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2015 (11) TMI 1525 - ITAT DELHI

2015 (11) TMI 1525 - ITAT DELHI - TMI - Reopening of assessment - Held that:- AO has merely relied on the report of the investigation wing but it is apparent that he has not applied his mind to the materials which were before him. In our view, without forming a prima facie opinion on the basis of only the report of the Investigation Wing of the Income Tax Department, it was not legal for the AO to have simply concluded that he has reason to believe that income chargeable to tax has escaped asses .....

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r is bad in law. In the circumstances, no interference is called with the order of the Ld. CIT (A). - Decided against revenue. - ITA No: 2820/Del/2011 - Dated:- 27-11-2015 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER For the Appellant : Ms. Rakhi Vimal, Sr. DR For the Respondent : Shri P.C. Yadav, Advocate O R D E R PER SUDHANSHU SRIVASTAVA JUDICIAL MEMBER Department has filed this appeal against the impugned order dated 14.02.2011 passed by the Ld. CIT(A) - .....

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e worthwhile to reproduce the reasons recorded for the issuance of notice u/s 148 off the Act. The reasons recorded for the issuance of notice u/s 148 of the Income Tax Act 1961 are as under:- "DIT (lnv) during the course of investigation in the case of Mukesh Gupta group along with its dose confidants Shri Rajan .Jassai and Shri Surinder Pal Singh found that the group have operated multiple accounts in various branches to plough back unaccounted black money for the purpose of business or f .....

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n a bank account either in his own name or in the name of relative/friends or other person hired by him, for the purpose of opening bank account. The entry operator thereafter issues cheque/DD/PO in the name of beneficiary from the same account (in which the cash is deposited) or another account in which funds are transferred through clearing in two or more stages. The beneficiary in turn deposits these instruments in his bank accounts and the money comes to his regular books of account in the f .....

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300000 923889 14·Aug·02 SHIVAM SOFTECH LTD. FEDERAL KAROLBAGH 595 In view of the report received from the DIT (lnv.) New Delhi, and in view of the facts narrated above it is clear that the assessee has not disclosed fully and truly all material facts necessary for its assessment for that assessment year. I have therefore, reason to believe that the sum of ₹ 8,00,000/- chargeable to tax has escaped assessment. Thus, the same is to be brought to tax under section 147/148 of the .....

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ivalent amount in cash or transfer just prior to the clearance of the cheques issued to the assessee company. Accordingly, it was the AO s opinion that the assessee had failed to prove the credit worthiness of the parties and as such these entries were bogus and it was assessee s own income from undisclosed sources and an addition of ₹ 16 lacs was made. 5. The appeal before the Ld. CIT (A) was decided in favour of the assessee on the ground that the assessee had provided proof of identity .....

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otice u/s 148 of the Act was not taken from the appropriate authority and (b) That the AO had not applied his mind independently to the information received from the investigation wing before the issuance of notice u/s 148 of the Act. With the consent of both the parties we proceed to adjudicate on the issue of assumption of jurisdiction u/s 147 of the Act raised by the assessee under Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963 first. 7. Ld. Counsel for the assessee drew our atten .....

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called information said to be received from the investigation wing had not been duly processed by the AO and that there was no material on record to show that the AO had applied his mind in forming a belief which would result in the reason to believe as required to proceed u/s 147 and 148 of the Income Tax Act 1961. Ld. Counsel vehemently contended that the copy of the reasons recorded given to the assessee clearly shows that the AO simply proceeded in a mechanical manner that there was a clear .....

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Delhi High Court which has affirmed the judgment of the ITAT Delhi C Bench in ITA No. 3149/2013 8. Ld. DR on the other hand stated that the AO had reopened the case on the basis of various documentary evidences relating to the assessee and submitted that the AO has rightly reopened the case of the assessee on the basis of such documentary evidences. Ld. DR also submitted that the decisions relied on by the Ld. AR are on a completely different set of facts and as such were not applicable to the a .....

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of the considered view that the AO has not applied his mind so as to give an independent conclusion that he had reasons to believe that income had escaped assessment during the year under consideration. We drew our support from the judgment of the Hon ble High Court of Delhi in ITA No. 545/2015 dated 8.10.2015 in the case of Pr. Commissioner of Income Tax -4 vs. G&G Pharma India Ltd. in which the Hon ble Jurisdictional High Court has recapitulated the jurisdictional requirement for reopenin .....

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s 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 .....

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f information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of S. 147 are satisfied, the ITO has no jurisdiction to issue a notice under S. 148. The Supreme Court 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 Constr .....

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eal. The Department was not entitled to reopen the assessment. 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax I I 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 .....

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he 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 p .....

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om the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. It is in the aforesaid context that this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (supra) explained that the ratio of the decision in Phool Chand Bajrang Lai (supra) may not be entirely applicable since the same was in respect of Section 147(a) as it existed prior to the .....

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y way of above accommodation entries. The above conclusion is unhelpful in understanding whether the AO 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 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 assess .....

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me Court in the decisions discussed hereinbefore, the basic requirement that the AO 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 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 r .....

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