M/s. K.C. Fibres Ltd., New Delhi V. ACIT, New Delhi

ITA 1565/DEL/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7487 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 04-05-2016
• Assessment Year: 2003-2004
• Appeal Filed On: 14-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SB GUPTA
• Keywords: Reopening of assessment; Unexplained cash credit; Gift; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO. 1565 /DEL/201 4 A.Y. : 200 3 - 0 4 M/S KC FIBRES LTD, BM-2A, DILKUSH INDUSTRIAL ESTATE, GTK ROAD, AZADPUR, DELHI 110 033 (PAN:AAACK3050H) VS. ACIT, CIRCLE 5(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SB GUPTA, CA DEPARTMENT BY : SH. T. JAMES SINGSON, SR. DR DATE OF HEARING : 11-05-2016 DATE OF ORDER : 03-06-2016 ORDER PER H.S. SIDHU, JM ASSESSEE HAS FILED THIS APPEAL AGAINST THE ORDER D ATED 08.2.2013 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VII, NEW DELHI PERTAINING TO ASSESSMENT Y EAR 2003-04 ON THE FOLLOWING GROUNDS:- ITA NO. 1565/DEL/2014 A.Y. 2003-04 2 1. THAT THE NOTICE UNDER SECTION 148 IS ILLEGAL AND VOID AB INITIO AND IS, THEREFORE, LIABLE TO BE QUASHED. 2. THAT THERE WAS NO 'REASON TO BELIEVE' THAT PETITIONER'S INCOME HAS ESCAPED ASSESSMENT WHICH IS 'MUST' FOR ASSUMING LAWFUL JURISDICTION ULS 147 AND SUCH ABSENCE OF REASON TO BELIEVE IS EVIDENT FROM THE PL AIN READING OF THE REASON RECORDED WHICH DOES NOT CONTA IN EVEN THIS BASIC JURISDICTIONAL ELEMENT. 3. REOPENING IS BARRED BECAUSE THE ASSESSING OFFICE R HAD NOT HIMSELF FORMED ANY BELIEF AS TO THE ESCAPEM ENT OF INCOME BUT HE HAD MERELY ACTED UPON THE DIRECTIO N OF THE INVESTIGATION WING, NEW DELHI. 4. NOTICE UNDER SECTION 148 IS ILLEGAL BECAUSE THE NOTICE HAS BEEN ISSUED BASED UPON A GENERAL STATEME NT OF ONE PERSON THAT HE WAS DOING ONLY NAME LENDING. 5. NOTICE UNDER SECTION 148 IS ILLEGAL BECAUSE REOPENING IS BARRED IN VIEW OF FIRST PROVISO TO SEC TION 147 AS OUR CASE IS GOVERNED BY FIRST PROVISO TO SECTION 147 AND NOT BY MAIN SECTION 147. IN THE ORIGINAL ASSESS MENT MADE UNDER SECTION 143(3) VIDE ASSESSMENT ORDER DAT ED 30/3/2006, THE ASSESSING OFFICER HAD MADE DETAILED ITA NO. 1565/DEL/2014 A.Y. 2003-04 3 ENQUIRY OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE-COMPANY. 6. NOTICE UNDER SECTION 148 IS ILLEGAL BECAUSE IT H AS BEEN ISSUED MERELY UPON CHANGE OF OPINION. 7. NOTICE IS ILLEGAL BECAUSE OUR CASE IS GOVERNED B Y FIRST PROVISO TO SECTION 147 AND IN THE REASON RECO RDED TO ISSUE NOTICE UNDER SECTION 148, THE ASSESSING OFFIC ER HAS NOWHERE ALLEGED THAT ESCAPEMENT OF INCOME HAS OCCUR RED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FA CTS NECESSARY FOR ASSESSMENT OF THAT YEAR. 8. NOTICE UNDER SECTION 148 IS ILLEGAL IN VIEW OF S ECOND PROVISO TO SECTION 147 WHICH DOES NOT ALLOW THE ASSESSING OFFICER TO REASSESS THE INCOME INVOLVING MATTERS WHICH WERE THE SUBJECT MATTERS OF ANY APPEA L. IN THE CASE IN HAND, THE ASSESSING OFFICER WHILE MAKIN G ORIGINAL ASSESSMENT UNDER SECTION 143(3) HAD MADE ADDITION ON ACCOUNT OF SHARE APPLICATION WHICH BECA ME SUBJECT MATTER OF APPEAL BEFORE INCOME TAX APPELLAT E TRIBUNAL AND HON'BLE DELHI HIGH COURT AND, THEREFOR E, THE PRESENT REOPENING INVOLVING THE SAME SUBJECT MATTER IS IN VIOLATION OF SECOND PROVISO TO SECTION 147. ITA NO. 1565/DEL/2014 A.Y. 2003-04 4 9. THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER IS ILLEGAL AND UNJUSTIFIED AND, THEREFORE, SHOULD BE QUASHED. 10. THAT THE ACTION OF THE ASSESSING OFFICER IN TRE ATING SHARE APPLICATION MONEY OF RS. 7,00,000/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 IS ILLEGAL AND UNJUSTIFIED AND, THEREFORE, ADDITION MADE TO TOTAL INCOME ON THIS ACCOUNT OUGHT TO BE DELETED. 11. THAT THE ASSESSEE-COMPANY CRAVES LEAVE TO ADD, MODIFY, ALTER, DELETE OR RAISE ANY OTHER GROUND AT THE TIME OF HEARING OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGINA L RETURN WAS FILED ON 28.11.2003 DECLARING LOSS OF RS. 1,21,87,176/-. THE RETURN WAS DULY PROCESSED UNDER SECTION 143(1)(A) OF THE ACT ON 15.3.2004. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.3.2006 AT A LOSS OF RS. 96,87,176/- AFTER MAKING AN ADDITION OF RS. 25,00,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. THE LD. CIT(A) VIDE ORDER DATED 15.5.2007 IN APPEAL NO . 37/06-07 DELETED THE ADDITION OF RS. 25,00,000/- AND THE SAI D DELETION WAS SUBSEQUENTLY CONFIRMED BY THE ITAT VIDE ORDER DATED 17.10.2008 AND THE HONBLE HIGH COURT VIDE ORDER DATED 8.7.20 09. ACCORDINGLY, ITA NO. 1565/DEL/2014 A.Y. 2003-04 5 THE AO BY GIVING EFFECT THE ORDER OF THE ITAT, PAS SED ORDER U/S. 254/143(3) ON 7.12.2009 ASSESSING TOTAL LOSS OF RS. (-) 1,91,37,726/-. SUBSEQUENTLY, THE CASE OF THE ASSESS EE WAS REOPENED U/S. 147 AS INFORMATION WAS RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE COMPANY HA D RECEIVED ACCOMMODATION ENTRY FROM M/S GARG PETROLEUM PRIVATE LIMITED THROUGH BANKING CHANNEL. AO CONSIDERED THIS INFORMA TION AND HAD REASON TO BELIEVE THAT INCOME OF THE ASSESSEE TO TH E EXTENT OF RS. 7 LACS HAD ESCAPED ASSESSMENT. AFTER RECORDING THE R EASONS TO BELIEVE, AO ISSUED NOTICE DATED 30.3.2010 AFTER OBT AINING NECESSARY APPROVAL FROM CIT-II, NEW DELHI. IN RESPONSE TO T HE SAID NOTICE, ASSESSEE FILED A LETTER DATED 5.4.2010 STATING THER EIN THAT THE RETURN FILED EARLIER AND AS ALREADY ASSESSED U/S. 143(3) M AY BE ACCEPTED AS RETURN FILED UNDER SECTION 148. THE ASSESSEE FUR THER REQUESTED TO SUPPLY A COPY OF REASONS WHICH WAS DULY SUPPLIE D TO HIM. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE IDENTITY, GE NUINENESS, AND CREDITWORTHINESS OF THE SHARE APPLICATION MONEY OF RS. 7 LACS RECEIVED BY IT FROM M/S GARG PETROLEUM PRIVATE LIMI TED. SUBSEQUENTLY NOTICE U/S. 143(2) WAS ISSUED TO THE A SSESSEE. ASSESSEE FILED OBJECTIONS TO THE REOPENING OF THE ASSESSMENT AND ISSUING OF NOTICE U/S. 148 BY HIS LETTER FILED ON 10.12.2010 WHICH WERE REJECTED VIDE ORDER SHEET ENTRY DATED 10.12.20 10. THEREAFTER, ITA NO. 1565/DEL/2014 A.Y. 2003-04 6 AO OBSERVED THAT THE ASSESSEE HAS SHOWN RECEIPT /CR EDIT OF RS. 7 LACS AS SHARE APPLICATION MONEY THROUGH TRANSACTION WHERE NO REAL TRANSACTION TOOK PLACE, HENCE, THE SAME WAS TREATED AS UNEXPLAINED FUNDS AND ADDED BACK TO THE INCOME OF THE ASSESSEE AND ASSESSED THE SAME AT LOSS OF RS. 1,84,37,726/- PASSED U/S . 147/143(2) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 24.12.2010. 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEA LED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 08.2.201 3 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. DURING THE COURSE OF HEARING LD. COUNSEL OF THE ASSESSEE ARGUED ONLY THE LEGAL ISSUE RELATING TO REOPENING . HE SUBMITTED THAT THE NOTICE UNDER SECTION 148 IS ILLEGAL BECAUS E REOPENING IS BARRED IN VIEW OF FIRST PROVISO TO SECTION 147 AS T HE CASE IS GOVERNED BY FIRST PROVISO TO SECTION 147 AND NOT BY THE MAIN SECTION 147. IN THE ORIGINAL ASSESSMENT MADE UNDER SECTION 143(3) VIDE ASSESSMENT ORDER DATED 30.3.2006 THE ASSESSING OFF ICER HAD MADE DETAILED ENQUIRY OF THE SHARE APPLICATION MONEY RE CEIVED BY THE ASSESSEE-COMPANY. THE ASSESSING OFFICER ISSUED NOT ICE U/S 148, I.E. AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR. HE FURTHER STATED THAT THERE WAS N O OMISSION OR ITA NO. 1565/DEL/2014 A.Y. 2003-04 7 FAILURE ON PART OF THE ASSESSEE TO DISCLOSE FULLY A ND TRULY ALL MATERIAL FACTS RELATING TO SHARE APPLICATION MONEY BECAUSE T HE ASSESSEE HAD SUBMITTED DETAILS OF SHARE APPLICATION MONEY IN INI TIAL ASSESSMENT PROCEEDINGS WHICH WAS VERIFIED BY THE ASSESSING OFF ICER BY WAY OF ISSUE OF SUMMONS TO THE SHARE APPLICANT WHO DULY RE SPONDED TO THE SUMMONS. HE FURTHER STATED THAT IN THE REASON RECO RDED TO ISSUE NOTICE U/S. 148, THE AO HAS NOWHERE ALLEGED THAT ES CAPEMENT OF INCOME HAS OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THAT YEAR. IN ORDER TO SUPPORT HIS CONTENTIONS, HE RELIED UPON THE FOLLOWING JUDGMENT S OF THE HONBLE DELHI HIGH COURT BY FILING THE COPIES THEREOF WITH THE PAPER BOOK AND REQUESTED TO QUASH THE REASSESSMENT. - CIT V. SUREN INTERNATIONAL P. LTD. (2013) 357 ITR 2 4 (DEL) - HARYANA ACRYLIC MANUFACTURING COMPANY V. CIT (2 009) 308 ITR 38 (DEL) - JSRS UDYOG LIMITED V. ITO (2009) 313 ITR 321 ( DEL) - WEL INTERTRADE P. LTD. ITO (2009) 308 ITR 22 ( DEL) 6. ON THE OTHER HAND, LD. DR RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER ON THE BASIS OF THE DOCUMENTARY EVIDENCE FILE D BY THE ITA NO. 1565/DEL/2014 A.Y. 2003-04 8 ASSESSEE AS WELL AS PREVAILING LAW. HE FURTHER STA TED THAT NOTICE U/S. 148 HAS BEEN ISSUED AFTER ADOPTING THE PRESCR IBED PROCEDURE UNDER THE LAW. THEREFORE, HE STATED THAT THE QUEST ION OF QUASHING THE REASSESSMENT DOES NOT ARISE. ACCORDINGLY, HE REQUESTED THAT THE APPEAL FILED BY THE ASSESSEE MAY BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES ALONGWITH THE PAPER BOOK FILED BY THE ASSESSEE HAVING VARIOUS DOC UMENTARY EVIDENCES. WE HAVE ALSO PERUSED THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE. IN THIS CASE THE ORIGINAL RETURN WAS FILED ON 28.11.2003 DECLARING LOSS OF RS. 1,21,87,176/-. THE RETURN WAS DULY PROCESSED UNDER SECTION 143(1)(A) OF THE ACT ON 15.3.2004. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN. THE ASSESSMENT WAS COMPLETED UNDER SECTIO N 143(3) ON 30.3.2006 AT A LOSS OF RS. 96,87,176/- AFTER MAKING AN ADDITION OF RS. 25,00,000/- UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. THE LD. CIT(A) VIDE ORDER DATED 15.5.2007 DELETED THE ADDITION OF RS. 25,00,000/- AND THE SAID DELETION WAS SUBSEQUENTLY CONFIRMED BY THE ITAT VIDE ORDER DATED 17.10.2008 AND THE HONB LE HIGH COURT VIDE ORDER DATED 8.7.2009. ACCORDINGLY, THE AO BY GIVING EFFECT THE ORDER OF THE ITAT, PASSED ORDER U/S. 254/143(3) ON 7.12.2009 ITA NO. 1565/DEL/2014 A.Y. 2003-04 9 ASSESSING TOTAL LOSS OF RS. (-) 1,91,37,726/-. SUBS EQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 AS INFORMATIO N WAS RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSESSEE COMPANY HAD RECEIVED ACCOMMODATION ENTRY FROM M/S G ARG PETROLEUM PRIVATE LIMITED THROUGH BANKING CHANNEL. AO CONSIDERED THIS INFORMATION AND HAD REASON TO BELIEVE THAT INC OME OF THE ASSESSEE TO THE EXTENT OF RS. 7 LACS HAD ESCAPED AS SESSMENT. AFTER RECORDING THE REASONS TO BELIEVE, AO ISSUED NOTICE DATED 30.3.2010 AFTER OBTAINING NECESSARY APPROVAL FROM CIT-II, NEW DELHI. IN RESPONSE TO THE SAID NOTICE, ASSESSEE FILED A LETTE R DATED 5.4.2010 STATING THEREIN THAT THE RETURN FILED EARLIER AND A S ALREADY ASSESSED U/S. 143(3) MAY BE ACCEPTED AS RETURN FILED UNDER S ECTION 148. THE ASSESSEE FURTHER REQUESTED TO SUPPLY A COPY OF REA SONS WHICH WAS DULY SUPPLIED TO HIM. THE ASSESSEE WAS ASKED TO SUB STANTIATE THE IDENTITY, GENUINENESS, AND CREDITWORTHINESS OF THE SHARE APPLICATION MONEY OF RS. 7 LACS RECEIVED BY IT FROM M/S GARG PE TROLEUM PRIVATE LIMITED. SUBSEQUENTLY NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE. ASSESSEE FILED OBJECTIONS TO THE REOPEN ING OF THE ASSESSMENT AND ISSUING OF NOTICE U/S. 148 BY HIS L ETTER FILED ON 10.12.2010 WHICH WERE REJECTED VIDE ORDER SHEET ENT RY DATED 10.12.2010. THEREAFTER, AO OBSERVED THAT THE ASSES SEE HAS SHOWN RECEIPT /CREDIT OF RS. 7 LACS AS SHARE APPLICATION MONEY THROUGH ITA NO. 1565/DEL/2014 A.Y. 2003-04 10 TRANSACTION WHERE NO REAL TRANSACTION TOOK PLACE, H ENCE, THE SAME WAS TREATED AS UNEXPLAINED FUNDS AND ADDED BACK TO THE INCOME OF THE ASSESSEE AND ASSESSED THE SAME AT LOSS OF RS. 1 ,84,37,726/- PASSED U/S. 147/143(2) OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 24.12.2010 AND LD. CIT(A) VIDE ORDER DATED 8.2.2013 DISMISSED THE APPEAL OF THE ASSESSEE. 7.1 FOR THE SAKE OF CLARITY, WE ARE REPRODUCING THE REASONS RECORDED BY THE AO AS UNDER:- THE ABOVE ASSESSEE FILED RETURN OF INCOME ON 28/11/2003 AT RETURN LOSS OF RS, 1,21,87,176/.THE R ETURN WAS PROCESSED U/S 143( 1) AT RETURNED INCOME. THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) ON 30.03.2006 AT LOSS OF RS. 96,87,176/-. AFTER GIVING EFFECT OF ORDER OF HONBLE DELHI HIGH COURT THE ASSESSED LOSS AT RS, 1,91,37,726/-. THE INVESTIGATIONS WERE CONDUCTE D BY THE INVESTIGATION WING OF THE DEPARTMENT ON CERTAIN PERSONS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES TO BENEFICIARIES OF THEIR SERVICES, IN RETURN OF COMMI SSION. IT HAS BEEN REVEALED THAT MANY PERSONS WERE USING SERVICES OF ACCOMMODATION ENTRY OPERATORS TO CHANNE LIZE THEIR OWN UNACCOUNTED MONEY IN THEIR REGULAR BOOKS OF ITA NO. 1565/DEL/2014 A.Y. 2003-04 11 ACCOUNTS BY ROUTING THE SAME THROUGH THE ACCOUNTS O F ACCOMMODATION ENTRY PROVIDERS. 2. THE MODUS OPERANDI OF THESE ENTRY PROVIDERS AND BENEFICIARIES OF THEIR SERVICES, WAS DETECTED AS UN DER: 2.1 ENTRIES WERE BEING BROADLY TAKEN FOR TWO PURP OSES: A) TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC., IN THE FORM OF GIFTS, SHAR E APPLICATION MONEY, LOANS ETC. B) TO INFLATE EXPENSES IN THE TRADING AND PROFIT AN D LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND T HEREBY PAY LESS TAXES. 2.2 THE ASSESSEES WHO HAD UNACCOUNTED MONEY (CAL LED AS ENTRY TAKERS OR BENEFICIARIES) AND WANTED TO INTROD UCE THE SAME IN THE BOOKS OR ACCOUNTS WITHOUT PAYING TA X, APPROACHED ANOTHER PERSON (CALLED AS ENTRY OPERATOR) AND HANDED OVER THE CASH (PLUS COMMISSION) AND HAD TAKEN CHEQUES/DDS/POS. THE CASH WAS BEING DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT EITHER IN HIS OWN NAME OR IN THE NAME OF RELATIVE/FRIENDS OR OTHER PERSON HIRED BY HIM, FOR THE PURPOSE OF OPENING BANK ACCOUNT. IN MOST OF THESE B ANK ITA NO. 1565/DEL/2014 A.Y. 2003-04 12 ACCOUNT THE INTRODUCER WAS THE MAIN ENTRY OPERATOR AND THE CASH DEPOSIT SLIPS AND OTHER INSTRUMENTS WERE F ILLED BY HIM. THE OTHER PERSONS (IN WHOSE NAME THE A/C IS OPENED) ONLY USED TO SIGN THE BLANK CHEQUE BOOK AND HAND OVER THE SAME TO THE MAIN ENTRY OPERATOR. THE ENTRY OPERATOR THEN USED TO ISSUE CHEQUES/DDS/POS I N THE NAME OF THE BENEFICIARY FROM THE SAME ACCOUNT ( IN WHICH THE CASH IS DEPOSITED) OR ANOTHER ACCOUNT IN WHICH FUNDS WERE TRANSFERRED THROUGH CLEARING IN TWO OR MORE STAGES. THE BENEFICIARY IN TURN DEPOSITED THESE INSTRUMENTS IN HIS BANK ACCOUNTS AND THUS HIS UNACCOUNTED MONEY IS INTRODUCED TO HIS REGULAR BOOK S OF ACCOUNT IN THE FORM OF GIFT, SHARE APPLICATION MONE Y LOAN ETC THROUGH BANKING CHANNELS. 2.3 THE OPERATORS GAVE THE ACCOUNT HOLDERS AMOUNT S RANGING FROM RS 1000 TO 2000 PER MONTH. THESE ACCOUNT HOLD ERS WERE MASONS, PLUMBERS, ELECTRICIANS, PEONS, DRIVERS ETC, WHOSE EARNINGS ARE NOT SUFFICIENT FOR A LIVING. THEY EARNED NORMALLY RS 3 TO 5 THOUSAND PER MONTH IN THEIR NORMAL WORK AND BY WORK ING FOR THE ENTRY OPERATORS EARNED EXTRA INCOME OF RS 2 TO 4 THOUSAND PER MONTH, THEIR SIGNATURES WERE TAKEN ON ITA NO. 1565/DEL/2014 A.Y. 2003-04 13 BLANK GIFT DEEDS, CHEQUE BOOKS, SHARE APPLICATION M ONEY ETC. IN FACT THESE PERSONS SIGNED ALL TYPES OF PAPE RS THEY WERE ASKED TO SIGN. THEY WERE MADE DIRECTORS OF COMPANIES, PARTNERS OF FIRMS AND PROPRIETOR OF DIFF ERENT CONCERNS SOLELY FOR OPERATION OF THESE ACCOUNTS. AC TUALLY, MANY OF THEM WERE NOT EVEN AWARE OF THE TAX IMPLICATIONS ETC. THEIR ONLY CONCERN WAS WITH THE F EW THOUSAND RUPEES GIVEN TO THEM BY THE ENTRY OPERATO RS. 3. SUMMING UP, THE REPORT AS A RESULT OF THESE EXT ENSIVE ENQUIRIES CARRIED OUT BY THE DIT(INV.), NEW DELHI H AS ESTABLISHED E NON-GENUINENESS OF TRANSACTIONS, WHET HER SHOWN BY BENEFICIARIES AS INFLOW OF SHARE CAPITAL O R RECEIPT OF GIFTS OR CONSIDERATION FOR SALE-PURCHASE . THE CREDITWORTHINESS OF THE PERSONS/PERSONS CONTROLLING THE CONCERNS WHO HAVE GIVEN THESE CREDIT ENTRIES/SHARE CAPITAL/GIFTS/SALE CONSIDERATION HAS ALSO NOT BEEN ESTABLISHED AS THEY HAVE BEEN FOUND TO BE MAN OF NO MEANS. 4. THE SAID REPORT OF INVESTIGATION WING OF THE DEPARTMENT, ON THE INVESTIGATIONS CONDUCTED IN THE CASE OF VARI OUS ACCOMMODATION ENTRY PROVIDERS ALONG WITH THE LIST O F THE BENEFICIARIES OF THEIR SERVICES, WAS FORWARDED TO T HIS ITA NO. 1565/DEL/2014 A.Y. 2003-04 14 OFFICE THROUGH ADDL.CIT, RANGE-5, VIDE LETTER F.NO. ADDL. CIT/RANGE-5/2005-06/759 DATED 13.3.2006. 4.1 ENQUIRIES REVEALED THAT ONE SHRI MAHESH GARG, WAS CONTROLLING A NUMBER OF BANK ACCOUNTS IN VARIOUS NA MES & WAS USING VARIOUS PERSONS OPERATE THESE ACCOUNTS. IN THIS REGARD, STATEMENTS ON OATH U/S 131 OF THE I. T. ACT, 1961 OF MAHESH GARG WAS RECORDED BY THE ADDL. DIT (INV.), UNITI, NEW DELHI. FOLLOWING IS THE GIST OF THE STATEMENTS & LETTERS CONTAINING ADMISSIONS RELEVANT TO THIS CASE:- (VII) STATEMENTS WERE GIVEN ON OATH BY SHRI MAHESH GARG BEFORE ADDL. DIT (INV.), UNIT, NEW DEIHI ON 22.9.2003 IN WHICH HE HAS ADMITTED TO HAVE INDULGED