NIHAL CHAND RAKYAN, NEW DELHI V. ACIT, CIRCLE- 30(1), NEW DELHI

ITA 4534/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3164 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 10-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Search and seizure; Accommodation entries; Reassessment proceedings
• Section: 143(3); 133(6); 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER ITA NO.4534/DEL/2017 ASSESSMENT YEAR : 2008-09 NIHAL CHAND RAKYAN, N. N. ASSOCIATES, H-32, MASJID MOTH, GREATER KAILASH- III, NEW DELHI. VS. ACIT, CIRCLE- 30(1), NEW DELHI. PAN : AAGPR6198C (APPELLANT) (RESPONDENT) ASSESSEE BY : MS. LALITA KRISHNAMURTHY, CA DEPARTMENT BY : MS. YAMINI, SR.DR DATE OF HEARING : 23-11-2017 DATE OF PRONOUNCEMENT : 12-12-2017 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 15.05.2017 OF CIT(A)- 10, NEW DELHI RELATING TO ASS ESSMENT YEAR 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL. THE CASE WAS REOPENED U/S 148 ON THE BASIS OF INFORMATION RE CEIVED FROM ADDL. CIT, CENTRAL RANGE, SURAT WHEREIN IT HAS BEEN MENTIONED THAT A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT BY THE DGIT (INV.), MUMBA I IN THE CASE OF M/S RAJESNDRA JAIN GROUP, M/S SANJAY CHAUDHARY GROUP AN D M/S DHARMICHAND JAIN GROUP (ENTRY OPERATORS). ON THE BASIS OF THE FINDI NGS OF THE SEARCH OPERATION, A LIST OF BENEFICIARIES OF THE ACCOMMODATION ENTRIES FROM THE ABOVE MENTIONED CONCERNS WAS FORWARDED TO THE ASSESSING OFFICER ALO NG WITH THE SAME 2 ITA NO.4534/DEL/2017 INFORMATION. THE NAME OF M/S N. N. ASSOCIATES M. V AJUBHAI JEWELLES WAS MENTIONED ACCORDING TO WHICH THE ASSESSEE WAS A BEN EFICIARY OF ACCOMMODATION ENTRY OF RS.14,54,400/- ON ACCOUNT OF SALE DURING T HE FINANCIAL YEAR 2007-08. THE SAID ENTRY HAS BEEN RECORDED ON ACCOUNT OF SALE OF JEWELLERY/DIAMOND TO M/S N. N. ASSOCIATES, PROP. NIHAL CHAND RAKYAN BY M /S AADI IMPEX, 406, SARYU JADDA KHADI, MAHENDRAPURA, SURAT, GUJRAT. IN RESPONSE TO NOTICE U/S 148, THE ASSESSEE FILED HIS RETURN OF INCOME. THE ASSES SEE ASKED FOR THE REASONS RECORDED WHICH WAS PROVIDED BY THE ASSESSING OFFICE R. THE ASSESSEE RAISED THE OBJECTION FOR SUCH REOPENING WHICH WAS ALSO DISPOSE D OFF BY THE ASSESSING OFFICER. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUE D NOTICE U/S 133(6) TO AADI IMPEX TO PROVIDE THE CONFIRMATION OF SAID TRANSACTI ONS MADE WITH THE ASSESSEE AND EXPLANATION OF THE NATURE OF TRANSACTION. HOWE VER, NONE ATTENDED ON BEHALF OF THE SAID PARTIES I.E. M/S AADI IMPEX. THE ASSES SING OFFICER BROUGHT THE ABOVE TO THE NOTICE OF THE ASSESSEE WHO SUBMITTED T HAT THE PURCHASE HAS BEEN MADE FROM KNOWN SOURCES AND PAID BY ACCOUNT PAYEES CHEQUES. SUBSEQUENTLY, THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN THE NATURE OF TRANSACTION. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE AND IN ABSENCE OF PROVIDING ANY CONFIRMATION FROM M/S AADI IMPEX, THE ASSESSING OFFICER MADE ADDITION OF RS.14,54,400/- TO THE TOTAL INCOME OF T HE ASSESSEE. 3. BEFORE THE LD. CIT(A), THE ASSESSEE APART FROM C HALLENGING THE ADDITION ON MERIT ALSO CHALLENGED THE VALIDITY OF THE REOPENING . HOWEVER, LD. CIT(A) 3 ITA NO.4534/DEL/2017 DISMISSED THE APPEAL FILED BY THE ASSESSEE BOTH ON MERIT AS WELL AS ON LEGAL GROUND. 4. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BOTH ON MERIT AS WELL AS ON VAL IDITY OF THE REASSESSMENT PROCEEDINGS. 5. LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMI TTED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE PRECEDIN G ASSESSMENT YEAR I.E. A.Y. 2007-08 AND SUBMITTED THAT UNDER IDENTICAL CIRCUMST ANCES, THE TRIBUNAL HAS HELD THAT THE REOPENING OF THE ASSESSMENT ON THE BASIS O F INFORMATION RECEIVED FROM THE INVESTIGATION WING IS INVALID AND SUBSEQUENT AS SESSMENT FRAMED WAS VOID AB INITIO . SHE ALSO RELIED ON THE FOLLOWING DECISIONS WHERE IN IT HAS BEEN HELD THAT REOPENING ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING WITHOUT INDEPENDENT APPLICATION OF MIND BY THE ASSE SSING OFFICER IS INVALID :- A. M/S LAVITRA TECHNOLOGIES PVT. LTD. VS. ITO (ITA NO.2912/DEL/2013 ORDER DATED 14.07.2016). B. G & G PHARMA INDIA LIMITED VS. ITO (ITA NO.3149/ DEL/2013 ORDER DATED 09.1.2015). C. PR.CIT VS. G & G PHARMA INDIA LTD. (ITA 545/2015 ORDER DATED 08.10.2015). D. DCIT VS. M/S VINEY AUTO PVT. LTD. (ITA NO.291/DE L/2010 ORDER DATED 14.03.2016). E. M/S MKM FINSEC (P) LTD. VS. ITO (ITA NO.5203/DEL /2013 ORDER DATED 08.08.2016). 4 ITA NO.4534/DEL/2017 6. LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE O RDER OF THE LD. CIT(A). SHE SUBMITTED THAT IT HAS BEEN CLEARLY ESTABLISHED THAT THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES ON ACCOUNT OF BOGUS PURCHASE WHICH WAS DETECTED DURING THE COURSE OF SEARCH IN THE CASE OF M/S RAJE SNDRA JAIN GROUP, M/S DHARMICHAND JAIN GROUP. NO CONFIRMATION FROM M/S A ADI IMPEX EXPLAINING THAT THE ASSESSEE HAS NOT RECEIVED THE ACCOMMODATIO N ENTRIES/BOGUS PURCHASE WAS FILED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS. THEREFORE, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ADDITION M ADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD. CIT(A) HAS TO BE UPHELD. SHE ALSO RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F RAYMOND WOOLLEN MILLS LTD. VS. ITO REPORTED IN 236 ITR 34 TO THE PROPOSIT ION THAT IN DETERMINING WHETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS WA S VALID OR NOT IT HAS ONLY TO BE SEEN WHETHER THERE WAS PRIMA-FACIE SOME MATERIAL ON THE BASIS OF WHICH DEPARTMENT COULD REOPEN THE CASE. THE SUFFIC IENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THIS ST AGE. SHE ACCORDINGLY SUBMITTED THAT THE GROUNDS RAISED BY THE ASSESSEE BE DISMISSE D. 7. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO CONSIDERED THE VARIOUS DECIS IONS CITED BEFORE ME. A PERUSAL OF THE REASONS RECORDED FOR REOPENING THE A SSESSMENT, COPY OF WHICH IS 5 ITA NO.4534/DEL/2017 PLACED AT PAGE 15 OF THE PAPER BOOK, SHOWS THAT THE FOLLOWING REASONS WERE RECORDED FOR REOPENING OF THE ASSESSMENT :- REASONS FOR REOPENING THE CASE U/S 147/148 OF THE I .T. ACT, 1961 FOR A.Y. 2008-09. THE ADDL. COMMISSIONER OF INCOME TAX, CENTRAL RANGE , SURAT VIDE LETTER NO.SRT/ADDL.CIT/CR/RAJENDRA JAIN, DHARMICHAND JAIN, SANJAY CHOUDHARY GR./2014-15/506 DATED 13/03/2015 HAS INFORMED THAT A SEARCH AND SEIZURE OPERATION U/S 132 OF THE I.T. ACT 1961 IN THE CASE OF SH. RAJ ENDRA JAIN, SH. SANJAY CHOUDHARY AND SH. DHARMICHAND JAIN GROUP WAS CARRIED OUT ON 0 3/10/2013 BY THE DGIT (INV.), MUMBAI CHARGE. DURING INVESTIGATION IT WAS FOUND T HAT SH. RAJENDRA JAIN, SH. SANJAY CHOUDHARY AND SH. DHARMICHAND JAIN WERE SOME OF THE ENTRY PROVIDERS OPERATING IN MUMBAI, INDULGING IN PROVIDING ACCOMMO DATION ENTRIES IN THE NATURE OF BOGUS SALES AND UNSECURED LOANS. DURING INVESTIGAT ION IT WAS ALSO REVEALED THAT BESIDES ABOVE LENDER GROUP, SOME OTHER ENTRY PROVID ERS WERE ALSO ENGAGED IN PROVIDING ACCOMMODATION ENTRY. AS PER INFORMATION PROVIDED, M/S N.N. ASSOCIATION, THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF SUCH B OGUS ACCOMMODATION ENTRIES. THE COMPLETE DETAILS OF THE TRANSACTIONS BETWEEN THE EN TRY PROVIDER AND THE ASSESSEE ARE AS UNDER :- PAN OF BILL PROVIDER NAME OF BILL PROVIDER A.Y. NATURE OF TRANSACTION BENEFICIARY PAN BENEFICIARY NAME TOTAL VALUE OF THE TRANSACTION RS. REAL VALUE OF TRANSACTION RS. (IF AVAILABLE) AHOPJ3837B AADI 2008-09 SALE UNDER PROCESS N.N. ASSOCIATION 14,54,400 14,54,400 FROM ABOVE IT IS CLEAR THAT THIS ISSUE COULD NOT BE EXAMINED FOR THE ASSESSMENT YEAR UNDER CONSIDERATION. THEREFORE, I HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE TO THE EXTENT OF RS.14,54,400/- FOR A.Y. 2 008-09 HAS ESCAPED ASSESSMENT IN TERMS OF SECTION 147 OF THE I.T. ACT 1961. SD/- (G. SATHISH) ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 30(1), NEW DELHI 8. I FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TR IBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR A ND THE TRIBUNAL VIDE ITA NO.1914/DEL/2016 ORDER DATED 08.11.2016 HELD THE RE ASSESSMENT PROCEEDINGS AS NOT VALID BY OBSERVING AS UNDER :- 6. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IN T HE PRESENT CASE IT IS NOTICED FROM THE REASONS RECORDED FOR REOPENING THE ASSESSMENT P LACED ON PAGE NO.12 OF THE ASSESSEES PAPER BOOK THAT THE REOPENING WAS DONE O NLY ON THE BASIS OF THE 6 ITA NO.4534/DEL/2017 INFORMATION RECEIVED FROM THE ADDITIONAL DIRECTOR O F INCOME TAX (INVESTIGATION) UNIT VI NEW DELHI VIDE LETTER DATED 24.3.2014 WHO SUGGES TED THAT NOTICE U/S 148 WAS REQUIRED TO BE ISSUED TO BRING TO TAX THE UNDISCLOS ED INCOME IN RESPECT OF ACCOMMODATION ENTRIES TAKEN BY DIFFERENT PERSONS/CO MPANIES AS PER THE LIST ENCLOSED WITH THE SAID LETTER. 7. ON A SIMILAR ISSUE, THE HONBLE JURISDICTION HIG H COURT IN THE CASE OF PR. COMMISSIONER OF INCOME TAX 4 VS. G & G PHARMA IND IA LTD. (SUPRA) VIDE ORDER DATED 8.10.2015 HELD AS UNDER :- 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. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES , WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, T HE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGA TION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS I NTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABO VE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDE RSTANDING WHETHER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABO UT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DA TE ON WHICH THE SO CALLED 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 ACCOMMODATION ENTRIES. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SU FFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREINBEFO RE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASS ESSMENT 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 BELIE VE THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MA TERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHE RENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY. 8. IN THE PRESENT CASE, THE REOPENING WAS DONE ONLY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING. THEREFORE, IN VI EW OF THE RATIO LAID DOWN BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE AFORESAID REFERRED TO CASE, THE REOPENING WAS NOT VALID AND THE SUBSEQUENT ASSESSMENT FRAMED WAS VOID AB INITIO. ACCORDINGLY, THE SAME IS SET-ASIDE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. 7 ITA NO.4534/DEL/2017 9. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE AR E IDENTICAL TO THE FACTS OF THE CASE DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO MY NOTICE AGAINST THE SAID DECISION, I HOLD THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER IS INVALID. THEREFORE, SUBSEQUENT ASSESSMENT FRAMED IS VOID AB INITIO . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED ON THE ISSU E OF VALIDITY OF THE REASSESSMENT PROCEEDINGS. SINCE THE ASSESSEE SUCCE EDS ON THIS LEGAL GROUND, I REFRAIN MYSELF FROM ADJUDICATING THE ISSUE ON MERIT . 10. RESULTANTLY, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH DAY OF DECEMBER, 2017. SD/- (R. K. PANDA) ACCOUNTANT MEMBER DATED: 12-12-2017. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI