* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved on: 11th December, 2015
Judgment Delivered on: 12th May, 2016
+ WP(C) 2526/2015
ALLIED STRIPS LIMITED ..... Petitioner
versus
ASSISTANT COMMISSIONER OF INCOME
TAX CENTRAL CIRCLE-15 ..... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Salil Aggarwal and Mr Prakash Kumar, Advocates.
For the Respondents: Mr Rohit Madan and Mr Akash Vajpai, Advocate for the Income
Tax.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SANJEEV SACHDEVA
JUDGMENT
SANJEEV SACHDEVA, J
1. This writ petition pertains to the assessment year 2007-08 and
seeks quashing of notice dated 27.03.2014 issued by respondent under
Section 148 of the Income Tax Act, 1961 (hereinafter referred to as
the said `Act') and the consequent proceedings thereto including the
order dated 23.02.2015 dismissing the objections filed by the
petitioner.
WP(C)No.2526/2015 Page 1 of 16
2. The main challenge raised in the writ petition is that the re-
assessment proceedings have been initiated after a period of 4 (four)
years from the end of the relevant assessment year and the pre-
condition for such initiation that there was failure on the part of the
assessee to fully and truly disclose all the material particulars
necessary for the assessment is absent. It is contended that there was
true and full disclosure of all material particulars made by the assessee
and the reasons for re-opening do not even show that there was any
such failure on the part of the assessee. It is further contended that it is
a clear case of change of opinion, in as much as, the issue sought to be
raked up by way of the impugned notice under Section 148 of the Act
had been duly considered by the Assessing Officer during the original
assessment under Section 143(3) of the Act.
3. The original assessment under Section 143(3) of the Act was
completed on 07.10.2009. The return of income was filed on
16.11.2007. On 15.07.2009 a detailed questionnaire was issued by the
Assessing Officer during the original proceedings under Section
143(3) of the Act raising specific queries with regard to share
application money. The specific query raised by the questionnaire
dated 15.07.2009 pertaining to the share application money is as
under:-
"B.1 For share capital, loans other than banks and inter
corporate deposits, introduced/taken during the year and
WP(C)No.2526/2015 Page 2 of 16
also in the period after passing of last order U/s' 1 43(3)
give list, source genuineness, identity of the same. Please
note you are to give confirmed copy of ledger A/c. from
the credit or/party including confirmation of mode, date,
address and acknowledgement of return etc' from the
said party along with source and relevant bank entries.
Same information may please be given in respect of
squared up loans if any during the year.
Please give a detailed note with regard to advance from
customer vis-a-vis the policy of company with regards to
recognition of income and treatment in accounts.
Complete detail of fresh security deposits made by you
during the year. File copy of ledger account and purpose
of making deposit and of interest earned thereon, if any."
4. In response to the said query raised in the questionnaire, the
assessee vide its response dated 07.08.2009 furnished the details of
the share capital raised during the year. Alongwith with the response
complete details of the shareholders, their addresses, PAN numbers
and number of shares were furnished. In addition thereto, a
confirmation letter from each of the shareholders was filed, providing
the details of the shares, investment made, mode of payment and the
bank through which the payment was made. In addition thereto, the
acknowledgement of e-returns of each of the shareholders was also
furnished. The following annexures were annexed to the response
dated 07.08.2009:-
WP(C)No.2526/2015 Page 3 of 16
Name of Address PAN No. of
Shareholder Shares
M/s Monisha 2A/65, Ground Floor, AABCM7083P 26700
Granit Ltd. Ramesh Nagar, New
Delhi-110 015
M/s Monisha 2A/65, Ramesh Nagar, AAFCM0694J 66700
Impex Ltd. New Delhi-110 015
M/s Bhalotia Agro WZ-241/S, Ground AABCB0388G 60000
Industries Ltd. Floor, Inderpuri, New
Delhi
M/s Elbee WZ-134, Plot No. 170, AABCH0899D 50000
Portfolio Ltd. Vishnu Garden, New
Delhi-110018.
M/s First Hi-Fin 73, Triloki Apartment, AAACF2099M 56700
Ltd. Plot No. 85, I.P. Extn.
New Delhi-110 092
M/s Salwan A-4/181, Sector-17, AAACS1320E 13400
Developers & Rohini, Delhi-110085
Promoters (P) Ltd.
M/s Paras Infotech E-71, Amar Colony, AACCP9931C 60000
(P) Ltd. Lalpat Nagar, New
Delhi-110024
M/s Rubik Export Shop No. 20, Krishna AABCR8845A 93400
Ltd. Market, Bawana Road,
Pooth Khurd, Delhi.
M/s M.V. WZ-134, Plot No. 170, AAACM8918J 56700
Marketing Pvt. Vishnu Garden, New
Ltd. Delhi-110018.
WP(C)No.2526/2015 Page 4 of 16
M/s U.P. 2A/55, Ground Floor, AAACU0290M 33400
Electricals Ltd. Ramesh Nagar, New
Delhi-110 015
M/s B. Fin-Lease 1/16 Ist Floor, Asaf Ali AAACB6410C 43400
Pvt. Ltd. Road, New Delhi-
110002
M/s Tashi Shop No. 20, Krishna AAACT6039R 33400
Contractors (P) Market, Bawana Road,
Ltd. Pooth Khurd, Delhi
M/s Akshay Sales 2A/65, Ground Floor, AAICA6630Q 16700
Pvt. Ltd. Ramesh Nagar, New
Delhi-110 015
M/s G.C. B-348, IIIrd Floor, AABCG3647B 73400
Technology (India) Hari Nagar, New
Pvt. Ltd. Delhi.
M/s Arun Finvest 50/12, Ashok Nagar, AABCA3510H 83400
Pvt. Ltd. New Delhi-110 018
M/s Maestro Mktg. A-4/181, Sector-17, AACCM0826H 40000
& Advg. Pvt. Ltd. Rohini, Delhi-110085
M/s Polo Leasing A-24, IInd Floor, AABCP8345D 23400
& Finance Pvt. Tagore Market, Kirti
Ltd. Nagar, New Delhi-
110015
M/s Shashi Sales RZ-41A, Mohan AAFCS8352R 83400
& Mktg. Pvt. Ltd. Nagar, Pankha Road,
New Delhi
M/s Rajkar Electri 5012, Ashok Vihar, AABCR4897G 70000
& Elect (P) Ltd. New Delhi-110 018
WP(C)No.2526/2015 Page 5 of 16
M/s Shattarchi 726, Pocket IIIrd AAFCS8159Q 15900
Finance & Leasing Sector-19, Dwarka,
Ltd. New Delhi-110045.
1000000
5. The confirmation letters issued by the shareholders are similar
and one such letter is extracted herein below. The same reads as
under:
"TO WHOM SO IT MAY CONCERN
This is confirm that we have made investment in shares,
the particulars of which are given hereunder, our own
declared sources.
Name of : Allied Strips Ltd.
Company No. of
Shares
No. of Shares : 26700 Equity
Shares of Rs. 10/-
each
At a premium of Rs.
20/- per share
Amount invested : 8,01,000/-
in Rupees
Particulars of :
Remittance
Cheque /DD/Pay : 453976, 453977
Order No.
WP(C)No.2526/2015 Page 6 of 16
Dated : 29/01/2007
Amount : 4,00,000/- each and
1,000/- each
Bank Particulars : The Bank of
Rajasthan Ltd.
Vikaspuri, Delhi
PAN/GIR No. : AABCM 7083 P
Share Certificate :
Received
Share Certificate :
No.
Share Distinctive :
No.
I hereby confirm that the information furnished above is
correct.
For Monisha Granite Ltd.
For MONISHA GRANITE LTD.
DIRECTOR"
6. After the above-mentioned information was received by the
Assessing Officer, the assessment was framed under Section 143(3) of
the Act on 07.10.2009. In the assessment order, the AO has recorded
as under:
WP(C)No.2526/2015 Page 7 of 16
"Assessment Order
Return declaring an income of Rs. 46,42,540/- was filed
on 16.11.2007 and the same was processed u/s 143(1) at
returned income on 21.02.2009. Subsequently, the case
was selected for scrutiny. Notice u/s 143(2) & 142(1)
along with detailed questionnaire was issued to the
assessee. In response to this notice, Shri N.C. Jain,
CA/AR attended from time to time and filed details as
called for vide letter dated 07.08.2009, 20.08.2009,
31.08.2009, 09.09.2009, 23.09.2009 and 07.10.2009
(Details are in part-I, II & III of record).
The assessee is engaged in the business of Re-rolling in
C.R. Strips. The Company has got its accounts audited
u/s 44AB of the I.T. Act, 1961 as per audit report dated
31.08.2007 filed with the return of income.
After discussion and considering the details filed by the
assessee in support of the balance sheet and profit & loss
account, the taxable income declared by the assessee is
accepted."
7. Perusal of the questionnaire along with the response furnished
and the assessment order reveals that the Assessing Officer after
examining the aspect of share application money received by the
assessee through the issuance of the questionnaire and notices framed
the assessment under Section 143(3) on 07.10.2009. The returned
income was accepted and no addition was made on account of the
share application money.
WP(C)No.2526/2015 Page 8 of 16
8. In CIT vs. Usha International Ltd. (2012) 348 ITR 485
(Delhi) (FB), a full bench of this Court held:-
"Re-assessment 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 re-assessment will be invalid because the
Assessing Officer had formed an opinion in the original
assessment, though he had not recorded his reasons."
9. On 27.03.2014, the impugned notice under Section 148 of the
Act has been issued. The reasons supplied to the assessee for re-
opening of the case dated 24.03.2014 record as under:-
"M/s Allied Strips Pvt. Ltd. (AABCA0609D)
Assessment in this case was completed u/s 143(3) at an
income of Rs. 46,42,540/- on 07.10.2009. An information
has been received from the Dy. Director of Income Tax
(Inv.), Unit-V(2), New Delhi that a search & seizure
operation was carried out in the case of Allied Strips
Limited on 17.12.2013. It has been observed by the
Investigation Wing that M/s Allied Strips Ltd. has taken
accommodation entry in the form of share premium/share
capital from various non-existent paper companies.
During the course of enquiry the alleged investors are
not found to be existing at the given address. The list of
such parties is as under:-
WP(C)No.2526/2015 Page 9 of 16
Name of Address Date No. of Premium Share Nominal
Shareholder Shares (Rs.) capital Value
received (Rs.)
(including
premium
(Rs.)
M/s Monisha 2A/65, Ground 31.03.2007 26700 20 2001000 10
Granit Ltd. Floor, Ramesh
Nagar, New
Delhi-110 015
M/s Monisha 2A/65, Ramesh 31.03.2007 66700 20 801000 10
Impex Ltd. Nagar, New
Delhi-110 015
M/s Bhalotia WZ-241/S, 31.03.2007 60000 20 1800000 10
Agro Ground Floor,
Industries Inderpuri, New
Ltd. Delhi
M/s Elbee WZ-134, Plot 31.03.2007 50000 20 1701000 10
Portfolio Ltd. No. 170,
Vishnu
Garden, New
Delhi-110018.
M/s First Hi- 73, Triloki 31.03.2007 56700 20 1500000 10
Fin Ltd. Apartment,
Plot No. 85,
I.P. Extn. New
Delhi-110 092
M/s Salwan A-4/181, 31.03.2007 13400 20 402000 10
Developers & Sector-17,
Promoters (P) Rohini, Delhi-
Ltd. 110085
M/s Paras E-71, Amar 31.03.2007 60000 20 1800000 10
Infotech (P) Colony, Lalpat
Ltd. Nagar, New
Delhi-110024
M/s Rubik Shop No. 20, 31.03.2007 93400 20 2802000 10
Export Ltd. Krishna
WP(C)No.2526/2015 Page 10 of 16
Market,
Bawana Road,
Pooth Khurd,
Delhi.
M/s M.V. WZ-134, Plot 31.03.2007 56700 20 1701000 10
Marketing No. 170,
Pvt. Ltd. Vishnu
Garden, New
Delhi-110018.
M/s U.P. 2A/55, Ground 31.03.2007 33400 20 1002000 10
Electricals Floor, Ramesh
Ltd. Nagar, New
Delhi-110 015
M/s B. Fin- 1/16 Ist Floor, 31.03.2007 43400 20 1302000 10
Lease Pvt. Asaf Ali Road,
Ltd. New Delhi-
110002
M/s Tashi Shop No. 20, 31.03.2007 33400 20 1002000 10
Contractors Krishna
(P) Ltd. Market,
Bawana Road,
Pooth Khurd,
Delhi
M/s Akshay 2A/65, Ground 31.03.2007 16700 20 501000 10
Sales Pvt. Floor, Ramesh
Ltd. Nagar, New
Delhi-110 015
M/s G.C. B-348, IIIrd 31.03.2007 73400 20 220000 10
Technology Floor, Hari
(India) Pvt. Nagar, New
Ltd. Delhi.
M/s Arun 50/12, Ashok 31.03.2007 83400 20 2502000 10
Finvest Pvt. Nagar, New
Ltd. Delhi-110 018
M/s Maestro A-4/181, 31.03.2007 40000 20 1200000 10
Mktg. & Sector-17,
Advg. Pvt. Rohini, Delhi-
Ltd. 110085
M/s Polo A-24, IInd 31.03.2007 23400 20 7020000 10
WP(C)No.2526/2015 Page 11 of 16
Leasing & Floor, Tagore
Finance Pvt. Market, Kirti
Ltd. Nagar, New
Delhi-110015
M/s Shashi RZ-41A, 31.03.2007 83400 20 2502000 10
Sales & Mohan Nagar,
Mktg. Pvt. Pankha Road,
Ltd. New Delhi
M/s Rajkar 5012, Ashok 31.03.2007 70000 20 2100000 10
Electri & Vihar, New
Elect (P) Delhi-110 018
Ltd.
M/s 726, Pocket 31.03.2007 15900 20 477000 10
Shattarchi IIIrd Sector-19,
Finance & Dwarka, New
Leasing Ltd. Delhi-110045.
Total 1000000 3,00,000/-
The DDIT (Inv.) has further submitted that the investors
have been verified from ITD and none of them reflect
receipt of nay dividend on the investment made by them.
The returns declaring meagre income/nil/loss income
create suspicion on the creditworthiness of the investors.
"it is evidently clear that the undisclosed income
of these beneficiary companies which has been
introduced by them in the form of share capital
/premium/loan has escaped taxation. Therefore it
is requested that there amounts be brought to tax
by initiating action under section 148 of the
Income Tax Act, 1961 for the A.Y. 2007-08 in the
case of above mentioned beneficiary companies."
Since the creditworthiness and genuineness of the above
investors remained unverified I therefore reason to
believe that an income to the extent of Rs. 3,00,00,000/-
WP(C)No.2526/2015 Page 12 of 16
has escaped assessment and to assessee the income
mentioned above and to verify the
genuineness/creditworthiness of the above investors. I
propose to issue notice u/s 148 of the Income Tax Act,
1961 for the assessment year 2007-08.
Therefore, I have reason to believe that THE ASSESSEE
COMPANY M/s Allied Strips Limited has concealed the
particulars of income to the extent of Rs. 3,00,00,000/-
which has not been disclosed in its return of income for
the assessment year 2007-08. In view of this, I am
satisfied that it is a fit case for reopening u/s 148 as the
case of the assessee is fully covered as per the provisions
of the I.T. Act, 1961 Section 147."
10. It is clear from the above, that the present case is one of change
of opinion. The questionnaire and particularly question B.1
specifically raise the issue with regard to share capital. It requires the
petitioner to give a list, source, genuineness, identity of the share
holders along with confirmation copies of the ledger account of the
party including confirmation of the mode, date, address and
acknowledgement of return, etc. from the said party along with source
and relevant bank entries. The said information was provided by the
assessee. After receipt of the said information, Assessing Officer did
not think it fit to make an addition and, under these circumstances, no
addition itself amounts to forming an opinion as has been held in
Usha International Ltd. (supra).
WP(C)No.2526/2015 Page 13 of 16
11. Therefore, in our view, the present exercise of issuing the notice
under Section 148 of the Act would amount to nothing but a change of
opinion, which is not permissible.
12. Another reason why the impugned notice under Section 148
and the proceedings consequent thereto have to be set aside is that the
pre-condition of there being a failure on part of the assessee to fully
and truly disclose all the material particulars necessary for assessment
has not been made out.
13. Perusal of the reasons for initiating re-assessment shows that
there is not even an allegation that there has been failure on the part of
the petitioner/assessee to fully and truly disclose all the material
particulars necessary for re-assessment.
14. In Haryana Acrylic Manufacturing P. Ltd. Co. Vs. CIT 2009
(308) ITR 38 (Delhi), this Court held 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
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
WP(C)No.2526/2015 Page 14 of 16
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."
15. In the present case also, there is not even a whisper of any
allegation that there has been a failure on the part of the assessee to
disclose fully and truly all material particulars necessary for
assessment.
WP(C)No.2526/2015 Page 15 of 16
16. Thus the petition is liable to succeed. The writ petition is
allowed and the impugned notice under Section 148 of the Act dated
27.03.2014 and all proceedings consequent thereto including the order
dated 23.02.2015 are quashed /set aside. There shall be no order as to
costs.
SANJEEV SACHDEVA, J.
BADAR DURREZ AHMED, J.
MAY 12, 2016
rs
WP(C)No.2526/2015 Page 16 of 16
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