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

ITA 1144/DEL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6840 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Bogus Share capital; Unexplained expenditure; Accommodation entries; Competent authority; Reassessment proceedings
• Section: 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.1144/DEL/2018 ASSESSMENT YEAR: 2009-10 RAGHAV TECHNOLOGY P. LTD., C/O RAJ KUMAR & ASSOCIATES, CAS, L-7A (LGF), SOUTH EXTENSION PART 2, NEW DELHI. PAN: AADCR5922J VS ITO, WARD-20(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RAJ KUMAR, CA REVENUE BY : SHRI S.L. ANURAGI, SR. DR DATE OF HEARING : 19.02.2019 DATE OF PRONOUNCEMENT : 29.04.2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 20 TH NOVEMBER, 2017 OF THE CIT(A)-38, DELHI, RELATING TO ASSESSMENT YEAR 2009-10. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 23 RD SEPTEMBER, 2009 DECLARING NIL INCOME. SUBSEQUENTL Y, ON THE BASIS OF INFORMATION RECEIVED FROM THE OFFICE OF THE DIRE CTOR OF INCOME-TAX (INVESTIGATION- II), JHANDEWALAN EXTENSION, NEW DELHI, THAT THE ASS ESSEE HAS RECEIVED ACCOMMODATION ENTRIES FROM CERTAIN COMPANIES FLOATED BY SHRI SURE NDRA KUMAR JAIN GROUP OF CASES WHICH WAS DETECTED DURING THE COURSE OF SEARCH AND POST SEARCH INQUIRIES CONDUCTED IN ITA NO.1144/DEL/2018 2 THE CASE OF SHRI SURENDRA KUMAR JAIN GROUP OF CASE S, THE ASSESSING OFFICER REOPENED THE ASSESSMENT BY RECORDING REASONS AND BY ISSUE OF NOTICE U/S 148. SUBSEQUENTLY, THE ASSESSEE ASKED FOR REASONS RECORDED WHICH WAS PROVI DED TO THE ASSESSEE. THE ASSESSEE FILED OBJECTIONS TO THE NOTICE ISSUED U/S 148 WHICH WAS REJECTED BY THE ASSESSING OFFICER. SUBSEQUENTLY, DURING THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEIVED SHARE CAPITAL OF RS.35 LAKHS FROM M/S SHALINI HOLDINGS LTD. AND M/S VIRGIN CAPITAL SERVIC ES PVT. LTD. SINCE THE ASSESSEE COULD NOT EXPLAIN SATISFACTORILY THE IDENTITY, CRED IT WORTHINESS AND GENUINENESS OF THE TRANSACTION OF THE TWO COMPANIES IN TERMS OF THE PR OVISIONS OF SECTION 68, THE ASSESSING OFFICER, RELYING ON VARIOUS DECISIONS MAD E ADDITION OF RS.35 LACS TO THE TOTAL INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECT ION 68. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS.60,000/- BEING THE COMM ISSION EXPENSES INCURRED FOR ARRANGING THE ACCOMMODATION ENTRY BEING 1.8% OF THE TOTAL BOGUS SHARE APPLICATION MONEY. THUS, THE ASSESSING OFFICER COMPLETED THE A SSESSMENT AT A TOTAL INCOME OF RS.35,63,000/-. 3. BEFORE THE CIT(A), THE ASSESSEE, APART FROM CHAL LENGING THE ADDITION ON MERIT, CHALLENGED THE VALIDITY OF THE REASSESSMENT PROCEED INGS INITIATED UNDER THE PROVISIONS OF SECTION 147/148. HOWEVER, THE LD.CIT(A) WAS ALS O NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND DISMISSED THE APPEAL F ILED BY THE ASSESSEE ON BOTH THE GROUNDS I.E., HE UPHELD THE VALIDITY OF THE REASSES SMENT PROCEEDINGS AND ALSO ITA NO.1144/DEL/2018 3 CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICE R U/S 68 OF THE IT ACT AND ON ACCOUNT OF UNEXPLAINED EXPENDITURE FOR EARNING SUCH COMMISSION INCOME. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE IN ITIATION OF PROCEEDINGS U/S. 147/ 148 ARE ILLEGAL, WITHOUT JURISDICTION, MECHANI CAL, WITHOUT APPLICATION OF MIND AND UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, APPROVAL U/ S. 151 OF THE SUPERIOR AUTHORITIES IS NOT ACCORDANCE WITH LAW AND OTHERWIS E ALSO MECHANICAL AND WITHOUT APPLICATION OF MIND, MAKING THE RE - ASSTT. PROCEED INGS UN - SUSTAINABLE IN LAW 3. THAT UNDER THEFACTS ANDCIRCUMSTANCES, ADDITION OF R S. 25 LACS UNDER SECTION 68 FOR THE SHARE CAPITAL / SHARE PREMIUM RE CEIVED FROM SHALINI HOLDINGS LTD. BY HOLDING THE SAME AS RECEIVED FROM ALLEGED E NTRY OPERATOR IS ILLEGAL AND UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 4. THAT UNDER THEFACTS ANDCIRCUMSTANCES, ADDITION OF R S. 10 LACS UNDER SECTION 68 FOR THE SHARE CAPITAL / SHARE PREMIUM RE CEIVED FROM VIRGIN CAPITAL SERVICES (P) LTD. BY HOLDING THE SAME AS RECEIVED F ROM ALLEGED ENTRY OPERATOR IS ILLEGAL AND UNSUSTAINABLE IN LAW AS WELL AS ON MERI TS. 5. THATTHE WHOLE ADDITION OF RS.35 LACS UNDER SECTION 68 BEINGMADE WITHOUT CONFRONTING WITH ALL THE ADVERSE MATERIAL USED AND ALSO WITHOUT ALLOWING THE CROSS EXAMINATION IN THE CASES WHERE STATEMENTS HAV E BEEN TAKEN ON THE BACK OF THE ASSESSEE WHICH HAVE BEEN USED ADVERSELY, CANNOT BE SUSTAINED IN LAW AS WELL AS ON MERITS. 6. THATUNDER THE FACTS AND CIRCUMSTANCES, ADDITION OF RS. 63,000/-UNDER SECTION 69 AT THE RATE OF 1.8 PER CENT OF RS. 35 LA CS IS ILLEGAL AND UNSUSTAINABLE IN LAW AS WELL AS ON MERITS. 5. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, CHALLENGED THE VALIDITY OF THE RE- ASSESSMENT PROCEEDINGS ON THE GROUND THAT THE APPRO VAL GIVEN U/S 151 OF THE IT ACT BY THE SUPERIOR AUTHORITIES IS NOT IN ACCORDANCE WITH THE LAW AND WAS GIVEN IN A MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND. REFERRING TO THE APPROVAL GIVEN ITA NO.1144/DEL/2018 4 U/S 151 OF THE IT ACT, COPY OF WHICH IS PLACED AT P AGES 20 AND 21 OF THE PAPER BOOK, THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO COLUMN NO.13 WHERE THE PRINCIPAL COMMISSIONER HAD GIVEN HIS APPR OVAL BY MENTIONING: YES. I AM SATISFIED. REFERRING TO THE DECISION OF THE HON'BL E DELHI HIGH COURT IN THE CASE OF UNITED ELECTRICAL COMPANY PVT. LTD. VS. CIT & ORS, REPORTED IN 258 ITR 317 , HE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES, THE H ON'BLE HIGH COURT HAS HELD THAT THE CIT IS REQUIRED TO APPLY HIS MIND TO THE PROPOSAL P UT UP TO HIM FOR APPROVAL IN THE LIGHT OF THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER. THE SAID POWER CANNOT BE EXERCISED CASUALLY AND IN A ROUTINE MANNER. REFERR ING TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF PR. CIT VS. N.C. CABLES REPORTED IN 391 ITR 11 (DEL ), HE SUBMITTED THAT WHEN THERE IS NO PROPER APPLICATI ON OF MIND BY THE SANCTIONING AUTHORITY FOR ISSUING NOTICE U/S 147 OR 148, REASSE SSMENT PROCEEDINGS ARE NOT VALID. IN THIS CASE ALSO THE APPROVAL U/S 151 WAS GIVEN AS A PPROVED. REFERRING TO THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GERMAN REMEDIES LTD. VS. DCIT (2006) 287 ITR 494 (BOM), HE SUBMITTED THAT WHILE GRANTING APPROVAL, THE CIT WAS REQUIRED TO VERIFY WHETHER THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE RELEVANT FACTS IN THE RETURN AND TO CONSIDER WHETHER OR NOT POWER TO REOPEN IS BEING INVOKED WITHIN A PERIOD OF FOUR YEA RS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. WHEN NONE OF THESE ASPECTS WAS CON SIDERED BY HIM, THE APPROVAL GRANTED SUFFERS FROM NON-APPLICATION OF MIND AND IS LIABLE TO BE QUASHED. REFERRING TO THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF CHHUGAMAL RAJPAL VS. S.P. CHALIHA & ORS REPORTED IN 79 ITR 603 (SC) , HE SUBMITTED THAT WHEN THE IMPORTANT ITA NO.1144/DEL/2018 5 SAFEGUARDS PROVIDED IN THE PROVISIONS OF SECTION 1 47 AND 151 ARE LIGHTLY TREATED BY THE ASSESSING OFFICER AS WELL AS THE CIT, BOTH OF THEM APPEAR TO HAVE TAKEN THE DUTY IMPOSED ON THEM UNDER THESE PROVISIONS AS OF LITTLE IMPORTANCE. THEY HAVE SUBSTITUTED THE FORM FOR THE SUBSTANCE. HE ALSO RELIED ON THE FOLLOWING DECISIONS TO THE PROPOSITION THAT WHEN THERE IS NO PROPER SATISFACTI ON RECORDED BY THE APPROVING AUTHORITY AND THE APPROVAL HAS BEEN GIVEN IN A MECH ANICAL MANNER WITHOUT PROPER APPLICATION OF MIND, THEN, IN THAT CASE, SUCH REOPE NING HAS TO BE HELD AS INVALID AND THE REASSESSMENT PROCEEDINGS SHOULD BE QUASHED:- I) CIT VS. S. GOYANKA LIME & CHEMICAL LTD. (2015) 64 T AXMANN.COM 313 (SC); II) KANSAL FINCAP LTD. VS. ITO, ITA NO.2661 & 2662/DEL/ 2013, ORDER DATED 31.08.2015 (ITAT DELHI); III) ARJUN SINGH VS. ANR VS. ADIT & ORS., 246 ITR 363 (M P); IV) RAJ KISHORE PRASAD, 88 CTR (ALL) 152; AND V) SHRI AMARLAL BAJAJ VS. ACIT, ITA NO.611/MUM/2004, O RDER DATED 24.07.2013 (ITAT, MUMBAI) 6. HE ACCORDINGLY SUBMITTED THAT ON THIS ISSUE ITSELF THE REASSESSMENT PROCEEDINGS SHOULD BE QUASHED BECAUSE THE LD. CIT WHILE GIVING APPROVAL HAS GIVEN THE SAME IN A MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND. 7. THE LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDER OF THE CIT(A) ON THIS ISSUE. THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOINDER, SUBMITTED THAT ALTHOUGH IT WAS ARGUED BEFORE THE CIT(A) ON THE ISSUE OF APPROVAL U/S 151 OF THE IT ACT, HOWEVER, THE ITA NO.1144/DEL/2018 6 LD.CIT(A) HAS CONVENIENTLY IGNORED THE SAME WHILE D ECIDING THE ISSUE OF VALIDITY OF REASSESSMENT PROCEEDINGS. 8. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FA CT THAT THE CASE OF THE ASSESSEE WAS REOPENED BY THE ASSESSING OFFICER AFTER RECORDING R EASONS AND ISSUE OF NOTICE U/S 148 AS PER THE PROVISIONS OF SECTION 147 AND 148 OF THE ACT ON THE BASIS OF THE INFORMATION RECEIVED FROM THE INVESTIGATION WING THAT THE ASSES SEE IS A BENEFICIARY OF ACCOMMODATION ENTRY OBTAINED FROM SURENDRA KUMAR JA IN GROUP OF CASES TOWARDS INTRODUCTION OF SHARE CAPITAL OF RS.35 LACS. I FIN D, THE ASSESSEE HAS TAKEN A SPECIFIC GROUND BEFORE THE CIT(A) CHALLENGING THE VALIDITY O F REASSESSMENT PROCEEDINGS ON THE GROUND THAT APPROVAL U/S 151 OF THE ACT OF THE SUPE RIOR AUTHORITIES IS NOT IN ACCORDANCE WITH LAW. THE RELEVANT GROUND OF APPEAL NO.2 TAKEN BEFORE THE CIT(A) READS AS UNDER:- 2. THAT UNDER THE FACTS AND CIRCUMSTANCES, APPROVA L U/S 151 OF THE SUPERIOR AUTHORITIES IS NOT ACCORDANCE WITH LAW AND OTHERWIS E ALSO MECHANICAL AND WITHOUT APPLICATION OF MIND, MAKING THE RE-ASSTT. PROCEEDIN GS UNSUSTAINABLE IN LAW. 9. I FIND THE ABOVE GROUND HAS BEEN EXTRACTED BY THE C IT(A) IN THE BODY OF THE ORDER. SHE HAS ALSO MENTIONED AT PARA 3.2 OF THE O RDER 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 TH E ENTIRE ORDER. A PERUSAL OF THE APPROVAL GIVEN U/S 151, COPY OF WHICH IS PLACED AT PAGES 20 AND 21 OF THE PAPER BOOK SHOWS THAT THE PR. CIT WHILE GIVING APPROVAL HAS SI MPLY MENTIONED AS UNDER:- YES. I AM SATISFIED. ITA NO.1144/DEL/2018 7 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 APPRO VAL TO THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT IS COUPLED WITH A DUTY. THE C OMMISSIONER 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 O F PR. CIT VS. N.C. CABLES LTD ., WHILE DECIDING AN IDENTICAL ISSUE HAS HELD THAT SEC TION 151 OF THE ACT CLEARLY STIPULATES THAT THE CIT, WHO IS THE COMPETENT AUTHORITY TO AUT HORIZE THE REASSESSMENT NOTICE HAS TO APPLY HIS MIND AND FORM AN OPINION. MERE APPENDI NG 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 TH E SAME TIME, SATISFACTION HAS TO BE RECORDED OF THE GIVEN CASE WHICH CAN BE REFLECTED I N 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 APPR OVAL BY A HIGHER RANKING OFFICIAL, THE FINDING OF THE TRIBUNAL QUASHING THE REASSESSMENT P ROCEEDINGS 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 MECHANICA LLY RECORDED PERMISSION AND THE IMPORTANT SAFEGUARDS PR OVIDED IN THE SECTION 147 AND 151 ITA NO.1144/DEL/2018 8 WERE LIGHTLY TREATED BY THE OFFICER AND THE COMMISS IONER, THE NOTICE ISSUED U/S 148 WAS HELD AS INVALID. THE VARIOUS OTHER DECISIONS RELIE D ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE PAPER BOOK ALSO SUPPORT HIS CASE. SINCE, IN THE INSTANT CASE, ADMITTEDLY, THE LD. PCIT WHILE GRANTING APPROVAL HAS SIMPLY MEN TIONED YES. I AM SATISFIED THEREFORE, FOLLOWING THE DECISIONS OF THE JURISDICT IONAL HIGH COURT (CITED SUPRA) ON THIS ISSUE WHICH ARE BINDING ON THE TRIBUNAL, THE REASSE SSMENT PROCEEDINGS ARE TO BE TREATED AS NOT IN ACCORDANCE WITH THE LAW SINCE THE APPROVA L HAS BEEN GIVEN IN A MECHANICAL MANNER WITHOUT DUE APPLICATION OF MIND BY THE APPRO VING AUTHORITY. I, THEREFORE, ALLOW GROUND OF APPEAL NO.2 BY THE ASSESSEE CHALLEN GING THE VALIDITY OF REASSESSMENT PROCEEDINGS. SINCE THE ASSESSEE SUCCEEDS ON THIS L EGAL GROUND, THE VARIOUS OTHER GROUNDS RAISED BY THE ASSESSEE ARE NOT BEING ADJUDI CATED BEING ACADEMIC IN NATURE. 13. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 2 9.04.2019. SD/- (R.K. PANDA) ACCOUNTANT MEM FBER DATED: 29 TH APRIL, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI