TMI Blog2018 (7) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... eve for initiating proceedings u/s 147 of the Act. - Decided in favour of assessee. - ITA No.1081/Del/2017 - - - Dated:- 18-5-2018 - Shri H.S. Sidhu, Judicial Member For the Assessee : Sh. Amit Goel, Adv. For the Department : Ms. Ashima Neb, Sr. DR. ORDER This appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-19, New Delhi on 06.01.2017 in relation to the assessment year 2010-11 on the following grounds:- 1. On the facts and circumstances of the case and in law, the proceedings initiated u/s. 147 are bad in law and are without jurisdiction and Commissioner of Income Tax (Appeal) erred in not holding so. 2. On the facts and circumstances of the case and in law, the notice issued u/s. 148 in this case is bad in law and without jurisdiction and the same is liable to be quashed alongwith assessment order passed on the foundation of such notice and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming addition of ₹ 19,00,000/- made by the AO u/s. 69C as alleged unexplained expenditure. 4. On the facts and circumstances of the case and in law, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has also forwarded appraisal report regarding this. From the statement of Dr. P. Mahalingam, recorded under the search it is very clear that the College has been accepting the capitation fees for the admission of the students and the capitation fees has not been accounted for in the regular books. On perusal of the documents, the AO observed that Sh. Bhikam Singh, F/o Dr. Pramod Kr. Rathore had given total fees of ₹ 22 lacs to Santosh Medical College for his son Dr. Pramod Kr. Rathor s admission in MDS (Periodonitics) Course. Out of this fees of ₹ 22 lacs, ₹ 12 lacs was the regular fees and remaining ₹ 10 lacs was capitation fees. AO issued notice u/s. 142(1) of the I.T. Act, 1961 on 24.6.2015 and in response to these notices no one attended. A summon u/s. 131 of the Act dated 15.9.2015 to the assessee Sh. Bikham Singh was issued and duly served upon the assessee. In response thereof, the A.R. of the assessee attended the proceedings from time to time and furnished the ITR copy of the assessee filed on 31.3.2011, for the AY 2010-11. On perusal of the ITR, it was notice that the PAN and address as mentioned in ITR is different from the assessee s PAN an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he donation / capitation fee in dispute by the assessee had no material much less tangible and relevant material to form an opinion even prima-facie that sum of ₹ 22,00,000/- was incurred as expenditure by the assessee and therefore action u/s. 147 of the Act was illegal, invalid and untenable. It was further stated that lower authorities wrongly made/upheld the addition of ₹ 19,00,000/- representing the alleged donation/ capitation fee etc. paid by the assessee for admission in the course of MBBS to Santosh Group of Institution and also failed to appreciate that addition had been made on arbitrary assumptions and, presumptions and overlooking the evidence and explanation tendered by the assessee. It was further submitted that the addition has been made without providing any cross examination to the assessee and therefore third party evidence and statement could not be a ground to make an addition in the hands of the assessee. On the issue of initiation of proceedings u/s. 147 of the Act on the basis of no material much less any tangible and, relevant material and as such reasons record do not constitute valid reason to believe for initiating proceedings u/s. 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Inv) cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that A.O. had independently applied his mind to arrive at a belief that the income had escaped assessment. In view of above, he requested to quash the re-assessment. 5. On the contrary, Ld. DR relied upon the orders of the authorities below and stated that Assessing Officer issued the notice u/s. 148 after due application of mind. She further stated that the AO has followed due procedure before issuing the notice u/s 148 of the I.T. Act, 1961. The Assessing Officer had tangible material in the form of information received from the Investigation Wing. The Assessing Officer did not proceed to any hearsay, conjecture or surmises. 6. I have heard both the parties and carefully considered the same. I note that in this case the AO while recording the reasons for the belief that income has escaped assessment has recorded the reasons as under:- From for recording the reasons for initiating procedure u/s. 147 of the I.T. Act. 1 Name and address of the assessee Sh. Bhikam Singh, C-97, Jagatpuri, Mandoli Road, Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash (which is likely to be unaccounted and disclosed) as per the details below:- S.No. Name of the candidate Father s name and address Date of payment of capitation/donation amount Total donation / capitation fee + Regular fees paid in cash CIT Charge Course pursued 1 Dr. Pramod Kr. Rathore Sh. Bhikam Singh, C- 97, Jagatpuri, mandolin Road, Shahdara, Delhi 06.04.2009 10,00,000 19 MDSPeriodontics In view of the above mentioned facts and evidence gathered, I have reasons to believe that, the assessee has suppressed primary facts and has income chargeable to tax which has escaped assessment. As the case falls under clause (b) to the explanation to section 147, I am satisfied that it is a fit case for issue of notice u/s. 148 of the Income tax Act, Act, 1961. 6.1 After perusing the aforesaid reasons recorded, I find that it is a case where action has been taken mechanically on the basis of information r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... echanically on the basis of alleged report of investigation wing, and, not on independent application of mind and therefore on this ground too, the proceedings are without jurisdiction. It is also noted that there is no live link or direct nexus between alleged material and, inference. It is a case of investigation in the garb of action u/s 148 of the Act on the basis that proceedings have been initiated on the basis of no material much less any tangible and, relevant material and as such reasons record do not constitute valid reason to believe for initiating proceedings uls 147 of the Act. In this regard, I draw support from the decision of the Hon ble Supreme Court 320 ITR 561 (SC) CIT vs Kelvinator of India Ltd. It is further noted that initiation of proceedings is also based on non application of mind much less independent application of mind but is a case of borrowed satisfaction. To support this view, I draw support from the following decisions:- i) Pr CIT v. RMG Plyvinyl (I) Ltd. (2017) 83 taxmann.com 348 (Hon ble Delhi High Court) 11. There can be no manner of doubt that in the instant there was a failure of application of mind by the AO to the facts. In fact he pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs. 6.2 Keeping in view of the facts and circumstances of the case as explained above and respectfully following the precedents, as aforesaid, the proceedings initiated by invoking the provisions of section 147 of the Act by the AO and upheld by the Ld. CIT(A) are nonest in law and without juris ..... X X X X Extracts X X X X X X X X Extracts X X X X
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