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ITO, CO. Ward 4 (1) , New Delhi Versus M/s James Capital & Finance Pvt. Ltd.

2016 (6) TMI 84 - ITAT DELHI

Reopening of assessment - Addition u/s 68 - bogus cash credit being the cash paid as commission for obtaining accommodation entries - Held that:- After going through the reasons recorded by the Assessing Officer/ITO-4(2), New Delhi, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not accep .....

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sessee. - ITA No. 278/Del/2010, Cross Objection No. 64/Del/2010 - Dated:- 10-5-2016 - Shri H. S. Sidhu, Judicial Member And Shri J. S. Reddy, Accountant Member For the Department : Sh. P. Damkanunjna, Sr. DR For the Respondent : Dr. Rakesh Gupta, Adv. & Sh. Somil Agarwal, Adv ORDER Per H. S. Sidhu, J. M. The Department has filed the Appeal and Assessee has filed the Cross Objection which is emanate from the Order dated 23.11.2009 of the Ld. CIT(A)-VII, New Delhi pertaining to assessment year .....

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not discharge the onus of proving the creditworthiness of the creditors and genuineness of the transactions. 3. The appellant craves leave to add, to alter, or amend any grounds of appeal raised above at the time of the hearing. 2. The grounds raised by the Assessee in the Cross Objection reads as under:- 1. That having regard to the facts and circumstances of the case Ld. CIT(A) has erred in law and on facts in confirming the action of AO in passing the impugned assessment order without comply .....

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tice under section 148 of the Income Tax Act, 1961 dated 25.1.2007 was served on the assessee i.e. within the statutory time period prescribed. The case was reopened because of the information received from the Investigation Wing of Delhi that the assessee is indulging in receiving the accommodation entries from the entry operators after paying its unaccounted cash. The notice u/s. 142(1) was served fixing the case for 12.3.2007. None attended. Another notice u/s. 142(1) fixing the case for 24.9 .....

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see has failed to discharge the initial onus cast upon him in accordance with the provisions of section 68 of the I.T. Act. Accordingly, money received on account of share application and commission were treated as undisclosed income and added to the total income of the assessee by completing the assessment at ₹ 1,40,36,000/- u/s. 147/143(3) of the Act vide order dated 24.12.2007. 4. Against the Order of the Ld. AO, assessee appealed before the Ld. CIT(A), challenging the validity of asses .....

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ng of assessment. 7. At the time of hearing, Ld. Counsel of the assessee has only argued the legal ground challenging the validity of reopening u/s. 147 of the I.T. Act by stating that action of the Assessing Officer is illegal, because no proper reasons were recorded; no nexus between the materials relied upon and the belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148 and no independent conclusion that there was es .....

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arty. In this behalf, he filed the copy of the order dated 08.10.2015 of the Hon ble High Court of Delhi in Pr. CIT vs. G&G Pharma India Ltd (Supra) as well as Tribunal s order dated 9.1.2015. Therefore, he requested that by following the decision in the case of Pr. CIT vs. G&G Pharma India Ltd., (Supra) the legal issue raised by the Assessee in the present Cross Objection may be allowed and accordingly, the Appeal filed by the Revenue may be dismissed. 8. On the contrary, Ld. DR relied .....

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h the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee s counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before issue of notice Dated 25.1.2007 u/s. 148 for reopening of assessment which reads as under:- REASONS RECORDED IN WRITING FOR REOPENING THE CASE U/S. 149 M/S JAMES CAPITAL & FINANCE PRIVATE LIMITED (AY 2003- 04) Informa .....

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fit and loss account so as to reduce the real profits and thereby pay less taxes. The specific information provided by the Investigation Wing of Income Tax Department, New Delhi is enclosed as per Annexure. In view of the specific information received as above from Investigation Wing of Income Tax Department, New Delhi, I have sufficient reason to believe that the assessee company M/s James Capital & Finance Private Limited has indulged in receiving accommodation entries and the total amount .....

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e Assessing Officer/ITO-4(2), New Delhi, we are of the view that AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), N .....

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r:- 12. In the 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 w .....

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essee, 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 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 cla .....

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