TMI Blog2016 (4) TMI 158X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged information, he would have certainly known that information and allegation of accommodation entry is factually incorrect and baseless. Thus we are inclined to hold that the AO proceeded to initiate reassessment proceedings and to issue notice u/s 147/148 of the Act on the vague information without verifying and examining the same and without application of mind in a mechanical manner and hence, the AO did not assume valid jurisdiction to issue notice u/s 148 of the Act and thus notice u/s 148 of the Act and impugned necessary order passed in pursuant thereto u/s 143(3) r.w.s. 147 of the Act is not sustainable and we quashed. - Decided in favour of assessee - ITA No. 3280/Del./2015 - - - Dated:- 24-2-2016 - G. D. Agarwal, VP And C. M. Garg, JM For the Petitioner : Shri V K Tulsiyan, CA For the Respondent : Shri P Dam Kanunjna, Sr. DR ORDER Per C. M. Garg, JM This appeal has been preferred by the assessee directed against the order of the CIT(A)-XVI, New Delhi dated 17.03.2015 passed in first appeal no. 42/2012-13 for AY 2004-05. 2. The grounds raised by the assessee in this appeal read as under: 1. Whether the Ld. CIT(A) was justifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received accommodation entry in the garb of gift and this fact was informed to the AO by the supplementary list of beneficiaries received from DCIT Central Circle-III letter dated 27/01/2006 4/7.3. 2005 and these facts has been mentioned in the reasons recorded, which are suffice to assume valid jurisdiction for issuance of notice u/s 148 of the Act. 6. On careful consideration of above rival submissions of both the sides at the outset we find it appropriate to reproduce the reasons recorded by the AO on 20.3.2005, for sake of completeness, which is as under :- Smt. Shardha Jain, 2234, Dharampura, Delhi. 110 006. (Asstt. Year 2004-05) As per the supplementary list of beneficiaries provided/ received from DCIT Central Circle-III, vide F. No. DCIT/Central Circle-III/05-06 dated 27.01.2006 and 4/7.3.2005 the above mentioned assessee is a beneficiaries of entry operator as details given below: S.No. Name of the entry giver Value of entry Date of entry 01. Ms. Sita Devi 5,01,000/- 24.01.2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court The Tribunal, it was held thus :- 7. We have heard both the parties and perused the records available with us specially the contentions raised by the assessee alongwith various decisions cited by the assessee's counsel on the issue in dispute as well as the documentary evidence filed by the Ld.DR in the shape of Paper Book and orders of the Revenue authorities. Before commenting upon the merits of the case and on the arguments advanced by both the parties, we want to discuss the reasons recorded for reopening of assessment in the case of the assessee vide AO's letter dated 15.9.2010, which is reproduced hereunder:- Certain investigation were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individual/companies. The name of the assessee figures as one of the beneficiaries of these elected bogus transactions given by the Directorate after making the necessary enquiries. It has been revealed that the following entries have been received by the assessee. Beneficiary's Name Beneficiary's Bank name Benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt thus, it is fit case for initiation of proceedings u/s 147 of the income tax act,1961. 8. We have perused the aforesaid reasons recorded by the AO for reopening the assessment in dispute and we are of the considered view that the AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. A mere reference is made to certain information received from the Investigation Wing which was supplied to the assessee vide AO's letter dated 15.9.2010. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO had mechanically issued notices u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Investigation, Jhandewalan, New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the ITA No. 3149/Del/2013 case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon'ble High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uary 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to the quashed. (b). In the case of CIT vs. Atul Jain reported in 299 ITR 383 it has been held as under:- ITA No. 3149/Del/2013 Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The AO did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his reasons to believe was nothing more than a report given by him to the Commissioner. The submission of the report was not the same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were name lenders and the transactions are bogus. The AO came to the conclusion 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about a material change in law w.e.f. 1st April, 1989. Section 147(a) as it stood prior to 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has 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 an assessment, which has been made under Section 143(3) of the Act, after the expiry of four years. However, this proscription is not applicable where the income of an Assessee has escaped assessment on account of failure on the part of the Assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Thus, in order to reopen an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... em exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 10. Furthermore, the ITAT, Delhi in the case of ITO vs. Arti Khattar reported as (2014) 41 CCH 0025 (Del-Trib) held as follows :- 6. We have carefully considered the submissions of both the sides and perused relevant material placed before us. From a perusal of the reasons recorded, it is evident that the Assessing Officer has mentioned about some information by which the assessee is the beneficiary of an accommodation entry of ₹ 6 lakhs because some bank instrument was got prepared on 19.04.2002 of ₹ 6 lakhs in favour of the assessee presentable at Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act for reassessment proceedings was not valid. 8. That the CIT(A) has also allowed relief to the assessee following the above decision of Hon'ble Jurisdictional High Court. The facts of the assessee's case clearly show that the Assessing Officer had not examined the information received from Investigation Wing before recording his own satisfaction of escapement of income. Though he has mentioned in the reasons recorded that he has examined the information and details so available. Because had he examined the details and information, he would have certainly known that the information is factually incorrect and incomplete. In view of the above, in our opinion, the CIT(A) rightly followed the above decision of Hon'ble Jurisdictional High Court. Learned DR relied upon the decision of Hon'ble Delhi High Court in the case of Aditya Khanna (supra). However, the facts were quite different in the above case which would be evident from the following facts noted by Hon'ble Delhi High Court:- The record produced by the revenue shows that the assessee had given statements before the Special Director, Enforcement Directorate. In the statement given, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in India, took strategic decisions from the Indian soil and rendered services on behalf of Indrus. According to 7 ITA-2395/Del/2012 the Assessing Officer, these documents established that the operations of Indrus were managed from the premises of Andaleeb Sehgal in India and since certain messages were addressed to the assessee at the address of Andaleeb Sehgal, the business connection between the assessee and Indrus was established. 9. Thus, in the above mentioned case, there was material before the Assessing Officer which enabled him to reach a prima facie conclusion with regard to the business connection of the assessee in India. Therefore, on the facts, the decision of Hon'ble Delhi High Court relied upon by the learned DR is different than the facts in the assessee's case and moreover, learned counsel for the assessee relied upon the decision of Hon'ble Jurisdictional High Court which would be binding on all the authorities working within the territorial jurisdiction of the said High Court. We, therefore, find no justification to interfere with the order of learned CIT(A). The same is sustained and ground No.1 2 of the Revenue's appeal are rejected. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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