Shri Hemant Kumar, New Delhi V. ITO, New Delhi

ITA 1040/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3975 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 26-04-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 25-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Keywords: Reopening of assessment; Gift; Salary income; Opportunity of being heard; Tangible material; Accommodation entries
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH C DELHI ] BEFORE SHRI C. L. SETHI, JM AND SHRI K. D. RAN JAN, AM I. T. A. NO. 1040 (DEL) OF 2011 ASSESSMENT YEAR : 2000-01. SHRI HEMANT KUMAR, THE INCOM E-TAX OFFICER, K U 158, P I T A M P U R A, VS. W A R D : 25 (1), N E W D E L H I. N E W D E L H I. PAN / GIR NO. AANPK2865J. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SALIL AGGARWAL, ADV.; DEPARTMENT BY : MS. MONA MOHANTY, SR. D. R. O R D E R. PER K. D. RANJAN, AM : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 20 00-01 ARISES OUT OF ORDER OF THE LD. CIT (APPEALS)-XXIV, NEW DELHI. 2. THE FIRST ISSUE FOR CONSIDERATION RELATES TO RE- OPENING OF ASSESSMENT UNDER SECTION 147 OF THE I. T. ACT, 1961. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSING OFFICER RECEIVED INFORMATION FROM D.I.T.[INVESTIGATION], NEW DELHI T HAT THE ASSESSEE HAD TAKEN ACCOMMODATION ENTRY FROM M/S. NEHA COMPUTERS & SERVICES, A FIRM I NVOLVED IN PROVIDING LARGE SCALE ACCOMMODATION ENTRIES. IT WAS CONVEYED THAT THE AS SESSEE HAD TAKEN AN ENTRY OF RS.5,00,400/- FROM M/S. NEHA COMPUTERS & SERVICES DURING FINANCIA L YEAR ENDED ON 31 ST MARCH, 2000. 2 I. T. A. NO. 1040 (DEL) OF 2011 ACCORDINGLY THE ASSESSING OFFICER RECORDED REASONS AND AFTER SEEKING APPROVAL OF THE ADDL. COMMISSIONER OF INCOME-TAX, RANGE - 25, NEW DELHI I SSUED NOTICE UNDER SECTION 148 ON 29 TH MARCH, 2007, WHICH WAS SERVED ON THE ASSESSEE BY RE GD. POST. IN RESPONSE TO THE SAID NOTICE IT WAS SUBMITTED BY THE ASSESSEE VIDE LETTER DATED 30 TH APRIL, 2007 THAT RETURN FOR AY 2000-01 ALREADY FILED ON 30 TH SEPT., 2000 MAY BE TREATED AS RETURN FILED IN RESP ONSE TO NOTICE UNDER SECTION 148 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEE DINGS IN RESPONSE TO A QUERY RAISED BY THE ASSESSING OFFICER, IT WAS SUBMITTED THAT THERE WAS NO TRANSACTION WITH M/S. NEHA EXPORTS & SERVICES. THE ASSESSEE ALSO SUBMITTED COPY OF PASS -BOOK. WHILE EXAMINING THE PASS BOOK IT WAS FOUND THAT A SUM OF RS.5,00,080/- WAS RECEIVED ON 1 4/3/2000 FROM SHRI MUKESH GUPTA. ON FURTHER DISCUSSION WITH HIS AR IT WAS EMERGED THAT SHRI MUKESH GUPTA WAS THE PROPRIETOR OF M/S. NEHA COMPUTERS & SERVICES AND SUCH SUM WAS A G IFT RECEIVED FROM SHRI MUKESH GUPTA, PROP. M/S. NEHA COMPUTERS & SERVICES. THE ASSESSIN G OFFICER, THEREFORE, ASKED THE ASSESSEE TO SUBMIT NECESSARY EVIDENCE TO ESTABLISH THE AUTHENTI CITY OF THE GIFT, THE CREDITWORTHINESS AND IDENTITY OF THE DONOR. IN RESPONSE TO THIS QUERY THE ASSESSEE FILED COPY OF GIFT DEED, AFFIDAVIT SIGNED BY THE DONOR, COPY OF ITR , RATION CARD AND THE BANK STATEMENT OF THE DONOR. DURING THE COURSE OF DISCUSSION THE LD. AR OF THE ASSESSEE CLA RIFIED THAT SHRI MUKESH KUMAR GUPTA WAS NOT RELATED TO THE ASSESSEE. FROM THE SCRUTINY OF THE BANK ACCOUNT THE ASSESSING OFFICER NOTED THAT THERE WAS CREDIT BALANCE OF RS.1,373/-. A SUM OF R S.5,05,000/- WAS CREDITED IN THE ACCOUNT ON 10 TH MARCH, 2000 AND ON THE SAME DAY PAY ORDER OF RS.5, 00,400/- WAS RELEASED. AFTER THAT A SUM OF RS.5,973/- WAS LEFT IN THE ACCOUNT. FROM THESE FACTS THE ASSESSING OFFICER CONCLUDED THAT THE DONOR WAS NOT A MAN OF ENOUGH MEANS WHO COULD HAVE GIFTED A SUM OF RS.5,00,000/- AND THAT TOO TO A STRANGER. FROM COPY OF THE INCOME-TAX RETURNS OF THE DONOR FOR AYS. 1997-98 AND 1998-99 THE AO GATHERED THAT THE DONOR WAS ONLY HAVING MERE SALARY INCOME OF RS.48,600/- AND RS.69,400/-. COPY OF RETURN FOR ASSESSMENT YEAR 200 0-01 WAS NOT FILED. THUS THE INCOME DECLARED IN THE INCOME TAX RETURN DID NOT COMMENSU RATE WITH THE CAPACITY OF THE DONOR. FROM THE STATEMENT OF AFFAIRS AS ON 31 ST MARCH, 1998 THE ASSESSING OFFICER NOTED THAT THE A SSESSEE HAD CAPITAL OF RS.15,75,000/- WHICH WAS FOUND TO BE DIS PROPORTIONATE TO THE INCOME DECLARED IN THE RETURN OF INCOME. THEREFORE, THE ASSESSEE FAILED T O PROVE THE CREDITWORTHINESS OF THE DONOR. AS REGARDS IDENTITY THE ASSESSEE FILED COPY OF RATION CARD. THE AO NOTED THAT SHRI MUKESH KUMAR GUPTA WAS NOT USING LPG. HE, THEREFORE, CONCLUDED THAT A PERSON WHO COULD NOT AFFORD LPG AND WAS USING KEROSENE FOR COOKING PURPOSES BELONGED T O LOWER ECONOMIC STRATA AND COULD NOT HAVE 3 I. T. A. NO. 1040 (DEL) OF 2011 DONATED GIFT OF RS.5,00,000/-. THE PERUSAL OF RATI ON CARD ALSO REVEALED THAT SHRI MUKESH GUPTA WAS HEAD OF HIS FAMILY COMPRISING OF EIGHT MEMBERS. THEREFORE, IT WAS NOT POSSIBLE FOR HIM TO SAVE RS.5,00,000/- AND GIFT THE SAME TO A STRANGER AFTER MEETING HIS LIVELIHOOD. THE ASSESSING OFFICER FURTHER NOTED THAT AFFIDAVIT ITSELF DID NOT POSSESS ANY EVIDENTIARY VALUE. THE AO BASED ON THESE FACTS CAME TO THE CONCLUSION THAT THE GIFTS W ERE BOGUS AS THE GENUINENESS OF THE TRANSACTION AND CREDITWORTHINESS OF THE DONOR WAS NOT PROVED. THE ASSESSING OFFICER RELYING ON VARIOUS DECISIONS ADDED THE AMOUNT OF RS.5,00,000/- AS INCO ME FROM OTHER SOURCES. 3.1 ON APPEAL THE ASSESSEE CHALLENGED THE ADDITION ON ASSUMPTION OF JURISDICTION UNDER SECTION 147 AS WELL AS ON MERITS. THE LD. AR OF TH E ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER DID NOT HAVE ANY VALID JURISDICTION TO REOPEN THE C ASE UNDER SECTION 147 AND, THEREFORE, THE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 W AS NULL AND VOID AB INITIO. IT WAS FURTHER SUBMITTED THAT THE AO HAD REOPENED THE ASSESSMENT O N THE GROUND THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM M/S. NEHA COMPUTERS & SERV ICES, WHO OPERATED BANK ACCOUNT IN BANK OF PATIALA, ROHINI. THE AO HAD REASON TO BELI EVE THAT THE ASSESSEE HAD OBTAINED SUCH ACCOMMODATION ENTRY BY OFFERING SUCH SUM IN CASH TO M/S. NEHA COMPUTERS & SERVICES AND RECEIVED BACK THE SAME THROUGH THE CHEQUE FROM M/S. NEHA COMPUTERS & SERVICES AND THAT SUCH SUM REPRESENTED UNDISCLOSED SUM OF THE ASSESSEE, WH ICH HAD ESCAPED ASSESSMENT. IT WAS, THEREFORE, SUBMITTED THAT THE REASONS RECORDED BY T HE AO WERE FACTUALLY WRONG AND, THEREFORE, DID NOT PROVIDE ANY VALID BASIS FOR THE AO TO ASSUM E JURISDICTION IN THE CASE OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS EXPLAINED TO THE AO THAT THE ASSESSEE DID NOT HAVE ANY TRANSACTION WITH M/S. NEHA COMPUTERS & SER VICES. ONCE IT HAD BECOME CLEAR TO THE ASSESSING OFFICER THAT THE ASSESSEE DID NOT HAVE AN Y TRANSACTION WITH M/S. NEHA COMPUTERS & SERVICES AND THE REASONS RECORDED BY HIM WERE FACTU ALLY WRONG, HE OUGHT TO HAVE DROPPED THE PROCEEDINGS UNDER SECTION 147 OF THE ACT. HOWEVER, THE AO PASSED ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT BY MAKING ADDITION OF RS.5,00,000/- ON ACCOUNT OF GIFT RECEIVED FROM SHRI MUKESH KUMAR GUPTA, THE FRIEND OF THE ASS ESSEE, WHO GAVE THE GIFT TO THE ASSESSEE. REFERRING TO COPY OF ACKNOWLEDGEMENT OF RETURN AND THE PERSONAL BALANCE SHEET OF SHRI MUKESH GUPTA AS ON 31 ST MARCH, 1998, IT WAS SUBMITTED THAT SHRI MUKESH GUP TA WAS NOT OWNER OF ANY FIRM BY NAME, M/S. NEHA COMPUTERS & SERVICES. THER EFORE, WHERE AN ASSESSMENT IS RE-OPENED 4 I. T. A. NO. 1040 (DEL) OF 2011 ON THE BASIS OF REASONS, WHICH ARE FOUND TO BE FACT UALLY WRONG, THEN SUCH REOPENING IS BAD IN LAW. IT WAS ALSO SUBMITTED THAT THE ASSESSEE OR THE AUTH ORIZED REPRESENTATIVE OF THE ASSESSEE HAD NEVER STATED THAT SHRI MUKESH GUPTA WAS PROP. OF M/S. NEH A COMPUTERS & SERVICES. IN FACT THE ASSESSEE HAD MADE A CATEGORICALLY STATEMENT TO THE AO THAT HE HAD NO TRANSACTION WITH M/S. NEHA COMPUTERS & SERVICES. IN FACT IN THE ASSESSMENT ORDER, THE AO HAD HIMSELF ADMITTED THAT HE HAD NO VALID BASIS FOR REOPENING OF THE CASE AS THE ASSESSEE HAD NO TRANSACTION WITH M/S. NEHA COMPUTERS & SERVICES. THE AO HAD ARBITRARILY DRAWN CONCLUSION THAT SHRI MUKESH GUPTA IS THE PROP. OF M/S. NEHA COMPUTERS & SERVICES. 3.2 THE LD. CIT (APPEALS) ON CONSIDERATION OF THE S UBMISSIONS OF THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE DONOR UNDER SECTIO N 250(4) OF THE ACT. THE ASSESSING OFFICER VIDE HIS REMAND REPORT DATED 23 RD FEBRUARY, 2010 HAD STATED THAT THE ASSESSEE HAD FA ILED TO PRODUCE DONOR THOUGH THE ASSESSEE WAS REQUESTED SPE CIFICALLY FOR THAT. THE LD. AR IN HIS REJOINDER DATED 11/11/2010 SUBMITTED THAT THE ASSES SING OFFICER SHOULD HAVE ENFORCED THE ATTENDANCE OF THE DONOR AS THE DONOR WAS NOT IN HIS CONTROL. LD. CIT (APPEALS) ON CONSIDERATION OF FACTS AND RELYING ON VARIOUS DECISIONS OBSERVED THAT REASONS TO BELIEVE COULD NOT BE EQUATED WITH THE REASONS TO SUSPECT. IT IS EQUALLY NOT NEC ESSARY THAT THERE SHOULD BE AMPLE EVIDENCE ON RECORD TO ESTABLISH THE ACTUAL ESCAPEMENT OF INCOME SO AS TO FORM A REASONABLE BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. ONE HAS TO KEEP IN MIND THE DISTINCTION BETWEEN SUSPICION AND BELIEF; AND BETWEEN BELIEF AND CONCLU SIVE FINDING BASED ON EVIDENCE. THE BELIEF FALLS IN BETWEEN THE SUSPICION AND CONCLUSIVE FINDI NG BASED ON EVIDENCE. THE LD. CIT (APPEALS) OBSERVED THAT THERE WERE ENOUGH REASONABLE GROUNDS FOR THE ASSESSING OFFICER TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT FOR T HE ASSESSMENT YEAR UNDER CONSIDERATION. HE ACCORDINGLY UPHELD THE REOPENING OF THE ASSESSMENT. THE LD. CIT (APPEALS) ALSO UPHELD THE ADDITION OF RS.5,00,000/- ON ACCOUNT OF GIFT RECEIV ED BY THE ASSESSEE RELYING ON VARIOUS DECISIONS. 4.1 BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER IN REASONS RECORDED HAS MENTIONED THAT THE ASSESSEE HAS RECEIV ED ACCOMMODATION ENTRIES FROM M/S. NEHA 5 I. T. A. NO. 1040 (DEL) OF 2011 COMPUTERS & SERVICES. HOWEVER, ADDITION HAS BEEN M ADE ON ACCOUNT OF GIFT RECEIVED FROM SHRI MUKESH KUMAR GUTPA. THEREFORE, THE REASONS RECORDE D DO NOT SHOW NEXUS WITH THE ESCAPEMENT OF INCOME. THE LD. AR OF THE ASSESSEE PLACED RELIA NCE ON THE FOLLOWING DECISIONS FOR THE PROPOSITION THAT EXISTENCE OF TANGIBLE MATERIAL FOR THE FORMATION OF OPINION IS A PRE-REQUISITE FOR INITIATION OF ACTION UNDER SECTION 147 OF THE ACT:- (I) SAGAR ENTERPRISES VS. ACIT 173 CTR 528 (GUJ.); (II) UNITED ELECTRICAL CO. P. LTD. VS. CIT 258 ITR 317 (III) CIT VS. RAINEE SINGH 189 TAXMAN 202 (DEL); & (IV) ITO VS. LAKSHYA EXIM P. LTD. 131 TTJ 621 (DEL) . 4.2 ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THA T THE ASSESSING OFFICER HAD INITIATED PROCEEDINGS UNDER SECTION 147 ON RECEIPT OF INFORMA TION FROM INVESTIGATION WING AND, THEREFORE, REOPENING OF ASSESSMENT WAS JUSTIFIED. 5.1 WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE AO HAD INITIATED PROCEEDINGS UNDER SECTION 147 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTM ENT THAT M/S. NEHA COMPUTERS & SERVICES WAS ENTRY PROVIDER, WHO OPERATED AN ACCOUNT IN BANK OF PATIALA, ROHINI [ACCOUNT NO. CA 1106679] TO PROVIDE ENTRIES. THE LIST OF BENEFICIA RIES, WHO HAD TAKEN ACCOMMODATION ENTRY INCLUDED SHRI HEMANT KUMAR, THE ASSESSEE, WHO HAD T AKEN ACCOMMODATION ENTRY WORTH RS.5,04,000/- FROM M/S. NEHA COMPUTERS & SERVICES D URING ASSESSMENT YEAR 2000-01. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE S UBMITTED THAT HE HAD NO TRANSACTION WITH M/S. NEHA EXPORTS AND SERVICES. HOWEVER, THE ASSES SING OFFICER HAD OBSERVED THAT ON DISCUSSION WITH THE AR IT HAD EMERGED THAT SHRI MUKESH GUPTA W AS THE PROP. OF M/S. NEHA COMPUTERS & SERVICES. BEFORE THE LD. CIT (APPEALS) THE ASSESSE E RAISED SAME CONTENTION. THE LD. CIT (APPEALS) DIRECTED THE ASSESSING OFFICER UNDER SECT ION 250(4) TO EXAMINE THE DONOR. WHEN THE AO ASKED THE ASSESSEE TO PRODUCE THE DONOR WAS NOT PRODUCED BEFORE HIM. THIS FACT WAS BROUGHT TO THE NOTICE OF THE LD. CIT (APPEALS). THE ASSESS EE IN HIS LETTER DATED 11 TH NOVEMBER, 2010 IN 6 I. T. A. NO. 1040 (DEL) OF 2011 HIS REJOINDER HAD STATED THAT THE DONOR WAS SUMMONE D BY THE ASSESSING OFFICER UNDER SECTION 131 OF THE ACT AND IT WAS FOR THE ASSESSING OFFICER TO ENFORCE HIS ATTENDANCE AS THE ASSESSEE DID NOT HAVE ANY CONTROL OVER THE DONOR. THE LD. CIT (APPE ALS), HOWEVER, UPHELD THE REOPENING OF ASSESSMENT UNDER SECTION 147 WITHOUT GIVING HIS FIN DING ABOUT THE FACTS WHETHER M/S. NEHA COMPUTERS & SERVICES WAS IN ANY WAY CONNECTED TO SH RI MUKESH GUPTA. THE ASSESSEE HAD RECEIVED DONATION OF RS.5,00,000/- FROM SHRI MUKESH GUPTA AND WHEN THE QUESTION OF PRODUCTION OF SHRI MUKESH GUPTA BEFORE THE ASSESSI NG OFFICER AROSE, THE ASSESSEE SHOWED HIS HELPLESSNESS TO PRODUCE HIM. THIS IS AGAINST THE P RINCIPLES OF HUMAN CONDUCT. SINCE THE LD. CIT (APPEALS) HAS NOT RECORDED ANY FINDINGS AS TO WHETH ER SHRI MUKESH GUPTA WAS THE PROP. OF DIRECTOR OF M/S. NEHA COMPUTERS & SERVICES OR IN A NY WAY CONTROLLED THE AFFAIRS OF M/S. NEHA COMPUTERS & SERVICES, WE ARE UNABLE TO DECIDE THE I SSUE. BEFORE US THERE IS NO EVIDENCE ON THE BASIS OF WHICH IT COULD BE CONCLUDED THAT SHRI MUKE SH GUPTA IS NOT HAVING ANY RELATION WITH M/S. NEHA COMPUTERS & SERVICES. MOREOVER, THE ASSESSEE HAD NOT FILED COPY OF RETURN OF INCOME FOR ASSESSMENT YEAR 2000-01 INDICATING THAT THE GIFT OF RS.5,00,000/- HAS GONE FROM SHRI MUKESH GUPTA. UNDER THESE CIRCUMSTANCES, WE THEREFORE, FE EL IT PROPER TO SET ASIDE THE MATTER REGARDING REOPENING OF ASSESSMENT TO THE FILE OF THE LD. CIT (APPEALS) WITH THE DIRECTIONS TO RECORD HIS FINDINGS AS TO WHETHER SHRI MUKESH GUPTA HAS ANY RE LATIONSHIP WITH M/S. NEHA COMPUTERS & SERVICES AND WHETHER THE AMOUNT HAS FLOWN FROM M/S. NEHA COMPUTERS & SERVICES TO SHRI MUKESH GUPTA OR THE FUNDS HAVE ROUTED THROUGH M/S. NEHA COMPUTERS & SERVICES. THE LD. CIT (APPEALS) WILL DECIDE THE ISSUE AFTER A FFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 5.2 AS REGARDS MERITS, THE MATTER IS SET ASIDE TO T HE FILE OF THE LD. CIT (APPEALS) TO RE-ADJUDICATE THE ISSUE ON MERITS AFTER DECIDING TH E ISSUE OF REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED, FOR STATISTICAL PURPOSES. 7 I. T. A. NO. 1040 (DEL) OF 2011 THE ORDER PRONOUNCED IN THE OPEN COURT ON : 13 TH MAY, 2011. SD/- SD/- [ C. L. SETHI ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 13 TH MAY, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT. 8 I. T. A. NO. 1040 (DEL) OF 2011