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ITA 6995/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2201 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 22-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D S RAWAT SENIOR
• Keywords: Reopening of assessment; Search and seizure; Question of law; Competent authority; Block assessment; Reassessment proceedings; Borrowed satisfaction
• Section: 69C; 143(3); 234B; 147; 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6995/DEL./2017 (ASSESSMENT YEAR : 2007-08) M/S. MDC SALES PVT. LTD., VS. ITO, WARD 16 (3), 3812/5, KANHAIYA NAGAR, NEW DELHI. TRI NAGAR, NEW DELHI 110 035. (PAN : AAACM5464D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ANIL JAIN, CA REVENUE BY : SHRI D.S. RAWAT, SENIOR DR DATE OF HEARING : 27.08.2018 DATE OF ORDER : 30.08.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. MDC SALES PVT. LTD. (HEREINAFT ER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESEN T APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 15.09.2017 PASSE D BY LD. CIT (APPEALS)-28, NEW DELHI QUA THE ASSESSMENT YEAR 200 7-08 ON THE GROUNDS INTER ALIA THAT :- 1. THE ASSESSMENT ORDER PASSED U/S 143(3)/147 BY T HE ASSESSING OFFICER IS ILLEGAL, BAD IN LAW AND THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS)-VI HAS ALSO ER RED IN UPHOLDING THE SAME. ITA NO.6995/DEL./2017 2 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - VI HAS ERRED IN UPHOLDING THAT THE AO HAS RIGHTLY INIT IATED THE PROCEEDINGS UNDER SECTION 147 OF THE ACT IRRESPECTI VE OF THE FACT THAT 'REOPENING OF CASE UNDER INCOME ESCAPEMENT ASS ESSMENT IS BAD IN LAW AND WITHOUT MERIT. FURTHER, THE INSTANT REOPENING SUFFERS FROM BASIC DEFECT OF NON-APPLICATION OF MIN D (REOPENING BEING MADE ARBITRARILY WITHOUT LOOKING CASE RECORDS ) BY THE ASSESSING OFFICER. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) - VI HA S ERRED IN UPHOLDING THAT THE ASSESSING OFFICER HAS R IGHTLY MADE ADDITION OF RS.5,00,000/- ON ACCOUNT OF SHARE APPLI CATION MONEY UNDER SECTION 68 OF THE INCOME TAX ACT 'IRRESPECTIV E OF THE FACT THAT CONDITIONS PRESCRIBED UNDER THE SAID SECTION A RE DULY FULFILLED BY THE ASSESSEE AND SHARE APPLICATION MON EY RECEIVED BY THE ASSESSEE IS A GENUINE AND BONAFIDE TRANSACTION' . 4. ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE AS WELL AS LAW ON THE SUBJECT, THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) - VI HAS ERRED IN CONFIRMING THE ACTION O F ASSESSING OFFICER IN MAKING OF ADDITION OF RS.10000/- U/S 69C OF THE ACT BY CONTENDED ON ITS OWN ASSUMPTION AND PRESUMPTION THA T ASSESSEE COMPANY WOULD HAVE PAID THE COMMISSION @2% FOR TAKI NG ACCOMMODATION ENTRY IN THE GARB OF SHARE APPLICATIO N MONEY. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - VI HAS FURTHER ERRED IN LAW AND ON THE FACTS OF THE CA SE IN CONFIRMING THE LEVY OF INTEREST AND INITIATION OF P ENALTY PROCEEDING BY ASSESSING OFFICER UNDER SECTION 271(1 )(C) OF THE INCOME TAX ACT 1961. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) - VI HAS FURTHER ERRED IN LAW AND ON THE FACTS OF THE CA SE IN CONFIRMING THE LEVY OF INTEREST BY ASSESSING OFFICE R U/S 234B OF THE ACT. 7. IT IS THEREFORE PRAYED THAT THE ASSESSMENT FRAME D U/S 143 (3) R.W.S. 147 OF THE INCOME TAX ACT MAY KINDLY BE QUASHED OR ALTERNATIVELY THE ADDITIONS MADE BY THE ASSESSING O FFICER AND CONFIRMED BY THE COMMISSIONER OF INCOME-TAX (APPEAL S)-VI MAY PLEASE BE DELETED. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ON RECEIVING INFORMATION FROM DIRECTOR OF INCOME-TAX (INVESTIGATION)-II, NEW DELHI THAT TH E ASSESSEE ITA NO.6995/DEL./2017 3 COMPANY HAD RECEIVED AN ACCOMMODATION ENTRY TO THE TUNE OF RS.5,00,000/- FROM M/S. KDG PROPERTIES AND CONSTRUC TION PVT. LTD. ON 22.02.2007, AO REOPENED THE ASSESSMENT BY R ECORDING REASONS THAT THE ASSESSEE HAD NOT DISCLOSED FULLY A ND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT AFTER G ETTING APPROVAL FROM ADDL. COMMISSIONER OF INCOME-TAX. THEREAFTER, A NOTICE U/S 142 (1) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) REQUIRING THE ASSESSEE TO FILE NECESSARY DETAILS. ASSESSEE W AS CALLED UPON TO PRODUCE PRINCIPAL OFFICER OF M/S. KDG PROPERTIES AN D CONSTRUCTION PVT. LTD. ON 16.01.2015 BUT ON ITS FAI LURE TO PRODUCE, AO PROCEEDED TO HOLD THAT RECEIPT OF RS.5,00,000/- ON ACCOUNT OF SHARE CAPITAL IS NOTHING BUT AN ACCOMMODATION ENTRY AND MADE ADDITION THEREOF TO THE TOTAL INCOME OF THE ASSESSE E. AO ALSO MADE ADDITION OF RS.10,000/- ON ACCOUNT OF ESTIMATED COM MISSION @ 2% FOR TAKING ACCOMMODATION ENTRY UNDER THE GARB OF SH ARE CAPITAL FROM ACCOMMODATION ENTRY PROVIDER. 3. ASSESSEE CARRIED THE MATTER BY WAY OF APPEAL BEF ORE THE LD. CIT (A) WHO HAS CONFIRMED THE ADDITION BY DISMISSIN G THE APPEAL. FEELING AGGRIEVED, THE ASSESSEE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF FILING THE PRESENT APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ITA NO.6995/DEL./2017 4 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. ASSESSEE BY MOVING SEPARATE APPLICATION SOUGHT T O RAISE THE ADDITIONAL GROUND OF APPEAL TO THE EFFECT THAT : THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D PROVISION OF THE LAW THE INITIATION OF PROCEEDING U /S 147/148 IS ILLEGAL AND BAD IN LAW AS THERE IS NO VA LID SATISFACTION OF THE APPROVING AUTHORITY AS REQUIRED U/S 151 OF THE ACT. ON THE GROUND THAT DUE TO OMISSION, THE LEGAL GROUN D NOT