TMI Blog2024 (2) TMI 639X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion of escapement of chargeable income on such purportedly suspicious transaction. No transaction claimed to have been carried out by the assessee from R.K. Trading Company at all as appearing in the reasons recorded. No addition has been made by the AO on this score either. The transaction was carried out with Netwest Trade Link but such transaction is wholly different. Thus, both the transactions forming part of the reasons have not been carried out by the assessee at all. The very basis for reopening the assessment is thus vitiated at the threshold. Addition qua high sea sale transactions executed with Netwest Tradelink Pvt. Ltd. supra which has no similarity with the transaction alleging escapement in the reasons recorded. The Assessing Officer has not bothered to link these transactions with the existing transaction in the course of re-assessment proceedings. The re-assessment made is thus totally divorced from the basis for which the case was reopened. This course is not permissible in law. In the absence of any addition/disallowance made qua the reasons recorded, the Assessing Officer is not entitled to make additions with respect to other items surfaced in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Assessing Officer (AO) under Section 147 r.w. Section 143(3) of the Income Tax Act, 1961 (the Act) concerning AYs 2009-10 and 2010-11, respectively. 2. Briefly stated, the assessee filed return of income for Assessment Year 2008-09 in question, declaring Nil income which was processed under Section 143(1) of the Act. Thereafter, notice dated 30.03.2016 was issued under Section 148 of the Act seeking to reopen the concluded assessment. The re-assessment order was consequently finalized after making additions / disallowances of Rs. 1,13,74,623/- owing to unexplained cash credits by invoking Section 68 of the Act. The reassessment order was thus framed determining re-assessed income at Rs. 1,13,74,623/-. 3. The assessee challenged the re-assessment proceedings before the CIT(A) on both counts, namely, validity of jurisdiction assumed under Section 148 of the Act as well as merits of additions made in the reassessment proceedings. The CIT(A) however upheld the action of the AO on both counts. 4. Aggrieved by the aforesaid order of the CIT(A), the assessee has filed appeal before the Tribunal. 5. The grounds of appeal raised by the assessee in ITA No.149/Del/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atter of fact, no bills were issued by aforesaid two entities to the assessee-company during the year, leave alone the question on any bogus billing. The ld. counsel submitted that it was duly explained to the AO that the assessee-company did not have any transaction with R.K. Trading Company during the year at all. In respect of other party, namely, Netwest Tradelink Pvt. Ltd., there was no transaction of Rs. 75,25,000/- as mentioned in the reasons. It was duly explained to the AO that during the year, the company has sold goods amounting to Rs. 113,74,623/- to Netwest Tradelink Pvt. Ltd. It was also explained to the AO that all the transactions were High Sea Sales. In evidence, the assessee submitted the documents before the Assessing Officer viz; copy of sale invoice, copy of purchase invoice, bill of entries, High Sea Sale Agreement, copy of account, bank statement etc. The factual position in this regard is not in dispute. 7.2 In this backdrop, the reasons recorded by the AO are without any factual basis for alleged escapement. The re-assessment proceedings initiated without foundation is thus not sustainable in law. 7.3 The ld. counsel next submitted that the notice und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 74,620/- on an altogether non-descript and different set of transaction is wholly impermissible in law. The ld. counsel pointed out that it is settled position of law that unless any of the escapement alleged in the reasons recorded is subject matter of any additions/disallowances, it is impermissible for the AO to indulge in making additions on other items unconnected to the main additions proposed in the reasons recorded. A reference was made to the judgment rendered in the case of CIT vs. Jet Airways (India) Ltd., (2011) 331 ITR 236 (Bom) and Ranbaxy Laboratories vs. CIT (2011) 336 ITR 136 (Del). 8. Per contra, the ld. DR for the Revenue submitted that the AO has rightly assumed jurisdiction to make re-assessment by issuing notice under Section 148 of the Act on the basis of tangible material / information received from Deputy Director of Income Tax (Inv.-I), Faridabad based on outcome of inquiries in the matter of assessee, based on STR report in the case of Netwest Tradelink Pvt. Ltd. and R.K. Trading Company Faridabad. It was submitted that AO acted upon such prima facie information received from other wing of the Department and hence such action was within the authority o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h. Tek Chand Sharma and Sh. Ram Kishan do not exist physically, hence not doing any business and are existing only on paper. 3. As per AST records, Sh. Tek Chand Sharma and Sh. Ram Kishan do not file their returns of income, hence not assessed to tax. 4. Since, all above mentioned entities are proprietorship concerns having high value transactions in many years, filing of returns of income are mandatory for the proprietors of these firms as per Income Tax Act, 1961. Therefore, it clearly establishes that they provided only accommodation entries to their beneficiaries. 5. All the parties which have either received of paid funds from the accounts of entities controlled and managed by Sh. Ram Kishan and Sh. Tek Chand Sharma have been benefited. Therefore information of these beneficiaries needs to be shared with their jurisdictional AOs. Thus the transaction patter of bank account statements of all firms of Sh. Tek Chand Sharma Sh. Ram Kishan, it has been considered that they were involved in the business of bogus billing during the financial year 2008-09 to 2011-12 and the assessee company namely M/s H. S. Impex Pvt. Ltd. (PAN-AABCH8227N) has been found to be on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred in the reasons recorded, it is ostensible that the information so provided by the DDIT (Inv.-I) Faridabad goes to show that certain transactions through banking channel has been carried out by the assessee with R.K. Trading Company and Netwest Trade Link. Noticeably, the information supplied by the DDIT is merely advisory in nature whereby the Assessing Officer was advised to check the copy of the account of the assessee with both these firms and examine them from an angle as to whether entries are in the nature of accommodation entries with such parties and carry necessary action as a consequence of any adverse observation. In essence, the AO was advised to make proper inquiries into such hugely suspicious entries. However, the AO appears to have straightaway took recourse to reopen the assessment without any intermittent inquiry to ascertain the propriety of comments emerging from such information to make prima facie opinion of escapement of chargeable income on such purportedly suspicious transaction. This is further reinforced by the fact that no transaction claimed to have been carried out by the assessee from R.K. Trading Company at all as appearing in the reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus find no rationale in the course adopted by the AO and by the CIT(A) on merits either. Hence, the order of the CIT(A) deserves to be set aside and the position taken by the assessee. 12. The appeal of the assessee is thus allowed both on the point of lack of jurisdiction under Section 147 of the Act as well as on merits. 13. In the result, the appeal of the assessee is allowed. ITA No.148/Del/2021 (Assessment Year 2010-11) 14. The grounds of appeal raised by the assessee read as under: 1. On the facts and circumstances of the case and in law, the notice under section 148 of the Income Tax Act, 1961 issued in the case is badin-law, void and without jurisdiction and, therefore, the said notice along with the assessment order passed by the assessing officer on the foundation of such notice are liable to be quashed and CIT (A) erred in not holding so. 2. On the facts and circumstances of the case and in law, the notice u/s. 148 issued in this case is contrary to law including the specific provision of section 147 to 151 of the Act and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the CIT (A) erred in confirmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are proprietorship concerns having high value transactions in many years, filing of returns of income are mandatory for the proprietors of these firms as per Income Tax Act, 1961. Therefore, it clearly establishes that they provided only accommodation entries to their beneficiaries. 5. All the parties which have either received of paid funds from the accounts of entities controlled and managed by Sh. Ram Kishan and Sh. Tek Chand Sharma have been benefited. Therefore information of these beneficiaries needs to be shared with their jurisdictional AOs. Thus the transaction patter of bank account statements of all firms of Sh. Tek Chand Sharma Sh. Ram Kishan, it has been considered that they were involved in the business of bogus billing during the financial year 2008-09 to 2011-12 and the assessee company namely M/s H. S. Impex Pvt. Ltd. (PAN-AABCH8227N) has been found to be one of the beneficiary of the bogus bills provided by M/s R. K. Trading Company Global Trade Corporation during the year under consideration. Sr. No. Name of the Assessee/Bank A/C. No. Debit (Approx.) Credit (approx.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supra) except the change in the name of the parties. The assumption of jurisdiction under Section 147 is bad in law in the wake of process of reasoning adopted for AY 2009-10 (supra). We are also guided by the judgment of Hon ble Delhi High Court in the case of Pr.CIT vs. G G Pharma India Ltd., 384 ITR 147 (Del) wherein the Hon ble Delhi High Court emphasized on the requirement of independent application of mind to the information obtained by the Assessing Officer. The information summarized in the reasons recorded do not reflect any independent application of mind per se. The AO has merely acted upon the information supplied without weighing the factual matrix on both the allegation namely bogus billing qua R.K. Trading Company (Proprietor Ram Kishan) of Rs. 51,63,804/- as well as Global Trade Corporation (Proprietor Tek Chand Sharma) of Rs. 1,01,26,687/- and Rs. 24,00,000/- respectively. The purchases made from these parties are backed by purchase invoice, corresponding sale and payment through banking channel and also sold in the course of trade giving rise to chargeable income in the hands of assessee. 18. As regards purchases from R.K. Trading Company amounting to Rs. 51,63 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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