DEPUTY COMMISSIONER OF INCOME TAX, DELHI V. ARM OVERSEAS PVT LTD, DELHI

ITA 4545/DEL/2024

AI Insights

The case involves ARM Overseas Pvt. Ltd., a company engaged in the business of manufacturing, trading, and processing of paddy and rice, which faced reassessment of its income for the assessment year 2012-13. Initially, the company filed its return declaring an income of Rs. 27,48,485, which was later assessed at Rs. 27,98,490 after minor disallowances. However, a reassessment notice was issued under section 148, leading to a significantly higher assessed income of Rs. 6,78,28,800, primarily due to alleged accommodation entries. The company contested this reassessment, leading to an appeal before the CIT(A), which deleted the additions made but upheld the legal grounds for reassessment. Both the revenue and the assessee appealed to the Tribunal, which focused on the legality of the reassessment notice and the sufficiency of the reasons recorded for it.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474658 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Other Referred Cases: Hindustan Lever Ltd. Vs. ACIT & others, Oracle India Pvt. Ltd. Vs. ACIT Circle 13(1), New Delhi, Haryana Acrylic Manufacturing Company Vs. CIT-iv & others, Ashish Niranjan Shah Vs. ACIT, Circle-7, CIT Vs. Kelvinator of India Ltd
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHISH TRIPATHI
• Assessee Lawyers: VED JAIN; UMA UPADHAYAY
• Keywords: Set aside; Difference of opinion; Change of opinion; Reassessment proceedings; Accommodation entries; Borrowed satisfaction
• Section: 147; 148; 143(3); 143(2); 139(1); 43

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.4545/Del/2024 (ASSESSMENT YEAR 2012-13) Dy. CIT, Delhi. Vs. ARM Overseas Pvt. Ltd. 2065-A/3, Old Anaj Mandi Narela, Delhi-110040. PAN-AAJCA7769G (Appellant) (Respondent) C.O. No.17/DEL/2025 Arising out of ITA No.4545/DEL/2024 ASSMENT YEAR 2012-13 ARM Overseas Pvt. Ltd., 2065-A/3, Old Anaj Mandi Narela, Delhi-110040. PAN-AAJCA7769G Vs. Dy. CIT, Delhi. (Appellant) (Respondent) Assessee by Shri Ved Jain, Advocate & Ms. Uma Upadhayay, CA Department by Shri Ashish Tripathi, Sr. DR Date of Hearing 17/02/2025 Date of Pronouncement 28/02/2025 O R D E R PER MANISH AGARWAL, AM: The Revenue has filed the appeal against the order of Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (‘the CIT(A)’ for short) dt. 30.07.2024 in Appeal No. CIT(A) Delhi 1/10315/2019-20 for Assessment Year 2012-13. The 2 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT assessee also filed a Cross Objection against the aforesaid order of CIT(A), NFAC. 2. Brief facts of the case are that the assessee is a private limited company engaged in the business of manufacturing, trading and processing of paddy and rice. The return of income was filed on 26.08.2012 declaring total income of Rs. 27,48,485/-. The case of the assessee was taken up for scrutiny by issue of notice u/s 143(2) on 12.8.2013 and after considering the submissions and details filed by the assessee in response to the notices issued u/s 142, the assessment order was passed u/s 143(3) dt. 23.02.1015 wherein total income of the assessee was assessed at Rs. 27,98,490/- after making disallowance of Rs. 50,000/- out of various expenses claimed. Subsequently, the reassessment proceedings were initiated by issue of notice u/s 148 dt. 31.3.2019. In response to the said notice, the assessee filed its return of income declaring same income as was declared in the return filed u/s 139(1) of the Act. The reassessment order was passed on 24.12.2019 at a total income of Rs. 6,78,28,800/- after making various additions including the addition on account of accommodation entries of Rs. 21,79,860/- received from Hitesh Jain, entry provider for which the satisfaction was reached in the reasons recorded before issue of notice u/s 148 of the Act. Against the said order, assessee preferred an appeal before the CIT(A) who vide impugned order dt. 30.07.2024 though has deleted all the additions made on merits however, has rejected the 3 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT legal grounds raised by the assessee. Thus, aggrieved by the said order of ld. CIT(A), revenue is in appeal before us. 3. The assessee also filed cross objections challenging the appellate order on legal issues. As the CO of the assessee relates to the legal issue thus the same is taken up for adjudication first. 4. In Grounds of cross objection No. 1 and 2 taken, assessee has challenged the notice u/s 148 issued beyond a period of four years when the original assessment had been completed u/s 143(3) without satisfying the conditions and procedure prescribed. Assessee further challenged the notice u/s 148 as the reasons recorded are vague and recorded without application of mind and on the basis of borrowed satisfaction. Further according to assessee there was failure on the part of the assessee to fully and truly disclose the material facts of the case. 5. Before us, the Ld. AR of the assessee argued that during the course of assessment proceedings, assessee has filed all the requisite details which are placed at paper book pages 43 to 325 filed before us. He further contended that in the reasons recorded, available at page 433 of the paper book, it is alleged that there has been failure on the part of the assessee to truly and fairly disclose all the material facts however, no instance has been pointed out as to how there has been failure on the part of the assessee. In the reason recorded, it is alleged that assessee has obtained accommodation entry of Rs. 4 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT 21,79,860 from Hitesh Jain through his paper/ dummy concern in the name of M/s Raghuveer Singh Davinder Singh (Prop. Devinder Kumar) 2263,68/15, Ist Floor, Gali Raghunandan Naya Bazar, Delhi in a/c No. 1950002100002268 PNB, Karnal however, there is no credit of this amount in the bank account of the assessee. Ld. AR submits that during the course of assessment proceedings, vide notice dt.17.7.2014 available at PB pages 41-42 assessee was asked to file all bank entries with their respective narrations. In reply the assessee has already filed all these details which are available at pages 43 to 325 of the paper book and after considering all these details the assessment order was passed u/s 143(3) without raising any doubts. Ld. AR submits that assessee vide reply dt. 19.11.2019 filed detailed objections pointing out all the infirmities, such letter is placed at pages 679-687 of PB. He further contended that it has not been pointed out in the reasons recorded by the AO that which fact or material was not fully and truly disclosed by the assessee during the course of assessment proceedings. For this reliance is placed on the following: - Hindustan Lever Ltd. Vs. ACIT & others reported in 2004 (2) TMI 41 (Bombay). - Oracle India Pvt. Ltd. Vs. ACIT Circle 13(1), New Delhi reported in 2017 (7) TMI 967(Delhi). - Haryana Acrylic Manufacturing Company Vs. CIT-iv & others reported in 2008 (11) TMI 2. - Ashish Niranjan Shah Vs. ACIT, Circle-7 reported in 2024 (8) TMI 1189 (Bombay). 5 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT Ld. AR further argued that the AO has recorded the reasons without application of mind to the facts and circumstances of the case. He submits that in para 8 of the reason recorded, AO observed that provisions of clause (a) of Explanation 2 to section 147 are applicable which applies in cases where income chargeable to tax has escaped assessment for non-filing of return of income. Such allegation is contrary to the fact as return was filed by the assessee which was already considered by AO while framing the assessment u/s 143(3) of the Act. With regard to the alleged accommodation entity, Ld. AR drew our attention to the page 352 of the paper book which is the copy of bank statement of assessee with State Bank of India, Sonepat No. 65127331130 for the period from 1.4.11 to 31.3.12 wherein on 20.3.2012, a credit entry of Rs.4,40,520/- is appearing having following narration: “Dep Trf RTGS PUNDH12080097535 Raghuveer Singh DA ….” He, thus submits that assessee received only a sum of Rs. 4,40,520/- towards the sale consideration of rice sold to the said party vide invoice No. 916 and 917 both dt. 10.3.2012 totaling to Rs. 4,48,000/. He further submits that except this entry, there was no other debit or credit entry of any amount related to this party in the bank account of the assessee. He thus argued that the while recording the reasons, the AO has neither applied his mind nor has made any effort to correlate the alleged entry of Rs. 21,79,860/- from the bank account of the assessee already available on record and therefore, the reasons so recorded are vague and accordingly the entire 6 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT reassessment order framed on vague and baseless reasons deserves to be quashed. 6. On the other hand, ld. Sr. D/R vehemently supported the order of the lower authorities and submits that the AO in the original assessment proceedings has not verified the sales made. The AO has received specific information that assessee has received accommodation entry from Shri Hitesh Jian, therefore the action of the AO in re-opening the assessment is fully justified and he prayed accordingly. 