Sonarika Hotels Pvt. Ltd., Delhi V. ITO, New Delhi

ITA 5757/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6950 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 04-07-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 28-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIMA BARNWAL
• Keywords: Reopening of assessment; Gift; Principle of natural justice; Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5757/DEL/2013 ASSESSMENT YEAR: 2008-09 SONARIKA HOTELS PVT. LTD., VS. ITO, WARD-9(1) C/O SH. KAPIL GOEL, ADVOCATE, NEW DELHI A-1/25, SECTOR-15, ROHINI, DELHI 110 085 (PAN: AAKCS1233L) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. KAPIL GOEL, ADVOCATE REVENUE BY : SMT. ANIMA BARNWAL, SR. DR DATE OF HEARING : 04-07-2016 DATE OF ORDER : 08-07-2016 ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 26.8.2013 OF THE LD. CIT(A)-XII, NEW DELHI PERTAINING TO ASSESSM ENT YEAR 2008-09 AND RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. AO ERRED IN REOPENING THE CASE U/S. 148 OF THE ACT, AS APPARENT FROM CURSORY LOOK TO REASONS RECORDED (DATED 30.6.2011) WITHOUT DESCRIBING THE BASIC ITA NO.5757/DEL/2013 2 ASPECTS OF ALLEGED TRANSACTION (VIZ. DATE, MODE, BA NK THROUGH WHICH TRANSACTED, INSTRUMENT, ITS NATURE, RETURN FILING D ETAILS, ETC.) IN ABSENTIA OF WHICH, WHOLE REOPENING ACTION GETS VITIATED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY AO U /S. 69A OF THE ACT, AMOUNTING TO RS. 50,00,000/- BEING GENUINE LOAN TA KEN FROM M/S TEJASVI INVESTMENT PVT. LTD. RETURNED IN SAME PREVIOUS YEAR , WITHOUT APPRECIATING THAT SAME WAS GENUINELY TAKEN FOR AUCTION BID (FOR HOTEL LAND, ONWARD UTILIZED FOR DRAFT TO DDA) DULY RETURNED WHEN SAID PURPOSE WAS NOT FULFILLED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY THE AO U/S. 69A OF THE ACT, AMOUNTING TO RS. 50,00,000/- BEING LOAN TAKEN FROM M/S TEJASVI INVESTMENT PVT. LTD. RETURNED IN SAME PREVIOUS YEAR , ON MERE BASIS OF INVESTIGATION WING RECOMMENDATION WITHOUT ANY INDEP ENDENT ENQUIRY AND APPLICATION OF MIND. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. CIT(A) ERRED IN UPHOLDING THE ADDITION MADE BY AO U /S. 69A OF THE ACT, AMOUNTING TO RS. 50,00,000/- BEING LOAN TAKEN FROM M/S TEJASVI INVESTMENT PVT. LTD. RETURNED IN SAME PREVIOUS YEAR , IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, WITHOUT FINDING WHAT HAPPENED IN CASE OF LENDER COMPANY. ITA NO.5757/DEL/2013 3 THAT THE APPELLANT CRAVES THE LEAVE TO ADD, MODIFY , RESCIND, SUPPLEMENT OR ALTER ANY OF THE GROUNDS STATED HEREIN ABOVE, EI THER BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 2. ASSESSEE HAS ALSO FILED AN APPLICATION FOR ADMIS SION OF ADDITIONAL GROUNDS OF APPEAL VIDE ITS APPLICATION DATED 27.6.2 016 IN WHICH THE ASSESSEE HAS STATED THAT IN VIEW OF THE SETTLED DECISIONS IN THE CASE OF NTPC 229 ITR 383 (SC), JUTE CORPORATION 187 ITR 688 AND HONBLE GU JARAT HIGH COURT DECISION IN THE CASE OF PV DOSHIS CASE 113 ITR 22 (LEGAL G ROUND CAN BE RAISED FOR FIRST TIME IN COLLATERAL AND SECOND ROUND ALSO). THE LEG AL GROUND CAN BE VERY WELL RAISED FOR FIRST BEFORE THE ITAT WHICH GOES TO THE ROOT OF THE MATTER AND PERTAINS TO THE ASSUMPTION OF JURISDICTION. FOR THE SAKE OF CONVENIENCE, THE LEGAL ADDITIONAL GROUNDS RAISED BY THE ASSESEEE ARE REPRO DUCED AS UNDER:- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE NOTICE ISSUED U/S. 148 IN THIS CASE IS BAD IN LAW, WITHOUT JURISDICTION, AND ALSO THE ASSESSMENT ORDER PASSED ON THE FOUNDATION OF SUCH NOTICE AND ORDER PASSED BY LD. CIT(A), ARE LIABLE TO BE QUASHE D. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE REASONS RECORDED IN PRESENT CASE FOR ASSUMPTION OF JURISDICTION DO NOT SATISFY THE REQUIREMENTS OF LAW AND ARE NOT SUFFICI ENT TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147/148 OF THE ACT AND AS A SEQUEL PRESENT REOPENING ACTION OF AO, ORDER PASSED BY THE AO THEREON, AND IMPUGNED O RDER OF THE LD. CIT(A) ARE LIABLE TO BE QUASHED. ITA NO.5757/DEL/2013 4 3. LD. COUNSEL OF THE ASSESSEE REQUESTED THAT KEEPI NG IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN T HE CASE OF NTPC 229 ITR 383 (SC) (SUPRA), THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE MAY BE ADMITTED AND DECIDED FIRST. 4. ON THE CONTRARY, LD. DR STRONGLY OPPOSED THE ADM ISSION OF ADDITIONAL GROUNDS (LEGAL) RAISED BY THE ASSESSEE. SHE STATED THAT ASSESSEE HAS ALSO RAISED LEGAL GROUNDS ALONGWITH THE FORM NO. 36 AT THE TIME OF FILING OF APPEAL. ASSESSEE HAS ALSO FILED THESE ADDITIONAL GROUNDS BY FILING THE SEPARATE APPLICATION DATED 27.6.2016 WHICH ARE NOT PERMISSIB LE AS PER RULE 11 OF THE ITAT. SHE FURTHER STATED THAT KEEPING IN VIEW OF T HE NTPC RULING THE ADDITIONAL GROUND MAY NOT BE ADMITTED, BECAUSE THESE ARE NOT T HE LEGAL GROUNDS AND THESE ARE FACTUAL GROUNDS. 5. AFTER HEARING BOTH THE PARTIES AS WELL AS PERUSI NG THE ADDITIONAL GROUNDS ALONGWITH THE ORDERS PASSED BY THE REVENUE AUTHORIT IES, WE ARE OF THE CONSIDERED VIEW THAT IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF NTPC LIMITED 229 ITR 383 (SUPR A), THE ADDITIONAL GROUNDS RAISED BY THE ASSESSEE VIDE ITS APPLICATION DATED 2 7.6.2016 ARE PURELY LEGAL GROUNDS AND DO NOT REQUIRE FRESH FACTS WHICH IS TO BE INVESTIGATED AND GOES TO THE ROOT OF THE MATTER. IN THE INTEREST OF JUSTIC E, WE ADMIT THE AFORESAID ADDITIONAL GROUNDS RAISED BY THE ASSESSEE, IN VIEW OF THE CASE LAW OF NTPC LIMITED (SUPRA) AND PROCEED TO DECIDE THE ADDITIONA L GROUNDS FIRST. 6. THE BRIEF FACTS OF THE CASE ARE THAT IN THIS CA SE INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING THAT ASSESSEE HAD RECEI VED AN AMOUNT OF ITA NO.5757/DEL/2013 5 RS. 50,00,000/- DURING THE PREVIOUS YEAR 2007-08 (R ELEVANT TO THE AY 2008-09) IN THE FORM OF CHEQUES/DDS AS ACCOMMODATION ENTRIE S, WHO WERE THOSE ENTITIES WHICH WERE CREATED BY SH. TARUN GOYAL GROUP AND USE D BY THEM IN THE BUSINESS OF ACCOMMODATION ENTRIES. THE STATEMENT OF SH. T ARUN GOYAL WAS RECORDED ON 15.9.2008, BY THE ADDL. DIRECTOR OF INCOME TAX (INV .), NEW DELHI IN WHICH HE ADMITTED THAT HE PROVIDES ACCOMMODATION ENTRIES AND HIS COMPANIES ARE USED FOR THIS PURPOSE. SH. TARUN GOYAL ALSO ADMITTED THAT H E HAS OPENED MANY BANK ACCOUNTS IN THE NAME OF VARIOUS COMPANIES/ FIRMS AN D INDIVIDUALS FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES. IN THE ANSWER TO THE QUESTION REGARDING BUSINESS ACTIVITY OF THESE ENTITIES, HE R EPLIED THAT THESE ENTITIES DID NOT CARRY OUT ANY NORMAL BUSINESS INVESTMENT BUT NOT GI VING ACCOMMODATION ENTRIES AFTER TAKING CASH FROM THE PARTIES WHICH WAS ROUTED THROUGH THE ACCOUNTS MAINTAINED BY THEM FOR GIVING CHEQUES IN THE SHAPE OF SHARE APPLICATION, SHARE CAPITAL, LOAN, GIFTS ETC. IN THESE ENTITIES, CASH U SED TO BE DEPOSITED AND THEN THE CHEQUES, DDS OR PAY ORDERS WERE ISSUED. HE ALSO ADM ITTED THAT HE USED TO ISSUE CHEQUES IN LIEU OF CASH TO VARIOUS PARTIES AFTER CH ARGING 0.5% AS COMMISSION. THE ASSESSEE I.E. M/S SONARIKA HOTEL (P) LTD. HAD R ECEIVED THE FOLLOWING ACCOMMODATION ENTRY OF RS.5O,OO,OOO/- FROM THE FOLL OWING CONCERN OF SH. TARUN GOYAL IN THE FORM OF CHEQUES, DETAILED AS UND ER: S.NO. NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT VALUE OF ENTRY TAKEN 1 M/S TAJASVI INVESTMENTS (P) LTD. 50,00,000/- TOTAL 50,00,000/ - ITA NO.5757/DEL/2013 6 6.1 IN THIS CASE THE ASSESSEE HAD FILED THE RETURN OF INCOME ON 30.09.2008 DECLARING LOSS AT RS.36,603/-. ON THE BASIS OF INFO RMATION RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT, THEREFORE, NO TICES U/S 147 AND U/S 148 OF THE INCOME TAX ACT, 1961 WAS ISSUED ON 30.06.2011 A FTER OBTAINING APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-9, NEW DELHI. THE SAME WAS SENT THROUGH SPEED POST. THE ASSESSEE DID NOT FILE ANY RETURN IN RESPONSE TO THE SAID NOTICE, NOR DID IT FILE ANY REPLY IN THIS REGA RD. NOTICES U/S 142(1) DATED 02.02.2012 ALONGWITH QUESTIONNAIRE ISSUED TO THE AS SESSEE FOR 14.3.2012. HOWEVER. ASSESSEE HAS NOT RESPOND. THEREAFTER VARIO US NOTICES U/S 142(1) DATED 23.05.2012, 15.10.2012, 06.11.2012 AND 27.12.2012 W ERE ISSUED TO THE ASSESSEE COMPANY BY SPEED POST AT THEIR FOLLOWING ADDRESSES- : 1. C-1/210, JANAK PURI, NEW DELHI-110058. 2. D-8, APPOLLO HOUSE, MAIN ROAD, MAYA PURI IND/. A REA. NEW DELHI- 110064. 3. C-225/4, MAYA PURI INDL. AREA, PHASE-II, NEW DEL HI-110064. HOWEVER, THE ASSESSEE NOT COMPLIED WITH. ON 24.01.2 013 AR OF. THE ASSESSEE, FILED SOME DETAIL VIDE LETTER DT. 24.01.2 013. ON REQUEST CASE WAS ADJOURNED ON 28.L.2013. SH. NAVEEN GUPTA. CA ATTEND ED THE ASSESSMENT PROCEEDINGS AND FILED A LETTER DATED 28.01.2013 WHE REIN HE STATED THAT THE RETURN FILED ON 30.09.2008 BE TREATED AS RETURN FILED IN R ESPONSE TO THE NOTICE U/S 148. ASSESSEE HAS ALSO REQUESTED FOR COPY OF REASON RECO RDED FOR ISSUANCE OF NOTICE UNDER SECTION 148.THE COPY OF REASON RECORDED FOR I SSUANCE OF NOTICE U/S 148 WAS PROVIDED TO HIM ON 28.01.2013 AND ASK TO FILE C OMPLETE ITR WITH ANNEXURE. THE CASE ADJOURNED TO 30.1.2013. THE ASSESSEE DID N OT FILE ANY RETURN IN RESPONSE ITA NO.5757/DEL/2013 7 TO THE NOTICE, NOR DID IT FILE ANY LETTER IN THIS R EGARD. FURTHER. NONE APPEARED ON BEHALF OF THE ASSESSEE. SHOW CAUSE AS TO WHY THE AC COMMODATION ENTRY RAISED BY THE ASSESSEE COMPANY MAY NOT BE ADDED TO THE INCOME , ALONG-WITH THE NOTICES U/S 143(2)/142(1) OF THE I.T. ACT, WERE ISSUED ON T HE ASSESSEE ON 07.03.2013, REQUIRING THE ASSESSEE TO FURNISH ITR WITH DETAILS /EVIDENCES FOR THE A.Y.2008-09 AND ALSO TO PRODUCE ITS BOOKS OF ACCOUNTS. HOWEVER. ONCE AGAIN HE FAILED TO RESPOND. AO HAS OBSERVED THAT SINCE THERE HAS BEEN NO COMPLIANCE TILL DATE, HE HAS LEFT WITH NO OPTION BUT TO COMPLETE THE ASSESSM ENT TO THE BEST OF HIS JUDGEMENT UNDER SECTION 144 READ WITH SECTION 147 O F THE IT ACT 1961. AO OBSERVED THAT THE ASSESSEE HAS RECEIVED RS.50,00,0 00/- IN THE FORM OF ACCOMMODATION ENTRY FROM SHRI TARUN GOYAL AND HIS A SSOCIATES, DURING THE RELEVANT PREVIOUS YEAR FOR WHICH IT HAS FAILED TO O FFER ANY EXPLANATION DESPITE SEVERAL OPPORTUNITIES PROVIDED TO IT. SHRI TARUN GO YAL HAS ADMITTED THAT HE ONLY USED TO PROVIDE ACCOMMODATION ENTRIES IN FORM OF CH EQUES IN LIEU OF UNACCOUNTED CASH OR FOR PROVIDE ENTRIES FOR BOGUS E XPENDITURE. THE ASSESSEE HAD FAILED TO FILE INCOME TAX RETURN AND TO PRODUCE NEC ESSARY EVIDENCE DESPITE REPEATED OPPORTUNITIES. THEREFORE. IT IS CONCLUDED THAT THE ASSESSEE HAS PAID RS.50,00,000/- PLUS COMMISSION OF RS.25,000/- TO S H. TARUN GOYAL FOR WHICH IT HAS FAILED TO EXPLAIN ABOUT ANY SOURCE. THEREFORE, AO ADDED RS.50,25,000/- TO THE INCOME OF THE ASSESSEE U/S 69A OF THE INCOME TA X ACT, 1961 BEING UNACCOUNTED MONEY IN THE HANDS OF THE ASSESSEE COMP ANY FOR WHICH IT HAS FAILED TO OFFER ANY EXPLANATION AND COMPLETED THE ASSESSME NT AT RS. 49,88,400/- U/S. 144/147 OF THE ACT VIDE HIS ORDER DATED 21.3.2013. ITA NO.5757/DEL/2013 8 7. AGAINST THE ORDER OF THE AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 26.8.2013 HAS DISMISS ED THE APPEAL OF THE ASSESSEE. 8. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD . CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL FOR CHALLENGING THE LEGA L ISSUE RAISED VIDE ADDITIONAL AS WELL AS THE ADDITION IN DISPUTE, AS AFORESAID. 9. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE HAS ONLY ARGUED THE LEGAL GROUND THAT NOTICE U/S. 148 ISSUED IN THIS CASE IS CONTRARY TO THE PROVISIONS OF SECTION 147 BY STATING THAT ACTION OF THE ASSESSING OFFICER IS ILLEGAL. FIRST OF ALL, HE DRAW OUR ATTENTION TOWARD S THE COPY OF REASONS FOR REOPENING THE CASE U/S. 148 AND STATED THAT NO PROP ER REASONS WERE RECORDED; NO NEXUS BETWEEN THE MATERIALS RELIED UPON AND THE BEL IEF FORMED FOR ESCAPEMENT OF INCOME; NO APPLICATION OF MIND; NO PROPER SATISFACT ION WAS RECORDED BEFORE ISSUE OF NOTICE U/S. 148; NO INDEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME AND NO PROPER SATISFACTION. IT WAS FURTHER STATED THAT THE CASE WAS REOPENED ONLY ON THE BASIS OF INVESTIGATION WING IN FORMATION WHICH SUFFERS WITH SERIOUS DEBILITY AND LACKS DEFINITENESS, WITHOUT DE SCRIBING THE BASIC ASPECTS OF ALLEGED TRANSACTION (VIZ. DATE, MODE, BANK THROUG H WHICH TRANSACTED, INSTRUMENT, ITS NATURE, RETURN FILING DETAILS ETC.) AND IN THE ABSENCE OF THE SAME, WHOLE ACTION OF THE AO GETS VITIATED. TO SUPPORT HIS CONTENTION HE SUBMITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FA VOUR OF THE ASSESSEE BY THE ITAT DECISION DATED 09.1.2015 IN THE CASE OF G&G PH ARMA INDIA LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04) IN WHICH THE JUDICIAL ITA NO.5757/DEL/2013 9 MEMBER IS THE AUTHOR. HE FURTHER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 9.1.2015 HAS BEEN UPHELD BY THE HONBLE JURIS DICTIONAL HIGH COURT IN ITS DECISION DATED 08.10.2015 IN ITA NO. 545/2015 IN TH E CASE OF PR. CIT-4 VS. G&G PHARMA INDIA LTD. IN THIS BEHALF, HE FILED THE COPY OF THE ORDER DATED 9.1.2015 OF THE ITAT, DELHI BENCH PASSED IN THE CAS E OF G&G PHARMA INDIA LTD VS. ITO (SUPRA) AND ALSO VARIOUS FOLLOWING DECI SIONS:- I) C IT VS . KA MDH E N U ST E ELS & ALLO Y S LTD . & ORS., ( 2 01 2 ) 248 CTR (DEL) 33 . , ( D HC) II) C I TVS. S FIL ST O C K B R OK I N G L T D ., (2 010) 3 2 5ITR 28 5 . , (DHC ) . III) S ARTHAK S ECU R ITIES C O. P V T. LTD. VS . ITO ., ( 2 010) 3 2 9ITR 110 . , (DHC ). IV) S IGNATUR E HO TE L S P V T. LTD. VS . ITO & ANR . , (2 011) 33 8 ITR 51 ., ( DHC) . V) R ECENT DE C ISION O F HON ' BL E JURISDI C TIONAL HI G H COU R T OF DELHI IN THE CASE O FC IT VS I N SE CT ICI D E S (I NDIA ) LTD. 2 013 357 ITR 330 ( DEL) . D ECIS I ON OF I TA T D E LH I BE NC H IN TH E CA S E OF ITO VS O N E XI M P V T . LTD . (2 01 3) 15 7 TTJ 633 (I T A T D E LHI ) . V II ) RECENT DELHI BENCH ITAT ORDER IN CASE OF ACIT VS SHRI DEVE S H KUMAR (ITA 20681DE112010) DATED 31 . 10.2014 (ENCLOSED) VIII) RECENT DELHI BENCH ITAT ORDER IN CASE OF ITO VS M . B.JEWELLERS (P) LTD ITA 24991DEL12011 DATED 14.11 . 2014 I X ) RECENT DELHI BENCH IT AT ORDER IN CASE OF RKG IN TERNATIONAL (P) LTD VS ITO (ITA 1011DE112013) ORDER DATED 14.11 . 2014 ITA NO.5757/DEL/2013 10 IN VIEW OF THE ABOVE, HE REQUESTED THAT BY FOLLOWI NG THE AFORESAID PRECEDENTS THE REASSESSMENT PROCEEDINGS OF THE AO MAY BE QUASHED BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. 10. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER P ASSED BY THE AUTHORITIES BELOW AND STATED THAT THE AO HAS PROPERLY RECORDED THE REASONS FOR REOPENING BY DUE APPLICATION OF MIND, HENCE, THE APPEAL OF THE A SSESSEE MAY BE DISMISSED. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REVENUE AUTHO RITIES AND THE CASE LAWS CITED BY THE ASSESSEES COUNSEL ON THE ISSUE IN DISPUTE. IN OUR VIEW, IT IS VERY MUCH NECESSARY TO REPRODUCE THE REASONS RECORDED BY THE AO BEFORE ISSUE OF NOTICE U/S. 148 FOR REOPENING OF ASSESSMENT WHICH READS AS UNDER:- REASONS FOR INITIATION OF PROCEEDINGS U/S. 147 OF THE I.TAX ACT, 1961 30/06/2011: M/S SONARIKA HOTEL PVT. LTD., PAN : A AKCS1233L, D-8, APPOLLO HOUSE, MAIN ROAD, MAYA PURI, INDL. AREA, NE W DELHI 110 064 AND C/O SH. ARUN MAHAJAN, DIRECTOR, C- I/2010, JANAKPURI, NEW DELHI 110 058 AY 2008-09 THE ADDL. DIRECTOR OF INCOME TAX (INVESTIGATION) UN IT-IV, NEW DELHI HAD, VIDE OFFICE LETTER F.NO. ADDL. DIT(INV.)/UNIT- IV/ BENEFICIARIES/2008-09/391 DATED 31.3.2009, SENT A CONFIDENTIAL REPORT REGARD ING THE ACCOMMODATION ENTRIES PROVIDED BY SH. TARUN GOYAL, CA, 13/34, WEA ARYA SAMAJ ROAD, KAROL ITA NO.5757/DEL/2013 11 BAGH, NEW DELHI AND HAD ENCLOSED A LIST OF BENEFICI ARIES PERTAINING TO CIT-III CHARGE, NEW DELHI. THE PERUSAL OF THE REPORT SHOWS THAT SEA4RCH WAS CO NDUCTED AT THE OFFICE PREMISES OF SH. TARUN GOYAL, CA 13/34, WEA, ARYA SAMAJ ROAD, NEW DELHI, BY THE INVESTIGATION WING ON 15.9.2008. THE ADDL. DIRECTOR OF INCOME TAX (INVESTIGATION), U NIT-IV, NEW DELHI, HAS STATED THAT AT THE TIME OF SEARCH ON 15.9.2008 , THE STATEMENT OF SH. TARUN GOYAL, CA WAS RECORDED ON OATH. AS PER HIS STATEMEN T HE HAS ACCEPTED THAT HE PROVIDES ACCOMMODATION ENTRIES AND HIS VARIOUS COMP ANIES ARE USED FOR THIS PURPOSE. DETAILED LIST OF THE BENEFICIARIES OF ACCOMMODATION ENTRIES HAS BEEN TAKEN BY THE CONCERNED ADIT (INV.) FOR THE AYS 2004-05, 2 005-06, 2006-07, 2007-08, 2008-09 AND 2009-10. AS PER THE LIST, SONARIKA HOTEL (P) LTD., PAN AAKCS 1223L, HAS TAKEN ACCOMMODATION ENTRIES OF RS. 50,00,000/- ACCOMMODAT ION ENTRIES OF RS. 50,00,000/- PERTAINING TO ASSESSMENT YEAR 2008-09 F ROM VARIOUS COMPANIES OF SH. TARUN GOYAL, CA. S.NO. NAME OF ACCOUNT HOLDER OF ENTRY GIVING ACCOUNT VALUE OF ENTRY TAKEN 1 M/S TAJASVI INVESTMENTS (P) LTD. 50,00,000/- TOTAL 50,00,000/ - IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THA T AT SUM OF RS. 50,00,000/- REPRESENTS INCOME OF M/S SONARIKA HOTEL (P) LTD., PAN ITA NO.5757/DEL/2013 12 AAKCS1233L, FOR THE AY 2008-09, WHICH HAS ESCAPED A SSESSMENT WITHIN THE MEANING OF PROVISIONS OF SECTION 147 OF THE I.T. AC T, 1961, THEREFORE A NOTICE U/S. 148 OF THE INCOME TAX ACT, 1961 IS REQUIRED TO BE I SSUED AND SERVED UPON THE ASSESSEE TO ASSESS THE INCOME ESCAPED ASSESSMENT AS STATED, HEREINABOVE. SD/- (JITENDRA KR. GOGIA) INCOME TAX OFFICER, WARD 9(1), NEW DELHI 12. AFTER GOING THROUGH THE REASONS RECORDED BY THE ITO, WARD 9(1), NEW DELHI, WE ARE OF THE VIEW THAT AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEV E THAT INCOME HAS ESCAPED DURING THE YEAR. IN OUR VIEW THE REASONS ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS ARE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAS MECHANICALLY ISSUED NOTICE U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE ADDL. DIRECTORAT E 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 CONSIDERED VIEW THAT THE REOPENING IN THE CA SE OF THE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN LAW AND DESERVES TO BE QU ASHED. OUR VIEW IS SUPPORTED BY THE FOLLOWING JUDGMENTS/DECISIONS:- (A) THE TRIBUNAL IN ITS DECISION DATED 9.1.2015 PAS SED IN ITA NO. 3149/DEL/2013 (AY 2003-04) IN THE CASE OF G &G PHARMA INDIA LIMITED VS. ITO, HAS HELD UNDER:- 8. WE HAVE PERUSED THE AFORESAID REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT IN ITA NO.5757/DEL/2013 13 DISPUTE AND WE ARE OF THE CONSIDERED VIEW THAT THE AO HAS NOT APPLIED HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. A MERE REFERENCE IS MADE TO CERTAIN INFORMATION RECEIVED FROM THE INVESTIGATION WING WHICH WAS SUPPLIED TO THE ASSESSEE VIDE AOS LETTER DATED 15.9.2010. IN OUR VIEW THE REASONS ARE VAGUE AND ARE NOT BASED ON ANY TANGIBLE MATERIAL AS WELL AS A RE NOT ACCEPTABLE IN THE EYES OF LAW. THE AO HAD MECHANICALLY ISSUED NOTICES U/S. 148 OF THE ACT, ON THE BASIS OF INFORMATION ALLEGEDLY RECEIVED BY HIM FROM THE DIRECTORATE OF INVESTIGATION, JHANDEWALAN, NEW DELHI. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, WE ARE OF T HE CONSIDERED VIEW THAT THE REOPENING IN THE CASE OF T HE ASSESSEE FOR THE ASSTT. YEAR IN DISPUTE IS BAD IN L AW AND DESERVES TO BE QUASHED. WE DRAW OUR SUPPORT FROM THE JUDGMENTS OF THE HONBLE HIGH COURT OF DELHI IN THE FOLLOWING CASES:- ITA NO.5757/DEL/2013 14 (I) SIGNATURE HOTELS (P)_ LTD. VS. ITO AND ANOTHER REPORTED IN 338 ITR 51 (DEL) HAS UNDER SIMILAR CIRCUMSTANCES AS FOLLOWS:- FOR THE A.Y. 2003-04, THE RETURN OF INCOME OF THE ASSESSEE COMPANY WAS ACCEPTED U/S.143(1) OF THE INCOME-TAX ACT, 1961 AND WAS NOT SELECTED FOR SCRUTINY. SUBSEQUENTLY, THE ASSESSING OFFICER ISSUED NOTICE U/S.148 WHICH WAS OBJECTED BY THE ASSESSEE. THE ASSESSING OFFICER REJECTED THE OBJECTIONS. THE ASSESSEE COMPANY FILED WRIT PETITION AND CHALLENGED THE NOTICE AND THE ORDER ON OBJECTIONS. THE DELHI HIGH COURT ALLOWED THE WRIT PETITION AND HELD AS UNDER: (I) SECTION 147 OF THE INCOME-TAX ACT, 1961, IS WIDE BUT NOT PLENARY. THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THIS IS MANDATORY AND THE REASON TO BELIEVE ARE REQUIRED TO BE RECORDED IN WRITING BY THE ASSESSING OFFICER. ITA NO.5757/DEL/2013 15 (II) A NOTICE U/S.148 CAN BE QUASHED IF THE BELIEF IS NOT BONA FIDE, OR ONE BASED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMATION. THE BASIS OF THE BELIEF SHOULD BE DISCERNIBLE FROM THE MATERIAL ON RECORD, WHICH WAS AVAILABLE WITH THE ASSESSING OFFICER, WHEN HE RECORDED THE REASONS. THERE SHOULD BE A LINK BETWEEN THE REASONS AND THE EVIDENCE/MATERIAL AVAILABLE WITH THE ASSESSING OFFICER. (III) THE REASSESSMENT PROCEEDINGS WERE INITIATED ON THE BASIS OF INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PETITIONER HAD INTRODUCED MONEY AMOUNTING TO RS.5 LAKHS DURING F.Y. 2002-03 AS STATED IN THE ANNEXURE. ACCORDING TO THE INFORMATION, THE AMOUNT RECEIVED FROM A COMPANY, S, WAS NOTHING BUT AN ACCOMMODATION ENTRY AND THE ASSESSEE WAS THE BENEFICIARY. THE REASONS DID NOT SATISFY THE REQUIREMENTS OF SECTION 147 OF THE ACT. THERE WAS NO REFERENCE TO ANY DOCUMENT OR STATEMENT, EXCEPT THE ANNEXURE. ITA NO.5757/DEL/2013 16 THE ANNEXURE COULD NOT BE REGARDED AS A MATERIAL OR EVIDENCE THAT PRIMA FACIE SHOWED OR ESTABLISHED NEXUS OR LINK WHICH DISCLOSED ESCAPEMENT OF INCOME. THE ANNEXURE WAS NOT A POINTER AND DID NOT INDICATE ESCAPEMENT OF INCOME. (IV) FURTHER, THE ASSESSING OFFICER DID NOT APPLY HIS OWN MIND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THERE WAS NO DISPUTE THAT THE COMPANY, S, HAD A PAID UP CAPITAL OF RS.90 LAKHS AND WAS INCORPORATED ON JANUARY 4, 1989, AND WAS ALSO ALLOTTED A PERMANENT ACCOUNT NUMBER IN SEPTEMBER 2001. THUS, IT COULD NOT BE HELD TO BE A FICTITIOUS PERSON. THE REASSESSMENT PROCEEDINGS WERE NOT VALID AND WERE LIABLE TO THE QUASHED. (II). IN THE CASE OF CIT VS. ATUL JAIN REPORTED IN 299 ITR 383 IT HAS BEEN HELD AS UNDER:- HELD, DISMISSING THE APPEALS, THAT THE ONLY INFORMATION WAS THAT THE ASSESSEE HAD TAKEN A BOGUS ENTRY OF CAPITAL GAINS BY PAYING CASH ITA NO.5757/DEL/2013 17 ALONG WITH SOME PREMIUM FOR TAKING A CHEQUE FOR THAT AMOUNT. THE INFORMATION DID NOT INDICATE THE SOURCE OF THE CAPITAL GAINS WHICH IN THIS CASE WERE SHARES. THERE WAS NO INFORMATION WHICH SHARES HAD BEEN TRANSFERRED AND WITH WHOM THE TRANSACTION HAD TAKEN PLACE. THE AO DID NOT VERIFY THE CORRECTNESS OF INFORMATION RECEIVED BY HIM BUT MERELY ACCEPTED THE TRUTH OF THE VAGUE INFORMATION IN A MECHANICAL MANNER. THE AO HAD NOT EVEN RECORDED HIS SATISFACTION ABOUT THE CORRECTNESS OR OTHERWISE OF THE INFORMATION FOR ISSUING A NOTICE U/S 148. WHAT HAD BEEN RECORDED BY THE AO AS HIS REASONS TO BELIEVEWAS NOTHING MORE THAN A REPORT GIVEN BY HIM TO THE COMMISSIONER. THE SUBMISSION OF THE REPORT WAS NOT THE SAME AS RECORDING OF REASONS TO BELIEVE FOR ISSUING A NOTICE. THE AO HAD CLEARLY SUBSTITUTED FORM FOR SUBSTANCE AND THEREFORE THE ACTION OF THE AO WAS NOT SUSTAINABLE. 9. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIE W THAT ABOVE ISSUE IS EXACTLY THE SIMILAR TO THE ISSUE I NVOLVED IN ITA NO.5757/DEL/2013 18 THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE A FORESAID DECISIONS OF THE HONBLE HIGH COURT OF DELHI. HEN CE, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENT, WE DECI DE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QUASH THE REASSESSMENT PROCEEDINGS. THE OTHER ISSUES ARE NOT DEALT WITH AS THE SAME HAVE BECOME ACADEMIC IN NATURE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. (B). 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, T HE AO STATED: 'I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVI DENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOU NTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODA TION ENTRIES.' THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO TH E ITA NO.5757/DEL/2013 19 MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE O N WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED I S KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENC E 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 HAVE SI MPLY 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 T HE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIEN T CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREIN BEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MI ND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE T HAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSIN G 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 MATERI ALS PRODUCED DURING THE HEARING OF THE APPEAL. THE COUR T ITA NO.5757/DEL/2013 20 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 AS SESSMENT 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 H E HAS REASON TO BELIEVE THAT INCOME OF THE ASSESSEE HAS E SCAPED ASSESSMENT. UNLESS THAT BASIC JURISDICTIONAL REQUIR EMENT IS SATISFIED A POST MORTEM EXERCISE OF ANALYSING MATER IALS PRODUCED SUBSEQUENT TO THE REOPENING WILL NOT RESCU E AN INHERENTLY DEFECTIVE REOPENING ORDER FROM INVALIDIT Y . 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. 13. IN VIEW OF ABOVE, WE ARE OF THE CONSIDERED VIE W THAT THE ABOVE LEGAL ISSUE IS EXACTLY THE SIMILAR AND IDENTICAL TO THE ISSUE INVOLVED IN THE PRESENT APPEAL AND IS SQUARELY COVERED BY THE AFORESAID DECISIONS OF THE HONBLE SUPREME COURT OF INDIA, HONBLE HIGH COURTS OF DELHI AND ITAT, DELHII. HENCE, RESPECTFULLY FOLLOWING THE ABOVE PRECEDENTS, WE DECIDE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF ITA NO.5757/DEL/2013 21 THE ASSESSEE AND AGAINST THE REVENUE AND QUASH THE REASSESSMENT PROCEEDINGS BEING BAD IN LAW. 14. AS WE HAVE HELD THAT THE REASSESSMENT IS BAD IN LAW, WE DO NOT FIND IT NECESSARY TO DECIDE OTHER ISSUES WHICH ARE ON MERIT S OF THE CASE. 15. IN THE RESULT, THE ASSESSEES APPEAL STANDS A LLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 08-07-2016. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08-07-2016 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.