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Vardai Overseas (P) Ltd. C/o Shri V.K. Sabharwal, Adv. Versus Income Tax Officer, Ward-8 (3) , New Delhi

2016 (1) TMI 450 - ITAT DELHI

Reopening of assessment - information received from the investigation wing - accommodation entries - Held that:- AO proceeded to issue notices for reassessment on the basis of information received from the investigation wing of the Department about the existence of accommodation entries providers. It is a settled legal position that at the stage of issue of notice u/s 148, the merits of the matter are not relevant and the AO at that stage is required to form only a prima facie belief or opinion .....

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at the assessee was a beneficiary of some accommodation entries. As per the reasons recorded, it is evident that the AO did not corroborate or examine the information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. In light of the aforesaid discussion, we are inclined to hold that in the instant case, the AO proceeded to initiate proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act only on .....

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t Kumar, Sr.DR ORDER Per Sudhanshu Srivastava, Judicial Member These appeals of the assessee have been filed against the common order passed by Ld. CIT (A) -XI New Delhi for Assessment Years 1999-2000 and 2000-01. Since the grounds raised in the appeal are similar and both the parties have agreed that the issue involved is common, these are being disposed of by a common order. 2. The facts, in brief, are as under:- Survey u/s 133A of the Income Tax Act, 1961 was conducted by the investigation wi .....

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o providing certain services in connection with the companies / concerns / entities that were not doing genuine business. For performing these activities, the address of his office at 210, Vakil Chamber, Vikas Marg, New Delhi was also used. A few private limited / limited companies were allegedly being used as front companies for execution of these transactions. The list of such companies included M/s. M.S. Leasing Private Ltd., which as per survey report, had issued a cheque of ₹ 1 lac to .....

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ustify the entries pertaining to receipt of cheques and notices u/s 133 (6) were issued to all the companies requiring them to furnish details and the purpose of payment etc. The AO has recorded a finding that all the notices were returned undelivered. Thereafter the assessee was asked to produce the directors of the company for examination but no compliance to that effect was also made. Since no party appeared to depose before the AO, the AO added ₹ 15 lacs as unexplained income of the as .....

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ess to the investors. Ld. CIT (A) further gave a finding that in spite of repeated opportunities the assessee failed to file the names, correct postal addresses, PAN numbers and copies of ledger account of all the investors. The addresses which were given were found to be incorrect in as much as the letters could not be served and were returned undelivered. The Ld. CIT(A) observed that the investors were not forthcoming to depose before the AO in support of claim by the assessee company regardin .....

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8 of the Income Tax Act, 1961. 2. That the provisions of law invoked u/s 147 by the Assessing Officer was further not legal as the reasons recorded were scanty and vague as not supported on any document or statement." 5. Ground No. 1 regarding the assumption of jurisdiction u/s 147 of the Income Tax Act, 1961 was not taken before the Ld. CIT (A) and it is only in this appeal before us that this ground has been raised for the first time. The assessee has specifically challenged the issue of .....

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te Corporation of India Ltd. v. CIT [1991] 187 ITR 688, wherein it was held that in the absence of any statutory provision, the appellate authority is vested with all the plenary powers which the subordinate authority may have in the matter. The Hon'ble Court held that the Tribunal will have the discretion to allow or not allow a new ground to be raised and further observed that where the Tribunal is only required to consider a question of law arising from the facts which are on record in th .....

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ai Overseas (P) Ltd. and as such it was not in the correct name of the assesee. The Ld. DR on the other hand submitted that since the assessee had cooperated and submitted to the reassessment proceedings throughout, this was a non-issue as far as assumption of jurisdiction u/s 147 of the Act was concerned. We have heard the rival submissions and have considered the facts of the case. It is seen from page 1 of the Assessment Order that the assessee had responded to the notice issued u/s 148 of th .....

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148 of the Income Tax Act, 1961. He strongly pleaded that the reassessment proceedings should be quashed as the reasons recorded were based on information received from Additional DIT (Investigation) which was accepted by the AO in a mere mechanical manner. The Ld. AR relied on a plethora of decisions in support of his preposition viz. CIT vs Atul Jain 299 ITR 383 (Delhi), United Electrical Company (P) Ltd vs. CIT & Ors. 258 ITR 317 (Delhi), CIT vs. SFIL Stock Broking Ltd. 325 ITR 285 (Delh .....

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mind by the AO and that the re-opening was valid as far as the recording of reasons and satisfaction was concerned. 9. We have gone through the records of the case and have also considered the rival submissions in this regard. It is seen from the records that the AO had received a letter from Additional DIT (Inv) Unit- VII, New Delhi forwarding a report containing information about bogus transaction by some companies. These transactions were detected during the course of survey on the business p .....

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ment on the basis of information received from the investigation wing of the Department about the existence of accommodation entries providers. It is a settled legal position that at the stage of issue of notice u/s 148, the merits of the matter are not relevant and the AO at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment. However, once that stage is crossed and the reassessment proceedings are set in motion, the material .....

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information received from the investigation wing before recording his own satisfaction of escaped income and initiating the reassessment proceedings. In light of the aforesaid discussion, we are inclined to hold that in the instant case, the AO proceeded to initiate proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act only on the basis of information received from the investigation wing of the Department. There is no material on record to show that the AO had applied an independ .....

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