BULLETIN(Issue No.125)DT.21-10-2020
Compiled by Vinod Kumar Goel, Advocate
CASE LAWS
Pankaj Malhotra Vs. Income Tax Officer Ward – 70(3) New Delhi vide ITA No. 6846/Del/2017 [Delhi]
We have heard the rival submissions and perused the material on record. The issue in the present ground is w.r.t addition on account of alleged cash payment for purchase of shop on the basis of the material retrieved from the hard disk found at the time of search in the case of AEZ group. We find that similar addition was made in the case of Deepak Gupta. The coordinate ITA No. 6846/Del/12017 Page | 6 Bench (ITA No.5464/Del/2018 order dated 28.01.2019) after following the Tribunal decision in the case of Subhash Khattar (supra) has deleted the addition by observing as under: “4. We have heard the rival submissions and perused the relevant material on record. The identical issue has been adjudicated by the Tribunal in the case of Asha Rani Lakhotia (Through Legal Heir Sh. R.N. Lakhotia) Vs. ACIT, in ITA No. 424/Del/2015, for AY: 2007-08, dated 16.01.2018. In the said case also, entries of cash payments were found on the basis of the extracts taken from the hard disc in the case of AEZ Group. In the said case, entries of cash as well as cheque were found to be recorded on such sheets extracted from the hard disc. The Tribunal following the decision in the case of other Investors deleted the addition of unexplained investment under Section 69 of the Act. The paras of order of Tribunal mentioning the facts of material found from AEZ Group are as under: “5. Further, both the Assessing Officer as well as the Ld. CIT-(A) has noted that the fact of cash investment was recorded in two documents found during the course of search action at the ‘AEZ Group’. Those two documents are as under: (i) Excel file named “down payment booking details.xls printed from the hard disk found during search on 17/08/2011 from the corporate office of the AEZ group at 301/303, Bakshi house, Nehru Place, New Delhi (ii) Excel file named “down payment booking details.xls retrieved from the hard disk found and seized as Annexure A-27 from the corporate office of AEZ group 6. The Ld. CIT-(A) has mentioned that in both these ‘Excel files’ name of the assessee as purchaser, covered area, sale price, cheque amount and cash amount received by the seller are recorded. 7. The Ld. CIT-(A) in para-6.1.2 of the impugned order has mentioned that on the basis of the ‘Excel sheet’, the amount received from the assessee by way of cheque and cash was shown at Rs.7,90,000/- and Rs.31,85,850/- respectively aggregating to Rs.39,35,850/- and the balance of Rs.40,000 was again shown to have been received by cheque.” ITA No. 6846/Del/12017 Page | 7 5. The addition has been deleted by the Tribunal observing as under: “14. Before us, the Ld. counsel of the assessee also relied on the decision of the Hon’ble High Court of Delhi dated 25/07/2017 in the case of Principal CIT, Central-2, New Delhi Vs. Subhash Khattar in ITA 60/2017. In the said case, the Tribunal in ITA No. 902/Del/2015 observed as under: “8. Considering the above submissions, we find that the Learned CIT(Appeals) has upheld the addition in question mainly on the basis of (i) the details written on the hard disc found during the course of search from the premises Aerens Group, wherein payment through cheque and cash have been mentioned against the name of assessee at Sr. No.32; Shri I.E. Soomar appearing at Sr. No. 39 of the said hard disc had admitted the cash investment of Rs.6.64 crores being made in the said project and had paid the taxes on the same; (iii) the said hard disc cannot be relied upon in part as the assessee has admitted the payment through cheque but denied the cash payment shown therein etc. In our view, a huge addition of Rs.3,21,00,000 cannot be made in a casual manner without having corroborative evidence in support. It is a prevailing practice in the dealings of immoveable properties that cash amount, if any, out of the agreed consideration is paid during the course of execution/registration of the sale deed and admittedly in the present case no sale deed or other mode of transfer has been effected. Merely because name of the assessee is appearing in the said hard disc and amongst other investors are investor Shri I.E. Soomar appearing in the said hard disc has admitted payment of cash amount, cannot be a basis for arriving at a definite conclusion, in absence of corroborative evidence in, support, that the assessee had also paid the amount of Rs.3,21,00,000 in cash. The Hon'ble jurisdictional High Court of Delhi in the case of CIT vs. Prem Prakash Nagpal (supra) wherein Assessing Officer had made certain additions under sec. 69 of the Act on the basis of the documents found during search at a place of third party which indicated that assessee ITA No. 6846/Del/12017 Page | 8 had purchased a plot by paying consideration in cash, it was held by the Hon’ble High Court that the Assessing Officer could not prove by evidencethat said documents belonged to the assessee and thafany on money transaction had taken place. The documents at the best only showed tentative/projected purchase consideration held the Hon'ble High Court. Again, in the case of CIT vs. Alpha Impact Pvt. Ltd. (supra), the Hon'ble Bombay High Court has been pleased to hold that addition to assessee’s income in respect of additional sales consideration received in sale of land merely on the basis of Email recovered during the course of search action at the premises of another person and there being no independent material available supporting such additions, was not justified. Besides, we also find substance in the contention of the Learned AR that assessment under sec. 153 A of the Act in absence of incriminating material found during the course of search at the premises of the assessee and in absence of abatement of assessment on the date of search, cannot be made in the present case as per the above cited decisions including the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT vs. Kabul Chawla (supra). Under the circumstances, we are of the view that the Assessing Officer was not justified in assuming jurisdiction under section 153 A and authorities below were also not justified in making and sustaining the addition in question merely on the basis of a hard disc found during the course of search at the premises of Aerens Group without any corroborative evidence in support. We thus hold that the assessee/appellant succeeds on both The above issues i.e. on validity of assumption of jurisdiction under sec. 153A and the addition in question. The grounds involving the above issues are accordingly allowed.” 15. We find that the Tribunal, both on the validity of addition under section 153A of the Act and merit of the addition in question has decided the issue in favour of the assessee. In the instant case, also the Assessing Officer has relied on the statement of Sh. I.E. Soomar for making addition in the hands of the assessee. ITA No. 6846/Del/12017 Page | 9 16. On further challenge of the decision of the Tribunal in above case, the Hon’ble Delhi High Court upheld the order of the Tribunal with following observations: “7. A question was posed to the learned counsel for the Revenue whether in the present case anything incriminating has been found when the premises of the Assessee was searched. The answer was in the negative. The entire case against the Assessee was based on what was found during the search of the premises of the AEZ Group. It is thus apparent on the face of it, that the notice to the Assessee under Section 153 A of the Act was misconceived since the so-called incriminating material was not found during the search of the Assessee's premises. The Revenue could have proceeded against the Assessee on the basis of the documents discovered under any other provision of law, but certainly, not under Section 153A. This goes to the root of the matter. 8. Consequently, the impugned order of the ITAT calls for no interference of this Court. The question framed by this Court on 7th February, 2017 is answered in negative, that is, in favour of the Assessee and against the Revenue. 17. Since the facts and circumstances in the instant case are identical to the facts and circumstances in the case of Subhash Khattar (supra), thus, respectfully relying on the decision of the Hon’ble Delhi High Court in the above case, we are of the opinion that no addition could have been made in the instant assessment year in absence of any incriminating material found from the premises of the assessee. 18. The facts and circumstances of the case being identical to the facts and circumstances of Sh. Subhash Khattar (supra), the addition on merit also deserve to be deleted following the finding of the Tribunal in ITA 902/Del/2015. We hold accordingly. The grounds of the appeal are allowed.” 6. In para-18 (above), the Tribunal has deleted the addition on merit. As the identical issue is involved in the instant case, respectfully following above findings of the Tribunal, the addition ITA No. 6846/Del/12017 Page | 10 made in the instant case, is also deleted on merit. Since we have already deleted the addition on merit, we are not adjudicating the grounds, challenging the validity of reassessment proceedings. 7. In the result, the appeal of the assessee is allowed.” 10. Before us, no distinguishing feature in the facts of the present case and that of Subhash Khattar/Deepak Gupta (supra) has been pointed out by the Revenue. Further it has also not brought on record any material to show that the decisions of the co-ordinate bench of the Tribunal in the case of Subhash Khattar/Deepak Gupta (supra) has been set-aside/stayed or over ruled by higher judicial forum. We therefore following the order of the co-ordinate bench in the case of Deepak Gupta (supra) and for similar reasons hold that the Revenue was not justified in making the addition of Rs. 56,27,160/-. We therefore, set aside the action of AO. Thus the ground of Assessee is allowed.
