ACIT, New Delhi V. Asis Plywood Pvt. Ltd(Formerly known as M/s Metro Doors Pvt. Ltd), New Delhi

ITA 2144/DEL/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5349 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 10-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI N.K. SAINI, VICE PRESIDEN T AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBE R ITA NO.2144/DEL/2015 ASSESSMENT YEAR: 2006-07 ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 3(2), NEW DELHI. VS M/S ASIS PLYWOOD PVT. LTD. (FORMERLY KNOWN AS M/S METRO DOORS PVT. LTD.), E-430, GREATER KAILASH-I, DELHI-110048 APPELLANT RESPONDENT DEPARTMENT BY: SHRI SRIDHAR DORA, S R. DR ASSESSEE BY: SHRI SANJEEV JAI N, CA DATE OF HEARING: 22.11.201 8 DATE OF PRONOUNCEMENT: 28.01.2019 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER DATED 29.01.2015 PASSED BY THE LD. CIT (APPEALS)-1, NEW DELHI FOR ASSESSMENT YEAR 2006-07. 2.0 BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS ORIGINALLY FILED ON 22 .02.2007 DECLARING TOTAL INCOME AT NIL. SUBSEQUENTLY, INFOR MATION WAS RECEIVED BY THE DEPARTMENT VIDE LETTER DATED 20.3.2 013 FROM THE INVESTIGATION WING OF THE DEPARTMENT THAT THE ASSES SEE HAD ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 2 RAISED SHARE CAPITAL AND SHARE PREMIUM TOTALLING TO RS. 1,25,00,000/- DURING THE YEAR UNDER CONSIDERATION B UT HAD NOT FILED ANY RETURN OF INCOME. FURTHER, THE ASSESSING OFFICER RECEIVED ANOTHER INFORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES OF RS. 19,00,500/- FROM ONE SHRI S.K. JAIN WHO HAD BEEN FOUND TO BE PR OVIDING ACCOMMODATION ENTRIES. ACCORDINGLY, THE ASSESSING OFFICER ISSUED NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 ( HEREINAFTER CALLED 'THE ACT') AFTER RECORDING REASONS THAT INCO ME TO THE EXTENT OF RS. 1,44,00,500/- HAD ESCAPED ASSESSMENT. THE A SSESSMENT WAS COMPLETED U/S 147 R/W 143(3) OF THE ACT AT AN I NCOME OF RS. 1,44,00,500/-. 2.1 AGGRIEVED, THE ASSESSEE APPROACHED THE LEARNED FIRST APPELLATE AUTHORITY AND CHALLENGED THE INITIATION O F REASSESSMENT PROCEEDINGS AS WELL AS CHALLENGED THE ADDITION ON M ERITS. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED IN THE A PPELLATE ORDER THAT FROM THE PERUSAL OF REASONS RECORDED BY THE ASSESSING OFFICER, IT WAS APPARENT THAT THE ENTIRE BASIS FOR REOPENING OF THE CASE WAS BASED ON THE PREMISE THAT THE ASSESSEE COM PANY HAD NOT FILED THE RETURN OF INCOME FOR THE YEAR UNDER C ONSIDERATION BUT THE FACT OF THE MATTER WAS THAT THE ASSESSEE HA D FILED THE ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 3 RETURN OF INCOME ON 22.02.2007 VIDE ACKNOWLEDGEMENT NO. 1111. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD T HAT THE VERY BASIS FOR ISSUANCE OF NOTICE U/S 148 DID NOT EXIST. LD. COMMISSIONER OF INCOME TAX (APPEALS) ALSO NOTED THA T WHILE RECORDING REASONS U/S 148, THE ASSESSING OFFICER DI D NOT APPLY HIS MIND TO THE INFORMATION RECEIVED FROM THE INVES TIGATION WING AND THAT THE ASSESSING OFFICER HAD RECORDED THE REA SONS IN A VERY CASUAL/MECHANICAL MANNER AS HE HAD MERELY REPRODUCE D THE LETTER/LIST RECEIVED FROM THE INVESTIGATION WING. IT WAS FURTHER NOTED BY THE LD. CIT (APPEALS) THAT WITH RESPECT TO THE INFORMATION RECEIVED FROM THE INVESTIGATION WING RE LATING TO ACCOMMODATION ENTRIES OF RS. 19,00,500/- FROM SHRI S.K. JAIN, THE ASSESSING OFFICER HAD NOT EVEN GIVEN THE BASIC DETAILS, NAME OF THE PARTIES AND NATURE OF TRANSACTIONS AND, THUS , THE REASONS HAD BEEN RECORDED IN A MECHANICAL MANNER WITHOUT IN DEPENDENT APPLICATION OF MIND. THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) WENT ON TO HOLD THAT THE INITIATION OF RE ASSESSMENT PROCEEDINGS AND ISSUANCE OF NOTICE U/S 148 OF THE A CT WAS BAD IN LAW AND WAS NOT SUSTAINABLE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) PROCEEDED TO QUASH THE NOTICE ISSUED U/S 148 AS WELL AS THE CONSEQUENT ASSESSMENT ORDER. THE DEPA RTMENT IS ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 4 NOW IN APPEAL BEFORE THE ITAT AGAINST THE QUASHING OF THIS REASSESSMENT ORDER AND HAS RAISED THE FOLLOWING GRO UNDS OF APPEAL:- 1. THE LD. CIT (A) ERRED IN QUASHING THE ASSESSMEN T AND ISSUE OF NOTICE U/S 148 OF THE ACT. 2. THE LD. CIT(A) ERRED IN OBSERVING THAT THE RETURN W AS AVAILABLE WITH THE A.O. AND HENCE THE MAIN GROUND O F REOPENING ITSELF THAT THE RETURN WAS NOT AVAILABLE ITSELF IS WRONG. THE FACT IS THAT THE ASSESSEE HAD FILED RETU RN WITH WRONG ASSESSING OFFICER WHICH IS A NON-EST RETURN. 3. THE LD. CIT(A) ERRED IN HOLDING THAT THE ONLY REASO N FOR REOPENING BEING A FINDING OF INVESTIGATION WING OF DEPARTMENT THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES FROM THE ENTITIES INDENTIFIED AS ENTRY OPERATORS, IS NOT SUFFICIENT MATERIAL FOR REO PENING THE ASSESSMENT. 4. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3.0 THE LD. SR. DR SUBMITTED THAT THE LD. COMMISSIO NER OF INCOME TAX (APPEALS) HAD ERRED IN OBSERVING THAT THE RETURN WAS AVAILABLE WITH THE A.O. AND HENCE THE MAIN GROUND O F REOPENING ITSELF THAT THE RETURN WAS NOT AVAILABLE ITSELF IS WRONG. THE FACT IS THAT THE ASSESSEE HAD FILED RETURN WITH WRONG ASSES SING OFFICER WHICH IS A NON EST RETURN. THE LD. SR. DR ALSO SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD ERRED IN HOLDING ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 5 THAT THE ONLY REASON FOR REOPENING BEING A REPORT F ROM THE INVESTIGATION WING OF DEPARTMENT THAT THE ASSESSEE HAD RECEIVED ACCOMMODATION ENTRIES FROM THE ENTITIES IDENTIFIED AS ENTRY OPERATORS WAS NOT SUFFICIENT MATERIAL FOR REOPENING THE ASSESSMENT. IT WAS SUBMITTED THAT THE ASSESSING OF FICER HAD DEFINITE INFORMATION FROM THE INVESTIGATION WING TH AT THE ASSESSEE COMPANY WAS ONE OF THE BENEFICIARY COMPANIES OF SHR I S.K. JAIN AND HAD RECEIVED ACCOMMODATION ENTRIES AND, THEREFO RE, THE ASSESSING OFFICER HAD REASON TO BELIEVE THAT THE IN COME OF THE ASSESSEE HAD ESCAPED ASSESSMENT AND, THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN ISSUING NOTICE U/S 148 OF THE ACT. THE LD. SR. DR ALSO PLACED RELIANCE ON NUMEROUS CASE LAWS I N SUPPORT OF HIS CONTENTION THAT THE QUASHING OF RE-ASSESSMENT W AS BAD IN LAW. 4.0 IN RESPONSE, THE LD. AR SUBMITTED THAT THE LD. SR. DR WAS FACTUALLY INCORRECT IN ALLEGING THAT THE ASSESSEE H AD FILED RETURN WITH THE WRONG ASSESSING OFFICER. IT WAS SUBMITTED THAT THE ASSESSEE HAD FILED THE RETURN WITH THE JURISDICTION AL ASSESSING OFFICER ONLY BUT IT WAS THE ASSESSING OFFICER NOT H AVING JURISDICTION OVER THE ASSESSEE WHO HAD INITIATED TH E REASSESSMENT PROCEEDINGS. THE LD. AR ALSO PLACED RELIANCE ON T HE FINDINGS OF ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 6 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND SU BMITTED THAT IN THE PRESENT CASE, THE REASONS RECORDED FOR INITIATING THE PROCEEDINGS U/S 147 OF THE ACT COULD NOT BE RECORDE D AS REASON TO BELIEVE AS REQUIRED UNDER THE MANDATE OF THE SE CTION BECAUSE THE REASONS RECORDED WERE TOTALLY VAGUE AND THE ASS ESSING OFFICER HAD FAILED TO APPLY HIS MIND ON THE INFORMATION SAI D TO HAVE BEEN RECEIVED FROM THE INVESTIGATION WING. HE ALSO DREW OUR ATTENTION TO THE REASONS RECORDED IN THIS CASE AND SUBMITTED THAT IT WAS THE APPARENT FROM THE REASONS THAT THE ASSESSING OFFICE R HAD NOT CARRIED OUT ANY INDEPENDENT INQUIRY APART FROM RELY ING ON THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WH ILE RECORDING HIS SATISFACTION THAT THE CASE WAS TO BE REOPENED. IT WAS PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME TA X (APPEALS) BE UPHELD. 5.0 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO GONE THR OUGH THE REASONS RECORDED BY THE ASSESSING OFFICER IN THIS R EGARD. SECTION 147 OF THE ACT EMPOWERS THE ASSESSING OFFICER TO IN ITIATE PROCEEDINGS UNDER THAT SECTION TO ASSESS OR REASSES S ANY INCOME OF THE ASSESSEE THAT ESCAPES ASSESSMENT. THE POWERS TO INITIATE PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE, HOWEV ER, NOT ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 7 UNFETTERED AND UNRESTRICTED. IN ORDER TO INITIATE P ROCEEDINGS UNDER SECTION 147, THE ASSESSING OFFICER HAS TO COM PLY WITH THE PROVISIONS OF SECTIONS 148 TO 153 OF THE ACT. UNDER THE SCHEME OF THE ACT, THE ASSESSING OFFICER CAN INITIATE PROCEED INGS UNDER SECTION 147 OF THE ACT ONLY IF HE HAS REASONS TO B ELIEVE THAT ANY INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. IN T ERMS OF SECTION 148 OF THE ACT, THE ASSESSING OFFICER IS RE QUIRED TO RECORD THE REASONS ON THE BASIS OF WHICH PROCEEDINGS UNDER SECTION 147 OF THE ACT ARE INITIATED. THE REASONS RECORDED MUST SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER TO COM E TO THE BELIEF THAT ANY INCOME OF THE ASSESSEE HAD ESCAPED ASSESSM ENT, AND THUS THE REASONS ACT AS THE STEPPING STONE IN INITI ATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT. THE VALID ITY OR OTHERWISE OF THE PROCEEDINGS INITIATED UNDER SECTIO N 147 IS ADJUDGED ON THE BASIS OF SUCH REASONS RECORDED. THE REASONS RECORDED MUST, THEREFORE, SHOW APPLICATION OF MIND BY THE ASSESSING OFFICER. IF THE REASONS RECORDED ARE VAGU E OR AMBIGUOUS, THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE ACT ARE LIABLE TO BE HELD AS INVALID AND BAD IN LAW. 5.1 A PERUSAL OF THE REASONS SHOWS THAT THE ASSESSI NG OFFICER HAS CLEARLY BORROWED THE INFORMATION RECEIVED FROM THE ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 8 INVESTIGATION WING BUT HE HAS NOT CARRIED OUT ANY V ERIFICATION TO TEST THE VERACITY OF THE INFORMATION WHICH HAS BEEN PASSED BY THE INVESTIGATION WING. THUS, HE HAS PROCEEDED TO FORM AN OPINION ON THE BASIS OF BORROWED REASONS AND THERE IS NO IN DEPENDENT APPLICATION OF MIND. IT IS ALSO SEEN IN THE ASSESS MENT ORDER THAT THE ASSESSING OFFICER HAD DULY NOTED THAT THE ORIGI NAL RETURN OF INCOME WAS FILED ON 22.02.2007 BUT HAS NOTED IN THE REASONS THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME. T HUS, THE ASSESSING OFFICER HAS CONTRADICTED HIMSELF BY ADMIT TING THAT THE RETURN WAS FILED AND THEN SAYING THAT IT WAS NOT FI LED. THUS, THIS ESTABLISHES THAT NOTICE U/S 148 VIS--VIS THE REASO NS RECORDED IS DEVOID OF ANY APPLICATION OF MIND. 5.2 AN IDENTICAL ISSUE ARISE BEFORE THE HONBLE DEL HI HIGH COURT IN THE CASE OF PRINCIPAL CIT VS. RMG POLYVINYL (I) LTD. REPORTED IN (2017) 83 TAXMANN.COM 348 (DEL) AND THE HONBLE DEL HI HIGH COURT UPHELD THE ORDER OF THE ITAT HOLDING THAT THE REOPENING OF THE ASSESSMENT U/S 147 WAS BAD IN LAW. IN THIS CAS E, THE ASSESSEE HAD FILED THE RETURN OF INCOME DECLARING A CERTAIN INCOME AND THE ASSESSING OFFICER SUBSEQUENTLY HAD ISSUED N OTICE U/S 147 OF THE ACT ON THE GROUND THAT INFORMATION HAD B EEN RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE WAS A BENEFICIARY OF ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 9 ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ESTABLI SHED ENTRY OPERATORS IDENTIFIED BY THE INVESTIGATION WING. AS PER THE INFORMATION RECEIVED FROM THE INVESTIGATION WING, T HE ACCOMMODATION PROVIDER HAD GIVEN ACCOMMODATION ENTR IES IN THE GARB OF SHARE APPLICATION MONEY ETC. NOTICE WAS IS SUED BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT ON THE B ASIS THAT INCOME CHARGEABLE TO TAX TO THE EXTENT OF ACCOMMODA TION ENTRY HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER ALSO NOTED THAT THE ASSESSEE HAD NOT FILED ANY RETURN OF INCOME. T HE ITAT HELD IN FAVOUR OF THE ASSESSEE BY HOLDING THAT REOPENING U/ S 148 WAS BAD IN LAW. THE REVENUE, THEREAFTER, APPROACHED THE HO NBLE DELHI HIGH COURT AND THE HONBLE HIGH COURT HELD THAT THE RE WAS A FAILURE OF APPLICATION OF MIND BY THE ASSESSING OFF ICER AS IT HAD PROCEEDED ON TWO WRONG PREMISES, ONE REGARDING NON- FILING OF THE RETURN AND SECOND REGARDING THE EXTENT OF ACCOMMODA TION ENTRIES. THE HONBLE DELHI HIGH COURT HELD THAT TH E COURT WAS UNABLE TO DISCERN THE LINK BETWEEN THE TANGIBLE MAT ERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. THE COURT FURTHER HELD THAT THE INFORM ATION RECEIVED FROM THE INVESTIGATION WING CANNOT BE SAID TO BE TA NGIBLE MATERIAL PER SE WITHOUT A FURTHER INQUIRY BEING UNDERTAKEN BY THE ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 10 ASSESSING OFFICER AND IN THE PRESENT CASE, THE ASSE SSING OFFICER HAD DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEED ING ON THE ERRONEOUS PREMISE THAT THE ASSESSEE HAD NOT FILED T HE RETURN WHEN IN FACT IT HAD. THE HONBLE HIGH COURT PROCEE DED TO UPHOLD THE ORDER OF THE TRIBUNAL. 5.3 IN THE INSTANT CASE BEFORE US ALSO, THE FACTS A RE IDENTICAL AND, THEREFORE, RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENT AS LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CA SE OF PRINCIPAL CIT VS. RMG POLYVINYL (I) LTD. (SUPRA), WE UPHOLD T HE FINDINGS OF THE LD. CIT (A) IN HOLDING THAT THE INITIATION OF R EASSESSMENT PROCEEDINGS IN THE INSTANT CASE WAS BAD IN LAW AND NOT SUSTAINABLE. ACCORDINGLY, WE DISMISS THE GROUNDS R AISED BY THE DEPARTMENT. 6.0 IN THE RESULT, THE APPEAL OF THE DEPARTMENT STA NDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.2 019. SD/- SD/- (N.K. SAINI) (SUDHANSHU SRIVAST AVA) VICE PRESIDENT JUDICIAL MEMBER DATED: 28TH JANUARY, 2019 GS ITA NO. 2144/DEL/2015 ASSESSMENT YEAR 2006-07 11 COPY FORWARDED TO: - 1)APPELLANT 2) RESPONDENT 3)CIT(A) 4) CIT 5) DR BY ORDER ASSTT. REGISTRAR DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER