Shri Parasram Industries Pvt. Ltd v. Income Tax Officer Ward 8(3) & Anr

*IN THE HIGH COURT OF DELHI AT NEW DELHI %Judgment delivered on: 11.12.2015 +W.P.(C) 9094/2014 SHRI PARASRAM INDUSTRIES PVT. LTD .... Petitioner versus INCOME TAX OFFICER WARD 8(3) & ANR .... Respondents Advocates who appeared in this case:For the Petitioner: Mr Sanjeev Sabharwal, Sr Advocate with Mr DeepakSharmaFor the Respondents: Mr Rohit Madan with Mr Akash Vajpai CORAM:HON'BLE MR JUSTICE BADAR DURREZ AHMEDHON'BLE MR JUSTICE SANJEEV SACHDEVA JUDGMENT BADAR DURREZ AHMED, J (ORAL) 1.This writ petition pertains to the assessment year 2007-08 and seeksthe quashing of the notice dated 23.08.2014 issued by the respondent No.1under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as‘the said Act’) as also all proceedings pursuant thereto, including the orderdated 26.09.2014, passed by the respondent No.1, dismissing the objectionsfiled by the petitioner. 2.The main grounds raised in the writ petition are that the re-assessmentproceedings having been initiated after four years from the end of therelevant assessment year, required certain pre-conditions to be fulfilled. Oneof the pre-conditions was that there was failure on the part of the assessee tofully and truly disclose all the material particulars necessary for theassessment.It is contended by the learned counsel for the petitioner thatapart from there being no such failure, in fact, there is not even an allegationin the reasons that there has been such a failure on the part of the assessee. 3.The second ground urged on behalf of the petitioner/assessee is thatthis is a case of change of opinion inasmuch as the very issue sought to beraked up by way of the impugned notice under Section 148 of the said Acthas been considered by the Assessing Officer during the time of the originalassessment under Section 143 (3) of the said Act. 4.The original assessment under Section 143(3) was completed on18.12.2009. This was, however, after a questionnaire had been issued to theassessee during the assessment proceedings on 12.06.2009. Question No. 3of the questionnaire specifically required the assessee to give the names,addressesandPANnumbersoftheshareholdersalongwiththeirpercentages/ ratios.This was provided by the assessee.In fact, the Assessing Officer did not stop at that and issued notices under Section 133(6) of the said Act to the individual applicants. One such letter dated 04.12.2009 was issued to M/s Sino Credits and Leasing Limited. The said letter reads as under:- “OFFICE OF THEINCOME TAX OFFICER, WARD 8 (3),ROOM NO. 196A, C. R. BUILDING, I.P. ESTATE, NEW DELHI-110002.PHONE-23705348 NOTICE UNDER SECTION 133 (6) OF THE INCOME TAX ACT, 1961 F. NO. ITO/ W8(3)/143(3)/2009-10/ Dated 04-12-2009 ToThe Principal OfficerM/s Sino Credits And Leasing Ltd308, Arunachal Building,19, Barakhambha RoadNew Delhi -110001 Sir/Madam, Sub:- Assessment proceedings u/s 143(3) of the I.T.Act, 1961 in the case ofM/s Shri Parasram Industries P Ltd for A.Y 2007-08-reg:- During the course of assessment proceedings u/s 143(3) of the I.T.Act, 1961 for A.Y. 2007-08 in the case of the above subject-mentionedAssessee Company it could be seen that you have made certain kinds oftransactions with this company. You are requested to give a certified copy of the Ledger Accountmaintained by you in respect of the above mentioned assessee company givingnecessary evidence with date-wise details and nature of such transaction madewith this company alongwith your source thereof in respect of such transactionwith you bank statement for the relevant period and latest copy of ITR. The above information should reach my office by 10-12-2009 failingwhich penalty u/S 272 A of the Income Tax Act, 1961 may be initiated. Yours faithfully Sd/- (PIYUSH SINHA)Income Tax Officer,Ward-8(3), New Delhi.” 5.The response to the said letter was given by M/s Sino Credits and Leasing Limited by issuing a confirmation letter to the following effect:- You are requested to give a certified copy of the Ledger Accountmaintained by you in respect of the above mentioned assessee company givingnecessary evidence with date-wise details and nature of such transaction madewith this company alongwith your source thereof in respect of such transactionwith you bank statement for the relevant period and latest copy of ITR. The above information should reach my office by 10-12-2009 failingwhich penalty u/S 272 A of the Income Tax Act, 1961 may be initiated. Yours faithfully Sd/- (PIYUSH SINHA)Income Tax Officer,Ward-8(3), New Delhi.” 5.The response to the said letter was given by M/s Sino Credits and Leasing Limited by issuing a confirmation letter to the following effect:- “SINO CREDITS AND LEASING LIMITEDSTOCK AND SHRE BROKERSMEMBER: NATIONAL STOCK EXCHAGNE OF INDIA LIMITED: OTC EXCHANGE OF INDIA CONFIRMATION LETTER This is to confirm that we have paid Share Application Money ofRs. 58,90,000/- (Fifty Eight Lac Ninety Thousand only) vide Cheque /DDNo. 1131 drawn on HDFC Bank of Rs 5500000/- and vide Cheque /DDNo. 1135 drawn on HDFC Bank of Rs 590000/- and vide Cheque /DDNo. 152512 drawn on HDFC Bank of Rs 1000000/- and vide Cheque /DDNo.152554 drawn on HDFC Bank of Rs 1000000/- to Shri ParasramIndustries Pvt. Ltd. 334, Sunheri Bagh Apartment, Sector-13, Rohini, Delhi-110085. We are assessed to Income Tax and our PAN is AAACS 1172 N. The Amount has been paid out of realization from our debtors. For Sino Credits And Leasing LimitedSd/Director” Similar letters were issued to all the share applicants and confirmations were obtained from the said share applicants. 6.The summary of documents filed by the petitioner/assessee and theconfirmations received from the third parties directly by the AssessingOfficer have been set out in Annexure P-XIII, which reads as under:- “SUMMARY OF DOCUMENTS FILED BY THE PETITIONER/ASSESSEE ANDCONFIRMATIONS RECEIVED FROM THIRD PARTIES DIRECTLY BY THE ASSESSING OFFICER Entries not in books of accounts (Reconciliation of Notice) ” 7.It is only after all the above mentioned information was received bythe Assessing Officer, that the assessment was framed under Section 143(3)on 18.12.2009.In the assessment order itself, it has been specificallyrecorded as under:- “In response through Harish Kumar, C.A and A.R attended theproceedings and submitted the requisite details/ information/documents from time to time. Case was discussed with him.” 8.It is clear that after the Assessing Officer examined the aspect of theshare application money received by the assessee through the issuance of aquestionnaire and notices under Section 133(6) of the said Act, theassessment under Section 143(3) of the said Act was framed on 18.12.2009. 9.The learned counsel for the petitioner placed reliance on the decisionof this Court in Lahmeyer Holding GMBH v. Deputy Director of Income Tax: [2015] 376 ITR 70 (Delhi) to submit that the re-assessmentproceedings would be invalid in case an issue or query is raised andanswered by the assessee in the original assessment and yet, the AssessingOfficer does not make any addition in the assessment order.In suchsituations, it would have to be accepted that the issue had been examined, butthe Assessing Officer did not find any ground or reason to make any additionor reject the stand of the assessee. Relying on the said decision, it was alsosubmitted that when such an exercise is undertaken by the Assessing Officer,it can be regarded as a case where the Assessing Officer forms an opinionand that re-assessment on the very same ground would be invalid becausethe Assessing Officer having once formed an opinion in the course of theoriginal assessment, although he did not record the reasons for the same,cannot be permitted to change his opinion through the re-assessmentproceedings. 10.We note that in Lahmeyer Holding GMBH (supra), a Division Benchof this Court had placed reliance on the Full Bench decision inCIT v. UshaInternational Limited: [2012] 348 ITR 485 (Delhi) (FB), wherein it was,inter alia, held as under:- “3.Reassessment proceedings will be invalid in case an issueor query is raised and answered by the assessee in originalassessment proceedings but thereafter the Assessing Officer doesnot make any addition in the assessment order. In such situationsit should be accepted that the issue was examined but theAssessing Officer did not find any ground or reason to makeaddition or reject the stand of the assessee. He forms an opinion.The reassessment will be invalid because the Assessing Officerhad formed an opinion in the original assessment, though he hadnot recorded his reasons.” 11.After hearing the submissions of the learned counsel for the petitionerand also the submissions made by the learned counsel for the respondents,we are of the opinion that the present case is also one of change of opinion.This is so, because, the questionnaire and, particularly, question No. 3,specifically raised the issue with regard to the shares. The responses weregiven by the assessee from time to time and what is more important is thatthe Assessing Officer had directly issued letters to all the share applicants,who had, in turn, given their confirmations along with their PAN numbersand bank details. After having received the said information, the AssessingOfficer did not think it fit to make an addition and that itself would amountto forming an opinion, as indicated in CIT v. Usha International Limited(supra) and Lahmeyer Holding GMBH (supra). Therefore, the presentexercise of issuing the notice under Section 148 of the said Act would benothing but one of change of opinion, which is impermissible. 12.The second point that has been urged by the learned counsel for thepetitioner/assessee is that even otherwise, the impugned notice under Section148 and the proceedings pursuant thereto have to be set aside for the simplereason that the clear pre-conditon of there being a failure on the part of theassessee to fully and truly disclose all the material particulars necessary forassessment, has not been made out. In fact, if one looks at the reasons whichhave been supplied for initiating re-assessment, there is not even anallegation that there has been such a failure on the part of the petitioner/assessee. For the sake of convenience, the reasons are set out herein below:- “Income Tax Department26/02/2014Reasons for reopening the case of M/s Shri Parasram-Industries P. Ltd. (AABCS7930D) A.Y. 200708, U/s147/148 of the Income Tax Act, 1961 1.Information /documents in the form of CD has been receivedfrom the office of ACIT, Central Circle 22-New Delhi wherein it wasrevealed that the above assessee, M/s Shri Parasram Industries P. Ltd.has received and is a beneficiary of accommodation entries provided bycertain entry operators. The Investigation Wing of the Department hadcarried out survey u/s 133A in the case of Shri Suresh Kumar Gupta(S.K. Gupta) on 20.11.2007. It was gathered that Sh.S.K. Gupta who ishaving his office at 308, Arunachal Building, Barakhamba Road, NewDelhi is a Chartered Accountant and is carrying on the business of sharebroker, financial consultancy and providing accommodation entries inthe form of loans, advances, share application money, issuing bogusexpenses' bills on commission basis. For this purposes, he had floatedseveral companies/firm in which he and his family members as well ashis employees were either directors or proprietors. Bank accounts wereopened III the names of these companies/firms in which he and hisfamily members as well as his employees were either directors or proprietors.Bankaccountswereopeninthenamesofthesecompanies/firm and individuals of create layer/layers before providingaccommodation entries of the beneficiaries through bank channels togive the color of genuineness of these accommodation entries.2.This information has been provided by the ACIT, central Circle22, New Delhi to the Assessing officer. In the case of the above assessee,the following accommodation entries have been taken:- 3.This case was completed under scrutiny assessment in the F.Y.2009-10 and it is observed that the said information about receipt ofaccommodation entry was not receivedat the time oforiginalassessment. In view of the above discussed factual matrix, additionalinformation/documents received from the Investigation Wing of theIncome Tax Department and the various Judgments of the Hon'ble Supreme Court and Hon'ble High Courts, I have reason to believe thatincome of Rs.2,85,000/- chargeable to tax has escaped assessment forAY.07-08, within the meaning of section 147 of the Income taxAct,1961. Therefore, file is put for necessary approval of Commissionerof Income tax, Delhi -III, New Delhi, as required u/s 151 of the IncomeTax Act, 1961 before issuance of notice u/s 148 of the Income tax Act,1961. (Manoj Tiwari) ITO, W-8(3), New Delhi (Binay K.Jha)Commissioner of Income Tax,Delhi -III, New Delhi” 13.It is evident from the above that there is not even an allegation thatthere has been a failure on the part of the assessee to disclose fully and trulyall the material particulars necessary for assessment. 14.This aspect is also covered by several decisions of this Court,including Global Signal Cables (India) Private Limited v. DeputyCommissioner of Income Tax: [2014] 368 ITR 609 (Delhi), wherein areference to an earlier decision inHaryana Acrylic ManufacturingCompany v. CIT: [2009] 308 ITR 38 (Delhi) was made.In HaryanaAcrylic (supra), this Court had observed as under:- “29.In the reasons supplied to the petitioner, there is no whisper,what to speak of any allegation, that the petitioner had failed to disclosefully and truly all material facts necessary for assessment and thatbecause of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income hadescaped assessment, is not sufficient to reopen assessments beyond thefour year period indicated above. The escapement of income fromassessment must also be occasioned by the failure on the part of theassessee to disclose material facts, fully and truly. This is a necessarycondition for overcoming the bar set up by the proviso to section 147. Ifthis condition is not satisfied, the bar would operate and no action undersection 147 could be taken. We have already mentioned above that thereasons supplied to the petitioner does not contain any such allegation.Consequently, one of the conditions precedent for removing the baragainst taking action after the said four year period remains unfulfilled.In our recent decision in Wel Intertrade Private Ltd. [2009] 308 ITR 22(Delhi) we had agreed with the view taken by the Punjab and HaryanaHigh Court in the case of Duli Chand Singhania [2004] 269 ITR 192that, in the absence of an allegation in the reasons recorded that theescapement of income had occurred by reason of failure on the part ofthe assessee to disclose fully and truly all material facts necessary for hisassessment, any action taken by the Assessing Officer under section 147beyond the four year period would be wholly without jurisdiction.Reiterating our view-point, we hold that the notice dated March 29,2004, under section 148 based on the recorded reasons as supplied to thepetitioner as well as the consequent order dated March 2, 2005, arewithout jurisdiction as no action under section 147 could be takenbeyond the four year period in the circumstances narrated above. (underlining added)” 15.A reference was also made to Swarovski India Limited v. Deputy (underlining added)” 15.A reference was also made to Swarovski India Limited v. Deputy CIT: [2014] 368 ITR 601 (Delhi), wherein a notice under Section 148 of thesaid Act was quashed for being issued after the expiry of four years from therelevant assessment year, wherein there was no specific mention of whichmaterial facts were not disclosed by the assessee in the course of its original assessment proceedings under Section 143(3) of the said Act. In the presentcase also there is not even a whisper of the allegation that there has been afailure on the part of the assessee to disclose fully and truly all materialparticulars necessary for assessment. 16.Thus, on both grounds, the petition is liable to succeed.The writpetition is allowed. The notice under Section 148 dated 28.03.2014 and allproceedings pursuant thereto, including the order dated 26.09.2014, arequashed/ set aside. There shall be no order as to costs. BADAR DURREZ AHMED, J DECEMBER 11, 2015SR SANJEEV SACHDEVA, J