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Income Tax Appellate Tribunal, DELHI BENCH: ‘G’: NEW DELHI
Before: SH. I.C. SUDHIR & SH. O.P. KANT
ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 17th May, 2013 of ld. Commissioner of Income-tax(Appeals)-XVIII, New Delhi, for assessment year 2004-05, raising following grounds of appeal:
1. On the facts and in the circumstances of the case, the CIT (A)- XVIII, New Deihi has erred both on facts and ;n law, in upholding the illegal order passed by the Respondent without jurisdiction, violative of natural justice, without application of fair and objective mind to facts of the case and the law applicable and hence liable to be set aside and quashed and declared non-est in law.
2. On the facts and in the circumstances of the case, the CIT (A)- XVIII, New Delhi has erred both on facts and in law, in upholding the illegal action of re-assessment and assumption of jurisdiction illegally by the Respondent that too without issue/ served notice u/s 148 and without following the statutory requirements of section 147 to 153 of the Income Tax Act, therefore the entire proceedings of reassessment is void ab initio, illegal and unauthorized by law.
3. On the facts and in the circumstances of the case, the CIT (A)- XVIII, New Delhi has erred both on facts and in law, in upholding assumption of jurisdiction in spite of the fact that the case is of after four year and the AO not recorded any satisfaction that there was escapement of any income by reason of failure on the part of the assessee that too without issue/served notice u/s 148 is void-ab-initio, illegal and unauthorized by law.
4. The order of Re-assessment having been passed in violation of natural justice and hastily by obtaining behind the back of the appellant on the basis of some alleged statements/information none of which had been made available to the appellant nor any opportunity provided to rebut the same and without providing opportunity of cross-examination of different persons specifically asked by the appellant and there was not even a show cause notice specifically proposing to make the additions nor any effective opportunity of personal hearing was given hence, the impugned order ought to have been set aside by the CIT (A) and failure to do so have vitiated the impugned order. 5. That under the facts and circumstances of the case and in law, the respondent has not discharged its onus of proof in any manner and has chosen to make illegal addition perversely and all the additions therefore ought to be set aside by ld. CIT(A) and failure to do so has vitiated the impugned order. 6. The Respondent has not replied to the objection specifically raised by the assessee during the course of proceeding by passing the speaking order in terms of law therefore impugned order passed ought to have set aside by Ld. CIT (A) and failure to do so have vitiated the impugned order. 7. Ld. CIT (A) erred in upholding the illegal additions of Rs. 7,50,000/-, which was not added in original re-assessment order passed by the AO but added by passing order u/s 154 on the direction issued by Ld. CIT(A), without any basis and legs u/s. 68 by treating the sale proceed of stock/shares as unexplained income ignoring the records and documents already filed before the ITO which were properly verified and accepted by him as no further explanation was sought by the AO nor submission made by the assessee was disproved by him. Hence the order of CIT(A) may be set aside. 8. The authorities below have erred in not following the binding decisions of Courts and Tribunals relied upon by the appellant for the fact that nothing was added out of reasons recorded and impugned orders cannot, therefore, be sustained both on facts and in law. 9. Ld. CIT (A) has also erred in upholding the illegal additions and disallowances and consequent demands of Income Tax, Interest and penalties illegally raised by the Respondent and hence the impugned order sustaining the additions and demand would require be setting aside and quashing to that extent 10. The appellant craves leave to raise further/additional grounds and documents and file paper book before the hearing of the appeal and prays for the appeal to be allowed after hearing both side.
The facts in brief are that return declaring income of Rs. 1,810/- was filed by M/s Roopin Capital Private Limited (in short “the Company”) on 19th of August 2004. This company now stands merged with the assessee company, so hereinafter the company is addressed as assessee. The return of income filed by the ‘Company’ was processed under section 143(1) of the Income-tax Act, 1961 (for short “the Act”) on 04/01/2005. Subsequently, on receipt of information from the Investigation Wing, New Delhi, that the assessee company was one of the beneficiaries of the bogus accommodation entries totalling to Rs. 7.5 lakh, the Assessing Officer (AO) after recording reasons to believe that income escaped assessment, issued notice under section 148 of the Act dated 30/03/2011 and supplied reasons for reopening of the assessment along with the notice. No compliance of the said notice under section 148 was made by the assessee. However, on 20/10/2011, the assessee submitted that no notice under section 148 of the Act was received and hence the proceeding might be withdrawn. The Assessing Officer sent reply to the assessee vide letter dated 22.11.2011 and 14/12/2011. Looking to the non-compliance, the re-assessment was completed by the Assessing Officer on 27/12/2011 making addition of Rs. 30 lakh, which was subsequently rectified to Rs. 7.5 lakh. Aggrieved, the assessee filed appeal before the learned Commissioner of Income-tax(Appeals) and challenged the jurisdiction in issuing notice under section 148 of the Act as well as the merit of the addition. The learned Commissioner of Income-tax(Appeals) keeping in view the facts and circumstances of the case and in law laid down in decision of the various courts, upheld the reassessment proceedings as well as merit of the addition. Aggrieved, the assessee is in appeal before the Tribunal.
In ground No. 1 to 6 raised, the assessee has challenged the jurisdiction assumed by the Assessing Officer in reopening the assessment through issue of notice under section 148 of the Act. 4. Before us, the learned Authorized Representative (AR) of the assessee submitted that no notice under section 148 dated 30/03/2011 was received by the assessee and therefore the proceedings are invalid and void-ab-initio. Further, the learned AR submitted that reasons recorded were containing duplicate entries and therefore Assessing Officer has not applied his mind while recording reasons. In support of the proposition, the learned AR relied on the decision of the coordinate bench of the Tribunal, Delhi in the case of Comero Leasing and Financial Private Limited versus Department of Income Tax in ITA No. 4281/Del/2010. Further, the ld AR submitted that the assessment was reopened in respect of entries from Zigma Telecom Private Limited, whereas name of the parties mentioned in the body of assessment order against which addition of Rs. 30 lakh was made in the assessment order, are altogether different from the party for which reasons were recorded and, therefore, if no addition is made in respect of the reasons recorded, then no other additions could be made in the reassessment proceedings. In support of the proposition, the assessee relied on the judgment of the Hon’ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. versus Commissioner of Income Tax reported in (2011) 336 ITR 136 (Del). On merit of the addition, the ld. AR submitted that the entry in reference was in respect of the sale of stocks and not in the nature of any credit or investment and, therefore, same could not be assessed under section 68 of the Act, as assessee has already declared the same as sales in the profit and loss account. The Ld AR further submitted that all the documents to substantiate the claim of sale were already filed before the Assessing Officer and therefore the addition was even not justified on merit.
On the other hand, the ld. Departmental Representative (DR) relying on the order of the authorities below submitted that the assessee received accommodation entry from Mr. Mukesh Gupta, who is a known entry provider and the information received was specific to the assessee, the AO after verification, reopened the relevant assessment year and therefore it cannot be said that the AO has not applied his mind while reopening the assessment. She further submitted that sufficiency or adequacy of reasons cannot be examined at the stage of recording of reasons and at the stage of recording of reason a prima facie satisfaction of having link of the information with the income escaped is sufficient. In support of the proposition, she relied on the judgment of the Hon’ble Supreme Court in the case of Raymond Woollen Ltd. reported in 236 ITR 34 (SC).
We have heard the rival submissions and perused the material on record. In the case of the assessee, reasons recorded by the Assessing Officer for reopening of assessment, enclosed by the assessee in the paper book at pages 20 to 21 , are reproduced as under: “ 1 1 . Reasons for the belief that income has escaped assessment: The assessee filed return of income for the A.Y. 2004-05 on 30.06.2004, declaring income of Rs. 1,508/-. The return was processed u/s 143(1) on 19.08.2004. DIT(Inv.) during the course of investigation in the, case of Mukesh Gupta group along with its close confidants Shri Rajan Jassal and Shri Surinder Pal Singh found that the group have operated multiple accounts in various branches to plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc. in the form of gifts, share application money loans etc. During the course of investigations by the DIT(Inv) it was discovered that the assesses who have unaccounted money (hereinafter called as entry takers or beneficiaries) and wart to introduce the same in the books of accounts without paying tax approach another person (entry operator) and hand over cash (plus commission) and take cheques/DDs/Pos. The cash is deposited by the entry operator in a bank account either in his own name or in the name of relative/friends or other person hired by him, for the purpose of opening bank account. The entry operator thereafter issues cheques/DD/PO in the name of beneficiary from the same account (in which the cash is deposited) or another account in which funds are transferred through clearing in two or more stages. The beneficiary as turn deposits these instruments in his bank accounts and the money comes to his regular books of account in the form of gift, share application money, loan etc. through banking channels and the transaction looks genuine. It is noticed from the list of entries that the assessee M/s Roopin Capital P Ltd. has taken following accommodation entries from the following persons (beneficiary) as per details hereunder:- Amount Instrument Date Name of Name of Branch of A/C No. No. Entry Bank Bank Entry Giving Provider Account 450000 376587 3-Mar-04 ZIGMA JAILAXMI FATEHPURI 3402 TELECOM COOP PVT. LTD. BANK 450000 376587 3-Mar-04 ZIGMA JAILAXMI FATEHPURI 3402 TELECOM COOP PVT. LTD BANK 300000 410646 24-Mar-04 ZIGMA JAILAXMI FATEHPURI 3402 TELECOM COOP PVT. LTD BANK 300000 410646 24-Mar-04 ZIGMA JAILAXMI FATEHPURI 3402 TELECOM COOP PVT. LTD BANK In view of the report received from the DIT(Inv.) New Delhi, and in view of-the facts narrated above it is clear that the assessee has not disclosed fully and truly all material facts necessary for its assessment for that assessment year. I have therefore, reason to believe that the sum of Rs. 15,00,000/- chargeable to tax has escaped assessment. Thus, the same is to be brought to tax 'under section 147/148 of the I.T. Act 1961. Notice u/s 148 may be issued, if approved.”
Thus, we find that according to the reasons recorded by the Assessing Officer, the assessee received accommodation entry from M/s. Zigma Telecom Private Limited, but in the assessment order there is no mention of the said party. The relevant part of the order of the Assessing Officer mentioning the name of the parties in respect of whom, he made addition is as under: “3.1 The information received from the Investigation Wing, New Delhi, indicated that the assessee had received bogus accommodation entries from the following parties:- i. M/s. RSG Marketing P. Ltd. –Rs. 10,00,000/- ii. M/s. Maple Sales Pvt. Ltd. – Rs. 3,00,000/- iii. M/s. Milansaar Impex & Traders Pvt. Ltd. – Rs. 5,00,000/- iv. M/s. Acoot India P. Ltd. - Rs. 5,00,000/- v. M/s. Bilz. Metals P. Ltd. – Rs, 5,00,000/- 8. In view of the above facts, we are in agreement with the contention of the learned AR that no addition has been made by the AO in respect of the reasons recorded for income escaped.
In the case of Ranbaxy laboratories Ltd versus Commissioner of Income Tax (supra), the Hon’ble Delhi High Court has held that “AO had jurisdiction to reassess income other than the income in respect of which proceedings under s. 147 were initiated but he was not justified in doing so when no addition is made on the very reasons for initiation of those proceedings. The question of law before the Hon’ble High Court was as under:
Whether on facts the Tribunal was right in law in holding that the AO had jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated especially when the reasons for the latter ceased to survive ?
The question of law in cited case was decided against the Revenue. The relevant para of the judgment is reproduced as under: “18. We are in complete agreement with the reasoning of the Division Bench of Bombay High Court in the case of Jaganmohan Rao (supra) [sic—Jet Airways (I) Ltd. (supra)]. We may also note that the heading of s. 147 is "Income escaping assessment" and that of s. 148 "Issue of notice where income escaped assessment". Sec. 148 is supplementary and complimentary to s. 147. Sub-s. (2) of s. 148 mandates reasons for issuance of notice by the AO and sub-s. (1) thereof mandates service of notice to the assessee before the AO proceeds to assess, reassess or recompute escaped income. Sec. 147 mandates recording of reasons to believe by the AO that the income chargeable to tax has escaped assessment. All these conditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per Expln. 3 if during the course of these proceedings the AO comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the AO that on assuming jurisdiction under s. 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before AO during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under s. 148. 19. In the present case, as is noted above, the AO was satisfied with the justifications given by the assessee regarding the items viz., club fees, gifts and presents and provision for leave encashment, but, however, during the assessment proceedings, he found the deduction under ss. 80HH and 80-I as claimed by the assessee to be not admissible. He consequently while not making additions on those items of club fees, gifts and presents, etc., proceeded to make deductions under ss. 80HH and 80-I and accordingly reduced the claim on these accounts. 20. The very basis of initiation of proceedings for which reasons to believe were recorded were income escaping assessment in respect of items of club fees, gifts and presents, etc., but the same having not been done, the AO proceeded to reduce the claim of deduction under ss. 80HH and 80-I which as per our discussion was not permissible. Had the AO