M/s. Shri Vardai Ovrseas (P) Ltd., New Delhi V. ITO, New Delhi

ITA 188/DEL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97718 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 16-06-2015
• Assessment Year: 2000-2001
• Appeal Filed On: 13-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VK SABHARWAL
• Keywords: Question of law; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 133A; 147; 131; 68; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: G NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NOS: 187, 188/DEL/2010 AYS : - 1999-2000, 2000-2001 VARDAI OVERSEAS (P) LTD. VS. ITO C/O SHRI V.K. SABHARWAL, ADVOCATE WARD-8 (3) ANSARI ROAD, DARYA GANJ, NEW DELHI. NEW DELHI 110 002. (PAN AACCS2481G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V.K. SABHARWAL, ADVOCATE RESPONDENT BY : SHRI SUJIT KUMAR, SR.DR DATE OF HEARING : 09.9.2015 DATE OF PRONOUNCEMENT : .10.2015 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THESE APPEALS OF THE ASSESSEE HAVE BEEN FILE D AGAINST THE COMMON ORDER PASSED BY LD. CIT (A) XI NEW DELHI FOR ASSESSMENT YEARS 1999-2000 AND 2000-01. SINCE THE GROUNDS RAISED IN THE APPEAL ARE SIMILAR AND BOTH THE PARTIES HAVE AGREED THAT THE ISSUE INVOLVED IS COMMON, THESE ARE BEING DISPOSED OF BY A COMMON ORDER. 2. THE FACTS, IN BRIEF, ARE AS UNDER:- SURVEY U/S 133A OF THE INCOME TAX ACT, 196 1 WAS CONDUCTED BY THE INVESTIGATION WING AT THE OFFICE PREMISES OF ONE SH RI SANJAY RASTOGI, CHARTERED ACCOUNTANT ON 4 TH MARCH, 2003 WHEREIN IT WAS FOUND THAT SHRI SANJAY RASTOGI ALONG WITH HIS FATHER AND HIS EMPLOYEES WAS RUNNING SOME CONCERNS INVOLVED IN PROVIDING ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 2 ACCOMMODATION ENTRIES. IN THESE CONCERNS SHRI SANJA Y RASTOGI AND HIS ASSOCIATES WERE DIRECTORS. SHRI SANJAY RASTOGI IN HIS STATEME NT DATED 20 TH APRIL, 2003 RECORDED U/S 131 OF THE INCOME TAX ACT, 1961 IS SAID TO HAVE STATED THAT APART FROM HIS PROFESSIONAL WORK HE WAS ALSO PROVIDING CERTAIN SER VICES IN CONNECTION WITH THE COMPANIES / CONCERNS / ENTITIES THAT WERE NOT DOING GENUINE BUSINESS. FOR PERFORMING THESE ACTIVITIES, THE ADDRESS OF HIS OFF ICE AT 210, VAKIL CHAMBER, VIKAS MARG, NEW DELHI WAS ALSO USED. A FEW PRIVATE LIMITE D / LIMITED COMPANIES WERE ALLEGEDLY BEING USED AS FRONT COMPANIES FOR EXECUTI ON OF THESE TRANSACTIONS. THE LIST OF SUCH COMPANIES INCLUDED M/S. M.S. LEASING PRIVAT E LTD., WHICH AS PER SURVEY REPORT, HAD ISSUED A CHEQUE OF RS. 1 LAC TO THE ASS ESSEE COMPANY. IN VIEW OF THIS INFORMATION, A NOTICE U/S 148 OF THE INCOME TAX ACT , 1961 WAS ISSUED TO THE ASSESSEE COMPANY ON 11.3.2004. IN RESPONSE TO THE N OTICE, THE ASSESSEE COMPANY SUBMITTED THAT THE RETURN FILED ON 31.12.1999 VIDE ACKNOWLEDGE NO. 833 SHOULD BE TREATED AS RETURN FILED IN RESPONSE TO THE NOTICE U /S 148. DURING THE COURSE OF ASSESSMENT PROCEEDINGS VARIOUS NOTICES WERE ISSUED WHICH WERE RESPONDED TO FROM TIME TO TIME BY THE ASSESSEE COMPANY. THE ASSESSEE WAS ASKED TO JUSTIFY THE ENTRIES PERTAINING TO RECEIPT OF CHEQUES AND NOTICE S U/S 133 (6) WERE ISSUED TO ALL THE COMPANIES REQUIRING THEM TO FURNISH DETAILS AND THE PURPOSE OF PAYMENT ETC. THE AO HAS RECORDED A FINDING THAT ALL THE NOTICES WERE RETURNED UNDELIVERED. THEREAFTER THE ASSESSEE WAS ASKED TO PRODUCE THE DI RECTORS OF THE COMPANY FOR EXAMINATION BUT NO COMPLIANCE TO THAT EFFECT WAS AL SO MADE. SINCE NO PARTY APPEARED TO DEPOSE BEFORE THE AO, THE AO ADDED RS. 15 LACS AS UNEXPLAINED INCOME OF THE ASSESEE U/S 68 OF THE INCOME TAX ACT FOR AY 1999-2000. SIMILARLY A SUM OF ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 3 RS. 13,50,000/- WAS TREATED AS UNEXPLAINED INCOME O F THE ASSESSEE AND ADDED TO ITS INCOME U/S 68 OF THE INCOME TAX ACT FOR AY 2000-200 1. 3. IN THE FIRST APPELLATE PROCEEDINGS THE LD . CIT (A), WHILE DISMISSING THE APPEALS OF THE ASSESSEE FOR BOTH THE YEARS THROUGH A COMMON ORDER, GAVE A CATEGORICAL FINDING THAT FROM A PERUSAL OF THE MATE RIAL PRODUCED, IT WAS NOT POSSIBLE TO FORM AN OPINION WITH REGARD TO THE CREDITWORTHIN ESS TO THE INVESTORS. LD. CIT (A) FURTHER GAVE A FINDING THAT IN SPITE OF REPEATED OP PORTUNITIES THE ASSESSEE FAILED TO FILE THE NAMES, CORRECT POSTAL ADDRESSES, PAN NUMBE RS AND COPIES OF LEDGER ACCOUNT OF ALL THE INVESTORS. THE ADDRESSES WHICH WERE GIVE N WERE FOUND TO BE INCORRECT IN AS MUCH AS THE LETTERS COULD NOT BE SERVED AND WERE RE TURNED UNDELIVERED. THE LD. CIT(A) OBSERVED THAT THE INVESTORS WERE NOT FORTHCO MING TO DEPOSE BEFORE THE AO IN SUPPORT OF CLAIM BY THE ASSESSEE COMPANY REGARDING INVESTMENTS MADE AND ACCORDINGLY THE ADDITIONS MADE BY THE AO WERE CONFI RMED. 4. ASSESSEE HAS RAISED AS MANY AS 6 GROUNDS OF A PPEAL FOR BOTH THE YEARS INCLUDING GROUND NO. 1 OF THE APPEAL WHICH HAS BEEN AMENDED AND READS AS UNDER: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW THE ASSESSING OFFICER WAS NOT JUSTIFIED AND HAD ERRED I N LAW TO ASSUME JURISDICTION U/S 147 OF THE ACT, BECAUSE NO NOTICE IF ANY HAS EVER BEEN ISSUED OR SERVED IN THE NAME OF APPELLANT COMPANY U /S 148 OF THE INCOME TAX ACT, 1961. 2. THAT THE PROVISIONS OF LAW INVOKED U/S 147 B Y THE ASSESSING OFFICER WAS FURTHER NOT LEGAL AS THE REASONS RECORDED WERE SCANTY AND VAGUE AS NOT SUPPORTED ON ANY DOCUMENT OR STATEMENT. 5. GROUND NO. 1 REGARDING THE ASSUMPTION OF JURISD ICTION U/S 147 OF THE INCOME TAX ACT, 1961 WAS NOT TAKEN BEFORE THE LD. CIT (A) AND IT IS ONLY IN THIS APPEAL BEFORE US ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 4 THAT THIS GROUND HAS BEEN RAISED FOR THE FIRST TIME . THE ASSESSEE HAS SPECIFICALLY CHALLENGED THE ISSUE OF ASSUMPTION OF JURISDICTION U/S 147 BEFORE US, ALBEIT, FOR THE FIRST TIME. THE LEARNED DR HAS STRONGLY OBJECTED TO THE ADMITTING OF THIS ADDITIONAL GROUND. HOWEVER, IN VIEW OF THE DECISION OF THE HON 'BLE SUPREME COURT IN THE CASE OF NATIONAL THERMAL POWER CO. LTD. VS. CIT 229 ITR 383 (SC), WE ARE OF THE OPINION THAT THE ASSESSEE IS ENTITLED TO URGE QUESTION OF L AW ON THE BASIS OF FACTS ALREADY AVAILABLE ON RECORD. WE ALSO RELY ON THE DECISION OF THE HONBLE SUPREM E COURT IN THE CASE OF JUTE CORPORATION OF INDIA LTD. V. CIT [ 1991] 187 ITR 688, WHEREIN IT WAS HELD THAT IN THE ABSENCE OF ANY STATUTORY PROVISION , THE APPELLATE AUTHORITY IS VESTED WITH ALL THE PLENARY POWERS WHICH THE SUBORDINATE A UTHORITY MAY HAVE IN THE MATTER. THE HON'BLE COURT HELD THAT THE TRIBUNAL WILL HAVE THE DISCRETION TO ALLOW OR NOT ALLOW A NEW GROUND TO BE RAISED AND FURTHER OBSERVE D THAT WHERE THE TRIBUNAL IS ONLY REQUIRED TO CONSIDER A QUESTION OF LAW ARISING FROM THE FACTS WHICH ARE ON RECORD IN THE ASSESSMENT PROCEEDINGS THEN SUCH A QU ESTION SHOULD BE ALLOWED TO BE RAISED WHEN IT IS NECESSARY TO CONSIDER THAT QUESTI ON IN ORDER TO CORRECTLY ASSESS THE TAX LIABILITY OF AN ASSESSEE. WE ACCORDINGLY, ALLOW THIS ADDITIONAL GROUND TO BE ADMITTED. 6. REGARDING LIMB 1 OF THE ADDITIONAL GROUND OF APPEAL, THE LD. AR FOR THE ASSESSEE DREW OUR ATTENTION TO A COPY OF THE NOTICE ISSUED U/S DATED 11.03.2004 AND SUBMITTED THAT THE NOTICE HAS BEEN ISSUED IN THE NA ME OF THE PRINCIPAL OFFICER, M/S SHRI VARDAI OVERSEAS (P) LTD. AND AS SUCH IT WAS NO T IN THE CORRECT NAME OF THE ASSESEE. THE LD. DR ON THE OTHER HAND SUBMITTED THA T SINCE THE ASSESSEE HAD CO- OPERATED AND SUBMITTED TO THE REASSESSMENT PROCEEDI NGS THROUGHOUT, THIS WAS A NON-ISSUE AS FAR AS ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT WAS CONCERNED. WE ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 5 HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CONSIDERE D THE FACTS OF THE CASE. IT IS SEEN FROM PAGE 1 OF THE ASSESSMENT ORDER THAT THE A SSESSEE HAD RESPONDED TO THE NOTICE ISSUED U/S 148 OF THE ACT THROUGH REPLY DATE D 14.01.2005. THE ASSESSEE HAS THEREAFTER SUBMITTED TO ALL THE PROCEEDINGS CONNECT ED WITH REASSESSMENT AND THEREFORE IT IS OUR CONSIDERED OPINION THAT THE ISS UANCE OF NOTICE IN THE WRONG NAME CANNOT BE RAISED AT THIS JUNCTURE. HENCE THIS GROUN D IS DISMISSED. 7. AS REGARDS LIMB 2 OF THE ADDITIONAL GROUND, IT WAS SUBMITTED BY LD. AR FOR THE ASSESSEE THAT THE REASONS WERE RECORDED ON BORROWED SATISFACTION AND THAT THE AO HAD NOT APPLIED HIS MIND BEFORE ISSUING THE NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. HE STRONGLY PLEADED THAT THE REASSESSMENT PR OCEEDINGS SHOULD BE QUASHED AS THE REASONS RECORDED WERE BASED ON INFORMATION RECE IVED FROM ADDITIONAL DIT (INVESTIGATION) WHICH WAS ACCEPTED BY THE AO IN A M ERE MECHANICAL MANNER. THE LD. AR RELIED ON A PLETHORA OF DECISIONS IN SUPPORT OF HIS PREPOSITION VIZ. CIT VS ATUL JAIN 299 ITR 383 (DELHI), UNITED ELECTRICAL COMPANY (P) LTD VS. CIT & ORS. 258 ITR 317 (DELHI), CIT VS. SFIL