ACIT, Meerut V. M/s. P.V.S. Multiplex (India) Ltd., Meerut

ITA 2369/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3792 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: F
• Next Hearing Date: 08-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 19-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Keywords: Reopening of assessment; Depreciation; Accommodation entries; Reason to believe
• Section: 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI K.D. RANJAN, ACCOUNTANT MEMBER I.T.A NO. 2369/DEL/10 ASSTT. YEAR 2002-03 ACIT RANGE-2 MEERUT VS. PVS MULTIPLEX (INDIA) LTD. 328, KISHANPURA, BAGHPAT ROAD, MEERUT AACCP8168R (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI B. KISHORE, SR. DR. RESPONDENT BY: SHRI M.P. RASTOGI, ADVOCATE ORDER PER RAJPAL YADAV, JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LD. CIT(A) DATED 9 TH MARCH, 2010 PASSED FOR ASSTT. YEAR 2002-03. IN T HE FIRST GROUND OF APPEAL, THE REVENUE HAS PLEADED THAT LD. CIT(A) HAS ERRED IN HOLDING THE REOPENING OF ASSESSMENT AS BAD IN LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT AN INFORMAT ION WAS SENT BY D I INVESTIGATION TO THE OFFICE OF LD. CIT (MEERUT), DI SCLOSING THAT, CERTAIN ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 2 COMPANIES WERE INVOLVED IN GIVING ACCOMMODATION ENT RIES AND ASSESSEE IS ONE OF THE BENEFICIARY OF SUCH ENTRY. T HESE INFORMATIONS WERE SUPPLIED TO THE AO WHO HAS THE JURISDICTION OV ER THE ASSESSEE. ON PERUSAL OF THE INFORMATION, LD. AO FOUND THAT FOUR COMPANIES HAVE GIVEN MONEY TO THE ASSESSEE THROUGH ACCOUNT PAYEE CHEQUE. ON THE BASIS OF INFORMATION, HE HARBORED A BELIEF THAT THESE COMPAN IES WERE IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES AND THE Y HAVE PROVIDED ACCOMMODATION ENTRY TO THE ASSESSEE ALSO. IN LIEU O F THE CHEQUES ISSUED IN FAVOUR OF ASSESSEE, THEY MUST HAVE RECEIVED CASH . THUS ACCORDING TO THE AO, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT AND HE ISSUED A NOTICE U/S 148 OF THE INCOME TAX ACT. IN R ESPONSE TO THE NOTICE, ASSESSEE APPEARED BEFORE THE AO AND REQUESTED THAT THE ORIGINAL RETURN FILED BY IT ON 29.10.2002 MAY BE TREATED AS FILED I N RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE INCOME TAX ACT. DURING THE CO URSE OF THE ASSESSMENT PROCEEDING, LD. AO FOUND THAT OUT OF THE FOUR COMPANIES MENTIONED IN THE REASONS RECORDED FOR REOPENING, ON LY TWO HAS PROVIDED ACCOMMODATION ENTRIES TO THE ASSESSEE. APART FROM T HESE TWO COMPANIES I.E. PARTICULAR MANAGE FINLEASE (I) PVT. LTD. AND M/S. GARG FINVEST (P) LTD., M/S. DIVISION TRADING (P) LTD. HA S ALSO GIVEN A CHEQUE OF RS. 4 LACS. HE DIRECTED THE ASSESSEE WITH REGARD TO THE CREDIT ENTRY AVAILABLE IN ITS BANK ACCOUNT AGAINST THE NAME OF F OLLOWING PARTIES :- ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 3 (1) M/S. PARTICULAR MANAGE FINLEASE (I) PVT. LTD. (RS.3,00,000/-) (2) M/S. GARG FINVEST PVT. LTD. (RS. 2,00,000/-) (3) M/S. DIVISION TRADING (P) LTD. (RS. 4,00,000/-) 3. AO HAS DIRECTED THE ASSESSEE TO PRODUCE THESE P ARTIES BEFORE HIM FOR EXAMINATION. THE ASSESSEE FAILED TO PRODUCE THE REPRESENTATIVE OF THESE COMPANIES AND THEREFORE, HE MADE AN ADDITION OF ` 9 LAC IN THE TOTAL INCOME OF THE ASSESSEE. 4. BEFORE LD. CIT(A), IT WAS CONTENDED BY THE ASSES SEE THAT AO HAS REOPENED THE ASSTT. WITHOUT APPLICATION OF MIND TO THE ALLEGED INFORMATION SUPPLIED BY THE DIT WING DELHI. IT WAS CONTENDED TH AT AO HAS MADE A REFERENCE TO FOUR PARTIES WHO ALLEGED TO HAVE PROVI DED ACCOMMODATION ENTRIES TO THE ASSESSEE. AO HAS NOT VERIFIED THE BA LANCE SHEET WHETHER ALL THESE FOUR COMPANIES HAVE PROVIDED THE ACCOMMO DATION ENTRIES OR NOT. IN FACT, ONLY TWO CONCERNS HAVE PROVIDED THE A LLEGED ACCOMMODATION ENTRIES. THUS, IT INDICATES THAT AO H AS NOT PROPERLY ANALYZED THE INFORMATION. BEFORE HARBORING A BELIEF THAT INCOME HAS ESCAPED TAX, LD. AO OUGHT TO HAVE MADE ANALYSIS OF THE SUBMISSIONS OF ASSESSEE AS WELL AS THE FACTS BROUGHT ON RECORD. LD . CIT(A) HAS CONSIDERED THE SUBMISSION OF ASSESSEE AND MADE A RE FERENCE TO THE ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 4 RATIO OF LAW REFERRED BY THE ASSESSEE, IN THIS CONN ECTION. LD. CIT (A) HAS HELD THAT THERE WAS NO MATERIAL WITH THE AO, WHICH COULD LEAD TO THE CONCLUSION THAT INCOME HAS ESCAPED FARE. 5. LD. DR HAS SUBMITTED THAT AO HAS AN INFORMATION SUPPLIED BY THE DIT WING, WHICH DISCLOSES CERTAIN COMPANIES WERE EN GAGED IN ACCOMMODATION ENTRIES AND ASSESSEE IS ONE OF THE BE NEFICIARY. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AO HAS NOT APPLIED HIS MIND IN THE INFORMATION TRANSMITTED TO HIM BY THE DIT. HAD HE APPLIED HIS MIND THEN HE WOULD NOT REOPENED THE AS SESSMENT. HE RELIED UPON THE JUDGMENT OF HONBLE DELHI HIGH COURT RENDE RED IN THE CASE OF SARTHAK SECRUITIES CO. P. LTD. REPORTED IN 329 ITR 110. 6. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. THERE WAS NO SCRUTINY ASSESSM ENT IN THIS CASE. SECTION 147 OF THE INCOME TAX ACT PROVIDED THAT IF THE AO HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAD ESCA PED ASSESSMENT FOR ANY ASSTT. YEAR, HE MAY, SUBJECT TO THE PROVISION O F SECTION 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER I NCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO ITS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDING U/S 14 7. THE AO CAN ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 5 RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED. WE DO NOT HAVE A NY DISPUTE WITH REGARD TO THE PROPOSITION THAT BELIEF OF AO EXHIBIT ING THE REASONS THAT INCOME CHARGEABLE TO TAX HAS ESCAPED SHOULD NOT BE ARBITRARILY OR IRRELEVANT BUT IT SHOULD BE BASED ON RELEVANT MATER IAL AND HAD A NEXUS WITH THE INFORMATION POSSESSED BY HIM. ONLY THEN, H E CAN ISSUE A NOTICE U/S 148 FOR REOPENING OF THE ASSESSMENT. IN THE PR ESENT CASE, NO DOUBT, HE MADE A REFERENCE TO FOUR CONCERNS WHO WERE FOUND TO BE INDULGED IN PROVIDING ACCOMMODATION ENTRIES BY THE INVESTIGATIO N WING OF THE INCOME TAX DEPARTMENT. TWO CONCERNS HAVE NOT ADVANCED ANY SHARE APPLICATION MONEY TO THE ASSESSEE. ON THE STRENGTH OF THIS FACT, IT WAS PLEADED THAT AO HAS NOT APPLIED HIS MIND BEFORE ISS UE OF NOTICE U/S 148. THE AO WAS NOT REQUIRED TO REACH AT ANY FIRM CONCLU SION BEFORE ISSUING A NOTICE U/S 148. HE HAS TO FORM A PRIME FACIE OPIN ION DEMONSTRATING THE ESCAPEMENT OF INCOME FROM TAX. THE QUALITY OF REASO NING CONSIDERED BY THE AO MAY NOT BE A VERY IMPORTANT FACTOR. FROM TH E REASON, PRIME FACIE IT IS DISCERNABLE THAT INCOME CHARGEABLE TO T AX HAS ESCAPED ASSESSMENT AND AO IS SATISFIED WITH THE GENUINENES S OF THE INFORMATION VIS A VIS ESCAPEMENT OF INCOME FROM TAX THEN HE CAN HARBOR A BELIEF THAT A NOTICE U/S 148 REQUIRED TO BE ISSUED. THE INVESTI GATION WING HAD CARRIED OUT SEARCHES AT DIFFERENT PLACES AND UNEART H RACKET ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 6 DEMONSTRATING THAT CERTAIN ENTITIES WERE INVOLVED I N PROVIDING ACCOMMODATION ENTRIES. THIS INFORMATION WAS TRANSMI TTED TO THE AO WHO HAS APPLIED HIS MIND AND FIND THAT ASSESSEE IS ALSO ONE OF THE BENEFICIARY. IN SUCH SITUATION, THERE WAS SUFFICIEN T MATERIAL WITH THE AO TO PROCEED AGAINST THE ASSESSEE. LD. CIT(A) IS NOT JUS TIFIED IN QUASHING THE REOPENING OF ASSESSMENT. WE ALLOW THE FIRST GROUND OF APPEAL AND SET ASIDE THE FINDING OF LD. CIT(A). WE UPHELD THE REOP ENING OF ASSESSMENT AND RESTORE THE ASSTT. ORDER ON THIS ISSUE. 7. IN GROUND NO. 2, THE GRIEVANCE OF REVENUE IS TH AT LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` 9 LAC. 8. WITH THE ASSISTANCE OF LD. REPRESENTATIVE, WE HA VE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECOR D THAT ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF ` 61,29,500/- FROM 12 ENTITIES. IT HAS DECLARED PAID UP SHARE CAPITAL IN THE BALANCE S HEET AT ` 1,27,96,900/-. THE AO HAS DISBELIEVED THE CONTRIBUT ION OF SHARE APPLICATION MONEY BY THREE COMPANIES ONLY. THE ASSE SSEE HAS SUBMITTED THEIR PERMANENT ACCOUNT NUMBER, CONFIRMAT ION, BANK STATEMENT ETC. IN RESPECT OF ALL THESE COMPANIES. L D. FIRST APPELLATE AUTHORITY HAS GONE THROUGH THESE DETAILS IN THE LIG HT OF DECISION OF ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 7 HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF PR ADEEP KUMAR GUPTA 303 ITR 95. AT THE TIME OF HEARING, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT ISSUE IN DISPUTE THE IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF OASIS REPORTED IN 333 ITR 109 . ON DUE CONSIDERATIO N THE DETAILS SUBMITTED BY THE ASSESSEE, ORDER OF THE LD. CIT(A), IN THE LIGHT OF THE DECISION OF HONBLE DELHI HIGH COURT, WE ARE OF THE VIEW THAT ASSESSEE HAS PROVED THE IDENTITY OF THE SHARE APPLICATION. I T HAS PROVED THAT SHARE APPLICATION MONEY WAS RECEIVED THROUGH ACCOUNT PAYE E CHEQUE. ALL THE SHARE APPLICATIONS WERE INCOME TAX ASSESSEE AND IT HAS FILED THEIR PERMANENT ACCOUNT NUMBER. THEREFORE, ASSESSEE HAS D ISCHARGED ITS ONUS AND NO ADDITION CAN BE MADE U/S 68 OF THE INCO ME TAX ACT. WE ALSO FIND THAT AO HAS NOT MADE ANY EFFORT FOR CONDU CTING THE INQUIRY. HE MADE THE ADDITION ON THE BASIS OF INFORMATION SUBMI TTED BY DIT INVESTIGATION. OTHERWISE THE HUGE MONEY OF ` 61,29,500/- WAS RECEIVED BY THE ASSESSEE AS SHARE APPLICATION MONEY FROM 12 ENTITIES. THERE IS NO DISCUSSION IN THE ASSTT. ORDER ABOUT ANY OTHER A SPECT. HE SIMPLY OBSERVED THAT ASSESSEE FAILED TO PRODUCE REPRESENTA TIVE OF THESE THREE CONCERNS AND THEREFORE, ITS TRANSACTION IS NOT GENU INE. THUS ON THE BASIS OF THE FINDING RECORDED BY THE AO, ORDER OF THE LD. CIT(A) CANNOT BE REVERSED. RESPECTFULLY FOLLOWING THE DECISION OF HO NBLE DELHI HIGH COURT ITA NO. 2369/DEL/10 ASSTT. YEAR 2002-03 8 IN THE CASE OF OASIS, WHEREIN HONBLE COURT HAS CO NSIDERED A LARGE NUMBER OF DECISIONS ON THIS ISSUE, WE DO NOT FIND A NY ERROR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION. 9. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17.6.2011. SD/- SD/- [K.D. RANJAN] [RAJPAL YADAV] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 17.6.2011 VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT