Dhanvidhya Multisales Pvt. Ltd., Ahmedabad V. The Income Tax Officer, Ward-1(4), Ahmedabad

ITA 1453/AHD/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4116 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALBINUS TIRKEY
• Keywords: Validity of assessment
• Section: 147; 148; 2; 143(3); 143(1)

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 1453/AHD/2016 ( ASSESSMENT YEAR : 2005-06) DHANVIDHYA MULTISALES PVT. LTD. F/2, TUSHAR CENTRE, STADIUM CIRCLE, NAVRANGPURA, AHMEDABAD - 380009 / VS. THE INCOME TAX OFFICER, WARD-1(4), AHMEDABAD. ./ ./ PAN/GIR NO. : AAACD7729E ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : ASEEM L. THAKKAR, AR / RESPONDENT BY : ALBINUS TIRKEY, SR. DR DATE OF HEARING 17/01/2019 !'# / DATE OF PRONOUNCEMENT 15/02/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-01, AHMEDA BAD (CIT(A) IN SHORT), DATED 23.03.2016 ARISING IN THE REASSESSMEN T ORDER DATED 25.03.2013 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) READ ITA NO.1453/AHD/2016 DHANVIDHYA MULTISALES PVT. LTD. VS. ITO] A.Y. 2005-06 - 2 - WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (THE A CT) CONCERNING A.Y. 2005-06. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE AR E TWOFOLD; (I) CHALLENGING THE LEGALITY OF ASSESSMENT OF JURISDICT ION UNDER SECTION 147 OF THE ACT AND (II) CHALLENGING ACTION OF THE A SSESSING OFFICER (AO) IN MAKING CERTAIN ADDITIONS ON MERITS IN PURSU ANCE OF ASSESSMENT OF JURISDICTION UNDER SECTION 147 OF THE ACT. 3. WHEN MATTER WAS CALLED FOR HEARING, THE LD. A R FOR THE ASSESSEE AT THE OUTSET CHALLENGED THE ACTION OF THE AO IN US URPING JURISDICTION UNDER SECTION 147 OF THE ACT WRONGFULLY. THE LD. A R CONTENDED THAT THE REASONS RECORDED BY THE AO DOES NOT MEET THE PR E-REQUISITES FOR ASSUMPTION OF JURISDICTION AND THEREFORE THE NOTICE ISSUED PURSUANT TO SUCH RECORDINGS OF REASONS IS BAD IN LAW. IT WAS T HUS SUBMITTED THAT THE CONSEQUENT REASSESSMENT ORDER IS WITHOUT AUTHOR ITY OF LAW. FOR THIS PURPOSE, THE LD. AR ADVERTED OUR ATTENTION TO THE REASONS RECORDED UNDER SECTION 148(2) OF THE ACT DATED 26/1 2/2012 AND CONTENDED THAT THE BARE READING OF THE REASONS RECO RDED WOULD SHOW THAT THE AO BASED ON CERTAIN INFORMATION RECEIVED F ROM ANOTHER AO HAS PROPOSED TO REOPEN THE CASE FOR MERE VERIFICAT ION OF THE CONCERNS OF INVESTMENT AND GENUINENESS OF THE SAME. THE LD. AR THUS SUBMITTED THAT IT IS OSTENSIBLE FROM THE REASONS RE CORDED THAT THE AO DID NOT FORM ANY FIRM REASONS TO BELIEVE CONTEMPL ATED UNDER SECTION 147 OF THE ACT TOWARDS ESCAPEMENT OF INCOME. THE P LAIN READING OF THE REASONS PROVIDED WOULD OVERTLY SHOW THAT THE AO MERELY WANTED TO MAKE ENQUIRY TO FIND OUT THE CORRECTNESS OF THE INFORMATION SO RECEIVED FROM OTHER AO. THE LD. AR ACCORDINGLY SUB MITTED THAT A BONA FIDE BELIEF TOWARDS ESCAPEMENT OF INCOME IS CLEARLY ABSENT IN THE CASE. THE LD. AR ACCORDINGLY SUBMITTED THAT TH E ENTIRE ACTION OF THE AO IS A COMPLETE NON-STARTER AND REQUIRES TO BE STRUCK DOWN. IN ITA NO.1453/AHD/2016 DHANVIDHYA MULTISALES PVT. LTD. VS. ITO] A.Y. 2005-06 - 3 - THIS CONTEXT, THE LD. AR ADVERTED OUR ATTENTION TO THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT IN SUNRISE EDUCATION TRU ST VS. ITO (EXEMPTION) [2018] 92 TAXMANN.COM 74 (GUJARAT) FOR THE PROPOSITION THAT REASSESSMENT NOTICE FOR MERE VERIFICATION OR F OR FISHING ENQUIRY IS NOT PERMISSIBLE IN LAW NOTWITHSTANDING THAT THE RET URN WAS NOT SCRUTINIZED BEFORE ITS ACCEPTANCE ORIGINALLY. THE LD. AR ALSO REFERRED TO ANOTHER DECISION OF HONBLE GUJARAT HIGH COURT I N THE CASE OF PRINCIPAL CIT VS. MANZIL DINESHKUMAR SHAH TAX APPEA L NO. 451 OF 2018 AND OTHER JUDGMENT DATED 07/05/2018 IN WHICH C ASE ALSO, THE ACTION OF AO TO REOPEN THE ASSESSMENT FOR BRIEF VER IFICATION OF INFORMATION RECEIVED WAS NOT APPROVED. THE LD. AR ACCORDINGLY CONTENDED THAT THE ACTION OF THE AO FOR ASSESSMENT OF JURISDICTION IS NOT CONSISTENT WITH THE MANDATE OF LAW AND THEREFOR E REQUIRES TO BE QUASHED. 4. THE LD. DR ON THE OTHER HAND RELIED UPON THE O RDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS. WE HAVE ALSO PERUSED THE REASONS RECORDED FOR ISSUANCE OF N OTICE UNDER SECTION 147 OF THE ACT WHICH IS UNDER CHALLENGE. IT WILL B E APT TO REPRODUCE REASONS RECORDED HEREUNDER:- IN THIS CASE THE ASSESSEE HAS FILED ITS RETURN OF INCOME U/S 139(1) ON 31/10/2005 DECLARING INCOME AT RS. 2,38,850/- WHIC H WAS ASSESSED U/S. 143(1) DATED 29/03/2006. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS IN THE CASE OF SHANTISURI SECURITIES PVT. LTD. PAN AA CCS6864P FOR THE A.Y. 2005-06 BY THE ITO. WD- 8(3), AHMEDABAD, HE HAS NO TICED THAT AN INVESTMENT OF RS. 5,00,000/- HAS BEEN MADE WITH TH AT COMPANY BEING INVESTMENT IN THEIR SHARE CAPITAL. IN VIEW OF THI S, THE SOURCE OF INVESTMENT AND GENUINENESS OF THE SAME IS TO BE VERIFIED. 2. INFORMATION HAS BEEN RECEIVED FROM THE ITO, WD 8(3), AHMEDABAD THAT DURING THE COURSE OF ASSESSMENT PROCEEDING IN THE CASE OF SHANTISURI SECURITIES PVT. LTD. (SSPL) FOR A.Y. 2005-06, IT W AS FOUND THAT SAID COMPANY HAD RECEIVED RS. 4,06,95,000/- AS SHARE CA PITAL FROM VARIOUS ITA NO.1453/AHD/2016 DHANVIDHYA MULTISALES PVT. LTD. VS. ITO] A.Y. 2005-06 - 4 - ENTITIES DURING PREVIOUS YEAR RELEVANT TO A.Y. 200 5-06. DURING THE COURSE OF ASSESSMENT PROCEEDING, A DETAILED INQUIRY HAD A LSO BEEN CARRIED OUT AS A RESULT OF WHICH IT WAS REVEALED THAT THE SOURCE COMPANIES WERE MERE PAPER COMPANIES, HAVING NO REAL BUSINESS OR P ROFESSION. THE CONCERNS HAD BEEN MERELY FLOATED AND CHANNELIZE TH E INTRODUCTION OF UNACCOUNTED CASH INTO BOOKS OF VARIOUS BENEFIT SEE KERS. FURTHER, THE STATEMENT ON OATH OF ONE OF THE DIREC TOR SHANTISURI SECURITIES PVT. LTD. WAS ALSO RECORDED DURING THE ASSESSMENT PROCEEDINGS WHEREIN HE ADMITTED TO THE EFFECT THAT THE PARTIES WHO HAD ALLEGEDLY CONTRIBUTED TO THE SHARE CAPITAL OF THE COMPANY WERE EITHER BOGUS OR WERE ENTRY GIVERS ONLY. IN THIS STATEMEN T, HE FURTHER DISCLOSED MODUS OPERANDI OF SUCH ENTRIES GIVING BY STATING THAT WHEN SUCH ENTRY SEEKERS APPROACHED HIM TO PROVIDE ACCOMMODATION EN TRIES TO THEM EITHER IN THE FORM OF SHARE CAPITAL OR AS LOANS AND ADVAN CES FOR A FIXED PERCENTAGE OF COMMISSION. SINCE HE DID NOT HAVE T HE CASH TO PROVIDE THE SAME, HE ACCEPTED CASH FROM THESE PARTIES AND HAND ED OVER TO THE VARIOUS PARTIES WHO HAD DEPOSITED THE CASH IN THEIR OWN CO MPANIES AND IN TURN INVESTED IN HIS COMPANY AS SHARE CAPITAL. THIS MON EY WAS FORWARDED BY SHANTISURI SECURITIES PVT. LTD. (SSPL) AS LOANS AND ADVANCES TO VARIOUS PARTIES WHO HAD GIVEN HIM CASH IN THE FIRST PLACE. THROUGH ABOVE MOUDS OPERANDI, DHANVIDYA MULTISALES PVT. LTD. PAN-AAACD 7729E HAS MADE INVESTMENT OF RS. 5,00,000/- AS SHARE CAPITAL OF S HANTISURI SECURITIES PVT. LTD. IN A.Y. 2005-06. 3. ON THE BASIS OF RETURN OF INCOME SO FILED, IT I S FOUND THAT THE ASSESSEE COMPANY HAS DECLARED SAID INVESTMENT OF R S. 5,00,000/- MADE IN ACQUIRING SHARE OF SSPL IN ITS BALANCE SHEET. HOW EVER, CONSIDERING THE DEPOSITION OF THE DIRECTOR OF SHANTISURI SECURITI ES PVT. LTD. AS DISCUSSED ABOVE, THE SOURCE OF INVESTMENT OF RS. 5,00,000/- MADE IN ACQUIRING SHARES OF SAID COMPANY REQUIRES TO BE VERIFIED IN THE CAS E OF DHANVIDYA MULTISALES PVT. LTD. FOR A.Y. 2005-06. 4. IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OP INION THAT THE INCOME OF RS. 5,00,000/- HAS ESCAPED ASSESSMENT BY THE ASSES SEE COMPANY, AND HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR HIS ASSESSMENT FOR ASSESSMENT YEAR 2005-06, AND THE CA SE IS THEREFORE, REQUIRED TO BE REOPENED U/S. 147 OF THE I.T. ACT B Y WAY OF ISSUING NOTICE U/S 148 OF THE IT ACT. 6. A BARE GLANCE OF THE REASONS RECORDED GIVES AN U NFLINCHING IMPRESSION THAT THE POWERS EXERCISED UNDER SECTION 147 WAS FOR DETAILED VERIFICATION OF THE VARIOUS ASPECTS OF THE