STOCK BROKING LTD. 325 IT R 285 (DELHI), SARTHAK SECURITIES CO. (P) LTD. VS. ITO 329 ITR 110 (DELHI) AND SIGNAT URE HOTELS (P) LTD. VS. ITO & ANR. 338 ITR 51 (DELHI). THE LD. AR ALSO PLACED RELIANCE ON THE DECISION RENDERED BY G BENCH OF THIS TRIBUNAL IN ITA NO. 3751/DEL/2011 IN SMT. SHAKUNTALA DEVI VS. ITO AND ON THE DECISION RENDERED BY B BENCH OF THIS T RIBUNAL IN ITA NO. 2068/DEL/2010 IN THE CASE OF ACIT VS. SHRI DEVESH KUMAR. 8. LD. DR SUBMITTED THAT THE NOTICE US/ 148 WAS ISS UED AFTER DUE APPLICATION OF MIND BY THE AO AND THAT THE RE-OPENING WAS VALID AS FAR AS THE RECORDING OF REASONS AND SATISFACTION WAS CONCERNED. ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 6 9. WE HAVE GONE THROUGH THE RECORDS OF THE CASE AN D HAVE ALSO CONSIDERED THE RIVAL SUBMISSIONS IN THIS REGARD. IT IS SEEN FROM T HE RECORDS THAT THE AO HAD RECEIVED A LETTER FROM ADDITIONAL DIT (INV) UNIT- VII, NEW D ELHI FORWARDING A REPORT CONTAINING INFORMATION ABOUT BOGUS TRANSACTION BY SOME COMPANI ES. THESE TRANSACTIONS WERE DETECTED DURING THE COURSE OF SURVEY ON THE BUSINES S PREMISES OF SHRI SANJAY RASTOGI AT 210, WAKIL CHAMBER, A-115, SHAKARPUR, DE LHI. DURING BANK INQUIRES BY THE INVESTIGATION WING, IT WAS REVEALED THAT COMPAN IES INCLUDING THE ASSESSEE COMPANY HAD RECEIVED CHEQUES WHICH WERE IN THE NATU RE OF ACCOMMODATION ENTRIES. BASED ON THE AFORESAID INFORMATION, THE AO ISSUED N OTICE U/S 148 OF THE ACT FOR REOPENING THE ASSESSMENT OF THE ASSESEE AND CALLED UPON IT TO FILE THE RETURN OF INCOME. THUS IT IS EVIDENT THAT THE AO PROCEEDED TO ISSUE NOTICES FOR REASSESSMENT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVES TIGATION WING OF THE DEPARTMENT ABOUT THE EXISTENCE OF ACCOMMODATION ENTRIES PROVID ERS. IT IS A SETTLED LEGAL POSITION THAT AT THE STAGE OF ISSUE OF NOTICE U/S 148, THE M ERITS OF THE MATTER ARE NOT RELEVANT AND THE AO AT THAT STAGE IS REQUIRED TO FORM ONLY A PRIMA FACIE BELIEF OR OPINION THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HO WEVER, ONCE THAT STAGE IS CROSSED AND THE REASSESSMENT PROCEEDINGS ARE SET IN MOTION, THE MATERIAL ON THE BASIS OF WHICH THE REQUISITE BELIEF WAS FORMED BY T HE AO HAS TO BE APPRAISED AND EXAMINED. IT IS SEEN THAT THE REASSESSMENT PROCEEDI NGS WERE INITIATED ENTIRELY ON THE BASIS OF SPECIFIC INFORMATION RECEIVED FROM THE INVESTIGATION WING AND IT WAS DURING THE COURSE OF INQUIRES FROM THE BANK BY THE INVESTIGATION WING THAT IT WAS REVEALED THAT THE ASSESSEE WAS A BENEFICIARY OF SOM E ACCOMMODATION ENTRIES. AS PER THE REASONS RECORDED, IT IS EVIDENT THAT THE AO DID NOT CORROBORATE OR EXAMINE THE INFORMATION RECEIVED FROM THE INVESTIGATION WING BE FORE RECORDING HIS OWN ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 7 SATISFACTION OF ESCAPED INCOME AND INITIATING THE R EASSESSMENT PROCEEDINGS. IN LIGHT OF THE AFORESAID DISCUSSION, WE ARE INCLINED TO HOL D THAT IN THE