CIT Vs. SUPREME POLYPROPOLENE PVT. LTD.

$~S-10 * IN THE HIGH COURT OF DELHI AT NEW DELHI Date of decision: 26.04.2013 + Rev. Petition No. 215/2013, CM Appl.6579/2013 in ITA No. 266/2011 CIT .... Petitioner Through : Ms Suruchi Aggarwal, Sr. standing counsel. versus SUPREME POLYPROPOLENE PVT. LTD. .....Respondent Through : Mr Sheel Vardhan, proxy for Mr Prakash Kumar, Adv. CORAM: MR. JUSTICE S. RAVINDRA BHAT MR. JUSTICE R.V. EASWAR R.V. EASWAR, J.: (OPEN COURT) CM Appl.6579/2013 The delay of 25 days in filing the review petition is condoned for the reasons stated in the application. The application is disposed of. Rev. Petition No. 215/2013 in ITA No. 266/2011 1. This petition has been filed by the revenue seeking review of the judgment of this Court dated 30.10.2012 in ITA No.266/2011, dismissing the appeal filed by the revenue against the order passed by the Income Tax Appellate Tribunal on 26.02.2010 Rev.Pet.215/2013 in ITA 266/2011 Page 1 of 5 in ITA NO.4622/Del./2009 on its file, setting aside the reassessment proceedings initiated under section 147 of the Act as being without jurisdiction. 2. The assessment of the assessee for the assessment year 2001-02 was completed under section 143(3) of the Income Tax Act on 19.3.2004. On 31.3.2008, acting on the basis of material which was stated to have been furnished to him, the assessing officer issued a notice under section 148 reopening the assessment on the ground that income chargeable to tax had escaped assessment. Detailed reasons were recorded by the assessing officer for reopening the assessment. He referred to a list which was sent to him by the Additional Director of Investigation-VI, New Delhi containing the details of transactions and particulars of beneficiaries and operators of accommodation entries in Delhi. He noted that the list revealed that the assessee had provided a large number of accommodation entries to other beneficiaries from its bank account with Vijaya Bank, Daryaganj. The assessing officer further noted that the assessee was an associate of one Sanjay Mohan Aggarwal, who was an entry operator of Delhi. According to the assessing officer, the entries in the bank account of the assessee represented unexplained cash deposits against which cheques were issued to the beneficiaries, after charging commission. The commission income was not declared in the return of income filed by the assessee and thus there was escapement of income chargeable to tax, inviting action under section 147. Since the quantum of the commission was believed to be more than `1 lakh, the extended period of limitation (more than 4 years) was applicable. On this basis the assessing officer issued notice under section 148 of the Act reopening the assessment of the assessee. 3. In the reassessment proceedings an amount of `4,98,47,560/- was added under section 68. The assessee's appeal to the CIT(Appeals) being unsuccessful, it filed a further appeal to the Tribunal. Rev.Pet.215/2013 in ITA 266/2011 Page 2 of 5 4. The Tribunal noted that even during the original assessment proceedings under Section 143(3), information was called for by the assessing officer vide letter dated 20.12.2002 including information about the introduction of share capital, vide letter dated 16.1.2003. According to the Tribunal, when the original assessment proceedings were completed on 19.3.2004, all the relevant information was available with the assessing officer. The Tribunal perused the reasons recorded for reopening the assessment and found that they did not contain any information on the basis of which it could be said that the assessee failed to disclose fully and truly all material facts necessary for its assessment. In the absence of a specific averment in the reasons recorded to the effect that the assessee failed to make a full and true disclosure, the Tribunal took the view that the assessing officer did not have jurisdiction to reopen the assessment. The Tribunal also noted that the quantum of the income which escaped assessment was not recorded in the reasons, the assessing officer having merely assumed that the quantum of the commission may be more than `1 lakh. In this view of the matter and after referring to several authorities, including judgments of this Court, the Tribunal held that the assessing officer erroneously assumed jurisdiction to reopen the assessment. The appeal of the assessee was accordingly allowed. 5. The revenue carried the matter in appeal before this Court in ITA 266/2011. This Court after examining the reasons recorded and the list produced before it observed as follows: "6. This Court notices from the extract of the "reasons to believe" reproduced in the earlier part of the order that the AO adverted to a list, on the basis of which he was of the opinion that there was no full and true disclosure of all sources of income by the assessee. There are no details of that list. Even the list is not part of the assessment record which this Court had the benefit of considering. More shockingly, the assessment file did not even contain the forwarding letter, much less mention of the date of that list or the date of that letter which allegedly forwarded that list. The complete absence of these facts and any whisper as to even a single detail of that list coupled with the vague Rev.Pet.215/2013 in ITA 266/2011 Page 3 of 5 mention of a list, which mentions some other material adverted to in other assessment proceedings, in the opinion of this Court certainly cannot be said to constitute sufficient "reasons to believe" to warrant a notice under Section 148 during the extended period within the meaning contemplated by law." 6. In the present review petition it is claimed that the list of beneficiaries, did exist and was sent by the Additional Director of Investigation to the assessing officer vide letter dated 26.3.2008. It is conceded that the list "was not available on the file produced before this Hon'ble Court but had been seen by the ADIT to the CIT-III on 26.03.2008 and has been located in other files subsequently"; a copy of the list is attached to the present review petition. On this basis it is contended that the reasons recorded were valid and proper and did bring out the fact that the assessee failed to make a full and true disclosure of the material facts at the time of the original assessment. 7. We are afraid that once it is conceded on behalf of the revenue that the list was not produced before this Court at the time of the hearing of the appeal and is only being produced along with the review petition after locating the same in other files subsequently, then there is no merit in the review petition. This Court had perused the reasons recorded but the list was not found to be part of the assessment record which was seen by this Court. This Court had also noted ­ "shockingly" ­ that the assessment record did not contain even the forwarding letter alleged to have been written by the ADIT to the assessing officer. It was open to the revenue to produce the list when the appeal was heard by this Court, though it would have been even then a matter of debate as to whether, in the absence of the list in the assessment record of the assessee, the reasons for reopening the assessment can be said to have been properly recorded by relying on a list which is not found in the assessment record. The prime requirement for the validity of a notice issued under section 148 of the Income Tax Act is that the reasons recorded should have a live link or nexus with the Rev.Pet.215/2013 in ITA 266/2011 Page 4 of 5 material on record. This Court on an examination of the assessment record did not find therein the list on the basis of which the reasons were recorded. There is no merit in the review petition, which is accordingly dismissed. R.V.EASWAR, J S. RAVINDRA BHAT, J APRIL 26, 2013 vld Rev.Pet.215/2013 in ITA 266/2011 Page 5 of 5