TMI Blog2017 (7) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... eclaring a total income of ₹ 29,99,190/-. Subsequently the Assessing Officer (AO) initiated proceedings under section 147 of the Income Tax Act, 1961 (the Act) for the impugned Assessment Year by recording the following reasons. Please refer to your letter dt. 16.4.2010 asking for the reasons for issue of notice u/s 148 of the IT Act, 1961. As desired, the reasons recorded for this purpose are reproduced below. Return of income was filed on 5.11.2003 declaring total income of ₹ 29,99,190/- which was processed u/s 143(1) on 30.01.2004. Information was received from the DIT (Investigation) that certain persons were indulged in providing accommodation entries/bogus share application money/bogus capital gains. In the course of enquiries before Investigation Wing these persons had provided the details of various persons to whom such accommodation/bogus entries were provided. Based on the enquiries made, the DIT has provided details of persons whom were beneficiary/entry operators of such accommodation/bogus entries in Delhi in the last 5-6 years. The Investigation Wing on the basis of enquiries conducted/information collected has sent the name and address of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f share application money/ share capital. He, therefore, asked the assessee to furnish details in respect of share application/ share capital received from M/s Tulip Engineering Private Limited. The assessee furnished confirmation from one Mr.Raghubir Singh, authorised signatory/Director of M/s Tulip Engineering Private Limited, copy of ITR and balance sheet of M/s Tulip Engineering Private Limited for the A.Y. 2003-04 and 2004-05. It was further submitted that the amount has been received through cheque. 2.2. During the course of assessment proceedings the AO asked the assessee to produce the share applicant for his examination. Instead of producing the Director or Principal Officer of the applicant company, the assessee filed an affidavit of Shri Raghubir Singh, Director of M/s Tulip Engineering Private Limited. It was submitted that there is no binding provision in any law by which they can enforce the presence of Director of M/s Tulip Engineering Private Limited. It was submitted that the AO can call for any information from him directly. The AO observed that notice under section 131 of the Act was issued to director of M/s Tulip Engineering Private Limited which was sent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y failed to discharge the onus cast on him. He further observed that the income of M/s Tulip Engineering Private Limited was only ₹ 231/-, the bank account produced by assessee shows that the opening balance was also not substantive. On 27.3.2002 ₹ 45 lakhs was deposited and withdrawn on the same day, on 31.3.2002 ₹ 2,70,000/- and ₹ 4,30,000 was deposited and ₹ 6,70,000/- withdrawn on the same day. This kind of transaction is indicative of typical traits of entry operators. In view of the above and in absence of inability of the assessee to produce the share applicant to prove the identity, genuineness and creditworthiness, he held that the action of the AO in making the addition is justified. 5. Aggrieved with such order of the Ld.CIT(A) the assessee is in appeal before the Tribunal with the following grounds. 1. That the CIT(A) has erred on facts and in law In upholding the notice issued and the subsequent proceedings u/s 148 . The notice issued u/s 148 is illegal, bad in law and without jurisdiction and the subsequent order passed u/s 143(3) and 147 is also illegal, bad in law and without jurisdiction. 2. That the notice u/s 148 has been is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tures and contrary to facts and evidence on record justified by any material on record. 6. The ld.Counsel for the assessee referring to the notice u/s 148 of the Act issued by the A.O. submitted that there is no independent application of mind by the AO while recording reasons and he has reopened the assessment only on the basis of information received from the investigation wing. Referring to the decision of Honorable Delhi High Court in the case of Principal CIT vs G G Pharma India Limited reported in 384 ITR 147 he submitted that the Hon ble High Court in the said decision has held that in absence of any independent application of mind by the Assessing Officer, assessment cannot be re-opened on the basis of information received from Directorate of Investigation. 6.1. Referring to the decision of Hon ble Delhi High Court in the case of Signature Hotels P.Ltd. vs. ITO reported in 338 ITR 51 he submitted that the Hon ble High Court in the said decision has held that information received from the DIT (Inv.) that amount received by the assessee from other company was nothing but accommodation entry, but the assessee was beneficiary was not sufficient to reopen the assessment wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said company. Despite opportunity given by the AO the assessee also did not produce the director of the said share applicant company for which AO made addition of ₹ 11,25,000/- to the total income of the assessee under section 68 of the Act. 9.1. I find before the Ld.CIT(A) the assessee took a ground that the reassessment proceedings initiated by the AO is void ab initio since the AO has not applied his mind independently and only on the basis of information received from the Investigation Wing issued notice under section 148 of the Act. I find the Ld.CIT(A) upheld the order of the AO and dismissed the appeal filed by the assessee on both the grounds. It is the submission of the Ld.Counsel for the assessee that in view of the decisions of the jurisdictional High Court in the case of G G Pharma India Limited (supra) and Signature Hotels Private Limited (supra), the reopening of assessment is void ab initio since the AO did not apply his own mind to the information received from the investigation wing that amount received by the assessee from the other company was nothing but an accommodation entry and the assessee is a beneficiary. It is the submission of the Ld.DR that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missing in the present case. 13. Mr.Sawhney took the Court through the order of the CIT(A) to show how the CIT(A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT(A) may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed. 9.3. I find the Hon ble Delhi High Court in the case of Signature Hotels Ltd. (supra) has also taken similar view. The relevant observation of Hon ble ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-Tax (Investigation) and on the basis of the statements they have come to the conclusion that the said persons were entry operators. Copy of the statements of Mahesh Garg and Shubhash Gupta have not been placed on record by the respondent. The petitioner, has, however, enclosed copy of statements of Mahesh Garg and Shubhash Gupta recorded on different dates. The said persons W.P. (C) NO. 8067/2010 Page 14 have not specifically named the petitioner though other parties have been named and details have been given and it is stated that they were provided accommodation entries. However, it is stated that the entries were made by giving cheque/DD/PO after receiving cash and sometimes expenses entries were provided. The reasons recorded by the Assessing Officer do not make reference to any statement of Mahesh Garg or Shubhash Gupta. This may not also be necessary, if the statements were on record and it is claimed and prima facie established that they were examined by the Assessing Officer before or at the time of recording reasons. On the other hand, in the present case, information as enclosed as Annexure, has been referred. This is the only material relied upon by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score. 18. The facts indicated above do not show that M/s Swetu Stone Pvt. Ltd. is a non-existing and a fictitious entity/person. Decision in AGR Investment Limited (supra), therefore, does not help the case of the respondent. 19. For the reasons stated above, the present writ petition is allowed and writ of certiorari is issued quashing the proceedings under Section 148 of the Act. In the facts of the case, there will be no order as to costs. 9.4. I find under identical circumstances the Ld.CIT(A) has accepted the share application money of ₹ 11,25,000/- in the A.Y. 2002-03 and the revenue is not in appeal against the order of the Ld.CIT(A) in deleting the addition of ₹ 11,25,000/- made by the A.O. in the order passed u/s 148 of the Act. 9.5. The various decisions relied by the Ld.DR are not applicable to the facts of the present case and are distinguishable. In all those cases either false evidences were adduced by the assessee to give a colour of genuineness to bogus entries through bank accounts or donor s detail ..... X X X X Extracts X X X X X X X X Extracts X X X X
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