TMI Blog2019 (7) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... v.) does not confer power to assume jurisdiction up on the AO to initiate reassessment proceedings. Therefore, in the present case, the reasons for initiating reassessment proceedings are against the spirit of provisions of section 147 of the Act and the notice issued u/s 148 of the Act on the suggestion of DDIT(Inv.) by the AO is bad in law. AO has proceeded to initiate reassessment proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with such information, by way of borrowed satisfaction and following Deepraj Hospital Pvt. Ltd. [ 2018 (6) TMI 496 - ITAT AGRA] we accept the grievance of the assessee justified. As such, the impugned order, notice u/s 148 of the Act and reassessment proceedings u/s 147 are not sustainable in the eyes of law. - Decided in favour of assessee. - ITA No. 124/Agra/2018 - - - Dated:- 16-5-2019 - Shri Sudhanshu Srivastava Judicial Member And Dr. Mitha Lal Meena, Accountant Member For the Assessee : Sh. Pradeep K. Sahgal, Adv. Sh. Utsav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he foregoing grounds, as during the year under consideration the appellant did not earn any income, and such fact was even accepted by the AO, thus there arises no question for presuming that the appellant had provided undisclosed cash to the shareholders for depositing in their bank accounts for making investment in the shares of the appellant and hence the addition of ₹ 88 lakhs made U/S 68 of the Act by arbitrarily treating the genuine investment made by the shareholders in the share capital of the appellant as alleged accommodation entry, deserves to be deleted. 6. That the authorities below have erred in law and on facts in not providing the appellant the informations and documents/material for which specific request(s) was made. It is settled law that the AO is free to make enquiries at the back of the appellant, but, if the material/evidence collected is sought to be used against the appellant then reasonable opportunity for rebuttal must be provided. The AO s failure to do so has resulted in miscarriage of justice and has thus violated the principle of natural justice. 7. That as Mr. Vijay Gupta, Mr. Surendra Kumar Jain and Mr. Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (2015) 61 taxmann.com 82 (Hon ble ITAT Mumbai Bench`G ) 7. Manoj Kumar Jain Vs. Income Tax Officer (ITA No.277/Agr/2017) (Hon ble ITAT Agra Bench) It is seen from the appeal memo that Ground no.3(a), (b), (c), (d) and (e) of appeal filed before the Ld.CIT(A), Aligarh as discussed in paras 4 to 7.1 of the impugned order, however, shows that this issue has been raised before the Ld.CIT(A), Aligarh. Therefore, this objection of the ld. DR is rejected. 4. Briefly, the facts of the case are that the assessee is a private limited company, which has been formed on 01/01/2009 to run a business of cold storage; that the assessee has not conducted any business but e-filed its Income-tax return on 09/09/2010 declaring NIL income for the year under appeal; that the AO has issued notice dated 16/09/2013 u/s 148 of the Act based on the information received from DGIT(Inv)-II, New Delhi, related to the search case of Shri Surendra Kumar Jain Group (entry operator); that according to the reasons suggested by the DDIT(Inv.) to the AO to issue notice u/s 148 of the Act to bring to tax the undisclosed income regarding the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now about the nature of alleged undisclosed income, therefore reassessment proceedings has been initiated solely on the basis of `reasons to suspect and not `reasons to believe and thus reassessment order made on the basis thereof deserves to be quashed/vitiated. d) Because the learned AO having reopened the assessment solely on the basis of general nature of information received from DGIT (Inv.), New Delhi and further on the basis of suggestion/dictatum of DDIT(Inv.) without making any effort to satisfy himself as to whether such information has some basis or not, therefore the reassessment proceedings has been initiated in a mechanical manner on vague grounds and mere suspicion and is invalid and thus the consequent order passed U/S 143(3)/147 of the Act dated 31st March, 2015 is liable to be quashed/annulled. e) Because the learned AO has initiated reassessment proceedings U/S 147 of the Act in the case of the assessee company solely on the basis of suggestion of DDIT(Inv.) therefore in view of well settled law the reassessment proceedings being initiated solely on the instance or dictatum of higher or superior authority and not on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by carrying out search and seizure operation and subsequent investigation. The provisions of search and seizure are ultimate tools in the hands of the Department and the facts gathered as a result of a search, provide a comprehensive picture of the modus operandi of the related entities. This comprehensive picture cannot be obtained by investigating a particular entity in isolation. The authorities in the investigation wing are statutory authorities who have been vested with specific powers under various provisions of the Act. A report compiled by such statutory authorities by carrying out search operation and investigation in accordance with the provisions of law, is good enough material to form a reasonable opinion in respect of an object which is covered under such report. The only reason why the requirement of reasons to believe has been provided in the law is because the legislature intended that the power to reopen the cases should be exercised with due care and without any prejudice. The intention is that the power should not be misused for any vested interest. In this case, there is no allegation of any vested interest on part of the AO. The AO has m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... belief is within the realm of the subjective satisfaction of the Assessing Officer. Further, it is observed that the appellant had not raised any objections before the AO regarding the validity of the proceedings. From the facts mentioned in the assessment order, it is apparent that the appellant had fully cooperated during the assessment proceedings. Therefore, as per the doctrine of waiver , it can be presumed that the appellant had waived the objection, if any and accepted the AO s jurisdiction and validity of the assessment proceedings. If, at all, the appellant had some objections with regard to validity of the proceedings initiated by the AO, he should have raised those objections before the AO so that he could have dealt with such objections before proceedings further. Since the appellant did not raise such objections and on the basis of the appellant s acquiescence the AO proceeded to complete the assessment, the appellant would not be eligible to raise any objections at any later stage because that will be contrary to the principle of Estoppel . In view of the above, I am of the firm opinion that AO s action of issuing notice U/S 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout 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, ITAT, Agra. 4. CIT vs. Active Traders (P.) Ltd. , 214 ITR 583 (Calcutta High Court). 5. M/s Pragati Financial Management Pvt. Ltd. Vs. The CIT-II , ITA 178 of 2016, GA 997 of 2016 (Calcutta High Court). 6. Anil Kumar Singhal vs. ITO , IT Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rits, 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. The Hon ble High Court refused to accept the assessee s contention that it was a case of a mere change of opinion. The Writ Petition was dismissed as having no merit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 portion thereof must be enc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has escaped assessment or its office record to establish and demonstrate link between tangible material and formation of reason to believe that income has escaped assessment, so as to justify the reassessment. In support, the Ld.AR relied on the following authoritative decisions: 1. Principal Commissioner of Income-tax-6 Vs. Meenakshi Overseas (P) Ltd. (2017) 82 taxmann.com 300 (Delhi High Court) 2. Signature Hotels (P.) Ltd. Vs. Income-tax Officer (2011) 338 ITR 51 (High Court of Delhi) 3. Principal Commissioner of Income-tax-4 Vs. G G Pharma India Ltd. (2017) 81 taxmann.com 109 (High Court of Delhi) 4. Principal Commissioner of Income-tax Vs. RMG Polyvinyl (I) Ltd. (2017) 83 taxmann.com 348 (High Court of Delhi) 5. CIT Jallendhar Vs. Smit. Paramjit Kaur (2008) 168 Taxman 39 (High Court of Punjab Haryana) 6. ITO Vs. Bajaj Company Pvt. Ltd. (ITA No.2989/DEL/2009 (ITAT Delhi Bench `A ) 9. He further submitted that the reasons to belief neither contain any reasons recorded by independent application of mind by the AO nor there was any nexus b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G G Pharma India Ltd.(Supra) , (2017) 81 Taxmann.com 109, contended that reopening of assessment by the AO based on the information received from Director of Investigation without making any effort to discuss the material on the basis of which he formed a prima facie opinion that income has escaped assessment, the basic requirement of section 147 of the Act that the AO should apply independent mind in order to form reasons to believe that income has escaped assessment, is not fulfilled. 13. In the case of PCIT Vs. RMG Polyvinyl (I) Ltd. , (Supra) 396 ITR 5, it was held that where information was received from investigation wing and the assessee was beneficiary of accommodation entries but no further inquiry was under taken by AO, said information could not be said to be tangible material as per se and, thus, reassessment on said basis was not justified. Finally, the Ld. AR submitted that the impugned initiation of reassessment proceedings, notice and all consequent proceedings and orders are not valid and bad in law therefore, the same may kindly be quashed. 14. The Ld. AR cited the judgment of CIT Vs. Vegetable Products Ltd. , (1973) 88 ITR 192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e material and formation of belief that income has escaped assessment in the case of the assessee. Therefore, the conclusion of the AO on the basis of general nature of information received by him, indeed constitute a borrowed satisfaction. 18. It is seen that the reasons are solely founded on the information received from the DCIT(Inv.)-II, New Delhi and its suggestion to issue notice u/s 148 of the Act to bring to tax the undisclosed income regarding the accommodation entry of ₹ 85,00,000/- obtained by the assessee. In fact, the crucial link between the information made available to the AO and formation of his belief is absent. The tangible material which forms the basis for the belief that income has escaped assessment, must be evident from a reading of the reason so that the reasons become self-evident selfspeaking. 19. As per section 147(1) of the Act, the AO should have reason to believe that any income chargeable to tax has escaped assessment, and the formation of reason to belief is subject matter of examination and that the AO being quasi-judicial authority is expected to arrive at the subjective satisfaction independently on an ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eenakshi Overseas (supra), the link between the information available with the AO and formation of belief is missing as there was no independent application of mind by the AO to material received from DDIT(Inv.) and the AO, has just stated about the information received and suggestion of the DDIT(Inv.) to the alleged escapement of income. As to what the AO did with the information made available to him is not discernible from the reasons. 22. We are of the considered opinion that the AO has proceeded to initiate reassessment proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with such information, by way of borrowed satisfaction and. 23. Following Deepraj Hospital Pvt. Ltd.(supra), we accept the grievance of the assessee justified. As such, the impugned order, notice u/s 148 of the Act and reassessment proceedings u/s 147 are not sustainable in the eyes of law. 24. In view of above, as such, the impugned proceedings, notice u/s 148 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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