M/s. Premier Polyfilm Ltd., New Delhi V. ITO, New Delhi

ITA 3086/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3573 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 12-04-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 19-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Bogus Share capital; Question of law; Tangible material; Accommodation entries; Competent authority; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 3086/DEL/2014 ASSESSMENT YEAR: 2004-05 M/S PREMIER POLYFILM LTD., VS. ITO, WARD 14(4), 305, ELITE HOUSE, NEW DELHI 36, COMMUNITY CENTRE, ZAMRUDPUR, KAILASH COLONY, NEW DELHI (PAN: AAACP0371Q) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SANJAY JAIN, CA REVENUE BY : SH. F.R. MEENA, SR. DR ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 04.2.2014 OF THE LD. CIT(A)-XVII, NEW DELHI PERTA INING TO ASSESSMENT YEAR 2004-05. IN THE APPEAL, THE ASSESSE E HAS RAISED AS MANY AS 16 GROUNDS, BUT LD. COUNSEL OF THE ASSESSEE HAS ONLY ARGUED THE GROUND NO. 1 WHICH REPRODUCED AS UNDER:- IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD . CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN FRAMING THE REASSESSMENT AT AN INCOME OF RS. 1,01,71,582/- AS AGAINST THE LOSS RETURNED BY THE 2 APPELLANT AT RS. 5,60,88,663/- WHICH IS ARBITRARY, ILLEGAL AND AGAINST THE PROVISIONS OF LAW. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED THE RETURN DECALRING LOSS OF RS. 5,60,88,663/- ON 30.10.2004 AND THE SAME WAS PROCESSED ON 15.3.2005. THE CASE WAS ASSESSED U/S. 143(3) OF THE I.T. ACT, 1961 ON 27.12.2006 AT NIL INCOME AFTE R ADJUSTMENT OF B/F LOSSES AMOUNTING TO RS. 35,21,582/-. SUBSEQUENT LY, THE AO AFTER RECORDING REASONS IN WRITING AND TAKING APPROVAL FR OM THE COMPETENT AUTHORITY ISSUED NOTICE U/S. 148 OF THE I.T. ACT, 1 961 ON 25.3.2011. IN RESPONSE THERETO, THE ASSESSEE RAISED SOME OBJEC TIONS VIDE LETTER DATED 25.3.2011. SUBSEQUENTLY, NOTICE U/S. 143(2) O F THE ACT WAS ISSUED ON 30.9.2011. THE SAID OBJECTIONS WERE REJE CTED VIDE ORDER DATED 30.92.011. A DETAILED QUESTIONNAIRE ALOGNWIT H NOTICE U/S. 142(1) OF THE I.T. ACT, 1961 WAS ISSUED ON THE ASSE SSEE ON 14.10.2011 AND IN RESPONSE TO THE SAME, THE A.R. O F THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND SUBM ITTED THE DETAILS AND DOCUMENTS. DURING THE PREVIOUS YEAR, T HE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURI NG OF PVC FILM AND SHEETS. SUBSEQUENTLY, CERTAIN INVESTIGATIONS WE RE CARRIED OUT BY THE DIRECTOR OF INCOME TAX (INV.), NEW DELHI IN RE SPECT OF THE BOGUS / ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVID UALS/ COMPANIES. THE NAME OF THE ASSESSEE FIGURES AS ONE OF THE BEN EFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS FOUND BY THE DIREC TORATE AFTER MAKING DEEP ENQUIRIES. THEREAFTER, THE AO COMPLETE D THE 3 ASSESSMENT VIDE ORDER 30.12.2011 BY ASSESSING THE INCOME OF THE ASSESSEE AT NIL U/S. 143(3)/147 OF THE I.T. ACT, 19 61. 3. AGAINST THE ASSESSMENT ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO VIDE HIS IMPUGNED ORDER DA TED 4.2.2014 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. C IT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING LD. COUNSEL OF THE ASSESS EE HAS STATED THAT ALTHOUGH THE ASSESSEE HAS RAISED SO MANY GROU NDS BUT HE HAS ONLY PRESSED THE GROUND NO. 1 I.E. LEGAL GROUND WHI CH IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ITAT DEC ISION DATED 09.01.2015 IN THE CASE OF G&G PHARMA INDIA LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04) IN WHICH THE JUDICIAL MEMBER IS THE AUTHOR. HE FURTHER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 09.01.2015 HAS BEEN UPHELD BY THE HO NBLE JURISDICTIONAL HIGH COURT IN ITS DECISION DATED 08. 10.2015 IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA IN DIA LTD. IN THIS REGARD, HE FILED THE COPIES OF THE AFORESAID DECISI ONS BEFORE THE TRIBUNAL. IN VIEW OF THE ABOVE, HE REQUESTED THAT BY FOLLOWING THE AFORESAID PRECEDENTS THE REASSESSMEN T PROCEEDINGS OF THE AO MAY BE QUASHED BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PA SSED BY THE AUTHORITIES BELOW AND STATED THAT THE AO HAS PROPER LY RECORDED THE 4 REASONS FOR REOPENING BY DUE APPLICATION OF MIND, H ENCE, THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED TH E RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE CASE LAW CITED BY THE ASSESSEE S COUNSEL ON THE ISSUE IN DISPUTE. WE ARE OF THE VIEW, IT IS VE RY MUCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE ISSUE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T . ACT, 1961 WHICH IS REPRODUCED HEREUNDER:- '11. REASONS OF THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT: INFORMATION WAS RECEIVED FROM THE DIRECTOR OF INVESTIGATION WING THAT CERTAIN PERSONS WERE INDULG ED IN PROVIDING ACCOMMODATION ENTRIES / BOGUS SHARE APPLICATION MONEY/ BOGUS CAPITAL GAIN. IN THE COURS E OF ENQUIRIES BEFORE INVESTIGATION WING THESE PERSONS HAD PROVIDED THE DETAILS OF VARIOUS PERSONS TO WHOM SUC H ACCOMMODATION / BOGUS ENTRIES WERE PROVIDED. BASED ON THE ENQUIRIES MADE, THE DIRECTORATE OF INVESTIGA TION HAS PROVIDED THE DETAILS OF PERSONS WHO WERE BENEFICIARIES / ENTRY OPERATORS OF SUCH ACCOMMODATI ON / BOGUS ENTRIES IN DELHI IN THE LAST 5-6 YEARS. 5 THE INVESTIGATION WING ON THE BASIS OF ENQUIRIES CONDUCTED / INFORMATION COLLECTED HAS SENT THE NAME AND ADDRESS AND BANK ACCOUNT OF THE BENEFICIARY AND THE VALUE OF ENTRY TAKEN FROM DIFFERENT PERSONS GIVING THE ACCOMMODATION ENTRY. THE NAMES OF THE ENTRY G IVER AND BANK ACCOUNTS THROUGH WHICH THE ENTRY WAS GIVEN HAS ALSO BEEN INFORMED BY THE INVESTIGATION WING, M /S PREMIER POLY FILM LTD. THE ASSESSEE HAS INTRODUCED HIS OWN UNDISCLOSED INCOME IN THE GARB OF SHARE APPLICATION MONEY THROU GH DIVISION TRADING PVT. LTD., RIGHT CHOICE CONSTRUCTI ON PVT. LTD. LABH TRONICES OVERSEAS PVT LTD., WEBNET SYSTEM PVT. LTD., MESTRO MART AND PVT. LTD., TASHI CONTRACTORS PVT. LTD. FAIR N. SQUARE EXPORT PVT. LT D., ARUN FINVEST PVT. LTD., ETHNIC CREATION PVT. LTD. R AJKAR ELECTRICALS PVT. LTD., MANU AGENCIES, DIGNITY FINVE ST PVT. LTD. AND RAMESH KUMAR. THEREFORE, THE ASSESSEE HAS DELIBERATELY FURNISHED WRONG FACTS AT THE TIME OF F ILING OF RETURN, THE DETAILS OF WHICH ARE ENCLOSED AS PER ANNEXURE A. IN VIEW OF THE ABOVE DISCUSSIONS, I HAVE REASON TO BELIEVE THAT INCOME AT LEAST TO THE EXTENT OF RS. 6 1,28,00,000/- FOR ASSTT. YEAR 2004-05 HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF THE PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961. FURTHER, I AM ALSO SATISFIED THAT ON ACCOUNT OF FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULL Y ALL THE MATERIALS, FACT NECESSARY FOR ABOVE ASSESSMENT YEAR, THE INCOME CHARGEABLE TO TAX TO THE TUNE OF R S. 1,28,00,000/- ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. SD/- DATED: MARCH, 2011 ASSTT. COMMISSIONER OF INCOME T AX CIRCLE 14(1), NEW DELHI 12. WHETHER THE COMMISSIONER/ADDL. CIT/BOARD IS SATISFIED ON THE REASONS RECORDED BY THE DCIT THAT IT IS A FIT CASE FOR THE ISSUE OF A NOTICE U/S. 148. YES, I AM SATISFIED. SD/- GOPAL MUKHERJEE CIT-DELHI-V, NEW DELHI 8. AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, AS AFORESAID, WE ARE OF THE VIEW THAT AO HAS NOT APPLI ED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO 7 BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. IN OUR CONSIDERED VIEW THE REASONS ARE VAGUE AND ARE NOT B ASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF T HE I.T. ACT, 1961 ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INCOME TAX (INV.), NEW DELHI. K EEPING 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 THE CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF T HE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERV ES TO BE QUASHED. OUR VIEW IS FULLY SUPPORTED BY THE FOLLOW ING JUDGMENT/DECISION:- 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 S INGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WH ICH 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 INVESTIGATION WING AND ON THAT 8 BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHET HER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TA LKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT T HOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLE D ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FA CT 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 NOVE MBER 2004 AND WAS 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 HA VE SIMPLY CONCLUDED: 'IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSIDERED VI EW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFI CIENT 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 RE ASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 9 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERI ALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COUR T WOULD LIKE 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 REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF T HE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BELIEVE T HAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLE SS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHE RENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. 9. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID ISSUE IN DISPUTE IS EXACTLY THE SIMILAR A ND IDENTICAL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQU ARELY COVERED BY THE AFORESAID DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE 10 CASE OF G&G PHARMA (SUPRA). HENCE, RESPECTFULLY FO LLOWING THE ABOVE PRECEDENT IN THE CASE OF PR. CIT-4 VS. G&G PH ARMA INDIA LTD. (SUPRA) WE DECIDE THE LEGAL ISSUE IN DISPUTE I N FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QU ASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE LEGAL ISSUE. SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, AS AFORESAID, THE OTHER ISSUES ARE NOT BEING DEALT WITH BEING ACA DEMIC IN NATURE. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 13-04-2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13-04-2017 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.