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Income Tax Appellate Tribunal, DELHI BENCH “A”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI J.S. REDDY
Revenue has filed this Appeal against the impugned Order dated 31.3.2009 passed by the Ld. CIT(A)-V, New Delhi relevant to assessment year 2001-02 on the following grounds:-
“1) On the facts and circumstances of the case, the ld. CIT(A) has erred in deleting addition. a) Of Rs. 5,00,000/- made by the AO u/s. 68 of the Act on account of addition to share application money as unexplained cash credits and Rs. 5000/- on account of commission paid from undisclosed sources. b) Rs. 27,00,000/- on account of unexplained share premium.
Ignoring the fact that i) The assessment order passed by the AO is based on information received from the Investigation Wing of the Department that the Assessee Company has received bogus entry of Rs. 5 lacs from M/s IG Properties (P) Ltd. a company engaged in providing bogus entries. ii) The assessee failed to explain as to how the value of the share premium of Rs. 27 lacs was arrived at iii) The assessee failed to produce the Director of M/s IG Properties (P) Ltd. so as to verify the genuineness of the transaction and to establish the identity of the party. The physical apperance of doubted parties is a must as a parameter of identity.
2) The facts of the present case are distinguishable to that of M/s Lovely Exports (P) Ltd. relied upon by the Ld. CIT(A).
3) The Appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The brief facts of the case are that the assessee has filed its return, declaring loss of Rs. 97,298/-on 19.10.2001. Thereafter, a Report from the DIT (Inv.) was received in respect of bogus entry racket wherein it was specifically mentioned that the assessee company had received an amount of Rs. 5 lacs on 27.4.2000 through cheque from one of the companies used by the entry providers to provide bogus entries namely, M/s IG Properties (P) Ltd., the AO had issued a notice u/s. 148 after recording the reasons in writing that income chargeable to tax had escaped assessment. In response to the said notice dated 3.11.2006, assessee’s authorized representative filed the details called for. Thereafter, the AO vide order dated 28.12.207 passed u/s. 143(3)(ii) and assessed the income at Rs. 31,27,380/- after making various additions.
Against the said order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 31.3.2009 has partly allowed the appeal of the assessee thereby deleting the addition in dispute and upholding the reopening in the case of Assessee.
Aggrieved with the aforesaid order of the Ld. CIT(A), Revenue is in appeal before us the Tribunal.
Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal. Ld. DR relied upon the order of the Ld. CIT(A) on the legal issue and stated that AO has rightly reopened the assessment proceedings on the basis of material which AO has mentioned in the assessment order and Ld. CIT(A) has rightly upheld the same. He requested that on legal issue, the order of the Ld. CIT(A) may be upheld.
On the contrary, Ld. Counsel of the assessee stated that the reopening in the present case is illegal and the same may be quashed. He further submitted that the present case is squarely covered by the Hon’ble High Court Decision dated 8.10.2015 passed in in the case of Pr. CIT-4 vs. G&G Pharma India Ltd., wherein the Tribunal decision dated 9.1.2015 has been followed. In this behalf, he filed the copy of the order dated 8.10.2015 of the Hon’ble High Court of Delhi in Pr. CIT vs. G&G Pharma India Ltd. Therefore, 3 he requested that by following the decision in the case of Pr. CIT vs. G&G Pharma India Ltd., the appeal filed by the Revenue may be dismissed.
We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case laws cited by the assessee’s counsel. For the sake of clarity, we would like to discuss the relevant reasons for reopening of assessment in the case of the assessee as under:-
“OFFICE OF THE INCOME TAX OFFICER,WARD 2(3)
ROOM No: 389A,C.R.BUILDING,NEW DELHI ..
REASONS An enquiry was initiated in August 2003, to probe into eight accounts from which cheques in form or gifts amounting to R~, ,15 lakhxhad been issued to SH, Ashok Kumar Chauhan, proprietor M/s Gurcharan Jewellers. his wife and son, During the course of survey conducted by the field officers the jeweller had admitted that these gifts had been "arranged" by paying cash to the donors, The assessee Sh, Ashok Kumar Chauhan agreed to pay taxes on such gifts, The accounts from which such gifts were received were in the Oriental Bank of Commerce, Minto Road, and the State Bank of Patiala, Darya Ganj.
Since the AO was not having jurisdiction over the Donors cases, the case was, the case was handed over to this Directorate to investigate and find out the other donors from those accounts. In two years time the number of accounts which were only eight in number have swollen in hundreds. It is however felt that the accounts identified by the Directorate ace not complete and the amount as well as the number of accounts involved will be much more, Further it may be safely presumed that such entry operators are operating in other parts of the country as well, causing revenue losses to the government. The manpower and resources available with the Directorate are limited and the hanks are generally slow in providing details due to several constraints faced by them.
Entries are broadly taken for two purposes
7. 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.
To inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes.
MODUS OPERANDI The assesses who have unaccounted money (hereinafter called as entry takers or beneficiaries) and want to introduce the same in the books of accounts without paying tax, approach another person (hereinafter called as entry operator) and hand over the 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 pu:pose of opening bank account In most of these bank accounts the introducer is the main entry operator and the cash deposit slips and other instruments are tilled by him.
The other persons (in whose name the A/c is opened) only signs the blank cheque book and hands. over the same to the main entry operator. The entry operator then issues cheques/DDs/Pos in the name of the 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 in 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. Since the funds have come through banking channel in the books of beneficiary these apparently look genuine. At the time of assessment the beneficiary provides the PAN, assessment particulars and confirmation from the entry operators to show the genuineness of these receipts and the Assessing Officer does not investigate any further……….
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…………Enquiries by the Investigation Wing, has revealed that M/s IG Properties P Ltd has given the entry to my assessee M/s Bajaj & Company Pvt. Ltd., B-104, Maharani Bagh, Delhi – 110 065. In the AY 2001-02 the assessee has shown these receipts in its bank account as per the DIT(Inv.).
In the instant case of the assessee, the following credits have been shown in the bank account:
Bank Branch Instrume Amount Date Credit of the of the nt No. entry Asses Bank coming see from the account of SBI Friends 493629 500000 27.4.2000 IG Colony Properti es P Ltd.
It is also seen from the IT return for the AY 2001-02, that the paid up share capital has increased from 25 lakhs to Rs. 43 lakhs and the share premium for 18000 shares has increased from Rs. 0 to Rs. 27 lakhs.
In view of the findings of the investigation report, the case of the above assessee needs scrutiny, in view of the fact that the above entry have been obtained through the Entry Operator, investigated and reported by the Investigation Wing. I therefore have reasons to believe that this amount of Rs. 5 lakhs represents income of the assessee chargeable to tax and which has escaped assessment for AY 2001-02. In order to verify the geunineness of this transaction, it is proposed that necessary permission for issue of Notice u/s. 148 for the AY 2001-02 is requested, since 4 years have elapsed, but not more than 6 years, the proposal is forwarded as laid down under the provisions of section 149(1)(b) of the I.T. Act, 1961.
Kind approval for issue of notice u/s. 148(i) is sought as
per the procedure laid down under the provisions of section 151, read with subsection (2) of the Income Tax Act, 1961.