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2016 (4) TMI 158 - ITAT DELHI

2016 (4) TMI 158 - ITAT DELHI - TMI - Reopening of assessment - unexplained gifts - reasons to believe - Held that:- AO merely mentioned that the name of the assessee appear in the list of beneficiaries having channelized her undisclosed income in the garb of gift. Admittedly. In the present case gift was from her paternal aunt, a close relative and the donor Smt. Sita Devi cann't be alleged as bogus or accommodation entry provider in absence of any substantial evidence, specially when the asses .....

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-05 which clearly shows not application of mind and issuance of notice u/s 148 of the Act in a mechanical manner. Because had the AO examined the details and 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 exami .....

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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 justified in upholding the Assumption of jurisdiction without proper appreciating the submission in the following manner that:-. 1(a) where the Ld. AO invoked Sec. 147/148 ju .....

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000/- u/s 68 without properly considering the evidence on record or any contrary material on record to draw any adverse inference. 3. Whether the Ld. CIT(A) was justified by not adjudicating upon Ground no. 2 i.e. addition of ₹ 25050/- made by the AO on a/c of the above alleged gift just on surmises and conjectures." Legal Ground nos. 1 to 1(c) of the assessee 3. The ld. Assessee's Representative (AR) and Ld. Departmental Representative (DR) agreed to that the legal objections of .....

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case of ITO vs. On Exims Pvt. Ltd. (2013) 57 TTJ 633 (ITAT-Delhi) and ACIT vs. Shri Devesh Kumar in ITA no. 2068/Del/2010 dated 31.10.2014 submitted that the AO in the reasons recorded for initiation of proceedings u/s 147 of the Act and issuance of notice u/s 148 of the Act, copy available at page 34 of assessee's paper book, has not mentioned even details of cheque etc. and the reasons recorded are vague and has been recorded without application of mind thus the AO wrongly assumed jurisdic .....

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me 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 d .....

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2003-04 relevant to assessment year 2004-05. The modus operandi is that the assessee actually paid an amount equivalent to the amount of draft/cheque received in the form of Gift, from the above mentioned person. So, in view of the above I have reason to believe that the said income of ₹ 5,01,000/- chargeable to tax had escaped the assessment for the relevant assessment year, and it is a fit case to issue notice u/s 148. Notice u/s 148 is, therefore, being issued in this case. Dated 20.3.2 .....

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d, as reproduced it is vivid that the AO proceeded to issue notice only on the basis of vague information which was a list of so called beneficiaries without any verification, examination or application of mind to the details and information received. 8. In the light of above when we analyse the preposition laid down by ITAT Delhi "A" Bench in the case of G & G Pharma u/s ITO reported as - 2015-TIOL-191-ITAT-Del, as relied by the Ld. AR, then we observe that reopening of assessment .....

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k Securities Ltd. vs. ITO (Supra) and referring to the other decisions/orders of Hon'ble 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 commentin .....

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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 Beneficiary's Bank branch Value Of entry taken Instrument no by which entry taken Date on which entry taken Name of account holder of entry giving account Bank from which entry given Branch of entry giving bank A/c. no. entry giving account G&G PHARMA .....

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B 50025 The above amount of ₹ 20,00,000/- has been credited into assesses's bank account on various dates. Investigation made by the investigation Wing of the Department has found that assessee is a beneficiary of ITA No. 3149/Del/2013 taking the aforesaid accommodation entries. I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above ac .....

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ssessment 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 ha .....

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the Hon'ble High Court of Delhi in the following cases:- (a) Signature Hotels (P) Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee .....

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e 'belief' is not bona fide, or one based on vague, irrelevant and nonspecific information. The basis of the belief should be ITA NO. 3149/Del/2013 discernible from the material on record, which was available with the Assessing Officer, when he recorded the reasons. There should be a link between the reasons and the evidence/material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax .....

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cie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid up capital of ₹ 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not .....

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h 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 .....

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ectfully following the ITA NO. 3149/Del/2013 above precedent, we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 10. In the result, the Appeal filed by the Assessee." 9. It is relevant to note that the order of the Tribunal in the case of G & G Pharma (Supra) has been upheld by Hon'ble Jurisdictional High Court at Delh .....

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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. Income-tax Officer (1993) 203 ITR 456 SC. The main thrust of the submission of Mr. Sawhney is that, as was in the case of India Terminal Connector System (supra), in the present case as well, there was specific information regarding the name of the entry provider, the date on which the entry was taken, the cheque details as well as the .....

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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, th .....

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ed 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 reason of the omission or failure on the part of the assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that .....

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urt 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 held as under: "Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the DVO. Opinion of the DVO per se is not an informati .....

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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 the decision of this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. v. CIT 308 ITR 38 (Del). The Court noted that a material change had been brought about to Section 147 of the Act with e .....

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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 as .....

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n 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, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by .....

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h 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 on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the A .....

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nt 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 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, th .....

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e 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 of Baroda, Faridabad. Now, in the reasons recorded, there is .....

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assessment proceedings, it was noticed that the assessee received gifts amounting to ₹ 2 lacs each from 6 persons namely Ms. Mala Khatri, Mrs. Renu Maini, Mr. Karan Sharma, Mr. Ishwar Sharma, Mr. Balvender Singh & Mr. Rajan Jassal. The assessee filed various documents relating to the donors to justify the source, capacity to pay, identification and genuineness of the transactions. From the perusal of the bank accounts of the donors, it was noticed that there was a credit entry of 2 lac .....

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39;ble Jurisdictional High ITA-2395/Del/2012 Court in the case of Smt. Paramjit Kaur (supra) would be squarely applicable, wherein their Lordships held as under:- "Held, that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income .....

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ove 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 a .....

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irector, Enforcement Directorate. In the statement given, the assessee stated how much was his share for introducing ITA-2395/Del/2012 Masefield to Andaleeb Sehgal. He also stated that he was offered the proposal by Andaleeb Sehgal to utilize the opportunity to get some crude oil allocation from Iraq which can be brought by some company interested in the same. The assessee apparently acted on the proposal and contacted George Curmi, who was able to find Masefield, who was interested in getting t .....

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icer when he recorded the reasons. In this statement, Andaleeb Sehgal had referred to the arguments which he had with the assessee regarding Indrus not receiving any remuneration from the second oil contract. Ultimately some money appears to have been received by Indrus from Masefield as commission. Andaleeb Sehgal had asked George Curmi to transfer his share of USD 17500 to Hamdaan India. In addition to this statement, the assessee has also made a statement before the Enforcement Directorate in .....

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te from the premises of Andaleeb Sehgal and Hamdaan Exports were also before the Assessing Officer when he recorded the reasons. The seized documents included facsimile transmission of messages with respect to different business transactions entered into by Indrus. Some of the documents were found to have been addressed to the assessee and Andaleeb Sehgal, which according to the Assessing Officer indicated that the assessee, while being present in India, took strategic decisions from the Indian .....

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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 .....

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has become infructuous and rejected as such." 11. In the light of above prepositions, when we deeply analyse the facts of the present case then we observe that the AO merely mentioned that the name of the assessee appear in the list of beneficiaries having channelized her undisclosed income in the garb of gift. Admittedly. In the present case gift was from her paternal aunt, a close relative and the donor Smt. Sita Devi cann't be alleged as bogus or accommodation entry provider in abse .....

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