Printman Associates Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4029/DEL/2013

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1162 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2003-2004
• Appeal Filed On: 28-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus Share capital; Tangible material; Accommodation entries; Revised return; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 143(1); 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4029/DEL/2013 ASSESSMENT YEAR : 2003-04 M/S PRINTMAN ASSOCIATES PRIVATE LIMITED, PLOT NO. 8, PRINTING PRESS AREA, BEHIND PUNJAB KESARI, NEAR WAZIRPUR DEPOT, RING ROAD, NEW DELHI 110 052 (PAN: AACCP6279M) VS. ITO, WARD 14(4), NEW DELHI ( APPELLANT ) ( RESPONDENT ) ASSESSEE B Y : SH. A NIL CHOPRA, CA & SH. DINESH AGGARWAL, CA DEPARTMENT BY : SH. PRADEEP SINGH GAUTAM, SR.DR.. ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER PASSED BY THE LD. CIT(A)-XVII, NEW DELHI ON 17.04.2 013 IN RELATION TO THE ASSESSMENT YEAR 2003-04 ON THE FOLLOWING GROUNDS: - 1. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF THE AO IN UPHOLDING THE ADD ITION 2 OF RS. 20,00,000/- MADE BY THE AO U/S. 68 OF THE INCOME TAX ACT, 1961. 2. HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, AO HAS ERRED IN LAW AND ON FACTS IN ASSUMING JURISDICTION AND IN PASSING THE ASSESSMENT ORDER U/S. 143(3)/147 OF THE ACT. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, FORGO SUBSTITUTE OR WITHDRAW ANY GROUND AT OR BEFORE THE TIME OF HEARING AND ALL THE ABOVE GROUNDS ARE WITHOUT PREJUDICE TO EACH OTHER. 2. THE FACTS IN BRIEF ARE THAT ASSESSE IS A PRIVATE LI MITED COMPANY AND FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2003-04 ON 31.10.2003 SHOWING NIL INCOME. THE ASSESSEE FILED A REVISED RETURN ON 20.11.2003 BUT AGAIN SHOWING NIL INCOME. NO ASS ESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS DONE INITIALLY IN THIS CASE. SUBSEQUENTLY, ON RECEIVING INFORMAT ION FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD RECEIVED A CCOMMODATION ENTRIES FROM INDIVIDUALS, NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 25.03.2010. THE ASSESSMENT WAS THEN COMPLETED U/S. 143(3)/147 OF THE ACT ON 24.12.2010 AFTER ADDING RS. 20 LACS U/S. 68 OF THE ACT AS THE GENUINENESS AND CREDITWORTHINESS OF THE SHARE AP PLICATION MONEY RECEIVED DURING THE RELEVANT ASSESSMENT YEAR WAS NOT PRO VED BY THE ASSESSEE. 3 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER DATED 24.12.2010, ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 17.04.2013 HAS AFFIRMED THE ACTIO N OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE HA S ONLY ARGUED LEGAL GROUND NO. 2 AND STATED THE REASSESSMENT AS MAD E IS WITHOUT JURISDICTION, WITHOUT SANCTION OF LAW, WITHOUT COMPL IANCE WITH MANDATORY PROVISIONS OF SECTION 147/148 OF THE ACT AN D AS SUCH THE SAME DESERVES TO BE QUASHED. HE FURTHER STATED THAT TH E REASONS RECORDED FOR THE REASSESSMENT ARE AT PAGER BOOK PAGE NO. 12 AND THE REASONS ARE BALD AND DO NOT CONTAIN EVEN THE PRIMA FAC IE VIEW OR REASON TO BELIEVE OF THE AO THAT INCOME HAS ESCAPED ASSESSMENT TO TAX WITHIN THE MEANING OF SECTION 147 OF THE ACT. THERE IS NO APPLICATION OF MIND BY THE AO AND NO PROCESS OF THE MATTER BY THE AO BEFORE RECORDING OF THE SAID REASONS. IT WAS FURT HER SUBMITTED THAT NOTICE UNDER SECTION 148 WAS ISSUED ON 25.3.2010 MERE LY ON THE BASIS OF INFORMATION FROM DI THAT ASSESSEE HAS RECEIVED ACCO MMODATION ENTRY OF RS. 7 LAKHS. NOWEHRE IS THERE ANY MENTION OF ANY APPLICATION OF MIND OR ANY INDEPENDENT INQUIRY OR ANY LINK BETWEE N ANY TANGIBLE MATERIAL AND FORMATION OF REASON TO BELIEVE THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IT WAS FURTHER SUBMITTED THAT ADDITION INVOLVED IS FOR RS. 20 LACS WHEREAS THE ALLEGED INF ORMATION WAS ONLY FOR RS. 7 LACS WHICH TOO SHOWS NON-APPLICATION OF MIND NON-PROCESS BY THE AO. IT IS ONLY SUBSEQUENTLY IN THE COURSE OF REASSES SMENT THAT ADDITION WAS MADE OF RS. 20 LAKHS. REASONS RECOR DED AND NOTICE IN THIS CASE WAS ISSUED SIMPLY BASED UPON INVESTIGATI ON REPORT WITHOUT ANY INDEPENDENT EXAMINATION OR INVESTIGATION OR APPLI CATION OF MIND AS 4 BORNE OUT FROM THE FACT THAT NOTICE ISSUED FOR ALLEGED RECEIPT OF BOGUS SHARE CAPITAL OF RS. 7 LAKHS WHEREAS THE ASSESSEE H AS RECEIVED TOTAL CAPITAL OF RS. 20 LAKHS WHICH WAS LATER ADDED TO INC OME. TO SUPPORT HIS AFORESAID CONTENTION, HE RELIED THE CASE LAW OF HO NBLE SUPREME COURT OF INDIA IN THE CASE OF ACIT VS. DHARIYA CONSTR UCTION CO. (2011) 197 TAXMAN 202 (SC); DELHI HIGH COURT IN THE CASE OF PR. CIT VS. RMG POLYVINYLS (I) LTD. (2017) 83 TAXMANN.COM 348 (DE LHI); PR. CIT VS. MEENAKSHI OVERSEAS () LTD. VS. ITO 395 ITR 677 (D EL.); SIGNATURE HOTELS PVT. LTD. VS. ITO (2012) 20 TAXMANN.COM 797 (DE L.); PR. CIT VS. G&G PHARMA INDIA LTD. 384 ITR 147 (DEL.) AND CIT VS. SFIL STOCK BROKING LTD. 2010) 435 ITR 285 (DELHI). IN VIEW OF AB OVE, HE REQUESTED TO QUASH THE RE-ASSESSMENT. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF T HE AUTHORITIES BELOW AND THE CASE LAWS REFERRED THEREIN AND STATED T HAT ASSESSING OFFICER ISSUED THE NOTICE U/S. 148 AFTER DUE APPLICAT ION OF MIND. HE FURTHER STATED THAT THE AO HAS FOLLOWED DUE PROCEDUR E BEFORE ISSUING THE NOTICE U/S 148 OF THE I.T. ACT, 1961. THE ASSES SING OFFICER HAD TANGIBLE MATERIAL IN THE FORM OF INFORMATION RECEIVED F ROM THE INVESTIGATION WING. THE ASSESSING OFFICER DID NOT PRO CEED TO ANY HEARSAY, CONJECTURE OR SURMISES. HE ONLY FILED THE C ASE LAWS ON THE MERITS OF THE CASE AND NOT ON THE LEGAL ISSUE RAISED IN GROUND NO. 2. 6. I HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONS IDERED THE RIVAL SUBMISSIONS. I NOTE THAT IN THIS CASE THE AO WHILE RECORDING THE REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESS MENT HAS RECORDED THE REASONS AS UNDER:- 5 6 6.1 AFTER PERUSING THE AFORESAID REASONS RECORDED, I FIN D THAT IT IS A CASE WHERE ACTION HAS BEEN TAKEN MECHANICALLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, AND, NOT ON AN INDEPENDENT APPLICATION OF MIND AND THEREFORE ON THI S GROUND, THE PROCEEDINGS ARE WITHOUT JURISDICTION. IT IS APPARENT FROM THE FACT THAT ACCORDING TO THE AO, INVESTIGATION WING HAS INFORMED THAT ASSESSEE COMPANY HAS RECEIVED ACCOMMODATION ENTRY OF RS. 7 LAC S IN THE GARB OF SHARE APPLICATION MONEY WHICH IS SAID TO BE AS P ER INQUIRY MADE BY THE