Sh. Ashok Arora, New Delhi V. ITO, New Delhi

ITA 377/DEL/2010

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4253 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-11-2016
• Assessment Year: 2001-2002
• Appeal Filed On: 27-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: VK SABHARWAL
• Keywords: Accommodation entries; Reason to believe
• Section: 143(3); 147; 148; 144; 139

Judgement Text

1 ITA NOS. 377 &770/DEL/2010 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. N. K. SAINI, AM AND SH. SUDHANSHU SRIVAS TAVA, JM ITA NO.377/DEL/2010 : ASSTT. YEAR : 2001-02 ASHOK ARORA 76, SUKHDHAM APARTMENTS PLOT NO. 1, SECTOR-9, NEW DELHI ADQPA7752E VS ITO WARD-37(3) NEW DELHI (APPELLANT) (RESPONDENT) ITA NO.770/DEL/2010 : ASSTT. YEAR : 2001-02 ITO WARD-37(3), ROOM NO. 408, N- BLOCK VIKAS BHAWAN, I. P. ESTATE, NEW DELHI VS ASHOK ARORA 76, SUKHDHAM APARTMENTS PLOT NO. 1, SECTOR-9, NEW DELHI ADQPA7752E (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. V. K. SABHARWAL, A DV REVENUE BY : SH. S. K. JAIN, DR DATE OF HEARING : 03.11.2016 DATE OF PRONOUNCEMENT : 4.11.2016 ORDER PER N. K. SAINI, AM: THESE CROSS APPEALS FILED BY THE ASSESSEE AND THE D EPARTMENT ARE DIRECTED AGAINST THE ORDER DATED 30/11/2009 OF CIT(A)-XXVIII , NEW DELHI. 2 ITA NOS. 377 &770/DEL/2010 2. THE GROUNDS OF APPEALS RAISED BY THE DEPARTMENT ARE AS FOLLOWS: (ITA NO. 770/DEL/2010) 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4 LAKHS WHILE HOLDING THAT THE A.O HAD MADE ADDITION OF THE AMOUNT ACTUALLY PAID AS LO AN TOTALING TO RS.24 LACS. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CA SE, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.5 LAKHS ON THE GROUND THAT THE ASSESSEE MAY POSSESS SUCH AMOUNT OUT OF HIS OPENING CAPITAL BALANCE WITHOUT THERE BEING ANY EVIDENCE OF POSSESSION OF S UCH CAPITAL BALANCE. 3. THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GROUNDS OF APPEAL AT ANY TIME. 3. FIRST, WE WILL DEAL WITH THE ASSESSEES APPEAL I N ITA NO. 377/DEL/2010 WHEREIN 10 GROUNDS HAVE BEEN RAISED. HOWEVER, AT T HE FIRST INSTANCE, THE ONLY GROUND NO. 1 WAS ARGUED WHICH READS AS UNDER:- 1. THAT THE ORDERS PASSED BY THE ASSESSING OFFICER AND UPHELD BY THE LD.CIT(A) ARE WRONG IN FACTS AND ERRONEOUS ON THE P OINT OF LAW, BECAUSE OF INVOKING PROVISIONS AND ASSUMING JURISDIC TION U/S 147 READ WITH SECTION 151 OF THE INCOME TAX ACT, 1961, AS BA SED UPON MERE SURMISES AND GUESS WORK. 4. DURING THE COURSE OF HEARING, THE LD. COUNSEL FO R THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT AN IDENTICAL ISSUE HAVING SIM ILAR FACTS WAS A SUBJECT MATTER OF THE ADJUDICATION BEFORE THIS BENCH OF THE TRIBUNA L IN ITA NO. 1894/DEL/2012 FOR THE ASSESSMENT YEAR 2002-03 IN ASSESSEES OWN CASE AND THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 18 TH MAY 2016. COPY OF THE SAID ORDER WAS FURNISHED. 3 ITA NOS. 377 &770/DEL/2010 5. IN HIS RIVAL SUBMISSION, THE LD. DR ALTHOUGH SUP PORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFOR ESAID CONTENTIONS OF THE LD. COUNSEL FOR THE ASSESSEE. 6. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS RELATED TO THE RE-OPENING U/S 147/148 OF THE INCOME-TAX ACT, 1961 WAS A SUBJECT MATTER OF ADJUDICATION BEFORE THIS BENCH OF T HE TRIBUNAL IN ITA NO. 1894/DEL/2012 FOR THE ASSESSMENT YEAR 2002-03 IN AS SESSEES OWN CASE WHEREIN VIDE ORDER DATED 18 TH MAY 2016, THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND THE RELEVANT FINDINGS HAVE BEEN GIVEN AT PARAS 8 TO 10 WHICH READ AS UNDER:- 8. HON'BLE SUPREME COURT DECIDED THE IDENTICAL ISSUE A S TO THE VALIDITY OF THE NOTICE ISSUED U/S 147 OF THE ACT FOR REOPENING OF THE ASSESSMENT IN THE CASE ENTITLED CHHUGAMAL RAJPAL VS. S.P. CHALIHA - (1971 ) 79 ITR 603 BY RETURNING THE FOLLOWING FINDINGS:- 'THE SUPREME COURT WAS DEALING WITH A CASE WHERE TH E AO HAD RECEIVED CERTAIN COMMUNICATIONS FROM THE COMMISSIONER OF INCOME TAX SHOWING THAT THE ALLEGED CREDITORS OF THE ASSESSEE WERE 'NAME-LENDERS AND TH E TRANSACTIONS ARE BOGUS.' THE AO CAME TO THE CONCLUSION THAT THERE WERE REASONS TO B ELIEVE THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE SUPREME COURT DISAGREED AND OBSERVED THAT THE AO 'HAD NOT EVEN COME TO A PRIMA FACIE CONCLUSION THAT THE TRAN SACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. HE APPEARED TO HAVE HAD O NLY A VAGUE FELLING THAT THEY MAY BE 'BOGUS TRANSACTIONS.' IT WAS FURTHER EXPLAINED B Y THE 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 ON THE PART OF TH E ASSESSEE TO MAKE A RETURN UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS 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 THE 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 FOR ANY ASSESSMENT YEAR. UNLESS THE REQUIREMENTS OF CL. (A) 4 ITA NOS. 377 &770/DEL/2010 OR CL. (B) OF S. 147 ARE SATISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A NOTICE UNDER S. 148.' THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFI ED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COULD SATISFY THE REQUIREMENTS UND ER SECTION 147 AND THEREFORE COULD NOT HAVE ISSUED NOTICE UNDER SECTION 148.' 9. SIMILAR ISSUE HAS BEEN DECIDED BY HON'BLE JURISDIC TIONAL HIGH COURT IN CASE OF PR. COMMISSIONER OF INCOME TAX-4 VS. G & G PHARMA LIMIT ED IN ITA 545/2015 ORDER DATED 08.10.2015 BY RELYING UPON THE HON'BLE SUPREME COURT JUDGMENT CIT ED AS CHHUGAMAL RAJPAL VS. S.P. CHALIHA (SUPRA). THE OPERATIVE PART OF THE JUDGMENT IN CASE OF G & G PHARMA LIMITED (SUPRA) IS AS UNDER : '12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIV EN 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 AC COUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONCLUSION IS UNH ELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TA LKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO M AKE 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 14TH 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 IT S OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSI DERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIENT CLARITY BY THE SU PREME COURT IN THE DECISIONS DISCUSSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE.' 10. NOW, ADVERTING TO THE CASE AT HAND, IN VIEW OF THE LAW LAID DOWN BY THE HON'BLE SUPREME COURT IN CHHUGAMAL RAJPAL VS. S.P. CHALIHA (SUPRA) AND HO N'BLE JURISDICTIONAL HIGH COURT IN G & G PHARMA LIMITED (SUPRA) DISCUSSED IN THE PRECEDING PARAS, W E ARE OF THE CONSIDERED VIEW THAT INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT BY THE AO IN THIS CA SE ON THE BASIS OF TAX EVASION PETITION ARE ITSELF BAD IN 5 ITA NOS. 377 &770/DEL/2010 LAW AS THE AO HAS NOT SATISFIED HIMSELF BEFORE INIT IATING THE PROCEEDINGS THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT FOR THE FOLLOWING REASONS :- (I) THAT AO HAS MERELY PROCEEDED T O INITIATE PROCEEDINGS U/S 147 OF THE ACT ON THE BA SIS OF TAX EVASION PETITION THAT THE ASSESSEE HAS PROVIDED LOA N OF RS.2,50,000/- AND RS.3,00,000/- TO MR. DEEPAK AND MR. SANJAY RESPECTIVELY; (II) THAT THE AO HAS MERELY FORWARDED THE INTIMATI ON CONTAINED IN THE TAX EVASION PETITION TO THE ASSESSEE WITHOUT RECORDING ANY REA SONS WHATSOEVER; (III) THAT THE AO HAS NOT EVEN CAME TO PRIMA FACIE CONCLUSION THAT THE ALLEGED LOAN TRANSACTION BETWEEN THE ASSESSEE AND DEEPAK AND SANJAY WERE GEN UINE TRANSACTIONS AND AS TO WHAT ARE THE FINDINGS RETURNED BY THE ID. CIVIL COURT IN THE ALL EGED SUIT FILED BY THE ASSESSEE; (IV) THAT THE AO HAS ADMITTEDLY NOT RECORDED THAT HE HAS REASON TO BELIEVE THAT THE INCOME OF RS.5,50,000/- HAS ESCAPED ASSESSMENT AND HE HAS SAT ISFIED HIMSELF BEFORE INITIATING THE PROCEEDINGS U/S 147 OF THE ACT; (V) THAT WHEN THE AO WITHOUT RECORDING ANY REASON FOR REOPENING FORWARDED THE INFORMATION RECEIVED BY WAY OF TAX EVASION PETITION, ACCORDING OF APPROVAL BY CIT FOR REOPENING IS ALSO A MECHANICAL EXERCISE WITHOUT APPLYING THE MIND AND A S SUCH, APPROVAL ACCORDED BY THE CIT IS ALSO NOT SUSTAINABLE. RELIANCE IN THIS REGARD IS PL ACED UPON JUDGMENT IN CASE OF VIJAY RAMESHBHAI GUPTA VS. ACIT - (2013) 32 TAXMAN.COM 41 (GUJ.). (VI) THAT EVEN AFTER INITIATION OF THE PROCEEDINGS U/S 147/148, THE AO HAS FAILED TO LAY HAND ON THE EVIDENCE IF SANJAY HAS RECEIVED A SUM OF RS.2,50,00 0/- IN CASH AS ADVANCE FROM AMITA ARORA, W/O ASHOK ARORA, RATHER RESORTED TO THE BEST JUDGME NT ASSESSMENT U/S 144 OF THE ACT; (VII) THAT NEITHER THE AO HAS APPLIED HIS MIND TO SATISFY HIMSELF TO REOPEN THE CASE NOR HE HAS INVESTIGATED THE MATTER DURING REASSESSMENT PROCEED INGS NOR CIT HAD APPLIED HIS MIND BEFORE ACCORDING APPROVAL FOR REOPENING. 7. IN THE PRESENT CASE ALSO, THE A.O ISSUED THE NOT ICE U/S 148 OF THE ACT ON THE BASIS OF INFORMATION RECEIVED BY WAY OF TAX EVASION PETITION AND DID NOT APPLY HIS OWN MIND. THEREFORE, RESPECTFULLY, FOLLOWING THE A FORESAID REFERRED TO ORDER, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. AS THE LEGAL ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, THE OTHER ISSUES RAISED ON MERIT B Y THE ASSESSEE AS WELL AS BY THE DEPARTMENT IN THEIR RESPECTIVE APPEALS BECOME ACADE MIC IN NATURE. 6 ITA NOS. 377 &770/DEL/2010 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED AND THAT OF THE DEPARTMENT IS DISMISSED. (ORDER PRONOUNCED IN THE COURT ON 4/11/2016) SD/- SD/- (SUDHANSHU SRIVASTAVA) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT M EMBER DATED: 4/11/2016 *R.NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 7 ITA NOS. 377 &770/DEL/2010 DATE INITIAL 1. DRAFT DICTATED ON 03.11.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 03.11.2016 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 4.11.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 4.11.2016 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. 8 ITA NOS. 377 &770/DEL/2010