Sh. Ashok Arora, New Delhi V. ITO, New Delhi

ITA 1894/DEL/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8025 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-04-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 25-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Keywords: Source of fund; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 234B; 147; 68; 69; 148; 144; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.1894/DEL./2012 (ASSESSMENT YEAR : 2002-03) SHRI ASHOK ARORA, VS. ITO, WARD 37 (3), FLAT NO.76, SUKHDHAM APARTMENTS, NEW DELHI. PLOT NO.1, SECTOR 9, ROHINI, NEW DELHI. (PAN : ADQPA7752E) (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI K.K. JAISWAL, DR DATE OF HEARING : 19.04.2016 DATE OF ORDER : 18.05.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, SHRI ASHOK ARORA (HEREINAFTER REFERRED TO AS THE ASSESSEE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 15.02.2012 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-XXI, NEW DELHI QUA THE ASSESSM ENT YEAR 2002-03 ON THE GROUNDS INTER ALIA THAT :- 1. THAT THE ORDERS PASSED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A) CONFIRMING TO INVOKE TH E JURISDICTION U/S 147 READ WITH SECTION 151 OF THE I NCOME TAX ITA NO.1894/DEL./2012 2 ACT, 1961, ARE PERVERSE TO THE PROVISIONS OF LAW AN D TO THE FACTS OF THE CASE. 2. THAT THE APPELLATE ORDERS PASSED BY THE LD. CIT( A) CONFIRMING THE LEGALITY AND VALIDITY OF THE ORDER P ASSED BY THE ASSESSING OFFICER WITHOUT THE ISSUANCE AND SERVICE OF ANY NOTICE U/S 143(2) IS FURTHER WRONG AND ILLEGAL. 3. THAT THE LD. CIT(A) WAS FURTHER NOT JUSTIFIED AN D HAD ERRED IN LAW TO CONFIRM THE ADDITIONS OF RS.2,00,00 0/- AS ALLEGED TO BE GIVEN TO SH. MR. DEEPAK BHARDWAJ, AS LOAN BY THE APPELLANT DURING THE YEAR, THOUGH MR. DEEPAK BH ARDWAJ HAS DENIED FOR RECEIVING ANY LOAN OF RS.2,00,000/- FROM THE APPELLANT. 4. THAT THE LD. CIT(A) WAS FURTHER NOT JUSTIFIED TO CONFIRM THE ADDITIONS OF RS.50,000/- AS ALLEGED TO BE THE FURTHER LOAN GIVEN TO MR. DEEPAK BHARDWAJ, THROUGH A/C PAYEE CHEQUE FROM HIS DECLARED SOURCES OF INCOME, T HEREFORE, NO ADDITIONS IF ANY COULD BE MADE U/S 69 OF THE INC OME TAX ACT, 1961. 5. THAT THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER ARE FURTHER WRONG, BECAUSE OF NOT ADJUDICAT ING THE AFFIDAVIT FILED BY THE MR. DEEPAK BHARDWAJ WHEREIN THE DENIED SPECIFICALLY TO RECEIVE ANY LOAN / ADVANCE F ROM THE APPELLANT DURING THE YEAR. 6. THAT THE INTEREST CHARGED U/S 234B OF THE INCOME TAX ACT, 1961, IS FURTHER ILLEGAL BECAUSE SPECIFIC DIRE CTIONS IF ANY HAS EVER BEEN PASSED FOR THE LEVY OF THE SAME WHILE PASSING THE ORDERS. 7. THAT THE ASSESSEE ASSAILS HIS RIGHT TO AMEND ALT ER OR CHANGE ANY GROUNDS OF APPEAL AT ANY TIME, EVEN DURI NG THE COURSE OF HEARING OF THE INSTANT APPEAL. PRAYER:- KEEPING IN VIEW OF THE ABOVE, IT IS, THEREFORE, PRA YED:- (I) THAT THE ILLEGAL AND IMPUGNED ASSESSMENT ORDER S PASSED U/S 147 / 144 OF THE INCOME TAX ACT, 1961, F OR THE ASSESSMENT YEAR 2002-03, MAY PLEASE BE QUASHED / CA NCELLED OR ALTERNATIVELY DELETE THE ILLEGAL AND IMPUGNED AD DITIONS ITA NO.1894/DEL./2012 3 MADE OF RS.2,50,000/- BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). (II) THAT THE INTEREST CHARGED U/S 234B MAY PLEASE ALSO BE CANCELLED. (III) THAT ANY OTHER RELIEF WHICH THIS HON'BLE COU RT MAY PLEASE BE DEEMS FIT AND PROPER IN THE FACTS AND TO THE CIRCUMSTANCES OF THE CASE. IT IS PRAYED ACCORDINGLY. 2. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ON T HE BASIS OF A TAX EVASION PETITION RECEIVED BY THE REVENUE TO THE EFF ECT THAT THE ASSESSEE HAS ADVANCED LOAN OF RS.2,50,000/- TO SHRI DEEPAK BHARDWAJ AND RS.3,00,000/- TO SHRI SANJAY REGARDING WHICH CASES ARE PENDING BEFORE THE COURT OF MR. MANOJ, LD. MM, ROHINI, DELHI. AFTER NECESSARY APPROVALS, NOTICE U/S 148 OF THE AC T WAS ISSUED ON 27.02.2009 AND IN RESPONSE THERETO, ASSESSEE ALONG WITH MR. B.K. GUPTA, ADVOCATE/AR ATTENDED THE PROCEEDINGS. ASSES SEES WAS PROVIDED WITH REASONS FOR REOPENING OF THE CASE WHO HAS FILED OBJECTIONS. DURING THE RELEVANT ASSESSMENT YEAR, T OTAL TAXABLE INCOME OF THE ASSESSEE WAS RS.85,650/-. ASSESSEE HA S FAILED TO EXPLAIN THE AMOUNT OF RS.5,50,000/- GIVEN AS LOAN T O THE AFORESAID PERSONS AND AS SUCH, THE SAME HAS BEEN ADDED TO HIS TAXABLE INCOME U/S 68 OF THE ACT AND HIS TOTAL INCOME COMES TO RS. 6,35,650/-. ITA NO.1894/DEL./2012 4 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) WHO HAS DISMISSED THE APPEAL. FEELING AGGRIEVED, THE ASSES SEE CAME UP IN APPEAL BEFORE THE TRIBUNAL BY WAY OF FILING THE PRE SENT APPEAL. 4. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E FOR THE REVENUE, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGH T OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. FROM THE PERUSAL OF THE ASSESSMENT ORDER, WE HAV E NOTICED THAT THE AO WITHOUT APPLYING THE MIND AND WITHOUT B EING SATISFIED, AS REQUIRED U/S 147 OF THE ACT PROCEEDED TO REOPEN THE PROCEEDINGS WHICH ARE BAD IN LAW, AS HAS BEEN HELD IN DECISIONS RENDERED BY HONBLE JURISDICTIONAL HIGH COURT IN PR. COMMISSION ER OF INCOME TAX-4 VS. G & G PHARMA LIMITED IN ITA 545/20 15 ORDER DATED 08.10.2015 AND ITAT, DELHI BENCH H, N EW DELHI IN CASE OF USG BUILDWELL PVT. LTD. VS. ACIT, CENTRA L CIRCLE 23, NEW DELHI ORDER DATED 15.02.2016 . HOWEVER, THE LD. DR FOR THE REVENUE RELIED UPON THE ORDER PASSED BY THE AO AS W ELL AS THE LD. CIT (A). 6. UNDISPUTEDLY, IT IS SETTLED PRINCIPLE OF LAW THA T THE AO IS REQUIRED TO COME TO AN INDEPENDENT CONCLUSION BY AP PLYING HIS OWN MIND THAT HE HAS REASON TO BELIEVE THAT THE INC OME OF THE ITA NO.1894/DEL./2012 5 ASSESSEE HAS ESCAPED ASSESSMENT TO ASSUME THE JURIS DICTION FOR REOPENING OF THE ASSESSMENT U/S 147 / 148 OF THE AC T. 7. TO PROCEED FURTHER, WE WOULD LIKE TO PERUSE THE REASONS RECORDED BY THE AO IN INITIATION OF PROCEEDINGS U/S 147 OF THE ACT WHICH ARE REPRODUCED FOR READY REFERENCE AS UNDER : ASSTT. YEAR 2002-03 A PERUSAL OF THE TEP RECEIVED IN THIS CASE REVEALS THAT THE ASSESSEE HAS ADVANCED LOANS TO VARIOUS PERSONS IN C ASH AS WELL AS IN CHEQUE AND IN SOME INSTANCES THE ASSESSEE HAS RE CEIVED POST DATED CHEQUES FROM PERSONS TO WHOM HE ADVANCES LOAN S. THE COPIES OF RECEIPTS GIVEN BY PERSONS WHO HAVE TAKEN LOANS FROM THE ASSESSEE REVEALS THAT DURING THE PERIOD RELEVANT TO ASSESSMENT YEAR 2002-03 THE ASSESSEE HAS ADVANCED LOANS TO THE FOLL OWING PERSONS AS PER DETAILS GIVEN BELOW :- S. NO. NAME OF THE PARTY AMOUNT POST DATED CHEQUES RECEIVED BY SH. ASHOK ARORA NO. & DATE RELEVANT ASSTT. YEAR CASE NO. PENDING IN THE COURT OF 1 SH. DEEPAK BHARDWAJ 2,00,000 IN CASH & 50,000/- CHEQUE NO. 041920 DATED 12.07.01 OF OBC, ROHINI 877565 DT. 12.03.03 OF FOR RS. 3,00,000 OF SBI, SAMAIPUR 2002 - 03 209/1 /03 SH. MANOJ KUMAR, HONBLE MM, ROHINI, DELHI SH. SANJAY CSP NO.7497 37 DATED 15.06.01 FOR RS. 60,000/- OF OBC, ROHINI & CASH OF RS. 2002 - 03 ITA NO.1894/DEL./2012 6 2,40,000 FROM ANITA ARORA AS MENTIONED ABOVE, THE ASSESSEE HAS FILED CASES B EFORE THE METROPOLITAN MAGISTRATE, WHICH CONFIRMS THE FACT TH AT THE ASSESSEE HAS ADVANCED LOANS TO THE ABOVE MENTIONED PERSONS T O THE TUNE OF RS.5,50,000/- AND HAS ALSO RECEIVED POST DATED CHEQ UE OF RS.3,00,000/-. THE MONEY ADVANCED AS LOANS TO VARIOUS PERSONS TO THE EXTENT OF RS.5,50,000/- DURING THE F.Y. 2001-02 REL EVANT TO ASSTT. YEAR 2002-03 HAS ESCAPED ASSESSMENT. TO RE-ASSESS THE INCOME OF THE ASSESSEE CORRECTLY, ACTION U/S 147 OF THE I.T. ACT, 1961 IS REQUIRED TO BE TAKEN. 8. HONBLE SUPREME COURT DECIDED THE IDENTICAL ISSU E AS TO THE VALIDITY OF THE NOTICE ISSUED U/S 147 OF THE ACT FO R REOPENING OF THE ASSESSMENT IN THE CASE ENTITLED CHHUGAMAL RAJPAL VS. S.P. CHALIHA (1971) 79 ITR 603 BY RETURNING THE FOLLOWING FINDINGS:- THE SUPREME COURT WAS DEALING WITH A CASE WHERE TH E AO HAD RECEIVED CERTAIN COMMUNICATIONS FROM THE COMMISSION ER OF INCOME TAX SHOWING THAT THE ALLEGED CREDITORS OF TH E ASSESSEE WERE NAME-LENDERS AND THE TRANSACTIONS ARE BOGUS. THE AO CAME TO THE CONCLUSION THAT THERE WERE REASONS TO BELIEV E THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE SUPREME CO URT DISAGREED AND OBSERVED THAT THE AO HAD NOT EVEN CO ME TO A PRIMA FACIE CONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. HE APPEARED TO HAVE HAD ONLY A VAGUE FELLING THAT THEY MAY BE BOGUS TRANSACTIONS. IT WAS FURT HER EXPLAINED BY THE SUPREME COURT THAT : BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMI SSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT FOR THAT YEAR OR ALTERNATIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON T HE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE OF INFO RMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR. UNLESS THE REQUIREMENTS OF CL. (A) OR CL. (B) OF S. 147 ARE ITA NO.1894/DEL./2012 7 SATISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A N OTICE UNDER S. 148. THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFI ED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COULD SATISFY THE REQUIREMENTS UNDER SECTION 147 AND THEREFORE COULD NOT HAVE ISSU ED NOTICE UNDER SECTION 148. 9. SIMILAR ISSUE HAS BEEN DECIDED BY HONBLE JURISDICTIONAL HIGH COURT IN CASE OF PR. COMMISSIONER OF INCOME TA X-4 VS. G & G PHARMA LIMITED IN ITA 545/2015 ORDER DATED 08.1 0.2015 BY RELYING UPON THE HONBLE SUPREME COURT JUDGMENT CITED AS CHHUGAMAL RAJPAL VS. S.P. CHALIHA (SUPRA). THE OPERATIVE PART OF THE JUDGMENT IN CASE OF G & G PHARMA LIMITED (SUPRA) IS AS UNDER : 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH 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 INVE STIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSES SEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER TH E AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABO UT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE M ATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMOD ATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE B EEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VE RY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHIC H MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14 TH NOVEMBER 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 HAVE 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 VIEW O F THE ITA NO.1894/DEL./2012 8 COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIEN T CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREIN BEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MI ND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN TH E PRESENT CASE. 10. NOW, ADVERTING TO THE CASE AT HAND, IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN CHHUGAMAL RAJPAL VS. S.P. CHALIHA (SUPRA) AND HONBLE JURISDICTIONAL HIGH COURT IN G & G PHARMA LIMITED (SUPRA) DISCUSSED IN THE PRECEDING PARAS, WE ARE OF THE CONSIDERED VIEW THAT INITIATION OF THE P ROCEEDINGS U/S 147 OF THE ACT BY THE AO IN THIS CASE ON THE BASIS OF T AX EVASION PETITION ARE ITSELF BAD IN LAW AS THE AO HAS NOT SA TISFIED HIMSELF BEFORE INITIATING THE PROCEEDINGS THAT INCOME OF TH E ASSESSEE HAS ESCAPED ASSESSMENT FOR THE FOLLOWING REASONS :- (I) THAT AO HAS MERELY PROCEEDED TO INITIATE PROCEEDING S U/S 147 OF THE ACT ON THE BASIS OF TAX EVASION PETI TION THAT THE ASSESSEE HAS PROVIDED LOAN OF RS.2,50,000/ - AND RS.3,00,000/- TO MR. DEEPAK AND MR. SANJAY RESPECTIVELY; (II) THAT THE AO HAS MERELY FORWARDED THE INTIMATION CONTAINED IN THE TAX EVASION PETITION TO THE ASSESS EE WITHOUT RECORDING ANY REASONS WHATSOEVER; ITA NO.1894/DEL./2012 9 (III) THAT THE AO HAS NOT EVEN CAME TO PRIMA FACIE CONCLUSION THAT THE ALLEGED LOAN TRANSACTION BETWEE N THE ASSESSEE AND DEEPAK AND SANJAY WERE GENUINE TRANSACTIONS AND AS TO WHAT ARE THE FINDINGS RETURN ED BY THE LD. CIVIL COURT IN THE ALLEGED SUIT FILED BY THE ASSESSEE; (IV) THAT THE AO HAS ADMITTEDLY NOT RECORDED THAT HE HAS REASON TO BELIEVE THAT THE INCOME OF RS.5,50,000/- HAS ESCAPED ASSESSMENT AND HE HAS SATISFIED HIMSELF BEFORE INITIATING THE PROCEEDINGS U/S 147 OF THE AC T; (V) THAT WHEN THE AO WITHOUT RECORDING ANY REASON FOR REOPENING FORWARDED THE INFORMATION RECEIVED BY WAY OF TAX EVASION PETITION, ACCORDING OF APPROVAL BY C IT FOR REOPENING IS ALSO A MECHANICAL EXERCISE WITHOUT APPLYING THE MIND AND AS SUCH, APPROVAL ACCORDED BY THE CIT IS ALSO NOT SUSTAINABLE. RELIANCE IN THIS REGARD IS PLACED UPON JUDGMENT IN CASE OF VIJAY RAMESHBHAI GUPTA VS. ACIT (2013) 32 TAXMAN.COM 41 (GUJ.). (VI) THAT EVEN AFTER INITIATION OF THE PROCEEDINGS U/S 147/148, THE AO HAS FAILED TO LAY HAND ON THE EVIDENCE IF SANJAY HAS RECEIVED A SUM OF RS.2,50,000/- IN CASH AS ADVANCE FROM AMITA ARORA, ITA NO.1894/DEL./2012 10 W/O ASHOK ARORA, RATHER RESORTED TO THE BEST JUDGME NT ASSESSMENT U/S 144 OF THE ACT; (VII) THAT NEITHER THE AO HAS APPLIED HIS MIND TO SATISFY HIMSELF TO REOPEN THE CASE NOR HE HAS INVESTIGATED THE MATTER DURING REASSESSMENT PROCEEDINGS NOR CIT HAD APPLIED HIS MIND BEFORE ACCORDING APPROVAL FOR REOPENING. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, SINCE THE INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT AN D CONSEQUENT ASSESSMENT FRAMED U/S 143(3)/ 147 HAVE H ELD TO BE NOT SUSTAINABLE IN THE EYES OF LAW, GROUNDS RAIS ED BY THE ASSESSEE CHALLENGING THE ADDITION OF RS.2,50,000/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT (A) U/S 68 OF T HE ACT HAS SINCE BECOME INFRUCTUOUS. RESULTANTLY, PRESENT APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED ORDER PRONOUNCED IN OPEN COURT ON THIS 18 TH DAY OF MAY, 2016. SD/- SD/- (N.K. SAINI) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 18 TH DAY OF MAY, 2016 TS ITA NO.1894/DEL./2012 11 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT-XXXIII, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.