DIRECTORATE OF INVESTIGATION (DI) ON THE PERSON S SAID TO BE INVOLVED PROVIDING ACCOMMODATION ENTRIES/ BOGUS SHARE APPLICATION. BASED ON INQUIRIES MADE, DI IS SAID TO HAVE PROVIDED DETAILS OF PERSONS WHO ARE BENEFICIARIES OF SUCH ACCOMMODATION E NTRIES AND ONE SUCH BENEFICIARY IS SAID TO BE THE ASSESSEE. IN TH IS CASE NOTICE U/S. 148 OF THE ACT WAS ISSUED ON 25.3.2010 MERELY ON THE BASIS OF INFORMATION FROM D.I. THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRY OF RS. 7 LAKS. THERE IS NO MENTION OF ANY APP LICATION OF MIND OR ANY INDEPENDENT INQUIRY OR ANY LINK BETWEEN ANY TANGI BLE MATERIAL AND FORMATION OF REASONS TO BELIEVE THAT INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT. IT IS ALSO NOTED THAT IN THE R EASONS RECORDED, THE AO HAS MADE VAGUE REMARKS THAT ASSESSEE HAS INCOME CH ARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT. THE AO HAS NOT EV EN SPECIFIED AS TO WHAT IS THE AMOUNT OF ALLEGED INCOME ESCAPING AS SESSMENT, WHICH SHOWS THAT AO HAS MERELY RECORDED CERTAIN UNSUBSTANTI ATED ALLEGATIONS ON THE BASIS OF SOME INFORMATION RECEIVED, WHICH IS AGAINST THE PRINCIPLE LAID DOWN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS SFIL STOCK BROKING LTD. (2010) 325 ITR 285 (DEL), WHEREIN IT WAS OBSERVED THAT REASSESSMENT PROCEEDINGS WERE INITIAT ED ON THE BASIS 7 OF INFORMATION RECEIVED FROM INVESTIGATION WING REGA RDING ALLEGED ACCOMMODATION ENTRIES AND IT HAS BEEN HELD BY JURISDI CTIONAL DELHI HIGH COURT THAT MERE INFORMATION RECEIVED FROM DDIT(INV ) CANNOT CONSTITUTE VALID REASONS FOR INITIATING REASSESSMENT PROCEEDINGS IN THE ABSENCE OF ANYTHING TO SHOW THAT A.O. HAD INDEPENDE NTLY APPLIED HIS MIND TO ARRIVE AT A BELIEF THAT THE INCOME HAD ESCAPE D ASSESSMENT. THUS, THE AO HAS ACTED MECHANICALLY AND WITHOUT ANY INDEPENDENT APPLICATION OF MIND. THE REASONS RECORDED ARE THEREFORE VAGUE, HIGHLY NON SPECIFIC AND REFLECT COMPLETE NON-APPLICATION OF MIND. IT IS ALSO NOTED THAT THERE IS NO LIVE LINK OR DIRECT NEXUS BETWE EN ALLEGED MATERIAL AND, INFERENCE. IT IS FURTHER NOTED THAT INIT IATION OF PROCEEDINGS IS ALSO BASED ON NON APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION OF MIND BUT IS A CASE OF BO RROWED SATISFACTION. TO SUPPORT THIS VIEW, I DRAW SUPPORT FROM THE FOLLOWING DECISIONS:- I)ACIT VS. DHARIYA CONSTRUCTION CO. (2011) 198 TAXMAN 202 (SC) WHEREIN THE HONBLE COURT HAS HELD THAT : SECTION 147 OF THE INCOME TAX ACT, 1961 INCOME ESCAPING ASSESSMENT NON- DISCLOSURE OF PRIMARY FACTS WHETHER OPINION OF DISTRICT VALUATION OFFICER (DVO) PER SE IS NOT AN INFORMATION FOR PURPOSES OF REOPENING OF AN ASSESSMENT UNDER SECTION 147; ASSESSING OFFICER HAS TO APPLY HIS MIND TO INFORMATION, IF ANY, COLLECTED AND MUST FORM A BELIEF THEREON HELD, YES. II) PR CIT V. RMG PLYVINYL (I) LTD. (2017) 83 TAXMANN.COM 348 (HONBLE DELHI HIGH COURT HAS OBSERVED AS UNDER:- 8 11. THERE CAN BE NO MANNER OF DOUBT THAT IN THE INSTANT THERE WAS A FAILURE OF APPLICATION OF MIND BY THE AO TO THE FACTS. IN FACT HE PROCEEDED ON TWO WRONG PREMISES - ONE REGARDING ALLEGED NON-FILING OF THE RETURN AND THE OTHER REGARDING THE EXTENT OF THE SO-CALLED ACCOMMODATION ENTRIES. 