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).
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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."
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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
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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
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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)
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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
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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
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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
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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
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