Soyuz Industrial Resources Ltd., New Delhi V. ITO, New Delhi

ITA 3833/DEL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81647 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 07-08-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 11-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Accommodation entries; Competent authority; Assessment record; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G: NEW DELHI BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUN TANT MEMBER ITA NO. 3853/DEL/2010 ASSESSMENT YEAR 2002-03 SOYUZ INDUSTRIAL RESOURCES LTD. VS. ITO, WARD-9(1) B-3/58, SAFDARJUNG ENCLAVE NEW DELHI. NEW DELHI. 110 029. PAN AAACS2399D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI GURJEET SI NGH, CA, SHRI B.L. GOYAL, FCA/AR RESPONDENT BY : SHRI RAKESH KUMAR, SR. DR ORDER PER GEORGE GEORGE K, JUDICIAL MEMBER THIS APPEAL AT THE INSTANCE OF THE ASS ESSEE IS DIRECTED AGAINST CIT(A) ORDER DATED 16.3.2010. THE RELEVANT ASSESSMENT YEA R IS 2002-03. 2. THE GROUNDS RAISED READ AS FOLLOWS :- 1. BECAUSE THE ACTION IS BEING CHALLENGED ON FAC TS AND LAW SINCE THE INITIATION OF THE ACTION FOR REASSESSMENT U/S 147 A ND THEREAFTER THE CONTINUATION THEREOF WITHOUT PASSING A SPEAKING ORD ER EXAMINING THE OBJECTIONS TAKEN BY THE ASSESSEE TO THE ISSUE OF NO TICE U/S 147 / 148 IS BEING CONTESTED. 2. BECAUSE THE ACTION IS BEING CHALALENGED ON FAC TS AND LAW SINCE THE ADDITION FOR RS. 90,00,000/- HAS BEEN MADE TRAVELIN G BEYOND THE REASONS ITA NO. 3853/DEL/10 2 RECORDED WHICH WERE LIMITED TO RS. 20,00,000/- WHER EIN THE ACTUAL RECEIPT FROM THE PAYEE BEING THE BASIS OF REASONS RECORDED IS RS. 10,00,000/-. 3. BECAUSE THE ACTION IS BEING CHALLENGED ON FACT S AND LAW SINCE THE ADDITION FOR RS. 90,00,000/- HAS BEEN MADE WITHOUT PROVIDING THE RESOURCE OF THE RECEIPT OF INFORMATION THAT THE SAM E IS AN ACCOMMODATION ENTRY AND WITHOUT HAVING GIVEN CROSS EXAMINATION OF THE PERSON ON WHOSE STATEMENT / INFORMATION THE PROCEEDINGS U/S 147 / 1 48 WERE INITIATED WHICH IS IN VIOLATION OF THE SETTLED PRINCIPLE OF L AW. 4. BECAUSE THE ACTION IS BEING CHALLENGED ON FACT S AND LAW SINCE THE ADDITION OF RS. 90,00,000/- HAS BEEN MADE WITHOUT M AKING PROPER INVESTIGATION WHEREBY ASSESSEE HAS DISCHARGED THE O NUS BY PROVIDING ALL RELEVANT DOCUMENTS WHICH SUBSTANTIATE THE IDENTITY AND GENUINENESS OF THE TRANSACTION. 5. BECAUSE THE ORDER UPHELD AMOUNTING RS. 90,00 ,000/- U/S 68 ON ACCOUNT OF SHARE SUBSCRIPTION OF A PRIVATE LIMITED COMPANY IS ILLEGAL AND AGAINST FACTS WHEREAS PER ASSESSEE THE SAID SHARE S UBSCRIPTION IS GENUINE AND SUPPORTED BY RELEVANT DOCUMENTS. 6. BECAUSE THE ORDER UPHELD AMOUNTING RS. 22,50 0/- ON ACCOUNT OF COMMISSION ESTIMATED ON SHARE APPLICATION MONEY IS UNJUSTIFIED AND BAD IN LAW. ALTERNATIVELY THE QUANTUM IS DISPUTED. 3. THERE IS A DELAY OF 29 DAYS OF FILING TO THIS APPEAL. THE ASSESSEE HAS FILED A CONDONATION PETITION FOR CONDONING THE DELAY. ON PERUSAL OF THE PETITION FOR CONDONATION OF DELAY, WE FIND THAT THERE IS SUFFICI ENT CAUSE FOR THE DELAY IN FILING THIS APPEAL. THEREFORE IN THE INTEREST SUBSTANTIAL JUSTICE, WE CONDONE THE DELAY IN FILING THIS APPEAL AND TAKE UP THE MATTER ON MER ITS. 4. THE ASSESSE HAS ALSO FILED A PETITION FOR FILING ADDITIONAL GROUNDS OF APPEAL. THE SAME READS AS UNDER :- ITA NO. 3853/DEL/10 3 1. IN THE AFORESAID CASE THE ASSESSMENT ORDER IS DT. 31.3.2009 WHICH RECORDS A FINDING OF FACT AT PG. 1 PARA 4 THEREFORE, NOTICE U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 25.3.2009 AFTER OBTAINING APPROVAL OF THE COMMISSIONER OF INCOME TA X, DELHI-III, NEW DELHI. 2. THE ADDITIONAL GROUND OF APPEAL I S BEING RAISED FOR THE FIRST INSTANCE BEFORE THE TRIBUNAL EME RGING FROM THE FACTS AND MATERIAL ON RECORD. 3. THE UNDERSTATED GROUND OF APPEAL IS BEING BRAYED TO BE ALLOWED TO BE RAISED AND ADMITTED FOR ADJ UDICATION AND EXAMINATION SINCE EMERGING OUT OF EXISTING MATERIA L ON RECORD ON THE FACT OF THE CASE. BECAUSE THE ACTION FOR CONCLUDING THE REASSESSMENT IS BEING CHALLENGED SINCE THE APPROVAL HAS NOT BEEN TAKEN FROM DESIGNATED AUTHORITY & IS IN VIOLATION OF SECTION 151 (2) AND ADDITIONALLY THE SANCTIONING AUTHORITY IS NOT HAVING THE CHARGE OV ER THE RECORDS WHILE GRANTING THE SAID APPROVAL. 4. THE AFORESAID GROUND IS LEGAL IN NATURE AND THE RELIANCE IS BEING PLACED UPON THE CIT VS. SPLS S IDDHARTHA LTD. (2012) 345 ITR 223 (DELHI), COPY AT PG. 34-38 5. IN ACCORDANCE WITH THE AFORESAI D FACTS & CIRCUMSTANCES AND THE NATURE OF THE CASE, THE PRAYE R BE ALLOWED IN THE INTEREST OF SUBSTANTIAL JUSTICE FOR A DECIS ION IN ACCORDANCE WITH LAW SINCE THERE DOES NOT REQUIRE ANY EXAMINATIO N AND APPRECIATION OF ANY NEW FACTS AND OR EVIDENCE THAN THAT ALREADY ON RECORD. 5. THE ISSUE OF SANCTION FOR REOPENING OF ASSES SMENT BEING PURELY A LEGAL ISSUE, WHICH GOES TO THE ROOT OF THE MATTER, WE DEE M IT NECESSARY TO ADJUDICATE THIS ISSUE FIRST BEFORE CONSIDERING THE MATTER ON MERITS, 6. BRIEF FACTS OF THE CASE ARE AS FOLLOWS :- ITA NO. 3853/DEL/10 4 THE ASSESEE IS A COMPANY. IT FILED RETURN OF INCOME ON 16.10.2002 ADMITTING AN INCOME OF RS. 2448/-. INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING, THAT THE ASSESSEE HAD RECEIVED AN AMOUNT OF 20 LACS DURING THE PREVIOUS YEAR RELEVANT TO THE CONCERN ASSESSMEN T YEAR, IN THE FORM OF CHEQUES/DDS AS THE ACCOMMODATION ENTRIES FROM VARIO US ENTITIES CREATED BY ONE SHRI PRADEEP KUMAR JINDAL AND USED BY THEM IN THE BUSINESS OF ACCOMMODATION ENTRIES. THEREFORE, A NOTICE U/S 148 OF THE INCOME TAX ACT 1961 WAS ISSUED ON 25.3.2009 AFTER OBTAINING THEIR APPROVAL OF COMMISS IONER OF INCOME TAX, NEW DELHI III, NEW DELHI. THE REASSESSMENT U/S 147 RE AD WITH SECTION 143(3) OF THE ACT WAS COMPLETED ON 31.12.2009 MAKING AN ADDITION UNDER THE HEAD INCOME FROM OTHER SOURCES AMOUNTING TO RS. 90,22,500/-. T HE ASSESSMENT WAS CONFIRMED BY THE CIT(A) BY THE IMPUGNED ORDER DATED 16.3.2010. 7. THE ASSESSEE BEING AGGRIEVED IS IN APPEAL BE FORE US. 8. WE HAVE HEARD RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. IN THE INSTANT CASE, ADMITTEDLY, NEITHER ASSESSMENT U/S 14 3 (3) NOR U/S 147 WAS COMPLETED PRIOR TO ISSUANCE OF NOTICE U/S 148 OF TH E ACT. THE NOTICE U/S 148 OF THE ACT WAS ISSUED ON 25.3.2009 I.E. FOUR YEARS B EYOND THE END OF THE ASSESSMENT YEAR. THEREFORE U/S 151 (2) OF THE ACT IS APPLICABLE TO THE FACTS OF INSTANT CASE. SECTION 151(2) OF THE ACT READ AS UN DER : ITA NO. 3853/DEL/10 5 (2) IN A CASE OTHER THAN A CASE FALLING UNDER SUB- SECTION (1), NO NOTICE SHALL BE ISSUED UNDER SECTION 148 BY AN ASSE SSING OFFICER, WHO IS BELOW THE RANK OF JOINT COMMISSIONER, AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE JOINT COMMISSIONER IS SATISFIED, ON THE REASONS RECORDED BY SUCH ASSESSING OFFICER, THAT IT IS A FIT CASE FOR T HE ISSUE OF SUCH NOTICE. 8.1. HENCE THE SANCTIONING AUTHORITY AS PER SEC TION 151(2) OF THE ACT FOR ISSUANCE OF NOTICE U/S 148 OUGHT TO HAVE BEEN THE J OINT COMMISSIONER OF INCOME TAX. HOWEVER ON PERUSAL OF THE ASSESSMENT RECORDS W HICH WAS PLACED BEFORE US, IT IS CLEAR THAT THE SANCTION FOR ISSUANCE OF NOTIC E U/S 148 WAS GRANTED BY THE COMMISSIONER OF INCOME TAX. A COPY OF THE REASON RE CORDED FOR REOPENING THE ASSESSMENT IS PLACED AT PAGE 26 OF THE PAPER BOOK F ILED BY THE ASSESSEE ON 7.9.2010. THE LD. DRS CONTENTION IS THAT ASSESSEE DID NOT RAISE ANY OBJECTION BEFORE THE AO ON THIS ISSUE. THE CONTENTION OF THE LD. DR IS THAT ONCE THE ASSESSEE SUBMITS TO THE JURISDICTION TO THE AO THEN SUBSEQUENTLY OBJECTION WITH REFERENCE TO JURISDICTION CANNOT BE RAISED. THE SAN CTION BY COMPETENT AUTHORITY, AS MENTIONED IN SECTION 151 ONLY CAN ASSIGN PROPER JURISDICTION TO THE ASSESSING OFFICER AND IF SUCH SANCTION WAS NOT OBTAINED, THE ASSESSING OFFICER LACKED THE JURISDICTION TO COMPLETE THE REASSESSMENT PROCEEDIN GS. WHEN THE LEGISLATURE HAS SPECIFICALLY ASSIGNED JURISDICTION TO A PARTICULAR AUTHORITY UNDER THE ACT TO GRANT SANCTION THEN, IF ALL OTHER CONDITIONS ARE FULFILLE D, THE SANCTION HAS TO BE GRANTED BY THAT VERY AUTHORITY. THIS FUNCTION CANNOT BE DEL EGATED TO ANY OTHER AUTHORITY. IT IS THE LEGAL DUTY CAST UPON THAT AUTHORITY TO PE RFORM THE SAID FUNCTION. IF THAT ITA NO. 3853/DEL/10 6 AUTHORITY FAILS IN PERFORMING HIS LEGAL FUNCTIONS A ND THE SAME IS PERFORMED BY THE OTHER AUTHORITY THEN IT GOES TO THE VERY ROOT OF PR OPER ASSUMPTION OR JURISDICTION BY THE AUTHORITY WHICH WAS REQUIRED TO TAKE THAT SA NCTION. THIS IS A PURELY LEGAL ISSUE AND CAN BE RAISED AT ANY STAGE OF PROCEEDING. 8.2. HONBLE DELHI HIGH COURT IN THE CASE OF SPLS SIDDHARTHA LTD. (SUPRA) HAS QUASHED THE REASSESSMENT PROCEEDINGS FOR WANT O F SANCTION OF JOINT COMMISSIONER OF INCOME TAX WHEN IT WAS SO REQUIRED AS PER SECTION 151(2), OBSERVING AS UNDER :- AS PER THE AFORESAID PROVISION, IT IS ONLY THE JO INT COMMISSIONER OR THE ADDITIONAL COMMISSIONER, WHICH CAN GRANT THE AP PROVAL. THE ARGUMENT OF THE ASSESSEE BEFORE THE TRIBUNAL WAS TH AT THE APPROVAL WAS NOT GRANTED BY THE JOINT COMMISSIONER. INSTEAD, IT WAS TAKEN FROM THE COMMISSIONER OF INCOME-TAX, DELH I-III, NEW DELHI, WHO WAS NOT COMPETENT TO APPROVE EVEN WHEN H E WAS A HIGHER AUTHORITY INASMUCH AS SECTION 151 OF THE ACT SPECIFICALLY MENTIONS JOINT COMMISSIONER AS THE COMPETENT AUTHOR ITY. THIS CONTENTION OF THE RESPONDENT-ASSESSEE HAS BEEN ACCE PTED BY THE TRIBUNAL THEREBY QUASHING THE ASSESSMENT PROCEEDIN GS. THE CONTENTION OF THE REVENUE THAT IT WAS MERELY AN IRR EGULARITY COMMITTED BY THE ASSESSING OFFICER AND WAS RECTIFIA BLE UNDER SECTION 292B OF THE ACT, HAS NOT BEEN FOUND CONVINC ING BY THE TRIBUNAL. THUS, IF AUTHORITY IS GIVEN EXPRESSLY BY AFFIRMATIV E WORDS UPON A DEFINED CONDITION, THE EXPRESSION OF THAT CONDITION EXCLUDES THE DOING OF THE ACT AUTHORIZED UNDER OTHER CIRCUMSTANC ES THAN THOSE AS DEFINED. IT IS ALSO ESTABLISHED PRINCIPLE OF LAW THAT IF A PARTICULAR AUTHORITY HAS BEEN DESIGNATED TO RECORD HIS/HER SAT ISFACTION OR ANY PARTICULAR ISSUE, THEN IT IS THAT AUTHORITY ALONE W HO SHOULD APPLY HIS/HER INDEPENDENT MIND TO RECORD HIS/HER SATISFAC TION AND FURTHER MANDATORY CONDITION IS THAT THE SATISFACTION RECORD ED SHOULD BE ITA NO. 3853/DEL/10 7 INDEPENDENT AND NOT BORROWED OR DICTATED SATI SFACTION. LAW IN THIS REGARD IS NOW SELF-SETTLED. IN SHEONARAINJAISW AL V ITO (1989) 176 ITR 352 (PATNA), IT WAS HELD: WHERE THE ASSESSING OFFICER DOES NOT HIMSELF EXERCISE HIS JURISDICTION UNDER 14 7 BUT MERELY ACTS AT THE BEHEST OF ANY SUPERIOR AUTHORITY, IT MU ST BE HELD THAT ASSUMPTION OF JURISDICTION WAS BAD FOR NON-SATISFAC TION OF THE CONDITIONS PRECEDENT. THE APEX COURT IN THE CASE OF ANIRUDH SINHJI KARANS INHJI JADEJAV, STATE OF GUJARAT (1995) 5 SSC 302 HAS HELD THAT IF A STATUTORY AUTHORITY HAS BEEN VESTED WITH JURISDICTION, HE HAS TO EXERCISE IT ACCORDING TO ITS OWN DISCRETION. IF DISCRETION IS E XERCISED UNDER THE DIRECTION OR IN COMPLIANCE WITH SOME HIGHER AUTHORI TIES INSTRUCTION, THEN IT WILL BE A CASE OF FAILURE TO EXERCISE DISCR ETION ALTOGETHER. WE ARE, THEREFORE, OF THE OPINION THAT THE TRIBUNA L HAS RIGHTLY DECIDED THE LEGAL ASPECT, KEEPING IN VIEW WELL-ESTA BLISHED PRINCIPLES OF LAW LAID DOWN IN A CATENA OF JUDGMENTS INCLUDING THAT OF THE SUPREME COURT. 8.3 IN OUR OPINION, THE RATIO OF THE ABOVE DECISION OF HONBLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE CASE OF THE ASSESSEE. NO CONTRARY DECISION ON THESE FACTS HAS BEEN BROUGHT T O OUR KNOWLEDGE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE DECISIO N OF HONBLE JURISDICTIONAL HIGH COURT HOLD THAT THE ASSESSMENT REOPENED WITH THE AP PROVAL OF COMMISSIONER OF INCOME-TAX, WHEREAS THE STATUTE REQUIRED THE APPROV AL OF THE JOINT COMMISSIONER OF INCOME-TAX, IS NOT VALID. WE, THEREFORE, QUASH T HE REOPENING OF ASSESSMENT. SINCE THE REOPENING OF ASSESSMENT ITSELF HAS BEEN Q UASHED, THE CONSEQUENTIAL ASSESSMENT ORDERS PASSED FOR THE ABOVE ASSTT. YEARS 2002-03 IS ALSO QUASHED. ITA NO. 3853/DEL/10 8 8.4. AS WE HAVE ALREADY QUASHED THE ASSESSMENT O RDERS, THE VARIOUS GROUNDS OF APPEAL RAISED BY THE ASSESSEE AGAINST THE ADDITI ONS MADE BY THE ASSESSING OFFICER NEED NO ADJUDICATION. 9. IN THE RESULT, THE ASSESSEES APPEAL IS P ARTLY ALLOWED AS INDICATED ABOVE. THIS DECISION WAS PRONOUNCED IN THE OPEN C OURT ON 22 ND AUGUST, 2014. SD/- SD/- (T.S. KAPOOR) ( GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE 22 ND AUGUST, 2014 *VEENA COPY OF ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT