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2017 (4) TMI 820 - ITAT DELHI

2017 (4) TMI 820 - ITAT DELHI - TMI - Validity of reopening of assessment - information received from the Addl. Directorate of Income Tax (Investigation) as relied upon - Held 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 o .....

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HU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER For The Assessee : Sh. P.C. Yadav, Adv. For The Revenue : Sh. F.R. Meena, Sr. DR ORDER PER H.S. SIDHU, JM The Assessee has filed the Appeal against the Order dated 03.12.2013 of the Ld. CIT(A)-XVII, New Delhi pertaining to assessment year 2005-06 on the following grounds:- 1. That the Ld. CIT(A) has erred in law and on facts in sustaining the addition of ₹ 20,00,000/- representing the share capital by invoking the provision .....

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craves leave to add/ alter any / all grounds of appeal before or at the time of hearing of the appeal. 2. Assessee has also filed an Application for admission of additional grounds of Appeal vide its Application in which the assessee has stated that in view of the settled decision in the case of NTPC 229 ITR 383 (SC), (legal ground can be raised for first time in collateral and second round also). He further stated that the following additional grounds are purely legal and do not require fresh i .....

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. Counsel of the Assessee requested that keeping in view of the decision of the Hon ble Supreme Court of India in the case of NTPC 229 ITR 383 (SC) (Supra), the aforesaid additional grounds raised by the assessee may be admitted and decided first. 4. On the contrary, Ld. DR strongly opposed the admission of additional grounds (legal) raised by the assessee. 5. After hearing both the parties as well as perusing the additional grounds alongwith the orders passed by the Revenue Authorities, we are .....

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ecide the additional grounds first. 6. The brief facts of the case are that return of income was filed on 31.10.2005 declaring income of ₹ 22,15,834/-. A notice u/s. 148 of the I.T. Act, 1961 was served upon the assessee company on 29.3.2012 on the reasons recorded. In response to the notice u/s. 148 of the I.T. Act, 1961 the assessee company filed a return of income on 1.5.2012. Thereafter, a notice under section 142(1) of the I.T. Act, 1961 was issued alongwith notice u/s. 143(2) of the .....

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Ld. CIT(A), who vide impugned order dated 03.12.2013 has dismissed the appeal of the Assessee. 8. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in Appeal before the Tribunal for challenging the legal issue raised vide additional as well as the addition in dispute, as aforesaid. 9. At the time of hearing, Ld. Counsel of the assessee has only argued the legal ground that notice u/s. 148 issued in this case is contrary to the provisions of section 147 by stating that action of t .....

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e 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; no independent conclusion that there was escapement of income and no proper satisfaction. It was further stated that the case was reopened only on the basis of investigation wing information which suffers with serious debility and lacks definiteness, without describing the basic aspects of alleged transaction (viz. date, mode, bank t .....

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2015 has been upheld by the Hon ble Jurisdictional High Court in its Decision dated 08.10.2015 in ITA No. 545/2015 in the case of Pr. CIT-4 vs. G&G Pharma India Ltd. In this behalf, he filed the copy of the order dated 9.1.2015 of the ITAT, Delhi Bench passed in the case of G&G Pharma India Ltd vs. ITO (Supra). In view of the above, he requested that by following the aforesaid precedent the reassessment proceedings of the AO may be quashed by accepting the Appeal filed by the Assessee. 1 .....

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easons recorded by the AO before issue of notice u/s. 148 for reopening of assessment which reads as under:- "Subsequently information has been received from the Directorate of Income Tax (Investigation) of the Income Tax Department that the above named assessee is a beneficiary of accommodation entries received during the period F. Y.2004-05 relevant to A. Y. 2005-06 taken from established entry-operators identified by the Investigation Wing on the basis of Search/Survey conducted by it on .....

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ccommodation entries and not doing any other real business. Sh. Tarun Goyal C.A. and Group have been doing the business of providing accommodation entries through these concerns by giving cheques/PO/DD in lieu of cash with/without the help of some agents/mediators. They have also being charging certain commission for providing these entries which usually varied from 1.5% to 3.5%. A perusal/ examination of report/ related documents/ related records show that M/s Paltech Cooling Water & Equipm .....

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troduced in its accounts after routing through these groups/entry providers to avoid taxing of such amounts. In view of the above, I have reason to believe that the assessee company has taken bogus/ accommodation entries only as discussed above to the tune of ₹ 10,00,000/- in the period relevant to A. Y. 2005-06 resulting into escapement of income to this extent plus the amount of commission paid there on out of books. Considering these facts I have reasons to believe that income to the ab .....

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ceedings." 12. After going through the reasons recorded by the AO, 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 Addl. Directo .....

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arma India Limited vs. ITO, has held under:- 8. We have perused the aforesaid reasons recorded by the AO for reopening the assessment in dispute and we are of the considered view that the 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. A mere reference is made to certain information received from the Investigation Wing which was supplied to the assessee vide AO s letter dated 15.9.2010. In our view the .....

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ear in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon ble High Court of Delhi in the following cases:- (i) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which w .....

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e Assessing Officer. (ii) A notice u/s.148 can be quashed if the belief is not bona fide, or one based on vague, irrelevant and nonspecific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reasons. There should be a link between the reasons and the evidence/material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received .....

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erial or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid up capital of ₹ 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in Sep .....

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in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The AO did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his reasons to believe was nothing more than a report .....

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bove precedent, we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 10. In the result, the Appeal filed by the Assessee stands allowed. (B). Pr. CIT vs. G&G Pharma India Ltd. in ITA No. 545/2015 dated 8.10.2015 of the Delhi High Court wherein the Hon ble Court has adjudicated the issue as under:- 12. In the present case, after s .....

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uot; 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 Assessee, which must have been tendered .....

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