ITO, New Delhi V. M/s Vaishali Financial Services Pvt. Ltd., New Delhi

ITA 138/DEL/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2090 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 17-11-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 14-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: A K JAIN
• Keywords: Reopening of assessment; Accommodation entries; Capital Gains
• Section: 143(3); 143(1); 147; 148; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH I NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NO. 138/DEL/2009 ASSESSMENT YEAR: 2002-03 INCOME-TAX OFFICER, VS. M/S. VAISHALI FINANCIAL SE RVICES WARD 17(1), PVT. LTD., A-69 PUSHPANJALI ENCLVE, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) C.O. NO. 126/DEL/2009 (IN I.T.A. NO. 138/DEL/2009) ASSESSMENT YEAR: 2002-03 M/S. VAISHALI FINANCIAL SERVICES VS. INCOME-TAX O FFICER, PVT. LTD., A-69 PUSHPANJALI ENCLVE, WARD 17(1), NEW DELHI. NEW DELHI. DEPARTMENT BY : MS. ANUSHA KHURANA, SR. DR RESPONDENT BY: SHRI AK JAIN , CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 05.11.2008 PASSED FOR ASSESSMENT YEAR 2002-03. ON RECEIPT OF NOTICE, ASSESSEE HAS FILED THE CROSS-OBJ ECTION BEARING NO.126/DEL/09.THE GROUNDS TAKEN BY THE ASSESSEE IN THE CROSS-OBJECTION ARE NOT IN CONSONANCE WITH RULE 8 OF ITAT RULES, THEY A RE ARGUMENTATIVE AND 2 DESCRIPTIVE IN NATURE. IN BRIEF, ASSESSEE HAS CHALL ENGED THE REOPENING OF ASSESSMENT BY ISSUANCE OF A NOTICE UNDER SEC. 148 O F THE INCOME-TAX ACT, 1961. SINCE IT IS A JURISDICTIONAL ISSUE, THEREFORE , WE TAKE THIS GROUND FIRST. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS INCORPORATED ON 25.6.1996. IT IS ENGAGED IN THE BUS INESS OF FINANCE, CONSULTANCY AND INVESTMENT IN SECURITIES. IT HAS FI LED ITS RETURN OF INCOME ON 30 TH SEPTEMBER, 2002 DECLARING TOTAL INCOME OF RS.2200. THE RETURN WAS PROCESSED UNDER SEC. 143(1) OF THE ACT. THE ASSESSI NG OFFICER HAD RECEIVED AN INFORMATION FROM DIT(INV.) ON 16.6.2006 WHEREBY IT WAS COMMUNICATED TO THE ASSESSING OFFICER THAT ONE M/S. MKM FINSEC ( P) LTD. IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS CONCERNS . SUCH ENTRIES ARE BOGUS TRANSACTIONS AND THESE ARE ONLY PROVIDED TO A CCOMMODATE OTHER CONCERNS FOR CONVERTING THEIR TAXABLE INCOME INTO T AX PAID INCOME. ON THE BASIS OF THIS INFORMATION, HE RECORDED THE REASONS FOR REOPENING AND SUCH REASONS ARE BEING REPRODUCED BY THE LEARNED CIT(APP EALS) ON PAGE 2. ON THE BASIS OF THESE REASONS, ASSESSING OFFICER HAD ISSUE D NOTICE UNDER SEC.148 ON 28 TH AUGUST 2006. ON THE ASKING OF ASSESSEE, THE ASSESS ING OFFICER HAS SUPPLIED COPIES OF THE REASONS TO THE ASSESSEE. THE ASSESSEE CHALLENGED REOPENING OF ASSESSMENT BEFORE THE LEARNED FIRST AP PELLATE AUTHORITY. THE 3 SUBMISSIONS MADE BY THE ASSESSEE ON THIS GROUND HAS BEEN REPRODUCED BY THE LEARNED CIT(APPEALS) IN PARAGRAPH 5 ON PAGE 3. THE LEARNED CIT(APPEALS) AFTER CONSIDERING THE CONTENTIONS OF THE ASSESSEE R ECORDED A FINDING THAT THERE ARE SUFFICIENT REASONS FOR FORMING AN OPINION THAT INCOME HAS ESCAPED ASSESSMENT AND ASSESSING OFFICER HAS RIGHTLY REOPEN ED THE ASSESSMENT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUG NING THE ORDER OF LEARNED CIT(APPEALS) REITERATED HIS CONTENTIONS AS WERE RAISED BEFORE THE LEARNED CIT(APPEALS) AS NOTICED IN PARAGRAPH 5. HE EMPHASIZED THAT THERE WAS NO MATERIAL AGAINST THE ASSESSEE COMPANY ON REC ORD WHICH CAN INDICATE LIVE NEXUS