Rasalika Trading And Investment ... vs Deputy Commissioner Of Income Tax ...
2014 Latest Caselaw 854 Del

$~14

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

                                           Date of decision: 14.02.2014

+       W.P.(C) 1608/2013 & CM Appl.3024/2013

     RASALIKA TRADING AND INVESTMENT CO. PVT. LTD
                                                   ..... Petitioner
                   Through Mr Rakesh Gupta, Mr Rishabh Kapoor
                   and Ms Khshbu Upadhyay, Advs.
                   versus
     DEPUTY COMMISSIONER OF INCOME TAX AND ANR.
                                                ..... Respondent

Through Mr Rohit Madan, Adv.

CORAM:

MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR

S. RAVINDRA BHAT, J.: (OPEN COURT)

The petitioner in this case challenges the notice proposing

reassessment under section 147/148 of the Income Tax Act in respect of

assessment year 2005-06. The assessee, an investment and security

business company, had raised additional capital and offered shares at a

premium of Rs.90 per share during the concerned assessment year. The

regular assessment under section 143(3) was completed by an order

framed on 24.12.2007. The notice proposing reassessment, in the present

case reads as follows :

"ANNEXURE 'A' RASALIKA TRADING & INVESTMENT CO. PVT. LTD.

2005-06 In this case initiation was received from DIT (Investigation), New Delhi which was circulated amongst the Assessing officers of Delhi Charge vide F. No. CIT-I/2005- 06/2132 dated 13.03.2006. The information received indicated that the assessee is amongst the beneficiaries of bogus accommodation entries as under:

       Bank     Amount/       Date of      Name of       Bank a/c of   Account
       A/c in   instruments   receipt      party from    entry given   No.
       which    no.                        whom
       entry is                            received
       received
       IDBI,      3,00,000/   10.06.2004   Ashiana       Corpn         4028
       KG         41708                    Electronics   Bank,
       Marg                                Pvt. Ltd.     Kamla
                                                         Nagar
       IDBI,      3,00,000/   29.08.2004   Ashiana       Corpn         4028
       KG         41704                    Electronics   Bank,
       Marg                                Pvt. Ltd.     Kamla
                                                         Nagar
       IDBI,      3,00,000/   10.06.2004   Paropkari     Corpn         4029
       KG         41710                    Finstock      Bank,
       Marg                                Pvt. Ltd.     Kamla
                                                         Nagar
       IDBI,      2,00,000/   24.06.2004   Paropkari     Corpn         4029
       KG         41719                    Finstock      Bank,
       Marg                                Pvt. Ltd.     Kamla
                                                         Nagar

The information received also indicated that the bank accounts of M/s Ashiana Electronics Pvt. Ltd. and M/s Propkari Finstock Pvt. Ltd. were maintained and controlled by one Shri Hari Om Bansal, who has in statement given on oath on 12.04.2005 before the Investigation Wing admitted that he had received cash in lieu of cheque or draft to various persons through various bank accounts maintained by him with the help of his associates.

In view of the reports received from the Investigation Wing and the above facts and findings, it is clear that the assessee company has not disclosed fully and truly all material facts necessary for its assessment for the assessment year under consideration. I am in possession of material that discredits and impeaches the particulars furnished by the assessee company and also establishes the link with the self- confessed "accommodation entry providers", whose business is to help assessee bring into their booms of accounts their unaccounted money.

In view of the above facts, I have reason to believe that the assessee had introduced its unaccounted/ disclosed income routed through such bogus accommodation entries. Thus, the Income chargeable to tax amounting to Rs. 11,00,000/ - during the A.Y. 2005-06 has escaped assessment in the case and there has been a failure on the part of the assessee to disclosed fully and truly all material facts necessary for his assessment in the AY 2005-06. Hence, the same is to be brought to tax under section 147 of the Income Tax Act. It is a fit case for initiating proceedings u/ s 147 of the Act. Sanction for issue of notice u/s. 148 as prescribed u/s 151, to assessee such income may kindly be accorded.

(Signature of Officer) Name: KEYUR PATEL Designation: DCIT. Circle - 15(1), N.D."

The petitioner urges that on the face of it the impugned notice and

subsequent proceedings are beyond the authority of law. It is urged that

the fresh or tangible material, on the basis of which recourse to section

148 is proposed, existed even when the original regular assessment was

completed. The learned counsel pointedly referred to the first sentence of

the impugned notice stating that the intimation or report of the DIT

(Investigation) was circulated to all concerned including AOs of Delhi

Charge on 13.3.2006. It was therefore urged that the reasons in support of

the notice were based upon material which was stale and therefore plainly

outside the jurisdiction conferred under section 148. Counsel relied upon

the decision of Supreme Court in CIT vs. Kelvinator (India) Ltd. (2010)

320 ITR 561. The learned counsel relied upon the response given during

the assessment proceedings particularly the letters dated 20.9.2007,

5.11.2007, 15.11.2007, 29.11.2007, 10.12.2007 and 17.12.2007. It was

submitted that the details of the share applicants, who had applied for

allotment, sought for by the AO in the regular assessment were furnished

to the AO. It was submitted that in these circumstances the reopening of

assessment proposed on the basis of the material said to have been

contained in the investigation report of 13.3.2006 was a matter that had

been specifically enquired and gone into by the revenue. It was argued

that in these circumstances, the notice is illegal and liable to be quashed.

Counsel for the revenue submitted that the notice no doubt adverted

to an investigation wing report of 13.3.2006. However, counsel argued

that this report was not on the record when the assessment was completed

originally on 20.4.2007. In the counter affidavit the revenue stated as

follows :

"The contents of the para are correct and admitted to the extent that the Respondents had passed the order after application of mind and accepted the income declared by the Assessee with no adverse finding but all this done on the basis of material/documents disclosed by the Assessee. The main reason for reopening the assessment was that the Assessee has not disclosed full and true material and the same has led to escapement of Income. So, the notice u/s 148 when issued after complying with all the legal formalities cannot be bad in law. Moreover the earlier order passed u/s 143(3) cannot be made a basis for proving the reopening bad in law when there was no disclosure of full and true material by the Assessee before the Assessing authority."

The learned counsel relied upon the following averment made in

additional affidavit filed after the counter affidavit is filed. The additional

affidavit was filed by one Arun S. Bhatnagar, Commissioner of Income

Tax, Delhi-V and affirmed on 16.12.2013. The relevant contents of the

said affidavit are as under :

"3. That after going through the original assessment records, it has been noticed that letter dated 13.03.2006 was not on record before the Assessing Officer when the original assessment was framed on 24.12.2007.

4. The information regarding the letter dated 13.03.2006 was received by the office of DCIT, Respondent No.1 after the proceedings u/s 143(3) were concluded and based on the contents of the letter dated 13.03.2006, appropriate proceedings have been initiated by the Department u/s 147/148 of the Income Tax Act, 1961."

Counsel for the revenue urged that in terms of Kelvinator (India) Ltd.

(supra) the reassessment proceedings were within jurisdiction and ought

not to be interfered with.

It is evident from the above discussion that the reassessment

proceedings were initiated by the impugned notice which expressly and

plainly states that "reasons to believe" are based upon the materials

contained in an investigation report of 13.3.2006. The notice itself does

not spell out that the report was not on the record when the original

assessment was completed on 24.12.2007 nor did the revenue even

suggest so in the counter affidavit filed in the proceedings. It is only in a

subsequently filed additional affidavit that the position is sought to be

clarified. Clearly this Court refrains from making such an enquiry, at a

time when the AO has, in the first instance, failed to spell out clearly in

the section 148 notice itself that such report was not on record. In other

words "the reasons to believe" do not state that even in one sentence that

the investigation report of 13.3.2006 was not with the AO when he

completed the assessment. The material on record in fact suggests

otherwise; the nature of the queries put to assessee and the replies and

confirmation furnished to the AO in the course of the regular assessment

clarify that what excited the suspicion was indeed gone into by the AO

himself while framing the assessment under section 143(3). This Court is

fortified in its conclusions by the decision of the Supreme Court in

Commissioner of Police v. Goverdhan Das Bhanji AIR 1952 SC 16 where

it was held that public orders made by public authorities intended to have

effect on the public should be construed objectively with reference to the

language used rather than explanations subsequently offered. This

principle was reiterated in a somewhat different vein in MS Gill V. Chief

Election Commissioner, AIR 1978 SC 851 by the Supreme Court. Such

being the case this Court has no doubt that the impugned notice, in the

circumstances of the case is based upon stale information which was

available at the time of the original assessment and in fact appears to have

been used by the AO at the relevant time i.e. during the completion of

proceedings under section 143(3). Therefore, the attempt to reopen the

proceedings under section 147/148 is really the result of a change of

opinion - and thus beyond the pale of the AD's jurisdiction and falling

under the illustration spelt out in Kelvinator (India) Ltd. (supra).

Consequently, the impugned notice and all proceedings further thereto are

beyond the authority of law and are hereby quashed.

The writ petition is allowed in the above terms.

S. RAVINDRA BHAT, J

R.V.EASWAR, J

FEBRUARY 14, 2014 vld