Raghav Technology P.Ltd, New Delhi V. ITO, Ward-20(4), New Delhi

ITA 1064/DEL/2019

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2712 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: F
• Next Hearing Date: 15-04-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 10-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Accommodation entries; Competent authority; Documents seized; Reassessment proceedings
• Section: 147; 68; 148; 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’: NEW DELHI BEFORE, SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER AND SHRI VIMAL KUMAR, JUDICIAL MEMBER ITA No.1064/Del/2019 (ASSESSMENT YEAR 2010-11) M/s Raghav Technology (P) Ltd. D-55, Mahendru Enclave, Opposite Model Town-III NewDelhi-110033 PAN-AADCR5922J Vs. ITO Ward-20(4) New Delhi (Appellant) (Respondent) Assessee by Sh. Rajkumar Gupta, CA Respondent by Mr. Vivek Vardhan, Sr. DR Date of Hearing 16/04/2024 Date of Pronouncement 30/04/2024 ORDER PER S.RIFAUR RAHMAN, AM: This appeal has been filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals)-7, New Delhi [“Ld. CIT(A”, for short], dated 14/01/2019 for Assessment Year 2010-11. 2 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO 2. The Assessee has raised the following grounds of appeal: “1. That under the facts and circumstances, proceedings u/s.147/148 are without jurisdiction, without application of mind, unwarranted and mechanical and unsustainable. 2 That the Ld. A.O., since failed in adjudicating all objections against reopening proceedings, properly, as per law and in totality and as per the directions of Hon'ble Supreme Court in the case of G.K.N Drive Shafts, hence consequential proceedings and impugned asstt. is illegal and without jurisdiction. 3. That under the facts and circumstances, the approval u/s.151 is fatally defective, mechanical and without application of mind which makes the whole proceedings without jurisdiction, illegal and unwarranted. 4. That under the facts and circumstances, addition of Rs. 20,00,000/- u/s.68 for the share capital/share premium received from Shalini Holdings Ltd. by holding the same as received from alleged entry operator is illegal and unsustainable in law as well as on merits. 4.1 That the findings of A.O. are unsustainable for addition of Rs.20,00,000/- in the absence of providing the copies of all materials used against the assessee and by not providing cross-examination of persons whose statements have been relied upon, thus no proper and reasonable opportunity of hearing has been allowed and principles of natural justice is grossly violated which makes the impugned asstt. unsustainable in law. 5. That under the facts and circumstances, addition of Rs. 10,00,000/- u/s.68 for the share capital/share premium received from Apporva leasing finance & investment (p) ltd. by holding the same as received from alleged entry operator is illegal and unsustainable in law as well as on merits. 5.1 That the findings of A.O. are unsustainable for addition of Rs. 10,00,000/- in the absence of providing the copies of all materials used against the assessee and by not providing cross-examination of persons whose statements have been relied upon, thus no proper and reasonable 3 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO opportunity of hearing has been allowed and principles of natural justice is grossly violated which makes the impugned asstt. unsustainable in law. 6. That both the lower authorities erred in making and confirming the addition of Rs.54,000/- as unexplained expenditure u/s.69C for alleged commission expenses @1.8% of Rs.30,00,000/-, the amt. of total sale consideration received of both the shares, although there is no material and evidence for the same.” 3. Brief facts of the case are, the assessee filed its return of income on 25/09/2010 for the Assessment Year 2010-11 declaring Nil income. The return was processed u/s 143(1) of the Act and no scrutiny assessment was made. Subsequently, Assessing Officer received an information from the office of the Director of Income Tax (Investigation-II) Jhandewalan Ext. New Delhi vide letter dated 12/03/2013 with an information that search operation was carried out in the case of Sh. Surendra Kumar Jan group of cases (herein after known as Entry Operator). On verification/enquiry of various documents seized during the course of search, it was noticed that the above said group is involved in providing accommodation entries to the persons which were named in the report. It was informed that assessee company also one of the beneficiaries of the accommodation entries. Accordingly, the Assessing Officer formed 4 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO reasons to believe based on record available with him and accordingly, notice u/s 148 of the Income Tax Act, 1961 (‘the Act’ for short) was issued to the assessee on 29/03/2017 and duly served on the assessee. In response, assessee filed its return of income on 30/03/2017, on request copy of reasons recorded vide letter dated 13/06/2017 was provided to the assessee. The assessee filed various objections vide letter dated 16/08/2017 and the Assessing Officer rejected the objections vide letter dated 10/10/2017. Based on the information found during the search in the case of entry operator and the documents seized during the search in particular page 39 & 40 Back Page of Annexure A-13. The Assessing Officer analyzed the various modus operandi related to the entry operator in his order and Assessing Officer linked the information found during the search and the information collected from the assessee. Accordingly, made additions u/s 68 to the extent of Rs.30,00,000/- and disallowed commission expenses for availing the above said accommodation entry @ 1.8% which comes to 54,000/-. 5 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO 4. Aggrieved with the above order, the assessee preferred an appeal before the Ld. CIT(A). The assesse has raised the several grounds objecting to the reopening of the assessment jurisdiction and merits of the case. After considering the detailed submissions of the assessee, both on jurisdictional as well as merit, the Ld. CIT(A) dismissed various grounds raised by the assessee by observing as under: “4.4 Therefore, from the above details, it is noted that the AO has not acted mechanically before framing the reasons to believe. He has applied his mind by considering all the information before him and then has taken the approval of the higher authorities as required u/s 151 of the Act before issuing notice u/s 148 of the Act. He has not acted under the borrowed belief or under the directions. In the information there is specific details of the amount and cheque number in respect of entities controlled and operated by Sh. S. K. Jain from whom the appellant has taken accommodation entries. At the stage of forming belief, it was necessary for the AO to see the existence of the reasons and not the sufficiency of the reasons. The cases laws relied upon by the appellant in his submission have been gone through and it is found that the facts of the present case are different from the case laws relied upon by the appellant. The Investigation Wing, Delhi has prepared a list of the beneficiaries after carrying out investigations from the material gathered as a result of action. On the basis of such investigation, the list of entities controlled and managed by Sh. S. K. Jain along with the beneficiaries has been prepared by the Investigation Wing, Delhi and has been made available to the AO for necessary action. Out of these entities, one specific entity has been found through which the appellant has taken accommodation entries. Therefore, the reasons recorded by the AO are based upon specific information, based upon Investigation conducted by the Department and, therefore, the reasons framed by the AO are based by the credible information about the bogus entries of Rs.30 lacs in the case of the appellant. The material to form the belief contain name of the entities, Cheque number and date on which accommodation entry has been taken. It not important that the AO should have initially ascertained the facts by 6 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO making further investigations and should have drawn conclusions as at this stage of proceedings it is not relevant. The important question is whether there was relevant material on which a reasonable person could have formed a belief is necessity which definitely there was in this case. Whether or not the material would conclusively establish the escapement is not important. This aspect has to be examined subsequently in the re- assessment proceedings. It is noted that the AO has applied his mind to the information independently to arrive at the belief on the basis of material which was available with him. 4.5 In view of the above facts and discussion, it is held that the A.O. has validly assumed jurisdiction u/s 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s 147 of the Act and, therefore, the same is hereby held to be valid. Accordingly, this ground of appeal is dismissed.” 5. Aggrieved the assessee is in appeal before us and filed the present appeal. 6. At the time of hearing, the Ld. AR pressed only ground No.3 before us raising the issue that Assessing Officer has not taken proper approval and even the approval was granted mechanically by the PCIT without applying his mind. In this regard, he submitted that the Ld. PCIT has granted approval u/s 151 of the Act before issuing notice u/s 148 of the Act. In this regard, he brought to our notice Page Nos. 3 & 4 of Paper Book, which is approval form u/s 151 of the Act, in which Ld. PCIT has merely approved by recording as “Yes, I am satisfied”. In this regard, he brought to our notice assessee’s own case for A.Y.2009-10 (ITA No.1144/Del/2018), in 7 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO which the SMC Bench has decided the issue in favour of the assessee. He prayed that similar issue in this approval may be decided accordingly. 7. Since, the assessee has pressed ground No.3. and other grounds of appeal were not heard or adjudicated. 8. On the other hand, the Ld. DR objected to the above submissions and brought to our notice page-4 of the PB wherein Ld. CIT(A) has approved the proceedings u/s 151 of the Act by observing “Yes, I am satisfied” it clearly shows that he has applied his mind, therefore, it cannot be said that it was approved mechanically. 9. Considered the rival submissions and material placed on record. We observed from the record that Assessing Officer has received the approval from the PCIT-7 for reopening of the assessment on 28/03/2017 and Ld. PCIT in point No.13 mentioned that it is a fit case for issue of notice u/s 148 by observing that “Yes I am satisfied”. At the time of hearing, the Ld. AR brought to our notice the case laws in particular PCIT vs. Pioneer Town Planners 8 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO (P.) Ltd. [2024] taxmann.com 652, wherein the Hon’ble High Court has decided the issue in favour of the assessee by observing that PCIT had merely written ‘yes’ without discussion, specifically noting his approval, such approval could not be considered to be a valid approval. And further in the case of Safonia Tradelinks (P.) Ltd. vs. Income Tax Officer, Ward-22(4) wherein the approval u/s 151 was granted simply and endorsing as approved. Even in this case the issue was decided in favour of the assessee. Further, it is brought to our notice in the case of VCR Township Pvt. Ltd. vs. ITO, ITA No.1503/Del/2017 Dated 14/10/2020 wherein similar approval was granted for reopening of the assessment by approving authority as “Yes, I am satisfied” and the Co-ordinate Bench has decided the similar issue in favor of the assessee. 10. It is also brought to our notice in assessee’s own case for A.Y. 2009-10, similar issue was decided by the SMC Bench in favour of the assessee as under: “9. I find the above ground has been extracted by the CIT(A) in the body of the order. She has also mentioned at para 3.2 of the order that the assessee contended that there was no proper compliance of the provisions of section 151 of the IT Act, 1961. However, her finding on this issue is missing in the entire order. A perusal of the approval given u/s 151, copy 9 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO of which is placed at pages 20 and 21 of the paper book shows that the Pr. CIT while giving approval has simply mentioned as under: “Yes, I am satisfied.” 10. I find, the Hon'ble Delhi High Court in the case of United Electrical Company Pvt. Ltd. (supra) while deciding an identical issue has held that the power vested in the commissioner u/s 151 to grant or not to grant approval to the Assessing Officer to reopen an assessment is coupled with a duty. The commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. That power cannot be exercised casually and in a routine manner. Accordingly, the Hon'ble High Court quashed the notice, since there was no proper application of mind by the Addl.CIT. 11. I find the Hon'ble Delhi High Court in the case of Pr. CIT vs. N.C. Cables Lid., while deciding an identical issue has held that section 151 of the Act clearly stipulates that the CIT, who is the competent authority to authorize the reassessment notice has to apply his mind and form an opinion. Mere appending of the expression 'approved' says nothing. It is not as if the commissioner has to record elaborate reasons for agreeing with the noting put up before him. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. When such exercise appears to have been ritualistic and formal rather than meaningful which is the rationale for the safeguard of an approval by a higher ranking official, the finding of the Tribunal quashing the reassessment proceedings cannot be disturbed. 12. I find the Hon'ble Supreme Court in the case of Chhugamal Rajpal vs. S.P. Chaliha & Ors (supra) has held that where the commissioner had mechanically recorded permission and the important safeguards provided in the section 147 and 151 were lightly treated by the officer and the commissioner, the notice issued u/s 148 was held as invalid. The various other decisions relied on by the Id. counsel for the assessee in the paper book also support his case. Since, in the instant case, admittedly, the Id. PCIT while granting approval has simply mentioned 'Yes. I am satisfied' therefore, following the decisions of the jurisdictional High Court (cited supra) on this issue which are binding on the Tribunal, the reassessment proceedings are to be treated as not in accordance with the law since the approval has been given in a mechanical manner without due application 10 ITA No.1064/Del/2019 Raghav Technology P. Ltd. vs. ITO of mind by the approving authority. I, therefore, allow ground of appeal No.2 by the assessee challenging the validity of reassessment proceedings. Since the assessee succeeds on this legal ground, the various other grounds raised by the assessec are not being adjudicated being academic in nature.” 11. Respectfully following the above decision, the facts in the present case are also exactly similar to the above facts on record. Accordingly, ground No.3 raised by the assessee is allowed and other grounds of appeal raised by the assessee are not adjudicate at this stage. Accordingly, appeal filed by the assessee is partly allowed. 12. In the result, the appeal filed by the assessee is partly allowed. Order pronounced in open Court on 30 th April, 2024. Sd/- Sd/- (VIMAL KUMAR) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 30/04/2024 Pk/sps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI