ITO, New Delhi V. M/s. Aryan Management Services (P) Ltd, New Delhi

ITA 2986/DEL/2009

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 2722 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 1 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-07-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 26-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHIM SINGH
• Assessee Lawyers: V K AGGARWAL
• Keywords: Accommodation entries; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE VICE PRESIDENT AND SHRI A.D. JAIN, JUDICIAL MEMBER ITA NO.2986/DEL/2009 ASSESSMENT YEAR : 2001-02 ITO, WARD 2(1), ROOM NO.381, CR BUILDING, NEW DELHI. VS. ARYAN MANAGEMENT SERVICES (P) LTD., 70, JANPATH, NEW DELHI. PAN : AADCA5084C C.O. NO.234/DEL/2009 (ITA NO.2986/DEL/2009) ASSESSMENT YEAR : 2001-02 ARYAN MANAGEMENT SERVICES (P) LTD., 70, JANPATH, NEW DELHI. PAN : AADCA5084C VS. ITO, WARD 2(1), ROOM NO.381, CR BUILDING, NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. AGGARWAL, AR REVENUE BY : SHRI BHIM SINGH, SR.DR ORDER PER A.D. JAIN, JUDICIAL MEMBER THIS IS DEPARTMENTS APPEAL AND ASSESSEES CROSS OBJECTIONS F OR ASSESSMENT YEAR 2001-02 AGAINST THE ORDER DATED 23.3.200 9 PASSED BY THE CIT (A)-V, NEW DELHI. THE DEPARTMENT HAS TAK EN THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DELETING ADDITION OF RS.20,00,000/- MADE BY THE ASSESSING OFFICER U/S 68 OF THE ACT ON ACCOUNT OF UNE XPLAINED ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 2 CASH CREDITS AND RS.10,000/- ON ACCOUNT OF COMMISSIO N PAID FROM UNDISCLOSED SOURCES IGNORING THE FACT THAT A) THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER I S BASED ON INFORMATION RECEIVED FROM THE INVESTIGATION WI NG OF THE DEPARTMENT THAT THE ASSESSEE COMPANY HAS RECEIVED BOG US ENTRIES AMOUNTING TO RS.20 LACS FROM DIFFERENT ENTRY OPE RATORS. B) THE A.O. HAS BASED THE ASSESSMENT BY RELYING UPON THE STATEMENT OF SHRI S.H. MALLICK, DIRECTOR IN MANY COMPAN IES ENGAGED IN PROVIDING ENTRIES, RECORDED BY THE INVESTI GATION WING WHO DEPOSED THAT THE COMPANIES WERE NOT DOING ANY ACTUA L BUSINESS OTHER THAN GIVING ACCOMMODATION ENTRIES BY WAY OF CHEQUE/DD/PO ON RECEIPT OF EQUIVALENT AMOUNT OF CASH P LUS COMMISSION @ 0.25% TO 0.50%. C) THE FACTS OF THE PRESENT CASE ARE DISTINGUISHABLE TO THAT OF M/S LOVELY EXPORTS (P) LTD. RELIED UPON BY THE LD. CIT (A). 2. THE ASSESSEE HAS RAISED THE FOLLOWING CROSS OBJECTIONS:- THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL A S ON FACTS IN HOLDING THAT THE INITIATION OF REASSESSMENT PROCEEDINGS IS VALID. THE LD. CIT (A) HAS GROSSLY ERRED IN LAW AS WELL AS ON FACTS IN NOT HOLDING THAT THE PROCEEDINGS UNDER SECTION 147/148 IS ILLEGAL AND HENCE THE ASSESSMENT ORDER IS TO BE QUASHED. 3. TAKING UP THE ASSESSEES CROSS OBJECTIONS FIRST, THE ASSESSEE HAS CONTENDED THAT THE LD. CIT (A) HAS ERRED IN HOLDING THE INITIATION OF RE- ASSESSMENT PROCEEDINGS TO BE VALID. 4. THE ASSESSING OFFICER RECORDED THE FOLLOWING REASONS ( COPY AT PAGE 15 OF THE ASSESSEES PAPER BOOK, APB FOR SHORT):- DIRECTORATE OF INVESTIGATION, AGRA, UP HAD SENT A LIST, CONTAINED IN COMPACT DISC. CONTAINING DETAILS OF TRANSACTIONS AND PARTICULARS OF BENEFICIARIES AND OPERATORS OF ACCOMMO DATION ENTRIES PERTAINING TO DELHI REGION. A PERUSAL OF THE L IST SHOWS THAT M/S ARYAN MANAGEMENT SERVICES )PVT.) LTD. WHOSE JURISDICTION LIES WITH THE UNDERSIGNED, HAS BEEN A B ENEFICIARY OF ENTRIES PROVIDED BY PERSONS AS MENTIONED BELOW: ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 3 BENEFICIARY NAME AND VALUE OF ENTRY TAKEN BENEFICIARY BANK, INSTRUMENT NO. AND DATE ON WHICH ENTRY TAKEN ENTRY GIVER, BANK, BRANCH & A/C NO. ARYAN MANAGEMENT SERVICES (PVT.) LTD. RS.3,00,000/- BANK OF MADURA, NOIDA, INST. NO.66568, 01 ST SEPT, 2000. M/S ONYX EXIM & SALES PVT. LTD., KESHAV SEHKARI CO- OP. BANK, KAROL BAGH, ACCOUNT NO.429. ARYAN MANAGEMENT SERVICES (PVT.) LTD. RS.4,00,000 BANK OF MADURA, NOIDA, INST. NO.786526, 13 TH OCTO, 2000 M/S WELCOME COIR INDUSTRIES LTD., CORPORATION BANK, KAROL BAGH, ACCOUNT NO.3694 IN VIEW OF THE ABOVE CREDIBLE INFORMATION RECEIVED FR OM THE DIT (INV.), I HAVE REASONS TO BELIEVE THAT THE INCOME OF MY ASSESSEE WHO STANDS AS A BENEFICIARY FROM THE ENTRY PROVIDER, WHICH IS CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AS PER THE PRO VISIONS OF SECTION 147 (A), (B) & (C) OF THE INCOME TAX ACT, 1 961. I AM, THEREFORE, SATISFIED THAT THE SAID INCOME ON ACCOMMODATION ENTRIES AS MENTIONED ABOVE HAS ESCAPED ASSESSMENT AND ACCORDINGLY AFTER RECORDING THE ABOVE S AID REASONS AS LAID DOWN UNDER THE PROVISIONS OF SECTION 148 (2) OF THE INCOME TAX ACT PROPOSE TO ISSUE A NOTICE TO THE ABOV E MENTIONED ASSESSEE U/S 148(1) OF THE IT ACT, 1961. THE PROPOSAL IS FORWARDED FOR KIND CONSIDERATION AND NECESSARY APPROVAL IN VIEW OF THE FACT THAT: (I) THE ASSESSMENT YEAR INVOLVED IS A.Y. 2001-02, IN VIE W OF WHICH, SINCE 4 YEARS HAVE ELAPSED, BUT NOT MORE THAN 6 YEARS, THE PROPOSAL IS FORWARDED AS LAID DOWN UNDER THE PROVISIONS OF SECTION 149 (1)(B) OF THE IT ACT, 1961. (II) KIND APPROVAL AND SANCTION FROM HONBLE CIT, DELHI- I, NEW DELHI IS REQUIRED FOR ISSUE OF NOTICE U/S 148 (1) AN D IS SOUGHT AS PER THE PROVISIONS OF SECTION 151 [READ WITH SUBSECTION (1) & (2)] OF THE INCOME TAX ACT, 1961 SUBMITTED. SD/- (VIRENDRA SINGH DHANDA) INCOME TAX OFFICER, WARD (2 (1), NEW DELHI. ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 4 5. BEFORE US, ON BEHALF OF THE ASSESSEE, IT HAS BEEN CON TENDED THAT THE NOTICE DATED 27.03.2008, ISSUED U/S 148 OF THE IT ACT WAS VIOLATIVE OF SECTION 151 OF THE ACT, SINCE THE SAME WAS ISSUED WIT HOUT OBTAINING SANCTION FROM THE ADDL. CIT, WHICH WAS THE REQUIREMEN T U/S 151 (2) OF THE ACT, AS THE ORIGINAL ASSESSMENT ORDER HAD BEEN PASSED U/S 143 (1) OF THE ACT AND MORE THAN FOUR YEARS HAD ELAPSED. REL IANCE HAS BEEN PLACED ON LOK PRIYA HOUSING DEVELOPMENT VS. ITO, 20 09-TIOL-282- ITAT-MUM. RELIANCE HAS ALSO BEEN PLACED ON CIT VS. S UMAN WAMAN CHAUDHARY, (2010) 321 ITR 495 (BOM). IT IS SUBMITT ED THAT AGAINST THIS DECISION OF THE HONBLE BOMBAY HIGH COURT, AN SL P HAD BEEN FILED BY THE DEPARTMENT, IN SLP (C) NO.6757 OF 2009, WHIC H STANDS DISMISSED BY THE HONBLE SUPREME COURT VIDE ORDER DATE D 16.03.2009. 6. IT HAS NEXT BEEN CONTENDED ON BEHALF OF THE ASSESSEE THAT IT IS APPARENT FROM THE REASONS RECORDED BY THE ASSESSING OFFIC ER FOR REOPENING THE COMPLETED ASSESSMENT OF THE ASSESSEE, THAT TH E NOTICE U/S 148 OF THE ACT WAS ISSUED IN A MERELY MECHANICAL MA NNER, BASED ON INFORMATION FROM THE INVESTIGATION WING OF THE DE PARTMENT; THAT THE ASSESSING OFFICER, WHILE RECORDING THE REASONS, DID NOT G O INTO THE VERACITY OR THE BEST OF THE INFORMATION RECEIVED; TH AT HE DID NOT MENTION ANY MATERIAL WHICH WOULD HAVE LEAD HIM TO B ELIEVE THAT THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WAS BASED ON SOME RELEVANT MATERIAL AND THAT THE INCO ME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. IN THIS REGARD, RELIANCE HA S BEEN PLACED ON THE FOLLOWING CASE LAWS:- I) SIGNATURE HOTELS (P) LTD. VS. ITO & ANR., 338 ITR 5 1 (DEL); II) CIT VS. ATUL JAIN, 299 ITR 383 (DEL); III) SARTHAK SECURITIES COMPANY PVT. LTD. VS. ITO, 329 I TR 110 (DEL); IV) CIT VS. SFIL STOCK BROKING LTD., 325 ITR 285 (DEL) ; ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 5 V) CIT VS. KAMADHENU STEEL & ALLOYS LTD., 2012-TIOL-23 6-HC- DEL-IT. 7. IT HAS BEEN SUBMITTED THAT IN THE CASE OF M/S KAMAD HENU (SUPRA), THE SLP FILED BY THE DEPARTMENT HAS BEEN DI SMISSED BY THE HONBLE SUPREME COURT IN CC15640/2012 VIDE ORDER DA TED 27.09.2012. 8. IT HAS FURTHER BEEN CONTENDED THAT THE ITO HAS ISSUE D THE NOTICE U/S 148 OF THE ACT ONLY ON THE BORROWED SATISFACTION O F THE INVESTIGATION WING OF THE DEPARTMENT, RATHER THAN ON HIS OWN SATISFACTION. IT HAS BEEN CONTENDED THAT THIS CANNOT B E DONE, AS HELD IN CIT VS. SHREE RAJASTHAN SYNTEX LTD., 313 ITR 231 (RAJ), ITO VS. VIJENDER KUMAR, 67 DTR (DEL) (TRIB.) 283. 9. THEN, IT HAS BEEN CONTENDED THAT THE REASONS RECORD ED BY THE ASSESSING OFFICER MAY AMOUNT TO ONLY REASONS TO SUSPECT ESCAPEMENT OF INCOME, BUT NOT REASONS TO BELIEVE ESCAPEMENT OF INCOME; REASONS TO SUSPECT CANNOT BE EQUATED WITH REASONS TO BELIEVE ; THAT BELIEF CANNOT BE BASED ON SUSPICION; THAT SECTION 147 OF THE ACT REQUIRES THE ASSESSING OFFICER TO HAVE REASONS TO BELIEVE FOR ESCAPEMEN T OF INCOME. RELIANCE HAS BEEN PLACED ON CIT VS. GUPTA ABHUSHAN P VT. LTD., 312 ITR 166 (DEL); DASS FRIENDS BUILDERS (P) LTD., 280 I TR 77 (ALL) AND INDIAN OIL CORPORATION VS. ITO AND ORS., 159 ITR 95 6 (SC). 10. LASTLY, IT HAS BEEN ARGUED THAT FOR JUSTIFICATION OF NOTICE U/S 148 OF THE ACT, ONLY THE REASONS RECORDED BY THE ASSESSING OF FICER ARE TO BE CONSIDERED AND THAT SUCH NOTICE CANNOT BE SUPPORTED BY ANY OTHER FACT. RELIANCE IN THIS REGARD HAS BEEN PLACED ON NO RTHERN EXIM PVT. LTD. VS. DCIT, 2012-TIOL-220-HC-DEL-IT AND PRASHAN T S. JOSHI VS. ITO, 1 TAXMAN.COM 103 (BOM). ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 6 11. THE LD. DR HAS, ON THE OTHER HAND, RELIED ON THE IMPUGNED ORDER IN THIS REGARD. 12. WE HAVE HEARD THE PARTIES AND HAVE PERUSED THE MA TERIAL ON RECORD WITH REGARD TO THE C.O. FILED BY THE ASSESSEE. 13. APROPOS THE ASSESSEES OBJECTION REGARDING THE VIOLA TION OF SECTION 151 OF THE ACT, THE SAID SECTION 151 (2) OF THE ACT READS AS FOLLOWS:- 151 (2) IN A CASE OTHER THAN A CASE FALLING UNDER S UB-SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSESSING OFFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSE SSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CA SE FOR THE ISSUE OF SUCH NOTICE. 14. THEREFORE, THE EXPRESS REQUIREMENT OF SECTION 151 (2) IS THAT OF GRANT OF SANCTION FOR ISSUANCE OF A NOTICE U/S 148 OF THE ACT, BY AN ASSESSING OFFICER NOT BELOW THE RANK OF JOINT COMMISSIONE R, WHERE A PERIOD OF MORE THAN FOUR YEARS HAS ELAPSED SINCE THE PA SSING OF AN ASSESSMENT ORDER U/S 143 (1) OF THE ACT. NOW, THE EXPRE SSION JOINT COMMISSIONER HAS BEEN DEFINED IN SECTION 2(28C) OF T HE ACT, AS FOLLOWS:- 2( 28C ) 'JOINT COMMISSIONER' MEANS A PERSON APPOINTED TO BE A JOINT COMMISSIONER OF INCOME-TAX OR AN ADDITIONAL COMM ISSIONER OF INCOME-TAX UNDER SUB-SECTION (1) OF SECTION 117 ; 15. ON THE OTHER HAND, A PERUSAL OF THE REASONS RECORD ED BY THE ASSESSING OFFICER (SUPRA) SHOWS THAT IN ITS LAST PARA, IT HA S BEEN STATED AS FOLLOWS:- KIND APPROVAL AND SANCTION FROM HONBLE CIT, DELHI -I, NEW DELHI IS REQUIRED FOR ISSUE OF NOTICE U/S 148 (1) AN D IS SOUGHT AS PER THE PROVISIONS OF SECTION 151 .. ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 7 16. THEREFORE, THE GRIEVANCE OF THE ASSESSEE IN THIS RE GARD IS JUSTIFIED. 17. THIS ISSUE, AS RIGHTLY CONTENDED, HAS BEEN DEALT WIT H, INTER ALIA, IN CIT VS. SPLS SIDHARTHA LTD. (SUPRA), WHEREIN, UNDE R SIMILAR CIRCUMSTANCES, WHERE APPROVAL HAD NOT BEEN ACCORDED B Y THE ADDL. CIT, BUT HAD BEEN SOUGHT FOR FROM THE COMMISSIONER, T HE ACTION OF THE TRIBUNAL IN QUASHING THE ASSESSMENT PROCEEDINGS WAS UPHELD BY THE HONBLE HIGH COURT, HOLDING THAT THIS WAS NOT AN IRRE GULARITY CURABLE U/S 292B OF THE ACT. TO SIMILAR EFFECT ARE THE DECISIONS IN SMT. SUMAN WAMAN CHAUDHARY (SUPRA), THE SLP WHEREAGAINST STANDS D ISMISSED BY GHANSHYAM K. KHABRANI VS. ACIT 70 DTR (BOM) 137 (SU PRA). 18. IN VIEW OF THE ABOVE, INDEED, THE VERY ISSUANCE O F THE NOTICE U/S 148 OF THE ACT IN THE PRESENT CASE IS A NULLITY, AND T HE SAME IS NOT CURABLE U/S 292B OF THE ACT. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN SPLS SIDHARTHA LTD. (SUPRA), THE SAID REASSESSMENT AND ALL PROCEEDINGS P URSUANT THERETO ARE HEREBY QUASHED. AS A RESULT OF THIS, NOTH ING ELSE SURVIVES FOR ADJUDICATION. 19. IN THE RESULT, THE CROSS OBJECTION OF THE ASSESSEE IS A LLOWED AS INDICATED, WHEREAS THE APPEAL OF THE DEPARTMENT IS DI SMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.07.20 13. SD/- SD/- [G.D. AGRAWAL] [A.D. JAIN] VICE PRESIDENT JUDICIAL MEMBER DATED, 31.07.2013. ITA NO.2986/DEL/2009 CO NO.234/DEL/2009 8 DK COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES