M/s. Essel Sales & Services (P) Ltd., New Delhi V. ITO, New Delhi

ITA 107/DEL/2014

• Counselvise Citation: 10720114 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 07-07-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 06-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: J S KOCHAR; UDAIBIR SINGH
• Keywords: Opportunity of being heard; Reassessment proceedings
• Section: 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - I , NEW DELHI BEFORE SH. N. K. SAINI, AM ITA NO. 107 /DEL/201 4 : ASSTT. YEAR : 200 4 - 05 ESSEL SALES & SERVICES (P) LTD. D - 118, BASEMENT, SAKET, NEW DELHI - 110017 VS INCOME TAX OFFICE R , WARD - 11(2 ), C. R. BUILDING, NEW DELHI - 110002 (APPELLANT) (RESPONDENT) PAN NO. A ABCE2547E ASSESSEE BY : SH. J. S. KOCHAR, CA & UDAIBIR SINGH, ADV. REVENUE BY : SH. BHIM SINGH, SR. DR DATE OF HEARING : 07 .0 7 .2015 DATE OF PRONOUNCEMENT : 10 .07 .201 5 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 11 .11.2013 OF LD. CIT (A) - XIII, DELHI . 2 . FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT THE LEARNED CIT(A) ERRED IN LAW IN UPHOLD ING THE VALIDITY OF INITIATION OF PROCEEDINGS U/S 147 OF THE INCOME TAX ACT ( THE ACT ) SOLELY ON THE BASIS OF THE SOME STATEMENT OF SOME MAHESH GARG, WHICH FOUND NO MENTION IN THE REASONS U/S 148(2) OF THE ACT. 2. THAT THE LEARNED CIT(A) ERRED IN UPHOLDI NG THE VALIDITY OF REOPENING RELYING UPON THE STATEMENTS OF SOME SH. MAHESH GARG DESPITE THE FACT THAT THE CIT(A) HIMSELF DISPUTED THE IDENTITY OF SH. MAHESH GARG. ITA NO.107 /DEL /2014 ESSEL SALES & SERVICES (P) LTD. 2 3. THAT THE LEARNED CIT(A) ERRED IN LAW IN UPHOLDING THE VALIDITY OF INITIATION OF PROCEEDIN GS U/S 147 OF THE ACT BY ERRONEOUSLY RECORDING THAT IT IS ACCEPTED BY THE COUNSEL OF THE ASSESSEE THAT THE SHARE APPLICANT COMPANIES WERE OPERATED BY MAHESH GARG, WHEN NO SUCH ADMISSION WAS EVER MADE BY THE ASSESSEE S COUNSEL, AS WOULD BE BORNE OUT FROM TH E WRITTEN SUBMISSIONS FILED BEFORE HIM. 4. THAT THE LEARNED CIT(A) ERRED IN LAW IN UPHOLDING THE VALIDITY OF REASSESSMENT PROCEEDING U/S 147/148 R/W 151 OF THE ACT, BY DISMISSING GROUNDS NO. 2, 3 AND 5 RAISED BY THE ASSESSEE IN THE APPEAL WITHOUT EVEN CON SIDERING AND DISCUSSING THE SUBMISSIONS MADE BY THE ASSESSEE. 5. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE A.O. TREATING THE SHARE CAPITAL OF RS. 5,00,000/ - RAISED DURING THE PREVIOUS YEAR AS UNDISCLOSED INCOME WHEN THE INITIAL ONUS PLAC ED ON THE ASSESSEE IN PROVING THE CASH CREDITS HAD BEEN DULY AND FULLY DISCHARGED BY IT BY PROVING THE IDENTITY AND THE CAPACITY OF THE SHAREHOLDERS AND THE GENUINENESS OF THE TRANSACTIONS. 6. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE A. O. TREATING THE SHARE CAPITAL OF RS. 5,00,000/ - AS UNDISCLOSED INCOME OF THE ASSESSEE WITHOUT DISPUTING OR REBUTTING THE EVIDENCE BROUGHT ON RECORD BY THE ASSESSEE TO PROVE THE GENUINENESS OF THE SAME. 7. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORD ER OF THE A.O. MAKING THE ADDITION OF RS. 5,00,000/ - BY RELYING UPON THE STATEMENTS OF SOME SH. MAHESH GARG AND SH. ANIL KUMAR SHARMA ALLEGEDLY RECORDED BY THE INVESTIGATION WING WITHOUT CONFRONTING THE ASSESSEE WITH THE SAME AND WITHOUT PROVIDING THEIR CO PIES AND WITHOUT PRODUCING THEM FOR CROSS EXAMINATION DESPITE A SPECIFIC DEMAND BY THE ASSESSEE FOR THE SAME. ITA NO.107 /DEL /2014 ESSEL SALES & SERVICES (P) LTD. 3 8. THAT THE LEARNED CIT(A) ERRED IN UPHOLDING THE ORDER OF THE A.O. BY RELYING UPON THE STATEMENTS OF SOME SH. MAHESH GARG AND SH. ANIL KUMAR SHA RMA, ALLEGEDLY RECORDED BY THE INVESTIGATION WING, AS NO RELIANCE CAN BE PLACED ON THE STATEMENTS RECORDED ON 10.09.2003, 22.09.2003 AND 20.10.2003 AS THEY WERE RECORDED PRIOR TO TRANSACTIONS WITH THE ASSESSEE COMPANY WHICH HAPPENED ON 29.11.2003. 9. THAT THE LEARNED CIT(A) ERRED IN DRAWING ADVERSE INFERENCE AGAINST THE ASSESSEE FOR NON SERVICE OF NOTICES U/S 131 OF THE I.T. ACT ON THE SHAREHOLDERS AS THE ASSESSEE WAS NEVER CONFRONTED BY THE A.O. ON THIS ASPECT. 10. THAT THE LEARNED CIT(A) ERRED IN UPHOLD ING THE ORDER OF THE A.O. AGAINST THE ASSESSEE FOR ALLEGED CASH DEPOSITS IN THE ACCOUNTS OF THE SHAREHOLDERS DESPITE THE FACT THAT THE ASSESSEE WAS NEVER CONFRONTED WITH THIS INFORMATION AND IT WAS ON ASSESSEE S SPECIFIC REQUEST THAT THE A.O. HAD CALLED FO R THEIR BANK STATEMENTS. 3 . AT THE FIRST INSTANCE, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THE LEGAL GROUNDS RELATING TO THE VALIDITY OF THE REASSESSMENT AND SUBMITTED THAT THE GROUND NOS. 2, 3 & 5 RAISED BY THE ASSESSEE BEFORE THE LD. CIT(A) RELATING T O THE VALIDITY OF REASSESSMENT PROCEEDING U/S 147/148 R.W.S. 151 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) WERE NOT CONSIDERED AND DISPOSED OFF BY THE LD. CIT(A). THE LD. DR COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. CO UNSEL FOR THE ASSESSEE. 4 . AFTER CONSIDERING THE SUBMISSIONS OF BOTH THE PARTIES, IT IS NOTICED THAT THE LD. CIT(A) REPRODUCED THE GROUNDS RAISED BY THE ASSESSEE IN PARA 3 OF THE IMPUGNED ORDER WHICH READ AS UNDER: ITA NO.107 /DEL /2014 ESSEL SALES & SERVICES (P) LTD. 4 1. THAT THE LD. AO ERRED IN INITIATING THE PROCEEDINGS U/S 147 OF THE INCOME TAX ACT WITHOUT INDEPENDENT APPLICATION OF MIND WHEN THE IDENTITY OF THE SHAREHOLDERS (WHICH WERE EXISTING COMPANIES) WAS MADE KNOWN TO HIM BY THE INVESTIGATION WING ITSELF AS ALSO THE FACT THAT THE ASSESSEE HAD RECEI VED THE SHARE APPLICATION MONEY THROUGH BANKING CHANNELS VIDE ACCOUNT PAYEE CHEQUES. 2. THAT THE LD. AO ERRED IN INITIATING THE PROCEEDINGS U/S 147 WITHOUT VERIFYING THE INFORMATION RECEIVED FROM THE INVESTIGATION WING AS ADMITTEDLY, EVEN THE ORIGINAL RET URN FILED BY THE ASSESSEE ALONG WITH THE BALANCE SHEET, P&L ACCOUNT ETC. WERE NOT EXAMINED AT THE TIME OF RECORDING THE REASONS. 3. THAT THE INITIATION OF PROCEEDINGS U/S 147 IS BAD IN LAW AS THE SANCTION U/S 151 OF THE ACT WAS ACCORDED BY THE ADDL. CIT I N A PERFUNCTORY MANNER WITHOUT APPLICATION OF MIND. 4. THAT THE LD. AO ERRED IN MAKING AN ASSESSMENT U/S 147/143(3) WHEN THE REASONS WERE NO SUPPLIED TO THE ASSESSEE WITHIN A REASONABLE PERIOD AND WERE SUPPLIED BEYOND THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 5. THAT THE LD. AO ERRED IN MAKING AN ASSESSMENT U/S 147/143(3) WITHOUT HAVING THE ASSESSEE S ORIGINAL RETURN ON RECORD, WHICH THE ASSESSEE ADOPTED AS THE RETURN FILED IN RESPONSE TO NOTICE U/S 148. 5 . IT IS ALSO NOTICED THAT GROUND NOS. 2, 3 & 5 ARE THE SPECIFIC GROUND S RELATING TO INITIATION OF PROCEEDINGS U/S 147 OF THE ACT AND MAKING THE ASSESSMENT U/S 147/143(3) OF THE ACT. THE LD. CIT(A) IN THE IMPUGNED ORDER MENTIONED THAT THE REASSESSMENT PROCEEDIN GS CAN BE VALID L Y INITIATED IN CASE RETURN OF INCOME IS PROCESSED U/S 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENT IS UNDERTAKEN. THE LD. CIT(A) RELIED THE JUDGMENT OF ITA NO.107 /DEL /2014 ESSEL SALES & SERVICES (P) LTD. 5 THE HON BLE JURISDICTIONAL HIGH COURT (FULL BENCH) IN THE CASE OF M/S USHA INTERNATIONAL LTD. REPORTED I N 348 ITR 485 AND HELD THAT THE AO VALIDLY INITIATED THE REASSESSMENT PROCEEDINGS BY ISSUING THE NOTICE U/S 148 OF THE ACT. HOWEVER, HE DID NOT ADJUDICATE THE SPECIFIC GROUNDS I.E. GROUND NOS. 2, 3 & 5 RAISED BY THE ASSESSEE. I, THEREFORE, DEEM IT APPROPRI ATE TO SET ASIDE THIS CASE BACK TO THE FILE OF THE LD. CIT(A) TO DECIDE THE AFORESAID GROUNDS NO. 2, 3 & 5 RAISED BEFORE HIM BY THE ASSESSEE. THE SAID GROUNDS ARE PURELY LEGAL AND GO TO THE ROOT OF THE MATTER, THEREFORE, THOSE GROUNDS AR E TO BE DECIDED BY THE LD. CIT(A ) . IN THE PRESENT CASE, SINCE THE LEGAL ISSUE AGITATED BY THE ASSESSEE IS SET ASIDE TO THE FILE OF THE LD. CIT(A). THE ISSUE AGITATED ON MERIT IS ALSO RESTORED TO HIS FILE TO BE ADJUDICATED ALONG WITH THE LEGAL ISSUES , IN ACCORDANCE WITH LAW A FTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES . ( ORDER PRON OUNCED IN THE COURT ON 10 /07 /2015 ) SD/ - (N. K. SAINI) ACCOUNTANT MEMBER DATED: 10 /07 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR