Metro Decorative (P) Ltd. Vs. ITO (ITAT Delhi)
Reasons recorded by the AO in this matter solely basing on the information received from the Directorate of investigation without any independent exercise of mental process cannot be construed as reasons to believe and the consequent proceedings of reopening are bad under law. Further, the approval/sanction of the Addl. CIT, is also not in accordance with the requirements of section 151 and this also vitiates the proceedings. For these reasons, the reopening proceedings are bad under law and are liable to be quashed.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
Aggrieved by the order dated 29-11-2013 in appeal no. 155/11-12 passed by the learned Commissioner (Appeals)-IX, New Delhi (hereinafter for short called as ‘the learned Commissioner (Appeals)). Assessee preferred this appeal on the following grounds :–
1. “On the facts and circumstances of the case and in law, the assessing officer erred in issuing notice under section 148 of the Income Tax Act, 1961. The notice under section 148 issued in this case is illegal, void and without jurisdiction and accordingly the assessment order passed on the foundation of such notice is liable to be quashed. The learned Commissioner (Appeal) should have held the reassessment proceedings as illegal, void and without jurisdiction.
2. On the facts and circumstances of the case and in law, the Commissioner (Appeal) erred in confirming the addition made by the assessing officer of share application money/share capital of Rs. 20,00,000 as alleged unexplained income under section 68 of the Income Tax Act, 1961. The addition made by the assessing officer is not sustainable and Commissioner (Appeals) should have deleted the same.
3. On the facts and circumstances of the case and in law, the Commissioner (Appeal) erred in confirming the addition of Rs. 40,000 made by the assessing officer as alleged commission paid. The addition made by the assessing officer is not sustainable and Commissioner (Appeal) should have deleted the same.
4. The alleged reasons given by assessing officer and Commissioner (Appeals) for making/confirming the additions of Rs. 20,00,000 and Rs. 40,000 are erroneous, both on facts and in law and, therefore, the additions of Rs. 20,00,000 and Rs. 40,000 made by the assessing officer and confirmed by Commissioner (Appeals) are liable to be deleted.
The appellant craves leave to add, alter, modify or delete one or more ground of appeal before or at the time of hearing of appeal.
The aforesaid grounds of appeal are without prejudice of each other.”
2. Briefly stated facts are that the return of income dated 30-10-2004 submitted by the assessee declaring a total income of Rs. 1,72,908 was processed under section 143(1) of the Income Tax Act, 1961 (hereinafter for short called as ‘the Act’) and subsequently an information was received from the Investigation Wing, New Delhi that certain persons including the assessee have resorted to money laundering by giving an unaccounted cash to entry operators and in turn taking cheques and DDs under the garb of share application money or sale proceeds of non-existent goods thereby ploughing back their undeclared cash into its books of accounts. Basing on such information the assessing officer recorded the following reasons for reopening the assessment :–
“The investigation wing of the Income Tax Department had unearthed a huge money laundering mechanism wherein it was establish that bogus accommodation entries were provided/taken. These accommodation entries received in lieu of payment of cash of equivalent amount plus commission thereon to the entry operators. For obvious reasons, these cash transactions are not routed through the books of account of the assessee. In this case, information has been received from Assistant Commissioner, Central Circle-4, New Delhi forwarded by Income Tax Officer Ward 14(4), New Delhi vide Letter F. No. ITO W 14(4)/2010-11/765, date 22-3-2011 that during the relevant assessment year, the assessee had received the following cheque amount(s) in nature of accommodation entry from the companies operated by Tarun Goyal (an entry operator) for the assessment year 2004-05.
