TMI Blog2011 (10) TMI 525X X X X Extracts X X X X X X X X Extracts X X X X ..... me on October 29, 2001 admitting taxable income of Rs. 2,65,753. The return of income was processed under section 143(1) of the Act. Subsequently, an information was received from the investigation wing, New Delhi, that certain persons called beneficiaries, have resorted to money-laundering by giving unaccounted cash to persons called entry operators and in turn taking from them cheques/demand drafts in the garb of share application money or sale proceeds of non-existent goods thereby ploughing back their undeclared cash into accounts/ business. The Assessing Officer after recording reasons issued notice under section 147 of the Act on March 27, 2008 to which the assessee did not file return of income. The Assessing Officer issued notice under section 142(1) on July 24, 2008, in response thereto, the assessee filed letter dated August 14, 2008 stating that the assessee had already filed return vide acknowledgment number 319 on October 29, 2001. The assessee was again specifically asked to file the return under section 148. The assessee then vide letter dated November 17, 2008 filed the return of income under section 148 of the Act. The assessee asked the copy of reasons recorded wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n allegations had been mentioned. In paragraph 3 the gist of investigation made by the investigation wing had been summarised. In paragraph 4 it is stated that the assessee had credits in the bank account of Shri Parmanand Garg, Shri Ashok Kumar Singhal and Shri Brahm Dutt. Even though not mentioned, this was an allegation made by the investigation wing in its report, which gave the Assessing Officer the reasons to believe that an amount had escaped assessment. The learned Commissioner of Income-tax (Appeals) after discussing the decisions of the hon'ble Delhi High Court in the case of United Electrical Co. P. Ltd. v. CIT [2002] 258 ITR 317 (Delhi) ; CIT v. Atul Jain [2008] 299 ITR 383 (Delhi) ; and CIT v. Vardhman Estates Ltd. [2007] 165 Taxman 473 (Delhi) has held that the Assessing Officer while reopening assessment did not independently make an enquiry on the veracity of the report filed by the investigation wing, which had been forwarded to him by the office of the learned Commissioner of Income-tax. The statements relied upon by him were general in nature. The return of income, as originally filed by the assessee, if any, has not been perused by the Assessing Officer. Still h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appeals) has cancelled the assessment on the ground that the Assessing Officer before issue of notice under section 148 had neither conducted inquiry nor verified information with the return of income and hence it was a case of non-application of the mind. In the case of Signature Hotels P. Ltd. v. ITO [2011] 338 ITR 51 (Delhi) the hon'ble Delhi High Court has held that the first sentence of reasons states that information had been received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5,00,000 during the financial year 2002-03 as per details given in the annexure. The last sentence records that as per information, the amount received was nothing but an accommodation entry and the assessee was beneficiary. Under these circumstances the hon'ble Delhi High Court had held that the aforesaid reasons do not satisfy the requirement of section 148 of the Act. The reasons and the information referred to was extremely scanty and vague. There was no reference to any document or statement, except annexure. Annexure could not be regarded as material or evidence that prima facie could show or establish nexus or link with escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count No. entry giving account Swetu Stone PV SBP DG 50106 From the information contained in annexure and reasons recorded by the Assessing Officer as above, the hon'ble Delhi High Court had concluded that there was no live nexus between the reasons recorded and information that income of Rs. 5,00,000 had escaped assessment. Also there was non-application of mind. However, in the case before us the Assessing Officer has recorded the following reasons : "Reasons for issuing notice under section 148 in the case of M/s. Contel Medicare Systems P. Ltd. for the assessment year 2001-02. A report on enquiries made by the Directorate of Income-tax (Investigation), New Delhi into accommodation entries given by entry operators has been received. This report was received in the office of the Commissioner of Income-tax, Delhi-1, New Delhi and was subsequently forwarded vide F. No. CIT-1/2005-06/2132 dated March 13, 2006. These enquiries were initiated to probe into some bank account which were used to issue cheques to entry seekers of beneficiaries against cash paid by them to the entry operators. Such a camouflaged transaction c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t holders were masons, plumbers, electricians, peons, drivers, etc. whose earnings are not sufficient for a living. They earned normally Rs. 3 to 5 thousand per month in their normal work and by working for the entry operators earned extra income of Rs. 2 to 4 thousand per month. Their signatures were taken on blank gift deeds, cheque books, share application money, etc. In fact, these persons signed all types of papers they were asked to sign. They were made directors of companies, partners of firms and proprietor of different concerns solely for operation of these accounts. Actually, many of them were not even aware of the tax implications, etc. Their only concern was with the few thousand rupees given to them by the entry operators. 3. Summing up, the report as a result of these extensive enquiries carried out by the Director of Income-tax (Investigation), New Delhi has assailed genuineness of transactions, whether shown by beneficiaries as inflow of share capital or receipt of gifts of consideration for sale-purchase. It has also dealt a body blow to the creditworthiness of the person/persons controlling the concerns who have given these credit entries/share capital/gifts/sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it by section 68 of the Act. There is no dispute about the fact that the Assessing Officer had not conducted independent enquiries after receipt of information. However, he has analysed the report received from the investigation wing to come to a conclusion that transactions were not genuine. The reasons recorded in the case of the present assessee are exhaustive as against the scanty reasons recorded in the case of Signature Hotels P. Ltd. [2011] 338 ITR 51 (Delhi). This is not the case in the present appeal. Therefore, in our considered opinion, the Assessing Officer had applied his mind while recording the reasons for reopening of the assessment under section 147 of the Act. Moreover, the information is specific giving the details of the branch, the name of the account holder and the date of cheque and cheque number. The hon'ble Supreme Court in the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) has held as under (headnote): "Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge, but it is open to an assessee to establish that there in fact existed no belief or that the belief was not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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