Parag Gupta Vs. DCIT, Central Circle-19, New Delhi vide ITA No. 410/Del/2017 [Delhi]
We have heard the rival submissions and perused the material available on record. The issue in the present ground is with respect to addition of Rs. 2,70,000/- on account of unexplained jewellery. It is the contention of the learned AR that if the correct quantity of jewellary (i.e. 671.53 gms is considered instead of 771.83 gms) and if the credit for jewellery in the hand of his son is also given then there would remain no excess jewellery. We find force in the contention of the learned AR. We find that CIT(A) in para 2.3 of the order has noted that total jewellery of 771.83 gms valued at Rs. 31,27,296/- was found from the possession of the assessee and his wife. The figure of ITA No. 410/Del/12017 Page | 5 771.83 gms noted by the CIT(A) appears to be incorrect as in the copy of the panchnama which has been placed by the assessee in the paper book shows the total weight of the jewellery found to be 671.534 gms with the value of Rs 31,27,296/-. We further find that CIT(A) has given credit of jewellery of 600 gms (500 gms for the wife of the assessee and 100 gms for the assessee) and no credit has been given for jewellery to the son of the assessee. The fact that the family of the assessee consists of himself, his wife and son is not disputed. 10. We find that CBDT vide instruction no. 1916 dated 11.05.1994 has issued guidelines which inter alia states that in case of person not assessed to wealth tax, gold jewellery ornaments to the extent of 500 gms per married lady, 250 gms per unmarried lady and 100 gms per male member of the family need not to be assessed. 11. In the present case, we find that CIT(A) has given credit for jewellery only to the assessee and his wife and no credit has been given to assessee’s son. If the credit for 100 gms of jewellery to the son of the assessee is granted, then there would remain no unexplained excess jewellery in the hands of the assessee and therefore no addition is called for. We, therefore, direct the deletion of addition upheld by the CIT(A).
M/s. Radhu Developers (P.) Ltd. Vs. ITO, Ward-15(1), New Delhi ITA No. 2165/Del/2017 (Del)
We have heard both the parties and perused the records, especially the legal ground argued by the Ld. Counsel for the assessee and perused the relevant documents available on record especially the assessment order, impugned order, reasons/satisfaction/approval recorded for issue of notice u/s. 148 of the Act which are placed in paper book-II at page no. 164-167, wherein the Ld. CIT, 4 Delhi-5, New Delhi granted the approval for issuing notice u/s. 148 of the Income Tax Act, 1961 by mentioning as under:- “I am satisfied with the reasons.” 5.1 After perusing the aforesaid remarks of the Ld. CIT-5, New Delhi, we find that the approval granted by the Ld. CIT-5, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings, because from the aforesaid remarks, it is not coming out as to which material; information; documents and which other aspects have been gone through and examined by the Ld. CIT-5, New Delhi for reaching to the satisfaction for granting approval. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act. Keeping in view of the facts and circumstances of the present case and the case laws applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Our aforesaid view is fortified by the following decisions including the ITAT, SMC, Bench, New Delhi decision dated 16.10.2019 in the case of Dharmender Kumar vs. ITO, Ward 65(5), New Delhi decided in ITA No. 2728/Del/2018 relevant to assessment year 2008-09 wherein the following case laws were followed on similar facts and circumstances of the case. A) United Electrical Company (P) Ltd. Vs. CIT & Ors. 258 ITR 317 (Del.) In this case, approval by the Addl. CIT u/s. 151 was given in the following terms:- “Yes, I am satisfied that it is a fit case for issue of notice u/s. 148 of the Income Tax Act.” 5 Analyzing, the above satisfaction/approval, it has been held that the CIT is required to apply his mind to the proposal put up to him for approval in the light to eh material relied upon by the AO. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case, there has been no application of mind by the Addl. CIT before granting the approval. (Para 19). (B) Hon’ble Supreme Court of India in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) arising out of order of Hon’ble High Court of Madhya Pradesh in CIT vs. S. Goyanka Lime & Chemicals Ltd. (2015) 56 taxmann.com 390 (MP). “Section 151, read with section 148 of Income Tax Act, 1961 – Income escaping assessment – Sanction for issue of notice (Recording of satisfaction) – High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid – Whether Special Leave Petition filed against impugned order was to be dismissed – Held, Yes (in favour of the Assessee).” 