ITO, New Delhi V. Shri Harish Kumar Chhabra, New Delhi

ITA 2999/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2717 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 14-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 14-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T VASANTHAN
• Assessee Lawyers: ABHISHEK ANAND
• Keywords: Gift; Principle of natural justice; Tangible material; Accommodation entries; Tax effect; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 139

Judgement Text

ITA NOS. 2490 & 2999/DEL/2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 2490 /DEL/201 3 A.Y. : 200 4 - 0 5 SH. HARISH KUMAR CHHABRA C/O M/S RRA TAXINDIA D-28, SOUTH EXTENSION, PART-I, NEW DELHI 49 (PAN: AACPC8169J) VS. INCOME TAX OFFICER, WARD 33(3), NEW DELHI (APPELLANT) (RESPONDENT) AND I.T.A. NO. 2999 /DEL/201 3 A.Y. : 200 4 - 0 5 INCOME TAX OFFICER, WARD 33(3), ROOM NO. 1609, E-2, CIVIC CENTRE NEW DELHI VS. SH. HARISH KUMAR CHHABRA 57-F, PLOT NO. 9 GODDIA ROAD, ANAND PARBAT, NEW DELHI 8 (PAN: AACPC8169J) (APPELLANT) (RESPONDENT) ASSESSEE BY : S H. TARUN KUMAR, ADV. & SH. ABHISHEK ANAND, ADV. DEPARTMENT BY : SH. T. VASANTHAN, SR. DR DATE OF HEARING : 14-12-2015 DATE OF ORDER : 04-1-2016 ORDER PER H.S. SIDHU : JM THESE ARE THE CROSS APPEALS FILED BY THE ASSESSE E AND REVENUE AGAINST THE IMPUGNED ORDER DATED 27.2.2013 PASSED BY THE LD. CIT(A)-XXVI, NEW DELHI RELEVANT TO ASSESSMENT YEAR 2004-05. ITA NOS. 2490 & 2999/DEL/2013 2 2. THE GROUNDS RAISED IN THE ASSESSEES APPEAL NO. 2490/DEL/2013 READ AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN FRAMING THE IMPU GNED ORDER ULS 147/143(3) AND THAT TOO WITHOUT COMMUNICA TING THE REASONS RECORDED AS PER LAW AND WITHOUT OBTAINI NG THE VALID SANCTION AS PER LAW AND WITHOUT COMPLYING WIT H OTHER MANDATORY CONDITIONS AS ENVISAGED U/S 147 TO 151 OF INCOME TAX ACT, 1961. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING AGGREGATE ADDITION OF RS.9,36,328/- (AS PER DETAILS GIVEN IN THE ASSES SMENT ORDER) ON 'ACCOUNT OF ALLEGED UNEXPLAINED ENTRIES I N BANK ACCOUNT AND THAT TOO BY RECORDING INCORRECT FACTS A ND FINDINGS AND WITHOUT CONSIDERING THE SUBMISSIONS/EV IDENCES OF THE ASSESSEE. 3. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, IMPUGNED ADDITION AND IMPUGNED ASSESSMENT ORDER ARE BAD IN LAW, ILLEGAL, UNJUSTIFIED, BARRED BY LIMITATION, CONTRARY TO FACTS & LAW AND BASED UPON RECORDING OF INCORRECT F ACTS AND FINDING, WITHOUT GIVING ADEQUATE OPPORTUNITY OF HEA RING, IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND THE SAME DESERVES TO BE QUASHED. 4. THAT THE APPELLANT CRAVES TO LEAVE TO ADD, MODIF Y, AMEND OR DELETE ANY OF THE GROUNDS OF APPEAL AT THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJU DICE TO EACH OTHER. ITA NOS. 2490 & 2999/DEL/2013 3 3. THE GROUNDS RAISED IN THE REVENUES APPEAL NO. 2999/DEL/2013 READ AS UNDER:- THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS . 10,00,000/- MADE BY AO U/S. 68 OF THE I.T. ACT, 196 1 ON ACCOUNT OF ACCOMMODATION ENTRIES WITHOUT APPRECIATI NG THE INQUIRIES CONDUCTED BY THE INVESTIGATION WING OF T HE DEPARTMENT. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E BEING INDIVIDUAL FILED HIS RETURN OF INCOME ON 31.10.2004 DECLARING A TOTAL INCOME OF RS.4,56,440/-. THIS RETURN WAS PROCESSED U/S 143(1) OF THE INCOME- TAX ACT, 1961. SUBSEQUENTLY INFORMATION WAS RECEIVE D BY THE ASSESSING OFFICER FROM DIRECTORATE OF INCOME-TAX (I NVESTIGATION) NEW DELHI THAT THE ASSESSEE HAD RECEIVED THE FOLLOWING ACCOMMODATION ENTRIES FROM ONE SH. SATISH KUMAR SHARMA DURING THE YEAR UNDER CONSIDERATION. BANK OF BRANCH OF THE INSTRUMENT AMOU NT DATE CREDIT ENTRY COMING THE BANK NO. FRO M THE ACCOUNT OF ASSESSEE BOR NEW ROHTAK ROAD - 25,00,000 5.8.200 3 SATISH KUMAR SHARMA BOR NEW ROHTAK ROAD - 25,00,000 5.8.2003 SATISH KUMAR SHARMA BOR NEW ROHTAK ROAD - 25,00,000 5.8.2003 SATISH KUMAR SHARMA BOR NEW ROHTAK ROAD - 25,00,000 5.8.200 3 SATISH KUMAR SHARMA 4.1 ON THE BASIS OF THE ABOVE INFORMATION, PROCEEDI NGS U/S 147 WERE INITIATED AND NOTICE DATED 29.3.2011 U/S 148 WAS IS SUED AND SERVED UPON THE ASSESSEE. IN RESPONSE, THE AR OF THE ASSES SEE FILED LETTER DATED 21.4.2011 STATING AS UNDER: 'WITH REFERENCE TO YOUR ABOVE MENTIONED NOTICE, WE HEREBY SUBMIT THAT THE RETURN FILED BY THE ASSESSEE FOR THE ASSES SMENT YEAR 2004-05, U/S 139 OF INCOME-TAX ACT VIDE RECEIPT NO. 0030401325 ITA NOS. 2490 & 2999/DEL/2013 4 DATED 31.10.2004 MAY BE TREATED AS RETURN FILED IN RESPONSE TO YOUR ABOVE MENTIONED NOTICE. HOWEVER, THESE PROCEEDINGS ARE BAD IN LAW, WE ARE F ILING THIS RETURN UNDER PROTEST. THE NOTICE IS ALSO INVALID. I T IS FURTHER REQUESTED TO PLEASE PROVIDE THE COPY OF THE REASONS RECORDED ALONG WITH ADVERSE MATERIAL RELIED UPON IN THE REAS ONS IF ANY. THE PHOTOCOPY OF THE ACKNOWLEDGMENT OF THE RETURN F ILED BY THE ASSESSEE FOR THE SAME IS ENCLOSED FOR YOUR PERUSAL. WE ARE ENCLOSING HEREWITH POWER OF ATTORNEY DULY SIGNED BY THE ASSESSEE. ASSURING YOU OF OUR BEST CO-OPERATION AND SERVICES ALWAYS.' 4.2 THEREAFTER, THE ASSESSING OFFICER ASKED THE AS SESSEE TO EXPLAIN THE SOURCE OF CREDIT ENTRIES OF RS.10,00,000/- IN H IS BANK ACCOUNT. IN RESPONSE TO THE SAME, THE ASSESSEE FILED A COPY OF HIS BANK STATEMENT WITH ICICI SANK, NEW ROHTAK ROAD, NEW DELHI WHEREIN THE CREDIT ENTRIES AGGREGATING TO RS.10,00,000/- WERE REFLECTE D. ON THE BASIS OF THIS BANK STATEMENT, THE ASSESSING OFFICER AGAIN BE SIDES ASKING THE ASSESSEE TO EXPLAIN THE CREDIT ENTRIES OF RS.10,00, 000/-, ALSO REQUIRED THE ASSESSEE TO EXPLAIN ALL THE OTHER CREDIT ENTRIE S IN THE BANK ACCOUNTS AND SIMULTANEOUSLY ALSO ASKED THE ASSESSEE TO EXPLAIN WHY ALL THE CREDIT ENTRIES APPEARING IN HIS BANK ACCOUN T BE NOT ADDED IN HIS RETURNED INCOME U/S 68 AS INCOME FROM UNDISCLOS ED SOURCES FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. 4.3 IN RESPONSE, THE AR OF THE ASSESSEE HAS FILED THE REPLY VIDE LETTER DATED 14.11.2011. AFTER CONSIDERING THE REPLY OF TH E AR, THE AO OBSERVED THAT AS PER THE INFORMATION OF THE DIT(INV .) SINCE SH. SATISH KUMAR SHARMA WAS INVOLVED IN GIVING BOGUS ACCOMMOD ATION ENTRIES, THE RECEIPTS OF RS. 10,00,000/- FROM HIM CANNOT BE HELD TO BE RELIABLE AND GENUINE. HE, ACCORDINGLY, ADDED THE AMOUNT OF C REDIT ENTRIES ITA NOS. 2490 & 2999/DEL/2013 5 AGGREGATING TO RS. 10,00,000/- TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE INCOME TAX ACT, 1961. 5. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEA LED BEFORE THE LD. CIT(A), CHALLENGING THE VALIDITY OF REASSESSME NT AS WELL AS THE ADDITION OF RS. 10,00,000/-. LD. CIT(A) WHO VIDE I MPUGNED ORDER DATED 27.2.2013 HAS PARTLY ALLOWED THE APPEAL OF TH E ASSESSEEE THEREBY DELETING THE ADDITION IN DISPUTE AND REJECT ED THE GROUND OF CHALLENGING THE VALIDITY OF REOPENING. 6. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), ASSESSEE AS WELL AS REVENUE ARE IN CROSS APPEALS BEFORE US. 7. LD. COUNSEL FOR THE ASSESSEE HAS ONLY ARGUED THE GROUND NO. 1 STATING THAT LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ACTION OF THE AO IN FRAMING THE IMPUGNED ORDER U/S . 147/143(3) AND THAT TOO WITHOUT COMMUNICATING THE REASONS RECORDED AS PER LAW AND WITHOUT OBTAINING THE VALID SANCTION AS PER LAW AND WITHOUT COMPLYING WITH OTHER MANDATORY CONDITIONS AS ENVISAGED U/S. 1 47 TO 151 OF THE INCOME TAX ACT, 1961. HE FURTHER SUBMITTED THAT THE PRESENT CASE IS SQUARELY COVERED BY THE HONBLE HIGH COURT DECISIO N DATED 8.10.2015 PASSED IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA INDIA LTD., WHEREIN THE TRIBUNAL DECISION DATED 9.1 .2015 HAS BEEN FOLLOWED. IN THIS BEHALF, HE FILED THE COPY OF TH E ORDER DATED 8.10.2015 OF THE HONBLE HIGH COURT OF DELHI IN PR. CIT VS. G &G PHARMA INDIA LTD. THEREFORE, HE REQUESTED THAT BY FOLLOWING THE DECISION IN THE CASE OF PR. CIT VS. G&G PHARMA INDIA LTD., THE GROUND NO . 1 RAISED BY THE ASSESSEE IN THE PRESENT APPEAL MAY BE ALLOWED. 8. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PA SSED BY THE CIT(A) ON ISSUE OF VALIDITY OF REOPENING AND STATED THAT LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO OF REOPENING. HE FURTHER STATED ITA NOS. 2490 & 2999/DEL/2013 6 THAT THE CASE LAW RELIED UPON BY THE LD. COUNSEL FO R THE ASSESSEE IN THE CASE OF PR. CIT VS. G&G PHARMA INDIA PVT. LTD. IS DISTINGUISHABLE ON THE FACTS OF THE CASE IN HAND. HE FURTHER STATE D THAT IN THE CASE OF G&G PHARMA (SUPRA), ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE I.T. ACT WHEREAS IN THE ASSESSEES OWN CASE IT WAS PROCESSED U/S. 143(1) OF THE I.T. ACT AND THEREFORE, THE AO HAS R IGHTLY REOPENED THE CASE OF THE ASSESSEE BY ISSUING THE NOTICE U/S. 148 OF THE I.T. ACT WITHOUT MAKING ANY INQUIRY OF THE MATERIAL SUPPLIE D TO HIM. IN SUPPORT OF HIS CONTENTION, HE RELIED UPON THE FOL LOWING CASE LAWS:- - RAYMOND WOOLEN MILLS LTD. VS. ITO & ORS. [236 IT R 34] HONBLE SUPREME COURT OF INDIA - CONTEL MEDICARE SYSTEMS P. LTD. VS. CIT [349 ITR 649] HONBLE DELHI HIGH COURT 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES AND THE CASE LAWS CITED BY THE ASSESSEES COUNSEL AS WE LL AS DEPARTMENTAL REPRESENTATIVE ON THE ISSUE IN DISPUTE. FOR THE S AKE OF CLARITY, WE WOULD LIKE TO DISCUSS THE REASONS FOR INITIATION O F PROCEEDINGS U/S. 147 AND FOR OBTAINING THE APPROVAL OF THE ADDL. CIT /CIT AS UNDER:- THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELHI HAS CARRIED OUT INVESTIGATION IN THE CASES OF CERTA IN GROUP OF PERSONS WHO WERE ENGAGED IN PROVIDING ACCOMMODATION ITA NOS. 2490 & 2999/DEL/2013 7 ENTRIES. THESE ENQUIRIES WERE INITIATED TO PROBE IN TO SOME BANK ACCOUNTS WHICH WERE USED BY THESE PERSONS TO I SSUE CHEQUES TO ENTRY SEEKERS OR BENEFICIARIES AGAINST C ASH PAID BY THEM TO THE ENTRY PROVIDERS. SUCH A CAMOUFLAGED TRANSACTION CAME TO LIGHT DURING THE COURSE OF SURV EY IN THE CASE OF M/S GURCHARAN JEWELLERS WHOSE PROPRIETOR SH . ASHOK KUMAR CHAUDHARY HAD ADMITTED TO HAVE TAKEN CHEQUES UNDER THE GARB OF GIFTS AFTER GIVING CASH T O THE ENTRY OPERATOR. PROBE WAS INITIATED INTO THE ACCOUNTS WHI CH WERE USED TO PROVIDE THESE ACCOMMODATION ENTRIES. THESE INVESTIGATIONS LED TO REVEALING OF MANY MORE BANK ACCOUNTS WHICH WERE BEING USED BY THE ENTRY OPERATO RS FOR THE PURPOSE OF GIVING BOGUS ACCOMMODATION ENTRIES. EXTENSIVE ENQUIRIES WERE-MADE IN A NUMBER OF SUCH B ANK ACCOUNTS, THE ACCOUNT HOLDERS, THE PERSONS OPERATIN G THESE ACCOUNTS AND THE PERSONS FOR WHOM SUCH ACCOUNT - HO LDERS WERE WORKING. THESE ENQUIRIES REVEALED INTER ALIA T HE FOLLOWING: ENTRIES WERE BEING BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PURPOSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS P URCHASE ITA NOS. 2490 & 2999/DEL/2013 8 OF ASSETS ETC., IN THE FORM OF GIFTS, SHARE APPLICA TION MONEY, LOANS ETC. 2. TO INFLATE EXPENSES IN THE TRADING AND PROFIT AN D LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREB Y PAY LESS TAXES. THE ASSESSEE WHO HAD UNACCOUNTED MONEY (CALLED AS E NTRY TAKERS OR BENEFICIARIES) AND WANTED TO INTRODUCE TH E SAME IN THE BOOKS OF ACCOUNTS WITHOUT PAYING TAX, APPROACHE D ANOTHER PERSON (CALLED AS ENTRY OPERATOR) AND HANDE D OVER THE CASH (PLUS COMMISSION) AND TOOK CHEQUES/ DDS/IP OS. THE CASH WAS BEING DEPOSITED BY THE ENTRY OPERATOR IN A BANK ACCOUNT EITHER IN HIS OWN NAME OR/IN THE NAME OF RELATIVES/ FRIENDS OR OTHER PERSONS HIRED BY HIM FO R THE PURPOSE OF OPENING BANK ACCOUNT. IN MOST OF THESE B ANK ACCOUNTS, THE INTRODUCER WAS THE MAIN ENTRY OPERATO R AND THE CASH DEPOSIT SLIPS AND OTHER INSTRUMENTS WERE F ILLED BY HIM. THE OTHER PERSONS (IN WHICH THE CASH IS DEPOSI TED) OR ANOTHER ACCOUNT IN WHICH FUNDS WERE TRANSFERRED THR OUGH CLEARING IN TWO MORE STAGES. THE BENEFICIARY IN TUR N DEPOSITED THESE INSTRUMENTS IN HIS BANK. ACCOUNTS A ND THE MONEY CAME TO HIS REGULAR BOOKS OF ACCOUNT IN THE F ORM OF ITA NOS. 2490 & 2999/DEL/2013 9 GIFT, SHARE . APPLICATION MONEY, LOAN ETC. THROUGH BANKING CHANNELS. THE OPERATORS GAVE THE ACCOUNT HOLDERS AMOUNTS RANG ING FROM RS. 1000 TO 2000 PER MONTH. THESE ACCOUNT HOLD ERS WERE MASONS, PLUMBERS, ELECTRICIANS, PEONS, DRIVERS ETC., WHOSE EARNINGS ARE NOT SUFFICIENT FOR A LIVING. THE Y EARNED NORMALLY 3 TO 5 THOUSANDS PER MONTH FROM THEIR NORM AL WORK AND BY WORKING FOR THE ENTRY OPERATORS TAMED EXTRA INCOME OF 2 TO 4 THOUSANDS PER MONTH. THEIR SIGNATURES WER E TAKEN ON BLANK GIFT DEEDS, CHEQUE BOOKS, SHARE APPLICATI ON MONEY ETC. IN FACT, THESE PERSONS SIGNED ALL TYPES OF PAPERS THEY WERE ASKED TO SIGN. THEY WERE MADE DIRECTORS O F COMPANIES, PARTNERS OF FIRMS AND PROPRIETORS OF DIF FERENT CONCERNS SOLELY FOR OPERATION OF THESE ACCOUNTS. AC TUALLY MANY OF THEM WERE NOT EVEN AWARE OF THE TAX IMPLICA TIONS ETC. THEIR ONLY CONCERN WAS WITH THE FEW THOUSAND RUPEES GIVEN TO THEM BY THE ENTRY OPERATORS. SUMMING UP, THE REPORT AS A RESULT OF THESE EXTENSI VE ENQUIRIES CARRIED OUT BY THE DIT(INV.), NEW DELHI H AS ASSAILED GENUINENESS OF TRANSACTIONS, WHETHER SHOWN BY BENEFICIARIES AS INFLOW OF SHARE CAPITAL / LOAN OR RECEIPT OF GIFTS OR CONSIDERATION FOR SALE PURCHASE. IT HAS A LSO DEALT A ITA NOS. 2490 & 2999/DEL/2013 10 BODY BLOW TO THE CREDITWORTHINESS OF THE PERSONS CO NTROLLING THE CONCERNS WHO HAVE GIVEN THESE CREDIT ENTRIES/ S HARE CAPITAL / GIFTS / SALE CONSIDERATION AS THEY HAVE B EEN FOUND TO BE MEN OF NO MEANS. IN THE INSTANT CASE OF THE ASSESSEE, THE FOLLOWING CREDITS HAVE BEEN SHOWN IN THE BANK ACCOUNT. BANK OF THE ASSESSEE BRANCH OF THE BANK AMOUNT INSTRUM ENT NO. DATE CREDIT ENTRY COMING FROM THE ACCOUNT OF BANK A/C OF ENTRY PROVIDER BOR NEW ROHTAK ROAD 25,00,000 5.8.2003 SATISH KUMAR SHARMA 15447, SBBJ, NRR BOR NEW ROHTAK ROAD 25,00,000 5.8.2003 SATISH KUMAR SHARMA 15447, SBBJ, NRR BOR NEW ROHTAK ROAD 25,00,000 5.8.2003 SATISH KUMAR SHARMA 15447, SBBJ, NRR BOR NEW ROHTAK ROAD 25,00,000 5.8.2003 SATISH KUMAR SHARMA 15447, SBBJ, NRR IN VIEW OF THE REPORT RECEIVED FROM THE DIT(INV.), NEW DELHI AND IN VIEW OF THE FACTS NARRATED ABOVE IT IS CLEAR THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THAT ASSESS MENT YEAR. I HAVE THEREFORE, REASON TO BELIEVE THAT THE SUM OF RS. 10,00,000/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. THUS, THE SAME IS TO BE BROUGHT TO TAX UNDER SECTIO N 147/148 OF THE I.T. ACT, 1961. 9.1 ON GOING THROUGH THE ABOVE REASONS RECORDED B Y THE AO, WE ARE OF THE VIEW THAT AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN ITA NOS. 2490 & 2999/DEL/2013 11 INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEV E THAT INCOME HAS ESCAPED DURING THE YEAR. IN OUR VIEW THE REASONS AR E VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE N OT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELH I. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, WE ARE OF T HE CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENTS/DECISIONS:- (A) PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA NO. 545/2015 DATED 8.10.2015 OF THE DELHI HIGH COURT WHEREIN THE HONBLE COURT HAS ADJUDICATED THE ISSUE AS UNDER:- 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. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGA TION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK AC COUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONC LUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED H IS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINC E HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KN OWN, IT ITA NOS. 2490 & 2999/DEL/2013 12 WOULD 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 ACCOU NTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH NOVEMBER 2004 AND WAS PROCE SSED 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 THA T THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSI DERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WI TH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO B ELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MI SSING 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 PRO DUCED DURING THE HEARING OF THE APPEAL. THE COURT WOULD L IKE TO OBSERVE THAT THIS IS 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 BASIS THAT THE RE OPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMEN T, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE TH AT HE HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS E SCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIR EMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATER IALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDIT Y . 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUES TION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. ITA NOS. 2490 & 2999/DEL/2013 13 (B) SIGNATURE HOTELS (P)_ LTD. VS. ITO AND ANOTHER REPORTED IN 338 ITR 51 (DEL) HAS UNDER SIMILAR CIRCUMSTANCES AS FOLLOWS:- FOR THE A.Y. 2003-04, THE RETURN OF INCOME OF THE ASSESSEE COMPANY WAS ACCEPTED U/S.143(1) OF THE INC OME- TAX ACT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U /S.148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING O FFICER REJECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME-TAX ACT, 1961, IS WI DE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIR ED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. (II) A NOTICE U/S.148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON-SPE CIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISC ERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WI TH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. TH ERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFI CER. (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED O N THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y. 2002-03 AS STAT ED IN ITA NOS. 2490 & 2999/DEL/2013 14 THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMO UNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFI CIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SEC TION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPE MENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY H IS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND M ATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE C OMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOT TED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, I T COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE RE ASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE Q UASHED. 10. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID ISSUE IN DISPUTE IS EXACTLY THE SIMILAR AND IDENTIC AL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVE RED BY THE AFORESAID DECISIONS OF THE HONBLE HIGH COURT OF DELHI IN THE CASE OF G&G PHARMA (SUPRA) & SIGNATURES HOTELS (P) LTD. (SUPRA) . HOWEVER, WE NOTE THAT THE CASE LAWS AS REFERRED BY THE LD. DR A RE DISTINGUISHABLE TO THE FACTS OF THE PRESENT APPEAL. HENCE, RESPECT FULLY FOLLOWING THE ABOVE PRECEDENTS IN THE CASE OF PR. CIT-4 VS. G&G P HARMA INDIA LTD. (SUPRA) AND SIGNATURE HOTELS (P) LTD. VS. ITO, WE D ECIDE THE LEGAL ISSUE ITA NOS. 2490 & 2999/DEL/2013 15 IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QUASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE GROUND NO. 1 RAISED BY THE ASSESSEE IN ITS APPEAL. SINCE WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS, AS AFORESAID, THE OTH ER ISSUES ARE NOT BEING DEALT WITH. REVENUES APPEAL NO. 2999/DEL/2013 11. AS THE REASSESSMENT PROCEEDINGS HAS BEEN QUASHE D BY US AS AFORESAID, THERE IS NO NEED TO ADJUDICATE THE APPEA L OF THE REVENUE. OTHERWISE, ALSO, WE FIND THAT THE TAX EFFECT IN THIS APPEAL IS LESS THAN RS.10,00,000/-, THEREFORE, THE DEPARTMENTS APPEAL IS NOT MAINTAINABLE, IN VIEW OF THE CIRCULAR NO. 21/2015 DATED 10 TH DECEMBER, 2015 ISSUED VIDE F.NO. 279/MISC. 142/2007-ITJ (PT.) BY THE CBDT. IN THE ABOVE-SAID CIRCULAR THE FOLLOWING CONDITIONS HAS BEEN PRESCRI BED:- 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HE REUNDER: S NO APPEALS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS) 1 BEFORE APPELLATE TRIBUNAL 10,00,000/- 2 BEFORE HIGH COURT 20,00,000/- 3 BEFORE SUPREME COURT 25,00,000/- IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETARY LIMITS PR ESCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIB UNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 AB OVE MAY BE WITHDRAWN/ NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE ITA NOS. 2490 & 2999/DEL/2013 16 GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERA TIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 12. IN VIEW OF THE ABOVE, WE DISMISS THIS APPEAL FI LED BY THE REVENUE BEING THE TAX EFFECT BELOW THE PRESCRIBED LIMIT OF RS. 1 0 LACS. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04/1/2016. SD/- SD/- [O.P. KANT] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 04/1/2016 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES