ITAT DELHI BENCH ‘B’
Income-tax Officer
Versus
Contel Medicare Systems (P.) Ltd.
IT APPEAL NO. 3642 (DELHI) OF 2011
[ASSESSMENT YEAR 2001-02]
OCTOBER 31, 2011
ORDER
K.D. Ranjan, Accountant Member
This appeal by the Revenue for the assessment year 2001-02 arises out of the order of the learned Commissioner of Income-tax (Appeals)-IV, New Delhi.
2. The ground of appeal raised by the Revenue reads as follows :
“The learned Commissioner of Income-tax (Appeals) has erred on the facts and in law in invalidating notice issued under section 148 of the Income-tax Act ignoring that the case was reopened under section 147 of the Income-tax Act on the basis of information received from the investigation wing. Reliance is placed on the decisions in ITO v. Smt. Gurinder Kaur [2007] 288 ITR (AT) 207 (Delhi) ; Badri Vishal Aggarwal v. Deputy CIT [2007] 14 SOT 42 (Delhi) (URO) ; and Ambica Steels Ltd. v. Deputy CIT [2008] 305 ITR (AT) 149 (Delhi).”
3. The only issue for consideration relates to reopening of assessment under section 147 of the Act. The facts of the case stated in brief are that the assessee filed the return of income on October 29, 2001 admitting taxable income of Rs. 2,65,753. The return of income was processed under section 143(1) of the Act. Subsequently, an information was received from the investigation wing, New Delhi, that certain persons called beneficiaries, have resorted to money-laundering by giving unaccounted cash to persons called entry operators and in turn taking from them cheques/demand drafts in the garb of share application money or sale proceeds of non-existent goods thereby ploughing back their undeclared cash into accounts/ business. The Assessing Officer after recording reasons issued notice under section 147 of the Act on March 27, 2008 to which the assessee did not file return of income. The Assessing Officer issued notice under section 142(1) on July 24, 2008, in response thereto, the assessee filed letter dated August 14, 2008 stating that the assessee had already filed return vide acknowledgement number 319 on October 29, 2001. The assessee was again specifically asked to file the return under section 148. The assessee then vide letter dated November 17, 2008 filed the return of income under section 148 of the Act. The assessee asked the copy of reasons recorded which were provided. The assessee filed certain objections, which were also disposed of by the Assessing Officer as mentioned in the assessment order.
4. During the relevant previous year, the assessee received share application money of Rs. 20,00,000. The Assessing Officer after detailed discussion added the amount of Rs. 20,00,000 as undisclosed income on the ground that the assessee could not discharge its onus to prove the genuineness of transactions and creditworthiness of the share applicants.
5. Before the learned Commissioner of Income-tax (Appeals) the assessee challenged the assessment on issue of notice under section 147 of the Act and also on merits. It was submitted before the learned Commissioner of Income-tax (Appeals) that the Assessing Officer while recording the reasons relating only to three share applicants, which were supplied to the assessee, but copies of documents relied upon by the Assessing Officer was not provided even till completion of assessment. During the course of appellate proceedings, the assessee filed paper book, which was referred to by the learned Commissioner of Income-tax (Appeals) for his comments. After reminders the Assessing Officer took the stand that the case was reopened under section 148 of the Act because there was reason to belief that income had escaped assessment to the tune of Rs. 16,00,000. It was also submitted that from the perusal of reasons recorded by the Assessing Officer it was clear that reference had been made to survey proceedings in the case of one M/s. Gurcharan Jewellers and thereafter he had discussed the modus operandi utilised by the assessee to plough money. It was further stated that the assessee had no connection whatsoever with M/s. Gurcharan Jewellers. The Assessing Officer had blindly relied upon the information received from the investigation wing of the Department without making any independent enquiry regarding information received by him. It was also alleged that the Assessing Officer did not apply his mind independently before reopening the assessment. The learned Commissioner of Income-tax (Appeals) in order to examine the contention of the assessee that the Assessing Officer had not applied his mind independently and proceeded to reopen the assessment on the report of the investigation wing, observed that paragraphs 1 to 3 of reasons recorded were general in nature wherein certain allegations had been mentioned. In paragraph 3 the gist of investigation made by the investigation wing had been summarised. In paragraph 4 it is stated that the assessee had credits in the bank account of Shri Parmanand Garg, Shri Ashok Kumar Singhal and Shri Brahm Dutt. Even though not mentioned, this was an allegation made by the investigation wing in its report, which gave the Assessing Officer the reasons to believe that an amount had escaped assessment. The learned Commissioner of Income-tax (Appeals) after discussing the decisions of the hon’ble Delhi High Court in the case of United Electrical Co. (P.) Ltd. v. CIT [2002] 258 ITR 317 ; CITv. Atul Jain [2008] 299 ITR 383 (Delhi); and CIT v. Vardhman Estates Ltd. [2007] 165 Taxman 473 (Delhi) has held that the Assessing Officer while reopening assessment did not independently make an enquiry on the veracity of the report filed by the investigation wing, which had been forwarded to him by the office of the learned Commissioner of Income-tax. The statements relied upon by him were general in nature. The return of income, as originally filed by the assessee, if any, has not been perused by the Assessing Officer. Still he has decided to initiate proceedings under section 147 of the Act. The learned Commissioner of Income-tax (Appeals) relied on the decision of the hon’ble Delhi High Court in the case of CIT v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Delhi) wherein it has been held that mere information received by the Deputy Director, Income-tax Investigation and directions of the senior officers to initiate proceedings under section 147 cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that the Assessing Officer has independently applied his mind to arrive at a belief that income had escaped assessment. The learned Commissioner of Income-tax (Appeals) relying upon the decision of the hon’ble Delhi High Court has held that reassessment proceedings initiated under section 147 of the Act were bad in law. He accordingly declared the assessment as void.
6. Before us the learned senior Departmental representative submitted that the Assessing Officer on receipt of information from investigation wing has recorded reasons by applying his mind. Specific instances have been given suggesting that the assessee had routed its money in the name of three persons in the garb of share application. Sufficiency of reasons cannot be challenged by the assessee. The Assessing Officer had, therefore, applied his mind while reopening the assessment. On the other hand, the learned authorised representative for the assessee submitted that there is no application of mind while recording the reasons. It is not discernible from the reasons recorded by the Assessing Officer. Therefore, the learned Commissioner of Income-tax (Appeals) is justified in cancelling the reopening of assessment. The learned authorised representative of the assessee relied on the decision of the hon’ble Delhi High Court in the case of Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51 to support his contention.
7. We have heard both parties and gone through the material available on record. The Assessing Officer had recorded detailed reasons on receipt of information from the investigation wing of the Department. It is a fact the Assessing Officer had not conducted any inquiry to verify information received by him before issue of notice under section 148 of the Act. The learned Commissioner of Income-tax (Appeals) has cancelled the assessment on the ground that the Assessing Officer before issue of notice under section 148 had neither conducted inquiry nor verified information with the return of income and hence it was a case of non-application of the mind. In the case of Signature Hotels (P.) Ltd. (supra) the hon’ble Delhi High Court has held that the first sentence of reasons states that information had been received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5,00,000 during the financial year 2002-03 as per details given in the annexure. The last sentence records that as per information, the amount received was nothing but an accommodation entry and the assessee was beneficiary. Under these circumstances the hon’ble Delhi High Court had held that the aforesaid reasons do not satisfy the requirement of section 148 of the Act. The reasons and the information referred to was extremely scanty and vague. There was no reference to any document or statement, except annexure. Annexure could not be regarded as material or evidence that prima facie could show or establish nexus or link with escapement of income. Annexure was not a pointer and did not indicate the escapement of income. Further it was apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-tax (Investigation) and arrived at a belief whether or not any income had escaped assessment. Under these circumstances the hon’ble Delhi High Court quashed the proceedings initiated under section 68 of the Act. We have gone through the decision of the hon’ble Delhi High Court carefully. In this case the reasons recorded by the Assessing Officer for the approval of the learned Commissioner of Income-tax and the approval accorded by the learned Commissioner are reproduced as below (page 56) :
“11. Reasons for the belief that income has escaped assessment. – Information is received from the Director of Income-tax (Investigation-1), New Delhi that the assessee has introduced money amounting to Rs. 5,00,000 during the financial year 2002-03 relating to the assessment year 2003-04. Details are contained in annexure. As per the information amount received is nothing but accommodation entry and the assessee is a beneficiary.”
8. On the basis of the aforesaid reasons, the Commissioner, Income-tax gave approval recording as under :
“Yes, I am satisfied on the reasons recorded by the Assessing Officer for approval and issue of notice under section 148 of the Income-tax Act, 1961.”
9. We may also like to reproduce the annexure received by the Assessing Officer on the basis of which the abovementioned reasons were recorded in the case of Signature Hotels (P.) Ltd. (supra) :
“13. Annexure attached to the said pro forma placed on record of the petitioner reads as under :
