Income Tax Appellate Tribunal - Amritsar
Rajeshwari Sangeet Academy Trust, ... vs Assessee on 25 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL,
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER
ITA Nos.710 & 711(Asr)/2014
Assessment year:2006-07 & 2007-08
PAN:AAATA3534F
M/s. Apeejay Education Society vs. Asstt. Commr. of Income Tax,
New Jawahar Nagar, Circle-III, Jalandhar.
Jalandhar.
(Appellant) (Respondent)
ITA No.705(Asr)/2014
Assessment year:2006-07
PAN:AAATR2430F
M/s. Rajeshwari Sangeet Academy, vs. Asstt. Commr. of Income Tax,
New Jawahar Nagar, Circle-III, Jalandhar.
Jalandhar.
(Appellant) (Respondent)
Appellant by:Sh. Salil Kapor, Adv. Sh. NIrmal Mahajan, CA,
Sh. Samit Lal Chandani, Adv. & Ananya Kapoor, Adv.
Respondent by: Sh.S. Kanwal, DR
Date of hearing:29/12/2015
Date of pronouncement: /02/2016
ORDER
PER A.D. JAIN, JM:
As the issue involved in all these appeals is common, the appeals are being decided together by this consolidated order.
2. First, we will take up appeal in ITA No.710(Asr)/2014 for the assessment year 2006-07.
3. In ITA No.710(Asr)/2014, the following grounds have been raised: 2
"1. That the notice issued u/s 148 & reassessment orders passed are illegal, bad in law, without jurisdiction and barred by time limitation.
2. That the CIT(A) has grossly erred in law and on facts in upholding the assessment order and also in upholding the denial of exemption u/s 11 of the Act by the Assessing officer.
3. That the CIT(A) has erred in confirming the assessment order framed by the AO, in gross violation of settled position of law that once registration U/s 12A of the Act was granted to the assessee, it was thereafter not open to the AO to make any enquiry regarding the exemption U/s 11 of the Act.
4. That the CIT(A) has erred in confirming the action of the assessing officer in invoking the provisions of section 13(1 )(c) of the Act, although there is no evidence or even allegation that amount of purchase of software from Washington Software Ltd has reached to the assessee trust or any of trustee.
5. That the CIT(A) has erred in law by upholding the contention of the ACIT, Circle III, Jalandhar, in holding that the appellant has violated the provisions of 13 of the Income Tax Act, 1961.
6. That the CIT(A) has erred in law by upholding the contention of the ACIT, Circle III, Jalandhar in assessing the income as business income instead of assessing the same u/s 11 to 13 of the Income Tax Act, 1961.
7. Without prejudice and in the alternative, the AO/ CIT(A) has wrongly held that the whole income is taxable and not restricting the taxability to the amount which is allegedly covered u/s 13(1) (c) of the Act.
8. That the depreciation on computer software has been illegally and wrongly denied and the CIT(A) has erred in upholding the same.
9. Without prejudice and in the alternative, expenses claimed has been illegally and wrongly disallowed and income has been wrongly and illegally assessed at a highly exorbitant figure.3
10. That the evidence filed and materials available on record have not been properly construed and judiciously interpreted, hence the addition/disallowance made are uncalled for.
11. That interest U/s 234A, 234B, 234C and 234D of the Income Tax Act, 1961 has been wrongly and illegally charged and has been wrongly worked out.
12. That the applicant craves leave to add, amend, alter and/or delete any of the above grounds of appeal at or before the time of hearing."
4. Apropos ground no.1, it has been contended on behalf of the assessee that earlier assessment in the assessee's case for the year under consideration, i.e., assessment year 2006-07 was completed under section 143(3) of the Income Tax Act, 1961; that the notice under section 148 of the Act was issued beyond a period of four years from the end of the assessment year and hence, the proviso to section 147 is applicable; that as per the proviso to section 147 of the Act, where an assessment under section 143(3) of the Act has been made for the relevant assessment year, no action shall be taken u/s 147 after the expiry of four years 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, inter-alia, to disclose fully and truly all material facts necessary for his assessment, for that assessment year. It has been contended that in the reasons recorded for the reopening of the completed assessment of the assessee, there is no allegation regarding any failure on the part of the assessee to 4 disclose any material facts relevant for the assessment; that in the absence of such allegation, the AO has no jurisdiction to issue any notice u/s 147 beyond four years from the end of the assessment year, where the assessment order was passed u/s 143(3). In this regard, reliance has been placed on the following case laws:
i) "Dulichand Singhania vs. ACIT", 269 ITR 192 (P&H)
ii) "Mahavir Spg. Mills Ltd. vs. CIT", 270 ITR 290 (P&H)
iii) "CIT vs. Punjab Leasing Pvt. Ltd.", ITA /596(Asr)/2014
iv) "DCIT vs. Microsoft Corporation India (P) Ltd.", 139 TTJ 40 (Del)
v) "Haryana Acrylic Manufacturing vs. CIT", 308 ITR 38 (Del.)
5. It has further been contended that the validity of notice u/s 148 of the Act has to be tested on the basis of the reasons recorded for initiating reopening of the assessment, to which reasons, nothing can be added or subtracted therefrom; that the reasons are to be read as they are; and that there is no scope for drawing any inference therefrom.
Reliance has been placed on "Hindustan Liver Ltd. vs. R.B. Badkar", 268 ITR 332 (Bom.). It has next been contended that in the case of "Dulichand Singhania" (supra), the Hon'ble Jurisdictional High Court has held that in order to assume jurisdiction by issuing a notice u/s 148 beyond four years from the end of the assessment year concerned, where the earlier assessment stands completed u/s 143(3), the AO has to record in the reasons that there is failure on the part of the assessee 5 to furnish all documents relevant to the assessment and that in the absence of such allegation in the reasons recorded, the AO has no jurisdiction to issue any notice u/s 148 of the Act.
6. In response to the above contention of the ld. counsel for the assessee, the ld. DR, by way of oral arguments, as well as written submissions, has contended that this issue was never taken before either of the Taxing Authorities and as such, the assessee is precluded from doing so for the first time before the Tribunal. It has further been submitted that the reasons recorded by the AO for initiating the reassessment proceedings are detailed and the failure on the part of the assessee is clearly evincible therefrom.
7. It has been contended that the assessee is wrong in comparing his case with the decision of "Dulichand Singhania" (supra). In this regard, he has made the following written submissions:
"It is indeed pain to note that the stand of the learned counsel is too atrocious to claim that its case has parity with the facts of the case decided by the Hon'ble Punjab & Haryana High Court in the case of Duli Chand Singhania reported at 269 ITR 0192. The comparison of the facts of the assessee's case with the case of Duli Chand Singhania on the face of it itself makes the comparison look ludicrously odious. The facts are delineated as under:-
Facts of the case of Shri Duli Chand Singhania:
In this case, the assessee, a legal practitioner, had claimed deduction under section 80-0 of the Income tax Act, 1951 at Rs.1,76,54,480/- i.e. @ 50% of his gross professional receipts declared at Rs.3,53,08,960/- declaring in the return of income for the assessment year 1995-96. The return was processed under section 143(l)(a) and necessary intimation was sent. Thereafter, the case was selected for scrutiny and requisite notices under ss. 143(2) and 142(1) of the Act, dt. 2nd Aug., 1996, were issued. A 6 questionnaire dt. 2nd Aug., 1996 was also issued requiring the assessee to furnish various details. The assessment was ultimately completed under s. 143(3) of the Act vide order dt. 30th March, 1997 at a total income of Rs. 16,12,230. The difference in the returned income and the assessed income represented various disallowances made by the AO. However, deduction under s, 80-0 of the Act was allowed as claimed at Rs.1,76,54,480.On 22nd March, 2002, the AO issued the impugned notice under s. 148 of the Act observing that income chargeable to tax for the assessment year 1995-96 had escaped assessment within the meaning of section 147 of the Act. The assessee was, therefore, required to furnish a return of income within 30 days from the service of that notice.
On receipt of a copy of the reasons recorded, the assessee filed his objections vide letter dt. 24th Jan., 2003. It was contended that in the absence of any allegation of failure on his part to disclose fully and truly all material facts necessary for the assessment, no action under s. 147 of the Act could be taken after the expiry of four years from the end of the assessment year in view of the proviso to s. 147 of the Act. It was also contended that the only ground on which the proceedings under s. 147 of the Act had been initiated was that deduction under s. 80-0 of the Act was admissible at the rate of 50 per cent of the net receipts and not the gross receipts, as claimed by the assessee. The case of the assessee was that the ciaim for deduction had duly been examined while making the assessment under s. 143(3) of the Act. Thus, the reassessment proceedings were being initiated merely on a change of opinion on the same facts, which is not permissible under the Act after the expiry of four years from the end of the relevant assessment year.
It was in the context of the above facts that the Hon'ble High Court had dismissed the appeal of the department.
Facts of the assessee's case In the case of the assessee, a search and seizure operation under section 132(1) of the Act was conducted by the Director of Income tax (Investigation)-!! Mumbai at the premises of one Shri Prarag V.Mehta at Mumbai on 22.3.2011. During the course of search and seizure operation, it was found that Shri Parag V Mehta had given table space to various bogus companies in his premises which did not actually transact any business but are engaged in providing accommodation entries to the needy concerns. Such companies included M/s. Washington Software Lm (WSL) which was being run by one Shri Sanjay D Sonawani. The fact that M/s. WSL was a 7 company engaged in providing accommodation entries was admitted by Shri Parag V.Mehta in his statement recorded on 22.3.2011. Further, Shri Sanjay D.Sonawani in his statement recorded on 12.05.2011 also admitted that his company M/s.
Washington Software Ltd was involved in providing accommodation entries and also accepted the fact that he has provided accommodation entries to the Apeejay Group through his company M/s.WSL. As a result of this information, survey operations under section 133A were conducted on the business premises of the assessee group on 29.3.2011 during which statements of different persons actively involved in the management and running of the assessee group were recorded. During the course of survey, the most incriminating fact which came to light that no soft was installed at any of the institution of the assessee group but entries in the books of account of different institutions being run by the assessee group were found. The persons whose statements were recorded had deposed that they had received only bills for entering in the books of account and no software were ever installed or received by them. It was further found that M/s. WSL had been providing accommodation entries in such manner in various years from assessment year 2003-04 onwards till 2010-11 i.e. the year which closed before the date of search on M/s.WSL and survey on the assessee's group's institutes. The quantum of accommodation entries provided by M/s. WSL was approximately as under during the different assessment year:-
2003-04 Rs.2 crores 2005-06 Rs.2.5 crores 2005-06 Rs.3.4 crores 2007-08 Rs.0.8 crore 2008-09 Rs.1.2 crore 2009-10 Rs.2,68,60,900 2010-11 Rs.2.6 crores
Since this was a mega discovery of garguantum levels and which fact had never been revealed by the assessee before, it clearly constituted that there had been massive failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the relevant assessment years. In fact, the 8 assessee had furnished false and inaccurate particulars of income; for which initiation of proceedings under section 147 were imperative for bringing to tax the income which had not been assessed.
In view of above submissions, it is hoped that the assessee's placing reliance on the judgment of the Hon'ble Punjab & Haryana High Court is simply ill-conceived.
It is further pertinent to highlight that at para 11 of its order the Hon'ble High Court had held that where the proceedings under section 147 had been initiated on the basis of subsequent information, the proviso to section 147 was not violated. Para of the High Court's order reads as under:
11. We may also briefly refer to the authorities cited by the Revenue.
The judgment of the Supreme Court in the case of Ess Ess Kay Engineering Co. (P) Ltd. (supra) is clearly distinguishable. In this case, the Supreme Court had dismissed the appeal by a short order against the decision of this Court in CIT vs. Ess Ess Kay Enqineerinq. Co. (P) Ltd. (1981) 25 CTR (P&H) 88: (1982) 137 ITR 446 (P&H). The proceedings in this (that) case been initiated on the ground that the AO, on the basis of subsequent information, had found that the facts disclosed at the time of original assessment were false. Thus, it had been clearly found that the assessee had failed to disclose truly all facts for its assessment. There is no allegation in the present case that the facts disclosed by the assessee have been found to be false at any later stage. It may be mentioned that the assessee's counsel had relied upon one other judgment of the Hon'ble Punjab & Haryana High Court in the case of Mahavir Spinning Mils Ltd. Vs CIT in 270 ITR 290. Again, the reliance is wholly misconceived. The factual matrix of the assessee's case has been delineated above and the factual matrix of this case has been delineated above and the factual matrix of this case has been delineated by the Hon'ble High Court as under:-
M/s Mahavir Spining Mills Ltd. is a public limited company incorporated under the Companies Act,1956, and is regularly assessed to income -tax under the Act. If filed its return of income for the asst. year 1995-96 on 28th Nov., 1995, showing a total income of Rs. 23,85,28,960. The return was subsequently revised on 16th July, 1996, showing an ncome of Rs. 24,24,63,910. In the return filed by the assessee, it had claimed exemption under s. 10B of the Act in respect of profits and gains derived from one of its units, M/s Annant Spinning Mills (Unit I), which was a 100 per cent export-oriented unit, amounting to Rs. 4,64,51,545. It also 9 claimed deduction under s. 80HHC of the Act amounting to Rs.5,51,59,320. Assessment under s. 143(3) of the Act was made on 16th March, 1998, at an income of Rs. 25,06,29,080. The AO allowed exemption under s. 10B as claimed whereas deduction under s. 80HHC was reduced to Rs. 5,29,90,077. The assessee preferred an appeal before the CIT(A) who allowed certain deductions.
During the course of assessment proceedings for the asst. yr. 1998- 99, it came to the notice that the assessee had been claiming exemption under s. 10B in respect of the income of its 100 per cent EOU named as Annant Spinning Mills (Unit I) for the asst. yrs. 1995-96 to 1999-2000. At the same time, it has also been claiming deduction under s. 80HHC in respect of export sales of the said unit resulting into double relief under ss. 10B and 80HHC on the same export sales. This double relief (exemption under s. 10B and deduction under s. 80HHC) is not allowable under the provisions of the Act to a 100 per cent EOU. This issue has been discussed in detail in the assessment order under s. 143(3) dt. 30th March, 2001, for the asst. yr. 1998-99. After taking into consideration, the assessee's reply and arguments on the said issue, it has been held that the assessee is not entitled to claim deduction under s. 80HHC on export sales of a 100 per cent EOU, in respect of income of which, exemption has been claimed under s. 10B of the Act.
It is in the light of the above facts that the Hon'ble High Court held that the assessee disclosed all material facts and as such invocation of the provisions of section 147 was not warranted. In view of the above, it is clear that this judgment is also not applicable to the facts of the case.
It may be mentioned that the reasons for reopening of the assessment had come to the knowledge of the department in survey operation and all the facts were duly recorded in the body of the 'reasons recorded'. Therefore, the mentioning of the new facts, per se, clearly indicated that the assessee had not disclosed all material facts fully and truly. The reasons so recorded carry the satisfaction as mandated in the proviso to section 147.
Notwithstanding and prejudice to the above, it is submitted that the Hon'ble Supreme Court I in the case of Grindlays Bank Ltd. Vs ITO reported at 122 ITR 55 has held that the Court is / empowered to give direction for completing assessment beyond the limitation period in order to / see complete justice is rendered. It is further submitted that the Hon'ble Supreme Court in the / case of Collector of Land Acquisition Vs Mst. Katiji reported at 167 ITR 0471 has held 10 that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred In view of the assessee's ground of appeal may kindly be rejected."
8. We have heard the rival contentions on this issue. Section 147 (relevant portion) reads as follows:
"Section 147: 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 section, or recompute 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 as 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 years 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"
9. The wording employed in the first proviso to section 147 is amply clear and self explanatory. As per this proviso, action u/s 147 can be taken after the expiry of four years from the end of the relevant assessment year, only in case there is failure on the part of the assessee, inter-alia, as relevant to the facts of the present case, to disclose fully and truly all material facts necessary for assessment for that assessment year.
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10. Now, as per section 148(1), before making reassessment u/s 147, the AO shall serve on the assessee, a notice, as required thereunder. According to the main provision of section 147, reassessment can be done only if the AO has reason to believe escapement of income. Where a period of four years from the end of the relevant assessment has expired, the income having escaped assessment needs must, in keeping with the first proviso to section 147, have so escaped assessment by reason of the failure on the part of the assessee, inter-alia, to disclose fully and truly all material facts necessary for his assessment, for that assessment year.
11. From the above analysis of the relevant provisions, it is evident that section 148 envisages issuance of a notice where income has escaped assessment. This notice, as is clear from the above analysis of the relevant provisions, need must be on the AO's reason to believe escapement of income from assessment. Now, since the mandate of the first proviso to section 147 is that in a case of expiry of four years from end of the relevant assessment where assessment, has been made u/s 143(3), it has to be the failure of full and true disclosure by the assessee, of all material facts necessary for the assessment, which has led to escapement of income from assessment, the assessee obviously, requires to be made aware of the fact of such non-disclosure on his part. This is clearly in accordance with the natural justice principle of audit alterem partem. The first proviso to section 147, thus, provides for: 12
(i) the necessary opportunity to the assessee to explain his alleged failure to disclose fully and truly all material facts necessary for his assessment for the relevant assessment year. This opportunity shall be granted to him by issuance of a notice u/s 148(1);
ii) clarity obviating any arbitrariness or haziness on the part of the AO in conveying to the assessee, the exact nature of the assessee's default, as per the A.O. such a notice would emerge from the AO's reasons to believe escapement of income from assessment, as envisaged u/s 147.
12. The genesis of the reassessment proceedings, therefore, is the reasons to be recorded by the AO, of his belief of escapement of income from assessment and in compliance with the first proviso to section 147, such reasons to believe must comprise of the specific mention of the assessee's failure to disclose fully and truly all material facts necessary for assessment for the relevant assessment year where, as in the present case, the reassessment is to be initiated after expiry of four years from the end of the relevant assessment year. It requires to be stressed here, that the first proviso to section 147 is prohibitive of any action u/s 147 being taken in such a case, if there is no such failure to disclose all material facts on the part of the assessee. It is the above position, which has been judicially recognized by the Courts, time and again.
13. The reasons recorded by the AO for reopening the assessment are as follows:
"13
"REASONS FOR RE-OPENING OF THE CASE U/S 148:-
Return declaring 'NIL' income was fifed by the assessee on 27.10.2006 for the Asstt. Year 2006-07. Assessment u/s 143(3) was made on 29.12.2008 at 'Nil' income.
As per information available in this office, the assessee had obtained accommodation entries from M/s Washington Software Ltd. Pune in the financial year 2005-06 relevant to Asstt. Year 2006-07 as per following details:-
Sr. Date of Invoice Amount (Rs.) No.
1. 07.09.2005 30,00,000/-
2. 27.09.2005 30,00,000/-
3. 28.09.2005 30,00,000/-
4. 29.09.2005 30,00,000/-
5. 11.10.2005 20,00,000/-
6. 15.10.2005 30,00,000/-
7. 18.10.2005 30,00,000/-
8. 20,10.2005 20,00,000/-
9. 24.10.2005 30,00,000/-
Total 2,50,00,000/
-
A statement of Sh. San jay D Sonawani, Director of M/s Washington Software Ltd. Pune was recorded by the DDIT (Inv.) Unit 1(1) Pune on 16.03,2011 u/s 131 of the Income Tax Act 1961 and his statement was again recorded on 12.Ub.2011 by DDIT(Inv.) Unit Vll(4) Mumbai. In these statements, Sh. Sanjay D. Sonawani stated that his company M/s Washington Software Ltd., only issued sale bills and no actual sales took place and he accepted the fact that his company was providing accommodation entries to the assessee Society. In order to verify the genuineness of purchase of software from M/sVashington Software Ltd., a survey u/s 133A was conducted in case of M/s Apeejay Education Society, at different premises of the assesses and during the course of survey it was found that no actual deliveries, of any goods or commodities or services : software have ever been provided by the company, M/s Washington Software Ltd, to / e various institutes of the above Society, though bills were received and claimed in its account by the assessee Society. Principals and IT persons of the Institutes covered u/s 133A categorically stated that they only 14 received bills from the head office of the Society and no software from the above company were ever supplied or installed in their institute. Statement of Sh. Vijay Kumar Berlia, Genera! secretary and authorized signatory of the Society was recorded on 29.03.2011 by DOIT (Inv.) Unit Vl(3), New Selhi. Shri Vijay Kumar Berlia failed to produce anything in support of the actual transaction with the above said company and expressed his inability to clarify any material fact on the issue.
Thus it is clear that the assessee has taken these entries w.r.t. Bogus purchases jf software without actual delivery of software. The vendor party M/s Washington tware Ltd, Pune had raised sales bills without actual delivery of software/ goods, ese entries were used by the assessee to inflate the expenses to the extent of Rs. 2 50,00,000/- and hence evaded tax on income of Rs. 2,50,00,000/-
I have independently examined the above stated facts and I have reasons to believe that income of the assessee chargeable to tax to the tune of Rs. 2,50,00,000/- has escaped from assessment for the assessment year 2006-07 and thus this case is fit for issuance of notice u/s 148 for re-opening of assessment for the A.Y. 2006-07. Therefore approval u/s 151 (1) of the Income Tax Act 1961 is sought to initiate -E'-ent proceedings in this case for A.Y.2006-
07."
14. In "Dulichand Singhania" (supra), it has been clearly held by the Hon'ble Jurisdictional High Court that in order to assume jurisdiction u/s 147 in a case where the assessment has been made u/s 143(3), the AO must have reason to believe that income chargeable to tax has escaped assessment and that such escapement occurred by reason of failure on the part of the assessee, inter-alia, to disclose fully and truly all material facts necessary for his assessment for that purpose, where action u/s 147 is sought to be taken after the expiry of four years from the end of the relevant assessment year, the assessment having been made u/s 143(3).
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15. The Department has sought to make out much from the difference between the facts in "Dulichand Singhania" (supra) and the assessee's case. However, in this endeavour, it has been lost sight of that no two cases can be identical and they can only be similar. While it is true that the applicability of a decision needs to be considered, keeping in mind the facts thereof, it is the ratio decidendi of the case, which has to be applied. Herein, as to how the above ratio of "Dulichand Singhania"
(supra) does not cover the case of the assessee, has not been shown. It remains undisputed that in the reasons recorded by the AO, there is no allegation, much less any specific one, regarding any alleged failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
16. In "Dulichand Singhania" (supra), 'Ess Ess Kay Engineering Co. Pvt. Ltd.', 137 ITR 446 (P&H) was referred to on behalf of the department. The same was, however, held to be distinguishable. In 'Ess Ess Kay Engineering Co. Pvt. Ltd.' (supra), the proceedings had been initiated on the ground that the AO on the basis of subsequent information, had found that the facts disclosed at the time of original assessment were false, due to which, the assessee had failed to disclose truly all facts for its assessment. In "Dulichand Singhania" (supra), there was no allegation that the facts disclosed by the assessee had been found to be false at any later stage. Before us, on behalf of the Department, it has been contended that as supposed to in 'Dulichand Singhania' (supra), in 16 the present case, the facts disclosed by the assessee have been found to be false at a later stage and so, in keeping with 'Ess Ess Kay Engineering Co. Pvt. Ltd.', (supra), it cannot be said that the assessee had disclosed fully and truly all the material particulars.
17. The contention of the department in this regard does not validate the reopening of the completed assessment of the present assessee. This is so, since the express requirement of the proviso to section 147 of the Act is the specific mention of the AO in the reasons recorded, as to the failure on the part of the assessee. In the present case, there is not even a whisper of an allegation by the AO in the reasons recorded that escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. It is very pertinent that this was not the case in 'Ess Ess Kay Engineering Co. Pvt. Ltd.' (supra). At page 448 of the report, it has been specifically observed that the claim of the assessee was accepted and the assessee was allowed deduction by the ITO; that later on, while examining the assessee's accounts for the next assessment year, the ITO, on the basis of the material found in such examination, formed the opinion that the sole selling agency firm did not render any service to the assessee and hence, the income to the extent of Rs.1,27,313/- paid to the said firm by the assessee in the shape of commission had escaped assessment on account of the failure on the part of the assessee to 17 disclose fully and truly all material facts necessary for the assessment. Thereafter, the said material has been reproduced. After that it has been observed that the AO "accordingly" issued a notice u/s 148 of the Act to the assessee.
18. From the above, it is quite evident that even in 'Ess Ess Kay Engineering Co. Pvt. Ltd.',(supra), the assessee was made aware by the notice u/s 148 of the Act, of the alleged failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. It would be appropriate, for clarity, to reproduce this relevant portion [page 448 of the report, i.e. 137 ITR 446 (P&H)] of the judgment in 'Ess Ess Kay Engineering Co. Pvt. Ltd.' (supra):
"The claim was accepted and the assessee was allowed deduction by the ITO, vide assessment order dated September 28,1968. Later on, while examining the assessee's accounts for the next subsequent yea, the ITO on the basis of the following material formed the opinion that the sole selling agency firm did not render any service to the assessee and hence the income to the extent of Rs.1,27,313/- paid to the said firm by the assessee in the shape of commission had escaped assessment on account of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment:
a) T.A. Bills of Sh. K.S.Khosla, managing partner of M/s.
Kay Engineering Sales Corporation which were impounded u/s 131 were false to the extent that he was shown on tour on certain dates on which he was actually present in Kapurthala and attended the directors' and shareholders' meetings of the company.
b) The receipt and despatch books of the company which were inspected during the course of proceedings for 1967-68 showed that no correspondence was exchanged between the so-called sole selling agents and the company.
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c) It was found that the existence of Sh. S.K. Puri and Yodha Ram, who are said to be the two traveling agents employed by the firm and submitted daily progress reports, was doubtful as the assessee had failed to furnish even the basic information about them.
d) The assessee's claim that M/s. Kay Engineering Sales Corporation had issued circulars, letters, etc., to its distributors was doubtful and was not supported by any evidence.
e) Sh. K.S. Khosla, who was working as director-in- charge (sales) in the account year relevant to the assessment year 1965-66, continued to work in this year as well and drew his salary and T.A. bills. This was in addition to the payment made by the assessee to M/s. Kay Engineering Sales Corporation on account of overriding commission.
He accordingly issued a notice u/s 148 of the I.T. A ct to the assessee which was served on February 2, 1971."
19. Now, in keeping with 'Dulichand Singhania' (supra), the specific mention by the AO in the reasons recorded for reopening the completed assessment, of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment, is the sine qua non for assuming jurisdiction u/s 147 of the Act in a case falling under the proviso thereto and in the absence threof makes the action taken by the AO wholly without jurisdiction ( para 13 of the judgment).
20. In 'Ess Ess Kay Engineering Co. Pvt. Ltd.' (supra), the assessee was made aware, of his alleged failure, but clearly, this is not so in the present case. The issue that the reasons sans the mention of the specific failure of the assessee, are non est in the eye of law, was not up for 19 consideration before the Hon'ble High Court in 'Ess Ess Kay Engineering Co. Pvt. Ltd.'(supra) and so, 'Ess Ess Kay Engineering Co. Pvt. Ltd.', (supra), is not applicable.
20. In "Mahavir Spg. Mills Ltd." (supra), the Hon'ble High Court observed that the entire thrust of the observation recorded by the AO in the assessment order was on justifying his satisfaction about escapement of income and there was not even a whisper of an allegation that such escapement had occurred due to reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment; that in the absence of that finding, the AO's action was wholly without jurisdiction; and that the illegality of the notice u/s 148 was apparent from the reasons recorded for initiation of proceedings u/s 147, and the notice was liable to be quashed.
21. All the other case laws relied on by the assessee are to the same effect. The Department has not been able to cite any decision contrary to these decisions. Therefore, the grievance of the assessee in this regard is justified. It is accepted as such. Accordingly, the notice issued u/s 148 of the Act and all proceedings pursuant thereto are quashed, as a result nothing further survives for adjudication.
22. Our above observations are , mutatis-mutandis, directly and squarely applicable to ITA Nos. 11(Asr)/2014 and ITA No.705(Asr)/2014. ITA No. 711(Asr)/2014 is the assessee's appeal for the AY 2007-08 in the matter of M/s. Apeejay Education Society whereas ITA 20 No.705(Asr)/2014 is the assessee's appeal for AY 2006-07 in the matter of Rajeshwari Sangeet Academy.
23. In the result, all the appeals in ITA Nos. 710, 711 & 705(Asr)/2014 are allowed. The respective stay applications are dismissed as infructuous.
Order pronounced in the open court on /02/2016
(T.S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: /02/2016
/skr/
Copy of order forwarded to:
1. The Assessee: M/s. Apeejay Education Society (ii) M/s. Rajeshwari Sangeet Academy, Jalandhar.
2. The ACIT, Circle-III, Amritsar.
3. The CIT(A), Amritsar
4. The CIT, Amritsar.
5. The Sr. DR, ITAT, ASR.
True copy By order (Assistant Registrar) Income Tax Appellate Tribunal Amritsar Bench: Amritsar.