$~5
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Decided on 09.01.2017
+ W.P.(C) 3174/2015
BDR BUILDERS AND DEVELOPERS PVT. LTD. ..... Petitioner
Through: Mr. Ajay Vohra, Senior Advocate with
Ms. Kavita Jha and Mr. Vaibhav Kulkarni, Advs.
Versus
THE ASSISTANT COMMISSIONER OF INCOME-TAX, & ANR.
..... Respondent
Through: Mr. Rahul Chaudhary, Senior Standing
Counsel.
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE NAJMI WAZIRI
S. RAVINDRA BHAT (ORAL)
1. The petitioner in these proceedings under Article 226 of the
Constitution challenges a notice under Section 147/148 of the Income Tax
Act , 1961 (`the Act' for short) issued on 31st March, 2014 for Assessment
Year (AY) 2007-08.
2. The brief facts are that pursuant to search and seizure proceedings
(which took place on 11.10.2006), a notice was issued under Section
153A/143(3) of the Act and the assessment was completed. This included
inter alia assessment for pending AY 2007-08. Before the assessments
could be completed, the petitioner approached the Income Tax Settlement
Commission (ITSC); after considering the submissions of charges, the
W.P.(C) 3174/2015 Page 1 of 8
application was admitted. Thereafter the ITSC called for a report under
Rule 9A of the ITSC Rules, which was furnished to it by the respondent/
revenue. Based upon the submissions made and its appreciation, of other
materials found during the cause of search (including the returns filed and its
supporting documents), the ITSC made its final order on 8th February, 2013.
In the meanwhile, original assessee i.e. M/s Rishi Promoters Pvt. Ltd. was
amalgamated with M/s. BDR Builders and Developers Pvt. Ltd with effect
from 01.04.2012 by order of this Court dated 20.02.2013. Consequently, for
AY 2007-08, the total income assessed in the hands of BDR Builders and
Developers Pvt. Ltd. was `3,76,90,206/- and to the account of M/s. Rishi
Promoters, it was `7,17,237/-. The ITSC had in its order dealt with the
question whether bogus share money had been introduced by the applicants
and observed as follows:
"6. xxx xxxx
(i) The Investigation Wing in Appraisal report has
pointed out about introduction of bogus share
application money shown to have been received by the
assessee company amounting to ` 3,00,00,000/- during
the period 01.04.2006 to 11.10.2006 relevant to
assessment year 2007-08 from various companies. In
post search enquiry by the Investigation Wing, such
bogus companies did not comply with the summons
issued to them. He further submitted that the
assessment is not completed in this case and therefore,
this aspect also remained unverified. Details of date-
wise receipt of bogus share application money received
by the assessee group from various 80 companies as
appearing on page 22 to 25 of the Appraisal Report
are enclosed.
(ii) The learned CIT submitted that from the details
W.P.(C) 3174/2015 Page 2 of 8
given in the appraisal. Report (page No.22 & 23), it is
clear that the applicant had received ` 3 crores in the
period from 09.06.2006 to 21.08.2006 falling in F.Y.
2006-07 (A.Y. 2007-08). These amounts have been
received from M/s. Thar Steels Pvt. Ltd. M/s. Bhawani
Portfolio Pvt. Ltd., M/s. Mahanivesh India Ltd. And
M/s. Taurus Iron & Steel Co. Pvt. Ltd. All these
companies are fictitious companies providing
accommodation entries. These companies were
controlled by Shri Tarun Goyal who was searched by
the Income Tax Department. Assessments in Tarun
Goyal Group have been completed. In some cases
appeals have also been decided. Copy of the appellate
order in the case of Mahanivesh India Ltd. issued by
the CIT(A)-XXXIII, New Delhi, is enclosed by CIT
which according to him clearly indicated that these
companies are bogus and fictitious and only providing
accommodation entries. In view of these
circumstances, the enhancement proposed under Rule
9 Report for the assessment year 2007-08 will increase
by this sum of ` 3,00,00,000/-.
7. xxx xxx
8. xxx xxx
9. During the hearing, the matter was discussed with
the learned CIT(DR) who did not raise any objection in
respect of such telescoping. Therefore, we increase the
additional income of the applicant for A.Y. 2007-08 by
` 3 crores in the hands of M/s. BDR Builders &
Developers Pvt. Ltd., New Delhi, Applicant No. 1. In
the cases of Applicants No. 2 and 3, the income is
settled as declared by them in their SOF.
3. The notice impugned in this case proposing re-assessment of income
tax of M/s Rishi Promoters Pvt. Ltd. reads as follows:
W.P.(C) 3174/2015 Page 3 of 8
"A search & seizure operation was conducted on
the BDR Group at the premises of the Directors.
During the search several incriminating documents
were found and seized. During the assessment
proceedings the assessee filed application in the
settlement commission for the assessment year under
consideration, amongst others. The order in this case
was passed on 07.02.2013 by the Hon'ble Commission
where in the returned income of the assessee was
accepted.
Now, a letter dt. 24.03.2014 from ITO, Ward
15(3), New Delhi has been received in this office on
26.03.2014 informing for initiating proceedings u/s
147 of the IT Act, 1961 in the case of the assessee for
the A.Y. 2007-08. Vide the letter, a page containing
entries in respect of the assessee, given by Taurus Iron
& Steel Co. Pvt. Ltd. (` 30,00,000/-) & Tejasvi
Investment Pvt. Ltd. (` 20,00,000/-) unearthed in the
case of entry operator called as Tarun Goyal. This
point has not been considered in the order of
settlement commission.
From the above facts I have reason to believe
that income to the tune of ` 50,00,000/- has escaped
assessment in the case of the assessee M/s Rishi
Promoters Pvt. Ltd for the A.Y. 2007-08, by reason of
the failure on the part of the assessee to disclose fully
and truly all material facts for his assessment and the
same needs to be assessed/reassessed as per the
provisions of sub-clause(i) of clause© to Explanation 2
to Section 147(b) of Income Tax Act, 1961in the
assessment year 2007-08. Issue notice u/s 148 of the
Income Tax Act, 1961 for the assessment year 2007-08.
Dated : 29.03.2014 ACIT, Central Circle 17,
New Delhi."
4. It is urged by the petitioner that by virtue of provision of Section
245C, 245D(4) and 245-I of the Act, the re-assessment notice is
W.P.(C) 3174/2015 Page 4 of 8
unsustainable and void. It also relied upon the judgment of this Court in
Omaxe Limited v. Assistant Commissioner of Income Tax 254 CTR 370
(Delhi) to say that where a Settlement Commission passes its final order in
respect of proceedings in any given order, the matters are conclusive and
final and it cannot be reopened under section 147 of the Act. It is also urged
in addition that re-assessment notice is unsustainable because it was issued
to M/s. BDR Builders and Developers Pvt. Ltd. which was no longer in
existence at that time i.e. on 31.03.2014. In support of this contention,
reliance is placed upon Spice Entertainment Ltd. v. Commissioner of Income
Tax 247 CTR 500 (Del) and Commissioner of Income Tax v. Dimension
Apparels (P) Limited : 370 ITR 288 (Del) and on Rustagi Engineering
Udyog (P) Ltd. v. Deputy Commissioner of Income Tax 382 ITR 443
(Delhi).
5. Learned counsel for the Revenue urges that the re-assessment notice
ought not to be quashed in the circumstances of the case. It is highlighted
that the discussion by the ITSC was vis-a-vis share capital infused only in
respect of BDR Builders and Developers Pvt. Ltd. which meant that there
was no preclusion of issuance of notice under section 147/148 of the Act in
respect of returns of M/s. Rishi Promoters. He points out that ITSC's final
order does not contain any discussion with respect to the declaration or
disclosures made by M/s. Rishi Promoters which can be said to have become
final. It was urged in the circumstances that the notice should not be
interfered with. The observation in Omaxe Limited (supra) with regard to
the finality that attaches itself in respect of that are discussed, is as follows:
"18. xxx xxx ...... We hold that since the
exclusive jurisdiction to exercise the powers and
W.P.(C) 3174/2015 Page 5 of 8
perform the functions of an income tax authority in
relation to the case vests with the ITSC after an order
is passed under Section 245D(1) till the final settlement
order is passed under Section 245D(4), it is not
possible to countenance a situation where it can be
said that the assessee's claim for deduction under
Section 80IB(10) was not the subject matter of the
order passed by the ITSC under Section 245D(4). It is
further necessary to keep in mind that Section 245B(3)
requires that the ITSC shall be manned by "persons of
integrity and outstanding ability having special
knowledge of, and, experience in, problems relating to
direct taxes and business accounts". The provisions of
Chapter XIX-A suggest that all matters in relation to
the case of the assessee shall be dealt with by the ITSC
just as an assessing authority would deal with them
while completing an assessment under Section 143(3)
of the Act. If this is the position, it would be difficult to
sustain the argument of the revenue that the matter
relating to the deduction under section 80IB(10) was
not the subject matter of the final order of settlement.
It follows that the Assessing Officer had no jurisdiction
to reopen the assessment for the assessment year 2006-
07 by issuing a notice under Section 148 of the Act on
the ground that the deduction was wrongly allowed.
19. The issue can also be viewed from another
angle. Barring the exception of the provisions relating
to appeal and revision, the Act does not contemplate or
provide for disturbing the finality of an order or
proceeding passed or completed by an income-tax
authority, by any order or proceeding passed or
initiated by a different income-tax authority. An
assessment order passed by an Assessing Officer can
be rectified or amended under Section 154 or Section
155 or reopened under Section 148 only by him, and by
no other income-tax authority. Similarly, an
assessment by way of settlement of a case, which is
W.P.(C) 3174/2015 Page 6 of 8
made by the ITSC, can be reopened only by the ITSC
and that too only in certain circumstances. Applying
this general principle that runs through the Act, an
assessment by way of settlement order passed by the
ITSC cannot be reopened by a different authority, viz.
The Assessing Officer. The fact that the ITSC has not
been designated as an "income-tax authority" under
Section 116 of the Act makes the position `a fortiori'.
Section 147 of the Act does not employ language that
permits him to do so, nor are the powers and orders of
the ITSC made subject to the provisions of Section 147.
Section 47 does not appear to fit into the general
scheme of Chapter XIX-A, which has been held to be a
self contained code by the Supreme Court in Brij Lal v.
CIT [2010] 328 ITR 477/Taxman 566."
6. In the present case, the Court notices that the impugned notice was
issued against a non-existent entity i.e. M/s. Rishi Promoters which had
ceased to exist by virtue of order of this Court dated 20.02.2013. The date
of its amalgamation was in fact earlier. Apparently, the respondent-revenue
was aware of this and despite that it proceeded to issue the impugned notice.
The judgment in Spice Entertainment (supra) and Dimension Apparels (P)
Limited (supra), though rendered after the final assessment was completed,
are clear that such notice and proceedings emanating from it are
unsustainable. Rustagi Engineering Udyog (P) Ltd. (supra) takes the logic
further and holds that notice issued under section 147 of the Act in respect
of an entity which ceases to exist by virtue of amalgamation order under
section 394 of the Companies Act, would also be illegal and unsustainable.
7. For the afore-going reasons, the Court hereby holds that the impugned
notice under section 147/148 of the Act and proceedings arising therefrom
are void and unsustainable and are hereby quashed. The writ petition is
W.P.(C) 3174/2015 Page 7 of 8
consequently allowed.
S. RAVINDRA BHAT, J
NAJMI WAZIRI, J
JANUARY 09, 2017/acm
W.P.(C) 3174/2015 Page 8 of 8
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