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R.K. Arora & Sons (Huf) B-4/48, Paschim Vihar, New Delhi Vs. Acit, Central Circle-02, New Delhi
September, 28th 2015
                                                        ITA NOS.4444 & 4445/DEL/2014



               IN THE INCOME TAX APPELLATE TRIBUNAL
                  DELHI BENCH "SMC-2", NEW DELHI
              BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER


                    I.T.A. No. 4444/DEL/2014
                            A.Y. : 2004-05
R.K. ARORA & SONS (HUF)                 ACIT, CENTRAL CIRCLE-02,
B-4/48, PASCHIM VIHAR,              VS. NEW DELHI
NEW DELHI
(PAN: AANHR4028Q)
(APPELLANT)                               (RESPONDENT)
                                  AND
                    I.T.A. No. 4445/DEL/2014
                            A.Y. : 2004-05
K.K. ARORA & SONS (HUF)                 ACIT, CENTRAL CIRCLE-02,
B-4/48, PASCHIM VIHAR,              VS. NEW DELHI
NEW DELHI
(PAN: AANHR4028Q)
(APPELLANT)                               (RESPONDENT)

         Assessee by                 :   Shri Anil Kr. Jain, CA
        Department by                :   Sh. Sudhiranjan Senpati, Sr. DR


                      Date of Hearing : 03-08-2015
                      Date of Order    : 24-09-2015


                             ORDER
PER H.S. SIDHU : JM
     These are two Appeals are filed by different assesses which is

against the separate orders of the Ld. CIT(A)'s both dated 25.6.2014

for the same asstt. year i.e. 2004-05. Since the issues involved in

both the appeals are identical and common,         hence, these appeals

are being consolidated by this common            order for the sake of

convenience, by dealing with ITA No. 4444/Del/2014 (AY 2004-05).



                                    1
                                                      ITA NOS.4444 & 4445/DEL/2014




2.   The following grounds have been raised in the Assessee's
Appeal No. 4444/Del/2014 (AY 2004-05).

     "1.   That on the facts and circumstances of the case and the
           provision of law the Ld CIT(Appeal) has failed to
           appreciate that the notice uls 148 is illegal, bad in law
           and without jurisdiction and as such the assessment
           order passed uls 148 is illegal and bad in law.

     2.    That on the facts and circumstances of the case and the
           provision of law the Ld CIT(Appeal) has failed to
           appreciate that the initiation of reassessment proceeding
           uls 147 is illegal and bad in law.

     3.    That on the facts and circumstances of the case and the
           provision of law the Ld CIT(Appeal) has failed to
           appreciate that the impugned assessment order passed
           by the Ld. AO is bad in law, illegal and wrong on facts.

     4.    That on the facts and circumstances of the case and the
           provision of law the Ld CIT(Appeal) has failed to
           appreciate that the impugned assessment order passed
           by the Ld. AO is against the principles of natural justice
           and has been passed without affording reasonable
           opportunity of being heard.

     5.    That on the facts and, on the circumstances of the case
           and the provision of law the Ld CIT Appeal has erred in
           sustaining an addition of Rs.5,00,000/- as unexplained
           cash credit uls 68 of the Income Tax Act, 1961.

     6.    That the Appellant craves the right to amend, append,
           delete any or all grounds of appeal."






                                   2
                                                       ITA NOS.4444 & 4445/DEL/2014




3.    The brief facts of the case are that       a search and seizure
action u/s. 132 of the I.T. Act, 1961 was carried out in Wings
Pharmaceuticals group of cases on 14.2.2008 and the assessee was
also covered under search.      Subsequent to centralization of the
case, proceedings u/s. 153A of the I.T. Act, 1961 had been initiated.
A notice u/s. 153A was issued on 15.1.2009. In response thereof, the
assessee filed its return of income for AY 2004-05 on 30.1.2009,
declaring income of Rs. 3,74,526/-. Thereafter, assessment in this
case was completed u/s. 143(3)/153A of the I.T. Act, 1961 vide order
dated 24.12.2009 at an income of Rs. 3,74,526/-. Subsequently, a
letter dated 25.3.2011 was received from the CIT(A), Delhi (Central)-
III, New Delhi forwarding therewith copy of letter of the ACIT, CC-19,
New    Delhi   containing    therewith    list   of   beneficiaries            of
accommodation entries provided by Sh. Suresh Kumar Gupta for AY
2004-05. After perusing the list enclosed with the letter of the ACIT,
CC-19, New Delhi, AO reveals that M/s RK Arora & Sons (HUF), who
is assessed to tax is one of the beneficiaries and has received
accommodation     entries from Anjali Gupta. In view of the facts and
circumstances of the case, the case of the assessee was reopened
u/s. 147 of the I.T. Act, 1961 after obtaining approval of the Ld. CIT,
Delhi (Central)-III, New Delhi vide his office letter dated 30.3.2011
and a notice u/s. 148 of the I.T. Act, 1961 was issued to the assessee
on 30.3.2011 which was sent through speed post. A copy of the
notice was also served upon the assessee by hand on 31.3.2011. In
response to the notice u/s. 148 r.w. Section 147 of the I.T. Act, 1961,
the assessee vide letter dated NIL has submitted on 2.5.2011 a copy
of return of income and also requested for the copy of the reasons
recorded before initiating the reassessment proceedings. A notice
u/s. 143(2) of the I.T. Act, 1961 was issued on 17.10.2011 and
served upon the assessee through speed post, fixing the case for
hearing on 25.10.2011. In response thereof, neither                anybody
                                   3
                                                                 ITA NOS.4444 & 4445/DEL/2014




attended,    nor   any     reply   has       been   filed   by    the       assessee.
Subsequently, a notice u/s. 142(1) of the I.T. Act, 1961 alongwith
questionnaire was issued to the assessee on 4.11.2011 and served
upon him through speed post. In response thereto, the assessee on
11.11.2011 has filed a letter and requested for copy of reasons
recorded before initiating the proceeding u/s. 148 for the AY 2004-
05. The same was sent to the assessee on 8.12.2011 and assessee
submitted vide his letter dated 13.12.2011 his reply. AO observed
that the assessee has not submitted any documentary evidence i.e.
any bank statement etc., in support of its contention. Hence, in the
absence of any documentary evidence, the cash credits received by
the assessee remained unverifiable. Thereafter, the assessment was
made u/s. 147 by order dated 20.12.2011 assessing the income at
Rs. 8,74,530/- passed u/s. 143(3)/148 of the Income Tax Act, 1961.

4.    Aggrieved     with    the    aforesaid        assessment       order        dated
20.12.2008, Assessee was in appeal before the                    Ld. CIT(A), who
vide impugned order dated 25.6.2014 has dismissed the appeal of
the assessee.

5.   Against the aforesaid order of the Ld. CIT(A), Assessee is in
appeal before the Tribunal.

6.    Ld. Counsel of the assessee reiterated the contention raised in
the Grounds of Appeal.         He further submitted that the AO has
mechanically issued the notice on the basis of letter received from
the office of the CIT Central-3. There is no live link in the reasons
recorded between the information obtained and the belief formed by
the AO. Only the value of entry taken is mentioned but the nature of
entry whether it is, bogus gift, loan or share capital money is not
mentioned.      Moreover, on what basis the above presumption is
drawn that the assesssee has taken any accommodation entry is


                                         4
                                                        ITA NOS.4444 & 4445/DEL/2014




also not mentioned. No reference is made to any tangible material
statement or annexure in support of the information receive on the
basis of which reasons have been recorded. From the reasons it is
also not clear whether any statement of Smt. Anjali Gupta/ Sh.
Suresh Kumar Gupta has been recorded or not. Even in the reasons
recorded, Pay Order no. mentioned is wrong meaning thereby that
the AO has not bothered to even verify the information received
with the assessment folder wherein the confirmation/copy of Pay
order has already been filed at the time of original assessment u/s
153A. It indicates that the AO has mechanically recorded the
reasons and issued the notice without applying his own mind.
Therefore, on these facts, the    decisions of Hon'ble Jurisdictional
High Court in the case Signature Hotels Pvt. Ltd. (supra), 338 ITR 51,
Insectici (India) Ltd. (supra), 357 ITR 330 and ClT vs. Atul Jain and
Vin Jain, 299 ITR 383 would be squarely applicable because                    the
information on the basis of which the AO had initiated proceedings
under section 147 was vague and uncertain as may be evidenced
from the relevant para of these judgments. Hence, he requested
that the reassessment proceedings may be quashed.

7.   On the other hand, Ld. DR relied upon the orders passed by the
lower authorities on the issue in dispute.

8.    I have   heard both the parties and perused the            records.         I
find that the AO has recorded the reasons for belief that income
has escaped assessment as under. The same is reproduced in the
impugned order.

           "Reasons to believe for reopening u/s. 147

                MIs R.K. Arora & Sons HUF, 8-4/48, Paschim Vihar,
           New Delhi (A.Y. 2004-05)



                                  5
                                            ITA NOS.4444 & 4445/DEL/2014




     A search & seizure action u/s 132 was carried out in
Wings Group of cases on 14.02.2008. The case was
centralized with Central Circle-2 vide order uls 127 by
CIT-IX, New Delhi on 24.10.2008.

     2. The assessrnept in the case of M/s R.K. Arora/&
Sons (HUF) was completed vide order u/s 143(3)/153A of
the Act. 1961 dated 24.12.2009 at the returned income
of Rs.3,74,526/-.

     3. A letter F.No. CIT(C)-1I1/2010-11/2334,. dated
25.03.2011 has been received from the CIT(Central)-III,
New Delhi forwarding therewith copy of letter of the ACIT,
Central Circle- H). New Delhi containing therewith list of
beneficiaries of accommodation entries provided by Sh.
Suresh Kumar Gupta for A.Y. 2004- 05.

     4. A perusal of the list enclosed with the letter of
the ACIT, CC-19, New Delhi reveals that M/s R.K. Arora &
Sons HUF, who is assessed to tax with this Circle, is one
of the beneficiaries and has received accommodation
entries from Anjali Gupta, as per details given below:

Mediatory   Actual       Date          Ch. No. Amount
            Beneficiary                PO No.
Deepak      R.K. Arora & 11.3.2004     060927 Rs. 5,00,000
Jain        sons (HUF)



     5. In view of this. I am satisfied that the income to
the tune of RS.5,00,OOOI- has escaped assessment by
reason of the failure on the part of the assessee and to
disclose fully and truly all material facts necessary for his
assessment for that assessment year



                        6
                                                           ITA NOS.4444 & 4445/DEL/2014




                6. In view of above facts and circumstances of the
           case, I have reason to believe that the income of the
           assessee of more than RS.1.0 lac has escaped from
           assessment.

                                                     SD/-
                                               (S.N. PANDEY)
                            ACIT, CENTRAL CIRCLE-2, NEW DELHI"


10.   In the background of the aforesaid discussions, I am of the
considered view that only legal ground involved in this Appeal is
whether the reassessment proceedings u/s. 148 of the I.T. Act are
illegal and without jurisdiction in the absence of             any tangible
evidence or material in respect of any undisclosed income and
recording of requisite satisfaction in respect of any such undisclosed
income or not. After hearing both the parties on the issue in dispute
as well as after going through the orders passed by the Revenue
Authorities alongwith order dated 21.7.2011 passed by the Hon'ble
Jurisdictional High Court in the case of Signature Hotels P. Ltd. vs.
Income Tax Officer [2011] 338 ITR 0051 wherein the Hon'ble High
Court has held as under:-

                "Held, allowing the petition, that the reassessment

                proceeding    were       initiated    on   the        basis        of

                information received from the Director of Income

                Tax    (Investigation)     that      the   petitioner           had

                introduced money amounting to Rs. 5 lacs during

                the financial year 2002-03 as stated in the

                Annexure.      According to the information, the

                amount received from a company, S, was nothing

                                  7
                                                         ITA NOS.4444 & 4445/DEL/2014




                but an accommodation entry and the assesee was

                the beneficiary.         The reasons did not satisfy the

                requirements of Section 147 of the Act. There was

                no reference to any document or statement, except

                the annexure. The annexure could not be regarded

                as a material or evidence that prima facie showed

                or established           nexus or link which disclosed

                escapement of income.            The annexure was not a

                pointer and did not indicate escapement of income.

                Further, the Assessing Officer did not apply his own

                mind to the information and examine the basis and

                material of the information. There was no dispute

                that the company, S, had a paid-up capital of Rs. 90

                lakhs and was incorporated on January 4, 1989, and

                was also allotted a permanent account number in

                September, 2001. Thus, it could not be held to be a

                fictitious person.        The reassessment proceedings

                were not valid and were lliable to be quashed."
11. In view of above, I am of the considered view that above issue is exactly the similar to the issue involved in the present appeal and is squarely covered by the aforesaid decision of the Hon'ble High Court of Delhi delivered in Hotel Signatures Ltd. (Supra). Hence, respectfully following the above precedent, I decide the legal issue 8 ITA NOS.4444 & 4445/DEL/2014 in dispute in favour of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 12. In the result, both the Assessees' Appeal No. 4444 & 4445/Del/2014 stands allowed. Order pronounced in the Open Court on 24/9/2015. Sd/- [H.S. SIDHU] JUDICIAL MEMBER Date 24/9/2015 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 9
 
 
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