REFERENCE MADE TO THE AO HEREIN BY ANOTHER AO. THUS, IT IS SELF EVID ENT THAT NO DEFINITE FORMATION OF BELIEF TOWARDS ESCAPEMENT OF INCOME WA S MADE AT THE TIME OF ISSUANCE OF NOTICE BY THE AO. THE AO HAS N OT EVEN COME TO A PRIMA FACIE CONCLUSION TOWARDS ESCAPEMENT OF INCOME . WHAT THE AO ITA NO.1453/AHD/2016 DHANVIDHYA MULTISALES PVT. LTD. VS. ITO] A.Y. 2005-06 - 5 - INTENDED IS TO MAKE OBJECTIVE INQUIRY INTO THE CORR ECTNESS OF THE INFORMATION RECEIVED FROM OTHER WING OF THE DEPARTM ENT AND FIND OUT IF THERE IS ANY ESCAPEMENT OF INCOME. THE AO MERELY S EEKS TO CONCLUDE THAT THERE IS A CASE FOR INVESTIGATION TO UNEARTH T RUTH OF ALLEGED TRANSACTIONS. THIS IS NOT THE SAME THING AS SAYING THAT THERE ARE REASONS TO BELIEVE THAT SOME CHARGEABLE INCOME HA S ESCAPED ASSESSMENT. OSTENSIBLY, THE AO AT BEST HAS MADE OU T A CASE OF PROBABLE ESCAPEMENT IN DISTINCTION TO A DEFINITE CO NCLUSION OF ESCAPEMENT OF INCOME. THUS, THE REQUIREMENT OF SEC TION 147 IS CLEARLY NOT FULFILLED. NEEDLESS TO SAY, PROVISIONS OF SECT ION 147 WHICH GIVES POWER TO REOPEN A COMPLETED ASSESSMENT CAN BE INVOK ED ONLY WHEN THE CONDITIONS PRECEDENT FOR EXERCISING THE JURISDICTIO N EXISTS. EXERCISE OF POWER UNDER SECTION 147 OF THE ACT CANNOT BE MADE O N THE BASIS OF MERE IPSE DIXIT OF REVENUE. THE EVIDENCE OR INFORMATION FROM OTHE R AO IS NOT A REALIZATION PER SE. SUCH INFORMATION/E VIDENCE CAN POSSIBLY GIVE BIRTH TO REALIZATION OR BELIEF OF THE AO AS CONTEMPLATED UNDER SECTION 147 OF THE ACT. HOWEVER, THE INDEPEN DENT FORMATION OF BELIEF THEREON IS SINE QUA NON FOR TAKING ACTION UNDER SECTION 147 OF THE ACT. IT IS WELL SETTLED BY PLETHORA OF JUDICI AL PRECEDENTS THAT REOPENING IS NOT PERMISSIBLE MERELY TO SEEK INVESTI GATION OF FACTS COLLECTED WITHOUT HOLDING AT LEAST PRIMA FACIE BELI EF BASED ON RELEVANT MATERIAL TOWARDS ESCAPEMENT OF INCOME. THE CONDITI ONS SET OUT HAVE NOT BEEN MET IN THE INSTANT CASE. HENCE, THE NOTIC E ISSUED UNDER SECTION 147 OF THE ACT IS NOT BACKED BY AUTHORITY O F LAW AND CONSEQUENTLY BAD IN LAW. 7. THE ASSESSMENT UNDER SECTION 147 AS A SEQUEL TO THE ILLEGAL NOTICE UNDER SECTION 148 IS THEREFORE NULL VOID AND REQUIRES TO BE QUASHED. ITA NO.1453/AHD/2016 DHANVIDHYA MULTISALES PVT. LTD. VS. ITO] A.Y. 2005-06 - 6 - 8. IN THE RESULT, THE ASSESSEE SUCCEEDS ON LEGAL GR OUND TOWARDS VALIDITY OF JURISDICTION UNDER SECTION 147 OF THE A CT. HENCE WE DO NOT CONSIDER IT NECESSARY TO DWELL UPON THE MERITS OF T HE CASE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 15/02/2019 TANMAY !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 15/02/ 2019