ACIT, NEW DELHI V. M/S. VISHAL GOLD & PRECIOUS STONES PVT. LTD., NEW DELHI

ITA 951/DEL/2017

AI Insights

The case revolves around the reassessment proceedings initiated against M/s. Vishal Gold & Precious Stones Pvt. Ltd. for the assessment year 2007-08. The Assessing Officer (AO) had made several additions to the income of the assessee based on the reassessment under sections 143(3) and 147 of the Income-tax Act, 1961, following a survey and the recording of statements from various parties. The CIT(A) quashed these proceedings, leading to the revenue's appeal to the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of direct evidence linking the assessee to any concealed income and the reliance on illegible and unverified documents and statements.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315430 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAHESH KUMAR
• Assessee Lawyers: NAGESH BEHL
• Keywords: Reassessment proceedings; Document seized; Documents seized; Reopening of assessment; Borrowed satisfaction
• Section: 147; 148; 143(3); 133A

Judgement Text

"Page | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No. 951/Del/2017 (Assessment Year: 2007-08) ACIT, Circle-26(2), New Delhi Vs. M/s. Vishal Gold & Precious Stones Pvt. Ltd, B-5, Moti Nagar, Near Durga Mandir, New Delhi- 110015 (Appellant) (Respondent) PAN: AABCV8836H Assessee by : Shri Nagesh Behl, Adv Revenue by: Shri Mahesh Kumar, CIT DR Date of Hearing 06/05/2025 Date of pronouncement 15/05/2025 O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in ITA No.951/Del/2017 for AY 2007-08, arises out of the order of the Commissioner of Income Tax (Appeals)-3, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 267/14-15 dated 03.10.2016 against the order of assessment passed u/s 143(3)/ 147of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 26.03.2013 by the Assessing Officer, DCIT, Circle-17(1), New Delhi (hereinafter referred to as ‘ld. AO’). 2. The revenue has raised the following grounds of appeal:- “1. \"On the facts and in the circumstances of the case and law, the Ld. CIT(A) has erred in quashing the re-assessment made by the AO u/s ITA No. 951/Del/2017 M/s. Vishal Gold & Precious Stones Pvt. Ltd Page | 2 147/143(3) when the AO has sufficient material on record to prove that the assessee has concealed particulars of its income.\" 2. \"The appellant craves, leave or 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.\" 3. We have heard the rival submissions and perused the material available on record. The assessee pleaded that reassessment proceedings u/s 147 of the Act stood initiated without there being any documentary evidence on the record which is found/ impounded during the survey conducted on 06.10.2010 u/s 133A of the Act. It was submitted that statement relied upon by the ld AO of certain parties which are incorporated in the assessment order, the copy of statement which was provided to the assessee was illegible and not clear as to who had recorded the statement, place of recording the statement, name of the persons whose statement was recorded, proceeding under which the statement was recorded and date and time of the statement. None of the crucial information was legible in the copy of the statement provided to the assessee by the ld AO. The ld AO however framed the assessment u/s 143(3) read with section 147 of the Act on 26.03.2013 determining the total income of the assessee at Rs. 6,65,95,770/- as against the returned income of Rs. 16,03,890/- after making the following additions:- a. Addition on account of share application/ share premium- Rs 3,82,49,000/- b. Addition on account of claim Rs. 13,14,250/- C. Addition on account of sundry creditors Rs. 4,28,628/- d. Addition on account of net profit Rs 50,00,000/- 4. The assessee preferred an appeal before the ld CIT(A) who deleted the addition on merits and also quashed the reassessment proceedings. ITA No. 951/Del/2017 M/s. Vishal Gold & Precious Stones Pvt. Ltd Page | 3 5. In the instant case, the notice u/s 148 of the Act was issued on 19.03.2012. Certain statements were recorded from alleged entry operators by the Investigation Wing of the Income Tax Department which were forwarded to the ld AO and which alone triggered the initiation of reassessment proceedings of the assessee vide issuance of notice u/s 148 of the Act. Hence, this is a clear case of borrowed satisfaction on the part of the ld AO. The statements recorded by the Investigation Wing were not forwarded to the assessee either by the Investigation Wing or by the ld AO in the readable format. It is pertinent to note that the certain impounded documents at the time of survey comprising blank share transfer forms, undated delivery notes, blank receipts of investing companies and power of attorney. It is not relatable to the year under consideration at all which facts has been duly appreciated by the ld CIT(A). Hence, there is no question of making any addition on account of share capital or share premium during the year under consideration. In our considered opinion, the ld CIT(A) had rightly deleted the same. 6. Further, the ld AO had sought to reject the books of account of the assessee u/s 145(3) and proceeded to make several additions based on the very same books of account in the form of commission and sundry creditors. Having resorted to reject the books and resorting to estimating the profits from business, no separate addition could be made on account of sundry creditors as they are also connected with the business. Hence, the same has been rightly deleted by the ld CIT(A). 7. We find that the profit estimation of Rs. 50 lakhs was made by the ld AO based on the gross profit rate of 20% as against the declared gross profit rate of 11.3 % by the assessee. The ld AO insisted for furnishing quarterly GP and NP rate which were not furnished by the ITA No. 951/Del/2017 M/s. Vishal Gold & Precious Stones Pvt. Ltd Page | 4 assessee. Accordingly, the estimated profit rate was made by the ld AO. Even if the books were rejected u/s 145(3) of the Act by pointing out certain defects, the ld AO is duty bound to bring on record comparable instances depending the nature of business carried out by the assessee and resort to estimation of profit percentage. There is no question for making adhoc addition of Rs. 50 lacs directly. We hold that this is not a fit case for rejection of book results u/s 145(3) of the Act. Hence, the estimation profit addition of Rs. 50 lacs has been rightly deleted by the ld CIT(A). 8. Before, the ld CIT(A), the ld AO vide letter dated 27.06.2016 gave the list of 4 parties seized documents which were impounded at the time of survey. They are as under:- a. Brightview Buildcon Pvt. Ltd b. Trinetra international ltd c. Kushal Infratech Pvt. Ltd c. Sachet Media Pvt. Ltd 9. Accordingly, the ld AO confirmed that this is the only information which he had at the time of recording the reasons for reopening the assessment and during the course of assessment proceedings. The assessee pleaded before the ld CIT(A) that these four parties have no transaction in any manner whatsoever with the assessee and they are not investors in the assessee company. Hence, there is no live link for formation of belief on the part of the ld AO that income of the assessee had escaped assessment. Apart from this, various objections were raised by the assessee challenging the validity of reopening of assessment ITA No. 951/Del/2017 M/s. Vishal Gold & Precious Stones Pvt. Ltd Page | 5 before the ld CIT(A). We find that the ld CIT(A) has quashed the entire reassessment by observing as under:- 2.7 In the instant case, the Assessing Officer while recording the reasons wrote that during the course of the survey by the ADIT, Investigation, blank share transfer forms, undated delivery notes, blank receipts of the investing companies and power of attorney were found and impounded. The assessee fails to prove the genuineness of the transaction and the identity of the applicants The companies who invested in the share capital have earlier been held to be entry operators and the creditworthiness of such companies could not be established 1 find that the reasons recorded by the Assessing Officer are mere information received from the ADIT (Investigation). No documentary evidence was found and impounded during the survey related to the year under consideration. The statement scanned and incorporated in the assessment order is illegible and the Assessing Officer could not locate the legible copy despite repeated directions. There is no evidence on the record to show that any incriminating documentary evidence was impounded during the survey for the year under consideration to hold that the share subscription is received from the entry operators. 2.8. From the above, it is clear that the Assessing Officer referred to the information received from the ADIT(Investigation) and other directions as \"reasons\" on the basis of which he proceeded to issue notice under section 148 of the Act. These cannot be the reasons for proceeding under section 147/148 of the Act. There is no evidence on the record to suggest that the Assessing Officer applied his mind to the information and independently arrived at the belief that on the basis of the material which he had before him income had escaped the assessment. Resultantly, the initiation of proceedings under section 147 and issuance of notice under section 148 of the Act are hereby quashed. 3. As the proceedings u/s 147/148 of the Act have been quashed. There is no need to adjudicate the other grounds raised regarding the merits of the case. 10. We find that the ld CIT(A) had quashed the reassessment proceedings per se apart from deleting the entire addition on merits. The revenue had challenged only the quashing the reassessment proceedings and had not raised any ground before us challenging the deletion of ITA No. 951/Del/2017 M/s. Vishal Gold & Precious Stones Pvt. Ltd Page | 6 addition of merits by the ld CIT(A). The very basis of reopening is borrowed satisfaction and insufficient and incorrect information. Hence, we hold that the ld CIT(A) had rightly quashed the reassessment proceedings in the instant case apart from deleting the addition on merits. Accordingly, grounds raised by the revenue are dismissed. 11. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 15/05/2025. -Sd/- -Sd/- (YOGESH KUMAR U.S.) (M. BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15/05/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi "