M/s. Neelkanth Organics Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 1203/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6242 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 24-02-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 02-03-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Unexplained cash credit; Gift; Principle of natural justice; Accommodation entries; Assessment record; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : SMC - 1 : NEW DELHI BEFORE SMT. DIVA SINGH , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 1203 /DEL/ 2015 ASSESSMENT YEAR: 2004 - 05 M/S. NEELKANTH ORGANICS PVT. LTD., A - 38/E, DDA FLATS, MUNIRKA, NEW DELHI. (PAN : AAACN0339G) VS. INCOME TAX OFFICER, WARD - 13(2), NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH. RAJESH JAIN, CA RESPONDENT BY SH. P. DAM KANUNJNA, SR.DR DATE OF HEARING 25.02.2016 DATE OF PRONOUNCEMENT 30.03.2016 ORDER PER O.P. KANT , A. M. : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST ORDER DATED 15/12/2014 OF LD. COMMISSIONER OF INCOME - TAX( APPEALS) FOR ASSESSMENT YEAR 2004 - 05, RAISING FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PAS SED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) UPHOLDING THE ADDITIONS IN THE RETURNED INCOME OF THE APPELLANT, MADE BY THE ASSESSING OFFICER, IS TOTALLY ILLEGAL ON THE FACTS OF THE CASE AND AS PER LAW. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX( APPEALS) ERRED IN DISMISSING ALL THE GROUNDS OF APPEAL RAISED BY THE APPELLANT WITHOUT APPRECIATING THE APPELLANT SUBMISSIONS JUDICIALLY. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN UPHOLDING THE CONTENTIONS OF THE ASSESSING OFFICER FOR I NITIATING AND SUSTAINING THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT, WITHOUT APPRECIATING THAT THE PROCEEDINGS WERE INITIATED MECHANICALLY ON INFORMATION RECEIVED BY INVESTIGATION WING BY THE ASSESSING OFFICER WHO DID NOT APPLY HIS OWN MIND ON THE FACTS OF THE CASE AT ALL WITH REFERENCE TO 2 ITA NO.1203/DEL/2015 AY: 2004 - 05 THE INCOME TAX RETURN AND AUDITED FINAL ACCOUNTS FILED THEREWITH. THAT THE LEARNED ASSESSING OFFICER ALSO VIOLATED THE PRINCIPLES OF NATURAL JUSTICE AS THE COPY OF THE STATEMENT OF THE WITNESS WAS NOT GIVEN TO THE APPELLANT. 4. THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN UPHOLDING THE ADDITION OF RS. 8,83,850/ - MADE BY THE ASSESSING OFFICER, ON ACCOUNT ALLEGED UNEXPLAINED DEPOSITS IN THE BANK ACCOUNT UNDER SECTION 68 OF THE ACT WITHOUT CONSIDERING THE FACTS & SUBMISSIONS OF THE APPELLANT FILED DURING THE APPELLANT PROCEEDINGS. THE APPELLANT DULY EXPLAINED THAT THESE TRANSACTIONS ARE BUSINESS TRANSACTIONS OF SALE/PURCHASE OF SHARES AND THE AMOUNTS ARE NOT IN THE NATURE OF THE SHARE CAPITAL, GIFTS ET C. AS ALLEGED IN THE REASONS FOR INITIATING THE RE - ASSESSMENT PROCEEDINGS. 5. THAT THE ORDERS OF THE ASSESSING OFFICER & COMMISSIONER OF INCOME TAX(APPEALS) ARE NOT BASED ON THE FACTS OF THE CASE & AS PER LAW AND HENCE ADDITIONS SUSTAINED BY THE COMMISSIONER OF INCOME TAX(APPEALS) ARE TOTALLY ILLEGAL. 6. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF THE APPEAL. 2. T HE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION ON 31/10/2004 DECLARING LOSS OF RS. 11,858/ - AND SAME WAS PROCESSED UNDER SECTION 143 (1 ) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). SUBSEQUENTLY, THE A SSESSING OFFICER ( IN SHORT THE AO ) RECEIVED INFORMATION FROM THE I NVESTIGATION WING OF THE INCOME T AX DEPARTMENT THAT THE NAME OF THE ASSESSEE APPEARED IN LIST OF BENEFICIARIES WHO ROOTED THEIR UNACCOUNTED MONEY THROUGH THE BANK ACCOUNTS OF ENTRY OPERATO RS IN THE GARB OF SHARE APPLICATION MONEY, LOAN, GIFTS, BOGUS SALES/PURCHASE OR SOME OTHER OSTENSIBLE BUSINESS TRANSACTIONS AND THE ASSESSEE SPECIFICALLY RECEIVED AN AMOUNT OF RS. 8,83,850/ - BY WAY OF TWO ACCOMMODATION ENTRIES OF RS. 3,84,850 AND RS. 4,99, 000/ - FROM SHRI DHAR FINANCIAL SERVICES LTD. , IN THE YEAR CORRESPONDING TO THE ASSESSMENT YEAR UNDER CONSIDERATION. CONSEQUENT TO RECEIPT OF THE INFORMATION, THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT ON 25/03/2011 AFTER RECORDING R EASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT. IN RESPONSE, THE ASSESSEE SUBMITTED V IDE LETTER DATED 25/04/2011 THAT THE RETURN FILED BY THE COMPANY UNDER SECTION 139 OF THE ACT MIGHT BE TREATED AS A RETURN 3 ITA NO.1203/DEL/2015 AY: 2004 - 05 FILED UNDER SECTION 148 OF THE ACT. SUBSEQUENTLY, NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED. REASONS RECORDED BY THE AO FOR INITIATING THE PROCEEDINGS UNDER SECTION 147 WAS PROVIDED TO THE ASSESSEE AND THE OBJECTIONS RAISED BY THE ASSESSEE BY LETTER DATED 11/10/2011 WAS DULY DISPOSED OF BY THE AO BY SPEAKING ORDER DATED 14/10/2011 . IN THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSEE E XPLAINED THAT SUM OF RS. 3,84, 850 / - WAS RECEIVED FROM M/S SHRI DHAR FINANCIAL SERVICES LTD IN ASSESSMENT YEAR 2003 - 04 , ON SALE OF CERTAIN SHARES TO TH E SAID CONCERN AND THE CHEQUE RECEIVED WAS DEPOSITED IN THE BANK IN PREVIOUS YEAR 200 2 - 03, CORRESPONDING TO THE ASSESSMENT YEAR 2003 - 04, HOWEVER SAME WAS CREDITED IN THE PREVIOUS YEAR CORRESPONDING TO THE ASSESSMENT YEAR UNDER CONSIDERATION, AND HENCE THE RECEIPT OF RS. 3,84,850/ - WAS NOT TO BE TAKEN INTO ACCOUNT IN THE PERIOD UNDER CONSI DERATION. THE RECEIPT OF RS. 4,99, 000 / - WAS ALSO RECEIVED FROM M/S SHRI DHAR FINANCIAL SERVICES LTD ON SALE OF CERTAIN SHARES ON 04/04/2003 AND THE CHEQUE RECEIVED WAS CRED ITED ON 08/04/2003 AND THUS THE COMPANY HAD NOT TAKEN ANY BENEFIT IN THE NATURE OF SHARE CAPITAL, LOAN, GIFT OR OTHERWISE FROM THE SAID TRANSACTION. HOWEVER , THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FAILED TO PRODUCE ANY CONFIRMATION FROM M/S SHRI DHA R FINANCIAL SERVICES LTD . AND RELEVANT DOCUMENTS IN RESPECT OF THE TRANSACTIONS, AND THEREFORE HE HELD BOTH THE RECEIPT S , AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT AND ADDED TO THE INCOME OF THE ASSESSEE. AGGRIEVED WITH THE FINDINGS OF THE AO, THE ASSESSEE FILED APPEAL BEFORE THE L D. COMMISSIONER OF INCOME - TAX ( APPEALS) AND CHALLENGED THE JURISDICTION TO INITIATE PROCEEDINGS UNDER 147 OF THE ACT AS WELL AS THE ADDITION OF RS. 8,83, 850 / - MADE UNDER SECTION 68 OF THE ACT. THE LEARNED COMMISSIONER OF INCOME - TA X ( APPEALS) OBSERVED THAT THE INFORMATION WAS SPECIFIC TO THE EXTENT IT CONTAINED B ANK AND BRANCH OF THE ASSESSEE A S BENEFICIARY , ACCOUNT NUMBER AND CHEQUE NUMBER OF ENTRY PROVIDER USED IN THE TRANSACTION ETC . AND ON THIS SPECIFIC INFORMATION , ANY REASONABLE PERSON COULD MAKE A BELIEF THAT INCOME ESCAPED ASSESSMENT. HE ALSO OBSERVED 4 ITA NO.1203/DEL/2015 AY: 2004 - 05 THAT EVEN THE SUFFICIENCY OF REASONS FOR FORMATION OF BELIEF WAS NOT REQUIRED AT THE STAGE OF ISSUE OF NOTICE UNDER SECT ION 148 OF THE ACT. ACCORDINGLY , HE UPHELD T HE PROCEEDINGS UNDER SECTION 147 OF THE ACT. AS R EGARD TO THE ADDITION OF RS. 8, 83, 850/ - , THE LD. COMMISSIONER OF INCOME - TAX ( APPEALS) OBSERVED THAT THE ASSESSEE DID NOT DISCHARGE ITS ONUS TO EXPLAIN THE NATURE AND SOURCE OF THE RECEIPT S , AND ACCORDINGLY H E UPHELD THE SAID ADDITIO N OF RS. 8,83, 850/ - UNDER SECTION 68 OF THE ACT. AGGRIEVED, THE ASSESSEE IS BEFORE THE TRIBUNAL. 3. IN THE GROUNDS NO S . 1 TO 3 OF THE APPEAL, THE ASSESSEE HAS CHALLENGED INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. 4. THE L D. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE SUBMITTED THAT PROCEEDINGS UNDER SECTION 147 OF THE ACT WERE INITIATED BY THE ASSESSING OFFICER MECHANICALLY ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, WITHOUT APPLYING HIS OWN MINDS ON T HE FACTS OF THE CASE. IN SUPPORT, HE RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF G & G PHARMA INDIA LTD VS. ITO IN ITA NO. 3149/DEL/2013, JUDGMENT OF THE HON BLE JURISDICTI ONAL HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME T AX - 4 VS. G & G PHARMA INDIA LTD . IN ITA 545/2015 AND DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS. SH. DAVESH KUMAR, IN ITA NO. 2068/DEL/2010. 4.1 O N THE OTHER HAND, THE L D. SENIO R DEPARTMENTAL REPRESENTATIVE ( SR . DR) RELYING ON THE ORDER OF THE AUTHORITIES BELOW, SUBMITTED THAT NOTICE UNDER SECTION 148 OF THE ACT WAS ISSUED ON THE BASIS OF THE SPECIFIC INFORMATION RECEIVED IN THE CASE FROM THE INVESTIGATION WING, WHO SUPPLIED THE INFORMATION AFTER CARRYING OUT PRO PER ENQUIRIES AND MATERIAL GATHERED DURING THE COURSE OF ENQUIRIES CONDUCT ED UNDER THE PROVISIONS OF THE INCOME T AX ACT AND , THEREFORE , INFORMATION BEING FROM A RELIABLE SOURCE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT INCOME IN THE CASE OF ASSESSE E ESCAPED ASSESSMENT. FURTHER , HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE, ONLY RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENT WAS COMPLETED PRIOR TO 5 ITA NO.1203/DEL/2015 AY: 2004 - 05 ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT, AS SUCH NO DETAILS OF TR ANSACTIONS CARRIED OUT WITH ASSESSEE WERE AVAILABLE ON RECORD AND THEREFORE THERE WAS NO OCCASION FOR THE ASSESSING OFFICER TO VERIFY THE TRANSACTIONS OF ACCOMMODATION ENTRY WITH THE RECORD AVAILABLE WITH HIM. HE FURTHER SUBMITTED THAT IN THE CASE OF G & G PHARMA INDIA LTD( SUPRA), THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT PRIOR TO ISSUE OF NOTICE UNDER SECTION 148 OF THE ACT, WHEREAS IN THE INSTANT CASE SCRUTINY ASSESSMENT WAS NOT COMPLETED PRIOR TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT, THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE BEING DIFFERENT FROM THE CITED CASE, THE RATIO OF THE CITED CASE CANNOT BE APPLIED OVER THE FACTS OF THE INSTANT CASE. 4.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE CASE OF G & G PHARMA INDIA LTD (SUPRA), THE TRIBUNAL HELD THAT THE AO FOR REOPENING OF THE ASSESSMENT NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAD REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR AND THE ASSESSING O FFICER ISSUED NOTICE UNDER SECTION 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INVESTIGATION, AND THUS REOPENING WAS HELD BAD IN LAW AND DESERVES TO BE QUASHED. THE HON BLE HIGH COURT IN THE CASE E NQUIRED F ROM THE STANDING COUNSEL OF THE R EVENUE WHETHER HE COULD PRODUCE THE MATERIALS ON THE BASIS OF WHICH THE ASSESSMENT WAS REOPENED BEFORE THE COURT . THE STANDING COUNSEL SOUGHT 3 WEEKS OF TIME FOR THIS PURPOSE, HOWEVER ON THE DATE OF HEARING NO SUCH MATERIAL WAS PRODUCED BEFORE THE HON BLE COURT AND IT WAS SUBMITTED THAT FURTHER EFFORTS WOULD BE MADE TO LOCATE THE MATERIAL ON THE BASIS OF WHICH THE AO FORMED OPINION REGARDING REOPENING OF THE ASSESSMENT AND THE COURT WAS NOT PREPARED TO GRANT FURTHER TIME FOR THIS PURPOSE SINCE IT WAS NOT CLEAR THAT THE MATERIAL WERE IN FACT AVAILABLE WITH THE DEPARTMEN T. THE STANDING COUNSEL OF THE R EVENUE TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT(A) 6 ITA NO.1203/DEL/2015 AY: 2004 - 05 DISCUSSED THE MATERIAL PRODUCED DURING THE HEARING OF THE APPEAL. IN BACKGROUND OF THE ABOVE FACTS THE HON BLE C OURT HELD AS UNDER: 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT(A) DISCUSSED THE MATERIAL PRODUCED DURING THE HEARING OF THE APPEAL. THE COURT WOULD LIKE T O OBSERVE THAT THIS IS THE NATURE OF A POST MORTEM EXERCISE AFTER THE EVENT OF REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASIS THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIAL, CONCLUDE THAT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS EXERCISE OF ANALYZING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY. 4.3 THUS THE HON BLE C OURT IN THE ABOVE CASE HAS HELD THAT THE AO MUST APPLY MIND TO THE MATERIAL IN ORDER TO HAVE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND WHICH WAS MISSING IN THAT CASE. IN THE CASE IN HAND, NO SUCH ISSUE OF EXISTENCE OF MATERIAL ON THE BASIS OF WHICH NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN ISSUED, I S RAISED. THE REASONS RECORDED BY THE ASSESSING OFFICER FO R REOPENING OF THE ASSESSMENT ARE REPRODUCED AS UNDER TO HAVE CLARITY OF THE ISSUE: PUC IS THE PROPOSAL FOR REOPENING THE CASE U/S 147 OF THE IT ACT FOR THE AY 2004 - 05 IN THE PRESCRIBED PERFORMA . THE INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATION W ING THAT THE NAME OF THE ABOVE ASSESSEE APPEARS IN THE LIST OF BENEFICIARIES, WHO HAVE ROUTED THEIR UNACCOUNTED MONEYS THROUGH THE BANK ACCOUNTS OF THE ENTRY OPERATORS IN THE GARB OF SHARE APPLICATION MONEY, LOAN, GIFTS, BOGUS SALES/PURCHASES OR SOME OTHER OSTENSIBLE BUSINESS TRANSACTIONS. THE ACCOMMODATION ENTRIES HAVE BEEN TAKEN IN LIEU OF CERTAIN PERCENTAGE OF COMMISSION PAID TO THE ENTRY OPERATORS, AGAINST OUT OF THE UNDISCLOSED SOURCES. DURING THE FY 2003 - 04, THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS. 8,83,850/ - BY WAY OF ACCOMMODATION ENTRIES FROM THE NOTIFIED ENTRY OPERATORS AS PER TABLES BELOW: - NAME OF THE BANK & BRANCH OF THE NAME OF BANK & BRANCH OF THE ENTRY AMOUNT OF ENTRY TAKEN (RS.) DATE NAME OF THE ENTRY OPERATOR ACCOUNT NO./CHEQUE NO. 7 ITA NO.1203/DEL/2015 AY: 2004 - 05 BENEFICIARY OPERATOR STANDARD CHARTERED BANK, PARLIAMENT STREET, NEW DELHI NAINITAL BANK, NEW D E LHI 3,84,850/ - 04.08.2003 SHRIDHAR FINANCIAL SERVICES LTD. 179/171037 STANDARD CHARTERED BANK, PARLIAMENT STREET, NEW DELHI NAINITAL BANK, NEW DELHI 4,99,000/ - 04.09.2003 SHRIDHAR FINANCIAL SERVICES LTD. 179/171039 I HAVE PERUSED THE INFORMATION RECEIVED FROM THE WING. THE WING HAS SENT COMPREHENSIVE DETAILS COMPRISING, INTER - ALIA THE BENEFICIARY S NAME, BENEFICIARY S B ANK NAME, BENEFICIARY S BANK BRANCH, ACCOUNT NO. OF BENEFICIARY IN WHICH ENTRY IS RECEIVED, VALUE OF ENTRY TAKEN, DATE ON WHICH ENTRY TAKEN, NAME OF ACCOUNT HOLDER OF ENTRY GIVEN ACCOUNT. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT INCOME TO THE EXTENT OF RS. 883850/ - HAS ESCAPED ASS ESSMENT. THEREFORE, PROCEEDINGS U/S 147 OF THE ACT IS PROPOSED TO BE INITIATED FOR AY 2004 - 05. SINCE, FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT AY I.E. 2004 - 05 APPROVAL OF THE ADDL. CIT, RANGE - 13, NEW DELHI IS SOLICITED U/S 151(2) OF THE ACT. 4.4 FROM PERUSAL OF ABOVE, WE FIND THAT, IN THE CASE IN HAND, NO SCRUTINY ASSESSMENT WAS COMPLETED AND THEREFORE NO INFORMATION IN RESPECT OF WHETHER THE TRANSACTIONS WERE DECLARED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS, WAS AVAILABLE WITH THE ASSES SING OFFICER FOR VERIFICATION OF THE INFORMATION RECEIVED FROM THE INVESTIGATION W ING. THE ASSESSING OFFICER RECEIVED INFORMATION SPECIFIC TO THE ASSESSEE HAVING DETAILS OF BANK AND BRANCH OF THE ASSESSEE AS BENEFICIARY, CHEQUE NUMBER AND AMOUNT USED IN T HE TRANSACTION ALONGWITH BANK AND BRANCH OF ENTRY OPERATORS FROM THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, WHICH COLLECTS THIS INFORMATION AFTER CARRYING OUT ENQUIRIES AS PER THE PROVISIONS OF INCOME TAX ACT AND ON THE BASIS OF THIS INFORMATION T HE ASSESSING OFFICER FORMED HIS BELIEF THAT INCOME ESCAPED ASSESSMENT IN THE CASE OF THE ASSESSEE IN RESPECT OF YEAR UNDER CONSIDE RATION. THUS , WE CANNOT SAY THAT 8 ITA NO.1203/DEL/2015 AY: 2004 - 05 THE ASSESSING O FFICER HAS NOT APPLIED HIS MIND AND MECHANICALLY ISSUED THE NOTICE UNDER SECTION 148 OF THE ACT. IN THE CASE OF ACIT VS. SH. DEVESH KUMAR (SUPRA), THE TRIBUNAL OBSERVED THAT THERE WAS NO MENTIONING OF THE DAT E ON WHICH THE REASONS WERE RECORDED FOR ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT, WHEREAS IN THE PRESENT CASE THERE IS NO SUCH OMISSION AND THEREFORE FINDING OF THE SAID CASE CANNOT BE APPLIED O N THE FACTS OF THE CASE OF THE ASSESSEE. THE LD. COM MISSIONER OF I NCOME T AX (APPEALS) HAS DECIDED THE ISSUE OF JURISDICTION UNDER SECTION 147 AS UNDER: FROM THE ABOVE IT IS CLEAR THAT THE ASSESSING OFFICER CONSIDERED THE INFORMATION FROM INVESTMENT WING AND MADE A REASONABLE BELIEVE THAT DUE TO THESE BOGUS ACCOMMODATION ENTRIES, THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. NOTICE U/S 148 WAS ISSUED AFTER RECORDING THE PROPER REASONS AS PER REQUIREMENT OF LAW. THEREFORE, REOPENING WAS BASED ON A REASONABLE BELIEF. THERE WAS INFORMATION IN RESPECT OF THE ASSESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES WHICH REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. THE INFORMATION WAS SPECIFIC TO THE EXTENT THAT IT CONTAINED THE BANK & BRANCH OF THE ASSESSEE AS BENEFICIARY, SPE CIFIC INFORMATION ANY REASONABLE PERSON SHALL MAKE A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, THERE WAS SUFFICIENT MATERIAL WHICH IS SUFFICIENT TO MAKE REASON TO BELIEVE FOR INITIATING THE PROVISIONS U/S 147. THERE WAS A RATIONAL CONNECTION BE TWEEN THE INFORMATION RECEIVED AND ESCAPEMENT OF THE INCOME. THERE IS A LIVE LINK BETWEEN THE MATERIAL THAT CAME TO THE NOTICE OF THE ASSESSING OFFICER AND THE FORMATION OF BELIEVE THAT INCOME HAS ESCAPED FROM ASSESSMENT. FOR THE PURPOSE OF INITIATION OF P ROCEEDINGS U/S 147, MERE EXISTENCE OF PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IS SUFFICIENT. 4.1.2 IN RESPONSE TO NOTICE U/S 148 THE ASSESSEE VIDE ITS LETTER 25.04.2011 HAD SUBMITTED THAT THE ASSESSEE COMPANY HAD DULY F ILED TAX RETURN FOR THE AY 2004 - 05 ON 31.10.2004 DECLARING TAXABLE INCOME OF RS. ( - 11,858)/ - . THE IT RETURN FILED BY THE COMPANY U/S 139 MAY BE TREATED AS FILED U/S 148 OF THE IT ACT. THEREAFTER, STATUTORY NOTICES U/S 143(2) WERE ISSUED BY THE AO AND IN RE SPONSE AR OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILED THE REQUISITE DETAILS. REASONS RECORDED BY THE AO F OR INITIATING THE PROCEEDINGS U/ S 147 WAS ALSO PROVIDED TO THE ASSESSEE. THE OBJECTION RAISED BY THE ASSESSEE BY LETTER DT. 11 .10.2011 WAS DULY DISPOSED OFF BY THE AO BY A SPEAKING ORDER DT. 14.1 0.2011. AT THE TIME OF INITIATION OF PROCEEDINGS U/S 147 DOCUMENTARY 9 ITA NO.1203/DEL/2015 AY: 2004 - 05 EVIDENCE OR MATERIALS RELATING TO ESCAPEMENT OF INCOME NEED NOT BE SUPPLIED TO THE ASSESSEE. EVEN THE SUFFICIENCY OF R EASONS FOR FORMING THE BELIEF IS NOT A REQUIREMENT. HON'BLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. REPORTED IN 291 ITK 500 HAS HELD WHEN THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ESCAPED ASSESSMENT, THE LAW DOES NOT REQUIRE THAT ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT OF LEGAL EVIDENCE OR CONCLUSION. THE MATERIAL REQUIRED FOR CONCLUSIVELY PROVING THE ESCAPEMENT OF INCOME IS NOT CONCERNED AT THE STAGE OF REOPENIN G. HON'BLE DELHI HIGH COURT IN THE CASE OF A.G. HOLDINGS (P) LTD. VS. ITO IN W.P. (C) 8031/2011 AND IN THE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD (2012) 18 TAXMANN.COM 217 (DELHI) HAS HELD THAT AT THE TIME OF ISSUING THE NOTICE TO REOPEN THE ASS ESSMENT, THE ASSESSING OFFICER IS ONLY EXPECTED TO FORM A PRIMA FACIE OR TENTATIVE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WHETHER THE ADDITION HAS TO BE MADE OR NOT IS A MATTER TO BE DECIDED ON MERITS IN THE COURSE OF THE REASSESSMENT PROCEEDING. THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WAS SPECIFIC. THE INFORMATION WAS SUFFICIENT FOR MAKING A BELIEF THAT INCOME AMOUNTING TO RS. 8,83,8501 - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT AND THE ASSESSING OFFICER WAS JUSTIFIED IN INITIATING THE PROCEEDINGS FOR REASSESSMENT BY ISSUING NOTICE U/S 148 AFTER RECORDING THE REASONS AS REQUIRED BY LAW. IN VIEW OF THE ABOVE, THE SUBMISSION OF THE APPELLANT IS NOT SUSTAINABLE. AS THE PROCEEDINGS U /S 147 HAVE BEEN INITIATED AND ASSESSMENT WAS MADE U/S 1471143(3) AS PER THE PROVISION OF THE LT. ACT, THEREFORE, NO INFIRMITY HAVE BEEN CAUSED BY THE A.O. THEREFORE, APPEAL FAILS IN GROUND NOS. 2 & 3 OF APPEAL. 4.5 IN VIEW OF THE ABOVE FINDINGS OF LD. COMMISSIONER OF INCOME - TAX ( APPEALS) AND OUR DISCUSSION ABOVE , WE ARE OF THE CONSIDERED OPINION THAT THE COMMISSIONER OF INCOME TAX(APPEALS) HAS PASSED A WELL REASONED ORDER ON THE ISSUE IN DISPUTE AND NO INTERFERENCE ON OUR PART IS REQUIRED . A CCORDING LY , WE UPHOLD THE FINDINGS OF THE LD. COMMISSIONER OF INCOME - TAX ( APPEALS) ON THE ISSUE IN DISPUTE AND THE GROUNDS OF THE APPEAL OF THE ASSESSEE ARE ACCORDINGLY DISMISSED. 5. IN GROUND NO S . 4 AND 5 THE ASSESSEE H AS CHALLENGED ADDITION OF RS. 8,83, 850/ - MADE BY THE ASSESSING OFFICER AND UPHELD BY THE LD. COMMISSIONER OF INCOME - TAX ( APPEALS). 10 ITA NO.1203/DEL/2015 AY: 2004 - 05 5.1 THE LD. AR REITERATING GROUNDS OF APPEAL SUBMITTED THAT THE ASSESSEE HAD DULY EXPLAINED THESE TRANSACTIONS AS BUSINESS TRANSACTION OF PURCHASE AND SALE OF SHARES AND IN CASE OF FIRST TRANSACTION, THE SALE WAS EVEN MADE IN THE EARLIER ASSESSMENT YEAR. HE FURTHER SUBMITTED THAT PURCHASES CORRESPONDING TO THE SALES HAVE NOT BEEN DOUBTED BY THE ASSESSING OFFICER AND THE ADDITION MADE UNDER SECTION 68 OF THE ACT IN RESP ECT OF THE SALE TRANSACTIONS IS AMOUNTING TO DOUBLE ADDITION FOR THE SAME TRANSACTION, WHICH IS NOT ALLOWED AS PER LAW. THE LD. A R FURTHER RELIED ON THE DECISION OF THE TRIBUNAL, DELHI BENCH IN THE CASE OF INCOME TAX O FFICER VERSUS SRISHTI FINCAP PVT LTD I N ITA NO. 2264/DEL/2013. THE LD. SENIOR DR, ON THE OTHER HAND RELIED ON THE FINDINGS OF THE AUTHORITIES BELOW. 5.2 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE CASE OF THE ASSESSEE, THE LD. COMMISSIONER OF INCOME - TAX( APP EALS), HAS NOTED THAT CONTRARY TO THE STATEMENT OF THE ASSESSEE THAT CONFIRMATIONS WERE FILED BEFORE THE AO, ON VERIFICATION OF THE ASSESSMENT RECORD, HE FOUND THAT NO CONFIRMATION FROM M/S SHRIDHAR FINANCIAL SERVICES LTD THAT THE IMPUGNED TRANSACTIONS WER E IN RESPECT OF SALES OF SHARES, WERE FILED. THIS WAS PRIMARY REQUIREMENTS OF THE ASSESSEE FOR DISCHARGING ITS ONUS UNDER SECTION 68 OF THE ACT AND ASSESSEE HAS FAILED IN DISCHARGING ITS ONUS NOT ONLY BEFORE THE ASSESSING OFFICER EVEN BEFORE THE LD. COMMIS SIONER OF INCOME - TAX ( APPEALS). THE RELEVANT FINDINGS OF THE COMMISSIONER OF INCOME - TAX ( APPEALS) ON THE ISSUE IN DISPUTE ARE AS UNDER: 4.2.2 IN THIS REGARD THE SUBMISSION F THE APPELLANT THAT TRANSACTIONS ARE DULY RECORDED IN THE BOOKS OF ACCOUNT OF THE COMPANY AND REFLECTED IN THE BALANCE SHEET AND PROFIT & LOSS ACCOUNT OF THE RELEVANT PERIOD ARE WITHOUT ANY MERIT. IT IS AN ESTABLISHED LEGAL POSITION THAT MERE ENTRIES IN THE BOOKS OF ACCOUNT OF THE ASSESSEE IS NOT ENOUGH TO JUSTIFY CASH CREDIT. THE BANK ACCOUNT STATEMENT FILED BY THE ASSESSEE IN RESPECT OF ITS ACCOUNT WITH STANDARD CHARTERED BANK SHOWS SIMPLY CREDIT OF RS. 3,84,850/ - ON 7 TH APRIL, 2003 AND RS. 4,99,000/ - ON 8 TH APRIL, 2003 BY CHEQUE NO. 171037 AND 171039 RESPECTIVELY. THE BANK STATEMENT D O NOT SHOW THAT THE ABOVE AMOUNTS WERE RECEIVED FROM M/S. SHRIDHAR FINANCIAL SERVICES LTD. IN THIS REGARD, THE SUBMISSION THAT STATEMENT OF ACCOUNT AS CONFIRMATION ISSUED BY 11 ITA NO.1203/DEL/2015 AY: 2004 - 05 M/S. SHRI DHAR FINANCIAL SERVICES LTD. PROVES THAT IT HAS PAID MONEY TOWARDS PURCH ASE OF SHARES IS WITHOUT ANY MERIT AS NO CONFIRMATION FROM M/S. SHRIDHAR FINANCIAL SERVICES LTD. WAS FURNISHED BY THE ASSESSEE AS RECORDED BY THE ASSESSING OFFICER. IN THIS CONTEXT THE ASSESSMENT RECORD WAS CALLED FROM THE ASSESSING OFFICER AND I HAVE VERIFIED THE ASSESSMENT RECORD IN THE PRESENCE OF THE AUTHORIZED REPRESENTAT IVE OF THE ASSESSEE ON THE LAST DAY OF HEARING OF THIS APPEAL ON 12.12.2014 AND IT IS FOUND THAT NO CONFIRMATION WAS FIELD BY THE ASSESSEE FROM M/S. SHRIDHAR FINANCIAL SERVICES LTD. THAT THE SAID SUMS WERE PAID BY M/S. SHRIDHAR FINANCIAL SERVICES LTD. AGAI NST PURCHASE OF SHARES FROM THE APPELLANT COMPANY. IN THIS REGARD, ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT AS REGARD CONFIRMATION FROM THE PARTY, THE DOCUMENTS PLACED ARE SELF EXPLANATORY AND MAY BE COUNTER VERIFIED BY YOUR GOOD SELF DIRECTLY FROM THE SAID PARTY. THE ABOVE REPLY OF THE ASSESSEE IS CLEARLY CONTRARY TO THE INITIAL ONUS PLACED ON THE ASSESSEE. THE ASSESSEE CANNOT TAKE SUCH AN UNREASONABLE ATTITUDE TOWARDS HIS ONUS U/S 68. THE ONUS OF FILING THE CONFIRMATION IS ON THE ASSESSEE A ND IT WAS NOT OPEN TO THE ASSESSEE TO DIRECT THE ASSESSING OFFICER TO OBTAIN THE CONFIRMATION FROM THE PARTY. THAT IS THE ONUS OF THE ASSESSEE, NOT OF THE ASSESSING OFFICER. FURTHER, NO EVIDENCE OF SALE OF SHARES COULD BE FILED BY THE ASSESSEE EXCEPT SELF SIGNED SALE BILL IN THE LETTER HEAD OF THE ASSESSEE COMPANY WHICH IS A SELF SERVING DOCUMENT AND DOES NOT HAVE ANY EVIDENTIARY VALUE. THUS, IT IS CLEAR THAT THE TRANSACTION OF SALE OF SHARES IS NOT PROVED. 5.3 W E FIND FROM THE ABOVE THAT THOUGH THE ASSE SSEE HAS CLAIMED THAT THE TRANSACTIONS WITH M/S SHRIDHAR FINANCIAL SERVICES LTD WERE IN THE NATURE OF SALE OF SHARES, BUT NO CONFIRMATION IN THIS RESPECT HAS BEEN FILED BEFORE THE LOWER AUTHORITIES DISCHARGING ITS ONUS. SIMULTANEOUSLY, IT IS SUBMITTED BY T HE ASSESSEE THAT THE ASSESSEE REQUESTED BEFORE THE AO FOR COPY OF STATEMENTS AND OTHER DOCUMENTARY EVIDENCE SUGGESTING THE SAID SALE TRANSACTIONS AS ACCOMMODATION ENTRY WERE NOT PROVIDED TO THE ASSESSEE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE ISSUE NEED TO BE RESTORED BACK TO THE FILE OF THE AO WITH THE DIRECTION TO PROVIDE THE ASSESSEE ALL THE NECESSARY MATERIAL, WHICH IS USED AGAINST THE ASSESSEE AND TO PROVIDE SUFFICIENT OPPORTUNITY OF HEARING TO THE ASSESSEE. THE AS SESSEE IS ALSO DIRECTED TO PROVIDE ALL THE 12 ITA NO.1203/DEL/2015 AY: 2004 - 05 NECESSARY DOCUMENTS IN SUPPORT OF ITS CONTENTIONS. ACCORDINGLY , THE GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED PARTLY FOR STATISTICAL PURPO SE. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 3 0 T H MARCH , 2016 . S D / - S D / - ( DIVA SINGH ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 0 T H MARCH , 2016 . LAPTOP COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI