TMI Blog2017 (6) TMI 131X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of reassessment proceedings. 4. Briefly stated, the facts of the case are that the assessee filed return on 17.11.2003 declaring loss of ₹ 6,718/-. The AO issued notice u/s 148 of the Income-tax Act, 1961 (hereinafter also called `the Act ) dated 17.03.2010 on the premise that income chargeable to tax had escaped assessment, which was highlighted because of some investigation conducted by the Investigation Wing of the Department on certain persons engaged in providing accommodation entries. The initiation of reassessment was done on the basis of report received from the Investigation Wing that the assessee was the beneficiary of ₹ 10 lac through accommodation entries received from M/s S.J. Capital Ltd. Such a view was canvassed on the bedrock of statements on oath u/s 131 of Shri Mahesh Garg of M/s S.J. Capital Ltd., recorded on 10.9.2003 and 22.9.2003, in which he admitted to have been involved in providing accommodation entries. The assessee raised objections against the initiation of reassessment proceedings, which came to be dismissed vide order dated 03.12.2010. Thereafter, the AO issued notice u/s 142(1) read with section 143(2) for proceeding further in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere conducted by the Investigation wing of the Department on certain persons engaged in providing accommodation entries to beneficiaries of their services, in return of commission. It has been revealed that many persons were using services of accommodation entry operators to channelise their own unaccounted money in their regular books of accounts by routing the same through the accounts of Accommodation entry providers. 2. The modus operandi of these entry providers and beneficiaries of their services, was detected to be as under: 2.1 Entries were being broadly taken for two purposes: 01. To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. 02. To inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. 2.2 The assessees who had unaccounted money (called as entry takers or beneficiaries] and wanted to introduce the same in the books of accounts without paying tax, approached another person (called as entry operator) and handed over the cash (plus commission) and had taken cheque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of various accommodation entry providers along with the list of the beneficiaries of their services, was forwarded to this office through Addl.CIT, Range-5, vide letter F.No. Addl. CIT/Range-5/2005-06/759, dated 13.3.2006. 5. In the instant case of the assessee, M/s. Kailashpati Overseas (P) Ltd., information has been received that the assessee has taken accommodation entries as noted below:- Bank of the assessee Branch of the Bank Amount Instrument No. Date Credit entry coming from the account of BOP PREET VIHAR 500000 7-Jan-03 S J CAPITAL LTD BOP PREET VIHAR 500000 7-Jan-03 S J CAPITAL LTD TOTAL 1000000 5.1 Further, enquiries by the Investigation Wing revealed that one Shri MAHESH GARG, Slo Shri R.S. GARG, R/o G-8/94, SEC.15, ROHINI, New Delhi was controlling a nu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mber of the transactions led to the recording of the same transaction twice. In my considered opinion, this fact per se cannot invalidate the reassessment proceedings. There is no denial of the fact that the particulars of one transaction, incorporated in the report of the Investigation Wing of the Department as the accommodation entry, absolutely matched with the transaction of ₹ 5 lac as recorded by the assessee in its books of account. It goes without saying that if the AO has recorded more than one reasons for initiation of reassessment and the reassessment can be sustained on at least one of such reasons, then no exception can be taken to the initiation of reassessment. As the AO correctly recorded the facts of one transaction, which gave him reason to believe about the escapement of income, though the second one was duplicate, no fault can be found with the AO in initiating the reassessment proceedings. 7. The ld. AR then argued that the mere fact of receipt of report of the Investigation Wing cannot entitle the AO to go ahead with the initiation of reassessment proceedings. In my considered opinion, this contention is unfounded in the facts and circumstances prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the AO is within the realm of subjective satisfaction. 9. At this stage, it is relevant to take note of the judgment of the Hon ble Supreme Court in Phoolchand Bajrang Lal and Anr vs. ITO and Anr (1993) 203 ITR 456 (SC ), in which AO s jurisdiction to initiate reassessment was challenged. Repelling the assessee s arguments, the Hon ble Supreme Court held that an ITO acquires jurisdiction to reopen assessment under s. 147(a) r/w s. 148 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission of failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciary of accommodation entry. The Hon ble High Court found that the assessment was reopened on the basis of information received from the investigation wing of the Department about the existence of accommodation entry providers and their modus operandi in which the assessee was also found to be involved. Upholding the initiation of reassessment, the Hon ble High Court held that : `at the stage of issuing the notice under section 148 the merits of the matter are not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax at escaped assessment . 14. In AG Holdings Pvt. Ltd. vs. ITO (2013) 352 ITR 364 (Del) , the Hon'ble jurisdictional High Court has upheld the initiation of reassessment proceedings under similar circumstances when the assessee therein was beneficiary of some accommodation entries about which the report of Investigation Wing was received by the Assessing Officer. 15. In CIT vs. Jansampark Advertising and Marketing (P) Ltd. (2015) 375 ITR 373 (Del) , the assessment was reopened and addition u/s 68 was made on the ground that the assessee was in receipt of accommodation entrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmodation entries, which included the name of the assessee. The information also gave details of the M/s S.J. Capital giving accommodation entry to the assessee. Further, statements of Sh. Mahesh Garg recorded u/s 131 admitting the operation of racket of accommodation entries and also his affidavit in this regard were before the AO. There was a close nexus between report of the Investigation Wing and the formation of belief by the Assessing Officer about the escapement of income of the assessee for the year under consideration. Such information was specific, not general or vague, and referred to transactions entered into by the assessee in its books of account during the year under consideration. Thus, it is abundantly clear that such a material was sufficient enough for the Assessing Officer to initiate the reassessment. In my considered opinion, no exception can be taken to the view canvassed by the Assessing Officer in initiating the reassessment on this score. 20. The ld. AR raised yet another legal issue challenging the initiation of reassessment proceedings. Referring to the approval of the Addl. CIT to the reasons recorded by the Assessing Officer, it was submitted that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 02 and sold to M/s S.J. Capital Ltd. on 10.12.2002. Both the purchase and sale transactions of 10,000 shares were at ₹ 50/- each. 24. The Assessing Officer, on receipt of information about accommodation entry provided by the alleged buyer of the shares (namely, M/s S.J. Capital Ltd.) issued summons u/s 131, but, the same could not be served as the said party did not exist at the given address. The assessee was made aware of it. M/s S.J. Capital Ltd. was controlled by Shri Mahesh Garg, who, in his statement recorded by the Addl. CIT (Inv) admitted to be involved in providing accommodation entries. The list of beneficiaries provided by him also included the name of the assessee. During the course of first appellate proceedings, the assessee contended that it had not received any accommodation entry. The remand report was called for from the Assessing Officer, who reported that one Shri Sanjay Kumar was a dummy director of M/s S.J. Capital Ltd., who, in his statement along with Shri Trilok Chand Bansal, recorded by the Investigation Wing of the Department in the year 2003, submitted that he was an employee of Shri Mahesh Garg and that further Shri Mahesh Garg himself opened b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this contention, the ld. AR relied on the judgment of the Hon'ble Supreme Court in Andaman Timber Industries VS. Commissioner of Central Excise (2015) 281 CTR 241 (SC) . This was countered by the ld. DR who also relied on certain judgments of Hon'ble Supreme Court including ITO VS. M. Pirai Choodi (2011) 334 ITR 262 (SC) . 29. I am more convinced with the arguments of the ld. DR that nongranting of opportunity to cross-examine by the Assessing Officer is an irregularity which can be set right by making good such deficiency and giving opportunity of cross examination. The facts of Andaman Timber Industries (supra) are that the statements of two buyers were recorded and on that basis, a show cause notice was served upon the assessee stating as to why the price at which the goods were sold to these customers from the depots may not be the basis for determining the value for the purpose of excise duty. Apart from contesting truthfulness of the statement of these two witnesses, the assessee also contended amongst others: that on the same ground, proceedings were taken earlier which resulted in favour of the assessee by the decision of the Tribunal and that decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urisdiction to continue the proceedings from the stage at which the illegality had occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require. It is pertinent to note that this judgment was given by a Bench comprising of three Judges, whereas the judgment in Andaman Timber Industries (supra) was rendered by a Bench comprising of two Judges and further the case of Guduthur Brothers (supra) was not brought to the notice of the Hon ble apex Court. Similar view was taken by the Hon ble Summit Court in the case of Kapurchand Shrimal vs. CIT ((1981) 131 ITR 451 (SC). 32. In CIT vs. Jai Prakash Singh (1996) 219 ITR 737 (SC) a return was filed voluntarily by one out of ten legal representatives disclosing entire income of deceased. The assessment was completed in this case when the legal representative complied with the notices under ss. 142(1) and 143(2). Later on an objection was raised for the first time in the appeal that the notice had not been issued to the other legal representatives, and it was claimed that the assessment so made should be held to be null and void. The Hon ble Supreme Court held that an omission to serve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inciples of natural justice suffered from a procedural irregularity which was curable. 33. The Hon ble Apex in an identical fact situation in ITO VS. M. Pirai Choodi (2011) 334 ITR 262 (SC) came across a situation in which opportunity to cross examine witness was not allowed by the AO. The Hon ble High Court quashed the order of assessment on the ground that no opportunity to cross-examine was granted, as sought by the assessee. Setting aside this view, the Hon ble Supreme Court in judgment rendered by three judges held that the High Court should have directed the AO to grant an opportunity to the assessee to cross-examine the concerned witness rather than quashing the assessment. Similar view has been taken by the Hon ble Apex Court in Supdt. (Tech) Central Excise VS. Pratap Rai (1977) 114 ITR 231 (SC). 34. Taking into consideration the entire conspectus of the case, I am of the considered opinion that there is no force in the argument of the ld. AR that the assessment be quashed for not providing the assessee an opportunity of cross examining Sh. Mahesh Garg. This being a procedural irregularity, is directed to be made good by the AO by allowing the assessee an oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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