TMI Blog2011 (10) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... correctly. The reopening of assessment made by the AO is invalid and liable to be quashed. - ITA No.1511/Del/2011 - - - Dated:- 7-10-2011 - SHRI C.L. SETHI, JM SHRI A.N. PAHUJA, AM For the Appellant : Shri Salil Aggarwal ,AR For the Respondent : Smt.Y.S. Kakkar,DR O R D E R A.N.Pahuja:- This appeal filed on 28.3.2011 by the assessee against an order dated 22nd December, 2010 of the ld. CIT(A)-XXII, New Delhi, raises the following grounds:- 1. That the order of the learned CIT(A) is bad in law and on the facts and in the circumstances of the case. 2. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in not appreciating the fact that notice u/s 148 of the Act was issued without application of mind as the same had not been based on any material in the possession of the Assessing Officer. 3. That on the facts and in the circumstances of the case, the learned CIT(A) has erred in upholding the validity of reassessment proceedings initiated u/s 147 of the Income-tax Act, 1961, (the Act ) by the Assessing Officer arbitrarily without assuming proper jurisdiction under the provisions of the Act. The authorities b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 25.2.2002 and No.072688 dated 26.2.2002 for ₹ 5,00,000/- each. Based on the above facts, the amount taken by the assessee as Manager s cheque from Sh. Harish Pawar is in fact accommodation entries and formed part of income of the assessee, which has escaped assessment for the financial year 2001-02 relevant to assessment year 2002- 03. In the light of above facts, I have reason to believe that Manager s cheques of Rs.`5,00,000/- each have escaped assessment during the assessment year 2002-03. 2.1 Accordingly, a notice u/s 148 of the Act was served upon the assessee on 31.03.2009. During the course of reassessment proceedings, the AO noticed that apart from an amount of ₹ 10 lcs received from Shri Harish Pawar, proprietor of Amrit Impex(India), the assessee received a gift of `7 lacs vide cheque no.018468 dated 12.09.2001 from Mrs. Susham Sharma, B-121, Karam Pura, Delhi. On inquiry, the AO found that no such person existed at the said address and instead, a firm M/s Somen was functioning from the said address. To a query by the AO as to why an amount of `17,00,000/- along with commission paid by the assessee for obtaining accommodation entries , be not treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s jurisdiction over salary cases, whereas the income of the appellant was from business. Moreover, she was regularly filing her income tax return in ward 20(3). It is seen that the appellant has not denied that her PAN was issued in the jurisdiction of the Income Tax Officer, ward-48(2). She has claimed to be regularly assessed in Ward-20(3), but has filed only copy of acknowledgement of filing of return of assessment year 2002-03 in support thereof. It is also seen that the appellant sought the reasons for reopening the assessment vide her letter dated 16.11.2009, which has been provided in the letter of the Assessing Officer dated 01.12.2009. The law does not require providing the appellant with copy of the form for obtaining prior approval of the Addl. CIT concerned. I also find the reliance on the judgment of the Apex Court in GKN Driveshafts to be misplaced. In that case, the appellant s writ petition challenging the validity of notices issued u/s 148 was dismissed, on the grounds that the appellant could have taken all the objections in its reply to the notices. The Hon ble Court held that, In the instant case, as the reasons have been disclosed in these proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Rajesh Jhaveri Stock Brokers P. Limited.,291 ITR 500 and supported the findings of learned CIT(A). 5. We have heard both the parties and gone through the facts of the case as also the aforesaid reasons recorded by the AO before reopening the assessment. As is apparent, in this case, return declaring income of ` 98,326/- was filed on 29.7.2002. It was only on 31.3.2009 that a notice u/s 148 of the Act was issued after recording reasons mentioned in para 2 above. In order to reopen the assessment , the AO should have valid reasons to doubt the correctness of the return filed by the assessee. In other words, reasons are required to be recorded by the AO on valid material and assessment cannot be reopened on mere assumptions. As observed in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/ 161 Taxman 316 (SC), all that is required for the Revenue to assume a valid jurisdiction under section 148, is the existence of cogent material that would lead a person of normal prudence, acting reasonably, to a honest belief as to the escapement of income from assessment, and nothing more .In Smt. Maniben Lalji Shah, 283 ITR 453, the Hon ble Bombay High Court had taken i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Hon ble Apex Court held that notice u/s 148 was not issued merely on change of opinion and accordingly, notice for reassessment was valid. But such are not the facts and circumstances in the case before us. Not even a whisper has been made in the reasons as to how Manager s cheque from Sh. Harish Pawar was in fact accommodation entry. There is nothing to suggest as to how the information mentioned in the reasons is specific ,definite or reliable. Therefore, reliance on the aforesaid decision is misplaced. 5.2 In Raymond Woollen Mills Limited. (supra) relied upon by the ld. DR, the assessee was charging to its profit and loss account, fiscal duties paid during the year as well as labour charges, power, fuel, wages, chemicals, etc. However, while valuing its closing stock, the elements of fiscal duty and the other direct manufacturing costs were not included. This resulted in undervaluation of inventories and understatement of profits. This information was obtained by the Revenue in a subsequent year's assessment proceedings. In these circumstances, Hon ble Apex Court observed that we have only to see whether there was prima facie some material on the basis of which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the strength of affidavit or oral submissions advanced. [Emphasis supplied] 5.5. Likewise, Hon ble jurisdictional High Court in CIT v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 while dealing with the validity of the proceedings under section 147 of the Act and referring to decisions in CIT v. Atul Jain [2008] 299 ITR 383 (Delhi), Rajesh Jhaveri Stock Brokers (P.) Ltd. s case (supra), Jay Bharat Maruti Ltd. v. CIT [2009] 180 Taxman 192 (Delhi) and CIT v. Batra Bhatta Co. [2008] 174 Taxman 444 (Delhi), held as under: :- 9. In the present case, we find that the first sentence of the socalled reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income-tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income-tax (Investigation) to issue a notice under section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons :- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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