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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC-I’, NEW DELHI
Before: SHRI J. SUDHAKAR REDDY
This is an appeal filed by the Assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-XV dated 28.11.2013 pertaining to the Assessment Year (A.Y.) 2005-06.
The assessee has challenged the reopening of the assessment on the ground that the reasons recorded demonstrate that the Assessing Officer (AO) has not applied his mind independently to the material referred to by him while recording reasons for reopening. It was submitted that without forming a prima facie opinion, on the basis of such material, that income chargeable to tax has escaped assessment, it is not correct on the part of the A.O. to record reasons and reopen the assessments.
After hearing rival contentions I hold as follows.
The reasons for reopening recorded by the A.O. are as follows. “An information has been received from the Central Circle 18. The DCIT, Central Circle -18 vide its letter No. DC1T/CC-18/2010-11/599 dated 18.02.2011 has stated that “ Survey u/s 133A of the Income Tax Act, 1961 was earlier carried out by the Investigation Wing on 20.11.2007 in the case of Shri S.K. Gupta who is an accommodation entries provider and it was A.Y. 2002-03 Neeta Gupta noticed that he had provided accommodation entries to a large number of beneficiaries. On the basis of the impounded material in the case of Shri S.K. Gupta and on the basis of further inquiries, it has been noticed that he has inter alia provided accommodation entries of the following companies/assessee who are under your jurisdiction:-
1.
M/s Hitashi Estates Ltd. PAN: AAACH0455M Rs.5 lacs The assessee belongs to Taneja Group of cases. During the course of search and seizure proceedings in the Taneja Group of cases, the main controlling person of the group Shri D.N. Taneja in his statement recorded on 07.01.2009 offered the entries (transactions) done with Mr. S.K. Gupta's Companies amounting to Rs. 6.23 crores as additional income in the respective financial years in respective companies of his group (there are 15 such companies and includes your assessee M/s Hitashi Estate Ltd. in which accommodation entries of Rs. 5 lacs for A.Y. 2005-06 have been offered as additional income by Shri D.N. Taneja in his above mentioned statement). In view of the above facts, you are requested to please examine the assessment records in the case of your above mentioned assessee and take necessary action. The following documents are enclosed herewith in this regard.
1. Copy of statement of Shri DN Taneja recorded on 7.1.2009.
2. Copy of statement of Shri SK Gupta recorded on 5.1.2009 during the course of survey u/s 133A of the I.T.Act, 1961 in the case of M/s Omni Farms Pvt.Ltd. in which he has admitted regarding providing of accommodation entries to various group, including Taneja Group.
3. Copy of ledger account which includes accommodation entries of Rs.5 lacs (duly highlighted) provided by the companies of Shri SK Gupta to your assessee. This ledger account was extracted by the investigation wing from the back up files of one of the laptops impounded during the course of survey in the case of Shri SK Gupta on 20.11.2007.
4. Extracts of following pages of appraisal report in TDI group explaining the modus operandi in respect of providing of accommodation entries by Shi SK Gupta through various companies of his group. a. Pages 3, 4 and 5 of letter dt. 24.7.2009 of ADIT(Inv.Unit VI, Delhi) (Copy of letter was enclosed in the Appraisal Report). b. Pages 20, 21, 24 to 32, 38 to 42, 47 to 49 of the appraisal report. From the perusal of details/documents forwarded by the DCIT, A.Y. 2002-03 Neeta Gupta Central Circle - 18, it has noticed that the assessee has received Rs. 5 Lacs from M/s Zenith Estate Limited on 07.08.2004. The assessee during the course of assessment proceeding has submitted that it has received advance of Rs. 5,00,000/- from M/s Zenith Estate Ltd. during F.Y. 2004- 05. The statement of Shri D.N. Taneja S/o Shri G.D. Taneja recorded on oath on 07.01.2009 during the course of search operation was also perused. In his statement while answering to Q. No. 5 Shri D.N. Taneja stated that “The transactions done with the companies controlled by Shri S.K. Gupta has been duly reflected in our books and were also assessed by the Income Tax Department. Now Shri S.K. Gupta has said that these are accommodation entries is best known to him only. Through we confirm that our accounts are maintained properly in normal course of business, however, considering my advance age and ill health it is difficult for me to continuously engaged in legal issues. Therefore in order to buy peace of mind and to avoid litigation on this time. I offer the entries (transactions) done with Mr.S.K. Gupta's companies amounting of Rs. 6.23 crores as our additional income in the respective FYs and in respective companies as tabulated in Annexure - A attached with the statements. I have made this officer to buy peace of mind and on the conditions that no penalty proceedings and prosecution proceedings is initiated on the same. I shall be provided with all the benefits available to us under the I.T.Act 1961.
The Annexure ‘A’ of this statement clearly points out the fact that the amount declared for surrender by Shri D.N. Taneja includes the name of the assessee in respect of entry of Rs. 5 Lakh received from M/s Zenith Estates Ltd. as this annexure assessee has been duly signed by Shri D.N. Taneja on 07.01.2009 itself. The fact was further reaffirmed upon perusal of the statement of Shri S.K. Gupta which was recorded on oath on 05.01.2009 during the course of survey operation. Shri S. K. Gupta while answering Q. No. 7 has stated that “we give the loans & advances and share capital through cheques after receiving of cash from them and take the premium on those cheques.” Shri S. K. Gupta while answering to Q.No. 8 further pointed out the fact that Taneja Group of Companies are such beneficiaries. While answering to Q. No. 17 Shri S.K. Gupta has admitted that he is controlling M/s Zenith Estates Ltd. and the same is running from the premises controlled by Shri S.K. Gupta. The part of the appraised report was also perused. The appraised report discussed in details the modus operandi of the entry given by Shri SK Gupta and taken by Taneja Group through Shri AS Aneja : “A survey action u/s 133A of the I.T. Act, 1961 was conducted by Unit-VI of Investigation Wing (Income Tax), Delhi on 20.11.2007, at the business premises of Shri Suresh Kumar Gupta (C.A.). In the Survey it was noticed that Shri S.K. Gupta, a Chartered Accountant by profession was controlling various companies from a small office (308, Arunachal Building, 19, Barakhamba Road) without having sufficient infrastructure/man power for running the business affairs of such A.Y. 2002-03 Neeta Gupta companies. Further, during the course of survey dated 20.11.2007, in his statement recorded on oath, Shri S.K. Gupta accepted that the various companies controlled by him do not have any actual business activities and are used only to issue accommodation entries. From the above referred survey action, following points conclusively pointed out that Shri S.K. Gupta is an established Entry Operator:- * Shri S.K. Gupta was controlling more that 35 companies from a small office premises without sufficient infrastructure or employees to carry out meaningful business activity in so many companies. * From the perusal of ledger accounts maintained in one of the laptop impounded during during survey, it is noticed that large amount of cash is deposited and cheques are issued on same day/ within few days. The description/narration of these transactions establishes that they were merely accommodation entries. The commission is calculated on the basis of cash received and balance amount is remitted back, it establishes an organic link between the cash received, commission deducted and cheques paid.
* Most of these entries appear as loans/advances or share application money in the books of various recipients and many of the recipients have admitted that they had procured the accommodation entries to bring their unaccounted money into regular books. * Circumstances leading to survey establish that Shri S. K. Gupta was an entry broker. Information was received from FIU-IND in respect of Shri S.K. Gupta that he was maintaining many account in Oriental Bank of Commerce, Connaught Place, New Delhi and in these accounts there were frequent cash deposits along with simultaneous transfer in same bank, value of transactions were inconsistent with client’s financial position and unexplained transfers between accounts for no apparent reasons. * During survey on Shri S.K. Gupta on 20.11.2007, Shri S.K. Gupta admitted on oath that he was merely an entry operator and using his companies to provide entries. Thus, more than a year before the actual search on Taneja Group, Shri S.K. Gupta urns established to be an entry broker. * List of the companies being controlled by Shri S.K. Gupta are as under:- The list includes the name of M/s Zenith Estates Pvt. Ltd. S. No.
The statement of Shri S.K. Gupta recorded on 05/01/2009 which give the complete insight of the modus operandi of entries business of Shri S.K. Gupta. From the above discussion it is very clear and admitted fact that M/s Hiteshi Estates Ltd. has received credits of Rs. 5,00,000/- and which does not stand the contours of the law defined by various courts in respect of section 68 of the Act. It is clear that assessee has earned an income of Rs. 5,00,000/- and has not reflected it in its books of account. The statements of Shri S.K, Gupta and Shri D.N. Taneja clubbed with the evidences collected during the course of survey/search operation has provided A.Y. 2002-03 Neeta Gupta the sufficient reasons to believe that income of Rs. 5,00,000/- has escaped assessment in the case of M/s Hiteshi Estates Ltd. for A.Y. 2005-06 and thus there is clear cut case of reopening the assessment u/s 1`48 of the Act. At this outset it is relevant to point out the fact that the assessee is duty bound to disclose fully and truly all material facts necessary for assessment and the same has not been done by the assessee. The assessee was aware that he has taken the accommodation entry and the same fact has been accepted by the assessee. It has been judiciously established that mere production of evidence before the IYO was not enough, that there may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That subject to the other conditions, jurisdiction to reopen is attracted. It is thus clear that there are some primary facts from which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the appropriate action is to reopen the assessment.”
4.1. The Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax vs.G & G Pharma India Ltd. in 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 A.Y. 2002-03 Neeta Gupta 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 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 .”
4.2. In the case on hand, the assessee has submitted that it received Rs.5 lakhs from M/s Zenith Estates Ltd. on 7.8.2004 vide cheque no. 000006 drawn on Kotak Mahindra Bank, New Delhi as advance against sale of property vide agreement on sale dt. 4.8.2004. This fact was recorded in the books of accounts of the assessee and the original return of income contained the audited accounts. This advance received was returned to M/s Zenith Estates Ltd. on 21.03.2009, consequent to cancellation of the agreement to sell. All these documents were with the Assessing Officer. In fact the assessee filed his objections also vide letter dt. 9.11.2011 which is at pages 79 to 87 of the paper book. Copies of all the documents were filed. In the reasons recorded, the Assessing Officer states that, the assessee has A.Y. 2002-03 Neeta Gupta received credit of Rs.5 lakhs and has not reflected it in the books of accounts. This is against the facts of the case. The AO also records that the assessee has accepted that it had taken an accommodation entry. This is also incorrect fact. This is not a case where the share capital is introduced by the company. The amount received as advance was returned. The assessee in his letter dt. 7.12.2011 has specifically asked for the statements of Mr.D.N.Taneja and Shri SK Gupta and ledger account of Sh.G.Taneja and copy of appraisal report in the case of TDS proof. It was specifically stated that Shri DN Taneja was never associated with the assessee company. It is also specifically submitted that Mr.SK Gupta has not mentioned that he received Rs.5 lakhs in cash in lieu of the cheque issued by Zenith Estates Ltd to the assessee. 4.3. From the above facts it is clear that, the Assessing Officer has not independently apply his mind to come to a conclusion that income chargeable to tax has escaped assessment. Thus, the reasons recorded and consequent reopening of the assessment, in my view are bad in law. Hence I uphold the statements of the assessee and quash the reopening of the assessment as bad in law.
In the result assessee’s appeal is allowed. Order pronounced in the Open Court on 30th November,2015.