Mukesh Adlakha, New Delhi V. ITO WARD - 62(1), New Delhi

ITA 9755/DEL/2019

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2587 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 25-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tangible material; Accommodation entries; Reason to believe
• Section: 147; 148; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: ‘SMC’ NEW DELHI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA No.9755/Del/2019 Assessment Year: 2011-12 Sh. Mukesh Adlakha, AE-43, Tagore Garden, New Delhi Vs. Income Tax Officer, Ward -62(1), New Delhi PAN :AAHPA3621L (Appellant) (Respondent) ORDER This is an appeal by the assessee against order dated 31.10.2019 of learned Commissioner of Income Tax (Appeals), Delhi, pertaining to assessment year 2011-12. 2. Grounds raised by the assessee are as under: 1. That the impugned order passed u/s 250 of the Income-tax Act, 1961 is bad in law and needs to be set-aside. 2. That the order passed u/s 147/143 is bad in law and needs to be set-aside. 3. That the objection against the reopening the case u/s 148 as filed by the Appellant was erroneously adjudicated by Ld. AA. 4) That the 'Reason to believe' as recorded u/s 148 was completely on erroneous facts and on mere suspicion. The assessment order was illegal as provisions of the sections 148 and 151 were not followed and complied with as provided under The Act'. 5) That assessment order was failed to appreciate the movement of goods through sale which is not possible for alleged accommodation entry. 6) That assessment order was further illegal due to the mis- representation of the facts in the order. Appellant by Mr. Shantanu, Advocate Respondent by Sh. Om Prakash, Sr. DR Date of hearing 30.05.2022 Date of pronouncement 27.07.2022 2 ITA No.9755/Del/2019 3. Ground nos. 1, 2 and 6 are general in nature, hence, do not require specific adjudication. 4. In ground no. 3, the assessee has challenged the order passed by the Assessing Officer disposing of the objections raised against initiation of proceeding under section 147 of the Act. In my view, in case, the assessee is aggrieved with the order passed by the Assessing Officer disposing of the objection, the remedy lies elsewhere and not before the Tribunal. Therefore, this ground is dismissed. 5. In ground no. 4, the assessee has challenged the validity of reopening of assessment under section 147 of the Act. Briefly the facts relating to this issue are, the assessee is a resident individual. As stated by the Assessing Officer, the assessee is engaged in the business of executing works contract relating to supply and fitting of electrical goods and installation of electrical equipment and repair, maintenance and operation of air conditioning plants through his proprietor concern, M/s. Space Age Engineers. For the assessment year under dispute, the assessee had filed his return of income on 29.09.2011 declaring income of Rs.9,19,919/-. It is evident, subsequently, the Assessing Officer received information from the Investigation Wing, Ghaziabad, that the assesse has taken 3 ITA No.9755/Del/2019 accommodation entry of Rs.2,06,016/- indicating that certain supplies amounting to Rs. 2,06,016/- made by M/s. Akshay Sales Corporation, a proprietary concern of Sh. Bijender Jain is nothing but in the nature of accommodation entry. Based on such information, the Assessing Officer reopened the assessment under section 147 of the Act. 6. Before us, learned counsel for the assessee submitted that merely based on information received from the Investigation Wing, the Assessing Officer has reopened the assessment mechanically without proper application of mind. He submitted, before initiating proceeding under section 147 of the Act, the Assessing Officer has not made inquiry to ascertain, whether there is any escapement of income. He submitted, since, there is no nexus between the material available and formation of belief to establish escapement of income, the proceeding initiated under section 147 of the Act is invalid. Further, he submitted, the approval granted under section 151 of the Act is also without proper application of mind and is mechanical. Thus, he submitted, the proceedings initiated under section 147 of the Act is invalid. 7. Learned Departmental Representative submitted, the Assessing Officer having information in his possession indicating 4 ITA No.9755/Del/2019 escapement of income has validly initiated proceedings under section 147 of the Act. 8. I have considered rival submissions and perused the materials on record. On a reading of the reasons recorded for reopening of assessment, a copy of which was placed before me, it is discernible that the Assessing Officer was in possession of tangible material indicating that certain purchases claimed to have been made by the assessee in the year under consideration are non-genuine and in the nature of accommodation entries received from one Sh. Bijender Jain, proprietor of M/s. Akshay Sales Corporation. Thus, it cannot be said that the Assessing Officer did not have any tangible material to form his belief that income chargeable to tax has escaped assessment. At the stage of recording of reasons for reopening of assessment, the Assessing Officer is not required to make full-blown inquiry and come to a definite conclusion that income has escaped assessment. What the Assessing Officer is required to do is to form a prima facie belief regarding escapement of income based on materials in his possession. In the facts of the present case, undoubtedly, there is a live link between materials available on record and formation of belief that income has escaped assessment. Insofar as assessee’s 5 ITA No.9755/Del/2019 contention that approval under section 151 of the Act has been mechanically granted without proper application of mind, I am unable to accept the claim of the assessee, as, the assesse has failed to establish such claim with cogent materials. Therefore, I do not find any merit in the ground raised. Accordingly, ground is dismissed. 9. In ground no. 5, the assessee has challenged the addition made by the Assessing Officer on merits. As could be seen from the materials on record, the Assessing Officer was of the view that purchases worth Rs.2,06,016/- claimed to have been made by the assessee from M/s. Akshay Sales Corporation is non-genuine and merely accommodation entry. Basis for coming to such conclusion is the statement recorded from Sh. Bijender Jain, proprietor of M/s. Akshay Sales Corporation. Referring to the aforesaid statement, the Assessing Officer has observed that the concerned person has admitted of having not carried on any genuine business activity but only provides accommodation entry. Further, referring to the bank statement of M/s. Akshay Sales Corporation, the Assessing Officer has observed that immediately after the cheque is received from customer/purchasing party, which is credited to the bank account, the amount is withdrawn in cash and refunded 6 ITA No.9755/Del/2019 back to the concerned party after deducting commission. Thus, ultimately, the Assessing Officer concluded that the purchases of Rs.2,06,016/- are non-genuine, hence, added back to the income of the assessee. Though, the assessee contested the aforesaid addition before learned Commissioner (Appeals), however, he was unsuccessful. 10. Learned counsel for the assessee submitted, simply relying upon the statement recorded from a third party by the Investigation Wing, the Assessing Officer has made the addition. He submitted, neither the statement recorded was confronted to the assessee during the assessment proceedings, nor an opportunity to cross- examine the person whose statement was relied upon was granted to the assessee. He submitted, no material has been brought on record to establish that the payments made by the assessee were returned back in cash. He submitted, in course of assessment proceeding, the assessee had furnished quantitative tally of purchases/sales, wherein, no defect was pointed out by the Assessing Officer. Thus, he submitted, the addition made is unsustainable. 7 ITA No.9755/Del/2019 11. Learned Departmental Representative strongly relied upon the observations of the Assessing Officer and learned Commissioner (Appeals). 12. I have considered rival submissions and perused the materials on record. Undoubtedly, based on the information received from the Investigation Wing and, more particularly, the statement supposedly recorded from Sh. Bijender Jain, proprietor of M/s. Akshay Sales Corporation, the Assessing Officer has concluded that the purchases of Rs. 2,06,016/- are in the nature of accommodation entry. Except the statement of Sh. Bijender Jain and the bank statement copy, the Assessing Officer had not brought on record any other corroborative evidence to establish that the purchases are non-genuine. This is crucial because the statement recorded from Sh. Bijender Jain, cannot by itself form the basis of addition, as, in the said statement, the concerned party has also stated that M/s. Akshay Sales Corporation does business in ferrous and non-ferrous steel and supplies goods by procuring from other companies on commission basis. Thus, the statement of Sh. Bijender Jain appears to be contradictory, hence, not fully reliable. Therefore, unless there are other corroborative evidence to establish the fact that whatever has been stated by Sh. Bijender 8 ITA No.9755/Del/2019 Jain regarding provision of accommodation entry is correct, no addition can be made simply relying upon the statement of Sh. Bijender Jain. More so, when the assessee has furnished the quantitative details of purchases, sales and stock, which have not been disbelieved by the Assessing Officer. Though, the material in possession of the Assessing Officer, to some extent, raises suspicion/doubt qua the purchases made, however, such suspicion/doubt cannot take place of evidence. One more aspect which needs to be mentioned is, the Assessing Officer has not mentioned the appropriate provision under which he made the addition. This, in my view, is a serious flaw in the assessment order. Thus, on overall consideration of facts and materials on record, I hold that the addition made is unsustainable. Accordingly, I delete the addition. 13. In the result, the appeal is partly allowed. Order pronounced in the open court on 27 th July, 2022 Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 27 th July, 2022. RK/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi