NEELKANTH PLYWOOD PVT. LTD., NEW DELHI V. ITO, WARD- 18(1), NEW DELHI

ITA 6702/DEL/2018

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5290 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 22-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Initiation of penalty proceedings; Tangible material; Accommodation entries; Reassessment proceedings; Borrowed satisfaction
• Section: 143(1); 147; 131; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SH. R. K. PANDA, ACCOUNTANT MEMBER ITA NO.6702/DEL/2018 ASSESSMENT YEAR: 2008-09 M/S. NEELKANTH PLYWOOD PVT. LTD. C/O ANIL JAIN DD & CO. CHARTERED ACCOUNTANTS, 611, SURYA KIRAN BUILDING, 19 K. G. MARG, NEW DELHI-110001 PAN NO.AAACN0805B VS INCOME TAX OFFICER WARD 18 (1) NEW DELHI (APPELLANT) (RESPONDENT) APPELLANT BY SH.ANIL KUMAR JAIN, CA RESPONDENT BY SHRI S. L. ANURAGI, SR. DR DATE OF HEARING: 02/07/2019 DATE OF PRONOUNCEMENT: /08/2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 31.08.2018 OF THE CIT(A)-37, NEW DELHI RELATING TO A. Y. 2008-09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 11.09.200 8 DECLARING TOTAL INCOME OF RS.1,77,185/-. THE RETURN WAS PROC ESSED U/S. 143(1) ON 20.07.2009. SUBSEQUENTLY THE ASSESSING O FFICER RECEIVED INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT PAGE | 2 THAT A SEARCH OPERATION WAS CARRIED OUT IN THE CASE OF SH. SURENDER KUMAR JAIN GROUP OF CASES, WHO ARE KNO WN AS ENTRY OPERATORS. DURING THE COURSE OF SEARCH AND PO ST SEARCH ENQUIRIES IT WAS ESTABLISHED THAT THE SAID GROUP IS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES TO VARIOUS PERSONS WHOSE NAMES WERE NAMED IN THE REPORT. THE NAME OF THE ASS ESSEE COMPANY ALSO APPEARS IN THE SAID LIST AS ONE OF THE BENEFICIARIES BEING AMOUNT OF RS.5,50,000/- RECEIVED BY THE ASSES SEE AS SHARE CAPITAL MONEY FROM FINAGE LEASE & FINANCE P. LTD. THE ASSESSING OFFICER THEREAFTER REOPENED THE ASSESSMEN T U/S. 147 AND NOTICE U/S. 148 WAS ISSUED TO THE ASSESSEE. IN RESPONSE TO THE SAME THE ASSESSEE SUBMITTED THAT THE ORIGINAL R ETURN FILED ON 11.09.2008 MAY BE TREATED AS RETURN FILED IN RES PONSE TO NOTICE U/S.148. THE ASSESSING OFFICER ISSUED NOTIC E U/S. 133 (6) TO ORIENTAL BANK OF COMMERCE FOR COPY OF ACCOUNT OP ENING FORM AND BANK STATEMENT FROM 01.04.2007 TO 31.03.2008. HE ALSO ISSUED NOTICE U/S. 133 (6) TO M/S. FINAGE LEASE & F INANCE P. LTD. ASKING FOR DOCUMENTS REGARDING ITS TRANSACTION WITH THE ASSESSEE. IT WAS REPLIED BY THE SAID COMPANY THAT IT HAS GIVEN AN AMOUNT OF RS.5,50,000/- THROUGH CHEQUE NO. 00011 1 DATED 24.12.2007 DRAWN ON KOTAK MAHINDRA BANK. THE ASSES SING OFFICER ASKED THE ASSESSEE TO PRODUCE THE DIRECTOR OF ABOVE SAID COMPANY. HE ALSO ASKED THE ASSESSEE TO SUBSTANTIATE THE IDENTITY AND CREDITWORTHINESS OF THE INVESTOR COMPA NY AND GENUINENESS OF THE TRANSACTION. HOWEVER, THE ASSESS EE FAILED TO PRODUCE THE DIRECTOR OF THE INVESTOR COMPANY. REJEC TING THE VARIOUS EXPLANATION GIVEN BY THE ASSESSEE AND RELYI NG ON PAGE | 3 VARIOUS DECISIONS THE ASSESSING OFFICER MADE ADDITI ON OF RS.5,50,000/- TO THE TOTAL INCOME OF THE ASSESSEE U /S. 68 OF THE IT ACT. ON THE GROUND THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE INGREDIENTS OF THE SAID SECTION. 3. BEFORE CIT(A) THE ASSESSEE APART FROM CHALLENGIN G THE ADDITION ON MERIT CHALLENGED THE VALIDITY OF REASSE SSMENT PROCEEDINGS. HOWEVER, THE LD. CIT(A) WAS NOT SATIS FIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE AND UPHELD THE V ALIDITY OF REASSESSMENT PROCEEDINGS AND ALSO SUSTAINED THE ADD ITION MADE BY THE ASSESSING OFFICER U/S. 68 OF THE IT ACT. 4. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASS ESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISION OF LAW THE LD CIT(A) HAS FAILED TO APPRECIATE THAT THE INITIATION OF PRO CEEDINGS U/S 147/148 IS ILLEGAL AND BAD IN LAW AND CONSEQUENTLY THE ASSESSMENT FRAMED BEING ILLEGAL REQUIRES TO BE QUASHED. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF THE LAW, THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADD ITION OF RS5,50,000/-ON ACCOUNT OF SHARE APPLICATION MONEY AS CASH CREDIT U /S 68. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE PROVISIONS OF THE LAW, THE LD. AO HAS ERRED IN INITIATION OF PENALTY PROCEEDINGS U/S 271(L](C) OF THE ACT. 4. THAT THE APPELLANT CRAVES LEAVE TO RESERVE TO ITSEL F THE RIGHT TO ADD, ALTER AMEND, VARY, MODIFY AND/OR WITHDRAW AND GROUNDS OF APPEAL AT OR BEFORE THE TIME PAGE | 4 OF HEARING. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE REOPENING OF THE ASSESSMENT BY THE ASSESSI NG OFFICER IS ILLEGAL AND VOID AB INITIO. REFERRING TO THE REASO NS RECORDED BY THE ASSESSING OFFICER, COPY OF WHICH IS PLACED AT P AGES 20 AND 21 OF THE PAPER BOOK HE SUBMITTED THAT THE REASONS HAVE BEEN RECORDED IN A MECHANICAL MANNER AND WITHOUT INDEPEN DENT APPLICATION OF MIND BY THE ASSESSING OFFICER. HE S UBMITTED THAT THE ASSESSING OFFICER HAS SIMPLY MENTIONED THAT AS PER THE INFORMATION RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT VIDE LETTER DATED 12.03.2013 THAT THE AS SESSEE DURING THE FINANCIAL YEAR 2007-08 HAS RECEIVED TOTA L ENTRIES OF RS.5,50,000/- FROM THE ENTITIES MANAGED AND CONTROL LED BY THE SH. SURENDER KUMAR JAIN FOR PROVIDING ACCOMMODATION ENTRIES TO THE BENEFICIARIES. HE SUBMITTED THAT IN THE REA SONS RECORDED THERE IS NO REFERENCE OF ANY TANGIBLE MATERIAL OR S TATEMENT ALLEGING THE INVOLVEMENT OF THE ASSESSEE. THE NATUR E OF THE ENTRY WHETHER IT IS LOAN OR SHARE CAPITAL OR PURCHASE HAS NOT BEEN CLEARLY SPELT OUT IN THE REASONS ITSELF. THUS IT I S CLEAR THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND REAS ONS HAVE BEEN RECORDED ON THE BASIS OF BORROWED SATISFACTION . THERE IS NO LIVE LINK OR NEXUS BETWEEN THE INFORMATION SO RECEI VED AND FORMATION OF BELIEF BY THE ASSESSING OFFICER FOR ES CAPEMENT OF INCOME. FOR THE ABOVE PROPOSITION HE RELIED ON THE FOLLOWING DECISIONS :- PAGE | 5 1. SABH INFRASTRUCTURE LTD. VS. ACIT OF HONBLE DELHI HIGH COURT 2. MEENAKSHI OVERSEAS VS. PCIT ITA NO.692/2016 3. SIGNATURE HOTELS (P) LTD. VS. ITO OF HONBLE DELHI HIGH COURT REPORTED IN 338 ITR 51 4. CIT VS. INSECTICIDES INDIA LTD. OF HONBLE DELHI H IGH COURT REPORTED IN 357 ITR 330 5. CIT VS. G&G PHARMA INDIA LTD. OF HONBLE DELHI HIGH COURT ITA NO.545/2015 6. SO FAR AS THE MERIT OF THE CASE IS CONCERNED HE SUBMITTED THAT TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF THE INVESTOR COMPANY AND GENUINENESS OF THE TRANSACTION THE ASSE SSEE COMPANY HAD FILED THE COPY OF CONFIRMATION, COPY OF SHARE APPLICATION FORM, BANK STATEMENTS, BALANCESHEET, IN COME TAX RETURN, AUDITOR REPORT, BOARD RESOLUTIONS, DIRECTOR S REPORT AND RETURN OF ALLOTMENT OF SHARES BEFORE THE ASSESSING OFFICER. FURTHER THE COMPANY M/S. FINAGE LEASE & FINANCE P. LTD IS HAVING NET WORTH OF RS.14.57 CRORES. HE SUBMITTED THAT THE INVESTOR COMPANY HAS COMPLIED WITH THE NOTICE ISSUE D U/S. 133 (6) BY THE ASSESSING OFFICER. 7. SO FAR AS THE PRODUCTION OF THE DIRECTOR IS CONC ERNED HE SUBMITTED THAT ASSESSEE HAD REQUESTED THE ASSESSING OFFICER TO CALL THEM BY ISSUING NOTICE U/S. 131 WHICH WAS NOT DONE BY THE ASSESSING OFFICER. HE SUBMITTED THAT THE ASSESSEE H AS DISCHARGED THE ONUS CAST ON IT BY PROVING THE VARIO US INGREDIENTS OF SECTION 68. THEREFORE, THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) IS NO T PROPER. HE ALSO RELIED ON THE FOLLOWING DECISIONS :- PAGE | 6 1. CIT VS. GANGESHWARI OF HONBLE DELHI HIGH COURT REP ORTED IN 361 ITR 10 2. GOODVIEW TRADING VS. PCIT OF HONBLE DELHI HIGH COU RT REPORTED IN 377/2016 3. CIT VS. VICTOR ELECTRODES 329 ITR 271 4. NANCY SALES PVT. LTD. VS. ITO ITA NO.4129/DEL/2017 5. MOTI ADHESIVES PVT. LTD. VS. ITO ITA NO.3133/DEL/20 18 8. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON T HE ORDER OF THE CIT(A). SO FAR AS THE VALIDITY OF REASSESSMENT PROCEEDINGS ARE CONCERNED THE LD. DR RELIED ON THE FOLLOWING DE CISIONS :- 1. YOQENDRAKUMAR GUPTA VS ITO (51 TAXMANN.COM 383) (SC )/R20141 227 TAXMAN 374 (SC) 2. RAYMOND WOOLLEN MILLS LTD. V. ITO AND OTHERS 236 IT R 3. YUVRAI V. UNION OF INDIA BOMBAY HIGH COURT R20091 3 15 ITR 84 (BOMBAY)/[2009] 225 CTR 283 (BOMBAY) 4. ACIT VS RAJESH JHAVERI STOCK BROKERS (P.) LTD [ 2007] 161 TAXMAN 316 (SC)/[2007] 291 ITR 500 ( SC)/[2007] 210 CTR 30 (SC) 5. DEVI ELECTRONICS PVT LTD VS ITO BOMBAY HIGH COURT 2 017-TIQL-92-HC-MUM- IT 6. ACORUS UNITECH WIRELESS (P.) LTD. VS ACIT DELHI HIGH COURT [2014] 43 TAXMANN.COM 62 (DELHI)/[2014] 223 TAXMAN 181 (DELHI )(MAG)/[2014] 362 ITR 417 (DELHI) 7. PRANAWA LEAFIN (P) LTD. VS. DCIT BOMBAY HIGH COURT [2013] 33 TAXMANN.COM 454 (BOMBA) /[2013] 215 TAXMAN 109 (BOM BAY) (MAG.) 8. PCIT VS. PARAMOUNT COMMUNICATIONS (P.) LTD. DELHI H IGH COURT [2017] 79 TAXMANN.COM 409 (DELHI)/[2017] 392 ITR 444 (DELHI). 9. PARAMOUNT COMMUNICATION (P.) LTD. VS PCIT SUPREME C OURT 2017-TIQL-253- SC-IT PAGE | 7 10. - AMIT POLYPRINTS (P.) LTD. VS PCIT GUJARAT HIGH COU RT T20181 94 TAXMANN.COM 393 (GUJARAT) 11. AASPAS MULTIMEDIA LTD. VS PCIT GUJARAT HIGH COURT T 20171 83 TAXMANN.COM 82 (GUJARAT) 12. MURLIBHAI FATANDAS SAWLANI VS. ITO GUJARAT HIGH CO URT 2016-TIOL-370- HC-AHM-IT 13. ANKIT AGROCHEM (P) LTD. VS. JCIT RAJASTHAN HIGH COU RT [2018] 89 TAXMANN.COM 45 (RAJASTHAN) 14. RAKESH GUPTA VS. CIT P & H HIGH COURT [2018] 93 TAX MAN.COM 271 (PUNJAB & HARYANA) 9. SO FAR AS THE ADDITION ON MERIT IS CONCERNED THE LD. DR RELIED ON THE FOLLOWING DECISIONS :- 1. PCIT VS. NRA IRON & STEEL (P) LTD. [2019] 103 TAXMA NN.COM 48 (SC) 2. PCIT VS. NDR PROMOTERS PVT. LTD. (2019-TIOL-172-HC- DEL-IT) 10. I HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. I HAVE ALSO C ONSIDERED THE VARIOUS DECISIONS CITED BEFORE ME. A PERUSAL OF THE REASONS FOR REOPENING OF THE CASE FOR THE IMPUGNED ASSESSMENT Y EAR, COPY OF WHICH IS PLACED AT PAPER BOOK PAGE NO. 20-21 SHOWS THAT THE REOPENING WAS MADE ON THE BASIS OF THE REPORT OF TH E INVESTIGATION WING AND THERE IS NO INDEPENDENT APPL ICATION OF MIND BY THE ASSESSING OFFICER FOR SUCH REOPENING. THE HONBLE DELHI HIGH COURT IN A NUMBER OF CASES HAS HELD THAT THE REOPENING ON THE BASIS OF REPORT OF INVESTIGATION W ING WITHOUT INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OF FICER IS NOT PAGE | 8 VALID. ACCORDINGLY THE REASSESSMENT PROCEEDINGS WH ICH WERE BASED ON THE REPORT OF THE INVESTIGATION WING AND W ITHOUT INDEPENDENT APPLICATION OF MIND BY THE ASSESSING OF FICER HAVE BEEN HELD TO BE ILLEGAL. SINCE THE ASSESSING OFFICE R IN THE INSTANT CASE HAS REOPENED THE ASSESSMENT ON THE BASIS OF RE PORT OF THE INVESTIGATION WING AND THERE APPEARS TO BE NO INDEP ENDENT APPLICATION OF MIND BY THE ASSESSING OFFICER FOR RE OPENING OF THE CASE, THEREFORE, THE REASSESSMENT PROCEEDING INITIA TED BY THE ASSESSING OFFICER ARE NOT PROPER. I, THEREFORE, HO LD THAT THE REASSESSMENT PROCEEDING INITIATED BY THE ASSESSING OFFICER IS ILLEGAL AND ACCORDINGLY THE SUBSEQUENT PROCEEDINGS ALSO BECOME ILLEGAL AND VOID. SINCE THE ASSESSEE SUCCEEDS ON TH IS LEGAL GROUND, THEREFORE, THE GROUND CHALLENGING THE ADDIT ION OF RS.5,50,000/- U/S. 68 OF THE IT ACT ON MERIT BECOME S ACADEMIC IN NATURE AND, THEREFORE, THE SAME IS NOT BEING ADJ UDICATED. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLO WED. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21.08.2019. SD/- (R.K PANDA) ACCOUNTANT MEMBER *NEHA* DATE:- 21.08.2019 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI PAGE | 9 DATE OF DICTATION 19.08.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 21.08.2019 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS 21.08.2019 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 21.08.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/ PS 21.08.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT 21.08.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 21.08.2019 DATE ON WHICH FILE GOES TO THE HEAD CLERK. THE DATE ON WHICH FILE GOES TO THE ASSISTANT REGIST RAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER