Mann Finance Leasing Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 3753/DEL/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6469 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 13-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 09-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEDOBINA CHAUDHURI
• Assessee Lawyers: TARUN KUMAR BATRA
• Keywords: Income from undisclosed sources; Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 3753/DEL/2015 ASSESSMENT YEAR: 2005-06 M/S MANN LEASING PVT. LTD. VS. ITO, WARD 6(2) 35/4, SHOP NO. 5-6, ASHOK NAGAR NEW DELHI DOUBLE STOREY, TILAK NAGAR, NEW DELHI 110 018 (PAN: AACCM5279L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. TARUN KUMAR BATRA, CA REVENUE BY : MS. BEDOBINA CHAUDHURI, SR. DR ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 19.3.2013 OF THE LD. CIT(A)-6, DELHI PERTAINING T O ASSESSMENT YEAR 2005-06 AND RAISED THE FOLLOWING GROUNDS:- 1. THE ASSESSING AUTHORITY HAS ERRED IN TAKING ACTION U/S. 147 OF THE ACT AS HE HAS NOT APPLIED HIS MIND WHILE ISSUING A NOTICE U/S. 148 OF THE ACT AND LD. CIT(A) HAS CONFIRMING THE ACTION OF ITO, WARD 6(2). 2. THE ASSESSING AUTHORITY HAS ERRED IN MAKING AN ADDITION OF RS. 6 LACS TO THE DECLARED INCOME FROM UNDISCLOSED SOURCES. THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE 2 ADDITION MADE OF RS. 6 LACS MADE BY THE ITO, WARD 6(2). 3. THIS ADDITION MADE IS UNJUSTIFIED AND AGAINST LAW AND FACTS OF THE CASE. THE ORDER IS PASSED BY AUTHORITIES BELOW ARE UNJUSTIFIED UNWARRANTED AND AGAINST LAW AND FACTS OF THE CASE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED ON 28.10.2005 DECLARING INCOME OF RS. 96,030/ -. THE CASE WAS PROCESSED U/S. 143(1) OF THE I.T. ACT, 1961 ON 27.1 .2005. IN THIS CASE INFORMATION WAS RECEIVED FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION) THAT M/S MANN FINANCE & LEASING (P ) LTD. HAD INTRODUCED ITS UNACCOUNTED MONEY OF RS. 9 LACS IN A GGREGATE IN ITS BOOKS OF ACCOUNTS WITH THE HELP OF ENTRY OPERATORS . ON THE BASIS OF THIS INFORMATION, PROCEEDINGS U/S 147 OF THE I.T. A CT WERE INITIATED AFTER RECORDING REASONS AND ACCORDINGLY A NOTICE U/ S 148 WAS ISSUED ON 19.03.2012. IN RESPONSE TO THE SAME, THE A.R. OF THE ASSESSEE APPEARED FROM TIME TO TIME. THEREAFTER, AO COMPLETE D THE ASSESSMENT ON THE BASIS OF MATERIAL ON RECORD AVAIL ABLE AND THE INFORMATION RECEIVED FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION) AND ASSESSED THE INCOME OF THE ASSE SSEE AT RS. 6,96,030/- U/S. 147 OF THE I.T. ACT, 1961 VIDE HIS ORDER DATED 15.1.2013. 3. AGAINST THE ASSESSMENT ORDER, ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A) WHO VIDE HIS IMPUGNED ORDER DA TED 19.3.2015 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 3 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. C IT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL OF THE ASSESSEE HAS FILED THE PAPER BOOK CONTAINING PAGES 1 TO 32 ATTACHING THEREWITH THE COPY OF PAPER BOOK FILED BEFORE THE CIT(A); COPY OF NOTICE U/S. 148 OF THE I.T. ACT ; COPY OF LETTER DATED 16.4.2012 REQUESTING FOR PROVIDING REASONS RE CORDED FOR REOPENING OF THE CASE; COPY OF OUR LETTER DATED 3 0.4.2012 REQUESTING FOR SUPPLY OF THE REASON RECORDED; AND C OPY OF REASON FOR BELIEF FOR INCOME HAS ESCAPED ASSESSMENT. HE STATE D THAT LD. CIT(A) HAS ERRED IN SUSTAINING THE INITIATION OF THE PROCE EDINGS UNDER SECTION 147 OF THE I.T. ACT AND, FURTHER COMPLETION OF ASSE SSMENT UNDER SECTION 143(3)/147 OF THE ACT WITHOUT SATISFYING TH E STATUTORY PRE- CONDITIONS FOR INITIATION OF THE PROCEEDINGS AND, C OMPLETION OF ASSESSMENT UNDER THE ACT. HE FURTHER STATED THAT LD . CIT(A) ALSO ERRED IN SUSTAINING THE INITIATION OF PROCEEDINGS U /S. 147 OF THE I.T. ACT ON THE BASIS OF INFORMATION RECEIVED FROM DIT( INV.) MECHANICALLY AND WITHOUT INDEPENDENT APPLICATION OF MIND. HE FU RTHER STATED THAT THE REASONS RECORDED WERE MERE REASONS TO SUSPECT A ND WERE JUST TO MAKE FISHING AND ROVING ENQUIRIES, AS NO INDEPENDEN T ENQUIRY WAS CONDUCTED BY THE AO BEFORE ISSUING SUCH NOTICE U/S. 148 OF THE I.T. ACT AND AS SUCH THE PROCEEDING INITIATED UNDER SECT ION 148 WAS A MERE PRETENCE. TO SUPPORT HIS CONTENTION HE SUBM ITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF T HE ASSESSEE BY THE ITAT DECISION DATED 09.1.2015 IN THE CASE OF G&G PH ARMA INDIA 4 LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04) IN WHICH THE JUDICIAL MEMBER IS THE AUTHOR. HE FURT HER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 9.1.2015 HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITS DECISION D ATED 08.10.2015 IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G P HARMA INDIA LTD. IN THIS REGARD, HE FILED THE COPIES OF THE AFORESAI D DECISIONS 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 REASONS FOR REOPENING BY DUE APPLICATION OF MIND, H ENCE, THE APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE 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. IN MY VIEW, IT IS VERY MUCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE ISS UE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T. ACT, 1961 WHIC H IS REPRODUCED HEREUNDER:- REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT: 5 IN THIS CASE, INFORMATION WAS RECEIVED FROM THE DIR ECTOR OF INCOME TAX (INVESTIGATION), NEW DELHI THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF RS. 9,00,000/- AS FOLLOWS :- BENEFICIARYS NAME BENEFICIARY BANK NAME BENEFICIARY BANK BRANCH VALUE OF 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 MANN FINANCE & LEASING P LTD. PSB TILAK NAGAR, NEW DELHI 300000 3.6.2004 UMESNEH SECURITIES PVT. LTD. KESHAV SEHKARI K.B. 625 MANN FINANCE LEASING PVT. LTD. PSB TILAK NAGAR 300000 3.6.2004 UMESNEH SECURITIES PVT. LTD. KESHAV SEHKARI K.B. 625 MANN FINANCE LEASING PVT. LTD. PSB TILAK NAGAR 300000 6.7.2004 FINE FINANCE & LEASING PVT. LTD. CORP. N. K.B. 3834 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 GIVER, 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 BONA FIDE ONE. THEREFORE, I HAVE REASON TO BELIEVE THAT AN INCOME OF RS. 9,00,000/- HAS ESCAPED ASSESSMENT IN THE ASSESSMENT YEAR 2005-06 DUE TO THE FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ITS ASSESSMENT SO FAR AS THIS AMOUNT IS CONCERNED. THEREFORE, THIS CASE IS FIT FO R ISSUING NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 . IN 6 THIS CASE THE ASSESSMENT WAS MADE U/S. 143(1), NOT U/S. 143(3) OF THE I.T. ACT, 1961. I AM THEREFORE, SATISFIED THAT THE SAID INCOME, ON ACCOUNT OF ACCOMMODATION ENTRY WORTH RS. 9,00,000/- RECEIVED BY THE ASSESSEE HAS ESCAPED OF ASSESSMENT AND ACCORDINGLY, AFTER RECORDING THE ABOVE SAID REA SON AS LAID DOWN UNDER THE PROVISIONS OF SECTION 148(2) OF THE INCOME TAX ACT, 1961 NOTICE U/S. 148 IS BEING ISSUED. SD/- (C.S. SARSAR) INCOME TAX OFFICER WARD 6(2), NEW DELHI 8. AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, AS AFORESAID, I AM OF THE VIEW THAT AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS RE ASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. IN MY 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 HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF THE I.T. ACT , 1961 ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INCOME TAX (INV.), NEW DELHI. KEEPI NG IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CAS E AND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, I AM OF THE CONSIDERED 7 VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QU ASHED. MY VIEW IS FULLY SUPPORTED BY THE FOLLOWING JUDGMENT/D ECISION:- 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 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 8 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. 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 9 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, I AM OF THE CONSIDERED VIEW TH AT 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 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) I DECIDE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QU ASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE LEGAL ISSUE. SINCE I HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, AS AF ORESAID, THE OTHER ISSUES ARE NOT BEING DEALT WITH BEING ACADEMI C IN NATURE. 10 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 10-03-2017. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED :10-03-2017 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.