THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.2.2013
+ ITA 271/2012
CIT ..... Appellant
versus
VINIYAS FINANCE & INVESTMENT
PVT LTD. ... Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Karan Khanna, Sr.Standing counsel for the Revenue
Department of Income Tax with Ms Asmita Kumar,
Advocate.
For the Respondent : Mr S. Krishnan, Advocate.
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE R.V.EASWAR
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
This appeal under Section 260A of the Income Tax Act, 1961 has
been filed by the Revenue being aggrieved by the order dated 18.11.2011
in ITA No.4652/DEL/2009 pertaining to the assessment year 2002-03.
These proceedings were initiated on the basis of a notice under Section
148 of the said Act issued by the Assessing Officer to the respondent-
assessee for re-opening of the assessment pertaining to the said
assessment year 2002-03. The said notice was issued on 30.07.2007
ITA 271/2012 Page 1 of 9
beyond the period of four years and, therefore, the respondent-assessee
had raised the issue as to whether the Assessing Officer had jurisdiction
at all to issue the said notice inasmuch as the provisions of Proviso to
Section 147 would become applicable. One of the pre-conditions for
invoking Proviso is that there must be failure on the part of the assessee
to disclose fully and truly all material facts necessary for the purpose of
assessment. It was the case of the respondent-assessee that this pre-
condition had not been satisfied and, in fact, there was no mention of any
failure to disclose the material facts in the reasons which have been
recorded. However, the Assessing Officer went ahead with the re-
assessment and completed the same on 30.12.2008 whereby he made an
addition of `77 lakhs on account of said amount having allegedly escaped
assessment in the first round when the assessment was originally framed
under Section 143(3) of the said Act on 22.12.2004.
2. The respondent-assessee was aggrieved by the said addition, and,
therefore, filed an appeal before the Commissioner of Income Tax
(Appeals). The appeal was preferred both on the question of jurisdiction
as well as on merits. Insofar as the plea of jurisdiction taken by the
respondent-assessee was concerned, the Commissioner of Income-Tax
ITA 271/2012 Page 2 of 9
(appeals) did not agree with the submissions of the respondent-assessee
and held that re-opening of the assessment was valid under Section 147 of
the said Act. However, on merits the Commissioner of Income Tax
(Appeals) held in favour of the respondent-assessment and deleted the
entire amount of `77 lakhs.
3. The Revenue, being aggrieved by the decision on merits by the
Commissioner of Income Tax (Appeals) preferred the said appeal ITA
No.4652 (Del) of 2009 before the Tribunal on the question of deletion of
the addition of `77 lakhs. The respondent-assessee preferred cross-
objection with regard to the jurisdictional issue. The cross-objection was
numbered as COA 29/Del/2010. The Tribunal has disposed of the said
appeal and the cross-objection by the common impugned order dated
18.11.2011. The Tribunal accepted the cross-objection of the respondent-
assessee on the point of jurisdiction and held the issuance of notice under
Section 148 of the said Act to be bad on account of the fact that there was
no failure to disclose fully and truly all material facts for the purposes of
assessment on the part of the respondent-assessee. Insofar as the question
of merits was concerned, the Tribunal did not examine the same
inasmuch as it had held the re-opening itself to be bad.
ITA 271/2012 Page 3 of 9
4. On going through the decision of the Tribunal we find that the
Tribunal was impressed by the fact that in the reasons there should have
been recorded that there was failure on the part of the assessee to disclose
fully and truly all the material facts necessary for the assessment. The
Tribunal followed the decisions of this Court in Wel Inter Trade P. Ltd.
& Anr. vs. ITO: 308 ITR 22 (Del.) and Haryana Acrylic Manufacturing
Company vs. CIT & Anr.: 308 ITR 38 wherein this Court held that in
situations where the reasons did not even contain and allegations that the
escapement of the income had been occasioned by failure on the part of
the assessee to disclose fully and truly all material facts necessary for his
assessment, the assessing officer would be barred from re-opening of the
assessment already done at an earlier stage. In Wel Inter Trade P. Ltd.
& Anr (supra) this Court has observed as under:-
"A plain reading of the said proviso makes it more than clear
that where the provisions of section 147 are being invoked
after the 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 chargeable to tax has
escaped assessment, it must also be established as a fact that
such escapement of assessment has been occasioned by
either the assessee falling to make a return under section 139
etc., or by reason of failure on the part of the assessee to
disclose fully and truly all material facts necessary for his
assessment, for that assessment year. In the present case, the
question of making of a return is not in issue and the only
ITA 271/2012 Page 4 of 9
question is with regard to the second portion of the proviso,
which relates to failure on the part of the assessee to disclose
fully and truly all material facts necessary for assessment.
Insofar as this pre-condition is concerned, there is not a
whisper of it in the reasons recorded by the Assessing
Officer. In fact, as indicated above, the Assessing Officer
could not have made this a ground because the Assessing
Officer had required the petitioner to furnish details with
regard to loss occasioned by foreign exchange fluctuation
which the petitioner did not by virtue of the reply dated
5.2.2002. Since the petitioner had fully and truly disclosed
all the material facts necessary for the assessment, the pre-
condition for invoking the proviso to section 147 of the said
Act had not been satisfied.
10. In this connection, it may be relevant to note one
decision, although there are several others. The said
decision is that of the Punjab and Haryana High Court in the
case of Duli Chand Singhania v. Asstt. CIT (2004) 264 ITR
192. In the said decision, the High Court of Punjab and
Haryana was faced with a similar situation. The court noted
that there was not even a whisper of an allegation that the
escapement in income had occurred by reason of failure on
the part of the assessee to disclose fully and truly all material
facts necessary for his assessment. The court observed that
absence of this find, which is the sine qua non for assuming
jurisdiction under section 147 of the Act in a case falling
under the proviso thereto, makes the action taken by the
Assessing Officer wholly without jurisdiction. We agree
with these observations of the Punjab and Haryana High
Court and are of the view that in the present case also, the
Assessing Officer has acted wholly without jurisdiction.
The invocation of section 147, the issuance of the notice
under section 148 and the subsequent order on the objections
are all without jurisdiction. The impugned notice as well as
the proceedings pursuant thereto are quashed. ..."
ITA 271/2012 Page 5 of 9
5. We have considered these submissions and we are inclined to agree
with the learned counsel for the petitioner. The proviso to section 147
reads as under:
"Provided that where an assessment under sub-section (3) of
section 143 or this section has been made for the relevant
assessment year, no action shall be taken under this section
after the expiry of four years from the end of the relevant
assessment year, unless any income chargeable to tax has
escaped assessment for such assessment year by reason of
the failure on the part of the assessment to make a return
under section 139 or in response to a notice issued under
sub-section (1) of section 142 or section 148 or to disclose
fully and truly all material facts necessary for his
assessment, for the assessment year. "
6. In the present case the purported reasons to believe that income had
escaped assessment were as under:-
"Reasons of the belief that income has escaped Assessemnt.
In this case the assessment for the asstt. Year 2002-03 was
made u/s 14(3) on 22.12.2004. A special information has
been received from Director of Income Tax (investigation)-
I, New Delhi vide letter dated 05.02.2007 that the assessee
company has received a sum of `77,00,000/-from the
companies as detailed below:-
ITA 271/2012 Page 6 of 9
S. Name of the Amount Instrume Name &
No. companies nt No. & Branch of
Dt. Bank
1. Rabik Exports Ltd. ` 400000 2258 Ratnakar
24.11.01 Bank, K.B.
2. -do- ` 300000 92420 Corpn. Bank,
21.02.02 Pas.V.
3. Mestrol Mktg. & ` 500000 2156 Ratnakar
Adg. (P) Ltd. 28.11.01 Bank, K.B.
4. -do- ` 500000 2163 -do-
14.12.01
5. Vin Fin & `50000 841908 KVB, Karol
Investment 07.01.02 Bagh
6. Fair "N" Square `200000 816168 Vijay Bank, R.
Exports (P) Ltd. 08.01.02 Nagar
7. Pololeasing & Fin. ` 600000 162529 SB Mysore,
(P) Ltd. 18.12.01 KB
8. -do- ` 350000 812701 Vijay Bank, R.
20.12.01 Nagar
9. -do- `500000 812722 -do-
8.01.02
10. -do- ` 500000 812730 -do-
18.01.02
11. -do- ` 300000 812723 -do-
26.02.02
12. Satwant Singh Sodhi ` 100000 816140 -do-
Const.(P) Ltd. 18.01.02
13. -do- ` 300000 816144 -do-
01.02.02
14. -do- ` 600000 816143 -do-
06.02.02
15. -do- ` 500000 826823 -do-
22.03.02
16. M.V. Mktg. (P) Ltd. ` 300000 816086 -do-
01.03.02
17. Ethnic Creation (P) ` 650000 816235 -do-
Ltd. 08.01.02
18. -do- ` 300000 816238 -do-
08.01.02
19. SGC Publishing (P) ` 150000 162524 State Bank,
Ltd. 08.01.02 Mysore
20. Harpal Associates (P) ` 300000 803279 Vijay Bank, R.
Ltd. 20.12.01 Nagar
ITA 271/2012 Page 7 of 9
21. Arun Finvest (P) Ltd. ` 300000 811672 -do-
18.01.02
` 7700000
According to the special information received, the entries
are in the nature of accommodation entries and in the reality
it is the assessee's own unaccounted money which has been
shown in the books of accounts as a receipt from aforesaid
companies.
In view of the above, I have reason to believe that income to
the extent of `77,00,000/- has escaped assessment."
7. On going through the purported reasons we find that there is no
mention of the respondent-assessee not having made a full and true
disclosure of the material facts necessary for assessment. On the contrary
the purported reasons indicate that the amounts mentioned therein had
been shown in the books of accounts as receipts from the companies
mentioned therein. We also note that at serial No.5 of the list of
companies from which amounts have been allegedly received, the name
of the assessee has been shown. This means that the assessee received
the received money from itself, which can hardly be an allegation in this
case.
8. For the foregoing reasons we feel that the Tribunal has approached
the matter in the correct perspective and has held the issuance of the
notice under Section 148 dated 30.7.2007 to be bad in law and so, too, all
ITA 271/2012 Page 8 of 9
the proceedings pursuant thereto. There is no reason for us to interfere
with the impugned order inasmuch as no substantial question of law
arises for our consideration.
9. The appeal is dismissed.
BADAR DURREZ AHMED, J
R.V.EASWAR, J
FEBRUARY 11, 2013
nk
ITA 271/2012 Page 9 of 9
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