Sumo Steels Pvt. Ltd.,, Haridwar vs Department Of Income Tax

ITA no. 1162/Del/2013 A.Y. 2004-05 ACIT, Circle Hardwar. Vs. Sumo Steels Pvt. Ltd., E-45/50, UPSIDC, Industrial Area, Jasodharpur, Kotdwar. PAN: AAGCS 1824 H ( Appellant ) ( Respondent )

Appellant by : Shri P. Dam Kanunjna Respondent by : Shri Anil Jain Adv.

Date of hearing : 22-05-2015 Date of order : 29-05-2015.

ORDER

PER S.V. MEHROTRA, A.M:-

This appeal, filed by the revenue, is directed against CIT(A)'s order dated 31-12-2012 pertaining to AY 2004-05.

2. Brief facts of the case are that proceedings u/s 147 were initiated against the assessee by ITO, Ward 9(3), New Delhi on the basis of information received from the office of DIT(Inv.), New Delhi about entry operators and their beneficiaries. The AO has observed that the proceedings were initiated as a result of transfer of case records and proceedings u/s 147 by the ITO Ward 9(3), New Delhi. The main reason for proceedings u/s 147 was that assessee had received Rs. 20,00,000/- by 2 ITA no. 1162/Del/2013 Sumo Steels Pvt. Ltd.

way of accommodation entries from M/s S.J. Capitals Ltd. The AO, after considering the assessee's submissions made addition of Rs. 20,00,000/-. 2.1. Ld. CIT(A) quashed the assessment by holding that the proceedings initiated by ITO u/s 147 were invalid and also on merits.

2.2. Being aggrieved, the department is in appeal before us and has taken following grounds of appeal:

"1. Whether Ld. CIT(A) has erred in law and on facts in holding that ITO Ward-9(3), New Delhi did not have jurisdiction in the case of the assessee in initiating reassessment proceedings u/s 147.

2. Whether Ld. CIT(A) has erred in law in not giving the Assessing Officer an opportunity of being heard and in relying on submission of the assessee only.

3. Whether Ld. CIT(A) has erred in law in holding the assessment proceedings invalid and the assessment void.

4. That the order of the Ld. CIT(A) be set aside and that of the AO be restored.

3. Ld. CIT(A) observed that the assessee was engaged in the business of manufacturing of MS ingots and had also shown income from share trading in the past. The ITO Ward 9(3), New Delhi, on the basis of information received from the office of DIT(Inv.), New Delhi that assessee had received accommodation entries amounting to Rs. 20,00,000/- from M/s S.J. Capitals Ltd., initiated proceedings u/s 147 of the I.T. Act. The assessment was made eventually by the ACIT, Circle, Hardwar. He has observed that the notice u/s 148 of the I.T. Act was issued by the ITO, Ward 9(3), New Delhi, presumably because assessee's PAN was linked with 3 ITA no. 1162/Del/2013 Sumo Steels Pvt. Ltd.

him and the address as per his record was B-85/A, Mansarovar Garden, New Delhi. The assessee on receipt of notice dated 28-3-2011, wrote a letter to the AO mentioning that the jurisdiction over the case lay with the AO with whom the original return had been furnished on 30-10-2004 and assessment u/s 143(3) had been made on 20-12-2006. The ITO did not deal with the assessee's objection but transferred the assessment records to ACIT, Circle Hardwar vide his letter no. ITO/ Ward 9(3)/Transfer of records/2011-12/50 dated 12-8-2011, mentioning clearly therein that jurisdiction over the case lay with ACIT, Circle Hardwar. ACIT continued the proceedings and made the assessment. In the background of these facts the ld. CIT(A) observed that the ITO Ward 9(3) New Delhi was duty bound to pass the information to the appropriate AO who could possibly initiate the same action after following the procedure established by law. Instead of doing that, he merely passed on the proceedings initiated by him to the ACIT, Hardwar even though he clearly acknowledged that the jurisdiction lay with the latter. He further observed that if the AO actually did not have jurisdiction over the case, the notice issued by him to the assessee, even under the understandable impression, could not be called a valid notice. He, accordingly, held that the proceeding initiated u/s 148 was invalid.

4. On merits, ld. CIT(A) observed as under:

"The AO, on the basis of information received from the office of the DIT(lnv.) New Delhi, held that the assessee had received an amount of RS.20 lakh from S.J.Capital Ltd. by way of accommodation entry and treated the same as the assessee's undisclosed income. It was clarified by the assessee that

- It had done no transaction with that concern during the previous year.

- Share transactions had been' done during the previous year relating to AY 2003-04 and the corresponding income had also been offered to tax in AY. 2003-04 only.

4 ITA no. 1162/Del/2013 Sumo Steels Pvt. Ltd.

- The amount received during the previous year under consideration was the amount receivable at the end of the previous year relating to A Y 2003-04.

- The amount received during the previous year under consideration was RS.10 lakh only; not RS.20 lakh.

The relevant documentary evidence to substantiate this contention is claimed to have been furnished before the AO. The AO did not deal with this aspect of the matter satisfactorily. He only mentioned that accommodation entries are made in such a way that they appear very genuine but they did not stand the test of investigation. He also mentioned that S.J. Capital Ltd. was not found at the given address and the assessee could not furnish confirmation from the said company in respect of its alleged transaction with the latter.

2.1 It is likely that the amount received by the assessee from S.J. Capital Ltd. was not sale proceed of share but accommodation entry. But that, by itself, does not mean that an amount of RS.20 lakh may be taxed as the assessee's undisclosed income for the previous year under consideration. Firstly, the assessee's contention that the amount received was only RS.1 0 lakh and not RS.20 lakh has not been controverted. Secondly, its contention that the amount had already been offered to tax in AY. 2003-04 has also not been controverted. In view of this, prima facie there was no justification for treating the amount of Rs. 20,00,000/- as the assessee's unexplained income for the previous year under consideration. Thus, the addition is not justified even on merits".

5. We have considered the submissions of both the parties. Facts are not disputed. The department has not brought on record any evidence to controvert the findings recorded by ld. CIT(A). We are in agreement with the findings of ld. CIT(A) that ITO having jurisdiction over the assessee only could issue notice u/s 148 and none else. Once the assessee brought to the notice of ITO Ward 9(3), NewDelhi that the jurisdiction lay with ACIT Circle Hardwar with which ITO Ward 9(3), New Delhi was fully satisfied, then he was required to pass on entire information received by him to the appropriate AO who could initiate proceedings 5 ITA no. 1162/Del/2013 Sumo Steels Pvt. Ltd.

u/s 148 if the law so permits. We, accordingly, uphold the order of ld. CIT(A) on this count.

5.1. On merits also we find that the findings of ld. CIT(A) are not controverted to the extent that the assessee had offered this amount in AY 2003-04. Therefore, we confirm the findings of ld. CIT(A) on this issue.

6. In the result, revenue's appeal is dismissed.

Order pronounced in open court on 29-05-2015.

Sd/- Sd/- (A.T. VARKEY) ( S.V. MEHROTRA ) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 29-05-2015. MP: Copy to : 1. Assessee 2. AO 3. CIT 4. CIT(A) 5. DR