Referred Sections:
Section 147 of the Act,
Section 148 of the Income Tax Act, 1961
Section 133(6)
section 142(1)
Section 143 (3) of the Act
Section 139,
Referred Cases / Judgments:
Income Tax Officer Ward No. 16(2) vs. M/s TechSpan India Private Ltd. (2018) 6 SCC 685
S.K.Enginnering Company Private Limited vs. Commissioner of Income Tax (Amritsar) 2001 10 SCC 189
CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561,
Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Del),
Sabh Infrastructure Ltd. v. ACIT 398 ITR 198 (Del)
Asia Private Ltd v. Deputy Director of Income Tax 397 ITR 665 (Del).
CIT v. Kelvinator of India Ltd.
Sabh Infrastructure v. ACIT
Oracle India Pvt. Ltd. v. ACIT 2017 SCC online Del 9360
Builders and Developers Pvt. Ltd. v. ACIT 2017 SCC Online Del 9425
$~21
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 12360/2018 & CM Appl. No. 47877/2018 (stay)
BEST CYBERCITY (INDIA) PVT. LTD. ..... Petitioner
Through: Mr. Salil Kapoor, Mr. Sumit Lal
Chandani, Ms. Ananya Kapoor &
Mr. Sidharth Kanwar, Advocates
versus
INCOME TAX OFFICER, WARD 4(3) & ANR. ..... Respondents
Through: Mr. Zoheb Hossain, Sr. Standing
counsel with Mr. Piyush Goyal,
Advocates for Revenue
CORAM:
JUSTICE S.MURALIDHAR
JUSTICE I.S.MEHTA
ORDER
% 21.05.2019
Dr. S. Muralidhar, J.:
1. The Petitioner challenges a notice dated 29th March, 2018 issued by the
Income Tax Officer, Ward 4(3) (hereafter Assessing Officer, AO) under
Section 147 read with Section 148 of the Income Tax Act, 1961 seeking to
re-open the assessment for the Assessment Year (AY) 2011-2012 as well as
the order dated 26th October, 2018 rejecting the Petitioners objections to the
re-opening of the assessment.
Relevant facts
2. The Petitioner is a company engaged in real estate development and
related services. It filed its return of income for the AY in question on 29th
September, 2011 declaring a loss of Rs. 22,534/-. The return was picked up
W.P.(C) 12360/2018 Page 1 of 13
for scrutiny and a questionnaire dated 23rd October, 2012 was issued by the
AO to the Petitioner inquiring about various aspects. Along with its reply
dated 30th October, 2012 the Petitioner submitted all the relevant bank
statements. A further reply was submitted on 6th November, 2012 stating
that copies of the Audit Report, Balance Sheet, Profit and Loss Account (P
& L Account) along with Schedule had already been placed on record.
Details of an unsecured loan of Rs.40 crores obtained by the Petitioner from
PACL India Limited (,,PACL) were also reflected in the accounts .
3. Another questionnaire was issued by the AO on 27th November, 2012
raising specific questions as regards PACL. The Petitioner submitted its
reply on 25th January, 2013 furnishing details of the unsecured loan with
confirmation of accounts. According to the Petitioner it informed the AO
that it had a plan to undertake a joint venture with PACL for development of
an IT park but the project did not materialize. Therefore, in the subsequent
AY, the said amount was refunded to PACL. The statement of Petitioners
account with Axis bank for the AY in question was already on record. The
bank statement for AY 2012-2013 along with the ledger account was also
filed. By a further submission dated 2nd February, 2013 the Petitioner
submitted details of the deployment of funds along with copies of the ledger
accounts, showing loans and advances, along with ledger account of PACL.
According to the Petitioner direct enquiries under Section 133(6) were made
by the AO from PACL during the assessment proceedings.
Original assessment order
4. The AO passed an assessment order dated 28th March, 2013 for the AY in
W.P.(C) 12360/2018 Page 2 of 13
question accepting the Petitioners return as filed. The order was a short one
and reads as under:
"A search and seizure operation u/s 132 of the IT Act was carried out
at the business premises of M/s Best group at H-8, Best Plaza, Netaji
Subhash Place, Pitampura, New Delhi as well as on residential
premises of the directors and their family members on 28 th March,
2011. The group is carrying out the activities of real estate
development and related services. The group is managed by Sh.
Harjeet Singh, Sh. Anu Aggarwal and others M/s Best Cyber City
(India) Private Limited is one of the companies of this group. Case of
the assessee company was centralized with Central Circle-11, New
Delhi. A notice under section 142(1) was issued on 11-10-2012.
Thereafter a questionnaire issued under section 142(1) on 23-10-2012
of the Income Tax Act, 1961. The assessee company filed its return of
income declaring loss of Rs. (22,534)/- for the Assessment Year
2011-12 on 20-11-2012.
2. Sh. Rajesh Arora, Chartered Accountant, Authorized
Representatives, attended the assessment proceedings in compliance
to notices under section 142(1) & 143 (2) of the Income Tax Act,
1961 from time to time. The details/information produced/furnished
during the course of assessment proceedings has been examined and
placed on record. The case was discussed with the assessee on various
related issues and submissions put forth.
After discussion income of assessee assessed at Nil
Assessed. Allow credit of prepaid taxes. Charge interest as per law.
Issue demand notice and challan.
3. This order has been issued with the approval of Additional
Commissioner of Income Tax, Central Range-III, New Delhi, as per
approval accorded vide F.No. Addl.CIT (CR)-111/2011-12/726 dated
28-3-13."
5. More than four years thereafter, the impugned notice dated 29 th March,
W.P.(C) 12360/2018 Page 3 of 13
2018 under Section 148 of the Act seeking re-opening of the aforementioned
assessment for AY 2011-2012 was issued by the AO. By a reply dated 23rd
April, 2018 the Petitioner stated that its original return may be treated as the
return filed pursuant to the above notice. The Petitioner also requested for
copy of the reasons recorded. On 5th September, 2018 the AO supplied to the
Petitioner a copy of the reasons recorded.
Reasons for re-opening
6. In Para 2.1 of the reasons, it was stated that during the course of
assessment proceedings of a sister concern of the Petitioner i.e. Best
International Projects Private Limited (BIPPL) for AY 2012-2013, it was
noticed that a sum of Rs. 40 crores had been transferred from the account of
PACL with Axis Bank to the account of the Assessee. It was observed that
PACL "is well known for giving and taking accommodating entries".
7. Para 3 of the reasons contained the analysis of the above information.
According to the AO, the creditworthiness and genuineness of the above
transaction remained unproved in the case of the Assessee in light of the
financial position reflected in the returns and nature of the debit and credit
entries reflected in the Bank account statements "in which transactions are
squared up on daily basis or a day after day basis." From statement of one
Shri Annu Aggarwal, Director of Assessee it was clear that it had done no
business activities ever since its incorporation and had no income for
investment. It was further stated that the assessee had no business office
premises either on rent basis or ownership basis. It had no fixed moveable
assets and no staff to carry on day to day activities. It was then noted that
W.P.(C) 12360/2018 Page 4 of 13
Shri Aggarwal admitted not knowing the names of the Directors and Top
Management officers of PACL which was well known for giving and taking
accommodating entries. The name of PACL had been mentioned by one
Shri Praveen Aggarwal a well known entry operator of Kolkata who had
made a statement to that effect on 12th November, 2012 during search and
seizure operation conducted at his group of companies.
8. For the above reasons, the AO recorded that he had reason to believe that
Rs. 40 crores received by the Assessee from PACL had escaped income for
AY 2011-2012. In Para 4.1 the AO concluded that the Assessee had
received "unexplained investment amounting Rs.40 crores" during the AY
in question, which had escaped taxation. In para 4.2 it was stated that the
above income had escaped assessment on account of "the failure on the part
of the Assessee disclosed fully and truly all material facts".
9. On 24th October, 2018 the Petitioner filed its objections to the re-opening
of the assessment. These were rejected by the AO by an order dated 26 th
October, 2018.
10. While directing notice to issue in the present petition on 19th November,
2018 this Court directed that the AO would not pass the final orders during
the pendency of the proceedings.
11. Pursuant to the notice issued in the petition, the Respondent AO has filed
a counter affidavit reiterating, more or less, the reasons given for reopening
of the proceedings. In particular, it is submitted that the assessment order
W.P.(C) 12360/2018 Page 5 of 13
dated 28th March, 2013 under Section 143 (3) of the Act was cryptic. In
other words, it is submitted that in the present case since the original
assessment order did not contain any discussion on the issues raised in the
notice for re-opening the assessment, it could not be said that the re-opening
was based on mere a ,,change of opinion of the AO.
Submissions of the Assessee
12. Mr. Sanat Kapoor, learned counsel for the Assessee, submitted that there
was total non-application of mind by the AO while re-opening the
assessment. In the first place, the proforma filled up by the AO for seeking
approval of the superior officer for the re-opening of the assessment
indicated that the earlier assessment was under Section 143(1) of the Act
whereas it was under Section 143(3) of the Act. According to Mr. Kapoor,
this led to neither the AO nor the Superior Officer examining the file and
noting that detailed questionnaires had already been issued by the AO for
which replies have been given by the Assessee disclosing the complete
particulars regarding the loan of Rs. 40 crores of the PACL. Mr. Kapoor
emphasized that this was not a case of failure by the Assessee to disclose the
complete relevant materials and information relevant to the assessment.
According to Mr. Kapoor the jurisdictional requirement in law for
assumption of jurisdiction under Section 147 of the Act, keeping in view
that the original assessment was under Section 143(3) of the Act, and the re-
opening was sought to be done four years after the earlier assessment, were
not fulfilled in the present case.
13. Mr. Kapoor placed reliance on the decisions of this Court and the
W.P.(C) 12360/2018 Page 6 of 13
Supreme Court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561,
Haryana Acrylic Manufacturing Co. v. CIT (2009) 308 ITR 38 (Del), Sabh
Infrastructure Ltd. v. ACIT 398 ITR 198 (Del) and Yum! Restaurants Asia
Private Ltd v. Deputy Director of Income Tax 397 ITR 665 (Del).
Submissions of the Revenue
14. Mr. Zoheb Hossain, learned Senior standing counsel for the Revenue on
the other hand submitted that the assessment order did not reflect any
discussion on the aspect of the unsecured loan obtained by the Assessee
from PACL during the AY in question. It was a cryptic order and, therefore,
couldnt be said to reflect any opinion of the AO on the issue. He placed
reliance on the decision in Income Tax Officer Ward No. 16(2) vs. M/s
TechSpan India Private Ltd. (2018) 6 SCC 685 as well as S.K.Enginnering
Company Private Limited vs. Commissioner of Income Tax (Amritsar)
2001 10 SCC 189 to urge that where the original assessment order was a
cryptic one it could not be said that the re-opening was based on a mere
change of opinion.
15. Mr. Hossain further submitted that the fact of utilisation of the sum of
Rs. 40 crores by the Assessee by giving Rs. 15.48 crores to BIPPL was not
disclosed by the Assessee during the assessment proceedings. PACL was an
accommodation entry provider and these facts emerged only during the
assessment proceedings of BIPPL for AY 2012-13.
Analysis and reasons
16. The requirement of the law in a case where the original assessment is
W.P.(C) 12360/2018 Page 7 of 13
under Section 143(3) of the Act and the re-opening of the assessment is
beyond four years is well settled in a large number of cases, including CIT
v. Kelvinator of India Ltd. (supra) and may be summarised thus:
(a) There must be tangible material that leads an AO to form reasons to
believe that income chargeable to tax for the AY Year concerned has
escaped assessment.
(b) The AOs reasons must not be based on a mere change of opinion.
Sections 147/148 of the Act cannot be invoked to overcome an oversight,
inadvertent error and/or mistake in the original assessment order.
(c) Where the original assessment is under Section 143(3) of the Act and is
sought to be reopened beyond a period of four years from the end of the
relevant AY, then in terms of the first proviso to Section 147 of the Act it
must be additionally shown that the escapement of income was either on
account of the Assessees failure to file a return under Section 139, or in
response to a notice under Sections 142(1) or 148 of the Act or failing to
disclose fully and truly all material facts necessary for the assessment.
(d) The reasons for re-opening the assessment must themselves contain all of
the above elements. In other words the factum of the existence of tangible
material and the recording of the satisfaction of the AO about the failure by
the Assessee to disclose fully and truly all material facts necessary for the
assessment must find place in the reasons recorded for re-opening the
assessment. The deficiency in this regard cannot be sought to be made up by
W.P.(C) 12360/2018 Page 8 of 13
a counter affidavit filed in the Court in response to a petition questioning the
reopening of the assessment.
17. In Sabh Infrastructure v. ACIT (supra) after referring to the decisions
in Oracle India Pvt. Ltd. v. ACIT 2017 SCC online Del 9360 and BDR
Builders and Developers Pvt. Ltd. v. ACIT 2017 SCC Online Del 9425 this
Court held
"Thus, it is also now well settled that the reasons to believe
have to be self explanatory. The reasons cannot be thereafter
supported by any extraneous material. The order disposing of
the objections cannot act as a substitute for the reasons to
believe and neither can any counter affidavit filed before this
court in writ proceedings."
18. As far as the present case is concerned, it is seen that the detailed
questionnaire was first issued on 23rd October, 2012 by the AO during the
course of the original assessment proceedings under Section 143 (3) of the
Act. The AO had called for copies of all the bank accounts, the details of the
sources of funds credited to the bank accounts and the application of the
funds debited in such accounts. A reference was made to the search and
seizure operations undertaken on 28th March, 2012 in which cash was found
from plot No. H-8, Netaji Subhash Palace, New Delhi. On 30th October,
2012 the Petitioner gave a point-wise reply including the Auditors report and
the balance sheets, profit and loss account etc. By a separate letter dated 6th
November, 2012 the Petitioner give further clarifications on certain other
points placed by the AO.
19. A further notice was issued on 27th November, 2012 by the AO which
W.P.(C) 12360/2018 Page 9 of 13
was specific to the amount received from PACL. Copy of the agreement
entered into with PACL Limited for development of IT park under joint
venture with the best group and "details of amount of Rs.40 crores received
from the parties during the year, along with documentary evidence" was also
called for. On 25th January, 2013 the Assessee provided the following
explanation:
"The Assessee Company has received Rs. 40 crore from M/s
PACL during the year under reference as the Assessee Company
was planning to undertake a joint venture with the said party for
development of IT Park. The said amount is reflected in the
schedule 2 of Balance Sheet already placed on record. However,
the deal couldn't be materialized. Therefore the Assessee
refunded the said amount to the said party in the financial year
2011-12. It is pertinent to mention hereby that the amount was
received and refunded through Account No.910020022934722,
Axis Bank. The bank statement for the financial year 2011-12,
confirming that the amount was refunded, is enclosed herewith
as per Annexure 5. The confirmation of PACL has already been
submitted in "Reply to Point No, 3" above."
20. The certificate issued by the PACL limited stating that there is a balance
of Rs. 40 crores in the name of the Assessee and the subsequent certificate
dated 4th January, 2013 that debit balance is zero as on 31st March, 2012 was
also furnished. The complete statement of bank account of Axis bank
reflecting the debits and credits in the account including money received
from PACL and repaid to it were furnished. It is therefore plain that all
details pertaining to the amount received from PACL was in fact furnished
by the Assessee to the AO.
21. While, in the present case the assessment order does not itself discuss the
W.P.(C) 12360/2018 Page 10 of 13
details furnished by the Assessee, the fact remains that all the relevant
materials were indeed disclosed by the Assessee before the AO. Also, the
details of how the sum of Rs. 40 crores was disbursed appears to have been
disclosed by the Assessee in a letter dated 2nd February, 2013 written by it to
the AO in response to the questionnaire issued to it on 27th November, 2012.
Relevant portions of the said letter read as under:
"Sir,
With reference to the subject captioned above, the Assessee seeks to
submit as follows in response to the questionnaires issued u/s 142(1):
Reply to Point No. 6
With regard to the query in relation to Rs. 40Cr received by the
Assessee Company, it is stated that the Assessee Company has received
Rs. 40 Cr in AY 2011-12 as an advance for development of IT park,
from M/s PACL, as highlighted in the bank statement and bank book
enclosed herewith for your ready reference.
Availing the deployment of funds, the amounts were temporarily
advanced to following parties whose debit balance on 31.03.2011 was
as under:
Name of the Party Amount (Rs.)
Best City Developers (I) Pvt. Ltd. 7,20,00,000/- Dr.
Best International Projects Pvt. 15,48,00,000/- Dr.
Ltd.
Best Realtech (I) Pvt. Ltd. 12,30,00,000/- Dr.
Harjeet Singh Arora 90,00,000/- Dr.
Parasmani Buildwell Pvt. Ltd. 4,00,00,000/- Dr.
Zile Singh 12,00,000/- Dr.
Total (Rs.) 40,00,00,000/- Dr.
W.P.(C) 12360/2018 Page 11 of 13
The copy of ledger accounts showing the loans and advances are
enclosed herewith as per Annexure 1.
Since the deal couldn't materialize therefore the Assessee Company
refunded the same amount to M/s PACL in F.Y. 2011-12 highlighted in
the bank statements enclosed herewith for your ready reference and
ledger account of M/s PACL as per Annexure 2.
The confirmation of the account of M/s PACL as on 31.03.2011 has
already been placed on record vide our letter dated 25.01.2013."
22. Therefore, in the present case all the material that was necessary for the
AO to form an opinion regarding the transaction involving the Assessee and
PACL was already available with the AO. There was no fresh tangible
material on the basis of which the AO could have formed an opinion about
any taxable having escaped assessment during the AY in question. Also, the
reasons recorded by the AO for re-opening the assessment do not refer to the
above facts. It merely repeats the language of Section 147 that there was a
failure by the Assessee to disclose fully and truly all material facts necessary
for the assessment. The Court is, therefore, satisfied that the jurisdictional
requirement of the first proviso to Section 147 proviso has not been satisfied
in the present case.
23. The learned counsel for the Assessee is right in his submission about the
mistakes committed even in the proforma accompanying the reasons
recorded which notes that the exercise was being undertaken in terms of
clause (b) to Explanation 2 to Section 147 which would mean that the
original assessment was under Section 143 (1) of the Act. The fact is that the
original assessment was under Section 143 (3) of the Act. This perhaps
W.P.(C) 12360/2018 Page 12 of 13
explains why the reasons recorded for re-opening the assessment does not
advert to what transpired during the original assessment and in particular the
questionnaires issued to the Assessee by the AO specifically on the issue of
the loan from PACL. The learned counsel for the Assessee is justified in his
submission that this also reflects non-application of mind by the AO, and the
superior officer who approved the re-opening, to the relevant materials.
Conclusion
24. For the aforementioned reasons, this Court quashes the notice dated 29 th
March, 2018 issued to the Assessee under Section 147 read with Section 148
of the Act and also sets aside the order dated 26th October, 2018 passed by
the AO rejecting the objections raised by the Petitioner to the re-opening of
the assessment for the AY in question.
25. The writ petition is accordingly allowed but in the circumstances with no
order as to costs. The application is also disposed of.
S. MURALIDHAR, J.
I.S. MEHTA, J.
MAY 21, 2019
mw
W.P.(C) 12360/2018 Page 13 of 13
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