BETWEEN THE INFORMATION VIS--VIS THE ES CAPEMENT OF INCOME HENCE ASSESSING OFFICER HAS FORMED HIS OPINION WITH OUT ANY BASIS. HE ALSO POINTED OUT THAT ASSESSING OFFICER HAD TABULATED CE RTAIN ENTRIES FROM THE REPORT OF DIT(INV.) WITHOUT HIS INDEPENDENT APPLICA TION OF MIND AND WITHOUT ANY SUPPORTING MATERIAL ON RECORD WHICH COULD HAVE ESTABLISHED THAT THE TRANSACTIONS, ALLEGED AS ACCOMMODATION ENTRY HAS ES CAPED ASSESSMENT. HE RELIED UPON THE CASE LAWS NOTED BY THE LEARNED CIT( APPEALS) IN PARAGRAPH 6 OF HIS ORDER, AND PRAYED THAT REOPENING OF ASSESSME NT BE DECLARED NULL AND VOID. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF LEARNED CIT(APPEALS). HE TOOK US THROUGH THE REASONS FOR RE OPENING EXTRACTED BY 4 LEARNED FIRST APPELLATE AUTHORITY ON PAGE 2 OF THE ORDER. HE POINTED OUT THAT ASSESSING OFFICER GOT AN INFORMATION FROM DIT. HE APPLIED HIS MIND AND ARRIVED AT A CONCLUSION THAT INCOME HAS ESCAPED ASSESSMENT. NO FAULT CAN BE ATTRIBUTED TO THE BELIEF OF ASSESSING OFFICER RE FLECTING IN THE REASONS FOR REOPENING. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND GON E THROUGH THE RECORD CAREFULLY. IN THIS CASE, THE RETURN WAS PROCESSED U NDER SEC. 143(1) OF THE ACT. THERE IS NO ASSESSMENT MADE UNDER SEC.143(3), THE B ENEFIT OF PROVISO APPENDED TO SEC. 147 RESTRICTING THE POWERS OF THE ASSESSING OFFICER FOR REOPENING OF AN ASSESSMENT, IF FOUR YEARS HAVE EXPI RED FROM THE END OF THE RELEVANT ASSESSMENT YEAR AND ASSESSMENT IN THE FIRS T ROUND WAS MADE EITHER UNDER SEC. 143(3) OR 147 OF THE ACT, UNLESS IT IS E STABLISHED THAT ASSESSEE FAILED TO DISCLOSE ALL MATERIAL FACT FULLY AND TRUL Y, IS NOT AVAILABLE TO THE ASSESSEE BECAUSE NO ASSESSMENT WAS MADE UNDER SEC.1 43(3) OR SEC.147 OF THE ACT. ASSESSING OFFICER HAS TO FORM A PRIMA FACIE OP INION THAT INCOME HAS ESCAPED ASSESSMENT ON THE BASIS OF THE INFORMATION COLLECTED BY HIM. IN THE PRESENT CASE, THE DIT HAS SUPPLIED AN INFORMATION T HAT M/S. MKM FINSEC (P) LTD. IS INVOLVED IN PROVIDING ACCOMMODATION ENTRY T O VARIOUS ASSESSEES. THE PRESENT ASSESSEE IS ALSO A BENEFICIARY BECAUSE IT H AS ALSO RECEIVED A SUM OF 5 RS.40 LACS THROUGH M/S. MKM FINSEC (P) LTD.. THUS, TAKING INTO CONSIDERATION THE ANTECEDENTS OF M/S.MKM FINSEC (P) LTD., ASSESSING OFFICER HAS RIGHTLY FORMED AN OPINION THAT INCOME H AS ESCAPED ASSESSMENT. LEARNED FIRST APPELLATE AUTHORITY HAS EXAMINED THIS ISSUE ELABORATELY AFTER TAKING NOTE OF ASSESSEES ARGUMENT AND POSITION OF LAW ON THE ISSUE. ON DUE CONSIDERATION OF HIS FINDING, WE DO NOT FIND ANY ER ROR IN IT. WE UPHOLD THE REOPENING OF ASSESSMENT BY ISSUANCE OF A NOTICE UND ER SEC. 148. THE GROUNDS RAISED IN THE CROSS-OBJECTION ARE ACCORDINGLY REJEC TED. 5. THE SOLITARY GRIEVANCE IN THE REVENUES APPEAL I S THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS. 40 LACS. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE COMPANY DURING THE YEAR HAS SOLD PARTS OF THE INVESTMENT IN EQUITY SHARES THROUGH M/S. MKM FI NSEC (P) LTD. AND RECEIVED A PAYMENT OF RS.40 LACS ON DIFFERENT DATES THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSING OFFICER SOUGHT THE EXPLANATIO N OF THE ASSESSEE TO PROVE THE SALES AND GENUINENESS OF THE SALE PROCEED S. IN RESPONSE TO THE QUERY OF ASSESSING OFFICER, ASSESSEE HAS FILED SHAR E SALES BILLS AND CONTRACT NOTE OF M/S. MKM FINSEC (P) LTD. IT HAS FILED CONFI RMATION. THE DETAILS OF RECEIPTS EXHIBITING THE TRANSACTION WAS THROUGH BAN KING CHANNELS. APART FROM THE ABOVE, IT WAS CONTENDED BY THE ASSESSEE TH AT IT HAD SOLD THE SHARES 6 OF M/S. YOUTH CONSTRUCTION (P) LTD.L AND M/S. YOUNG BUILDERS (P) LTD. THE SHARES WERE ACQUIRED BY THE ASSESSEE DURING THE ACC OUNTING PERIOD RELEVANT TO ASSESSMENT YEARS 2000-01 AND 2001-02. THE TOTAL INVESTMENT OF THE ASSESSEE AS ON 31.3.2001 WAS RS.3,04,50,000. ITS IN VESTMENT WAS NEVER DOUBTED BY THE DEPARTMENT. OUT OF THIS INVESTMENT, ASSESSEE HAD SOLD THE SHARES OF RS. 40 LACS. IT HAS NOT EARNED ANY PROFIT ON THE SALE OF SUCH SHARES. THE SALE WAS MADE AT NET PRICE I.E. NEITHER ANY LOS S OF CAPITAL NOR ANY CAPITAL GAINS WAS SHOWN BY THE ASSESSEE. ASSESSING OFFICER MADE A REFERENCE OF HON'BLE SUPREME COURTS DECISION IN THE CASE OF MCD OWELL & CO. VS. ITO REPORTED IN 154 ITR 148 AND REJECTED THE CONTENTION OF THE ASSESSEE. HE POINTED OUT CERTAIN SUPERFICIAL DEFECTS IN THE COND UCT OF M/S. MKM FINSEC (P) LTD. 6. ON APPEAL, LEARNED CIT(APPEALS) HAS NOTED THE FI NDING OF THE ASSESSING OFFICER AS WELL AS EXTRACTED THE WRITTEN SUBMISSIONS OF THE ASSESSEE ON PAGES 6 & 7. LEARNED FIRST APPELLATE AU THORITY HAS DELETED THE ADDITION PRIMARILY ON THE GROUND THAT ASSESSING OFF ICER HAS NOT DISPUTED THE INVESTMENT MADE BY THE ASSESSEE COMPANY IN M/S. YOU NG BUILDERS (P) LTD. AND M/S. YOUTH CONSTRUCTION (P) LTD. WHICH WAS SHOW N TO THE DEPARTMENT IN 7 EARLIER YEARS. IT HAS SOLD ITS INVESTMENT PARTLY WI THOUT SHOWING ANY CAPITAL GAINS OR CAPITAL LOSS. IN SUCH SITUATION, THE SALE NEED NOT TO BE DOUBTED. 7. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORDS CAREFULLY. THERE IS NO DISPUTE TO THE F ACTS THAT INVESTMENT IN THE EQUITY SHARES OF M/S. YOUNG BUILDERS AND M/S. YOUTH CONSTRUCTION WAS MADE IN THE EARLIER YEARS. THE SHAREHOLDING WITH TH E ASSESSEE OF THESE TWO COMPANIES AVAILABLE IN THE OPENING STOCK OF THIS YE AR ARE NOT BEING SHOWN TO THE EXTENT SALE HAS BEEN CLAIMED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AS CLOSING STOCK AT THE END OF THE YEAR. THE ASSESSEE HAS FILED CONFIRMATION FROM THE BROKER, CONFIRMATION FROM THE COMPANIES IN WHOM INVESTMENT WAS MADE, DETAILS OF SALE PROCEEDS RECEIVED BY IT THROUGH BAN KING CHANNEL AND THE EVIDENCE INDICATING THAT NO CAPITAL GAINS OR LOSS H AS BEEN CLAIMED BY IT. ASSESSING OFFICER HAS DOUBTED THE TRANSACTION OF SA LE ONLY. THE STOCK TO THE EXTENT OF SALE HAS BEEN EXTINGUISHED FROM THE BOOKS . IN SUCH SITUATION WHAT THE ASSESSING OFFICER WOULD GIVE THE TREATMENT OF N ON AVAILABILITY OF INVESTMENT IN THE BOOKS OF ASSESSEE TO THE EXTENT S ALES HAVE BEEN CLAIMED. BOTH THESE THINGS WOULD SET OFF WITH EACH OTHER AND NO ADDITION ULTIMATELY COULD BE MADE BECAUSE THE MOMENT SALE IS DOUBTED TH E STATUS OF THE SHARES HAS TO BE RESTORED IN THE BOOKS OF ASSESSEE BECAUSE IT HAS COME FROM THE 8 OPENING STOCK. BUT IN FACT SHARES ARE NOT AVAILABLE WITH THE ASSESSEE, IN SUCH SITUATION NO ADDITION BY DOUBTING THE SALES IN THIS YEAR SHOULD BE MADE, MORE SO THAT ONLY ON THE BASIS OF SURMISES AND APPREHENS ION. THE LEARNED CIT(APPEALS) HAS CONSIDERED THE ISSUE IN DETAIL AND HAS RIGHTLY DELETED THE ADDITION. 8. IN THE RESULT, THE APPEAL AS WELL AS THE CROSS-O BJECTION ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON .12 .2009 ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: /12/2009 MOHAN LAL COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. 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