ACIT vs Umang Leasing and Credit Company Ltd.

PER NAVEEN CHANDRA, ACCOUNTANT MEMBER :

The above captioned appeal by the Revenue and Cross Objection by the assessee is preferred against order of the ld. Commissioner of Income Tax (Appeals) – NFAC, Delhi dated 22.09.2023 under section 250 of the Act arising from the assessment order dated 24.12.2019, passed by the Asstt. Commissioner of Income Tax, Circle – 27(1) – New Delhi under Section 147 of the Income Tax Act, 1961 (‘the Act’) concerning Assessment Year 2012-13.

Since the underlying facts are common in the cross objections of the assessee and Revenue and pertain to same assessee, they were heard together and are disposed of by this common order for the sake of convenience and brevity.

The grounds raised by the assessee are as under :

The assessee has filed the following Grounds of Cross Objections

We take up the assessee CO first. Brief facts of the case are that the assessee is a domestic Non-Banking Finance Company (NBFC) engaged in the business of acceptance and granting of loans and advances. Assessee filed original return declaring income of Rs. "16,18,690/-" on 24.09.2012. The return was scrutinised u/s 143(3) of the I.T. Act and original assessment was made u/s 143(3) at an income of Rs. 18,19,820/- on 26.11.2014.

The AO received information from Investigation Wing, Kolkata, gathered from search and seizure carried out u/s 132 of the IT Act 1961 on 15.09.2008 on Tarun Goyal, a tax consultant who was providing accommodation entries, that M/s Sai Dwarka Finman Pvt. Ltd (SDFPL) and a shell entity operated by Sh. Tarun Goyal, had transaction with the assessee amounting to Rs 25,00,000/-; M/s Priya Tissue Pvt Ltd (PTPL), another shell entity operated by Sh. Tarun Goyal, had transaction with the assessee amounting to Rs 2,82,50,000/-; another entry provider Anand Jain and Naresh Kumar Jain had transaction with the assessee amounting to Rs 90,00,000/-. On the basis of such information received, the assessee’s case was reopened by issuance of notice u/s 148 dated 31.03.2019, in response to which the assessee company stated that the return filed on 24.09.2012 may be treated as return filed in pursuance to Notice u/s 148 of the Act.

In the course of reassessment proceedings, not satisfied with the explanation of the assessee, the Assessing Officer made an addition u/s 147/143(3) of Rs.3,97,50,000/- as unexplained income under section 68 of the Act considering the assessee being a beneficiary of accommodation entries. The CIT(A) though dismissed the challenge made to reopening under section 147, deleted the addition made of Rs. 3,97,50,000/-.

Aggrieved, the Revenue is before us, on account of deletion of amount of addition. The assessee has filed the CO on account of dismissal of challenge to 147 proceedings.

At the outset, learned Counsel of the assessee pointed out to the reasons recorded wherein the AO has recorded that the debit and credit entries of Rs.50,00,000/- has not been verified and hence escaped assessment. It is the claim of the assessee that the case cannot be reopened for verification. It was argued that the assumption of jurisdiction u/s 148 is illegal because the reopening was made beyond 4 years from the end of relevant assessment year which kicks in the first Proviso to Section 147 wherein the AO had to record that there was omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment during the course of initial assessment proceedings. The ld AR relied on Haryana Acrylic Manufacturing Co. v. CIT [2009] 308 ITR 38 (Del) and JSRS Udyog Ltd. v. ITO (2009) 313 ITR 321 (Del),

The ld AR further submitted that, in the instant matter, there was no omission or failure on the part of assessee in disclosing material primary facts related to its transactions with SDFPL and PTPL which were necessary for the assessment during the course of initial assessment made u/s 143(3). The assessee's transactions with SDFPL, was receipt of loan Rs. 25 lakh on 14/10/2011 through banking channels and repayment in the same year of the entire amount on 30.01.2012 through banking channels. Further, assessee's transactions with PTPL did not comprise of any receipt of loan during FY 2011-12; the assessee had only repaid through banking channel the loan taken in earlier year. During the course of initial assessment proceedings, the assessee had submitted confirmed ledger, ITR, Bank statements, and Audited accounts of the above said two companies vide its letter dated 21/11/2014 enclosed at Page No. 96-164 of paper book.

The ld AR argued that the AO has not indicated as to which material facts, in relation to assessee's transaction with the above referred two companies, the assessee failed to disclose during the course of initial assessment proceeding, which is an essential pre-condition for assumption of jurisdiction under 1" proviso to section 147. The ld AR relied on Swarovski India P. Ltd. vs. DCIT [2014] 368 ITR 601 (Del) and Sun Pharmaceutical Industries Ltd. vs. DCIT (2016) 381 ITR 387.

Per contra the ld DR relied on the orders of the authorities below.

We have heard the rival submissions and have perused the materials on record. It is admitted fact that the initial assessment was made u/s 143(3) dated 26.11.2014 and that the notice u/s 148 dated 31.03.2019 has been issued after the lapse of four years from the end of relevant assessment year AY 2012-13. It was incumbent upon the AO to fulfill the provision of 1st proviso to section 147 to show that there was an omission or failure on the part of the assessee to disclose truly and fully all the material facts. In this respect, we find that it is also an uncontroverted fact that the assessee had disclosed the material primary facts related to its transactions with SDFPL and PTPL during the course of initial assessment made u/s 143(3) and had furnished, in the course of original assessment, all the relevant documents with regard to transaction with (SDFPL) and (PTPL) which was examined and verified by the AO.

We further find that the AO has recorded in the reasons that the transactions with SDFPL has not been verified as follows:

As the Cross appeal of the assessee is allowed, the appeal of the Revenue is dismissed.

In the result, the appeal of the Revenue ITA No. 3281/DEL/2023 is dismissed and the cross appeal of the Assessee CO No.60/Del/2024 (In ITA No.3281/Del/2023) is allowed.