TMI Blog2015 (12) TMI 1738X X X X Extracts X X X X X X X X Extracts X X X X ..... ovided to the assessee vide letter dated 04.10.2012 and that recorded in the order of assessment, in our view, prevented the assessee from putting up any defence in respect of the reopening of assessment under section 147 of the Act. This has clearly violated the principles of natural justice as the AO proceeded on a different premise while finalizing the order of assessment dated 25.03.2013. - Decided in favour of assessee. - ITA No.2800/Mum/2014 - - - Dated:- 9-12-2015 - SHRI JASON P. BOAZ, AM AND SHRI AMIT SHUKLA, JM Appellant by: Shri Ajay R. Singh Respondent by: Shri K. Mohandas O R D E R PER JASON P. BOAZ , A.M. This appeal by the assessee is directed against the order of CIT(A)-27, Mumbai dated 27.01.2014 for A.Y. 2005-06. 2. The facts of the case, briefly, are as under: - 2.1 The assessee HUF filed its return of income for A.Y. 2005-06 on 16.12.2005 declaring total income of `1,61,875/-. The return of income was processed under section 143(1) of the Income Tax Act, 1961 (in short the Act ). From the details in the order of assessment for A.Y. 2005-06 dated 25.03.2013, the Assessing Officer ( AO ) states that after the return was process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was no escapement of assessment in the assessee's case as the original return was accepted u/s. 143(1) dtd. 26/10/2006. And there is no new material or facts brought on record, thus reopening is nothing but based on change of opinion and hence bad in law. 2.2 The Learned CIT(A) failed to appreciate that The Assessing Officer failed to provide a copy of the recorded reasons to the Appellant on the basis of which the assessment was reopened even till the completion of assessment. Therefore, the action of the Assessing Officer confirmed by the CIT (A) is contrary to law and well established principles of natural justice, and hence, the reopening of assessment is bad in law. 2.3 The Learned CIT(A) erred in confirming the action of the Assessing Officer and failed to appreciate the fact that the notice u/s 148 dtd. 14/03/2011 was issued on the basis of third party's statement recorded on oath in the search and seizer action u/s. 132 in the case of M/s. Mahasagar Securities Pvt. Ltd., Hence the reopening is bad in law and is liable to be quashed. 3. Addition under section 69 of ₹ 29,95,981/- on alleged Accommodation Entries : 3.1 The Learned CIT(A) erred in conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the party cited in the reasons recorded by AO i.e. M/s. Gold Star Finvest Securities Pvt. Ltd. The learned A.R. for the assessee then took us through the order of assessment for A.Y. 2005-06 and brought to our notice that neither has any addition on account of escapement of income been made by AO on account of transactions by assessee with Gold Star Finvest Securities Ltd. nor is there a whisper in this regard in the order of assessment. The learned A.R. for the assessee contends that this established that the reasons recorded by AO for reopening the case on hand for A.Y. 2005-06 was made without any application of mind and being factually incorrect, and having no nexus with assessee s case, the very basis of reasoning for initiating proceedings under section 147 of the Act being factually flawed, the consequent notice under section 148 is invalid and consequently the order of assessment for A.Y. 2005-06 being null and void requires to be cancelled. 4.1.3 The learned A.R. for the assessee further submitted that even though on appeal the above facts were placed before the learned CIT(A) in the grounds raised challenging the validity of reopening the assessment for A.Y. 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act and issued notice under section 148 of the Act to assessee on 27.03.2012 (copy placed on pages 4 5 of paper book). In response thereto, assessee, vide letter dated 27.04.2012 (pages 6 7 of paper book), submitted that there was no escapement of income and that the return of income for A.Y. 2005-06 filed on 17.12.2005 be treated as filed in response to the aforesaid notice issued under section 168 of the Act. The assessee also requested the AO to furnish the reasons recorded for reopening the assessment. In response thereto, the AO vide letter dated 04.10.2012 (copy placed at page 8 of the paper book) provided the assessee with the reasons recorded by him for reopening of the assessment for A.Y. 2005-06 and which were as under: - The assessee has obtained accommodation entries amounting to `29,95,981/- for F.Y. 2004-05 relevant to A.Y. 2005-06 from M/s. Gold Star Finvest Securities Pvt. Ltd. You are requested to file the details as per the reasons mentioned above. 4.3.2 From the above, it is seen that the AO made available a copy of the reasons recorded by him for reopening the assessment by letter dated 27.10.2012. We find that the order of assessment concluded und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth by the assessee and factual errors in the reasons recorded by the AO for initiating the proceedings under section 147 of the Act in the case on hand for A.Y. 2005-06. 4.3.5 It is also a matter of record that though the assessee had raised grounds in this regard, which are recorded at B, 1 2 at pages 3 4 of the impugned order, the learned CIT(A) has failed to consider and adjudicate the grounds raised by the assessee. 4.3.6 In the facts and circumstances of the case, on the issue of the reopening of assessment for A.Y. 2005-06 under section 147 of the Act, as discussed at paras 4.1 to 4.3.5 of this order (supra), we are of the view that formation of belief by the AO was a condition precedent as regards the escapement of tax pertaining to the relevant assessment year. Before proceeding to issue the notice under section 147 of the Act, the AO was required to form an opinion, the validity of which are supposed to sustain the formation of an opinion, which can be challenged. Though conclusive evidence is not requisite at the stage of formation of belief, it must be based on application of mind which a reasonable person would apply. In our view, the reasons recorded, as co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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