ITO, New Delhi V. M/s. Motors Pvt. Ltd., New Delhi

ITA 3189/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9555 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIDHI SRIVASTAVA
• Assessee Lawyers: DEEPAK OSTWAL
• Keywords: Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SH. H. S. SIDHU, JUDICIAL MEMBER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER ITA NO. 3189/DEL/2016 : ASSTT. YEAR : 2007-08 INCOME TAX OFFICER, WARD-22(1), NEW DELHI VS M/S S. MOTORS PVT. LTD., HOUSE NO. 5, BLOCK A-31, MAIN SHASTRI GALI, MAUJPUR, NEW DELHI-110053 (APPELLANT) (RESPONDENT) PAN NO. A A ICS1966J ASSESSEE BY : SH. DEEPAK OSTWAL, CA REVENUE BY : MS. NIDHI SRIVASTAVA, CIT DR DATE OF HEARING: 18.12.2019 DATE OF PRONOUNCEMENT: 07.01.2020 ORDER PER DR. B. R. R. KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AG AINST THE ORDER OF LD. CIT (A)-28, NEW DELHI DATED 22.03. 2016. 2. THE ASSESSEE RAISED THE FOLLOWING EFFECTIVE GROU ND: 1. THE LD. CIT (A) ERRED IN HOLDING THAT THE AO HA S NO JURISDICTION TO ISSUE NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 AND HENCE THE RE-OPENING IS BAD IN LAW WITHOUT APPRECIATING THE FACTS THAT THE REASONS WERE DULY R ECORDED BY THE AO ON 28.03.2014 THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES OF RS.10.70 CRORE DURING F.Y. 2006-07 AFTER TAKING NECESSARY APPROVAL U/S 151(2) OF THE I .T. ACT. FACTS TAKEN FROM THE RECORD OF THE LD. CIT (A). 3. IN THE CASE UNDER CONSIDERATION THE REVENUE HAS CHALLENGED THE QUASHING OF REOPENING OF THE ASSESSMENT ON THE GROU ND THAT SUFFICIENT REASONS HAVE BEEN RECORDED AS PER PROVISION OF SECT ION 148(2) OF THE ACT. ITA NO. 3189/DEL/2016 S. MOTORS PVT. LTD. 2 FURTHER REASON RECORDED FOR TAKING APPROVAL FROM TH E ADDL.CIT DEMONSTRATE THAT THE ASSESSING OFFICER AND THE ADDL . COMMISSIONER HAVE INDEPENDENTLY APPLIED MIND TO THE MATERIAL AVAILABL E WITH THEM WHILE RECORDING REASONS FOR REOPENING. 4. THE LD. DR ARGUED THAT THE ASSESSING OFFICER HAS RECEIVED INFORMATION AND THE REOPENING PROPOSAL HAS BEEN SEN T ONLY AFTER GOING THROUGH THE ENTIRE INFORMATION IN HAND AND AFTER DU E APPLICATION OF MIND. SHE ARGUED THAT THE NOTICES HAVE BEEN DULY SENT AS PER THE ADDRESS AVAILABLE IN THE PAN DATA BASE AND AS PER THE RETUR NS FILED BY THE ASSESSEE. HENCE, IT CANNOT BE SAID THAT THE NOTICES HAVENT BEEN ISSUED PROPERLY. IT WAS ARGUED BY THE LD. DR THAT IN THE CASE UNDER CONSIDERATION, THE NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT HAS BEEN ISSUED BY THE ASSESSING OFFICER AFTER TAKING A PPROVAL OF THE ADDL.CIT ON THE BASIS OF INFORMATION RECEIVED FROM THE INVES TIGATION WING. 5. IT WAS ARGUED BY THE LD. AR THAT IN THE ABSENCE OF REASONS RECORDED BY THE A O BEFORE ISSUE OF NOTICE U/S 148 IS FATAL TO THE IMPUGNED ORDER WHICH IS LIABLE TO BE VACATED AND DECLARED NON-EST IN LAW. FURTHER, HE REITERATED NON-RECORDING OF REASONS BY THE ITO ARE FATAL TO THE IMPUGNED ACTION AND ORDERS WHICH ARE LIABLE TO BE DECLARED V OID IN LAW AND ACCORDINGLY SHOULD BE QUASHED. THE LD. AR ARGUED TH AT THE REASSESSMENT PROCEEDINGS SHOULD BE QUASHED AS THE REOPENING WAS SOLELY BASED ON INFORMATION RECEIVED FROM DIT (INV.) WHICH WAS ACCE PTED BY THE ASSESSING OFFICER IN A MECHANICAL MANNER. 6. THE LD. AR RELIED ON THE DECISIONS IN SUPPORT OF HIS PREPOSITION VIZ. CIT VS ATUL JAIN 299 ITR 383 (DELHI), UNITED ELECTR ICAL COMPANY (P) LTD VS. CIT & ORS. 258 ITR 317 (DELHI), CIT VS. SFIL STOCK BROKING LTD. 325 ITR 285 (DELHI), SARTHAK SECURITIES CO. (P) LTD. VS. IT O 329 ITR 110 (DELHI) AND SIGNATURE HOTELS (P) LTD. VS. ITO & ANR. 338 IT R 51 (DELHI). ITAT ITA NO. 3189/DEL/2016 S. MOTORS PVT. LTD. 3 DELHI IN ITA NO. 3751/DEI/2011 IN SMT. SHAKUNTALA D EVI VS. ITO IN ITA NO. 2068/DEL/2010 IN THE CASE OF ACIT VS. SHRI DEVE SH KUMAR IN ITA NO. 187/DEL/2010/2015. 7. HEARD THE ARGUMENTS OF BOTH THE PARTIES AND PERU SED THE MATERIAL AVAILABLE ON RECORD. 8. THE REASON RECORDED PROVIDED BY THE A.O READS AS UNDER: DATED - M/S S MOTORS (P) LTD P AN -AAICS1966J A.Y 20007-08 'SUB: PROCEEDING U/S 147/148 FOR THE ASSTT. YEAR 20 07-08- APPROVAL FOR REOPENING THE CASE- REG.- THE PROPOSAL IN PRESCRIBED FORMAT IN THE ABOVE MEN TIONED CASE FOR ISSUING NOTICE U/S!48 FOR THE INCOME TAX ACT 1961 F OR REOPENING THE CASE FOR THE A Y 2007-08 . IN THIS CASE, INFORMATIO N WAS RECEIVED FROM THE OFFICE OF DIT (INV), NEW DELHI THAT THE AB OVE ASSESSEE HAS RECEIVED BOGUS ACCOMMODATION ENTRIES OF RS. 10,70,0 0,000/ - DURING THE F.Y. 2006-07. IN THIS CASE MORE THAN FOUR YEARS ELAPSED FROM THE END OF THE RELEVANT ASSTT. YEAR IN WHICH THE ACCOMM ODATION ENTRIES WERE TAKEN. IT IS THEREFORE REQUESTED THAT NECESSAR Y APPROVAL U/S 151(2) OF THE ACT MAY BE ACCORDED TO ISSUE NOTICE U /S 148. THE IMITATION FOR ISSUING NOTICE EXPIRES ON 31/03/2013. ASSTT TO BE COMPLETED FOR THE 1ST TIME U/S 143(3). 9. WE HAVE CAREFULLY CONSIDERED THE FACT OF THE CAS E, PROVISIONS OF THE ACT FINDING OF THE ASSESSING OFFICER AND SUBMISSION OF BOTH THE PARTIES. PLAIN READINGS OF THE REASONS RECORDED REVEAL THAT THE A.O. HAS NOT APPLIED HIS MIND TO THE MATERIAL/INFORMATION RECEIVED FROM THE OFFICE OF THE DIRECTOR OF INCOME TAX (INV.). IT FACT THERE WAS NE ITHER ANY APPLICATION OF MIND NOR REASON OF BELIEF THAT THE INCOME HAS ESCAP ED ASSESSMENT AS PER THE PROVISION OF THE ACT. THE ASSESSING OFFICER EVE N WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, AND WITHOUT EVEN RECORDING REASONS THAT HE HAS REASON TO BELIEVE THA T INCOME HAS ESCAPED ASSESSMENT SOUGHT APPROVAL NECESSARY APPROVAL U/S 1 51(2) OF THE ACT TO ISSUE NOTICE UNDER SECTION 148 OF THE ACT. ITA NO. 3189/DEL/2016 S. MOTORS PVT. LTD. 4 10. AS PER THE REASONS RECORDED, IT IS EVIDENT THAT THE AO HAS NEITHER CORROBORATED NOR EXAMINED THE INFORMATION RECEIVED FROM THE INVESTIGATION WING NOT RECORDED HIS REASON TO BELIEF BEFORE INITI ATING THE REASSESSMENT PROCEEDINGS. HENCE IN THE INSTANT CASE, IT IS CLEAR THAT THE AO PROCEEDED TO INITIATE PROCEEDINGS U/S 147 OF THE ACT AND TO ISSU E NOTICE U/S 148 OF THE ACT ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT. THERE IS NO MATERIAL ON RECORD T O SHOW THAT THE AO HAD APPLIED AN INDEPENDENT MIND IN FORMING A BELIEF WHI CH MAY RESULT IN THE REQUIRED REASON TO BELIEVE AS PER THE PROVISIONS OF SECTION 147 AND 148 OF THE ACT. HON'BLE APEX COURT IN THE CASE OF CHUGGAMA L RAJPAL VS. S.P. CHALIHA 79 ITR 603 (SC) DEALING WITH A CASE WHERE T HE AO HAD RECEIVED CERTAIN COMMUNICATIONS FROM THE CIT SHOWING THAT TH E ALLEGED CREDITORS OF THE ASSESSEE WERE NAME LENDERS AND THAT THE TRANSAC TIONS WERE BOGUS. THE AO CAME TO THE CONCLUSION THAT THERE WERE REASO NS TO BELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE HON'BLE SUPREME COURT DISAGREED AND OBSERVED THAT THE AO HAD NOT EV EN COME TO A PRIMA FACIE CONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. 11. IT WAS FURTHER EXPLAINED BY THE HON'BLE SUPREME COURT THAT: 'BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMISSION OR FAILURE O N THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER S. 139 FOR ANY ASSE SSMENT YEAR TO THE ITO OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT YEAR OR ALTERNATIVELY NOTWITHST ANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON T HE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ITA NO. 3189/DEL/2016 S. MOTORS PVT. LTD. 5 FOR ANY ASSESSMENT YEAR. UNLESS THE REQUIREMENTS OF CLAUSE (A) OR CL. (B) OF SECTION 147 ARE SATISFIED, THE ITO HAS NO JURISD ICTION TO ISSUE A NOTICE UNDER SECTION 148. 12. LIKEWISE IN THE CASE OF CIT VS. SPL'S SIDDHARTH A LTD., THE HON'BLE DELHI HIGH COURT HAS CATEGORICALLY HELD THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT IF A PARTICULAR AUTHORITY HAS BEEN DESIGNA TED TO RECORD HIS/HER SATISFACTION ON ANY PARTICULAR ISSUE, THEN IT IS TH AT AUTHORITY ALONE WHO SHOULD APPLY HIS/HER INDEPENDENT MIND TO RECORD HIS /HER SATISFACTION AND FURTHER MANDATORY CONDITION IS THAT THE SATISFACTIO N RECORDED SHOULD BE 'INDEPENDENT' AND NOT 'BORROWED' OR 'DICTATED' SATI SFACTION . 13. IN THE CASE UNDER CONSIDERATION THE ASSESSING O FFICER HAS NOT PROPERLY ASSUMED JURISDICTION OF THIS CASE, IN VIEW OF THE FACT THAT THE REASONS RECORDED FOR REOPENING ARE WITHOUT INDEPEND ENT APPLICATION OF MIND. WE FIND THAT IN THE FORM FOR RECORDING THE RE ASONS AT COLUMN NO. 11, THE REASONS FOR THE BELIEF WERE MENTIONED AS PER A NNEXURE A. WE HAVE GIVEN OPPORTUNITY TO THE REVENUE TO FILE THE SATISF ACTION RECORDED- AS PER ANNEXURE A IF ANY ON THEIR RECORDS. THE REVENUE CO ULD NOT FILE ANY ANNEXURE INSPITE OF SUFFICIENT OPPORTUNITY. 14. HENCE, WE DECLINE TO INTERFERE IN THE REASONED ORDER OF THE LD. CIT (A). THE OPERATIVE PART IS REPRODUCED AS UNDER FOR THE SAKE OF CONVEYANCE: UNDER THE CIRCUMSTANCES AND RESPECTFULLY APPLYING T HE RATIO OF THE JUDGMENTS RENDERED BY THE JURISDICTIONAL HIGH COURT IN CIT VS ATUL JAIN 299 ITR 383 (DELHI), UNITED ELECTRICAL COMPANY (P) LTD VS. CIT & ORS. 258 ITR 317 (DELHI), CIT VS. SFIL STOCK BROKIN G LTD. 325 ITR 285 (DELHI), SARTHAK SECURITIES CO. (P) LTD. VS. IT O 329 ITR 110 (DELHI) AND SIGNATURE HOTELS (P) LTD. VS. ITO & ANR . 338 ITR 51 (DELHI), AND THE DECISION IN THE CASE OF PRINCIPAL COMMISSIONER OF INCOME TAX VS. G & G PHARMA INDIA LTD. IN ITA NO. 5 45/2015 ORDER DT. 8.10.2015, IT IS HELD THAT IN ABSENCE OF REASON TO BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT, THE REQUIREMENTS OF S. 147 ARE NOT SATISFIED. ACCORDINGLY IT IS HELD THAT THE ASSESSIN G OFFICER HAS NO JURISDICTION TO ISSUE A NOTICE UNDER S. 148 OF THE ACT AND HENCE THE ITA NO. 3189/DEL/2016 S. MOTORS PVT. LTD. 6 REOPENING IN THIS CASE IS BAD IN LAW. ACCORDINGLY, I HOLD THE REASSESSMENT ORDER AS INVALID FOR THE YEAR UNDER AP PEAL 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07/01/2020. SD/- SD/- (H. S. SIDHU) (DR . B. R. R. KUMAR) JUDICIAL MEMBER ACCOUNT ANT MEMBER DATED: 07/01/2020 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR