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M/s Apeejay Education Society, M/s Rajeshwari Sangeet Academy Versus Asstt. Commissioner of Income Tax

2016 (4) TMI 299 - ITAT AMRITSAR

Reopening of assessment - reasons recorded - Held that:- 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 assessme .....

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irement 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. - Decided in favour of assessee. - ITA Nos. 710 & 711(Asr)/2014, ITA No. 705(Asr .....

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ing grounds have been raised: "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 r .....

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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 .....

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udiciously 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 .....

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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 .....

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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 scop .....

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that there is failure on the part of the assessee 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 pr .....

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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 asses .....

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ionnaire 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 ₹ 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 ₹ 1,76,54,480.On 22nd March, 2002, the AO issued the impugned notice under s. .....

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ial 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 w .....

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assessee, a search and seizure operation under section 132(1) of the Act was conducted by the Director of Income tax (Investigation)-II 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 in .....

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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 o .....

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he 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 p .....

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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 disting .....

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ruly 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 factua .....

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of ₹ 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 ₹ 4,64,51,545. It also claimed deduction under s. 80HHC of the Act amounting to ₹ 5,51,59,320. Assessment under s. 143(3) of the Act was made on 16th March, 1998, at an income of ₹ 25,06,29,080. The AO allowed e .....

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en 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 argu .....

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able 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 .....

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derations 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 reas .....

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on 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 as .....

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on 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 .....

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7 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 p .....

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ge 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 assessm .....

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O for reopening the assessment are as follows: "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. .....

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orded on 12.05.2011 by DDIT(Inv.) Unit VII(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/s Vashington Software Ltd., a survey u/s 133A was conducted in case of M/s Apeejay Education Society, at different premises o .....

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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 VI(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 .....

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rom 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 ma .....

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uch 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 cove .....

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nguishable. 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. Bef .....

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d 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 ve .....

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essee and hence, the income to the extent of ₹ 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. 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 e .....

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e 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 ₹ 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 a .....

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gs for 1967-68 showed that no correspondence was exchanged between the so-called sole selling agents and the company. 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 distri .....

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, 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 judgme .....

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