ACIT CIRCLE- 7(1), NEW DELHI V. DEE FACES HERBAL PVT LTD, NEW DELHI

ITA 10/DEL/2020

AI Insights

The case revolves around the appeal by the Department of Revenue against the order of the Commissioner of Income Tax (Appeals) which had quashed the reopening of the assessment proceedings and deleted the addition made by the Assessing Officer (A.O.) regarding unexplained share application money. The A.O. had initially reopened the assessment for the Assessment Year 2011-12 based on information suggesting that the assessee had taken accommodation entry of Rs. 42,00,000 from shell companies as share application money. However, the CIT(A) found that the reopening was not justified as the additions made were not based on the reasons recorded for reopening. The Tribunal upheld the CIT(A)'s decision, citing precedents that support the quashing of reassessment when the additions made do not correspond to the reasons for reopening.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474902 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Other Referred Cases: Ranbaxy Laboratories Ltd. Vs. CIT, ACIT Vs. ATS Infrastructure Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR DHANESTA
• Assessee Lawyers: AMIT GOEL; PRANAV
• Keywords: Gift; Reason to believe
• Section: 147; 148; 68

Judgement Text

" 1 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘B’ NEW DELHI) BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SH. YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 10/Del/2020 (A.Y. 2011-12) ACIT Room No. 413, 4th Floor, CR Building, IP Estate, New Delhi Vs. Dee Faces Herbal Pvt. Ltd. Plot No. 67, Road, No. 41, West Punjabi Bagh, New Delhi PAN: AAACCD2153Q Appellant Respondent Assessee by Shri Amit Goel, CA and Sh. Pranav Yadav, Adv Revenue by Sh. Rajesh Kumar Dhanesta, Sr. DR Date of Hearing 13/01/2025 Date of Pronouncement 07/02/2025 ORDER PER YOGESH KUMAR, U.S. JM: This appeal is filed by the Department against the order of Commissioner of Income Tax (Appeal) (‘Ld. CIT (A)’ for short) - Delhi-3, dated 25/10/2019 for the Assessment Year 2011-12. 2. The Grounds of Appeal are as under:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in quashing the reopening of the assessment proceedings u/s 147 without appreciating the facts that the AO had recorded detailed reasons clearly stating 2 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD amount of Rs. 42,00,000/- being the forfeited share application money as well as total amount of Rs. 2,70,50,000/- and hence, the addition made was based on the reasons recorded only.\" 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs. 2,70,50,000/- made by the AO on account of unexplained share application money, ignoring the fact that genuineness and creditworthiness of the investor company being shell entity was not established.\" 3. The appellant craves to add, amend or forgo any ground(s) of appeal at any time before or during the hearing of this appeal.\" 3. Brief facts of the case are that, the Assessee filed return of income declaring loss of Rs. 67,326/-, subsequently the same has been revised on 21/09/2011showing the same amount as loss. Thereafter, on the basis of the information received from Central Circle-8, New Delhi, the A.O. recorded the reason to believe that ‘the Assessee had taken accommodation entry of Rs. 42,00,000/- from shell companies in the form of share application money which was fortified as the investing company did not pay the remaining call money, accordingly the Assessee was beneficiary to the extent of Rs. 42,00,000/-.’ The A.O. further recorded that the said amount of Rs. 42,00,000/- has escaped assessment,accordingly,reopened the case of the Assessee u/s 147 of the Act and issued notice u/s 148 of the Act. The assessment order came to be passed by the A.O. on 26/12/2018by making an addition of 3 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD Rs. 2,70,50,000/- u/s 68 of the Act on the ground that the Assessee was not able to establish the creditworthiness of the person/entity and genuineness of the transaction. Aggrieved by the assessment order dated 26/12/2018, the Assessee preferred anAppeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 25/10/2019, allowed the Appeal of the Assessee by quashing the reopening of the assessment proceedings u/s 147 of the Act and also deleted the addition on merits. Aggrieved by the order of the Ld. CIT(A), the department of Revenue preferred the present Appeal on the Grounds mentioned above. 4. The Ld. Departmental Representative arguing on the Ground No.1, submitted that the Ld. CIT(A) committed error in quashing the reopening of the assessment proceedings u/s 147 of the Act without appreciating the fact that the A.O. had recorded detailed reasons, wherein clearly stated the amount of Rs. 42,00,000/- being forfeited as the share application money as well as the total amount of Rs. 2,70,00,000/-. Further submitted that the additionhas been made was based on the reasons recorded only, thus submitted that the Ld. CIT(A) committed error in quashing the assessment proceedings. 4 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD 5. Per contra, the Ld. Assessee's Representative submitted that the Ld. CIT(A) has rightly quashed the reopening as the A.O. has not made any addition on the issue of reopening. By relying on the Judgments of the Jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. Vs. CIT 336 ITR Delhi (2011) and in the case ofACIT Vs. ATS Infrastructure Ltd. in writ petition No. 3804 and 3807/2023, dated 18/07/2024,sought for dismissal of Ground No. 1 of the Revenue. 6. We have heard both the parties and perused the material available on record. In the present case, admittedly, A.O. had reopened the case by recording the reasons to believe that the Assessee had taken accommodation entry of Rs. 42,00,000/- in the form of share application money fortified and accordingly income of Rs. 42,00,000/- has escaped assessment. However, in the assessment order no such addition has been made on account of share application money forfeited and the A.O. has examined the issue of fresh share application of money of Rs. 2,70,50,000/- received by the Assessee during the year and thereby made addition u/s 68 of the Act on the ground that the Assessee has failed to establish the creditworthiness of the persons/entity who have invested the amount and also opined that the Assessee has failed to prove the genuineness of the transaction. Thus, it 5 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD is crystal clear that the A.O. has initiated the re-assessment proceedings on one issue and has not made any addition on that issue, the Hon'ble High Court of Delhi in the case of Ranbaxy Laboratories Ltd. Vs. CIT 336 ITR 136 Delhi [2011] held as under:_ “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 Assessing Officer proceeded to reduce the claim of deduction under Section 80 HH and 80-I which as per our discussion was not permissible. Had the Assessing Officer proceeded not to make dis-allowance in respect of the items of club fees, gifts and presents, etc., then in view of our discussion as above, he would have been justified as per explanation 3 to reduce the claim of deduction under Section 80 HH and 8-I as well. 21. In view of our above discussions, the Tribunal was right in holding that the Assessing Officer had the jurisdiction to reassess issues other than the issues in respect of which proceedings are initiated but he was not so justified when the reasons for the initiation of those proceedings ceased to survive. Consequently, we answer the first part of question in affirmative in favour of Revenue and the second part of the question against the Revenue.” 7. Further, the above ratio has been reiterated by the Hon'ble High Court of Delhi in the case of ACIT Vs. ATS Infrastructure Ltd. in writ petition No. 3804 and 3807/2023 order dated 18/07/2024. Considering the above facts and circumstances, we find no error or infirmity in the order of the Ld. CIT(A) in quashing the reopening proceedings initiated by the A.O. u/s 147 of the Act. Finding no merits in the Grounds of appeal of the Revenue, we dismiss the Appeal of the Revenue. 6 ITA No. 10/Del/2020 ACIT VS. DEE FACES HERBAL PVT. LTD 8. In the result, the Appeal filed by the Department of Revenue is dismissed. Order pronounced in the open court on 07th March, 2025 Sd/- Sd/- (M. BALAGANESH) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 07 .03.2025 R.N, Sr.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "