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TMI Blog2016 (5) TMI 625X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee company is engaged in the business of manufacturing of electrical parts. It maintained regular books of account and the same were audited under the Companies Act. The assessee company had also filed annual returns with the Registrar of the Companies, Delhi and Haryana giving the names and addresses of its directors and shareholders in the said annual returns besides the audited balance sheet and profit and loss account. The assessee company had received Rs. 6,50,000 from the private limited company during the year under consideration and had filed several documents in support of receipt of share application. He submitted that the return of income filed on 30.10.2001 was processed under sec. 143(1) of the Act and no notice under sec. 143(2) of the Act was issued. Subsequently, on the basis of report of the Investigation Wing of the Department, the Assessing Officer initiated reopening proceedings under sec. 147 of the Act without application of his mind and solely based upon the said report. Statements of some persons alleged to have been engaged in providing accommodation entry, as per the assessment order were provided to the Assessing Officer. The Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer that it was money of the assessee which routed through those entries. Copies of the above evidences have been made available at page Nos. 22 to 42 of the paper book. The Assessing Officer has made the addition only on the basis that the assessee could not produce the share applicant. Since the reasons recorded are vague and solely based upon the information received from the Investigation Wing of the Department without application of mind by the Assessing Officer, the initiation of reopening proceedings based on those reasons is invalid. In support, he placed reliance on the following decisions: a) Signatures Hotel (P) Ltd., vs. ITO - (2011) - 338 ITR 51 (Del.); b) Sarthak Securities Co. (P) Ltd. vs. ITO - 2010) - 329 ITR 110 (Del.); c) Pr. CIT vs. G& G Pharma India Ltd.- ITA 545/2015 - order dated 08.10.2015 (Del.); d) Pr. CIT vs. Rakam Money Matters Pvt. Ltd. - ITA No. 778/2015 - order dated 13.10.2015 (Del.); e) ITO vs. Rajat Export Imports (P) Ltd., - ITA No. 2820/Del/2011 (A.Y. 2003-04) - order dated 27.11.2015; f) Unique Metal Industries vs. ITO - ITA No. 1372/Del/2015 (A.Y. 2006-07) - order dated 28.10.2015; g) Jiten Gurnani Vs. ITO - ITA No. 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of taxable income to initiate the reopening proceedings. The purpose of the legislature behind it is that the reopening proceedings should not be invoked in a casual manner and in absence of some tangible material as on the date when reasons to believe in this regard is formed by the Assessing Officer. Relevant para Nos. 9 to 13 of the recent decision of the Hon'ble jurisdictional High Court of Delhi in the case of Pr. CIT vs. G & G Pharma India Ltd. (supra) are being reproduced hereunder for a ready reference: "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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 effect from 1st April 1989 and observed: "29. It is at once seen that the Amendment in Section 147 of the Act brought 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment 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 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 analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity." 5. When we examine the facts of the present case in view of the ratios laid down in the above cited decisions, we find that the Assessing Officer in the present case has initiated reopening proceedings without verifying the information received from the Investigation Wing of the Department alleging that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investigation wing of the department. The Assessing Officer did not appreciate that there was repetition of same entries and the Assessing Officer has totally banked upon the investigation made by the Investigation Wing of the Department. He did not bother himself to verify the veracity of the information received nor had he confronted the assessee with the claimed various material and report received from the investigation wing of the department, on perusal of which the Assessing Officer has claimed in the reasons recorded that, it was evident before him that the assessee had introduced its own unaccounted money in its bank by way of accommodation entry. We thus respectfully following the ratios laid down in the above cited decisions of the Hon'ble jurisdictional High Court of Delhi hold that the initiation of re-opening proceedings in the present case by the Assessing Officer was not valid and the assessment made in furtherance to such initiation is also held void ab initio. The issue raised in ground No.2 questioning the validity of initiation of re-opening proceedings and the assessment framed in furtherance thereto is thus decided in favour of the assessee. Ground No. ..... 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