M/s. Baldev Arya HUF, New Delhi V. ITO, New Delhi

ITA 1955/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3338 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-04-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 03-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBANI CHAUDHURI
• Assessee Lawyers: PUNEET THUKRAL
• Keywords: Gift; Principle of natural justice; Reassessment proceedings
• Section: 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC NEW DELHI BEFORE SHRI B.P. JAIN, ACCOUNTANT MEMBER ITAS NO.1955/DEL/2014 ASSESSMENT YEAR 2003-04 BALDEV ARYA HUF, 2664/2, BEADONPURA, KAROL BAGH, NEW DELHI. PAN: AADHB 4207K VS. ITO, WARD-33(2), NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : MS. BEDOBANI CHAUDHURI, SR.D.R. ASSESSEE(S) BY : SHRI PUNEET THUKRAL, CA / DATE OF HEARING : 24/04/2017 / DATE OF PRONOUNCEMENT: 26/04/2017 ORDER THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF LEARNED CIT(A)- XIX, NEW DELHI VIDE ORDER DATED 22.01.2013 FOR THE ASSESSMENT YEAR 2003- 04. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL AS UNDER: 1) THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE IMPUGNED ORDER PASSED BY THE LD. C.LT. (A) IS ARBITRARY, ILLEGAL, VIOLATIVE OF NATURAL JUSTICE AND AGAINST THE FACTS OF THE CASE AND HENCE LIABLE TO BE SET AS IDE. 2) THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. A.O. HAS ERRED IN FRAMING IMPUGNED ASSESSMENT WITHOUT ASSUMI NG JURISDICTION IN LAW AND WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS AS PER SECTION 147 TO 153 OF THE INCOME TAX ACT,1961. 3)THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. A.O. HAS ERRED IN FRAMING THE IMPUGNED ASSESSMENT WITHOU T GRANTING ADEQUATE OPPORTUNITY OF HEARING TO THE ASSESSEE AND WITHOUT CONFRONTING THE ENTIRE ADVERSE MATERIAL USED AGAINST THE ASSESSEE. 4)THAT ON THE FACTS AND IN CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. A.O. HAS ERRED IN MAKING AN UNWARRANTED ADDITION OF RS. 4,01,000/- U/S.68 OF THE INCOME TAX ACT,1961 INSPITE OF THE FACT THAT SO URCE OF RECEIPT WAS PROPERLY EXPLAINED BEFORE HIM. 5)THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE LD. CIT(A) HAS ERRED IN DENYING SUFFICIENT OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE PARTIES/CREDITORS BEFORE THE A.O. WHICH WERE SUBJEC T TO ADDITION U/S 68 OF THE INCOME TAX ACT . 6)THAT THE APPELLANT RESERVES THE RIGHT TO ADD, ALT ER, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL . ITAS NO.1955/DEL/2014 2 2. GROUND NO.1 IS LEGAL AND GROUNDS NO.2 AND 3 ARE ON MERIT. 3. LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTSET A RGUED ABOUT THE LEGAL GROUND. THE ASSESSEE RECEIVED FOLLOWING AMOUNT WHIC H WERE MADE SUBJECT MATTER OF ADDITION AS UNDER: A) CLS CONSTRUCTIONS PVT. LTD. RS.1,50,000/- B) CIJSONS POLYCOATS PVT. LTD. RS.1,50,000/- C) PIC INDIA PVT. LTD. RS.1,00,000/- D) CASH DEPOSIT RS.1,000/- TOTAL RS.4,01,000/- 4. THE ASSESSEE FIELD THE RETURN OF INCOME WHICH WA S PROCESSED U/S.143(3) WHICH WERE REOPENED U/S.147 AND THE NOTI CE WERE ISSUED U/S.148 OF THE ACT ON 30.03.2010. THE REASONS ASKED FOR BY THE ASSESSEE WERE SUBMITTED, REPRODUCED HEREINBELOW. 1. THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELHI HAS CARRIED OUT INVESTIGATION IN THE CASES OF CERTAIN GROUP OF PERS ONS WHO WERE PROVIDING ACCOMMODATION ENTR I ES . THESES ENQUIRIES WERE INITIATED TO PROBE INTO SOME BANK ACCOUNTS WHICH WERE USED TO IS S UE CHEQUES TO ENTRY SEEKERS OR BENEFICIARIES AGAINS T CASH PA I D BY THEM TO THE ENTRY OPERATIONS . SUCH A CAMOUFLAGED TRANSACTION CAME TO LIGHT DURING THE COURSE OF SURVEY IN THE CASE OF M/ S . GURCHARAN JEWELLERS WHOSE PROPRIETOR SHRI ASHOK KUMAR CHAUHAN HAD ADMITTED TO HAVE TAKEN CHEQUES UNDER THE GARB OF GIFTS AFTER GIVING CASH TO THE ENTRY OP ERATOR . PROBE WAS INITIATED INTO THE ACCOUNTS WHICH WERE USED TO PROVIDE THESE ENTRIES . THESE INVEST IG ATIONS LED TO REVEAL I NG OF MANY MORE BANK ACCOUNTS WHICH WERE BEING USED BY THE ENTRY OPERA T ORS FOR THE PURPOSE OF GIVING ACCOMMODATION ENTR I ES . 2 E X TE N SI VE ENQUIRIES WERE MADE INTO NUMEROUS SUCH BANK ACCO UNTS THE ACCOUNT HOLD ERS, T HE PERSONS OPERATING THESE ACCOUNTS AND THE PERSONS FOR WHOM SUCH ACCOUNT HOLD E R S WERE WORKING . THESE ENQUIRIES REVEALED INTER ALIA THE FOLLOWING :- 2 . 1 E NTRIES WERE BEING BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURP OSE OF BUSINESS OR FOR PERS ONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC. IN THE F ORM OF GIFTS, SHARE APPLICATION MONEY, L O A N S E TC . 2 . T O INFLATE EXPENSES IN THE TRADING AND PROFIT AND LO SS ACCOUNT SO AS TO REDUCE THE REAL PROF I TS AND THEREBY PAY LESS TAXES . 2.2 T HE ASSESSES WHO HAD UNACCOUNTED MONEY ( CALLED AS ENTRY TAKERS OR BENEFIC I ARIES) A ND WA N TED TO INTRODUCE THE SAME IN THE BOOKS OF ACCOUNTS WITHOUT PAYING TAX, APPROACHED A NOTHER PE R SON (CALLED AS ENTRY OPERATOR) AND HANDED OVER THE CASH (PLUS COMMISSION) AND H A D TAKEN CHEQUE/DDS/POS. THE CASH WAS BEING DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT E ITHER IN HIS OWN NAME OR IN THE ITAS NO.1955/DEL/2014 3 NAME OF RELATIVES/FRIENDS OR OTHER PERSONS H I RED BY HIM , FOR THE PURPOSE OF OPENING BANK ACCOUNT . IN MOST OF THESE BANK ACCOUNTS, THE INTRODUCER WAS THE MAIN ENTRY OPERATOR AND THE CASH DEPOSIT SLIPS AND OTHER INSTR UMENTS W E RE FILLED BY HIM. THE OTHER PERSONS (IN WHOSE NAME THE A/C IS OPENED) ONL Y 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 IN THE NAME OF THE BENEFICIARY FROM THE SAME ACCOUNT (IN WHICH THE CASH IS DEPOSITED) OR AN OTHER ACCOUNT IN WHICH FUNDS WERE TRANSFERRED THROUGH CLEARING IN TWO OR MORE ST AGES . THE BENEFICIARY IN TURN DEPOSITED THESE INSTRUMENTS I N HIS BANK ACCOUNTS AND THE MONEY CAME TO HIS REGUL AR BOOKS OF ACCOUNT IN THE FORM OF GIFT, S H A RE APPL I CATION MONEY, LOAN ETC THROUGH BANKING CHANNELS . 2. 3 THE OPERATORS GAVE THE ACCOUNT HOLDERS AMOUNTS RA NGING FROM RS . 1000 TO 2000 PER MONTH. THE S E ACCOUN T HOLDERS WERE MASONS , PLUMBERS , ELECTRICIANS , PEONS , DRIVERS ETC , WHO S E E ARNINGS ARE NOT SUFFICIENT FOR A LIV I NG. THEY EARNED NORMALLY 3 TO 5 THOUSANDS PER MONTH FROM THEIR NORMAL WORK AND BY WORKING FOR THE ENTRY OPERATORS EARNED EXTRA INCOME OF 2 TO 4 THOUSANDS P ER MONTH . THEIR SIGNATURES WERE TAKEN ON BLANK GIFT DEEDS , CHEQUE BOOKS, SHARE APPLICATION MONEY ETC. IN FACT, THESE PERSONS SIGNED ALL TYPES OF PAPERS THEY WERE ASKED TO SIGN . THEY WERE MADE DIRECTORS OF COMPANIES, PARTNERS OF FIRMS AND PROPRIETORS OF DIFFERENT CONCERNS SOLELY FOR OPERATION OF THESE ACCOUNTS . ACTUALLY, MANY OF THEM WERE NOT EVEN AWARE OF THE T AX IMPLICATIONS ETC. THEIR ONLY CONCERN WAS WITH THE F EW THOUSAND RUPEES GIVEN TO THEM BY THE ENTRY OPERATORS . 3 . SUMMING UP, THE REPORT AS A RESULT OF THESE EXTENSI VE ENQUIRIES CARRIED OUT BY THE D.I . T . [LNV.], NEW DELHI HAS ASSAILED GENUINENESS OF TRANS ACTIONS, WHETHER SHOWN BY BENEFICIARIES AS INFLOW OF SHARE CAPITAL/LOAN OR RE CEIPT OF GIFTS OR CONSIDERATION FOR SALE - PURCHASE . IT HAS ALSO DEALT A BODY BLOW TO THE CREDITWORTHINE SS OF THE PERSONS /PERSONS CONTROLLING THE CONCERNS WHO HAVE GIVEN TH ESE CREDIT ENTRIES/SHARE CAPITAL/GIFTS/SALE CONSIDERATION AS THEY HAVE BEEN SEEN TO BE MAN OF NO MEANS. 4 . 'LN THE IN S TANT CASE OF THE ASSESSEE, M/S BALDEV ARYA (HUF) THE FOLLOWING CREDITS HAVE BEEN SHOWN I N THE BANK ACCOUNT :- BANK OF THE BRANCH INSTRUMENT AMOUNT DATE CREDIT ENTRY COMING FROM THE ACCOUNT OF A SSESSEE OF THE NO . BANK F EDERAL BANK KAROL 717702 50,000 14/11/2002 CLS CONSTRUCTIONS BAGH PVT. LTD. F EDERAL BANK KAROL 717705 1 , 00 , 000 14/12/2002 CLS CONSTRUCTIONS BAGH PVT. LTD . 4 . 1 IN VIEW OF THE FINDINGS OF THE INVESTIGATION REPORT , THE LENDERS IN THESE CASES HAVE BEEN PROVED TO BE MEN/PARTIES OF NO CREDITWORTHINESS. TH E STATEMENT THE LETTERS OF AD MI S SION CLEAR L Y SHOW THAT THESE TRANSACTIONS ARE NON GENUINE. THE REFORE THE AFORESAID CR E D I T EN T R IES ARE SQUARELY HIT BY SECTION 68 OF THE I . T. ACT . I THEREFORE HAVE REASONS TO BEL IE VE THAT THIS AMOUNT OF RS . 1,50,000/ - REPRESENTS INCOME OF THE ASSESSEE CHARGEABLE TO ITAS NO.1955/DEL/2014 4 TAX WHICH HAS ESCAPED ASSESSMENT FOR A.Y. 2003-04 . T H E NECES S ARY APPROVAL ULS 151(2) MAY KINDLY BE ACCORDED FOR ISSUE OF NOTICE ULS 148 OF THE INCOM E TAX ACT , 1961 FOR A . Y . 03-04 . SD/ - ITO. WARD 33(2) . NEW DELHI 5. IT WAS ARGUED BY THE LEARNED COUNSEL FOR THE ASS ESSEE THAT THE ASSESSING OFFICER REOPENED THE CASE ONLY ON THE BAS IS OF THE INVESTIGATION RECORD AND NO INDEPENDENT APPLICATION OF MIND WAS M ADE. IT WAS MENTIONED THAT THERE WAS STATEMENT ON OATH AND LETTERS OF ADM ISSION THAT THESE TRANSACTIONS ARE NON GENUINE. IT WAS ARGUED THAT TH ERE WAS NO STATEMENT ON OATH ON RECORD AND NO LETTER OF ADMISSION HAS BEEN PLACED ON RECORD. THEREFORE, THE LEARNED COUNSEL FOR THE ASSESSEE ARG UED THAT THE ASSESSMENT /RE-ASSESSMENT MADE IS BAD IN LAW AND NEEDS TO BE Q UASHED. 6. LEARNED DR, ON THE OTHER HAND, RELIED UPON THE O RDERS OF BOTH THE AUTHORITIES BELOW. 7. I HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED T HE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSING OFFICER HAS ACTED UPON THE BASIS OF INVESTIGATION REPORT AS IS EVIDENT FROM TH E REASONS RECORDED HEREINABOVE. THERE IS NO STATEMENT ON OATH AND LETT ERS OF ADMISSION WHICH WERE GIVEN TO THE ASSESSEE IN SPITE OF REPEATED REQ UEST MADE AND ALSO THE LEARNED DR COULD NOT PRODUCE SUCH STATEMENT ON OATH AND LETTERS OF ADMISSION. IN SUCH CIRCUMSTANCES AND FACTS OF THE C ASE, ASSESSING OFFICER DOES NOT ACQUIRE ANY JURISDICTION TO MAKE ASSESSMEN T / RE-ASSESSMENT U/S.147/148 OF THE ACT. THE RELIANCE IS PLACED UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTELS P. LTD. VS. INCOME TAX OFFICER AND ANOTHER, REPORTED IN (2011) 338 ITR 51 (DELHI) WHERE THE RELEVANT DECISION IS REPRODUCED HEREINUNDER: ITAS NO.1955/DEL/2014 5 HELD, ALLOWING THE PETITION, THAT THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 L AKHS DURING FINANCIAL YEAR 2002-03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMA TION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIR EMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT , EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVI DENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMEN T OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT APPLY HIS OWN MIND TO THE INF ORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE T HAT THE COMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED IN SEPT EMBER, 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PR OCEEDINGS WERE NOT VALID AND WERE LIABLE TO BE QUASHED. 7.1 RELIANCE IS ALSO PLACED UPON THE DECISION OF HO NBLE DELHI HIGH COURT IN THE CASE OF SARTHAK SECURITIES CO. P. LTD. VS. ITO, REPORTED IN (2010) 329 ITR 110 (DEL). 8. IN THE CIRCUMSTANCES AND FACTS OF THE PRESENT CA SE AND THE DECISION RELIED UPON HEREINABOVE THE AO DOES NOT ACQUIRE JUR ISDICTION TO ASSESS OR RE- ASSESS THE MATTER IN THE PRESENT CASE AND ACCORDING LY THE ASSESSMENT / RE- ASSESSMENT ARE DIRECTED TO BE QUASHED. 9. IN THE RESULT, THE LEGAL GROUND OF THE ASSESSEE, I.E. GROUND NO.1 IS ALLOWED. 10. SINCE THE ASSESSEE SUCCEEDS ON LEGAL GROUND, TH EREFORE, THE GROUNDS ON MERIT BECOME ACADEMIC IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY 26 TH APRIL, 2017 SD/- (B.P. JAIN) ACCOUNTANT MEMBER DATED: 26/04/2017