RKG International Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 101/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82124 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-11-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 07-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Reopening of assessment; Gift; Reasonable cause; Tangible material; Accommodation entries; Reassessment proceedings
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH F FF F : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO . .. . 101/DEL/2013 101/DEL/2013 101/DEL/2013 101/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2004 2004 2004 2004 - -- - 05 0505 05 M/S RKG INTERNATIONAL M/S RKG INTERNATIONAL M/S RKG INTERNATIONAL M/S RKG INTERNATIONAL PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, A AA A- -- -1/25, SECTOR 1/25, SECTOR 1/25, SECTOR 1/25, SECTOR- -- -15, 15, 15, 15, ROHINI, ROHINI, ROHINI, ROHINI, DELHI DELHI DELHI DELHI 110 085. 110 085. 110 085. 110 085. PAN : AAACR4388P. PAN : AAACR4388P. PAN : AAACR4388P. PAN : AAACR4388P. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -15(1), 15(1), 15(1), 15(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI KAPIL GOEL, ADVOCATE. RESPONDENT BY : SHRI VIKRAM SAHAY, SR.DR. ORDER ORDER ORDER ORDER PER G.D. AG PER G.D. AG PER G.D. AG PER G.D. AGRAWAL, VP RAWAL, VP RAWAL, VP RAWAL, VP : :: : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-XVIII, NEW DELHI DATED 19 TH OCTOBER, 2012 FOR THE AY 2004-05. 2. GROUND NO.1 OF THE ASSESSEES APPEAL READS AS UN DER:- VALIDITY OF REOPENING U/S 148 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, LEARNED CIT-A ERRED IN UPHOLDING T HE REOPENING ACTION OF LD. AO WHICH STANDS VITIATED IN TER ALIA FOR FOLLOWING REASONS : A. TOTAL LACK OF TANGIBLE MATERIAL/REASONABLE CAUSE AND JUSTIFICATION. B. ABSENCE OF NEXUS (MUCH LESS LIVE NEXUS) BETWEEN ALLEGED INFORMATION (UNKNOWN WHETHER EXISTS ON FILE OR NOT) AND TENTATIVE INFERENCE DRAWN; C. NON APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND. ITA-101/DEL/2013 2 D. TOTAL LACK OF CLARITY ON NATURE OF TRANSACTION I N REASONS RECORDED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D PERUSED RELEVANT MATERIAL PLACED BEFORE US. THE COPY OF RE ASONS RECORDED FOR REOPENING OF ASSESSMENT IS AT PAGE 1 & 2 OF THE ASS ESSEES PAPER BOOK, THE RELEVANT PORTION OF WHICH READS AS UNDER: - 11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT : RETURN IN THIS CASE HAS BEEN FILED ON 30.07.2004 WH ICH HAS BEEN PROCESSED U/S 143(1) AT AN INCOME OF RS.184240/-. AS PER INFORMATION RECEIVED FROM ACIT, CIRCLE-1, FARIDABAD, HARYANA VIDE LETTER NO.ACIT/FBD/10- 11/23543 DATED : 24.03.2011 THAT THE ABOVE NOTED ASSESSEE (BENEFICIARY) HAS TAKEN ACCOMMODATION ENTR Y, IT WAS DISCOVERED THAT THE ASSESSEES WHO HAVE UNACCOUNTED MONEY (HEREINAFTER CALLED AS ENTRY, TAK ERS OR BENEFICIARIES) AND WANT TO INTRODUCE THE SAME IN THE BOOKS OF ACCOUNTS WITHOUT PAYING TAX APPROACH ANOTH ER PERSON (ENTRY OPERATOR) AND HAND OVER CASH (PLUS COMMISSION) AND TAKE CHEQUES/DDS/POS. THE CASH IS DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT EITHER IN HIS OWN NAME OR IN THE NAME OF RELATIVE/F RIENDS OR OTHER PERSON HIRED BY HIM. FOR THE PURPOSE OF OPENING BANK ACCOUNT. THE ENTRY OPERATOR THEREAFTE R ISSUES CHEQUE/DD/PO IN THE NAME OF BENEFICIARY FROM THE SAME ACCOUNT (IN WHICH THE CASH IS DEPOSITED) O R ANOTHER ACCOUNT IN WHICH FUNDS ARE TRANSFERRED THRO UGH BANKING IN TWO OR MORE STAGES. THE BENEFICIARY IN TURN DEPOSITS THESE INSTRUMENTS IN HIS BANK ACCOUNTS. T HE MONEY COMES TO HIS REGULAR BOOKS OF ACCOUNT IN THE FORM OF GIFT, SHARE APPLICATION MONEY, LOAN THROUGH BANKING CHANNELS AND THE TRANSACTION LOOKS GENUINE. IT IS NOTICED FROM THE LIST OF ENTRIES THAT THE ASS ESSEE M/S RKG INTERNATIONAL P.LTD. HAS TAKEN FOLLOWING ACCOMMODATION ENTRIES TO THE FOLLOWING PERSONS (BENEFICIARY) AS PER DETAILS HEREUNDER:- AMOUNT (RS.) INSTRUMENT NO. DATE NAME OF ENTRY NAME OF BANK BRANCH OF BANK A/C NO. ENTRY ITA-101/DEL/2013 3 PROVIDER GIVING ACCOUNT 500000 983304 19 - APR-03 SHIMMER MARKETING P LTD. KVB KAROL BAGH CA 3339 IN VIEW OF THE REPORT RECEIVED FROM THE DIT (INV.) NEW DELHI, AND IN VIEW OF THE FACTS NARRATED ABOVE, IT IS CLEAR THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THA T ASSESSMENT YEAR. I HAVE THEREFORE, REASON TO BELIE VE THAT THE SUM OF RS.500000/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THUS THE SAME IS TO BE BROUGHT TO TAX UNDER SECTION 148 OF THE I.T. ACT, 1961. 4. FROM THE ABOVE, IT IS EVIDENT THAT THE REASONING GIVEN BY THE ASSESSING OFFICER IS OF GENERAL NATURE I.E. THE SYS TEM BEING FOLLOWED BY THE PERSONS WHO HAVE THE UNACCOUNTED MONEY AND WANT TO INTRODUCE THE SAME UNACCOUNTED MONEY IN THEIR BOOKS OF ACCOUN T. FOR THAT PURPOSE, THEY TAKE THE HELP OF ENTRY OPERATOR AND T HE ASSESSING OFFICER HAS EXPLAINED THE MODUS OPERANDI HOW THE NEXUS BETWEEN THE PERSONS HAVING BLACK MONEY AND ENTRY OPERATOR WORKS. HOWEV ER, APART FROM THAT GENERAL THEORY, THERE IS NO SPECIFIC DETAILS W HICH MAY JUSTIFY THE FORMING OF BELIEF THAT THE INCOME HAS ESCAPED ASSES SMENT IN THE CASE OF THE ASSESSEE. IN THE REASONING, IT IS MENTIONED THAT THE BENEFICIARIES I.E. THE PERSONS WHO ARE HAVING BLACK MONEY INTRODU CED THE AMOUNT IN THEIR BOOKS OF ACCOUNT IN THE FORM OF GIFT, SHARE A PPLICATION MONEY, LOAN ETC. HOWEVER, IT WAS NOT SPECIFIED IN WHICH F ORM THE MONEY HAS BEEN INTRODUCED BY THE ASSESSEE IN ITS BOOKS OF ACC OUNT AND HOW IT IS THE UNACCOUNTED MONEY. SO FAR AS THE ASSESSEES CA SE IS CONCERNED, ONLY THE DETAIL OF SOME AMOUNT HAVING BEEN RECEIVED FROM M/S SHIMMER MARKETING PVT.LTD. THROUGH KVV BANK, KAROL BAGH BRANCH IS MENTIONED. BUT, MERELY BECAUSE THE ASSESSEE HAS RE CEIVED A CHEQUE FROM SOME PARTY TO WHOM THE DEPARTMENT DOUBTS TO BE ENTRY OPERATOR ITSELF IS NOT SUFFICIENT TO ARRIVE AT THE CONCLUSIO N THAT THE AMOUNT RECEIVED BY THE ASSESSEE IS ALSO IN THE FORM OF ACC OMMODATION ENTRY WITHOUT THERE BEING ANY FURTHER DETAIL TO REACH TO SUCH CONCLUSION. IT ITA-101/DEL/2013 4 HAS NOT BEEN POINTED OUT WHETHER THIS AMOUNT IS IN THE FORM OF GIFT, SHARE APPLICATION MONEY OR LOAN AND WHETHER THIS AM OUNT IS SHOWN IN THE ASSESSEES BOOKS OF ACCOUNT OR NOT. AT THE TIM E OF HEARING BEFORE US, IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT THE ASSESSEE WAS HAVING 50,000 SHARES OF `10/- EACH AND THE SAID SHA RES WERE SOLD AT COST TO M/S SHIMMER MARKETING PVT.LTD. AND THE SUM OF `5 LAKHS HAS BEEN RECEIVED AS A SALE CONSIDERATION OF SHARES WHI CH WERE ALREADY DISCLOSED IN THE ASSESSEES BOOKS OF ACCOUNT. THE PURCHASE OF SHARES AS WELL AS SALE OF SHARES BOTH HAVE BEEN DISCLOSED IN THE ASSESSEES BOOKS OF ACCOUNT AND IT HAS NOT GENERATED EITHER AN Y PROFIT OR LOSS IN THE BOOKS OF ACCOUNT NOR ANY ADDITIONAL FLOW OF CAP ITAL IN THE ASSESSEES BOOKS OF ACCOUNT. THESE FACTS STATED BY THE LEARNED COUNSEL COULD NOT BE CONTROVERTED BY THE REVENUE. ON THESE FACTS, IN OUR OPINION, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIGNATURE HOTELS P.LTD. VS. INCOME-TAX OFFICER A ND ANOTHER [2011] 338 ITR 51 (DELHI) WOULD BE SQUARELY APPLICATION WH EREIN THEIR LORDSHIPS HELD AS UNDER:- HELD, ALLOWING THE PETITION, THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMAT ION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGA TION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING FINANCIAL YEAR 2002-03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMEN T OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, THE ASSESS ING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATI ON AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATI ON. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAI D- UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOTTED A PERMANENT ITA-101/DEL/2013 5 ACCOUNT NUMBER IN SEPTEMBER, 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMEN T PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO BE QUASHED. 5. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT TH E REOPENING OF ASSESSMENT UNDER SECTION 148 ON THE ABOVE FACTS WAS NOT JUSTIFIED. WE, THEREFORE, QUASH THE ISSUE OF NOTICE UNDER SECT ION 148 AND CONSEQUENTLY, THE ASSESSMENT ORDER PASSED IN PURSUA NCE TO SUCH NOTICE IS ALSO QUASHED. 6. SINCE WE HAVE ALREADY QUASHED THE ASSESSMENT ORD ER, THE OTHER GROUNDS RAISED BY THE ASSESSEE NEED NO ADJUDICATION . 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. DECISION PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER, 2014. SD/- SD/- ( (( ( I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR I.C. SUDHIR ) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 14.11.2014 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S RKG INTERNATIONAL PVT.LTD., M/S RKG INTERNATIONAL PVT.LTD., M/S RKG INTERNATIONAL PVT.LTD., M/S RKG INTERNATIONAL PVT.LTD., C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, C/O KAPIL GOEL, ADVOCATE, A AA A- -- -1/25, SECTOR 1/25, SECTOR 1/25, SECTOR 1/25, SECTOR- -- -15, ROHINI, DELHI 15, ROHINI, DELHI 15, ROHINI, DELHI 15, ROHINI, DELHI 110 085. 110 085. 110 085. 110 085. 2. RESPONDENT : INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -15(1), NEW DELHI. 15(1), NEW DELHI. 15(1), NEW DELHI. 15(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR