Rajni Gugnani and Ravinder Kumar Gugnani and Jyoti Gugnani and Urmil Gugnani and Veena Gugnani V. Commissioner of Income Tax, Rohtak

ITA/41/2013

AI Insights

This case involves five appeals by different appellants, all members of the Gugnani family, against the Commissioner of Income Tax, Rohtak, concerning the reassessment of their income for the assessment year 2003-04. The reassessment was based on the discovery of accommodation entries in their bank accounts, which were initially thought to be genuine gifts but were later found to be part of a racket involving bogus financial transactions. The main legal issues revolved around the jurisdiction of the income tax authorities in Delhi to issue reassessment notices and the validity of these notices after the case was transferred to Rohtak. The High Court's decision focused on the procedural correctness of the notices issued and the substantive findings of the Tribunal regarding the nature of the financial transactions involved.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 795594 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 13-12-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax Versus Smt. Anjali Dua (2008) 219 CTR (Del) 183, Commissioner of Income Tax, Delhi Versus Shri Ranjeet Singh in ITA No.1405 of 2008, Commissioner of Income Tax Versus Shri Anil Khosla in ITA No.838/2008, Lt. Col. Paramjeet Singh Versus Commissioner of Income Tax and another (1996) 220 ITR (P&H)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: INDERPREET SINGH
• Assessee Lawyers: RAKESH GUPTA; SUNIL MUKHI; RISHABH KAPOOR
• Keywords: Accommodation entries; Bogus gifts; Income from undisclosed sources; Jurisdiction; Reassessment
• Section: 147; 148; 142(1)

Judgement Text

"I.T.A. No.41 of 2013 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH (1) I.T.A. No.41 of 2013 (O&M). Decided on:-December 13, 2013. Rajni Gugnani. .........Appellant. Versus Commissioner of Income Tax, Rohtak. .........Respondent. (2) I.T.A. No.42 of 2013 (O&M). Ravinder Kumar Gugnani. .........Appellant. Versus Commissioner of Income Tax, Rohtak. .........Respondent. (3) I.T.A. No.43 of 2013 (O&M). Jyoti Gugnani. .........Appellant. Versus Commissioner of Income Tax, Rohtak. .........Respondent. (4) I.T.A. No.44 of 2013 (O&M). Urmil Gugnani. .........Appellant. Versus Commissioner of Income Tax, Rohtak. .........Respondent. Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -2- (5) I.T.A. No.132 of 2013 (O&M). Veena Gugnani. .........Appellant. Versus Commissioner of Income Tax, Rohtak. .........Respondent. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. ***** Argued by:- Dr. Rakesh Gupta, Advocate, Mr. Sunil K; Mukhi, Advocate and Mr. Rishabh Kapoor, Advocate for the appellants. Mr. Inderpreet Singh, Advocate for the respondent. Dr. Bharat Bhushan Parsoon, J These five appeals arise out from a common order dated 19.10.2012 (Annexure A-3) passed by the Income Tax Appellate Tribunal, Delhi Bench “H”, New Delhi (hereinafter referred to as, the Tribunal) in ITA Nos.5128 to 5132/Del/2011 pertaining to the assessment year 2003-04. 2. Following substantial questions of law have been posed in these appeals: A. Whether Hon'ble Tribunal erred in law in holding that jurisdiction u/s 147 of the Income Tax Act, 1961 was assumed in accordance with law? Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -3- B. Whether Hon'ble Tribunal erred in law in upholding the reopening though reopening was done by non-jurisdiction assessing officer and the reassessment order was passed by ACIT, Rohtak? C. Whether the Hon'ble Tribunal erred in law in not following its own orders and decision of Hon'ble Delhi High Court given in similar cases thus the impugned order is against the principle of judicial consistency? D. Whether the order passed by the Hon'ble Tribunal is perverse in nature as the Tribunal has passed the impugned order without appreciating the evidences/pleadings and in contravenion of provision of law? 3. As questions of law to be answered are same in all the appeals, the appeals have been taken up together for adjudicaiton. Facts have been taken from Income Tax Appeal No.41 of 2013. 4. The assessee is a resident of New Delhi at the address given in the Bank records and was maintaining her account in Bank of Rajasthan, New Delhi. On a tip of, that a racket involving accommodation entries was at work, the Director of Income Tax (Investigation), Delhi conducted large scale investigations to unearth such racket. It was found that certain unscrupulous persons were involved in giving accommodation entries in the forms of bogus gifts/loans/share application money/captial gain etc. by way of cheques/demand drafts in lieu of cash received from intending beneficiaries. It was also discovered that such entry providers were operating a large number of bank accounts either in their own names or in some other fictitious names. During the investigations, name of the assessee also appeared as one who had taken accommodation entry of Rs.5 lacs from one Manoj Kumar Batra through account No.6914 on 25.11.2002 and yet Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -4- another entry again of Rs.5 lacs from one Vishnu Kumar Jain through yet another account of State Bank of Patiala on 12.5.2002. 5. In view of this reliable information and after recording reasons in terms of Section 147 of the Income Tax Act, 1961 (hereinafter referred to as, the Act), notice under Section 148 of the Act was issued to the assessee on 26.3.2010 by Income Tax Officer, Ward-25(3), New Delhi with the approval of Joint Commissioner of Income Tax, Range-25, New Delhi requiring her to file return of her income for the financial year 2002-03 relevant to the assessment year 2003-04. Later on, a notice under Section 142(1) of the Act was also issued. The assessee had disclosed that she had already submitted her return of income to Income Tax Officer, Ward-1, Rohtak where she was regularly being assessed and had requested for transfer of her case to the said ward. 6. Finding information given by her to be correct, the case of re-assessment was transferred on her request to Rohtak. During the course of proceedings, it was the claim of the assessee that Rs.5 lacs each from Manoj Kumar Batra and Vishnu Kumar Jain was received as gift out of love and affection. When the version of the assessee was investigated, it was found that there was no Manoj Kumar Batra at the given address and name as also address were fictitious. So far as another gift from Vishnu Kumar Jain is concerned, it was found that on the relevant date, there was a balance of only Rs.4,60,000/- and making further deposit of little over Rs.40,000/-, cheque of Rs.5 lacs was cleared. It is worth notice that earlier to deposit of Rs.4,60,000/-, his bank balance was only Rs.489/- in the account. However, perusal of copy of his bank account, it was found that making a deposit of Rs.4,60,000/- and Rs.40,000/- separately on 5.12.2002 itself, cheque of Rs.5 lacs was issued on the same date on account of donation and prior to this date, there was balance only of Rs.3125/- as on 14.12.2002. Cheque of Rs.5 lacs was cleared on 5.12.2002 itself. Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -5- 7. The Assessing Officer had come to a firm finding that donors Manoj Kumar Batra and Vishnu Kumar Jain had provided accommodation entries of cash by opening their bank accounts for this purpose only and that the alleged donors were not actual donors but were engaged in the business of providing accommodation entries. 8. Concededly, there was neither any blood relationship of donors with the assessee nor there was any occasion for making the alleged gifts. The assessee had not been able to produce the donors before the Assessing Officer. Holding that the so called donors were bogus and that these entries, in fact, had reflected undisclosed income of the assessee, which was wilfully and intentionally not disclosed just to evade tax incidence. Sequelly, treating Rs.10 lacs as income of the assessee from undisclosed sources, it was charged to income tax. Penalty proceedings were also started. 9. This order of 21.12.2010 (Annexure A-1) though was reversed by CIT (Appeals), Rohtak vide order dated 9.9.2011 (Annexure A-2) was affirmed in favour of the revenue by the Tribunal on 19.10.2012 (Annexure A-3). 10. Plea of the assessee is that the income tax authorities at Delhi had no jurisdiction to re-open the case of the assessee as she was being assessed to income tax at Rohtak. It is also claimed that when the case of re-assessment was transferred to Rohtak from Delhi, fresh notice under Section 148 as also under Section 142(1) of the Act was necessary. 11. Claim of the revenue, on the other hand, is that the assessee was maintaining bank account while residing at Delhi and thus there was no error in issuance of notice under Section 148 in terms of Section 147 of the Act when there was case of income having escaped assessment. It is urged that when notice under Section 148 as also 142(1) of the Act had validly been given by the Income Tax Officer, Delhi merely because the case had been transferred to Rohtak, there was no requirement of re-issuance of these Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -6- notices under the Act. 12. We have heard counsel for the parties while going through the paper books. 13. Without going into the merits, it may be gathered that entire concentration of the assessee is focussed on jurisdictional legality of the notices issued by the authorities at Delhi and on validity of the proceedings initiated by the Assessing Officer, Rohtak without re-issuance of notices which had hitherto had been issued from Delhi. It is not the case of the assessee that she was not residing at the address given in the bank pass book. It is also not her case that the bank account does not pertain to her. Rather, her consistent case is that she had received Rs.10 lacs by way of two cheques of Rs.5 lacs each as donation from the named persons. It also remains a fact that while filing her return for the relevant assessment year, she had neither disclosed details of such alleged gifts nor had furnished details of her bank account at Delhi. Rather, it transpires that there was no information of the fact of her bank account being with Bank of Rajasthan, New Delhi and that her assessing authority was at Rohtak. In short, on finding two entries of Rs.5 lacs each dramatically appearing in her bank account, investigating agency had found that these were accommodation entries. Since, there was no knowledge, information or occasion to note the fact of her being assessed at Rohtak, income tax authorities at Delhi were well within their rights to issue notice under Section 148 after compliance of provisions of Section 147 regarding disclosing of reasons and in issuance of notice under Section 142(1) of the Act. 14. The moment it was disclosed by the assessee that she was being assessed to income tax at Rohtak and had furnished particulars thereof, on her request, the matter was transferred to Rohtak. 15. Now the question arises as to whether notice under Section 148 as also Section 142(1) of the Act was to be re-issued by the Assessing Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -7- Officer at Rohtak? Had it been a case of absence of jurisdiction with income tax authorities at Delhi, issuance of notice by the Assessing Officer at Rohtak was sine qua non for legality of the proceedings but when authorities at Delhi were competent to initiate proceedings, the assessee being a resident of Delhi where she was having a bank account wherein dubious entries were found to exist, there was neither want nor error of jurisdiction. Had the assessee not being assessed to income tax at Rohtak, Delhi authorities were to proceed further in the matter. It was only a matter of convenience for the assessee as also to maintain consistency and uniformity that on her request, the matter was transferred to Rohtak where she was already being assessed. 16. Reliance has been placed by the assessee upon Commissioner of Income Tax Versus Smt. Anjali Dua (2008) 219 CTR (Del) 183 wherein it was held that after transfer of the case from Ludhiana to New Delhi, revenue authorities at New Delhi had jurisdiction over the assessee’s cases, is a proposition of law which does not help the assessee. Facts of the cited authority are different. In this authority, the assessee was a resident of Ludhiana and was being assessed there. The assessee had shifted from Ludhiana to New Delhi to the knowledge of authorities at Ludhiana. For an earlier assessment year when assessee used to reside at Ludhiana re-opening was sought to be done by issuance of notice under Section 148 of the Act by Income Tax Officer, Ludhiana at his Ludhiana address knowing it well that the assessee was no more being assessed at Ludhiana. 17. There were multiple factors proved by documentary evidence that the authorities at Ludhiana were well within the knowledge of change of address as also jurisdiction of assessment from Ludhiana to New Delhi. In fact, the Income Tax Officer, Ludhiana on no objection having been given by his counter part at Delhi had transferred case of the assessee to New Delhi. Entire record of the cases of the assessee had, in fact been sent to New Delhi by the Income Tax Officer, Ludhiana. It was in these circumstances that the Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -8- Division Bench of Delhi High Court had affirmed order of the Tribunal which had held that the Income Tax Officer, Ludhiana had no jurisdiction over the assessee. 18. Yet another judgment cited by the assessee is Commissioner of Income Tax, Delhi Versus Shri Ranjeet Singh in ITA No.1405 of 2008 decided by the Hon’ble High Court of Delhi on 30.9.2010. It also does not help the petitioner because it was only land of the assessee which was situated at Ghaziabad; compensation of acquisition of such land was received by the assessee, a resident of Delhi who was assessed at Delhi. It was in these circumstances that notice under Section 148 and 143(3) of the Act issued by the Income Tax Officer, Ghaziabad was not found to be valid in law. For similar reasons, judgment dated 1.9.2008 of Hon’ble High Court of Delhi in Commissioner of Income Tax Versus Shri Anil Khosla in ITA No.838/2008 does not help the assessee because facts in the case in hand are different. 19. Facts of the case in hand reveal that the assessee was residing at Delhi where she was operating her bank account in which certain dubious transactions were made, which on investigations were found to be accommodation entries taken by the assessee from entry providers who were working as a racket. Residence of the assessee was at Delhi. She was operating her bank account at Delhi. Her address at Delhi had also been prominently recorded in the record of the bank. Dubious entries of heavy amounts had been traced to her bank account. After recording reasons in terms of Section 147 of the Act that certain income of the assessee had escaped assessment and after complying with the legal requirements, notice under Section 148 of the Act was issued by the income tax authorities to the assessee at her Delhi address. It was followed by yet another notice in terms of Section 142(1) of the Act. It is a conceded fact that immediately on request of the assessee for transfer of her case to Income Tax Officer, Rohtak Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -9- (where she was being assessed), such request was accepted and her case was transferred to Rohtak, where subsequent proceedings were conducted. 20. In the present case, income tax authorities at Delhi were not strangers to the assessee as the assessee was not only maintaining a residence but was also having her bank account where dubious transactions had taken place and later those transactions had come under the scanner by the income tax authorities. In the absence of any information that the assessee was being assessed to income tax at Rohtak, the authorities at Delhi were legally competent to issue notices under Section 148 (in compliance with Section 147) as also under Section 142(1) of the Act. It is worth notice that concededly, the assessee had not accounted for the transactions questioned vide notices under Section 148 as also under Section 142(1) of the Act. Support sought from Lt. Col. Paramjeet Singh Versus Commissioner of Income Tax and another (1996) 220 ITR (P&H) also is not available to the assessee due to disparity of facts of the cited authority and of the case in hand. In the cited authority, there was no order of transfer of case of the assessee to Pune and the Assessing Officer, Jalandhar had started proceedings even in absence of order under Section 127 of the Act. In the case in hand, admittedly there was transfer of the case from Delhi to Rohtak on request of the assessee. 21. Having not been able to muster either factual or legal support, the assessee has claimed that the Tribunal lacked judicial consistency when the impugned order was passed by it in ignorance of another order of 4.11.2010 (Annexure A-9). At the outset, it may be mentioned that though judicial consistency is always aspired for and should be maintained, merely because the impugned order is inconsistent with an order rendered by another Bench of the Tribunal, sanctity would not be lent to the said another order and the said order by no means would be taken to be eclipsing the validity and legality of the impugned verdict. In order Annexure A-9 at the Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document I.T.A. No.41 of 2013 -10- relevant time, assessment proceedings were going on before the Deputy Commissioner of Income Tax, Circle-1, Muradabad and the matter was pending and thus notice issued by the Income Tax Officer, Delhi was held to be invalid. Circumstances of the case in hand are different. 22. Without commenting upon the legality and validity of Annexure P-9, there being neither factual nor legal error in the order of the Tribunal, the same is upheld and consequently, all the five appeals, being without any merit, are dismissed. (Dr. Bharat Bhushan Parsoon) Judge (Rajive Bhalla) Judge December 13, 2013 'Yag Dutt' 1. Whether Reporters of local papers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Yag Dutt 2013.12.17 19:28 I attest to the accuracy and integrity of this document "