* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.12.2015
+ W.P.(C) 9094/2014
SHRI PARASRAM INDUSTRIES PVT. LTD .... Petitioner
versus
INCOME TAX OFFICER WARD 8(3) & ANR .... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr Sanjeev Sabharwal, Sr Advocate with Mr Deepak
Sharma
For the Respondents : Mr Rohit Madan with Mr Akash Vajpai
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. This writ petition pertains to the assessment year 2007-08 and seeks
the quashing of the notice dated 23.08.2014 issued by the respondent No.1
under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as
`the said Act') as also all proceedings pursuant thereto, including the order
dated 26.09.2014, passed by the respondent No.1, dismissing the objections
filed by the petitioner.
WP(C)9094/2014 Page 1 of 15
2. The main grounds raised in the writ petition are that the re-assessment
proceedings having been initiated after four years from the end of the
relevant assessment year, required certain pre-conditions to be fulfilled. One
of the pre-conditions was that there was failure on the part of the assessee to
fully and truly disclose all the material particulars necessary for the
assessment. It is contended by the learned counsel for the petitioner that
apart from there being no such failure, in fact, there is not even an allegation
in the reasons that there has been such a failure on the part of the assessee.
3. The second ground urged on behalf of the petitioner/assessee is that
this is a case of change of opinion inasmuch as the very issue sought to be
raked up by way of the impugned notice under Section 148 of the said Act
has been considered by the Assessing Officer during the time of the original
assessment under Section 143 (3) of the said Act.
4. The original assessment under Section 143(3) was completed on
18.12.2009. This was, however, after a questionnaire had been issued to the
assessee during the assessment proceedings on 12.06.2009. Question No. 3
of the questionnaire specifically required the assessee to give the names,
addresses and PAN numbers of the shareholders along with their
percentages/ ratios. This was provided by the assessee. In fact, the
WP(C)9094/2014 Page 2 of 15
Assessing Officer did not stop at that and issued notices under Section
133(6) of the said Act to the individual applicants. One such letter dated
04.12.2009 was issued to M/s Sino Credits and Leasing Limited. The said
letter reads as under:-
"OFFICE OF THE
INCOME TAX OFFICER, WARD 8 (3),
ROOM NO. 196A, C. R. BUILDING, I.P. ESTATE, NEW DELHI-110002.
PHONE-23705348
NOTICE UNDER SECTION 133 (6) OF THE INCOME TAX ACT, 1961
F. NO. ITO/ W8(3)/143(3)/2009-10/ Dated 04-12-2009
To
The Principal Officer
M/s Sino Credits And Leasing Ltd
308, Arunachal Building,
19, Barakhambha Road
New Delhi -110001
Sir/Madam,
Sub:- Assessment proceedings u/s 143(3) of the I.T.Act, 1961 in the case of
M/s Shri Parasram Industries P Ltd for A.Y 2007-08-reg:-
During the course of assessment proceedings u/s 143(3) of the I.T.
Act, 1961 for A.Y. 2007-08 in the case of the above subject-mentioned
Assessee Company it could be seen that you have made certain kinds of
transactions with this company.
You are requested to give a certified copy of the Ledger Account
maintained by you in respect of the above mentioned assessee company giving
necessary evidence with date-wise details and nature of such transaction made
with this company alongwith your source thereof in respect of such transaction
with you bank statement for the relevant period and latest copy of ITR.
The above information should reach my office by 10-12-2009 failing
which penalty u/S 272 A of the Income Tax Act, 1961 may be initiated.
WP(C)9094/2014 Page 3 of 15
Yours faithfully
Sd/-
(PIYUSH SINHA)
Income Tax Officer,
Ward-8(3), New Delhi."
5. The response to the said letter was given by M/s Sino Credits and
Leasing Limited by issuing a confirmation letter to the following effect:-
"SINO CREDITS AND LEASING LIMITED
STOCK AND SHRE BROKERS
MEMBER: NATIONAL STOCK EXCHAGNE OF INDIA LIMITED
: OTC EXCHANGE OF INDIA
CONFIRMATION LETTER
This is to confirm that we have paid Share Application Money of
Rs. 58,90,000/- (Fifty Eight Lac Ninety Thousand only) vide Cheque /DD
No. 1131 drawn on HDFC Bank of Rs 5500000/- and vide Cheque /DD
No. 1135 drawn on HDFC Bank of Rs 590000/- and vide Cheque /DD
No. 152512 drawn on HDFC Bank of Rs 1000000/- and vide Cheque /DD
No.152554 drawn on HDFC Bank of Rs 1000000/- to Shri Parasram
Industries Pvt. Ltd. 334, Sunheri Bagh Apartment, Sector-13, Rohini, Delhi-
110085.
