PANKAJ KHANNA DY. CIT, CENTRAL CIRCLE-13,NEW DELHI , DELHI V. TIPSY FINANCIAL & MANAGEMENT SERVICES PVT. LTD. , NEW DELHI

ITA 1425/DEL/2021

AI Insights

The case involves an appeal by the Revenue against the order of the Ld. CIT(A)-26, New Delhi, which annulled the reassessment proceedings for the assessment year 2011-12. The reassessment was initiated by the AO based on information suggesting that the assessee, Tipsy Financial and Management Services Pvt. Ltd., was involved in providing accommodation entries and had not filed its return of income for the relevant assessment year. The CIT(A) found that the AO had incorrectly stated the facts and failed to establish that there was any non-disclosure of material facts by the assessee necessary for the assessment. The Tribunal, after reviewing the submissions and the records, concurred with the CIT(A)'s decision and dismissed the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 31585 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Other Referred Cases: Parthas Info Park (P) Ltd Vs. ACIT, Avtec Ltd Vs. DCIT, Bharti Infratel Ltd. v. Deputy Commissioner of Income-tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reassessment proceedings; Reopening of assessment; Accommodation entries; Assessment record; Reason to believe; Tangible material; Bogus
• Section: 147; 148; 143(3); 101

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “C”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA NO. 1425/Del/2021 DCIT, CC-13, NEW DELHI TIPSY FINANCIAL AND ROOM NO. 247, E-2 ARA VS. | MANAGEMENT SERVICES PVT. CENTRE, JHANDEWALAN LTD. EXTENSION, NEW DELHI — 55 201, 28° FLOOR, VIJAY BLOCK, LAXMI NAGAR, DELHI — 92 PAN: AACCTS5888J (APPELLANT) __| (RESPONDENT) Department by : Shri Om Parkash, Sr. D.R. Assessee by : Shri Yudhister Mehtani, CA Date of hearing : 19.03.2025 Date of pronouncement : 24 03.2025 ORDER PER SHAMIM YAHYA, AM: This appeal filed by the Revenue is directed against the orders dated 08.03.2021 of the Ld. CIT(A)-26, New Delhi relating to assessment year 2011-12. 2. The grounds raised in assessment year 2011-12 read as under :- 1. The Ld. CIT(A) has erred in fact's consideration that the AO has neither spelt out the correct facts about the filing the return of income nor he was able to fulfil the conditions as specified by proviso to section 147 of the Act. Since, there is no satisfaction recorded by the AO that there is any failure on the part of appellant in disclosing full and true all material facts, the condition stipulated u/s 147 of the Act to re-open the assessment beyond four years is not satisfied. 2. The Ld. CIT(A) has erred in fact's consideration that AO has initiated the reassessment proceedings w/s 147 of the Act on the basis of wrong premise, the subsequent assessment proceedings also become invalid in the eyes of law. 3. The Ld. CIT(A) has erred in law and on facts that the AO has wrongly initiated reassessment proceedings u/s 147 of the Act, hence the re-assessment proceedings are held to be invalid and therefore, annulled. 4. (a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal. 3. The brief facts of the case are that an information was received from the Asstt. Director of Income Tax (Investigation), Unit 2(2), New Delhi vide letter dated 18.7.2016 which was passed on to the ITO, Ward 25(3), New Delhi. After verification from the record and recording satisfaction in writing with approval of Pr. CIT-09, New Delhi, the ITO Ward 25(3), New Delhi issued notice u/s. 148 of the Act. The reason recorded for issue notice u/s. 148 of the Act were as under:- \"An information has been received from the investigation wing, Delhi that Shri Mukesh Kumar and Shri Deepak Aggarwal are kingpin of a syndicate who form, control and manage large number of non-descript corporate and non-corporate entities through dubious means in lieu of unaccounted cash taken from them. After the study of documents that were seized during the search and seizure operations carried out at their premises, a clear inference has been drawn that they are into the business of providing accommodation entries as entry operators engaged in running of several bogus/paper entities in the name of either non- existent persons or persons with no means. The document clearly reveal that the identity of a number of beneficiaries who introduced their own unaccounted money into their books with the help of Shri 2 an. / v Mukesh Kumar and Shri Deepak Aggarwal whose banking accounts were used to give it a colour of legitimate banking transactions. In return for services provided by the entry operators, these beneficiaries paid commission to the tune of 0.5% to 2%. One of the beneficiary company happen to be assessed with the undersigned. Its name is M/s Tipsy Finance and Management Services Put, Ltd. (PAN: AABCT3545K) which has received Rs. 50,00,000/- on 27.04.2010 from M/s I-Tech Insurance Broker Put. Ltd. but did not file its Return of Income for the AY 2011-12 as it has been found out from the ITD system. The latter is one of the companies run and controlled by Mr. Deepak Aggarwal and Shri Mukesh kumar engaged in providing accommodation entries. It is well settled that in order to discharge the onus, the assessee must prove the following: The identity of the creditor, The capacity of the creditor to advance money and The genuineness of the transaction. As the facts are within the knowledge of the assessee. Mere production of PAN details or saying that the transaction was done through banking channel are not sufficient to prove the above three factum. Also, the three factum of the transaction is not established by merely showing the transaction was through banking channel. Therefore, it is obvious that the transaction is not genuine. In view of the above, I have reason to believe that income chargeable to tax which has escaped assessment is above one lakh rupees for AY 2011-12. The same needs to be brought under the ambit of taxation and action u/s 147/148 of the I T Act is being initiated. Moreover, as the case pertains to a period within 6 years but beyond 4 years from the end of the relevant assessment year, necessary sanction from the Pr. CIT - 9, New Delhi in view of amended provision of section 151 of the LT. Act, 1961 is being obtained separately. \" 3.1 In response to the notice, assessee submitted his reply, which was not acceptable by the AO, hence, assessment was farmed w/s. 147/143(3)/153C of the Act at the total income of Rs. 2,34,46,230/- vide order dated 28.12.2018. Against the said action of the AO, Assessee, appealed before the Ld. CIT(A) who vide his impugned order has partly allowed the appeal of the assessee and quashed the reopening by observing as under:- “8. From the reasons recorded, as above, it is clear that the AO has initiated the reassessment proceedings us 147 of the Act on the basis of the fact that the return of income for A.Y. 2009-10 was not filed by the appellant. This fact has been clearly spelt out by AO in Para 3, of the assessment order where the reasons for reopening had been reproduced. It is further stated by AO that though the re-assessment proceedings under consideration pertains to period beyond four years but had not mentioned the status of assessment. However, the perusal of submissions made by the appellant and assessment records reveal that the AO has taken a wrong basis for re-opening of assessment proceedings in the case of the appellant. The appellant has enclosed with its submissions the assessment order passed u/s 143(3)/153C of the Act dated 21.12.2011 for A.Y. 2009-10. As per the reply of the appellant made in response to these proceedings u/s 143(3)/153C, necessary details, submissions relating to these transactions were called by AO, which were placed on records. Thus, the assessment proceedings were completed by 143(3) of the Act after examining the details and submissions filed by appellant on this issue. In such situation, when the original assessment has been completed u/s 143(3) of the Act and period of reopening is beyond four years from the relevant assessment year, the first proviso to section 147 of the Act is clearly applicable. The said proviso is reproduced as under:- \"Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section afier the expiry of 4 years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all 4 7 material facts necessary for his assessment for that assessment year.\" 9. The reading of the aforesaid proviso clearly says that no action shall be taken w/s 147 of the Act after the expiry of four years unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. In the case of the appellant, AO has defaulted on both the counts. Firstly, he has taken the wrong premise that the return of income has not been filed by the appellant. and secondly, he has failed to mention that first proviso to section 147 of the Act is applicable in the case of appellant apart from being failed to establish that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year under consideration. Hon'ble Kerela High Court in the case Parthas Info Park (P) Ltd Vs. ACIT 396 ITR 682, has held that re-assessment proceedings initiated against the assessee on a wrong premise, is unsustainable. It is further held by Hon'ble Court that it is necessary on the part of AO to show that there was any non-disclosure of full and true material facts that were necessary for the assessment by the AO, to justify the invocation of the first proviso to section 147, while issuing notice u/s 148 to the assessee. Hon'ble Jurisdictional High Court, in the case of Avtec Ltd Vs. DCIT 395 ITR 434, has held that the reasons recorded by the AO, should, where the re-opening u/s 147 of the Act is after expiry of four years from the end of the financial year, specifically state in what manner there was a failure by the assessee to make a full and true discloser of material facts and that will have to be preceded by spelling out the tangible material that laid the AO to come to that conclusion. In the judgment of Hon'ble Jurisdictional Delhi High Court in the case of Bharti Infratel Ltd. v. Deputy Commissioner of Income-tax [2019] 101 Taxmann.com 285 (Delhi) has held that: \"when the proviso applies, the Assessing Officer must satisfy himself and state that there has been failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment or another jurisdictional preconditions. In absence of failure or lapse to disclose fully and truly all material facts or one of the other pre-conditions, re- opening is impermissible and barred under the statute. In such cases, it does not matter whether the Assessing Officer has applied his mind to the material facts stated, but had failed to draw legal or other factual inferences.\" 9.1 In the case of the appellant, as is evident from the reasons recorded reproduced in Para 3 of the assessment order and as reproduced above, the AO has neither spelt out the correct facts about the filing the return of income nor he was able to fulfill the conditions as specified by proviso to section 147 of the Act. Since there is no satisfaction recorded by the AO that there is any failure on the part of appellant in disclosing full and true all material facts, the condition stipulated u/s 147 of the Act to re-open the assessment beyond four years is not satisfied. All the case has been built up by the AO on the wrong foundation in the satisfaction note forming the \"Reasons to believe\" and not recording the satisfaction that there was any failure on the part of the appellant to disclose fully and truly material facts necessary for its assessment. The mistake committed by AO raises the jurisdictional issue and this mistake is not curable u/s 292B of the Income Tax Act, 1961. Once the AO has initiated the re-assessment proceedings u/s 147 of the Act on the basis of wrong premise, the subsequent assessment proceedings also become invalid in the eyes of law. It is, therefore, held that the AO has wrongly initiated the re- assessment proceedings u/s. 147 of the Act, hence, the reassessment proceedings are held to be invalid and therefore, annulled. The relevant grounds taken by appellant are allowed. 4. Against the above findings of the Ld. CIT(A), Revenue is in appeal before us. 5. We have heard both the parties and perused the records. Ld. DR relied upon the order of the AO. Per contra, Id. AR for the assessee submitted that Ld. CIT(A) has passed a reasonable order which is quite appropriate and need not be interfered. We have carefully considered the submissions. It is evident from the findings of the Ld. CIT(A) who has observed that from the reasons recorded, the AO has neither spelt out the correct facts about the filing the return of income nor he was able to fulfill the conditions as specified by provision to section 147 of the Act. There is no satisfaction recorded by the AO 6 that there is any failure on the part of the assessee in disclosing full and true all material facts, the condition stipulated u/s. 147 of the Act reopen the assessment beyond four years is not satisfied. Accordingly, we do not find any infirmity in the order of the Ld. CIT(A) on this issue, hence, we uphold the same and reject the grounds raised by the Revenue by dismissing the appeal of the Revenue. 6. Inthe result, the Revenue’s appeal is dismissed in the aforesaid manner. Order pronounced in the Open Court on r! /03/2025. od|- ge gel] (SUDHIR PAREEK) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBhatnagar a Copy forwarded to: - Appellant. Respondent. Yaw yo Q oo | ioe DR, ITAT Assistant Registrar "