Bdr Builders And Developers Pvt. Ltd v. The Assistant Commissioner Of Income-Tax, & Anr

$~5 *IN THE HIGH COURT OF DELHI AT NEW DELHI%Decided on 09.01.2017 Decided on 09.01.2017 +W.P.(C) 3174/2015 BDR BUILDERS AND DEVELOPERS PVT. LTD. ..... PetitionerThrough: Mr. Ajay Vohra, Senior Advocate withMs. Kavita Jha and Mr. Vaibhav Kulkarni, Advs. Versus THE ASSISTANT COMMISSIONER OF INCOME-TAX, & ANR. ..... Respondent Through: Mr. Rahul Chaudhary, Senior StandingCounsel. CORAM:HON'BLE MR. JUSTICE S. RAVINDRA BHATHON'BLE MR. JUSTICE NAJMI WAZIRI S. RAVINDRA BHAT (ORAL) 1.The petitioner in these proceedings under Article 226 of theConstitution challenges a notice under Section 147/148 of the Income TaxAct , 1961 (‘the Act’ for short) issued on 31[st]March, 2014 for AssessmentYear (AY) 2007-08. 2.The brief facts are that pursuant to search and seizure proceedings(which took place on 11.10.2006), a notice was issued under Section153A/143(3) of the Act and the assessment was completed. This includedinter alia assessment for pending AY 2007-08.Before the assessmentscould be completed, the petitioner approached the Income Tax SettlementCommission (ITSC); after considering the submissions of charges, the application was admitted.Thereafter the ITSC called for a report underRule 9A of the ITSC Rules, which was furnished to it by the respondent/revenue. Based upon the submissions made and its appreciation, of othermaterials found during the cause of search (including the returns filed and itssupporting documents), the ITSC made its final order on 8[th]February, 2013.In the meanwhile, original assessee i.e. M/s Rishi Promoters Pvt. Ltd. wasamalgamated with M/s. BDR Builders and Developers Pvt. Ltd with effectfrom 01.04.2012 by order of this Court dated 20.02.2013. Consequently, forAY 2007-08, the total income assessed in the hands of BDR Builders andDevelopers Pvt. Ltd. was `3,76,90,206/- and to the account of M/s. RishiPromoters, it was `7,17,237/-.The ITSC had in its order dealt with thequestion whether bogus share money had been introduced by the applicantsand observed as follows: (i) The Investigation Wing in Appraisal report haspointedoutaboutintroductionofbogusshareapplication money shown to have been received by theassessee company amounting to ` 3,00,00,000/- duringthe period 01.04.2006 to 11.10.2006 relevant toassessment year 2007-08 from various companies. Inpost search enquiry by the Investigation Wing, suchbogus companies did not comply with the summonsissuedtothem.Hefurthersubmittedthattheassessment is not completed in this case and therefore,this aspect also remained unverified. Details of date-wise receipt of bogus share application money receivedby the assessee group from various 80 companies asappearing on page 22 to 25 of the Appraisal Reportare enclosed. (ii) The learned CIT submitted that from the details given in the appraisal. Report (page No.22 & 23), it isclear that the applicant had received ` 3 crores in theperiod from 09.06.2006 to 21.08.2006 falling in F.Y.2006-07 (A.Y. 2007-08). These amounts have beenreceived from M/s. Thar Steels Pvt. Ltd. M/s. BhawaniPortfolio Pvt. Ltd., M/s. Mahanivesh India Ltd. AndM/s. Taurus Iron & Steel Co. Pvt. Ltd. All thesecompaniesarefictitiouscompaniesprovidingaccommodationentries.Thesecompanieswerecontrolled by Shri Tarun Goyal who was searched bythe Income Tax Department. Assessments in TarunGoyal Group have been completed. In some casesappeals have also been decided. Copy of the appellateorder in the case of Mahanivesh India Ltd. issued bythe CIT(A)-XXXIII, New Delhi, is enclosed by CITwhich according to him clearly indicated that thesecompanies are bogus and fictitious and only providingaccommodationentries.Inviewofthesecircumstances, the enhancement proposed under Rule9 Report for the assessment year 2007-08 will increaseby this sum of ` 3,00,00,000/-. 7. xxxxxx8. xxxxxx 7. xxxxxx8. xxxxxx 9. During the hearing, the matter was discussed withthe learned CIT(DR) who did not raise any objection inrespect of such telescoping. Therefore, we increase theadditional income of the applicant for A.Y. 2007-08 by` 3 crores in the hands of M/s. BDR Builders &Developers Pvt. Ltd., New Delhi, Applicant No. 1. Inthe cases of Applicants No. 2 and 3, the income issettled as declared by them in their SOF. 3.The notice impugned in this case proposing re-assessment of incometax of M/s Rishi Promoters Pvt. Ltd. reads as follows: “A search & seizure operation was conducted onthe BDR Group at the premises of the Directors.During the search several incriminating documentswerefoundandseized.Duringtheassessmentproceedings the assessee filed application in thesettlement commission for the assessment year underconsideration, amongst others. The order in this casewas passed on 07.02.2013 by the Hon’ble Commissionwhere in the returned income of the assessee wasaccepted. Now, a letter dt. 24.03.2014 from ITO, Ward15(3), New Delhi has been received in this office on26.03.2014 informing for initiating proceedings u/s147 of the IT Act, 1961 in the case of the assessee forthe A.Y. 2007-08. Vide the letter, a page containingentries in respect of the assessee, given by Taurus Iron& Steel Co. Pvt. Ltd. (` 30,00,000/-) & TejasviInvestment Pvt. Ltd. (` 20,00,000/-) unearthed in thecase of entry operator called as Tarun Goyal. Thispoint has not been considered in the order ofsettlement commission. From the above facts I have reason to believethat income to the tune of ` 50,00,000/- has escapedassessment in the case of the assessee M/s RishiPromoters Pvt. Ltd for the A.Y. 2007-08, by reason ofthe failure on the part of the assessee to disclose fullyand truly all material facts for his assessment and thesame needs to be assessed/reassessed as per theprovisions of sub-clause(i) of clause© to Explanation 2to Section 147(b) of Income Tax Act, 1961in theassessment year 2007-08. Issue notice u/s 148 of theIncome Tax Act, 1961 for the assessment year 2007-08.Dated : 29.03.2014 ACIT, Central Circle – 17,New Delhi.” 4.It is urged by the petitioner that by virtue of provision of Section245C, 245D(4) and 245-I of the Act, the re-assessment notice is unsustainable and void. It also relied upon the judgment of this Court inOmaxe Limited v. Assistant Commissioner of Income Tax 254 CTR 370(Delhi) to say that where a Settlement Commission passes its final order inrespect of proceedings in any given order, the matters are conclusive andfinal and it cannot be reopened under section 147 of the Act. It is also urgedin addition that re-assessment notice is unsustainable because it was issuedto M/s. BDR Builders and Developers Pvt. Ltd. which was no longer inexistence at that time i.e. on 31.03.2014.In support of this contention,reliance is placed upon Spice Entertainment Ltd. v. Commissioner of IncomeTax 247 CTR 500 (Del) and Commissioner of Income Tax v. DimensionApparels (P) Limited :370 ITR 288 (Del)and on Rustagi EngineeringUdyog (P) Ltd. v. Deputy Commissioner of Income Tax 382 ITR 443 (Delhi).5.Learned counsel for the Revenue urges that the re-assessment noticeought not to be quashed in the circumstances of the case. It is highlightedthat the discussion by the ITSC was vis-a-vis share capital infused only inrespect of BDR Builders and Developers Pvt. Ltd. which meant that therewas no preclusion of issuance of notice under section 147/148 of the Act inrespect of returns of M/s. Rishi Promoters. He points out that ITSC’s finalorder does not contain any discussion with respect to the declaration ordisclosures made by M/s. Rishi Promoters which can be said to have becomefinal. It was urged in the circumstances that the notice should not beinterfered with. The observation in Omaxe Limited (supra) with regard tothe finality that attaches itself in respect of that are discussed, is as follows: “18. xxxxxx......We hold that since theexclusive jurisdiction to exercise the powers and “18. xxxxxx......We hold that since theexclusive jurisdiction to exercise the powers and perform the functions of an income tax authority inrelation to the case vests with the ITSC after an orderis passed under Section 245D(1) till the final settlementorder is passed under Section 245D(4), it is notpossible to countenance a situation where it can besaid that the assessee’s claim for deduction underSection 80IB(10) was not the subject matter of theorder passed by the ITSC under Section 245D(4). It isfurther necessary to keep in mind that Section 245B(3)requires that the ITSC shall be manned by “persons ofintegrityandoutstandingabilityhavingspecialknowledge of, and, experience in, problems relating todirect taxes and business accounts”. The provisions ofChapter XIX-A suggest that all matters in relation tothe case of the assessee shall be dealt with by the ITSCjust as an assessing authority would deal with themwhile completing an assessment under Section 143(3)of the Act. If this is the position, it would be difficult tosustain the argument of the revenue that the matterrelating to the deduction under section 80IB(10) wasnot the subject matter of the final order of settlement.It follows that the Assessing Officer had no jurisdictionto reopen the assessment for the assessment year 2006-07 by issuing a notice under Section 148 of the Act onthe ground that the deduction was wrongly allowed. 19.The issue can also be viewed from anotherangle. Barring the exception of the provisions relatingto appeal and revision, the Act does not contemplate orprovide for disturbing the finality of an order orproceeding passed or completed by an income-taxauthority, by any order or proceeding passed orinitiated by a different income-tax authority.Anassessment order passed by an Assessing Officer canbe rectified or amended under Section 154 or Section155 or reopened under Section 148 only by him, and bynootherincome-taxauthority.Similarly,anassessment by way of settlement of a case, which is made by the ITSC, can be reopened only by the ITSCand that too only in certain circumstances. Applyingthis general principle that runs through the Act, anassessment by way of settlement order passed by theITSC cannot be reopened by a different authority, viz.The Assessing Officer. The fact that the ITSC has notbeen designated as an “income-tax authority” underSection 116 of the Act makes the position ‘a fortiori’.Section 147 of the Act does not employ language thatpermits him to do so, nor are the powers and orders ofthe ITSC made subject to the provisions of Section 147.Section 47 does not appear to fit into the generalscheme of Chapter XIX-A, which has been held to be aself contained code by the Supreme Court in Brij Lal v.CIT [2010] 328 ITR 477/Taxman 566.” 6.In the present case, the Court notices that the impugned notice wasissued against a non-existent entity i.e. M/s. Rishi Promoters which hadceased to exist by virtue of order of this Court dated 20.02.2013. The dateof its amalgamation was in fact earlier. Apparently, the respondent-revenuewas aware of this and despite that it proceeded to issue the impugned notice.The judgment in Spice Entertainment (supra) and Dimension Apparels (P)Limited (supra), though rendered after the final assessment was completed,are clear that such notice and proceedings emanating from it areunsustainable. Rustagi Engineering Udyog (P) Ltd. (supra) takes the logicfurther and holds that notice issued under section 147 of the Act in respectof an entity which ceases to exist by virtue of amalgamation order undersection 394 of the Companies Act, would also be illegal and unsustainable. 7.For the afore-going reasons, the Court hereby holds that the impugnednotice under section 147/148 of the Act and proceedings arising therefromare void and unsustainable and are hereby quashed.The writ petition is consequently allowed. S. RAVINDRA BHAT, J JANUARY 09, 2017/acm NAJMI WAZIRI, J