BERLIA PLASTOCHEM P.LTD ( NOW KNOWN AS GLB FINVEST P. LTD), MUMBAI V. DCIT CEN CIR 20, MUMBAI

ITA 4570/MUM/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 3129 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2015
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 07-04-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-06-2013
• Court: TRIBUNAL
• Department Lawyers: VIVEK BATRA
• Assessee Lawyers: HARI S RAHEJA
• Keywords: Unexplained cash credit; Gift; Tangible material; Accommodation entries
• Section: 143(3); 147; 68; 148; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI RAJENDRA , ACCOUNTATN MEMBER AND SHRI SAKTIJIT DEY , JUDICIAL MEMBER . / ITA NO .4570 / MUM./ 2013 ( / ASSESSMENT YEAR : 2004 05 ) BERLIA PLASTOCHEM PVT. LT D. (NOW KNOWN AS GLB FINVEST PVT. LTD.) C/O 504, NAIN KRIPA 118,122, KAZI SYED STREET MUMBAI 400 003 PAN AAACB1844I .. / APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 20, MUMBAI .... / RESPONDENT / ASSESSEE BY : SHRI HARI S. RAHEJA / REVENUE BY : SHRI VIVEK BATRA / DATE OF HEARING 23.09.2015 / DATE OF ORDER 30.09.2015 / ORDER , / PER SAKTIJIT DEY, J.M. THE PRESENT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE IMPUGNED ORDER DATED 30 TH JAN UARY 2013, PASSED BY THE LEARNED BERLIA PLASTOCHEM PVT. LTD. 2 COMMISSIONER (APPEALS) 39, MUMBAI, FOR THE ASSESSMENT YEAR 2004 05. 2. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE EXPRESSED HIS INTENTION TO MAKE HIS SUBMISSIONS ON GROUND NO.2, WHICH RELATES TO THE LEGAL ISSUE OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). CONSIDERING SUCH SUBMISSIONS OF THE ASSESSEE, WE PROPOSE TO DISPOSE OF THIS ISSUE AT THE FIRST INSTANCE. 3. BRIEFLY THE FACTS OF THIS ISSUE ARE, THE ASSESSEE, WHICH I S NOW KNOWN AS GLB FINVEST PVT. LTD. , IS A COMPANY. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 18 TH OCTOBER 2004, DECLARING TOTAL INCOME OF ` 98,233 . T HE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT ON 15 TH FEBRUARY 2005. SUBSEQUENTLY, ON THE BASIS OF INFORMATION FOUND AS A RESULT OF SEARCH CONDUCTED UNDER SECTION 132 OF THE ACT, IN CASE OF GIRIRAJ VIJAYV ARGIA ON 26 TH APRIL 2007, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT OF THE ASSESSEE F OR THE IMPUGNED ASSESSMENT YEAR UNDER SECTION 147 OF THE ACT BY ISSUING A NOTICE UNDER SECTION 148 OF THE ACT ON 30 TH MARCH 2011. AS PER INFORMATION AVAILABLE, IT WAS NOTICED THAT SHRI GIRIRAJ VIJAYVARGIA WAS PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF GIFT, LOANS, SHARE APPLICATION MONEY THOUGH HE WAS NOT HAVING ANY SOURCE. AS STATED BY THE ASSESSING OFFICER, SHRI BERLIA PLASTOCHEM PVT. LTD. 3 GIRIRAJ VIJAYVARGIA , IN A STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, ADMITTED THAT IN ALL THESE TRANSACTIONS, THE ACTUAL AMOUNTS WER E PAID BY RECIPIENTS OF THESE ENTRIES IN CASH ON PAYMENT OF CERTAIN COMMISSION. IT WAS ALSO FOUND THAT THE ASSESSEE COMPANY IS A FAMILY CONCERN OF SHRI VIKAS BARLIA AND SHRI VIKAS BARLIA HAS INTRODUCED UNACCOUNTED MONEY IN THE FORM OF SHARES ALLOTTED TO SH RI GIRIRAJ VIJAYVARGIA , AND HIS FAMILY MEMBERS IN EXCHANGE OF ACCOMMODATION ENTRY GIVEN BY SHRI GIRIRAJ VIJAYVARGIA . HE, THEREFORE, WAS OF THE VIEW THAT THE ACCOMMODATION ENTRIES APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE COMPANY HAVE TO BE TREATED AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. THOUGH, THE ASSESSEE OBJECTED TO SUCH TREATMENT BUT THE ASSESSING OFFICER ULTIMATELY PROCEEDED TO COMPLETE ASSESSMENT UNDER SECTION 143(3) R/W SECTION 147 OF THE ACT, VIDE ORDER DATED 30 TH DECEMBER 20 11, BY ADDING AN AMOUNT OF ` 33,74,000. 4. BEING AGGRIEVED OF SUCH ADDITION MADE IN THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS) CHALLENGING THE ASSESSMENT ORDER BOTH ON THE ISSUE OF RE OPENING OF ASSESSMENT AS WELL AS ON MERITS OF ADDITION MADE. AS IT APPEARS, SINCE ON THE DATE OF HEARING BEFORE THE LEARNED COMMISSIONER (APPEALS), NO ONE APPEARED ON BEHALF OF THE ASSESSEE TO REPRESENT THE CASE, THE LEARNED COMMISSIONER (APPEALS) PROCEEDED TO DISPOSE OF THE BERLIA PLASTOCHEM PVT. LTD. 4 AP PEAL EX PARTE BY CONFIRMING THE ADDITIONS MADE. BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED BEFORE US THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY VIR TUE OF THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003 04, WHEREIN THE TRIBUNAL, WHILE CONSIDERING THE VALIDITY OF RE OPENING OF ASSESSMENT ON THE BASIS OF IDENTICAL REASONS, HELD THAT THE INITIATION OF ACTION UNDER SECTION 147 OF THE ACT IS INVALID AND, ACCORDINGLY, QUASHED THE ASSESSMENT ORDER. IN THIS CONTEXT, THE LEARNED COUNSEL FOR THE ASSESSEE SPECIFICALLY INVITED OUR A TTEN TION TO PARA 12 TO 15 OF THE TRIBUNAL S ORDER DATED 31 ST DECEMBER 2014, PASSED IN ITA NO.1159, 11 60 & 1161/MUM./2013 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, AFTER PERUSING THE ORDER OF THE CO ORDINATE BENCH, DID NOT DISPUTE THE AFORESAID CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE . 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. ON A PERUSAL OF THE REASONS RECORDED FOR RE OPENING OF THE ASSESSMENT IN THE IMPUGNED ASSESSMENT YEAR AS WELL AS THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2003 04, W HICH IS EXTRACTED IN ENTIRETY IN THE ORDER OF THE CO ORDINATE BENCH UNDER REFERENCE, THE REASONS ARE FOUND TO BE IDENTICAL. THE CO ORDINATE BERLIA PLASTOCHEM PVT. LTD. 5 BENCH, AFTER PERUSING THE REASONS RECORDED FOR RE OPENING THE ASSESSMENT, HELD AS UNDER: 12. THESE REASONS ARE NO THING BUT THE SUMMARY OF STATEMENT OF SHRI GIRIRAJ VIJAYVARGIYA DURING THE SEARCH AS WELL AS THE ASSESSMENT PROCEEDINGS OF SHRI GIRIRAJ. IT IS MANIFEST FROM THESE REASONS RECORDED BY THE ASSESSING OFFICER THAT FOUR CONCERNS ARE MENTIONED WHICH ARE CONTROLL ED BY SHRI VIKAS BERLIA IN WHICH THE ALLEGATION OF GIVING ACCOMMODATION ENTRIES IN THE SHAPE OF SHARE APPLICATION MONEY WAS MADE BY SHRI GIRIRAJ IN HIS STATEMENT . IT IS PERTINENT TO NOTE THAT THESE THREE CONCERNS(ASSESSEE BEFORE US) ARE NOT PART OF THE BE NEFICIARIES OF THE ACCOMMODATION ENTRIES AS PER THE ALLEGATION MADE IN THE STATEMENT OF SHRI GIRIRAJ. FURTHER EVEN THOSE FOUR CONCERNS WHO HAVE ALLEGEDLY RECEIVED THE ACCOMMODATION ENTRIES IN THE FORM OF SHARE APPLICATION MONEY ARE NOT THE SHARE APPLICANTS OF THESE ASSESSEES BEFORE US. THEREFORE, AS FAR AS, SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE THE SAME IS NEITHER CAME FROM SHRI GIRIRAJ OR FROM ANY RELATED PARTY OR PERSON OR EVEN FROM THE OTHER GROUP CONCERN OF SHRI VIKAS BERLIA. THE SHARE APPLI CATION WERE RECEIVED BY THE ASSESSEE FROM FOLLOWING CONCERNS: - 1. M/S SHRESTH LEASING AND FINANCE LTD. 2. WATSON SOFTWARE LTD. 3. UPBEAT TRADING PVT. LTD. 13. THERE IS NO ALLEGATION OF THE ASSESSING OFFICER THAT THE SHARE APPLICANTS OF THE ASSESSEE HA VE ANY CONNECTION WITH SHRI GIRIRAJ VIJAYVARGIYA OR WITH SHRI VIKAS BERLIA. ONCE THESE SHARE APPLICANT COMPANIES ARE UNRELATED/ INDEPENDENT PARTIES AND HAVE NO CONNECTION EITHER WITH SHRI GIRIRAJ OR WITH SHRI VIKAS BERLIA THEN THERE WAS NOTHING CAME TO THE POSSESSION OF THE ASSESSING OFFICER TO BELIEVE THAT THE SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE IS BOGUS TRANSACTION AND CONSEQUENTLY THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. FROM THE REASONS RECORDED BY THE ASSESSING OFFICER, THERE I S NO INDICATION ABOUT THE RELATION BETWEEN THE SHARE APPLICATION MONEY AND THE BOGUS ACCOMMODATION ENTRIES GIVEN BY SHRI GIRIRAJ. THEREFORE, THE ASSESSMENTS WERE REOPENED BY THE AO MERELY ON THE BASIS OF ASSUMPTIONS WITHOUT HAVING ANY TANGIBLE MATERIAL OR INFORMATION ON THE BASIS OF WHICH IT COULD BE BELIEVED THAT TRANSACTION OF SHARE APPLICATION MONEY WAS AS BOGUS TRANSACTION. IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (SUPRA), THE HON'BLE SUPREME COURT WHILE CONFIRMING THE JUDGMENT OF FULL BENCH DECI SION OF HONBLE DELHI HIGH COURT HAS HELD THAT THE REASON MUST HAVE A LINK WITH THE FORMATION OF BELIEF BERLIA PLASTOCHEM PVT. LTD. 6 AND THERE MUST BE A TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. SIMILARLY, IN THE CASE OF PRASHANT S . JOSHI (SUPRA), THE HON'BLE HIGH COURT HAS HELD IN PARA 20 AS UNDER: - 18. FOR ALL THESE REASONS, IT IS EVIDENT THAT THERE WAS ABSOLUTELY NO BASIS FOR THE FIRST RESPONDENT TO FORM A BELIEF THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF THE SUBSTANTIVE PROVISIONS OF SECTION 147. EXPLANATION (2) TO SECTION 147 CREATES A DEEMING FICTION OF CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. CLAUSE (B) DEALS WITH A SITUATION 'WHERE A RETURN OF INCOME HAS BEEN FURNISHE D BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN.' FOR THE PURPOSE OF CLAUSE (B) TO EXPLANA TION (2), THE ASSESSING OFFICER MUST NOTICE THAT THE ASSESSEE HAS UNDERSTATED HIS INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. THE TAKING OF SUCH NOTICE MUST BE CONSISTENT WITH THE PROVISIONS OF THE APPLICABLE LAW. TH E ACT OF TAKING NOTICE CANNOT BE AT THE ARBITRARY WHIM OR CAPRICE OF THE ASSESSING OFFICER AND MUST BE BASED ON A REASONABLE FOUNDATION. THE SUFFICIENCY OF THE EVIDENCE OR MATERIAL IS NOT OPEN TO SCRUTINY BY THE COURT BUT THE EXISTENCE OF THE BELIEF IS THE SINE QUA NONFOR A VALID EXERCISE OF POWER. IN THE PRESENT CASE, HAVING REGARD TO THE LAW LAID DOWN BY THE SUPREME COURT IT WAS IMPOSSIBLE FOR ANY PRUDENT PERSON TO FORM A REASONABLE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT. THE REASONS WHICH HAVE BEE N RECORDED COULD NEVER HAVE LED A PRUDENT PERSON TO FORM AN OPINION THAT INCOME HAD ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147. IN THESE CIRCUMSTANCES, THE PETITION SHALL HAVE TO BE ALLOWED BY SETTING ASIDE THE NOTICE UNDER SECTION 148. 14. TH US IT IS CLEAR THAT THOUGH THE SUFFICIENCY OF EVIDENCE OR MATERIAL FOR FORMING THE BELIEF IS NOT OPEN TO SCRUTINY BUT THE EXISTENCE OF BELIEF IS MUST FOR A VALID EXERCISE OF POWER. IF IT IS IMPOSSIBLE FOR ANY PRUDENT PERSON TO FORM A BELIEF ON THE BASIS OF MATERIAL OR EVIDENCE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND REASON WHICH HAVE BEEN RECORDED WOULD NOT LEAD TO A PRUDENT PERSON TO FORM AN OPINION THAT THE INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION BERLIA PLASTOCHEM PVT. LTD. 7 147 THEN THE ACTIO N OF THE ASSESSING OFFICER IN REOPENING THE ASSESSMENT U/S 147/148 IS CONTRARY TO THE POWERS PERMITTED UNDER THE SAID PROVISIONS OF ACT. IN THE CASE IN HAND, THE REASONS RECORDED BY THE ASSESSING OFFICER DO NOT INDICATE EVEN A REMOTE NEXUS BETWEEN THE APPL ICATION MONEY RECEIVED BY THE ASSESSEE WITH THE ALLEGED ACCOMMODATION ENTRIES PROVIDED BY SHRI GIRIRAJ VIJAYVARGIYA OR THE ALLEGED BENEFICIARY OF THE ACCOMMODATION ENTRIES. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE REOPENING IN THESE CASES ARE NOT VALID AND CONSEQUENTLY THE SAME IS QUASHED. THE AFORESAID FINDINGS OF THE CO ORDINATE BENCH APPLY IN LETTER AND SPIRIT TO THE FACTS OF THE PRESENT CASE ALSO . T HEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH CITED SUPRA, WE HOLD THE RE OPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT IN THE IMPUGNED ASSESSMENT YEAR TO BE IN VALID AND ACCORDINGLY, QUASH THE ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER. 7. IN VIEW OF OUR AFORESAID FINDINGS IN GROUND NO.2 , THE OTHER GROUNDS RAISED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS, HENCE, NEED NOT BE ADJUDICATED SEPARATELY. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT O N 30.09.2015 SD/ - RAJENDRA ACCOUNTANT ME MBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 30.09.2015 BERLIA PLASTOCHEM PVT. LTD. 8 / COPY OF THE ORDER FORWARDED TO : (1) / THE ASSESSEE; (2) / THE REVENUE; (3) ( ) / THE CIT(A); (4) / THE CIT, MUMBAI CITY CONCERNED; (5) , , / THE DR, ITAT, MUMBAI; (6) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI