TMI Blog2018 (5) TMI 1325X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 (hereinafter the Act ), relating to Assessment Year 2009-10. 2. Facts in brief:- The assessee is a company and is in the business of manufacturing of cement. It filed its original return of income for the impugned Assessment Year 2008-09, on 24/09/2009. A search operation was conducted on the company u/s 132 of the Act. A notice u/s 153A of the Act was issued to the assessee on 18/12/2012. The assessee filed a return in response to this notice u/s 153A of the Act and thereafter assessment was completed u/s 143(3) r.w.s. 153A of the Act, on 31/03/2014. 2.1. A second search and seizure operation was conducted on the assessee u/s 132 of the Act on 11/03/2016. Thereafter a notice u/s 148 of the Act was issued to the assessee for the impugned Assessment Year 2009-10 on 22/03/2016. The assessee filed a reply to the same on 13/04/2016. The assessee contended that the notice for reopening of the assessment was issued only after a lapse of four years from the end of the Assessment Year and hence it was barred by limitation and that the notice was issued without jurisdiction of the competent authority. The assessee also filed a return of income in response to this notice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no reason to reopen the case, without assigning any reason as to why it was not voluntary. 2. That in the facts and circumstances of the case, the Ld CIT(A) erred in holding that statements of ShriSandip Sharma and ShriDilip Kumar Khetan recorded on 11/03/2016 were not voluntary merely based on some answers given during crossexamination in spite of the fact that the A.O had brought material evidence on record in the form of answers given in some other questions, that ShriKhetan and ShriSharma were lying during cross-examination meaning thereby the statements recorded on 11/03/2016 was correct. 3. That in the facts and circumstances of the case, the LdCIT(A) erred in holding that statements of ShriSandip Sharma and ShriDilip Kumar Khetan recorded on 11/03/2016 were not voluntary ignoring the fact that the blatant lie of ShriKhetan regarding the ownership of his mobile number was unearthed during the crossexamination itself, which has been discussed in the order itself rendering the whole statements given during the course of examination to be false. 4. The appellant craves the leave to make any addition, alteration and modification etc. of ground or grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld. D/R and submitted that the entire reopening was based on the alleged statements recorded by the Investigation wing from two persons, namely, Mr. Sandeep Kumar Sharma and Mr. Dilip Kumar Khetan. The assessee objected to the reopening which was after four years and has also sought cross-examination of these two witnesses of the revenue. He pointed out that the Apex Court in the case of Andaman Timer Industries vs. CCE (2015) 127 DTR 241, has recognised the right of the assessee to cross-examine the witness of the revenue. He took this bench through the replies given by these two witnesses of the revenue during the course of crossexamination and submitted that it is not a case of retraction. He pointed out that it was during cross examination of the revenue witness, the facts have come out and to call it retraction, is factually and legally incorrect. Hence he argued that the propositions of law relied upon by the ld. D/R, on the issue of retraction, is not applicable to the facts of the case. He contended that the entire reopening was based on two statements made by Mr. Sandeep Kumar Sharma and Mr. Dilip Kumar Khetan and these two persons during the course of cross-examinatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents recorded from Mr. Sandeep Kumar Sharma and Mr. Dilip Kumar Khetan. We would discuss the case law as and when necessary. 4.3. On a query from the Bench that, as on the date of recording of reasons, the Assessing Officer had information and that the statements recorded from these two persons were in existence and the correctness or otherwise of the same can be decided only during the assessment proceedings, the ld. Counsel for the assessee submitted that these two persons have stated on oath during the cross-examination before the Assessing Officer that they do not know the contents of the statements and they were forced to sign the same and denied the contents therein and hence the statements in question cease to be evidence ab initio and hence the reopening based on such statements is bad in law. He further pointed out that the Assessing Officer did not verify the information received by him from the DDIT(Inv.) and on the same day, based on this information issued notice u/s 148 of the Act and thus the reasons are recorded without application of mind. He further submitted that mandatory approved u/s 151 of the Act was not obtained. The ld. D/R, in reply submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) of the Income Tax Act, 1961 during the course of search wherein they admitted to providing such accommodation entries to M/s Adhunik Cement Limited. In view of the above fact I have reason to believe that the income of the assessee chargeable to tax for the assessment year 2009-10 has escaped assessment within the meaning of Section 147 of the Income tax Act 1961. Issue statutory notice u/s 148 of the I.T. Act. 1961 to the assesse company requesting to deliver a return of income for the assessment year 2009-10 within thirty days of receipt of notice. The reasons were recorded on 22.03.2016 which is the day on which the letter was received from DIT(Inv.) Unit 1(2) Gauhati dated 22.03.2016 and received as the same day by the A.O. 5.3. A perusal of the above recorded reasons demonstrates that the Assessing Officer has not alleged that there is a failure on part of the assessee truly and fully discloses all the material facts which are necessary for assessment. The case law on this matter is as follows: The A Bench of this Tribunal in the case of M/s. Beekay Steel Industries Ltd. vs. DCIT CC-XXX, Kolkata, in I.T.A. No. 105/Kol/2015, order dt. 31/05/2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of section 147. 27 Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: ( a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment forsuch assessment year by reason of the failure on the part of the assessee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29.03.2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 02.03.2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. 4.8. Applying the propositions laid down in the above case law to the facts to this case, we have to necessarily hold that the re-opening of the assessment proceedings is not valid that there is not even a whisper in the reasons recorded for the reopening of the assessment that there is a failure on the part of the assessee to disclose fully and truly all the necessary material facts required for assessment in view of the 1st proviso to Section 147 of the Act. In this case no tangible materials have come to the possession of the Assessing Officer subsequent to the Assessment Order u/s 143(3). Re-opening is done based on the same material and record and hence it is bad in law. As far as the contention, that there is a change in opinion is concerned, we are unable to agree with the ld. Counsel for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is factually incorrect. Thus, the basis on which the DDIT (Inv.) wrote the letter dt. 22/03/2016 to the Assessing Officer cease to exist. Hence, in our view, the ld. CIT(A) on going through the statements and holding that they were not voluntary, was right in coming to a conclusion that the reopening of the assessment based on such material is non-existent and that the very basis of the reopening does not exist. The denial of a witness of the contents in a statement is not the same as a retraction. These are two different things. We now discuss the case law on this issue. 6.1. The Hon ble Calcutta High Court in the case of Dr. PankasBiswas vs. State of West Bengal, C.R.A. 418 of 2012, held as follows:- I am in agreement with the submission of the learned counsel for the assessee that statement recorded under Section 14 of the Code of Criminal Procedure cannot be treated as substantive evidence when the maker does not depose of such facts on oath during trial. Hence, there is no direct evidence on record connecting the assesse with the alleged crime. The Hon ble Karnataka High Court in the case of CIT vs. R.N. ThippaShetty reported in [2010] 230 CTR (Kar) 26 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey cannot be a basis of assumption of jurisdiction u/s 147 of the Act. Respectfully following the decision of Hon'ble Karnataka High Court in the case of CIT vsDr. R.N. ThippaShetty, we are inclined to hold that if the very basis on which reopening was ordered did not exist, then there was no question of reopening the assessment and thus, notice u/s 148 of the Act deserves to be held as illegal and without jurisdiction. 6.2. Applying the propositions of law laid down in the above judgements to the facts of this case, we uphold the finding of the ld. CIT(A) that the reopening of amount is bad in law. 6.3. We also find total non-application of mind by the A.O. The letter dated 22.03.2016 was written by the DDIT (Inv.) to the A.O. and the same was received by the A.O. at Kolkata on the same day from Gauhati. The reasons for reopening were recorded the same day i.e. 22.03.2016. The letter of the DDIT (Inv.) say that post search investigation are in progress. Addresses of the alleged paper companies from whom bogus share capital is alleged to have been generated, evidence based on which such allegation is made, copies of the alleged statements of the two persons were not wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. There shall be no order as to costs. 7.2. The Hon ble Delhi High Court in the case of Principal CIT vs G G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: 12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the A.O. stated: I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee 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 A.O. applied his mind to the materials that he talks about particularly since he did not describe what 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 A.O., if he had in fact undertaken the exercise, to make ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer. ( iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to ₹ 5 lakhs during F.Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. ( iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, bad a paid up capital of ₹ 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a fictitious person. The reassessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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