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TMI Blog2016 (3) TMI 1368X X X X Extracts X X X X X X X X Extracts X X X X ..... nd circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the initiation of the reassessment proceedings and the reassessment order are bad both on facts and in law and liable to be quashed as the statutory conditions and procedure prescribed under the statute have not been complied with. 3 (i) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned A.O. are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and are contrary to the facts. (ii) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the A.O. is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are vague and has been recorded without application of mind on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and circumstances of the case, the learned CIT(A) has erred both on facts & in law in rejecting the contention of the assessee that the addition made by the learned AO is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal." 4. Ground Nos. 1 and 12 are general in nature and need no adjudication at our end. 5. Ground Nos. 2 and 3 challenging the validity of reopening of assessment are legal grounds. 6. We have heard the arguments of the ld. DR and have carefully perused the relevant material placed on record before us. The ld. Counsel for the assessee has drawn our attention towards the order of the ITAT Delhi, SMC - 2 Bench dated 28.10.2015 passed in ITA No. 1372/Del/2015 for A.Y 2006-07 in the case of Unique Metal Industries Vs. ITO for A.Y 2006-07 and submitted that the conclusion of this order on legal grounds as well as on merits have been followed in the subsequent orders of the ITAT Delhi vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned above. 2. The assessment of search cases of Sh. Rakesh Gupta, Sh. Vishesh Gupta, Sh. Navneet Jain & Sh. Vaibhav Jain are under process with the ACIT, Central Circle-10. During the assessment proceedings u/s 153A in the aforesaid cases, details regarding accommodation entries given by the above entry providers has been obtained by the Assessing Officer. 3. The list of accommodation entry recipients has been obtained from Sh. Rakesh Gupta and Sh. Vishesh Gupta. Hard copy of the list is enclosed as Annexure A, duly signed by Sh. Vishes Gupta. The list given the name of the firm which has provided the accommodation entry along with the name and address of the recipients of accommodation entry. 4. Sh. Navneet Jain & Sh. Vaibhav Jain has provided accommodation entry through thirty seven paper entities. The list of the firms giving accommodation entry is enclosed as annexure-B. The list of accommodation entry recipients, has been obtained from Sh. Naveneet Jain & Sh. Vaibhav Jain. It does not give year wise bifurcation. Hard copy of the list is enclosed as annexure-C, duly signed by Sh. Vaibhav Jain. Thus, the firms mention in the list 'B' have provided accommodation ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar Vashist) Income Tax Officer Ward 39(3), New Delhi 9. From the first order of the Tribunal in the case of Unique Metal Industries Vs. ITO [supra] it i s vivid that the Tribunal in the similar facts, circumstances a nd situation of the case, satisfaction note held as under: "8. On going through the above reasons it is evident that this assessment has been reopened on the basis of the letter received from the ld. CIT, Central-2, New Delhi with the direction to take necessary action as per section 148 of the Act. As per this, accommodation entries were obtained by various persons from Sh. Rakesh Gupta and Sh.Vishesh Gupta as well as Sh. Navneet Jain and Sh. Vaibhav Jain. Copy of this list was forwarded in a CD to the Assessing Officer. Thus this list contained the name of the assessee. The Assessing Officer reopened the assessment on the basis of this information. The basis given by the Assessing Officer in the reasons is that these persons have admitted that they have given accommodation entries to the parties whose lists have been provided by them. From the above facts it is apparent that the Assessing Officer at that point of time when he recorded the reasons was not havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke a view that the purchase bills provided by these persons or their family members is nothing but bogus purchase bills. At the time of recording of the reasons the Assessing Officer apparently was not having any idea about the nature of the transactions entered into by the assessee. In the reasons recorded there is no mention about the nature of the transactions. As per provision of section 147 an assessment can be reopened if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The reasons to believe has to be that of the Assessing Officer and further there have to be application of mind by the Assessing Officer though the reasons to believe does not mean that the Assessing Officer should have finally ascertained the fact that income has escaped assessment but at the same time, it also means that the Assessing Officer is required to examine the facts on the basis of the information and satisfy himself that the taxable income has escaped assessment. In the present case, on going through the reasons it is quite evident that the Assessing Officer was also not aware of the nature of the accommodation entries. In the reasons recorded h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact this information was not with the Assessing Officer till fag end of the reassessment proceedings, a fact admitted by the Assessing Officer himself in the assessment order. The judgment relied upon by the learned AR also supports the case of the assessee. In the case of Sarthak Securities Pvt. Ltd. vs. ITO (2009) 329 ITR 110 the Hon'ble jurisdictional Delhi High Court has held that under the circumstances narrated hereinabove the reopening cannot be said to be a valid reopening. The Hon'ble Court has held as under:- "In the case at hand, as is evincible, the AO was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the AO was made aware of the situation by the Investigation Wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine the basis and material of the information. The AO accepted the plea on the basis of vague information in a mechanical manner. The CIT also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the AO did not independently apply his mind to the information received from the Director of IT (Inv.) and arrive at a belief whether or not any income had escaped assessment. Company SS Ltd. had applied for and was allotted shares in the petitioner company on payment by cheque of Rs. 5 lacs. SS Ltd. is an incorporated company and the petitioner has pleaded and stated that the said company has a paid-up capital of Rs. 90 lacs. The company was incorporated on 4th Jan., 1989 and was also allotted PAN in September, 2001. The facts indicated above do not show that SS Ltd. is a non-existing and a fictitious entity/person. For the reasons stated above, writ of certiorari is issued quashing the proceedings under s. 148" 12. In the case of CIT vs. SFIL Stockbroking Co. (2010) 325 ITR 285 (Del) also the Hon'ble High Court has quashed the reopening proceedings on the ground that from the reasons it is not discernible as to whether the AO has appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o follow the decisions of the Tribunal in the case of the order of the Tribunal in the case of Unique Me tal Industries [supra] and other as mentioned hereinabove. Therefore, we are of the considered opinion that the initiation of rea ssessment proceedings as well a s issuance of notice u/s 148 of the Act was not valid and the same was void ab initio and thus we quash the same and subsequently the assessment order passed in pursuance thereto is also quashed. Accordingly, Ground Nos. 2 and 3 of the assessee are allowed. On merits 11. The remaining issues on merits are sustenance of addition made by the ld. CIT(A) to the extent of 20% purchases made by the assessee during F.Y. 2005-06 pertaining to A.Y 2006-07, from the order of the Tribunal in the case of Unique Metal Industries [supra] dated 30.11.2015 and other cases of the Tribunal, we note that the Tribunal has followed the finding s given by the coordinate bench of the Tribunal in the order dated 28.10.2015 in the case of Unique Metal Industries [supra]. The relevant operative finding of the order of the Tribunal in the case of Radhey Shyam [supra] reads as under: 7. "Now coming to the merit about the sustenance of the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the relevant F.Y. Consequently, the grounds of the assessee on merits are also allowed. 13. As a result, the appeal of the assessee in ITA No. 1365/Del/2015 in the case of Kri shni Meta l Store Vs. ITO are allowed. 14. Since the ld. DR has fairly accepted that the facts and circumstances in the case of Unique Metal Indus tries [supra] are quite similar to the facts and circumstances in ITA No. 1365/Del/2015 in the case of Krishni Metal Store Vs. ITO in all the other five appeals viz:, 1. ITA No. 1370/Del /2015 [2006-07] Bhardwaj Metal[India] 2. ITA No. 1369/Del /2015 [2006-07] Laxmi Dhatu Bhandar 3. ITA No. 1379/Del /2015 [2006-07] Krishan Lal & Sons 4. ITA No. 1380/Del /2015 [2006-07] Kakkar Bartan Store 5. ITA No. 1366/Del /2015 [2006-07] Kashmir Metal Store Therefore, our conclusion drawn by the earlier pa rt of this order in the case of Krishni Metal Store Vs. ITO [supra] would apply muta tis mutandis to all the other five appeals as well. Consequently, the legal grounds a s well as grounds on merits in all the other above mentioned five appeals are also allowed. 15. In the result, all the six appeals of the assessee stand allowed. The order is pronounced ..... 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