M/s. N.S. Creation (P) Ltd., Delhi V. DCIT, New Delhi

ITA 1824/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7144 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 06-09-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 31-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Assessee Lawyers: AMIT GOEL; SAURABH GOEL
• Keywords: Unexplained cash credit; Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 1824/DEL/2015 ASSESSMENT YEAR: 2008-09 M/S N.S. CREATION (P) LTD., VS. DCIT, CC-3 921/60, LEKHU NAGAR, NEW DELHI TRI NAGAR, DELHI 110 035 (PAN: AABCN8344A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. AMIT GOEL, FCA & MR. SAURA BH GOEL, CA REVENUE BY : SH. AMRIT LAL, SR. DR DATE OF HEARING : 06-09-2016 DATE OF ORDER : 14-09-2016 ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 20.2.2015 OF THE LD. CIT(A)-XXVI, NEW DELHI PERTAIN ING TO ASSESSMENT YEAR 2008-09 AND RAISED THE FOLLOWING GR OUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ASSESSING OFFICER ERRED IN ISSUING NOTICE U/S 1 48 OF INCOME TAX ACT 1961. THE NOTICE U/S 148 ISSUED IN T HIS CASE IS ILLEGAL, VOID WITHOUT JURISDICTION AND BARR ED BY 2 LIMITATION AND ACCORDINGLY THE ASSESSMENT ORDER PAS SED ON THE FOUNDATION OF SUCH NOTICE IS LIABLE TO BE QU ASHED. THE LD. COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE HELD THE REASSESSMENT PROCEEDINGS AS ILLEGAL, VOID WITHOUT JURISDICTION AND BARRED BY LIMITATION. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFIC ER OF SHARE APPLICATION MONEY/SHARE CAPITAL OF RS. 40,00, 000/- AS ALLEGED UNEXPLAINED CASH CREDIT U/S 68 OF INCOME TAX ACT 1961. THE ADDITION MADE BY THE ASSESSING OFFICE R IS NOT SUSTAINABLE AND COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE DELETED THE SAME. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEAL) ERRED IN CONFIRMING THE ADDITION OF RS.20,000/- MADE BY THE ASSESSING OFFICER AS ALLEGED COMMISSION PAID. THE ADDITION MADE BY THE AO IS NOT SUSTAINABLE AND COMMISSIONER OF INCOME TAX (APPEAL) SHOULD HAVE DELETED THE SAME. 4. THE ALLEGED REASONS GIVEN BY ASSESSING OFFICER AND CIT(A) FOR MAKING CONFIRMING THE ADDITIONS OF RS.40,00,000/- AND RS.20,000/-- ARE ERRONEOUS, BOTH ON FACTS AND IN LAW AND, THEREFORE, THE ADDITIONS OF 3 RS.40,00,000/- AND RS.20,000/- MADE BY THE ASSESSIN G OFFICER AND CONFIRMED BY CIT(A) ARE LIABLE TO BE DE LETED. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE ONE OR MORE GROUND OF APPEAL BEFORE OR AT THE TIME OF HEARING OF APPEAL. THE AFORESAID GROUNDS OF APPEAL ARE WITHOUT PREJUDI CE OF EACH OTHER. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME ON 25.9.2008 DECLARING LOSS OF RS. 3,94,575/-. THE RETURN OF INCOME WAS DULY PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961. THE CASE TAKEN UP FOR SCRUTINY AND ASSESSMENT ORDER U/S. 143(3) OF THE I.T. ACT PASSED AT A LOSS OF RS. 1,94 ,575/- BY DISALLOWING SUM UNVERIFIED EXPENSES. LATER THE CAS E WAS SELECTED FOR SCRUTINY U/S. 147 R.W.S. 148 OF THE I.T. ACT, 1961. THE NOTICE U/S. 148 OF THE I.T. ACT WAS ISSUED ON 26.3.2013. IN R ESPONSE TO NOTICE U/S. 148 OF THE I.T. ACT ASSESSEE VIDE ITS REPLY D ATED 11.4.2013 HAS SUBMITTED THAT RETURNED FILED DATED 25.2.2008 MAY B E TREATED AS RETURN IN RESPONSE TO NOTICE ISSUED U/S. 148 OF THE I.T. ACT, 1961. THEREAFTER, THE AO ASSESSED THE INCOME OF THE ASSE SSEE AT RS. 36,25,425/- VIDE HIS ORDER DATED 20.3.2014 PAS SED U/S. 148 R.W.S. 147 OF THE I.T. ACT, 1961 AND MADE THE ADDIT IONS. 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 20.2.