Delhi High Court
Revolution Forver Marketing Pvt. Ltd vs Income Tax Officer on 14 February, 2019
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat, Prateek Jalan
$~13
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Decided on: 14th February, 2019
+ W.P.(C) 10857/2016
REVOLUTION FORVER MARKETING PVT. LTD ..... Petitioner
Through: Mr.S.Krishnan & Ms.Sujata
Kashyap, Advocates
versus
INCOME TAX OFFICER ..... Respondent
Through: Mr.Ajit Sharma, Advocate
CORAM:
HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE PRATEEK JALAN
S. RAVINDRA BHAT, J. (OPEN COURT)
%
1. The petitioner is aggrieved by the impugned notice dated 30.03.2016,
under Section 147/148 proposing to re-assess its income for A.Y.2009-10.
It contends that all information necessary for computation of income was
provided in the returns and that taking them into consideration the AO
framed the scrutiny assessment under Section 143(3) on 30.11.2011.
2. The relevant parts of the impugned re-assessment notice reads as
follows:
"Information was received from ITO (investigation)
Unit-2 New Delhi vide letter F.No.ITO(Inv.)/U-2/S-56/2015-
16/ 307 dated 28.03.2016. The contents of the letter are as
under:
W.P.(C) 10857/2016 Page 1 of 7
2. During the course of investigation on a STR
No.1000062089 (UIN 120718442) in the case of M/s AVS
Mann and CO, K-11, 1st Floor, Rajouri Garden, New Delhi-
110027 received in this office.
3. In the dissemination note it has been stated that "The
bank has identified an account no.207010200013439 in the
name of Revolution Forever Mkt. Wherein, frequent intersol
cash deposites. Transfers and clearing are seen. The total
turnover of the account since account opening is over Rs.72.10
crores. Out of total credit Rs.14.78 crores are in form of cash,
as declared by the customer, company is trading in FMCG
products in line of MLM model. On scrutiny over internet it
was observed that the said company hold a website in the
name of http://www.revolutionforever.com. On perusing the company
website, various offers/schemes resembling of MLM
companies are there business plan can generate unlimited
income. Mr.Gurjeet Singh/Mr.Mann Ramanjeet / Mr.Abhishek
Johri / Mr.Davinder Singh / Mr.Mukesh Kumar Sharma
authorised signatory of Revolution Forever Mkt. Ltd.
Mr.Gurjeet Singh is a common authorised for 9 current
account no.035010200026895, 207010200007931 &
106010200016010 (REVOLUTION FOREVER MKT. LTD.),
207010200014261 (MARG LIFE CARE AND FINANCIAL
PRODUCTS PRIVATE LIMITED), 20701020000731
(REVOLUTION FOREVER TECHNOLOGIES),
910020031920816 (A. V. S. MANN AND CO. (HUF)),
910020047999532 (JIVA ANDEEP ENTERPRISE) and
207010200013129 (VENUS LIFE CARE), wherein Bank and
observed high value transfer credits followed by clearing and
transfer debits. Instances of case deposits and withdrawals are
also observed. Mr.Gurjeet Singh also mainrains two saving
bank accounts no. 207010100295482 and 040010100218085,
wherein High value transfer and RTGS credits following by
transfer and RTGS debits are seen. Mr.Davinder Singh
W.P.(C) 10857/2016 Page 2 of 7
maintains a saving bank account no.207010100299718,
wherein transfer from main account and clearing debit are
observed. There are transfer transactions between Account of
Revolution Forever Mkt. Ltd. and various account herein
mentioned as related account. There is a trend of transfers
from main account and clearing credits following by cash
withdrawals and clearing debit in all the related accounts.
Based on the nature of transactions resembling of MLM
activity and internet findings, intent of the customer is
suspicious."
4. From the replies/submissions made by ARs of the
assessee during the investigation proceedings viz-a-viz
allegation made in the STR, the following points emerges:-
(a) In the STR the bank identified on account no.
20701020013439 maintained with Axis Bank Ltd. C-3/21,
Janakpuri, Delhi-58 which belongs to M/s Revolution Forever
Marketing Pvt. Ltd. which is the main company having various
office maintained by different entities at different locations.
The main business of the company is to do online marketing
and supply of goods through its various representatives, firms
from different locations.
(b) M/s Revolution Forever Marketing Pvt. Ltd. has
following parties with whom it deals during the whole process
(whose name also reflects in the STR). Further, the assessee
has submitted all the bank accounts:-
(i) M/s Marg Life Care and Financial Products Pvt.
Ltd.
(ii) M/s AVS Mann & Co.HUF
(i) M/s Revo Life care
(ii) M/s J.S.Technologies,
(iii) M/s Jivandeep Enterprise.
(iv) M/s Venus Life Care.
(v) Mr.Manoj Kumar Rai.
W.P.(C) 10857/2016 Page 3 of 7
(vi) Sh.Ranjit Kumar Bhardwaj.
(vii) Sh.Amod Kumar.
(c) With regard to credit entries of aggregate Rs.72.10
Crores and Rs.14.78 crore cash deposited since the opening of
above stated bank account on various dates remained
unverified during the F.Y.2008-09. Further, assessee has
shown his turnover amounting to Rs.4.36 crores which does
not match with the bank accounts maintained by the Company
during the F.Y. 2008-09.
Keeping in view of above facts and circumstances, I
have reason to believe that an amount at least Rs.4.36 crore
has escaped assessment in the case of M/s Revolution Forever
Marketing (P) Ltd. for the A.Y.2009-10, within the meaning of
of section 147/148 of the Income Tax Act, 1961."
3. It is contended that the assessee, a multi-level marketing company
which specialises in FMCG products, transacts through various group
companies/sister concerns, which are tasked to perform specific work on
territorial and other defined basis. Its marketing model is dependent
heavily upon cash receipts from consumers who subscribe to its segments,
as members at various levels. Being a cash intensive transaction model, the
business reflects deposits in the assessee‟s accounts.
4. Mr.S.Krishnan, learned counsel for the petitioner contends on behalf
of the petitioner that once the scrutiny assessment was complete, based
upon all the relevant material such as bank account statements, information
vis.-a-vis sundry creditors and answers to the queries given apparently to
the specification of the AO, the dredging of that material on the basis of
information and vague internet searches, did not constitute material
information, which was withheld from the Revenue at the stage of the
return filing. It was contended that the impugned re-assessment notice was
W.P.(C) 10857/2016 Page 4 of 7
preceded by some investigation [as evident from para 4 of the re-
assessment notice]. Learned counsel faulted the notice for being open
ended stating that para 4(c) and the inferences drawn i.e. amount of ₹4.36
crores had escaped assessment for assessment year in question, taking into
consideration "credit entries of the aggregate ₹72.10 crores and ₹14.78
crores cash deposit since the opening of the above stated account on various
dates", cannot constitute fresh or tangible material justifying re-assessment.
5. Learned counsel for the Revenue resisted the petition and urged that
the re-assessment was not based upon appraisal of the material by the AO
but rather on the intimation received from the investigation wing, which
had carried out inquiry into assessee‟s accounts and affairs. It was
submitted that the investigation report - which was quoted in material parts
in the reassessment notice in the present case had clearly stated that income
to the extent of ₹4.36 crores, at least, was remitted to have escaped
assessment for A.Y. 2009-10.
6. The counter affidavit filed by the respondent/Revenue in the present
case does not dispute that the petitioner had undergone scrutiny assessment
in the first instance. The AO on that occasion satisfied herself/himself as to
the veracity of the statements made and even that the relevant particulars
relating to the bank accounts [together with the account statements for the
concerned year] and all entries had been furnished. Furthermore, the AO
was also aware of the fact that the assessee was engaged in multi-level
marketing business model, which is dependent on cash intensive
transactions that in turn leads to deposit of cash on daily basis in high
volume. The material on record - the balance sheets filed along with the
return disclosed the bank accounts and its particulars. The assessee had by
a letter dated 19.09.2011 replied to various queries addressed to it by the
W.P.(C) 10857/2016 Page 5 of 7
AO in reply to the notice in the course of scrutiny proceedings. These
include letters of confirmation from major sundry trade creditors, list of
purchases from sundry trade creditors of value of more than Rs.1 lakh, list
of sundry creditors other than trade creditors; TDS Deduction Registers
relating to distributors‟ incentives, statement of rent and TDS and all
detailed statements of accounts of the company. Consequently in the
opinion of the Court this is a disclosure of all related material of fact.
7. The law relating to the reopening of assessment is well settled unless
the AO is satisfied that in the original assessment, including scrutiny
assessment, disclosure of relevant material facts were not made or if some
new materials subsequently lead the AO to believe that income has escaped
assessment, reassessment is justified. As to what constitutes „new
material‟, this is now well settled by the judgment of the Supreme Court in
Commissioner of Income Tax vs. Kelvinator 320 ITR 561. With respect to
what are the duties of the assessee, with respect to cash deposits, the law is
also well settled. The ruling in Commissioner of Income Tax vs. Lovely
Exports (2014) 14 SCC 761 affirmed previous ruling of this Court. The
primary duty is upon the assessee to disclose material facts relating to share
application amounts, credits claimed etc. In the present case, the details of
all sundry creditors were disclosed; the nature of business transactions by
cash intensive transaction, all bank statements were also furnished in the
original assessment. In case the AO was not satisfied, he ought to have
made further inquiries seeking confirmations in respect of particular entries.
In the present case, no such inquiry was made. The failure of the Revenue
in that regard does not clothe it with the power to carry out reassessment
under Section 147/148.
W.P.(C) 10857/2016 Page 6 of 7
8. This Court is also of the opinion that the principal basis for
reassessment appears to be the opinion of the Revenue that substantial cash
transactions were carried out, having regard to the date of opening of the
accounts, which were not verified. Now this Court is of the opinion that
this reason is vague. The duty of the assessee is to disclose the bank
statements for the relevant year, which it did. As to what inferences are to
be drawn for the previous years is not within the remit of the AO and
consequently of no relevance whatsoever at least in considering whether to
issue or not to issue reassessment notice, on just cash intensive transactions;
clearly, this reason is vague and unjustified.
9. In view of the foregoing reasons the impugned assessment notice and
all consequential proceedings are hereby quashed.
10. The writ petition is allowed in the above terms.
S. RAVINDRA BHAT, J.
PRATEEK JALAN, J.
FEBRUARY 14, 2019 „hkaur‟ W.P.(C) 10857/2016 Page 7 of 7