INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D": NEW DELHI
BEFORE SMT BEENA A PILLAI, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No. 5207/Del/2015
(Assessment Year: 2006-07)
ITO, Vs. Accord Overseas Pvt Ltd,
Ward-1(3), A-18/2, Wazipur Indl Area,
New Delhi Delhi
PAN: AABCA8860G
(Appellant) (Respondent)
Revenue by : Ms. Naina soin Kapil, Sr. DR
Assessee by: None
Date of Hearing 31/01/2019
Date of pronouncement 13/03/2019
ORDER
PER PRASHANT MAHARISHI, A. M.
1. This is an appeal filed by the revenue against the order of the ld CIT(A)-I,
New Delhi dated 11.06.2015 for the Assessment Year 2006-07.
2. The revenue has raised the following grounds of appeal:-
1. On the facts and in the circumstances of the case, the Ld. CIT(A) has
erred in quashing the notice u/s 148 and the assessment thereof when
the A. 0. had recorded his satisfaction and this recording had been
approved by the Pr. CIT as per provisions of the I. T. Act, 1961.
2. On the facts and in the circumstances of the case Ld. CIT(A) has erred
in not appreciating the fact that the purchases shown by the appellant
from M/s. Heer International and M/s. Omaxe Overseas were found to
be bogus/non-genuine and thus cannot be construed as disclosure of
material facts truly and fully.
3. The Ld. C1T(A) erred in relying on the decisions of the Hon'ble Delhi
High Court in CIT Vs. M/s. Suren International Private Limited (ITA No.
289/2012) & CIT Vs. Viniyas Finance & Investment Pvt. Ltd. (ITA
271/2012) while quashing the assessment when the facts of the two
cases are different from the instant case."
3. The assessee is a company who filed its return of income for Rs. 41239/
and assessment under section 143 (3) was completed on 7/11/2008
determining the total income of INR 61956/.
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4. The case of the assessee was reopened u/s 147 by issuing notice u/s 148
on 30/3/2011. The main reason for reopening was that that information
was received from CIT (c), Delhi that two persons Shri navneet Jain and
Vaibhav Jain have provided accommodation entries through 37 entities
controlled by them was found during the course of assessment proceedings
under section 153A in those cases. Both these persons have also confirmed
the above facts. The learned assessing officer examined the assessment
records and found that assessee has purchased INR 8119572/ with these
persons controlled entities. It was also found that these two persons were
engaged in giving bogus accommodation entries and above two entities are
controlled by these two persons. The learned assessing officer further noted
that such nature of the transactions undertaken by the assessee company
has come to light only after the detailed investigation carried out by the
investigation wing, Delhi and during the course of assessment proceedings
in the case of those two persons. The learned AO further noted this
tantamount to fresh information. As the assessee was found to be the
beneficiary of bogus accommodation entries provided by them. This also
represents the undisclosed income of the assessee company, which has not
been offered to tax by the assessee in its return filed. Therefore, the learned
assessing officer noted that it is a fit case for issuance of notice u/s 148 of
the income tax act. In response to the notice u/s 148 the assessee
company wide letter dated 2/9/2013 submitted that the original return filed
by the assessee on 11th/6/2006 may be treated as return filed in response
to the above notice. The copy of the reasons was also handed over to the
authorised representative of the assessee company wide order sheet entry
dated 3/9/2013. Subsequently the notice u/s 143 (2) of the act was issued
on 9/10/2013. The assessee against the reopening of the assessment filed
no objections.
5. Therefore, assessment proceedings commenced and the learned assessing
officer requested the assessee to file several details of party wise purchases
and details in nature of purchases made from about two entities mentioned
in the reasons, which are controlled by the entry operators. The learned
assessing officer further issued notices u/s 133 (6) of the income tax act to
both the parties and it was found that there is no such person at the given
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address. Therefore, the learned assessing officer issued a show cause notice
on 24/10/2013. Subsequently on 9/1/2014, the assessee submitted the
detail stating that the case of the assessee was assessed u/s 143 (3) of the
income tax, act and all the information and details were already submitted
at the time of original assessment. It was further stated that there may be a
chance of change of address in the case of these parties and the assessee is
trying to contact these persons to get the present address. It was further
stated that the goods purchased from these parties are exported which are
duly accounted for in the books of account. Assessee also stated that the
purchases were genuine and the assessee made payment for these
purchases through account payee cheques. A copy of the account of the
above parties along with the copy of the bank account of the assessee was
produced. The learned assessing officer considered the explanation
furnished by the assessee and stated that payment for purchases made
through account payee cheque does not have any weight in view of the
information that these are the bogus accommodation entries. After that, the
assessing officer noted about the modus operandi of the entry operators in
the present case and further issued a show cause notice on 22/1/2013. In
response to that notice, nobody attended. Therefore the learned assessing
officer reached to a conclusion that assessee has failed to discharge its onus
to prove that the purchases made during the financial year 2005 06
relevant to the assessment year 2006 07 from the about to parties are not
genuine. Therefore he held that these are bogus purchases and therefore an
addition of INR 8 119572/ was made to the total income of the assessee.
The assessment order u/s 143 (3) section 147 of the income tax act was
passed on 28/2/2014 determining total income of the assessee at INR 8
181528/ against the original assessment u/s 143 (3) of the act of INR 6
1956/.
6. The assessee aggrieved with the order of the learned assessing officer
preferred an appeal before the learned Commissioner of income tax appeals
1, New Delhi. The assessee challenged the assessment order against
reopening as well as on the merits of the case. On the reopening assessee
submitted that AO was not justified in issuing the notice u/s 148 of the
income tax act, as there was no escapement of income two of the assessee to
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disclose material facts fully and truly necessary for the assessment. The
main ground of the argument of the assessee was that in the reasons
recorded there is no satisfaction on the part of the learned assessing officer
with respect to the escapement of income and there is no whisper that the
appellant has failed to disclose fully and truly all material facts necessary
for assessment. The learned CIT A in para number 5.3.1 of the order
noted that there is no allegation in the reasons recorded by the assessing
officer that there was any failure on the part of the assessee to disclose fully
and truly all material facts. He further stated that the learned assessing
officer is also not mentioned as to whether Mr. Vaibhav Jain as stated in the
statement that they have provided accommodation entry to the appellant
also therefore the learned CIT A relying on the jurisdictional High Court in
case of CIT vs Surren international private limited held that the reasons
recorded for issue of notice u/s 148 of the act is invalid. The learned CIT
also noted that the honourable Delhi High Court in case of CIT vs Viniyas
finance and investment private limited is also on the similar facts and
therefore requires to reopening notice. However, he did not decide on the
issue of the addition on the merit and held that it is academic in nature.
7. The learned assessing officer aggrieved with the order of the learned CIT A
has preferred an appeal before us. The learned departmental representative
vehemently stated that there is no defect in the notice for reopening. He
stated that the reasons recorded by the learned assessing officer perfectly in
order. It was further mentioned that the learned assessing officer has
mentioned that assessee has obtained accommodation entry from two
accommodation entry providers. The assessee before the assessing officer
has not disclosed these facts and therefore there is a perfect failure on the
part of the assessee to disclose fully and truly all material facts necessary
for the computation of the income of the assessee.
8. Despite notice, none appeared on behalf of the assessee and therefore this
appeal is decided based on the information available on record.
9. We have carefully considered the rival contention and perused the orders of
the lower authorities. The originally the income of the assessee was
assessed u/s 143 (3) on 7/11/2008. Subsequently the information was
received from the investigation wing that assessee has obtained the
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accommodation entry from two accommodation entry providers. The
assessee has purchased goods from two different entities, which are out of
37 entities controlled by the entry operators. The assessee has purchased
goods from these parties. Therefore the learned assessing officer recorded
the reasons wherein in paragraph number 4 of the reasons recorded has
clearly mentioned that the true nature of the transaction undertaken by the
assessee company has come to light only after the detailed investigation
carried out by the investigation wing and during the course of assessment
proceedings in the case of the entry operators. Therefore, it is apparent that
the learned assessing officer has come to know because of the failure on the
part of the assessee about the true nature of the transaction. Therefore,
according to the learned assessing officer has noted the failure on account
of the assessee to disclose fully and truly that these purchases are from
accommodation entry providers. The learned CIT A has quashed the
assessment only on the reason that the learned assessing officer has failed
to mention in the reasons recorded that the reopening has been made on
account of failure on part of the assessee to fully and truly disclose to the
assessing officer the material facts of the computation of the total income.
According to us the learned assessing officer has clearly mentioned in the
reasons recorded, the true nature of the transaction undertaken by the
assessee has not been disclosed by the assessee, which has become known
only after the investigation done by the investigation wing as well as the
statement of the entry operators. Therefore, it is apparent that the assessee
has alleged that failure is on part of the assessee to disclose fully and truly.
The learned CIT A has relied upon the decision of the jurisdictional High
Court [2013] 35 taxmann.com 398 (Delhi) Commissioner of Income tax III
v. Suren International (P.) Ltd. wherein honourable High Court has recorded
as under
"15. Having stated the above, we are also unable to accept the
contention that there has been failure on the part of the
assessee to disclose all material facts in his return as, first of
all, there is no such allegation in the reasons as furnished to
the assessee; secondly, we cannot ignore the fact that the
enquiry into the share application money had been conducted
in detail by the Assessing Officer in the first round of
assessment. Having framed his assessment after enquiry into
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the identity, genuineness and the creditworthiness of the share
applicants, it would not be open for the Assessing Officer to re-
examine the same without there being any material allegation of
failure, on the part of the assessee, to make a full and true
disclosure..........
16. In the reasons as furnished by the Assessing Officer, we
find that there is neither any allegation that the assessee had
failed to truly disclose any material facts at the time of
assessment, nor can we readily infer the same in view of the
fact that a detailed enquiry had been conducted by the
Assessing Officer with regard to the identity and
creditworthiness of the share-applicants and genuineness of the
transactions in relation to the share application money received
by the assessee. Further the mere statement that the DRI has
seized certain goods of the assessee and levied a penalty also
cannot be stated to be a reason for reopening of assessment of
the assessee as the said statement made is neither followed by
the recording of a belief that the income escaped on that count
or that the assessee has failed to disclose all relevant material,
fully and truly, at the stage of the first assessment."
(Underline supplied by us)
10. on reading the reasons recorded by the learned assessing officer in the
present case it can be readily inferred that the assessee has not disclose
true nature of the transactions undertaken by the assessee which has come
to light only after the detailed investigation carried out by the investigation
and during the course of the assessment proceedings in the case of the
entry operators. Even the learned CIT A also not verified that whether in
the 1st round of the appeal the assessee furnish the relevant details and the
learned assessing officer is applied his mind 2 that are not. Even otherwise,
the decision rendered by the honourable Delhi High Court was on different
facts. Further on careful perusal of the decision of the honourable Delhi
High Court it can be noted that it is not always necessary for the assessing
officer to mention specific word in the reasons recorded for the reopening of
the assessment about "failure to disclose fully and truly all material facts"
Therefore the decision relied upon by the learned CIT A is distinguishable.
11. Further on identical facts and circumstances beyond 4 years the
honourable Delhi High Court in [2017] 79 taxmann.com 409 (Delhi)/ [2017]
392 ITR 444 (Delhi) principal Commissioner of income tax vs. Paramount
communications private limited has upheld the reopening beyond 4 years
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even though there was no mention in the reasons recorded that assessee
has failed to disclose fully and truly the material facts. Against the above
decision, the special petition filed before the honourable Supreme Court is
also dismissed. In view of the above facts, we are of the opinion that the
learned CIT A has wrongly quashed the reopening of assessment.
Accordingly, ground numbers 1 3 of the appeal of the learned assessing
officer are allowed.
12. Appeal of the learned assessing officer is allowed.
Order pronounced in the open court on 13/3/2019
-Sd/- -Sd/-
(BEENA A PILLAI) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 13/03/2019
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
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