ITO, New Delhi V. M/s Viniyas Finance & Investment Pvt. Ltd., New Delhi

ITA 4652/DEL/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 53182 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 25-10-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 09-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Assessee Lawyers: PRATAP GUPTA
• Keywords: Reopening of assessment; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 147; 148; 139; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ DELHI BENCH H DELHI ] BEFORE SHRI A. D. JAIN, JM AND SHRI K. D. RANJAN, AM I. T. APPEAL NO. 4652 (DEL) OF 2009. ASSESSMENT YEAR : 2002-03. THE INCOME-TAX OFFICER, M/S. VINI YAS FINANCE & INVESTMENT PVT. LTD., W A R D : 17 (3), VS. 810ARUNACHAL BHAWAN, BARAKHAMBA ROAD, N E W D E L H I. CONNAUGHT PLACE, N E W D E L H I P A N / G I R NO. AAA CV 1597 A. A N D C. O. NO. 29 (DEL) OF 2010. [ IN I. T. APPEAL NO. 4652 (DEL) OF 2009 ]. ASSESSMENT YEAR : 2002-03. M/S. VINIYAS FINANCE & INVESTMENT PVT. LTD., T HE INCOME-TAX OFFICER, 810ARUNACHAL BHAWAN, BARAKHAMBA ROAD, VS . W A R D : 17 (3), CONNAUGHT PLACE, N E W D E L H I N E W D E L H I. P A N / G I R NO. AAA CV 1597 A. ( APPELLANTS ) ( RESPONDENTS ) ASSESSEE BY : SHRI PRATAP GUPTA, C. A.; DEPARTMENT BY : DR. B. R. R. KUMAR, SR. D. R.; O R D E R. PER K. D. RANJAN, AM : THE APPEAL BY THE REVENUE AND THE CROSS OBJECTION BY THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 ARISE OUT OF THE ORDER OF THE LD. CIT (APPEALS)XIX, NEW DELHI. THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF, FOR THE S AKE OF CONVENIENCE, BY THIS CONSOLIDATED ORDER. 2 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE READS AS FOLLOWS:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN DELETING AN ADDITION OF RS.77,00,000/- IGN ORING THE FACT THAT THE ASSESSEE HAS NOT DECLARED ANY CAPITAL / LOSS ON THE SALE TRA NSACTION STATED TO BE THE SALE OF INVESTMENT. 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE CROSS OBJECTION READ AS FOLLOWS :- 1. LD. CIT (APPEALS) IS NOT JUSTIFIED IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ACTION OF ASSESSING OFFICER IN INITIATION OF PROCEEDINGS UNDER SECTION 147 OF THE I. T. ACT, IN VIEW OF PROV ISO OF SECTION 147 OF THE I. T. ACT UNDER THE CIRCUMSTANCES WHEN ORIGINAL ASSESSMENT WA S COMPLETED UNDER SECTION 143(3) OF THE I. T. ACT AND PROCEEDINGS UNDER SECTI ON 147 WAS INITIATED AFTER THE FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR; 2. LD. CIT (APPEALS) IS NOT JUSTIFIED IN LAW AND FACTS AND CIRCUMSTANCES OF THE CASE IN CONFIRMING THE PROCEEDINGS INITIATED UNDER SECTION 147 OF THE I. T. ACT WITHOUT COMPLYING WITH THE PROVISIONS OF SECTION 14 7 TO 151 OF I. T. ACT UNDER THE CIRCUMSTANCES WHEN NOTICE UNDER SECTION 148 IS ISSU ED AFTER 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. 4. WE FIRST TAKE UP THE CROSS OBJECTION FILED BY TH E ASSESSEE. THE ONLY ISSUE FOR CONSIDERATION RELATES TO REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT]. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ORIGINAL ASSESSMENT UNDER SECTION 143(3) WAS MADE ON 22/12/2 004. THE ASSESSING OFFICER RECEIVED INFORMATION FROM DIT [INVESTIGATION-I] NEW DELHI, V IDE LETTER DATED 5/02/2007 THAT THE ASSESSEE COMPANY HAD RECEIVED A SUM OF RS.77,00,000/- FROM V ARIOUS COMPANIES. THE ASSESSING OFFICER ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGA TION WING IN REASONS STATED THAT THE ENTRIES ARE IN THE NATURE OF ACCOMMODATION ENTRIES AND IN R EALITY IT WAS ASSESSEES OWN UNACCOUNTED MONEY WHICH HAD BEEN SHOWN IN THE BOOKS OF ACCOUNTS AS A RECEIPT FROM SEVERAL COMPANIES. THE ASSESSING OFFICER AFTER OBTAINING THE APPROVAL FROM THE LD. CIT ISSUED NOTICE UNDER SECTION 148 OF THE ACT. 4.1 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS PLEADED BY THE ASSESSEE THAT IN REASONS RECORDED THE ASSESSING OFFICER HAD NOT RECO RDED SATISFACTION AS REQUIRED BY PROVISO TO 3 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. SECTION 147 READ WITH SECTION 148(2) THAT THE INCOM E CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THEREFORE, THE CONDI TION PRECEDENT NECESSARY FOR INVOKING JURISDICTION UNDER SECTION 147 WAS MISSING AND THE ISSUANCE OF NOTICE WAS WHOLLY WITHOUT JURISDICTION. THE ASSESSEE PLACED RELIANCE ON SEVE RAL DECISIONS. THE ASSESSING OFFICER, HOWEVER, REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROU ND THAT PRIMA FACIE IT WAS A CASE OF ESCAPEMENT OF INCOME. 5. ON APPEAL IT WAS SUBMITTED THAT THERE WAS NO WHI SPER OF A WORD IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT THAT THE ASSESSEE HAD F AILED TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT AT THE TIME OF O RIGINAL ASSESSMENT PROCEEDINGS. THE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER O N 5/02/2007 MUCH BEFORE THE END OF FOUR YEARS. HOWEVER, THE AO INITIATED PROCEEDINGS ON 25 /06/2007. THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT AND, THEREFORE, THE NOTICE ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT Y EAR IS BARRED BY LIMITATION. THEREFORE, THE REASSESSMENT PROCEEDINGS SO COMPLETED SHOULD BE ANN ULLED. THE LD. CIT (APPEALS), HOWEVER, OBSERVED THAT THERE WAS NO MERIT IN THE ARGUMENTS O F THE LD. AR OF THE ASSESSEE AND THE CASE LAWS CITED WERE NOT APPLICABLE TO THE FACTS OF THE CASE. THERE WAS INFORMATION WITH REGARD TO ESCAPEMENT OF INCOME IN ACCOMMODATION ENTRIES. AFT ER RECORDING PROPER REASONS THE ASSESSMENT WAS REOPENED. AT THE TIME OF REOPENING THE ASSESSI NG OFFICER IS REQUIRED TO FORM A REASONABLE BELIEF THAT THERE WAS CONCEALMENT OF INCOME. THE A SSESSING OFFICER NEED NOT PROVE THAT THERE WAS ESCAPEMENT OF INCOME AT THAT POINT OF TIME. THE AD EQUACY OR SUFFICIENCY OF REASONS COULD NOT BE GONE INTO AT THE TIME OF REOPENING OF ASSESSMENT. THE LD. CIT (APPEALS) RELYING ON VARIOUS DECISIONS HELD THAT THERE WAS A SPECIFIC INFORMATIO N WITH THE DEPARTMENT THAT ENTITIES/COMPANIES WHICH WERE MENTIONED IN THE REASONS RECORDED FOR RE OPENING WERE INVOLVED IN ACCOMMODATION ENTRIES. THESE FACTS CAME TO THE NOTICE OF THE ASS ESSING OFFICER AFTER COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT FOR THE FIRST TIME. THE LD. CIT (APPEALS), THEREFORE, UPHELD THE REOPENING OF ASSESSMENT. 4 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. 6.1 BEFORE US THE LD. AR OF THE ASSESSEE SUBMITTED THAT ORIGINAL ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS MADE ON 22/12/2004. NOTICE U NDER SECTION 148 WAS SERVED ON THE ASSESSEE ON 30 TH JULY, 2007. THEREFORE, THE NOTICE UNDER SECTION 1 48 WAS SERVED ON THE ASSESSEE AFTER EXPIRY OF FOUR YEARS. HENCE ASSESSEES CASE FALLS UNDER PROVISO TO SECTION 147 OF THE ACT. FOR INITIATION OF PROCEEDINGS UNDER PROVISO TO SECTION 147, THE ASSESSING OFFICER IN THE REASONS SHOULD HAVE RECORDED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. NO SU CH REASONING/SATISFACTION HAD BEEN RECORDED AND, THEREFORE, REOPENING OF ASSESSMENT IS BAD IN L AW. HE PLACED RELIANCE ON THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASES OF WEL INTER TRADE P. LTD. & ANOTHER [FORMERLY WEL INTER TRADE LTD.] VS. ITO 308 ITR 22 (DEL.) & HA RYANA ACRYLIC MANUFACTURING COMPANY VS. CIT & ANOTHER 308 ITR 38 (DEL). 6.2 ON THE OTHER HAND, THE LD. SR. DR SUBMITTED THA T THERE WAS SPECIFIC INFORMATION RECEIVED BY THE AO FROM DIT [INV.] THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE ACCOMMODATION ENTRIES. THEREFORE, THE ISSUE IS COVERED BY THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF AGR INVESTMENT LTD. VS. ADDL. CIT [2011] 333 ITR 146 (DEL.). HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF DALMIA PVT. LTD. VS. CIT IN WRIT PETITION [CIVIL] NO. 6205 OF 2010 DATED 26 TH SEPTEMBER, 2011. IN VIEW OF THE DECISIONS OF HONBLE DELHI HIGH COURT, THE LD. SR. DR SUBMITTED THAT THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF HARYANA ACRYLIC MANUFACTURING COMPANY VS. CIT & ANOTHER (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. 7. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE FACT THAT THE NOTICE UNDER SECTION 148 OF THE ACT HAS BEEN ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF ASSESSMENT YEA R IN WHICH INCOME WAS FIRST ASSESSABLE. THEREFORE, THE ASSESSEES CASE IS COVERED BY PROVIS O TO SECTION 147 OF THE ACT. IN THE REASONS RECORDED BY THE ASSESSING OFFICER ON THE BASIS OF S PECIFIC INFORMATION RECEIVED FROM DIT [INVESTIGATION], NEW DELHI, THERE IS NO WHISPER OF A WORD THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. HONBLE DELHI 5 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. HIGH COURT IN THE CASE OF WEL INTER TRADE P. LTD. & ANOTHER VS. ITO (SUPRA) HAS HELD THAT WHERE PROVISIONS OF SECTION 147 ARE BEING INVOKED AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER IN ADDITION TO HAVING REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, M UST ALSO STATE AS A FACT THAT SUCH ESCAPEMENT OF ASSESSMENT HAS BEEN OCCASIONED BY EITHER THE ASS ESSEE FAILING TO MAKE A RETURN UNDER SECTION 139(1) ETC., OR BY REASON OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR. IN THIS CASE THERE WAS NO ISSUE FOR MAKING THE RETURN UNDER SECTION 139 OF TH E ACT. THE ISSUE INVOLVED WAS IN RELATION TO SECOND PORTION OF THE PROVISO, WHICH RELATES TO FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSME NT. IN SO FAR AS THIS PRE-CONDITION WAS CONCERNED, THERE WAS NOT A WHISPER OF IT IN THE REA SONS RECORDED BY THE ASSESSING OFFICER. HONBLE DELHI HIGH COURT REFERRED TO THE DECISION O F HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DULI CHAND SINGHANIA VS. ACIT 269 ITR 1 92 (P & H). IN THIS DECISION THE HIGH COURT FACED WITH THE SIMILAR SITUATION. THE COURT NOTED THAT THERE WAS NOT EVEN A WHISPER OF ALLEGATION THAT THE ESCAPEMENT OF INCOME HAD OCCURR ED BY THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. THE COURT OBSERVED THAT IN THE ABSENCE OF THIS FINDING, WHICH IS THE SINE QUA NON FOR ASSUMING JURISDICTION UNDER SECTION 147 OF THE ACT IN A CASE FALLING UNDE R THE PROVISO TO SECTION 147, MADE THE ACTION OF THE ASSESSING OFFICER WHOLLY WITHOUT JURISDICTION. HONBLE DELHI HIGH COURT AGREED WITH THE OBSERVATIONS OF THE HONBLE PUNJAB & HARYANA HIGH C OURT AND HELD THAT IN THE ABSENCE OF ANY SUCH ALLEGATION THAT ESCAPEMENT OF INCOME OCCURRED BY REASON OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT, THE INVOCATION OF SECTION 147 AND ISSUANCE OF NOTICE UNDER SECTION 14 8 AND SUBSEQUENT COMPLETION OF ASSESSMENT WAS WITHOUT JURISDICTION. 8. IN THE CASE OF HARYANA ACRYLIC MANUFACTURING COM PANY VS. CIT (SUPRA) THE REASONS RECORDED DID NOT INDICATE THE FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR ASS ESSMENT YEAR 1998-99. WHILE IN THE REASONS SUPPLIED TO THE PETITIONER THERE WAS NO MENTION OF ALLEGATION THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS, IN THE REASONS SHOWN IN THE SAID FORM 6 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. TO THE COUNTER AFFIDAVIT THERE WAS A SPECIFIC ALLEG ATION THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS RELATING TO ACCOMMODATION ENTRIES RAISED FROM THE COMPANIES TO THE EXTENT OF RS. 5 LAKHS. IN VIEW OF THESE FACTS HONBLE DELHI HIGH COURT HAS HELD THAT ONE OF THE CONDITIONS PRECEDENT FOR R EMOVING THE BAR AGAINST TAKING ACTION AFTER THE SAID FOUR YEARS PERIOD REMAINED UNFULFILLED. CONSE QUENTLY, THE NOTICE UNDER SECTION 148 BASED ON THE RECORDED REASONS SUPPLIED TO THE PETITIONER, AS WELL AS THE CONSEQUENT ORDER WERE WITHOUT JURISDICTION AS NO ACTION UNDER SECTION 147 OF THE ACT COULD BE TAKEN BEYOND THE FOUR YEAR PERIOD. 9. IN THE CASE OF DALMIA PVT. LTD. (SUPRA) THE ITO HAS RECORDED IN THE REASONS THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THEREFORE, THE FACTS OF THE PRESENT CA SE ARE DISTINGUISHABLE FROM THE FACTS OF THE CASE OF DALMIA PVT. LTD. (SUPRA). IN THE CASE OF AGR IN VESTMENTS LTD. VS. ADDL. CIT (SUPRA) THE ASSESSMENT WAS REOPENED AFTER EXPIRY OF PERIOD OF F OUR YEARS ON SPECIFIC INFORMATION AND AFTER APPLICATION OF MIND. HONBLE DELHI HIGH COURT UPHE LD THE REOPENING OF ASSESSMENT ON THE GROUND THAT THERE WAS DUE APPLICATION OF MIND BY TH E ASSESSING OFFICER. WE ALSO FIND THAT IN THIS CASE THERE WAS NO DISCUSSION ABOUT RECODING OF SATI SFACTION IN THE REASONS RECORDED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THOUGH DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF AGR INVESTMENTS LTD. VS. ADDL. CIT (SUPRA) HAS BEEN RENDERED IN 2011 AND DECISIONS IN WEL INTER TRADE P. LTD. & ANOTHER VS. ITO (SUPRA) & HARYANA ACRYLIC MANUFACTURING COMPANY VS. CIT (SUPRA) IN 2008 BUT THE ISSUE RELATING TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT WAS NOT DELIBERATED. THEREFORE, THE DEC ISION OF HONBLE DELHI HIGH COURT IN THE CASE OF AGR INVESTMENTS LTD. (SUPRA) IS DISTINGUISHABLE ON FACTS. 10.1 IN THE CASE BEFORE US IN THE REASONS THE ASSES SING OFFICER HAS NOT RECORDED SATISFACTION THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. THEREFORE, THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECISIONS OF HONBLE DELHI HIGH COURT IN THE CASE OF WEL INTER T RADE P. LTD. VS. ITO (SUPRA) AND HARYANA ACRYLIC MANUFACTURING CO. VS. CIT (SUPRA). WE, THE REFORE, HOLD THAT REOPENING OF ASSESSMENT IN 7 I. T. A. NO. 4652 (DEL) OF 2009 A N D C. O. NO. 29 (DEL) OF 2010. THE ABSENCE OF REASONS RECORDED THAT THERE WAS FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT, IS BAD IN LAW AND DESERVES TO BE QUASHED. WE ORDER ACCORDINGLY. 10.2 SINCE WE HAVE ANNULLED THE ASSESSMENT, THE GRO UND OF APPEAL RAISED IN REVENUES APPEAL BECOMES INFRUCTUOUS AND IS DISMISSED, AS SUCH. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED AND THE APPEAL FILED BY THE REVENUE IS DISMISSED, AS INFRUCTUOUS. THE ORDER PRONOUNCED IN THE OPEN COURT ON: 18 TH NOVEMBER, 2011 . SD/- SD/- [ A. D. JAIN ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH NOVEMBER, 2011 . *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANTS. 2. RESPONDENTS. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.