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Sunaina Towers Pvt. Ltd. Versus Asstt. Commissioner of Income Tax, Central Circle-23, New Delhi

Validity of reopening of assessment - reasons to believe - information received from ACIT, Central Circle-19, New Delhi - Held that:- The very perusal of the reasons, it is apparent that these were based on the information received from ACIT, Central Circle-19, New Delhi after narration of which, the Assessing Officer has simply recorded that she has reason to believe that amount/income of ₹ 25 lacs has escaped assessment for the assessment year 2004-05 for failure on the part of the asses .....

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ec. 147 of the Act is missing in the present case before us. As it is evident in the reasons recorded, reproduced hereinabove, the Assessing Officer has simply recorded the information received from her colleague and without making any exercise of her mind on those information to form her own reasons to believe for the escaped assessment has issued notice under sec. 148 of the Act. Hence, the initiation of the proceedings was not valid and nor the assessment made in furtherance to the said initi .....

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t on thefacts 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 without prejudice, on the facts and circumstances of the case and in law, the Commissioner of Income Tax(Appeals)-XXXIII, New Delhi erred in upholding the assumption of jurisdiction u/s 147 by the Assessing Officer and in making the assessments in .....

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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 before the date of hearing of the appeal." 2. In ground Nos. 1 and 2, validity of assessment framed under sec. 147 of the Income-tax Act, 1961 has been questioned. We thus prefer to adjudicate upon these grounds first. 3. The assessee had filed .....

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essing Officer, the assessee had raised objection against the validity of initiation of reopening proceedings but could not succeed. It raised this issue again before the Learned CIT(Appeals) but the Learned CIT(Appeals) has also decided the issue against the assessee, hence, the same has been questioned before the ITAT. 4. In support of the ground on the issue, the Learned AR submitted that the reasons recorded under sec. 148(2) of the Income-tax Act, 1961 in the present case are based on " .....

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d AR referred the contents of the reasons recorded and reproduced at page No.2 of the assessment order. 4.3 The Learned AR submitted that there was no application of mind by the Assessing Officer is evident from the telltale evidence on record. While the reasons were recorded on the belief that Chanderprabhu Finance Services (P) Ltd./Chanderprabhu Financial & Security Ltd. deposited ₹ 25 lacs which was construed/conceived to be in the nature of income by labelling it as an accommodatio .....

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, the Learned AR placed reliance on the following decisions as well: i) Andaman Timber Ind. Vs. CIT - Civil Appeal No. 4228 of 2006 - order dated 02.09.2015 (S.C); ii) PR. CIT vs. G&G Pharma India Ltd. - ITA 545/2015 - order dated 08.10.2015 (Del.); iii) USG Buildwell Pvt. Ltd. vs ACIT - I.T.A. No. 4517/Del/2013 ITAT Delhi 'H' Bench 5. The Learned Senior DR on the other hand tried to justify the orders of the authorities below on the issue. She submitted that in the reasons recorded, .....

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t after detailed discussion on the issue and after discussing several decisions cited before the Hon'ble Court has been pleased to come the following conclusion vide para Nos. 12 and 13 of the decision, which are relevant to adjudicate upon the issue raised before us in the present case, are being reproduced hereunder: "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 entries which w .....

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id 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 A.O., 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 assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under sec. 143(3) of the Act. Without forming a prima facie opinio .....

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ieve 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 Learned CIT(Appeals) 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, th .....

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ITAT cannot be said to be erroneous. No substantial question of law arises." 7. Now, we have to examine the reasons recorded in the present case before us in view of the ratios laid down in the above cited decision of the Hon'ble jurisdictional High Court recently pronounced on 08.10.2015 to verify the contention of the Learned AR that while forming the belief that income chargeable to tax has escaped assessment on the basis of information received by it, the Assessing Officer has not .....

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ntained in Tally for the F.Y. 2003-04, besides various other documents/accounts were found. Further, during the course of survey & assessment proceedings. Sh. S.K. Gupta admitted that he had been providing accommodation entries to various persons/beneficiaries through a large no. of shell companies/concerns floated by & effectively controlled by him. He operated a number of accounts in the same bank/branch or in different branches, in the names of these shell companies/concerns. After re .....

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ceived amount of ₹ 25,00,000 vide cheque no. 778926 dated 10.10.2003, from the Federal Bank account of M/s. Chanderprabhu Financial Services/Chanderprabhu Finance & securities Ltd., a shell company/concern floated/controlled by Shri S.K. Gupta. 4. In view of the above, I have reason to believe that amount/income of ₹ 25,00,000 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 assess .....

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to disclose fully and truly all material facts necessary for its assessment within the meaning of sec. 147 of the Income-tax Act, 1961. Notice under sec. 148 of the Act has accordingly been issued by the Assessing Officer. In the above cited decisions of the Hon'ble High Court, it has been observed by the Hon'ble High Court that such type of conclusion is unhelpful in understanding whether the Assessing Officer had applied his mind to the materials that he talks about particularly since .....

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r the Assessing Officer 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. The basic requirement is that the Assessing Officer must apply his mind to the material in order to form reasons to believe that the income of the assessee has escaped assessment. Such basic requirement while recording the reasons for initiation of proceedings under sec. 147 of the Act is missing in the present case .....

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