TMI Blog2017 (9) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the A.O, at best, are reproduction of the conclusion of the Investigation report. Thus, it is clearly a borrowed satisfaction. Appeal of the assessee is allowed. - ITA.No.915/Del./2017 - - - Dated:- 13-9-2017 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER For The Assessee : Shri O.P. Mody, Advocate. For The Revenue : Shri T. Vasanthan, Sr.D.R ORDER This appeal by assessee has been directed against the order of the Ld. CIT(A)-15, Delhi, dated 04th December, 2015 for the A.Y. 2000-2001, challenging the reopening of the assessment under section 147/148 of the I.T. Act, 1961 and additions of ₹ 34,50,200 under section 68 of the I.T. Act, 1961 and ₹ 3,450 on account of commission under section 69A of the I.T. Act, 1961. 2. Briefly the facts of the case are that return of income declaring income of ₹ 34,510 was filed by assessee-company on 19th September, 2000. The return was processed under section 143(1) of the I.T. Act. An information was received from O/o. DIT (Investigation), New Delhi, vide letter dated 31st January, 2007 and dated 05th February, 2007 that assessee had taken accommodation entry of ₹ 34,50,200 from various entities cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., who have paid ₹ 5 lakhs to the assessee on behalf of M/s. Dupas Leasing Financing Co. Ltd., being amount due to the assessee. PB-16 is letter of M/s. Hare Krishan Investment Trading Company Pvt. Ltd., in which they have made payment of ₹ 5 lakhs to assessee on behalf of M/s. Dupas Leasing Financing Co. Ltd., as due to the assessee. Learned Counsel for the Assessee, therefore, submitted that all amounts were outstanding for earlier years which have been repaid in the assessment year under appeal. Therefore, A.O. has merely copied the report of the Investigation Wing in the reasons and without applying the mind, reopened the assessment. In support of his contention, he has relied upon the decision of the Hon ble Delhi High Court in the case of Pr. CIT vs. G And G Pharma India Ltd., (2016) 384 ITR 147 (Del.) and decision of Hon ble Delhi High Court in the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 395 ITR 677. He has, therefore, submitted that reopening of the assessment is bad in law in this case. He has also submitted that for repayment of loan of earlier year, Section 68 will not apply. 4. On the other hand, Ld. D.R. relied upon the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td., (A/c No.19041 with UBI, Azadpur). Rs.2,00,200 15.01.2000 Riya Investment (A/c No.28265 with UBI, Azadpur) Rs.1,00,000 20.12.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.5,30,000 21.12.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.7,00,000 04.01.2000 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.5,00,000 01.10.1999 Hare Krishan Investment Trading Co. Pvt. Ltd., (A/c. No.610CA with Vaish Coop New Bank, Kamla Nagar) Rs.5,00,000 01.10.1999 Lord Shiv Investment Trading Co. Pvt. Ltd., (A/c.No.611CA with Vaish Coop New Bank Kamla Nagar. Rs.7,00,000 20.09.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) The said amounts are stated to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part, this tells us what the AO did with the information so received. He says: The information so received has been gone through. One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that the above said instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver) . The AO adds that the said accommodation was a known entry operator the source being the report of the Investigation Wing . 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of ₹ 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... 22. As rightly pointed out by the ITAT, the 'reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) of the Act requires the AO to have reasons to believe that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment. 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment. 28.4. The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1. The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: Entries are broadly taken for two purposes: 1. To plough back unaccounted black money for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of ₹ 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of ₹ 5,00,000 (as mentioned abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. 34. Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to believe should have a link with an objective fact in the form of information or materials on record... It was further emphasized that mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments. 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntry giver and how he could be said to be an entry operator were not mentioned. The source for all the conclusion was the Investigation Report. The tangible material which formed the basis, for the belief that income had escaped the assessment must be evident from reading of the reasons. Learned Counsel for the Assessee filed copy of the ledger account and letters of the parties who are named in the reasons recorded under section 148 of the I.T. Act, to show that the amounts were due to the assessee from earlier years and the amounts in question are repayment of the debts in assessment year under appeal. The A.O. recorded incorrect facts in reasons for reopening of assessment. The reasons failed to demonstrate that the link between the tangible material and the formation of the reasons to believe that income has escaped assessment. The A.O. had not independently considered the tangible material which formed the basis for the reasons to believe that income had escaped assessment. The A.O. merely reproduced information received from Investigation wing and enquiries conducted by them and then, straightaway came to the conclusion that Income chargeable to tax has escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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