M/s Pankaj Gas Cylinders Ltd., New Delhi V. ACIT, New Delhi

ITA 5273/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7846 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 18-04-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 20-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S NEGI
• Keywords: Question of law; Reasonable cause; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5273/DEL/2013 (ASSESSMENT YEAR : 2002-03) M/S PANKAJ GAS CYLINDERS LTD., VS. ACIT, CIRC LE 14(1), 138, UGF, WORLD TRADE CENTRE, NEW DELHI NEW DELHI (PAN : AAACP0419M) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SATYEN SETHI, ADV. DEPARTMENT BY: SH. R.S. NEGI, SR. DR DATE OF HEARING : 18-04-2016 DATE OF ORDER : 03-05-2016 ORDER PER H.S. SIDHU, JM THE ASSESSEE HAS FILED THE APPEAL AGAINST THE IMP UGNED ORDER DATED 16.7.2013 PASSED BY THE LD. CIT(A)-XVII , NEW DELHI RELEVANT TO ASSESSMENT YEAR 2002-03. 2. THE GROUNDS RAISED BY THE ASSESSEE READS AS UNDE R:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, WHETHER THERE WAS ANY MATERIAL BEFORE T HE ASSESSING AUTHORITY TO FORM AN OPINION THAT INCOME HAD ESCAPED ASSESSMENT IN THE HANDS OF THE APPELLANT, I N VIEW OF ITA NO.5273/DEL./2013 2 THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF M/S. LOVELY EXPORTS PVT. LTD. WHERE THE COURT HAS HELD T HAT IF THE SHARE APPLICATION MONEY IS RECEIVED BY THE ASSESSEE COMPANY FROM ALLEGED BOGUS SHAREHOLDERS, WHOSE NAME WAS GIVEN TO THE AO, THEN THE DEPARTMENT IS FREE TO PRO CEED TO REOPEN THEIR INDIVIDUAL ASSESSMENTS IN ACCORDANCE W ITH LAW. 2. THAT ON THE FACTS AND I THE CIRCUMSTANCES OF THE CASE AND IN LAW, WHETHER THE ASSESSING OFFICER HAD ANY M ATERIAL BEFORE HIM TO HOLD THAT THE APPELLANT'S INCOME HAS ESCAPED ASSESSMENT EVEN THOUGH HE HAD NO KNOWLEDGE AS TO WH AT HAS BEEN STATED AND WHO HAD MADE THE ALLEGED STATEM ENT BEFORE DIRECTORATE OF INVESTIGATION, THAT SHARE CAP ITAL MONEY RECEIVED BY THE APPELLANT RECEIVED THROUGH BANKING CHANNEL, WAS A BOGUS TRANSACTION? 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE ORDER U/S 143(3)/147 PASSED BY THE ASSE SSING AUTHORITY IS A VALID ORDER THOUGH THE SAME AS AGAIN ST THE DIRECTIONS OF ADDL. COMMISSIONER OF INCOME TAX U/S 144 A OF THE INCOME TAX ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, WHETHER THE ASSESSING OFFICER WAS JUSTI FIED IN REJECTING ALL DOCUMENTARY EVIDENCE IN SUPPORT OF TH E SHARE CAPITAL RECEIVED AS AGAINST ORAL ALLEGED STATEMENT MADE BY SOME UNKNOWN PERSON BEFORE THE DIRECTOR OF INVESTIG ATION, WITHOUT MAKING THE STATEMENT AVAILABLE TO THE APPEL LANT FOR REBUTTAL OR WITHOUT GIVING THE OPPORTUNITY TO CROSS EXAMINE THE PERSON MAKING THE STATEMENT? 5. WHETHER (IT (A) WAS LEGALLY JUSTIFIED IN REJECTI NG THE APPEAL EVEN WITHOUT CONSIDERING THE FOLLOWING POINT S AND ITA NO.5273/DEL./2013 3 SUBMISSIONS MADE TO HIM THROUGH WRITTEN SUBMISSIONS DURING THE APPEAL PROCEEDINGS: I) FRESH CONFIRMATION WITH COPIES OF INCOME TAX RE TURNS FOR THE ASSESSMENT YEAR 2002-03 AND ASSESSMENT YEAR 2012-13 WITH PAN DETAILS OF BOTH THE COMPANIES FILED BEFORE HIM II) COPIES OF ROC RETURNS FILED BEFORE HIM. III) LIST OF DIRECTORS OF BOTH THE COMPANIES WITH L ATEST ADDRESSES IV) COPIES OF BALANCE SHEET SHOWING INVESTMENT. 6. WHETHER THE AUTHORITIES BELOW WERE JUSTIFIED IN NOT APPLYING THE RATIO OF DECISION OF HON'BLE SUPREME C OURT IN THE CASE OF M/S. LOVELY EXPORTS PVT. LTD. AND DELHI HIG H COURT CASE IN THE CASE OF DWARKADHISH INVESTMENT PVT. LTD . AND FAIR FINVEST LTD. ON THE FACTS OF THE APPELLANT'S C ASE 7. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, WHETHER THE ASSESSING AUTHORITY HAD ACTED O N HIS OWN BELIEF REGARDING THE ESCAPEMENT OF INCOME OR ON THE BORROWED OPINION OF DIRECTORATE OF INVESTIGATION AB OUT ESCAPEMENT 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED ORIGINAL RETURN OF INCOME ON 30.10.2002 DECLARING INCOME OF RS.72,97,625/-. ASSESSMENT IN THE CASE WAS MADE U/S . 143(3) OF THE I.T. ACT ON 30.12.2004 ON TOTAL INCOME OF RS. 7 3,88,130/-. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTORATE OF INVESTIGATION IT WAS STATED THAT THE ASSESSEES INCOME HAD ESCAPED ASSESSMENT TO THE EXTENT OF RS. 15,00,000/-. ACCORDINGLY, PROCEEDINGS U/S. 147 OF THE ACT WAS IN ITIATED BY THE AO AND TO THIS EFFECT A NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 30.3.2009. THE ASSESSEE VIDE ITS RE PLY DATED 16.4.2009 SUBMITTED THAT RETURN FILED BY IT EARLIER MAY BE TREATED ITA NO.5273/DEL./2013 4 AS RETURN FILED IN COMPLIANCE TO NOTICE U/S. 148 OF THE ACT. STATUTORY NOTICE U/S. 143(2) WAS ISSUED AND SERVED AND IN RESPONSE THERETO ASSESSEES AUTHORIZED REPRESENTATI VE ATTENDED THE ASSESSMENT PROCEEDINGS AND DURING THE ASSESSM ENT PROCEEDINGS AO NOTICED THAT THE ACCOMMODATION ENTRI ES IN THE GARB OF SHARE APPLICATION MONEY. THUS, THE ASSESSE HAS INTRODUCED ITS OWN UNDISCLOSED INCOME IN ITS BOOKS OF ACCOUNTS ROUTING IT THROUGH THE ENTRY PROVIDERS. HENCE, AN A MOUNT OF RS. 15 LACS SHOWN BY THE ASSESSEE AS SHARE APPLICATION MONEY RECEIVED FROM VARIOUS PARTIES WAS TREATED AS ASSESS EES UNDISCLOSED INCOME AN ACCORDINGLY THE SAME WAS ADDE D U/S. 68 OF THE ACT AND COMPLETED THE ASSESSMENT AT RS. 88,8 8,130/- U/S. 147/143(3) OF THE ACT VIDE ORDER DATED 24.12.2009. 4. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEA LED BEFORE THE LD. CIT(A), CHALLENGING THE VALIDITY OF REASSE SSMENT AS WELL AS THE ADDITIONS IN DISPUTE WHO VIDE IMPUGNED ORDER DATED 16.7.2013 HAS DISMISSED THE APPEAL OF THE ASSESSEEE . 5. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSESSE E HAS ONLY ARGUED THE LEGAL GROUND CHALLENGING THE VALIDI TY OF REOPENING U/S. 148 OF THE I.T. ACT BY STATING THAT ACTION OF THE ASSESSING OFFICER IS ILLEGAL, BECAUSE THE SAME IS LACKING TAN GIBLE MATERIAL / REASONABLE CAUSE AND JUSTIFICATION. THE ACTION OF THE REVENUE AUTHORITIES IS IN ABSENCE OF NEXUS BETWEEN ALLEGED INFORMATION AND TENTATIVE INFERENCE; NON APPLICATION OF MIND M UCH LESS ITA NO.5273/DEL./2013 5 INDEPENDENT APPLICATION OF MIND; TOTAL LACK OF CLAR ITY ON NATURE OF TRANSACTION IN REASONS RECORDED. HE FURTHER SUBM ITTED THAT THE PRESENT CASE IS SQUARELY COVERED BY THE HONBLE HI GH COURT DECISION DATED 8.10.2015 PASSED IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA INDIA LTD., WHEREIN THE TRIBUNALS DECISION DATED 9.1.2015 HAS BEEN FOLLOWED. IN THIS BEHALF, HE FILED THE COPY OF THE ORDER DATED 8.10.2015 OF THE HONB LE HIGH COURT OF DELHI IN PR. CIT VS. G&G PHARMA INDIA LTD. THERE FORE, HE REQUESTED THAT BY FOLLOWING THE DECISION IN THE C ASE OF PR. CIT VS. G&G PHARMA INDIA LTD., THE LEGAL GROUND RAISED BY T HE ASSESSEE IN THE PRESENT APPEAL MAY BE ALLOWED. 7. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PA SSED BY THE CIT(A) ON ISSUE OF VALIDITY OF REOPENING AND STATED THAT LD. CIT(A) HAS RIGHTLY UPHELD THE ACTION OF THE AO OF REOPENIN G. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE AUTHORITIES AND THE CASE LAW CITED BY THE ASSESSEE S COUNSEL ON THE ISSUE IN DISPUTE. IN OUR VIEW, IT IS VERY M UCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE IS SUE OF NOTICE TO THE ASSESSEE U/S. 148 OF THE I.T. ACT, 1961 WHIC H IS REPRODUCED HEREUNDER:- ITA NO.5273/DEL./2013 6 F.NO. DCIT CIR.14(1)/148/2009-10/144 OFFICE OF THE ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 14(1), NEW DELHI DATED : MAY 13, 2009 THE PRINCIPAL OFFICER, M/S PANKAJ GAS CYLINDERS LTD., 138, UGF, WORLD TRADE CENTRE BABAR ROAD, NEW DELHI 110 001 SIR, SUB:- NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 F OR THE ASSTT. YEAR 2002-2003 INTIMATION OF REASONS F OR REOPENING THE CASE REGARDING PLEASE REFER TO YOUR LETTER NO. NIL DATED 16 TH APRIL, 2009, ON THE ABOVE MENTIONED SUBJECT. AS REQUESTED, THE REAS ONS FOR ISSUING THE NOTICE U/S. 148 IS FURNISHED AS UNDER:- IN THIS CASE, ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 WAS COMPLETED ON 30.12.2004 AT AN INCOME OF RS . 73,88,130/-. SUBSEQUENTLY, INFORMATION WAS RECEIVED FROM THE DI RECTORATE OF INVESTIGATION WING THAT CERTAIN PERSONS WERE IND ULGED IN PROVIDING ACCOMMODATION ENTRIES/ BOGUS SHARE APPLIC ATION MONEY / BOGUS CAPITAL GAIN. IN THE COURSE OF ENQUIR IES BEFORE THE INVESTIGATION WING THESE PERSONS HAD PROVIDED T HE DETAILS VARIOUS PERSONS TO WHOM SUCH ACCOMMODATION / BOGUS ENTRIES WERE PROVIDED. BASED ON THE ENQUIRED MADE, THE DIRECTORATE OF INVESTIGATION HAS PROVIDED THE DETA ILS OF ITA NO.5273/DEL./2013 7 PERSONS WHO WERE BENEFICIARIES / ENTRY OPERATORS OF SUCH ACCOMMODATION / BOGUS ENTRIES IN DELHI IN THE LAST 5-6 YEARS. THE INVESTIGATION WING ON THE BASIS OF ENQUIRIES CO NDUCTED / INFORMATION COLLECTED HAS SENT THE NAME AND ADDRESS AND BANK ACCOUNT OF THE BENEFICIARY AND THE VALUE OF EN TRY TAKEN FROM DIFFERENT PERSONS GIVING THE ACCOMMODATION ENT RY. THE NAMES OF ENTRY GIVER AND BANK ACCOUNTS THROUGH WHIC H THE ENTRY WAS GIVEN HAS ALSO BEEN INFORMED BY THE INVES TIGATION WING. ONE SUCH BENEFICIARY IS M/S PANKAJ GAS CYLIN DER LTD. AS PER THE REPORT OF THE INV. WING, M/S PANKAJ GAS CYLINDER LTD., HAD RECEIVED ACCOMMODATION ENTRY AMOUNTING T O RS. 15,00,000/-, IN THE FY 2001-02 RELEVANT TO AY 2002 -03 UNDER THE GARB OF SHARE APPLICATION MONEY/ SHARE CA PITAL. IN VIEWS OF THE ABOVE DISCUSSION, I HAVE REASON TO BELIEVE THAT INCOME AT LEAST TO THE EXTENT OF RS. 15,00,000/- FO R THE ASSESSMENT YEAR 2002-03 HAD ESCAPED ASSESSMENT WITH IN THE MEANING OF PROVISIONS OF SECTION 147(C) OF THE I.T. ACT, 1961. TO ASSESS THIS ESCAPED INCOME, PROCEEDINGS U /S. 147 OF THE INCOME TAX ACT, 1961 ARE INITIATED. YOURS FAITHFULLY, SD/- (S.B. SINGH) ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 14(1), NEW DELHI 8.1 AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, WE ARE OF THE VIEW THAT AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN ITA NO.5273/DEL./2013 8 INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEV E THAT INCOME HAS ESCAPED DURING THE YEAR. IN OUR VIEW THE REASON S ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANIC ALLY ISSUED NOTICE U/S. 148 OF THE ACT, ON THE BASIS OF INFORMA TION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INCOME TAX (INVESTIGATION), NEW DELHI. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, WE ARE OF THE CONSIDER ED VIEW THAT THE REOPENING IN THE CASE OF THE ASSESSEE FOR THE ASSTT . YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QUASHED. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENT/DECISION:- PR. CIT VS. G&G PHARMA INDIA LTD. IN ITA NO. 545/2015 DATED 8.10.2015 OF THE DELHI HIGH COURT WHEREIN THE HONBLE COURT HAS ADJUDICATED THE ISSUE AS UNDER:- 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A S INGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WH ICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS ITA NO.5273/DEL./2013 9 INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHET HER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TA LKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT T HOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLE D ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WO ULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FA CT 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 NOVE MBER 2004 AND WAS 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 HA VE SIMPLY CONCLUDED: 'IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSIDERED VI EW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFI CIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCU SSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUS T APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE RE ASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE. ITA NO.5273/DEL./2013 10 13. MR. SAWHNEY TOOK THE COURT THROUGH THE ORDER OF THE CIT(A) TO SHOW HOW THE CIT (A) DISCUSSED THE MATERI ALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COUR T WOULD LIKE TO OBSERVE THAT THIS IS 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 BASIS THAT THE REOPENING OF THE ASSESSMENT WAS VALID, THIS DOES NOT SATISFY THE REQUIREMENT OF LAW THAT PRIOR TO THE REOPENING OF T HE ASSESSMENT, THE AO HAS TO, APPLYING HIS MIND TO THE MATERIALS, CONCLUDE THAT HE HAS REASON TO BELIEVE T HAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. UNLE SS THAT BASIC JURISDICTIONAL REQUIREMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATERIALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCUE AN INHE RENTLY DEFECTIVE REOPENING ORDER FROM INVALIDITY . 14. IN THE CIRCUMSTANCES, THE CONCLUSION REACHED BY THE ITAT CANNOT BE SAID TO BE ERRONEOUS. NO SUBSTANTIAL QUESTION OF LAW ARISES. 15. THE APPEAL IS DISMISSED. 9. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE AFORESAID ISSUE IN DISPUTE IS EXACTLY THE SIMILAR A ND IDENTICAL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQU ARELY COVERED BY THE AFORESAID DECISION OF THE HONBLE HIGH COURT OF DELHI IN THE ITA NO.5273/DEL./2013 11 CASE OF G&G PHARMA (SUPRA). HENCE, RESPECTFULLY FO LLOWING THE ABOVE PRECEDENT IN THE CASE OF PR. CIT-4 VS. G&G PH ARMA INDIA LTD. (SUPRA) WE DECIDE THE LEGAL ISSUE IN DISPUTE I N FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QU ASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE LEGAL ISSUE IN DISPUTE RAISED BY THE ASSESSEE IN ITS APPEAL. SINCE WE HA VE QUASHED THE REASSESSMENT PROCEEDINGS, AS AFORESAID, THE OTHER I SSUES ARE NOT BEING DEALT WITH. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 03-05-2016. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 03-05-2016 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.