Richa Enterprises Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 4163/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7258 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 10-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 28-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AMIT GOEL
• Keywords: Depreciation; Accommodation entries; Revised return; Reason to believe; Borrowed satisfaction
• Section: 143(3); 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-3 : NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.4163/DEL/2014 ASSESSMENT YEAR : 2006-07 RICHA ENTERPRISES PVT. LTD., C-21A, 1 ST FLOOR BETWEEN C- 19 TO C-47, OPP. C-45, GULMOHAR PARK, NEW DELHI. PAN: AACCR1497D VS. ITO, WARD-15(3), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT GOEL, CA DEPARTMENT BY : SHRI RAJESH KUMAR, SR. DR DATE OF HEARING : 16.08.2016 DATE OF PRONOUNCEMENT : 01.09.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) DATED 1.7.2014 FOR THE ASSESSMENT YEAR 2006- 07, WHEREIN ASSUMPTION OF JURISDICTION IS CHALLENGED. ITA NO.4163/DEL/2014 2 2. THE ASSESSEE STATES THAT THE NOTICE ISSUED U/S 1 48 IN THIS CASE IS ILLEGAL, VOID AND WITHOUT JURISDICTION. 3. WE HAVE PERUSED THE REASONS RECORDED WHICH IS AT PAGE 2 OF THE PAPER BOOK:- FORM FOR RECORDING THE REASONS FOR INITIATING PROC EEDINGS U/S 147 AND FOR OBTAINING THE APPROVAL OF THE ADDL. CIT/CIT/CBDT 1. NAME AND ADDRESS OF THE ASSESSEE : M/S RICHA ENTERPRISES PVT. LTD. 1798/52, NAIWALA KAROL BAGH, NEW DELHI-110005 1D POCKET K, SHEIKH SARAI PHASE II, NEW DELHI 110049. 2. PAN : AACCR1497D 3. STATUS : COMPANY 4. WARD/CIRCLE : WARD-15(3) 5. ASSTT. YEAR IN RESPECT OF WHICH IT IS PROPOSED TO ISSUE NOTICE U/S 148 : A.Y 2006-07 6. THE QUANTUM OF INCOME WHICH HAS ESCAPED ASSESSMENT : RS.6,00,000/- 7. WHETHER THE ASSESSMENT IS PROPOSED TO BE MADE FOR THE FIRST TIME : YES 8. IF ANSWER TO ITEM 7 IS NEGATIVE STATE : (A) INCOME ORIGINALLY ASSESSED : NA (B) WHETHER IT IS A CASE OF UNDER ASSESSMENT, AT LOWER RATE, ASSESSMENT WHICH HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF OR ALLOWING EXCESS LOSS/ DEPRECIATION : NO ITA NO.4163/DEL/2014 3 9. WHETHER THE PROVISION OF SEC. 150(1) ARE APPLICABLE. IF THE REPLY IS IN AFFIRMATIVE THE RELEVANT FACTS MAY BE STATED AGAINST ITEM NO. 11 AND 8 MAY ALSO BE BROUGHT OUT THAT THE PROVISIONS OF SEC. 150(2) WOULD NOT STAND IN THE WAY OF INITIATING PROCEEDINGS U/S 147 : NO 10. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT : THE ASSESSEE COMPANY FILED ITS ORIGINAL RETURN OF I NCOME FOR THE AY. 2006-07 ON 23.10.2006 VIDE ACKNOWLEDGEMENT NO. 57002114. THIS RETURN WAS REVISED ON 23-11- 2006 AND THE REVISED RETURN DECLARING NIL INCOME WA S FILED VIDE ACKNOWLEDGEMENT NO. 67005046. THE RETURN WAS PROCESSED U/S 143(1) OF TH E I.T. ACT, 1961 ON 11-08-2007. A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 CONDU CTED BY THE INVESTIGATION WING, DELHI IN THE CASE OF SHRI SURESH KUMAR GUPTA (SK GU PTA) ON 20.11.2007. IT WAS GATHERED THAT SH. S.K.GUPTA WAS CARRYING ON THE BUS INESS OF SHARE BROKER, FINANCIAL CONSULTANCY AND PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF LOANS, ADVANCES, SHARE APPLICATION MONEY, ISSUING BOGUS EXPENSES BIL LS ON COMMISSION BASIS. FOR THIS PURPOSE, HE HAD FLOATED SEVERAL COMPANIES/FIRMS IN WHICH HE AND HIS FAMILY MEMBERS AS WELL AS HIS EMPLOYEES WERE EITHER DIRECTORS OR P ROPRIETORS. BANK ACCOUNTS WERE OPENED IN THE NAMES OF THESE COMPANIES/FIRMS AND IN DIVIDUALS TO CREATE LAYER/LAYERS BEFORE PROVIDING ACCOMMODATION ENTRIES TO THE BENEF ICIARIES THROUGH BANKING CHANNELS TO GIVE THE COLOR OF GENUINENESS TO THESE ACCOMMODATION ENTRIES. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN THE CASE OF SH. S.K GUPTA, THE ASSESSING OFFICER RECORDED HIS STATEMENT ON OATH ON 26.12.2008 U/S131 OF THE INCOME TAX ACT. 1961. IN THIS STATEMENT ALSO, SH. S.K GUPT A ADMITTED MORE EXPLICITLY THAT HE IS CONTROLLING AROUND 30 COMPANIES THROUGH WHICH HE USED TO CARRY OUT THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEF ICIARIES FOR WHICH HE USED TO CHARGE COMMISSION. HE ALSO ADMITTED THAT THE DETAIL S OF VARIOUS BENEFICIARIES FROM WHOM CASH WAS RECEIVED AND CHEQUES WERE ISSUED BY V ARIOUS COMPANIES CONTROLLED BY HIM. IN VIEW OF THE ABOVE IT IS CLEAR THAT SH. S. K. GUP TA WORKED AS AN ENTRY OPERATOR AND PROVIDED ACCOMMODATION ENTRIES TO VARIOUS BENEFICIA RIES THROUGH A LARGE NUMBER OF ENTITIES CONTROLLED AND MANAGED BY HIM. CASH WAS RE CEIVED FROM THE BENEFICIARIES THROUGH MEDIATORS AND WAS DEPOSITED IN THE BANK ACC OUNTS OF THESE ENTITIES AND THEREAFTER IT WAS TRANSFERRED TO THE BANK ACCOUNTS OF THE ULTIMATE BENEFICIARIES THROUGH CONDUIT/INTERMEDIARY COMPANIES FLOATED BY SH. S.K G UPTA. ITA NO.4163/DEL/2014 4 SUBSEQUENTLY, SH. S.K GUPTA FILED PETITION BEFORE T HE INCOME TAX SETTLEMENT COMMISSION, DELHI FOR THE ASSESSMENT YEAR 2008-09 W HEREIN HE ADMITTED AN ADDITIONAL INCOME OF RS. 68,76,755/- ON ACCOUNT OF COMMISSION/PREMIUM EARNED FOR PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICI ARIES. IN THE STATEMENT OF FACTS (SOF) FILED BY SH. S.K GUPTA BEFORE THE HON'BLE SET TLEMENT COMMISSION, HE ADMITTED THAT HE USED TO PROVIDE ACCOMMODATION ENTR IES THROUGH 32 COMPANIES AND TWO INDIVIDUALS WHICH WERE USED AS CONDUITS/ROUTES FROM WHERE CHEQUES USED TO BE GIVEN TO BE BENEFICIARIES. THIS FACT HAS ALSO BEEN ENDORSED BY THE HON'BLE SETTLEMENT COMMISSION VIDE ITS ORDER DATED 22.06.2012 IN SETTL EMENT APPLICATION NUMBER DL/DC53/2010-11/22-1T. IN VIEW OF THE ABOVE IT IS CLEAR THAT SHRI S.K. GUP TA WAS PROVIDING ACCOMMODATION ENTRIES TO VARIOUS BENEFICIARIES THROUGH DIFFERENT MEDIATORS BY CHARGING COMMISSION (FOR WHICH A SEPARATE LEDGER ACCOUNT REFERRED TO AS 'PREMIUM ACCOUNT' HAS BEEN MAINTAINED IN HIS IMPOUNDED ACCOUNTS). IT IS NOTICED FROM THE LIST OF ENTRIES THAT THE AS SESSEE COMPANY M/S RICHA ENTERPRISES PVT. LTD. HAS TAKEN FOLLOWING ACCOMMODATION ENTRIES FROM THE FOLLOWING PERSONS (BENEFICIARY) AS PER DETAILS HEREUNDER:- AMOUNT NAME OF THE ENTRY PROVIDER CH.NO./PO/DD AND DATE DATE OF ENTRY IN BOOKS CONDUIT COMPANY THROUGH WHICH CHEQUE ISSUED NAME OF BANK RS.6,00,000 SHRI AJAY MANGAL DDNO 730598 DATED 29.10.05 26.10.05 M/S AGM HOLDINGS LTD. ORIENTAL BANK OF COMMERCE IN VIEW OF THE REPORTS RECEIVED FROM THE INVESTIGA TION WING AND THE ABOVE FACTS AND FINDINGS, IT IS CLEAR THAT THE ASSESSEE COMPANY HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. I AM IN POSSESSION OF MATERIAL THAT DISCREDITS AND IMPEACHES THE PARTICULARS FURNISHED BY THE ASSESSEE COMPANY AND A LSO ESTABLISHES THE LINK WITH THE SELF-CONFESSED 'ACCOMMODATION ENTRY PROVIDERS' WHOS E BUSINESS IS TO HELP ASSESSES BRING INTO THEIR BOOKS OF ACCOUNT THEIR UNACCOUNTED MONIES THROUGH THE MEDIUM OF SHARE SUBSCRIPTION. THEREFORE, I HAVE REASON TO BELIEVE THAT INCOME OF THE ASSESSEE TO THE EXTENT OF RS. 6,00,000 HAS BEEN INTRODUCED IN THE GARB OF BOGUS A CCOMMODATION ENTRIES AND THE SAME HAS ESCAPED ASSESSMENT. ITA NO.4163/DEL/2014 5 THEREFORE, IT IS A FIT CASE FOR INITIATING PROCEEDI NGS U/S 147/148 OF THE ACT. SD/- ITO, WARD 15(3), NEW DELHI THE ADDL.CIT, RANGE-15, NEW DELHI . 4. A PERUSAL OF THESE REASONS DEMONSTRATES NON-APPL ICATION OF MIND BY THE AO. THIS IS MERELY A BORROWED SATISFACTION. THE HONBLE DELHI HIGH COURT IN THE CASE OF SIGNATURE HOTELS PVT. LTD. VS. ITO 328 ITR 51 (DEL) HELD THAT NOTICE ISSUED BASED ON A REPORT FROM INV ESTIGATION WING IS INVALID WHERE THE AO DOES NOT EXAMINE THE EVIDEN CE. THE HONBLE DELHI HIGH COURT IN THE CASE OF PRINCIPAL COMMISSIO NER OF INCOME TAX VS. G & G PHARMA INDIA LTD. IN ITA NO. 545/2015 VID E ORDER DT. 8.10.2015 AT PARA 12 AND 13 HELD AS FOLLOWS. 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. 10 F EBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES , WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATIO N, THE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE C OMPANY HAS, INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNH ELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO TH E MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ITA NO. 3602/DEL/2010 C.O. NO. 276/DEL/2010 A.Y. 2000-2001 M/S BAWA FLOAT GLAS S LIMITED 3 ITA NO.4163/DEL/2014 6 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 MAKE A REFERENCE TO THE 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 NOVEMBER 2004 AND W AS 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 ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATI ON ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW E XPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND T O THE MATERIALS IN ORDER TO HAVE REASONS 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 MATERIALS PRODUCED DU RING THE HEARING OF THE APPEAL. THE COURT WOULD LIKE TO OBSERVE THAT THIS I S 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 BASI S THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF THE ASSESSMENT, THE AO HA S TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BE LIEVE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 5. RESPECTFULLY FOLLOWING THE HONBLE JURISDICT IONAL HIGH COURT DECISIONS CITED ABOVE, WE HOLD THE ASSESSMENT TO BE BAD IN LAW. ITA NO.4163/DEL/2014 7 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 01.09.2 016. SD/- [J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED, 01 ST SEPTEMBER, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.