M/s N.S. CREATION (P) LTD. v. DCIT,CC-3, New Delhi
[Citation -2016-LL-0914-18]

Citation 2016-LL-0914-18
Appellant Name M/s N.S. CREATION (P) LTD.
Respondent Name DCIT,CC-3, New Delhi
Court ITAT-Delhi
Relevant Act Income-tax
Date of Order 14/09/2016
Assessment Year 2008-09
Judgment View Judgment
Keyword Tags reassessment proceedings • unexplained cash credit • reason to believe • share application • unaccounted money
Bot Summary: The brief facts of the case are that the assessee company filed its return of income on 25.9.2008 declaring loss of Rs. 3,94,575/-. Against the Order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 20.2.2015 has dismissed the appeal of the assesseee and affirmed the action of the AO on the 4 legal issue i.e. reopening of the case u/s. To support his contention he submitted that the issue in dispute is squarely covered in favour of the assessee by the ITAT decision dated 09.1.2015 in the case of GG Pharma India Limited vs. ITO passed in ITA No. 3149/Del/2013 in which the Judicial Member is the Author. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: I have also perused various materials and report from Investigation Wing and on that 8 basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. Respectfully following the above precedent in the case of Pr. CIT-4 vs. GG Pharma India Ltd. I decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings and allow the legal issue.


IN INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-2 : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA No. 1824/Del/2015 Assessment Year: 2008-09 M/s N.S. CREATION (P) LTD., Vs. DCIT, CC-3 921/60, LEKHU NAGAR, NEW DELHI TRI NAGAR, DELHI 110 035 (PAN: AABCN8344A) (APPELLANT) (RESPONDENT) Assessee by : Sh. AMIT GOEL, FCA & MR. SAURABH GOEL, CA Revenue by : Sh. AMRIT LAL, SR. DR Date of hearing : 06-09-2016 Date of order : 14-09-2016 ORDER PER H.S. SIDHU, J.M. Assessee has filed Appeal against Order dated 20.2.2015 of Ld. CIT(A)-XXVI, New Delhi pertaining to assessment year 2008-09 and raised following grounds:- 1. On facts and circumstances of case and in law, assessing officer erred in issuing notice u/s 148 of Income Tax Act 1961. notice u/s 148 issued in this case is illegal, void without jurisdiction and barred by 2 limitation and accordingly assessment order passed on foundation of such notice is liable to be quashed. Ld. Commissioner of Income Tax (Appeal) should have held reassessment proceedings as illegal, void without jurisdiction and barred by limitation. 2. On facts and circumstances of case and in law, Commissioner of Income Tax (Appeal) erred in confirming addition made by assessing officer of share application money/share capital of Rs. 40,00,000/- as alleged unexplained cash credit u/s 68 of Income Tax Act 1961. addition made by assessing officer is not sustainable and Commissioner of Income Tax (Appeal) should have deleted same. 3. On facts and circumstances of case and in law, Commissioner of Income Tax (Appeal) erred in confirming addition of Rs.20,000/- made by assessing officer as alleged commission paid. addition made by AO is not sustainable and Commissioner of Income Tax (Appeal) should have deleted same. 4. alleged reasons given by Assessing Officer and CIT(A) for making confirming additions of Rs.40,00,000/- and Rs.20,000/-- are erroneous, both on facts and in law and, therefore, additions of 3 Rs.40,00,000/- and RS.20,000/- made by assessing officer and confirmed by CIT(A) are liable to be deleted. appellant craves leave to add, alter, modify or delete one or more ground of appeal before or at time of hearing of appeal. aforesaid grounds of appeal are without prejudice of each other. 2. brief facts of case are that assessee company filed its return of income on 25.9.2008 declaring loss of Rs. 3,94,575/-. return of income was duly processed u/s. 143(1) of I.T. Act, 1961. case taken up for scrutiny and assessment order u/s. 143(3) of I.T. Act passed at loss of Rs. 1,94,575/- by disallowing sum unverified expenses. Later case was selected for scrutiny u/s. 147 r.w.s. 148 of I.T. Act, 1961. notice u/s. 148 of I.T. Act was issued on 26.3.2013. In response to notice u/s. 148 of I.T. Act assessee vide its reply dated 11.4.2013 has submitted that returned filed dated 25.2.2008 may be treated as return in response to notice issued u/s. 148 of I.T. Act, 1961. Thereafter, AO assessed income of assessee at Rs. 36,25,425/- vide his order dated 20.3.2014 passed u/s. 148 r.w.s. 147 of I.T. Act, 1961 and made additions. 3. Against Order of Ld. AO, assessee appealed before Ld. CIT(A), who vide impugned order dated 20.2.2015 has dismissed appeal of assesseee and affirmed action of AO on 4 legal issue i.e. reopening of case u/s. 147/148 of I.T. Act, 1961 as well as on merits. 4. Aggrieved with aforesaid order of Ld. CIT(A), Assessee is in appeal before Tribunal. 5. Ld. Counsel of assessee has filed Paper Book containing pages 1 to 52 attaching therewith copy of reasons recorded u/s. 148; copy of letter dated 21.2.2014 furnished before AO alongwith documentary evidences in respect of share capital; copy of letter issued by AO to share holder; copy of letter dated 6.3.2014 submitted by share holder to AO; copy of letter dated 10.3.2014 submitted by share holder to AO; copy of letter dated 18.3.2014 submitted to AO; copy of original assessment order u/s. 143(3); copy of judgments. He stated that Ld. CIT(A) has erred in confirming action of AO in assuming jurisdiction u/s. 147 and that too without complying with mandatory conditions as prescribed under section 147 to 151 of I.T. Act, 1961 and reasons recorded are invalid and contrary to law and facts and there is no satisfaction as per law u/s. 151 of Act. He further draw our attention towards copy of reasons for reopening case u/s. 148 and stated that no proper reasons were recorded; no nexus between materials relied upon and belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148; no independent conclusion that there was escapement of income. It was further 5 stated that case was reopened only on basis of Investigation Wing information which suffers with serious debility and lacks definiteness, without describing basic aspects of alleged transaction and in absence of same, whole action of AO gets vitiated. To support his contention he submitted that issue in dispute is squarely covered in favour of assessee by ITAT decision dated 09.1.2015 in case of G&G Pharma India Limited vs. ITO passed in ITA No. 3149/Del/2013 (AY 2003-04) in which Judicial Member is Author. He further stated that above decision of ITAT dated 9.1.2015 has been upheld by Hon ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in case of Pr. CIT-4 vs. G&G Pharma India Ltd. In this regard, he filed copies of aforesaid decisions before Tribunal. In view of above, he requested that by following aforesaid precedents reassessment proceedings of AO may be quashed by accepting Appeal filed by Assessee. 6. On contrary, Ld. DR relied upon order passed by authorities below and stated that AO has properly recorded reasons dfor reopening by due application of mind, hence, appeal of Assessee may be dismissed. 7. I have heard both parties and perused relevant records available with us, especially orders of revenue 6 authorities and case law cited by assessee s counsel on issue in dispute. In my view, it is very much necessary to reproduce reasons recorded by AO before issue of Notice to Assessee u/s. 148 of I.T. Act, 1961 which is reproduced hereunder:- assessee company has filed income tax return for asstt. Year 2008-09 declaring loss of Rs. 394578/-. Regular assessment was completed by DCIT, CC-3, New Delhi by making addition of Rs. 2,00,000/-. Being information received from DGIT (Inv.), New Delhi. I have reasons to believe that assessee has understated income has also failed to disclose truly and fully all material facts in his return of income for above assessment year, income chargeable to tax for FY 2007-08 relevant to assessment year 2008-09 has escaped assessment within meaning of Section 147 of Act. Issue notice u/s. 148 of I.T. Act, 1961. I therefore, deem it, proper to initiate proceedings under provision of section 147 of Act, 1961, notice u/s. 148 of Act, is being issued. Date: 26.3.2012 Sd/- (B.L. Kain) Asstt. Commissioner of Income Tax Central Range-2, New Delhi 8. After going through reasons recorded by AO, as aforesaid, I am of view that AO has not applied his mind so 7 as to come to independent conclusion that he has reason to believe that income has escaped during year. In my view reasons are vague and are not based on any tangible material as well as are not acceptable in eyes of law. AO has mechanically issued notice u/s. 148 of Act, on basis of information allegedly received by him from Directorate of Income Tax (Investigation), New Delhi. Keeping in view of facts and circumstances of present case and case law applicable in case of assessee, I am of considered view that reopening in case of assessee for asstt. Year in dispute is bad in law and deserves to be quashed. My view is supported by following judgment/decision:- Pr. CIT vs. G&G Pharma India Ltd. in ITA No. 545/2015 dated 8.10.2015 of Delhi High Court wherein Hon ble Court has adjudicated issue as under:- 12. In present case, after setting out four entries, stated to have been received by Assessee on single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by Directorate of Investigation, AO stated: "I have also perused various materials and report from Investigation Wing and on that 8 basis it is evident that assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries." above conclusion is unhelpful in understanding whether AO applied his mind to materials that he talks about particularly since he did not describe what those materials were. Once date on which so called accommodation entries were provided is known, it would not have been difficult for AO, if he had in fact undertaken exercise, to make reference to manner in which those very entries were provided in accounts of Assessee, which must have been tendered along with return, which was filed on 14th November 2004 and was processed under Section 143(3) of Act. Without forming prima facie opinion, on basis of such material, it was not possible for AO to have simply concluded: "it is evident that assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In considered view of Court, in light of law explained with sufficient clarity by Supreme Court in decisions discussed hereinbefore, basic requirement that AO must apply his mind to materials in order to have reasons to believe that income of Assessee escaped assessment is missing in present case. 9 13. Mr. Sawhney took Court through order of CIT(A) to show how CIT (A) discussed materials produced during hearing of appeal. Court would like to observe that this is in nature of post mortem exercise after event of reopening of assessment has taken place. While CIT may have proceeded on basis that reopening of assessment was valid, this does not satisfy requirement of law that prior to reopening of assessment, AO has to, applying his mind to materials, conclude that he has reason to believe that income of Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied post mortem exercise of analysing materials produced subsequent to reopening will not rescue inherently defective reopening order from invalidity . 14. In circumstances, conclusion reached by ITAT cannot be said to be erroneous. No substantial question of law arises. 15. appeal is dismissed. 9. In view of above, I am of considered view that aforesaid issue in dispute is exactly similar and identical to issue involved in present appeal and is squarely covered by aforesaid decision of Hon ble High Court of Delhi in 10 case of G&G Pharma (Supra). Hence, respectfully following above precedent in case of Pr. CIT-4 vs. G&G Pharma India Ltd. (Supra) I decide legal issue in dispute in favor of Assessee and against Revenue and accordingly quash reassessment proceedings and allow legal issue. Since I have already quashed reassessment proceedings, as aforesaid, other issues are not being dealt with being academic in nature. 10. In result, Assessee s appeal is allowed. Order pronounced in Open Court on this 14-09-2016. Sd/- (H.S. SIDHU) JUDICIAL MEMBER Dated : 14-09-2016 SR BHATANGAR Copy forwarded to: 1.Appellant 2.Respondent 3.CIT 4.CIT(A), New Delhi. 5.CIT(ITAT), New Delhi. AR, ITAT NEW DELHI M/s N.S. CREATION (P) LTD. v. DCIT,CC-3, New Delhi
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