G&G Pharma India Ltd., Delhi V. ITO, New Delhi

ITA 3149/DEL/2013

• Counselvise Citation: 314920114 RSA 2013
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 09-12-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 20-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAI
• Keywords: Reopening of assessment; Reasonable cause; Tangible material; Accommodation entries; Competent authority; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 148

Judgement Text

ITA NO. 3149/ DEL/ 2013 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C , NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. N O. 3 149 /DEL/2013 A.Y . : 200 3 - 0 4 G&G PHARMA INDIA LIMITED, C/O KAPIL GOEL, ADVOCATE, A - 1/25, SECTOR - 15, ROHINI, DELHI 110 085 (PAN: AABCG6272A) VS. INCOME TAX OFFICER, WARD 12(1), NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : S H. KAPIL GOEL, ADV. DEPARTMENT BY : SH. VIKRAM SAHAI, SR. DR DATE OF HEARING : 06 - 0 1 - 201 5 DATE OF ORDER : 09 - 01 - 201 5 ORDER PER H.S. SIDHU : J M ASSESSEE HAS FILED THIS A PPEAL AGAINST THE IMPUGNED ORDER DATED 3 0 . 8 .201 1 PASSED BY THE LD. CIT(A) - X V , NEW DELHI RELEVANT TO ASSESSMENT YEAR 200 3 - 0 4 . 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HAS FILED ITS RETURN ON 14.11.2014 AT RS. 1190/ - WHICH WAS PROCESSED U/S. 143(3) OF THE I.T. ACT ON 1.3.2004. THEREAFTER ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION, JHANDEW ALAN, NEW DELHI, AO ISSUED NOTICE U/S. 148 OF THE ACT ON 19.3.2010. AFTER ITA NO. 3149/ DEL/ 2013 2 RECORDING THE REASONS FOR REOPENING OF THE ASSESSMENT U/S. 148 AND AFTER OBTAINING THE DUE APPROVAL OF THE HIGHER AUTHORITY FOR RE - ASSESSMENT. THEREAFTER, A NOTICE U/S. 142(1) AL ONGWITH QUESTIONNAIRE WAS ISSUED ON 10.8.2010. IN RESPONSE TO THE SAME DIRECTOR OF THE COMPANY APPEARED AND FILED THE NECESSARY DETAILS AND ALSO FILED CERTAIN OBJECTIONS TO THE ISSUE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T. ACT. AFTER APPLYING THE NECESSARY PROCEDURES, THE AO COMPLETED THE ASSESSMENT IN THE CASE OF THE ASSESSEE BY MAKING VARIOUS ADDITIONS AND COMPLETED THE ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE I.T. ACT ON 20.12.2010. 3 . THE ASSESSEE HAS RAISED 09 GROUNDS IN THE APPEAL ON LEGAL AS WELL AS ON MERIT. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSEE HAS ONLY ARGUED THE LEGAL GROUND CHALLENGING THE VALIDITY OF REOPENING U/S. 148 OF THE I.T. ACT BY STATING THAT ACTION OF THE ASSESSING OFFICER IS ILLEGAL , BECAUSE THE SA M E IS LACKING TANGIBLE MATERIAL / REASONABLE CAUSE AND JUSTIFICATION. THE ACTION OF THE REVENUE AUTHORITIES IS IN ABSENCE OF NEXUS BETWEEN ALLEGED INFORMATION AND TENTATIVE INFERENCE; NON APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND; TOTA L LACK OF CLARITY ON NATURE OF TRANSACTION IN REASONS RECORDED; REQUISITION SANCTION FROM COMPETENT AUTHORITY U/S. 151 WAS CONSPICUOUSLY MISSING ON FACE OF REASONS SUPPLIED TO THE ASSESSEE AND THE REASONS RECORDED IN THE CASE OF THE ASSESSEE. LD. COUNS EL OF THE ASSESSEE HAS FILED A SMALL PAPER BOOK WHICH ESTABLISH THAT THE AO HAS NOT APPLIED HIS MIND BEFORE ISSUING THE NOTICE FOR REOPENING THE CASE OF THE ASSESSEE AND NOT MAKING ANY INDEPENDENT ENQUIRY. THEREFORE, THE REOPENING U/S. 148 OF THE ACT IS INVALID, IN VIEW OF THE FOLLOWING DECISIONS RENDERED BY THE HON BLE JURISDICTIONAL HIGH COURT AND THE ITAT, DELHI BENCHES. ITA NO. 3149/ DEL/ 2013 3 I) CIT VS. KAMDHENU STEELS & ALLOYS LTD. & ORS. (2012) 248 CTR (DEL) 33, (DHC) II) CIT VS. SFIL STOCK BROKING LTD., (2010) 325 ITR 285 (DHC) III) SARTHAK HOTELS PVT. LTD. VS. ITO & ANR. (2011) 338 ITR 51 (DHC) IV) SIGNATURE HOTELS PVT. LTD. VS. ITO & ANR. (2011) 338 ITR 51 DHC) V) HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN THE CASE OF CIT VS. INSECTICIDES (INDIA) LTD. (2013) 357 ITR 330 (DEL.) VI) DECISION OF ITAT DELHI BENCH IN THE CASE OF ITO VS. ON EXIM PVT. LTD. (2013) 157 TTJ 633 (ITAT, DELHI) VII) DECISION OF ITAT, DELHI BENCH IN THE CASE OF ACIT VS. SHRI DEVESH KUMAR (ITA NO. 2068/DEL/2010) DATED 31.10.2014. VIII) DEC ISION OF ITAT, IN THE CASE OF ITO VS. MB JEWELLERS P LTD. ITA NO. 2499/DEL/2011 DATED 14.11.2014 AND IX) DECISION OF ITAT, IN THE CASE OF RKG INTERNATIONAL (P) LTD. VS. ITO (ITA NO. 101DEL/2013) ORDER DATED 14.11.2014. LD. COUNSEL OF THE ASSESSEE REQUE STED THAT THE REOPENING OF THE ASSESSMENT IN THE CASE OF THE ASSESSEE MAY BE QUASHED AND THE APPEAL OF THE ASSESSEE MAY BE ACCEPTED. ITA NO. 3149/ DEL/ 2013 4 4. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 30 . 8 .201 1 HA S DISMISSED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE US. 6 . LD. DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. CIT(A) AND STATED THAT THE AO HAS REOPENED THE CASE OF THE ASSESSE E ON THE BASIS OF VARIOUS DOCUMENTARY EVIDENCE RELATING TO THE ASSESSEE SHOWING THAT THE ASSESSEE HAVE RECEIVED VARIOUS BOGUS ACCOMMODATION ENTRIES AMOUNTING TO RS. 20 LACS WHICH HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THEREFORE, THE ASSESSEE IS A BENEFICIARY OF TAKING THE AFORESAID ACCOMMODATION ENTRIES WHICH HAS NOT BEEN ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE AND HAS ESCAPED ASSESSMENT AND HENCE THE INCOME OF THE ASSESSEE IS ESCAP ED INCOME AND IS A FAILURE ON THE PART OF THE ASSESSEE COMPANY TO DISCLOSE TRULY AND FULLY ALL THE MATERIAL FACTS IN THE ASSESSMENT IN DISPUTE. HE FURTHER SUBMITTED THAT THE AO HAS RIGHTLY REOPENED THE CASE OF THE ASSESSEE ON THE BASIS OF THE DOCUMENTARY EVIDENCE AVAILABLE WITH THE AO. HE HAS ALSO FILED THE DOCUMENTARY EVIDENCE IN THE SHAPE OF PAPER BOOK CONTAINING PAGES 1 TO 62 IN WHICH HE HAS ATTACHED THE BRIEF NOTE ON ACCOMMODATION ENTRIES FROM INVESTIGATION WING; STATEMENTS OF S/SH. RAJESH KUMAR JHA, VIPALAV BHARTI & P.N. JHA AND THE DETAILS OF ACCOMMODATION ENTRIES TAKEN BY THE ASSESSEE. IN VIEW OF THE ABOVE, HE REQUESTED THAT THE APPEAL OF THE ASSESEE MAY BE DISMISSED. 7 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AVAILABLE WITH US SP ECIALLY THE CONTENTIONS RAISED BY THE ASSESSEE ALONGWITH VARIOUS DECISIONS CITED BY THE ASSESSEE S COUNSEL ON THE ITA NO. 3149/ DEL/ 2013 5 ISSUE IN DISPUTE AS WELL AS THE DOCUMENTARY EVIDENCE FILED BY THE LD. DR IN THE SHAPE OF PAPER BOOK AND ORDERS OF THE REVENUE AUTHORITIES. BEFORE COMMENTING UPON THE MERITS OF THE CASE AND ON THE ARGUMENTS ADVANCED BY BOTH THE PARTIES, WE WANT TO DISCUSS THE REASONS RECORDED FOR REOPENING OF ASSESSMENT IN THE CASE OF THE ASSESSEE VIDE AO S LETTER DATED 15.9.2010, WHICH IS REPRODUCED HEREUNDER : - CERTAIN INVESTIGATION WERE CARRIED OUT BY THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI IN RESPECT OF THE BOGUS / ACCOMMODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUAL / COMPANIES. THE NAME OF THE ASSESSEE FIGURES AS ONE OF THE BENEFICIARIES OF THESE ELECTED BOGUS TRANSACTIONS GIVEN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. IT HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAVE BEEN RECEIVED BY THE ASSESSEE. BENEFICIARY S NAME BENEFICIARY S BANK NAME BENEFICIAR Y S BANK BRANCH VALUE OF ENTRY TAKEN INSTRUMENT NO BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVING BANK A/C NO. ENTRY GIVING ACCOUNT G&G PHARMA (INDIA) LTD STATE BANK OF HYDERABAD KAROL BAGH 500,000 8603 10.2.03 SHUBHAM ELECTRONICS AND ELECTRONIC SBH KB 50038 G&G PHARMA (INDIA) LTD STATE BANK OF HYDERABAD KAROL BAGH 500,000 10373 10.2.03 GARNER FINANCE & SECURITY SBH KB 50029 G&G PHARMA (INDIA) LTD STATE BANK OF HYDERABAD KAROL BAGH 500,000 11112 10.2.03 STERING SECURITIES AND FINANCE SBH KB 50030 G&G PHARMA (INDIA) LTD STATE BANK OF HYDERABAD KAROL BAGH 500,000 12302 10.2.03 AGGRAGALE FINANCE P LTD SBH KB 50025 THE ABOVE AMOUNT OF RS. 20,00,000/ - HAS BEEN CREDITED INTO ASSESSES'S BANK ACCOUNT ON VARIOUS DATES. INVESTIGATION MADE BY THE INVESTIGATION WING OF THE DEPARTMENT HAS FOUND THAT ASSESSE IS A BENEFICIARY OF ITA NO. 3149/ DEL/ 2013 6 TAKING THE AFORESAID ACCOMMODATION ENTRIES. L HAV E ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THEREFORE, I HAVE REASONS TO BE LIEVE THAT THE INCOME OF THE ASSESSEE COMPANY AMOUNTING TO RS 20,00,0001 - HAS ESCAPED ASSESSMENT. THE ESCAPEMENT OF INCOME HAS BEEN CLEARLY ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSE COMPANY TO TRULY AND FULLY DISCLOSED ALL MATERIAL FACTS NECESSARY F OR ASSESSMENT THUS, IT IS FIT CASE FOR INITIATION OF PROCEEDINGS U/S 147 OF THE INCOME TAX ACT, 1961.' 8 . WE HAVE PERUSED THE AFORESAID REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT IN DISPUTE AND WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. A MERE REFERENCE IS MADE TO CERTAIN INFORMATION RECEIVED FROM TH E INVESTIGATION WING WHICH WAS SUPPLIED TO THE ASSESSEE VIDE AO S LETTER DATED 15.9.2010. IN OUR VIEW THE REASONS ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAD MECHANICALLY ISSUED NOT ICES U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI . KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE LAW APPLICABLE IN THE ITA NO. 3149/ DEL/ 2013 7 CASE OF THE A SSESSEE, WE ARE OF THE 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. WE DRAW OUR SUPPORT FROM THE JUDGMENT S OF THE HON BLE HIGH COURT OF DELHI IN THE FOLLOWING CASE S: - (A) 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 INCOME - TAX ACT, 1961 AND W AS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON O BJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME - TAX ACT, 1961, IS WIDE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. T HIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIRED 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 - SPECIFIC INFORMATION. THE BASIS O F THE BELIEF SHOULD BE ITA NO. 3149/ DEL/ 2013 8 DISCERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. THERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. (III) T HE REASSESSMENT PROCEEDINGS WERE INITIATED ON 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 STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, E XCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTH ER, THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS A LSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE QUASHED. (B). IN THE CASE OF CIT VS. ATUL JAIN REPORTED IN 299 ITR 383 IT HAS BEEN HELD AS UNDER: - ITA NO. 3149/ DEL/ 2013 9 HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS BY PAYING CASH ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. THE INFORMATION DID NOT INDIC ATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE AO DID NOT VERIFY THE CORRECTNESS OF INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE INFORMATION IN A MECHANICAL MANNER. THE AO HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE U/S 148. WHAT HAD BEEN RECORDED BY THE AO AS HIS REASONS TO BEL IEVE WAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORDING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE AO HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE ACTION OF THE AO WAS NOT SUSTAINABLE. 9 . IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT ABOVE ISSUE IS EXACTLY THE SIMILAR TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE AFORESAID DECISION S OF THE HON BLE HIGH COURT OF DELHI . HENCE, RESPECTFULLY FOLLOWING THE ITA NO. 3149/ DEL/ 2013 10 ABOVE PRECEDENT, WE DECIDE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QUASH THE REASSESSMENT PROCEEDINGS. THE OTHER ISSUES ARE NOT DEALT WITH AS THE SAME HAVE BECOME ACA DEMIC IN NATURE. 10 . IN THE RES ULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE O PEN C OURT ON 09 / 01 /20 1 5 . SD/ - SD/ - [ G.D. AGRAWAL ] [ H.S. SIDHU ] VICE PRESIDENT JUDICIAL MEMBER DATE 09 / 01 /201 5 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 ITA NO. 3149/ DEL/ 2013 11