Case Law Details
Priyank Mittal Vs. ITO (ITAT Agra)
A perusal of the reasons recorded by the AO shows that the allegation as per the reasons to believe escapement of income is bogus purchase/sale of shares, while the impugned addition has been made with respect to gift, which shows that the A.O. had no specific information. Hence, as rightly contended, the reasons recorded are vague and farfetched. The A.O., vide letter date 01.12.2009 (Paper Book Pg.16) alleged that the appellant had entered into the transaction of sale/purchase of shares for Rs. 5,01,250/-, even before initiating the re-assessment proceedings. The appellant, in reply to the above letter, vide letter date 10.12.2009 (Paper Book Pg. 17) categorically submitted that he had not entered into any transaction of purchase/sale of shares. No new adverse information has been brought on record which could suggest any justification for satisfaction to initiate proceedings u/s 147/148, in spite of specific request of the appellant vide letter date 24.11.2010, (Paper Book Pg. 18 &19). In the proceedings u/s 147, the burden is on the A.O. to prove income escaping assessment as it is the belief of the A.O. for income escaping assessment which can trigger such proceedings.
This onus has not been discharged by the AO herein, rendering the initiation of the reassessment proceedings void.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
This is assessee’s appeal for assessment year 2004-05, taking the following effective grounds:
“1.1- Because in any view, the Id. CIT (A) has grossly erred in holding the initiation of Re – Assessment proceedings u/s 147/148 as valid, which is highly perverse, wrong, illegal, and bad in law.
1.2- Because in any view, the reasons recorded is mere suspicion and vague, hence not valid.
1.3- Because in any view, in proceedings u/s 147 the “onus” is on the revenue to prove “income escape assessment”.
1.4- Because in any view, the Assessment Order passed u/s 143(3)/148 is wrong, illegal, perverse and bad in law.
2.1- BECAUSE in any view, the CIT(A) has grossly erred in confirming the addition of Rs. 5,01,250/- made by the A.O. is arbitrary, wrong, illegal, and against the fact and law of the case.
2.2 BECAUSE in any view, the CIT(A) has grossly erred in confirming the addition of Rs. 5,01,250/- without prejudice to the aforesaid grounds, and in any view the amount credited of Rs. 5 Lacs in the Union Bank Account stands fully explained of the gift received duly confirmed by donor, and material on record.
2.3- BECAUSE in any view, the CIT(A) has grossly erred in confirming the addition of Rs. 5,01,250/- in view of the fact that the amount of Rs. 5 lacs credited in the Bank Accounts is strengthened and explained from the confirmation to the A.O., from “Jai Lakshmi Co-Operative Bank Ltd.” and relied by the A.O.
2.4- BECAUSE in any view, the CIT(A) has grossly erred in confirming the addition of Rs. 5,01,250/- even after the gap of more then 7 and 1/2 years in the facts and evidence on record, the credit in Bank Account remains fully explained.
2.5 BECAUSE in any view, the CIT(A) has grossly erred in confirming the addition of Rs. 5,01,250/- without admitting the fact that as per the certificate given to A.O. by Jai Lakshmi Cooperative Bank Ltd. the draft no. is 541638 date 13.06.2003 of Rs. 5 Lacs, which is drawn through State Bank of Indore the same as per copy of affidavit of Shri Mitlesh Gupta donor, was mentioned in the affidavit of assessee (as per memorandum of gift) accordingly, thus no adverse inferences of it can be taken, and in any view without giving any show cause to the assessee,
3. Because in any view, the interest charged u/s 234B, 234C and 234D as per Notice of Demand date 15.12.2010 is wrong, illegal & excessive.
2. The facts of the assessee’s case are that the AO had received information from Addl..DIT (Inv), Agra, wherein, it had been informed that the assessee was recipient of an entry from one Shri Deepak Gupta, Delhi, amounting to Rs. 5,01,250/- during financial year 2003-04, which was, in fact, a bogus entry of gift given by the said Sh. Gupta to the assessee. The AO, on the basis of the information so received, arrived at his satisfaction that income in the assessee’s case had escaped assessment within the meaning of section 147 of the I.T. Act and, accordingly, the AO initiated re-assessment proceedings against the assessee by way of issuing notice u/s 147 read with section 148 of the Act. The AO has recorded the following reason of satisfaction before issuing the notice to the assessee:
“Information has been received from the Addl. D1T (Inv.), Agra that one Mr. Deepak Gupta has provided bogus entries of Gift/sale proceeds of shares to the assessee. Enquiries have been conducted by the Addl. DIT (Inv.), Agra and it has been found that no genuine transaction in sale / purchase of shares has taken place through this bank account. The beneficiaries have taken entries by paying in cash an amount equivalent to the beneficiaries deposited the same in the bank account and then issued draft/cheque to the beneficiaries. Addl. DIT (Inv.), Agra has provided has provided a list of such beneficiaries. In the same list, name of the assessee Shri Priyank Mittal W/o Sh. Ashok Kumar Mittal, 121, Chaubeji Ka Bagh, Firozabad exists who falls under the jurisdiction of the undersigned. The assessee has taken bogus entry amounting to Rs. 5,01,250/- on 13.06.2003.
“In view of the information received from the Investigation Wing and the adverse material in possession of the Department as mentioned above, 1 have reasons to believe that income to the tune of Rs. 5,01,250/- shown as bogus sale proceeds of shares has escaped assessment in the case Shri Priyank Mittal W/o Sh. Ashok Kumar Mittal, 121, Chaubeji Ka Bagh, Firozabad”.
As a result of the said re-opening, the assessment in the assessee’s case was completed by the AO by making addition of Rs. 5,01,250/- to the assessee’s income. On total income of Rs. 761200/- as against returned income of Rs. 2,59,946/-.
3. The ld. CIT(A) confirmed the addition.
4. The ld. Counsel for the assessee has submitted, as also as per the Synopsis filed, that the allegation as per the “Reasons to believe” is regarding bogus purchase/ sale of shares, while the impugned addition has been made with respect to gift, which shows that the A.O. had no specific information and hence, the reasons recorded are vague and farfetched; that the A.O., vide letter date 01.12.2009 (Paper Book Pg. 16), alleged that the appellant has entered into the transaction of sale/purchase of shares for Rs. 5,01,250/- even before initiating re-assessment proceedings; that the appellant, in reply to the above letter date 01.12.2009, vide letter date 10.12.2009 (Paper Book Pg. 17), categorically submitted that the appellant has not entered into any transaction of purchase/ sale of shares, that no new adverse information has been brought on record which could suggest to initiate proceedings u/s 147/148, in spite of specific request of the appellant vide letter date 24.11.2010. (Paper Book Pg. l8 & 19) and that in the proceedings u/s 147, the burden is on the A.O. to prove income escaping assessment as it the belief of the A.O. for income escaping assessment.
5. The ld. DR has placed strong reliance on the impugned order. It has been contended that the AO in this case has formed his belief on receiving information from the Addl. DIT(Inv), Agra through the CIT-II, Agra and the Addl.CIT-Range-5, Firozabad, that Sri Deepak Gupta, R/o 1756, Nai Basti, Naya Bazar, Delhi has provided bogus entry of Gift to the assessee. Enquiries have been conducted by the Addl. DIT (Inv.), Agra and it has been found that no genuine transaction in sale / purchase of shares/gift has taken place through this bank account. On the basis of definite and detailed information, the AO formed his belief that the appellant has arranged bogus entry and, therefore, he initiated proceedings u/s 147 by issuing notice u/s 148 of the Act. After 1/4/1989 the AO has power to reopen assessment, provided there is ‘tangible material’ to come to his conclusion that there was escapement of income from assessment.
6. I have heard both the parties and have perused the material on record. As available on record, the assessee, vide ground no. 1, has challenged the AO’s action in re-opening the assessee’s case under sections 147/148 of the Act. The assessee had objected to the proposed re-opening of its case by submitting before the AO that he had not received any such alleged gift from Sri Deepak Gupta 1756, Nai Basti, Naya Bazar, Delhi and further objected that the reasons recorded were false and the notice issued u/s 148 of the Act was illegal. However, the AO, after duly considering the objections raised by the assessee had rejected the same by stating as under :-
“With regard to your objection, it is clarified that in your case proceedings u/s 147 of the I. T. Act, 1961 for the assessment year 2004-05 were initiated on the basis of definite information received from the Investigation Wing of the department that you have received bogus entry of Rs. 5,01,250/- from Sri Deepak Gupta, 1756, Nai Basti, Naya Bazar, Delhi, which formed the basis of reason to believe for issue of notice u/s 148 of the I.T Act, 1961. It is also clarified that at the time of initiation of proceedings u/s 147, the A.O. was not supposed to examine the information. Honorable Supreme Court in the case of Purshottam Das Bongue and ors 224 IRE 362 (SC), has given categorical ruling that the AO on receipt of information from the Investigation wing of the department without further enquiry can form an opinion regarding escapement of income u/s 147 of the I.T. Act, 1961. Similar views have been held by the Bombay High Court in the case of Adore Techno pact Ltd, Vs. Dr. Zaki Hussain DCIT, 271 ITR 50 and Honorable Jurisdiction High Court in the case of Brij Mohan Agarwal Vs. AC1T, 268 ITR 400.
Further it has been held by the Honorable Supreme Court in the case of Raymond Woolen Mills Ltd. Vs. /TO 236 1TR (SC) that sufficiency of material cannot be considered while initiating reassessment proceedings, the final outcome of the proceedings is not relevant, In the case of ACTT Vs. Rajesh Jhaveri Stock Broker Pvt. Ltd. 291 1TR 3 (SC), It has been held that the formation of belief is a subjective satisfaction of the A.O. In your case this office received definite information from the Investigation Wing, which was specific in nature and in character. The Investigation Wing after making necessary inquiries passed on the information to this office regarding bogus entry of Rs. 5,01,250/- on the basis of bank account no. 15942 of Sri Deepak Gupta, 1756, Nai Basti, Naya Bazar, Delhi in Jai Laxmi Coop. Bank, Fatehpuri, New Delhi from where draft of Rs. 5,00,000/- (debit entry of Rs. 5,01,250/- Rs. 1,250/- draft commission) was issued in the name of Sri Mayank Mittal. This also find support from your bank a/c with union bank of India, in which an amount of Rs. 5,00,000/- was credited on 18.06.2003.
From the above it is clear that the reasons recorded were specific and on the basis of information received from Investigation Wing; nexus between material and belief is well established. Thus proceedings u/s 147 of the 1. T. Act have been rightly initiated by the AO in your case for the assessment year 2004-05 after recording valid reasons. Hence your objection raised in this regard are hereby rejected.”
7. Before the ld. CIT(A), the assessee submitted that:
“That the A.O. while making the impugned addition has himself contradicted, that as per “Reason to believe”. The allegation is for bogus purchase/sale of shares while the impugned addition has been made with respect to gift, which itself goes to show that the reasons recorded are vague, farfetched. The A.O. himself belies the reasons recorded.
That before initiating the proceedings u/s 147/148 vide letter date 01.12.2009 (Copy enclosed, Pg. 2) issued by ITO 5(3), Firozabad in verification of transaction of Rs. 5,00,000/-has alleged that the appellant is entered into the transaction of sale/ purchase of shares. The appellant vide letter date 10.12.2009 (Copy enclosed, Pg. 3/1), that is much before the issue of notice u/s 148 date 16.03.2010 has categorically submitted w.r.t. above the appellant begs to submit that he has not entered any transaction of purchase/ sale of shares. That it is a settled law that to see the validity of reopening only the reasons recorded have to be seen and not any event thereafter.
Reliance Placed:
69 ITR 461 (Allahabad High Court) Jamna Lal Kabra vs. ITO. That further reliance is placed on the decision of Id. CIT (A) – II vide order date 15.01.2014 in ITA No. 139/CIT(A)-II/Agra/ACIT-4(1)/Agra/2005-06/118 date 15.01.2014 in the case of Smt. Brij Lata Mittal, Agra (Copy enclosed, Pg. 9/1 to 9/9). While relying on various decisions including in which, “Ramesh Prasad HUF vs Income Tax Officer Ward 1(3), Agra In ITA No. 99/Agra/2013 date 05.09.2013because of the failure of the departmental representative to produce the report of the Investigation wing on the basis of which reopening of the case of the above mentioned assessee was claimed to have been done, the Hobble ITAT, Agra has held that in absence of any report of the investigation wing, the reference of report of the Investigation wing given in the reasons recorded can be held only in the nature of vague and general information and on the basis such vague and general information, the reopening of the assessment proceedings u/s 147 cannot be held to be valid and therefore, the assessment order passed in the case of Sh. Ramesh Prasad, HUF vs. Income Tax Officer Ward 1(3) (Supra) has been quashed. The relevant portion of this decision is reproduced as under:
10. Considering the facts of the case in the light of above decision, it is clear that there were no specific reliable information received from Investigation Wing about escapement of Income on account of long term capital gain. The AO without examining any report or information, acted upon the said vague and general information which is bad in law. There was no reference to any document or material with the alleged report of the Investigation Wing, thus the same could not be regarded as material or evidence that prima facie showed nexus or live link, disclosed escapement of income. It is, therefore, clear that the A.O. does not apply his own mind the vague information and did not examine the basis or material, if any to support such information. The above decision squarely apply in favor of the assessee in proving reassessment is bad in law including decision of Division bench of 1TAT, Agra in the case of DC1T Vs. Late Sri Satish Prakash Mittal & others (Supra).
The decision relied upon by the Ld. Department Representative would not support the case of the Revenue as the same are clearly distinguishable of facts of the case. Therefore, there was no prima facie belief available to the AO to say that there was any escapement of income. There is no reason to believe as required under section 147 of the Act. Considering the above discussion, I am of the view that there was no justification for the AO to have initiated reassessment proceedings under section 147/148 of the Act. The reassessment order is liable to be quashed. 1 accordingly, set aside and quash the reassessment proceedings under section 148 of the Act. Therefore, all the resultant addition made by the AO would stand deleted. In view of the above, there is no need to consider the additions on merit. In the result, appeal of the assessee is allowed.”
5.2 Considering the legal position of reopening of assessment proceedings u/s 147 as laid down by the Honorable Supreme Court in the case of Income Tax officer Vs. Lakhnami Mewal Das (Supra) and further similar view taken by the Hobble ITAT, Agra Bench, Agra in case of Ramesh Prasad (HUF) Vs income tax officer ward 1(3), Agra, I hold that the reasons recorded by the AO for reopening of the assessment proceedings u/s 147 in the present case under appeal is only based on a general information and there is no material in possession of the AO to show that the shares transaction declared by the assessee to have been done through the broker Sh. S.K. Garg & company is the bogus shares transactions and hence, reopening of the assessment proceedings u/s 147 has not been found to be legally valid and consequently, assessment order passed u/s 143(3) read with section 147 dated 21.10.2005 cannot be sustained. Therefore, I annul the assessment order u/s 143(3) read with section 147 dated 21.10.2005 and accordingly, ground number 3 challenging the legal validity of the assessment order has been allowed.”
Further in the similar type of reasons for reopening, the Assessment Order has been quashed u/s 143/147 of the Income Tax Act.
Reliance Placed:
(i) ITA No. 120/Agr./07-08 CIT(A)-11 Dr. R.P. Mangal -Vs- Income Tax Officer. (Pg. 10/1 to 10/2)
Followed :
ITA No. 63/Agr/2009 (A.Y. 2002-03) ITAT Agra Bench, Agra Rajeev Mangal & Sons (HUF) -Vs- I.T.O. (Pg. 11/1 to 11/4).
(ii) 299 ITR 179 (P&H High Court) CIT vs. Anupam Kapoor. (Pg. 12/1 to 12/3).
(iii) ITA No. 396/ Agr/2004 A. Y. 2001-02 Memo Devi (Copy enclosed Pg. 13/1 to 13/6).
10. That no new adverse information has been brought on record which could suggest to initiate proceedings u/s 147/148, in spite of specific request of the appellant vide letter date 24.11.2010. (Copy enclosed, Pg.3/2 to 3/3).
11. That in the proceedings u/s 147 the burden is on the A.O. to prove income escaping assessment as it the belief of the A.O. for income escaping assessment.
Reliance Placed: Tin Manufacturing Co. of India Vs. CIT [19961 88 Taxmann 34 (Allahabad)
12. That the “reasons to believe” that the Income is of escaped assessment are not as per the A. O. but from DDIT (Inv.) as envisaged from the reasons itself.
Thus the reassessment proceedings are not valid. Reliance Placed:
176 ITR 352 Sheo Narain Jaiswal and Others – Vs- I. T. O. Others. (Pg. 15/1 to 15/2).
Thus in any view, the assessment order passed u/s 143(3)/148 by making addition of Rs. 5,01,250/- is arbitrary, wrong, illegal, and against the fact and law of the case and is liable to be annulled/quashed.”
8. The ld. CIT(A) rejected the assessee’s contention by observing that:
“The AO in this case had formed his belief on receiving information from the Addl. DIT(Inv), Agra through the CIT-II, Agra and the Addl.CIT-Range-5, Firozabad, that Sh. Deepak Gupta, R/o 1756, Nai Basti, Naya Bazar, Delhi had provided bogus entry of Gift to the assessee. Enquiries had been conducted by the Addl. DIT (Inv.), Agra and it had been found that no genuine transaction in sale/purchase of shares/gift had taken place through this bank account. On the basis of definite and detailed information, the AO formed his belief that the assessee had arranged bogus entry and, therefore, initiated proceedings u/s 147 by issuing notice u/s 148 of the Act. After 1/4/1989, the AO has power to reopen and assessment, provided there is ‘tangible material’ to come to his conclusion that there was escapement of income from assessment. Therefore, while respectfully following the aforementioned judicial decisions as rendered by the Honorable jurisdictional High Court and the Honorable Supreme Court decisions, notably the decisions in the cases of ‘Purshottam Das Bangur’ and ‘Raymond Woolen Mills’ ( supra), I find there is no substance or credence in the assertions as put forth by the Ld AR of the appellant that the information as sent from the Investigation wing was vague and general in nature and which was not based upon any relevant material. Rather, as seen from the AO’s order the has had in his possession definite information which was supplied by the Investigation Wing, and which per its contents, was quite sufficient to come in the aid of the AO to arrive to his satisfaction that assessee’s income had escaped assessment indeed. It is relevant to refer here that on perusal of similar set of reasons which were drawn by the AO, the Honorable jurisdictional ITAT Agra in the case of DCIT Circle 4(1) vs. Sanjay Kumar Agarwal (HUF) (ITA No. 290/Agra/2010 AY 2001-02), in which the Honorable ITAT while following and applying the decision of the Honorable Supreme Court in Pusthottam Das Bangur (supra) has held the re- assessment proceedings were validly initiated by the AO. The AO in the said case has recorded the following reason of his satisfaction:-
“On the basis of information received from Addl. D1T (Inv.), Agra vide his letter dated 20.03.2008 through Addl. CI T, Range-4, Agra’s letter F. No. Addl. CIT/R-4/Agra/R-4/Agra/Accommodation Entries /2007-08 dated 24.03.2008, that the assessee has obtained accommodation entries and received an amount of Rs. 8,39,212/- on F.Y. 2000-2001 through cheque No./Other No. 121983/111 by arranging/obtaining unreliable document etc. in the form of share application money/capital gains/gifts etc. during the F.Y. 2000-01 from Aayushi Stock Broker Pvt. Ltd. Sanjay Place, Agra and the same is deposited in her bank account of ANZ Grindlays Bank. On the basis of information received from Add!. DIT(Inv.), Agra vide his letter dated 20.03.2008, I have reason to believe that the income earned as unexplained entry for Rs. 8,39,212/- has escaped assessment and liable to be taxed in F.Y. 2000-2001 relevant to A.Y. 2001-2002.
4.6 Thus, in view of the foregoing, and keeping in view the decision of Honorable ITAT, Agra Bench in Sanjay Kumar Agarwal (supra), I am of the considered view that the AO has validly re-opened the assessee’s case after receiving cogent and relevant information which was supplied by the Inv. Wing, therefore, accordingly the Ground Nos. 1.1 to 1.4 as taken by the assessee are dismissed.”
9. A perusal of the reasons recorded by the AO shows that the allegation as per the reasons to believe escapement of income is bogus purchase/sale of shares, while the impugned addition has been made with respect to gift, which shows that the A.O. had no specific information. Hence, as rightly contended, the reasons recorded are vague and farfetched. The A.O., vide letter date 01.12.2009 (Paper Book Pg.16) alleged that the appellant had entered into the transaction of sale/purchase of shares for Rs. 5,01,250/-, even before initiating the re-assessment proceedings. The appellant, in reply to the above letter, vide letter date 10.12.2009 (Paper Book Pg. 17) categorically submitted that he had not entered into any transaction of purchase/sale of shares. No new adverse information has been brought on record which could suggest any justification for satisfaction to initiate proceedings u/s 147/148, in spite of specific request of the appellant vide letter date 24.11.2010, (Paper Book Pg. 18 &19). In the proceedings u/s 147, the burden is on the A.O. to prove income escaping assessment as it is the belief of the A.O. for income escaping assessment which can trigger such proceedings.
10. This onus has not been discharged by the AO herein, rendering the initiation of the reassessment proceedings void. In these circumstances, in the present case, the decisions relied on by the Department are not applicable.
11. In view of the above, the initiation of the reassessment proceedings, culminating in the order under appeal, is held to be bad in law. Nothing further survives for adjudication.
12. In the result, the appeal is allowed.
Order pronounced in the open court on 08/01/2018.