IN GIVING ENTRIES. HE HAS ALSO ADMITTED THAT HE IS CONTROLLING VARIOUS PERSONS WHO SIGN ON HIS BEHEST TO PROVIDE THE ACCOMMODATION ENTRY AND ONE OF SUCH FIRM IS GARG PETROLEUM PVT. LTD .. (VIII) SH. MAHESH GARG IN HIS STATEMENT HAS ELABORATED THE MODUS OPERANDI ADOPTED BY THEM IN GIVING ACCOMMODATION ENTRIES IN HIS ANSWER TO QUESTION 4, 5 AND 6. ITA NO. 1565/DEL/2014 A.Y. 2003-04 15 5. IN THE INSTANT CASE OF THE ASSESSEE, MLS KC FIB RES LTD., INFORMATION HAS BEEN RECEIVED THAT THE ASSESS EE HAS TAKEN THE ACCOMMODATION ENTRIES AS NOTED BELOW: - BANK & BRANCH AMOUNT INSTRUMENT NO. DATE CREDIT ENTRY COMING FROM THE ACCOUNT OF SBOP, WAZIRPUR 700000 159077 06.02.03 GARG PETROLEUM PVT. LTD. TOTAL 7,00,000/- IN VIEW OF THE FINDINGS OF THE INVESTIGATION REPORT , THE CREDITWORTHINESS OF THE LENDERS HAVE NOT BEEN ESTABLISHED AND THESE TRANSACTIONS SEEM TO BE NON GENUINE. I THEREFORE, HAVE REASON TO BELIEVE THAT T HE AMOUNT OF RS. 7,00,000/- REPRESENTS INCOME OF THE ASSESSEE CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR AY. 2003-04. SD/- ( A. S. NEHRA) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 5(1)), NEW DELHI 7.2 WE HAVE PERUSED THE REASONS RECORDED BY THE AO AND WE FIND THAT THE AO ISSUED NOTICE U/S. 148 OF THE ACT ON 3 0.3.2010 FOR THE ASSESSMENT YEAR IN DISPUTE I.E. 2003-04 WHICH IS AF TER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YE AR. WE ARE OF ITA NO. 1565/DEL/2014 A.Y. 2003-04 16 THE VIEW THAT THE CASE OF THE ASSESSEE IS GOVERNED BY THE FIRST PROVISO TO SECTION 147 OF THE ACT AND IN THE ORIGIN AL ASSESSMENT MADE U/S. 143(3) VIDE ASSESSMENT ORDER DATED 30.3.2 006 THE AO HAD MADE DETAILED ENQUIRY OF THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE COMPANY. WE FIND THAT THERE IS NO OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS RELATING TO SHARE APPLICATION MONEY BECAUSE THE ASSESSEE HAD SUBMITTED DETAILS OF SHARE APPLICATION MONEY IN INITIAL ASSESSMENT PROCEEDINGS WHICH WAS VERIFIED BY THE A O BY WAY OF ISSUE OF SUMMONS TO THE SHARE APPLICANT WHO DULY RE SPONDED TO THE SUMMONS. WE FURTHER FIND THAT IN THE REASONS RECOR DED THE AO HAS NOWHERE ALLEGED THAT ESCAPEMENT OF INCOME HAS OCC URRED BY REASON OF EITHER OMISSION ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ASSESSMENT. IT IS A SETTLED LAW THAT IN THE ABSENCE OF OMISSION OR FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS, THE TIME LIMIT TO ISSUE NOTICE U/S. 148 EXPIRED ON 31.3.2008, THER EFORE, THE NOTICE U/S. 148 DATED 30.3.2010 IS TIME BARRED. THEREFORE, WE ARE OF THE CONSIDERED VIEW THAT NOTICE ISSUED U/S. 148 OF THE ACT IS ILLEGAL AND DESERVE TO BE QUASHED. OUR AFORESAID VIEW IS SUPPO RTED BY THE FOLLOWING JUDGMENTS:- ITA NO. 1565/DEL/2014 A.Y. 2003-04 17 - CIT V. SUREN INTERNATIONAL