Sri Madan Mohan Pradhan, Bhubaneswar V. ITO, Ward-2(1), Bhubaneswar

ITA 491/CTK/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2247 (ITAT-CUTTACK)
• Duration Of Justice: 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-09-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P K MISHRA
• Keywords: Reopening of assessment; Accommodation entries; Reason to believe; Reassessment proceedings; Borrowed satisfaction
• Section: 143(3); 68; 148

Judgement Text

P A G E 1 | 8 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 491 /CTK/201 7 ASSESSMENT YEAR : 20 08 - 2009 MADAN MOHAN PRADHAN, M/S. MAA GOURI ENTERPRISES, PLOT NO.565, NEAR POONAMA GATE, BHUBANESWAR. VS. ITO, WARD 2(1), BHUBANESWAR. PAN/GIR NO. AFZPPO 0846 H (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRI SU BH ENDU DATTA , DR DATE OF HEARING : 04 /0 9 / 2018 DATE OF PRONOUNCEMENT : 07 /0 9 / 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 2 5.11.2016 FOR THE ASSESSMENT YEAR 2008 - 09. 2. GROUND NOS.1 TO 3 OF APPEAL READ AS UNDER: 1. FOR THAT, THE IMPUGNED ORDER OF REASSESSMENT SO PASSED BY THE LEARNED A.O. U/S. 147/143(3) OF THE ACT IS WITHOUT JURISDICTION AND WITHOUT THE AUTHORITY OF LAW, AS SUCH THE SAME IS LIABLE TO BE QUASHED IN THE INTEREST OF JUSTICE. 2. FOR THAT, THE IMPUGNED REASSESSMENT PROCEEDING IS BARRED BY LIMITATION, AS SUCH THE SAME IS NOT SUSTAINABLE IN ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 2 | 8 THE EYE OF LAW, HENCE IS LIABLE TO BE QUASHED IN THE INTEREST OF JUSTICE. 3. FOR THAT, SINCE THERE WAS NO NEW MATERIAL FOR INITIATION OF REASSESSMENT PROCEEDING AND IS BARRED BY LIMITATION, THE LEARNED C.I.T.(A) SHOULD HAVE QUASHED THE ORDER OF REASSESSMENT INSTEAD OF CONFIRMING THE REASSESSMENT ORDER WHICH IS WITHOUT JURISDICTION AND WITHOU T THE AUTHORITY OF LAW. 2. AT THE OUTSET, LD A.R. OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE FILED ORIGINAL RETURN OF INCOME ON 30.9.2008 DISCLOSING INCOME OF RS.2,95,980/ - . THE SAME WAS PROCESSED U/S.143(1) OF THE ACT. THEREAFTER, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 OF THE ACT ON 17.3.20 15 FOR REOPENING OF THE ASSESSMENT BY RECORDING THE FOLLOWING REASONS: THE ASSESSEE HAS DEPOSITED A TUNE OF RS. RS.20,00,000/ - BY CASH IN THE ACCOUNT MAINTAINED AT CANARA BANK, BHUBANESWAR ON DALE 07.1 1. 2007, AND ISSUED SAME AMOUNT OF CHEQUE ON THE SAME DAY ON WHICH THE CASH IS DEPOSITED TO M/S - PAN PRATISTAN. IN THIS REGARD, THE ASSESSEE WERE GIVEN OPPORTUNITY BY THE ITO , INVESTIGATION - 1, BHUBANESWAR, TO EXPLAIN THE SOURCE OF MONEY AND THE NATURE OF TRANSACTION WITH M/S PAN PRATISTAN. HOWEVER, THEY COUL D NOT BE ABLE TO EXPLAIN THE SOURCE AND THE NATURE 'OF THE TRANSACTION. THEREFORE, IT IS REASON TO BELIEVE THAT THE ASSESSEE HAS ESCAPED ASSESSMENT U/S - 127 OF THE I T ACT.1961. LETTER ISSUED TO A DDL. CIT BHUBANESWAR SEEKING APPROVAL U/S - 151 OF I. T.ACT. 19 61, TO REOPEN THE CASE OF THE ASSESSEE . 3. HE SUBMITTED THAT THE REOPENING OF ASSESSMENT IS BAD IN LAW AS THE REASONS RECORDED BY THE ASSESSING OFFICER ARE SOLELY BASED ON THE INFORMATION RECEIVED FROM THE ITO , INVESTIGATION - 1, BHUBANESWAR WITHOUT ANY INDEPENDENT EXERCISE OF MENTAL PROCESS AND THE SAME CANNOT BE CONSTRUED AS REASONS TO BELIEVE AND THE ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 3 | 8 CONSEQUENT PROCEEDINGS OF REOPENING ARE BAD IN LAW. FOR THIS, HE RELIED ON THE DECISION OF HONBLE DELHI HIGH CO URT IN THE CASE OF PR. CIT VS. G&G PHARMA INDIA LTD., IN ITA 545/2015 ORDER DATED 8.10.2015 . 4. ON THE OTHER HAND, LD D.R. SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 5 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERI ALS AVAILABLE ON RECORD. WE FIND ON A PERUSAL OF ABOVE RECORDED REASONS THAT IN THE INSTANT CASE, REOPENING HAS BEEN MADE BY THE ASSESSING OFFICER BY RECORDING REASONS WHICH HAVE BASED ON THE INFORMATION RECEIVED FROM THE ITO, INVESTIGATION - 1, BHUBANESWAR WITHOUT INDEPENDENTLY APPLYING HIS MIND TO THE MATERIALS RECEIVED BY HIM. 6. FROM THE RECORDED REASONS, IT COULD NOT BE DECIPHERED HOW AND WHY THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE ASSESSEE COULD NOT EXPLAIN THE NATURE AND SOURCE OF DEPOSIT OF RS.20,00,000/ - IN HIS BANK ACCO UNT ON 7.11.2007. FURTHER, IT IS NOT CLEAR FROM THE RECORDED REASONS WHETHER THE ABOVE CONCLUSION WAS OF THE ASSESSING OFFICER OF HIS OWN AFTER APPLYING MIND TO THE EXPLANATION GIVEN BY THE ASSESSEE DURING THE PROCEEDINGS BEFORE ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 4 | 8 ITO, INVESTIGATION - 1, BHUB ANESWAR OR THE SAME WAS MERELY THE OPINION OF THE ITO, INVESTIGATION - 1, BHUBANESWAR . 7. MOREOVER, THE ASSESSING OFFICER NOWHERE RECORDED THAT IT IS HIS OWN BELIEF THAT INCOME HAS ESCAPED ASSESSMENT IN THE INSTANT CASE. THUS, WE FIND FORCE IN THE SUBMISSIO N OF THE ASSESSEE THE REASONS WERE RECORDED ON BORROWED SATISFACTION ONLY AND NOT BECAUSE OF OWN SATISFACTION OF THE ASSESSING OFFICER AFTER INDEPENDENT APPLICATION OF OWN MIND TO ANY RELEVANT MATERIAL WHICH WAS BEFORE HIM. IT IS A SETTLED POSITION OF LAW THAT RECORDED REASONS ALONE CAN BE LOOKED INTO FOR DETERMINING THE VALIDITY OF ASSUMPTION OF JURISDICTION FOR REASSESSMENT . FURTHER, IT IS ALSO A SETTLED POSITION OF LAW THAT REOPENING CAN BE MADE ONLY ON OWN BELIEF OF THE ASSESSING OFFICER INITIATING T HE REASSESSMENT PROCEEDINGS AND REASSESSMENT PROCEEDINGS CAN NNOT BE INITIATED ON THE BASIS OF BORROWED SATISFACTION. OUR ABOVE VIEW FINDS SUPPORT FROM THE DECISION OF DELHI BENCH OF THE TRIBUNAL IN THE CASE OF METRO DECORATIVE PVT LTD. VS ITO IN ITA NO. - 450/DEL/2014 (ASSESSMENT YEAR: 2004 - 05) ORDER DATED 24.10.2017 , WHEREIN, IT WAS HELD AS UNDER: 6. WE HAVE CAREFULLY GONE THROUGH THE RECORD, THE DOCUMENTS AND DECISIONS RELIED UPON BY EITHER SIDE. IN SO FAR AS THE CHALLENGE OF THE ASSESSEE AS TO THE LEGALITY AND VALIDITY OF THE REOPENING IS CONCERNED, ASSESSEE IS PLACING RELIANCE ON THE DECISIONS REPORTED IN G&G PHARMA INDIA LTD. (DEL. HIGH COURT) (SUPRA), N.C. CABLES ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 5 | 8 LTD . (SUPRA) AND MEENAKSHI OVERSEAS (P) LTD. (SUPRA). HE ALSO PLACED RELIANCE ON THE DECISIONS REPORTED IN SIGNATURE HOTELS (P) LTD. V. ITO 338 ITR 51 (DEL), SARTHAK SECURITIES CO. (P) LTD. V. ITO (2010) 195 TAXMAN 262 (DEL), CIT V. KAMDHENU STEELS & ALLOYS LTD. (2014) 361 ITR 220 (DELHI). AS COULD BE SEEN FROM THESE DECISIONS, IT IS CONS ISTENTLY HELD THAT THE REOPENING BASED ON THE INFORMATION FURNISHED BY THE DIRECTORATE OF INVESTIGATION AND THE ASSESSING OFFICER WITHOUT MAKING ANY FURTHER INVESTIGATION ON HIS OWN, RECORDING THE REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT ARE BAD. IN FACT IN PR. CIT V. M/S. N.C. CABLES LTD. (SUPRA) ABOVE VIDE PARAGRAPH NO. 10 THE HONBLE HIGH COURT EXTRACTED THE REASONS WHICH ARE AS FOLLOWS : 10. AS FAR AS THE FIRST ISSUE WITH RESPECT TO THE APPROVAL GRANTED TO REOPEN THE ASSESSMENT UNDER SECTION 147/148 OF THE ACT IS CONCERNED, THE RELEVANT NOTING IS AS FOLLOWS : REASONS FOR ISSUING NOTICE UNDER SECTION 148 OF THE ACT IN THE CASE OF M/S. N. C. CABLES LIMITED, FOR THE ASSESSMENT YEAR 2001 - 02 - REG. INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATI ON WING OF THE INCOME TAX DEPARTMENT THAT THE ABOVE NAMED ASSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ESTABLISHED ENTRY OPERATORS IDENTIFIED BY THE WING DURING THE PERIOD LAUNDERING FOR THE BENEFICIARIES AND ON THE BASIS OF INV ESTIGATION CARRIED OUT AND EVIDENCES COLLECTED, A REPORT HAS BEEN FORWARDED. I HAVE PERUSED THE INFORMATION CONTAINED IN THE REPORT AND THE EVIDENCES GATHERED. THE REPORT PROVIDES DETAILS OF THE MODUS OPARANDI OF THE MONEY LAUNDERING SCAM AND EXPLAIN HOW THE UNACCOUNTED MONEY OF THE BENEFICIARIES ARE PLOUGHED BACK IN ITS BOOKS OF ACCOUNT IN THE FORM OF BOGUS SHARE CAPITAL/CAPITAL GAINS ETC. AFTER ROUTING THE SAME THROUGH THE BANK ACCOUNT (S) OF THE ENTRY OPERATORS. ENTRY OPERATORS WERE IDENTIFIED AFTER TH OROUGH INVESTIGATION ON THE BASIS OF DEFINITIVE ANALYSIS OF THEIR IDENTITY, CREDITWORTHINESS AND THE SOURCE OF THE MONEY ULTIMATELY RECEIVED BY THE BENEFICIARIES. THESE ENTRY OPERATORS ARE FOUND TO BE MOSTLY ABSCONDING AFTER THE UNEARTHINQ OF THE MONEY LA UNDERING SCAM LEAVING THE SAID MONEY AT THE DISPOSAL OF THE BENEFICIARIES WITHOUT ANY ASSOCIATED COST OR LIABILITY. IN THE INSTANT CASE, THE ASSESSEE IS FOUND TO BE THE BENEFICIARY OF ACCOMMODATION ENTRY FROM SUCH ENTRY OPERATORS AS PER THE FOLLOWING SPEC IFIC DETAILS OF TRANSACTION: - ENTRY OPERATOR BENEFICIARYS BANK AMOUNT RS. INSTRUMENT NO. BY WHICH ENTRY TAKEN AND DATE ENTRY GIVING BANK ACCOUNT NO. FROM WHICH ENTRY WAS GIVEN ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 6 | 8 MAHESH GARG 800480 30.11.2000 SBP - DG 4507 PERFORMANCE TRADING & INV. 700420 13.11.2000 SBP - DG 4281 CHINTPURNI CREDITS 900540 22.11.2000 SBP - DG 50058 SUBHASH CHANDER SINGHAL 500300 23.11.2000 SBP - DG 4544 KULDEEP TEXTILES P. LTD. 500500 21546 24.03.2001 INNOVATIVE WAZIPUR 239 SWETA STONE P. LTD. 500500 23510 24.03.2001 - DO - 1200259 - CA DIVISION TRADING P. LTD. 500500 33612 24.3.2001 - DO - 225 DURING THE COURSE OF THE PROCEEDINGS UNDER SECTION 148 FOR THE SAME ASSESSMENT YEAR, WHICH WAS DROPPED ON THE TECHNICAL GROUND THAT PROPER SANCTION WAS NOT OBTAINED, IT WAS NOTICED THAT THERE ARE OTHER RECEIPTS ALSO FROM THE IDENTIFIED ENTRY OPERATORS. INFORMATION ABOUT THOSE ENTRIES WAS NOT AVAILABLE IN THE DATA RECEIVED FROM THE INVESTIGATION WING. NEVERTHELESS THEY ALSO FALL WITHIN THE AMBIT OF SECTION 68 OF THE ACT . THE ASSESSEE HAS RECEIVED UNEXPLAINED SUMS FROM THE ENTRY OPERATORS AS PER THE ABOVE DETAILS AS PER INFORMATION AVAILABLE WITH THE UNDERSIGNED. AS EXPLAINED ABOVE THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS WITH THE PERSONS FOUND TO BE ENTRY OPERATORS CANNOT BE ESTABLISHED. I THEREFORE HAVE REASONS TO BELIEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR ABOVE ASSESSMENT YEAR THE INCOME CHARGEABLE TO TA X TO THE EXTENT OF ACCOMMODATION ENTRY MENTIONED ABOVE, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF S.147 OF THE ACT. SINCE FOUR YEARS HAS BEEN EXPIRED FROM THE END OF THE RELEVANT YEAR, AND ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS MADE IN THE CASE OF THE ASSESSEE FOR THE SAID A ~ THE REASONS RECORDED ABOVE FOR THE PURPOSE OF REOPENING OF ASSESSMENT IS PUT UP FOR KIND SATISFACTION OF THE CIT, DELHI T1, NEW DELHI IN TERMS OF THE PROVISO TO SECTION 151 OF THE ACT. ` SD (ITO) WARD 13(1). THE ACIT, RANGE 13, NEW DELHI FOR KIND APPROVAL OF CIT - V, NEW DELHI CIT - V, DELHI : ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 7 | 8 APPROVED SD 7. IN THE CASE ON HAND ALSO THE CONTENTION OF THE REVENUE IS THAT THE ASSESSEE ISSUED CASH AND RECEIVED CHEQUES FROM ONE SH. TARUN GOYAL, AN ENTRY OPERATOR . IT IS ONLY ON THE BASIS OF INFORMATION FURNISHED BY THE DIRECTORATE OF INVESTIGATION UNIT ASSESSING OFFICER FOUND THE SATISFACTION THAT THE INCOME OF RS. 20,40,000 HAD ESCAPED THE ASSESSMENT DUE TO THE REASON OF FAILURE ON THE PART OF THE ASSESSEE TO PRO VE NOT ONLY THE IDENTITY OF SHARE APPLICANTS BUT ALSO THE CAPACITY OF SUCH APPLICANTS AND THE GENUINENESS OF THE TRANSACTION. THE HONBLE JURISDICTIONAL HIGH COURT IN SARTHAK SECURITIES (P) LTD. V. ITO (2010) 195 TAXMAN 262 (DEL), SIGNATURE HOTELS (P) LTD. V. ITO 338 ITR 51 (DEL), CIT V. SFIL STOCK BROKING LTD. (2010) 325 ITR 285 (DEL), PR. CIT V. G&G PHARMA INDIA LTD. (ITA NO. 545/D/2015) (DELHI HIGH COURT), ITO V. N.C. CABLES LTD. (DELHI ITAT) - JUDGMENT, DATE 22 - 10 - 2014 AND PR. CIT V. MEENAKSHI OVERSEAS (P ) LTD. (2017) 395 ITR 677 HELD THAT THE REOPENING OF THE ASSESSMENT WITHOUT THE ASSESSING OFFICER INDEPENDENTLY UNDERTAKING THE EXERCISE OF EXAMINATION OF FACTS IS BAD UNDER LAW. 8. THE JURISDICTION DELHI HIGH COURT IN THE CASE OF PR. CIT V. MEENAKSHI OVERSEAS (P) LTD. (2017) 395 ITR 677 (DEL - HC) HAS HELD THAT REOPENING UNDER SECTION 147/148 WAS NOT JUSTIFIED WHERE REASONS WERE RECORDED MERELY ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION USING AND WITHOUT INDEPENDENT APPLICATION OF MIND BY TH E ASSESSING OFFICER. THE HONBLE COURT HELD THAT IT WAS INDEED A BORROWED SATISFACTION AND REOPENING WAS NOT JUSTIFIED. 12. IN THE CIRCUMSTANCES SURROUNDING THIS CASE, IN VIEW OF THE DECISIONS REFERRED TO ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE DECISIONS REPORTED IN SARTHAK SECURITIES (P) LTD. (SUPRA), SIGNATURE HOTELS (SUPRA), KAMDHENU STEELS & ALLOYS LTD. (2014) 361 ITR 220 (DELHI) & G&G PHARMA INDIA LTD. (SUPRA) ARE DIRECTLY APPLICABLE TO THE FACTS OF THE CASE TO HOLD THAT THE REASONS RECORDED BY THE ASSESSING OFFICER IN THIS MATTER SOLELY BASING ON THE INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION WITHOUT ANY INDEPENDENT EXERCISE OF MENTAL PROCESS CANNOT BE CONSTRUED AS REASONS TO BELIEVE AND THE CONSEQUENT PROCEEDINGS OF REOPENIN G ARE BAD UNDER LAW . 8 . HENCE, WE QUASH THE REASSESSMENT ORDER PASSED U/S.143(3)/147 OF THE ACT DATED 15.10.2015 AND ALLOW THE GROUNDS OF APPEAL OF THE ASSESSEE. ITA NO.491/CTK/2017 ASSESSMENT YEAR : 2008 - 2009 P A G E 8 | 8 8. SINCE, WE HAVE QUASHED THE REASSESSMENT ORDER DATED 15.10.2015, OTHER GROUNDS OF APPEAL ON MERITS OF THE ADDITIONS HAVE BECOME INFRUCTUOUS AND HENCE , DISMISSED. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 07 /0 9 /2018. S D/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 07 /0 9 /2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER SR. PVT. SECRETARY, ITAT, CUTTACK 1. THE APPELLANT : MADAN MOHAN PRADHAN, M/S. MAA GOURI ENTERPRISES, PLOT NO.565, NEAR POONAMA GATE, BHUBANESWAR. 2. THE RESPONDENT. ITO, WARD 2(1), BHUBANESWAR. 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//