Reliance Polycrete Ltd, vs Department Of Income Tax

DCIT, Circle 15(1), Vs. M/s Reliance Polycrete Ltd. Room No.412, 1504, Wazir Nagar, Kotla CR Bldg., I.P. Estate, N. Mubarakpur, Opp., Defence Delhi. Colony, New Delhi

(PAN AAACR 4589 A)

(Appellant) (Respondent)

Date of hearing : 23.04.2015 Date of Pronouncement : 06.05.2015

Appellant by : Shri Vikram Sahay, Sr. DR Respondent by : None

ORDER

PER SHRI INTURI RAMA RAO, AM:

1. This is an appeal filed by the Revenue for the AY 1999-2000 impugning the

order of the CIT(A)-XVIII, New Delhi raising the following grounds:-

"1. Ld. CIT(A) has erred in law and in the facts and circumstances of the case in quashing the reassessment proceedings by holding that the proceeding are invalid and not in accordance with the statutory provisions as per section

147.

2. Ld. CIT(A) has erred in law and in entertaining fresh evidence without affording any opportunity to the Assessing Officer to examine those evidences.

ITA No.244/Del /2007 2

3. Ld. CIT(A) has erred in law and in the facts and circumstances of the case in deleting the addition of Rs.26,00,000/- on account of unexplained cash credit u/s 68 of the I.T. Act.

4. Ld. CIT(A) has erred in law and in the facts and circumstances of the case in deleting the addition of Rs.29,94,850/- on account of expenses incurred out of unexplained cash credit.

5. Ld. CIT(A) has erred in law and in holding that the Assessing Officer was not justified in invoking provisions of Section 145 of the Act.

6. Ld. CIT(A) has erred in law and in the facts and circumstances of the case in deleting the addition of Rs.4,75,975/- made on account of net profit ratio of 2.5%.

7. The appellant craves to be allowed to amend, delete or add any other grounds of appeal during the course of hearing of this appeal."

2. The brief facts of the case are that the respondent-assessee company had

filed the return of income for the AY 1999-2000 on 31.12.1999 declaring a loss of

Rs.1,84,500/-. The return of income was processed u/s 143(1) of the I.T. Act on

16.06.2000. Subsequently, based on the strength of information received from

another Assessing Officer namely Assistant Commissioner of Income Tax, Circle

14(1), New Delhi that the assessee company invested a sum of Rs.26,00,000/- in

cash in the form of share application money for purchase of shares of M/s. P.P.C.

Business & Products (P) Ltd. during the previous year relevant to the Assessment

Year 1999-2000 issued notice u/s 148 of the Act. Subsequently, the assessment

was completed after making the following addition:-

ITA No.244/Del /2007 3

"Total Business Income

i) Net Income on total turnover of Rs.1,90,39,041 as discussed in the body of order 4,75,975

ii) Unexplained cash credit u/s 68 introduced in the company as discussed in the body of order 26,00,000

iii) Unexplained cash credit u/s 68 introduced in the company as discussed inm the body of order 29,94,850 Net Income 60,70,825"

Being aggrieved by the above assessment order, the assessee company preferred an

appeal before the CIT(A) who vide order dated 06.10.2007 in Appeal No.61/05-06

allowed the appeal of the assessee company both on the preliminary issue relating

to reopening of the assessment and as well as on merits of the addition. Being

aggrieved, the revenue had come up present appeal before us. The Ld.

Departmental Representative vehemently argued that the CIT(A) was not justified

in holding the reassessment proceeding to be in valid, in as much as the original

assessment was made only u/s 143(1) of the Act. He also placed reliance on the

ratio of the Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock

Brokers P. Ltd. reported in 291 ITR 500 (SC). He further argued that the CIT(A)

admitted the additional evidence without affording an opportunity to the Assessing

Officer in utter disregard of provisions of Rule 46A of the IT Rules, 1962.

3. No one was present on behalf of the respondent-assessee. It is seen from the

record, the notice could not be served on the assessee company despite best of

efforts of the Department and hence we proceed to pass the ex-parte order on ITA No.244/Del /2007 4

merits. At the first instance, we shall deal with preliminary issue on the validity of

reopening proceedings, the Ld. CIT(A) had held the reopening assessment invalid

as according to him there was no reason to believe that income chargeable tax as

escaped assessment. The Ld. CIT(A) further held that the reason to believe cannot

be equated with reason to suspect and placing reliance on the decisions of the

Hon'ble Supreme Court in the cases of Bajranj Lal Vs. ITO reported in (1993) 203

ITR 456 (SC) and Lakhmani Mewal Das reported in (1976) 103 ITR 437 (SC)

held the reassessment proceedings were invalid. After considering the material

available on record, we are of the considered opinion that Ld. CIT(A) misdirected

himself in placing reliance in decisions mentioned supra. In the present case, the

Assessing Officer received information from another Assessing Officer that the

assessee company invested in cash in the form of share application money of

Rs.26,00,000/. This information in our considered view gave the Assessing Officer

reason to believe that income chargeable tax had escaped assessment. The

investment in the cash form for share application money certainly forms belief that

income escaped assessment. In this kind of transaction it is the duty of Assessing

Officer to give a finding in whose hand such sum is taxable. Now it is settled law

that in case where it appears to the Assessing Officer that certain income has been

received during the relevant assessment year but it is not clear who has received

that income and, prima facie, it appears that the income may have been received

either by A or B or by both together, it would be open to the relevant income tax ITA No.244/Del /2007 5

authorities to determine the said question by taking appropriate proceedings both

against A and B" [Chhotolal Haridas Vs. M.D. Karnik, (1961) 43 ITR 387, 392

(SC); Sidh Gopal Gajanad Vs. ITO, (1969) 73 ITR 226, 233 (All); R. Dalmia Vs.

Union of India, (1972) 84 ITR 616 (Del)]. It is also equally settled law that at the

time of issuance of reassessment notice, is not mandatory that the Assessing

Officer should come to a conclusive finding that income has escaped assessment

and, therefore, we hold that the Ld. CIT(A) is not justified in holding that the

reassessment proceeding invalid. Now, we shall deal with the merits of the

addition. The Ld. CIT(A) during the course of proceedings before him had

accepted the additional evidence in the form of MOU with M/s. Mahavir Trade

Links Private Ltd. and confirmation from them. Without affording an opportunity

of being heard to the Assessing Officer, this offends the provisions of Rule 46A of

the IT Rules, 1962 which is reproduced below:

"(2) No evidence shall be admitted under sub-rule (1) unless the [Deputy Commissioner (Appeals) [ or, as the case may be, the Commissioner (Appeals) records in writing the reasons for its admission.

(3) The [Deputy Commissioner (Appeals) [ or, as the case may be, the Commissioner (Appeals) shall not take into account any evidence produced under sub-rule (1) unless the [Assessing Officer] has been allowed a reasonable opportunity--

(a) to examine the evidence or document or to cross-

examine the witness produced by the appellant, or

(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the appellant."

ITA No.244/Del /2007 6 4. From the perusal of the CIT(A)'s order we do not find any thing as to the

prayer made by the assessee company for admission of additional evidence. The

reassessment was made u/s 144 of the Act. It implies that the assessment was made

for non cooperation, non production evidence before the Assessing Officer. If the

CIT(A) grant relief, obviously it means that the assessee had filed some additional

evidence in rebuttal of the assessment order. But, it appears from the order of the

CIT(A) that he had not given the Assessing Officer reasonable opportunity--

(a) to examine the evidence or document or to cross-examine the witness produced by the assessee company

(b) to produce any evidence or document or any witness in rebuttal of the additional evidence produced by the assessee.

As per the mandate of Rule 46A of the Income Tax Rules, 1962. Therefore, we

remit the matter back to the file of the CIT(A) with the direction that the appeal

shall be reheard and the Assessing Officer shall be given reasonable opportunity as

per provisions of Clause(3) of Rule 46A of the Rules, 1962 and dispose of the

matter accordingly.

5. In the result, appeal filed by the Revenue is partly allowed.

The Order pronounced in the open Court on 06th May, 2015.

Sd/- Sd/- (G.C. GUPTA) (INTURI RAMA RAO) Vice President Accountant Member

Dated: 06th May, 2015. Aks/- DCOM ITA No.244/Del /2007 7

Copy forwarded to 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi