1 ITA No. /Del/2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `G' NEW DELHI
BEFORE HON'BLE SHRI G. D. AGRAWAL, PRESIDENT
AND
HON'BLE SMT. SUCHITRA KAMBLE, JUDICIAL MEMBER
ITA No. 7441/DEL/2018 (A.Y 2010-11)
The Gita Education Vs Income Tax Officer, Exemption
Society, C/o Kapil Goel Ward, Ghaziabad
Adv F-26/124 Sector 7
Rohini, Delhi-110085
PAN-AAAAT9753G
(APPELLANT) (RESPONDENT)
Appellant by Sh. Kapil Goel, CA
Respondent by Sh. S.S. Rana, CIT DR
Date of Hearing 07.05.2019
Date of Pronouncement 22.05.2019
ORDER
PER G.D. AGRAWAL, V.P.
This is an appeal filed by the assessee against the order dated
28.09.2018 passed by the CIT(A, Ghaziabad.
In this appeal filed by the assessee, Ground No. 1 reads as under:-
i. That order passed by Ld AO dated 13/11/2017 and further order passed by Id CIT
(A) dated 28/09/2018 are bad in law in as much as impugned assessment is
made in violation of jurisdictional conditions stipulated under the Act, ergo,
orders of Ld AO and Ld CIT-A may please be quashed.
a. That order passed by Ld AO dated 13/11/2017 and further order passed
by Id CIT A dated 28/09/2018 are bad in law as reasons recorded are
based on borrowed satisfaction and without independent application of
mind as no where it is established that assessee is real beneficiary of
stated amount of Rs 50,00,000 which is solely based on suspicion only
and reasons recorded lack live nexus which is sine qua non for valid
reopening action;
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b. That order passed by Ld AO dated 13/11/2017 and further order passed
by Id CIT A dated 28/09/2018 are bad in law as reasons recorded in
extant case are delightfully silent on lack of disclosure on stated bank a/c
in earlier assessment proceedings (order u/s 143(3) dated 27.02.2013)
vide first proviso in section 147 of the Act and same is the position in
notice u/s 148 dated 28.03.2017 for AY 2010-2011 and objection disposal
dated 29.09.2017.
c. That order passed by Ld AO dated 13/11/2017 and further order passed
by Id C1T A dated 28/09/2018 are bad in law as reasons recorded as
supplied are sans approval if any taken from competent authority.
d. That order passed by Ld AO dated 13/11/2017 and further order passed
by Id CIT A dated 28/09/2018 are bad in law as reasons recorded stated
Rs 50,00,000 is unexplained amount simply where as Ld AO changing
basis of reopening in order passed states that assessee has utilized
undisclosed funds being cash for clearing of cheque in the bank a/c and
Ld CIT-A further changes it to held that assessee could not substantiate
the genuineness of transaction of Rs 50,00,000 being amount reed from
SOWHAP which amorphous and fleeting allegation breaks the entire belief
formed in reasons recorded.
2. At the time of hearing before us, it is stated by the assessee's
counsel that the assessee is a society which has been granted
registration under section 12AA of the Income Tax Act. For the year
under consideration, the assessment was originally completed under
section 143(3) vide order dated 27.2.2013 on nil income. The assessment
was reopened vide notice under section 148 dated 28th March, 2017.
Thus, admittedly the assessment was reopened beyond the period of four
years when the original assessment was completed under section 143(3).
Therefore, the proviso to section 147 is clearly applicable. That no finding
is recorded by the Assessing Officer in the reasons recorded that the
alleged escapement of income is on account of any failure on the part of
the assessee to disclose any material fact and therefore, the reopening is
not valid.
3. He further stated that in the reasons recorded it is alleged by the
Assessing Officer that as per the information received from the CIT(E)
Kolkata it was gathered by the Department that there was a society
3 ITA No. /Del/2018
named as M/s Society for Welfare of Handicapped Persons, which was
approved under section 35 (i)(ii) of the Income Tax Act and it is used to
transfer the bogus donation to the society / trust in lieu of cash. The
Assessing Officer alleged that the assessee had received the donation of
Rs. 50,00,000/- on 17th March, 2010 by cheque for which the assessee
made the payment in cash which was the undisclosed income of the
assessee.
4. However, in the reasons recorded, the Assessing Officer himself has
recorded that the assessee furnished the list of donation during the
assessment proceedings but no name of the donor M/s Society for
Welfare of Handicapped Person is mentioned. Thus as per the books of
the assessee, no donation is received from the so called society.
Moreover, the Assessing Officer himself has mentioned in the reasons
recorded that the assessee received the sum of Rs. 50,00,000/- on 17th
March, 2010 and paid Rs. 50,00,000/- on 19th March, 2010. He stated
that by some mistake the cheque of Rs. 50,00,000/- was issued and
credited in the name of assessee when this fact came to the knowledge of
the assessee it returned the same immediately and therefore, there is no
credit of any donation in the accounts of the assessee.
5. The learned DR on the other hand fiiled the written submissions
which is reproduced below:-
"In the above case, it is humbly submitted that the following decisions may
kindly be considered with regard to reopening of cases beyond 4 years u/s 147 of
I.T.Act:
1. PCIT Vs Paramount Communication (P.) Ltd.(2017-TIOL-253-SC-IT)(Copy
enclosed)
where Hon'ble Supreme Court dismissed SLP of assessee. Information
regarding bogus purchase by assessee received by DRI from CCE which was
passed on to revenue authorities was 'tangible material outside record' to initiate
valid reassessment proceedings.
4 ITA No. /Del/2018
PCIT Vs Paramount Communication (P.) Ltd.[2017] 79 taxmann.com 409
(Delhi)/[2017] 392 ITR 444 (Delhi)
where Hon'ble Delhi High Court held that Information regarding bogus purchase
by assessee received by DRI from CCE which was passed on to revenue
authorities was 'tangible material outside record' to initiate valid reassessment
proceedings
2. Aradhna Estate (P.) Ltd.Vs DCIT [2018] 91 taxmann.com 119 (Gujarat) (copy
enclosed)
where Hon'ble Gujarat High Court held that where reassessment proceedings
were initiated on basis of information received from Investigation wing that
assessee had received certain amount from shell companies working as an
accommodation entry provider, merely because these transactions were
scrutinised by Assessing Officer during original assessment, reassessment could
not be held unjustified
3. Pushpak Bullion (P.) Ltd. Vs DCIT[2017] 85 taxmann.com 84 (Gujarat)(copy
enclosed)
where Hon'ble Gujarat High Court held that where investigation wing of
department had during course of investigation in case of a third party found that
he was indulged in providing accommodation entries and bogus bills, and
assessee had made sizeable purchases from him, reopening notice against
assessee was justified
4. Ankit Financial Services Ltd. Vs DCIT[2017] 78 taxmann.com 58 (Gujarat)
(Copy enclosed)
where Hon'ble Gujarat High Court held that where material recovered in search
of another person indicated that assessee had received bogus share applications
through accommodation entries, since assessee was beneficiary, initiation of re-
opening was justified.
5. Aaspas Multimedia Ltd. Vs DCIT[2017] 83 taxmann.com 82 (Gujarat)(Copy
enclosed)
where Hon'ble Gujarat High Court held that where reassessment was made on
basis of information received from Principal DIT (Investigation) that assessee
was beneficiary of accommodation entries by way of share application provided
by a third party, same was justified.
6. Ankit Agrochem (P.) Ltd. Vs JCIT[2018] 89 taxmann.com 45
(Rajasthan)(Copy enclosed)
where Hon'ble Rajasthan High Court held that where DIT informed that
assessee-company had received share application money from several entities
which were only engaged in business of providing bogus accommodation entries
to beneficiary concerns, reassessment on basis of said information was justified.
7. Mona Mahesh Bhojani Vs ITO (2017-TIOL-345-SC-IT)(copy enclosed)
SLP dismissed against appeal challenging the judgment, whereby the High Court
had held that reopening initiated in case of an assessee who had not filed his
return, could not be claimed by the assessee to be based on 'change of opinion'.
5 ITA No. /Del/2018
The Assessee had also challenged the action of High Court in holding that when
the AO had tangible material at his command to form a bonafide belief that
income chargeable to tax had escaped assessment, the writ court would not
interfere with the formation of such belief unless it is shown to be wholly
perverse.
