SHRI BINDIYA AHUJA,NEW DELHI vs. ITO, NEW DELHI

consolidated order for the sake of convenience, by dealing with (AY 2003-04).

“1. That the order passed by the Hon'ble CIT(A) is bad in Law, wrong on facts and against the principles of natural justice. 2(a) That the proceedings initiated under section 147 of the Income Tax Ac 1961 are void-ab-initio and the re- assessment is bad in law. The assessment u/s 147 has been completed on wholly erroneous interpretation of section 147 of the Income Tax Act. The conditions precedent imperative for the issuance of a notice u/s 147 of the Income Tax Act were wholly conspicuous by their absence in the facts and circumstances of this case and as a consequence thereof, all imminent proceedings and the assessment order are wholly illegal, without the authority of law, null and void. (b) The Hon'ble CIT(A) has failed to consider the fact that the learned Assessing Officer has exercised his powers under section 147 of the Income Tax Act on mere surmises and suspicions and on wholly unreasonable and speculative premises and he had no reason to believe that income chargeable to tax for the aforesaid relevant year has escaped assessment either by reason of the appellant company failing to make a return u/s 139 of the Income Tax Act or by its failure by omission or failure to disclose, fully and truly, all the material facts necessary for such an assessment.

(c) The Hon'ble CIT(A) has failed to appreciate that the notice u/s 148 of the Income Tax Act was not served upon on the appellant within the stipulated time limit and therefore the assessment is invalid, null and void-ab- initio. 3(a) The Hon'ble CIT(A) has erred both in law and in facts in confirming the addition of Rs. 4 Lacs made by the Ld. AO u/s 68 of the Income Tax Act in respect of gift received by him from Smt. Renu Maini 3(b) The Hon'ble CIT(A) has confirmed the addition of Rs.4 Lacs without appreciating the fact that the appellant during the course of assessment and appellate proceedings had filed copy of declaration of gift by the donor alongwith her affidavit, bank statement of the donor and the acknowledgment of income tax return of the donor and therefore the identity of the donor, genuineness of the transaction and the creditworthiness of the donor stands proved and therefore the question of making an addition in respect of gift received does not arise at all.

4. The Hon'ble CIT(A) has erred in confirming the addition of Rs.1000/- being alleged payment of commission @ 0.25% on the gift received without having any evidence in this regard and the addition has been made merely on conjectures and surmises.

5. The Hon'ble CIT(A) while computing the addition of Rs. 4 Lacs u/s 68 of the Income Tax Act has failed to appreciate the fact that as the appellant is not having any business income during the year therefore he was not required to maintain books of accounts and therefore the provision of Section 68 are not applicable to the appellant and, therefore the addition has been wrongly made.

The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing.” 3. The grounds raised in (AY 2003-04) read as under:-

“1. That the order passed by the Hon'ble CIT(A) is bad in Law, wrong on facts and against the principles of natural justice. 2(a) That the proceedings initiated under section 147 of the Income Tax Ac 1961 are void-ab-initio and the re- assessment is bad in law. The assessment u/s 147 has been completed on wholly erroneous interpretation of section 147 of the Income Tax Act. The conditions precedent imperative for the issuance of a notice u/s 147 of the Income Tax Act were wholly conspicuous by their absence in the facts and circumstances of this case and as a consequence thereof, all imminent proceedings and the assessment order are wholly illegal, without the authority of law, null and void. (b) The Hon'ble CIT(A) has failed to consider the fact that the learned Assessing Officer has exercised his powers under section 147 of the Income Tax Act on mere surmises and suspicions and on wholly unreasonable and speculative premises and he had no reason to believe that income chargeable to tax for the aforesaid relevant year has escaped assessment either by reason of the appellant company failing to make a return u/s 139 of the Income Tax Act or by its failure by omission or failure to disclose, fully and truly, all the material facts necessary for such an assessment.

(c) The Hon'ble CIT(A) has failed to appreciate that the notice u/s 148 of the Income Tax Act was not served upon on the appellant within the stipulated time limit and therefore the assessment is invalid, null and void-ab- initio. 3(a) The Hon'ble CIT(A) has erred both in law and in facts in confirming the addition of Rs. 4 Lacs made by the Ld. AO u/s 68 of the Income Tax Act in respect of gift received by him from Smt. Renu Maini 3(b) The Hon'ble CIT(A) has confirmed the addition of Rs.4 Lacs without appreciating the fact that the appellant during the course of assessment and appellate proceedings had filed copy of declaration of gift by the donor alongwith her affidavit, bank statement of the donor and the acknowledgment of income tax return of the donor and therefore the identity of the donor, genuineness of the transaction and the creditworthiness of the donor stands proved and therefore the question of making an addition in respect of gift received does not arise at all.

The appellant craves leave to add, alter, amend, modify or forego any of the grounds of appeal before or at the time of hearing.”

4. The brief facts of the case are that the assessee filed its return of income on 26.9.2003 declaring income of Rs. 1,31,770/- which was subsequently processed u/s. 143(1) of the I.T. Act, 1961. AO received the information from the Directorate of Income Tax (Inv.), New Delhi that the assessee had taken bogus accommodation entry amounting to Rs. 4,00,600/- during the financial year under consideration. Accordingly, proceedings u/s. 147 of the Act were initiated and a notice u/s. 148 of the I.T. Act dated 14.3.2007 was issued and 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. 4,00,000/- being the unexplained gift and completed the assessment at Rs. 5,32,770/- vide his order dated 17.2.2017 passed u/s. 143(3)/147 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 12.4.2016 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 40 attaching therewith the copy of Return of income for AY 2003-04; copy of reply to AO dated 25.10.2007; copy of reasons recorded provided by AO; copy of reply to AO dated 19.11.2007 alongwith annexures; copy of written submission filed before CIT(A); copy of remand report dated 20.1.2010 and copy of rejoinder filed before the CIT(A). He 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. Hhe 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 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 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.

“Smt. Bindiya Ahuja, G-78,

Ashok Vihar, Phase-I, Delhi

In this case an information is received from the O/o the DI (Inv.-I, ARA Centre, Jhandewalan Extension, New Delhi vide office letter No. DIT(Inv)/I/2006-07/AE/1543 dated 5.2.2007 Smt. Bindiya Ahuja has taken bogus accommodation entries from the following parties in lieu of unaccounted money paid by the above named assessee.

As per Annexure enclosed with the above letter DIT(Inv. Unit- I), New Delhi dated 5.2.2007 the detail of transaction made by the above assessee is as under:-

Date Amount Cheque No. Name of the party 400600 00874601 Renu Maini 400600 00874501 Renu Maini (SBI Indore) The relevant assessment year involved is 2003-04.

In view the above facts, I am satisfied that Smt. Bindiya Ahuja, R/o Ashok Vihar, Phase-I, New Delhi has concealed his income Rs. 8,01,200/- for taxation. Since the aount income which has escaped assessment more than 100000/-, therefore, notice u/s. 148 of the I.T. Act, 1961 may be issued.

SD/- (NAND LAL) INCOME TAX OFFICER, WARD – 19(2), NEW DELHI”

545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon’ble Court has adjudicated the issue as under:-

“12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.

13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless

that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity .

Order pronounced in Open Court on 03-1-2017.