Intime Credit & Holdings (P) Ltd., New ... vs Assessee

ITA NO. 1726/Del/2012

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "C", NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER And SHRI J.S. REDDY, ACCOUNTANT MEMBER I.T.A. No. 1726/DEL/2012 A.Y. : 2001-02 M/s Intime Credit & Holdings Income Tax Officer, Ward-11(4) Pvt. Ltd., VS. New Delhi 101, Aman Chamber, Old Rajinder Nagar, New Delhi - 110 060 (PAN: AAAC12890K) (APPELLANT) (RESPONDENT)

Assessee by : Sh. Salil Aggarwal, Adv. & Sh. Shailesh Gupta, CA Department by : Sh. T. Vasanthan, Sr. DR

Date of Hearing : 27-7-2015 Date of Order : 27-7-2015

ORDER

PER H.S. SIDHU : JM Assessee has filed this Appeal against the impugned order dated 13.2.2012 passed by the Ld. CIT(A)-XV, New Delhi relevant to assessment year 2001-02.

2. The following grounds have been raised :-

1. That the learned Commissioner of Income Tax (Appeals) has grossly erred both in law and on facts in sustaining an order of assessment under section 143(3)/147 of the Act at an income of Rs.5,85,260/- as against returned income of Rs. 5,450/-.

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ITA NO. 1726/Del/2012

2 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining the initiation proceedings under section 147 of the Act and, further completion of assessment under section 143(3)/147 of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act.

2.1 That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in initiating proceedings U/S 147 of the Act on the basis of information received from DIT (investigation) mechanically and without independent application of mind. In doing so, he overlooked the fact that, there was no basis/ material to allege or assume that Assessee Company received accommodation entries and as such notice issue U/S 148 of the Act is entirely misconceived, misplaced and, unsustainable.

3 That the learned Commissioner of lncome Tax (Appeals) has erred in law and on facts in overlooking the basic fact that the addition of Rs. 5,78,365/- comprising of amounts received from three parties namely Mls Kanodia Agency, Sh. Dinanath Luhariwala Spinning Mills Pvt. Ltd. and Mls Ashish Investments during the impugned assessment year and held to be unexplained cash credit uls 68 of 2 ITA NO. 1726/Del/2012

the Act was wholly unsustainable in law, as the same was received against the repayment of loans and advances given in earlier assessment years to these parties by the appellant company and as such, the allegation of the learned ITO that appellant company had received accommodation entries during the impugned assessment year, has no legs to stand and should be deleted, as such.

3.1 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the fact that the assessee had filed detailed explanation, information's and evidences during the assessment proceedings in order to support the loans given and received back, which was all arbitrarily brushed aside (without conducting any enquiry or investigation) on the basis of mere conjectures, surmises and suspicion and the learned AO has not even made a whisper of such documents in his order and as such sustenance of penalty so levied is illegal, invalid and untenable and is liable to be deleted.

3. The brief facts of the case are that the return of income in this

case was filed on 19.6.2001 declaring income of Rs. 5,450/-. The

Return was processed u/s. 143(1)(a) of the Income Tax Act, 1961

(hereinafter referred as "I.T. Act") on 27.2.2003. In this case an

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information was received from the Investigation Wing to the effect

that the assessee has taken accommodation entries from certain

entry operators and has introduced a sum of Rs. 5,78,365/-,

consequently, the AO issued notice under section 148 of the I.T. Act

for reopening the assessment of the assessee. The assessee

requested for the reasons for reopening and the same were

provided to them by the AO vide letter dated 9.7.2008, in this letter

it was specifically informed that objections if any for reopening may

be communicated within 7 days, failing which it will be presumed

that they have no objection for reassessment proceedings. The

assessee did not responded to this letter. Later in response to

notice under section 143(2) dated 31.3.2007 and later on 18.8.2008

then 29.8.2008 the assessee started appearing in the reassessment

proceedings. Subsequently the AO passed an order under section

143 of the I.T. Act read with section 147 of the I.T. Act dated

26.12.2008 and held that an amount of Rs. 5,78,365/- is a bogus

unexplained credit and made an addition under section 68 of the I.T.

Act to the income of the assessee.

4. Against the order of the Ld. AO, assessee appealed before the

Ld. CIT(A), who vide impugned order dated 13.2.2012 has

dismissed the appeal of the assessee.

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5. Aggrieved with the order of the Ld. CIT(A), Assessee is in

appeal before the Tribunal.

6. At the time of hearing, Ld. Counsel of the assessee stated that

the Revenue Authorities has passed the impugned order against the

facts and law on file which deserve to be cancelled. To support his

contention, he draw our attention towards Page No. 14 of the Paper

Book filed by the assessee which are the reasons recorded u/s.

148(2) of the I.T. Act for issue of notice u/s. 148(1) of the I.T. Act,

1961. He stated that Department does not possess any information

which may have provided foundation for belief that income had

escaped. The assessee had maintained full and true account of its

income and all relevant documents have been attached with the

return of income filed by the assessee. He further stated that Notice

U/s. 148 of the I.T. Act dated 31.3.2008 was unexpectedly issued by

the Department, after a lapse of 7 years, the date of filing of the

original return. In response to the same, assessee has written a

letter stating that the original return may be taken to have been

filed in compliance with notice u/s. 148 and assessee has also filed

objections to the reasons recorded vide letter dated 29.8.2008

which the assessee has attached in the Paper Book at Pages 15 to

19. He stated that the proceedings have been initiated merely on

the basis of the special information received from the Directorate of

Income Tax (Investigation)-I, New Delhi in which it was alleged that

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assessee company received amount of Rs. 5,78,365/-. He further

stated that under the provisions of section 147 of the I.T. Act, the

completed assessment can be reopened if the Assessing Officer has

reason to believe that any income chargeable to tax has escaped

assessment for any assessment year, but in the case of assessee all

necessary documents have been filed alongwith return of income.

There was no concealment of any fact in the original return filed

for the assessment year in dispute. Hence, there was no

escapement of income which could give any cogent reasons to form

such a belief. Secondly, he argued that there is no statement of any

person who allegedly to have confessed that he provided

accommodation entries. In case there is any statement in the

possession of the Department, which shows that assessee company

received accommodation entries that has not been provided to the

assessee for cross examination of that person, in spite of the

request dated 29.8.2008 made by the assessee to the Assessing

Officer.

6.1 Finally, Ld. Counsel of the assessee stated that the issue in

dispute is squarely covered by the Hon'ble Jurisdictional High Court

decision in the case of Signature Hotels P. Ltd. vs. ITO [2011] 338 ITR

51 (Delhi). To support his contention, he has filed a small Paper

Book containing pages 1 to 38 having the copy of the orders of the

ITAT, Delhi passed in the following cases:- 6

ITA NO. 1726/Del/2012

i) Mrs. Kaushalya Gupta vs. ITO in ITA NO. 2235/Del/2013.

ii) Laureate Educational Society vs. ITO in ITA No.

1945/Del/2012

iii) ITO vs. Smt. Arti Khattar in ITA No. 2395/Del/2012

iv) M/s RKG International Ltd. vs. ITO in ITA No.

101/Del/2013.

v) DCIT vs. International Credits Ltd. in ITA NO.

2027/Del/2012

vi) ACIT vs. Gulshan Polyols Ltd. in ITA No. 1644/Del/2012

6.2 On the other hand, Ld. DR relied upon the order passed by the

lower authorities and requested that the same may be upheld.

7. We have heard both the parties and perused the records,

specially the impugned order passed by the Ld. First Appellate

Authority alongwith documentary evidence filed by the assessee as

well as the case laws cited by the Ld. Counsel of the assessee. At

the time of hearing, Ld. Counsel of the assessee only argued on the

legal issue mentioned in ground no. 2 reproduced above. To

adjudicate the ground raised by the assessee, we have perused the

reasons recorded u/s. 148(2) for issue of Notice u/s. 148(1) of the

I.T. Act, 1961, which the assessee has attached at Page No. 14 of

the Paper Book which is reproduced as under:-

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ITA NO. 1726/Del/2012

"1. The assessee company filed its return of income on

19/06/2001 declaring a total income of Rs.5,450/-.

2. Certain investigations were carried out by the Directorate

Income-Tax (Investigation)-I, New Delhi in respect of the

bogus/accommodation entries provided by certain

individuals/companies. The name of the assessee company

figures as one of the beneficiaries of these alleged bogus

transactions given by the Directorate after making the

necessary enquires. The name and other particulars of the

above said assessee are as under: -

Name of Name Name of Instrument Operato Date of Amount the of the the No. r's a/c entry (in Rs.) assessee bank of operator No. and / benefici Bank.

beneficia ary ries M/s Kanodia 22879 4, 20.2.2001 60,000 Intime Agency Innovati Credit & ve Holdings Wazirpu Pvt. Ltd. r, Delhi - do Ashish 33737 -do- 25.2.2001 68,365 - Investment - do - Dinanath 7473 120021 20.2.2001 4,50,000 Luhariwala 7, Spinning Innovati Mills Pvt. ve Ltd. Wazirpu r, Delhi

3. In view of the above information, it is evident that the

assessee company has introduced its own unaccounted money

in its bank by way of accommodation entries. Therefore, I have

reasons to believe that the income amounting to RS.5,78,365/-

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ITA NO. 1726/Del/2012

has escaped assessment, which is required to be assessed to

tax under the provisions of section 147 of the LT. Act, 1961.

4. Since, the period of 4 years have lapsed from the end of the

relevant assessment year, no notice u/s 148 shall be issued by

an Assessing Officer, who is below the rank of the Joint

Commissioner, unless the Joint Commissioner is satisfied on

the reasons recorded by such Assessing Officer. [Reference is

invited to the Section 151(2) of the I. T. Act, 1961].

5. Submitted for kind perusal and necessary approval for issue of Notice u/s 148 of the I.T. Act, 1961. A proforma for obtaining the approval is enclosed.

Sd/-

(C.M. MEENA) INCOME TAX OFFICER WARD-11(4), NEW DELHI

7.1 In response to the reasons recorded, the assessee filed a reply dated 29.8.2008 to the ITO, Ward-11(4), New Delhi in which the assessee has submitted that the notice u/s. 148 was unexpectedly issued by the Department on 31.3.2008 on the last date when the proceedings were getting time barred under the Income Tax Act, 1961, after a lapse of nearly 7 years from the date of filing the original return i.e. 19.6.2001. Assessee further objected for initiation of proceedings merely on the basis of the special information received from the Directorate of Income Tax (Inv.-I), New Delhi in which it was alleged that the assessee has received amount of Rs. 5,78,365/-.

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ITA NO. 1726/Del/2012

7.2 We have perused the reasons recorded u/s. 148(2) of the I.T. Act for issue of Notice u/s. 148(1) of the I.T. Act as well as the replies/objections dated 29.8.2008 to the issuance of notice for initiation of proceedings u/s. 148 of the I.T. Act. We are of the considered view that the reasons recorded by the AO for issuance of notice u/s. 148 of the I.T. Act are not acceptable to the law. There is no independent application of mind, AO had mechanically issued u/s. 148 of the I.T. Act, on the basis of the information allegedly received by him from the Ld. DIT(Inv.)-I, New Delhi. Even otherwise, the AO had issued notice u/s. 148 of the I.T. Act in the absence of tenable evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. Secondly, AO as well as Ld. CIT(A) has wrongly held that assessee was given sufficient opportunity to raise the objection within the specified time which he never responded and thus the Assessee cannot claim and the Rule of Natural Justice were adhered to. The finding of the revenue authorities are totally wrong and contrary to the evidence filed by the assessee. In fact the assessee has filed the reply/objection dated 29.8.2008 to the reasons recorded for issuance of notice u/s. 148 of the I.T. Act and also requested for supply of statements of any party recorded at the back of the assessee which has been used. The asseseee has also requested to the AO to give opportunity of cross examination that persons whose statements has been recorded and used against the assessee for making the addition in dispute. We have seen that the AO has not provided the same to the assessee and has not given any chance to cross examine that persons. Therefore, the proceedings u/s. 148 are illegal. To support this contention, we draw support from the following decisions:-

i) United Electrical Co. (P) Ltd. vs. CIT & Others (2002) 178 CTR (Del) 192.

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ITA NO. 1726/Del/2012

ii) Chuharmal vs. CIT (1988) 172 ITR 250

iii) CBI vs. VC Shukla & Others (1998) 3 SCC 410.

iv) NR Paper & Board Ltd. vs. DCIT (1998) 234 ITR 733 (Guj)

(v) Prarthana Constructions Pvt. Ltd. vs. DCIT (2001) 70 TTJ (Ahmd.) 122.

7.3 We find that as regards the effective ground in this appeal relating to reassessment proceedings u/s. 148 of the I.T. Act is concerned, the Assessee has reiterated that reassessment proceedings are illegal and without jurisdiction in the absence of any tangible evidence or material in respect of any undisclosed income and recording of requisite satisfaction in respect of any such undisclosed income. After hearing both the parties on the issue in dispute as well as after going through the orders passed by the Revenue Authorities alongwith order dated 21.7.2011 passed by the Hon'ble Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs. Income Tax Officer [2011] 338 ITR 0051, wherein the Hon'ble High Court has held matter as under:-

"Held, allowing the petition, that the reassessment

proceeding were initiated on the basis of

information received from the Director of Income

Tax (Investigation) that the petitioner had

introduced money amounting to Rs. 5 lacs during

the financial year 2002-03 as stated in the

Annexure. According to the information, the

amount received from a company, S, was nothing

but an accommodation entry and the assesee was

11 ITA NO. 1726/Del/2012

the beneficiary. The reasons did not satisfy the

requirements of Section 147 of the Act. There was

no reference to any document or statement, except

the annexure. The annexure could not be regarded

as a material or evidence that prima facie showed

or established nexus or link which disclosed

escapement of income. The annexure was not a

pointer and did not indicate escapement of income.

Further, the Assessing Officer did not apply his own

mind to the information and examine the basis and

material of the information. There was no dispute

that the company, S, had a paid-up capital of Rs. 90

lakhs and was incorporated on January 4, 1989, and

was also allotted a permanent account number in

September, 2001. Thus, it could not be held to be a

fictitious person. The reassessment proceedings

were not valid and were lliable to be quashed."

7.4 In view of above, we are of the considered view that above

issue is exactly the similar to the issue involved in the present

appeal and squarely covered by the aforesaid decision of the

Hon'ble High Court of Delhi. Hence, respectfully following the

above precedent, we decide the legal issue in dispute in favor of the

Assessee and against the Revenue and accordingly quash the

12 ITA NO. 1726/Del/2012

reassessment proceedings u/s 148 of the I.T. Act. The other issues

are not dealt with as the same have become academic in nature.

8. In the result, the Appeal filed by the Assessee stands allowed.

Order pronounced in the Open Court on 27/7/2015.

Sd/- Sd/- [J.S. REDDY] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date 27/7/2015 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant -

2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT

TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches

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