M/s International Amusement Ltd., New Delhi V. DCIT, New Delhi

CO 208/DEL/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7417 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 6 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 23-02-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 30-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Keywords: Reopening of assessment; Income from undisclosed sources; Question of law; Tangible material; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 144

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI H.S. SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO . 2795/DEL/2011 (ASSESSMENT YEAR: 2003 - 04 ) DCIT, CIRCLE - 11(1), ROOM NO.312, C.R.BUILDING, NEW DELHI VS. INTERNATIONAL AMUSEMENT LTD., METRO CITY WALK, SECTOR - 10, ROHINI, NEAR RITHALA METRO STATION, NEW DELHI PAN:AAACI0169F (APPELLANT) (RESPONDENT) C.O. NO. 208 /DEL/2011 (ASSESSMENT YEAR: 2003 - 04) INTERNATIONAL AMUSEMENT LTD., METRO CITY WALK, SECTOR - 10, ROHINI, NEAR RITHALA METRO STATION, NEW DELHI PAN:AAACI0169F VS. DCIT, CIRCLE - 11(1), ROOM NO.312, C.R.BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. R.S.SINGHAVI, CA SH. SATYAJEET GOEL, CA SH. REVENUE BY: SH. SHRAVAN GOTRU , SR. DR DATE OF HEARING 29/02 / 2016 DATE OF PRONOUNCEMENT 28 / 05 /2016 O R D E R PER PRASHANT MAHARISHI, A. M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER DATED 30.03.2011 OF THE LD CIT(A) - XXX , NEW DELHI FOR THE ASSESSMENT YEAR 2003 - 04 . 2. THE REVENUE H AS RAISED THE FOLLOWING GROUND OF APPEAL: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT ( A) HAS ERRED IN DELETING THE ADDITION OF RS.1 CRORE ON ACCOUNT OF ACCOMMODATION ENTRIES. 3. AND THE ASSESSEE HAS FILED C.O. IN WHICH IT HAS RAISED THE FOLLOWING GROUND: - ON THE BASIS OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, IT IS INCORRECT TO CALL INVESTMENT IN SHARE APPLICATION, WHICH IS PURELY BUSINESS TRANSACTION, AS ACCOMMODATION ENTRY. HENCE, CIT ( A) WAS JUSTIFIED IN DELETING ADDITION OF RS.1 CRORES AND HOLDING AS A BUSINESS TRANSACTION. 4. 5. THE BRIEF FACTS OF THE CASE IS THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY WHICH FILED ITS RETURN OF INCOME FOR AY 2003 - 04 SHOWING TOTAL INCOME OF RS.3909435 0/ - . PAGE 2 OF 4 THE ASSESSMENT ORDER U/S 143(3) WAS COMPLETED ON 31.03.2005. SUBSEQUENTLY NOTICE U/S 148 WAS ISSUED ON 30.03.2009. THE REASONS RECORDED FOR REOPENING OF ASSESSMENT IS AS UNDER: - M/S INTERNATIONAL AMUSEMENT LTD. A. Y. 2003 - 04 'INFORMATION HAS BEEN RECEIVED FROM DCIT, CENTRAL CIRCLE VI, KOLKATA THAT DURING SEARCH OPERATION ON PAWAN KUMAR RUIA AND HIS GROUP COMPANIES ON 19.02.2014, IT HAS BEEN FOUND THAT HE HAS FLOATED A NUMBER OF COMPANIES WITH A HOST OF DUMMY DIRECTORS. ALL THESE COMPANIES WERE FORM ED THROUGH A FICTITIOUS CROSS HOLDING OF SHARES AND ARE BEING USED TO PROVIDE JAMA KHARCHI ENTRIES TO DIFFERENT BENEFICIARIES AFTER RECEIVING CASH FROM THEM. IN THE PROCESS, COMMISSION IS BEING CHARGED FOR THE SERVICE RENDERED TO THEM. IN COURSE OF SEARCH & SEIZURE OPERATION AT THE SECRET OFFICE OF P. K. RUIA AT 2 N FLOOR AT STEPHEN COURT, ISA, PARK STREET, KOLKATA, MANY INCRIMINATING BOOKS OF ACCOUNTS/DOCUMENTS ETC. HAVE BEEN FOUND AND SEIZED. ONE OF SUCH SEIZED DOCUMENT IS PR 169, WHICH ILLUSTRATES ENTRIES GIVEN TO OUTSIDE COMPANIES. PAGE NO. 1 TO 116 OF PR 169 CONTAINS DETAILS OF LOANS, ADVANCE, SHARE APPLICATION, INVESTMENT ETC. MADE BY THE VARIOUS GROUP COMPANIES TO OUTSIDE COMPANIES SINCE 01.04.1997 TO 31.03.2003. THESE DETAILS GIVE INFORMATION ABOUT TH E DATE OF INVESTMENT/ADVANCE, NAME OF THE GROUP COMPANY, NAME OF THE PARTY TO WHOM ADVANCE HAS BEEN MADE, AMOUNT (DR./CR.) (RATE OF INTEREST AND THE RATE ON WHICH SHARE ARE ACQUIRED) DR. & CR. STANDS FOR AMOUNT GIVEN AND AMOUNT RECEIVED RESPECTIVELY. AT VA RIOUS PLACES IN THE COLUMN 'A/CS 1 SA AND LOAN REFUND ARE WRITTEN AND THESE SEEM TO STAND FOR SHARE APPLICATION AND LOAN RECEIVED BACK ON THE RESPECTIVE DATES. THE ANALYSIS OF THE ENTRIES PRIMA FACIE PROVES LAUNDERING OF THE MONEY TO PROVIDE ACCOMMODATION T O DIFFERENT OUTSIDE PARTIES AFTER RECEIVING CASH FROM THEM ON CERTAIN COMMISSION. THE ASSESSEE IS ONE OF THE BENEFICIARY COMPANY AND RECEIVED THE FOLLOWING ENTRIES: DATE FROM TO AMOUNT 29.01.2003 M A YANK INTERNATIONAL AMUSEMENT LTD. 50,00,000.00 29.01.2003 MILLER INTERNATIONAL AMUSEMENT LTD. 50,00,000.00 THE ASSESSE HAS INTRODUCED ITS UNACCOUNTED INCOME IN BOOKS OF ACCOUNTS THROUGH THE ENTRIES AS REPRODUCED ABOVE. THE INCOME TO THE EXTENT OF RS. ONE CRORE HAS ESCAPED ASSESSMENT BECAUSE OF THE FAILURE ON THE PART OF THE ASSESSE TO DISCLOSE ITS INCOME FULLY AND TRULY. 3. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT.' 6. BASED ON THE ABOVE REASONS RECORDED WHICH ARE BASED ON INFORM ATION RECEIVED FROM INVESTIGATION WING NOTICES U/S 143(2) WAS ISSUED, HOWEVER NOBODY APPEARED AND HENCE, LD AO PASSED AN ORDER U/S 144 R.W.S. 147 OF THE ACT ON 12.11.2009 MAKING AN ADDITION OF RS.1 CRORE. ASSESSEE PREFERRED AN APPEAL BEFORE LD CIT ( A) , WHO DELETED THE ADDITION VIDE ORDER DATED 30.03.2011. LD CIT ( A) DELETED THE ADDITION AFTER SENDING THE MATTER TO THE LD ASSESSING OFFICER IN REMAND PROCEEDINGS. LD CIT ( A) ALSO HELD THAT THERE WAS NO NEW INFORMATION AVAILABLE TO THE ASSESSING OFFICER FOR REOPENING, AND ALSO THAT WHEN IN THE ORIGINAL ASSESSMENT THE ISSUE HAS BEEN EXAMINED THEN IT IS A CHANGE OF OPINION. IT WAS FURTHER NOTED BY LD CIT ( A) THAT THE PAGE 3 OF 4 ASSESSEE COMPANY WAS GIVEN A CONTRACT TO MODERNIZE APPU GHAR IN NEW DELHI AND THEREFORE THE ABOVE FUNDS OF RS.1 CRORE WERE OBTAINED FROM THE ABOVE TWO COMPANIES IN JANUARY 2003 AND SUBSEQUENTLY AS ASSESSEE COMPANY DID NOT GET THE CONTRACT FROM THE GOVT THE MONEY WA S RETURNED TO THE ABOVE COMPANIES. HENCE, THE LD CIT ( A) DELETED THE ABOVE ADDITION. THEREFORE, REVENUE IS IN APPEAL BEFORE US AND ASSESSEE HAS PREFERRED CROSS OBJECTION. 