We are assessed to Income Tax and our PAN is AAACS 1172 N.
The Amount has been paid out of realization from our debtors.
For Sino Credits And Leasing Limited
Sd/
Director"
Similar letters were issued to all the share applicants and confirmations were
obtained from the said share applicants.
WP(C)9094/2014 Page 4 of 15
6. The summary of documents filed by the petitioner/assessee and the
confirmations received from the third parties directly by the Assessing
Officer have been set out in Annexure P-XIII, which reads as under:-
"SUMMARY OF DOCUMENTS FILED BY THE PETITIONER/ASSESSEE AND
CONFIRMATIONS RECEIVED FROM THIRD PARTIES DIRECTLY BY THE ASSESSING OFFICER
ANNEXURE-P-XIII
S. No. Name of Party Amount Relevant documents filed by Confirmations/
Petitioner / Assessee and documents directly
verified by Assessing received by AO u/s
Officer during proceedings 133(6) and duly
u/s 143(3) verified
1 Advantage Software 1000000 i. Confirmation Letter filed i. Confirmation
Pvt. Ltd. letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement
recd
2 Central Gum & 4000000 Confirmation Letter filed i. Confirmation
Chemical Ltd. Letter recd
ii. IT Return recd
iii. Bank Statement
recd
3 Dhamaka Trading 1000000 i. Confirmation Letter filed i. Confirmation
& Constructions Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement filed iii. Bank Statement
recd
4 Giriasho Company 1000000 i.Confirmation Letter filed i. Confirmation
Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement filed iii. Bank Statement
recd
5 KSA Chits 2000000 i. Confirmation Letter filed i. Confirmation
Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement filed iii. Bank Statement
recd
WP(C)9094/2014 Page 5 of 15
6 New Star 1000000 Confirmation Letter filed i.Confirmation Letter
recd
ii. IT Return recd
iii. Bank Statement
recd
7 Sino Credits and 2000000 i.Confirmation Letter filed i. Confirmation
Leasing Ltd Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement
recd
8 V.A. Foods 1000000 -- i. Confirmation
Letter recd
iii. Bank Statement
recd
9 Vasudeva Farms 1000000 i. Confirmation Letter filed i.Confirmation Letter
recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement
recd
10 Vijay Conductors 5500000 i. Confirmation Letter filed i. Confirmation
Letter recd
ii.IT Return filed ii. IT Return recd
iii. Bank Statement
recd
11 Vijay Shines 500000 Confirmation Letter filed i. Confirmation
Letter recd
ii. IT Return recd
iii. Bank Statement
recd
12 Vishrut Marketing 850000 i. Confirmation Letter filed i. Confirmation
Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement filed iii. Bank Statement
recd
13 Zenith Estates 4000000 i. Confirmation Letter filed i. Confirmation
Letter recd
ii. IT Return filed ii. IT Return recd
iii. Bank Statement filed iii. Bank Statement
recd
Total 24850000
WP(C)9094/2014 Page 6 of 15
Entries not in books of accounts (Reconciliation of Notice)
Dated Name of Party Cheq / Amount
DD No.
10.04.2006 Vasudeva Farms 750092 900000
10.04.2006 Vasudeva Farms 750093 600000
10.04.2006 V.A. Foods 775320 600000
10.04.2006 Giriasho Company 397652 900000
27.06.2006 Omni Farms 776932 650000
Total amount as per notice 28500000
"
7. It is only after all the above mentioned information was received by
the Assessing Officer, that the assessment was framed under Section 143(3)
on 18.12.2009. In the assessment order itself, it has been specifically
recorded as under:-
"In response through Harish Kumar, C.A and A.R attended the
proceedings and submitted the requisite details/ information/
documents from time to time. Case was discussed with him."
8. It is clear that after the Assessing Officer examined the aspect of the
share application money received by the assessee through the issuance of a
questionnaire and notices under Section 133(6) of the said Act, the
assessment under Section 143(3) of the said Act was framed on 18.12.2009.
9. The learned counsel for the petitioner placed reliance on the decision
of this Court in Lahmeyer Holding GMBH v. Deputy Director of Income
WP(C)9094/2014 Page 7 of 15
Tax: [2015] 376 ITR 70 (Delhi) to submit that the re-assessment
proceedings would be invalid in case an issue or query is raised and
answered by the assessee in the original assessment and yet, the Assessing
Officer does not make any addition in the assessment order. In such
situations, it would have to be accepted that the issue had been examined, but
the Assessing Officer did not find any ground or reason to make any addition
or reject the stand of the assessee. Relying on the said decision, it was also
submitted that when such an exercise is undertaken by the Assessing Officer,
it can be regarded as a case where the Assessing Officer forms an opinion
and that re-assessment on the very same ground would be invalid because
the Assessing Officer having once formed an opinion in the course of the
original assessment, although he did not record the reasons for the same,
cannot be permitted to change his opinion through the re-assessment
proceedings.
10. We note that in Lahmeyer Holding GMBH (supra), a Division Bench
of this Court had placed reliance on the Full Bench decision in CIT v. Usha
International Limited: [2012] 348 ITR 485 (Delhi) (FB), wherein it was,
inter alia, held as under:-
WP(C)9094/2014 Page 8 of 15
"3. Reassessment proceedings will be invalid in case an issue
or query is raised and answered by the assessee in original
assessment proceedings but thereafter the Assessing Officer does
not make any addition in the assessment order. In such situations
it should be accepted that the issue was examined but the
Assessing Officer did not find any ground or reason to make
addition or reject the stand of the assessee. He forms an opinion.
The reassessment will be invalid because the Assessing Officer
had formed an opinion in the original assessment, though he had
not recorded his reasons."
11. After hearing the submissions of the learned counsel for the petitioner
and also the submissions made by the learned counsel for the respondents,
we are of the opinion that the present case is also one of change of opinion.
This is so, because, the questionnaire and, particularly, question No. 3,
specifically raised the issue with regard to the shares. The responses were
given by the assessee from time to time and what is more important is that
the Assessing Officer had directly issued letters to all the share applicants,
who had, in turn, given their confirmations along with their PAN numbers
and bank details. After having received the said information, the Assessing
Officer did not think it fit to make an addition and that itself would amount
to forming an opinion, as indicated in CIT v. Usha International Limited
(supra) and Lahmeyer Holding GMBH (supra). Therefore, the present
exercise of issuing the notice under Section 148 of the said Act would be
nothing but one of change of opinion, which is impermissible.
WP(C)9094/2014 Page 9 of 15
12. The second point that has been urged by the learned counsel for the
petitioner/assessee is that even otherwise, the impugned notice under Section
148 and the proceedings pursuant thereto have to be set aside for the simple
reason that the clear pre-conditon of there being a failure on the part of the
assessee to fully and truly disclose all the material particulars necessary for
assessment, has not been made out. In fact, if one looks at the reasons which
have been supplied for initiating re-assessment, there is not even an
allegation that there has been such a failure on the part of the petitioner/
assessee. For the sake of convenience, the reasons are set out herein below:-
"Income Tax Department
26/02/2014 Reasons for reopening the case of M/s Shri Parasram
Industries P. Ltd. (AABCS7930D) A.Y. 2007-08, U/s
147/148 of the Income Tax Act, 1961
1. Information /documents in the form of CD has been received
from the office of ACIT, Central Circle 22-New Delhi wherein it was
revealed that the above assessee, M/s Shri Parasram Industries P. Ltd.
has received and is a beneficiary of accommodation entries provided by
certain entry operators. The Investigation Wing of the Department had
carried out survey u/s 133A in the case of Shri Suresh Kumar Gupta
(S.K. Gupta) on 20.11.2007. It was gathered that Sh.S.K. Gupta who is
having his office at 308, Arunachal Building, Barakhamba Road, New
Delhi is a Chartered Accountant and is carrying on the business of share
broker, financial consultancy and providing accommodation entries in
the form of loans, advances, share application money, issuing bogus
expenses' bills on commission basis. For this purposes, he had floated
several companies/firm in which he and his family members as well as
his employees were either directors or proprietors. Bank accounts were
opened III the names of these companies/firms in which he and his
family members as well as his employees were either directors or
WP(C)9094/2014 Page 10 of 15
proprietors. Bank accounts were open in the names of these
companies/firm and individuals of create layer/layers before providing
accommodation entries of the beneficiaries through bank channels to
give the color of genuineness of these accommodation entries.
2. This information has been provided by the ACIT, central Circle
22, New Delhi to the Assessing officer. In the case of the above assessee,
the following accommodation entries have been taken:-
Date of Ch. No. /PO/ Conduit Bank a/c Such Party to whom issued Amount
entry in DD/ Ch.And Companies conduit (beneficiaries)
books date through which company
cheque issued
07.04.2006 Ch. No. 296100 Giriasho OBC Shri Parasram Indus. 10,00,000
dt. 07.04.06 Company P. Ltd.
07.04.2006 Ch. No. 152554 Sino Credits HDFC Shri Parasram Indus. 10,00,000
dt. 06.04.06 P. Ltd.
10.04.2006 Ch. No. 775319 V.A. Foods SIB Shri Parasram Indus. 10,00,000
dt. 10.04.06 P. Ltd.
10.04.2006 Ch. No. 750090 Vasudeva Farms SIB Shri Parasram Indus. 10,00,000
dt. 10.04.06 P. Ltd.
10.04.2006 Ch. No.775261 Vijay Shines SIB Shri Parasram Indus. 5,00,000
dt. 10.04.06 P. Ltd.
10.04.2006 Ch. No.750092 Vasudeva Farms SIB Shri Parasram Indus. 9,00,000
dt. 11.04.06 P. Ltd.
10.04.2006 Ch. No.750093 Vasudeva Farms SIB Shri Parasram Indus. 6,00,000
dt. 10.04.06 P. Ltd.
10.04.2006 Ch. No.775320 V.A. Foods SIB Shri Parasram Indus. 6,00,000
dt. 11.04.06 P. Ltd.
10.04.2006 Ch. No.793197 Central Gum SIB Shri Parasram Indus. 30,00,000
dt. 17.04.06 P. Ltd.
10.04.2006 Ch. No.287098 Dhamaka OBC Shri Parasram Indus. 10,00,000
dt. 15.04.06 Trading P. Ltd.
10.04.2006 Ch. No.397652 Giriasho OBC Shri Parasram Indus. 9,00,000
dt. 13.04.06 Company P. Ltd.
20.04.2006 Ch. No.000034 New Star Kotak Shri Parasram Indus. 10,00,000
WP(C)9094/2014 Page 11 of 15
dt. 18.04.06 P. Ltd.
20.04.2006 Ch. No.000121 Advantage Kotak Shri Parasram Indus. 10,00,000
dt. 18.04.06 P. Ltd.
20.04.2006 Ch. No.727314 Zenith Estates IPSB Shri Parasram Indus. 10,00,000
dt. 18.04.06 P. Ltd.
21.04.2006 Ch. No.786367 Central Gum SIB Shri Parasram Indus. 10,00,000
dt. 18.04.06 P. Ltd.
29.04.2005 Ch. No.141336 Vijay HDFC Shri Parasram Indus. 15,00,000
dt. 27.04.06 Conductors P. Ltd.
29.04.2005 Ch. No.115494 Vijay HDFC Shri Parasram Indus. 15,00,000
dt. 01.05.06 Conductors P. Ltd.
29.04.2005 Ch. No.141335 Vijay HDFC Shri Parasram Indus. 20,00,000
dt. 27.04.06 Conductors P. Ltd.
29.04.2005 Ch. No.141337 Vijay HDFC Shri Parasram Indus. 5,00,000
dt. 27.04.06 Conductors P. Ltd.
19.05.2006 PO. No. 016727 Zenith Estates IPSB Shri Parasram Indus. 10,00,000
dt. 19.05.06 P. Ltd.
19.05.2006 PO. No. 016727 Zenith Estates IPSB Shri Parasram Indus. 20,00,000
dt. 19.05.06 P. Ltd.
19.05.2006 PO. No. 016725 KSA Chits IPSB Shri Parasram Indus. 20,00,000
dt. 19.05.06 P. Ltd.
08.06.2006 Ch. No. 152512 Sino Credits Bus HDFC Shri Parasram Indus. 10,00,000
dt. 07.06.06 A/c P. Ltd.
29.06.2006 Ch. No. 776932 Omni Farms SIB Shri Parasram Indus. 6,50,000
dt. 27.06.06 P. Ltd.
29.06.2006 Ch. No. 505419 Vishrut OBC Shri Parasram Indus. 8,50,000
dt. 29.06.06 Marketing P. Ltd.
3. This case was completed under scrutiny assessment in the F.Y.
2009-10 and it is observed that the said information about receipt of
accommodation entry was not received at the time of original
assessment. In view of the above discussed factual matrix, additional
information/documents received from the Investigation Wing of the
Income Tax Department and the various Judgments of the Hon'ble
WP(C)9094/2014 Page 12 of 15
Supreme Court and Hon'ble High Courts, I have reason to believe that
income of Rs.2,85,000/- chargeable to tax has escaped assessment for
AY.07-08, within the meaning of section 147 of the Income tax
Act,1961. Therefore, file is put for necessary approval of Commissioner
of Income tax, Delhi -III, New Delhi, as required u/s 151 of the Income
Tax Act, 1961 before issuance of notice u/s 148 of the Income tax Act,
1961.
(Manoj Tiwari)
ITO, W-8(3), New Delhi
(Binay K.Jha)
Commissioner of Income Tax,
Delhi -III, New Delhi"
13. It is evident from the above that there is not even an allegation that
there has been a failure on the part of the assessee to disclose fully and truly
all the material particulars necessary for assessment.
14. This aspect is also covered by several decisions of this Court,
including Global Signal Cables (India) Private Limited v. Deputy
Commissioner of Income Tax: [2014] 368 ITR 609 (Delhi), wherein a
reference to an earlier decision in Haryana Acrylic Manufacturing
Company v. CIT: [2009] 308 ITR 38 (Delhi) was made. In Haryana
Acrylic (supra), this Court had observed as under:-
"29. In the reasons supplied to the petitioner, there is no whisper,
what to speak of any allegation, that the petitioner had failed to disclose
fully and truly all material facts necessary for assessment and that
because of this failure there has been an escapement of income
WP(C)9094/2014 Page 13 of 15
chargeable to tax. Merely having a reason to believe that income had
escaped assessment, is not sufficient to reopen assessments beyond the
four year period indicated above. The escapement of income from
assessment must also be occasioned by the failure on the part of the
assessee to disclose material facts, fully and truly. This is a necessary
condition for overcoming the bar set up by the proviso to section 147. If
this condition is not satisfied, the bar would operate and no action under
section 147 could be taken. We have already mentioned above that the
reasons supplied to the petitioner does not contain any such allegation.
Consequently, one of the conditions precedent for removing the bar
against taking action after the said four year period remains unfulfilled.
In our recent decision in Wel Intertrade Private Ltd. [2009] 308 ITR 22
(Delhi) we had agreed with the view taken by the Punjab and Haryana
High Court in the case of Duli Chand Singhania [2004] 269 ITR 192
that, in the absence of an allegation in the reasons recorded that the
escapement of income had occurred by reason of failure on the part of
the assessee to disclose fully and truly all material facts necessary for his
assessment, any action taken by the Assessing Officer under section 147
beyond the four year period would be wholly without jurisdiction.
Reiterating our view-point, we hold that the notice dated March 29,
2004, under section 148 based on the recorded reasons as supplied to the
petitioner as well as the consequent order dated March 2, 2005, are
without jurisdiction as no action under section 147 could be taken
beyond the four year period in the circumstances narrated above.
(underlining added)"
15. A reference was also made to Swarovski India Limited v. Deputy
CIT: [2014] 368 ITR 601 (Delhi), wherein a notice under Section 148 of the
said Act was quashed for being issued after the expiry of four years from the
relevant assessment year, wherein there was no specific mention of which
material facts were not disclosed by the assessee in the course of its original
WP(C)9094/2014 Page 14 of 15
assessment proceedings under Section 143(3) of the said Act. In the present
case also there is not even a whisper of the allegation that there has been a
failure on the part of the assessee to disclose fully and truly all material
particulars necessary for assessment.
16. Thus, on both grounds, the petition is liable to succeed. The writ
petition is allowed. The notice under Section 148 dated 28.03.2014 and all
proceedings pursuant thereto, including the order dated 26.09.2014, are
quashed/ set aside. There shall be no order as to costs.
BADAR DURREZ AHMED, J
DECEMBER 11, 2015 SANJEEV SACHDEVA, J
SR
WP(C)9094/2014 Page 15 of 15
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