Income Tax Appellate Tribunal - Delhi
Viniyas Finance & Investment Pvt. ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
[ DELHI BENCH "H" DELHI ]
BEFORE SHRI A. D. JAIN, JM AND SHRI K. D. RANJAN, AM
I. T. Appeal No. 4652 (Del) of 2009.
Assessment year : 2002-03.
The Income-tax Officer, M/s. Viniyas Finance & Investment Pvt. Ltd.,
W a r d : 17 (3), Vs. 810-Arunachal Bhawan, Barakhamba Road,
N E W D E L H I. Connaught Place, N E W D E L H I
P A N / G I R No. AAA CV 1597 A.
AND
C. O. No. 29 (Del) of 2010.
[ in I. T. Appeal No. 4652 (Del) of 2009 ].
Assessment year : 2002-03.
M/s. Viniyas Finance & Investment Pvt. Ltd., The Income-tax Officer,
810-Arunachal Bhawan, Barakhamba Road, Vs. W a r d : 17 (3),
Connaught Place, N E W D E L H I N E W D E L H I.
P A N / G I R No. AAA CV 1597 A.
( Appellants ) ( Respondents )
Assessee by : Shri Pratap Gupta, C. A.;
Department by : Dr. B. R. R. Kumar, Sr. D. R.;
O R D E R.
PER K. D. RANJAN, AM :
The appeal by the Revenue and the Cross Objection by the assessee for assessment year 2002-03 arise out of the order of the ld. CIT (Appeals)-XIX, New Delhi. These were heard together and are being disposed of, for the sake of convenience, by this consolidated order.
2I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
2. The ground of appeal raised by the Revenue reads as follows:-
" On the facts and in the circumstances of the case, the ld. CIT (Appeals) has erred in deleting an addition of Rs.77,00,000/- ignoring the fact that the assessee has not declared any capital / loss on the sale transaction stated to be the sale of investment. "
3. The grounds of appeal raised by the assessee in the cross objection read as follows :-
" 1. Ld. CIT (Appeals) is not justified in law and facts and circumstances of the case in confirming the action of assessing officer in initiation of proceedings under section 147 of the I. T. Act, in view of proviso of section 147 of the I. T. Act under the circumstances when original assessment was completed under section 143(3) of the I. T. Act and proceedings under section 147 was initiated after the four years from the end of the relevant assessment year;
2. Ld. CIT (Appeals) is not justified in law and facts and circumstances of the case in confirming the proceedings initiated under section 147 of the I. T. Act without complying with the provisions of section 147 to 151 of I. T. Act under the circumstances when notice under section 148 is issued after 4 years from the end of the relevant assessment year. "
4. We first take up the Cross Objection filed by the assessee. The only issue for consideration relates to reopening of assessment under section 147 of the Income-tax Act, 1961 [hereinafter referred to as the Act]. The facts of the case stated in brief are that the original assessment under section 143(3) was made on 22/12/2004. The assessing officer received information from DIT [Investigation-I] New Delhi, vide letter dated 5/02/2007 that the assessee company had received a sum of Rs.77,00,000/- from various companies. The assessing officer on the basis of information received from Investigation Wing in reasons stated that the entries are in the nature of accommodation entries and in reality it was assessee's own unaccounted money which had been shown in the books of accounts as a receipt from several companies. The assessing officer after obtaining the approval from the ld. CIT issued notice under section 148 of the Act.
4.1 During the course of assessment proceedings, it was pleaded by the assessee that in reasons recorded the assessing officer had not recorded satisfaction as required by proviso to 3 I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
section 147 read with section 148(2) that the income chargeable to tax had escaped assessment on account of failure on the part of the assessee to disclosed fully and truly all material facts necessary for his assessment. Therefore, the condition precedent necessary for invoking jurisdiction under section 147 was missing and the issuance of notice was wholly without jurisdiction. The assessee placed reliance on several decisions. The assessing officer, however, rejected the contention of the assessee on the ground that prima facie it was a case of escapement of income.
5. On appeal it was submitted that there was no whisper of a word in the reasons recorded for reopening of assessment that the assessee had failed to disclose fully and truly all the material facts necessary for his assessment at the time of original assessment proceedings. The information was received by the assessing officer on 5/02/2007 much before the end of four years. However, the AO initiated proceedings on 25/06/2007. The assessee had disclosed fully and truly all material facts necessary for assessment and, therefore, the notice issued after expiry of four years from the end of relevant assessment year is barred by limitation. Therefore, the reassessment proceedings so completed should be annulled. The ld. CIT (Appeals), however, observed that there was no merit in the arguments of the ld. AR of the assessee and the case laws cited were not applicable to the facts of the case. There was information with regard to escapement of income in accommodation entries. After recording proper reasons the assessment was reopened. At the time of reopening the assessing officer is required to form a reasonable belief that there was concealment of income. The assessing officer need not prove that there was escapement of income at that point of time. The adequacy or sufficiency of reasons could not be gone into at the time of reopening of assessment. The ld. CIT (Appeals) relying on various decisions held that there was a specific information with the Department that entities/companies which were mentioned in the reasons recorded for reopening were involved in accommodation entries. These facts came to the notice of the assessing officer after completing the assessment under section 143(3) of the Act for the first time. The ld. CIT (Appeals), therefore, upheld the reopening of assessment.
4I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
6.1 Before us the ld. AR of the assessee submitted that original assessment under section 143(3) of the Act was made on 22/12/2004. Notice under section 148 was served on the assessee on 30th July, 2007. Therefore, the notice under section 148 was served on the assessee after expiry of four years. Hence assessee's case falls under proviso to section 147 of the Act. For initiation of proceedings under proviso to section 147, the assessing officer in the reasons should have recorded that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. No such reasoning/satisfaction had been recorded and, therefore, reopening of assessment is bad in law. He placed reliance on the decisions of Hon'ble Delhi High Court in the cases of Wel Inter Trade P. Ltd. & Another [formerly Wel Inter Trade Ltd.] Vs. ITO 308 ITR 22 (Del.) & Haryana Acrylic Manufacturing Company Vs. CIT & Another 308 ITR 38 (Del).
6.2 On the other hand, the ld. Sr. DR submitted that there was specific information received by the AO from DIT [Inv.] that the assessee was one of the beneficiaries of the accommodation entries. Therefore, the issue is covered by the decision of Hon'ble Delhi High Court in the case of AGR Investment Ltd. Vs. Addl. CIT [2011] 333 ITR 146 (Del.). He also placed reliance on the decision of Hon'ble Delhi High Court in the case of Dalmia Pvt. Ltd. Vs. CIT in Writ Petition [Civil] No. 6205 of 2010 dated 26th September, 2011. In view of the decisions of Hon'ble Delhi High Court, the ld. Sr. DR submitted that the decision of Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Company Vs. CIT & Another (supra) is not applicable to the facts of the assessee's case.
7. We have heard both the parties and gone through the material available on record. There is no dispute about the fact that the notice under section 148 of the Act has been issued after expiry of four years from the end of assessment year in which income was first assessable. Therefore, the assessee's case is covered by proviso to section 147 of the Act. In the reasons recorded by the assessing officer on the basis of specific information received from DIT [Investigation], New Delhi, there is no whisper of a word that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Hon'ble Delhi 5 I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
High Court in the case of Wel Inter Trade P. Ltd. & Another Vs. ITO (supra) has held that where provisions of section 147 are being invoked after the expiry of four years from the end of the relevant assessment year, the assessing officer in addition to having reason to believe that any income chargeable to tax has escaped assessment, must also state as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under section 139(1) etc., or by reason or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In this case there was no issue for making the return under section 139 of the Act. The issue involved was in relation to second portion of the proviso, which relates to failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In so far as this pre-condition was concerned, there was not a whisper of it in the reasons recorded by the assessing officer. Hon'ble Delhi High Court referred to the decision of Hon'ble Punjab & Haryana High Court in the case of Duli Chand Singhania Vs. ACIT 269 ITR 192 (P & H). In this decision the High Court faced with the similar situation. The court noted that there was not even a whisper of allegation that the escapement of income had occurred by the reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The court observed that in the absence of this finding, which is the sine qua non for assuming jurisdiction under section 147 of the Act in a case falling under the proviso to section 147, made the action of the assessing officer wholly without jurisdiction. Hon'ble Delhi High Court agreed with the observations of the Hon'ble Punjab & Haryana High Court and held that in the absence of any such allegation that escapement of income occurred by reason or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, the invocation of section 147 and issuance of notice under section 148 and subsequent completion of assessment was without jurisdiction.
8. In the case of Haryana Acrylic Manufacturing Company Vs. CIT (supra) the reasons recorded did not indicate the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for assessment year 1998-99. While in the reasons supplied to the petitioner there was no mention of allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form 6 I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
to the counter affidavit there was a specific allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from the companies to the extent of Rs. 5 lakhs. In view of these facts Hon'ble Delhi High Court has held that one of the conditions precedent for removing the bar against taking action after the said four years period remained unfulfilled. Consequently, the notice under section 148 based on the recorded reasons supplied to the petitioner, as well as the consequent order were without jurisdiction as no action under section 147 of the Act could be taken beyond the four year period.
9. In the case of Dalmia Pvt. Ltd. (supra) the ITO has recorded in the reasons that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Therefore, the facts of the present case are distinguishable from the facts of the case of Dalmia Pvt. Ltd. (supra). In the case of AGR Investments Ltd. Vs. Addl. CIT (supra) the assessment was reopened after expiry of period of four years on specific information and after application of mind. Hon'ble Delhi High Court upheld the reopening of assessment on the ground that there was due application of mind by the assessing officer. We also find that in this case there was no discussion about recoding of satisfaction in the reasons recorded that there was failure on the part of the assessee to disclose all material facts necessary for assessment. Though decision of Hon'ble Delhi High Court in the case of AGR Investments Ltd. Vs. Addl. CIT (supra) has been rendered in 2011 and decisions in Wel Inter Trade P. Ltd. & Another Vs. ITO (supra) & Haryana Acrylic Manufacturing Company Vs. CIT (supra) in 2008 but the issue relating to failure on the part of the assessee to disclose all material facts necessary for his assessment was not deliberated. Therefore, the decision of Hon'ble Delhi High Court in the case of AGR Investments Ltd. (supra) is distinguishable on facts.
10.1 In the case before us in the reasons the assessing officer has not recorded satisfaction that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Therefore, the assessee's case is squarely covered by the decisions of Hon'ble Delhi High Court in the case of Wel Inter Trade P. Ltd. Vs. ITO (supra) and Haryana Acrylic Manufacturing Co. Vs. CIT (supra). We, therefore, hold that reopening of assessment in 7 I. T. A. No. 4652 (Del) of 2009 A N D C. O. No. 29 (Del) of 2010.
the absence of reasons recorded that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, is bad in law and deserves to be quashed. We order accordingly.
10.2 Since we have annulled the assessment, the ground of appeal raised in Revenue's appeal becomes infructuous and is dismissed, as such.
11. In the result, the appeal filed by the assessee is allowed and the appeal filed by the Revenue is dismissed, as infructuous.
The order pronounced in the open court on: 18th November, 2011.
Sd/- Sd/-
[ A. D. JAIN ] [ K. D. RANJAN ]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 18th November, 2011.
*MEHTA*
" Copy of the order forwarded to : -
1. Appellants.
2. Respondents.
3. CIT,
4. CIT (Appeals),
5. DR, ITAT, NEW DELHI.
True Copy. By Order.
Assistant Registrar, ITAT. "