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEEE AND AFFIRMED THE ACTION OF THE AO ON THE 4 LEGAL ISSUE I.E. REOPENING OF THE CASE U/S. 147/148 OF THE I.T. ACT, 1961 AS WELL AS ON MERITS. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. C IT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL OF THE ASSESSEE HAS FILED THE PAPER BOOK CONTAINING PAGES 1 TO 52 ATTACHING THEREWITH THE COPY OF REASO NS RECORDED U/S. 148; COPY OF LETTER DATED 21.2.2014 FURNISHED BEFOR E THE AO ALONGWITH DOCUMENTARY EVIDENCES IN RESPECT OF SHARE CAPITAL; COPY OF LETTER ISSUED BY AO TO THE SHARE HOLDER; COPY OF LE TTER DATED 6.3.2014 SUBMITTED BY SHARE HOLDER TO AO; COPY OF LETTER DAT ED 10.3.2014 SUBMITTED BY SHARE HOLDER TO AO; COPY OF LETTER DAT ED 18.3.2014 SUBMITTED TO AO; COPY OF ORIGINAL ASSESSMENT ORDER U/S. 143(3); COPY OF JUDGMENTS. HE STATED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE AO IN ASSUMING JURISDI CTION U/S. 147 AND THAT TOO WITHOUT COMPLYING WITH THE MANDATORY CONDI TIONS AS PRESCRIBED UNDER SECTION 147 TO 151 OF THE I.T. ACT , 1961 AND THE REASONS RECORDED ARE INVALID AND CONTRARY TO LAW AN D FACTS AND THERE IS NO SATISFACTION AS PER LAW U/S. 151 OF THE ACT. HE FURTHER DRAW OUR ATTENTION TOWARDS THE COPY OF REASONS FOR REOPE NING THE CASE U/S. 148 AND STATED THAT NO PROPER REASONS WERE RECORDED ; NO NEXUS BETWEEN THE MATERIALS RELIED UPON AND THE BELIEF FO RMED FOR ESCAPEMENT OF INCOME; NO APPLICATION OF MIND; NO PR OPER SATISFACTION WAS RECORDED BEFORE ISSUE OF NOTICE U/S. 148; NO IN DEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. I T WAS FURTHER 5 STATED THAT THE CASE WAS REOPENED ONLY ON THE BASIS OF INVESTIGATION WING INFORMATION WHICH SUFFERS WITH SERIOUS DEBILIT Y AND LACKS DEFINITENESS, WITHOUT DESCRIBING THE BASIC ASPECTS OF ALLEGED TRANSACTION AND IN THE ABSENCE OF THE SAME, WHOLE ACTION OF THE AO GETS VITIATED. TO SUPPORT HIS CONTENTION HE SUBM ITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE ITAT DECISION DATED 09.1.2015 IN THE CASE OF G&G PHARMA INDIA LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04 ) IN WHICH THE JUDICIAL MEMBER IS THE AUTHOR. HE FURTHER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 9.1.2015 HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITS DECISION DATED 08. 10.2015 IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA IN DIA LTD. IN THIS REGARD, HE FILED THE COPIES OF THE AFORESAID DECISI ONS BEFORE THE TRIBUNAL. IN VIEW OF THE ABOVE, HE REQUESTED THAT BY FOLLOWING THE AFORESAID PRECEDENTS THE REASSESSMEN T PROCEEDINGS OF THE AO MAY BE QUASHED BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PA SSED BY THE AUTHORITIES BELOW AND STATED THAT THE AO HAS PROPER LY RECORDED THE REASONS DFOR REOPENING BY DUE APPLICATION OF MIND, HENCE, THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE 6 AUTHORITIES AND THE CASE LAW CITED BY THE ASSESSEE S COUNSEL ON THE ISSUE IN DISPUTE. IN MY VIEW, IT IS VERY M UCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE IS SUE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T. ACT, 1961 WHIC H IS REPRODUCED HEREUNDER:- THE ASSESSEE COMPANY HAS FILED INCOME TAX RETURN F OR THE ASSTT. YEAR 2008-09 DECLARING LOSS OF RS. 39457 8/-. REGULAR ASSESSMENT WAS COMPLETED BY THE DCIT, CC-3, NEW DELHI BY MAKING AN ADDITION OF RS. 2,00,000/-. BEING THE INFORMATION RECEIVED FROM DGIT (INV.), NEW DELH I. I HAVE REASONS TO BELIEVE THAT THE ASSESSEE HAS UNDERSTATED THE INCOME HAS ALSO FAILED TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS IN HIS RETURN OF INCOM E FOR ABOVE ASSESSMENT YEAR, THE INCOME CHARGEABLE TO TAX FOR FY 2007-08 RELEVANT TO ASSESSMENT YEAR 2008-09 HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 1 47 OF THE ACT. ISSUE NOTICE U/S. 148 OF THE I.T. ACT, 1961. I THEREFORE, DEEM IT, PROPER TO INITIATE THE PROCE EDINGS UNDER THE PROVISION OF SECTION 147 OF THE ACT, 1961 , NOTICE U/S. 148 OF THE ACT, IS BEING ISSUED. DATE: 26.3.2012 SD/- (B.L. KAIN) ASSTT. COMMISSIONER OF INCOME TAX CENTRAL RANGE-2, NEW DELHI 8. AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, AS AFORESAID, I AM OF THE VIEW THAT AO HAS NOT APPLIE D HIS MIND SO 7 AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. IN MY VIEW THE REASONS ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRE CTORATE OF INCOME TAX (INVESTIGATION), NEW DELHI. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE A ND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, I AM OF TH E CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED . MY VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENT/DECISION:- PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA NO. 545/2015 DATED 8.10.2015 OF THE DELHI HIGH COURT WHEREIN THE HONBLE COURT HAS ADJUDICATED THE ISSUE AS UNDER:- 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A S INGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WH ICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT 8 BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHET HER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TA LKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT T HOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLE D ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FA CT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TEND ERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVE MBER 2004 AND WAS PROCESSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HA VE SIMPLY CONCLUDED: 'IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSIDERED VI EW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFI CIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE RE ASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 9 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERI ALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COUR T WOULD LIKE TO OBSERVE THAT THIS IS IN 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 T HE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BELIEVE T HAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLE SS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHE RENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. 9. IN VIEW OF ABOVE, I AM OF THE CONSIDERED VIEW TH AT THE AFORESAID ISSUE IN DISPUTE IS EXACTLY THE SIMILAR A ND IDENTICAL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQU ARELY COVERED BY THE AFORESAID DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE 10 CASE OF G&G PHARMA (SUPRA). HENCE, RESPECTFULLY FO LLOWING THE ABOVE PRECEDENT IN THE CASE OF PR. CIT-4 VS. G&G PH ARMA INDIA LTD. (SUPRA) I DECIDE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QU ASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE LEGAL ISSUE. SINCE I HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, AS AF ORESAID, THE OTHER ISSUES ARE NOT BEING DEALT WITH BEING ACADEMI C IN NATURE. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14-09-2016. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED : 14-09-2016 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.