M/s. PCI Ltd., New Delhi V. ACIT, New Delhi

ITA 5936/DEL/2012

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9983 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 29-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIKRAM SAHAY
• Keywords: Reopening of assessment; Unexplained expenditure; Search and seizure; Accommodation entries; Onus to prove
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : F NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NOS.: 5936,5937/DEL/2012 ASSESSMENT YEARS : - 2005-06, 2006-07 M/S. PCI LTD. VS. ACIT 19, RAJENDRA PARK CIRCLE 14 (1) NEW DELHI -110 060 NEW DEL HI. (PAN AAACP1565E) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATISH AGGARWAL, CA RESPONDENT BY :SHRI VIKRAM SAHAY, SR. DR DATE OF HEARING :1.4.2015 DATE OF PRONOUNCEMENT :5.5 .2015 O R D E R PER G.C. GUPTA, VICE PRESIDENT THESE TWO APPEALS BY THE ASSESSEE FOR T HE ASSESSMENT YEARS 2005-06 AND 2006-07 ARE DIRECTED AGAINST THE ORDER OF CIT(A). SINCE IDENTICAL ISSUE IS INVOLVED IN BOTH THESE APPEALS PREFERRED BY THE ASSESEE, THESE ARE BEING DISPOSED OF BY A CONSOLIDATED ORDER. 2. THE GROUNDS OF APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2005-06 ARE AS UNDER :- 1. THAT THE ORDER OF THE LEARNED COMMISSIONE R OF INCOME TAX (APPEALS) IS ARBITRARY, BIASED AND BAD IN LAW AND FACTS OF THE CASE. ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 2 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN ASSUMING JURISDI CTION U1S 147/148 OF THE ACT, AND IN PASSING AN ORDER U1S 143(3)/147 WHICH IS VOID, AB-I NITIO. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN HOLDING THE MECHANICAL REOPENING OF THE ASSESSMENT BY THE ASSES SING OFFICER AS PROPER WITHOUT HAVING BELIEF THAT THE INCOME HAD ESCAPED ASSESSMEN T AS THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WAS M ECHANICALLY REPRODUCED IN REASONS FOR REOPENING THE ASSESSMENT. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN REOPENING THE AS SESSMENT U1S 147/148 IGNORING THAT IN THE REASONS GIVEN FOR REOPENING THE NAME O F THREE PARTIES WAS MENTIONED WITH WHOM THE APPELLANT HAD ALLEGED DEALINGS WHEREA S, THE APPELLANT DID NOT HAVE ANY DEALINGS WITH TWO OF THE PARTIES MENTIONED IN THE REASONS FOR REOPENING THE ASSESSMENT NAMELY M/S ESQUIRE PRINTERS AND M/S HI-T ECH COMPUTECH LTD. 5. WITHOUT PREJUDICE TO GROUND NO. 2, 3 AND 4 ABOVE , THE CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 3 LAKHS OF EXPENDITU RE INCURRED BY THE APPELLANT AND PAID TO M/S GLOBTEX TECH INDIA LTD BY HOLDING IT TO BE UNEXPLAINED EXPENDITURE. 6. THAT THE CIT(A) HAS GROSSLY ERRED IN IGNORING TH E FACT WHILE CONFIRMING THE ADDITION THAT THE APPELLANT HAD DISCHARGED ITS ONUS FOR CLAI MING THE ABOVE EXPENDITURE. 7. CONVERSELY, THE LEARNED COMMISSIONER OF INCOME T AX (A) HAS GROSSLY ERRED IN HOLDING THAT THE REVENUE HAS DISCHARGED ITS ONUS TO PROVE T HE AMOUNT OF RS. 3 LAKHS SPENT AS BUSINESS EXPENSE BY THE APPELLANT AND PAID TO M/S G LOBTEX TECH INDIA LTD AS AN ACCOMMODATION ENTRY WITHOUT THE REVENUE BRINGING ON RECORD ANY EVIDENCE OR MATERIAL TO DISALLOW THE EXPENDITURE. 3. THE GROUNDS OF APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2006-07 ARE AS UNDER : 1) THAT THE ORDER OF THE LEARNED COMMISSIONER OF INC OME TAX(APPEA1S) IS ARBITRARY, BIASED AND BAD IN LAW AND FACTS OF THE CASE. 2) THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HA S GROSSLY ERRED IN CONFIMING THE ACTION OF THE ASSESSING OFFICER IN ASSUMING JURISDICTION U /S 147/148 OF THE ACT, AND IN PASSING AN ORDER U/S 143(3)/147 WHICH IS VOID, AB-INITIO. 3) THAT THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS GROSSLY ERRED IN HOLDING THE MECHANICAL REOPENING OF THE ASSESSMENT BY THE ASSES SING OFFICER AS PROPER WITHOUT HAVING BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT AS TH E INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT WAS MECHANICAL LY REPRODUCED IN REASONS FOR REOPENING THE ASSESSMENT. ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 3 4) WITHOUT PREJUDICE TO GROUND NO. 2 AND 3 ABOVE, T HE CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS. 6 LAKHS OF EXPENDITURE INCURRED BY THE APPELLANT AND PAID TO M/S BT TECHNET LTD. BY HOLDING IT TO BE UNEXPLAINED EXPENDITURE. 5) THAT THE CIT(A) HAS GROSSLY ERRED IN IGNORING TH E FACT WHILE CONFIRMING THE ADDITION THAT THE APPELLANT HAD DISCHARGED ITS' ONUS FOR CLAIMING THE ABOVE EXPENDITURE. 6) CONVERSELY, THE LEARNED COMMISSIONER OF INCOME T AX (A) HAS GROSSLY ERRED IN HOLDING THAT THE REVENUE HAS DISCHARGED ITS ONUS TO PROVE THE AMOUNT OF RS. 6 LAKHS SPENT AS BUSINESS EXPENSE BY THE APPELLANT AND PAID TO M/S BT TECHNET LTD. AS AN ACCOMMODATION ENTRY WITHOUT THE REVENUE BRINGING ON RECORD ANY EVIDENCE OR MATERIAL TO DISALLOW THE EXPENDITURE. 7) THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR DELETE THE ABOVE GROUNDS OF APPEAL AT THE TIME OF HEARING. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THE MAIN ISSUE IN THESE TWO APPEALS IS REGARDING VALIDITY OF THE ACTION OF THE AO IN ASSUMING OF JURISDICTION U/S 147/48 OF THE ACT. HE SUBMITTED THAT THE REOPE NING IN THIS CASE WAS VOID AB- INITIO AS THERE WAS NO INFORMATION RECEIVED BY THE AO THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT. HE REFERRED TO THE DIRECTION OF THE LD. CIT(A) U/S 250(4) OF THE ACT DATED 27.2.2012 TO THE AO DIRECTI NG HIM TO VERIFY THE SWORN STATEMENTS OF SHRI S.K. GUPTA, THE SOCALLED ENTRY P ROVIDER, AND INTIMATE WHETHER THERE IS ANY REFERENCE TO THE TRANSACTIONS WITH M/S . PCI LTD.( THE APPELLANT). THE CIT(A) HAS CATEGORICALLY MENTIONED IN THIS DIRECTIO N DATED 27.2.2012 THAT HE WAS UNABLE TO FIND ANY REFERENCE TO THE TRANSACTION WIT H M/S. PCI LTD. IN THE COPY OF THE SWORN STATEMENT OF SHRI S.K. GUPTA SUPPLIED TO HIS OFFICE. THE LD. COUNSEL FOR THE ASSESEE SUBMITTED THAT THE AO IN HIS REMAND REPORT DATED 4.7.2012 WITH REFERENCE TO THE DIRECTION OF THE CIT(A) U/S 250 (4) DATED 2 7.2.2012 SUBMITTED IN PARA 3.2 THEREOF THAT THE COPY OF STATEMENT OF SHRI S.K. GUP TA AS REPORTED BY INVESTIGATION WING AND FORWARDED TO CIT(A) WAS PRESENTLY NOT AVAI LABLE IN HIS OFFICE RECORD. HE MADE A GENERAL OBSERVATION THAT SHRI S.K. GUPTA HAS FLOATED A NUMBER OF PAPERS CONCERNS / ENTITIES AND EACH CONCERN GAVE HUGE NUMB ER OF ACCOMMODATION ENTRIES ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 4 OF DIFFERENT NATURES TO NUMBER OF INTERESTED PERSON S. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT IS CLEAR FROM THE READI NG OF THE REMAND REPORT SUBMITTED BY THE AO IN RESPONSE TO THE DIRECTION BY THE CIT(A ) THAT THERE IS NO MATERIAL WHATSOEVER TO CONNECT THE ASSESSEE COMPANY WITH THE STATEMENTS OF SHRI S.K. GUPTA AND IN FACT SHRI S.K. GUPTA HAS NEVER STATED THAT I T HAS PROVIDED ACCOMMODATION ENTRIES TO THE APPELLANT M/S. PCI LTD. . IN THESE F ACTS THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ACTION OF THE AO IN REO PENING THE ASSESSMENT U/S 147 IS BAD IN LAW. HE SUBMITTED THAT THE ASSESSEE DID NOT HAVE ANY DEALING WITH TWO OF THE PARTIES MENTIONED IN THE REASONS RECORDED FOR REOPE NING THE ASSESSMENT NAMELY M/S. ESQUIRE PRINTERS & STATIONERS AND M/S. HITECH COMPUTECH LTD.. 5. THE LD. DR HAS OPPOSED THE SUBMISSIONS OF THE LD. COUNSEL FOR THE ASSESSEE. HE REFERRED TO PARA 2 OF THE ASSESSMENT O RDER WHEREIN IT IS RECORDED THAT IT WAS POINTED OUT BY THE INVESTIGATION WING THAT S HRI S.K. GUPTA WAS HAVING PAPER ENTITIES AND INDULGING IN GIVING BOGUS BENEFICIARY, WHO HAD TAKEN ACCOMMODATION ENTRIES FROM FEW COMPANIES MANAGED BY SHRI S.K. GUP TA. HE SUBMITTED THAT THERE WAS A SPECIFIC INFORMATION WITH THE DIRECTORATE OF INVESTIGATION, NEW DELHI AND A SEARCH AND SEIZURE OPERATION WAS CARRIED OUT AGAINS T SHRI S.K. GUPTA GROUP OF CASES. HE SUBMITTED THAT IT WAS POINTED OUT BY THE INVESTI GATION WING THAT ALL SUCH COMPANIES WERE PAPER ENTITIES AND THESE COMPANIES H AVE NO SUPPORTIVE INFRASTRUCTURE WHATSOEVER TO RENDER SERVICE SO DISC LOSED IN THE BUSINESS. HE REFEREED THE RELEVANT PORTION OF THE ORDER OF THE CIT(A) IN SUPPORT OF THE CASE OF THE REVENUE AND RELIED ON THE ORDER OF THE AO AND CIT(A). ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 5 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIO NS CAREFULLY AND PERUSED THE ORDER OF THE AO AND THE CIT(A). IN THIS CASE OF THE ASSES SEE ORIGINAL ASSESSMENT WAS FRAMED IN SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT . THEREAFTER THE COMPLETED ASSESSMENT WAS SOUGHT TO BE REOPENED BY THE AO BY I SSUANCE OF THE NOTICE U/S 148 ON THE ASSESSEE ON BASIS OF REOPENING OF THE TWO AS SESSMENTS OF THE ASSESSEE BY WAY OF REASONS RECORDED BY THE AO THAT INFORMATION WAS RECEIVED FROM INVESTIGATION WING OF THE DEPARTMENT AS A RESULT OF SEARCH AND SE IZURE OPERATION CARRIED OUT AGAINST ONE SHRI S.K. GUPTA GROUP OF CASES THAT HE HAS FLOATED PAPER ENTITIES AND THESE COMPANIES HAVE NO SUPPORTIVE INFRASTRUCTURE W HATSOEVER TO RENDER SERVICES SO DISCLOSED IN THE BUSINESS. WE FIND THAT EVEN IF TH E REASONS RECORDED BY THE AO THAT SHRI S.K. GUPTA HAS FLOATED PAPER ENTITIES IN THE FORM OF COMPANIES TO PROVIDE ACCOMMODATION ENTRIES TO VARIOUS PERSONS IS TAKEN A S CORRECT, THE SAME COULD NOT BE MADE THE BASIS FOR REOPENING THE ASSESSMENTS OF T HE APPELLANT COMPANY BEFORE US TILL THE REVENUE HAS SOME MATERIAL BROUGHT ON RECOR D TO CONNECT THE ACT OF PROVIDING ACCOMMODATION ENTRIES BY THE SAID SHRI S.K. GUPTA G ROUP OF COMPANIES WITH THE APPELLANT COMPANY. IN THE CASE BEFORE US THE DEPART MENT HAS FAILED TO PROVIDE ANY MATERIAL TO CONNECT THE ASSESSEE COMPANY WITH THE S O CALLED PAPER ENTITIES FLOATED BY SHRI S.K. GUPTA. WE FIND THAT CIT(A) VIDE HIS DI RECTION U/S 250(4) OF THE ACT DATED 27.2.2012 ADDRESSED TO THE AO HAS SPECIFICALLY MENT IONED THAT HE WAS UNABLE TO FIND ANY REFERENCE OF THE TRANSACTION WITH THE APPELLANT COMPANY M/S. PCI LIMITED IN THE COPY OF SWORN STATEMENT OF SHRI S.K. GUPTA SUPPLIED TO THE OFFICE OF THE CIT(A). THE AO WAS REQUESTED IN THE DIRECTION DATED 27.2.2012 T O VERIFY THE DULY SWORN STATEMENT AND INTIMATE WHETHER ANY REFERENCE TO THE TRANSACTIONS WITH M/S PCI LIMITED IN THESE SWORN STATEMENTS OF SHRI S.K. GUPT A WAS THERE. THE CIT(A) IN PARA ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 6 2 OF THE DIRECTION DATED 27.2.2012 RECORDED THAT IT APPEARS THAT NO ENQUIRES WERE CONDUCTED IN THE ADDRESS OF BOTH M/S GLOBEX TECH IN DIA LTD. AND M/S. BT TECH NET LTD.( GROUP COMPANIES OF SHRI S.K. GUPTA). THE CIT( A) HAS FURTHER DIRECTED TO DEPUTE THE INSPECTOR TO CARRY OUT NECESSARY ENQUIRE S ETC. AND THE ASSESSEE MAY BE ASKED TO FURNISH COPIES OF THE BANK ACCOUNT, DETAIL S OF THE PERSONS WHO HAVE VERIFIED THESE PAYMENTS ETC. THE AO HAS FILED A DET AILED REMAND REPORT DATED 4.7.2012 ADMITTING THAT THE ACTION U/S 147 OF THE A CT WAS TAKEN IN THE ASSESSEES CASE ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATION WING. THE AO FURTHER SUBMITTED IN THE REMAND REPORT THAT THE COP Y OF STATEMENT OF SHRI S.K. GUPTA AS RECORDED IN THE INVESTIGATION WING AND FORWARDED TO CIT(A)S OFFICE IS PRESENTLY NOT AVAILABLE IN THIS OFFICE RECORD. HE FURTHER SUB MITTED THAT SHRI S.K. GUPTA HAS FLOATED A NUMBER OF PAPER CONCERNS/ENTITIES AND EA CH CONCERN GAVE HUGE NUMBER OF ACCOMMODATION ENTRIES OF DIFFERENT NATURES TO NUMB ER OF INTERESTED PERSONS. HE FURTHER RECORDED IN HIS REMAND REPORT THE TOTAL OF SUCH ENTRIES / RECIPIENTS PARTIES WAS RUNNING INTO THOUSANDS AND THEREFORE IT WAS CER TAINLY NOT POSSIBLE FOR SHRI S.K. GUPTA TO NAME EACH SUCH RECIPIENTS / TRANSACTIONS IN HIS STATEMENT. 7. WE FIND THAT THE CIT(A) HAS CATEGORI CALLY RECORDED IN HIS DIRECTION U/S 250 (4) DATED 27.2.2012 THAT HE WAS UNABLE TO FIND ANY REFERENCE TO THE TRANSACTION WITH M/S. PCI LTD. ( THE APPELLANT) IN THE COPY OF THE SWORN STATEMENT SUPPLIED TO THIS OFFICE. THIS FINDING OF THE CIT(A) RECORDED IN HIS DIRECTION U/S 250(4) DATED 27.2.2012 COULD NOT BE CONTROVERTED BY THE REVENUE. THE AO IN HIS REMAND REPORT DATED 4.7.2012 HAS ADMITTED THAT THE STATEMENT OF S HRI S.K. GUPTA AS RECORDED BY THE INVESTIGATION WING WAS PRESENTLY NOT AVAILABLE IN HIS OFFICE RECORD. IN THESE FACTS OF THE CASE WE ARE UNABLE TO UPHOLD THE ACTION OF T HE AO IN REOPENING THE ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 7 ASSESSMENT BY ISSUANCE OF NOTICE U/S 148 AS THE DEP ARTMENT HAS FAILED TO CONNECT THE NAME OF THE APPELLANT BEFORE US WITH THE STATEM ENTS OF THE SOCALLED ENTRY PROVIDER SHRI S.K. GUPTA . ACCORDING TO THE AO THE STATEMENTS OF SHRI S.K. GUPTA AS RECORDED BY THE INVESTIGATION WING OF THE DEPARTMEN T WERE NOT AVAILABLE IN HIS OFFICE. THE CIT(A) HAS ALREADY HELD THAT HE WAS UNABLE TO F IND ANY REFERENCE TO THE TRANSACTION WITH THE APPELLANT COMPANY M/S. PCI LTD . IN THE COPY OF THE SWORN STATEMENTS OF SHRI S.K. GUPTA SUPPLIED TO HIS OFFIC E. ACCORDINGLY THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENT U/S 148 WERE BASED ON NO MATERIAL AND ARE CLEARLY UNSUSTAINABLE. IN THIS VIE W OF THE MATER WE HOLD THAT THERE WAS NO VALID REASON WITH THE AO TO REOPEN THE ASSES SMENT FOR THE RELEVANT ASSESSMENT YEARS AND ACCORDINGLY THE JURISDICTION U /S 147 / 148 OF THE ACT WAS WRONGLY ASSUMED BY THE AO AND THE REOPENING IS HEL D VOID AND THE REASSESSMENT FRAMED FOR BOTH THE RELEVANT ASSESSMENT YEARS ARE C ANCELLED AND THE GROUNDS OF APPEAL OF THE ASSESSEE RELATING TO THE LEGAL ISSUE OF REOPENING OF ASSESSMENT FOR BOTH THE ASSESSMENT YEARS ARE ALLOWED. IN VIEW OF O UR DECISION HOLDING THAT REOPENING OF ASSESSMENT IN BOTH THE ASSESSMENT YEAR S WAS VOID , WE ARE NOT ADJUDICATING THE OTHER GROUNDS OF APPEAL ON MERITS OF THE ADDITIONS MADE BY THE AO. 8. IN THE RESULT BOTH THE APPEALS OF THE ASS ESEE ARE ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON 5 TH MAY, 2015. SD/- SD/- (J.SUDHAKAR REDDY) (G.C. GUPTA) ACCOUNTANT MEMBER VIC E PRESIDENT DATED: THE 5 TH MAY, 2015 VEENA ITA NOS.5936, 5937/DEL/2012 M/S. PCI LTD. VS . ACIT. 8 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 1.4.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 6.4.20 15 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER