M/s Roopali Marketing Ltd., New Delhi V. ITO, New Delhi

ITA 98/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 82026 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 19-11-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 07-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M B REDDY
• Assessee Lawyers: R SANTHAN AM; VIS H AL AGGARWAL
• Keywords: Principle of natural justice; Accommodation entries
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SH. N. K. SAINI , AM AND SH. I. C. SUDHIR , JM ITA NO. 98/DEL/2011 : ASSTT. YEAR : 2002 - 03 M/S ROOPALI MARKETING L IMITED C/O - D OSTWAL & ASSOCIATES, 303 - 304, DAKHA CHAMBERS, 2068/38, NAIWALA, KAROL BAGH, NEW DELHI - 1100 05 VS INCOME TAX OFFICER, WARD - 9(1 ), NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AABCR8276P A SSESSEE BY : SH. R. SANTHANAM & VIS H AL AGGARWAL, ADV. REVENUE BY : SH. M. B. REDDY, CIT, DR DATE OF HEARIN G : 19.11 . 2014 DATE O F PRONOUNCEMENT : 21 . 11 .2014 ORDER P ER N. K. SAINI , AM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 29.10.2010 OF LD. CIT(A) - X I I , NEW DELHI . 2. FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) - XII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW, IN UPHOLDING THE ILLEGAL ORDER PASSED BY THE AO WITHOUT JURIS DICTION, VIOLATIVE OF NATURAL JUSTICE, WITHOUT APPLICATION OF FAIR AND OBJECTIVE MIND TO FACTS OF THE CASE AND THE LAW APPLICABLE AND WITHOUT GUIDED BY THE BINDING DECISIONS OF THE COURTS AND TRIBUNALS AND HENCE LIABLE TO BE SET ASIDE AND QUASHED AND DECLA RED NON - EST IN LAW. ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) - XII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW, IN UPHOLDING THE ILLEGAL ACTION OF RE - ASSESSMENT AND ASSUMPTION OF JURISDICTION ILLEGALLY BY THE RESPONDENT AND THE IMP UGNED ASSESSMENT ORDER IS LIABLE TO QUASHED AS UNSUSTAINABLE, BOTH ON FACTS AND IN LAW. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) - XII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW, IN UPHOLDING THE ILLEGAL ORDER PASSED BY THE AO W ITHOUT CONSIDERING THE PROVISIONS OF SECTION 170(2) OF INCOME TAX ACT. BY WHICH ALL THE CASE OF AMALGAMATION, THE LIABILITY OF SUCCESSOR COMPANY IS LIMITED TO THE TAX IF ANY PAYABLE FOR THE YEAR OF SUCCESSION AND THE IMMEDIATELY PRECEDING YEAR. THEREFORE T HE SUCCESSOR HAS NO LIABILITY AT ALL AND REOPENING THE CASE IS BAD IN LAW AND BEYOND THE JURISDICTION OF THE AO. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) - XII, NEW DELHI HAS ERRED BOTH ON FACTS AND IN LAW, IN UPHOLDING THE NOTICE IS SUED U/S 148 AS VALID IGNORING THE FACT THAT THE NOTICE U/S 148 WAS NOT ISSUED AND/OR SERVED ON NON - EXISTING COMPANY AND ENTIRE PROCEEDING OF RE - ASSESSMENT IS VOID - AB - INITIO, ILLEGAL AND UNAUTHORIZED BY LAW. 5. THE RESPONDENT HAS ERRED IN LAW AS THE STATU TORY REQUIREMENT OF SECTION 147 TO 153 OF THE INCOME TAX ACT AND THE IMPUGNED ORDER OUGHT TO HAVE BEEN SET ASIDE BY THE CIT(A) AND FAILURE TO DO SO HAS VITIATED THE IMPUGNED ORDER. 6. THE ORDER OF RE - ASSESSMENT HAVING BEEN PASSED IN VIOLATION OF NATURAL J USTICE AND HASTILY BY OBTAINING BEHIND THE BACK OF THE APPELLANT ON THE BASIS OF SOME ALLEGED STATEMENTS/INFORMATION NONE OF WHICH HAD BEEN MADE AVAILABLE TO THE APPELLANT NOR ANY OPPORTUNITY PROVIDED TO REBUT THE SAME AND WITHOUT PROVIDING OPPORTUNITY OF CROSS - EXAMINATION OF DIFFERENT PERSONS SPECIFICALLY ASKED BY THE APPELLANT AND THERE WAS NOT EVEN A SHOW CAUSE NOTICE SPECIFICALLY PROPOSING TO MAKE THE ADDITIONS NOR ANY ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 3 EFFECTIVE OPPORTUNITY OF PERSONAL HEARING WAS GIVING HENCE, THE IMPUGNED ORDER OUGHT TO HAVE BEEN SET ASIDE BY THE CIT(A) AND FAILURE TO DO SO HAVE VITIATED THE IMPUGNED ORDER. 7. THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE RESPONDENT HAS NOT DISCHARGED ITS ONUS OF PROOF IN ANY MANNER AND HAS CHOSEN TO MAKE ILLEGAL ADDITION PERVERSELY AND ALL THE ADDITIONS THEREFORE OUGHT TO BE SET ASIDE BY LD. CIT(A) AND FAILURE TO DO SO HAS VITIATED THE IMPUGNED ORDER. 8. THE RESPONDENT HAS NOT REPLIED TO THE OBJECTION SPECIFICALLY RAISED BY THE ASSESSEE DURING THE COURSE OF PROCE EDING BY PASSING THE SPEAKING ORDER IN TERMS OF LAW THEREFORE IMPUGNED ORDER PASSED OUGHT TO HAVE BEEN SET ASIDE BY LD. CIT(A) AND FAILURE TO DO SO HAVE VITIATED THE IMPUGNED ORDER. 9. LD. CIT(A) ERRED IN UPHOLDING THE ILLEGAL ADDITIONS OF RS. 48,00,000/ - U/S 68 BY TREATING UNEXPLAINED INCOME BY THE RESPONDENT AS JUSTIFIED IGNORING THE RECORDS AND DOCUMENTS ALREADY FILED BEFORE THE ITO WHICH WERE NOT PROPERLY VERIFIED AND ACCEPTED BY HIM. HENCE THE ORDER MAY BE VACATED AND DEMAND MAY BE DELETED. 10. THE A UTHORITIES BELOW HAVE ERRED IN NOT FOLLOWING THE BINDING DECISIONS OF COURTS AND TRIBUNALS RELIED UPON BY THE APPELLANT AND IMPUGNED ORDERS CANNOT, THEREFORE, BE SUSTAINED BOTH ON FACTS AND IN LAW. 11. LD. CIT(A) HAS ALSO ERRED IN UPHOLDING THE ILLEGAL AD DITIONS AND DISALLOWANCES AND CONSEQUENT DEMANDS OF INCOME TAX, INTEREST AND PENALTIES ILLEGALLY RAISED BY THE RESPONDENT AND HENCE THE IMPUGNED ORDER SUSTAINING THE ADDITIONS AND DEMAND WOULD REQUIRE TO BE SET ASIDE AND QUASHED TO THAT EXTENT. 12. THE AP PELLANT CRAVES LEAVE TO RAISE FURTHER/ADDITIONAL GROUNDS AND DOCUMENTS AND FILE PAPER BOOK BEFORE THE HEARING OF THE ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 4 APPEAL AND PRAYS FOR THE APPEAL TO BE ALLOWED AFTER HEARING BOTH SIDE. 3. FROM THE ABOVE GROUNDS IT IS GATHER ED THAT THE ASSESSEE HAD CHA LLENGED THE VALIDITY OF THE RE - ASSESSMENT PROCEEDINGS INITIATED BY THE AO BY ISSUING THE NOTICE U/S 148 OF THE IT ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE COMPANY I.E. M/S SPARROW RESORTS PVT . LTD. WAS AMALGAMATED WITH M/S ROOPALI MARKETING PVT. LTD. , THE AO RECEIVED INFORMATION FROM THE INVESTIGATION WING THAT AS A RES ULT OF ENQUIRIES CONDUCTED, I T WAS FOUND THAT SOME PERSONS WERE ENGAGED IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES BY CREATING VARIOUS ENTITIES WHOSE ONLY ACTIVITY WAS PROVIDING ACCOMMODATION ENTRIES AND IN LIEU OF SUCH SERVICES, TH O SE PERSONS CHARGED SOME COMMISSION. THE AO POINTED OUT THAT THE ASSESSEE RECEIVED AN AMOUNT OF RS. 30,50,000/ - DURING THE PREVIOUS YEAR RELEV ANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION AS ACCOMMODATION ENTRIES FROM VARIOUS CONCERNS. HE, THEREFORE, ISSUED NOTICE U/S 148 OF THE ACT IN THE NAME OF M/S SPARROW RESORTS PVT. LTD. ON 25.03.2009 AFTER OBTAINING APPROVAL OF COMMISSIONER OF INCOME TAX - III, NEW DELHI. THE AO SUBSEQUENTLY FRAMED THE ASSESSMENT BY MAKING AN ADDITION OF RS. 48,00,000/ - . 5 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND CHALLENGED THE VALIDITY OF INITIATION OF THE PROCEEDINGS U/S 147 OF THE ACT BY STATING THAT THE ORDER PASSED BY THE AO WAS BAD IN LAW BECAUSE THE ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 5 ASSESSEE COMPANY AMALGAMATED WITH M/S ROOPALI MARKETING PVT. LTD. AND THEREFORE AS PER THE PROVISIONS OF SECTION 170(2) OF THE ACT THE SUCCESSOR HAD LIABILITY TO PAY TAX IF ANY PAYABLE FOR THE YEAR IN WHICH THE SUCCESSION TOOK PLACE OR IN THE IMMEDIATE PRECEDING YEAR. IT WAS FURTHER STATED THAT THE NOTICE U/S 148 OF THE ACT WAS ISSUED TO NON - EXISTING COMPANY AS SUCH THE ASSESSMENT PROCEEDINGS WERE VOID AB - INITIO . 6. THE LD. CIT(A) AFTER CO NSIDERING THE SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE COMPANY MERGED WITH M/S ROOPALI MARKETING PVT. LTD. W.E.F 01.04.2003, THEREFORE, THE NOTICE FOR THE ASSESSMENT YEAR 2002 - 03 U/S 147 OF THE ACT WAS CORRECTLY SENT IN THE NAME OF M/S SPARRO W RESORTS PVT. LTD. HE FURTHER OBSERVED THAT AS PER THE PROVISIONS OF SECTION 176(3) OF THE ACT ANY PERSON WHO DISCONTINUED ITS BUSINESS WAS REQUIRED TO GIVE A NOTICE OF SUCH DISCONTINUANCE TO THE AO WITHIN 15 DAYS THEREOF. H OWEVER , THE ASSESSEE HAD NOT BE EN ABLE TO SUBMIT ANY EVIDENCE TO THIS EFFECT THEREFORE, THE NOTICE U/S 147 OF THE ACT WAS CORRECTLY ISSUED. THE LD. CIT(A) ALSO MENTIONED THAT THE AO ISSUED A NOTICE WHICH PERTAINED TO THE PERIOD PRIOR TO THE AMALGAMATION AND SECTION 292B OF THE ACT TAKES CARE OF ANY SUCH SITUATION WHEN NOTICE HAD BEEN ISSUED ACCORDING TO THE INTENT AND PURPOSE OF THE ACT. 7 . NOW THE ASSESSEE IS AN APPEAL . T HE LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND FURTHER SUBMITTED T HAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE VIDE THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 6 SPL S SIDDHARTHA LTD. REPORTED AT 340 ITR 223. IT WAS FURTHER STATED THAT THE ISSUE UNDER CONSIDERATION IS ALSO CO VERED BY THE DECISION OF THE ITAT DELHI, BENCH E IN THE CASE OF CIT VS MILESTONE OVERSEAS (P) LTD. COPIES OF THE SAID ORDER S WERE FURNISHED. IN HIS RIVAL SUBMISSIONS THE LD. CIT DR STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND REITER ATED THE OBSERVATION MADE IN THE SAID ORDER. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE IT IS AN UNDISPUTED FACT THAT THE NOTICE U/S 148 OF THE ACT HAD BEEN ISSUED AFTER THE EXPIRY OF ALMOST MORE THAN 4 YEARS IN THE NAME OF AMALGAMATED COMPANY AND NOT IN THE NAME OF THE AMALGAMATING COMPANY. THEREFORE, NO VALID NOTICE WAS SERVED TO THE SUCCESSOR COMPANY AND AS SUCH THE NOTICE ISSUED U/S 148 OF THE ACT FOR REOPENING THE ASSESSMENT U/S 147 OF THE ACT IN THE NAME OF M/S SPARROW RESORTS PVT. LTD. INSTEAD OF THE ASSESSEE M/S ROOPALI MARKETING PVT. LTD., NEW DELHI WAS INVALID AND THE SUBSEQUENT RE - ASSESSMENT FRAMED U/S 147 OF THE ACT R.W SEC TION 143(3) OF THE ACT WAS VOID AB INTIO . 9. F OR THE AFORESAID VIEW WE ARE FORTIFIED BY THE DECISION OF THE ITAT DELHI BENCH E , DELHI IN THE CASE OF ITO VS MILESTONE OVERSEAS (P.) LTD. REPORTED AT (2011) 12 ITR (T) 781 (DELHI - TRIB.) WHEREIN IT HAS BEEN HELD AS UNDER: T HAT THE NOTIC E UNDER SECTION 148 HAD BEEN ISSUED IN THE NAME OF THE AMALGAMATED COMPANY AFTER EXPIRY OF ALMOST FOUR YEARS ITA NO. 98/DEL/2011 ROOPALI MARKETING LTD. 7 FROM THE DATE OF ORDER PASSED BY THE HIGH COURT. MOREOVER, THE NOTICE WAS SERVED ON V WHO WAS NOT AUTHORIZED TO RECEIVE NOTICE AFTER THE AMALGAMA TION HAD TAKEN PLACE. THEREFORE, NO VALID NOTICE WAS SERVED IN THE CASE OF THE SUCCESSOR COMPANY. THE ASSESSMENT MADE ON THE AMALGAMATED COMPANY AFTER THE MERGER OF THE SAME IN TO KAML HAD TO BE HELD INVALID AS THE ASSESSMENT HAD BEEN MADE ON NON - EXISTENT ASSESSEE. 10 . IN VIEW OF THE ABOVE WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND THE RE - ASSESSMENT FRAMED BY THE AO IS HELD TO BE INVALID. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ( ORDER PRONOU N CED IN T HE OPEN COURT ON 21 / 11 / 2014 ) . SD/ - SD/ - (I. C. SUDHIR ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 / 11 / 2014 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGIST RAR