M/s Meenakshi Overseas (P) Ltd., New Delhi V. ITO, New Delhi

ITA 3148/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87109 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-03-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Keywords: Question of law; Reasonable cause; Tangible material; Accommodation entries; Competent authority; Reason to believe
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: E: NEW DELHI BEFORE SHRI G.D. AGARWAL, HONBLE VICE PRESIDENT & SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO.3148/DEL/2013 ASSESSMENT YEAR : 2004-05 MEENAKSHI OVERSEAS (P) LTD., C/O KAPIL GOEL ADVOCATE A-1/25, SECTOR 15, ROHINI, NEW DELHI. AAACM6576E VS. ITO WARD 6(3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KAPIL GOEL, ADV. DEPARTMENT BY : SHRI P. DAM KANUNJNA, SR. DR DATE OF HEARING : 15.03.2016 DATE OF PRONOUNCEMENT : 22.03.2016 ORDER PER BEENA A. PILLAI, JM: THE PRESENT APPEAL HAS BEEN SENT BACK BY THE HONB LE HIGH COURT VIDE ORDER DATED 11/01/2016, WITH A SPECIFIC DIRECTION TO DECIDE GROUNDS 1(A) TO 1(D), AS URGED BY THE ASSESS EE IN ACCORDANCE WITH LAW. THE GROUNDS TO BE DEALT WITH A RE AS UNDER: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE REOPE NING *ACTION OF LD. ASSESSING OFFICER WHICH STANDS VITIA TED INTER ALIA FOR FOLLOWING REASONS: A) TOTAL LACK OF TANGIBLE MATERIAL/REASONABLE CAUSE AND JUSTIFICATION. B) ABSENCE OF NEXUS (MUCH LESS LIVE NEXUS) BETWEEN ALLEGED INFORMATION (UNKNOWN WHETHER EXISTS ON FILE OR NOT) AND TENTATIVE INFERENCE DRAWN. C) NON APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND. D) TOTAL LACK OF CLARITY ON NATURE OF TRANSACTION IN REASONS RECORDED. 2. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RETURN OF INCOME FOR THE AY 2004-05 WAS FILED O N 30.10.2004 DECLARING AN INCOME OF RS. 2,050/-. THE SAME WAS P ROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE CASE WAS REOP ENED U/S 147, AND ASSESSMENT WAS COMPLETED U/S 143(3), READ WITH SEC.147 OF THE ACT, ON THE BASIS OF AN INVESTIGATION REPORT. THE REASONS FOR BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT AS RE CORDED BY THE ITO, WARD 6(3), NEW DELHI READS AS UNDER: REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT: IN THIS CASE, INFORMATION HAS BEEN RECEIVED FROM TH E DIRECTOR OF INCOMETAX, (INVESTIGATION) NEW DELHI TH AT THE ASSESSEE HAS RECEIVED AN AMOUNT OF RS.5,00,000/- AS FOLLOWS: BENEFICIARYS NAME MEENAKSHI OVERSEAS P. LTD. BENEFICIARY BANK NAME STATE BANK OF HYDERABAD BENEFICIARY BANK BRANCH KAROL BAGH VALUE OF ENTRY TAKEN 500,000 INSTRUMENT NO. BY WHICH ENTRY TAKEN 8628 DATE ON WHICH ENTRY TAKEN 31.03.2004 NAME OF A/C HOLDER OF ENTRY GIVING ACCOUNT SHUBHAM ELECTRONICS & ELECTRIC BANK FROM WHICH ENTRY GIVEN SBH BRANCH OF ENTRY GIVING BANK KB A/C NO. ENTRY GIVING ACCOUNT 50038 INFORMATION SO RECEIVED HAS BEEN GONE THROUGH. THE ABOVE SAID INSTRUMENTS ARE IN THE NATURE OF ACCOMMODATION ENTRY, WHICH THE ASSESSEE HAS TAKEN AFTER PAYING UNACCOUNTED CASH TO THE ACCOMMODATION ENTRY GIVEN, WHO IS A KNOWN ENTRY OPERATOR AS PER T HE REPORT OF THE INVESTIGATION WING. IN VIEW OF THESE FACTS, THE ALLEGED TRANSACTION IS NOT THE BONAFIDE ONE. THEREFORE, I HAVE REASON TO BELIEVE THAT AN INCOME OF RS.5,00,000/- HAS ESCAPED ASSESSMENT IN THE AY 2004- 05 DUE TO THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT SO FAR AS THIS AMOUNT IS CONCERNED. THEREFORE, THIS CASE IS FIT FOR ISSUING NOTICE U/S 148 OF THE INCOME TAX ACT, 1961. IN THIS CASE THE ASSESSMENT WAS MADE U/S 143(1), NOT U/S 143(3) OF THE I.T. ACT, 19 61. I AM THEREFORE, SATISFIED THAT THE SAID INCOME, ON ACCOUNT OF ACCOMMODATION ENTRY WORTH RS.5,00,000/- RECEIVED BY THE ASSESSEE HAS ESCAPED ASSESSMENT AND ACCORDINGLY AFTER RECORDING THE ABOVE SAID REASONS AS LAID DOWN UNDER THE PROVISIONS OF SECTION 148(2) OF THE INCOM E TAX ACT, 1961NOTICE U/S 148 IS BEING ISSUED. 2.2 SUBSEQUENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) READ WITH 147 OF THE ACT AT AN INCOME OF RS. 76,01, 050/- MAKING AN ADDITION OF RS. 74,50,000/- U/S 68 OF THE ACT AN D COMMISSION OF RS. 1,49,000/-. 3. AGGRIEVED BY THE ORDER OF THE LD. ASSESSING OFFI CER THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). 3.1 THE ASSESSEE RAISED THE GROUNDS ON MERITS WHICH WAS DISMISSED BY THE LD. CIT(A). 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE PREFERRED AN APPEAL BEFORE THIS TRIBUNAL. THE COOR DINATE BENCH OF THIS TRIBUNAL PASSED ORDER DATED 18/03/2015, WHE REIN IT ALLOWED THE APPEAL FILED BY THE ASSESSEE, BY ADJUDI CATING GROUND(E), WHICH WAS CONCERNED WITH THE VALIDITY OF REOPENING AS THE ASSESSEE SUBMITTED THAT REQUISITE SANCTION WAS NOT OBTAINED BY THE LD. AO FROM THE COMPETENT AUTHORITY U/S.151 OF THE ACT. 5. AGGRIEVED BY THE ORDER OF THIS HONBLE TRIBUNAL THE REVENUE PREFERRED AN APPEAL BEFORE THE HONBLE HIGH COURT, WHEREIN THE QUESTION THAT WAS ADMITTED READS AS UNDER: ADMIT. THE FOLLOWING QUESTION OF LAW ARISES FOR CONSIDERATION: WAS THE ITAT JUSTIFIED IN INVALIDATING THE REOPENIN G OF THE ASSESSMENT U/S 147/148 OF THE ACT ON THE GROUND THAT THE REASONS RECORDED ONLY CARRIED THE SIGNATUR E OF THE ADDITIONAL CIT AND DID NOT MENTION THE WORD APPROVAL? 5.1 THE HONBLE HIGH COURT AFTER CONSIDERING THE SU BMISSIONS OF REVENUE AS WELL AS LD.AR, HAS RESTORED THE GROUNDS RELATING TO THE VALIDITY OF REOPENING BEING GROUNDS 1(A) TO 1(D ) BACK TO THIS TRIBUNAL, TO BE DECIDED IN ACCORDANCE WITH LAW. 5.2 WE ARE, THEREFORE, ADJUDICATING THE LIMITED ISS UE OF VALIDITY OF REOPENING BEING GROUNDS 1(A) TO 1(D). 6. THE LD. AR SUBMITTED THAT THE PRE-CONDITIONS FO R REOPENING ARE NOT SATISFIED TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US. THE LD. AR SUBMITTED THAT REASONS TO BELIEVE C ANNOT BE THE REASON TO SUSPECT. HE SUBMITTED THAT REASON TO BEL IEVE MUST BE BASED ON TANGIBLE MATERIALS ON RECORD, WHICH LEADS TO THE FORMATION OF A PRIMA FACIE OPINION OF ESCAPEMENT OF INCOME IN THE HANDS OF THE ASSESSEE. THE LD. AR PLACED HIS RELIA NCE ON VARIOUS JUDGMENTS OF HONBLE SUPREME COURT, HONBLE HIGH CO URT AND COORDINATE BENCHES OF THIS TRIBUNAL, TO SUBSTANTIA TE HIS ARGUMENTS. 7. ON THE CONTRARY THE LD. DR SUBMITTED THAT ASSESS MENT HAS BEEN REOPENED ON THE BASIS OF THE INVESTIGATION REP ORT OBTAINED FROM THE INVESTIGATION WING. THE LD. DR SUBMITTED THAT THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN TH E CASE OF NOVA PROMOTERS AND FINANCE P. LTD. REPORTED IN 342 ITR 1 69, COVERS THE ISSUE TO BE ADDRESSED IN RESPECT OF THE CASE IN HAND. 7.1 WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE RIVAL SUBMISSIONS ADVANCED BY LD.AR AND LD.DR. WE HAVE CA REFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE DIRECTIONS ISSUED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE ASSESSEES OWN CASE. 7.1. THE ASSESSEE HAD FILED RETURN OF INCOME FOR AY 2004-05 ON 30.102004, DECLARING TOTAL INCOME OF RS. 2,050/- . ON THE BASIS OF A REPORT FROM THE INVESTIGATION WING, THE CASE WAS REOPENED ON THE BASIS THAT THE MONEY PAID BY THE AS SESSEE, ASSESSEE AMOUNTING TO RS.5,00,000/-, TO M/S.SUBHAM ELECTRICALS PVT. LTD. IS AN ACCOMMODATION ENTRY. 7.2. A PERUSAL OF THE REASONS MENTIONED HEREINABOVE CLEARLY SUGGEST THAT THERE IS NO APPLICATION OF MIND. ON CA REFUL CONSIDERATION OF RIVAL SUBMISSIONS OF BOTH THE SIDE S, IT IS AMPLE CLEAR THAT THE ASSESSING OFFICER RECORDED REA SONS ON RECEIPT OF CERTAIN INFORMATION RECEIVED FROM DIT(IN V.) WHICH ARE AVAILABLE AT PAGES 1 & 2 OF ASSESSEES PAPER BO OK. ON BARE READING OF REASONS RECORDED IT IS APPARENT THA T THE ASSESSING OFFICER PROCEEDED TO INITIATE AND TO ISSU E NOTICE U/S 147/148 OF THE ACT SOLELY ON THE BASIS OF INFORMATI ON RECEIVED FROM THE DIT (I). IN THE FIRST PART OF REASONS REC ORDED, HE MENTIONS FACTUAL DETAILS IN A TABULAR FORM, THEN WR ITES INFORMATION SO RECEIVED HAS BEEN GONE THROUGH, THEN HE WRITES MODUS OPERANDI FOR THIS TRANSACTION AND HE J UMPED TO THE CONCLUSION THAT SAID TABULATED INSTRUMENT ARE I N THE NATURE OF ACCOMMODATION ENTRY. THE ASSESSING OFFIC ER PROCEEDED TO TAKE ACTION U/S 147/148 OF THE ACT, SO LELY BY MENTIONING THE DETAILS RECEIVED FROM DIT(INV.) AND WITHOUT ANY FURTHER VERIFICATION, EXAMINATION OR ANY OTHER EXERCISE. HE THEN PROCEEDED TO INITIATE REASSESSMENT PROCEEDI NGS AND NOTICE U/S 147/148 OF THE ACT. IT IS RELEVANT TO N OTE THAT THE ASSESSING OFFICER HAS NOT MENTIONED NATURE OF TRANS ACTION WHICH WAS EFFECTED FOR ALLEGED ACCOMMODATION ENTRY AND EVEN WITHOUT MENTIONING THE DATE OF RECORDING OF REASONS . 7.3. THE LD. AR RELIED UPON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. G&G PHARMA IN ITA NO. 545/2015 VIDE ORDER DATED 08.10.2015, WHEREIN THE L ORDSHIPS HELD AS FOLLOWS: 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, T HE AO STATED: I HAVE PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT 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 WHETHER THE AO APPLIED HIS MIND TO THE ABOVE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT 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 ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14 TH NOVEMBER, 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 HAVE SIMPLY CONCLUDED: IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN THE LIGHT OF THE L AW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEV E THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. 8. IN THE FACTS OF THE PRESENT CASE THE LD. ASSESSI NG OFFICER HAS SET OUT THE ENTRY, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE AMOUNTING TO RS. 5 LACKS. THE LD. AR SUBMITS THAT RS. 5 LACKS HAS BEEN PAID BY THE ASSESSEE IN THE NAME OF SHUBHA M ELECTRONICS BY WAY OF SHARE APPLICATION MONEY. THE LD. ASSESSING OFFICER TERMED THESE ENTRIES AS ACCOMMODATION ENTRY , WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION. THE LD. ASSESSING OFFICER HAS STATED THAT THE ABOV E INSTRUMENT ARE IN THE NATURE OF ACCOMMODATION ENTRY, WHICH THE ASSESSEE HAS TAKEN AFTER PAYING UNACCOUNTED CASH TO THE ACCO MMODATION ENTRY GIVER WHO IS A KNOWN ENTRY OPERATOR AS PER TH E REPORT OF INVESTIGATION WING. IN VIEW OF THESE FACTS, THE AL LEGED TRANSACTION IS NOT THE BONAFIDE ONE. 8.2. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTAN DING WHETHER THE ASSESSING OFFICER APPLIED HIS MIND TO T HE MATERIALS THAT HE TALKS ABOUT PARTICULARLY, SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. IT IS OBSERVED THAT THE DETA ILS GIVEN ARE ONLY WITH REGARD TO THE NAME OF THE BANK AND ITS BR ANCH, ADDRESSES OF THE BENEFICIARY, INSTRUMENT NUMBER, DA TE OF TRANSACTION AND THE AMOUNT THEREIN, BUT IN THE OPER ATIVE PART OF THE REASONS RECORDED THERE IS NO MENTION OF THE NAT URE OF THE TRANSACTION, MUCH LESS TO BE ESTABLISHED THAT THE I MPUGNED TRANSACTION WAS IN THE NATURE OF ACCOMMODATION ENTR IES. IN THE PRESENT CASE THE ASSESSING OFFICER PROCEEDED TO REC ORD REASONS TO BELIEVE AS REQUIRED FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT IN A MECHANICAL MANNER ONLY AFTER MENTIONING DETAILED RE ASONS FROM INVESTIGATION WING OF THE DEPARTMENT, WITHOUT APPLY ING ITS INDEPENDENT MIND AND EVEN WITHOUT MENTIONING THE DA TE OF RECORDING OF BELIEF THAT INCOME HAS ESCAPED ASSESSM ENT. WE HAVE ALSO PERUSED THE DECISION OF CIT VS. NOVA PROMOTERS (SUPRA) RELIED UPON BY LD.DR.THIS JUDGMENT DOES NOT HELP THE REVEN UE IN ANY MANNER AS THE JURISDICTIONAL HIGH COURT, HAS DECID ED IT IS ON MERITS. 9. IN VIEW OF THE ABOVE DISCUSSIONS AND FINDINGS, A ND IN THE LIGHT OF THE DICTA LAID DOWN BY HONBLE JURISDICTIONAL IN THE CASE OF G&G PHARMA(SUPRA), WE ARE OF THE CONSIDERED OPINION THAT THE LD. ASSESSING OFFICER HAS NOT APPLIED HIS MIND AT THE T IME OF INITIATING THE PROCEEDINGS OF REASSESSMENT U/S 147 OF THE ACT. WE ARE THUS, INCLINED TO HOLD THAT AT THE TIME OF I NITIATION OF PROCEEDINGS AND ISSUANCE OF NOTICE, THE ASSESSING O FFICER HAD NO REASON TO BELIEVE THAT THE INCOME HAD ESCAPED ASSES SMENT AND THAT THE ASSESSING OFFICER PROCEEDED WITH INCORRECT ASSUMPTION OF FACTS AND WITHOUT ANY BASIS TO INITIATE PROCEEDINGS OF REASSESSMENT U/S 147 OF THE ACT AND FOR ISSUANCE OF NOTICE U/S 148 OF THE ACT WHICH CANNOT BE SUSTAINABLE. 10. ACCORDINGLY, GROUND NO. 1(A) TO 1(D) OF THE ASS ESSEES APPEAL STANDS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 22.03.201 6. SD/- SD/- [G.D. AGARWAL] [BEENA A. PILLAI] VICE PRESIDENT JUDICIAL MEMBER DATED: 22/03/2016 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI. DATE 1. DRAFT DICTATED ON 16.03.16/17.3.16 2. DRAFT PLACED BEFORE THE AUTHOR 16.03.16/18.3.16 3. DRAFT PLACED BEFORE THE OTHER MEMBER 4. APPROVED DRAFT COMES TO THE SR.PS/PS 5. FILE SENT TO THE BENCH CLERK 6. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 7. DATE ON WHICH FILE GOES TO THE AR 8. DATE OF DISPATCH OF ORDER.