M/s. Motherson Air Travel Agencies Ltd., New Delhi V. DCIT, New Delhi

ITA 2405/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4776 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S R SENAPATI
• Assessee Lawyers: Y K SHARMA
• Keywords: Reopening of assessment; Wrong claim; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 145; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E, NEW DELHI BEFORE SH. N. K. BILLAIYA , ACCOUNTANT MEMBER AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 2405/DEL/2015 (ASSESSMENT YEAR: 2005-06) MOTHERSON AIR TRAVEL AGENCIES LTD., 2 ND FLOOR, F-7, BLOCK B-1, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI PAN : AAACM1993R VS. DCIT CIRCLE 5(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. Y.K.SHARMA, CA REVENUE BY : SH. S.R.SENAPATI, SR. DR DATE OF HEARING : 06.08.2018 DATE OF PRONOUNCEMENT : 08.08.2018 O R D E R PER BEENA A. PILLAI, J.M : PRESENT APPEAL HAS BEEN FILED BY ASSESSEE AGAINST O RDER DATED 27/02/15 PASSED BY LD. CIT (A)-6, NEW DELHI FOR ASSE SSMENT YEAR 2005-06 ON THE FOLLOWING GROUNDS OF APPEAL: 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND UNDER THE PROVISIONS OF LAW, THE COMMISSIONER H AS ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFI CER TO INITIATE PROCEEDINGS U/S 147 OF THE I.T.ACT. 2 ITA NO. 2405/DEL/2015 2) THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE A ND UNDER THE PROVISIONS OF LAW, THE COMMISSIONER HAS ERRED I N UPHOLD THE DISALLOWANCE OF EXPENSES LAID OUT WHOLLY AND EXCLUSIVELY FOR THE BUSINESS AGGREGATING TO RS. 19, 87,460/-. HE HAS FURTHER ERRED IN ADDING AN AMOUNT OF RS. 49, 687/- AS ALLEGED COMMISSION ON THE DISALLOWED PURCHASES. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE FILED ITS RETURN OF INCOME ON 31/10/05 DEC LARING TOTAL INCOME OF RS.60,41,680/-. THE RETURN WAS PROCESSED U NDER SECTION 143 (1) OF THE ACT. SUBSEQUENTLY A SEARCH WAS CONDUC TED IN SH. S.K. GUPTA GROUP OF CASES, BY INVESTIGATING WING ON 12/12 /06. DURING SEARCH OPERATION, IT WAS GATHERED THAT THIS GROUP WAS ENGAGED IN PROVIDING ACCOMMODATION SALES/EXPENSES BILLS TO BEN EFICIARY COMPANIES, PROVIDING ACCOMMODATION INVESTMENT ENTRI ES IN THE FORM OF SHARE CAPITAL AND/OR LOANS TO BENEFICIARY C OMPANIES. THIS FACT WAS CONFIRMED IN SCRUTINY ASSESSMENT OF GROUP C ONCERNS. DURING SCRUTINY ASSESSMENT OF GROUP CONCERNS, IT WAS REVEALED THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRIES FROM SK GU PTA GROUP OF CASES IN THE SHAPE OF BOGUS BILLS OF EXPENDITURE OF PRINTING AND STATIONERY. DETAILS GATHERED DURING SEARCH FORMED T HE BASIS FOR REOPENING OF ASSESSMENT FOR YEAR UNDER CONSIDERATIO N IN CASE OF ASSESSEE. A SHOW CAUSE NOTICE WAS ISSUED REQUIRING AS SESSEE TO EXPLAIN WHY AN AMOUNT OF RS.68,87,460/- SHOULD NOT B E CONSIDERED AS BOGUS EXPENSES. 3 ITA NO. 2405/DEL/2015 3. AFTER CONSIDERING SUBMISSIONS OF ASSESSEE, LD.AO EX AMINED REPETITION OF CERTAIN BILLS THAT WAS ALLEGED BY ASSE SSEE AND AFTER REMOVING REPETITIVE ENTRIES, DETAILS OF BILLS ACTUA LLY PROCURED FROM 2 CONCERNS OF S.K.GUPTA GROUP AMOUNTED TO RS.30,87,46 0/-, WHICH WAS TREATED AS BOGUS EXPENDITURE BOOKED IN ASSESSEE S PROFIT AND LOSS ACCOUNT. 4. AGGRIEVED BY THE ORDER OF LD.AO, ASSESSEE PREFERRED APPEAL BEFORE LD.CIT (A) CHALLENGING VALIDITY OF INITIATION OF RE OPENING OF ASSESSMENT, AS WELL AS ADDITION MADE IN THE HANDS O F ASSESSEE AS BOGUS EXPENDITURE DISALLOWED. 5. ON THE ISSUE OF REOPENING OF ASSESSMENT LD.CIT (A) HELD AS UNDER: ON PERUSAL OF REASONS RECORDED BY THE A.O. IT IS E VIDENT THAT THE PROCEEDINGS U/S 147 WAS INITIATED ON THE BASIS OF REPORT RECEIVED FROM THE ACIT, CENTRAL CIRCLE-9, NEW DELHI THAT THE ASSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ESTABLISHED ENTRY OPERATORS DURING TH E PERIOD RELEVANT TO A.Y. 2005-06. AS PER THE REPORT THE ASS ESSEE IS THE BENEFICIARY OF ACCOMMODATION ENTRY FROM SUCH ENTRY OPERATORS AS PER TRANSACTION TOTALING A SUM OF RS. 58,87,460/ - IN THE GARB OF BOGUS EXPENDITURE UNDER THE HEAD PRINTING & STATIONARY IN THE NAMES OF THE CONCERNS OF ENTRY OP ERATORS. THE A.O. ALSO RECORDED THAT NO SCRUTINY ASSESSMENT WAS COMPLETED IN THE CASE AND THE RETURN FILED BY THE ASSESSEE WA S SIMPLY PROCESSED U/S 143(1). 4 ITA NO. 2405/DEL/2015 4.1.2 THERE WAS INFORMATION IN RESPECT OF THE ASSE SSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES WHI CH REPRESENTED UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSING OFFICER CONSIDERED THIS INFORMATION AND M ADE A REASONABLE BELIEVE THAT DUE TO THESE ACCOMMODATION ENTRIES IN THE GARB OF BOGUS CLAIM OF EXPENDITURES, THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 14 7 OF THE ACT. NOTICE U/S 148 WAS ISSUED AFTER RECORDING PROP ER REASONS AS PER REQUIREMENT OF LAW. THEREFORE, REOPENING WAS BASED ON A REASONABLE BELIEF. THE INFORMATION WAS SPECIFIC T O THE EXTENT THAT IT CONTAINED THE NAME OF THE ASSESSEE AS A BEN EFICIARY, NAME OF ENTRY PROVIDERS, BILL., DATE & AMOUNT. ANY REASONABLE PERSON SHALL MAKE A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. THEREFORE, THERE WAS SUFFICIENT MATERIA L WHICH IS SUFFICIENT TO MAKE REASON TO BELIEVE FOR INITIATING THE PROVISIONS U/S 147. THERE WAS A RATIONAL CONNECTION BETWEEN TH E INFORMATION RECEIVED AND ESCAPEMENT OF THE INCOME. THERE IS A LIVE LINK BETWEEN THE MATERIAL THAT CAME TO THE NOT ICE OF THE ASSESSING OFFICER AND THE FORMATION OF BELIEVE THAT INCOME HAS ESCAPED FROM ASSESSMENT. FURTHER NO ASSESSMENT U/S 143(3) WAS MADE EARLIER IN THIS CASE AND THE RETURN OF INC OME WAS SIMPLY PROCESSED U/S 143(1). FOR THE PURPOSE OF INI TIATION OF PROCEEDINGS U/S 147, MERE EXISTENCE OF PRIME FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, IS SUFFICIENT. 5 ITA NO. 2405/DEL/2015 4.1.3 FURTHER, SUFFICIENCY OF REASONS FOR FORMING THE BELIEF IS NTO A REQUIREMENT. HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. RE PORTED IN 291 ITR 500 HAS HELD WHEN THE ASSESSING OFFICER HAS CAUSE OR JUSTIFICATION TO KNOW OR SUPPOSE THAT INCOME HAD ES CAPED ASSESSMENT, THE LAW DOES NTO REQUIRE THAT ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED THE FACT OF LEGAL E VIDENCE OR CONCLUSION. THE MATERIAL REQUIRED FOR CONCLUSIVELY PROVING THE ESCAPEMENT OF INCOME IS NOT CONCERNED AT THE STAGE OF REOPENING. HONBLE DELHI HIGH COURT IN THE CASE OF A.G.HOLDINGS (P) LTD. VS. ITO IN W.P.(C) 8031/2011 AND IN THE CASE OF CIT VS. NOVA PROMOTERS & FINLEASE (P) LTD. (2012) 18 TAXMANN.COM 217 (DELHI) HAS HELD THAT AT THE TIME O F ISSUING THE NOTICE TO REOPEN THE ASSESSMENT, THE ASSESSING OFFICER IS ONLY EXPECTED TO FORM A PRIMA FACIE OR TENTATIVE BE LIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. WH ETHER THE ADDITION HAS TO BE MADE OR NOT IS A MATTER TO B E DECIDED ON MERITS IN THE COURSE OF THE REASSESSMENT PROCEEDING S. THE INFORMATION RECEIVED FROM THE INVESTIGATION WING WA S SPECIFIC. THE INFORMATION WAS SUFFICIENT FOR MAKING A BELIEF THAT INCOME AMOUNTING TO RS. 58,87,460/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT AND THE ASSESSING OFFICER WAS JUSTIFIED IN INITIATING T HE PROCEEDINGS FOR REASSESSMENT BY ISSUING NOTICE U/S 148 AFTER RE CORDING THE REASONS AS REQUIRED BY LAW. IN VIEW OF THE ABOVE AS THE PROCEEDINGS U/S 147 HAVE BEEN INITIATED AND ASSESSM ENT WAS 6 ITA NO. 2405/DEL/2015 MADE U/S 147/143(3) AS PER THE PROVISION OF THE I.T .ACT, THEREFORE, NO INFIRMITY HAVE BEEN CAUSED BY THE A.O . THEREFORE, APPEAL FAILS IN GROUND NO. 1 OF APPEAL. 6. ON THE ISSUE OF ADDITION MADE BY LD.A.O. BY HOLDIN G EXPENSES TO THE TUNE OF RS.30,87,460/- AS BOGUS, LD.CIT(A) DELE TED ADDITION TO AN EXTENT OF RS.11 LAKHS AS HE OBSEEVED THAT ASSESS EE HAD NEVER CLAIMED THESE EXPENSES. IT WAS OBSERVED BY LD.CIT(A) THAT ASSESSEE HAD CLAIMED EMAINING BILLS AS FOLDERS CHARGES UNDER THE HEAD, BUSINESS PROMOTION EXPENSES AND PAMPHLETS AND, BANN ERS PRINTING UNDER THE HEAD ADVERTISEMENT EXPENSES. HOWEVER LD.C IT(A) FURTHER MADE ADDITION OF 2% AMOUNTING TO BE COMMISSION CHAR GES. TOTAL ADDITION THUS MADE BY LD.CIT (A) WAS RS.19,87,460/- + 2% OF RS.19,87,460/-, BEING COMMISSION CHARGES. 7. AGGRIEVED BY ADDITION MADE BY LD.CIT (A) ASSESSEE I S IN APPEAL BEFORE US NOW. 8. GROUND NO.1 : ASSESSEE CHALLENGES VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS ON THE GROUND THAT REASONS TO BELIEVE ARE MERE SUSPICION AND BASED ON AMBIGUOUS INFORMATION. LD.AR SUBMITTED THAT THERE HAS BEEN NO INFORMATION OF BEL IEF AND PROCEEDINGS HAVE BEEN INITIATED IN A ROUTINE AND CA SUAL MANNER. IT WAS SUBMITTED BY LD. AR THAT ASSESSING OFFICER ISSUE D NOTICE UNDER SECTION 147 WITHOUT VERIFYING INFORMATION FORWARDED TO IT BY INVESTIGATING WING. 9. ON THE CONTRARY LD.SR.DR SUBMITTED THAT, AS PER REP ORT OF INVESTIGATING WING, ASSESSEE IS ONE OF THE BENEFICIA RY OF 7 ITA NO. 2405/DEL/2015 ACCOMMODATION ENTRY FROM CONCERNS OF S.K. GUPTA GRO UP. AS NO SCRUTINY ASSESSMENT WAS COMPLETED IN ASSESSEES CASE , LD.AO BASED UPON INFORMATION, MADE A REASONABLE BELIEF THAT DUE TO THESE ACCOMMODATION ENTRIES IN THE GARB OF BOGUS CL AIM OF EXPENDITURE INCURRED INCOME HAS ESCAPED ASSESSMENT, WITHIN THE MEANING OF SECTION 147 OF THE ACT. HE SUBMITTED THA T INFORMATION WAS VERY SPECIFIC TO THE EXTENT THAT IT CONTAINED TH E NAME OF ASSESSEE AS A BENEFICIARY, NAME OF ENTRY PROVIDER, BILL NUMBER, DATE AND AMOUNT. LD.SR.DR, THUS, SUBMITTED THAT THESE WE RE SUFFICIENT MATERIALS TO MAKE REASON TO BELIEVE FOR INITIATIN G PROVISIONS UNDER SECTION 147. HE SUBMITTED THAT THERE IS ALSO A LIVE LINK BETWEEN MATERIAL THAT CAME TO THE NOTICE OF LD.AO, AND INFO RMATION OF BELIEF THAT INCOME HAS ESCAPED ASSESSMENT SINCE THERE WAS N O ASSESSMENT UNDER SECTION 143 (3) FOR THE YEAR UNDER CONSIDERATION. THE LD.SR.DR SUBMITTED THAT INITIATION OF PROCEEDIN GS UNDER SECTION 147 ON EXISTENCE OF A PRIMA FACI BELIEF, BASED UPON SPECIFIC INFORMATION REGARDING ASSESSEE IS SUFFICIENT. 10. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH TH E SIDES AND THE LIGHT OF THE RECORDS PLACED BEFORE US. WE H AVE ALSO PERUSED REASONS RECORDED FOR REOPENING THE ASSESSMENTS, WHER EIN THERE IS SPECIFIC INFORMATION REGARDING ASSESSEE BEFORE US, OF HAVING ACCEPTED ACCOMMODATION ENTRY BILLS, WHICH COULD NOT HAVE BEEN VERIFIED WITHOUT CALLING FOR NECESSARY DETAILS. FURT HER IN ORDER TO VERIFY THE INFORMATION RECEIVED BY LD.AO ISSUED NOT ICE UNDER SECTION 8 ITA NO. 2405/DEL/2015 147 WHICH WAS NECESSARY TO ASCERTAIN, IF THERE HAS BE EN ANY ESCAPEMENT OF INCOME. 11. THUS, IN OUR CONSIDERED OPINION, WE DO NOT FIND ANY INFIRMITY IN THE REASONING AND OBSERVATIONS OF LD.CIT (A) IN DISMISSING THE GROUND OF ASSESSEE AND UPHOLDING REOPENING OF ASSES SMENT BY LD. AO. ACCORDINGLY THIS GROUND RAISED BY ASSESSEE STANDS D ISMISSED. GROUND NO. 2 12. THIS GROUND HAS BEEN RAISED BY ASSESSEE, CHALLENGI NG ADDITION MADE BY LD.AO OF RS.30,87,460/-, AS BOGUS EXPENDITU RES. ASSESSEE SUBMITTED THAT IT HAD ADMITTEDLY MADE PURCHASES OF FOLDERS AND BANNERS PRINTED PAMPHLETS FROM 2 GROUP CONCERNS OF S.K. GUPTA GROUP TO EXTENT OF RS.19,87,460/-. HE ALSO SUBMITTE D THAT OUT OF THESE EXPENSES ASSESSEE HAD SUBMITTED THAT AN AMOUN T OF RS.11 LACS WAS NEVER CLAIMED OR DEBITED TO P&L ACCOUNT. LD .AR, THUS, SUBMITTED THAT ENTIRE ADDITION MADE BY LD.AO DESERV ES TO BE DELETED. 13. ON THE CONTRARY LD.SR.DR SUBMITTED THAT VERY FACT THAT ACCOMMODATION ENTRIES WERE BEING PROVIDED BY S.K. G UPTA GROUP WAS UNEARTHED DURING SEARCH OPERATION CARRIED OUT BY INVESTIGATING WING, WHEREIN ASSESSEE WAS ALSO HELD TO HAVE TAKEN ACC OMMODATION ENTRIES IN THE NATURE OF SALES/EXPENSES BILLS. THES E ENTITIES BEING GROUP CONCERN OF ESCAPE GROUP, GROUP WHO HAS PROVID ED BOGUS BILLS TO ASSESSEE HAS NOT BEEN MAINTAINING PROPER BOOKS O F ACCOUNTS, 9 ITA NO. 2405/DEL/2015 SALES AND PURCHASES, EXPENSE VOUCHERS ETC., AND THE REFORE THEIR BOOKS WERE REJECTED UNDER SECTION 145 (3) OF THE AC T. LD.SR.DR SUBMITTED THAT THEY HAVE ALSO FAILED TO ESTABLISH G ENUINE BUSINESS BEING CARRIED OUT OTHER THAN ACCOMMODATION ENTRY BU SINESS. HE THUS SUBMITTED THAT UNDER SUCH CIRCUMSTANCES ASSESS EE HAVING FAILED TO HAVE ESTABLISHED THE TRANSACTION TO BE GE NUINE IN NATURE ASSESSING OFFICER WAS RIGHT IN MAKING ADDITION. 14. WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH THE S IDES AND THE LIGHT OF RECORDS PLACED BEFORE US. ON PERUSAL O F REASONING GIVEN BY LD.CIT (A), IT IS OBSERVED THAT UPON PROPER VERI FICATION OF PROFIT AND LOSS ACCOUNT AND LEDGER ACCOUNT OF EXPENSES UND ER THE HEAD, ADVERTISEMENT EXPENSES AND BUSINESS PROMOTION EXPEN SES LD.CIT (A) WAS SATISFIED REGARDING A SUM OF RS.11 LAKH HAVI NG NOT BEEN CLAIMED AS EXPENSES BY ASSESSEE. IT IS OBSERVED THA T LD.CIT (A) THUS RESTRICTED THE ADDITION TO RS. 19,87,460/-(30,87,46 0 11,00,000). 15. WE DO NOT FIND ANY INFIRMITY IN THE OBSERVATIONS OF LD. CIT (A) IN RESTRICTING ADDITION AT RS.19,87,460/-, AND THE SAM E IS UPHEALD. 16. HOWEVER IN THE CONCLUDING PARAGRAPH, LD.CIT (A) HAS IN A WAY ENHANCED ADDITION BY CHARGING 2% COMMISSION FOR PRO VIDING ACCOMMODATION ENTRIES TO ASSESSEE. HE HAS THUS MADE ADDITION OF RS.49,686/-. IT IS OBSERVED THAT ASSESSEE WAS NOT GI VEN ANY NOTICE OF ENHANCEMENT BY LD.CIT (A), THEREBY NOT FOLLOWING DUE PROCESS OF LAW, AS PER SECTION 251 OF THE ACT. 10 ITA NO. 2405/DEL/2015 WE ARE THEREFORE INCLINED TO DELETE ADDITION MADE B Y LD.CIT (A) TO OF 2% AS COMMISSION FOR PROVIDING ACCOMMODATION ENTRY TO ASSESSEE. ACCORDINGLY, THIS GROUND RAISED BY ASSESSEE STANDS PARTLY ALLOWED. IN THE RESULT APPEAL FILED BY ASSESSEE STANDS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH AUGUST, 2018. SD/- SD/- (N. K. BILLAIYA) (BEENA A. PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 08.08.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI 11 ITA NO. 2405/DEL/2015