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2016 (5) TMI 1130 - ITAT DELHI

2016 (5) TMI 1130 - ITAT DELHI - TMI - Reopening of assessment - addition u/s 68 - Held that:- prior to reopening of the assessment, the Assessing Officer has to apply his mind to the materials available to conclude that he has reasoned to believe that income of the assessee has escaped assessment. It has been further held that unless that basic jurisdictional requirement is satisfied, a postmortem exercise of analyzing material produced subsequent to the reopening will not rescue an inherently .....

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one of the beneficiaries and two entries from the entry operator. The issue raised in the ground under consideration is thus decided in favour of the assessee with this finding that the Assessing Officer was not justified to acquire jurisdiction to initiate reopening proceedings and the action of the Assessing Officer in this regard was not valid. The assessment framed in furtherance to the said initiation of reopening proceedings is thus also held as void ab initio and is quashed as such. - Dec .....

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e share application money as unexplained cash credits. 2. The assessee on the other hand has moved application under Rule 27 of the ITAT Rules, 1962 seeking permission to raise following ground: That in the facts and circumstances of the case and in law, the CIT(A) erred in upholding the assumption under sec. 148 of the Act. 3. In support of the above application, the Learned AR submitted that since the addition in question was deleted by the Learned CIT(Appeals), hence, the assessee applicant d .....

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raised before the Learned CIT(Appeals) but it was decided by him against the assessee. 4. The Learned Senior DR on the other hand opposed the application. 5. Considering the above submissions, we find that as per Rule 27 of ITAT Rules, a respondent in the appeal, though may not have appealed, may support the order appealed against on any of the grounds decided against him. In the present case, undisputedly a similar issue was raised before the Learned CIT(Appeals) regarding the validity of reope .....

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on is accordingly allowed and since the issue raised in the ground under Rule 27 of the ITAT Rules is legaly in nature and goes to the root of the matter, we preferred to adjudicate upon this issue firstly. The parties were directed to advance their respective arguments on the issue. 6. In support of the above grounds, the Learned AR submitted that the reopening of assessment was initiated by the Assessing Officer merely on the basis of information received from the Investigation Wing of the Dep .....

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operators implicating the assessee. The Learned AR referred to the reasons to belief recorded by the Assessing Officer for initiation of the reopening proceedings with this submission that it is a apparent case of non-application of mind on the part of the Assessing Officer since similar figure have been repeated thrice against the same cheque No. dated 16.11.2002. He placed reliance on the following decisions: a) Signatures Hotel (P) Ltd., vs. ITO - (2011) - 338 ITR 51 (Del.); b) Sarthak Secur .....

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r DR on the other hand submitted that there was specific information regarding entries operators and their beneficiaries received from the Investigation Wing of the Department with this averment that the assessee company was one of the beneficiaries and had taken entry from the entry operator, details of which were provided. He submitted that here in the present case though there was repetition of same entry in the reasons recorded but no such repetition was there in the assessment order passed .....

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dated 25.8.2014 (367 ITR 306 - Del ) - upheld by the Hon'ble Supreme Court - reported in (2015) - 230 Taxman 268 (S.C). 8. The Learned AR rejoined with the submission that the decision in the case of CIT vs. Navodaya Castles Pvt. Ltd., (supra) replied upon by the Learned Senior DR is not helpful to the Revenue as in that case the ITAT had decided the issue of validity of addition made under sec. 68 of the Act in favour of the assessee on its merit and had held the legal issue on the validit .....

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sessing Officer had made the addition ignoring the evidences which were sufficient to establish the claimed transaction in question. He submitted that the genuineness of the entries in question was fully supported with the evidences like confirmation from the investor company, its acknowledgement of return, PAN, certificate of incorporation, ROC Data generated from the ROC Website, affidavit for payment of share application money supporting the identity of the investor company were filed and con .....

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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 conclusi .....

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s 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 year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to be .....

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e 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 information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not enti .....

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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 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 b .....

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e 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 the Assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Thus, in order to reopen an assessment which is beyond the period of four years from the end of the relevant .....

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e 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 the Directorate of Investigation, the AO stated: "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 a .....

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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 AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the S .....

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f 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 t .....

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beneficiaries of the accommodation entry: Assessee has filed return of income declaring an income of NIL on 02.12.2003. The return was processed u/s. 143(3) on 11.03.2004. An information regarding entry operators and their beneficiaries was received from DIT(Inv.I), New Delhi vide D. No. 1399 dated 02.03.2006 and No. DIT(Inv)-I/2006-07AE/1536 dated 05.02.2007 that the assessee company is one of the beneficiaries and took entry from the entry operator as detailed below: As a result of above, I a .....

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this case. 11. The Assessing Officer in the present case has not bothered himself to apply his mind independently on the information received from the Investigation Wing of the Department regarding the assessee being alleged beneficiaries of the accommodation entry to form his reasons to believe regarding the alleged escapement of assessment of income chargeable to tax before jumping to his conclusion that as a result of information received from Investigation Wing of the Department, he is convi .....

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