Km. Swati Gupta, J.P. Nagar V. ITO, Sambhal

ITA 4422/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7022 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 09-08-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 22-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMRIT LAL
• Keywords: Gift; Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 4422/DEL/2013 ASSESSMENT YEAR: 2002-03 SWATI GUPTA VS. ITO, SAMBHAL D/O SH. ANIL KUMAR MOHALLA KATRA, DHANAURA, DISTT. JP NAGAR, UP 244 231 (PAN: ACQPG5571J) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. VENKATESH CHAURASIA, ADV. REVENUE BY : SH. AMRIT LAL, SR. DR DATE OF HEARING : 08-09-2016 DATE OF ORDER : 04-10-2016 ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 18.3.2013 OF THE LD. CIT(A)-BAREILLY PERTAINING TO ASSESSMENT YEAR 2002-03 AND RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACTS IN DISMISSING THE APPEAL FILED BY THE ASSESSEE. 2. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE JUDICIAL PRONOUNCEMENTS RELIED 2 UPON BY THE ASSESSEE AGAINST ACTION OF THE A.O. IN ASSUMING JURISDICTION U/S 147. 3. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE WRITTEN SUBMISSIONS AND RELEVANT EVIDENCES FILED BY THE ASSESSEE WITH THE APPEAL PAPERS WHICH SUPPORTED THE STAND OF THE ASSESSEE AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER. 4. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FA CTS IN NOT APPRECIATING THE FACTS OF THE CASE WITH THAT O F VARIOUS CASES RELIED UPON BY THE ASSESSEE INCLUDING THAT OF MS MAYAWATI (AFFIRMED BY DELHI HIGH COURT) WHEREIN THE ITAT HAD ACCEPTED THE STAND OF THE ASSESSEE THAT EVEN STRANGERS CAN GIVE GIFTS DESPITE THE FACT THAT MANY OF THE DONORS TOOK LOANS AND BOUGHT THE PROPERTIES TO GIFT SAME TO MS. MAYAWATI. 5. THE LD. CIT, (APPEALS) ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT UNDER THE IDENTICAL FACTS, THE LD. C.I.T. (APPEALS), BAREILLY HAS ACCEPTED THE GIFTS IN THE CASE OF SHRI DEEPAK KARNWAL IN APPEAL NO.262/ITO.1/NAJIBABAD.08-09 PERTAINING TO A.Y. 2002-03. 3 6. THE LD. CIT (APPEALS) ERRED IN LAW AND ON FACTS IN NOT, APPRECIATING THE FACT THAT THE ASSESSEE HAVING NOT MAINTAINED BOOKS OF ACCOUNTS, THE PROVISIONS OF SECTION 68 OR 69 RESORTED TO BY THE ASSESSING OFFICER WERE NOT APPLICABLE IN THE CASE OF THE ASSESSEE. 7. THE ORDER OF THE C.I.T. {APPEALS) MAY BE CANCELL ED AND THE ORDER OF THE ASSESSING OFFICER MAY BE MODIFIED BY DELETING THE ADDITION OF RS.2,OO,OOO/- 8. ANY OTHER GROUND OF APPEAL WHICH MAY BE RAISED DURING THE COURSE OF HEARING OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED HER RETURN OF INCOME ON 10.7.2002 DECLARING TOTAL INCOM E OF RS. 79,990/-. THE RETURN OF INCOME WAS DULY PROCES SED U/S. 143(1) OF THE I.T. ACT, 1961 ON 23.1.2003. THE ASSESSEE EN JOYS INCOME FROM SHORT TERM CAPITAL GAINS AND INCOME FROM OTHER SOUR CES WHICH INCLUDES INTEREST ON DIVIDEND AND FROM RAJSHREE COL D STORAGE (P) LTD. LATER A LIST OF BENEFICIARIES INVOLVED IN ACCOMMODA TION ENTRY SCAM WAS RECEIVED FROM COMMISSIONER OF INCOME TAX, MORA DABAD VIDE HIS LETTER DATED 19.10.2007 IN WHICH ASSESSEES NAME FI ND PLACE. THEREFORE, A PROPOSAL U/S. 147 WAS SENT TO THE ADD L. CIT AND ACCORDINGLY, AFTER HIS APPROVAL, NOTICE U/S. 148 O F THE I.T. ACT WAS ISSUED ON 26.3.2008. IN RESPONSE TO NOTICE U/S. 1 48 OF THE I.T. ACT ASSESSEE VIDE HER RETURN OF INCOME DECLARING TOT AL INCOME OF RS. 4 78,990/- ON 26.5.2008. THEREAFTER, THE AO ASSESSE D THE INCOME OF THE ASSESSEE AT RS. 2,79,993/- VIDE HIS ORDER DATED 21.11.2008 PASSED U/S. 143 AND MADE THE ADDITIONS. 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 18.3.2013 HAS DISMISSED THE APPEAL OF THE ASSESSEEE AND AFFIRMED THE ACTION OF THE AO ON THE LEGAL ISSUE I.E. REOPENING OF THE CASE U/S. 147/148 OF THE I.T. ACT, 1961 AS WELL AS ON MERITS. 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 33 ATTACHING THEREWITH THE COPY OF ACKNO WLEDGEMENT OF RETURN OF INCOME; COPY OF COMPUTATION OF INCOME; CO PY OF REASONS RECORDED FOR REOPENING; COPY OF REPLY TO AO DATED 14.11.2008; COPY OF DONOR PAN CARD, ITR FOR 2001-02, COPY OF ITR 200 0-01, COPY OF STATEMENT OF AFFAIRS, COPY OF NOTORISED AFFIDAVIT, COPY OF GIFT DEED; COPY OF WRITTEN SUBMISSIONS FILED BEFORE CIT(A); CO PY OF ASSESSMENT ORDER OF SH. ANKIT GUPTA; COPY OF CIT(A)S ORDER OF SH. ANKIT GUPTA AND COPY OF ITATS ORDER OF SH. ANKIT GUPTA. HE ST ATED THAT LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF THE A O IN ASSUMING JURISDICTION U/S. 147 AND THAT TOO WITHOUT COMPLYIN G WITH THE MANDATORY CONDITIONS AS PRESCRIBED UNDER SECTION 14 7 TO 151 OF THE I.T. ACT, 1961 AND THE REASONS RECORDED ARE INVALID AND CONTRARY TO LAW AND FACTS AND THERE IS NO SATISFACTION AS PER L AW U/S. 151 OF THE 5 ACT. HE FURTHER DRAW OUR ATTENTION TOWARDS THE C OPY OF REASONS FOR REOPENING THE CASE U/S. 148 AND STATED THAT NO PROP ER REASONS WERE RECORDED; NO NEXUS BETWEEN THE MATERIALS RELIED UPO N AND THE BELIEF FORMED FOR ESCAPEMENT OF INCOME; NO APPLICATION OF MIND; NO PROPER SATISFACTION WAS RECORDED BEFORE ISSUE OF NOTICE U/ S. 148; NO INDEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. IT WAS FURTHER STATED THAT THE CASE WAS REOPENED ONLY ON THE BASIS OF INVESTIGATION WING INFORMATION WHICH SUFFERS WITH S ERIOUS DEBILITY AND LACKS DEFINITENESS, WITHOUT DESCRIBING THE BASIC AS PECTS OF ALLEGED TRANSACTION AND IN THE ABSENCE OF THE SAME, WHOLE ACTION OF THE AO GETS VITIATED. TO SUPPORT HIS CONTENTION HE SUBM ITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE ITAT DECISION DATED 09.1.2015 IN THE CASE OF G&G PHARMA INDIA LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04 ) IN WHICH THE JUDICIAL MEMBER IS THE AUTHOR. HE FURTHER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 9.1.2015 HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITS DECISION DATED 08. 10.2015 IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA IN DIA LTD. IN THIS REGARD, HE FILED THE COPIES OF THE AFORESAID DECISI ONS 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 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 M UCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE IS SUE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T. ACT, 1961 WHIC H IS REPRODUCED HEREUNDER:- THE ASSESSEE HAD DISCLOSED INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM OTHER SOURCES OF RS. 79,990/- IN ASSESSMENT YEAR 2002-03. INFORMATION H AS BEEN RECEIVED FROM DIT(SYSTEM) THROUGH A CD WHERE THE NAMES OF BENEFICIARIES WHO GOT ADJUSTMENT ENTRI ES HAVE BEEN MENTIONED. THE NAME OF THE ASSESSEE WITH DETAILS (MATCHING AS THOSE FILED THE RETURN) HAVE BEEN CORRELATED. THE ASSESSEE HAD RECEIVED ADJUSTMENT E NTRY OF RS. 2,00,300/-. ON A PERUSAL OF CASE RECORDS OF THE ASSESSEE, IT IS SEEN THAT THE ASSESEE FAILED TO DISCLOSE THE MATERIAL FA CTS IN THIS CONNECTION IN THE RETURN OF INCOME FILED BY HI M AS MENTIONED ABOVE. 7 I HAVE, THEREFORE, REASON TO BELIEVE THAT THE INCOM E OF THE ASSESSEE TO THE TUNE OF RS. 2,00,300/- HAS ESCA PED ASSESSMENT AS PER PROVISIONS OF SECTION 147 OF THE I.T. ACT, 1961. SD/- (JP SHARMA) INCOME TAX OFFICER, SAMBHAL 8. AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, AS AFORESAID, I AM OF THE VIEW THAT AO HAS NOT APPLIE D HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON 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 ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRE CTORATE OF INCOME TAX (SYSTEM), NEW DELHI. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, I AM OF THE CONSIDERE D VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT . YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. MY VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENT/DECISION:- PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA NO. 545/2015 DATED 8.10.2015 OF THE DELHI HIGH COURT 8 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 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 9 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 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 . 10 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. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 04-10-2016. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED : 04-10-2016 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. 11