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Sehrawat Associates (P) Ltd. Versus Income Tax Officer, Ward 8 (1) , New Delhi

2016 (4) TMI 995 - ITAT DELHI

Reopening of assessment - Held that:- The reasons to believe recorded by the Assessing Officer in the present case to initiate the proceedings under sec. 147 of the Act without application of his own mind on the information received were not as per the requirement of the provisions of the law laid down under sec. 147 of the Act, hence, the initiation of the proceedings was not valid and nor the assessment made in furtherance to the said initiation of the proceedings. The assessment framed under .....

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hi for Assessment Year 2005-06 on the following grounds of appeal:- That on the facts and circumstances of the case, the learned ITO & CIT(A) erred in: (a) Assuming jurisdiction u/s 148 of the IT Act 1961 in the absence of relevant information with him leading to formation of belief that the income had escaped assessment. (b) Making an addition of ₹ 10,01,045/- in the returned income of the Assessee Company by treating the amount of share application money as accommodation entries amou .....

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person before the AO, the share application money amount cannot be treated as income by the Learned AO. (f) That Assessee discharged its onus by providing the addresses of the then directors of the defunct investee companies but since the Assessee has no authority/ power/ rights to force any person/ entity to comply with the proceedings initiated by the Income Tax Department, doesn't make Assessee liable for any penal actions. 2. In ground No. 1(a), validity of assessment framed under sec. 1 .....

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aipur, New Rohtak Road of M/s Tosha Chemicals and VR Traders Pvt. Ltd., added the said amount in the total income of the assessee. Before the Ld. CIT(A), the assessee had raised objection against the validity of initiation of reopening proceedings but could not succeed. Hence, the same has been questioned before the ITAT. 4. In support of the ground on the issue, the Learned AR submitted that the reasons recorded under sec. 148(2) of the Income-tax Act, 1961 in the present case are based on borr .....

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f the reasons recorded and reproduced at page No.1 of the assessment order. He pointed out that the reasons recorded alleged that an amount of ₹ 6,00,600/- has escaped assessment, whereas the addition has been made for ₹ 10,01,045/-. 4.3 The Learned AR submitted that there was no application of mind by the Assessing Officer is evident from the telltale evidence on record. In support of his contentions, the Learned AR placed reliance on the following decisions as well: i) Andaman Timb .....

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of application of mind is not required to be considered at the stage of recording of reasons. 6. Having gone through the above cited decisions, especially the recent decisions of Hon ble jurisdictional High Court of Delhi in the case of CIT vs. G&G Pharma India Ltd. (supra), we find that the Hon'ble High Court after detailed discussion on the issue and after discussing several decisions cited before the Hon ble Court has been pleased to come the following conclusion vide para Nos. 12 and .....

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n 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 accommodation entries. The above conclusion is unhelpful in understanding whether the A.O. 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 A.O., if he had in fact .....

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ay of accommodation entries . In the considered view of the court, in light of the law explained with sufficient clarity by the Hon'ble Supreme Court in the decisions discussed hereinbefore, the basic requirement that the A.O. 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 Learned CIT(Appeals) to show how the CIT(A) discussed the .....

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ssee has escaped assessment. Unless that basic jurisdictional requirement is satisfied, a post mortem exercise of analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 7. Now, we have to examine the reasons recorded in the present case before us in view of the ratios laid down in the above c .....

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sociates (P) Ltd.. New Delhi has been beneficiary of accommodation entries being provided by certain entry operators. On the basis of the information chart forwarded by the DIT(Inv.) New Delhi it is seen that the assessee is involved in the following bogus transactions detailed in the chart forwarded by the DIT(Inv.) New Delhi. Beneficiary name Beneficiary bank name M/s Sehrawat Associates (P) Ltd. State Bank of Bikaner & Jaipur Beneficiary bank branch Value of entry taken ₹ 10,01,045/ .....

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of the Income Tax Act, 1961. Since 4 years have been elapsed, the facts are submitted for your kind perusal and approval of the Addl./Jt. CIT, Range-8, New Delhi as per section 151(2) of the Income Tax Act, 1961 for issuance of notice u/s 148 of the Income Tax Act. 8. The very perusal of the reasons, it is apparent that these were based on the information received from DIT(Inv), New Delhi after narration of which, the Assessing Officer has simply recorded that he had reason to believe that amou .....

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l in understanding whether the Assessing Officer had applied his mind to the materials that he talks about particularly since he did not describe what those material were. Hon'ble High Court has observed further that once the date on which the socalled accommodation entries were provided is known, it would not have been difficult for the Assessing Officer, 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 .....

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