6. In the background of the aforesaid discussions and respectfully following the precedents, as aforesaid, we are of the considered view that approval granted by the Ld. CIT-5, New Delhi is a mechanical and without application of mind, which is not valid for initiating the reassessment proceedings issue of notice u/s. 148 of the I.T. Act, 1961 and is not in accordance with section 151 of the I.T. Act, 1961, thus, the notice issued u/s. 148 of the Act is invalid and accordingly the reopening in this case is bad in law and therefore, the same is hereby quashed. Accordingly, the legal ground involved in the appeal No. 2165/Del/2017 is 6 allowed. Since we have quashed the reassessment, there is no need to adjudicate other grounds. In the result, the appeal is allowed. 7. As regards the penalty appeal No. 6693/Del/2019 is concerned, since we have already quashed the reassessment in the quantum appeal, as aforesaid, hence, the penalty, does not stand in the eyes of law, therefore, the same is deleted as such, by allowing the appeal of the assessee.
ACIT, Circle-2(1), New Delhi Vs. Petrotech ITA No. 6778 & 6779/Del/2017 [Delhi]
We have carefully perused the orders of the authorities below. The undisputed fact is that the very issues were there in A.Y. 2009-10 to A.Y.2012-13. We further find that CIT(A) while deciding the appeal in favour of the assessee has followed the earlier years orders. The findings of the CIT(A) read as under :- “4.1.2 I have considered the order of the Assessing Officer, submissions of the appellant and the orders of CIT(A)-XXI/36 for assessment years 2009-10 (Appeal No. 420/2011-12) and 2010-11 and 2011-12 (Appeal Nos. 147 and 34/2015-16). I've also considered my own orders in the case of the appellant for assessment year 2012 - 13 (Appeal No. 140/2015 - 16). The Id. CIT(A)-36 in her order for assessment years 2010-11 and 2011-12 has held as under: 4 "6. I have considered the order of the AO, submissions of the asses see and the order of CIT (A) for AY 2009-10. My predecessor has in his order dated 15.10.2012 for AY 2009-10 found as under: "That on going through the facts of this case and from the examination of the records produced which were also submitted and available with the AO in the course of assessment proceedings, it is found that the activities of the society were not in the nature of advancement of any other object of general public utility, and not involved in carrying on any activity in the nature of trade commerce or business, as this society is wholly engaged in the academic filed and providing education being a non-profit, non-commercial organization as of providing a platform in the field of petroleum technology and related areas viz. Exploration, drilling, production, refining, petro-chemical, research and development and health, safety and environment. The said society organizes international and national seminars/ conferences on the said topic pertaining to Hydro Carbon Industry for the Oil Industry and academia on no profit no losses basis and is covered under the provision of law contained u/s. 2(15) of the Income Tax Act, 1961, because of providing education in the field of Oil Industry in order to explore areas of growth in the field of Petroleum Technology and related areas viz. Exploration, drilling, production, refining, petro-chemical, research and development and health, safety and environment, to provide them latest techniques and technology by way of organizing national and International and national seminars / conferences and when needed, therefore, is having the character of charitable activities only, and as such covered under the 2nd limb of section 2(15) of the Act, which is education though it has been mentioned as 1st limb in submissions of appellant but it makes no difference as it has been emphasized by the Circular dated 19.12.2008 that amendment in section 2(15) does not apply to first three limbs, which are; (i) relief of the poor (ii) education and (iii) medical relief. It applies only to the last limb which is advancement of any other object of general public utility. 4.1 As such, activity of the appellant has been found in the nature of education, the exemption u/s. 11 and 12 of the IT Act cannot be disallowed. The same is therefore, allowed and additions made in this regard are hereby deleted. The AO is directed to grant relief accordingly, Grounds no. 1 to 8 of the appeal are allowed". 7. It is seen that the facts & circumstances and the nature of disallowances and its reasoning is exactly the same for both these years i.e. AY 2010-11 & 2011-12 5 as they were for AY 2009-10. The matter as submitted by the assessee & as mentioned by the AO in his order, is already in the IT AT. Therefore, respectfully following the order of my predecessor, I find that the activities of the assessee are in the nature of education and therefore Proviso to Sec. 2(15) shall not apply to it. The exemption u/s. 11 is therefore allowable..." 4.1.3 The Hon'ble IT AT Delhi Bench "F" in ITA No. 6259/Del/2012 in appellant's own for assessment year 2009 - 10vide order dated 11/ 04/2017 have held as under: "7. We have carefully perused the memorandum of Association and bylaws of the society, which are placed before us, and page No. 30 of the paper book. According to that, the assessee is required to provide a forum for national and international experts in oil and gas industry exchange view and share their knowledge expert eyes and experience. Further, it is also formed to identify new areas for cooperation and technology transfer relating to petroleum industry and to find out new ways to assimilate and harness the petroleum resources of the world for the benefit of mankind. Therefore on looking at the clause No. 3 of the memorandum of Association of the assessee it is apparent that assessee is formed to carry on the educational activities in the field of oil and gas industry. The annual accounts-placed before us at page No. 22 on 23 of the paper book shows that the assessee has excess of income of Rs. 8351077 for the year ended on 31st of March 2009 and 5188749/- for March 2008. On a query being raised by the bench that whether the assessee is still enjoying the registration under section 12 A of the income tax act or not, it was replied by both the parties that still assessee is registered under section 12 A of the income tax act. Merely because the assessee is holding conferences and seminars which are according to us in furtherance of the object of education only against payment of fees will not make the object of the trust falling into the 6th category i.e. ' Any other object of general public utility'. Further more it is not the case of the revenue that assessee is not carrying on the objective for which it has been formed and the fees and the income earned by the assessee is not used for charitable purposes. The Ld. departmental representative could not controvert the decisions relied upon by the Ld. AR. The revenue also could not place before us any evidence to show that the objects of the assessee are not 'educationIn view of this we do not find any infirmity in the order of the Ld. CIT (A) in holding that assessee is entitled for deduction or exemption under section 11 and 12 of the income tax act as assessee is carrying on the activity of education only and income generated there from is also used for the charitable objects of education only" 6 4.1.4 The facts and circumstances of the case are same as for the earlier years, i.e., assessment years 2009-10, 2010-11, 2011-12 and 2012 - 13. Further, as has also been mentioned by the Assessing officer in his assessment order, there is no change in the activities of the assessee from the assessment year 2012 - 13. Therefore, respectfully following the orders of the Hon'ble ITAT in IT A No. 6259/10/2012 and those of my predecessors, CIT(A)-XXI and CIT(A)-36 and my own orders for assessment year 2012 - 13, it is held that the activities of the appellant are in the nature of education and, therefore, proviso to section 2(15) is not applicable. The Assessing Officer is directed to allow exemption under section 11 with all consequential benefits. Grounds of appeal Nos. 1 to 10 are allowed.” 6. We further find that the revenue approached the Hon’ble High Court of Delhi in A.Y.2009-10 and the Hon’ble High Court declined to interfere with the findings of the Tribunal holding that no substantial question of law arises. The relevant findings of the Hon’ble High Court read as under :- 7 7. Respectfully following the findings of the Co-ordinate Bench read with the decision of Hon’ble High Court (supra), we decline to interfere with the findings of the CIT(A). 8. In the result, both the appeals filed by the revenue are accordingly dismissed.
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