ITA NO. 3149/Del/2013
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "C", NEW DELHI
BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT
AND
SHRI H.S. SIDHU, JUDICIAL MEMBER
I.T.A. No. 3149/DEL/2013
A.Y. : 2003-04
G&G PHARMA INDIA VS. INCOME TAX
LIMITED, OFFICER,
C/O KAPIL GOEL, WARD 12(1),
ADVOCATE, NEW DELHI
A-1/25, SECTOR-15,
ROHINI,
DELHI 110 085
(PAN: AABCG6272A)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Kapil Goel, Adv.
Department by : Sh. Vikram Sahai, Sr. DR
Date of Hearing : 06-01-2015
Date of Order : 09-01-2015
ORDER
PER H.S. SIDHU : JM
Assessee has filed this Appeal against the impugned order
dated 30.8.2011 passed by the Ld. CIT(A)-XV, New Delhi relevant to
assessment year 2003-04.
2. The brief facts of the case are that the assessee has filed its
return on 14.11.2014 at Rs. 1190/- which was processed u/s. 143(3)
of the I.T. Act on 1.3.2004. Thereafter on the basis of information
received from the Directorate of Investigation, Jhandewalan, New
Delhi, AO issued notice u/s. 148 of the Act on 19.3.2010. After
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recording the reasons for reopening of the assessment u/s. 148 and
after obtaining the due approval of the higher authority for re-
assessment. Thereafter, a notice u/s. 142(1) alongwith
questionnaire was issued on 10.8.2010. In response to the same
Director of the company appeared and filed the necessary details
and also filed certain objections to the issue of notice to the
assessee u/s. 148 of the I.T. Act. After applying the necessary
procedures, the AO completed the assessment in the case of the
assessee by making various additions and completed the
assessment u/s. 143(3) r.w.s. 147 of the I.T. Act on 20.12.2010.
3. The assessee has raised 09 grounds in the appeal on legal as
well as on merit. At the time of hearing, Ld. Counsel of the
assessee has only argued the legal ground challenging the validity
of reopening u/s. 148 of the I.T. Act by stating that action of the
Assessing Officer is illegal, because the same is lacking tangible
material / reasonable cause and justification. The action of the
Revenue Authorities is in absence of nexus between alleged
information and tentative inference; non application of mind much
less independent application of mind; total lack of clarity on nature
of transaction in reasons recorded; requisition sanction from
competent authority u/s. 151 was conspicuously missing on face of
reasons supplied to the assessee and the reasons recorded in the
case of the assessee. Ld. Counsel of the assessee has filed a small
Paper Book which establish that the AO has not applied his mind
before issuing the notice for reopening the case of the assessee and
not making any independent enquiry. Therefore, the reopening u/s.
148 of the Act is invalid, in view of the following decisions rendered
by the Hon'ble Jurisdictional High Court and the ITAT, Delhi
Benches.
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i) CIT vs. Kamdhenu Steels & Alloys Ltd. & Ors. (2012)
248 CTR (Del) 33, (DHC)
ii) CIT vs. SFIL Stock Broking Ltd., (2010) 325 ITR 285
(DHC)
iii) Sarthak Hotels Pvt. Ltd. vs. ITO & Anr. (2011) 338
ITR 51 (DHC)
iv) Signature Hotels Pvt. Ltd. vs. ITO & Anr. (2011) 338
ITR 51 DHC)
v) Hon'ble Jurisdictional High Court of Delhi in the case
of CIT vs. Insecticides (India) Ltd. (2013) 357 ITR
330 (Del.)
vi) Decision of ITAT Delhi Bench in the case of ITO vs.
On Exim Pvt. Ltd. (2013) 157 TTJ 633 (ITAT, Delhi)
vii) Decision of ITAT, Delhi Bench in the case of ACIT vs.
Shri Devesh Kumar (ITA NO. 2068/Del/2010) dated
31.10.2014.
viii) Decision of ITAT, in the case of ITO vs. MB Jewellers
P Ltd. ITA No. 2499/Del/2011 dated 14.11.2014 and
ix) Decision of ITAT, in the case of RKG International
(P) Ltd. vs. ITO (ITA No. 101Del/2013) order dated
14.11.2014.
Ld. Counsel of the assessee requested that the
reopening of the assessment in the case of the assessee
may be quashed and the appeal of the assessee may be
accepted.
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4. Against the order of the Ld. AO, assessee appealed before the
Ld. CIT(A), who vide impugned order dated 30.8.2011 has dismissed
the appeal of the assessee.
5. Aggrieved with the order of the Ld. CIT(A), Assessee is in
appeal before us.
6. Ld. DR on the other hand relied upon the order of the Ld.
CIT(A) and stated that the AO has reopened the case of the
assessee on the basis of various documentary evidence relating to
the assessee showing that the assessee have received various
bogus accommodation entries amounting to Rs. 20 lacs which has
introduced its own unaccounted money in its bank account by way
of above accommodation entries. Therefore, the assessee is a
beneficiary of taking the aforesaid accommodation entries which has
not been accounted for in the books of accounts of the assessee and
has escaped assessment and hence the income of the assessee is
escaped income and is a failure on the part of the assessee
company to disclose truly and fully all the material facts in the
assessment in dispute. He further submitted that the AO has rightly
reopened the case of the assessee on the basis of the documentary
evidence available with the AO. He has also filed the documentary
evidence in the shape of Paper Book containing pages 1 to 62 in
which he has attached the brief note on accommodation entries
from Investigation Wing; statements of S/Sh. Rajesh Kumar Jha,
Vipalav Bharti & P.N. Jha and the details of accommodation entries
taken by the assessee. In view of the above, he requested that the
appeal of the assesee may be dismissed.
7. We have heard both the parties and perused the records
available with us specially the contentions raised by the assessee
alongwith various decisions cited by the assessee's counsel on the
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issue in dispute as well as the documentary evidence filed by the Ld.
DR in the shape of Paper Book and orders of the Revenue
authorities. Before commenting upon the merits of the case and on
the arguments advanced by both the parties, we want to discuss the
reasons recorded for reopening of assessment in the case of the
assessee vide AO's letter dated 15.9.2010, which is reproduced
hereunder:-
"Certain investigation were carried out by the
Directorate of Investigation, Jhandewalan, New
Delhi in respect of the bogus / accommodation
entries provided by certain individual / companies.
The name of the assessee figures as one of the
beneficiaries of these elected bogus transactions
given by the Directorate after making the necessary
enquiries. It has been revealed that the following
entries have been received by the assessee."
Beneficiary's Beneficiary' s Beneficiary's Value of Instrument date on Name of Bank Branch A/c no.
name bank name bank Branch entry no by which account from of entry
taken which entry holder of which entry giving
entry taken entry entry giving account
taken giving given bank
account
G&G STATE KAROL 500,000 8603 10.2.03 Shubham SBH KB 50038
PHARMA BANK OF BAGH Electronics
(INDIA) LTD HYDERABAD and
Electronic
G&G STATE BANK KAROL 500,000 10373 10.2.03 Garner SBH KB 50029
PHARMA OF BAGH Finance &
(INDIA) LTD HYDERABAD Security
G&G STATE BANK KAROL 500,000 11112 10.2.03 Stering SBH KB 50030
PHARMA OF BAGH Securities
(INDIA) LTD HYDERABAD and
Finance
G&G STATE BANK KAROL 500,000 12302 10.2.03 Aggragale SBH KB 50025
PHARMA OF BAGH Finance p
(INDIA) LTD HYDERABAD Ltd
The above amount of Rs. 20,00,000/- has been credited
into assesses's bank account on various dates.
Investigation made by the investigation Wing of the
Department has found that assesse is a beneficiary of
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taking the aforesaid accommodation entries. L have also
perused various materials and report from Investigation
Wing and on that basis it is evident that the assesse
company has introduced its own unaccounted money in
its bank account by way of above accommodation
entries. Therefore, I have reasons to believe that the
income of the assessee company amounting to Rs
20,00,0001- has escaped assessment. The escapement of
income has been clearly on account of failure on the part
of the assesse company to truly and fully disclosed all
material facts necessary for assessment thus, it is fit case
for initiation of proceedings u/s 147 of the income tax act,
1961."
8. We have perused the aforesaid reasons recorded by the AO
for reopening the assessment in dispute and we are of the
considered view that the AO has not applied his mind so as to
come to an independent conclusion that he has reason to believe
that income has escaped during the year. A mere reference is made
to certain information received from the Investigation Wing which
was supplied to the assessee vide AO's letter dated 15.9.2010. In
our view the reasons are vague and are not based on any tangible
material as well as are not acceptable in the eyes of law. The AO
had mechanically issued notices u/s. 148 of the Act, on the basis of
information allegedly received by him from the Directorate of
Investigation, Jhandewalan, New Delhi. Keeping in view of the facts
and circumstances of the present case and the law applicable in the
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ITA NO. 3149/Del/2013
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:-
(a) 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 recorded in writing by the
Assessing Officer.
(ii) A notice u/s.148 can be quashed if the `belief' is not
bona fide, or one based on vague, irrelevant and non-
specific information. The basis of the belief should be
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discernible from the material on record, which was
available with the Assessing Officer, when he recorded
the reasons. There should be a link between the reasons
and the evidence/material available with the Assessing
Officer.
(iii) The reassessment proceedings were initiated on the
basis of information received from the Director of
Income-tax (Investigation) that the petitioner had
introduced money amounting to Rs.5 lakhs during F.Y.
2002-03 as stated in the annexure. According to the
information, the amount received from a company, S,
was nothing but an accommodation entry and the
assessee was the beneficiary. The reasons did not satisfy
the requirements of section 147 of the Act. There was no
reference to any document or statement, except the
annexure. The annexure could not be regarded as a
material or evidence that prima facie showed or
established nexus or link which disclosed escapement of
income. The annexure was not a pointer and did not
indicate escapement of income.
(iv) Further, the Assessing Officer did not apply his own
mind to the information and examine the basis and
material of the information. There was no dispute that
the company, S, had a paid up capital of Rs.90 lakhs and
was incorporated on January 4, 1989, and was also
allotted a permanent account number in September
2001. Thus, it could not be held to be a fictitious person.
The reassessment proceedings were not valid and were
liable to the quashed."
(b). In the case of CIT vs. Atul Jain reported in 299 ITR
383 it has been held as under:-
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"Held, dismissing the appeals, that the only information
was that the assessee had taken a bogus entry of capital
gains by paying cash along with some premium for taking
a cheque for that amount. The information did not
indicate the source of the capital gains which in this case
were shares. There was no information which shares had
been transferred and with whom the transaction had
taken place. The AO did not verify the correctness of
information received by him but merely accepted the
truth of the vague information in a mechanical manner.
The AO had not even recorded his satisfaction about the
correctness 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
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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.
Order pronounced in the Open Court on 09/01/2015.
Sd/- Sd/-
[G.D. AGRAWAL] [H.S. SIDHU]
VICE PRESIDENT JUDICIAL MEMBER
Date 09/01/2015
"SRBHATNAGAR"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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