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TMI Blog2017 (9) TMI 1229X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Investigation Wing of Delhi which constitutes an opinion and not material which is necessary for reopening. 5. The Ld. Assessing officer has erred in law in issuing twice reasons to believe with a letter dated 22.04.2013 and letter dated 20.03.2014 by simply saying that some typographically mistakes have crept in therefore letter dated 22.04.2013 is withdrawn. Reasons to believe cannot be altered, changed or supplemented. 6. The Ld. Assessing officer has erred in law in disposed off the objections of the appellant on the very same day vide letter dated 24.03.2014 without application of mind which is totally unjustified and unwarranted. 7. The Ld. Assessing officer has no reasons to believe within the section of 147/148 of the I. T. Act, 1961 that the amount of Rs. 78,58,980/- was paid as booking amount by the appellant to M/s. AEZ Group (part of Aerens Group) for booking space at SF - 117 and G.F commercial. 8. The Ld. Commissioner of Income Tax (Appeals), has erred in law in sustaining the addition of Rs. 67,21,980/- under section 69A of the Income Tax Act, 1961." 3. The brief facts of the case is that the assessee is an individual who purchased one commercial pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1137000/- and on 21.06.2011 Rs. 20.63 lacs. Therefore, the assessee has paid total sum of Rs. 32 lacs. The assessee further explained by submitting the copy of agreement between the assessee and the builder. On 19.03.2014 assessee was issued a summon and on 20.03.2014 the assessee was further provided an altogether different reasons stating that there was typographical error in the original returns recorded. Such reasons are as under:- "Information has been received from ADIT (Investigation) Unit-III(3), New Delhi that a search and seizure operation was conducted on 17.08.2011 on AEZ group (part of Arerens Group). On the basis of material seized/ impounded during the course of search and survey operation and post survey conducted on several investors groups comprising of 23 investors to verify payment of such unaccounted money on booking. During the course of search/ survey operation it has been accepted by the investors that they have made cash payment for booking/ purchase of property in the above said project. The amount accepted by them to have been paid exactly matched with the amounts mentioned in the extracted sheets of the hard Disk seized from the Corporate Office o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in this letter that Information was received from ADIT(Inv) Unit -11(3) that assessee had booked FF117, GF, Commercial Indirapuram Habitat Centre Project, Ghaziabad of AEZ Group(thereafter referred as "Indirapuram property"). Assessee made total payment of Rs. 78,58,980/- during financial year 2006-07. Out of this, Rs. 11,37,000/- was paid by cheque and Rs. 67,21,980/- was paid in cash. It was also specified in the letter that assessee had accepted the same. 5) Then, just before 8 days of passing of the assessment order, the Id. AO issued another "Reasons to Believe" vide letter dated 20.03.2014 citing the reason that while sending "Reasons to Believe" vide letter dated 22.04.2013, some typographically mistakes had been crept in. Therefore letter dated 22.04.2013 was withdrawn. (Refer pg. no-55 of PB) 6) In second letter of "Reasons to Believe", reasons of reopening were completely different. (Refer page no-56 of PB) 7) Assessee filed the objections against the said "Reasons to Believe" on 24.03.2014 which were disposed off by the Id. AO on the same date. (Refer pg. no-59 to 62 of PB) 8) Ld. AO passed the assessment order u/s 143(3)/148 of I.T Act on 28.03.2014 asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well-settled that the question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the Assessing Officer. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under section 148." (EMPHASIS SUPPLIED) b. The above case has been followed by the Delhi High Court in the case of Signature Hotels (P.) Ltd. v. ITO [2011] 338 ITR 51. c. Reliance has been placed on the decision of the Hon'ble Bombay High Court in the case of Hindustan Lever Ltd. v. R.B. Wadkar [2004] 190 CTR 166 (Bombay) whereby following has been held: "20. The reasons r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h was the booking amount of Unit No. FF-117, GF, Commercial Indirapuram Habitat Centre Project. 2.2 In the same reasons, ld. AO made two contradictory statements. The last four lines of the 2nd para of original reasons are reproduced as under: "The same was also accepted by you during the course of post search enquiries conducted by the Investigation Wing. Thereafter, in responses to query letter dated 05/02/2013 of the undersigned, vide your letter dated 27/02/2013 you have accepted investment of Rs. 11.37 lakh only for the above property." 2.3 In the first line, ld. AO stated that the assessee accepted the total payment of Rs. 78,58,980/- made to the Aerens Group for Indirapuram property during post search enquiries which is not true because there was no search u/s 132 or survey u/s 133A was conducted on the assessee. Even assessee was never questioned during search/survey. 2.3 In the very next line, ld. AO stated that assessee admitted only for the payment of Rs. 11.37 lakh to the Aerens Group. This shows that ld. AO recorded the reasons for reopening of case u/s 147 without application of his mind. 2.4 Further ld. AO recorded new reasons for reopening of case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in the decisions discussed here- in-before, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case." b) Commissioner of Income-tax - II v. Multiplex Trading & Industrial Co. Ltd- [2015] 63 taxmann.com 170 (Delhi-HC) 22.09.2015 "10 The first and foremost issue to be addressed is whether the Assessing Officer could assume jurisdiction to reopen the assessment based on the information received from the Investigation Wing of the department. It is now well settled that the Assessing Officer can reopen the assessment if he has reason to believe the assessee's income has escaped assessment. However, his reasons to believe must not be based on surmises, conjectures or occasioned by change in opinion but must be based on some tangible and credible material on the basis of which a reasonable belief could be formed that income of an assessee has escaped assessment c) CIT vs. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (DHC) "Held that, in the present case, the first sentence of the so-called reasons recorded by the Assessing Officer was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vestigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income, but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of believe must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports [P.] Ltd. 