8. Indu Lata Rangwala Vs DCIT [2017]80taxmann.com102(Delhi)/[2016] 384
ITR 337 (Delhi)/[2016] 286 CTR 474 (Delhi) (copy enclosed)
where Hon'ble Delhi High Court held that where initial return of income is
processed under section 143(1), it is not necessary in such a case for Assessing
Officer to come across some fresh tangible material to form 'reasons to believe'
that income has escaped assessment
9. Honda Siel Power Products Ltd. v. Dy. CIT [2012] 20 taxmann.com 5
(SC)/[2012] 206 Taxman 33 (SC)(MAG.)/[2012] 340 ITR 64 (SC)/[2012] 247
CTR 316 (SC) (Copy enclosed)
where Hon'ble Supreme Court held that assessee having not pointed out during
assessment proceedings about expenses incurred relatable to tax free income
u/s 14A there was omission and failure on its part to disclose fully and truly
material facts and hence reopening of assessment was justified
10. Honda Siel Power Products Ltd. v. Dy. CIT [2011] 10 taxmann.com 2
(Delhi)/[2011] 197 Taxman 415 (Delhi)/[2012] 340 ITR 53 (Delhi)/[2012] 247
CTR 322 (Delhi) (Copy enclosed)
where Hon'ble Delhi High Court held that assessee having not pointed out during
assessment proceedings about expenses incurred relatable to tax free income
u/s 14A there was omission and failure on its part to disclose fully and truly
material facts and hence reopening of assessment was justified
11. New Delhi Television Ltd. Vs DCIT[2017] 84 taxmann.com 136 (Delhi) (Copy
enclosed)
where Hon'ble Delhi High Court held that proceedings under section 147, beyond
a period of 4 years can only be initiated if the Assessing Officer has reason to
believe that there has been escapement of income and this escapement is owing
to the lack of true and fair disclosure by the assessee. In this regard, it is
essential to understand the meaning of the phrase 'true and fair disclosure'. The
Court has considered the meaning of this phrase in Honda Siel Power Products
Ltd. v. Dy. CIT [2012] 340 ITR 53/[2011] 197 Taxman 415/10 taxmann.com 2
(Delhi) where the Court held that that the term 'failure' on the part of the
assessee is not restricted to the return and the columns of the return or the tax
audit report. There can be omission and failure on the part of the assessee to
disclose material facts fairly and truly during the course of the assessment
proceedings. [Para 42]
12. Sun Direct TV Pvt. Ltd. Vs ACIT [2018] 98 taxmann.com 201 (Madras) (Copy
enclosed)
6 ITA No. /Del/2018
where Hon'ble Madras High Court held that completed assessment could be
reopened within period of six years where there were some information with
department that share premium invested by foreign company was income of
assessee-company which had not been disclosed
13. A Sridevi Vs ITO (2018-TIOL-2246-HC-MAD-IT)(Copy enclosed)
where Hon'ble Madras High Court held that any fresh information filed before the
AO during the process of re-assessment u/s 147, which gives force to the belief
of the AO that certain income of the assessee had escaped assessment, can be
construed as tangible material for reopening the assessment once again. Since
alleged escapement of income exceeds One lakh rupees, reopening in such
case can be done within the period of six years from the end of relevant AY as
prescribed by section 149(1)(b), and thus, the same cannot be said to be barred
by limitation
14. South Asia FM Ltd. Vs ACIT [2018] 98 taxmann.com 200 (Madras) (Copy
enclosed)
where Hon'ble Madras High Court held that Reopening of assessment on basis
of information on record with revenue that assessee had received share capital
which according to CBI were revenue receipts camouflaged as capital receipts,
was justified. Reasons to be recorded by Assessing Officer for taking decision to
reopen escaped assessment does not mean that such reasons are to be
communicated along with notice itself; very notice will not provide a cause of
action for assessee to file writ petitions.
15. CIT Vs P.V.S. Beedies (P.) Ltd.[1999] 103 Taxman 294 (SC)/[1999] 237 ITR 13
(SC)/[1999] 155 CTR 538 (SC) (Copy enclosed)
where Hon'ble Supreme Court held that Audit party had merely pointed out a fact
which had been overlooked by Assessing Officer and this was not a case of
information on a question of law. Reopening of case under section 147(b) on
basis of factual information given by internal audit party was valid in law
16. PranawaLeafin (P.) Ltd. Vs DCIT [2013] 33 taxmann.com 454
(Bombay)/[2013] 215 Taxman 109 (Bombay)(MAG.)(Copy enclosed)
where Hon'ble Bombay High Court held that where there was failure on part of
assessee to make true and complete disclosure in respect of share transactions
entered into by it, in view of proviso to section 147, Assessing Officer was
justified in initiating reassessment proceedings even after expiry of four years
from end of relevant assessment year
17. CIT Vs KiranbhaiJamnadasSheth (HUF)[2013] 39 taxmann.com 116
(Gujarat)/[2014] 221 Taxman 19 (Gujarat)(MAG.) (Copy enclosed)
where Hon'ble Gujarat High Court held that Assessment without scrutiny would
mandate reassessment beyond 4 years even if assessee made true disclosure
18. Dishman Pharmaceuticals & Chemicals Ltd. Vs CIT[2012] 346 ITR 228 (Guj)
(Copy enclosed)
The assessee had shown an amount as loan from company. The assessee had
not disclosed that it had substantial interest in the company. Reassessment
7 ITA No. /Del/2018
proceedings after four years to assess amount as deemed dividend was held to
be valid.
Sd/-
(S S Rana)
Commissioner of Income Tax(DR)
G-Bench, ITAT, New Delhi.
6. The learned counsel for the assessee on the other hand stated that
on the peculiar facts of the case, none of the above decision would be
applicable, on the other hand the decision of Hon'ble Jurisdictional High
Court in the case of Unitech Limited vide W.P. (C) 12324/2015 would
be squarely applicable wherein their Lordships have clearly mentioned
that for complying with the Jurisdictional requirement under the first
proviso to section 147 of the Act, the reasons would have to show in what
manner the assessee had failed to make a full and true disclosure of all
the material facts necessary for assessment.
7. We have carefully considered the argument of both the sides and
perused the material placed before us. The copy of the reasons recorded
for reopening of the assessment is produced before us, which reads as
under:-
Sub: Communication of Reasons for issue of notice U/s 148 of I.T. Act.- Reg:
Please refer to your letter dated 25.04.2017 requesting reasons. As
requested the reasons are communicated to you, as under:-
In this case , an information is received from the Commissioner of Income
Tax (Exemption), Kolkata vide letter dated 08.08.2016 that a large number of
societies/trust, situated all over India have received huge donation from a Society
named M/s Society for Welfare of Handicapped Persons located at 27, Tagore
Avenue, Durgapur. This society has approval of section 35(l)(ii) of the income
Tax Act. It transpires that one chartered Accountant based in Kolkata by
fraudulent means opened a bank account in the name of this society in Axis
Bank Limited. Prince Anwar Shah Road, Kolkata branch vide A/c No.
255010100128834 which carried the transfer of several crores of rupees.
Contributions were received u/s 25(l)(ii) of the Income Tax Act, 1961from various
corporate/non - corporate entities in this fraudulent account and these amount
were either withdrawn in cash through two or more layers, which happed to be
societies/trusts or bogus donations were paid in lieu of cash to the societies
8 ITA No. /Del/2018
/trusts, who are beneficiaries to these transactions of bogus donation, which are
situated all over India. The mediators, who are generally Chartered Accountants,
get commission of 15-20% in cash out of the contributions received u/s 35(l)(ii) of
the I.T. Act and 2-5% out of the bogus donation paid. By way of this mediators
get benefit from both parties. This facts relating to fraudulent bank account
opened by the Chartered Account, are further confirmed from the letter filed by
the President of the society before various enforcement agencies namely:-
1. The Manager, Axis Bank, Kolkata
2. The Chairman, Axis Bank, Mumbai
3. Officer Incharge, Durgapur Police Station
4. FIR/complain in Durgapur Police Station
5. Letter of ACIT, Durgapur
The list of second/third layer Trust/Societies, through which money is
either withdrawn in cash or transacted for bogus donations alongwith their
respective bank account numbers are as follows:-
S. No. Name of the Name ofName of the Account
society the Bank Bank branch Numbers
1. M/s Society for Axis Bank Prince Anwar 255010100128834
Welfare of the Ltd. Shah Road
Handicapped branch,
Person Kolkata
2. M/s Society for Axis Bank New Alipore 909010033440278
Rural & Ltd. branch,
Development Kolkata
3. M/s Community Axis Bank One Town 911010041883071
Rural Orient Ltd. branch,
Service Society Vijaywada
The list of the beneficiary trust / societies who received donation in lieu of
cash is as per annexure-D, which speaks that the assessee society M/s Geeta
Education Society, has received donation of Rs.50,00,000/- on 17.03.2010 and
thereafter oil 19.03.2010 paid Rs.50,00,000/-. The name of the assessee finds
place in the bank statement of Axis Bank Limited. The assessee has taken the
amount of Rs.50,00,000/- from M/s Society for Welfare of the Handicapped
Person, which is in lieu of cash because before the clearing entry of cheque No.
228925 of Rs.50,00,000/- on 17.03.2010, there are two cash deposit of
Rs.25,00,000/- and 25,00,000/- in the bank account on 17.03.2010. Thus, this
amount of Rs.50,00,000/-is unexplained amount. In this case, assessee filed
return showing NIL income on 11.11.2010 and assessment was completed u/s
143(3) on 27.02.2013 on NIL income. The assessee furnished the list of donation
during assessment proceedings, but no name of donor M/s Society for Welfare of
Handicapped Persons located at 27 Tagore Avenue, Durgapur is mentioned.
9 ITA No. /Del/2018
Keeping in view the above facts, the above amount of Rs.50,00,000/-
being amount of donation in lieu of cash is assessable in the hands of assessee.
I have therefore reason to believe that the income of Rs.50,00,000/- has escaped
the assessment within the meaning of section 147 of the Income Tax Act, 1961
and is chargeable to tax for the A.Y 2010-11."
8. We find that the identical issue is considered by the Hon'ble
Jurisdictional High Court in the case of Unitech Limited vs. DCIT in W.P.
(C) 12324/2015 wherein their Lordships of Jurisdictional High Court
vide order dated 24.7.2017quashed the notice under section 148. Their
Lordships followed the decision of the same court i.e. Hon'ble Delhi High
Court in the case of HCL Technologies Limited vs. DCIT in W.P. (C)
8164/2010 order dated 20.7.2017 wherein their Lordships held as
under:-
"16. The AO has not made the effort of disclosing, in the reasons, what
according to him constituted the failure by the Assessee to make a full and true
disclosure. A mere reproduction of the language of the provision will not suffice.
Also, although making such an averment either in the order rejecting the
objections of the Assessee or subsequently in the counter-affidavit in the answer
to a writ petition will not satisfy the requirement of the law. The reasons will have
to speak for themselves. For complying with the jurisdictional requirement under
the first proviso to Section 14/ of the Act, the reasons would have to show in what
manner the Assessee had failed to make a full and true disclosure of all the
material facts necessary for the assessment. The failure to do so would not be a
mere irregularity. It would render the reopening of the assessment after four
years vulnerable to invalidation. "(emphasis supplied)
Thus wherever first proviso to section 147 is applicable the reasons
recorded should show in what manner the assessee had failed to make a
full and true disclosure of all material facts necessary for the
assessment. The failure to do so would not be more irregularity but it
would render the reopening of assessment after four year invalid.
9. We have already reproduced above the reasons recorded for
reopening of assessment. In the reasons recorded, the Assessing Officer
nowhere mentioned that which material facts assessee failed to disclose.
10 ITA No. /Del/2018
There is no finding by the Assessing Officer that there is any failure on
the part of the assessee to make a full and true disclosure of any
material fact and therefore on these fact, the Hon'ble Jurisdictional High
Court in the case of HCL Technologies Limited (supra) as well as Unitech
Limited (supra) would be squarely applicable.
10. Even otherwise an allegation in the reasons recorded is that there
was a society at Kolkata named as M/s Society for Welfare of
Handicapped Person. The assessee paid the cash of Rs. 50,00,000/- to
the said society and got the cheque of donation of Rs. 50,00,000/-. Thus
the assessee utilized its undisclosed income to get the accommodation
entry in the form of donation of Rs. 50,00,000/-. However, at the time of
conclusion of the reasons recorded the Assessing Officer himself has
mentioned that the assessee has furnished the list of donation during
assessment proceedings but no donor from M/s Society Welfare of
Handicapped Person is mentioned. Thus, when the assessee has not
claimed to have received any donation from the said society the question
of making any cash payment from undisclosed sources by the assessee
could not arise. Therefore, we are of the opinion that there was no
justifiable reason for arriving at the finding by the Assessing Officer that
there was undisclosed income of the assessee which was utilized for
obtaining Donation from M/s Society for Welfare of Handicapped Person.
11. After considering the above facts and also relying upon the decision
of Hon'ble Jurisdictional High Court in the case of Unitech Limited and
also in HCL Technologies Limited (supra), we quash the notice issued for
reopening of assessment under section 148.
12. Once the notice for reopening of assessment u/s 148 is quashed,
the assessment order passed in pursuance to such notice cannot survive
the same is also quashed. Since the assessment order itself has been
11 ITA No. /Del/2018
quashed, the other ground raised by the assessee which is against the
addition of Rs. 50,00,000/- made by the Assessing Officer does not
require any adjudication.
13. In the result, assessee's appeal is allowed.
Order pronounced in the Open Court on 22nd May, 2019.
Sd/-
Sd/- (G. D. AGRAWAL)
(SUCHITRA KAMBLE) VICE PRESIDENT
JUDICIAL MEMBER
Dated: 22/05/2019
SH
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
Date
1. Draft dictated on 14.5.2019 PS
2. Draft placed before author PS
3. Draft proposed & placed before the JM/AM
second member
4. Draft discussed/approved by Second JM/AM
Member.
5. Approved Draft comes to the Sr.PS/PS PS/PS
6. Kept for pronouncement on PS
7. File sent to the Bench Clerk PS
8. Date on which file goes to the AR
9. Date on which file goes to the Head
Clerk.
10. Date of dispatch of Order.
11. Date of uploading 22.5.2019
12 ITA No. /Del/2018
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