TMI Blog2016 (3) TMI 1274X X X X Extracts X X X X X X X X Extracts X X X X ..... se, the order passed by the ld. CIT(A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the initiation of the reassessment proceedings and the reassessment order are bad both on facts and in law and liable to be quashed as the statutory conditions and procedure prescribed under the statute have not been complied with. 3. (i)On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the ld. Assessing Officer are bad in the eye of law as the reasons recorded for the issue of notice u/s 148 are bad in the eye of law and are contrary to the facts. (ii) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the Assessing Officer is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded without application of mind on the part of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee is bad in law liable to be deleted. 11. On the facts and circumstances of the case, the ld. CIT(A) has erred both on facts in law in rejecting the contention of the asessee that the addition made by the ld. Assessing Officer is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal. 2. Brief facts of the case as recorded by the ld. Assessing Officer are as under: The assessee had not filed its return of income for the year under consideration. The assessment was reopened on an information received from the ACIT, Central Circle 10, Jhandelwalan Extn., on the allegation that the assessee had made bogus purchases. The assessment was completed by the ld. Assessing Officer by making an addition of ₹ 43,52,304/- treating the entire purchases made by the assessee from M/s Shree Bankey Bihari Trading Company, M/s. Om Agencies and M/s Shree Syam Trading Company to be accommodatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry 1. Vishnu Trading Co. M/s. Nayar Metal Company Rs.17,79,173 2. Shree Bankey Bihari M/s. Nayar Metal Company Rs.13,77,212 3. Shree Shyam Trading M/s. Nayar Metal Company Rs.8,00,948 4. Om Agencies M/s. Nayar Metal Company Rs.3,94,979 Total amount of entries ₹ 43,52,304 6. On the contrary the Ld. DR, submitted that in this case information has been received after the assessee s return was accepted under section 143 (1). In the information provided by CIT, Central-II, New Delhi, there is a clear allegation that the persons mentioned therein have provided accommodation entries. Since the name of the assessee appears in the list of accommodation entries the assessing officer was justified and recording reasons and reopening the assessment. It was submitted that at the time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list is enclosed as Annexure A, duly signed by Sh. Vishes Gupta. The list given the name of the firm which has provided the accommodation entry along with the name and address of the recipients of accommodation entry. 4. Sh. Navneet Jain Sh. Vaibhav Jain has provided accommodation entry through thirty seven paper entities. The list of the firms giving accommodation entry is enclosed as annexure-B. The list of accommodation entry recipients, has been obtained from Sh. Naveneet Jain Sh. Vaibhav Jain. It does not give year wise bifurcation. Hard copy of the list is enclosed as annexure-C, duly signed by Sh. Vaibhav Jain. Thus, the firms mention in the list B have provided accommodation entries to the firms mentioned in list C . 5. The soft copy of the information in respect to annexure A, B C is also enclosed. 6. The information of accommodation entry includes A.Y. 2006-07 also, which is a time baring year for taking action u/s 148. 7. This information is forwarded to you for early dissemination to various field offices in Delhi. On examining the list of accommodation entries provided by Shri Rakesh Gupta Shri Vishesh Gupta and Shri Navneet Jain S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax Officer Ward 39(3), New Delhi Joint CIT, Range-39, N.Delhi For the reasons recorded above, it is a fit case for issuance of notice u/s.148. Hence necessary approval asper section 151(2) if the I.T.Act is hereby given for reopening the case for A.Y.2006-07 7.1. It is observed that the assessee has filed its return of income on 30/10/2006 declaring an income of ₹ 15,930 the same was processed under section 143 (1) of IT act dated 02. 03. 2007 at the declared income later on, information was received by assessing officer wide letter dated 13. 03. 2013, forwarded by CIT, Central-II, New Delhi and CCIT, New Delhi-1 wide letters dated 19.03.2013 and 26.03.2013, respectively providing a CD wherein the list of parties to whom bogus purchases/accommodation entries provided by Sh. Rakesh Gupta, Shree Vishesh Gupta Sh. Navneet Jain and Sh. Vaibhav Jain was appearing. The Ld.AO records at page 2 para 1 of assessment order that, after going through the complete list and identifying the parties whose territorial jurisdiction lies with this board, this office, after properly recording the following reasons for forming the belief that the income has escape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rding of reasons to believe, does not mean that the assessing officer has to finally ascertain the fact that income has escaped assessment, but it mean that the assessing officer is required to examine the facts on the basis of the information and satisfy himself that taxable income has escaped assessment as held by Nova Promoters(supra). In the present case, on going through the reasons, it is quite evident that the assessing officer has simply mentioned the alleged accommodation entries in the reasons recorded, even without specifying the nature of such accommodation entries. This shows that the assessing officer has made no efforts to look into the return of the assessee, which was available with him. 7.5. It is a settled position of law that there must be material for information of a belief that income has escaped assessment. Further reasons referred to must disclose process of reasoning by which the assessing officer holds reasons to believe. There must be nexus between such material and belief and most importantly the reasons referred to, must show application of mind by the assessing officer. Hon ble Supreme Court and various High Courts have held that the validity of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Unique Metal Industries (supra), deleted similar addition by observing in para 27 as under: 27. As regards the addition of 20% sustained by the ld. CIT(A) I am of the view that since purchases are not bogus the addition on this account cannot be sustained. Even otherwise the addition of 20% on the facts and circumstances is apparently too high. The ld. CIT(A) having held that tax has to be levied on real income and the profit cannot be ascertained without deducting the cost of purchases from the sales as otherwise it amount to levy of tax on gross receipt, she ought to have applied profit rate in this nature of trade. Estimating profit @ 20% by taking into consideration the or visions of section 40A(3) will not lead to determination of correct real income. Section 40A(3) is meant for a different purpose when the assessee has made purchases in cash. This provision cannot be applied in such cases. Once the purchases are held to be bogus then the trading results declared by the assessee cannot be accepted and right course in such case is to reject books of accounts and profit has to be estimated by applying a comparative profit rate in the same trade. Though there ..... X X X X Extracts X X X X X X X X Extracts X X X X
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