KNIGHT FRANK (I) P.LTD, MUMBAI V. DCIT 2(2), MUMBAI

ITA 1165/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8060 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-11-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 11-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Assessee Lawyers: M M GOLAVALA
• Keywords: Tangible material; Accommodation entries; Reason to believe; Borrowed satisfaction
• Section: 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ITA NO.1165/MUM/2013 , / ASSESSMENT YEAR: 2002-03 M/S. KNIGHT FRANK (INDIA) PVT.LTD. C/O. KALYANIWALA & MISTRY ARMY & NAVY BUILDING, 3 RD FLOOR 148, M.G. ROAD, FORT MUMBAI-400 001. PAN: AAACK 1544 J VS. DY. CIT-RANGE-2(2) ROOM NO.577, 5 TH FLOOR AAYAKAR BHAVAN, M.K. MARG MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: S/SHRI M.M.GOLAVALA & AMEY WAGLE / DATE OF HEARING: 31.01.2017 / DATE OF PRONOUNCEMENT:09.03.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , -PER RAJENDRA,AM: CHALLENGING THE ORDER,DATED 30/11/2012 OF THE CIT(A )-5,MUMBAI THE ASSESSE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY IS ENGAGED IN THE B USINESS OF REAL ESTATE. IN THIS CASE,ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143 (3) OF THE ACT, O N 20/03/ 2005 AT RS.39.27 LAKHS,AS AGAINST THE RETURNED INCOME OF RS. 37.77 LAKHS. LATER ON, T HE ASSESSING OFFICER(AO)ISSUED A NOTICE U/S. 148 OF THE ACT,AFTER RECEIVING INFORMATION FROM THE INVESTIGATION WING OF DELHI THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS.3,65,365/-AS SHARE APP LICATION MONEY, FROM M V MARKETING PRIVATE LTD.(MVMPL),FOR THE YEAR UNDER CONSIDERATIO N. HE COMPLETED THE ASSESSMENT U/S.143(3) R.W.S.147 OF THE ACT, ON 11/12/2009, DETERMINING TH E INCOME OF THE ASSESSEE AT RS. 42.92 LAKHS. 2. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA).BEFORE HIM, THE ASSESSEE CHALLENGED THE REOPENING AND STATED THAT THERE WAS NO INDICATION IN THE RECORDED REASONS AS REGARDS FAILU RE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY THE MATERIAL FACTS,THAT THE AO HAD RELIED SOLELY ON THE INFORMATION SUPPLIED BY THE INVESTIGATION WING OF THE NEW DELHI WITHOUT APPLICATION OF MIND,THAT H E HAD NOT RECORDED ANY SATISFACTION WHILE REOPENING THE ASSESSMENT, THAT THE REOPENING WAS BA SED ON A BORROWED SATISFACTION, THAT IT HAD NOT RECEIVED ANY SHARE APPLICATION MONEY DURING THE YEAR UNDER APPEAL, THAT NO FRESH CAPITAL HAD BEEN INTRODUCED,THAT THE ONLY SHARE CAPITAL ISSUED IN THE HISTORY OF THE ASSESSEE WAS DURING THE 1165/ M/13(02-03) M/S. KN I GHT FRANK (INDIA)PVT.LTD. 2 FINANCIAL YEARS ENDING ON 31/03/1996, 31/03/1997 AN D 31/3/1998,THAT IT HAD NO DEALING WITH MVMPL, THAT THE ASSESSEE HAD REQUESTED THE AO TO AF FORD AN OPPORTUNITY OF CROSS-EXAMINATION OF MVMPL, THAT IT HAD NEVER ENTERED INTO ANY DEALIN G WITH THE ALLEGED CREDITOR. AFTER CONSIDERING THE AVAILABLE MATERIAL, DURING TH E APPELLATE PROCEEDINGS,THE FAA DIRECTED THE ASSESSEE TO FILE AN AFFIDAVIT WITH REGARD TO THE EN TRIES RELATING TO MVM PL.AS PER THE FAA THE AFFIDAVIT WAS SIGNED BY THE PRESENT CHAIRMAN AND MA NAGING DIRECTOR AND NOT BY THE ACTING DIRECTOR FOR THE AY.2002-03,THAT IN THE AFFIDAVIT T HE ASSESSEE DID NOT MENTION ANYTHING ABOUT ENTRIES IN QUESTION IN THE BANK ACCOUNT FOR THE ASS ESSMENT YEAR 2002-03.FINALLY,HE DISMISSED THE APPEAL FILED BY THE ASSESSEE. 3. BEFORE US,THE AUTHORISED REPRESENTATIVE (AR) ARGUED THAT THE AO HAD NOT SUPPLIED THE REASONS RECORDED EVEN THOUGH THE ASSESSEE HAD FILED A RETUR N OF, INCOME,THAT THERE WAS NO FAILURE ON PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS, THAT OB JECTIONS RAISED BY THE ASSESSEE WERE NOT DEALT WITH BY THE AO, THAT THERE WAS NO TANGIBLE MATERIAL FOR REOPENING THE ASSESSMENT,THAT THE F AA DID NOT DECIDE THE ISSUE OF JURISDICTION, THAT BOOK S OF ACCOUNTS OF THE ASSESSEE WERE AUDITED, THAT NO SHARE APPLICATION MONEY WAS RECEIVED BY IT DURIN G THE YEAR UNDER CONSIDERATION. HE RELIED UPON THE CASES OF HINDUSTAN LEVER LTD.(268ITR332),A TUL JAIN(299 ITR 383) AND G AND G PHARMA INDIA LTD.(384 ITR 147). THE DEPARTMENTAL RE PRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. BEFORE PROCEEDING FURTHER WE WOULD LIKE TO REPRODUCE THE REGIONS BRAC KETED BY THE AO TO REOPEN THE ASSESSMENT AND SAME READS AS UNDER:- IN THIS CASE,THE ASSESSMENT WAS COMPLETED U/S. 143 (3) OF THE INCOME TAX ACT, 1961 ON 23.2. 2005 DETERMINING THE TOTAL INCOME AT RS. 39, 27, 18 0/-AS AGAINST THE RETURNED INCOME OF RS. 37, 77, 180/-. INFORMATION HAS BEEN RECEIVED FROM THE A DDL. DIT (INV.), UNIT-VI, NEW DELHI THAT THE ABOVE ASSESSEE HAD TAKEN SOME AMOUNT IN FORM OF SHA RE APPLICATION MONEY TOTALLING RS. 3,65, 365/-THROUGH ENTRY OPERATORS (ACCOMMODATION ENTRIES ). IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME TO THE TUNE OF RS. 3,65,365/-HAS ESCAPED ASSESSMENT FOR THE AY 2002-03. WE FIND THAT THE NOTICE U/S. 148 WAS ISSUED ON 31/0 3/2009, THAT THE ASSESSEE ON 4 TH , APRIL 2009 HAD REQUESTED AO TO SUPPLY ITS COPY OF THE REASONS RECORDED. ON 21/04/2009, THE ASSESSEE AGAIN 1165/ M/13(02-03) M/S. KN I GHT FRANK (INDIA)PVT.LTD. 3 REQUESTED FOR SUPPLYING THE COPY OF THE REASONS REC ORDED AND INFORMED THE AO TO TREAT THE RETURN FILED ON 31/10/2002 TO BE CONSIDERED AS WRITTEN FIL ED IN PURSUANCE TO THE NOTICE ISSUED U/S. 148 OF THE ACT. ON 28/07/2009 THE AO DIRECTED THE ASSESSEE TO APPEAR BEFORE HIM FOR REOPENING ASSESSMENTS.THE ASSESSEE,VIDE ITS LETTER,DATED 17/0 8/2009,AGAIN REQUESTED THE AO TO FURNISH IT A COPY OF THE REASONS RECORDED. ON 02/09/2009, THE AO SUPPLIED A COPY OF THE REASONS RECORDED TO THE ASSESSEE, WHO OBJECTED TO THE REOPENING VIDE IT S LETTER DATED 11/09/2009. ON 18/09/2009 THE AO PASSED AN ORDER DISPOSING THE OBJECTIONS RAISED BY THE ASSESSEE. IT IS FOUND THAT THE ASSESSEE HAD RAISED THE ISSUE OF THE JURISDICTION ON VARIOUS COUNTS BEFORE THE FAA,BUT HE DID NOT ADJUDICATE ANY OF THE ISSUES.IT APPEARS THAT THE AS SESSEE WAS DIRECTED BY THE FAA TO FILE AND AFFIDAVIT AND IT OBJECTED TO INCLUSION OF CERTAIN W ORDS IN ITS AFFIDAVIT. 4.1. FROM THE REASONS RECORDED,IT IS CLEAR THAT THE ASSE SSMENT WAS REOPENED AFTER A PERIOD OF FOUR YEARS.THE AO HAD NOWHERE ALLEGED THAT THERE WAS A F AILURE ON PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY THE MATERIAL FACTS. THE FAILURE OF THE ASSESSEE IN SUCH CASES NOT ONLY HAS TO ALLEGE BUT HAS TO DEMONSTRATE IT. REOPENING OF A COMPLETED SCRUTINISED ASSESSMENT IS NOT A ROUTINE MATTER-IT HAS TO BE BACKED BY SOLID REASONS OF ESCA PEMENT OF TAXABLE INCOME. THE SECTION CANNOT BE INVOKED FOR OTHER PURPOSES OR ON THE GROUNDS OF SUSPICION. IN OUR OPINION,THE AO WAS JUSTIFIED IN RECORDING THE SATISFACTION FOR REOPENI NG THE ASSESSMENT, AS HE HAD RECEIVED SOME SPECIFIC INFORMATION FROM THE INVESTIGATION WING OF THE DELHI UNIT. BUT,AFTER RECEIVING THE REPLY OF THE ASSESSEE ABOUT NOT ISSUING ANY SHARES OR NOT RECEIVING ANY SHARE APPLICATION MONEY DURING THE YEAR UNDER APPEAL HE SHOULD HAVE MADE FURTHER E NQUIRIES. THE AO HAD NOT DOUBTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE.IF IN THE BALANCE SHEET OR IN THE LEDGER ACCOUNTS THERE WAS NO ENTRY ABOUT THE ALLEGED SHARE APPLICATION MONEY,THEN HE S HOULD HAVE DROPPED THE ASSESSMENT PROCEEDINGS.THE ASSESSEE HAD ALSO ASKED FOR CROSS-E XAMINATION OF THE CREDITOR BUT THE AO DID NOT AFFORD THE OPPORTUNITY TO ITS. THE REASONS RECORDED BY THE AO WERE SUPPLIED TO THE ASSESSEE IN THE MONTH OF SEPTEMBER, 2009 THOUGH THE ASSESSEE HAD RE QUESTED FOR THE SAME ON EARLIER OCCASIONS. 4.2. WE ALSO FIND THAT THE FAA HAS NOT DEALT WITH THE OB JECTIONS RAISED BY THE ASSESSEE WITH REGARD TO THE JURISDICTION.IN OUR OPINION, THE FAA CANNOT DICTATE AS TO HOW THE AFFIDAVIT SHOULD BE SIGNED OR PREPARED. HE SHOULD HAVE ADDRESSED THE BA SIC ISSUE OF NON-RECEIPT OF SHARE APPLICATION MONEY FOR THE YEAR UNDER CONSIDERATION AND SHOULD H AVE DECIDED THE ISSUE.IN SHORT, THERE WAS FAILURE ON PART OF THE AO AS WELL AS THE FAA TO DEA L WITH THE ISSUES RAISED BY THE ASSESSEE WITH REGARD TO REOPENING. 1165/ M/13(02-03) M/S. KN I GHT FRANK (INDIA)PVT.LTD. 4 4.3. HERE WE WOULD LIKE TO REFER TO THE CASE OF MASTEK L TD.(387ITR72),DELIVERED BY THE HONBLE HIGH COURT OF GUJARAT AND IT READS AS UNDER: FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL NECESSARY MATERIAL FACTS IS A PRIME REQUIREMENT UNDER THE PROVISIONS OF SECT ION 147 OF THE ACT WHICH ENABLES THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT PREVIOUSL Y FRAMED BEYOND THE PERIOD OF FOUR YEARS OF THE ASSESSMENT ORDER. RESPECTFULLY FOLLOWING THE ABOVE JUDGMENT AND CONS IDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE,WE ARE OF THE OPINION THAT REOPENING WA S NOT VALID.SO, REVERSING THE ORDER OF THE FAA,FIRST EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS WE HAVE ALREADY HELD THAT REOPENING WAS INVALID, SO, WE ARE NOT DEC IDING THE OTHER GROUNDS OF APPEAL. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS AL LOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 09 TH MARCH, 2017. 09 , 2017 SD/- SD/- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 09.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.