M/s. R.K. Arora & Sons (HUF), New Delhi V. ACIT, New Delhi

ITA 4444/DEL/2014

• Counselvise Citation: 444420114 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 2
• Next Hearing Date: 03-08-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 13-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU DHIRANJAN SENPATI
• Assessee Lawyers: ANIL KR JAIN
• Keywords: Unexplained cash credit; Gift; Search and seizure; Opportunity of being heard; Principle of natural justice; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 142(1); 153A; 132

Judgement Text

ITA NO S . 4444 & 4445/DEL/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC - 2 , NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER I.T.A. NO. 4444 /DEL/20 14 A.Y. : 200 4 - 0 5 R.K. ARORA & SONS (HUF) B - 4/48, PASCHIM VIHAR, NEW DELHI (PAN: AANHR4028Q) VS. ACIT, CENTRAL CIRCLE - 02, NEW DELHI (APPELLANT) (RESPONDENT) AND I.T.A. NO. 4445 /DEL/20 14 A.Y. : 200 4 - 0 5 K.K. ARORA & SONS (HUF) B - 4/48, PASCHIM VIHAR, NEW DELHI (PAN: AANHR4028Q) VS. ACIT, CENTRAL CIRCLE - 02, NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : S HRI ANIL KR. JAIN, CA DEPARTMENT BY : SH. SU DHIRANJAN SENPATI, SR. DR DATE OF HEARING : 03 - 0 8 - 201 5 DATE OF ORDER : 2 4 - 0 9 - 201 5 ORDER PER H.S. SIDHU : J M THE SE ARE TWO APPEALS ARE FILED BY DIFFERENT ASSESSES WHICH IS AGAINST THE SEPARATE ORDERS OF THE LD. CIT(A) S BOTH DATED 25 . 6 .20 14 FOR THE SAME ASSTT. YEAR I.E. 2004 - 05. SINCE THE ISSUES INVOLVED IN BOTH THE APPEALS ARE IDENTICAL AND COMMON, HENCE, THESE APPEALS ARE BEIN G CONSOLIDATED BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE , BY DEALING WITH ITA NO. 4444/DEL/2014 (AY 2004 - 05). ITA NO S . 4444 & 4445/DEL/2014 2 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THE ASSESSEE S APPEAL NO. 4444/DEL/2014 (AY 2004 - 05) . 1. THAT ON THE FACTS AND CI RCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(APPEAL) HAS FAILED TO APPRECIATE THAT THE NOTICE ULS 148 IS ILLEGAL, BAD IN LAW AND WITHOUT JURISDICTION AND AS SUCH THE ASSESSMENT ORDER PASSED ULS 148 IS ILLEGAL AND BAD IN LAW. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW T HE LD CIT(APPEAL) HAS FAILED TO APPRECIATE THAT THE INITIATION OF REASSESSMENT PROCEEDING ULS 147 IS ILLEGAL AND BAD IN LAW. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(APPEAL) HAS FAILED TO APPRECIATE THAT THE IMPUGNED ASSESSMENT ORDER PASSED BY THE LD. AO IS BAD IN LAW, ILLEGAL AND WRONG ON FACTS. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(APPEAL) HAS FAIL ED TO APPRECIATE THAT THE IMPUGNED ASSESSMENT ORDER PASSED BY THE LD. AO IS AGAINST THE PRINCIPLES OF NATURAL JUSTICE AND HAS BEEN PASSED WITHOUT AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD. 5. THAT ON THE FACTS AND, ON THE CIRCUMSTANCES OF THE CASE A ND THE PROVI S ION OF LAW THE LD CIT APPEAL HAS ERRED IN SUSTAINING AN ADDITION OF RS.5,00,000/ - AS UNEXPLAINED CASH CREDIT ULS 68 OF THE INCOME TAX ACT, 1961. 6. THAT THE APPELLANT CRAVES THE RIGHT TO AMEND, APPEND, DELETE ANY OR ALL GROUNDS OF APPEAL. ITA NO S . 4444 & 4445/DEL/2014 3 3 . THE BRIEF FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION U/S. 132 OF THE I.T. ACT, 1961 WAS CARRIED OUT IN WINGS PHARMACEUTICALS GROUP OF CASES ON 14.2.2008 AND THE ASSESSEE WAS ALSO COVERED UNDER SEARCH. SUBSEQUENT TO CENTRALIZATION OF THE CASE, PROCEEDINGS U/S. 153A OF THE I.T. A CT, 1961 HAD BEEN INITIATED. A NOTICE U/S. 153A WAS ISSUED ON 15.1.2009. IN RESPONSE THEREOF, THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2004 - 05 ON 30.1.2009, DECLARING INCOME OF RS. 3,74,526/ - . THEREAFTER, ASSESSMENT IN THIS CASE WAS COMPLETED U/S. 143(3)/153A OF THE I.T. ACT, 1961 VIDE ORDER DATED 24.12.2009 AT AN INCOME OF RS. 3,74,526/ - . SUBSEQUENTLY, A LETTER DATED 25.3.2011 WAS RECEIVED FROM THE CIT(A), DELHI (CENTRAL) - III, NEW DELHI FORWARDING THEREWITH COPY OF LETTER OF THE ACIT, CC - 19, NEW DELHI CONTAINING THEREWITH LIST OF BENEFICIARIES OF ACCOMMODATION ENTRIES PROVIDED BY SH. SURESH KUMAR GUPTA FOR AY 2004 - 05. AFTER PERUSING THE LIST ENCLOSED WITH THE LETTER OF THE ACIT, CC - 19, NEW DELHI , AO REVEALS THAT M/S RK ARORA & SONS (HUF), WHO I S ASSESSED TO TAX IS ONE OF THE BENEFICIARIES AND HAS RECEIVED ACCOMMODATION ENTRIES FROM ANJALI GUPTA. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CASE OF THE ASSESSEE WAS REOPENED U/S. 147 OF THE I.T. ACT, 1961 AFTER OBTAINING APPROVAL OF THE LD. CIT, DELHI (CENTRAL) - III, NEW DELHI VIDE HIS OFFICE LETTER DATED 30.3.2011 AND A NOTICE U/S. 148 OF THE I.T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 30.3.2011 WHICH WAS SENT THROUGH SPEED POST . A COPY OF THE NOTICE WAS ALSO SERVED UPON THE ASSESS EE BY HAND ON 31.3.2011. IN RESPONSE TO THE NOTICE U/S. 148 R.W. SECTION 147 OF THE I.T. ACT, 1961, THE ASSESSEE VIDE LETTER DATED NIL HAS SUBMITTED ON 2.5.2011 A COPY OF RETURN OF INCOME AND ALSO REQUESTED FOR THE COPY OF THE REASONS RECORDED BEFORE INIT IATING THE REASSESSMENT PROCEEDINGS. A NOTICE U/S. 143(2) OF THE I.T. ACT, 1961 WAS ISSUED ON 17.10.2011 AND SERVED UPON THE ASSESSEE THROUGH SPEED POST, FIXING THE CASE FOR HEARING ON 25.10.2011. IN RESPONSE THEREOF, NEITHER ANYBODY ITA NO S . 4444 & 4445/DEL/2014 4 ATTENDED, NOR ANY REPLY HAS BEEN FILED BY THE ASSESSEE. SUBSEQUENTLY, A NOTICE U/S. 142(1) OF THE I.T. ACT, 1961 ALONGWITH QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE ON 4.11.2011 AND SERVED UPON HIM THROUGH SPEED POST . IN RESPONSE THERETO, THE ASSESSEE ON 11.11.2011 HAS FIL ED A LETTER AND REQUESTED FOR COPY OF REASONS RECORDED BEFORE INITIATING THE PROCEEDING U/S. 148 FOR THE AY 2004 - 05 . THE SAME WAS SENT TO THE ASSESSEE ON 8.12.2011 AND ASSESSEE SUBMITTED VIDE HIS LETTER DATED 13.12.2011 HIS REPLY. AO OBSERVED THAT THE ASS ESSEE HAS NOT SUBMITTED ANY DOCUMENTARY EVIDENCE I.E. ANY BANK STATEMENT ETC., IN SUPPORT OF ITS CONTENTION. HENCE, IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE, THE CASH CREDITS RECEIVED BY THE ASSESSEE REMAINED UNVERIFIABLE. THEREAFTER, T HE ASSESSMENT WAS MADE U/S. 147 BY ORDER DATED 20. 12.20 11 ASSESSING THE INCOME AT RS. 8,74,530/ - PASSED U/S. 14 3(3) /14 8 OF THE INCOME TAX ACT, 1961. 4 . AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER DATED 20 .12.2008, ASSESSEE WAS IN APPEAL BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 25 . 6 .20 14 HAS DISMISSED THE APPEAL OF THE ASSESSEE. 5 . AGAINST THE AFORESAID ORDER OF THE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6 . LD. COUNSEL OF THE ASSESSEE REITERATED THE CONTENTION RAISED IN THE GROUNDS OF APPEAL . HE FURTHER SUBMITTED THAT THE AO HAS MECHANICALLY ISSUED THE NOTICE ON THE BASIS OF LETTER R ECEIVED FROM THE OFFICE OF THE CIT CENTRAL - 3 . THERE IS NO LIVE LINK IN THE REASONS RECORDED BETWEEN THE INFORMATIO N OBTAINED AND THE BELIEF FORMED BY THE AO . ONLY THE VALUE OF ENTRY TAKEN IS MENTIONED BUT THE NATURE OF ENTRY WHETHER IT IS, BOGUS GIFT, LOAN OR SHARE CAPITAL MONEY IS NOT MENTIONED . MOREOVER, ON WHAT BASIS THE ABOVE PRESUMPTION IS DRAWN THA T THE ASSESSSEE HAS TAKEN ANY ACCOMMO DATION ENTRY IS ITA NO S . 4444 & 4445/DEL/2014 5 ALSO NO T MENTIONED. NO REFERENCE IS MADE TO ANY TANGIBLE MATERIAL STATEMENT OR ANNEXURE IN SUPPORT OF THE INFORMATION RECEIVE ON THE BASIS OF WHICH REASONS HAVE B E EN RECORDED. FROM TH E REASONS IT IS ALSO NOT CLEAR WHETHER ANY STATEMENT OF SMT. AN JALI GUPTA/ SH. SURESH KUMAR GUPTA HAS BEEN RECORDED OR NOT. EVEN IN THE REASONS RECORDE D , PAY ORDER NO. MENTIONED IS WRONG MEANING THEREBY THAT T HE A O HAS NOT BOTHERED TO EVEN VERIFY THE INFORMATIO N RECEIVED WITH THE ASSESSMENT FOLDER WHEREIN T HE CONFIRMATION/COPY OF PAY ORDER HAS ALREADY BEEN FILED AT THE TIME OF ORIGINAL ASSESSMENT U/S 153A. IT INDICATES THAT THE AO HAS MECHANICALLY RECORDED THE REASONS AND ISSUED THE NOTI CE WITHOUT APPLYING HIS OWN MIND. THEREFORE, ON THESE FACTS, THE DECISI ONS OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE SIGNATURE HOTELS PVT. LTD. (SUPRA), 338 ITR 51, INSECTICI (INDIA) LTD. (SUPRA), 357 ITR 330 AND CLT VS. ATUL JAIN AND VIN JAIN, 299 ITR 383 WOULD BE SQUARELY APPLICABLE BECAUSE THE INFORMATION ON THE BA SIS OF WHICH THE AO HAD INITIATED PROCEEDINGS UNDER SECTION 147 WAS VAGUE AND UNCERTAIN AS MAY BE EVIDENCED FROM THE RELEVANT PARA OF THESE JUDGMENTS. HENCE, HE REQUESTED THAT THE REASSESSMENT PROCEEDINGS MAY BE QUASHED. 7 . ON THE OTHER HAND, LD. DR R ELIED UPON THE ORDER S PASSED BY THE LOWER AUTHORITIES ON THE ISSUE IN DISPUTE. 8 . I HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS. I FIND THAT THE AO HAS RECORDED THE REASONS FOR BELIEF THAT INCOME HAS ESCAPED ASSESSMENT AS UNDER. THE SAME IS REPRODUCED IN THE IMPUGNED ORDER. REASONS TO BELIEVE FOR REOPENING U/S. 147 MI S R.K. ARORA & SONS HUF, 8 - 4/48, PASCHIM VIHAR, NEW DEL HI (A.Y. 2004 - 05) ITA NO S . 4444 & 4445/DEL/2014 6 A SEARCH & SEIZURE ACTION U/S 132 WAS CARRIED OUT IN WINGS GROUP OF CASES ON 14.02.2008. THE CASE WAS CENTRALIZED WITH CENTRAL CIRCLE - 2 VIDE ORDER ULS 127 BY CIT - IX, NEW DELHI ON 24.10.2008. 2. THE ASSESSRNEPT IN THE CASE OF M/S R.K. ARORA/& SONS ( HUF ) WA S COMPLETED VIDE ORDER U/S 143(3)/153A OF THE ACT. 1961 DATED 24.12.2009 AT THE RETURNED INCOME OF RS.3,74,526/ - . 3. A LETTER F.NO. CIT(C) - 1I1/2010 - 11/2334,. DATED 25.03.2011 HAS BEEN RECEIVED FROM THE CIT(CENTRAL) - III, NEW DELHI FORWARDING THEREWITH CO PY OF LETTER OF THE ACIT, CENTRAL CIRCLE - H). NEW DELHI CONTAINING THEREWITH LIST OF BENEFICIARIES OF ACCOMMODATION ENTRIES PROVIDED BY SH. SURESH KU MAR GUPTA FOR A.Y. 2004 - 05. 4. A PERUSAL OF THE LIST ENCLOSED WITH THE LETTER OF THE ACIT, CC - 19, NEW DEL HI REVEALS THAT M/S R.K. A RORA & SONS HUF, WHO IS ASSESSED TO TAX WITH THIS CIRCLE, IS ONE OF THE BENEFICIARIES AND HAS RECEIVED ACCOMMODATION ENTRIES FROM ANJALI GUPTA, AS PER DETAILS GIVEN BELOW: MEDIATORY ACTUAL BENEFICIARY DATE CH. NO. PO NO. AMO UNT DEEPAK JAIN R.K. ARORA & SONS (HUF) 11.3.2004 060927 RS. 5,00,000 5. IN VIEW OF THIS. I AM SATISFIED THAT THE INCOME TO THE TUNE OF RS.5,00,OOOI - HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE AND TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR ITA NO S . 4444 & 4445/DEL/2014 7 6. IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, I HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE OF MORE THAN RS.1.0 LAC HAS ESCAPED FROM ASSESSMENT. SD/ - (S.N. PANDEY) ACIT, CENTRAL CIRCLE - 2, NEW DELHI 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSIONS, I AM OF THE CONSIDERED VIEW THAT ONLY LEGAL GROUND INVOLVED IN THIS APPEAL IS WHETHER THE REASSESSMENT PROCEEDINGS U/S. 148 OF THE I.T. ACT ARE ILLEGAL AND WITHOUT JURISDICTION IN THE ABSENCE OF ANY TANGIB LE EVIDENCE OR MATERIAL IN RESPECT OF ANY UNDISCLOSED INCOME AND RECORDING OF REQUISITE SATISFACTION IN RESPECT OF ANY SUCH UNDISCLOSED INCOME OR NOT. AFTER HEARING BOTH THE PARTIES ON THE ISSUE IN DISPUTE AS WELL AS AFTER GOING THROUGH THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONGWITH ORDER DATED 21.7.2011 PASSED BY THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SIGNATURE HOTELS P. LTD. VS. INCOME TAX OFFICER [2011] 338 ITR 0051 WHEREIN THE HON BLE HIGH COURT HAS HELD AS UNDER: - HELD, ALL OWING THE PETITION, THAT THE REASSESSMENT PROCEEDING WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING THE FINANCIAL YEAR 2002 - 03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING ITA NO S . 4444 & 4445/DEL/2014 8 BUT AN ACCOMMODATION ENTRY AND THE ASSESEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND D ID NOT INDICATE ESCAPEMENT OF INCOME. FURTHER, THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAID - UP CAPITAL OF RS. 90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER, 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LLIABLE TO BE QUASHED. 1 1 . IN VIEW OF ABOVE, I AM OF THE CONSIDERED VIEW THAT ABOVE ISSUE IS EXACTLY THE SIMILAR TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE AFORESAID DECISION OF THE HON BLE HIGH COURT OF DELHI DELIVERED IN HOTEL SIGNATURES LTD. (SU PRA) . HENCE, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, I DECIDE THE LEGAL ISSUE ITA NO S . 4444 & 4445/DEL/2014 9 IN DISPUTE IN FAVO U R OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QUASH THE REASSESSMENT PROCEEDINGS. THE OTHER ISSUES ARE NOT DEALT WITH AS THE SAME HAVE BECOME A CADEMIC IN NATURE. 1 2 . IN THE RESULT, BOTH THE ASSESSEE S APPEAL NO. 4444 & 4445/DEL/2014 STANDS ALLOWED. ORDER PRONOUNCED IN THE O PEN C OURT ON 2 4 / 9 /20 1 5 . S D / - [ H.S. SIDHU ] JUDICIAL MEMBER DATE 2 4 / 9 /201 5 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES