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2016 (3) TMI 923 - ITAT DELHI

2016 (3) TMI 923 - ITAT DELHI - TMI - Reopening of assessment - receipt of accomadation enteries - Held that:- It is pertinent to mention that once from the details received from the DIT (Inv.) the dates on which alleged accommodation entries were provided is known to the AO, it would not have been difficult for the AO, if he had infact undertaken the exercise of verification of assessment records of the assessee to make a reference to the manner in which those disputed entries were provided or .....

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requirement is that the AO must apply his mind to the materials in order to have reason to believe that the income of the assessee has escaped assessment and without forming a prima facie opinion, on the basis of such material that income has escaped assessment the AO can not assume valid jurisdiction to initiate proceedings and to issue notice u/s 147/148 of the Act. - Notice u/s 148 quashed - Decided in favour of assessee - ITA No. 4029/Del. 2015 - Dated:- 19-2-2016 - SRI G.D. AGARWAL, HON BLE .....

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d. CIT(A) was justified by upholding order dt. 09.11.11 passed u/s 144 which is valid one on assumption of jurisdiction i.e. for recording of reasons, its approval as well as within the limitation. 2. Whether the Ld. CIT(A) was justified by upholding the assessment order served before disposed-off the preliminary objections dt. 16.11.11 for invoking of jurisdiction u/s 147. 3. We have heard arguments of both the sides and carefully perused the materials placed on record before us. The Ld. AR poi .....

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u/s 147 of the Act and for issuing notice u/s 148 of the Act. The Ld. AR placed his reliance on the recent decision of Hon ble High Court of Delhi in the case of Pr. CIT vs. G & G Pharma dated 8.10.2015 in ITO no. 545/2015 wherein dismissing the appeal of the revenue, the tribunal order reported as 2015-TIOL-191-ITAT-Delhi has been upheld. The Ld. AR also placed reliance on the order of the Tribunal in the case of ACIT u/s Shri Devesh Kumar dated 31.10.2014 passed in ITA no. 2068/Del/2010 f .....

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isions of section 147/148 of the Act rightly proceeded to initiate proceedings u/s 147 of the Act and to issue valid notice u/s 148 of the Act under validly assumed jurisdiction hence, the same was correctly upheld by the CIT(A). No other argument has been placed before us by both the parties in this regard. 5. On careful consideration of above rival submissions of both the sides it is ample clear that the AO recorded reasons on receipt of certain information received from DIT (Inv.) which are a .....

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ough and he further jumped to a conclusion that said tabulated instrument are in the nature of accommodation entry and then he writes modus operandi for this transaction. In the last lines of para 3 on page 2 on the top the AO writes that he has reason to believe that an income has escaped assessment. This shows that the AO proceeded to take action u/s 147/148 of the Act solely by mentioning the details received from DIT(Inv.) and without any further verification, examination or any other exerci .....

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, has placed extensive reliance on the decision dated 21st March 2012 passed by this Court in ITA No. 643 of 2011 (CIT v. India Terminal Connector System Ltd.) where, according to Mr. Sawhney, in similar circumstances, the appeal of the Revenue was allowed and the matter was remanded to the ITAT for examination of the case on merits. He also relied upon the decision of the Supreme Court in Phool Chand Bajrang Lal v. Incometax Officer (1993) 203 ITR 456 SC. The main thrust of the submission of Mr .....

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y way of accommodation entries . 8. Mr. Kapil Goel, learned counsel for the Assessee, placed reliance on other decisions of this Court including CIT v. Pradeep Kumar Gupta (2008) 303 ITR 95; the decision dated 27th March 2015 in W.P.(C) No. 5330 of 2014 (Krown Agro Foods Pvt. Ltd. v. ACIT); the decision dated 4th August 2015 in ITA No. 486 of 2015 (CIT v. Shri Govind Kripa Builders P.Ltd.) and the decision dated 24th August 2015 in ITA No. 226 of 2015 (CIT v. Ashian Needles Pvt. Ltd.) 9. The Cou .....

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that there were reasons to believe that income of the Assessee had escaped assessment. The Supreme Court disagreed and observed that the AO had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be ' bogus transactions'." It was further explained by the Supreme Court that: Before issuing a notice under S. 148, the ITO must have either reasons to believe that by .....

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argeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of S. 147 are satisfied, the ITO has no jurisdiction to issue a notice under S. 148. The Supreme Court concluded that it was not satisfied that the ITO had any material before him which could satisfy the requirements under Section 147 and therefore could not have issued notice under Section 148. 10. In ACIT v. Dhariya Construction Co.(2010)328 ITR 515 the Supreme Court in a short order h .....

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1. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as .....

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as escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has reason to believe that income of an Assessee has escaped assessment. However, the proviso to Section 147 of the Act provides a complete bar for reopening .....

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s been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. It is in the aforesaid context that this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (supra) explained that the ratio of the decision in Phool Chand Bajrang Lal (supra) may not be entirely applicable since the same was in respect of Section 147(a) as it existed prior to the amendment. 12. In the present case, after setting out four entries, st .....

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in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed .....

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nt that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have pro .....

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from invalidity. 7. Furthermore, in the order dated 31.10.2014 in the case of DLIT vs. Shri Devesh Kumar (Supra) the ITAT Delhi B ( which was authored by one of Shri C. M. Garg, J.M.) it was held thus : 10. From bare reading of the copy of the reasons recorded by the AO for issuance of notice u/s 148 of the Act available on page no. 17 and 18, we observe that there is no mention of date therein. However, the details given are only with regard to name of the bank and its branch, address of the be .....

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from the Investigation Wing of the department which had conducted the search. It was not the case where the AO of the person searched had handed over the relevant information to the AO of the assessee. In this case, the assessment was reopened at the instance of the same AO who conducted search and on information received during the course of search of person other than the assessee, therefore, it was held that there was no question of any satisfaction having been recorded by the AO having juri .....

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n the case of Raymond Woollen Mills (supra), Hon ble Apex Court considered the fact that there was a charge of under-valuation of closing stock against the assessee company, therefore, it was held that court can only consider whether there was a prima facie case for reassessment; sufficiency of material cannot be considered. 14. In the case of Rajesh Zhaveri (supra), Hon ble Apex court held that formation of belief within subjective assessment of AO is required. In this case, the claim of the as .....

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on from Investigation Wing of the Department in a CD Form without applying its independent mind and even without mentioning the date of recording of reason to believe that the income has escaped assessment. 16. We further proceed to consider the ratio of the decisions relied by the ld. Counsel of the assessee in the recent judgment of Hon ble Jurisdictional High Court of Delhi in the case of CIT vs Insecticides (India) Ltd., it was held that on the basis on which the AO has initiated proceedings .....

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requirement of section 147 of the Act, then the reassessment proceedings cannot be held as valid and the same is liable to be quashed. 17. In the case of CIT vs. SFIL Stock Broking Ltd. (supra), speaking for the Jurisdictional High Court of Delhi, their lordships held that where the AO has not applied his mind to information to independently arrive at a belief that income had escaped assessment, then quashing of reassessment and entire proceedings thereunder is justified. 18. In the case of ITO .....

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ed has duly been considered while computing the income of the assessee for the assessment year under consideration. In view of the above, in our opinion, the ratio of the above decisions of Hon'ble Jurisdictional High Court would be squarely applicable and, respectfully following the same, we hold that the reasons did not satisfy the requirement of Section 147. 19. In the light of aforesaid discussion, we are inclined to hold that in the extant case the AO proceeded to initiate proceedings u .....

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of nature of transaction to establish and fortify the fact that the impugned transactions were in the nature of accommodation entries. We also observe that there is no mentioning of date therein and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed u/s 143(1)(a) of the Act on 15.3.2005 for forming a belief that the income of the assessee had escaped assessment. 20. Under these facts and circumstances, we are in agreement with the ob .....

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Dheeman vs ITO (supra) which have been fully reelucidated and affirmed by subsequent decision of Delhi High Court in the case of Jai Bharati Maruti Ltd. Vs CIT (supra). In this situation, the CIT(A) was justified and reasonable in quashing the notice u/s 148 of the Act and entire reassessment proceedings conducted thereunder. Accordingly, ground no. 1 and 2 of the revenue being devoid of merits are dismissed. 8. In the light of above noted prepositions, as we have already noted in the earlier pa .....

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mentioned that : Information so received has been gone through. The above said instruments are in the nature of accommodation entry, which the assessee has taken after paying unaccounted cash to the accommodation entry giver, who is a known entry operator as per report of the Investigation Wing. In view of these facts, the alleged transaction is not bona fide one. Therefore, I have reason to believe that an income of ₹ 14,10,000/- has escaped assessment in the year 2004-05 due to failure .....

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hanical and casual manner which does not clothe the AO with valid jurisdiction to issue notice u/s 148 of the Act. It is pertinent to mention that once from the details received from the DIT (Inv.) the dates on which alleged accommodation entries were provided is known to the AO, it would not have been difficult for the AO, if he had infact undertaken the exercise of verification of assessment records of the assessee to make a reference to the manner in which those disputed entries were provided .....

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