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Income Tax Appellate Tribunal - Agra

Smt. Sarla Devi Nigam, Agra vs I.T.O.-1(1), Agra on 23 May, 2018

            IN THE INCOME TAX APPELLATE TRIBUNAL
                    AGRA (SMC) BENCH: AGRA

             BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER

                            I.T.A No. 250/Agra/2016
                         (ASSESSMENT YEAR-1999-00)

   Smt. Sarla Devi Nigam,                 Vs.. ITO-1(1),
   Upadhyaya Complex, 12, Shaheed              Agra.
   Nagar, Agra.
   PAN No.ACKPN3834F
   (Assessee)                                  (Revenue)


                 Assessee by       Shri Deependra Mohan, AR.
                 Revenue by        Shri Waseem Arshad, Sr.DR.


                    Date of Hearing                14.05.2018
                      Date of Pronouncement        23.05.2018
                                      ORDER

This is assessee's appeal for assessment year 1999-00, taking the following grounds:

"01. That the reassessment proceedings are arbitrary, wrong, illegal, bad on facts and contrary to the provisions of law and the assessee denies his liability to be assessed u/s 143(3) of the Income Tax Act, 1961.

02. That the reassessment proceedings have been initiated on the basis of borrowed belief and additions made without I.T.A No. 250/Agra/2016 2 confronting the assessee with any adverse material in possession of the department against the assessee.

03. That the Ld. Commissioner of Income Tax (Appeals)-I, Agra has erred in law and on facts in not considering the fact that the assessment completed u/s 143(3) of the Income Tax Act, 1961 is invalid( without issuing notice u/s. 143(2) of the Income Tax Act, 1961.

04. That the Learned Commissioner of Income Tax (Appeals)

- 1, Agra has erred in law and on facts in confirming addition of Rs.2,00,000/- made u/s 68 of the Income Tax Act, 1961 on account of alleged gift taken from M/S Garg Enterprises Trust when neither such amount was taken from the aforementioned person nor such amount was found credited in the books of accounts of the assessee."

2. The following Additional ground has also been taken:

"That there was no independent application of mind by the Learned Assessing Officer to tangible material which formed basis of reasons to believe that income had escaped assessment, thus the reassessment proceedings are liable to be quashed."

3. The additional ground comprises a legal issue which goes to the root of the matter. It does not require any fresh evidence/material to be gone into. Accordingly, it is admitted.

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4. Apropos the additional ground, the AO recorded the following reasons to believe escapement of income:

"It has gathered that the above mentioned assessee has taken gift from the following party during the financial year:

M/S Garg Enterprises Trust of Rs.2,00,000/- on 23-2-99. An Information has been received from the Income Tax Officer-4(l), Agra vide his letter F.No.I.T.O 4(l)/Agra/148/2005-06 dated 22.03,2006 which has been forwarded by the Joint Commissioner of Income Tax. Range-1, Agra vide his letter F.No. LTCG/J.C.I.T/R- l/AGRA/05-06 dated 23.03.2006. On enquiry it has been found that the transaction of receipt of gift by the trust and gift made by the trust to unknown persons are bogus and ungenuineness. The trust created arrange gift for donees and received certain commission from donees. The trust do not conducted any business but receipt of large money in the hand of trust by the way of gift business profit, donation etc. The trust has received gift in cash from other trust and other trust gives gifts to other persons. There is no relationship between doner and donees. Trust do not conducted any business activities and are only lender. Hence, the trust are given gift to doner is bogus gift and arranged gift.

Since the gift of Rs,2,00,000/- as per details given above have been found as bogus the entire amount of gift claimed to have been received by the assessee from the above party is his own income from undisclosed sources. Hence I have reason to believe that the above income of Rs,2,00,000 has escaped assessment within the meaning of sec.147 of the I.T. Act 1961."

5. The ld. CIT(A) decided the assessee's challenge to the reopening of the completed assessment, holding as follows:

"6. Grounds no. 3 to 6 relate to the reopening of the assessment. Apart from challenging the reopening of the assessment, assessee has also contended that the reasons for issue of notice under section 148 have not been recorded before issue of such notice. Assessing officer has reopened the case under section 148 of the income tax act, as an information was received from another officer ITO Ward 4(1) that assessee has taken a gift of Rs. 2,00,000/- from M/s Garg Enterprises Trust. It was found that this entry belonged to a trust owned by Sh. DK Agarwal. Specific information was received that an amount of Rs. 2,00,000/- has been received by the assesses on 23.02.1999 in her bank account. It was also informed that these are managed entries with a view to form capital. In view of this specific information, AO recorded his reasons for reopening the case, as it was I.T.A No. 250/Agra/2016 5 noticed that amount of Rs. 2,00,000/- was received by the assessee. In view of this specific information received regarding deposit in the bank account, AO is correct in forming a view that the income has escaped assessment. Hence the reopening of the assessment is held valid. This ground of the assessee is therefore dismissed."

6. The ld. Counsel for the assessee has contended that in the reasons recorded for the year under consideration, the nature of the transactions allegedly entered into by the assessee have not been specified and that the reasons were recorded without any application of mind, merely on the basis of information received from the Investigation Wing of the Department, i.e., just on borrowed satisfaction. Reliance has been place on 'Principal CIT vs. Meenakshi Overseas (P) Ltd.', 154 DTR 100 (Del), 'Mayank Mittal vs. ITO', ITA No.276/Agra/2016, A.Y. 2004-05, order dated 26.04.2018 (ITAT Agra).

7. The learned DR, on the other hand, has stated that the information received by the AO from the Investigation Wing of the Department was new and fresh evidence, on which, the AO could have drawn an inference and could have formed a prima facie opinion whether or not to initiate reassessment proceedings. Reliance has been placed on "CIT vs. India Terminal Connector System Ltd.", order dated 21.03.2012, passed by the Hon'ble Delhi High Court in ITA No.643/2011 (copy filed). Reliance has also been placed on the following case laws for the proposition I.T.A No. 250/Agra/2016 6 that information received from the Investigation Wing of the Department is information on the basis of which, the AO can initiate reassessment proceedings:

1. 'Mitsui and Company India Pvt. Vs. ITO and Another', WP(C) 1121/2012 & CM No.2447/2012 (Delhi High Court).

2. 'Brij Mohan Agarwal vs. Asstt. Commissioner of Income Tax', 268 ITR 400 (Allahabad High Court).

3. 'Hosang R. Debra vs. ITO-1(2)', ITA No.331/Agr/2012, ITAT, Agra.

4. 'CIT vs. Active Traders (P.) Ltd.', 214 ITR 583 (Calcutta High Court).

5. 'M/s Pragati Financial Management Pvt. Ltd. Vs. The CIT-II', ITA 178 of 2016, GA 997 of 2016 (Calcutta High Court).

6. 'Anil Kumar Singhal vs. ITO', IT Appeal Nos. 408 & 413/Agr/2012, ITAT Agra.

7. 'Acorus Unitech Wireless Pvt. Ltd. Vs. ACIT', Judgment dated 28.02.2014, passed by the Hon'ble Delhi High Court in WP (C) 1957/2013.

8. The question is as to whether or not in the facts and circumstances of the present case, the reasons for belief of escapement of income were recorded by the I.T.A No. 250/Agra/2016 7 AO without application of mind, merely on the information received from the Investigation Wing of the Department.

9. As per the reasons recorded, it has been found that 'the transaction of receipt of gift by the trust and gift made by the trust to unknown persons are bogus and ungenuineness. The trust created arrange gift for donees and received certain commission from donees. The trust do not conducted any business but receipt of large money in the hand of trust by the way of gift business profit, donation etc. The trust has received gift in cash from other trust end other trust gives gifts to other persons. There is no relationship between doner and donees. Trust do not conducted any business activities and are only lender. Hence, the trust are given gift to doner is bogus gift and arranged gift'.

10. Heard. In 'Meenakshi Overseas' (supra), under similar facts and circumstances, relying on 'Signature Hotels (P) Ltd. Vs. ITO', 338 ITR 51 (Del), it has been held that the reasons must be self-evident and they must speak for themselves; that the tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons; and that where the link between the information made available to the AO and the formation of belief is absent, the reasons are not sustainable. It has further been held that where there is no independent application of mind by the AO to the I.T.A No. 250/Agra/2016 8 tangible material which forms the basis of the reasons and the reasons fail to demonstrate the link between the tangible material and the formation of the reasons to believe escapement of income, the reasons are unsustainable.

11. In the present case, like in 'Meenakshi Overseas' (supra), the link between the information available with the AO and the formation of belief by the AO is missing. No independent application of mind by the AO to the material forming the basis of the reasons recorded is evincible from the reasons. The AO, in the reasons, has just stated the information received and his conclusion about the alleged escapement of income. As to what the AO did with the information made available to him, is not discernible from the reasons. As such, 'Meenakshi Overseas' (supra), is squarely applicable.

12. 'Meenakshi Overseas' (supra) is by the Hon'ble Delhi High Court, whereas the decisions cited by the ld. DR are from other different High Courts. Of all these, 'Brij Mohan Agarwal' (supra) is by the Hon'ble Allahabad High Court, i.e., the jurisdictional High Court qua the assessee. However, that decision is essentially fact-specific. It does not lay down any proposition of law, as such. The Civil Writ Petition filed by the assessee was decided by the Hon'ble High Court on merits, having taken into consideration the investigation report of the Investigation Wing of the Department, as conveyed to the AO, the assessee's record, the Department's I.T.A No. 250/Agra/2016 9 counter-affidavit (alongwith its annexures) to the Writ Petition and the rejoinder affidavit filed by the assessee. It was held that from the findings of the Investigation Wing and as per the record, the AO of the assessee (Respondent No.1 in the Writ Petition) had reason to believe that the assessee had diverted and, thus, concealed his income by disclosing it to be sale proceeds of shares, which was not correct, as no real transaction of shares had ever taken place. It was held that in view of the investigation made by the Investigation Wing, relevant and very material facts had come before the AO that the assessee was concealing his income by indulging in bogus transactions. It was, accordingly, held that the belief of the AO was an honest and reasonable belief based on the material which he had received from the Investigation Wing. The Hon'ble High Court refused to accept the assessee's contention that it was a case of a mere change of opinion. The Writ Petition was dismissed as having no merit.

13. In the case at hand, however, the issue raised is altogether different. Here, the challenge of the assessee is that since in the reasons recorded, the AO has not spelt out as to what he did with the information received by him from the Investigation Wing, the reasons are hit by the vice of non-application of mind to the information so received.

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14. From the above, it is evident that there is no parity whatsoever between 'Brij Mohan Agarwal' (supra) and the present case. Accordingly, Brij Mohan Agarwal' (supra) is of no help to the Department.

15. 'Hosang R. Debra vs. ITO' (supra) by the coordinate Bench is of no relevance. In that case, the ground concerning reopening was withdrawn.

16. Reliance by the Department on 'India Terminal Connector System Ltd.' (supra), it is seen, is misplaced. The question before their Lordships in that case was as to whether the Tribunal was right in setting aside the reassessment proceedings on the ground that the AO had failed to prove and establish that the assessee had been unable to disclose fully and truly all material facts at the time of original assessment. The Tribunal had quashed the re-assessment proceedings on the basis that the original assessment was completed u/s. 143(3) of the IT Act and the share application money was duly reflected.

17. There is, in fact, no dispute, as none can be, to the proposition that information received from the Investigation Wing of the Department is information on the basis of which, the AO can initiate reassessment proceedings. The issue actually is as to whether the AO applied his mind to the information received and if the reasons recorded evince such application of mind by showing a direct nexus or live link between the information received and the reasons recorded. I.T.A No. 250/Agra/2016 11

18. Now, in a situation like the present one, as is trite, where there is a cleavage of opinion between different High Courts on an issue and none of the decisions has been rendered by the jurisdictional High Court, the view in favour of the assessee needs to be followed. Hence, in deferential keeping with 'Meenakshi Overseas' (supra), the reasons recorded by the AO to form belief of escapement of income are found to be no reasons in the eye of the law. They are held to be null and void and are cancelled. Accordingly, the reassessment proceedings, culminating in the impugned order, are also cancelled. Nothing further survives for adjudication.

19. In the result, the appeal is allowed.

Order pronounced in the open court on 23/05/2018.

Sd/-

(A.D. JAIN) JUDICIAL MEMBER Dated 23/05/2018 *AKV* Copy forwarded to:

1. Appellant

2. Respondent

3. CIT

4. CIT(Appeals)

5. DR: ITAT ASSISTANT REGISTRAR