ITO WARD - 20(1), NEW DELHI V. PLUS CORPORATE VENTURES PVT LTD, NEW DELHI

ITA 9441/DEL/2019

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income Tax (Appeals)-7, New Delhi, which had deleted the addition made by the AO regarding share application money received by the assessee. The AO had reopened the assessment for the Assessment Year 2011-12, alleging that the assessee had received accommodation entries in the guise of share application money amounting to Rs. 5.50 Crores. The ITAT, after examining the reasons recorded for reopening the assessment, found them to be based on incorrect and vital facts, leading to the conclusion that the reopening was not valid.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653169 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Other Referred Cases: Subh Infrastructure Ltd vs ACIT [WP (C) 1357/2016], Sanjay Sawhney vs. Pr.CIT, ITO vs. IME International Pvt. Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANINDER KAUR
• Assessee Lawyers: APOORVA BHARDWAJ
• Keywords: Salary income; Reopening of assessment; Capital Gains; Principle of natural justice; Accommodation entries; Source of fund; Earning of tax free income; Bogus Share capital; Reason to believe; Bogus
• Section: 147; 148; 143(3); 271(1)(c)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES “F”, NEW DELHI BEFORE :SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 9441/Del/2019 (िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण िनधा\u0005रण वष\u0005 वष\u0005 वष\u0005 वष\u0005 / Assessment Year : 2011-12) ITO Ward 20(1), NewDelhi ब ब ब बनाम नाम नाम नाम/ Vs. M/s Plus Corporate Ventures Pvt. Ltd. L-7, Green Park, Extension, New Delhi, Delhi 110016 \u0001थायीलेखासं./जीआइआरसं./PAN No. : AACCP7899K (Appellant) .. (Respondent) अपीलाथ\u0007 ओर से/Appellant by : Dr. Maninder Kaur, Sr. DR \b यथ\u0007 क ओर से/Respondentby: Ms. Apoorva Bhardwaj & Shri Sumakash Mahajan, A.Rs. Date of Hearing 08/04/2025 Date of Pronouncement 20/06/2025 O R D E R PER SMT. ANNAPURNA GUPTA, AM: The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-7, New Delhi, (in short ‘the CIT(A)’),dated 05.09.2019 passed under Section 250(6) of the Income Tax Act, 1961 (hereinafter referred to as ‘theAct’) and relates to Assessment Year (A.Y.) 2011-12. ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 2 – 2. Brief facts relating to the case are that the assessee company had initially filed return of income declaring a loss of Rs.18,73,977/-, which was subsequently revised to loss of Rs.17,83,211/-. Thereafter, assessment was completed u/s.143(3) of the Act assessing taxable income of the assessee at Rs.18,92,566/-. Subsequently, on the basis of information received to the effect that the assessee took accommodation entries in the guise of share application money to the tune of Rs.5.50 Crores during the impugned year, i.e. F.Y. 2010-11 pertaining to A.Y. 2011-12,the case of the assesse was reopened by issuing notice u/s.148 of the Act and assessment framed u/s.147 of the Act making addition of share application money received amounting to Rs.5.50 Crores, for the reason that the AO found the assessee to have not established the genuineness of the share application money. 3. The matter was carried in appeal before the Ld. CIT(A). The assessee raised legal grounds challenging the validity of the order passed u/s.147 of the Act as also grounds on merits. The Ld. CIT(A) dismissed the legal grounds raised by the assessee, however, on merits, he found substance in the arguments of the assessee and, accordingly, deleted the addition made by the AO. 4. Aggrieved with the same, the Revenue has come up in appeal before us raising the following grounds: “1. That, under the facts and circumstances of the case and in law, and in any view of the matter, initiation of assessment ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 3 – proceedings u/s 147 r.w. Section 143(3) of the Income Tax Act, 1961 is bad in law and be quashed. 2. That, under the facts and circumstances of the case and in law, and in any view of the matter, addition made by L.d. Assessing Officer of Rs 5.50 crores is bad in law 3. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in initiating the proceedings u/s 147 of the Income Tax Act, 1961 after recording reasons to believe u/s 148 of the Income Tax Act, 1961, because the reasons as recorded are not reasons to believe, but in fact, they are reasons, to suspect, and not based on any definite and concrete information. 4. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in initiating the proceedings u/s 147 of the Income Tax Act, 1961 merely on the basis of information received from ADIT (Inv.) Unit 2(3) without making any cross verification and inquiry. 5. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in recording reasons to believe u/s 148 of the Act (Para 8 of reasons recorded), that no return has been filed for the year under consideration and accordingly no assessment was made and as such further requirement regarding non-disclosure of material facts necessary for assessment. 6. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred by not providing the materials forming the basis of reasons recorded along with reasons, in contravention of the principle of natural justice as reiterated in Subh Infrastructure Ltd vs ACIT [WP (C) 1357/2016] by jurisdictional Delhi High Court. 7. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred by not passing and providing a speaking order to dispose of objection to issuance of notice u/s 148. 8. That, under the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in mentioning in the assessment order that the original assessment proceedings had not covered the issue ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 4 – of share application money received by the assessee during FY 2010-11. 9. That, on the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in initiating penalty proceeding u/s 271(1)(c) of the Income Tax Act, 1961. 10. That, on the facts and circumstances of the case and in law, and in any view of the matter, the Ld. Assessing Officer has erred in ordering for charge of interest u/s 234A/234B/234C/234D as may be applicable.” 5. During the course of hearing before us, Ld. Counsel for the assessee moved an application raising grounds by invoking Rule 27 of the ITAT Rules, 1963, (in short ‘ITAT Rules’), as per which, the respondent is given right to defend the order of the Ld. CIT(A) by raising issue in respect of those grounds which are decided against him. Rule 27 of the ITAT Rules, 1963 is reproduced hereunder for clarity: “Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him.” 6. Invoking the said Rule, a legal ground was raised before us, which reads as under: \"That the learned Commissioner of Income Tax Appeal has erred in law and on facts in confirming the initiation of assessment u/s 148 of the Act on the basis of reasons recorded which are not in accordance with law being factually incorrect, vague, without any material basis and without application of mind also mechanically approved and as such consequential order passed u/s 147 of the Act is bad in law and may please be quashed.\" 7. Ld. Counsel for the assessee contended that this legal ground had been raised by the assessee before the Ld. CIT(A) who had dismissed it and as per Rule 27 of the ITAT Rules, therefore, the assessee was well within his rights to raise this ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 5 – ground. In support of his contention that he was entitled to raise a ground before us decided against him, by invoking Rule 27 of the ITAT Rules, he referred to the decision of the Hon’ble Delhi High Court in the case of Sanjay Sawhney vs. Pr.CIT, reported in 116 taxmann.com 701 (Delhi High Court) and in the case of ITO vs. IME International Pvt. Ltd. in ITA No.1873/DEL/2012, dated 08.01.2016. Relevant portion of these orders were brought to our attention vide his application dated 18th June, 2024 filed before us. Ld. Counsel for the assessee further contended that in any case he wishes to raise a legal ground before us and in terms of the proposition of law laid down by the Hon’ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT, reported in 299 ITR 383 (SC) holding that a legal ground can be raised at any stage of the proceedings, he requested admission of the ground raised before us. 8. We have heard both the parties and we have gone through the Rule 27 of the ITAT Rules as per which respondent is given right to defend the order of the Ld. CIT(A) by raising issues, which were decided against him by the Ld.CIT(A). There is no dispute in relation to the scope of Rule 27 of the ITAT Rules as noted by us . In the present case, admittedly, the assessee has raised a legal challenge to the validity of the order passed u/s.147 of the Act by invoking Rule 27 of the ITAT Rules which ground admittedly has been decided by the Ld. CIT(A) against him, though, the Ld. CIT(A) has allowed the assessee’s appeal on merits. Therefore, we find that the assessee is entitled to ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 6 – raise this legal ground before us in terms of Rule 27 of the ITAT Rules and we, accordingly, admit the same for adjudication. Since, the assessee has challenged the validity of the order passed in the present case, we shall first deal with the ground raised by the assessee before us in this regard. 9. The contention of the Ld. Counsel for the assessee before us was that the AO in his reasons recorded for reopening in the case the assessee had formed belief of escapement of income of the assessee noting incorrect facts, which were vital for the formation of belief of escapement of income. Therefore, the reasons recorded clearly were without any application of mind and the jurisdiction assumed, therefore, for reopening the case of the assessee was bad in law. 10. In this regard, he drew our attention to the reasons recorded for reopening of the case of the assessee, which were filed before us at paper book Page Nos. 65 to 67, the contents of which are reproduced hereunder: “Facts of the case: 1. From the records available in this office, it is gathered that the abovementioned assessee company i.e. M/s. Plus Corporate Ventures Pvt Ltd (formerly known as Pranidhi Holding Pvt Ltd and Pranidhi Estates Pvt Ltd has taken accommodation entries in the guise of share application money from various bogus companies and the same is passed on to various persons of commission during the A.Y. 2011-12. Information available and Analysis of the said information: 2. In this case information was received from the ACIT, Circle- 20(1), Delhi on 16.03.2018 which was previously received by ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 7 – Circle-20(1), Delhi from ADIT (Inv.) Unit-2(3), Delhi. The main aim of the Director of the company i.e M/s. Plus Corporate Ventures Pvt Ltd (formerly known as Pranidhi Holding Pvt Ltd and Pranidhi Estates Pvt Ltd) is to provide accommodation entries to person who are ready to pay heavy commission to him. For giving the entries the director of the company arranges funds from various bogus companies run by him and manage the affairs of these companies in such a way that there shall not be any doubt to Income Tax Authorities on him. He take accommodation entries in the guise of share application money from various bogus companies and the same is passed on to various persons of commission. Reasons for formation of belief u/s 147 of the Act 3. The main aim of the Director of the company i.e M/s. Plus Corporate Ventures Pvt Ltd (formerly known as Pranidhi Holding Pvt Ltd and Pranidhi Estates Pvt Ltd) is to provide accommodation entries to person who are to pay heavy commission the company arranges funds from various bogus companies run by him and manage the affairs of these companies in such a way that there shall not be any doubt to Income Tax Authorities on him. He take accommodation entries in the guise of share application money from various bogus companies and the same is passed on to various persons of commission. 4. Summons were sent to assessee company by the ADIT (Inv.) Unit-2(3), Delhi and following findings were emerged out from the submission submitted by the AR of the assessee. 4.1 M/s. Plus Corporate Ventures Pvt. Ltd (formerly known as Pranidhi Holding Pvt Ltd and Pranidhi Estates Pvt Ltd) received share application money (pending allotment) of Rs. 5,50,00,000/- in F.Y. 2010-11(Α.Υ.-2011-12). The details were asked regarding of shares. As per details, the subscriber of the shares was Sh. Pradeep Kumar Dixit. On perusal of ITR of Sh. Pradeep Kumar Dixit, it was found that the assessee has mainly salary income and returned income in A.Y. 2009-10, Α.Υ. 2010-11 & Α.Υ. 2011-12 were Rs. 37,20,352/-, Rs. 34,65,923/- and Rs. 43,08,589/- respectively. 4.2 Further, it was asked to produce Pradeep Kumar Dixit and also, establish its identity, prove the creditworthiness and ascertain the genuineness of the transaction. No proof was provided no person was produced. Thus, the creditworthiness of the person was not proved as it has given large share premium entries and share application money which is disproportionate to known sources of income. ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 8 – Keeping in view all the above, I have reason to believe that an amount at least of Rs. 5,50,00,000/- has escaped assessment in case of M/s. Plus Corporate Ventures Pvt Ltd (formerly known as Pranidhi Holding Pvt Ltd and Pranidhi Estates Pvt Ltd)for the A.Y. 2011-12 within the meaning of Section 147/148 of Income Tax Act, 1961. 5 Prior to 1989 section 147 provided for two grounds to reopen concluded assessments: (i) On basis of information received by the Assessing Officer assessment could be reopened. This had to be within four years. (ii) Where facts material for assessment are not disclosed in the course of assessment, whether within or beyond four years. 6 Supervening these two requirements in the alternative, the initial condition is that the assessing officer has reason to believe that there is escapement of income. The first requirement regarding information is now dropped by 1989 amendment and therefore for reopening of assessment within a period of 4 years from the end of the assessment year, the only requirement is \"reason to believe\". For a period beyond 4 years in cases where an original assessment was made u/s 143(3), further requirement is the non-disclosure of material facts necessary for assessment by the assessee. However in cases where no scrutiny assessment has been made even beyond period of 4 years the only requirement is \"reason to believe. 7 Keeping in view the above facts, I have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year 2011-12, the income exceeding Rs. 1 lakh chargeable to tax as mentioned above, has escaped assessment within the meaning of Section 147/148 of the Act. 8 In this case, no return has been filed for the year under consideration. Accordingly, in this case, no assessment was made and the only requirement to initiate proceedings u/s 147 is reason to belief which has been recorded in above paragraphs. 9 It is pertinent to mention here that in this case the assessee has chosen not to file return of income for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed in paragraph 8 above and the assessee was assessable under the income tax Act. In view of the above, the provisions of ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 9 – clause (b) of Explanation to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 10 As the case pertains to a period beyond four years from the end of relevant assessment year, for issuing the notice u/s 148, necessary approval / sanction may kindly be accorded by the Pr. Commissioner of Income Tax, Delhi-7, New Delhi in view of the amended provision of section 151 w.e.f 01.06.2015.” 11. We have gone through the reasons recorded and based on the incorrect facts pointed out by the Ld. Counsel for the assessee, we are in agreement with him that the reasons have been recorded without any application of mind by the AO. 12. In the submissions filed before us, the Ld. Counsel for the assessee has pointed out several inconsistencies /incorrect facts, out of which, the ones which have been noted by us are that Pradeep Kumar Dixit mainly had salary income and had filed return of income disclosing income of Rs.37.20 Lacs, Rs.34.65 Lacs and Rs.43.08 Lacs in A.Y. 2009-10, 2010-11 & 2011-12, which it has been pointed out to us from the ITR of Shri Pradeep Kumar Dixit placed at paper book is incorrect since besides salary income in A.Y. 2010-11,he also had exempt income to the tune of Rs.17,67,06,813/- being long term capital gains exempt u/s.10(38) of the Act. We have also noted the reasons to record the fact that no return was filed by the assessee and no assessment made for the impugned year,while the AO in his assessment order itself notes the assessee to have filed return of income declaringlosses,which in turn were assessed u/s.143(3) of the Act at Rs.18,92,566/-in the assessment completed u/s.143(3) of the Act. These are certainly ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 10 – incorrect facts noted in the reasons recorded by the AO and we agree with the Ld. Counsel for the assessee that these facts were vital for the formation of belief of escapement of income. This is for the reason that as per the reasons recorded, the AO’s belief of escapement of income stemmed from the information received by him from the investigation wing that the assessee was involved in providing accommodation entries and earning commission thereon. The accommodation entries were provided by way of share capital. The assessee was noted to have received share application money of Rs.5.50 Crores from one Shri Pradeep Kumar Dixit during the year.Inquiry conducted by the department revealed that Shri Pradeep Kumar Dixit was not a man of sufficient means to make the impugned investment in the assessee company returning only salary income as noted above. Based on this information, the AO was of the belief that the share capital received by the assessee from Pradeep Kumar Dixit was only an accommodation entry and, therefore, income to this extent had escaped assessment in the case of the assessee. Further, in the reasons, the AO notes that since the assessee had not filed any return of income and had also not been assessed to tax this was sufficient for the reopening of the case of the assessee as per Clause (b) of Explanation to Section 147 of the Act. Thus, the AO’s belief of escapement of income of the assessee rested on two factors: i. Shri Pradeep Kumar Dixit from whom share application money of Rs.5.50 Crores was received by the assessee ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 11 – during the year was not found to be a man of sufficient means, and ii. since the assessee had not filed any return of income, Explanation (b) to Section 147 of the Act deemed it to be a case where the income chargeable to tax had escaped assessment. Both the basis for assuming jurisdiction to reopen the case of the assessee are undoubtedly based on incorrect facts.That Shri Pradeep Kumar Dixit was not a man of sufficient means,the Ld. Counsel for the assessee has pointed out was incorrect since his return of income disclosed exempt income of Rs.1.76 Crores while the AO had mentioned only salary income returned by him of Rs.34 Lakhs. 13. Further his belief of escapement of income on the ground that no return of income had been filed by the assessee for the impugned year, is also based on incorrect facts since itis a fact on record that the assessee had filed the return of income which was also assessed u/s 143(3) of the Act. 14. In the light of the same, we are in complete agreement with the Ld. Counsel for the assessee that formation of belief of escapement of income by the AO was clearly based on incorrect facts recorded by him. That the reasons therefore ,which were recorded, was without any application of mind at all. We agree with the Ld. Counsel for the assessee that jurisdiction assumed, therefore, to reopen the case of the assessee u/s 147 of the Act was an invalid jurisdiction.The assessment order passed in the present case is accordingly held to be invalid and directed to be quashed. The assessee, therefore we hold, succeeds on the ground raised by invoking Rule 27 of the ITAT Rules. ITA No.9441/Del/2019[ITO vs. Plus CorporateVenturesPvt. Ltd.] .Y. 2011-12- 12 – 15. Since, we have held the assessment order passed in the present case to be invalid, the appeal of the Revenue merits no consideration since it raised grounds relating to the merits of the case, which is only an academic exercise. 16. In the result, the assessment order passed in the present case is quashed as invalid. The assessee succeeds on the ground raised before us by invoking Rule 27 of the ITAT Rules, 1963 and the appeal filed by the Revenue is dismissed as infructuous. This Order pronounced on 20/06/2025 Sd/- Sd/- (MADHUMITA ROY) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 20.06.2025 S. K. SINHA/vk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, Delhi the approved draft comes to "