12. RECENTLY, IN ITS DECISION DATED 26TH MAY, 2017 IN ITA NO.692/20L6 (PRINCIPAL COMMISSIONER OF INCOME TAX-6 V. MEENAKSHI OVERSEAS PVT. LTD.), THIS COURT DISCUSSED THE LEGAL POSITION REGARDING REOPENING OF ASSESSMENTS WHERE THE RETURN FILED AT THE INITIAL STAGE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AWL NOT UNDER SECTION 143(3) OF THE ACT. THE REASONS FOR THE REOPENING OF THE ASSESSMENT IN THAT CASE WERE MORE OR LESS SIMILAR TO THE REASONS IN THE PRESENT CASE, VIZ., INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING REGARDING ACCOMMODATION ENTRIES PROVIDED BY A 'KNOWN' ACCOMMODATION ENTRY PROVIDER. THERE, ON FACTS, THE COURT CAME TO THE CONCLUSION THAT THE REASONS WERE, IN FACT, IN THE FORM OF CONCLUSIONS 'ONE AFTER THE 9 OTHER' AND THAT THE SATISFACTION ARRIVED AT BY THE AO WAS A 'BORROWED SATISFACTION' AND AT BEST 'A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT.' 13. AS IN THE ABOVE CASE, EVEN IN THE PRESENT CASE, THE COURT IS UNABLE TO DISCERN THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE TOO, THE INFORMATION RECEIVED FROM THE INVESTIGATION WING CANNOT BE SAID TO BE TANGIBLE MATERIAL PER SE WITHOUT A FURTHER INQUIRY BEING UNDERTAKEN BY THE AO. IN THE PRESENT CASE THE AO DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEEDING ON THE ERRONEOUS PREMISE THAT ASSESSEE HAD NOT FILED A RETURN WHEN IN FACT IT HAD. 14. TO COMPOUND MATTERS FURTHER THE IN THE ASSESSMENT ORDER THE AO HAS, INSTEAD OF ADDING A SUM OF 78 LAKH, EVEN GOING BY THE REASONS FOR REOPENING OF THE ASSESSMENT, ADDED A SUM OF RS.1.13 CRORE. ON WHAT BASIS SUCH AN ADDITION WAS MADE HAS NOT BEEN EXPLAINED. 15. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATISFIED THAT NO ERROR WAS 10 COMMITTED BY THE ITAT IN HOLDING THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS BAD IN LAW. III) 395 ITR 677 (DEL) PR. CIT V. MEENAKSHI OVERSEAS (P) LTD. V. ITO 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE REASONS TO BELIEVE CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE TANGIBLE MATERIAL WHICH FORMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT. INDEED IT IS A BORROWED SATISFACTION'. THE REASONS FAIL TO DEMONSTRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMITTED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QUESTION DOES NOT SATISFY THE REQUIREMENT OF LAW. 38. THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS, ACCORDINGLY, DISMISSED BUT WITH NO ORDERS AS TO COSTS. 11 6.2 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AS EXPLAINED ABOVE AND RESPECTFULLY FOLLOWING THE PRECED ENTS, AS AFORESAID, THE PROCEEDINGS INITIATED BY INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT BY THE AO AND UPHELD BY THE LD. CIT(A) ARE NONEST IN LAW AND WITHOUT JURISDICTION, HENCE, THE A SSESSMENT IS QUASHED AND GROUND NO. 2 IS ALLOWED. SINCE NO OTHER GROUNDS WERE RAISED BY THE ASSESSEES COUNSEL, THE SAME ARE DISM ISSED AS SUCH. ACCORDINGLY, THE ASSESSEES APPEAL IS PARTLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE S TANDS PARTLY ALLOWED. ORDER PRONOUNCED ON 18-12-2019. SD/- [ H.S. SIDHU ] JUDICIAL MEMBER DATED: 18-12-2019 SRB COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.