CIT v. Suren International (P) Ltd.

SUBSCRIBE FOR FULL CONTENT


The Tax Publishers2013 TaxPub(DT) 1753 (Del-HC) : (2013) 357 ITR 0024 : (2013) 088 DTR 0016 Income Tax Act, 1961 --Reassessment--Full and true disclosure Notice issued after expiry of four years--Assessee's assessment was completed under section 143(3) and balance sheet and books of account of assessee disclosed that during the relevant previous year, the assessee had received aggregate sum of Rs. 4,82,01,000 as share application money from various persons and same was outstanding, pending allotment of shares. Assessing officer issued a detailed questionnaire to inquire into the said share application money and sought details of share applicants who had paid the share application money to assessee-company. Assessing officer thereafter conducted an inquiry to determine genuineness and creditworthiness of transactions relating to share applications. Assessee produced confirmations from the concerned share applicants during the course of assessment proceedings. In order to make further inquiries, assessing officer issued summons under sections 131 to 25 parties. Whilst some of the parties to whom summons under section 131 were issued remained unserved, in certain other cases share applicants did not come forward on scheduled dates of hearing for being examined. Assessing officer, thereafter, concluded that a sum of Rs. 42,00,000 on account of share application money was liable to be taxed as unexplained credit in the books of account under section 68. After completion of assessment, one DG stated that he was provider of accommodation entries to assessee. As such, assessing officer reopened assessment on ground of bogus share application money. Only reason for initiating proceedings under sections 147/148 was alleged accommodation entries purportedly given. *Held:* Was not justified. In the reasons as furnished by assessing officer, there was neither any allegation that assessee had failed to disclose truly any material facts at the time of assessment, nor can court readily infer the same in view of fact that a detailed enquiry had been conducted by assessing officer with regard to identity and creditworthiness of the share applicants and genuineness of the transactions in relation to the share application money received by assessee. This court is unable to accept the contention that there has been failure on the part of the assessee to disclose all material facts in his return as, first of all, there is no such allegation in the reasons as furnished to the assessee; secondly, one cannot ignore the fact that the enquiry into the share application money had been conducted in detail by the assessing officer in the first round of assessment. Having framed his assessment after enquiry into the identity, genuineness and the creditworthiness of the share applicants, it would not be open for the assessing officer to re-examine the same without there being any material allegation of failure, on the part of the assessee, to make a full and true disclosure. It is well-settled that in order to invoke the provisions of section 147, after a period of four years from the end of the relevant assessment year, in addition to the assessing officer having reason to believe that any income has escaped assessment, it must also be established that the income has escaped assessment on account of the assessee failing to make returns under section 139 or on account of failure on the part of the assessee to disclose, fully and truly, the necessary material facts. [Para 15] In the reasons as furnished by the assessing officer, there is neither any allegation that the assessee had failed to truly disclose any material facts at the time of assessment, nor can court readily infer the same in view of the fact that a detailed enquiry had been conducted by the assessing officer with regard to the identity and creditworthiness of the share-applicants and genuineness of the transactions in relation to the share application money received by the assessee. Further the mere statement that the DRI has seized certain goods of the assessee and levied a penalty also cannot be stated to be a reason for reopening of assessment of the assessee as the said statement made is neither followed by the recording of a belief that the income escaped on that count or that the assessee has failed to disclose all relevant material, fully and truly, at the stage of the first assessment. [Para 16] Income Tax Act, 1961, Section 147 Income Tax Act, 1961, Section 148 In the Delhi High Court Badar Durrez Ahmed & Vibhu Bakhru CIT v. Suren International (P) Ltd. ITA No.289/2012 7 May, 2013 Appellant by : Amol Sinha, Sr.Standing Counsel with Mr Deepak Anand, Anshum Jain & Rahul Kochar, Advocates. Respondent by : S. Krishnan, Advocate JUDGMENT *Vibhu Bakhru, J.* This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the said Act') has been filed on behalf of the revenue challenging the order dated 23-12-2011 passed by the Income Tax Appellate Tribunal, in ITA No. 2941/D/2010, pertaining to the assessment year 2002-03. The Tribunal has, by its order dated 23-12-2011, quashed the proceedings initiated, by the assessing officer, on the basis of a notice under section 148 of the said Act issued for reopening the assessment pertaining to the said assessment year 2002-03. The notice under section 148 of the said Act was issued on 25-3-2009 which is beyond the period of 4 years from the end of the relevant assessment year. The Tribunal held that as there has been no failure on the part of the assessee to disclose material facts and the same is also not alleged either in the notice under section 148 or in the reasons recorded for initiating reassessment proceedings, the reassessment proceedings are illegal and without jurisdiction. In absence of failure, on the part of the assessee, to disclose fully and truly all material facts necessary for the proceedings, the assessing officer would lack the jurisdiction to initiate reassessment proceedings. Consequently, the Tribunal has quashed the reassessment order. 2. The challenge on the part of the revenue to the order passed by the Tribunal has to be considered in light of the following facts. 3. The assessee filed its return of income on 31-3-2003 declaring an income of 7-3-2005 30,18,779. The said return was initially accepted under section 143(1) on 30-5-2003. However, subsequently on 20-10-2003, the same was taken up for scrutiny. The balance sheet and the books of account of the assessee disclosed that, during the relevant previous year, the assessee had received an aggregate sum of 7-3-2005 4,82,01,000 as share application money from various persons and the same was outstanding, pending allotment of shares. The assessing officer issued a detailed questionnaire to inquire into the said share application money and sought details of the share applicants who had paid the share application money to the assessee company. The assessing officer thereafter conducted an inquiry to determine the genuineness and creditworthiness of the transactions relating to the share applications. The assessee produced confirmations from the concerned share applicants during the course of the assessment proceedings. In order to make further inquiries, the assessing officer issued summons under section 131 of the Act to 25 parties from whom the share application money had been received. Initially, some of the summons were received back unserved and the assessee was asked to furnish fresh addresses, which were provided by the assessee. However even thereafter summons to certain persons were received back and the assessee again provided a fresh set of addresses with respect to those persons. The hearings for examining the noticees under section 131 were fixed on 7-3-2005, 22-3-2005 and 23-3-2005. One of the persons examined under section 131 declined to acknowledge any relationship with the assessee and consequently the amount of share application money deposited by the said party amounting to Rs. 5,00,000 was added as income in the hands of the assessee, as unexplained credit in the books of accounts, in terms of section 68 of the Income Tax Act. Whilst some of the parties to whom summons under section 131 were issued remained unserved, in certain other cases the share-applicants did not come forward on the scheduled dates of hearing for being examined. The assessing officer, thereafter, concluded that a sum of Rs. 42,00,000 on account of share application money was liable to be taxed as unexplained credit in the books of accounts under section 68 of the Income Tax Act. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers2013 TaxPub(DT) 1753 (Del-HC) : (2013) 357 ITR 0024 : (2013) 088 DTR 0016

Income Tax Act, 1961

--Reassessment--Full and true disclosure Notice issued after expiry of four years--Assessee's assessment was completed under section 143(3) and balance sheet and books of account of assessee disclosed that during the relevant previous year, the assessee had received aggregate sum of Rs. 4,82,01,000 as share application money from various persons and same was outstanding, pending allotment of shares. Assessing officer issued a detailed questionnaire to inquire into the said share application money and sought details of share applicants who had paid the share application money to assessee-company. Assessing officer thereafter conducted an inquiry to determine genuineness and creditworthiness of transactions relating to share applications. Assessee produced confirmations from the concerned share applicants during the course of assessment proceedings. In order to make further inquiries, assessing officer issued summons under sections 131 to 25 parties. Whilst some of the parties to whom summons under section 131 were issued remained unserved, in certain other cases share applicants did not come forward on scheduled dates of hearing for being examined. Assessing officer, thereafter, concluded that a sum of Rs. 42,00,000 on account of share application money was liable to be taxed as unexplained credit in the books of account under section 68. After completion of assessment, one DG stated that he was provider of accommodation entries to assessee. As such, assessing officer reopened assessment on ground of bogus share application money. Only reason for initiating proceedings under sections 147/148 was alleged accommodation entries purportedly given. Held: Was not justified. In the reasons as furnished by assessing officer, there was neither any allegation that assessee had failed to disclose truly any material facts at the time of assessment, nor can court readily infer the same in view of fact that a detailed enquiry had been conducted by assessing officer with regard to identity and creditworthiness of the share applicants and genuineness of the transactions in relation to the share application money received by assessee.

This court is unable to accept the contention that there has been failure on the part of the assessee to disclose all material facts in his return as, first of all, there is no such allegation in the reasons as furnished to the assessee; secondly, one cannot ignore the fact that the enquiry into the share application money had been conducted in detail by the assessing officer in the first round of assessment. Having framed his assessment after enquiry into the identity, genuineness and the creditworthiness of the share applicants, it would not be open for the assessing officer to re-examine the same without there being any material allegation of failure, on the part of the assessee, to make a full and true disclosure. It is well-settled that in order to invoke the provisions of section 147, after a period of four years from the end of the relevant assessment year, in addition to the assessing officer having reason to believe that any income has escaped assessment, it must also be established that the income has escaped assessment on account of the assessee failing to make returns under section 139 or on account of failure on the part of the assessee to disclose, fully and truly, the necessary material facts. [Para 15] In the reasons as furnished by the assessing officer, there is neither any allegation that the assessee had failed to truly disclose any material facts at the time of assessment, nor can court readily infer the same in view of the fact that a detailed enquiry had been conducted by the assessing officer with regard to the identity and creditworthiness of the share-applicants and genuineness of the transactions in relation to the share application money received by the assessee. Further the mere statement that the DRI has seized certain goods of the assessee and levied a penalty also cannot be stated to be a reason for reopening of assessment of the assessee as the said statement made is neither followed by the recording of a belief that the income escaped on that count or that the assessee has failed to disclose all relevant material, fully and truly, at the stage of the first assessment. [Para 16]

Income Tax Act, 1961, Section 147

Income Tax Act, 1961, Section 148

In the Delhi High Court

Badar Durrez Ahmed & Vibhu Bakhru

CIT v. Suren International (P) Ltd.

ITA No.289/2012

7 May, 2013

Appellant by : Amol Sinha, Sr.Standing Counsel with Mr Deepak Anand, Anshum Jain & Rahul Kochar, Advocates.

Respondent by : S. Krishnan, Advocate

JUDGMENT

Vibhu Bakhru, J.

This appeal under section 260A of the Income Tax Act, 1961 (hereinafter referred to as 'the said Act') has been filed on behalf of the revenue challenging the order dated 23-12-2011 passed by the Income Tax Appellate Tribunal, in ITA No. 2941/D/2010, pertaining to the assessment year 2002-03. The Tribunal has, by its order dated 23-12-2011, quashed the proceedings initiated, by the assessing officer, on the basis of a notice under section 148 of the said Act issued for reopening the assessment pertaining to the said assessment year 2002-03. The notice under section 148 of the said Act was issued on 25-3-2009 which is beyond the period of 4 years from the end of the relevant assessment year. The Tribunal held that as there has been no failure on the part of the assessee to disclose material facts and the same is also not alleged either in the notice under section 148 or in the reasons recorded for initiating reassessment proceedings, the reassessment proceedings are illegal and without jurisdiction. In absence of failure, on the part of the assessee, to disclose fully and truly all material facts necessary for the proceedings, the assessing officer would lack the jurisdiction to initiate reassessment proceedings. Consequently, the Tribunal has quashed the reassessment order.

2. The challenge on the part of the revenue to the order passed by the Tribunal has to be considered in light of the following facts.

3. The assessee filed its return of income on 31-3-2003 declaring an income of 7-3-2005 30,18,779. The said return was initially accepted under section 143(1) on 30-5-2003. However, subsequently on 20-10-2003, the same was taken up for scrutiny. The balance sheet and the books of account of the assessee disclosed that, during the relevant previous year, the assessee had received an aggregate sum of 7-3-2005 4,82,01,000 as share application money from various persons and the same was outstanding, pending allotment of shares. The assessing officer issued a detailed questionnaire to inquire into the said share application money and sought details of the share applicants who had paid the share application money to the assessee company. The assessing officer thereafter conducted an inquiry to determine the genuineness and creditworthiness of the transactions relating to the share applications. The assessee produced confirmations from the concerned share applicants during the course of the assessment proceedings. In order to make further inquiries, the assessing officer issued summons under section 131 of the Act to 25 parties from whom the share application money had been received. Initially, some of the summons were received back unserved and the assessee was asked to furnish fresh addresses, which were provided by the assessee. However even thereafter summons to certain persons were received back and the assessee again provided a fresh set of addresses with respect to those persons. The hearings for examining the noticees under section 131 were fixed on 7-3-2005, 22-3-2005 and 23-3-2005. One of the persons examined under section 131 declined to acknowledge any relationship with the assessee and consequently the amount of share application money deposited by the said party amounting to Rs. 5,00,000 was added as income in the hands of the assessee, as unexplained credit in the books of accounts, in terms of section 68 of the Income Tax Act. Whilst some of the parties to whom summons under section 131 were issued remained unserved, in certain other cases the share-applicants did not come forward on the scheduled dates of hearing for being examined. The assessing officer, thereafter, concluded that a sum of Rs. 42,00,000 on account of share application money was liable to be taxed as unexplained credit in the books of accounts under section 68 of the Income Tax Act.