Income Tax Appellate Tribunal - Delhi
Ime International Pvt. Ltd., Delhi vs Assessee
ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "C" NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. No. 3483/Del/2010 A.Y. : 2001-02 Income Tax Officer, vs. M/s IME International Pvt. Ltd., Ward 11(3), Room No. 374-A, 211, New Delhi House, C.R. Building, I.P. Estate, 27, Barakhamba Road, New Delhi New Delhi - 110 001 (PAN: AAAC18126Q) (Appellant ) (Respondent ) C.O. NO. 298/Del/2010 (IN ITA No. 3483/Del/2010) A.Y. : 2001-02 M/s IME International Pvt. Ltd., vs. Income Tax Officer, 211, New Delhi House, Ward 11(3), Room No. 374-A, 27, Barakhamba Road, C.R. Building, I.P. Estate, New Delhi - 110 001 New Delhi (PAN: AAAC18126Q) Assessee by : Sh. Ranjan Chopra, CA Department by : Smt. Mona Mohanty, Sr. D.R. PER SHAMIM YAHYA: AM This appeal by the revenue and cross objection by the assessee emanate out of order of Ld. Commissioner of Income Tax (Appeals) dated 10.5.2010 pertaining to assessment year 2001-02.
2. In the C.O. assessee has agitated against the assumption of jurisdiction, hence we take up the C.O. first.
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3. The issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in confirming the Assessing Officer 's action of framing the assessment u/s 147 of the IT Act. More so, when necessary ingredients of that section are missing.
4. The assessee in this case filed return of income on 30.10.2001 declaring a loss of ` 15381/-. The scrutiny u/s 143(3) was completed on 27.11.2003 on Nil income. Thereafter the Assessing Officer noted that information in that case has been received from the Investigation Wing of the Department that the assessee company has received accommodation entries of ` 4 lacs vide cheque no. 916372 and 916373 dated 28.3.2001 amounting to ` 2 lacs from each M/s Maa Shakumbhari Stone Crushers Pvt. Ltd. in its account with Karur Vaisya Bank, Karol Bagh, New Delhi. Thereafter, Assessing Officer noted that notice u/s 148 was issued after duly recorded the reasons in the case and after taking approval of Commissioner of Income Tax, Delhi-IV, New Delhi u/s 151 of the IT Act on 29.3.2007. Thereafter the Assessing Officer proceeded to consider the merits of the case and held that a sum of ` 16 lacs received from companies mentioned therein on account of share capital and share premium was bogus and hence added as income of the assessee under section 68 of the IT Act. 2
ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02
5. Before the Ld. Commissioner of Income Tax (Appeals) assessee at the threshold agitated against the jurisdiction of the re-assessment. It was further submitted that reassessment proceedings and the reassessment order is liable to be quashed on the ground that no reason to believe within the meaning of section 147/148 exist for initiating the proceedings under the said provision of the Act. It was further submitted that on the basis of information / direction of the Investigation Wing, the Assessing Officer initiated the proceedings u/s 148 of the IT Act which is clearly against the spirit of the section. Hence it is a clear case of change of opinion which cannot form the basis of reopening of completed assessment. The assessee in this regard further referred to the CBDT Circular no. 549 dated 31.10.1989 which also came up for consideration before the Full Bench of the Hon'ble Delhi High court in the case of C.I.T. vs. Kelvinator India Ltd. reported in 256 ITR 1, wherein it was held on page 18 of the report that the said Circular having been issued u/s 119 is binding on the revenue. Hence assessee submitted that change of opinion cannot form the basis of reopening of completed assessment. It was further submitted that as per the said circular what is the requirement for law for reopening of completed assessment is that reasons to believe of the Assessing Officer that income has escaped assessment based on 3 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 material on record which has lead to the formation of belief and "not opinion of the Assessing Officer ." In this case the Assessing Officer had no material before him. on the basis of which he could form the belief that income has escaped assessment in his opinion. It was further submitted that assessee for reopening of completed assessment, opinion of the Assessing Officer has no meaning as held by the Delhi High Court in the case of Kelvinator India Ltd. (supra). Assessee further made submissions on the merits of the case also. 5.1 Considering the above Ld. Commissioner of Income Tax (Appeals) held that there is no dispute that Assessing Officer acted on the basis of the specific information as such there was valid ground for the Assessing Officer to act on the same. He further noted that Assessing Officer had obtained the approval of ACIT, Range-11, New Delhi and as such jurisdiction was assumed after careful consideration of the facts and material on record. He held that in his opinion there was a prima- facie case to assume the jurisdiction u/s 148. The reopening was not merely on the basis of direction of any higher authorities but on the basis of information to the Assessing Officer for further action. As per law Ld. Commissioner of Income Tax (Appeals) concluded that reopening was after application of mind, as such there was adequate material assuming jurisdiction u/s 148. Hence he held that the legal 4 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 ground of the assessee is dismissed. However, on merits of the case, he decided the issue in favour of the assessee by holding that he was inclined to agree with the arguments and evidences provided by the assessee to substantiate that the share capital money and loan received by it were genuine transactions and the same were accommodation entries. Accordingly, it is directed that the addition of ` 16,00,000/- may be deleted.
5.2 Against this order both the revenue and assessee are in appeal before us. While the revenue has appealed against the decision of the Ld. Commissioner of Income Tax (Appeals) on the merits of the case the assessee in the cross objection has urged that Ld. Commissioner of Income Tax (Appeals) has erred in confirming the Assessing Officer 's action of framing the assessment u/s 147 of the IT Act. 5.3 On the issue of jurisdiction, we have heard both the counsels and perused the records. In this case the reasons recorded as supplied to the assessee for reopening the assessment u/s 147 dated 16.7.2007 reads as under:-
"The case was reopened on the basis of information received from the Directorate of Investigation Wing, Delhi that your company has received accommodation entries of ` 4 lacs vide 5 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 cheque no. 916372 and 916373 dated 28.3.2001 amoutning to ` 2 lacs each from M/s Maa Shakumbhari Stone Crushers Pvt. Ltd. in its bank account with Karur Vaisya Bank, Karol Bagh, New Delhi in the year concerned."
5.4 Ld. counsel of the assessee in this regard reiterated the submissions referred before the Assessing Officer and the Ld. Commissioner of Income Tax (Appeals). He further placed reliance upon the decision of the Hon'ble Jurisdictional High Court in the case of Haryana Acrylic Manufacturing Co. vs. C.I.T. and Anr. : 308 ITR 38. Ld. Departmental Representative on the other hand supported the orders of authorities below.
5.5 We have carefully considered the submissions. It will be apt to refer to the provision of section 147 here.
The provisions of section 147 read as under:-
"If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this 6 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to a the relevant assessment year):
Provided that where an assessment under sub-section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four year from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
5.6 In the case of Haryana Acrylic Manufacturer Co. cited above assessee filed its income declaring NIL income for the assessment year 1998-99. The assessment u/s 143(3) was completed at NIL income. Notice u/s 148 issued beyond 4 years from the end of the assessment year 1998-99 stating that the assessee had taken accommodation entries from one of the companies. Assessee had submitted before 7 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 the Assessing Officer that assessment was completed u/s 143(3) and in the course of assessment proceedings of the relevant documents, share application money, confirmation from the appellant and bank statement were submitted before the Assessing Officer. In these facts, Hon'ble Jurisdictional High Court held that "action under section 147 of the Income Tax Act, 1961, can be taken after the expiry of four years from the end of the relevant assessment year only if any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee (a) to make a return under section 139 or in response to a notice under sub-section (1) of section 142 or section 148, or (ii) to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The proviso to section 147 carved out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 would not be material. Once the exception carved out by the proviso came into0 play, the case would fall outside the ambit of section 147. However, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the conditions that (a) an assessment under sub-section (3) of section 143 of this section has been made for the relevant assessment year, and 8 ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02
(b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee : (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148, or
(ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year, are satisfied. Merely having reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the period of four years. The escapement of income must also be occasioned by the failure on the part of the assessee to disclose material facts fully and truly. This is a necessary conditions for overcoming the bar set by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken." 5.7 In the present case before us assessee had filed the return of income for A.Y. 2001-02 on 30.10.02. The assessment u/s 143(3) was completed on 27.11.2003. Thereafter notice u/s 148 was issued on 29.3.2007. Hence, we find that notice u/s 148 was issued after the expiry of the 4 years from the end of the relevant assessment year. 9
ITA NO. 3483/DEL/2010 & CO NO. 298/DEL/2010 A.Y. 2001-02 5.8 Now we find that in this case as per the reasons recorded, on the basis of information /direction received from the Investigation Wing, Assessing Officer initiated the proceedings u/s 148. Thus clearly there was no statement by the Assessing Officer in the reasons recorded that it was his own opinion that there was escapement of income due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment. In the present case Assessing Officer has not noted that re-assessment was occasioned due to the failure of assessee to furnish fully and truly any material fact. The reopening was solely based upon information/direction of the Investigation Wing. Under these circumstances, in our considered opinion on the anvil of the Jurisdictional High Court decision cited above the reassessment cannot be sustained as original assessment was done u/s 143(3) and 4 years thereafter reopening was done on the basis of information / direction received from the Investigation Wing of the Department. Assessing Officer not having himself formed a belief that there is escapement of income in the reasons recorded, the reopening cannot be justified. Accordingly, in the background of the aforesaid discussion and precedent, we allow the Cross Objection filed by the assessee and hold that the assessment was devoid of jurisdiction.
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6. Since we have already quashed the assessment on jurisdiction, the adjudication on merits of the case are academic. Hence the appeal by the revenue is treated as infructuous.
7. In the result, the cross objection filed by the assessee is allowed. and appeal filed by the revenue is dismissed being infructuous.
Order pronounced in the open court on 30/09/2010.
Sd/- Sd/-
[C.L. SETHI]
SETHI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 30/09/2010
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches
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