SH. KAMAL DHAWAN,NEW DELHI vs. ITO, NEW DELHI

Date of Hearing : 06-08-2015 Date of Order : 28-09-2015 ORDER

PER H.S. SIDHU : JM

2. The following grounds have been raised in the Appeal. Validity of Reopening u/s. 148

1. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not quashing the reopening action of the AO being made in contravention of jurisdictional conditions stipulated u/s. 147 to section 151 of the Act.

6. That on the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in not deleting the addition of Rs. 749,000/- made in violation of principles of natural justice as no adequate opportunity is provided to assessee to explain his case. That the appellant craves leave to add, to amend, modify, rescind, supplement or alter any of the grounds stated herein above, either before or at the time of hearing of this appeal.” 3. The brief facts of the case are that in this case, a TEP was received from DG (Vigilance), New Delhi through CIT, Delhi-IX, New Delhi vide letter No. CIT-IX/Hqrs/TEP/2007-08/1604 dated 12.09.2007 that a bank locker no. 33 of Shri Kamal Dhawan and Smt. Anju Dhawan maintained with SBI, Subhash Nagar Branch, New Delhi was operated on 08.06.2006 and a cash of Rs. 7.49 lakhs, 800 grams jewellery and 3 property papers were found in it. In fact, an investigation was carried by the CBI, who carried out a search at the Bank Locker of Sh. Kamal Dhawan, the assessee. The locker contained cash amounting to Rs.7,49,000/-, approx. 800 grams of gold jewellery and documents pertaining to three properties i.e. shop no. 5 in Maya Enclave, Plot No. B-45, Sitapuri, Dabri and House No. 7/143, Subhash Nagar. The assessee stated that these three properties were purchased by him in the years 2000, 1999 and 1998 respectively. As regards the gold jewellery, he stated that most of it was received by his wife Smt. Anju Dhawan at the time of their marriage. The assessee gave a statement dated 14.06.2006, recorded u/s. 161 of Cr.PC. by Sh. Rajiv Wahi, Inspector, CBI, SCR-II, New Delhi. In the above statement, the assessee stated that he had 3 kept cash of Rs.7,49,000/- in his bank locker no. 33 of SBl Branch Subhash Nagar, which was collected by himself from the market and his friend Sh. Sanjay Sharan, resident of Janakpuri, for purchasing plywood core from Kashmir. He stated that the money was collected and kept in the locker one week before the search at his residence on 07.07.2005. The assessee further stated that his source of income was from running a Dhaba in Maya Enclave. He further stated that he earned approximately Rs. 3 to 4 lacs from the passport work which he did for nine years. He stated that he was filing his return of income showing business in the name of M/s. Dhawan Enterprises, which did not exist. The locker was opened on 8.6.2006 in the presence of the assessee, his wife Smt. Anju Dhawan, Sh. Rajiv Wahi, Inspector, CBI and Dy. Manager, Accounts in SBI Subhash Nagar, New Delhi Sh. Ravi Chopra. This information was passed on to the AO, who issued notice u/s. 148 for AY 2007-08 on 2.6.2009, since the assessment proceedings for that year had already been completed by that time. Thereafter, notice u/s. 143(2) dated 08.07.2009 was served on the assessee. In response, the assessee filed a copy of return which had already been filed for A.Y. 2007-08 declaring a total income of Rs.1,24,916/-. With regards to cash of Rs.7,49,000/-, the AO issued a query letter to the assessee, who replied that out of this amount Rs.2,50,000/- belonged to Sh. Sanjay Sharma, Rs.3,70,000/- belonged to Sh. Jatinder Pal Singh and Rs. 1,29,000/- belonged to him and his wife. The assessee also claimed that approx. 800 grams of jewellery found belonged to him and his wife. The AO issued letters uls. 133(6) to Sh. Sanjay Sharma and Sh. Jatinder Pal Singh, whose statements were recorded by the AO on 13.12.2010. Both Sh. Sanjay Sharma and Sh. Jatinder Pal Singh admitted that they had given cash of Rs.2,50,000/- and Rs.3,70,000/- to the assessee for business purposes, but both of them were not aware that this cash was kept in locker no. 33 with 4 SBI, Subhash Nagar, New Delhi. The AO did not accept the explanations given by the assessee with regards to the cash found and added the amount of Rs.7,49,000/- to the income of the assessee as undisclosed cash receipts and assessed the income at Rs. 8,73,920/- vide order dated 24.12.2010 passed u/s. 147/143(3) of the Income Tax Act, 1961.

7. On the other hand, Ld. DR relied upon the order passed by the Ld. CIT(A) on the issue in dispute.

1. 1. An information has been received from CBI, New Delhi vide letter No. 3/6(a)2004 SCU/V/SCR.II/3015 dated 20.7.2007 that Shri Kamal Dhawan has kept the cash of Rs. 749,000/- and jewellery of 800 grams in locker No. 33, SBI, Subhash Nagar, New Delhi.

2. On the basis of above information and perusal of asstt. records, it is found that assessee has not shown any cash in hand nor in the books of accounts even he has not shown any jewellery in the books of accounts.

3. On the basis of information as per para 1 above, I have reason to believe that assesee has not disclosed true and correct particulars of his income and income has escaped assessment is likely to exceed more than Rs. 100,000. Notice u/s. 148 is required to be issued to assessee for asstt. year 2007-08. Sd/- (S.P. Sachdeva) ITO, Ward 27(2), New Delhi 9. I find that Assessee Sh. Kamal Dhawan has asked some information from the Income Tax Department under the Right to Information Act, 2005 and the Income Tax Department has replied the said information by passing an Order dated 176.2014 issued vide F.No. ITO/Ward27(2)/RTI/2014-15/32. For the sake of clarity, the contents of the order is reproduced as under:- “The application from Sh. Kamal Dhawan (the applicant) has been received in this office on 6 23.5.2014 with request to supply following information. In this regard, question wise reply in respect of this office is as under:- S.No. Information/ Details Reply / Status required 1. Whether before issuing Yes notice u/s. 148 for Asstt. year 2007-08, any reasons were recorded by Assessing Officer kindly reply in Yes or No.

2. If answer is Yes, whether You have not same were informed to the made and any Assessee and whether a request to copy of said reasons were provide the served on Assessee. same during assessment proceedings.

3. Also provide copy of the Copy attached. said reasons recorded alongwith accompanying material.

In case you wish to file an appeal against this order, you may file the same within thirty days from the receipt of this letter before the appellate Authority i.e. the Jt. CIT, Range-27, New Delhi at Room No. 1806, 18th floor, Pratyaksh Kar Bhawan, E- 2 Block, Dr. SPM Civic Centre, Minto Road, New Delhi – 110 002. Sd/- (Suresh Kumar) Central Public Information Officer & Income Tax Officer, Ward 27(2), New Delhi 9.1 From the above, I find considerable cogency in the assesse’s counsel submission that was not given opportunity to rebut and confute the reopening and reasons recorded as per dictum of Apex Court in GKN Driveshafts (India) Ltd. vs. ITO [2003] 259 ITR 19 which nullifying entire proceedings. In this case, the Hon’ble Apex Court has held as under:-

That after the receipt of the notice under section 148 of the I.T. Act, the assesse must file the return, but he is entitled to ask for the reasons for issuance of a notice. The Supreme Court has further held that when the reasons are asked for, the AO is bound to furnish the reasons within a reasonable time. Thus the sine qua non for issuance of a notice under section 148 of the I.T. Act is recording of the reasons by the AO. In our view recording of the reasons and furnishing copy thereof to the Assessee when asked is not an empty formality. If the reasons recorded and a copy thereof required to be furnished to the assessee on demand the assessee would be entitled to show that the reasons recorded were factually incorrect. Furthermore, the power of the AO to proceed with the Assessment proceedings would be limited by the reasons recorded by him. He would be assessing or reassessing the income of the assessee only 8 on the reasons recorded by him and cannot travel beyond the reasons and continue the proceedings of assessment on different reasons.

9.2 In the background of the aforesaid discussions and precedent relied upon, I am of the considered view that only effective ground in this appeal is reassessment proceedings u/s. 148 of the I.T. Act, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. After hearing both the parties on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 21.7.2011 passed by the Hon’ble Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051 wherein the Hon’ble High Court has held matter as under:-

Held, allowing the petition, that the reassessment proceeding were initiated on the basis of information received from the Director of Income Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during the financial year 2002-03 as stated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assesee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed.