IN 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. petitioner is aggrieved by 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 returns and that taking them into consideration AO framed scrutiny assessment under Section 143(3) on 30.11.2011. 2. relevant parts of 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. contents of letter are as under: W.P.(C) 10857/2016 Page 1 of 7 2. During course of investigation on STR No.1000062089 (UIN 120718442) in case of M/s AVS Mann and CO, K-11, 1st Floor, Rajouri Garden, New Delhi- 110027 received in this office. 3. In dissemination note it has been stated that bank has identified account no.207010200013439 in name of Revolution Forever Mkt. Wherein, frequent intersol cash deposites. Transfers and clearing are seen. total turnover of 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 customer, company is trading in FMCG products in line of MLM model. On scrutiny over internet it was observed that said company hold website in name of http://www.revolutionforever.com. On perusing 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 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 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 trend of transfers from main account and clearing credits following by cash withdrawals and clearing debit in all related accounts. Based on nature of transactions resembling of MLM activity and internet findings, intent of customer is suspicious. 4. From replies/submissions made by ARs of assessee during investigation proceedings viz-a-viz allegation made in STR, following points emerges:- (a) In STR 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 main company having various office maintained by different entities at different locations. main business of 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 whole process (whose name also reflects in STR). Further, assessee has submitted all 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 opening of above stated bank account on various dates remained unverified during F.Y.2008-09. Further, assessee has shown his turnover amounting to Rs.4.36 crores which does not match with bank accounts maintained by Company during F.Y. 2008-09. Keeping in view of above facts and circumstances, I have reason to believe that amount at least Rs.4.36 crore has escaped assessment in case of M/s Revolution Forever Marketing (P) Ltd. for A.Y.2009-10, within meaning of of section 147/148 of Income Tax Act, 1961. 3. It is contended that assessee, 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 cash intensive transaction model, business reflects deposits in assessee s accounts. 4. Mr.S.Krishnan, learned counsel for petitioner contends on behalf of petitioner that once scrutiny assessment was complete, based upon all relevant material such as bank account statements, information vis.-a-vis sundry creditors and answers to queries given apparently to specification of AO, dredging of that material on basis of information and vague internet searches, did not constitute material information, which was withheld from Revenue at stage of return filing. It was contended that impugned re-assessment notice was W.P.(C) 10857/2016 Page 4 of 7 preceded by some investigation [as evident from para 4 of re- assessment notice]. Learned counsel faulted notice for being open ended stating that para 4(c) and inferences drawn i.e. amount of 4.36 crores had escaped assessment for assessment year in question, taking into consideration credit entries of aggregate 72.10 crores and 14.78 crores cash deposit since opening of above stated account on various dates , cannot constitute fresh or tangible material justifying re-assessment. 5. Learned counsel for Revenue resisted petition and urged that re-assessment was not based upon appraisal of material by AO but rather on intimation received from investigation wing, which had carried out inquiry into assessee s accounts and affairs. It was submitted that investigation report which was quoted in material parts in reassessment notice in present case had clearly stated that income to extent of 4.36 crores, at least, was remitted to have escaped assessment for A.Y. 2009-10. 6. counter affidavit filed by respondent/Revenue in present case does not dispute that petitioner had undergone scrutiny assessment in first instance. AO on that occasion satisfied herself/himself as to veracity of statements made and even that relevant particulars relating to bank accounts [together with account statements for concerned year] and all entries had been furnished. Furthermore, AO was also aware of fact that 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. material on record balance sheets filed along with return disclosed bank accounts and its particulars. assessee had by letter dated 19.09.2011 replied to various queries addressed to it by W.P.(C) 10857/2016 Page 5 of 7 AO in reply to notice in 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 company. Consequently in opinion of Court this is disclosure of all related material of fact. 7. law relating to reopening of assessment is well settled unless AO is satisfied that in original assessment, including scrutiny assessment, disclosure of relevant material facts were not made or if some new materials subsequently lead AO to believe that income has escaped assessment, reassessment is justified. As to what constitutes new material , this is now well settled by judgment of Supreme Court in Commissioner of Income Tax vs. Kelvinator 320 ITR 561. With respect to what are duties of assessee, with respect to cash deposits, law is also well settled. ruling in Commissioner of Income Tax vs. Lovely Exports (2014) 14 SCC 761 affirmed previous ruling of this Court. primary duty is upon assessee to disclose material facts relating to share application amounts, credits claimed etc. In present case, details of all sundry creditors were disclosed; nature of business transactions by cash intensive transaction, all bank statements were also furnished in original assessment. In case AO was not satisfied, he ought to have made further inquiries seeking confirmations in respect of particular entries. In present case, no such inquiry was made. failure of Revenue in that regard does not clothe it with power to carry out reassessment under Section 147/148. W.P.(C) 10857/2016 Page 6 of 7 8. This Court is also of opinion that principal basis for reassessment appears to be opinion of Revenue that substantial cash transactions were carried out, having regard to date of opening of accounts, which were not verified. Now this Court is of opinion that this reason is vague. duty of assessee is to disclose bank statements for relevant year, which it did. As to what inferences are to be drawn for previous years is not within remit of 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 foregoing reasons impugned assessment notice and all consequential proceedings are hereby quashed. 10. writ petition is allowed in above terms. S. RAVINDRA BHAT, J. PRATEEK JALAN, J. FEBRUARY 14, 2019 hkaur W.P.(C) 10857/2016 Page 7 of 7 Revolution Forever Marketing Pvt. Ltd. v. Income-tax Officer