ITO, Faridabad V. Sh. Vinod Khatter, Faridabad

ITA 2393/DEL/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97539 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 24-09-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJA
• Keywords: Reopening of assessment; Gift; Income from undisclosed sources; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H NEW DELHI BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUD ICIAL MEMBER ITA NO: 2393/DEL/2012 AY : - 2003-04 ITO VS. VINOD KHATTER WARD-1(4) H .N. 489, FARIDABAD SECTOR-15, FARIDABAD (PAN AKRPK2599K) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI P.DAM KANUNJA SR DR RESPONDENT BY : SHRI SALIL AGARWAL, ADVOCATE DATE OF HEARING : 29.9.2015 DATE OF PRONOUNCEMENT : 30.9.2015 O R D E R PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER THIS DEPARTMENTS APPEAL IS AGAINST THE OR DER DATED 24.02.2012 PASSED BY THE LD. CIT (A) FARIDABAD. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED A RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 87,150/-. T HEREAFTER THE AO RECEIVED INFORMATION FROM THE DIRECTORATE OF INCOME TAX (INV .) NEW DELHI THAT THE ASSESSEE WAS THE BENEFICIARY OF AN ACCOMMODATION ENTRY OF RS . 19 LACS OBTAINED OUT OF HIS UNACCOUNTED MONEY THROUGH AN ENTRY OPERATOR. ON THE BASIS OF ABOVE INFORMATION IT WAS THE AOS VIEW THAT HE HAD REASON TO BELIEVE THA T A SUM OF RS. 19 LACS AND THE ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 2 COMMISSION PAID ON PROCURING SUCH ENTRIES REPRESENT ED INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES, WHICH HAD ESCAPED ASSESSMENT W ITHIN THE MEANING OF SECTION 147 OF THE ACT. THE AO, THEREFORE, ISSUED NOTICE U/ S 148 OF THE ACT. IN RESPONSE TO NOTICE U/S 148 THE ASSESSEE SUBMITTED THAT THE ORIG INAL RETURN FILED BY HIM MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 1 48. IN COMPLIANCE TO THE QUESTIONNAIRE PUT FORTH BY THE AO, IT WAS ASSESSEE S SUBMISSION THAT HE HAD RECEIVED A GIFT OF RS. 3 LACS FROM SHRI ROHIT RANA, RS. 3 LA CS FROM MS. BABITA, RS. 2 LACS FROM SHRI ASHOK KUMAR GUPTA, RS. 2 LACS FROM SHRI RANJEE T SINGH, RS. 3 LACS FROM SHRI MUKESH GUPTA, RS. 3 LACS FROM SHRI RAJESH KUMAR GUP TA AND RS. 3 LACS FROM SHRI PRAMOD KUMAR. THE ASSESSEE ALSO FILED VARIOUS DOCUM ENTS FROM THE DONORS TO JUSTIFY THE SOURCE, CAPACITY, IDENTITY AND GENUINENESS OF T HE TRANSACTIONS. THE ASSESSEE WAS THEREAFTER ASKED TO PRODUCE THE DONORS TO VERIFY TH EIR GENUINENESS AND CREDITWORTHINESS. INSTEAD OF PRODUCING THE DONORS, THE ASSESSEE FILED WRITTEN SUBMISSIONS BUT THE DONORS COULD NOT BE PRODUCED. T HE AO THEREAFTER ISSUED SHOW CAUSE NOTICE ASKING THE ASSESSEE TO ATTEND THE PROC EEDINGS PERSONALLY ALONG WITH THE DONORS. BESIDES THIS SUMMONS U/S 131 (1) OF TH E ACT WERE ISSUED TO ALL THE SEVEN PERSONS TO APPEAR PERSONALLY AND FURNISH RELE VANT DOCUMENTS. ALL THE SUMMONS WERE RETURNED BACK WITHOUT SERVICE WITH THE REMARKS LIKE REFUSED, NO SUCH ADDRESS, UNDER CONSTRUCTION AND UNCLAIMED. THE AO T HEREAFTER HELD THAT THE EXISTENCE OF THE PERSONS FROM WHOM GIFTS WERE RECEI VED WAS UNREAL AND NOT AUTHENTIC. THE AO ACCORDINGLY MADE AN ADDITION OF R S. 19 LACS AS INCOME FROM UNDISCLOSED SOURCES. 2. THE LD. CIT (A) IN HIS ORDER HAS DELETED THE ENTIRE ADDITION ON THE GROUND THAT THERE WAS NO MATERIAL BEFORE THE AO WHICH COUL D LEAD TO FORMATION OF REASON ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 3 TO BELIEVE BEFORE TAKING RECOURSE TO PROVISIONS OF 148. THE LD. CIT(A) NOTED THAT THE ALLEGATION THAT THE APPELLANT HAD RECEIVED A G IFT OF RS. 19 LACS WAS NOT CORRECT AS THE ASSESSEE HAD RECEIVED GIFTS FROM SEVEN PERSONS. THE LD. CIT(A) ALSO NOTED THAT THIS WAS THE CASE OF REOPENING OF ASSESSMENT AFTER FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. THAT THE AO HAD CALLED FO R A COPY OF RETURN FROM THE ASSESSEE ALONG WITH PROFIT AND LOSS ACCOUNT AND BAL ANCE SHEET LED TO THE INFERENCE THAT RECORDS WERE NOT AVAILABLE WITH THE AO AT THE TIME OF RECORDING OF REASONS. THE LD. CIT(A) GAVE A CATEGORICAL FINDING THAT THERE RE MAINED NO DISPUTE THAT THE AO HAS RECORDED THE REASONS FOR REOPENING OF ASSESSMENT IN ABSENCE OF CASE RECORDS AND HAS ISSUED NOTICE U/S 148 OF THE ACT ONLY ON THE S TRENGTH OF THE INFORMATION RECEIVED FROM INVESTIGATION WING. ACCORDINGLY THE A SSESSMENT ORDER DATED 29.12.2010PASSED BY THE AO WAS ANNULLED. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SID ES AND PERUSED THE MATERIAL PLACED BEFORE US. AT PAGE 2 AND 3 OF THE ASSESSMENT ORDER THE AO HAS GIVEN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT WHICH ARE BEING REPRODUCED BELOW FOR READY REFERENCE :- THERE IS AN INFORMATION WITH THE DEPARTMENT THAT THE ABOVE NAMED ASSESSEE IS THE BENEFICIARY OF AN ACCOMMODATION ENT RY AMOUNTING TO RS. 19,00,000/- WHICH WAS ACTUALLY HIS OWN UNACCOUNTED MONEY INTRODUCED TO HIS OWN CAPITAL WITHOUT PAYING ANY TAX, BY APPROACHING THE ENTRY OPERATOR WHO AFTER RECEIVING THE CASH EQUAL TO ENTRY AMOUNT AND COMMISSION WHICH IS NORMALLY 10% OF THE ENTRY, FROM THE ASSESSEE, GOT P REPARED BANK INSTRUMENT ON 18.4.2002 OF RS. 19,00,000/- OUT OF HIS OWN BANK ACCOUNT IN FAVOUR OF THE ASSESSEE PRESENTABLE AT BOB, FARIDABAD. A BIG RACKE T OF PROVIDING SUCH ACCOMMODATION ENTRIES HAS BEEN UNEARTHED BY THE I NCOME TAX DEPARTMENT. AFTER EXAMINING THE INFORMATION AND FURTHER DETAILS SO AVAILABLE. I HAVE REASON TO BELIEVE THAT ON ACCOUNT FAILURE ON THE PA RT OF THE ASSESSEE TO DISCLOSE THE PARTICULARS. I HAVE REASON TO BELIEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE PARTICULAR S OF HIS INCOME TRULY AND ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 4 CORRECTLY, AN AMOUNT OF RS. 19,00,000/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE A.Y. 2003-04. IN VIEW OF ABOVE, PROCEEDINGS U/S 147 OF INCOME TAX ACT, 1961 ARE HEREBY INITIATED AGAINST THE ASSESSEE FOR THE A.Y. 2003-04, BY ISSUANCE OF NOTICE U/S 148 TO BRING TO TAX THE ABOVE MENTIONED UNDISCLOSED INCOME OF RS. 19,00,000/- PLUS THE COMMISSION @ 10% OF THIS ENTRY AMOUNT (EXACT AMOUNT OF COMMISSION SUBJECT TO VERIFICATION DURING THE PR OCEEDINGS U/S 147) AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPE D ASSESSMENT AND WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF TH E PROCEEDINGS UNDER SECTION 147 OF THE ACT. 4. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE STATED THAT THE REASONS RECORDED BY THE AO ARE FACTUALLY INCORR ECT, VAGUE AND DO NOT GIVE ANY SPECIFIC INFORMATION SO AS TO EVEN PRIMA FACIE POIN T OUT ANY ESCAPEMENT OF INCOME. THE LD. AR SUBMITTED THAT THE AO HAS NOT MENTIONED THE NAMES OF PERSONS FROM WHOM THE ACCOMMODATION ENTRIES, IF ANY, WERE RECEIV ED AND THE NATURE OF ACCOMMODATION ENTRIES. HE SUBMITTED THAT DURING THE ASSESSMENT YEAR UNDER CONSIDERATION THE ASSESSEE HAD RECEIVED GIFTS OF RS . 19 LACS FROM SEVEN PERSONS BUT IN THE REASONS RECORDED THERE IS NO MENTION OF ANY GIFT AND NO MENTION OF THE DIFFERENT AMOUNTS RECEIVED FROM VARIOUS PERSONS. ON THE OTHER HAND, THE ONLY MENTION IN THE REASONS RECORDED IS THE SO CALLED AC COMMODATION ENTRY OF RS. 19 LACS. LD. AR SUBMITTED THAT THE AO DID NOT APPLY HIS MIND BEFORE ISSUANCE OF NOTICE U/S 148. HE FURTHER RELIED ON THE DECISION OF THE HONB LE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. PARAMJIT KAUR (2009) 311 ITR 38 (P &H) AND ALSO UPON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF SIGNATUR E HOTELS PVT. LTD. VS. ITO AND ANOTHER (2011) 338 ITR 51 (DELHI). 5. LD. DR ON THE OTHER HAND STATED THAT AT TH E TIME OF ISSUE OF NOTICE U/S 148 ONLY A TENTATIVE OR PRIMA FACIE BELIEF REGARDING TH E ESCAPEMENT OF INCOME IS ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 5 REQUIRED. NO CONCLUSIVE FINDING WITH REGARD TO ESCA PEMENT OF INCOME IS REQUIRED. THE LD. DR SUBMITTED THAT INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WITH REGARD TO A BIG RACKET OF PROVI DING ACCOMMODATION ENTRIES. FROM THE DETAILS RECEIVED FROM THE INVESTIGATION WI NG IT WAS GATHERED THAT THE ASSESEE IS A BENEFICIARY OF ACCOMMODATION ENTRY AMO UNTING TO RS. 19 LACS. LD. DR SUBMITTED THAT THE REOPENING OF ASSESSMENT WAS QUIT E JUSTIFIED AND THEREFORE THE ORDER OF THE LD. CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL PLACED BEFORE US. FROM A PERUSAL OF THE REASONS RECORDED, IT IS EVIDENT THAT THE AO HAS MENTIONED ABOUT SOME INFORM ATION BY WHICH THE ASSESEE WAS A BENEFICIARY OF AN ACCOMMODATION ENTRY OF RS. 19 LACS. HOWEVER IN THE REASONS RECORDED THAT THERE IS NO MENTION ABOUT THE NAME OF THE PERSON WHO IS ALLEGED TO BE THE ENTRY PROVIDER. IT IS NOT ALSO A CASE WHERE THE ASSESSEE DID NOT FI LE HIS RETURN OF INCOME U/S 139(1) OF THE ACT SO AS TO BE COVERED UN DER CLAUSE (A) OF EXPLANATION -2 TO SECTION 147 OF THE ACT. 7. IN OUR CONSIDERED OPINION, THE AO HAS MERELY ACTED ON THE REPORT OF THE INVESTIGATION WING. IN ORDER TO ASSUME JURISDICTION U/S 148 AND TO ISSUE NOTICE IN RESPECT OF ASSESSMENT BEYOND THE PERIOD OF FOUR YEA RS BUT WITHIN THE PERIOD OF SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, TWO CONDITIONS NEED TO BE SATISFIED. FIRST IS THAT THE AO MUST HAVE REASON T O BELIEVE THAT INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED. THE SECOND IS THAT HE MUST ALSO HAVE REASON TO BELIEVE THAT SUCH UNDER ASSESSMENT HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 6 FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN OF HIS INCOME, OR (II) OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO DISCLOSE FULL Y AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. BOTH TH ESE CONDITIONS ARE REQUIRED TO BE SATISFIED BEFORE THE AO COULD HAVE THE JURISDICTION TO ISSUE NOTICE FOR THE ASSESSMENT OR REASSESSMENT BEYOND THE PERIOD OF FOUR YEARS. IT IS CLEAR FROM THE FACTS OF THE PRESENT CASE THAT THE AO DID NOT HIMSELF APPLY HIS MIND TO ANY FACT IN ORDER TO COME TO ANY BELIEF WITH REGARD TO THE OMISSION OR FAILUR E OF THE ASSESSEE TO DISCLOSE ANY PRIMARY FACT RELEVANT FOR THE PURPOSE OF ASSESSMENT OF INCOME NOR HE COULD HAVE ANY BELIEF THAT AS A CONSEQUENCE OF SUCH FAILURE OR MISSION, THE INCOME FOR THAT YEAR HAD ESCAPED ASSESSMENT. THUS IN OUR CONSIDERED OPIN ION, THE CONDITIONS PRECEDENT FOR THE ISSUE OF THE IMPUGNED NOTICE U/ S148 IN THE INSTANT CASE WERE NOT SATISFIED. THE HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CA SE OF CIT VS. PARAMJIT KAUR (SUPRA) HAS HELD THAT WHERE THE AO HAS NOT CORROBOR ATED AND EXAMINED THE INFORMATION BEFORE RECORDING HIS OWN SATISFACTION O F ESCAPED INCOME AND INITIATED REASSESSMENT PROCEEDINGS, IT COULD BE SAID THAT THE AO HAS ACTED ONLY ON THE BASIS OF SUSPICION AND THE ISSUANCE OF NOTICE WAS INVALID . THE HONBLE P & H HIGH COURT (WHICH IS ALSO THE JURISDICTIONAL HIGH COURT FOR TH E ASSESSEE) HAS OBSERVED AS UNDER: SECTION 147 OF THE ACT DEFINES THE POWER AND JURIS DICTION OF THE ASSESSING OFFICER FOR MAKING AN ASSESSMENT OR REASSESSMENT OF ESCAPED INCOME. SECTION 148 OF THE ACT, ON THE OTHER HAND, PROVIDES FOR INITIATION OF THE REASSESSMENT PROCEEDINGS WITH ISSUANCE OF A NOTICE ON THE ASSESSEE CONCERNED. SECTION 147 EMPOWERS THE ASSESSING OFFIC ER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASONS TO BELIE VE THAT THE INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE POWER C ONFERRED UNDER THIS SECTION IS VERY WIDE, BUT AT THE SAME TIME IT CANNO T BE STATED TO BE A PLENARY POWER. THE ASSESSING OFFICER CAN ASSUME JURISDICTIO N UNDER THE SAID PROVISION ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 7 PROVIDED THERE IS SUFFICIENT MATERIAL BEFORE HIM. H E CANNOT ACT ON THE BASIS OF HIS WHIM AND FANCY, AND THE EXISTENCE OF MATERIAL M UST BE REAL. FURTHER, THERE MUST BE NEXUS BETWEEN THE MATERIAL AND ESCAPEMENT O F INCOME. THE ASSESSING OFFICER MUST RECORD REASONS SHOWING DUE A PPLICATION OF MIND BEFORE TAKING RECOURSE TO REASSESSMENT PROCEEDINGS. STILL FURTHER, THE ASSESSING OFFICER CAN ASSUME JURISDICTION FOR REASSESSMENT PR OCEEDINGS PROVIDED HE HAS REASONS TO BELIEVE BUT THE SAME CANNOT BE TAKEN REC OURSE TO ON THE BASIS OF REASONS TO SUSPECT. HELD, THAT THE ASSESSING OFFICER HAD NOT EXAMINED A ND CORROBORATED THE INFORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HIS OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASS ESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED ONLY ON THE BASIS OF SUSPICION AND IT CANNOT BE SAID THAT THE SAME WAS BASED ON THE BELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED INCOME. THE ASSESSING OFFICER HAS T O ACT ON THE BASIS OF ' REASONS TO BELIEVE' AND NOT ON ' REASONS TO SUSPECT '. THE TRIBUNAL HAD, THUS, RIGHTLY CONCLUDED THAT THE ASSESSING OFFICER HAD FA ILED TO INCORPORATE THE MATERIAL AND HIS SATISFACTION FOR REOPENING THE ASS ESSMENT AND, THEREFORE, THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMENT PROCEEDINGS WAS NOT VALID. 8. THEREFORE, IN VIEW OF THE FACTS OF THE CASE AND RESPECTFULLY FOLLOWING THE RATIO OF THE JUDGMENT LAID DOWN BY THE HONBLE P & H HIGH COURT IN CIT VS. PARAMJIT KAUR (SUPRA) WE FIND NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD. CIT (A). GROUNDS NOS. 1 TO 4 ARE REJECTED. 9. IN THE RESULT THE APPEAL FILED BY THE REV ENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2015. SD/- SD/- (INTURI RAMA RAO) (SUD HANSHU SRIVASTAVA ) ITA NO.2393/DEL/2012 ITO VS. V INOD KHATTER 8 ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: THE 30. 9. 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 29.9.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 30.9.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 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