7. BEFORE US THE LD AR ON CROSS OBJECTION FILED HAS SUBMITTED THAT AS NOTICE U/S 148 IS ISSUED BEYOND 4 YEARS IN THE REASONS RECORDED THERE IS NO MENTION ABOUT ANY FAILURE ON PART OF THE ASSESSEE TO FURNISH ANY DETAIL. HE FURTHER SUBMITTED THAT THE REASONS ARE VAGUE, INSUFFICIENT AND NOT BASED ON ANY TANGIBLE MATERIAL OR REQUISITE APPROVAL F ROM ADDITIONAL CIT AS REQUIRED U/S 151(1) OF THE INCOME TAX ACT. HE SUBMITTED VARIOUS CASE LAWS ON THE ABOVE SUBMISSION. ON MERITS, HE SUBMITTED THAT BEFORE LD CIT ( A) COMPLETE DETAILS OF SHARE APPLICATION MONEY RECEIVED FROM THESE TWO PARTIES WERE FURNISH ED AND THE TRANSACTIONS ARE THROUGH BANKING CHANNEL. THE LD CIT ( A) HAS OBTAINED REMAND REPORT AND NO ADVERSE COMMENT HAS BEEN MADE BY THE ASSESSING OFFICER ON THIS POINT. 8. AGAINST THIS LD DR RELIED ON THE ORDERS OF ASSESSING OFFICER HOLDING THAT INFORMATI ON IS RECEIVED FROM THE INVESTIGATION WING WITH RESPECT TO TWO COMPANIES, WHICH ARE FOUND TO BE ACCOMMODATION ENTRY PROVIDERS, AND THEREFORE REOPENING AS WELL AS ADDITION ON THE MERITS IS RIGHTLY MADE. THEREFORE, THE ORDER OF THE LD CIT (A) MAY BE REVERSED . 9. WE HAVE CAREFULLY EXAMINED THE RIVAL CONTENTIONS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR REOPENING. THE REASONS HAVE BEEN RECORDED SIMPLY BASED ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING . ON RECEIPT OF THIS INFORMATION LD ASSESSING OFFICER HAS NOT APPLY ITS MIND BUT ISSUED THE NOTICE U/S 148 STRAIGHT AWAY . WE ARE OF THE VIEW IN THE CASE OF THE ASSESSEE THE SQUARELY COVERED BY THE DECISION OF HONBLE DELHI HIGH COURT IN ITS DECISION DATED 08.10.2015 IN CASE OF PR. CIT VS. G&G PHARMA LTD. WHEREIN HONBLE DELHI HIGH COURT HAS HELD THAT ACTION OF THE LD ASSESSING OFFICER IN ISSUING NOTICE U/S 148 ON THE BASIS OF MATERIAL FROM INVESTIGATION WING WITHOUT FORMING A PRIMA FACIE OPINION IS NOT PROPER. HONBLE DELHI HIGH COURT HAS DEALT WITH T HIS ISSUE AS UNDER: - 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTO RATE 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 ACCOMMODA TION 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 ENTR IES 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 PAGE 4 OF 4 THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED A LONG 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 THA T 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 HEREINB EFORE, 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. 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE C IT ( 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 ANALYZING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE REOPENING O RDER FROM INVALIDITY. 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUESTION OF LAW ARISES. 10. THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF THE HONBLE DELHI HIGH COURT WE ARE OF THE VIEW THAT N OTICE ISSUED BY LD ASSESSING OFFICER U/S 148 OF THE ACT IS NOT VALID AS WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF INFORMATION FROM INVESTIGATION WING IT WAS NOT POSSIBLE FOR ASSESSING OFFICER TO HOLD THAT THE INCOME TO THE EXTENT OF RS.1 CRORE IS INTRODUCED BY THE ASSESSEE AS ITS UNACCOUNTED INCOME IN THE BOOKS OF ACCOUNTS THROUGH ENTRIES AS MENTIONED IN THE REASONS. 11. IN THE RESULT WE ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE AND DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED IN TH E OPEN COURT ON 2 8 / 04 /2016 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 8 / 04 /2016 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI