TMI Blog2017 (9) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... port of Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. The reason to believe contain no reason but the conclusion of A.O. without any basis. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing which form the basis for reasons to believe that income has escaped assessment. The conclusion of the A.O. in the reason are at best reproduction of conclusion of the Investigation report. It is borrowed satisfaction not permissible in law. Appeal of the assessee is allowed. - ITA.No.2418/Del./2014 - - - Dated:- 15-9-2017 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O . P . KANT, ACCOUNTANT MEMBER For The Assessee : Shri Salil Kapoor, Advocate For The Revenue : Ms . Shweta Nakra Datta, Sr . D . R ORDER PER BHAVNESH SAINI, J . M . This appeal by assessee has been directed against the order of the Ld. CIT(A)-9, New Delhi, dated 20th February, 2014 for the A.Y. 2003-2004, challenging the reopening of the assessment under section 148 of the I.T. Act, 1961 and addition of ₹ 27,54,000 on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atiala Darya Ganj 50082 300315 26-Mar-03 Kuldeep Textiles (P) Ltd., SBBJ NRR 24624 400415 27-Mar-03 Division Trading Pvt. Ltd., SBBJ NRR 24620 Therefore, I have reason to believe that an income of Rs . 10,01,105 /- plus commission @ 2 % thereon amounting to Rs . 20,022 /- totaling to Rs . 10,21,127 /- has escaped assessment during the assessment year . On the basis of this information, I have reason to believe that the incomes described above have escaped assessment and the case is fit for issuing . Notice u / s 148 of Income Tax Act, 1961 . 2.1. The A.O. noted that assessee has not filed any objections to the validity of the notice issued under section 148 of the Act. The assessee informed the A.O. that it has had no transaction with M/s. Kuldeep Textiles (P) Ltd., as noted in the reasons. The assessee filed details to show that addition to the amounts mentioned above from Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be tangible material . 20 . Coming to the second 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 Rs . 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment . 26 . The first part of Section 147 ( 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er and does not indicate escapement of income . Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information . The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner . The Commissioner also acted on the same basis by mechanically giving his approval . The reasons recorded reflect that the Assessing 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee till its return pursuant to the notice issued to it was filed . This is a crucial factor that went into the formation of the belief . In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee . He does not also examine the return already filed to ascertain if the entry has been disclosed therein . 30 . 1 . In Commissioner of Income Tax, New Delhi v . Highgain Finvest ( P ) Limited ( 2007 ) 164 Taxman 142 ( Del ) relied upon by Mr . Chaudhary, the reasons to believe read as under : It has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad escaped assessment had not been fulfilled . Likewise in CIT - 4 v . Independent Media P . Limited ( supra ) the Court in similar circumstances invalidated the initiation of the proceedings to reopen the assessment under Section 147 of the Act . 32 . In Oriental Insurance Company Limited v . Commissioner of Income Tax 378 ITR 421 ( Del ) it was held that therefore, even if it is assumed that, in fact, the Assessee s income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material . In absence of the jurisdictional precondition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise . 33 . In Rustagi Engineering Udyog ( P ) Limited ( supra ) , it was held that ... 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 year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n favour of the Assessee and against the Revenue . The appeal is, accordingly, dismissed but with no orders as to costs . 5.1. In this case, the reasons for reopening are also reproduced in the judgment of the Hon ble Delhi High Court in which similarly information has been received from Director of Income Tax (Investigation), New Delhi that assessee has received amount of ₹ 5 lakhs. The A.O. on going through the information found that it is an accommodation entry and reopened the assessment. In the instant case under appeal, the A.O. has reproduced the precise information he has received from Investigation Wing of the Revenue and reproduced the same in the reasons recorded under section 148 of the I.T. Act. This information shows that assessee has received the amount of credit through banking channels by mentioning names of the parties and cheque nos. with amount. This information by itself cannot be said to be tangible material. The A.O. has not gone through the details of these information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. The reason to believe are therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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