M/s Chanderiya Real Estate (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 6657/DEL/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7208 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 23-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 15-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA
• Keywords: Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-3 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 6657/DEL/2015 ASSESSMENT YEAR: 2009-10 M/S CHANDERIYA REAL ESTATE (P) LTD., VS. ACIT, CE NTRAL CIRCLE-30 26/26, EAST PATEL NAGAR, NEW DELHI NEW DELHI 110 008 (PAN: AAACL4917C) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RAMESH GOYAL, CA REVENUE BY : SHRI FR MEENA, SR. DR DATE OF HEARING : 23-08-2016 DATE OF ORDER : 30-08-2016 ORDER PER H.S. SIDHU, J.M. THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 21.10.2015 OF THE LD. CIT(A)-30, NEW DELHI PERTAINI NG TO ASSESSMENT YEAR 2009-10 AND RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORD ER PASSED BY THE LD. AO WHICH IS CONFIRMED BY LD. CIT( A) IS BAD BOTH IN THE YE OF LAW AND ON FACTS. 2. THE LD. CIT(A) IS TOTALLY UNJUSTIFIED IN DISMISSING THE APPEAL OF THE ASSESSEE IN UPHOLDING THE ORDER OF TH E AO ITA NO.6657/DEL/2015 2 WHO MADE THE ADDITION OF RS. 10,00,000/- ON ACCOUNT OF SHARE APPLICATION MONEY AND RS. 10,000/- ON ACCOUNT OF COMMISSION. 3. THE LD. CIT(A) IS TOTALLY UNJUSTIFIED IN CONFIRMING ADDITION ON ACCOUNT OF SHARE APPLICATION MONEY AND COMMISSIO N PAID WHERE NO CROSS EXAMINATION HAS BEEN DONE BY TH E AO. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY OF THE GROUNDS OF APPEAL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY FILED ITS RETURN OF INCOME FOR AY 2009-10 ON 28.8.2009 DE CLARING INCOME OF RS. 10,86,360/-. THE RETURN WAS PROCESSED U/S. 143(1) AT THE RETURNED INCOME. AN INFORMATION WAS RECEIVED FROM THE COMMISSIONER OF INCOME TAX, CENTRAL-II, NEW DELHI V IDE LETTER DATED 14.3.2002 AS UNDER:- SEARCH AND SURVEY OPERATIONS WERE UNDERTAKEN AT VARIOUS RESIDENTIAL AND BUSINESS PREMISES OF ASEEM KUMAR GUPTA, CA & GROUP AND OTHER BENEFICIARY GROUP OF CASES ON 26.3.2010. WHEN CONFRONTED WITH THE EVIDENCES GATHERED, SHREE ASEEM KUMAR GUPTA ADMITTE D TO HAVE PROVIDED ACCOMMODATION ENTRIES TO SEVERAL BENEFICIARIES WITH THE COMPANIES IN WHICH EITHER HE HIMSELF, OR HIS EMPLOYEES, WERE DIRECTOR OR PROPRIE TOR. ITA NO.6657/DEL/2015 3 THE GENERAL MODUS OPERANDI OF SHRI ASEEM KUMAR GUPT A WAS TO ACCEPT CASH FROM THE BENEFICIARIES. THE CASH WAS DEPOSITED IN THE BANK ACCOUNT AND CHEQUES WERE ISS UED TO THE BENEFICIARIES. IN ORDER TO DISGUISE HIS TRA NSACTIONS AS GENUINE, SHRI ASEEM KUMAR GUPTA HAS BEEN FOLLOWI NG LAYERING OF ACCOUNTS, WHEREY CASH WAS INTRODUCED AND BENEFICIARIES WERE ISSUED CHEQUES FROM ONE OF HIS INTERMEDIARY COMPANY AFTER ROUNDING THE FUNDS AMONG SEVERAL INTERMEDIARIES. SHRI ASEEM KUMAR GUPTA HAS STATED ON OATH (AT THE T IME OF SEARCH AS WELL AS DURING THE ASSESSMENT PROCEEDI NGS) THAT THE CASH AND OTHER UNEXPLAINED DEPOSITS IN VAR IOUS BANK ACCOUNTS OF SEVERAL ENTITIES CONTROLLED BY HIM BELONG TO THE BENEFICIARIES AND SHOULD BE TAXED IN THE HANDS OF RESPECTIVE BENEFICIARIES. THE EVIDENCES GA THERED AT THE TIME OF SEARCH FURTHER CORROBORATE THE ASSER TION MADE BY SHRI ASEEM KUMAR GUPTA THAT HE WAS MERELY PROVIDING ACCOMMODATION ENTRIES. IN VIEW OF THE ABOVE FACTS, THE CASE WAS REOPENED U /S. 147 AFTER RECORDING THE REASONS AND ORDER U/S. 143(3) R .W.S. 147 OF THE I.T. ACT WAS PASSED ON 22.12.2014 AT A TOTAL INCOM E OF RS. 20,96,360/-. ITA NO.6657/DEL/2015 4 3. AGAINST THE ORDER OF THE LD. AO, ASSESSEE APPEAL ED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 21.10.201 5 HAS DISMISSED THE APPEAL OF THE ASSESSEEE. 4. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. C IT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. LD. COUNSEL OF THE ASSESSEE HAS FILED THE PAPER BOOK OF PAGES 1 TO 90 CONTAINING WRITTEN SUBMISSION; COPY OF THE OR DER OF HONBLE DELHI HIGH COURT IN THE CASE OF G & G PHARMA INDIA LTD, ITA NO. 545/2015; ITAT ORDER IN THE CASE OF G & G PHARMA I NDIA LTD. ITA NO. 3149/DEL/2015; SHARE APPLICATION MONEY FORM OF M/S MODERATE CREDIT CORPORATION LTD. DATED 23.7.2008; COPY OF BO ARD RESOLUTION OF M/S MODERATE CREDIT CORPORATION LTD. DATED 25.6.200 8; CERTIFICATE OF INCORPORATION OF THE COMPANY; COPY OF BANK STATEMEN T OF THE INVESTOR COMPANY WITH CORPORATION BANK; COPY OF TH E AUDITED BALANCE SHEET AS ON 31.3.2009 I.E. AT 2009-10; COPY OF INCOME TAX RETURN FOR THE AY 2009-10; COPY OF FORM 23AC OF ROC REGARDING LATEST REGISTERED OFFICE AND BALANCE SHEET AS ON 31 .3.2014 OF THE COMPANY; COPY OF THE ORDER OF HONBLE ITAT IN THE C ASE OF NEELKANT FINBUILD LTD. ITA NO. 2821/DEL/2009 AND COPY OF THE ORDER HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. VRINDAVAN F ARMS PVT. LTD. ITA NO. 71/2015. HE STATED THAT LD. CIT(A) HAS ERRED I N CONFIRMING THE ACTION OF THE AO IN ASSUMING JURISDICTION U/S. 147 AND THAT TOO WITHOUT COMPLYING WITH THE MANDATORY CONDITIONS AS PRESCRIBED UNDER SECTION 147 TO 151 OF THE I.T. ACT, 1961 AND THE REASONS ITA NO.6657/DEL/2015 5 RECORDED ARE INVALID AND CONTRARY TO LAW AND FACTS AND THERE IS NO SATISFACTION AS PER LAW U/S. 151 OF THE ACT. HE FURTHER DRAW OUR ATTENTION TOWARDS THE COPY OF REASONS FOR REOPENING THE CASE U/S. 148 AND STATED THAT NO PROPER REASONS WERE RECORDED ; NO NEXUS BETWEEN THE MATERIALS RELIED UPON AND THE BELIEF FO RMED FOR ESCAPEMENT OF INCOME; NO APPLICATION OF MIND; NO PR OPER SATISFACTION WAS RECORDED BEFORE ISSUE OF NOTICE U/S. 148; NO IN DEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. I T WAS FURTHER STATED THAT THE CASE WAS REOPENED ONLY ON THE BASIS OF INVESTIGATION WING INFORMATION WHICH SUFFERS WITH SERIOUS DEBILIT Y AND LACKS DEFINITENESS, WITHOUT DESCRIBING THE BASIC ASPECTS OF ALLEGED TRANSACTION AND IN THE ABSENCE OF THE SAME, WHOLE ACTION OF THE AO GETS VITIATED. TO SUPPORT HIS CONTENTION HE SUBM ITTED THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASS ESSEE BY THE ITAT DECISION DATED 09.1.2015 IN THE CASE OF G&G PHARMA INDIA LIMITED VS. ITO PASSED IN ITA NO. 3149/DEL/2013 (AY 2003-04 ) IN WHICH THE JUDICIAL MEMBER IS THE AUTHOR. HE FURTHER STATED THAT THE ABOVE DECISION OF THE ITAT DATED 9.1.2015 HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITS DECISION DATED 08. 10.2015 IN ITA NO. 545/2015 IN THE CASE OF PR. CIT-4 VS. G&G PHARMA IN DIA LTD. IN THIS REGARD, HE FILED THE COPIES OF THE AFORESAID DECISI ONS BEFORE THE TRIBUNAL. IN VIEW OF THE ABOVE, HE REQUESTED THAT BY ITA NO.6657/DEL/2015 6 FOLLOWING THE AFORESAID PRECEDENTS THE REASSESSMEN T PROCEEDINGS OF THE AO MAY BE QUASHED BY ACCEPTING THE APPEAL FILED BY THE ASSESSEE. 6. ON THE CONTRARY, LD. DR RELIED UPON THE ORDER PA SSED BY THE AUTHORITIES BELOW AND STATED THAT THE AO HAS PROPER LY RECORDED THE FOR REOPENING BY DUE APPLICATION OF MIND, HENCE, TH E APPEAL OF THE ASSESSEE MAY BE DISMISSED. 7. I 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 MY 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:- SEARCH AND SURVEY OPERATIONS WERE UNDERTAKEN AT VARIOUS RESIDENTIAL AND BUSINESS PREMISES OF ASEEM KUMAR GUPTA, CA & GROUP AND OTHER BENEFICIARY GROUP OF CASES ON 26.3.2010. WHEN CONFRONTED WITH THE EVIDENCES GATHERED, SHREE ASEEM KUMAR GUPTA ADMITTE D TO HAVE PROVIDED ACCOMMODATION ENTRIES TO SEVERAL BENEFICIARIES WITH THE COMPANIES IN WHICH EITHER HE HIMSELF, OR HIS EMPLOYEES, WERE DIRECTOR OR PROPRIE TOR. ITA NO.6657/DEL/2015 7 THE GENERAL MODUS OPERANDI OF SHRI ASEEM KUMAR GUPT A WAS TO ACCEPT CASH FROM THE BENEFICIARIES. THE CASH WAS DEPOSITED IN THE BANK ACCOUNT AND CHEQUES WERE ISS UED TO THE BENEFICIARIES. IN ORDER TO DISGUISE HIS TRA NSACTIONS AS GENUINE, SHRI ASEEM KUMAR GUPTA HAS BEEN FOLLOWI NG LAYERING OF ACCOUNTS, WHEREY CASH WAS INTRODUCED AND BENEFICIARIES WERE ISSUED CHEQUES FROM ONE OF HIS INTERMEDIARY COMPANY AFTER ROUNDING THE FUNDS AMONG SEVERAL INTERMEDIARIES. SHRI ASEEM KUMAR GUPTA HAS STATED ON OATH (AT THE T IME OF SEARCH AS WELL AS DURING THE ASSESSMENT PROCEEDI NGS) THAT THE CASH AND OTHER UNEXPLAINED DEPOSITS IN VAR IOUS BANK ACCOUNTS OF SEVERAL ENTITIES CONTROLLED BY HIM BELONG TO THE BENEFICIARIES AND SHOULD BE TAXED IN THE HANDS OF RESPECTIVE BENEFICIARIES. THE EVIDENCES GA THERED AT THE TIME OF SEARCH FURTHER CORROBORATE THE ASSER TION MADE BY SHRI ASEEM KUMAR GUPTA THAT HE WAS MERELY PROVIDING ACCOMMODATION ENTRIES. ALL THE RELEVANT EVIDENCES IN THE FORM OF CASH BOOK AND CHEQUE BOOK PAGES RECORDED IN THE HAND WRITING OF S HRI ASEEM KUMAR GUPTA IN VARIOUS ANNEXRES FOUND AND SEIZED FROM THEIR RESIDENCES. AS PER THE REPORT, THE ASSESSEE COMPANY M/S CHANDER IYA REAL ESTATE PVT LTD. HAD OBTAINED THE FOLLOWING ITA NO.6657/DEL/2015 8 ACCOMMODATION ENTIRES IN THE FORM OF SHARE APPLICAT ION / SHARE PREMIUM / LOAN DURING THE FY 2008-09 RELEVANT TO AY 2009-10. FROM TO BANK CHEQUE NO. RTGS RTGS DATE AMOUNT MODERATE CREDIT CORP. LTD. CHANDERIYA REAL ESTATE PVT. LTD. CORP. BANK, CP, NEW DELHI RTGS 22.7.2008 10,00,000/- IN VIEW OF THE ABOVE MENTIONED FACTS, IT IS CLEAR T HAT THE UNDISCLOSED INCOME OF THE BENEFICIARY COMPANY WHIC H HAS BEEN INTRODUCED BY THEM IN THE FORM OF SHARE CAPITA L /PREMIUM/ LOAN HAS ESCAPED TAXATION BECAUSE THE ASS ESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS BE FORE THE AO, RESULTING IN UNDER ASSESSMENT OF INCOME OF RS. 10,0 0,000/-. HENCE, I HAVE REASONS TO BELIEVE THAT INCOME OF RS. 10,00,000/- AS PER TABLE IN PRECEDING PARAGRAPHS HA S ESCAPED ASSESSMENT IN THE CASE OF ASSESSEE RELEVANT TO AY 2 009-10, WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT. 8. AFTER GOING THROUGH THE REASONS RECORDED BY THE AO, AS AFORESAID, I AM OF THE VIEW THAT AO HAS NOT APPLIE D HIS MIND SO AS TO COME TO AN INDEPENDENT CONCLUSION THAT HE HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED DURING THE YEAR. IN MY 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 DIRE CTORATE OF ITA NO.6657/DEL/2015 9 INCOME TAX (INVESTIGATION), NEW DELHI. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE A ND THE CASE LAW APPLICABLE IN THE CASE OF THE ASSESSEE, I AM OF TH E CONSIDERED 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 . MY 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 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 ITA NO.6657/DEL/2015 10 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. 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 ITA NO.6657/DEL/2015 11 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, I AM OF THE CONSIDERED VIEW TH AT 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 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) I DECIDE THE LEGAL ISSUE IN DISPUTE IN FAVOR OF THE ASSESSEE AND AGAINST THE REVENUE AND ACCORDINGLY QU ASH THE REASSESSMENT PROCEEDINGS AND ALLOW THE LEGAL ISSUE. SINCE I HAVE ITA NO.6657/DEL/2015 12 ALREADY QUASHED THE REASSESSMENT PROCEEDINGS, AS AF ORESAID, THE OTHER ISSUES ARE NOT BEING DEALT WITH BEING ACADEMI C IN NATURE. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30-08-2016. SD/- (H.S. SIDHU) JUDICIAL MEMBER DATED : 30-08-2016 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.