VIJENDER NATH GUPTA,DELHI V. ITO WARD-34(5), NEW DELHI

ITA 8738/DEL/2019

AI Insights

The case revolves around the reopening of an assessment for the Assessment Year 2011-12 concerning Vijender Nath Gupta, who was accused of having unexplained income based on transactions in his bank account. The Income Tax Officer (ITO) initiated reassessment under sections 147/143(3) of the Income Tax Act, 1961, after receiving information about unusual debit and credit entries in Gupta's bank account. The AO alleged that these transactions indicated income that had escaped assessment. The Tribunal examined whether the reopening was justified and whether the AO had adequately applied his mind to the facts and circumstances of the case.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 102493 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Other Referred Cases: ITO vs. Satya Narayan Parwal, ITA No.706-708/JP/2003
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMIT KATOCH
• Assessee Lawyers: RAKESH GUPTA; SAKSHAM AGARWAL
• Keywords: Source of fund; Competent authority; Reason to believe
• Section: 147; 148; 143(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : E : NEW DELHI BEFORE SHRI M. BALAGANESH, ACCOUNTANT MEMBER AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.8738/Del/2019 Assessment Year: 2011-12 Vijender Nath Gupta, 2764, am Room Street, Sabzi Mandi, Delhi – 110 007. PAN: AETPG2244R Vs Income-tax Officer, Ward-34(5), New Delhi. (Appellant) (Respondent) Assessee by : Dr. Rakesh Gupta, Advocate & Shri Saksham Agarwal, CA Revenue by : Shri Amit Katoch, Sr. DR Date of Hearing : 20.03.2025 Date of Pronouncement : 16.04.2025 ORDER PER ANUBHAV SHARMA, JM: This is an appeal preferred by the assessee against the order dated 30.08.2019 of the Commissioner of Income-tax (Appeals)-12, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in Appeal No.352/18-19 arising out of the appeal before it against the order dated 28.12.2018 passed u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the ITO, Ward-34(5), New Delhi (hereinafter referred to as the Ld. AO). ITA No.8738/Del/2019 2 2. On hearing both the sides, we find that it is ground No.2 which goes to the root of assumption of jurisdiction by way of reopening of the assessment for which the the ld. counsel for the assessee has opened and argued the case submitting that the reopening is based on reasons which establish utter non- application of mind. The same has been contested by the ld. DR and based upon the rival submissions it comes up that at page No.64 of the paper book the copy of a form for recording the reasons for initiating proceedings u/s 148 of the Act and for obtaining the approval of the competent authority is filed and the same is by way of Annexure-A available at pages 65-66 the reasons for the belief as recorded by the AO alleging the escapement of income and at page No.67 is the satisfaction recorded by the competent authority for granting approval u/s 151(1) of the Act. 3. It comes up from the reasons as recorded that the assessee had filed return of income declaring income of Rs.715,590/- which was processed u/s 143(1) of the Act. The case of the AO is that information was received from ITO (Inv.) OSD-2, Unit-4, Delhi by a letter dated 09.03.2018 through ITO, ward 35(3) Delhi vide letter dated 14.03.2018 alleging that the assessee has been maintaining a savings bank account in Allahabad Bank, Account No.50009610812 in which, allegedly, high volume debit and credit entries took place which is unusual for a saving account. In para 3 of the reasons for reopening the AO has given narration of facts mentioning that the assessee had filed the ITR for AY 2011-12 and shown income of Rs.7,15,590/-. When the ITA No.8738/Del/2019 3 debit and credit entries are taken into consideration the income shown in ITR does not commensurate with total credits in the assessee’s bank account. The ld. AO mentions that the assessee has submitted he has taken unsecured loan of Rs.8,99,12,000/- from M/s Shiva Chain Private Ltd. and no interest was charged by M/s Shiva Chain Pvt. Ltd. It was found to be doubtful as allegedly M/s Shiva Chain Pvt. Ltd. has shown income in ITR of Rs.2,02,492/-. Thereafter, the ld. AO mentions the fact that the assessee was summoned by ITO (Inv.) and asked to provide explanation of credit and debit entries along with supporting documentary evidences. Assessee submitted various details from time to time. Assessee is a proprietor in M/s VNI Exports. He is partner in M/s Manraj Enterprises, M/s. V.N. International and M/s Jewel Craft (later converted into M/s Golden Jewel Craft India Pvt. Ltd. during F.Y 2010-11). In addition, the assessee was also director in M/s Golden Phoenix FL Pvt. Ltd., M/s Golden Jewel Craft India Pvt. Ltd. and M/s Kashvi Metals Pvt. Ltd. Assessee submitted that various debit and credit entries in his savings account are related to unsecured loan and fund transfer among above said firms/companies. Narration of entries in bank account was given. Assessee submitted various ledgers and confirmation in support of entries in his bank accounts. 4. Thereafter, the ld. AO observes in para 5 that while tracing the ultimate source of funds routed through his saving bank account, it has been found by ITO (Inv) that major chunk of these funds were sourced from M/s Shiva Chain Pvt. Ltd. Then, as he was associated with various firms and companies, he ITA No.8738/Del/2019 4 rotated funds among all related concerns but the ultimate source is unsecured loan from M/s Shiva Chain Pvt. Ltd. Assessee was asked to submit the current status of loan and details of interest charged by them. He submitted vide reply dated 21.02.2018 that no interest was charged by them and loan is still outstanding. M/s Shiva Chain Pvt. Ltd. has given unsecured loan of Rs. 8,99,12,000/- to the assessee. ITRs of M/s Shiva Chain Pvt. Ltd. for A.Y. 2010- 11 and A.Y. 2011-12 has been examined by the ITO (lnv) to check creditworthiness of the company which is as under:- A.Y. Returned income Turnover Total loan given Total loan taken 2010-11 21,062 1,32,60,987 35,73,45,634 34,97,00,000 2011-12 2,02,492 22,77,17,680 15,15,36,551 32,34,92,267 5. It is not going with the business prudence that a company earning income of only Rs. 2,02,492/- and has given unsecured loan of Rs. 8,99,12,000/- without any interest. It. is also pertinent to mention that M/s Shiva Chain Pvt. Ltd. has never filed ITR after the relevant year i.e. 2011-12. In view of the findings, it can be concluded that creditworthiness of M/s Shiva Chain Pvt. Ltd. is not proved. So all unsecured loan i.e. Rs. 8,99,12,000/- taken by the assessee from M/s Shiva Chain Pvt. Ltd. during F.Y. 2010-11 appears to be income from unexplained sources. 6. Based on aforesaid information from the investigation wing what the ld. AO concluded is as follows; ITA No.8738/Del/2019 5 “I have examined the assessee's return of income for assessment year 2011-12 in the light of above noted information, I am satisfied that neither the particulars declared in the return of income vindicate the information stated above nor the income disclosed by the assessee in his return of income is commensurate with the credits/debits shown in the assesee's bank account as per above noted information. Hence I am satisfied with the above noted material has a live link with the assessee's income assessable to tax as per the provisions of Income Tax Act, 1961. In view of the information that the assessee had credits/unsecured loans in his saving bank account with Allahabad Bank (Account No. 50009610812) during the FY 2010-11, the assessee's case is clearly covered by the Explanation 2 to Section 147 of the I.T. Act, 1961. Hence, it is a case where it shall be deemed to the case where income chargeable to tax has escaped assessment. In view of the findings stated in Para 5 above, the undersigned has reason to believe that the assessee's income for A.Y. 2011-12 has escaped assessment within the meaning of Section 147 of the I.T. Act, 1961.” 7. The first contention of the ld. counsel is that without quantifying the amount of escapement for the purpose of section 149 of the Act, the reopening has been done. In this context, as we consider the form for recording of reasons for obtaining approval available at page No.64 in para 6, the AO has quantified ITA No.8738/Del/2019 6 the escaped income at Rs.12,73,65,912/-. However, based upon the narration of facts in the reasoning, the ld. DR was unable to justify as to how this amount in absolute figures has been arrived. Merely writing of an amount which is otherwise not getting justified from the facts as narrated only needs an inference that as for the purpose of section 149(1), for the purpose of assumption of jurisdiction for reopening beyond a period of four years there was lack of application of mind by the ld. AO. The attention of this Bench was drawn by the ld. counsel to the order of the Jaipur Bench of the Tribunal in the case titled ITO vs. Satya Narayan Parwal, ITA No.706-708/JP/2003, order dated 28.12.2004 wherein the Revenue was challenging the order of the ld.CIT(A) alleging that quantification of escaped income was necessary at the stage of recording of reasons and it was held by the coordinate Bench that the recording of the amount of escapement was obligatory on the part of the AO. 8. Then, as we go through the format for recording the reasons and for obtaining approval, we find that the AO specifically mentions applicability of clause (a) of Explanation 2 to section 147. In column 8, the AO mentions that the assessment is proposed to be made for the first time and then records that no voluntary return has been filed by the assessee. Further, in column 9 of this proforma for obtaining approval of the competent authority, the ld. AO observes specifically that there has been no original assessment. 9. These facts as narrated when examined in the light of the reasons for reopening it appears that the fact of the assessee filing the return and that it was ITA No.8738/Del/2019 7 processed u/s 143(1) of the Act has not at all been taken cognizance of by the ld. AO and he merely relied whatever information reached the Investigation Wing and how it was examined. It appears that the AO has merely reproduced the facts coming up from the Investigation Wing and added his remark of escapement of income. It is coming up from the reopening reasons that the ITO (Inv.) had called for all the relevant information with regard to credit and debit entries in the bank accounts which were filed before the ITO (Inv.). However, not a word of the same has been examined by the ld. AO to show as to if this information has been part of the assessee’s return. 10. The aforesaid also established that authority granting the approval has also not entered into the facts of the case by application of mind. The non application of mind to information to record a live link of information with the escapement of income thus not being there the reasons for reopening suffer fatal defect and thus we are inclined to allow this ground no. 2. The appeal is allowed. The impugned assessment order is quashed. Order pronounced in the open court on 16.04.2025. Sd/- Sd/- (M. BALAGANESH) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 16th April, 2025. dk Copy forwarded to: ITA No.8738/Del/2019 8 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi "