Bhageria Finance and Investment Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3595/DEL/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86549 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 12-01-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 20-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Difference of opinion; Accommodation entries; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. GEORGE GEORGE K. , JM ITA NO. 3595/DEL/2011 : ASSTT. YEAR : 2002 - 03 M/S BHAGERIA FINAN CE AND INVESTMENT PVT. LTD., C/O KAPIL GOEL ADV., A - 1/25, SECTOR 15, ROHINI, DELHI - 110085 VS DCIT, CIRCLE 2(1), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. A AACB4130F ASSESSEE BY : SH. KAPIL GOEL, ADV. REVENUE BY : SMT. PARWINDER KA UR , SR. DR DATE OF HEARING : 12 .01.2015 DATE OF PRONOUNCEMENT : 16 .01.2015 ORDER PER N. K. SAINI, AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.05. 2011 OF LD. CIT(A) - V , NEW DELHI. 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT QUASHING THE INSTANT REOPENING MADE BY THE LD. ASSESSING OFFICER (AO) U/S 147/148 OF THE ACT IN VIEW OF FIRST PROVISO TO SECTION 147. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT QUASHING THE INSTANT REOPENING MADE BY THE LD. ASSESSING OFFICER ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 2 (AO) U/S 147/148 OF THE ACT FOR NON EXISTENCE OF STATUTORILY REQUIRED REASONS TO BELI EVE . 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT QUASHING THE INSTANT REOPENING MADE BY THE LD. ASSESSING OFFICER (AO) U/S 147/148 OF THE ACT, BEING MADE FOR CHANGE OF OPINION AND REVIEW HELD IMPRESSI BLE BY SC IN KELVINATOR 320 ITR 561. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT QUASHING THE INSTANT REOPENING MADE BY THE LD. ASSESSING OFFICER (AO) U/S 147/148 OF THE ACT FOR NON COMMUNICATION OF RE ASONS AS PER JURISDICTIONAL DHC ORDER IN CASE OF HARYANA ACRYLIC 308 ITR 38. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MA D E BY THE LD. AO AMOUNTING TO RS. 2,91,292/ - ESPECIALLY IN VIEW OF FACT THAT NO ADDITION IS MADE ON REOPENING GROUND. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MA D E BY THE LD. AO AMOUNTING TO RS. 2,91,292/ - WITHOUT APPRECIATING THAT NO ENQUIRY IS MADE BY LD. AO AT ANY TIME DURING ASST. BEFORE MAKING SUBJECT ADDITION WHICH IS SURMISICAL. 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MA D E BY THE LD. AO AMOUNTING TO RS. 2,91,292/ - WITHOUT APPRECIATING THAT SECTION 68 DO NOT APPLY TO SUBJECT REALIZATION OF TRADE DEBT. ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 3 8. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LEARNED CIT(A) ERRED IN NOT DELETING THE ADDITION MA D E BY THE LD. AO AMOUNTING T O RS. 2,91,292/ - WITHOUT APPRECIATING THAT PROFITS FROM SUBJECT TRADING ACCOUNT TRANSACTION IS DULY OFFERED AND SUBJECTED TO TAXATION. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO, AMEND, MODIFY, RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STATED HEREIN ABOVE, EITHER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. THE MAIN GRIEVANCE OF THE ASSESSEE VIDE GROUND NOS. 1 TO 4 RELATES TO THE REOPENING OF THE ASSESSMENT MADE BY THE AO U/S 147/148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT). 4 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING OF SHARES AND STOCK AND FI LED ITS RETURN OF INCOME ON 31. 1 0.2002 SHOWING A TOTAL INCOME OF RS. 27,150/ - . THE AO FRAMED THE ASSESSMENT U/S 143(3)/148 OF THE ACT ON 16.12.2005 ASSESSING THE TOTAL INCOME AT RS. 58,450/ - . THEREAFTER THE AO AGAIN ISSUED A NOTICE U/S 148 OF THE ACT ON 27.03.2009 BY RECORDING THE FOLLOWING REASONS: IN THIS CASE RETURN WAS FILED ON 31.10.2002 DECLARING INCOME OF RS. 27,146/ - . RETUR N WAS ASSESSED U/S 143(3) ON 16.12.2005. THE DIRECTORATE OF INVESTIGATION - I, NEW DELHI HAD SENT A LIST CONTAINING THE NAME OF BENEFICIARIES AND OPERATORS OF ACCOMMODATION ENTRIES IN DELHI. A PERUSAL OF THE LIST SHOWS THAT M/S BHAGERIA FINANCE & INVESTMENT PVT. LTD. WHOSE JURISDICTION LIES WITH THE UNDERSIGNED, HAS BEEN A BENEFICIARY OF ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 4 ENTRY TO VARIOUS ENTRIES PROVIDED BY PERSONS AS MENTIONED BELOW: SL. NO. AMOUNT DATE PROVIDER 1 4,02,000 23.01.2001 R. K. INVESTMENT IN VIEW OF THE ABOVE CREDIBLE INFORM ATION RECEIVED FROM THE DIT( INV.) - I HAVE REASONS TO BELIEVE THAT INCOME TO THE TUNE OF RS. 4,02,000/ - CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSM ENT FOR THE YEAR UNDER CONSIDERATION I.E. 2002 - 03 WITHIN THE MEANING OF SEC. 147 OF THE I. T. ACT, 1961 AND ACCORDINGLY NOTICE U/S 148 OF THE I. T. ACT, 1961 IS TO BE ISSUED. 5 . THE AO AGAIN FRAMED THE ASSESSMENT AT RS. 3,49,740/ - BY MAKING AN ADDITION O F RS. 2,91,292/ - . 6 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO CONFIRMED THE ADDITION MADE BY THE AO. 7 . NOW THE ASSESSEE IS IN APPEAL. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE WAS HAVING AN OPENING DEBIT BALANCE OF RS. 4,02,000/ - IN THE ACCOUNT O F M/S R. K. INVESTMENT S AND THIS ISSUE WAS THOROUGHLY EXAMINED BY THE AO IN THE PRECEDING YEAR WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT FOR THE ASSESSMENT YEAR 2000 - 01. OUR ATTENTION WAS DRAWN TOWARDS PAG E NO. 3 OF THE ASSESSEE S PAPER BOOK. IT WAS SUBMITTED THAT THE DEBIT BALANCE IN THE ACCOUNT OF M/S R. K. INVESTMENT S CANNOT BE AN ESCAPED INCOME OF THE ASSESSEE, THEREFORE, THE REASONS RECORDED BY THE AO FOR REOPENING THE CASE WAS NOT VALID. IT WAS ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 5 FURTHE R STATED THAT THE AO REOPENED THE ASSESSMENT FOR THE YEAR UNDER CONSIDERATION BY ISSUING NOTICE U/S 148 OF THE ACT AND AFTER PROPER VERIFICATION FRAMED THE ASSESSMENT U/S 143(3)/148 OF THE ACT BY PASSING THE RE - ASSESSMENT ORDER DATED 16.12.2005. THE AO AGA IN REOPENED THE SAME ASSESSMENT ON THE BASIS OF FLIMSY GROUND BY ISSUING THE NOTICE U/S 148 OF THE ACT ON 27.03.2009, SO THE REOPENING OF THE ASSESSMENT WAS NOT VALID. RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS: SARTHAK SECURITIES CO. P. LTD. VS ITO ( 2010) 329 ITR 110 (DEL) SIGNATURE HOTELS P. LTD. VS ITO AND ANOTHER (2011) 338 ITR 51 NARMADHA CHEMICALS (P.) LTD. VS ACIT (2013) 357 ITR 45 (MAD) CIT VS GANGESHWARI METAL P. LTD. (2014) 361 ITR 10 (DEL) 8. IN HIS RIVAL SUBMISSIONS THE LD. DR SUPPORTED TH E ORDERS OF THE AUTHORITIES BELOW AND FURTHER SUBMITTED THAT THE CASE WAS REOPENED BY THE AO AFTER MAKING THE PROPER INQUIRIES AND RECORDING THE REASONS, THEREFORE, REOPENING WAS VALID. 9. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFU LLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CASE IT IS AN ADMITTED FACT THAT THE AO REOPENED THE ASSESSMENT BY CONSIDERING THE OPENING BALANCE IN THE ACCOUNT OF M/S R. K. INVESTMENT AMOUNTING TO RS. 4,02,000/ - AS ESCAPED INCOME OF THE ASSESSEE. HOWEVER, IT IS NOT CLEAR THAT HOW AND IN WHAT MANNER THE OPENING DEBIT BALANCE IN THE ACCOUNT OF M/S R. K. INVESTMENT S WAS TREATED AS THE ESCAPED INCOME OF THE ASSESSEE. PARTICULARLY WHEN THE SAID ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 6 AMOUNT WAS ACCEPTED AS GENUINE WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT FOR THE PRECEDING ASSESSMENT YEAR I.E. 2001 - 02 VIDE AS SESSMENT ORDER DATED 11.03.2003. T HEREFORE, IT IS CLEAR THAT THE AO WHILE ISSUING THE NOTICE U/S 148 OF THE ACT ON 27.03.2009 HAD NOT MADE PROPER INQUIRIE S AND ALSO NOT APPLIED HIS MIND, HE SIMPLY ACTED ON THE INFORMATION RECEIV ED FROM THE INVESTIGATION WING. ON A SIMILAR ISSUE THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIGNATURE HOTELS P. LTD. VS ITO AND ANOT H ER (2011) 338 ITR 51 (SUPRA) HAS HELD AS UNDER: THAT THE 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 FINANCIAL YEAR 2002 - 03 AS STATED IN THE ANNEXUR E. 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 DOCUM ENT 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 ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, 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 ALSO 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 BE QUASHED. ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 7 10. IN THE PRESENT CASE , IT IS NOTICED THAT THE E ARLIER ALSO FOR THE SAME ASSESSMENT YEAR I.E . ASSESSMENT YEAR 2002 - 03, T HE AO FRAMED THE ASSESSMENT U/S 143(3)/147 OF THE ACT VIDE ASSESSMENT ORDER DATED 16.12.2005. THE SAID ASSESSMENT WAS FRAMED AFTER PROPER VERIFICATION AND SCRUTINY AND NO NEW MATERIAL WAS BROUGHT ON RECORD TO JUSTIFY THE ACTION FOR ISSUING THE NOTICE U/S 148 OF THE ACT AGAIN ON 27.03.2009. THE AO ISSUED THE NOTICE ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THE DIT(INVESTIGATION), HOWEVER, HE DID NOT CONSIDER THIS VITAL FACT THAT THE AMOUNT OF RS. 4,02,000/ - MENTIONED BY HIM IN THE REASONS RECORDED FOR REOPENING , IN FACT WAS THE CLOSING DEBIT BALANCE IN THE ACCOUNT OF M/S R. K. INVESTMENT S AND WAS PERTAINING TO THE PRECEDING ASSESSMENT YEAR 2001 - 02 AND NOT THE YEAR UNDER CONSIDERATION . MOREOVER, IT IS NOT CLEAR AS TO HOW AND IN WHAT MANNER THE DEBIT BALANCE IN THE NAME OF M/S R. K. INVESTMENT S WAS TREATED AS THE ESCAPED INCOME OF THE ASSESSEE PARTICULARLY WHEN THE AMOUNT WAS PAID FOR PURCHASING THE SHARES SO IT WAS NOT AN ENTRY PROVIDE D BY M/S R. K. INVESTMENT S IF IT HAD BEEN SO THEN THE AMOUNT WAS TO BE SHOWN AS CREDIT IN THE NAME OF M/S R. K. INVESTMENT S AND NOT THE DEBIT. 11. IN OUR OPINION THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT U/S 148 OF THE ACT WAS NOT VALID. WE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE PRESENT CASE AND BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF M/S SIGNATURE HOTELS PVT. LTD. VS ITO (SUPRA), SET ASIDE THE IMPUGNED ITA NO. 3595 /DEL /2011 BHAGERIA FINANCE & INVESTMENT PVT. LTD. 8 ORDER BY HOLD ING THAT THE REOPENING U/S 147 OF THE ACT BY ISSUING THE NOTICE U/S 148 OF THE ACT ON 27.03.2009 WAS NOT VALID AND THE ASSESSMENT FRAMED SUBSEQUENTLY ON THE BASIS OF THE SAID NOTICE WAS VIDE AB I NITIO . S INCE WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE ASSES SEE O N THE LEGAL GROUND, T HE OTHER GROUNDS RAISED ON MERIT DO NOT REQUIRE ADJUDICATION. 12 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . ( ORDER PRON OUNCED IN THE COURT ON 16 /01/2015 ) SD/ - SD/ - (GEORGE GEORGE K. ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 16 /01/2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 13 .01.2015 PS 2. DRAFT PLACED BEFORE AUTHOR 14 .01.2015 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE S ENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.