.S. SIDHU
The Assessee has filed the Appeal against the Order dated 28.11.2014 of the Ld. CIT(A)-6, New Delhi pertaining to assessment year 2005-06 and raised the following grounds:-
1 That the learned Commissioner of Income Tax
(appeals) has grossly erred both in law and on facts in sustaining an assessment under section 143(3)/147 of the Act at an income of Rs.44, 82, 092/- as against returned loss of Rs. 15,018/-, and that too without giving any fair and proper opportunity of being heard to the appellant company, thereby, violating the principles of natural justice.
2 That the learned Commissioner of Income Tax
(Appeals) has further erred both in law and on facts in sustaining the initiation of the proceedings under section 147 of the Act and, further completion of assessment under section 143(3)/147 of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act.
That the learned Commissioner of Income Tax
(Appeals) has further erred in law and on facts in sustaining the initiation of proceedings uls 147 of the Act on the basis of information received from DIT
(investigation) mechanically and without independent application of mind.
3.1 That further, the reasons recorded were mere reasons to suspect and were just to make fishing and roving enquiries, as no independent enquiry was conducted by the assessing officer before issuing such notice under section 148 and as such the proceeding initiated under section 148 was a mere pretence.
4 That the learned Commissioner of Income Tax
(Appeals) has further erred both in law and on facts in sustaining an addition of Rs.45,00,000/- as alleged accommodation entry received from Sh. S.K. Gupta, and held to be unexplained cash credit uls 68 of the Act.
4.1 That in doing so, the learned Commissioner of Income Tax (Appeals) has completely ignored and overlooked all the necessary documents which were filed before him explaining the fact that the appellant company has sold its shareholding in various companies and as a result received Rs. 45,00,000/-- from M/s
Passion Chit Company Pvt. Ltd, which was duly reflected in the appellant company's bank account.
4.2 That further the learned Commissioner of Income
Tax (Appeals) ignored the basic fact that no amount was ever received from Sh. S.K. Gupta (the alleged accommodation entry operator), rather Rs. 45,00,000/- was received from M/s Passion Chits Company Pvt. Ltd. and all necessary details regarding the said transactions were filed before learned ITO and CIT (A), which were totally ignored by the both the lower authorities, thus, addition so made and sustained was clearly based on suspicions and surmises and is liable to be deleted as such.
That the learned Commissioner of Income Tax
(Appeals) has further erred in law and on facts by failing to appreciate the basic fact that there could be no double taxation of the same sum once as sale consideration on and again as undisclosed income received from MIs
Passion Chits Company Private Ltd. This addition is in disregard of the judgment of Apex Court in the case of Laxmipat Singhania vs CIT reported in 72 ITR 291 and therefore, unsustainable.
6. That the learned Commissioner of Income Tax
(Appeals), solely based his order on statement made by Sh. D.N. Taneja on 07.01.2009, wherein he specifically surrendered Rs. 45,00,000/- on behalf of appellant company, ignoring and overlooking the basic fact that Sh. D.N.Taneja was never a Director in the appellant company and nor he had any shareholding in the appellant company, and thus, the surrender made by him on behalf of appellant company cannot be relied upon, as he is not aware of the facts of the appellant company.
7 That the learned Commissioner of Income Tax
(Appeals) further relied on a statement of Sh. S.K. Gupta dated 05.01.2009, which statement was never provided to the appellant company for rebuttal and further no opportunity was given to cross examine the alleged entry operator. Thus, his statement should be excluded altogether and further addition made on the basis of his statement is liable to be deleted as such.
8 That the learned Commissioner of Income Tax
(Appeals) has erred in law and on facts in sustaining additions in the hands of assessee company by merely relying on the order of assessment passed by learned AO and not giving any independent finding of his own and as such the appeal so decided by learned CIT (A) is with total non application of mind and also without giving any fair and proper opportunity of being heard to the appellant company., thereby, violating the principles of natural justice.
The brief facts of the case are that the assessee originally filed the return on 21.11.2005 declaring loss of Rs. 15,018/-. The return was processed u/s 143(1) of the I.T. Act, 1961. In this case information was received from the Directorate of Income Tax (Investigation) that the assessee company was a beneficiary of accommodation entries of Rs. 45 lacs through one Sh. D.N. Taneja.
Sh. Taneja in his statement recorded on 07.01.2009 offered the transaction done Mr. S.K. Gupta company M/s Passion Chits P ltd., who is a known entry operator, who had admitted before the investigation wing that he was operating as an entry operator & various companies floated by him were also used for this purpose.
On the basis of this information, proceedings u/s 147 of the I.T. Act were initiated after recording reasons there for and accordingly a notice u/s 148 was issued on 12.03.2012. A notice u/s 142(1) of the I.T. Act, 1961 was issued on 25.09.2012 fixing the case for 20.11.2012. In response to the same, the A.R. of the assessee appeared from time to time. During the course of assessment proceeding assessee was asked to submit the nature of accommodation entry to M/s Passion Chits P ltd. and in response of the claim assessee submitted evidence/ proof in support of received Rs. 45,00,000/- on 12.07.2004. In response to letter dated 02.01.2013 assessee filed a reply wherein the assessee were asked to adduce evidence regarding receipt of Rs. 45,00,000/- on 09.07.2004 through Sh. D.N. Tanja (Passion Chits P Ltd.). A show cause letter dated 30.01.2013 issued to the assessee requested specifically asked the transaction through Sh. D.N. Taneja (Passion Chits) and required to prove this credit as per norms laid down u/s 68 of the I.T. Act, 1961 and the case fixed for 11.02.2013. In response to this, no body attended nor any reply was submitted.
Final opportunity issued through a show cause letter dated 15.02.2013 fixing the case for 22.02.2013. In response to this, no body attended nor any reply was submitted. Therefore, in the absence of any reply receipt from the assessee, AO completed the assessment on the basis of material on record available and the information received from the Directorate of Income tax (Investigation). Hence AO held that the receipt of a sum of Rs. 45,00,000/- credited in the books of the assessee on 09.07.2004 held to be in the nature of an accommodation entry & treated as unexplained & brought to tax u/s 68 of the LT. Act, 1961 vide his order dated 01.3.2013 by assessing the income of the Assessee at Rs. 44,84,982/- u/s. 147/143(3) of the I.T. Act, 1961.
3. Against the assessment order, assessee preferred an appeal before the Ld.CIT(A) who vide his impugned order dated 28.11.2014 has dismissed the appeal of the assessee.
Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in appeal before the Tribunal.
5. Ld. Counsel of the assessee has filed the Paper Book containing pages 1 to 119 attaching therewith the copy of Return of income alognwith financial statements for the year ended on 31.3.2005; copy of notice under section 148 dated 12.3.2012; copy of reply to AO dated 16.4.2012; copy of reasons recorded provided by AO; copy of reply to AO dated 11.5.2012 containing objections to reopening of assessment; copy of documentary evidences filed before AO in order to establish the sale of share holding in various companies to M/s Passion Chits Pvt. Ltd; and copy of written submission filed before CIT(A). He stated that Ld. CIT(A) has erred in sustaining the initiation of the proceedings under section 147 of the I.T. Act and, further completion of assessment under section 143(3)/147 of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act. He further stated that Ld. CIT(A) also erred in sustaining the initiation of proceedings u/s. 147 of the I.T. Act on the basis of information received from DIT(Inv.) mechanically and without independent application of mind. He further stated that the reasons recorded were mere reasons to suspect and were just to make fishing and roving enquiries, as no independent enquiry was conducted by the AO before issuing such notice u/s. 148 of the I.T. Act and as such the proceeding initiated under section 148 was a mere pretence. To support his contention he 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. He 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 this regard, he filed the copies of the aforesaid decisions before the Tribunal. In view of the above, he requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee.
On the contrary, Ld. DR relied upon the order passed by the authorities below and stated that the AO has properly recorded the reasons for reopening by due application of mind, hence, the appeal of the Assessee may be dismissed.
I have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee’s counsel on the issue in dispute. In my view, it is very much necessary to reproduce the reasons recorded by the AO before issue of Notice to the Assessee u/s. 148 of the I.T. Act, 1961 which is reproduced hereunder:-
“REASONS FOR THE BEUEF THAT INCOME HAS ESCAPED ASSESSMENT IN THE, CASE OF M/S
NEPTUNE PROMOTERS PVT, LTD. FOR A.Y.2005-06
PUC is a proposal for reopening the case u/s 147 of the IT Act for the A .Y. 2005-06 in the prescribed Performa.
M/s Neptune Promoters Pvt. Ltd ,3374, Hauz Qazi, Delhi, is assessed to tax with Ward 13(2), New Delhi the assessee filed its return of income for the assessment year 2005-06 declaring loss of Rs 15018/-.
Survey u/s 133A of the Income Tax Act, 1961 was earlier carried out by the Investigation wing on 2006-
2007 in the case of Sh. S.K. Gupta who is an accommodation entries provider and it was noticed that had assessee had provided accommodation entries to a large number of beneficiaries. On the basis of the impounded material in the case of Mr. S.K. Gupta and on the basis of further inquires it has been noticed that he inter alia provided accommodation entries of Rs 45 lakhs to the company M/s Neptune Promoters Pvt. Ltd. having PAN, AAACN 24910 .
During the course of search and seizure proceedings in the Taneja Group of cases, the main controlling person of the group Mr. D.N. Taneja in his statement recorded on 07-01-2009 offered the entire (transactions) done with Mr. S.K. Gupta's companies amounting to Rs 6.23 crores as additional income the respective financial years and in respective companies of his group (there are 15 such companies includes M/s Neptune Promoters Pvt. Ltd) in which accommodation entries of Rs 45 lakhs for A.Y. 2005-06 have been offered as additional income by Mr D.N. Taneja in-his above mentioned statement tabulated as below. S.No. Date Name Amount Name of the other company 1 09.7.2004 Neptune 20,000,00 Passion Promoters Chits Pvt. Ltd. 2 09.7.2004 Neptune 10,000,00 Passion Promoters Chits Pvt. Ltd. 3 09.7.2004 Neptune 15,000,00 Passion Promoters
Pvt. Ltd. Chits
In statement of Mr S.K. Gupta reported on 05.01.2009 during the course of survey u/s. 133A of the Income tax Act, in the case of M/s Omni Farms Pvt. Ltd. in which he has admitted regarding providing of accommodation entries to various group including Taneja Group.
Copy of Ledger Account “Loan July, 03 to July, 04 – TANEJA JI” which includes accommodation entries of Rs. 45 lakhs provided by the companies of Mr. SK Gupta to the assessee was extracted by the Investigation Wing from the back up files of one of the Laptops impounded during the course of survey in the case of Mr. SK Gupta on 20.11.2007.
Extracts of pages of Appraisal Report in TOI Group explains the modus operandi in respect of providing of accommodation entries by Mr. S.K. Gupta through various group of his companies.
In view of the above, I have reason to believe that income to the extent of Rs 45 Lakhs has escaped assessment . Therefore, proceedings u/s 147 of the Act is proposed to be initiated for A.Y. 2005-06.
Since four years have elapsed from the end of the relevant assessment year i.e. A.Y. 2005-66 approval of the Addl. ClT, Range -13 , New Delhi is solicited u/s 151(2) of the Act. Submitted please for kind direction and approval.