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2016 (6) TMI 375 - ITAT DELHI

2016 (6) TMI 375 - ITAT DELHI - TMI - Reopening of assessment - reason to believe - time barred - Held that:- We have perused the reasons recorded by the AO and we find that the AO issued notice u/s. 148 of the Act on 30.3.2010 for the assessment year in dispute i.e. 2003-04 which is after the expiry of 4 years from the end of the relevant assessment year. We are of the view that the case of the assessee is governed by the first proviso to section 147 of the Act and in the original assessment ma .....

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who duly responded to the summons. We further find that in the reasons recorded the AO has nowhere alleged that escapement of income has occurred by reason of either omission on the part of the assessee to disclose fully and truly all material facts for assessment. It is a settled law that in the absence of omission or failure on the part of the assessee to disclose fully and truly all material facts, the time limit to issue notice u/s. 148 expired on 31.3.2008, therefore, the notice u/s. 148 d .....

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er of Income Tax (Appeals)-VII, New Delhi pertaining to assessment year 2003-04 on the following grounds:- 1. That the notice under section 148 is illegal and void ab initio and is, therefore, liable to be quashed. 2. That there was no "reason to believe" that petitioner's income has escaped assessment which is "must" for assuming lawful jurisdiction uls 147 and such absence of reason to believe is evident from the plain reading of the reason recorded which does not conta .....

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147 as our case is governed by first proviso to section 147 and not by main section 147. In the original assessment made under section 143(3) vide assessment order dated 30/3/2006, the Assessing Officer had made detailed enquiry of the share application money received by the assessee-company. 6. Notice under section 148 is illegal because it has been issued merely upon change of opinion. 7. Notice is illegal because our case is governed by first proviso to section 147 and in the reason recorded .....

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the Assessing Officer while making original assessment under section 143(3) had made addition on account of share application which became subject matter of appeal before Income Tax Appellate Tribunal and Hon'ble Delhi High Court and, therefore, the present reopening involving the same subject matter is in violation of second proviso to section 147. 9. That the assessment order passed by the assessing officer is illegal and unjustified and, therefore, should be quashed. 10. That the action .....

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eturn was duly processed under section 143(1)(a) of the Act on 15.3.2004. The assessee company is engaged in the business of manufacturing of yarn. The assessment was completed under section 143(3) on 30.3.2006 at a loss of ₹ 96,87,176/- after making an addition of ₹ 25,00,000/- under section 68 of the Income Tax Act, 1961. The Ld. CIT(A) vide order dated 15.5.2007 in appeal No. 37/06-07 deleted the addition of ₹ 25,00,000/- and the said deletion was subsequently confirmed by t .....

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sidered this information and had reason to believe that income of the assessee to the extent of ₹ 7 lacs had escaped assessment. After recording the reasons to believe, AO issued Notice dated 30.3.2010 after obtaining necessary approval from CIT-II, New Delhi. In response to the said notice, assessee filed a letter dated 5.4.2010 stating therein that the return filed earlier and as already assessed u/s. 143(3) may be accepted as return filed under section 148. The assessee further requeste .....

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Thereafter, AO observed that the assessee has shown receipt /credit of ₹ 7 lacs as share application money through transaction where no real transaction took place, hence, the same was treated as unexplained funds and added back to the income of the assessee and assessed the same at loss of ₹ 1,84,37,726/- passed u/s. 147/143(2) of the I.T. Act, 1961 vide his order dated 24.12.2010. 3. Against the order of the Ld. AO, assessee appealed before the Ld. CIT(A), who vide impugned order .....

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made under section 143(3) vide assessment order dated 30.3.2006 the Assessing Officer had made detailed enquiry of the share application money received by the assessee-company. The Assessing Officer issued notice u/s 148, i.e. after the expiry of four years from the end of the relevant assessment year. He further stated that there was no omission or failure on part of the assessee to disclose fully and truly all material facts relating to share application money because the assessee had submitt .....

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to support his contentions, he relied upon the following judgments of the Hon ble Delhi High Court by filing the copies thereof with the Paper Book and requested to quash the reassessment. - CIT v. Suren International P. Ltd. (2013) 357 ITR 24 (Del) - Haryana Acrylic Manufacturing Company v. CIT (2009) 308 ITR 38 (Del) - JSRS Udyog Limited v. ITO (2009) 313 ITR 321 (Del) - Wel Intertrade P. Ltd. ITO (2009) 308 ITR 22 (Del) 6. On the other hand, Ld. DR relied upon the order of the Ld. CIT(A) and .....

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orders of the Revenue authorities alongwith the Paper Book filed by the assessee having various documentary evidences. We have also perused the case laws cited by the Ld. Counsel of the Assessee. In this case the original return was filed on 28.11.2003 declaring loss of ₹ 1,21,87,176/-. The return was duly processed under section 143(1)(a) of the Act on 15.3.2004. The assessee company is engaged in the business of manufacturing of yarn. The assessment was completed under section 143(3) on .....

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1,91,37,726/-. Subsequently, the case of the assessee was reopened u/s. 147 as information was received from Investigation Wing of the Department that the assessee company had received accommodation entry from M/s Garg Petroleum Private Limited through banking channel. AO considered this information and had reason to believe that income of the assessee to the extent of ₹ 7 lacs had escaped assessment. After recording the reasons to believe, AO issued Notice dated 30.3.2010 after obtaining .....

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rg Petroleum Private Limited. Subsequently notice u/s. 143(2) was issued to the assessee. Assessee filed objections to the reopening of the assessment and issuing of notice u/s. 148 by his letter filed on 10.12.2010 which were rejected vide order sheet entry dated 10.12.2010. Thereafter, AO observed that the assessee has shown receipt /credit of ₹ 7 lacs as share application money through transaction where no real transaction took place, hence, the same was treated as unexplained funds and .....

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sment was completed under section 143(3) on 30.03.2006 at loss of ₹ 96,87,176/-. After giving effect of order of Hon ble Delhi High Court the assessed loss at Rs, 1,91,37,726/-. The Investigations were conducted by the Investigation wing of the Department on certain persons engaged in providing accommodation entries to beneficiaries of their services, in return of commission. It has been revealed that many persons were using services of accommodation entry operators to channelize their own .....

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the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. 2.2 The assessees who had unaccounted money (called as entry takers or beneficiaries) and wanted to introduce the same in the books or accounts without paying tax, approached another person (called as entry operator) and handed over the cash (plus commission) and had taken cheques/DDs/Pos. The cash was being deposited by the entry operator in a bank account either in his own name or in the name o .....

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is deposited) or another account in which funds were transferred through clearing in two or more stages. The beneficiary in turn deposited these instruments in his bank accounts and thus his unaccounted money is introduced to his regular books of account in the form of gift, share application money loan etc through banking channels. 2.3 The operators gave the account holders amounts ranging from ₹ 1000 to 2000 per month. These account holders were masons, plumbers, electricians, peons, dr .....

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or operation of these accounts. Actually, many of them were not even aware of the tax implications etc. Their only concern was with the few thousand rupees given to them by the entry operators. 3. Summing up, the report as a result of these extensive enquiries carried out by the DIT(Inv.), New Delhi has established e non-genuineness of transactions, whether shown by beneficiaries as inflow of Share Capital or receipt of Gifts or consideration for sale-purchase. The creditworthiness of the person .....

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d 13.3.2006. 4.1 Enquiries revealed that one Shri Mahesh Garg, was controlling a number of bank accounts In various names & was using various persons operate these accounts. In this regard, statements on oath u/s 131 of the I. T. Act, 1961 of Mahesh Garg was recorded by the Addl. DIT (Inv.), Unit-I, New Delhi. Following is the gist of the statements & letters containing admissions relevant to this case:- (vii) Statements were given on oath by Shri Mahesh Garg before Addl. DIT (Inv.), Uni .....

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ved that the assessee has taken the accommodation entries as noted below:- Bank & Branch Amount Instrument No. Date Credit entry coming from the account of SBOP, Wazirpur 700000 159077 06.02.03 Garg Petroleum Pvt. Ltd. Total 7,00,000/- In view of the findings of the investigation report, the creditworthiness of the lenders have not been established and these transactions seem to be non genuine. I therefore, have reason to believe that the amount of ₹ 7,00,000/- represents income of the .....

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7 of the Act and in the original assessment made u/s. 143(3) vide assessment order dated 30.3.2006 the AO had made detailed enquiry of the share application money received by the assessee company. We find that there is no omission or failure on the part of the assessee to disclose fully and truly all material facts relating to share application money because the assessee had submitted details of share application money in initial assessment proceedings which was verified by the AO by way of issu .....

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8, therefore, the notice u/s. 148 dated 30.3.2010 is time barred. Therefore, we are of the considered view that Notice issued u/s. 148 of the Act is illegal and deserve to be quashed. Our aforesaid view is supported by the following judgments:- CIT v. Suren International P. Ltd. (2013) 357 ITR 24 (Del) wherein the Hon ble High Court has held that there was neither any allegation that the assessee had failed to truly disclose any material facts at the time of assessment, nor could it be readily i .....

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