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2018 (6) TMI 145
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.... and CIT(A) ought to have deleted the same. 3. The alleged reasons given by AO and CIT(A) for making / confirming the addition of Rs. 40,80,000/- are erroneous, both on facts and in law and, therefore, the addition of Rs. 40,80,000/- made by the AO and confirmed by CIT(A) is liable to be deleted. The appellant craves leave to add, alter, modify or delete one or more ground of appeal before or at the time of hearing of appeal. The aforesaid grounds of appeal are without prejudice of each other. 2. The brief facts of the case are that the proceedings u/s. 147/148 of the Income Tax Act, 1961 (hereinafter referred as the Act) were initiated in this case after recording the reasons on the basis of the information received from the Investigation Wing of the Department, Delhi on the basis of search and seizure operation carried out on Tarun Goyal Group of cases, that certain persons/Cos. were using services of accommodation entry operators to channelize their own unaccounted money in their regular books of accounts by routing the same through the accounts of accommodation entry providers. The modus operandi adopted by such beneficiaries of the services of accommodation entry p....
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....at the name of assesee company also figures in the list of names having received from such accounts of operators, amount in aggregate amounting to Rs. 40,80,000/- from M/s. Geefcee Finance Ltd. The above company is found by the investigation wing as engaged in business of providing accommodation entries. 2.1 In view of above the case of the assessee was selected for scrutiny as per the provisions of section 147 and 151 of the I.T. Act, 1961 and accordingly notice u/s 148 of the Act was issued to the assessee on 23.3.2012. 2.2 In response to the notice u/s. 148 of the Act, a letter dated 16.4.2012 was filed by the assessee stating therein that return of income tor A.Y. 2005-06 was filed 31.10.2005 vide acknowledgement No. 2455 dt. 31. 10.2005 be treated as a return filed in pursuance of captioned notice u/s 148 of the Act declaring an income of Rs. 6340/, and its nature of business of commission agent. Thereafter a notice u/s 143(2) of the I. T. Act, 1961 issued on 7.5.2012, but none attended on the given date. Further notice issued on 8.10.2012. On 19.11.2012 assesee/ AR of the assessee attended, a copy of the reasons recorded was provided to him and specifically asked to fil....
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....her value amount have been received through high value cheques such as on 24.6.2004 assessee received Rs. 6 lacs and on immediately preceding date i.e 23.6.04 Rs. 8 lacs have been deposited as Sai Dwarka, on 26.6.2004 assessee received Rs. 6 lacs from M/s Geefcee Finance Ltd. and on same date the same amount has been deposited in its accounts from Merta Finance Ltd. one of the company of the entry operator which is used as providing accommodation entry. Similarly same pattern has been found in all the money received by the assessee. 2.5 In view of above the claim of the assesee that they have genuine business transaction with M/s Gee fcee Finance Ltd. and as stated by Shri Tarun Goyal in his statement recorded on 22.3.2013 that they have genuine business transactions cannot be tenable. Further mere filing application for license for mining doesn't affected the growth of the company immediately which the M/s Geefcee Finance Ltd. invested a sum of Rs. 4080000/- almost 90% capital of assessee company. The assessee company has also not having any technical expertise in the mining industry. In view of the above, AO concluded that it is a camouflage just to introduce its own fund ....
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.... he filed the copy of the order dated 9.1.2015 of the ITAT, Delhi Bench passed in the case of G&G Pharma India Ltd vs. ITO (Supra) and referred the page nos. 88-105 of his Paper Book. He further draw our attention towards the page no. 106-108 which is a copy of decision dated 14.10.2014 of Hon'ble High Court of Madhya Pradesh in the case of CIT vs. S. Goyanka Lime & Chemical Ltd.reported as (2015) 56 taxmann.com 390 (Madhya Pradesh) which was late upheld by the Hon'ble Supreme Court of India in SLP (c) No. 11916 of 2015 vide judgment dated 8.7.2015 reported as (2015) 64 taxmann.com 313 (SC). Therefore, he requested that by following the aforesaid precedents the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee. 5.1 However, on the merit of the case, ld. Counsel of the assessee has stated that AO has made the addition of share capital of Rs. 40.80 lacs invested in the company by GEEFCEE Finance Ltd. There was no reason or basis for making the addition of the aforesaid amount of share capital of Rs. 40.80 lacs u/s. 68 of the Act. The assessee had furnished before the AO all the necessary details and documentary evidences to discharge i....
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....e u/s. 148 of the Act and the approval of the Ld. Addl. CIT, Range-2, New Delhi for reopening of assessment which reads as under:- "FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 148 AND FOR OBTAINING THE APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX / COMMISSIONER OF INCOME TAX-Range-16, New Delhi 1. Name and address of the assessee M/s. Tara Alloys Ltd. 102, Harsha House Karampra Commercial Complex, New Delhi 2. PAN AAACT0545N 3. Status Company 4. Range/Ward Ward-16(1), Delhi 5. Assessment year in respect of which it is proposed to issue notice under section 148. 2005-06 6. The quantum of income which has escaped assessment. Rs. 40,80,000 7. Whether the assessment is proposed to be made for the first time. If the rely is in affirmative. Please state As per office record, yes. 8. If the answer to item 8 is in the negative please state : (a) The income originally assessed. N. A. (b) Whether it is a case of too low a rate, assessment under assessment, assessment at been made the subject of excessive relief or allowing of excessive loss of depreciati....
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....e form of gift, share application money, loan, transaction of sale of unquoted shares etc through banking channels. C) The statement of bank accounts of accommodation entry providers were collated by the Investigation wing and it is seen that the name of the assessee company also figures in the list of names having received from such accounts of entry operators, amounts in aggregate amounting to Rs. 4080000/- whose from Geefcee Finance Limited. The above named companies I found by the Investigation Wing as engaged in business of providing accommodation entries only and they had no other business. In view of above, I have reasons to believe that this is a fit case for reopening u/s. 147 of the Income Tax Act, 1961. As per the records of this ward, no scrutiny was done in this case approval is therefore solicited for issuing notice u/s. 148. Sd/- ( Dharam Singh ) Dt. 23.03.2012 ITO, Ward 16(1), N Delhi" 8. After going through the reasons recorded by the Assessing Officer/ITO, Ward 16(1), New Delhi for reopening and the approval thereof by the Ld. Addl. CIT, Range-16, New Delhi, I am of the view that AO has not applied his mind so as to come to an independent c....
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....rcumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon'ble High Court of Delhi in the following cases:- (i) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: "(i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The Assessing Officer must have 'reason to believe' that income chargeable to tax has escaped assessment. This is mandatory and the 'reason to believe' are required to be record....
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....ectness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his "reasons to believe"was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The AO had clearly substituted form for substance and therefore the action of the AO was not sustainable." 9. 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 is squarely covered by the aforesaid decisions 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 reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 10. In the result, the Appeal filed by the Assessee stands allowed." (B). Pr. CIT vs. G&G Pharma India Ltd. in ITA No. 545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon'ble Court has adjudicated the issue as under:- "12. In the present case, after setti....
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....t mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity . 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed." (C) ITAT, 'E' Bench, New Delhi in the case of ITO vs. M/s NC Cables Ltd. in ITA No. 4122/Del/2009 (AY 2001-02) and in Cross Objection No. 388/Del/2009 in the matter of M/s NC Cables Ltd. vs. ITO, vide order dated 22.10.2014, the Tribunal has held as under:- "10.2. The Mumbai 'E' Bench of the Tribunal in ITA 611/Mum/2004 Amarlal Bajaj (supra) order dt. 24.7.2013 has considered the legal position and held as follows. "5. We have considered the rival submissions and carefully perused the orders of the lower authorities and also the material evidences brought on 8 record from both sides. We have also the benefit of perusing the order sheet entries by which the Ld. CIT has granted sanction. Let us first consider the relevant part of the provisions of Sec. 151 of the Act. 151. (1) In a case where an assessment under subsection....
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.... On these facts, the Hon'bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the 9 Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO. "Intimation has been received from DCIT-24(2), Mumbai vide his letters dt. 22nd February, 2002 that one Shri Nitin 1. Rugmani assessed in his charge had arranged Hawala entries in arranging loans, expenses, gifts. During the year Shri Amar G. Bajaj, Prop. Of Mohan Brothers, 712, Linking Road, Khar (W), Mumbai-52 was the beneficiary of such loans, expenses and gifts. The modus-operandi was to collect cash from the parties to whom loans were given and cash was deposited into account of Shri Nitin 1. Rugani and cheques were i....
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....ears from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material r....
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.... is a fit case for the issue of such notice] : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.] [Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself.]" 6. A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unle....
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....was completed u/s. 143(3) of the I.T. Act on 31st March, 1998 by DCITSpl. Rg. 40, Mumbai. It is seen from records that the aforesaid points have not been verified in the assessment. I have therefore reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income has escaped assessment within the meaning of proviso to Sec. 147 and explanation 2 (c)(i) of the income-tax Act, 1961." 7. In the light of the above mentioned reasons, in our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and ....
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....oner has simply mentioned "approved" to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon'ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee's appeal is allowed. 10. As we have held that the reassessment is bad in law, we do not find it necessary to decide other issues which are on merits of the case." (E). Hon'ble High Court of Madhya Pradesh in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. reported in (2015) 56 taxmann.com 390 (MP) has held as under:- "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am Satisfied". In the case of ARjun Singh vs. Asstt. DIT (2000) 246 ITR 363 (MP), the same question has been considered by a Coordinate Bench of this Court and the following principles are laid down:- "The Commissioner acted, of course, mechanically in order to discharge his statutory obligation properly in the matter of recording sanction a....