COULD BE RAISED. KEEPING IN VIEW THE SETTLED PRINCIPLE OF L AW THAT THE LEGAL GROUND CAN BE RAISED AT ANY STAGE OF PROCEEDINGS, W HICH IS NECESSARY TO ADJUDICATE THE COMPLETE CONTROVERSY AT HAND, THE APPLICATION FOR ADDITIONAL GROUND IS ALLOWED WITHOU T PREJUDICE TO THE MERITS OF THIS CASE. 6. SINCE THE ASSESSEE HAS RAISED AFORESAID LEGAL GR OUND, WE WOULD ADJUDICATE THIS FIRST BEFORE GOING INTO THE M ERITS OF THIS CASE. 7. THE LD. AR FOR THE ASSESSEE CONTENDED THAT AO, W ITHOUT APPLYING HIS MIND, HAS REOPENED THE ASSESSMENT MERE LY ON THE BASIS OF INFORMATION RECEIVED FROM THE INVESTIGATIO N WING OF THE INCOME-TAX DEPARTMENT AND DREW OUR ATTENTION TOWARD S PAGE 4 TO 6 OF THE PAPER BOOK WHICH IS A NOTE PUT UP BY THE ITO TO ADDL. COMMISSIONER OF INCOME-TAX SEEKING NECESSARY APPROV AL FOR ITA NO.6995/DEL./2017 5 REOPENING THE ASSESSMENT. APPROVAL ACCORDED BY LD. CIT (A) IS EXTRACTED AS UNDER :- APPROVED IN VIEW OF REASONS GIVEN ABOVE. SD/- 26.03.2009 8. WHEN WE EXAMINE THE EXTRACT OF THE APPROVAL ACCO RDED BY ADDL. CIT FOR REOPENING THE ASSESSMENT, IT SHOWS TH AT THE SAME IS NOT ONLY ON THE BASIS OF BORROWED SATISFACTION BUT IS A MECHANICAL APPROVAL WITHOUT APPLYING INDEPENDENT MIND. MOREOV ER, THERE IS NOT AN IOTA OF MATERIAL ON RECORD AS TO WHICH OF TH E DOCUMENTS HAVE BEEN PERUSED AND WHAT WERE THE REASONS FOR HIS (ADD L. CIT) TO BE SATISFIED TO INITIATE THE REOPENING OF ASSESSMENT U /S 148 OF THE ACT. EVEN OTHERWISE, REASONS RECORDED BY THE AO FOR REOP ENING OF THE ASSESSMENT SHOWS THAT HE HAS ALSO NOT APPLIED HIS M IND RATHER BASED THE ENTIRE CASE ON THE BASIS OF INFORMATION R ECEIVED FROM INVESTIGATION WING. 9. HONBLE SUPREME COURT IN CASE CITED AS CIT VS. S. GOYANKA LIME & CHEMICAL LTD. (2015) 64 TAXMANN.COM 313 (S C) EXAMINED THE IDENTICAL ISSUE AS TO ACCORDING THE SA NCTION FOR REOPENING THE ASSESSMENT U/S 148 OF THE ACT BY MERE LY RECORDING YES. I AM SATISFIED. AND HELD THAT REOPENING ON T HE BASIS OF MECHANICAL SANCTION IS INVALID BY RETURNING FOLLOWI NG FINDINGS :- ITA NO.6995/DEL./2017 6 SECTION 151, READ WITH SECTION 148 OF THE INCOME- TAX ACT, 1961 - INCOME ESCAPING ASSESSMENT - SANCTION FOR IS SUE OF NOTICE (RECORDING OF SATISFACTION) - HIGH COURT BY IMPUGNE D ORDER HELD THAT WHERE JOINT COMMISSIONER RECORDED SATISFACTION IN MECHANICAL MANNER AND WITHOUT APPLICATION OF MIND T O ACCORD SANCTION FOR ISSUING NOTICE UNDER. SECTION 148, REO PENING OF ASSESSMENT WAS INVALID - WHETHER SPECIAL LEAVE PETI TION FILED AGAINST IMPUGNED ORDER WAS TO BE DISMISSED - HELD, YES [IN FAVOUR OF ASSESSEE] SEARCH AND SEIZURE-PROCEDURE FOR BLACK ASSESSMENT- SEARCH WAS CONDUCTED AT RESIDENTIAL AND BUSINESS PR EMISES OF ASSESSEE AND NOTICE FOR BLOCK ASSESSMENT U/S. 158-B C WAS ISSUED- FOR BLOCK PERIOD, RETURNS WERE FILED THAT WERE PROC ESSED U/S. 143 (1)- HOWEVER, NOTICE U/S. 148 WAS ISSUED BY AO, ON BASIS OF CERTAIN REASONS RECORDED-ASSESSEE OBJECTED TO SAME BEFORE AO, THAT WAS REJECTED AND ASSESSMENT WAS COMPLETED U/SS . 143(3) AND 147-CIT(A) FOUND THAT REASON RECORDED BY JOINT COMM ISSIONER OF INCOME TAX, FOR ACCORDING SANCTION, WAS MERELY R ECORDING I AM SATISFIED'-ACTION FOR SANCTION WAS ALLEGED TO BE WITHOUT APPLICATION OF MIND AND TO BE DONE IN MECHANICAL MA NNER-HELD, WHILE ACCORDING SANCTION, JOINT COMMISSIONER, INCOM E TAX ONLY RECORDED 'YES, I AM SATISFIED'-MECHANICAL WAY OF RE CORDING SATISFACTION BY JOINT COMMISSIONER, THAT ACCORDED S ANCTION FOR ISSUING NOTICE U/S. 147, WAS CLEARLY UNSUSTAINABLE- ON SUCH CONSIDERATION, BOTH APPELLATE AUTHORITIES INTERFERE D INTO MATTER- NO ERROR WAS COMMITTED WARRANTING RECONSIDERATION-A S FAR AS EXPLANATION TO S. 151, BROUGHT INTO FORCE BY FINANC E ACT, 2008 WAS CONCERNED, SAME ONLY PERTAINED TO ISSUANCE OF N OTICE AND NOT WITH REGARD TO MANNER OF RECORDING SATISFACTION-AME NDED PROVISION DID NOT HELP REVENUE-NO QUESTION OF LAW I NVOLVED IN MATTER, THAT WARRANTED RECONSIDERATION-REVENUE'S AP PEALS DISMISSED. 10. THE HONBLE DELHI HIGH COURT HAS ALSO DECIDED T HIS LEGAL ISSUE IN CASE CITED AS PR. CIT VS. N.C. CABLES LTD. IN ITA 335/2015 ORDER DATED 11.01.2017 BY RETURNING FOLLOWING FINDINGS:- REASSESSMENT-ISSUANCE OF NOTICE-SANCTION FOR ISSU E OF NOTICE- ASSESSEE HAD IN ITS RETURN FOR A Y 2001-02 CLAIMED THAT SUM OF RS. 1 CRORE WAS RECEIVED TOWARDS SHARE APPLICATION AMOUNT S AND A FURTHER SUM OF THIRTY FIVE LAKHS WAS CREDITED TO IT AS AN A DVANCE TOWARDS LOAN-ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3)-H OWEVER, PURSUANT TO REASSESSMENT NOTICE, WHICH WAS DROPPED DUE TO TE CHNICAL REASONS, AND LATER NOTICE WAS ISSUED AND ASSESSMENTS WERE TA KEN UP AFRESH-AFTER CONSIDERING SUBMISSIONS OF ASSESSEE AND DOCUMENTS P RODUCED IN REASSESSMENT PROCEEDINGS, AO ADDED BACK A SUM OF RS .1,35,00,000- CIT(A) HELD AGAINST ASSESSEE ON LEGALITY OF REASSES SMENT NOTICE BUT ITA NO.6995/DEL./2017 7 ALLOWED ASSESSEE'S APPEAL ON MERITS HOLDING THAT AO DID NOT CONDUCT APPROPRIATE ENQUIRY TO CONCLUDE THAT SHARE INCLUSIO N AND ADVANCES RECEIVED WERE FROM BOGUS ENTITIES-TRIBUNAL ALLOWED ASSESSEE'S APPEAL ON MERITS-REVENUE APPEALED AGAINST APPELLATE ORDER ON MERITS- ASSESSEE'S CROSS APPEAL WAS ON CORRECTNESS OF REOPE NING OF ASSESSMENT- TRIBUNAL UPHELD ASSESSEE'S CROSS-OBJECTIONS AND DIS MISSED REVENUE'S APPEAL HOLDING THAT THERE WAS NO PROPER APPLICATION OF MIND BY CONCERNED SANCTIONING AUTHORITY U/S SECTION 151 AS A PRE-CONDITION FOR ISSUING NOTICE U/S 147/148-HELD, SECTION 151 STIPUL ATES THAT CIT (A), WHO WAS COMPETENT AUTHORITY TO AUTHORIZE REASSESSME NT NOTICE, HAD TO APPLY HIS MIND AND FORM OPINION- MERE APPENDING OF EXPRESSION 'APPROVED' SAYS NOTHING-IT WAS NOT AS IF CIT (A) HA D TO RECORD ELABORATE REASONS FOR AGREEING WITH NOTING PUT UP-A T SAME TIME, SATISFACTION HAD TO BE RECORDED OF GIVEN CASE WHICH COULD BE REFLECTED IN BRIEFEST POSSIBLE MANNER-IN PRESENT CASE, EXERCI SE APPEARS TO HAVE BEEN RITUALISTIC AND FORMAL RATHER THAN MEANINGFUL, WHICH WAS RATIONALE FOR SAFEGUARD OF APPROVAL BY HIGHER RANK ING OFFICER- REVENUE'S APPEAL DISMISSED. 11. FURTHERMORE, PERUSAL OF THE NOTING SHEET DATED 09.03.2010 TO 30.12.2010 MADE AVAILABLE TO THE BENCH FOR PERUSAL SHOWS THAT ONLY AO HAS RECORDED THAT ADDL.CIT HAS CONSIDERED T HE REASONS RECORDED BEFORE ACCORDING THE SANCTION, HOWEVER EVE N NO PRIMA FACIE MATERIAL IS THERE, IF ADDL.CIT HAS APPLIED HI S MIND BY CONSIDERING THE REASONS RECORDED BEFORE ACCORDING T HE SANCTION. WE ARE OF THE CONSIDERED VIEW THAT THE AO WHO HAS R ECORDED THE REASONS CANNOT ENTER INTO THE MIND OF THE SANCTIONI NG AUTHORITY (ADDL.CIT) DISCHARGING THE QUASI-JUDICIAL FUNCTION FOR ACCORDING VALID SANCTION FOR REOPENING THE ASSESSMENT. 12. MOREOVER, ACCORDING SANCTION IS NOT A SUPERVISO RY ROLE RATHER IT IS A QUASI-JUDICIAL FUNCTION TO BE PERFORMED BY THE ADDL.CIT AS REQUIRED U/S 151 OF THE ACT. WHEN THE REVENUE DEPA RTMENT IS MANNED BY HIGHLY QUALIFIED OFFICERS THEY ARE TO EVO LVE LEGALLY ITA NO.6995/DEL./2017 8 SUSTAINABLE STANDARD OPERATING PROCEDURE FOR DISCHA RGING QUASI- JUDICIAL FUNCTION. 13. COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF SHRI AMARLAL BAJAJ VS. ACIT IN ITA NO.611/MUM/2004 ORDER DATED 24.07.2013 WHILE DECIDING THE IDENTICAL ISSUE ALSO PROCEEDED TO HOLD THAT MERELY RECORDING WORD (APPROVED ) AT THE BOTTOM OF THE NOTE SHEET PREPARED BY THE ITO IS NOT APPROVAL FOR ACCORDING THE SANCTION AFTER APPLYING HIS MIND RATHER IT IS A MEC HANICAL APPROVAL WHICH IS NOT SUSTAINABLE IN THE EYES OF LAW. 14. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, WITHO UT GOING INTO THE MERITS OF THE CASE, WE ARE OF THE CONSIDER ED VIEW THAT INITIATION OF REASSESSMENT PROCEEDINGS U/S 147 OF T HE ACT, FOLLOWED WITH NOTICE U/S 148 OF THE ACT, ARE NOT SUSTAINABLE IN THE EYES OF LAW FOR WANT OF VALID APPROVAL BY THE ADDL.CIT, HEN CE HEREBY QUASHED. CONSEQUENTLY, THE APPEAL FILED BY THE ASS ESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF AUGUST, 2018. SD/- SD/- (N.K. BILLAIYA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF AUGUST, 2018 TS ITA NO.6995/DEL./2017 9 COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-28, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.