Asstt Vs Maruti Clean Coal & Power Ltd. (ITAT Raipur)
There is no dispute that no incriminating material has been found at the time of search and therefore it is now settled proposition of law that no assessment u/s. 153A of the Act can be framed in the absence of any incriminating material found at the time of search. For this proposition, we draw support from the decision of the Hon’ble High Court of Delhi in the case of Kabul Chawla (supra).
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:
1. This appeal by the Revenue and cross objection of the Assessee are directed against the order of the Ld. CIT(A), Raipur dated 30.04.2012 pertaining to A.Y. 2004-05.
2. The grievance of the revenue relates to the deletion of the addition of Rs. 35 lacs made by the A.O. u/s. 68 of the Act. In its cross objection, the assessee has challenged the reopening of the assessment by the issue of notice u/s. 148 of the Act.
3. Since the cross objection of the assessee goes to the root of the matter, we take up the cross objection first. In this case, the original assessment was framed u/s. 153A r.w.s. 143(3) of the Act vide order dated 31.12.2008. A notice u/s. 148 was issued and served on 31.03.201. Since the impugned assessment year is 2004-05, therefore, it can be safely concluded that the notice u/s. 148 of the Act was issued beyond 4 years from the end of the assessment
4. The reasons for reopening the assessment are as under:-
Annexure-A’
In the Course of investigation made by the Investigation Wing under the DIT (Investigation), New Delhi into the cases of various entry operators and had circulated a CD containing the statement and details of the entry operators and the beneficiaries. The date in the CD shows that M/s Maruti Clean Coal & Power Ltd PAN No. AADCH4810C has taken accommodation entries of Rs. 35,00,000/- during the F. Y. 2003-04 relating to A.Y. 2004-05 from the Laboratories Overseas (P) Ltd, Parkash Punit Commerce & Consultant, Rubik Export Ltd, Satwant Singh Sodhi Construction, Mestro Marketing & Advertising (P) Ltd, Ethnic Creations (P) Ltd and Baldev Harish Electricals (P) Ltd The ALIT has made assessment u/s 153A with section 143(3) of IT Act, 1961 in the assesse’s case. The accommodation entries from the various parties mentioned above, which did not find place in the assessee’s book of account. Accordingly, 1 have reasons to believe that the above income chargeable to tax escaped assessment and it is proposed to assess/ re-assess that income and such other income which comes to notice subsequently during course of investigation by D1T (Investigation). Therefore, notice u/s 148 is issued for A.Y. 2004-05
5. We are unable to understand when in the reasons so recorded, the A.O. himself is stating that the accommodation entries from the various parties mentioned above, which did not find place in the assessee’s books of account, therefore, he has reasons to believe that the income chargeable tax has escaped assessment. When the entries are not found in the books of the assessee how the same could be made basis for reopening the completed assessment. In our understanding of the law, veracity of the notice u/s. 148 of the Act has to be tested on the basis of the notice itself. As mentioned elsewhere, the notice is issued after four years from the end of the relevant assessment years, First proviso to section 147 of the Act squarely apply and the same is as under:-
Provided that where an assessment under sub-section (3) of section 143 or this section 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 ossessee 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 assessment, for that assessment year.
6. The mandate of this proviso is that income that has to be taxed must have escaped assessment by reasons of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
7. There is not even a whisper in the reasons recorded for the reopening of the assessee relating to non disclosure of full and true facts by the assessee. The Hon’ble High Court of Delhi in the case of I Iaryana Acrylic Manufacturing Company 308 ITR 38 had the occasion to consider a similar issue and observed as under:-
20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel lntertrade (P.) Ltd.’s we &Id agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the 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 his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.
8. A similar view was taken by the Hon’ble High Court of Punjab and Harayana in the case of Dulichand Singhania 269 ITR 192, the relevant part reads as under:-
13. The entire thrust of the findings recorded by the AO in his order dt. 13th March, 2003 is to justify his satisfaction about escapement of income. According to him, it was a clear case of escapement of income as defined in Expin. 2 to Section 147 as the assessee had been allowed excessive relief under Section 800 of the Act. However, it is not necessary for us to go into the merits of this finding as the second requirement of the proviso has not been satisfied obviously. The reasons recorded by the AO for initiation of proceedings under Section 147 of the Act have already been reproduced above. A bare perusal of the same shows that the satisfaction recorded therein is merely about escapement of income. There is not even a whisper of an allegation that such escapement had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Absence of this finding, which is a “sine quo non” for assuming jurisdiction under Section 147 of the Act in a case falling under the proviso thereto, makes the action taken by the AO wholly without jurisdiction. As already observed, the learned counsel for the Revenue has conceded that neither in the reasons recorded nor in the order dt. 13th March, 2003, has the assessee been charged with failure to disclose, fully and truly all material facts necessary for his assessment. In Fennei (India) Ltd. v. Dy. CTT (2000) 241 ITR 672 (Mad), similar matter had come up for consideration before the Madras High Court and it has been held as under:
“The precondition for the exercise of the power under Section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the belief reasonably “entertained by the AO that any income chargeable to tax has escaped assessment for that assessment year. However, when the power is invoked after the expiry of the period of four years from the end of the assessment year, a further precondition for such exercise is imposed by the proviso namely, that there has been a failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Section 142 or Section 148 or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Unless, the condition in the proviso is satisfied, the AO does not acquire jurisdiction to initiate any proceeding under Section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the AO must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire proceedings. The relevant words in the proviso are, ” unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee
Mere escape of income is insufficient to justify the initiation of action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment.
Whenever a notice is issued by the AO beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of Section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the AO to record that anyone or all the circumstances referred to in the proviso existed before the issue of notice under Section 147.”
Similarly, in Aivind Mills Ltd. v. Dy. CTT (2000) 242 ITR 173 (Guj) it was held as under:
“It is a clear case where the AO has no reason to link escapement of income from assessment with non-disclosure of any material fact necessary for his assessment at the time of original assessment but is due to an erroneous decision on the question of law by the AO. Thus, the case is squarely covered by the proviso to Section 147 and not Section 149. Initiation of proceedings under the proviso being clearly barred by time, the AO could not have assumed jurisdiction by issuing notice under Section 148 in respect of the asst. yr. 1982-83.”
9. We find that during the course of the assessment proceeding u/s 153A/143(3) of the Act, the assessee has filed complete details of share application money received and refunded along with names/addresses/PAN details for A.Y. 2001-02 to 2007-08.
10. Coming back to the reasons recorded for reopening of the assessment as mentioned elsewhere, it can be seen that there is no independent application of mind by the A.O. It appears that the A.O. has borrowed the investigation made by the Investigation Wing under the DIT (Investigation), New Delhi. The Hon’ble High Court of Delhi in the case of G & G Pharma India Ltd. 384 ITR 147 has observed as under:
12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: “I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries.” The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: “it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries”. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.
11. The Hon’ble High Court of Delhi in 338 ITR 51 had the occasion to consider identical set of facts and observed as under:-
13 Annexure attached to the said proforma placed on record of the petitioner reads as under:-