P. LTD. (2013) 357 ITR 2 4 (DEL) WHEREIN THE HONBLE HIGH COURT HAS HELD THAT THERE WAS NEITHER ANY ALLEGATION THAT THE ASSESSEE HAD FAILED TO TRULY DISCLOSE ANY MATERIAL FACTS AT THE TIME OF ASSESSM ENT, NOR COULD IT BE READILY INFERRED IN VIEW OF THE FACT TH AT A DETAILED ENQUIRY HAD BEEN CONDUCTED BY THE AO WITH REGARD TO THE IDENTITY AND THE CREDITWORTHINESS OF THE SHARE APPL ICANTS AND THE GENUINENESS OF THE TRANSACTIONS IN RELATI ON TO THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. FURTHER, THE MERE STATEMENT THAT THE DEPARTMENT OF REVENUE INTELLIGENCE HAD SEIZED CERTAIN GOODS OF TH E ASSESSEE AND LEVIED A PENALTY ALSO COULD NOT BE STA TED TO BE REASON FOR REOPENING OF ASSESSMENT OF THE ASSES SEE AS THE STATEMENT MADE WAS NEITHER FOLLOWED BY THE RECO RDING OF A BELIEF THAT THE INCOME ESCAPED ON THAT COUNT O R THAT THE ASSESSEE HAD FAILED TO DISCLOSE ALL RELEVANT MA TERIAL, FULLY AND TRULY, AT THE STAGE OF THE FIRST ASSESSME NT. THE NOTICE OF REASSESSMENT WAS NOT VALID AND WAS LIABLE TO BE QUASHED. - HARYANA ACRYLIC MANUFACTURING CO. VS. CIT AND ANOTH ER. IN THIS CASE IT HAS BEEN HELD THAT ALLOWING THE PETI TION, THAT THE REASONS RECORDED DID NOT INDICATE THE FAILURE O N THE PART ITA NO. 1565/DEL/2014 A.Y. 2003-04 18 OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEA R 1998-99. WHILE IN THE REASONS SUPPLIED TO THE PETIT IONER THERE WAS NO MENTION OF THE ALLEGATION THAT THERE W AS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS IN THE REASONS SHOWN IN THE SAI D FORM OF THE COUNTER AFFIDAVIT THERE WAS A SPECIFIC ALLEGATI ON THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO ACC OMMODATION ENTRIES RAISED FROM ONE OF THE COMPANIES TO THE EX TENT OF RS. 5 LAKHS. THUS, ONE OF THE CONDITIONS PRECEDENT FOR REMOVING THE BAR AGAINST TAKING ACTION AFTER THE SA ID FOUR YEAR PERIOD REMAINED UNFULFILLED. CONSEQUENTLY, THE NOTICE UNDER SECTION 148 BASED ON THE RECORDED REASONS SUP PLIED TO THE PETITIONER AS WELL AS THE CONSEQUENT ORDER W ERE WITHOUT JURISDICTION AS NO ACTION UNDER SECTION 147 COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD. 7.3 IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDENTS OF THE HONBL E HIGH COURT OF DELHI AS AFORESAID, WE QUASH THE NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 DATED 30.3.2010 AS WELL AS THE REASSESSM ENT. ITA NO. 1565/DEL/2014 A.Y. 2003-04 19 8. SINCE WE HAVE ALREADY QUASHED THE NOTICE U/S. 14 8 OF THE ACT AS WELL AS REASSESSMENT PROCEEDINGS, AS AFORESAID, THE OTHER GROUNDS RAISED IN THE ASSESSEES APPEAL NEEDS NO AD JUDICATION. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03/06/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEM BER DATE 03/06/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES