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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI J. SUDHAKAR REDDY & SMT. BEENA PILLAI
PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER
All these appeals are filed by the assessee directed against the order dt. 24.9.2012 of Ld.CIT(A)-IX, New Delhi for Assessment Years 2000-01, 2001-02, 2002-03 and 2004-05, on the following common ground.
ITA No. 6232/Del/12 A.Y.2000-01 A.Y.200102 ITA No. 6232/Del/12 A.Y.2002-03 ITA No. 6255/Del/12 A.Y.2004-05 M/s Manglam Securities Ltd., New Delhi “That under the facts and circumstances, proceedings u/s 147 are unwarranted, illegal and unsustainable.” 1.1. The assessee has also raised other grounds on merits.
We have heard Shri Raj Kumar Gupta, the Ld.Counsel for the assessee and Sh. P.Damkanunjna, Ld.Sr.D.R. on behalf of the Revenue.
On a careful consideration of the facts and circumstances of the case, on perusal of material placed on record, order of lower authorities, we hold as follows.
The reasons recorded by the A.O. for reopening of assessment are as under. “The DIT (Investigation), New Delhi, had sent a report in the case of beneficiaries and operators of accommodation entries in Delhi. The CIT, Del-II had enclosed the CD received from CCIT-II, New Delhi, containing supplementary list of beneficiaries and operators of accommodation entries in Delhi. The letter was accompanies with a detailed report. The perusal of the report shows which enclosed as Annexure-A. The Investigation Wing is also a part of the Income Tax Department and whatever enquiry work is done by the officers posted in that Wing is valid and legal. Moreover, the investigation wing is a specialized wing and the officers of the investigation Wing perform special jobs which included the search & survey operations and the conduction of enquiries by the field officers in the Commissionerate charges lack the wherewithal and expertise to conduct such large amount of enquiries. It is normal practice to send the result of such enquiries to the filed officers for taking further necessary action. In view of the above credible information received from the DIT (Inv.), New Delhi, I have reasons to believe that the income of Rs.6,00,000/-, who stands as beneficiary from the entry provider, has escaped assessment to the extent of Rs,6,00,000/- as per the provisions tax act, 1961. 1 am therefore, satisfied that the said income, on account of accommodation entry worth Rs.6,00,000/- received by the assessee, has escaped assessment and accordingly after recording the above said reasons as laid down under the provisions of section 148(2) of the income Tax Act. 1961, the proposal is forwarded for your kind consideration and necessary approval.”
ITA No. 6232/Del/12 A.Y.2000-01 A.Y.200102 ITA No. 6232/Del/12 A.Y.2002-03 ITA No. 6255/Del/12 A.Y.2004-05 M/s Manglam Securities Ltd., New Delhi 5. The Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax vs. G & G Pharma India Ltd. in ITA no. 545/2015 vide order dt. 8.10.2015 at para 12 and 13 held as follows.
“12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10 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. 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
ITA No. 6232/Del/12 A.Y.2000-01 A.Y.200102 ITA No. 6232/Del/12 A.Y.2002-03 ITA No. 6255/Del/12 A.Y.2004-05 M/s Manglam Securities Ltd., New Delhi 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 .”
5.1. The Hon’ble Delhi High Court in the case of CIT-4 vs. Independent Media P.Ltd. in ITA 108/2013 judgement dt. 19.11.2015 at para 7 and 8 held as follows.
“7. Recently this Court by order dt. 8th October, 2015 in (Pr.CIT vs.G&G Pharma India Ltd.) dealt with a similar instance of reopening of assessment by an AO based on the information received from DIT (Investigation) without making any effort to discuss the material on the basis of which he formed a prima facie opinion that income had escaped assessment. The Court held that the basic requirement of S.147 of the Act that AO should apply a mind in order to form reasons to believe that income had escaped assessment had not been fulfilled.
8. As far as the present case is concerned, the situation is no different. The ITAT was, in the circumstances, justified in holding the initiation of the reassessment proceedings was invalid.”
The Ld.Sr.D.R. Shri P.Damkanunjna argued that the decision of Hon’ble Delhi High Court in the case of G&G Pharma (P) Ltd. is not applicable as it was a case where the Hon’ble High Court held that there was no substantial question of law and had not admitted the appeal. He argued that no binding precedent was laid down by the Hon’ble High Court. He further submitted that in many other cases the High Court has upheld the reopening.
ITA No. 6232/Del/12 A.Y.2000-01 A.Y.200102 ITA No. 6232/Del/12 A.Y.2002-03 ITA No. 6255/Del/12 A.Y.2004-05 M/s Manglam Securities Ltd., New Delhi 7. A plain reading of the reasons recorded demonstrate that the A.O. has not applied his mind to the material/information received from the Director (Investigations). Without such independent application of mind, it is not possible for the A.O. to come to a conclusion that he has reason to believe that income assessable to tax has escaped assessment. Thus, respectfully following the propositions of law laid down by the Hon’ble Delhi High Court in the case of Pr.CIT vs. G & G Pharma India Ltd. (supra) we hold that the reopening is bad in law.
7.1. In the case on hand the A.O. has not properly assumed jurisdiction of this case, in view of the fact that the reasons recorded for reopening are without independent application of mind. When the assumption of jurisdiction itself is bad in law, all the assessments have to be quashed.
In the result all the appeals filed by the assessee are allowed.
Order pronounced in the Open Court on 10th February, 2016.