7. We have heard the rival submissions and perused the material available on records. In the instant case, the assessment was firstly completed u/s 143(3) wherein the AO after examine all the submissions filed by the assessee as available on records, reached to the conclusion that the trading results declared by the assessee are correct and petty disallowance of Rs. 50,000/- out of various expenses claimed was made. Thereafter, based on some information received from the Investigation Wing, the AO framed an opinion that the assessee has received accommodation entry of Rs. 21,789,860/- from Shri Hitesh Jian and reopened the assessment beyond the period of four years. The reason recorded before issue of notice u/s 148 are available at pages 433-436 of the PB filed by the assessee. Since beginning of the reassessment proceedings, the assessee has objected the reopening and filed a details objection vide letter dt. 19.11.2019 and stated that there is no credit entry of Rs. 21,79,860/- 7 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT received from M/s Raghuveer Sing Davinder Kumar (Prop. Davinder Kumar) nor any debit entry of payment to such party. Before us the assessee has successfully demonstrated that the actual transaction with the said party was of a transaction of sale of goods worth of Rs.4,48,000/- against which a sum of Rs. 4,40,520/- stood credited in its bank account on 20.3.2012. Except this entry, the assessee claimed that there was no debit or credit entry with this party during the year, which contention is not controvert by the revenue, therefore, the reasons recorded to this extent are defective and contrary to the facts. 8. From the perusal of the reasons recorded, we find that assessee has disclosed all the material facts necessary for the purpose of assessment. In the original assessment proceedings, the AO after considering all the material has framed an opinion. There was nothing more to disclose and a person cannot be said to have omitted or failed to disclose something when, of such thing, he had no knowledge. Not only material facts were disclosed by the assessee but also they were fully scrutinized by the AO in the original assessment proceedings and figure of income as well as the deductions were worked out by the AO. The sale was duly disclosed in the Profit & Loss account which was available with the AO while framing the assessment. Now based on some information received from Investigation wing, the AO has tried to reopen the assessment without in any manner verifying the said information with the 8 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT material available on record. This is clearly an effort of the AO to review the completed proceedings. The hon’ble Supreme court in the case of CIT Vs. Kelvinator of India Ltd reported in (2010) 187 TAXMANN 312 (SC) has held as under: “ the assessing officer has no power to review; he has the power to re-assess, but re-assessment has to be based on fulfilment of certain pre -condition and if the concept of ‘change of opinion’ is removed, then, in the garb of re-opening the assessment, the review would take place. One must treat the concept of ‘Change of opinion’ as an in-built test to check abuse of power by the assessing officer.” The hon’ble Bombay High court in the case of Hindustan Lever Ltd. Vs. ACIT & others (supra) has held as under: 21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous 9 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced. 22. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to Section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under Section 143(3) of the Act. On this short count alone the impugned notice is liable to be quashed and set aside. Under these circumstances, by respectfully following the judgement of Hon’ble Supreme Court and Bombay High Court, 10 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT we are of the considered opinion that the reopening in the instant case is not by proper application of mind and the reasons recorded by the AO are vague and not supported by independent verification done from the material already available on record. Further assessee has been able to rebut the allegation made in the reasons recorded of receiving the accommodation entry of Rs.21,79,860/- which remained uncontroverted. Thus the reassessment proceedings as initiated vide notice issued u/s 148 dt.31.3.2019 are hereby quashed. The ground of cross objection No. 1 & 2 of the assessee are allowed. 9. Since we have already allowed the cross objection filed by the assessee by accepting the legal grounds taken, the grounds of appeal in revenue’s appeal relating to the merits of the additions become academic and thus not adjudicated upon. 10. As a result, the appeal filed by the revenue is dismissed and the cross objection filed by the assessee is allowed. Order pronounced on 28/02/2025. Sd/- Sd/- (MAHAVIR SINGH) (MANISH AGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: 28/02/2025 PK/Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 11 ITA No.4545/Del/2024 C.O. No.17/Del/2025 ARM Overseas Pvt. Ltd. vs. DCIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI "