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Allied Strips Limited Vs. Assistant Commissioner Of Income Tax Central Circle-15
May, 18th 2016
*       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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