M/s. Constellation Capital Ltd., New Delhi V. ITO, New Delhi

CO 337/DEL/2010

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1873 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-01-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-12-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 08-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: LD CIT AS IV NEW DELHI GROUNDS
• Keywords: Reopening of assessment; Cost of acquisition; Accommodation entries; Reassessment proceedings
• Section: 143(3); 147; 68; 148

Judgement Text

1 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 3836/DEL/2010 (ASSESSMENT YEA R-2001-02) ITO WARD-3(4) NEW DELHI (APPELLANT) VS CONSTELLATION CAPITAL LTD. 10, LOCAL SHOPPING COMPLEX KALKAJI NEW DELHI AAACC5128J (RESPONDENT) C.O. NO. 337/ DEL/2010 (ASSESSMENT YEA R-2001-02) CONSTELLATION CAPITAL LTD. 10, LOCAL SHOPPING COMPLEX KALKAJI NEW DELHI AAACC5128J (APPELLANT) VS ITO WARD-3(4) NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL AND CROSS OBJECTION ARE FILED BY THE RE VENUE AND ASSESSEE, RESPECTIVELY, AGAINST THE ORDER DATED 15/ 6/2010 PASSED BY LD. CIT (A)S IV, NEW DELHI, BY THE REVENUE. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- APPELLANT BY SH. NEEHAR RANJAN PANDEY, SR. DR RESPONDENT BY SH. ADESH JAIN, AKSHAT JAIN. CAS DATE OF HEARING 17.12.2015 DATE OF PRONOUNCEMENT 19.01.2016 2 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. CIT(A) IS WRONG, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN TREATING THE PENALTY LEVIED BY THE ASSESSING OFFICER U/S 271(1) (C) OF THE I.T. ACT AS INVALID IGNORING THE FACT THAT PROV ISIONS OF SECTION 271 (1B) OF THE I.T. ACT ARE CLEARLY APPLIC ABLE IN THIS CASE. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING ADDITION OF RS.30,00,000/- MADE BY THE ASSESSING OF FICER U/S 68 OF THE I.T ACT, IGNORING THE FACT THAT THE A SSESSEE FAILED TO PROVE THE PHYSICAL IDENTITY OF THE PERSON S IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTION RELATE D TO SALE OF SHARES. 3. THE GROUNDS OF APPEAL ARE AS FOLLOWS (C.OS GROU ND) 1. THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW I N UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDINGS U/S 147/14 8 OF THE INCOME TAX ACT, 1961, EVEN THOUGH NOTICE U/S 148 WA S ISSUED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WITHOUT RECORDING REASON ABOUT FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT, WHEN ASSESSMENT HAS A LREADY COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961. 4. AN INFORMATION HAS BEEN RECEIVED FROM THE INVEST IGATION WING, NEW DELHI THAT CERTAIN PERSONS CALLED BENEFICIARIES HAVE RESORTED TO MONEY LAUNDERING BY GIVING UNACCOUNTED CASH TO PERS ONS CALLED 3 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 ENTRY OPERATORS AND IN TURN TAKING FROM THEM CHEQUE S, DDS IN THE GARB OF SHARE APPLICATION MONEY OF SALE PROCEEDS OF NON-EXISTING GOODS, THEREBY PLOUGHING BACK THERETO UNDECLARED CA SH INTO ITS ACCOUNTS/BUSINESS. SOME OF PERSONS ENGAGED IN PROVI DING ACCOMMODATION ENTRIES WERE M/S H. B RELAN & CO. THE INVESTIGATION WING AFTER COMPLETING THE INVESTIGATI ON ANALYSIS INFORMATION COLLECTED BY ITSELF FROM VARIOUS SOURCE S INCLUDING BANKS & SUCH ENTRY OPERATORS. THE CASE WAS REOPEN U/S 14 7 OF THE ACT AFTER RECORDING THE REASONS AND REOPENING AND TAKIN G NECESSARY APPROVAL FROM THE HIGHER AUTHORITIES REQUIRED UNDER THE PROVISIONS OF INCOME TAX ACT ON 31/3/2008, IN RESPONSE TO WHIC H THE ASSESSEE FILED A LETTER DATED 16/4/2008 REQUESTING TO TREAT THE RETURN FILED EARLIER AS RETURN FILED U/S 148 OF THE INCOME TAX A CT VIDE LETTER DATED 12/11/2008. THE ASSESSEE WAS ONCE AGAIN ASKE D TO FILE THE RETURN IN THE PRESCRIBED FORMAT. THE ASSESSEE IN CO MPLIANCE TO THIS LETTER FILED THE RETURN OF INCOME VIDE ITS LETTER D ATED 19/11/2008 IN THE MEANWHILE THE ASSESSEE VIDE HIS LETTER DATED 16 /4/2008 ASKED FOR THE REASONS TO REOPENING THE ASSESSMENT PROCEED INGS WHICH WERE SUPPLIED TO HIM. SUBSEQUENTLY, THE ASSESSEE V IDE LETTER DATED 22/8/2008 RAISED CERTAIN OBJECTIONS TO REOPENING OF ASSESSMENT PROCEEDINGS TILL WITHOUT DATED THE ASSESSEE HAD NOT APPLIED WITH THE PROVISIONS OF THE ACT LIKE THE ASSESSEE HAS NOT FIL ED THE RETURN OF INCOME IN PROPER FORMAT. THE ASSESSEE WAS THEN ASK ED TO COMPLY UPON WHICH, HE FILED RETURN OF INCOME ON 19/11/2008 AND RAISED CERTAIN OBJECTIONS AS LISTED IN THE LETTER DATED 22 /8/2008. THE OBJECTIONS RAISED BY THE ASSESSEE WERE DISCUSSED OF VIDE SPEAKING 4 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 ORDER ON 19/12/2008. VIDE NOTICE DATED 19/12/2008 THE ASSESSEE WAS ASKED TO SUBMIT THE DETAILS IN REGARD TO THE TR ANSACTION WITH M/S H. B RELAN & CO. DURING THE FINANCIAL YEAR 2000 -01. THE ASSESSEE SUBMITTED CERTAIN DETAILS VIDE ITS LETTER DATED 29/12/2008, THE ASSESSEE HAS STATED THAT IT HAS SOLD 1,10,000/- SHARES OF M/S ECO HOLDING PVT. LTD. FOR VALUE OF RS. 11 LACS AT R S. 10.02%. IT IS RELEVANT TO MENTION HERE THAT THE COST OF ACQUISITI ON OF THESE SHARES AS REPORTED IN THE BOOKS OF THE ASSESSEE WHERE THE SUM OF RS. 11 LACS. THE ASSESSEE HAS SOLD THESE SHARES AFTER INV ESTIGATING RS. 11 LACS FOR SUCH A LONG TIME WITHOUT GAINING ANYTHING FROM HIS INVESTMENT. IT IS MORE RELEVANT TO POINT OUT AND T HESE JUNCTURE THAT NO DIVIDEND HAS BEEN RECEIVED BY THE ASSESSEE EVEN AFTER HOLDING THE 1,10,000/- SHARES FOR SUCH A LONG TIME. THIS U NIQUE FEATURE DOES NOT HAPPEN TO THE ASSESSEE IN THIS SCRIPT ONLY BUT EACH AND EVERY SCRIPT WHICH THE ASSESSEE HAS SOLD TO M/S H. B. RELAN & COMPANY IN CASE OF ANOTHER SCRIPT I.E. M/S BILU SEC URITIES PVT. LTD. THE ASSESSEE WAS HOLDING 20,000/- SHARES OF THIS S CRIPT AND AGAIN SOLD THE SHARE AT RS. 10.02 PER SHARE TOTALING RS. 2 LACS I.E AT THE COST OF ACQUISITION LIVING NOT GAIN TO THE ASSESSEE NO DIVIDEND EARNED, NO INTEREST RECEIVED, AND NO PROFIT BOOK IN ITS PROFIT AND LOSS ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT IT IS HARD TO ASSUME THAT THE ASSESSEE WHO INVESTIGATED SUCH BIG AMOUNT I.E. OF RS.30 LACS AND EVEN AFTER ONE YEAR GAINS NOTHING ON ANY O THER SCRIPTS IN WHICH IT DEALS EACH AND EVERY SHARE WHICH THE ASSES SEE HAS SOLD TO M/S H. B. RELAN & CO. WHICH AT COST PRICE AND THE G AIN TO THE ASSESSEE REMAINS ZERO. THIS ASPECT DEFIES HUMAN PR EPONDERANCES. 5 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 THE ASSESSING OFFICER FURTHER OBSERVED THAT MORE OV ER THERE ARE MORE REASONS THAN ONE REASON TO QUESTION THE GENUIN ENESS OF THE TRANSACTION ENTERED BY THE ASSESSEE WITH M/S H. B. RELAN & CO. THE ASSESSEE IN EACH AND EVERY SCRIPT HAS FAILED TO SUB MIT THE DISTINCTIVE NUMBERS OF THE SCRIPTS IT HAS SOLD. TH E ASSESSEE HAS NOT ONLY FAILED IN SUBSTANTIATING THE REASONS OF SELLIN G THE SHARES AT COST PRICE BUT ALSO FAIL TO PRODUCE THE SUPPORTING EVIDE NCES WHICH CAN SUPPORT THE CLAIM OF THE ASSESSEE THAT THE PRICE OF ALL THESE SCRIPTS WERE UNIFORMLY AND UNIQUELY AT RS. 10.02 PER SHARE. THE ASSESSING OFFICER MADE AN ADDITION ON ACCOUNT OF CASH CREDIT TO THE EXTENT OF 30 LACS AND CIT WHILE DECIDING THE MATTER OBSERVED THAT THE SALE OF SHARES HAS ALREADY BEEN REPORTED BY THE ASSESSEE AS PART OF ITS REGULAR TRADING TRANSACTIONS AND THE VARIOUS DEALS INCLUDING THE EXISTENCE OF THESE SHARES AS PER THE BALANCE-SHEET OF THE ASSESSEE HAS NOT BEEN DISPUTED ACCORDINGLY. IT CANNOT BE HE LD THAT THE AMOUNT OF RS.30 LACS HAS BEEN RECEIVED AGAINST NON- EXISTENCE OF SHARES. WITH REGARD TO THE SALE PRICE OF THE SHARE S, THE COST OF ACQUISITION OF REMAINING THE SAME THIS FACT IN ITSE LF IS NOT SUFFICIENT TO ARRIVE AT AN ADVERSE INFERENCE AGAINST THE ASSES SEE. THE CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. THE LD. DR RELIED UPON THE ORDER OF THE ASSESSIN G OFFICER AND SUBMITTED THAT THERE WAS NOTHING ON RECORD TO SHOW THAT THE GAP BETWEEN THE PURCHASE AND THE SALE AND WAS NOT POINT ED OUT FROM THE BANK DETAILS BY THE ASSESSEE. THE LD. DR FURTH ER SUBMITTED THAT THERE WAS NO MATERIAL GIVEN FOR VERIFICATION B Y THE ASSESSEE TO THE ASSESSING OFFICER. THE SALE PRICE OF ALL SHARE S WAS 10.02% ONLY 6 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 WHICH DOES NOT APPEAR TO BE BEST AND PROPER. AS ME NTIONED IN CIT (A)S ORDER THERE WAS NO REPORT BY THE ASSESSEE OR THERE WAS NO BALANCE-SHEET REFLECTION IN THE PREVIOUS YEAR SHOWN BY THE ASSESSEE TO THE ASSESSING OFFICER HOW THE CIT(A) HAS ARRIVE D AT THIS CONCLUSION IS NOT ELABORATED IN THE CIT(A)S ORDER. THE DR SUBMITTED THAT NO VERIFICATION OF BALANCE-SHEET OF EARLIER YEAR HAS BEEN PRODUCED BY THE ASSESSEE. THE MODE OF PURCHAS E FROM WHOM THE PURCHASE OF SHARE WAS MADE AND HOW THE SAME WAS SOLD WAS NOT JUSTIFIED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER. THUS, IT IS BOGUS ACCOMMODATION ENTRY AS PER THE LD. DR. 6. THE LD. AR CONTENDED THAT THE ASSESSEE HAS FILED CROSS- OBJECTION AND SUBMITTED THAT NO INVESTIGATION BY A. O WAS DONE AS RELATED TO THE QUANTUM AND THE SAME WAS NOT KNOWN T O THE ASSESSING OFFICER WHEN THE INCOME OF THE ASSESSEE W AS ALREADY ASSESSED. THE LD. AR SUBMITTED THAT GROUND NO. 2 O F THE DEPARTMENTS APPEAL IS NOT PROPER. AS RELATES TO T HE CROSS OBJECTION, THE LD. AR FURTHER SUBMITTED THAT THERE WAS NO PROPER REASONING GIVEN. AS RELATED TO THE REVENUES APPEA L, THE AR POINTED OUT THAT AT PAGE 10 OF THE PAPER BOOK POINT 11 WAS RELATED TO THE FINANCE INVESTMENT AND PAGE 17 OF THE PAPER BOOK TH ERE WAS STOCKING IN MENTIONED AS OPENING STOCK. THE LD. AR ALSO POINTED OUT PAGE 73 & 74 OF THE PAPER BOOK AND HEARD ON THA T THE STOCKING TRADE IS AN OPENING BALANCE FOR THE ASSESSEE. THE LD. AR RELIED UPON THE CIT (A)S ORDER AND HELD THAT THE CIT(A) R IGHTLY SET ASIDE THE ORDER OF THE ASSESSING OFFICER. 7 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 7. THE LD. DR GAVE THE REJOINDER TO THE ARS CONTEN TIONS THAT THE INVESTIGATION WAS PROPERLY DONE AND WHEN THE ASSESS ING OFFICER GOT INFORMATION FROM INVESTIGATION DEPARTMENT, THE A.O HAD VALID REASONS TO REOPEN THE ASSESSMENT PROCEEDINGS. THERE WAS A PRIMA FACIE BELIEF. THERE WAS A FAILURE ON PART OF THE A SSESSEE AND THEREFORE CROSS OBJECTION DOES NOT SUSTAIN. THE D R SUBMITTED THAT GROUND NO. 2 OF REVENUES APPEAL IS NOT PRESSED. 8. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. GROUND NO. 2 OF THE REVENUES APPEAL IS DISMISSED A S NOT PRESSED. AS RELATES TO OTHER GROUND OF THE DEPARTMENTS APPE AL, IT IS SUBMITTED THAT THE CIT (A) WHILE ALLOWING THE APPEA L OF THE ASSESSEE HAS MENTIONED THAT VARIOUS DETAILS INCLUDING THE EX ISTENCE OF SHARES AS PER THE BALANCE-SHEET OF THE APPELLANT FROM EARL IER YEARS HAS NOT BEEN DISPUTED. THIS PARTICULAR FINDING IS NOT PROP ER AS BEFORE THE ASSESSING OFFICER, THE BALANCE-SHEET WAS NOT PRODUC ED BY THE ASSESSEE AND THE SAME WAS NOT PRODUCED DURING THE C IT (A) PROCEEDINGS. THE CIT (A) HAS SIMPLICITOR TAKEN THE STOCKING TRADE OPENING BALANCE AS PREVIOUS YEARS BALANCE BUT NOT V ERIFICATION HAS BEEN DONE BY THE CIT (A) TO THE GENUINENESS OF THE SUBMISSION OF THE ASSESSEE. IN VIEW OF THIS, IT IS PROPER TO REM AND BACK THE MATTER BEFORE THE CIT (A) FOR VERIFYING THE PREVIOUS YEAR S BALANCE-SHEET AND TO GIVE PROPER FINDING. 9. THE CROSS-OBJECTION WILL NOT SUSTAIN AS THE PROP ER REASONING AFTER INVESTIGATION HAS BEEN GIVEN BY THE ASSESSING OFFICER FOR REOPENING THE MATTER. THE REASONS WERE PROVIDED TO THE ASSESSEE 8 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 AND THE OBJECTION TO THE REOPENING WAS SUBMITTED BY THE ASSESSEE BEFORE THE A.O AFTER CONSIDERING OF RIGHTLY THE ASS ESSING OFFICER HAS REOPEN THE MATTER. 10. IN RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THE CROSS-OBJECTION OF THE ASSESSEE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 19 TH OF JANUARY, 2016. SD/- SD/- ( S. V. MEHROTRA) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 19/01/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 9 ITA NO. 3836/ DEL/2010 & C.O. 337/DEL/2010 DATE 1. DRAFT DICTATED ON 17.12.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 18.12.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .12.2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. .12.2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 19.01.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON .12.2015 PS 7. FILE SENT TO THE BENCH CLERK 19.01.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.