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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC-1’ NEW DELHI
Before: SMT DIVA SINGH & Sh. O.P.KANT
Date of Hearing 22.02.2016 Date of Pronouncement 16.05.2016 ORDER
PER DIVA SINGH, JM
The present appeal has been filed by the assessee assailing the correctness of the order dated 11.02.2014 of CIT(A)-XVIII, New Delhi pertaining to 2004-05 assessment year on the following grounds:-
1. “That the Ld.CIT(A)-XVIII has grossly erred by approving the action of the Assessing Officer for reopening of the case.
2. That the Learned CIT(Appeals)-XVIII has further erred by sustaining the addition of Rs.500000/- on account of undisclosed sources u/s 68 of the I.T.Act, 1961.”
2. The record shows that the AO vide his order u/s 147/143(3) passed on 12.12.2011 required the assessee to verify the genuineness of the transactions noticed. The transaction referred to by the AO was “the entry pertains to financial year 2003-04 relevant to A.Y. 2004-05. On the basis of above information there was sufficient reason to believe that an amount of Rs.5,00,750/- escaped income for the A.Y.2004-05 and accordingly the notice u/s 148 was issued and it was duly served upon the assessee and assessment was framed on 19.11.2007 u/s 147/143(3) of the I.T.Act,
I.T.A .No.-2390/Del/2014 1961.” In view thereof in order to verify the genuineness of the transactions. The AO required the assessee to produce Sh. Mithlesh Gupta. In response thereto the assessee is found to have filed explanation dated 12.12.2011. The explanation was rejected and addition was made holding that in the face of a large scam of accommodation entries detected by the Investigation Wing of the Department the explanation had no force. The relevant finding is extracted hereunder:-
“The assessee has made his unaccounted money which should have been brought to tax, which has been earned from undisclosed sources and the assessee has instead of doing so, has bought the profit entry from Sh.Mithlesh Gupta by banker’s cheque No.057062 dated 22.10.2003, drawn from Jai Lakshmi Co-operative Bank Ltd., Fateh Puri, Delhi without entering into any real transactions. The credit entries appearing in the account of the assessee to the tune of Rs.5,00,750/- is transfer of profit entries appearing in the account of Sh.Mithlesh Gupta to the bank account of the assessee without entering into any real business transaction. The sum of Rs.5 lacs which is nothing but assessee’s undisclosed income and brought to the tax u/s 68 of the Act, 1961. As the assessee has furnished inaccurate particulars of income and has concealed the true income, penalty u/s 271(1)(c) of the I.T.Act, 1961 is also being initiated.” (emphasis provided) 3. Aggrieved the assessee went in appeal before the First Appellate Authority raising various arguments challenging the re-opening as well as the addition on merits. The Jurisdictional challenge was dismissed by the CIT(A) vide para 5.1 holding as under:-
5.1. “So, I donot find any infirmity in action of the AO as far as reopening is concerned.” 3.1. The decision of the AO was confirmed in appeal relying upon the decision of the Hon’ble Punjab & Haryana High Court in the case of Hanuman Das vs CIT 97 DTR 10 (P&H) holding as under:-
7.1. “The details filed by the Ld.AR of the appellant have been perused and copy of declaration of gift by Mithlesh Gupta which is available at Annexure-A1 of the order and affidavit dated 22.10.2003 as also been filed but nowhere it has been mentioned that why Mithlesh Gupta has donated sum of Rs.5 lacs to a person who is not related with him. In this regard, reliance is placed on the judgement of Hon’ble P&H High Court in the case of Hauman Das vs CIT 97 DTR 10 (P&H)” (emphasis provided) Page 2 of 4
I.T.A .No.-2390/Del/2014
Both the parties have been heard. On a consideration of the facts and circumstances of the case, it is evident that the tax authorities in the facts of the present case concluded the issue at each stage on the fact that as per the information available with the Investigation Wing of the Department an amount of Rs.5 lacs was received by the assessee by way of a cheque from Jai Laxmi Company-operative Bank Ltd., Fatehpuri, Delhi Whereas the AO without caring to discuss the explanation offered vide letter dated 12.12.2011 concludes that “the assessee has transferred profit entries appearing in the account of Sh.Mithlesh Gupta to the bank account of the assessee without entering into any real business transaction.” The CIT(A) upholding the addition though considers that the claim of gift by Sh. Mithilesh Gupta cannot be accepted. It is seen that he makes a reference to the fact that there was a copy of declaration of gift by Sh. Mithlesh Gupta which was supported by an affidavit dated 22.10.2003. However, he discards the same without caring to being any reason on record assailing the veracity of the evidences filed. Thus what is evident is that in the course of the assessment proceedings the AO failed to take not of the fact that Rs.5 lacs was claimed to be a gift as he concludes that it is a business transaction and the CIT(A) on the other hand does record the fact that a claim of gift was made which was supported by an affidavit. However he upholds the addition without caring to address the evidences filed. It is seen that although the facts have been taken note of but the evidences in support thereof have not been considered. Instead of first addressing the facts the Ld. CIT(A) has instead rushed towards the decision in the case of Hanuman Das vs CIT (cited supra). It cannot be over-emphasized that before a decision can be relied upon to support the conclusion, it is necessary to first address the facts. It is only after the facts have been settled that the same can be said to be pari materia with a decision or not. The role of judicial precedent will come only after the facts have been settled and even at the stage an exercise is necessitated to establish that the material facts as considered in the decision relied upon are pari materia with the settled facts in the case at hand. Without this requisite exercise the order cannot be said to be a speaking order and would be open to the challenge of perversity. In the facts of the present case the conclusion that the assessee “has bought the profit from Sh. Mithlesh Gupta” by the AO has been drawn in haste guided by the Investigation carried out in some cases. The Page 3 of 4
I.T.A .No.-2390/Del/2014 Ld.CIT(A) though has reproduced arguments which bring out the fact that a gift was claimed to be given however, he fails to address the evidences relied upon in support of the claim. Accordingly in the interests of substantial justice, the impugned order is set aside. Both the parties have been heard on the issue of remand. Since facts have not been considered correctly right from the outset it was a common stand of the parties that the issue be restored to the AO. Accepting the suggestion made the issue is restored back to the file of the AO with the direction to consider the same denovo. Needless to say that the AO shall pass a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. The said order was pronounced in the open Court in the presence of the parties.
In the result, the appeal of the assessee is allowed for statistical purposes. The order is pronounced in the open court on 16th of May, 2016.