TMI Blog2018 (6) TMI 496X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the assessee were not met. CIT(A) also did not deal with these objections of the AO. The reasons recorded by the AO are found to be not in accordance with law. Accordingly, they are cancelled. Too, in view of “Sabh Infrastructure Limited” (supra), none of the other decisions cited by the Department are of any aid to it. Consequently, the reassessment proceedings, culminating in the order under appeal, are also not sustainable in the eye of law and they too are cancelled. Nothing further survives for adjudication. Appeal is allowed. - I.T.A No. 41/Agra/2017, I.T.A No. 40/Agra/2017 - - - Dated:- 1-6-2018 - Shri A. D. Jain, Judicial Member Assessee by : Shri Pankaj Gargh, AR. Revenue by : Shri Waseem Arshad, Sr. DR. ORDER I.T.A No. 41/Agra/2017 This is assessee s appeal for assessment year 2010-11, taking the following grounds: 1. Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the action of the Assessing Officer for which specific grounds were taken before him challenging the validity of initiation of proceedings u/s 147 and the consequent issue of notice u/s 148 of the I. T. Act. 2. Because the Ld. CIT(A) has erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot been reflected by him in Income Tax Return is not disclosed on the picture of amount. Therefore, source of ₹ 7,00,000/- is not disclosed before the department. Thus I have reason to believe that income of ₹ 7,00,000/- has escaped A.Y. 2010-11 within the meaning of section 147 of Income Tax Act 1961. 3. The assessee filed the following objections against the aforesaid reasons recorded by the AO: Re: M/s Deepraj Hospitals Pvt. Ltd. Palika Market, Hathras. Sub: Objection regarding validity/issuance of notice u/s 148 of the Act, For Assessment Year 2010-11. Sir, With reference to the notice dated 10.04.2013 issued u/s 148 of the Act and the subsequent receipt of copy of reason recorded for initiating proceedings u/s 147 of the Act, objecting to the validity and issuance of notice u/s 148 of the Act and the reasons recorded, it is respectfully submitted:- 1. That on receipt of the above mentioned notice dated 10.04.2013 an application dated 24.04.2013 was filed in the office of your goodself on 02.05.2013 with the request that the return for A.Y. 2010-11 has already been e-filed on 28.09.2010 vide Acknowledgement No.16287213 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atural justice to enable the assessee to file further objection, if required. 7. That without prejudice to the above mentioned submission and at the most if there is any information though neither the same has been mentioned in the reason recorded nor otherwise confronted with the assessee, the said information is clearly termed as borrowed satisfaction and until unless the belief is directly not of the officer recording reasons the initiation u/s 147 is invalid and without jurisdiction. 8. That even on the basis of any information, though in the present case whether there is any information or not is not clear, the proceedings u/s 147 of the Act cannot be validly initiated. i) Hon'ble ITAT Delhi Bench in the case of Vinita Jain vs. ITO reported in (2007) 158 Taxman 167 (Mag) quashed the notice issued under section 148 as well as consequent assessment where assessment was reopened on the basis of report of DDI, who believed that transaction of capital gain shown by the assessee was bogus. The Hon'ble Bench while quashing the notice observed that Whether Assessing Officer reopened assessee's assessment merely because DDIT (Inv) believed that transaction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice issued u/s 148 of the Act may kindly be withdrawn. 4. The AO, vide order (APB 18-23) dated 17.03.2015, rejected the assessee s objections. It was held as under: 8. Keeping in view the above position of law, the objection raised by the assessee against reopening of the assessment of Assessment Year 2010-2011 are adjudicated hereunder:- The submission made by the assessee have duly been considered. However, the case was processed for A.Y.2010-11 u/s 143(1) of I.T. Act i.e. without calling the assessee and without verifying the items of the income and expenditure disclosed by him in his return of income. Therefore, at the time of processing of assessee s return of income u/s 143(1) of I.T. Act, the Assessing Officer did not have the occasion to form an opinion about the genuineness of investment being made by the assessee in the year under consideration. Since the present case, the Assessing Officer at the time of processing of return u/s 143(1) of I.T. Act did not form an opinion about the genuineness of the investment made by the assessee in the year under consideration, therefore, there does not arise any question regarding change of opinion on invest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or re-assess income chargeable to tax if he has reason to believe that the income for any assessment year has escaped assessment. The word reason in the pharase reason to believe would be cause or justification. If the A.O. has cause or justification to know or suppose that the income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment The expression cannot be read to mean that the A.O. should have finally ascertained the fact by legal evidence or conclusion. The scope and effect of section 147 as substituted with effect from 01.04.1989 are substantially different from the provision as they stood prior to such substitution. Since the Assessing Officer had reason to believe on the basis of information received from JCIT Range -3, Etah that the assessee failed to explain the source of invested a sum of ₹ 7,00,000/- and not disclosed before the department in his return of income. After examining the factual and legal aspect as discussed in the foregoing paras and since the notice u/s 148 of I.T. Act is based on the satisfaction that there was escapement of income in the form of investment of ₹ 7,00,000/- rega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of your goodself the same may kindly be communicated to the assessee in the interest of natural justice to enable the assessee to file further objection, if required . 5. That in the order passed by the Assessing Officer deciding the objection filed it is mentioned information received by this ward from Commissioner of Income Tax, Aligarh vide his letter dated 21.03.2013 through Joint Commissioner of Income Tax, Range-3, Etah providing the list of parties to whom the bogus purchases/accommodation entries provided by Shri Surendra Kumar Jain and Shri Virendra Jain Group, Delhi 6. That from the above mentioned facts it is very much clear that the reason to believe of the Assessing Officer is only an information received by him without there being any corroborative material or evidence in his possession to form a valid reason to believe that particular income has escaped assessment. At the time of recording the reason there was no material with the Assessing Officer except the information received by him to form his own belief. Thus it is simply a borrowed satisfaction which according to the provision of section 147 of the Income Tax Act is not valid for issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s follows: Subject:- Notice u/s 250(4) of Income Tax Act, 1961 and Rule 46A of Income Tax Rules, 1962 in connection with enquiries at the appellate stage for AY 2010-11 regarding - Please refer to the above mentioned subject. On above context following photocopies of scanned documents seized from the residence of Shri Surendra Kumar Jain during the search/survey on 14.09.2010 are furnished to you for confrontation. 1. Photocopy of annexure-A containing the list of the names of the assessee and the names of entry providing company. 2. Photocopies of page no 28 of annexure A-13 of seized documents containing name of middleman Shri Vivek Bansal against the entry of Hum Tum Marketing Pvt. Ltd. In this page there are details of cheques/RTGS/P.O./DD issued by S.K. Jain Group company and other details of such type of transactions to (he beneficiary companies on a particular date. 3. Photocopies of the cash book page no.1 of seized annexure A-13 containing details of receiving the cash by Shri S.K. Jain Group for the purpose of accommodation entry. There is also name of Shri Vivek Bansal in it. 4. Photocopies of page no 36 and back side of page no.36 of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nference can be drawn from this Annexure 'A'. Moreover the assessee, as already earlier submitted, neither know Shri Surendra Kumar Jain nor has any sort of connection or transaction with Shri Surendra Kumar Jain and hence the papers found from the residence of Shri Surendra Kumar Jain does not in any way can be co-related with the assessee company. 2. The noting mentioned on Page no. 28 as mentioned in the notice cannot in any way be co-related with any transaction of the assessee company as on the entire, page no. 28 nowhere the name of assessee company is noted. Moreover, as already earlier submitted, we do not know who is Mr. Vivek Bansal, neither we have any relation nor any sort of transaction with Shri Vivek Bansal. What sort of work Mr. Vivek Bansal is doing, we are not at all concerned with that as we have no connection with him. Moreover the Department has never given any opportunity to get Mr. Vivek Bansal confronted with the assessee. In the absence of all these facts the name of Mr. Vivek Bansal written on any paper cannot be co-related with assessee company . 3. Similarly the transaction as noted on cash book page no. 1 of seized annexure A-13, as me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 17.03.2015. In the photocopies of seized documents placed on record furnished to assessee on page no 28 of annexure A-13 there is the name of M/s Hum Turn, Marketing Pvt. Ltd. which clearly reflects that this company was involved in providing share application money in lieu of cash. In this page there is also the details of cheques/RTGS/P.O./DD issued by Shri S.K. Jain Group to such beneficiary companies. There is also the name of the assessee in the list of such companies which have taken such type of accommodation entry. In the page no. 1 of annexure A-13 there are details of receiving the cash by Shri S.K. Jain Group for the purpose of accommodation entry. These all documents clearly establish that the assessee company received the share application of Rs. Seven Lacs in lieu of cash. These documents were furnished to the assessee for confrontation. On his reply assessee submitted that assessee's name is not on these pages and transactions noted on these pages cannot be co-related to his transaction as mentioned above. Assessee's name is the annexure A furnished to the assessee and the name of the company providing accommodation entry is also in the seized documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. The ld. CIT(A) decided the matter, holding as follows: 7.2 Decision In its written submission, the appellants has alleged that the AO had issued notice u/s 148 merely on the basis of borrowed satisfaction based on the information received from some other authorities without there being any corroborating material or evidence in his possession to form a valid reason to believe that certain income has escaped assessment. It has been submitted that the conditions precedent for taking action u/s 147 of the Act are wholly non- existent. It has been explained that section 147 of the Act mandates that exclusively the satisfaction of the assessing authority based on some direct and relevant material could lay the foundation for issuing notice u/s 148 of the Act. According to the appellant, the AO has not applied his own mind and hence the assessment is not justified. I have considered all the facts and circumstances of the case and also perused the appellant's written submission. It is a well known fact that certain unscrupulous persons have been indulging in the business of providing entries by channelizing unaccounted money of people through a maze of artific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out independent investigation and establish the facts before he can issue notice u/s 148. This is not necessary because the facts are ultimately established during the course of the assessment proceedings and while issuing notice u/s 148 only a prima facie satisfaction is required. That satisfaction is to be based on the material available before the AO. He is not required to proactively investigate the veracity of facts narrated in the material that he possesses. In this case, the facts had already been investigated by the Investigation Wing and a report detailing the modus operandi and other relevant information was made available to the AO. Considering that the report was prepared in accordance with the law and forwarded by a statutory authority, the AO could not reasonably doubt the contents thereof. There is nothing to show that this opinion of the AO is not a genuine opinion but arising from extraneous considerations. Existence of reasons to believe is a question of fact which is determined in the given facts and circumstances of the case. None of the case laws relied by the appellant have applicability to the facts of the present case. In determining whether com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 13. The ld. Counsel for the assessee has contended that the ld. CIT(A) has erred in confirming the AO s action of issuance of notice u/s 148 of the Act, by holding such action to be in accordance with law. Relying on PCIT vs. Meenakshi Overseas (P) Ltd. , 154 DTR 100 (Del.), the ld. Counsel has contended that mere reliance on the information received, without having acted thereon before recording the reasons, showing non-application of mind on the part of the AO, is unsustainable in law. The ld. Counsel has also placed on reliance on Sabh Infrastructure Ltd. Vs. ACIT , order dated 25.9.2017, passed by the Hon ble Delhi High Court in Writ Petition (C) 1357/2016. 14. The ld. DR, on the other hand, has relied on the following decisions to contend that information received from the Investigation Wing of the Department, is information on the basis of which, the AO can initiate reassessment proceedings: 1. Mitsui and Company India Pvt. Vs. ITO and Another , WP(C) 1121/2012 CM No.2447/2012 (Delhi High Court). 2. Brij Mohan Agarwal vs. Asstt. Commissioner of Income Tax , 268 ITR 400 (Allahabad High Court). 3. Hosang R. Debra vs. ITO-1(2) , ITA No.331/Agr/2012, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision is essentially fact-specific. It does not lay down any proposition of law, as such. The Civil Writ Petition filed by the assessee was decided by the Hon ble High Court on merits, having taken into consideration the investigation report of the Investigation Wing of the Department, as conveyed to the AO, the assessee s record, the Department s counter-affidavit (alongwith its annexures) to the Writ Petition and the rejoinder affidavit filed by the assessee. It was held that from the findings of the Investigation Wing and as per the record, the AO of the assessee (Respondent No.1 in the Writ Petition) had reason to believe that the assessee had diverted and, thus, concealed his income by disclosing it to be sale proceeds of shares, which was not correct, as no real transaction of shares had ever taken place. It was held that in view of the investigation made by the Investigation Wing, relevant and very material facts had come before the AO that the assessee was concealing his income by indulging in bogus transactions. It was, accordingly, held that the belief of the AO was an honest and reasonable belief based on the material which he had received from the Investigation Wing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the reasons; (iv) the exercise of considering the Assessee s objections to the reopening of assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed. 22. Thus, in deference to Sabh Infrastructure Limited (supra), it is incumbent on the AO, while communicating the reasons for the reopening of the assessment, to provide the standard form, used for obtaining approval of the superior officers. Merely stating the reasons in a letter addressed by the AO, is not enough. Then, the reasons to believe escapement of income need to spell out all the reasons and grounds available with the AO for reopening the assessment. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof. Further, and this is most relevant for the case at hand, where the reasons make a reference to any document, such document and / or relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and circumstances of the case. ii) No valid material and ground justifying the reason recorded. The reasons are wholly, irrelevant, general, vague and wrong. iii) Reasons recorded based on borrowed satisfaction. 3. Because considering the facts of the case and the legal position the assessment deserves to be quashed. The Ld. CIT(A) has arbitrarily erred in confirming the Assessing Officer's action of issuing notice u/s 148 by holding the same to be in accordance with the provisions of law. 4. Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the addition of ₹ 15,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act treating the receipt of share application money to be an unexplained cash investment. 5. Because the Ld. CIT(A) has erred both in law and on facts in rejecting the appellant's submission and the documents filed to prove the identity of the share applicant, their creditworthiness and genuineness of transaction. The Ld. CIT(A) has arbitrarily and wrongly held that genuineness of the transaction of share application money and the creditworthiness of the creditors are not proved. 6. Because u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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