Commissioner Of Income Tax vs Bhushan Capital And Credits ...
2013 Latest Caselaw 483 Del

        THE HIGH COURT OF DELHI AT NEW DELHI
%                                           Judgment delivered on: 01.02.2013

+       ITA 1462/2010
+       ITA 1463/2010
+       ITA 751/2011


        COMMISSIONER OF INCOME TAX                            ..... Appellant

                                   versus

        BHUSHAN CAPITAL AND CREDITS SERVICES LTD
                                         ..... Respondent

Advocates who appeared in these cases:
For the Appellant                  : Mr. Abhishek Maratha, Advocate
For the Respondent                 : Mr. Ajay Vohra, Advocate


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR

                                          JUDGMENT

R.V.EASWAR, J

These are appeals filed by the revenue under section 260A of the

Income Tax Act, 1961. They relate to the assessment year 1999-2000.

2. The assessee is a company. It filed a return of income which was

processed under section 143(1) on 21.3.2000. The assessment was

reopened under section 147 of the Act and the reopened assessment was

completed under section 147 read with section 143(3). This assessment

was quashed by the CIT(Appeals) on the ground of lack of jurisdiction of

the AO to reopen the assessment. His order was confirmed by the

Tribunal. Thereafter the assessment was reopened again under section

147 of the Act on the basis of information given by the Director of

Income Tax (Investigation) to the effect that the assessee has received

accommodation entries from another company - My Money Security (P)

Ltd. - for Rs.5 lacs by cheque No.421180 dated 23.3.2009. The assessee

was asked to provide details of the shares purchased from the above

company between the period 9.5.1998 and 22.3.1999. After examining

the details the AO took the view that the capital gains of Rs.5,10,130/-

which was declared in the return of income arose on account of a

transaction which was sham, that no shares were sold by the assessee and

only an accommodation entry was taken from My Money Security (P)

Ltd and that the amount of Rs.5,10,130/- declared as capital gains (short

term) should be assessed as the undisclosed income of the assessee. On

this basis the reassessment was completed by order dated 29.12.2006 in

the following manner:-

Income as per order u/s 250/147/143(3) dt.18.07.05 NIL

Add : Loss on sale of share M/s Décor Steel Ltd. 52,36,333 disallowed {as discussed above (`57,46,463 -

5,10,130 = 52,36,333)}

Add : Undisclosed income introduced under guise of 5,10,130 short term

TOTAL INCOME 57,46,463

3. In the appeal filed before the CIT(Appeals), the assessee

challenged the jurisdiction of the AO to reopen the assessment and also

challenged the addition on merits. The CIT(Appeals) rejected the

challenge to the jurisdiction of the AO to reopen the assessment. On

merits, he decided the appeal in favour of the assessee by deleting the

addition of Rs.5,10,130/-.

4. Both the assessee as well as the revenue filed appeals before the

Tribunal. The appeal of the assessee was against the decision of the

CIT(Appeals) upholding the jurisdiction of the AO to reopen the

assessment, whereas the appeal of the revenue was against the decision of

the CIT(Appeals) deleting the addition of Rs.5,10,130/-. The Tribunal

passed a common order on 15.10.2009. In ITA No.2476/Del/2007, which

was the appeal filed by the assessee, the Tribunal held, agreeing with the

assessee, that the AO did not have jurisdiction to reopen the assessment.

After referring to the precedents on the point, the Tribunal held that there

was no material before the AO to show that the short term capital gains

shown by the assessee were his undisclosed income and that the

assessment having been reopened after a period of almost 8 years cannot

be upheld since it was a case of a change of opinion on the basis of

material which was not relevant to the formation of the belief that income

chargeable to tax had escaped assessment. On this reasoning the Tribunal

held that the AO had not properly assumed the jurisdiction to reopen the

reassessment. It accordingly allowed the assessee's appeal. The appeal

filed by the revenue in ITA No.2703/Del/2007, in which the decision of

the CIT(Appeals) was questioned on merits, thus became academic in

nature and was not decided by the Tribunal.

5. The effective appeal of the revenue before us is in ITA No.1463

which is against the order of the Tribunal in the assessee's appeal in ITA

No.2476/Del/2007. The other appeal filed by the revenue in ITA

No.1462 of 2010 is directed against the Tribunal's decision in ITA

No.2703/Del/2007 which seems to have been filed by way of abundant

caution, since the Tribunal has not dealt with the merits of the addition.

6. The reasons recorded under section 148(2) for reopening the

assessment are as follows:-

"M/S BHUSHAN CAPITAL CREDIT SERVICES LTD, AY :

1999-2000

The Directorate of Investigation-I, New Delhi, vide its office letter No.1320 dated 2.3.2006 had sent a report in case of beneficiaries and operators of accommodation entries in Delhi. The letter was accompanied with a detail report. A perusal of the report shows that, M/s Bhushan capital Credit Services Ltd, whose jurisdiction lies with the undersigned, has been a beneficiary of an entry provided by M/s MY MONEY SECURITIES LTD. which has provided accommodation entries to the tune of several crores to various beneficiaries. The assessee M/s Bhushan capital Credit Services Ltd, has also been a beneficiary of accommodation entries, provided by M/s MY MONEY SECURITIES LTD. at `5 lacs vide chq no.421180 dt.23/03/99.

In view of the above credible information received from the DIT (Inv), I have reasons to believe that the said income chargeable to tax has escaped assessment, as per the provisions of section 147 (a), (b) & (c) of the Income Tax Act 1961.

3. I am, therefore, satisfied that the said income has escaped assessment, and accordingly after recording the above said reasons as laid down under the provisions of Section 148(2) of the Income Tax Act, propose to issue a notice to the above mentioned assessee u/s 148(1) of the IT Act 1961."

We find from a perusal of the assessment order that the assessee had

declared the amount of Rs.5,10,130/- in its return of income as short term

capital gains on sale of shares. In the reopened assessment, the AO has

taken the view that the amount in fact did not represent any capital gains

on sale of shares, but represented the undisclosed income of the assessee

brought in by means of an accommodation entry given by My Money

Security Pvt. Ltd. Accordingly he brought the amount to tax with the

narration "undisclosed income introduced under guise of short term

capital gains". The fact however remains that the amount had been

declared in the return of income as capital gains and what the AO did was

only to change the nomenclature from "capital gains" to "undisclosed

income". The assessment has been reopened after a lapse of about 8

years from the end of the relevant assessment year as noted by the

Tribunal in paragraph 10 of the impugned order. If the assessment is

sought to be reopened after a period of four years from the end of the

relevant assessment year, it is incumbent upon the AO, under the first

proviso to section 147, to show that the escapement of income was on

account of failure of the assessee to file the return of income or to furnish

fully and truly all material facts relating to the assessment. As we have

already noted, according to the revenue the assessee had declared the

amount of Rs.5,10,130/- as capital gains in the return of income. There

was thus no failure to disclose the income. Consequently, there is no

escapement of income. The change of the nomenclature from "capital

gains" to "undisclosed income" does not result in any escapement of

income since the rate of tax is the same under both heads. In the relevant

assessment year, there was no difference in the rate of tax applicable to

capital gains. Therefore, neither is there any escapement of income nor is

there any under assessment. It is not a case covered by special sub-clause

(ii) of clause (c) of Explanation (2) below section 147 which speaks of

the income being assessed at too low a rate. The primary condition for

invoking section 147 is that there should be escapement of income. It

appears to us from the facts of the case that there was no escapement of

income chargeable to tax. In this view of the matter, we find no infirmity

in the ultimate decision of the Tribunal that the reassessment was without

jurisdiction. No substantial question of law arises from the order of the

Tribunal. Both the appeals of the revenue in ITA Nos. 1462 and 1463 of

2010 are accordingly dismissed with no order as to costs.

7. ITA No.751/2011 is consequential. It is directed against the order

of the Tribunal in ITA No.465/Del/2010 dated 28.9.2010 by which the

Tribunal agreed with the CIT(Appeals) who had cancelled the penalty of

Rs.20,54,140/- imposed on the assessee under section 271(1)(c) of the

Act. Since we have held in ITA No.1463/10 that the Tribunal was right

in quashing the reassessment on the ground of lack of jurisdiction, the

quashing of the penalty is consequential. No substantial question of law

arises out of the order of the Tribunal.

8. In the result, all the three appeals filed by the revenue are

dismissed with no order as to costs.

R.V.EASWAR, J

BADAR DURREZ AHMED, J

February 01, 2013 Bisht