Rahul Bhandari, Delhi V. ACIT, New Delhi

ITA 2637/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7253 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 01-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 05-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ASHISH CHADHA CAS; VED JAIN SHRI ASHISH GOEL
• Keywords: Reopening of assessment; Business income; Peak credit; Accommodation entries; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-3 : NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.2637/DEL/2015 ASSESSMENT YEAR : 2006-07 RAHUL BHANDARI, N-50, DR. MUKHERJEE NAGAR, DELHI. PAN: AAFPB3371A VS. ACIT, CIRCLE-20(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE, SHRI ASHISH GOEL, & SHRI ASHISH CHADHA, CAS DEPARTMENT BY : SHRI ANIL SHARMA, SR. DR DATE OF HEARING : 01.09.2016 DATE OF PRONOUNCEMENT : 08.09.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) DATED 30.12.2014 FOR THE ASSESSMENT YEAR 2006-07 ON THE FOLLOWING GROUNDS:- ITA NO.2637/DEL/2015 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [C IT(A)] IS BAD BOTH IN THE EYE OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING T HE CONTENTION OF THE ASSESSEE THAT PROCEEDINGS INITIATED UNDER SECTION 1 47, READ WITH SECTION 148 ARE BAD AS THE CONDITION AND PROCEDURE PRESCRIBED UNDER THE STATUTE HAVE NOT BEEN COMPLIED WITH. 3(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING T HE CONTENTION OF THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS INITIATE D BY THE LEARNED A.O. ARE BAD IN THE EYE OF LAW AS THE REASONS RECOR DED FOR THE ISSUE OF NOTICE UNDER SECTION 148 ARE BAD IN THE EYE OF LAW AND ARE CONTRARY TO THE FACTS. (II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN REJECTING T HE CONTENTION OF THE ASSESSEE THAT THE REASSESSMENT PROCEEDINGS INITIATE D BY THE LEARNED A.O. ARE BAD IN LAW AS THE SAME ARE BASED ON REASON S WHICH ARE VAGUE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ADDITION OF RS.14,67,410/- ON ACCOUNT OF DEPOSITS IN BANK ACCOU NT. 5(I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW IN CONFIRMING TH E ABOVESAID ADDITION REJECTING THE EXPLANATION AND EVIDENCES BROUGHT ON RECORD BY THE ASSESSEE TO SHOW THAT THE SAID DEPOSITS PERTAIN TO BUSINESS RECEIPTS OF THE ASSESSEE. (II) WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALT ERNATIVE, ADDITION HAS TO BE RESTRICTED TO THE INCOME COMPONENTS OF THE DE POSITS AND NOT ALL THE DEPOSITS CAN BE ADDED. (III) WITHOUT PREJUDICE TO THE ABOVE AND IN THE AL TERNATIVE, THE ADDITION CAN BE MADE ONLY OF THE PEAK CREDIT IN THE SAID BAN K ACCOUNT. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE GROUNDS OF APPEAL. ITA NO.2637/DEL/2015 3 2. AFTER HEARING THE RIVAL CONTENTIONS, I FIND THAT THE AO TRIED TO ASSUME JURISDICTION BY ISSUING NOTICE U/S 148 FOR R EOPENING THE ASSESSMENT. HE HAS RECORDED THE REASONS FOR REOPEN ING THE ASSESSMENT AS FOLLOWS:- REASONS FOR REOPENING OF THE CASE U/S 147/148, A.Y . 2006-07 IN THIS CASE, AS PER AIR INFORMATION (WITHOUT PAN) CONTAINED IN A CD CIRCULATED BY THE CCIT-I, DELHI VIDE LETTER F.NO. CCIT/DELHI/JURIS/CRPU/2007-08/10065 DATED 05.12.200 8 AND FURTHER THE SAME WAS FORWARDED BY ITO, WARD-29(4) VIDE LETT ER F.NO.ITO/WARD 29(4)/DAO/CASHDEPOSIT/204/2011-12/609 DATED 15.03.2012, IT WAS FOUND THAT SH. RAHUL BHANDARI HA D MADE TRANSACTION OF RS. 14,67,400/- WITH INDUSTRIAL DEVE LOPMENT BANK OF INDIA LTD, MUM 100314 ON 31.03.2006. FOR THE ABOVE STATED REASONS TO BELIEVE, THE CASE OF THE ASSESSEE NEEDS EXAMINATION FOR REASSESSMENT, U/S 147 OF, THE INCOM E TAX ACT, 1961, AS THE ABOVE MENTIONED INCOME OF RS. 14,67,400/- ES CAPED ASSESSMENT. NECESSARY APPROVAL IN THIS REGARD MAY BE ALLOWED TO REOPEN THE CASE U/S147. 3. I OBSERVE THAT THE AOS FINDING THAT AN INVESTME NT WAS MADE ON 31.3.2006 IS FACTUALLY INCORRECT. I HAVE, THEREFORE , TO NECESSARILY CONCLUDE THAT THE REASONS WERE RECORDED WITHOUT APP LICATION OF MIND. THEREFORE, ON THIS GROUND ITSELF, THE REOPENING OF ASSESSMENT HAS TO BE HELD BAD IN LAW BY FOLLOWING THE JUDGEMENTS OF THE JURISDICTIONAL HIGH COURT IN THE CASE SIGNATURE HOTELS PVT. LTD. VS. ITO 328 ITR 51 (DEL) ITA NO.2637/DEL/2015 4 WHEREIN IT WAS HELD THAT NOTICE ISSUED BASED ON A R EPORT FROM INVESTIGATION WING IS INVALID WHERE THE AO DOES NOT EXAMINE THE EVIDENCE. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE PRINCIPAL COMMISSIONER OF INCOME TAX VS. G & G PHARMA INDIA L TD. IN ITA NO. 545/2015 VIDE ORDER DT. 8.10.2015 AT PARA 12 AND 13 HELD AS FOLLOWS. 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 F EBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES , WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATIO N, THE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS, INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNH ELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO TH E MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ITA NO. 3602/DEL/2010 C.O. NO. 276/DEL/2010 A.Y. 2000-2001 M/S BAWA FLOAT GLAS S LIMITED 3 ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TEND ERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER 2004 AND W AS PROCESSED UNDER SECTION 143(3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATI ON ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW E XPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND T O THE MATERIALS IN ITA NO.2637/DEL/2015 5 ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERIALS PRODUCED DU RING THE HEARING OF THE APPEAL. THE COURT WOULD LIKE TO OBSERVE THAT THIS I S IN THE NATURE OF A POST MORTEM EXERCISE AFTER THE EVENT OF REOPENING OF THE ASSESSMENT HAS TAKEN PLACE. WHILE THE CIT MAY HAVE PROCEEDED ON THE BASI S THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMENT, THE AO HA S TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BE LIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 4. RESPECTFULLY FOLLOWING THE JUDGEMENTS OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASES CITED ABOVE , THE ASSESSMENT BEING BAD IN LAW I QUASH THE SAME. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 08.09.2 016. SD/- [J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED, 08 TH SEPTEMBER, 2016. DK ITA NO.2637/DEL/2015 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.