M/s Bhormal Dhansi Ram Ltd, Delhi V. ITO, New Delhi

ITA 891/DEL/2009

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3361 (ITAT-DELHI)
• Duration Of Justice: 8 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 06-07-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 09-03-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAVI KANT GUPTA SENIOR
• Keywords: Source of fund; Question of law; Tangible material; Accommodation entries; Reason to believe; Reassessment proceedings
• Section: 68; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH A : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.891/DEL./2009 (ASSESSMENT YEAR : 2000-01) M/S. BHOR MAL DHANSI RAM LIMITED, VS. ITO, WARD 2( 4), 17/16, SHAKTI NAGAR, NEW DELHI. DELHI 110 007. (PAN : AABCB8177D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI, ADVOCATE REVENUE BY : SHRI RAVI KANT GUPTA, SENIOR DR DATE OF HEARING : 08.02.2018 DATE OF ORDER : 21.02.2018 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, M/S. BHOR MAL DHANSI RAM LTD. (HEREI NAFTER REFERRED TO AS THE ASSESSEE COMPANY) BY FILING TH E PRESENT APPEAL, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 27.01. 2009 PASSED BY LD. CIT(APPEALS)-V, NEW DELHI QUA THE ASSESSMENT YE AR 2000-01 ON THE GROUNDS INTER ALIA THAT :- 1. (I) THE LOWER AUTHORITIES HAD ERRED IN TREATING THE SHARE APPLICATION MONEYS OF RS.12,50,000 FROM THREE PRIVATE LIMITED COMPANIES, VIZ. (A) RS. 5,00,000 FR OM ITA NO.891/DEL./2009 2 VICTORIA ADVERTISING PVT LTD., (II) RS.5,00,000 FR OM PARIVARTAN CAPITAL & FINANCIAL SERVICES PVT. LTD. A ND (III) RS.2,50,000 FROM I.G. PROPERTIES PVT. LTD. AS BEING THE ALLEGED UNDISCLOSED INCOME OF THE APPELLANT FOR THIS YEAR. (II) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIATING THAT THE SAID SHARE APPLICATION MONEYS HAD BEEN RECEIVED BY ACCOUNT PAYEE CHEQUES AND AS SUCH THE APPELLANT HAD DISCHARGED THE BURDEN ON THIS ACCOUNT IN THE LIGHT OF THE JUDGMENT OF PATNA HIGH COURT IN TH E CASE OF ADDITIONAL CIT V S BAHRI BROTHERS PVT. LTD. (1985) 154 ITR 244 AND THE JUDGMENT OF THE SUPREME COURT OF INDIA IN THE CASE OF CIT V S ORISSA CORPORATION PVT. LTD. (1986) 159 ITR 78 (SC). (III) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIATING THAT THE APPELLANT HAD FILED FORM NO.2 BEFORE THE REGISTRAR OF COMPANIES IN SUPPORT OF THE ALLOTMENT, INTER ALIA, IN RESPECT OF THE SAID EQUIT Y SHARES OF RS.12,50,000 ON THE BASIS OF THE BONA FIDE SHARE APPLICATION MONEYS. 2.(I) THE LOWER AUTHORITIES HAD ERRED IN NOT APPRECIATING THE THREE JUDGMENTS OF DELHI HIGH COUR T IN THE CASES OF (I) CIT V S DIVINE LEASING AND FINA NCE LTD., (II) CIT V S GENERAL EXPORTS & CREDIT LTD. AN D (III) CIT V S LOVELY EXPORTS WHEREBY THE ORDERS OF THE TRIBUNAL IN RESPECT OF SHARE APPLICATION MONEYS HAD BEEN AFFIRMED BY THE HIGH COURT. (II) THE LOWER AUTHORITIES HAD ERRED IN OVERLOOKIN G NOT ONLY THE SAID HIGH COURT JUDGMENTS BUT ALSO THE JUDGMENTS OF THE SUPREME COURT OF INDIA IN RESPECT OF SPECIAL LEAVE PETITIONS IN THE CASES OF CIT V S DIV INE LEASING AND FINANCE LTD. AND CIT V S LOVELY EXPORTS PVT. LTD. WHEREBY THE APEX COURT HAD UPHELD THE SAI D JUDGMENTS OF DELHI HIGH COURT AND HAD DISMISSED THE SPECIAL LEAVE PETITIONS OF THE CIT. 3. THE CIT (A) HAD ERRED IN OVERLOOKING THE JUDGMENT OR DELHI BENCH 'B' OF THE INCOME TAX APPELLATE TRIBUNAL DATED 24.10.2008 ARISING OUT OF ITA ITA NO.891/DEL./2009 3 NO.4670/DELL07 IN APPELLANT'S OWN CASE FOR THE ASSESSMENT YEAR 1999-2000 WHEREBY THE APPEAL OF THE CIT AGAINST THE ORDER OF THE CIT (A) FOR THE ASSESS MENT YEAR 1999-2000 HAD BEEN DISMISSED BY THE TRIBUNAL. 4. THE CIT (A) HAD ERRED IN UPHOLDING THE STAND OF THE ASSESSING OFFICER AND HAD DISMISSED THE APPEAL OF THE APPELLANT FOR THIS YEAR. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICA TION OF THE CONTROVERSY AT HAND ARE : ASSESSEE COMPANY HAS ORIG INALLY FILED RETURN OF INCOME FOR AY 2000-01 ON 30.11.2000 DECLA RING INCOME OF RS.54,470/- WHICH WAS PROCESSED ON 25.01.2002. SUBSEQUENTLY, ASSESSMENT WAS REOPENED ON THE BASIS OF INVESTIGATI ON REPORT RECEIVED FROM DIRECTORATE OF INCOME-TAX (INV.), NEW DELHI REGARDING ACCOMMODATION ENTRIES PROVIDED BY SOME EN TRY OPERATOR. AO PROPOSED TO REOPEN THE ASSESSMENT AND AFTER TAKI NG NECESSARY APPROVAL, ISSUED NOTICE U/S 148 OF THE INCOME-TAX A CT, 1961 (FOR SHORT THE ACT) ON 16.01.2007 AND IN REPLY THERETO , ASSESSEE COMPANY RELIED UPON THE EARLIER RETURN FILED ON 30. 11.2000 AS REPLY TO THE NOTICE U/S 148 OF THE ACT. THEREAFTER, NOTI CES U/S 143(2) / 142 (1) OF THE ACT ALONG WITH QUESTIONNAIRE WERE IS SUED AND IN RESPONSE THERETO, THE ASSESSEE SUBMITTED THE NAMES AND ADDRESSES OF THE PERSONS WHO HAD APPLIED FOR THE SHARES IN TH E ASSESSEE COMPANY. AO PROCEEDED U/S 133 (6) ALSO TO COLLECT NECESSARY INFORMATION AND ULTIMATELY FOUND THE AMOUNT OF RS.1 2,50,000/- ON ITA NO.891/DEL./2009 4 ACCOUNT OF SHARE APPLICATION MONEY AS UNEXPLAINED C ASH CREDIT DETAILED AS UNDER :- (I) M/S. VICTORIA ADVERTISING (P) LTD. RS.5,00,000/ - (II) M/S. PARIVARTAN CAPITAL & FINANCIAL SER. (P) LTD. RS.5,00,000/- (III) M/S. I.G. PROPERTIES (P) LTD. RS.2,50,000/- 3. ASSESSEE CARRIED THE MATTER BY WAY OF FILING APP EAL BEFORE THE LD. CIT (A) WHO HAS DISMISSED THE APPEAL. FEEL ING 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 ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. ASSESSEE WHILE MOVING AN APPLICATION UNDER RULE 27 OF INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 (FOR SH ORT THE RULES) SOUGHT TO RAISE THE FOLLOWING ADDITIONAL GR OUND :- THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, REASSESSMENT PROCEEDINGS U/S. 148 ARE ILLEGAL AND INVALID IN THE ABSENCE OF RECORDING OF PROPER SATISFACTION AND EXISTENCE OF ANY TANGIBLE MATERIAL . ITA NO.891/DEL./2009 5 6. SINCE THE ADDITIONAL GROUND SOUGHT TO BE RAISED BY THE ASSESSEE IS A LEGAL GROUND WHICH GOES TO THE ROOTS OF THE CASE, THE ASSESSEE IS ALLOWED TO RAISE THE ADDITIONAL GROUND CHALLENGING THE REASSESSMENT PROCEEDINGS U/S 148 OF THE ACT AS ILLE GAL, NULL AND VOID. 7. FIRST OF ALL, WE WOULD DISCUSS THE SUSTAINABILIT Y OF THE LEGAL GROUND THAT : ON THE FACTS AND CIRCUMSTANCES OF THE CASE, REASSESSMENT PROCEEDINGS U/S. 148 ARE ILLEGAL AND INVALID IN THE ABSENCE OF RECORDING OF PROPER SATISFACTION AND EXISTENCE OF ANY TANGIBLE MATERIAL . RAISED BY THE ASSESSEE COMPANY AS AN ADDITIONAL GRO UND. THE LD. AR FOR THE ASSESSEE CONTENDED THAT REOPENING MERELY ON THE BASIS OF REPORT OF DIRECTORATE OF INCOME-TAX (INV.) IS LI ABLE TO BE QUASHED WHEN NO INTANGIBLE OR INCRIMINATING MATERIAL UNEART HED BY THE AO AFTER COMPLETION OF THE ASSESSMENT PROCEEDINGS. 8. UNDISPUTEDLY, ON FILING OF THE RETURN OF INCOME BY THE ASSESSEE COMPANY ON 30.11.2000, INTIMATION U/S 143 (1) WAS ISSUED AND THEREAFTER AO PROPOSED TO REOPEN THE ASSESSMENT AFTER RECORDING REASONS U/S 148 OF THE ACT. LD. AR FOR T HE ASSESSEE COMPANY ALSO DREW OUR ATTENTION TO PARA 4.3 OF THE REASONS RECORDED BY THE AO, AVAILABLE AT PAGES 1 TO 7 OF TH E PAPER BOOK. ITA NO.891/DEL./2009 6 FOR FACILITY OF REFERENCE, PARA 4.3 OF THE REASONS RECORDED FOR REOPENING ARE REPRODUCED AS UNDER :- 4.3 IN VIEW OF THE FINDINGS OF THE INVESTIGATION REPORT , THE LENDERS IN THESE CASES HAVE BEEN PROVED TO BE MEN/PARTIES OF NO CREDITWORTHINESS. THE STATEMENTS ON OATH AND THE ADMISSION CLEARLY SHOW THAT THESE TRANSACTION ARE NON GENUINE. FURTHER, THE RESULTS O F ENQUIRIES CONDUCTED FOR THE A.Y 1999-00 BOLSTER THE REPORT OF INVESTIGATION WITH ALL MERITS. THEREFORE THE AFORESAID CREDIT ENTRIES ARE SQUARELY HIT BY SECTIO N 68 OF THE I.T. ACT. I THEREFORE HAVE REASONS TO BELIEVE T HAT THIS AMOUNT OF RS.12,50,000/- REPRESENTS INCOME OF THE ASSESSEE CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR A.Y. 2000-01. 9. BARE PERUSAL OF THE REASONS RECORDED BY THE AO U /S 148 PARTICULARLY PARA 4.3 REPRODUCED ABOVE GOES TO PROV E THAT THE AO HAS MERELY PROCEEDED ON THE BASIS OF INVESTIGATION REPORT PREPARED BY THE DIRECTORATE OF INCOME-TAX (INV.) AND THE AO HAS NOT LAID HAND ON ANY TANGIBLE OR INCRIMINATING MATERIAL ON T HE BASIS OF HIS OWN ENQUIRY. AO HAS ALSO RELIED UPON SOME ENQUIRIE S CONDUCTED FOR AY 1999-00 IN CASE OF ASSESSEE COMPANY AND PROC EEDED TO HAVE REASON TO BELIEVE THAT THE AMOUNT OF RS.12,50, 000/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR AY 200 0-01. 10. THE LD. AR FOR THE ASSESSEE COMPANY ALSO DREW O UR ATTENTION TOWARDS DECISION RENDERED BY THE COORDINATE BENCH O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1999-00 IN ITA NO.4670/D EL/2007 ITA NO.891/DEL./2009 7 ORDER DATED24.10.2008 WHICH WAS ALSO REOPENED ON THE SAME INVESTIGATION REPORT BY THE DIRECTORATE OF INCOME-T AX (INV.) WHEREIN THE ASSESSMENT WAS QUASHED BY THE CIT (A) A ND CONFIRMED BY THE TRIBUNAL. 11. HONBLE JURISDICTIONAL HIGH CURT IN CASE OF DHARAMVIR SINGH RAO VS. ACIT 2017-TIOL-2447-HC-DEL-IT HELD THAT WHEN REOPENING NOTICE IS SOLELY BASED ON THE INVEST IGATION WINGS REPORT AND NO TANGIBLE OR INCRIMINATING MATERIAL IS UNEARTHED AFTER COMPLETION OF ASSESSMENT PROCEEDINGS, THE REOPENING NOTICE DESERVES TO BE QUASHED. THIS DECISION RENDERED BY THE HONBLE HIGH COURT HAS BEEN AFFIRMED BY HONBLE SUPREME COU RT IN ACIT VS. DHARAMVIR SINGH RAO - 2017-TIOL-431-SC-IT. IN THE AFORESAID DECISION, THE HONBLE DELHI HIGH COURT HA S ALSO HELD THAT IT DOES NOT MATTER IF THE ASSESSMENT HAS BEEN COMPL ETED U/S 143 (3) OR INTIMATION U/S 143(1), THE ESSENTIAL PREREQUISIT E FOR EXISTENCE OF TANGIBLE MATERIAL HAS TO BE FULFILLED. EVEN ON THE BASIS OF SOME REPORT GIVEN BY INVESTIGATION WING OF DIRECTOR OF I NCOME-TAX (INV.) ASSESSMENT WAS REOPENED FOR 1999-00 IN ASSESSEES O WN CASE AND ASSESSMENT WAS NOT FOUND TO BE SUSTAINABLE BY THE C IT (A) AS WELL AS COORDINATE BENCH OF THE TRIBUNAL. ITA NO.891/DEL./2009 8 12. HONBLE PUNJAB AND HARYANA HIGH COURT IN CASE C ITED AS CIT VS. K.C. PIPES PVT. LTD. (2016) 386 ITR 532 ( P&H) WHILE DEALING WITH THE IDENTICAL ISSUE HELD AS UNDER :- THE ASSESSING OFFICER WAS OF THE VIEW THAT THE SHA RE APPLICATION MONEY WAS RECEIVED BY THE ASSESSEE FROM THE SHAREHOLDERS WHOSE SOURCES OF INCOME WERE DOUBTFUL. HOWEVER, IT WAS A FINDING OF FACT BY TH E TRIBUNAL AND THE COMMISSIONER (APPEALS) THAT THE MONEY RECEIVED BY THE COMPANY WAS CREDITED IN THE ACCOUNT AND THAT THE SHARES WERE ISSUED. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT IF THE SHAREHOLDE RS HAD ACQUIRED THE MONEY ILLEGALLY, THE ASSESSEE COUL D NOT 'BE HELD LIABLE. THERE WAS NOTHING ON RECORD TO SHO W THAT THE MONEY BELONGED TO THE ASSESSEE ITSELF AND THE DEPARTMENT COULD ONLY PROCEED AGAINST THE SHAREHOLDERS. NO QUESTION OF LAW AROSE. 13. SO, THE RATIO OF THE JUDGMENT IN CIT VS. K.C. PIPES PVT. LTD. (SUPRA) IS IN CASE ILLEGAL MONEY OF THE SHAREHOLDER IS INVESTED WITH THE ASSESSEE COMPANY, THE ASSESSEE COMPANY CANNOT B E MADE LIABLE AND THE REVENUE AUTHORITIES CAN PROCEED AGAINST THE SHAREHOLDER. 14. SO, IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, W E ARE OF THE CONSIDERED VIEW THAT UNEARTHING OF TANGIBLE/INCRIMI NATING MATERIAL AGAINST THE ASSESSEE AFTER COMPLETION OF ASSESSMENT U/S 143 (3) OR AFTER ISSUANCE OF INTIMATION U/S 143 (1) IS SINE QUA NON FOR ISSUANCE OF THE NOTICE U/S 148 OF THE ACT. 15. IN THE INSTANT CASE, THE ENTIRE EXERCISE OF REC ORDING OF REASONS AND ISSUANCE OF NOTICE U/S 148 IS BASED UPON THE RE PORT RECEIVED BY ITA NO.891/DEL./2009 9 THE AO FROM DIRECTORATE OF INCOME-TAX (INV.), HENCE THE ASSESSMENT IN THIS CASE IS NOT SUSTAINABLE AND IS L IABLE TO BE QUASHED. SO, WITHOUT GOING INTO THE MERITS OF THE SUSTAINABILITY OF THE ADDITION MADE BY THE AO, WE HEREBY QUASH THE AS SESSMENT PROCEEDINGS MADE BY THE AO AND AFFIRMED BY THE LD. CIT (A) AND THEREBY ALLOW THE APPEAL FILED BY THE ASSESSEE COMP ANY. ORDER PRONOUNCED IN OPEN COURT ON THIS 21 ST DAY OF FEBRUARY, 2018. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 21 ST DAY OF FEBRUARY, 2018/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-V, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.