High Court Of Delhi
CIT vs. Rainee Singh
Section 147
Asst. Year 1998-99, 1999-2000, 2000-01
A.K. Sikri & Valmiki J. Mehta, JJ.
IT Appeal No. 566 of 2009
20th August, 2009
Counsel Appeared :
Ms. P.L. Bansal, Paras Chaudhary & Ms. Anshul Sharma, for the Appellant : Dr. Rakesh Gupta & Ms. Aarti Saini, for the Respondent
JUDGMENT
A.K. SIKRI, J. :
Civil Misc. No. 5809 of 2009 (Exemption) in IT Appeal No. 566 of 2009 Exemption sought is granted subject to all just exceptions.
2. Application is disposed of. IT Appeal No. 566 of 2009 1. A notice under s. 147 of the IT Act was issued to the assessee herein on 4th March, 2005 seeking to reopen the assessment. In the said notice, the following reasons were given by the AO : “The Sahara Group had made certain land deals in Gurgaon wherein certain plots of agricultural land were purchased in the name of certain employees of various Sahara companies. It was found that two Sahara companies had advanced loan aggregating to Rs. 31.93 crores from financial year 1997-98 to financial year 1999-2000 to the employees of the Sahara Group for the purchase of 233 plots of agricultural land at Chauma Village at Tehsil Gurgaon. The amount of loan sanctioned to the employees against the equitable mortgages of lands were deposited in their bank accounts and therefore, the payments were made to the sellers through Mrs. Rainee Singh, proprietor Rainee’s Creations, New Delhi. However, the arrangements were so made that while the payments to the sellers aggregated to Rs. 24.55 crores, Mrs. Rainee Singh paid Rs. 6.30 crores out of the payments received from the employees, to a loss-making company M/s Rathi Ispat Ltd. The company M/s Rathi Ispal Ltd. has not furnished any evidence of having rendered of any kind of services rendered in relation to the land deals. Further, Mrs. Rainee Singh has also only shown a surplus of just Rs. 1.07 crores. Out of the land transactions. It is thus apparent that Mrs. Rainee Singh has diverted her income amounting to Rs. 6.30 crores by way of showing the bogus payment of Rs. 6.30 crores to M/s Rathi Ispal Ltd. which is a loss-making company. Presumably, the sum of Rs. 6.30 crores might have been taken back in cash from M/s Rathi Ispat Ltd. by Mrs. Rainee Singh, proprietor M/s Rainee Creations.”
2. It is clear from the aforesaid order that the AO proceeded on the following two assumptions : (1) The assessee herein had diverted her income amounting to Rs. 6.30 crores by way of showing the bogus payment of that amount to M/s Rathi Ispat Ltd. which was a loss-making company. (2) The presumption was drawn that M/s Rathi Ispat Ltd. would have returned back that amount to the assessee in cash.
3. In appeal filed by the assessee against that order, the assessee pointed out that the aforesaid payment made by the assessee to M/s Rathi Ispat Ltd. was not a bogus payment and it was against the services rendered by M/s Rathi Ispat Ltd. The CIT(A), after considering the matter in detail, allowed the said appeal and quashed the assessment proceedings inter alia on the following grounds :
(a) A finding of fact was recorded that M/s Rathi Ispat Ltd. was not a loss-making company and in fact in all three years it had earned profits. Profits earned before payment of tax were as under :
(b) M/s Rathi Ispat Ltd. had also paid tax on the aforesaid income which included the income received from the assessee herein in the form of against the services rendered to the assessee. From this, the CIT(A) recorded that when the income was taxed at the hands of M/s Rathi Ispat Ltd., it clearly points to the genuineness of the transaction which had even been accepted by the Department.
(c) Finding of fact is also recorded that M/s Rathi Ispat Ltd. had actually rendered services to the appellant. In arriving at this conclusion, the CIT(A) took into consideration various documents, submitted before it and the discussion in this behalf is reproduced in the following manner : Asst. yr. Rs. “After execution of the MoU whenever a piece of land was registered with the effort of M/s Rathi Ispat Ltd. in the name of appellant’s nominee, a letter was written by M/s Rathi Ispat Ltd. to the appellant along with the relevant invoice for making balance payment to M/s Rathi Ispat Ltd. During the course of appellate proceedings copy of all such letters and respective invoices were furnished which prove beyond doubt that it was as a result of positive involvement of M/s Rathi Ispat Ltd. that different pieces of land could be got registered in the name of appellant’s nominee i.e., M/s Sahara India Housing Ltd. All the payments were made by the appellant through account payee cheques and this is found properly recorded in the books of accounts of the appellant as well as in the books of accounts of M/s Rathi Ispat Ltd. It is verifiable from the books of accounts of the appellant with reference to individual ledger account of the persons from whom the land was purchased and payment was made to them by appellant. Whenever such payment was made by the appellant to M/s Rathi Ispat Ltd. it was sent through a letter. Copy of all such letters were submitted by the appellant during the appellate proceedings. Each letter indicates the date, number and amount of the pay order and the bank on which it was drawn. Likewise whenever such payment was received a receipt was issued by M/s Rathi Ispat Ltd. acknowledging the payment and all these find place in the books of M/s Rathi Ispat Ltd. and their bank account. It would also be pertinent to mention here that the assessment of M/s Rathi Ispat Ltd. was also completed by the Dy. CIT, Circle 15(1), New Delhi under s. 147/143(3) wherein all these transactions were examined in detail. Copy of assessment order for asst. yr. 2000- 01 dt. 10th March, 2006 is placed on record. This order very specifically, discuss in details that a sum of Rs. 1,47,52,572 had accrued to M/s Rathi Ispat Ltd. against which they had received a sum of Rs. 1,03,73,510 from M/s Rainee’s Creations and all payments had been received through account payee cheques and deposited in various accounts maintained by them. It also discuss that copy of account of M/s Rainee’s Creations was also filed which corroborates that the payment had actually been made by the appellant. This order also speaks that all these amounts had been credited in sales and service account maintained by the assessee i.e., M/s Rathi Ispat Ltd. Thus, all these overwhelming evidences prove beyond doubt that not only effective services were rendered by M/s Rathi Ispat Ltd. to the appellant, the payments made to them by the appellant were genuine and cannot be termed as bogus payment as held by the AO.”
4. The Department filed appeal against this order before the Tribunal but unsuccessfully in as much as the said appeal has been dismissed by the Tribunal while its order dt. 25th Aug., 2008 [reported at Dy. CIT vs. Mrs. Rainee Singh (2009) 125 TTJ (Del) 816—Ed.] inter alia recorded as under : “6. We have carefully considered the rival submissions and perused the records. As could be noticed from the reasons recorded by the learned Asstt. CIT the reopening of assessment was based on mere suspicion and the use of the expression ‘presumably, the sum of Rs. 6.30 crores might have been taken back in cash….’ Clearly shows that the AO has not made any effort to satisfy himself as to whether the information received from the office of the Director General of IT (Inv.) has some basis or not and thus it is to be held that the reassessment proceedings are initiated in a mechanical manner on vague grounds. In the light of the decision of the jurisdictional High Court (supra), as well as the decision of the Hon’ble Punjab & Haryana High Court (supra), we are of the view that the reopening of assessment, based on mere suspicion, is invalid in law and therefore, unable to be quashed. As declared in the Open Court we hold that the reopening of assessment is bad in law and therefore, the reassessment proceedings are hereby quashed. In view of our conclusion that the reopening is bad in law, it is not necessary for us to go into the other issues on merits, urged by the Revenue. In the result the appeals filed by the Revenue are treated as dismissed and the cross-objections filed by the assessee are allowed for the reasons stated above.”
The submission of learned counsel for the appellant is that it was not open to the CIT(A) or for that matter the Tribunal to go into the merits of this case at this stage when notice under s. 147 of the IT Act was issued. However, when we put specific query to learned counsel for the appellant as to whether the aforesaid facts particularly, the fact that M/s Rathi Ispat Ltd. was not a loss-making undertaking and it had paid the taxes on the amount received from the assessee herein, it could not be disputed by the learned counsel. Thus, we find from this that the very basis for initiating proceedings under s. 147 is on wrong premise as it is neither factually correct that M/s Rathi Ispat Ltd. was a loss-making company and on the other hand it also stands established that the payment was received by M/s Rathi Ispat Ltd. for the services rendered by it to the assessee which had been shown as income in its return and duly taxed by the IT Department.
In these circumstances, we are of the opinion that no question of law much less substantial question of law arises and the appeal is an abuse of the process of law.
Dismissed.
[Citation : 330 ITR 417]
