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2016 (5) TMI 259 - ITAT DELHI

2016 (5) TMI 259 - ITAT DELHI - TMI - Reopening of assessment - assessments based on receipt of certain information from Investigation Wing - Held that:- The reopening is bad in law due to non application of mind by the A.O. - Decided in favour of assessee - ITA No. 470/Del/2011, Cross Objection 55/Del/2011 - Dated:- 26-4-2016 - Shri J. Sudhakar Reddy, Accountant Member And Ms. Suchitra Kamble, Judicial Member For the Appellant : None For the Respondent : Sh. Saurabh Goel, C.A. ORDER Per J. Sudh .....

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unds. Both were informed that the adjournments will not be granted as sufficient opportunities were granted to both the parties. 1.2. None represented the Revenue and hence we dispose the same ex parte after hearing Shri Saurabh Goel, the Ld.Counsel for the assessee. 2. On a careful consideration of the facts and circumstances of the case we hold as follows. 3. The A.O. in this case has reopened the assessments based on receipt of certain information from Investigation Wing. The Ld.CIT(A) at par .....

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s Gujarat Electricity Board [2003] 260 ITR 84 (SC), MTNL Vs. Chairman CBDT [2000] 246 ITR 84 (Delhi), ACIT Vs Rajesh Jhaveri Stock Brokers Pvt. Ltd. [2007] 291 ITR 500 (SC) and Rakesh Aggarwal Vs. ACIT [1997] 225 ITR 496 (Delhi.). Thus, there can be no quarrel that the notice u/s 148 was issued, per-se. 11. The issue which needs to be determined, at the very outset, is whether there was sufficient material and independent application of mind by the Ld. AO on the information received by him. Even .....

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as filed on 31.10.2004 declaring loss of ₹ 3,27,483/-. The return was processed u/s 143(1) of the I. T. Act on 6.1.2006. The return was processed u/s 143(1) OF THE i. t. Act. A report of the Investigation Wing of Income Tax Department intimated that certain persons are engaged in the providing accommodation entries to the various persons. Following this the statement of such persons providing accommodation entries has been recorded on oath by the investigation wing of Income Tax Department .....

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collected by it from various sources including banks and such entry operators. In light of these observations the case of assessee was re-opened and notice u/s 148 was issued to the assessee for A. Y. 2004-05 on 20.9.2006 after recording the reasons of re-opening. The assessee filed the letter dated 23.5.2007 requesting that the return of income filed on 30.10.2004 be treated as return filed u/s 148 of I. T. Act." (emphasis, in bold, assigned) 12. From a plain reading of the relevant extra .....

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rt in United Electrical Co (P) Ltd. Vs. CIT (2002) 178 CTR (Del) 192 wherein it has been observed as under: "Sec. 147 of the Act authorized the A 0 to assess or reassess income chargeable to tax, if he has reason to believe that the said income for any assessment year has escaped assessment. The power conferred under the said section, particularly after t" April, 1989, is no doubt very wide but it cannot be said to be plenary. True, the amended provisions of s. 147 are contextually dif .....

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eve' still exists in the new provision. The amended s. 147provides that where the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of ss. 148 to 153 and assess or reassess the income which has escaped assessment. For the present purpose, only ss. 148 to 151 are relevant. Sub-s.(2) of s. 148 of the Act mandates that before issuing notice to the assessee under sub-s.(1), for filing the return, the AO shall re .....

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These are some inbuilt safeguards to prevent arbitrary exercise of power by an AO to fiddle with the completed assessment. Thus, existence of tangible material, for the information of opinion is a prerequisite for initiation of action under s. 147 of the Act. Therefore, what s.147 of the Act postulates is that the AO must have reason to believe that income has escaped assessment. There should be facts before him that reasonably given rise to the belief, but the facts on the basis of which he ent .....

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a & Ors. Vs. CIT (1967) 63 ITR 219 (SC). (emphasis, in bold, assigned) 13. The above decision was followed in Commissioner of Income Tax Vs. Vardhman Estates Ltd. (2007) 165 Taxman 473 (Del). In that case the assessee had filed return declaring income of ₹ 23,552/- which was accepted u/s 143(1) of the Act. Subsequently, the AD took proceedings u/s 147 of the Act and issued the notice u/s 148 to the assessee on the basis of a statement of one Sh. V.K. Jain who had stated that his compan .....

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e in the statement of Sh. V. K. Jain and as such we have no hesitation in holding that the reassessment proceedings under s. 147 of the Act were not initiated in accordance with law and we have no reason to disagree with the reasoning given by the Tribunal. 14. No substantial question of law arises for our consideration in the present case and the present appeal, is hereby, dismissed with costs of ₹ 5, 000/- which should be deposited by the appellant within four weeks with the Delhi High C .....

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formation is that the assessees had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In so far as the basis for the reasons is concerned, ev .....

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" is nothing more than a report given by him to the Commissioner of Income-tax. As held by the Supreme Court in Chhugamal Rajpal (1971) 79 ITR 603, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, therefore, the action of the respondent falls foul of the law laid down by the Supreme Court in Chhugamal Rajpal (1971) 79 ITR 603 which is clearly applicable to the facts of th .....

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atements relied upon by the Investigation Wing have also not directly alleged that the assessee was a beneficiary of the accommodation entries. When challenged during the assessment proceedings, the AO has opted to keep quiet on the issue. Most significantly the <;.;has not even recorded his satisfaction about the correctness or otherwise of the information received from the Investigation Wing. 16. Considering the above decision and the facts on law, it is crystal clear that while reopening t .....

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ith Section 148 of the Act. 4. The order of the Ld.CIT(A) is in consonance with the decision of the Jurisdictional High Court in the case of Principal Commissioner of Income Tax vs. G&G Pharma India Ltd. in ITA no. 545/2015 vide order dt. 8.10.2015 wherein at paras 12 and 13 it was held as follows. 12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10 February 2003, from four entities which were termed as accommodation .....

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terials 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 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 mate .....

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