ITO, New Delhi V. M/s. Hopewin Admark & Consultancy Services Pvt. Ltd., New Delhi

ITA 256/DEL/2014

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3488 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 22-06-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 13-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH SENIOR
• Keywords: Unexplained cash credit; Gift
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH FRIDAY, NEW DELHI. BEFORE HONBLE VICE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6634/DEL./2013 (ASSESSMENT YEAR : 2003-04) M/S. HOPEWIN ADMARK & CONSULTANCY VS. ITO, WARD 12 (4), SERVICES PVT. LTD., NEW DELHI. 39/2068, NAIWALA, 315, DAKHA CHAMBER, KAROL BAGH, NEW DELHI 110 005. (PAN : AAACH6960P) ITA NO.256/DEL./2014 (ASSESSMENT YEAR : 2003-04) ITO, WARD 12 (4), VS. M/S. HOPEWIN ADMARK & CONSUL TANCY NEW DELHI. SERVICES PVT. LTD., 39/2068, NAIWALA, 315, DAKHA CHAMBER, KAROL BAGH, NEW DELHI 110 005. (PAN : AAACH6960P) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DEEPAK OSTWAL, CA SHRI RISHAB OSTWAL, ADVCOATE REVENUE BY : SHRI AMIT KATOCH, SENIOR DR DATE OF HEARING : 31.01.2019 DATE OF ORDER : 25.02.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 2 PRESENT CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE BEING DISPOSED OF BY WAY OF COMPOSITE O RDER TO AVOID REPETITION OF DISCUSSION. 2. THE APPELLANT, M/S. HOPEWIN ADMARK & CONSULTANCY SERVICES PVT. LTD. (HEREINAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 17.10.2013 PASSED BY LD. CIT (APPEALS)-XI, N EW DELHI QUA THE ASSESSMENT YEAR 2003-04 ON THE CONCISE GROUNDS INTER ALIA THAT:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT (A), NEW DELHI HAS ERRED BOTH FACTS AND IN LAW, IN UPHOLDING THE ILLEGAL ORDER OF THE RESPONDENT ON TH E FOLLOWING GROUNDS AND HENCE LIABLE TO BE QUASHED BECAUSE: 1. REASONS RECORDED ARE VAGUE AND SCANTY, WITHOUT APPLICATION OF HIS OWN MIND BY AO AND WITHOUT NECESSARY APPROVAL OF THE JOINT CIT AND HENCE RE- ASSESSMENT PROCEEDING ARE NOT IN TERMS OF SECTION 1 47 TO 151 OF THE INCOME TAX ACT. 2. RE-ASSESSMENT PROCEEDINGS ARE WITHOUT ISSUE/SERVICE OF NOTICE U/S 148 RENDER THE PROCEEDI NG VOID-AB-INITIO. 3. OBJECTION SPECIFICALLY RAISED WERE NOT DISPOSED OF BEFORE PASSING THE IMPUGNED ORDER. 4. NO ADDITION ON ACCOUNT OF INCOME ALLEGED TO ESCAPE ASSESSMENT ON THE BASIS OF WHICH ASSESSMENT WAS REOPENED THEN OTHER ADDITIONS CANNOT BE SUSTAINED A S ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 3 PER DECISION OF HON'BLE DELHI HIGH COURT IN THE CAS E OF RANBAXY LABORATORIES LIMITED VS. CIT (2011) 336 ITR 136. 5. REASSESSMENT ORDER PASSED IN VIOLATION OF NATURA L JUSTICE WITHOUT PROVIDING CORROBORATION OF THE MATE RIAL AND WITHOUT PROVIDING CROSS EXAMINATION ASKED AND WITHOUT PROPER SHOW CAUSE NOTICE. 6. ADDITION OF RS.5,25,000/- U/S. 68 BY TREATING UNEXPLAINED INCOME. 7. ADDITIONS OF HYPOTHETICAL COMMISSION OF RS.1,28,535/- U/S. 68 BY TREATING UNEXPLAINED INCOM E. 8. CIT (A) ERRED BY EXCEEDING HIS JURISDICTION BY ISSUING UNWARRANTED DIRECTION TO AO TO LAUNCH PROSECUTION AGAINST THE APPELLANT AND UNWARRANTED ACTION UNDER MONEY LAUNDERING ACT AS WELL AS BY SERIOUS FRAUD INVESTIGATING AUTHORITY ETC. SUCH DIRECTIONS ARE LIABLE TO BE VACATED. 9. ILLEGAL ADDITIONS AND DISALLOWANCES AND CONSEQUENT DEMANDS OF INCOME TAX, INTEREST AND PENALTIES ILLEGALLY RAISED. 3. THE APPELLANT, ITO, WARD 12 (4), NEW DELHI (HERE INAFTER REFERRED TO AS THE REVENUE) BY FILING THE PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 17.10.2013 PASSE D BY LD. CIT (APPEALS)-XI, NEW DELHI QUA THE ASSESSMENT YEAR 200 3-04 ON THE GROUNDS INTER ALIA THAT :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE LD. CIT (A) IS WRONG AND AGAI NST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASI DE. ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 4 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1,28,53,466/- AS THE ASSESSEE COMPANY HAS FAILED TO EXPLAIN THE IDENTITY, GENUINENESS AND SOURCE OF CRE DITS APPEARING IN HIS BANK ACCOUNT. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN HOLDING THAT THE ASSESSEE COMPANY WAS A STEPPING STONE IN ROUTING BACK UNDISCLOSED MONEY OF THE BENEFICIARIES. 4. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ASSESSING OFFICER FRAMED THE ASSESSMENT UNDER SECTION 143(3)/147 OF THE INCOME-TAX ACT, 196 1 (FOR SHORT THE ACT) AT TOTAL INCOME OF RS.7,82,370/- ON SUBS TANTIVE BASIS AND RS.1,35,07,301/- ON PROTECTIVE CASES. AO MADE SUBS TANTIVE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDIT AT R S.6,25,000/- AND ADDITIONS OF RS.15,625/- & RS.1,28,535/- ARE MADE O N ACCOUNT OF COMMISSION EARNED ON PROVIDING ENTRIES TO THE BENEF ICIARIES. PROTECTIVE ADDITION OF RS.1,28,53,466/- WAS MADE ON ACCOUNT OF BOGUS CASH CREDITS USED BY THE ASSESSEE FOR ROTATIN G THE ENTRIES AS ENTRY OPERATORS. 5. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF AN APPEAL WHO HAS GIVEN PART RELIEF BY PARTLY ALLOW ING THE APPEAL. FEELING AGGRIEVED, THE REVENUE AS WELL AS THE ASSES SEE HAVE COME BEFORE THE TRIBUNAL BY WAY OF FILING CROSS APPEALS. ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 5 6. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. GROUNDS NO.1 TO 5 OF ASSESSEES APPEAL (ITA NO.6634/DEL/2013 7. AO REOPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT AFTER RECORDING REASONS WHICH ARE EXTRACTED AS UNDE R :- REASONS FOR ISSUING NOTICE U/S 148 IN THE CASE OF M/S. HOPEWIN ADMARK & CONSULTANCY SERVICES PRIVATE LIMITED. AY 2003-04 THE ASSESSEE FILED RETURN OF INCOME ON 02.12.2003 V IDE RECEIPT NO.1244000859 DECLARING INCOME OF RS.13,210 /-. THE SAME WAS PROCESSED U/S 143(1) OF THE I.T. ACT 1961 ON 12.03.2004. AN INFORMATION REGARDING ENTRY OPERATORS AND THEIR BENEFICIARIES HAVE BEEN RECEIVED IN THE FORM OF CD FROM THE OFFICE OF THE DIRECTORATE OF INCOME-TAX, JHANDEWALA N, THAT THE ASSESSEE HAS RECEIVED RS.4,50,000/- AS ACCOMMODATIO N ENTRIES FROM M/S. SHIVAM SOFTECH LTD. & ARPIT SALES CORP. THE DETAIL IS AS UNDER :- BENEFICIARYS NAME VALUE OF ENTRY TAKEN INSTRU- MENT NO. BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK AND BRANCH FROM WHICH ENTRY GIVEN A/C NO. ENTRY GIVEING ACCOUNT HOPEWIN ADMARK & CONSULTANCY SERVICES (P) LTD. HOPEWIN ADMARK & CONSULTANCY SERVICES (P) LTD. 250000 200000 941601 115504 08/02/2002 27/03/2003 SHIVAM SOFTECH LTD. ARPIT SALES CORP. FEDERAL KAROL BAGH KESHAV SEHKARI KAROL BAGH 595 695 ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 6 THE ABOVE MENTIONED AMOUNT OF RS.4,50,000/- WAS CREDITED IN THE BANK ACCOUNT OF THE ASSESSEE WITH S BBJ, NEW ROHTAK ROAD. THE REPORT RECEIVED FROM DIT (INV.) R EVEALED THAT THE ENQUIRIES WERE INITIATED TO PROBE INTO SOME BAN K ACCOUNT WHICH WERE USED TO ISSUE CHEQUES TO ENTRY SEEKERS O R BENEFICIARIES AGAINST CASH PAID BY THEM TO THE ENTR Y OPERATORS. THE ASSESSEE COMPANY HAS RECEIVED THE SAID ENTRY. ON THE BASIS OF THE INFORMATION SENT BY THE INVEST IGATION WING AND AFTER GOING THROUGH ACCOMPANYING DOCUMENTS , I AM COMPLETELY SATISFIED THAT THIS TRANSACTION OF RS.4, 50,000/- AS MENTIONED ABOVE, IS NOTHING BUT ASSESSEES OWN UNAC COUNTED MONEY WHICH HAS BEEN ROUTED BACK TO IT IN THE FORM OF ACCOMMODATION ENTRY ONLY. ACCORDINGLY, THE AMOUNT OF RS.4,50,000/- IS UNACCOUNTED MONEY BELONGING TO THE ASSESSEE WHICH HAS BEEN UTILIZED FOR THE ENTRY AND REPRESENT S INCOME ESCAPING ASSESSMENT. ACCORDINGLY, I HAVE REASONS T O BELIEVE THAT RS.4,50,000/- HAS ESCAPED ASSESSMENT AND THE ESCAPE MENT HAS BEEN ON ACCOUNT OF FAILURE ON PART OF ASSESSEE TO T RULY AND FULLY DISCLOSE ALL MATERIAL FACTS THEREFORE IT IS A FIT C ASE FOR INITIATION OF PROCEEDINGS U/S 147 OF THE I.T. ACT. IN VIEW OF THE PROVISION OF SECTION 151 OF THE I.T . ACT, NECESSARY APPROVAL FOR THE ISSUE OF NOTICE U/S 148 MAY KINDLY BE ACCORDED FOR THE A.Y. 2003-04. SD/- (YOGESH NAYYAR) INCOME TAX OFFICER, WARD 12 (4), NEW DELHI. ADDL.CIT, RANGE 12, NEW DELHI. 8. UNDISPUTEDLY, AO REOPENED THE ASSESSMENT ON THE GROUND THAT AN INCOME OF RS.4,50,000/- (RS.2,50,000/- AND RS.2,00,000/-) TAKEN BY THE ASSESSEE AS ENTRY FROM M/S. SHIVAM SOF TECH LTD. AND M/S. ARPIT SALES CORP. RESPECTIVELY HAS ESCAPED ASS ESSMENT. IT IS ALSO NOT IN DISPUTE THAT THE AMOUNT OF RS.2,00,000/ - ALLEGED TO HAVE BEEN TAKEN BY THE ASSESSEE FROM M/S. ARPIT SALES CO RP. MERELY AS AN ENTRY PERTAINS TO EARLIER YEAR I.E. FOR AY 2002- 03 BEING OF 27.03.2003. ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 7 9. IT IS ALSO NOT IN DISPUTE THAT THE ENTRY AMOUNT OF RS.2,50,000/- AND RS.2,00,000/- ALLEGED TO HAVE ESC APED ASSESSMENT BY THE AO, HAS BEEN DULY ACCEPTED BY THE AO DURING ASSESSMENT PROCEEDINGS, HAVING BEEN DULY EXPLAINED BY THE ASSESSEE AND NO ADDITION THEREON HAS BEEN MADE. 10. NOW THE QUESTION ARISES FOR DETERMINATION IN TH IS CASE IS :- AS TO WHETHER IN THE ASSESSMENT UNDER SECTION 143 (3)/147, THE AO CAN TRAVEL BEYOND THE SUBJECT MATTER OF THE REAS ONS RECORDED FOR REOPENING THE ASSESSMENT? 11. THIS ISSUE HAS ALREADY BEEN DEALT WITH BY THE H ONBLE DELHI HIGH COURT IN CASE CITED AS RANBAXY LABORATORIES LTD. VS. CIT (2011) 336 ITR 136 (DELHI) BY RETURNING THE FOLLOWING FINDINGS:- HELD, THAT SECTION 148 WAS SUPPLEMENTARY AND COMPLEMENTARY TO SECTION 147. SUB-SECTION (2) OF SECTION 148 MANDATES REASONS FOR ISSUANCE OF NOTICE BY THE ASSESSING OFFICER AND SUB-SECTION (1) MANDATES SERVICE OF NOTICE TO THE ASSESSEE BEFORE THE ASSESS ING OFFICER PROCEEDS TO ASSESS, REASSESS OR RECOMPUTE ESCAPED INCOME. SECTION 147 MANDATES RECORDING OF REASONS TO BELIEVE BY THE ASSESSING OFFICER THAT TH E INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. A LL THESE CONDITIONS WERE REQUIRED TO BE FULFILLED TO A SSESS OR REASSESS THE ESCAPED INCOME CHARGEABLE TO TAX. UNDER EXPLANATION 3 IF DURING THE COURSE OF THE PROCEEDINGS THE ASSESSING OFFICER COMES TO THE CONCLUSION THAT SOME ITEMS HAVE ESCAPED ASSESSMENT, THEN NOTWITHSTANDING THAT THOSE ITEMS WERE NOT INCL UDED IN THE REASONS TO BELIEVE AS RECORDED FOR INITIATIO N OF THE PROCEEDINGS AND THE NOTICE, HE WOULD BE COMPETENT T O MAKE ASSESSMENT OF THOSE ITEMS. FOR EVERY NEW ISSUE COMING BEFORE THE ASSESSING OFFICER DURING THE COUR SE OF PROCEEDINGS OF ASSESSMENT OR REASSESSMENT OF ESCAPED INCOME, AND WHICH HE INTENDS TO TAKE INTO ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 8 ACCOUNT, HE WOULD BE REQUIRED TO ISSUE A FRESH NOTI CE UNDER SECTION 148. THE ASSESSING OFFICER WAS SATISF IED WITH THE JUSTIFICATIONS GIVEN BY THE ASSESSEE REGAR DING THE ITEMS OF CLUB FEES, GIFTS AND PRESENTS AND PROV ISION FOR LEAVE ENCASHMENT, BUT DURING THE ASSESSMENT PROCEEDINGS, HE FOUND THE DEDUCTION UNDER SECTIONS 80HH AND 80-I AS CLAIMED BY THE ASSESSEE TO BE NOT ADMISSIBLE. HE CONSEQUENTLY PROCEEDED TO MAKE DEDUCTIONS UNDER SECTIONS 80HH AND 80-I AND ACCORDINGLY REDUCED THE CLAIM ON THESE ACCOUNTS. T HE VERY BASIS OF INITIATION OF PROCEEDINGS FOR WHICH R EASONS TO BELIEVE WERE RECORDED WAS INCOME ESCAPING ASSESSMENT IN RESPECT OF ITEMS OF CLUB FEES, GIFTS AND PRESENTS, ETC., BUT WHILE THESE ITEMS WERE NOT DIST URBED, THE ASSESSING OFFICER PROCEEDED TO REDUCE THE CLAIM OF DEDUCTION UNDER SECTIONS 80HH AND 80-I WHICH WAS NO T PERMISSIBLE. THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE ASSESSING OFFICER HAD THE JURISDICTION TO REASSESS ISSUES OTHER THAN THE ISSUES IN RESPECT OF WHICH PROCEEDIN GS WERE INITIATED BUT HE WAS NOT JUSTIFIED WHEN THE RE ASONS FOR THE INITIATION OF THOSE PROCEEDINGS CEASED TO SURVIVE. 12. WHEN UNDISPUTEDLY THE AO HAS NOT MADE ANY ADDIT ION QUA THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT AS PE R REASONS RECORDED, HE HAD NO JURISDICTION TO MAKE REASSESSME NT ON OTHER ITEMS FOR WHICH REOPENING WAS NOT INITIATED. WHEN THE AO HAS ACCEPTED THE EXPLANATION MADE BY THE ASSESSEE AS TO THE ALLEGED ESCAPEMENT OF INCOME OF RS.4,50,000/- AND HAS NOT M ADE ANY ADDITION THERE ON, INITIATION OF PROCEEDINGS QUA OT HER SUBJECTS HAS CEASED TO SURVIVE. SO, WE ARE OF THE CONSIDERED VI EW THAT OTHER ADDITIONS MADE BY THE ASSESSEE WHICH WERE NOT THE S UBJECT MATTER ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 9 OF THE REASONS RECORDED, ARE NOT SUSTAINABLE. SO, GROUNDS NO.1 TO 5 ARE DETERMINED IN FAVOUR OF THE ASSESSEE. GROUNDS NO. 6 & 7 OF ASSESSEES APPEAL (ITA NO.6634/DEL/2013 GROUND NO.2 OF REVENUES APPEAL (ITA NO.256/DEL/2014) 13. AO MADE ADDITION OF RS.5,25,000/- ON ACCOUNT OF UNEXPLAINED INCOME TAKEN BY HIM IN THE FORM OF SHAR E APPLICATION MONEY FROM M.C. GOYAL, SMT. MANJU AGARWAL, PARAMANA ND BHARDWAJ AND VIKAS AGARWAL TO THE TUNE OF RS.2,00,0 00/-, RS.25,000/-, RS.1,00,000/- AND RS.2,00,000/- RESPEC TIVELY. SIMILARLY AO AFTER NOTICING CREDIT ENTRY OF RS.1,28 ,53,466/- MADE ADDITION OF RS.1,28,535/- ON SUBSTANTIVE BASIS BEIN G 1% OF THE COMMISSION OF RS.1,28,53,466/- CREDITED IN THE PROF IT AND LOSS ACCOUNT. AT THE SAME TIME, AO MADE ADDITION OF RS. 1,28,53,466/- ON PROTECTIVE BASIS IN THE HANDS OF ASSESSEE. 14. UNDISPUTEDLY, PROTECTIVE ADDITION OF RS.1,28,53 ,466/- HAS BEEN DELETED BY THE LD. CIT(A) WIDE IMPUGNED ORDER WHICH HAS BEEN CHALLENGED BY THE REVENUE BY WAY OF FILING CRO SS APPEAL. BUT AGAIN FOR THE SAKE OF REPETITION, WE ARE OF THE CONSIDERED VIEW THAT SINCE ITEMS OF THESE ADDITIONS WERE NOT SUBJEC T MATTER OF THE REASONS RECORDED / REOPENING, THE ADDITION PER SE C ANNOT SURVIVE, AS ITA NO.6634/DEL./2013 ITA NO.256/DEL./2014 10 HAS BEEN HELD BY HONBLE DELHI HIGH COURT IN RANBAXY LABORATORIES LTD. (SUPRA). CONSEQUENTLY, GROUNDS NO.6 & 7 OF THE ASSESSEES APPEAL ARE DETERMINED IN FAVOUR OF THE A SSESSEE AND GROUND NO.2 OF REVENUES APPEAL IS DETERMINED AGAIN ST THE REVENUE. GROUNDS NO.1 & 3 OF REVENUES APPEAL (ITA NO.256/DEL/2014) 15. GROUNDS NO.1 & 3 OF REVENUES APPEAL NEED NO AD JUDICATION BEING GENERAL IN NATURE. 16. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, APPEA L FILED BY THE ASSESSEE IS HEREBY ALLOWED, HOWEVER THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF FEBRUARY, 2019. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) VICE PRESIDENT JUDICIAL MEMBER DATED THE 25 TH DAY OF FEBRUARY, 2019 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.