's case (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered into the agreement of purchase and had paid the sum of Rs. 11,37,000/- on 21.04.2006 and Rs. 20,63,000/- on 21.06.2011 by account payee cheques. 3.4 It is well settled law that without confronting the material, on which the reliance has been placed by the assessing officer, no adverse inference can be drawn against the assessee. For above proposition, reliance has been placed on the following judgements: a) Hon'ble ITAT Delhi in the case of Babcock Power (Overseas Projects) Ltd. v. DCIT reported in 131 Taxman 86 in 2013 has held that "7 We have considered the rival submissions and have perused the relevant material on which our attentions were drawn. After perusing all these material, we find that assessee deserves to succeed in both of these years, on the ground alone that the material found during the course of search from a third party was not confronted to the assessee. The relevant records could not be produced even before the Tribunal in spite of affording so many opportunities to the department...." b) It is well-settled legal position after the judgment of Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT (1980)125 ITR that any material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Coordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur - 140 TTJ 249 the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143 accordingly quashed. The ground No.l is accordingly allowed." G. Koteswara Rao vs DCIT [2015] 64 taxmann.com 159 (Visakhapatnam - Trib.) During the course of search carried out in case of a developer, certain incriminating documents were seized from which indicated that the assessee along with others had invested an amount of Rs. 230 lakhs for purchase of lands. The assessee admitted before the DDIT (Inv) that he had source for investments to the extent ofRs. 206 lakhs and the balance amount of Rs. 24 lakhs was declared as unexplained investment. The Assessing Officer, based on the assessee's statement, issued notice under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in FF117, GF, Commercial Indirapuram Habitet Centre vide letter dated 27/02/2014 (Refer pg. no-37 of PB). 7.2 Assessee also furnished the copy of bank statement of relevant period and statement of affairs disclosing the impugned investment. (Refer pg. No- 104-106 and 110 of PB). 7.3 Copy of agreement between Indirapuram Habitat Centre Private Limited and assessee, Smt. Taruna Verma was also provided vide letter dated 10/02/2016 to substantiate the total investment made by the assessee. (Refer pg. no 75 to 100 of PB) 7.4 Assessee also vide letter dated 24/03/2014 explained before ld. AO that she had paid an amount of Rs. 11,37,000/- by cheque on 19.04.2006. However she was never allotted her share in the property at the time of booking of the space and, therefore, the question of making full payment at the time of booking of the space does not arise. 7.5 Furthermore, AEZ group assured the assessee at the time of booking of the space that considerable return can be received by the asessee. Keeping in view of this fact, the assessee obtained loans from various persons for making the payment of Rs. 20,63,000/- through account payee cheque on 21.06.2011. And after this paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Representative relied upon the order of the lower authorities. 8. We have carefully considered the rival contentions. The issue before us is twin fold: one with respect to the reopening of the assessment challenged by the assessee vide ground No. 1 to 6 of the appeal of the assessee and ground No. 7 and 8 are related to the merits of the case of the assessee. In the present case the original reasons recorded by the ld Assessing Officer on 22.04.2013 shows that information was received that assessee has made total payment of Rs. 7858980/- and out of this sum of Rs. 1137000/- was paid by cheque and balance amount of Rs. 6721980/- was paid in cash. It was stated in the reason that the assessee has accepted it during the course of post search enquiries conducted by the Investigation Wing. The reasons also stated that AO had issued a query letter on 5.02.2013, which was replied by the assessee on 27.02.2013, wherein the assessee has accepted investment of Rs. 11.37 lacs only. Therefore, the ld AO had reason to believe that sum of Rs. 6721980/- is paid by the assessee in cash. 9. In response to above reasons assessee submitted that it has paid on 21.04.2006 Rs. 1137000/- vide cheque No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . [2010] 328 ITR 515 (SC), the Supreme Court in a short order held as under : "Having examined the record, we find that in this case, the Depart ment sought reopening of the assessment based on the opinion given by the District Valuation Officer, the opinion of the District Valuation Officer per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, col lected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment." 11. The above basic requirement of sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this court. Recently, this court rendered a decision dated September 22, 2015 in I. T. A. No. 356 of 2013 (CIT v. Multiplex Trading and Industrial Co. Ltd. [2015] 378 ITR 351 (Delhi)) where the assessment was sought to be reopened beyond the period of four years. This court considered the decision of the Supreme Page No : 0152 Court in Phool Chand Bajrang Lal v. ITO (supra) as well as the decision of this court in Haryan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries". The above conclusion is unhelpful in understanding whether the Assessing Officer applied his mind to the materials that he talks about particularly since he did not describe what Page No : 0153 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 Assessing Officer, 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 November 14, 2004, and was processed under section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for 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". In the considered view of the court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years. In so far as the appeals filed against the order of assessment before the Commissioner (Appeals), we direct the appellate authority to dispose of the same, expeditiously." 13. In the present case the assessee has filed the return of income on 18/04/2013 in response to the notice under section 148 of the income tax act dated 22/03/2013. On the date of filing of the return of income, the assessee requested for the reasons recorded. However, the correct reasons recorded were provided to the assessee only on 20/03/2014 i.e. Just before 10 days of the completion of the assessment. The Hon'ble Supreme Court has provided guid ..... X X X X Extracts X X X X X X X X Extracts X X X X
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