INSTANT CASE, THE AO PROCEEDED TO INITIATE PROCEEDINGS U/S 147 OF THE AC T AND TO ISSUE NOTICE U/S 148 OF THE ACT ONLY ON THE BASIS OF INFORMATION RECEIVED F ROM THE INVESTIGATION WING OF THE DEPARTMENT. THERE IS NO MATERIAL ON RECORD TO SHOW THAT THE AO HAD APPLIED AN INDEPENDENT MIND IN FORMING A BELIEF WHICH MAY RESU LT IN THE REQUIRED REASON TO BELIEVE AS PER THE PROVISIONS OF SECTION 147 AND 14 8 OF THE ACT. REFERENCE MAY BE MADE TO THE JUDGMENT RENDERED BY THE HONBLE APEX C OURT IN CHUGGAMAL RAJPAL VS. S.P. CHALIHA 79 ITR 603 (SC) WHEREIN THE HONBLE AP EX COURT WAS DEALING WITH A CASE WHERE THE AO HAD RECEIVED CERTAIN COMMUNICATIO NS FROM THE CIT SHOWING THAT THE ALLEGED CREDITORS OF THE ASSESSEE WERE NAME LEN DERS AND THAT THE TRANSACTIONS WERE BOGUS. THE AO CAME TO THE CONCLUSION THAT THER E WERE REASONS TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE HONBLE SUPREME COURT DISAGREED AND OBSERVED THAT THE AO HAD NOT EVEN COM E TO A PRIMA FACIE CONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. IT WAS FURTHER EXPLAINED BY THE HONBLE SUPREME COURT THAT : BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE ON THE PA RT OF THE ASSESSEE TO MAKE A RETURN UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR OR ALTERNA TIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON THE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSES SION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. UNLESS THE REQUIREMENTS OF CL. (A) OR CL. (B) OF S. 147 AR E SATISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A NOTICE UNDER S. 148. ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 8 10. UNDER THE CIRCUMSTANCES AND RESPECTFULLY APPLY ING THE RATIO OF THE JUDGMENTS RENDERED BY THE JURISDICTIONAL HIGH COURT IN CIT VS ATUL JAIN 299 ITR 383 (DELHI), UNITED ELECTRICAL COMPANY (P) LTD VS. CIT & ORS. 25 8 ITR 317 (DELHI), CIT VS. SFIL STOCK BROKING LTD. 325 ITR 285 (DELHI), SARTHAK SEC URITIES CO. (P) LTD. VS. ITO 329 ITR 110 (DELHI) AND SIGNATURE HOTELS (P) LTD. VS. I TO & ANR. 338 ITR 51 (DELHI), WE AGREE WITH THE LEARNED COUNSEL OF THE ASSESSEE THAT THE REOPENING IN THIS CASE IS BAD IN LAW. ACCORDINGLY, WE HOLD THE REASSESSMENT AS IN VALID FOR BOTH THE YEARS UNDER APPEAL. SINCE WE HAVE HELD THAT THE REASSESSMENT I S INVALID, WE ARE NOT ADJUDICATING ON THE OTHER AS THE SAME HAVE BECOME IN FRUCTUOUS . 11. IN THE RESULT THE APPEALS OF THE ASSESS EE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2015. SD/- SD/- (J. SUDHAKAR REDDY) (S UDHANSHU SRIVASTAVA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 29. 10. 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 16.10.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 19.10. 2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER ITA NOS. 187,188/DEL/2010 VARDAI OVERSEAS ( P) LTD. VS. ITO 9 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER