Case Law Details
ITO Vs Aggregate Finance & Investment P. Ltd (ITAT Delhi)
Be that as it may, as adverted to supra, the case of the Ld. AO while recording the reasons was that the assessee derived the income as a provider of bogus accommodation entries. However, the addition was made on account of receipt of share application money. The issue of bogus entry operation is given a go bye during the assessment proceedings. In such circumstances, the question arises as to whether the learned AO could proceed to make any addition of any other income chargeable to tax in such circumstances. This issue is no longer res integra and is covered by the decision of the Hon’ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. 336 ITR 136 wherein it was clearly stated that the learned AO had the jurisdiction to re-asses the issue other than the issues in respect of which the proceedings were initiated, but he has no jurisdiction when the reasons for the initiation of the proceedings cease to survive. On this score also, the assessee succeeds. In this backdrop, we find it difficult to hold that the findings of the learned CIT(A) suffers any illegality or irregularity. We, therefore, uphold the same as devoid of any merit. The same is liable to be dismissed we order so.
FULL TEXT OF THE ORDER OF ITAT DELHI
Challenging the order of the learned Commissioner of Income-tax (Appeals)-I, New Delhi (for short hereinafter called as “the learned CIT(A)’) in Appeal No.314/11-12 dated 19.10.2015, revenue preferred this appeal.
2. Brief facts of the case relevant for the disposal of the appeal are that the assessee company has been engaged in the investment business. For the Asstt. Year 2003-04, they have filed their return of income on 2.12.2003 after adjusting the-brought forward losses and the said return was processed u/s 143 (1) of the Income -tax Act, 1961 (“the Act”) on 5.1.2004.
3. Subsequently, on receipt of information from the Directorate of Investigation, New Delhi to the effect that the assessee company engaged in providing accommodation entries, the learned AO recorded reasons by issuing notice u/s 148 on 8.3.2010. Proceedings u/s 147 of the Act completed by order dated 3.12.2010 u/s 144/147 of the Act by determining the total income of the assessee at Rs.1,70,04,230/- and by making addition of Rs.1.70 crore on account of receipt of share application money. By preferring an appeal before the learned CIT(A), the assessee challenged the assessment order on two counts. Firstly, the reopening of assessment u/s 147/148 merely on the information from the DUIT (Inv) without independently applying his mind to the satisfaction of the learned AO was bad and not maintainable. In so far as the merits were concerned, it was the argument of the assessee before the learned CIT(A) that when the reasons were recorded for certain grounds and when the addition was made for a different ground, the addition cannot be sustained.
4. Learned CIT(A) examined both the issues at length and reached a conclusion that the assessment order cannot be sustained. He, therefore, while allowing the appeal, deleted the addition made by the learned AO.
5. The revenue is, therefore, before us in this appeal challenging the deletion. It the argument of the learned DR before us that the information that was furnished by the Investigation Wing was reproduced by the learned AO in the assessment order and the AO rightly construed this to be a fresh information. She further submitted that inasmuch as the assesssee did not cooperate with the learned AO, he is justified in passing the best judgment assessment. She further submitted that when the reasons were not objected by the assesse before the AO and the learned CIT (A) did not seek the remand report on the contentions of the assessee, learned CIT(A) is not justified in holding that the reopening of the assessment u/s 147 is bad under law or that the additions are liable to be deleted. She lastly submitted that being an entry operator means the assessee both receives as well as gives the bogus entries, as such, though the reasons were reading that the assessee was providing bogus entries, the addition made on the ground that he received the accommodation entries to route their own money is sustainable.
6. Per contra, it is the submission on behalf of the assessee that in this matter, the reasons recorded by the learned AO on their own establish that there is no independent application of mind by the learned AO. He brought to our notice that in the reasons recorded, it was stated by the learned AO that the transactions involving Rs.1,01,83,288/- has escaped assessment as defined by Section 147 of the Act. Learned AR submitted that this very statement of the learned AO in the reasons clearly establishes that the learned AO had recorded the reasons without examining the contents of the information received and without verifying the same with reference to the business modus operandi of the assessee.
7. He further submitted that except the information received from the DIT(Inv), absolutely, there is no evidence available much less adverse in the custody of the learned AO to form a live link between the information and the transactions done by the assessee company through their banking channels.
8. Next he submitted that when the reasons for reopening were found to be nonexistent, AO loses jurisdiction to make any addition of any other income.
9. We have gone through the record in the light of the submission on either side. From the very reasons recorded by the learned AO, it is evident that the learned AO was blowing hot and cold in the same breath inasmuch as in the first limb, he states that the assessee derived some income as a provider of the bogus accommodation entries, whereas the second limb to the effect that the entire amount was believed to have escaped income shows that the assessee is a beneficiary of bogus accommodation entries to the tune of Rs.101,83,288/-. It shows that there is confusion in the mind of the learned AO as to whether the transactions involving Rs.1,01,83,288/- was provided by the assessee as the bogus entry operator or the assessee is the beneficiary of the bogus accommodation entries to rout their own money through such transactions. It is, therefore, clear that there was no verification on the part of the learned AO as to how the assessee derived the escaped income. Whether it was the commission relatable to the bogus accommodation entry transactions worth Rs.1,01,83,288/- or the assessee routed their own money by way of share application through such bogus transactions. Had there been some information collected by the learned AO on this aspect in pursuance of the receipt of the information from DIT(Inv), the things would have been clear but without making any verification or enquiries to know how the assessee derived the benefit in the bogus accommodation entry transactions, learned AO issued the notice u/s 148.
10. We are convinced with the decision of the Hon’ble Apex Court in the case of Chhugmal Rajpal, 79 ITR 603 and the decision of the Hon’ble Delhi High Court in the case of G&G Pharma Ltd. dated 8.10.2015 in ITA No.545/2015 squarely applies to the facts of the case and the irresistible conclusion is that the reopening of the case was not in accordance with ti provisions of Section 147 of the Act. On this ground, the assessee suceeds.
11. Be that as it may, as adverted to supra, the case of the Ld. AO while recording the reasons was that the assessee derived the income as a provider of bogus accommodation entries. However, the addition was made on account of receipt of share application money. The issue of bogus entry operation is given a go bye during the assessment proceedings. In such circumstances, the question arises as to whether the learned AO could proceed to make any addition of any other income chargeable to tax in such circumstances. This issue is no longer res integra and is covered by the decision of the Hon’ble jurisdictional High Court in the case of Ranbaxy Laboratories Ltd. 336 ITR 136 wherein it was clearly stated that the learned AO had the jurisdiction to re-asses the issue other than the issues in respect of which the proceedings were initiated, but he has no jurisdiction when the reasons for the initiation of the proceedings cease to survive. On this score also, the assessee succeeds. In this backdrop, we find it difficult to hold that the findings of the learned CIT(A) suffers any illegality or irregularity. We, therefore, uphold the same as devoid of any merit. The same is liable to be dismissed we order so.
12. In the result appeal of the revenue is dismissed.
Order pronounced in the open court on 27th December,2018
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