Remarkable Estates Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 4515/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 4096 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 11-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 30-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Assessee Lawyers: V S RASTOGI
• Keywords: Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F NEW DELHI BEFORE SH. H.S. SIDHU , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 4515 /DEL/ 2013 ASSESSMENT YEAR: 2004 - 05 M/S. REMARKABLE ESTATES PVT. LTD. , M - 11, MIDDLE CIRCLE, CONNAUGHT CIRCUS, NEW DELHI VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 23, NEW DELHI GIR/PAN : (APPELLANT) (RESPONDENT) APPELLANT BY SH. V.S. RASTOGI, AR RESPONDENT BY SH. F.R. MEENA, SR.DR DATE OF HEARING 11.08.2016 DATE OF PRONOUNCEMENT 16.08.2016 ORDER PER O.P. KANT , A. M. : THE PRESENT APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - XXXIII, NEW DELHI, DATED 27.05.2013 , RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX (APPEALS) - XXXIII, NEW DELHI ERRED IN REJECTING APPELLANT'S CONTENTION THAT ASSESSMENT ORDER MADE BY ASSESSING OFFICER WAS BAD IN LAW AND VOID AB - INITIO. 2. THAT WITHOUT PREJUDICE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX(APPEALS) - XXXIII, NEW DELHI ERRED IN UPHOLDING THE 2 ITA NO. 4515/DEL/2013 AY: 2004 - 05 ASSUMPTION OF JURISDICTION U/S 147 BY THE ASSESSING OFFICER AND IN MAKING THE ASSESSMENTS IN PURSUANCE THERE OF. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX(APPEALS) - XXXIII, NEW DELHI ERRED IN CONFIRMING THE ADDITION OF RS.20LACS MADE BY ASSESSING OFFICER U/S 68 OF THE INCOME TAX ACT,1961. 3.1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME TAX(APPEALS) - XXXIII, NEW DELHI ERRED IN CONFIRMING THE ADDITION OF AMOUNT OF RS.20LACS RECEIVED BY THE APPELLANT TOWARDS SALE OF INVESTMENT IN SHARE AS INCOME U/S 68 OF THE INCOME TAX ACT ,1961 DESPITE SEVERAL JUDICIAL PRONOUNCEMENTS TO THE EFFECT THAT SECTION 68 WAS NOT APPLICABLE IN SUCH A SITUATION. 4. THE APPELLANT CRAVES PERMISSION TO ADD, AMEND, ALTER OR VARY ALL OR ANY GROUNDS OF APPEAL ON OR BEFORE THE DATE OF HEARING OF THE APPEAL. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME AT RS. 90,250/ - ON 26.10.2004. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE - 19, NEW DELHI IN MARCH, 2011, THE ASSESSING OFFICER INITIA TED PROCEEDINGS UNDER SECTION 147 OF THE INCOME - TAX ACT, 1961 (FOR SHORT THE ACT ) AND BEING NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE REGARDING ENTRIES OF RS. 20 LACS FROM THE FEDERAL BANK ACCOUNT OF M/S CHANDER PRABHU FINANCIAL SERVICES, ADDED THE SAID AMOUNT IN THE TOTAL INCOME OF THE ASSESSEE . BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAD RAISED OBJECTION AGAINST THE VALIDITY OF INITIATION OF REOPENING PROCEEDING BUT COULD NOT SUCCEED. IT RAISED THIS ISSUE AGAIN BEFORE THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) BUT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ALSO 3 ITA NO. 4515/DEL/2013 AY: 2004 - 05 DECIDED THE ISSUE AGAINST THE ASSESSEE, HENCE, THE PRESENT APPEAL BEFORE THE ITAT. 3 . AT THE OUTSET OF HEARING, LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN THE CASE , REASSESSMENT PROCEEDINGS WERE INITIATED UNDER SECTION 147 OF THE ACT BY WAY OF ISSUING NOTICE UNDER 148 OF THE ACT ON 30 TH MARCH, 2011 AFTER RECORDING REASONS FOR REOPENING OF THE ASSESSMEN T. THE REASSESSMENT PROCEEDING WAS CHAL LENGED BEFORE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), HOWEVER, COULD NOT SUCCEED , AND THUS , THE ASSESSEE HAS CHALLENGE D THE REASSESSMENT PROCEEDINGS BEFORE THE TRIBUNAL. 4 . IN SUPPORT OF GROUND NO. 2 OF THE PRESENT APPEAL, LEARNED AUTHORIZED REP RESENTATIVE SUBMITTED THAT IN THE CASE OF OTHER SISTER CONCERN S OF THE ASSESSEE COMPANY ALSO, IDENTICAL REASONS WERE RECORDED FOR REOPENING OF THE ASSESSMENT BUT THE TRIBUNAL IN THOSE CASES HELD THE INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE ACT AS INVALID. THE L EARNED AUTHORIZED REPRESENTATIVE GIVEN A LIST OF SUCH CASES, WHEREIN THE INITIATION OF PROCEEDINGS UNDER SECTION 147 WAS HELD INVALID, AS UNDER: I. M/S. SUNAINA TOWERS PVT. LTD., ITA NO. 4514/DEL/2013, DATED 11.03.2016 FOR AY : 2004 - 05 II. M/S. ANU PAM TOWERS PVT. LTD., ITA NO. 4516/DEL/2013, DATED 17.05.2016 FOR AY: 2004 - 06 III. M/S. VASUNDRA PROMOTERS PVT. LTD., ITA NO. 4014/DEL/2014 , DATED 28.04.2016 FOR AY : 2004 - 05 IV. M/S. WESTLAND DEVELOPERS PVT. LTD., ITA NO. 4984/DEL/2013, DATED 28.06.2016 FOR AY: 20 04 - 05 5 . ACCORDINGLY, HE REQUESTED THAT THE REASSESSMENT PROCEEDINGS IN THE INSTANT CASE ALSO BE HELD AS INVALID DUE TO NON - APPLICATION OF MIND BY THE ASSESSING OFFICER. 4 ITA NO. 4515/DEL/2013 AY: 2004 - 05 6 . ON THE OTHER HAND, LEARNED SR. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LOWER AUTHORITIES, HOWEVER, COULD NOT CONTROVERT THAT THE REASONS RECORDED IN THE INSTANT CASE ARE IDENTICAL TO THE REASONS RECORDED IN THE CASES BEFORE THE TRIBUNAL (SUPRA) RELIED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE. 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, INCLUDING THE ORDER S OF THE TRIBUNAL CITED BY THE ASSESSEE IN THE CASE OF SISTER CONCERN S OF THE ASSESSEE COMPANY. WE FIND THAT IN THE CASE OF M/S. SUNAINA TOWERS PVT. LTD. (SUPRA), REAS ONS RECORDED HAVE BEEN REPRODUCED IN PARA 7 OF THE ORDER, WHICH ARE AS UNDER: 7. NOW, WE HAVE TO EXAMINE THE REASONS RECORDED IN THE PRESENT CASE BEFORE US IN VIEW OF THE RATIOS LAID DOWN IN THE ABOVE CITED DECISION OF THE HON'BLE JURISDICTIONAL HIGH CO URT RECENTLY PRONOUNCED ON 08.10.2015 TO VERIFY THE CONTENTION OF THE LEARNED AR THAT WHILE FORMING THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON THE BASIS OF INFORMATION RECEIVED BY IT, THE ASSESSING OFFICER HAS NOT APPLIED HER MIND. THE REASONS RECORDED IN THE PRESENT CASE BY THE ASSESSING OFFICER FOR THE PURPOSE ARE BEING REPRODUCED HEREUNDER: 2. AS PER THE INFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE - 19, NEW DELHI, A SURVEY OPERATION WAS CONDUCTED IN THE S.K. GUPTA GROUP O F CASES ON 20.11.2007, ARUNACHAL BUILDING, 19 - BARAKHAMBA ROAD, NEW DELHI - 1100 01 AND 1007 - 1008, ARUNACHAL BUILDING, 19 - BARAKHAMBA ROAD, NEW DELHI - 1100 01. DURING THE COURSE OF SURVEY PROCEEDINGS SEVERAL LEDGER ACCOUNTS MAINTAINED IN TALLY FOR THE F.Y. 2003 - 04, BESIDES VARIOUS OTHER DOCUMENTS/ACCOUNTS WERE FOUND. FURTHER, DURING THE COURSE OF SURVEY & ASSESSMENT PROCEEDINGS. SH. S.K. GUPTA ADMITTED THAT HE HAD BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS/BENEFICIARIES 5 ITA NO. 4515/DEL/2013 AY: 2004 - 05 THROUGH A LARGE NO. OF SHELL COMPANIES/CONCERNS FLOATED BY & EFFECTIVELY CONTROLLED BY HIM. HE OPERATED A NUMBER OF ACCOUNTS IN THE SAME BANK/BRANCH OR IN DIFFERENT BRANCHES, IN THE NAMES OF THESE SHELL COMPANIES/CONCERNS. AFTER RECEIVING CASH FROM THE BENEFICIARIES, SH. S.K. GUPTA US ED TO DEPOSIT THE SAME IN THE BANK ACCOUNT OF ONE OF THE THESE SHELL COMPANIES/CONCERNS. THEN HE USED TO ROUTE THE ENTRIES THROUGH TWO TO FOUR ACCOUNTS OF THESE SHELL COMPANIES/CONCERNS BEFORE ULTIMATELY TRANSFERRING SAME TO THE BANK ACCOUNTS OF TIRE BENEF ICIARIES TO GIVE THE COLOR OF GENUINENESS TO THESE TRANSACTIONS. 3. FURTHER, AS PER THE INFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE - 19, NEW DELHI, M/S. SUNAINA TOWERS PVT. LTD. HAS RECEIVED AMOUNT OF RS.25,00,000 VIDE CHEQUE NO. 778926 DATED 10.10. 2003, FROM THE FEDERAL BANK ACCOUNT OF M/S. CHANDERPRABHU FINANCIAL SERVICES/CHANDERPRABHU FINANCE & SECURITIES LTD., A SHELL COMPANY/CONCERN FLOATED/CONTROLLED BY SHRI S.K. GUPTA. 4. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT AMOUNT/INCOME OF R S.25,00,000 HAS ESCAPED ASSESSMENT FOR THE A.Y. 2004 - 05 FOR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE INCOME - TAX ACT, 1961. 5. ISSUE NOTICE U/S. 148 OF THE INCOME - TAX ACT, 1961. 8 . THE TRIBUNAL IN PARA 8 OF THE ORDER HELD THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS OWN MIND WHILE RECORDING THE REA SONS. THE RELEVANT PARA OF THE ORDER OF THE TRIBUNAL IS AS UNDER: 8. THE VERY PERUSAL OF THE REASONS, IT IS APPARENT THAT THESE WERE BASED ON THE INFORMATION RECEIVED FROM ACIT, CENTRAL CIRCLE - 19, NEW DELHI AFTER NARRATION OF WHICH, THE ASSESSING OFFICER HAS SIMPLY RECORDED THAT SHE HAS REASON 6 ITA NO. 4515/DEL/2013 AY: 2004 - 05 TO BELIEVE THAT AMOUNT/INC OME OF RS.25 LACS HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2004 - 05 FOR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT WITHIN THE MEANING OF SEC. 147 OF THE INCOME - TAX ACT, 1961. NOTICE UNDER SEC. 148 OF THE ACT HAS ACCORDINGLY BEEN ISSUED BY THE ASSESSING OFFICER. IN THE ABOVE CITED DECISIONS OF THE HON'BLE HIGH COURT, IT HAS BEEN OBSERVED BY THE HON'BLE HIGH COURT THAT SUCH TYPE OF CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AS SESSING OFFICER HAD APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIAL WERE. HON'BLE HIGH COURT HAS OBSERVED FURTHER THAT ONCE THE DATE ON WHICH THE SO - CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE ASSESSING OFFICER, 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. IT WAS HELD THAT WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE ASSESSING OFFICER TO HAVE SIMPLY CONCLUDED, IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES. THE BASIC REQUIREMENT IS THAT THE ASSESSING OFFICER MUST APPLY HIS MIND TO THE MATERIAL IN ORDER TO FORM REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. SUCH BASIC REQUIREMENT WHILE RECORDING THE REASONS FOR INITIATION OF PROCEEDING S UNDER SEC. 147 OF THE ACT IS MISSING IN THE PRESENT CASE BEFORE US. AS IT IS EVIDENT IN THE REASONS RECORDED, REPRODUCED HEREINABOVE, THE ASSESSING OFFICER HAS SIMPLY RECORDED THE INFORMATION RECEIVED FROM HER COLLEAGUE AND WITHOUT MAKING ANY EXERCISE OF HER MIND ON THOSE INFORMATION TO FORM HER OWN REASONS TO BELIEVE FOR THE ESCAPED ASSESSMENT OF RS. 25 LACS, HAS ISSUED NOTICE UNDER SEC. 148 OF THE ACT. WE, RESPECTFULLY FOLLOWING THE RATIOS LAID DOWN BY THE HON BLE JURISDICTIONAL HIGH COURT OF DELHI IN T HE CASE OF CIT VS. G&G PHARMA INDIA LTD. (SUPRA), HOLD THAT THE REASONS TO BELIEVE RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CASE TO INITIATE THE PROCEEDINGS UNDER SEC. 147 OF THE ACT WITHOUT APPLICATION OF HER OWN MIND ON THE INFORMATION RECEIVED W ERE NOT AS PER THE REQUIREMENT OF 7 ITA NO. 4515/DEL/2013 AY: 2004 - 05 THE PROVISIONS OF THE LAW LAID DOWN UNDER SEC. 147 OF THE ACT, HENCE, THE INITIATION OF THE PROCEEDINGS WAS NOT VALID AND NOR THE ASSESSMENT MADE IN FURTHERANCE TO THE SAID INITIATION OF THE PROCEEDINGS. THE ASSESSMENT FRA MED UNDER SEC. 147 READ WITH 143(3) OF THE ACT IN THE PRESENT CASE IN QUESTION IS THUS HELD AS VOID - AB - INITIO. THE GROUND NOS. 1 AND 2 ARE ACCORDINGLY ALLOWED. 9 . WHEN WE ADVERT TO THE FACTS OF THE PRESENT CASE, WE FIND THAT THE COPY OF THE REASONS RECO RDED HAS BEEN REPRODUCED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN PARA 3.3 OF THE IMPUGNED ORDER, WHICH WE ARE REPRODUCING FOR THE PURPOSE OF CLARITY AS UNDER: 2. AS PER THE INFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE - 19, NEW DELHI, A SURVEY OPERATION WAS CONDUCTED IN THE S.K. GUPTA GROUP OF CASES ON 20.11.2007, ARUNACHAL BUILDING, 19 - BARAKHAMBA ROAD, NEW DELHI - 1100 01 AND 1007 - 1008, ARUNACHAL BUILDING, 19 - BARAKHAMBA ROAD, NEW DELHI - 1100 01. DURING THE COURSE OF SURVEY PROCEEDINGS SEVERAL LEDGER ACCOUNTS MAINTAINED IN TALLY FOR THE F.Y. 2003 - 04, BESIDES VARIOUS OTHER DOCUMENTS/ACCOUNTS WERE FOUND. FURTHER, DURING THE COURSE OF SURVEY & ASSESSMENT PROCEEDINGS. SH. S.K. GUPTA ADMITTED THAT HE HAD BEEN PROVIDING ACCOMMODATION ENTRIES T O VARIOUS PERSONS/BENEFICIARIES THROUGH A LARGE NO. OF SHELL COMPANIES/CONCERNS FLOATED BY & EFFECTIVELY CONTROLLED BY HIM. HE OPERATED A NUMBER OF ACCOUNTS IN THE SAME BANK/BRANCH OR IN DIFFERENT BRANCHES, IN THE NAMES OF THESE SHELL COMPANIES/CONCERNS. A FTER RECEIVING CASH FROM THE BENEFICIARIES, SH. S.K. GUPTA USED TO DEPOSIT THE SAME IN THE BANK ACCOUNT OF ONE OF THE THESE SHELL COMPANIES/CONCERNS. THEN HE USED TO ROUTE THE ENTRIES THROUGH TWO TO FOUR ACCOUNTS OF THESE SHELL COMPANIES/CONCERNS BEFORE UL TIMATELY TRANSFERRING SAME TO THE BANK ACCOUNTS OF TIRE BENEFICIARIES TO GIVE THE COLOR OF GENUINENESS TO THESE TRANSACTIONS. 8 ITA NO. 4515/DEL/2013 AY: 2004 - 05 3. FURTHER, AS PER THE INFORMATION RECEIVED FROM THE ACIT, CENTRAL CIRCLE - 19, NEW DELHI, M/S. SUNAINA TOWERS PVT. LTD. HAS RECEIV ED AMOUNT OF RS.25,00,000 VIDE CHEQUE NO. 778926 DATED 10.10.2003, FROM THE FEDERAL BANK ACCOUNT OF M/S. CHANDERPRABHU FINANCIAL SERVICES/CHANDERPRABHU FINANCE & SECURITIES LTD., A SHELL COMPANY/CONCERN FLOATED/CONTROLLED BY SHRI S.K. GUPTA. 4. IN VIEW O F THE ABOVE, I HAVE REASON TO BELIEVE THAT AMOUNT/INCOME OF RS.25,00,000 HAS ESCAPED ASSESSMENT FOR THE A.Y. 2004 - 05 FOR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT WITHIN THE MEANING OF S ECTION 147 OF THE INCOME - TAX ACT, 1961. 5. ISSUE NOTICE U/S. 148 OF THE INCOME - TAX ACT, 1961. 10 . ON COMPARISON OF THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE INSTANT CASE AND IN THE CASE OF M/S. SUNAINA TOWERS PVT. LTD . (SUPRA) , WE FIND THAT THE REASONS RECORDED ARE IDENTICAL, EXCEPT THE CHANGE OF AMOUNT INVOLVED . THUS, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF M/S. SUNAINA TOWERS PVT. LTD . (SUPRA), WE HOLD THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND WHILE RECO RDING THE REASONS TO BELIEVE THAT THE INCOME ESCAPED THE ASSESSMENT AND HE HAS ACTED ONLY IN A MECHANICAL MANNER. THUS, THE REASSESSMENT PROCEEDINGS COMPLETED UNDER SECTION 147 R.W.S. 143 OF THE ACT IN THE PRESENT CASE IN QUESTION ARE THUS, HELD AS VOID - AB - INITIO. 1 1 . SINCE WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, THE OTHER GROUNDS HAVE BEEN RENDERED INFRUCTUOUS. 9 ITA NO. 4515/DEL/2013 AY: 2004 - 05 1 2 . IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. THE DECISION IS PRONOUNCED IN THE OPEN COURT ON 1 6 T H AUGUST , 2016 . S D / - S D / - ( H.S. SIDHU ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 6 T H AUGUST , 2016 . LAPTOP / - COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI