TMI Blog2015 (6) TMI 804X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation received from the Investigation Wing of the Department was on account of change of opinion and as such the reopening u/s 147 of the Act was not valid, therefore, the subsequent reassessment framed on that basis was invalid. Accordingly, we set aside the impugned order passed by the ld. CIT(A) and the original assessment framed by the AO is restored. - Decided in favour of the assessee. - ITA No. 5509/Del/2012 - - - Dated:- 19-6-2015 - Sh. G.C. Gupta And Sh. N.K. Saini, JJ. For The Assessee : Sh. Pradeep Dinodia R.K. Kapoor, CAs For The Revenue : Sh. P. Dam Kanunjna, Sr. DR ORDER Per N. K. Saini, AM: This is an appeal by the assessee against the order dated 25.07.2012 of ld. CIT(A)-IX, New Delhi. 2. Following grounds have been raised in this appeal: General 1.0 That on the facts and in circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-IX, New Delhi has erred in upholding the reassessment order dated 26th November 2010 passed by the Deputy Commissioner of Income Tax, Circle- 6(1), New Delhi under section 143(3) read with section 147 of the Income Tax Act, 1961 ( The Act ) Reopening of assessment is ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act were not attracted on the facts of the appellants case. 12.0 That the order passed by the CIT(A)/AO is bad in law. 13.0 That each ground is independent of and without prejudice to the other grounds raised herein. 3. Ground Nos. 2 to 5 are legal ground which relates to the reopening of the assessment u/s 147 r.w.s 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act). At the first instance the aforesaid legal grounds were argued by the ld. Counsel for the assessee. 4. The facts related to this issue in brief are that the assessee furnished the return of income on 28.11.2003 declaring an income of ₹ 4,17,61,259/-. The assessment however was framed on 30.03.2006 u/s 143(3) of the Act at an income of ₹ 4,28,28,277/-. Against the said order, the assessee went in appeal before the ld. CIT(A) who partly allowed the relief and thereafter the AO by giving effect to the appellate order assessed the income by passing the order u/s 250 of the Act at ₹ 4,28,28,277/- on 21.07.2010. In the mean time the assessee recorded the reason for reopening the assessment and issued the notice u/s 148 of the Act to the assessee on 29.03.2010. The AO record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the account holders amounts ranging from ₹ 1000 to 2000 per month. These account holders were masons, plumbers, electricians, peons, drivers etc., whose earnings are not sufficient for a living. They earned normally ₹ 3 to 5 thousand per month in their normal work and by working for the entry operators earned extra income of ₹ 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 D.I.T (Inv.), New Delhi has established the non-genuineness of transactions, whether shown by beneficiaries as inflow of Share Capital or receipt of Gifts or consideration for sale-purchase. The creditworthiness of the persons/persons controlling the concerns who have given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S. No. Name of the party Value of entry Instrument no. Date 1. Kohinoor Oil Mills Ltd. 500000 184330 25.10.2002 2. Kohinoor Oil Mills Ltd. 500000 184332 29.10.2002 3. Kohinoor Oil Mills Ltd. 500000 184334 09.11.2002 4. Shimmer Marketing Pvt. Ltd. 500000 585840 20.11.2002 5. Aries Pisces Finsec Services Pvt. Ltd. 500000 724823 21.11.2002 We have checked our records and found that company has received the unsecured loans from the above parties. In this support we are attaching the copy of confirmation of accounts duly signed by the authorized person of above parties alongwith the PAN details as annexure 1 of this reply. The copy of Balance sheet and Profit Loss A/c are b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of affidavit from Director of Shimmer Marketing Pvt. Ltd. for granting loan to us in financial year 2002-03. ii. The copy of ITR acknowledgement for assessment year 2003- 04. iii. The copy of balance sheet alongwith P L A/c for relevant financial year. Let me know if more information required in this regard we shall be glad to furnish the same. However, the AO did not find merit in the submissions of the assessee and made the addition of ₹ 25,00,000/- on account of cash credit. 6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and furnished the written submission which are incorporated by the ld. CIT(A) in para 4 of the impugned order and are reproduced verbatim as under: Based on the aforesaid reopening of the AO and the corresponding facts narrated by the assessee, the first issue which the assessee has raised vide ground no. 2 and 3 of its grounds of appeal before your honour is - whether the reopening done by the AO is as per provisions of law especially when original assessment had been completed uls.143(3) of the I. T. Act and the information about these entries of loans had been enquired into and explained at the stage (if ori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing questionnaire dated 4.4.2005 under which he had required the assessee to file confirmation for the increase in unsecured loans, copy of which is enclosed. The assessee, in response to this questionnaire vide its letter dated 9.12.2005 filed complete details of loan obtained during the year along with copy of income-tax return, copy of balance sheet of each creditors and all such other information, as was required by the AO. The AO being satisfied had accepted these transactions of obtaining loans front all the parties as per Tax Audit Report, as genuine as the assessee had always believed it to be so. Thereafter, the loans from these parties were repaid in subsequent periods i.e. assessment year 2004-05 and 2005-06. Thereafter assessee had no dealings/business relations of obtaining ICD from these parties. Under these circumstances, firstly it is needs to be decided, as to whether the