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2016 (6) TMI 449 - ITAT DELHI

2016 (6) TMI 449 - ITAT DELHI - TMI - Reopening of assessment - whether the AO can initiate proceedings u/s 147/148 on the basis of certain communication received from his superior revenue authorities showing that the assessee has been provided with accommodation entry to the tune of ₹ 15,00,000/- by a shell company/concern floated by S.K. Gupta? - Held that:- Basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Asses .....

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the assessee ), by filing the present appeal sought to set aside the impugned order dated 27.05.2013 passed by the Commissioner of Income-tax (Appeals)-XXXIII, New Delhi qua the assessment year 2004-05 on the grounds inter alia that :- 1. That on the facts and circumstances of the case and in law, the Commissioner of Income Tax (Appeals)-XXXIII, New Delhi erred in rejecting appellant's contention that assessment order made by Assessing Officer was bad in law and void ab-initio. 2. That with .....

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That on the facts and circumstances of the case and in law, the Commissioner of Income Tax(Appeals)-XXXIII, New Delhi erred in confirming the addition of amount of ₹ 15 lacs received by the appellant towards Sale of Investment in share as income u/s 68 of the Income Tax Act, 1961 despite several judicial pronouncements to the effect that section 68 was not applicable in such a situation. 4. The appellant craves permission to add, amend, alter or vary all or any grounds of appeal on or befo .....

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, during the financial year 2003-04 and consequently, to reassess the income which has escaped assessment, a notice u/s 148 of the Income-tax Act, 1961 (hereinafter the Act ) was issued and in response thereto, assessee filed its return of income on 25.04.2011 declaring total income at ₹ 41,940/-. Assessee filed objections for initiation of proceedings u/s 147 of the Act which were rejected. Shri Ajay Bhagwani, CA attended the proceedings, filed necessary details and clarifications. Assess .....

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ey / share capital / sale & purchase of share / bogus expenditure of entries / loan etc. Assessee has failed to furnish any confirmation or any supporting evidence to support his contention that he has received an amount of ₹ 15,00,000/- from CPFSL on account of sale of investment during financial year 2003-04, thus failed to establish the genuineness of the transaction and creditworthiness of the creditor in respect of the amount of ₹ 15,00,000/-. So, the amount of ₹ 15,00 .....

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ssed by the revenue authorities below in the light of the facts and circumstances of the case. 5. Ld. AR for the assessee contended that the AO without applying the mind and without being satisfied himself as required u/s 147 of the Act proceeded to reopen the proceedings which are bad in law and relied upon the decision rendered by Hon ble jurisdictional High Court in Pr. Commissioner of Income Tax- 4 vs. G & G Pharma Limited in ITA 545/2015 order dated 08.10.2015 and ITAT, Delhi Bench H , .....

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sessment u/s 147 / 148 of the Act. 7. Now before proceeding further, we would like to peruse the decision rendered by the AO for reopening of the assessment u/s 147 of the Act which are reproduced for ready reference as under :- "2. As per the information received from the ACIT, Central Circle-19, New Delhi, a survey operation was conducted in the S K Gupta group of cases on 20.11.2007 at 308. Arunachal Building, 19, Barakhamba Road, New Delhi- 110001 and 1007-1008, Arunachal Building, 19, .....

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e same bank/branch or in different branches, in the names of these shell companies/concerns. After receiving cash from the beneficiaries, Sh S K Gupta used to deposit the same in the bank account of one of these shell companies / concern. Then he used to route the entries through two to four accounts of these shell companies / concerns before ultimately transferring same to the bank accounts of the beneficiaries to give the color of genuineness to these transactions. 3. Further, as per the infor .....

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7; 15,00,000/- has escaped assessment for the A. Y 2004-05 for failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment within the meaning of section 147 of the IT Act, 1961. 5. Issue notice u/s 148 of the IT Act, 1961" 8. Bare perusal of the reasons recorded by the AO for initiation of the proceedings u/s 147 of the Act apparently goes to prove inter alia that he has simply acted on the basis of information provided by the ACIT, Centra .....

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- vide cheque no. 778929 dated 15.10.2003 and an amount of ₹ 5,00,000/- vide cheque no.778945 dated 18.11.2003 from the Federal Bank account of M/s Chanderprabhu Financial Services/ Chanderprabhu Finance & Securities limited, a shell company/concern floated/controlled by Sh. S.K. Gupta. 9. Now, the sole question arises for determination in this case is as to whether the AO can initiate proceedings u/s 147/148 of the Act on the basis of certain communication received from his superior r .....

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editors 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 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 : B .....

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ITO has in consequence of 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. 11. I .....

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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 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. O .....

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t 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 Supreme 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 .....

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f the Act and as such, assessment framed u/s 143 read with section 143(3) is not sustainable. 13. Now, adverting to the case at hand, we are of the considered view inter alia : (i) that AO has merely acted in mechanical manner on receipt of information from ACIT, Central Circle 19, New Delhi that he has reason to believe that income of ₹ 15,00,000/- has escaped assessment for the year 2004-05 due to failure on the part of the assessee to disclose fully and truly all material facts necessar .....

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