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TMI Blog2015 (8) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... essment as well as the merits of the addition. The first appellate authority dismissed the appeal of the assessee. Aggrieved the assessee filed this appeal on the following grounds :- 1. "(i)That CIT(A) was not justified in confirming reassessment under section 148 without appreciating facts of the case, provisions of law and submission of the appellant. (ii) That there is no factual or legal basis in assuming jurisdiction U/S 148 as there is no case of any income escaping assessment or any tangible material and recording of satisfaction in the context of provisions of section 148. 2. That even otherwise, orders of lower authorities are not in consonance with reasons recorded by the assessing officer and orders passed by lower authorities are illegal, arbitrary and without jurisdiction. 3. That the appellant has duly filed all the relevant documents in support of addition of Rs. 2,14,27,4001- and same has totally been ignored and disregarded and addition was made on mechanical basis. 4(i). That no evidence or material was brought on record or provided to the appellant in the context of alleged addition and as such there is no valid basis for any such addition in the impugned r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitrary manner and without recording proper reasons, had issued a notice u/s 148 illegally. He argued that no other addition can be in the reassessment proceeding beyond the material based to which reasons for reopening was recorded and notice under section 148 cannot be given, unless tangible material comes to the possession of the AO and a fresh reopening notice is issued. He relied on the decision of Hon'ble Delhi High Court in the case of Ranbaxy Laboratories Ltd. vs. CIT (2011) 336 ITR 136 (Delhi) and other cases in support of this contentions. He submitted that the additions have to be deleted on this ground. 7. On merits he argued that the whole addition is based on the statement of Shri S.K. Gupta and in this statement Shri S.K. Gupta has made no references to the name of the assessee M/s. Raj Hans Towers Pvt. Ltd. He submitted that the share capital was received from directors. As regards other transactions i.e. loans he submitted that these were received from directors, family members and associated concerns who were all regularly assessed to income tax. He submitted that all necessary evidences were placed on record in support of these loan and share capital receipt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age 26 of the assessee's paper book which is a statement of account of Shri R.C. Goel with Oriental Bank of Commerce. He pointed out that, the income of Shri R.C. Goel is by way of salary of Rs. 72,000/- page 18 of the paper book and whereas the cumulative transaction in the bank was Rs. 3.41 crores which is abnormal. He submitted that in the case of Smt. Neelam Goel the rent receipt was Rs. 2,72,400/- and the taxable income was Rs. 165050/- and whereas the cumulative transactions in the bank account were Rs. 50,73,000/-. This shows that the transactions of the assessee are not genuine. The assessee submits that the information received by the revenue was not vague information as alleged. He submitted a note to explain the circumstances leading to the search and survey action on Taneja Group. On the argument that , in the subsequent assessment year, no addition was made by the AO on the very same material, the Ld. DR submitted that this cannot a ground for deleting the additions and the order of the AO for that assessment year is not well founded. He pointed out during this year Shri S.K. Gupta did not appear and give his statement to the AO. He relied on the order of the Ld. CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e said money at the disposal of the beneficiaries without any associated cost or liability. In the instant case, the assessee is found to be the beneficiary of accommodation entry 'from such entry operators as per the following specific details of transaction:- Amount Instrument No. Date Name of entry provider Name of Bank 20,00,000 650618 24.12.2003 Anjali Gupta/R.C. Goel Mitsu HDFC The assessee has received unexplained sums from the entry operators as per the above details as per information available with the undersigned . As explained above, the identity, creditworthiness and genuineness of transactions with the persons found to be entry operators cannot be established. I therefore have reasons to believe that the income chargeable to tax amounting to Rs. 20,00,000/-, which is the assessee's own money, has escaped assessment within the meaning of Section 147 of the Act. Since four years have since expired from the end of the relevant, assessment year, and no scrutiny assessment was completed in the case of the assessee for the said assessment year, the reasons recorded above for the purpose of reopening of assessment are put up for kind satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght on record is a vague and unsubstantiated reason. This is a case where Shri S.K. Gupta and his family members claimed to have invested money in the company and under such circumstances , the reasons recorded for reopening in our view does not stand the tests laid down for sustaining the reopening. 18. Various courts have laid down the principles and propositions based on which the validity of reopening has to be tested. We list some of them : 1. Signature Hotels Pvt. Ltd. vs. ITO (2011) 338 ITR 51 (Del) held as follows:- Allowing the petition, that the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or establ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question regarding the said capital contribution, it could not be said that there was a "change of opinion". HELD by the High Court allowing the Petition: (i) In the recorded reasons. no details are provided as to what such information is which excited the AO's notice and attention. The reasons must indicate specifically what such objective and new material facts are, on the basis of which a reopening is initiated u/s 148. This reassessment is clearly not on the basis of new (or "tangible") information or facts that which the Revenue came by. It is in effect a re-appreciation or review of the facts that were provided along with the original return filed by the assessee; (ii) The foundation of the AO's jurisdiction and the raison d'etre of a reassessment notice are the "reasons to believe". Now this should have a relation or a link with an objective fact in the form of information or facts external to the materials on the record. Such external facts or material constitute the driver, or the key which enables the authority to legitimately re-open the completed assessment. In absence of this objective "trigger", the AO does not possess jurisdiction to reopen the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to show that any tangible material had come into the possession of the Assessing Officer subsequent to the issue of the intimation. The notice ref1ected an arbitrary exercise of the power conferred under section 147. 6 Sarthak Securities Co. P Ltd. vs. ITO (2010) 329 ITR 110 (Delhi) held as follows:- Allowing the petition, that the formation of belief was a condition precedent as regards the escapement of the tax pertaining to the assessment year by the Assessing Officer. The Assessing Officer was required to form an opinion before he proceeded to issue a notice. The validity of reasons, which were supposed to sustain the formation of an opinion, was challengeable. The reasons to believe were required to be recorded by the Assessing Officer. Once the ingredients of section 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147. The Assessing Officer was aware of the existence of" the four companies with whom the assessee had entered into transaction. Both the orders showed that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of income from assessment. There is no reference to any statement or bank account or any other material other than a main report of the investigation wing. b) The reasons recorded are not after independent verification and application of mind by the AO and it is merely based on a report of the investigation wing. This is clear from the conclusions in the assessment order that the figure of Rs. 20 lakhs is not correct. c) The reasons are vague and unsubstantiated and are not corroborated at the time of assessment or by any other evidence, such as statement, bank account copy etc. d) When share capital is contributed by the directors, to believe that the money in question belonged to the assessee company and that this money was routed through the director of the assessee company, based on the report of the investigation wing is unsubstantiated and not corroborated by any material. 20. We now consider the contentions on merits. The argument of the assessee is that the reopening is bad in law for the reason that approval was not obtained from the Joint Commissioner has to be dismissed as devoid of merit, as the Ld. DR has produced the approval by the Additional Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of a notice under Section 148(1) of the Act. d. Vipan Khanna v. CIT 255 ITR 220 (P& H) held as follows :- Reassessment proceeding u/s 147 is a special proceeding and can be confined to only to the issue on the basis of reassessment proceeding has been initiated and no general questionnaire can be issued for the same. It is not permissible for the AO to make fishing and Roving enquiries for finalizing the reassessment of the assessee. e. Travancore Cements Ltd vs ACIT; (2008) 219 CTR 359 (Ker) Assessing officer gets jurisdiction under Section 148 to assess or reassess the income which has escaped assessment only after Sub-section (2) of Section 148 is complied with. The question is whether Sub-section (2) of Section 148 has to be complied with if any other income chargeable to tax has escaped assessment, or which comes to his knowledge subsequently in the course of the proceedings. In other words, when proceedings are already on in respect of one item in respect of the income for which he had already recorded reasons is it necessary that he should record reasons for assessing or reassessing any of the items which are totally unconnected with the proceedings already in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditworthiness of some of the share applicants. Out of four persons who have purchased shares and out of 11 persons who have given loans, the Ld. DR analysed the evidence filed only by two persons. To this extent the claim of the Ld. DR is credible. The creditworthiness of these persons is not proved . Nevertheless in our view when Directors / share holders of the assessee company confirms having contributed capital and fails to substantiate the source of such contribution, this addition should be made in the hands of such directors / share holders, as no investigation is carried out by the AO in these cases also. 26. A perusal of the above demonstrates that the assessee has furnished before the AO evidences to establish the identity of the persons who either invested in share capital or granted a loan. On the other hand the AO has not conducted any investigation nor did he have any of the material gathered by the Investigation Wing based on which the addition can be made. He merely relied on a report of the Investigation Wing. 27. The legal position enunciated by the Jurisdictional High Court is as follows. a) In the case of CIT vs. Gangeshwari Metal P.Ltd. in ITA no.597/2012 ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 271(1)(c ) are being initiated separately. " The facts of Nova Promoters and Finlease (P) Ltd. (supra) fall in the former category and that is why this Court decided in favour of the revenue in that case. However, the facts of the present case are clearly distinguishable and fall in the second category and are more in line with facts of Lovely Exports (P) Ltd. (supra). There was a clear lack of inquiry on the part of the Assessing Officer once the assessee had furnished all the material which we have already referred to above. In such an eventuality no addition can be made under Section 68 of the Income Tax Act, 1961. Consequently, the question is answered in the negative. The decision of the Tribunal is correct in law. " The case on hand clearly falls in the category where there is lack of enquiry on the part of the A.O. as in the case of Gangeshwari Metals (supra). b) In the case of Finlease Pvt.Ltd. 342 ITR 169 (supra) in ITA 232/2012 judgement dt. 22.11.2012 at para 6 to 8, it is held as follows. 6. This Court has considered the submissions of the parties. In this case the discussion by the Commissioner of Income Tax (Appeals) would reveal that the assessee ha ..... 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