reopening of the assessment pertaining to assessment year 2003-04 after the expiry of four years, can be said to be on account of failure of the assessee to disclose fully and truly all material facts for the purpose of computation of income. Admittedly, notice u/s 148 was issued to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 25 lakhs, especially when seen in the light of the fact that total amount during the year as inter-corporate loan/ICDs is more than 5 crores and the total loan from these three alleged entry operators, is just 5% of the total loan amount received by the assessee. It is respectfully submitted that the reopening done without even an allegation that the assessee has failed in its statutory obligation to disclose fully and truly the material facts necessary for the computation of income cannot be held to be valid in law and needs to be cancelled on this primary ground only. There is not even an allegation in the reasons that assessee has failed to disclose fully truly all material facts for the computation of its income. 7. The reliance was placed on the following case laws: (i) CIT vs. Bhaji Lavji, 79 ITR 582; ITO vs. Lakhmani Mewal Das, 103 ITR 437 (SC); (ii) CIT vs. Motor General Finance Ltd., (2009) 184 Taxman 465 (Del). (iii) CIT vs. KELVINATOR OF INDIA LTD., 256 ITR 1 (DELHI- FB) (iv) CIT vs. GOETZE (INDIA) LTD., (2010) 321 ITR (DEL) 431 (v) CIT vs. CHAKIAT AGENCIES PVT. LTD. (2009) 314 ITR 200 (MADRAS) (vi) CARTINI INDIA LTD. vs. ADDL. CIT (2009) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Lal (HUF) Vs CIT (1973) 38 ITR 439 (SC) ITO Vs Lakhmani Mewal Das (1976) 103 ITR 437 (SC) CIT Vs TSPLP Chidambaram Chettiar (1971) ITR 467 (SC) HA Hanji CO. Vs ITO (1979) 120 ITR 593 (Cal.) Sheo Singh Vs AAC (1971) 82 ITR (SC) Sri Krishna (P) Ltd. Vs ITO (1966) 221 ITR 538 (SC) Raymond Woollen Mills Ltd. Vs ITO (1999) 236 ITR 34 (SC) S. Narayanappa Vs CIT (1967) 63 ITR 219 (SC) Ganga Saran Sons (P) Ltd. Vs ITO (1981) 130 ITR 1 (SC) Phool Chand Bajrang Lal Vs ITO (1993) 203 ITR 456 at 477 (SC) 9. The ld. CIT(A) observed that whereas the reason to believe cannot be equated with the reason to suspect. It is equally not necessary that there should be ample evidence on record to establish the actual escapement of income so as to form a reasonable belief that the income of the assessee has escaped assessment and that one has to keep in mind the distinction between suspicion and belief and between belief and conclusive finding based on evidence. The ld. CIT(A) observed that in the present case, the reassessment proceedings were initiated on the basis of information received from the Investigation Wing of the Department stating that the assessee had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el alongwith interest after making TDS as per the provisions of law. It was contended that the assessee submitted the details of repayment of loan i.e. cheque nos., dates on which the loans were repaid and this fact was noted by the AO at page no. 3 of the assessment order. It was also contended that the assessee filed the details, such as affidavits from the Directors of the lending companies as well as copies of acknowledgment of income-tax return etc. and the details pertaining to the loans transactions were given in Annexure H of Tax Audit Report wherein names, addresses, PAN, Ward Nos. etc. of all the persons from whom loans exceeding ₹ 20,000/- were obtained or repaid during the year. It was stated that the reopening of the completed assessment u/s 147/148 of the Act was a change of opinion, because there was no failure on the part of the assessee to disclose fully and truly all material facts which were necessary for the purpose of computation of the assessee s income. Therefore, the reopening made by the AO u/s 147 r.w.s. 148 of the Act was not valid that the ld. CIT(A) was not justified in confirming the action of the AO. 11. The Reliance was placed on the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at an income of ₹ 4,28,28,277/- after making certain additions/disallowances. Thereafter, on the basis of information received by the AO from Investigation Wing that the assessee was engaged in receiving the bogus entries, the assessment was reopened. The AO identified 3 parties and issued summons u/s 131 of the Act which returned back with the remarks of the Postal Authority left without address . The AO made the addition of ₹ 25,00,000/- by observing that that the loans received in the said amount by the assessee were on account of bogus entries. In the present case, it is an admitted fact that the reassessment proceedings were initiated by the AO only on the basis of information received from the Investigation Wing and no independent inquiry was made by the AO. It is also noticed that during the course of original assessment proceedings the AO, vide notice u/s 142(1) of the Act dated 04.04.2005 asked the details and confirmation for increase in unsecured loan as is evident from page no. 101 of the assessee s paper book which is the copy of the said notice. In response to the said notice, the assessee vide letter dated 09.12.2005 furnished the list of inter-corpora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. The aforesaid order has been affirmed by the Hon ble Supreme Court in the case of CIT Vs Kelvinator of India Ltd. 320 ITR 561. 15. In the present case, also the AO while framing the original assessment, specifically, asked the assessee to furnish the details of the unsecured loans and the assessee gave the details by disclosing the name of the persons from whom loans were received and also furnished their PAN nos. alongwith the requisite details in the form of affidavit from the Directors of the lending companies, balance sheet profit loss A/c of those companies as well as copies of acknowledgment of Income Tax Return etc. to demonstrate the creditworthiness, b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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