Siya Real Estate Pvt Ltd New Delhi v. Ito New Delhi

In The Income Tax Appellate Tribunal Delhi Bench Smc New Delhi Before Sh N K Saini A Ccountant M Ember Ita No 865 Del 2013 Asstt Year 2008 0 9 Siya Real Estate Pvt Ltd Up 12 Pi Tampura New Delhi 110034 Vs Income Tax Officer Ward 8 4 New Delhi Appellant Respondent Pan No A Aics 7889 N Assessee By Smt Rano Jain Adv Sh Ashish Chadha Adv Revenue By Sh T Vasanthan Sr Dr Date Of Hearing 21 09 201 7 Date Of Pronouncement 20 12 201 7 Order This Is An Appeal By The Assessee Against The Order Dated 21 12 2012 Of Ld Cit A Xi New Delhi 2 Following Grounds Have Been Raised In This Appeal 1 On The Facts And Circumstances Of The Case The Order Passed By The Learned Commissioner Of Income Tax Appeals Cit A Is Bad Both In The Eye Of Law And On Facts 2 On The Facts And Circumstances Of The Case The Learned Cit A Has Erred Both On Facts A Nd In Law In Rejecting The Contention Of The Assessee That The Reopening And Consequent Reassessment Not Being In Accordance With The Statutory Conditions Prescribed Under Section 147 Read With Section 148 Of The Act Is Bad In Law Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 2 3 On The Facts And Cir Cumstances Of The Case The Learned Cit A Has Erred Both On Facts And In Law In Rejecting The Contention That The Assessment Order Passed By The Ao In The Absence Of Notice Und Er Section 143 2 Is Bad In Law 4 On The Facts And Circumstances Of The Case The Learned Cit A Has Erred Both On Facts And In Law In Confirming The Addition Of Rs 13 00 000 On Account Of Unexplained Cas H Credit 5 On The Facts And Circumstances Of The Case Th E Learned Cit A Has Erred Both On Facts And In Law In Ignoring Th E Contention Of The Appellant That The Addition Of Rs 5 00 000 On Account Of Share Capital Received From Thar Steel Pvt L Td Is Not Legally Sustainable During The Year Under Consideration As This Amount Was Not Received During The Year 6 On The Facts And Circumstances Of The Case The Learned Cit A Has Erred Both V On Facts And In Law In Con Firming The Addition Of Rs 8 00 000 On Account Of Share Capital Received From Bhavani Portfolio Ltd Despite The Assessee Bringing All Material Facts And Eviden Ces In Support Of Its Contention 7 That The Appellant Craves L Eave To Add A Mend Or Alter Any Of The Grounds Of Appeal 3 Ground Nos 1 7 Are General In Nature And Ground No 3 Was Not Pressed So These Grounds Do Not Require Any Comments On My Part Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 3 4 Vide Ground No 2 The Grievance Of The Assessee Relates To The Validity Of The Reopening U S 147 R W S 148 Of The Income Tax Act 1961 Hereinafter Referred To As The Act 5 Facts Of The Case In Brief Are That The Assessee Filed The Return Of Income On 30 09 2008 Declaring An Income Of Rs 2 900 Which Was Processed U S 143 1 Of The Act Subsequently The Ao Received Information From Addl Director Of Income Tax Investigation Iv Jhandewalan Extn New Delhi To The Effect That Assessee Was One Of The Beneficiaries Of Accommodation Entries Provided By Entry Operator Sh Tarun Goyal Chartered Accountant 13 34 Wea Arya Samaj Road Karol Bagh New Delhi O N The Basis Of The Said Report From The Investigation Wing The Ao Came To The Reasons To The Belief That Income Had Escaped Assessment And The Assessee Was One Of The Beneficiaries Who Had Taken A Sum Of Rs 13 00 000 As Accommodation Entries From M S Bhavani Portfilio Pvt Ltd Amounting To Rs 8 00 000 And M S Thar Steel Pvt Ltd Amou Nting To Rs 5 00 000 The Companies Created By Sh Tarun Goyal Accordingly Notice U S 148 Of The Act Was Issued In Response The Assessee Filed The Details Vide Letter Dated 17 08 2010 However T He Ao Added A Sum Of Rs 13 00 000 U S 68 Of The Act B Y Holding That The Explanation Given By The Assessee Was Not Tenable And That The True Fact Was That The Assesse S Own Unaccounted Income Had Been Routed Through The Companies Created By Sh Tarun Goyal Who Was Providing Accommodation Entries Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 4 6 Being Ag Grieved The Assessee Carried The Matter To The Ld Cit A And Submitted That The Ao Had Written A Very Philosophical Order And Had Made Additions Without Giving Even An Iota Of Fact Against The Assessee With Regard To The Allegations Made By Him It Was F Urther Submitted That The Ao Had Accepted That The Assessee Had Filed Confirmation Etc From The Contributors But He Had Travelled Further In Making Additions On Frivolous Ground It Was Further Submitted That As Per The Provisions Of Section 147 Of The A Ct The Satisfaction Has To Be That Of The Ao Not Of Anyone Else And That The Ao Cannot Blindly Issue A Notice U S 148 Of The Act Simply On Any Information Available It Was Stated That The Amount Received From All The Three Parties On Account Of Share Ap Plication Money Received Had Been Clearly Shown By The Assessee In The Computation Of Income Filed Alongwith Return Of Income Therefore There Was No Reason To Form An Opinion That A Sum Of Rs 13 00 000 Had Escaped Assessment It Was Contended That In T He Reasons Recorded There Was No Reference To Any Statement Or Any Evidence On The Basis Of Which A Satisfaction Had Been Reached By The Ao Therefore The Reopening Of The Assessment Merely On The Basis Of Doubt Was Unjustified And Legally Untenable The Reliance Was Placed On The Following Case Laws Ito Vs Lakhmani Mewal Das 103 Itr 437 Sc Ito Vs Dwarka Dass Bros 131 Itr 571 Del United Electrical Company Pvt Ltd Vs Cit Ors 258 Itr 317 Del Iac Vs Nasik Eggs Enterprises 42 Itd 105 Pune Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 5 Raja Bahadur Motilal Pvt Ltd Vs K R Vishwanathan Ito Ano 183 Itr 80 Bom C D Singh Vs Ito 2002 77 Ttj 282 Aii Tri Panchananhati Vs Cit 115 Itr 336 Cal Sheonarain Jaiswal Vs Ito 1989 1796 Itr 352 Pat Ganga Saran Sons P Ltd 1981 1 30 Itr 1 Sc Cst Vs Bhagwan Industries P Ltd 1973 31 Stc 293 Sc Calcutta Discount Co Ltd Vs Ito 1961 41 Itr 191 Ashok Kumar Sen Vs Ito 132 Itr 707 Del Sheo Nath Singh Vs Aac 1971 82 Itr 147 Sc Technocraft Industries Vs Ao 1990 186 Itr 514 Murlidhar Bhagwandas 1961 52 Itr 335 Sc Gardhara Singh 1980 125 Itr 340 P H Phool Chand Bajrang Lal 1993 203 Itr 456 Sc Ito Vs Rajeev Aggarwal 89 Ttj 1095 Del Kishenchand Chellaram Vs Cit 125 Itr 713 Sc Acit Vs G M Infrastructure It Ss No 133 Ind 2008 To 135 Ind 2008 Jyoti Pat Ram Vs Ito 2007 92 Itd 423 Luc Acit Vs Smt Jyoti Devi 2004 84 Ttj 689 Jai Cit Vs Mudra G Nanavati Hc Bom Cit Vs Mudra G Nanavati Hc Bom Mudra G Nanavati Vs Wcit 2007 30 Dtr 217 Mum Trib Ms C Malathy Vs Ito 2004 88 Itd 37 Chennai Smt Amarjeet Kaur Vs Acit 2009 17 Dtr 127 Del Trib Aegis Chemical Ind Limited Vs Ito 1998 65 Itd 147 Mum Sat Narain Vs Ito 2005 94 Ttj 499 Del Shringer Verlag Gmbh Vs Dcit 2005 97 Ttj 269 Del Dcit Vs Indian Syntans Investments Private Limited 2007 107 Itd 457 Cehnnai Acit Vs Santosh Kumar Ors 2003 87 Itd 107 Ah Cit Vs Pawan Gupta Ors 2009 22 Dtr 291 Del Cwt Vs Huf Of H H Late Shri J M Scindia 2008 300 Itr 193 Bom R Da Lmia Another Vs Cit 236 Itr 480 Sc Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 6 7 It Was Further Submitted That The Assessee Did Not Receive Any Sum On Any Account From M S Thar Steel Pvt Ltd During The Year Under Consideration Therefore The Addition Made By The Ao Alongwith Reason Recorde D Were Bad In Law And Against The Case Of The Assessee And That The Addition Of Rs 5 00 000 Was Liable To Be Deleted It Was Also Stated That The Assessee In Order To Satisfy The Ao Regarding The Receipt Of Rs 8 00 000 From M Sbhavani Portfolio P Ltd Produced Confirmations Share Application Forms Balance Sheet Pan Details Etc Related To Various Parties Before The Ao Who Disbelieving The Explanation Filed By The Assessee With Respect To The Said Parties Added The Amoun T In The Hands Of The Assesse E By Stating That The Said Transactions Were Done With The Bogus Companies Which Was A Mere Belief As The Ao Never Put On The Record Any Evidence Supporting His Contention It Was Also Pointed Out That The Ao Issued Notices To The Parties U S 133 6 Of The Act Which Were Duly Replied By Them And That The Assessee Had Produced The Following Details With Regard To Every Transaction Related To The Share Capital Application Money A Pan Details B Certificate Of Incorporation C Copy Of Memorandum And Article S Of Association D Audited Balance Sheet Profit And Loss A C E Copy Of Share Application Form F Copy Of Compliance Certificate From C S 8 It Was Contended That The Assessee Had Discharged Primary Onus To Prove The Identity Genuineness And Creditw Orthiness Of The Share Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 7 Applicant Therefore No Addition Could Have Been Made On The Basis Of Material Collected At The Back Of The Assessee The Reliance Was Placed On The Following Case Laws Cit Vs Lovely Exports Pvt Ltd 2008 216 Ctr 195 Sc Cit Vs Steller Investment Ltd 2001 251 Itr 263 Sc Cit Vs Sophia Finance Ltd 1993 205 Itr 98 Del Cit Vs Achal Investments Ltd 2004 268 Itr 211 Del Cit Vs Divine Leasing Finance Ltd 299 Itr 268 Del Cit Vs Orissa Vs Orissa Corporation Pvt Lt D 1986 159 Itr 78 Sc Cit Vs Value Capital Services Pvt Ltd 307 Itr 334 Sarthak Securities Co P Ltd Vs Ito 329 Itr 110 Del 9 The Ld Cit A After Considering The Submissions Of The Assessee Observed That There Were Sufficient Reasons For The Ao To Belief That The Income Had Escaped Assessment And Proceedings Were Initiated After Recording The Reasons And That Reassessment Was Valid If There Was Prima Facie Reason To Belief That Income Had Escaped Assessment He Further Observed That The Infor Mation Was Received By The Ao And Reasons Were Recorded That There Was Escapement Of Income The Ld Cit A Also Confirmed The Addition To Rs 13 00 000 Made By The Ao The Reliance Was Placed On The Following Case Laws Ratnachudamani S Utnal Vs Ito 20 04 269 Itr 212 Karn Ito Others Vs Shree Bajrang Commercial Co Pvt Ltd 2004 269 Itr 338 Cal Raymond Woolen Mills Ltd 1999 236 Itr 34 Sc Acit Vs Rajesh Jhaveri Stock Brokers P Ltd 161 Taxman 316 Sc Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 8 10 Now The Assessee Is In Appeal The Ld Counsel For The Assessee Reiterated The Submissions Made Before The Authorities Below And Further Submitted That The Ao Initiated The Reassessment Proceedings Only On The Basis Of Information Received From Dit Inv Without Any Independent Appli Cation Of Mind And This Fact Was Clearly Evident From The Reasons Recorded For Reopening The Assessment Our Attention Was Drawn Towards Page No 12 Of The Assessee S Paper Book It Was Further Submitted That The Reasons Recorded By The Ao Did Not Disclose The Basis On Which He Termed The Receipt Of Money By The Assessee Towards Share Application Money As Accommodation Entries And That The Alleged Information Provided By The Dit Inv Had Been Accepted As Gospel Truth Without Any Verification By The Ao The Refore The Blind Acceptance Of The Information Could Not Have Formed The Reasons Leading To The Belief Of Any Escapement Of Income It Was Further Submitted That The Reasons Recorded By The Ao Clearly Shows That There Was No Independent Finding To The Eff Ect That The Assessee Had Failed To Disclose True And Full Material Facts Or Regarding The Fact That Any Income Had Escaped Assessment The Reliance Was Placed On The Following Case Laws Pr Cit Vs Meenakshi Overseas Pvt Ltd 2017 395 Itr 677 Pr Cit Vs Rmg Polyvinyl I Ltd 2017 396 Itr 5 Pr Cit Vs G G Pharma India Ltd 2016 384 Itr 147 Del Sabharwal Properties Industries Pvt Ltd Vs Ito 2016 382 Itr 547 Del Cit Vs Independent Media Pvt Ltd In Ita No 108 2015 Order Dated 19 11 2015 Ito Vs Navodaya Castles Pvt Ltd In Ita No 4613 Del 2010 Order Dated 24 08 2016 Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 9 Pr Cit Vs G G Pharma Ltd 384 Itr 147 Del 11 In His Rival Submissions The Ld Dr Strongly Supported The Orders Passed By The Authorities Below And Reiterated The Ob Servations Made Therein 12 I Have Considered The Submissions Of Both The Parties And Perused The Material Available On The Record In The Present Case It Is Not In Dispute That The Ao Reopened The Assessment Only On The Basis Of Information Received Fr Om The Investigation Wing I E From The Addl Dit Investigation Iv Jhandewalen Extension New Delhi In The Present Case The Ao Had The Reason For Belief That The Income Had Escaped Assessment Only On The Basis Of Information Received From The Investi Gation Wing And Did Not Apply His Own Mind 13 On A Similar Issue The Hon Ble Jurisdictional High Court In The Case Of Principal Commissioner Of Income Tax 4 Vs G G Pharma Ltd 384 Itr 147 Supra Held As Under The Basic Requirement Of Law For Reope Ning An Assessment Is Application Of Mind By The Assessing Officer To The Materials Produced Prior To Reopening The Assessment To Conclude That He Has Reason To Believe That Income Has Escaped Assessment Unless That Basic Jurisdictional Requirement Is S Atisfied A Post Mortem Exercise Of Analysing Materials Produced Subsequent To The Reopening Will Not Make An Inherently Defective Reassessment Order Valid It Has Further Been Held As Under Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 10 Without Forming A Prima Facie Opinion On The Basis Of Such M Aterial It Was Not Possible For Him To Have Simply Concluded That It Was Evident That The Assessee Company Has Introduced Its Own Unaccounted Money In Its Bank By Way Of Accommodation Entries The Basic Jurisdictional Requirement Was Application Of Mind B Y The Assessing Officer To The Material Produced Before Issuing The Notice For Reassessment Without Analysing And Forming A Prima Facie Opinion On The Basis Of Material Produced It Was Not Possible For The Assessing Officer To Conclude That He Had Reason To Believe That Income Had Escaped Assessment 14 Similarly The Hon Ble Jurisdictional High Court In The Case Of Pr Cit Vs Meenakshi Overseas Pvt Ltd 2017 395 Itr 677 Supra Held As Under That While The Report Of The Investigation Wing Might Have Constituted Material On The Basis Of Which The Assessing Officer Formed The Reasons To Believe The Process Of Arriving At Such Satisfac Tion Could Not Be A Mere Repetition Of The Report Of Investigation In The Asses Sees Case The Crucial Link Betw Een The Information Made Available To The Assessing Officer And The Formation Of Belief Was Absent The Reasons To Believe Recorded Were Not Reasons But Only Conclusions And A Reproduction Of The Conclusion In The Investigation Report Received From The D Irector Investigation It Was A Borrowed Satisfaction The Expression Accommo Dation Entry Was Used To Describe The Information Set Out Without Explaining The Basis For Arriving At Such A Conclusion The Basis For The Statement That The Entry Was Giv En To The Assessee On His Paying Unaccounted Cash Was Not Disclosed Who Was The Accommodation Entry Giver And How He Could Be Said To Be A Known Entry Operator Were Not Mentioned The Source For All The Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 11 Conclusions Was The Investigation Report The Ta Ngible Material Which Formed The Basis For The Belief That Income Had Escaped Assessment Must Be Evident From A Reading Of The Reasons The Reasons Failed To Demonstrate The Link Between The Tangible Material And The Formation Of The Reason To Believe That Income Had Escaped Assessment The Assessing Officer Had Not Independently Considered The Tangible Material Which Formed The Basis For The Reasons To Believe That Income Had Escaped Assessment No Error Had Been Committed By The Appellate Tribunal In Conc Luding That The Initiation Of The Reassessment Proceedings Under Section 147 148 To Reopen The Assessments For The Assess Ment Year 2004 05 Was Not Legal 15 On A Similar Issue The Hon Ble Jurisdictional High Court In The Case Of Pr Cit Vs Rmg Polyvin Yl I Ltd 2017 396 Itr 5 Supra Held As Under That No Link Between The Tangible Material And The Formation Of The Reasons To Believe That Income Had Escaped Assessment Could Be Discerned The Information Received From The Investigation Wing Was Not Tangible Material Per Se Without A Further Enquiry Having Been Undertaken By The Assessing Officer Who Had Deprived Himself Of That Oppor Tunity By Proceeding On The Erroneous Premise That The Assesses Had Not Filed A Return For The Assessment Year 2004 05 When In Fact It Had In His Assess Ment Order The Assessing Officer Had Instead Of Adding A Sum Of Rs 78 Lakhs Even Going By The Reasons For Reopening Of The Assessment Added A Sum Of Rs 1 13 Crores And The Basis For Such Addition Had Not Been Ex Plained No Error Was Committed By The Appellate Tribunal In Holding That Reopening Of The Assessment Under Section 147 Was Bad In Law Ita No 865 Del 201 3 Siya Real Estate Pvt Ltd 12 16 In The Present Case Also The Ao Simply Acted Upon The Information Received From The Investigation Wing And Did Not Apply His Own Mind Therefore The Reopening U S 147 By Issuing The Notice U S 148 Of The Act Only On The Basis Of Information Received From The Investigation Wing Was Not Valid Accordingly The Reassessment Framed By The Ao Is Quashed 17 Since I H Ave Quashed The Reassessment Proceedings Therefore No Findings Are Given On The Remaining Ground Raised By The Assessee On Merit 1 8 In The Result The Appeal Of The Assessee Is Allowed O Rd E R Pronounced In The Court On 20 12 2017 Sd N K Saini Accountant Member Dat Ed 20 12 2017 Subodh Copy Forwarded To 1 Appellant 2 Respondent 3 Cit 4 Cit Appeals 5 Dr Itat Assistant Registrar