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TMI Blog2019 (12) TMI 674X X X X Extracts X X X X X X X X Extracts X X X X ..... .w.s. 143(3) of the Act. Additions were made u/s 68 of the Act for both the assessment years. 3. Aggrieved, the assessee carried the matter in appeal. The first appellate authority confirmed the order of the AO. Further aggrieved, the assessee is in appeal before us. 4. The re-opening of assessments u/s 148 of the Act has been challenged in both the assessment orders. The assessee further challenged the addition made u/s 68 of the Act as bad in law in both the assessment orders. 5. The ld. Counsel for the assessee submitted that the re-opening of the assessment for both the assessment years is bad in law. For assessment in AY 2009-10, he submitted that the reasons recorded, copy of which is placed at pages 123-126 of the paper book, demonstrates that the AO has not independently applied his mind to the material which came into his possession before coming to a conclusion that the income which is subject to tax has escaped assessment. He pointed out that the two bank accounts in Oriental Bank of Commerce bearing Nos. 03921131001285 and 11011131000575 do not belong to the assessee nor is the assessee in any way connected with the same. He drew the attention of the Bench to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it was never alleged that the bank accounts in question belong to the assessee company. He submitted that the amount deposited in those two bank accounts, were transferred to the assessee company through a number of Jama-Kharchi companies. He argued that reasonable belief has to be entertained by the AO and escapement of income need not be proved with evidence conclusively at the time of recording reasons for reopening of assessment. He relied on certain case laws in support of this contention which he will be discussing as and when the occasion arises. He relied on the order of the ld. CIT(A) on this issue of re-opening. For the AY 2010-11, he submitted that a survey was conducted and during the course of survey, it has come to the notice of the AO that the assessee had received certain cash credits. He submitted that spot verification was made and on such enquiry it was found that the creditors from whom the assessee received amounts, were non-existent. Thus he submits that the re-opening of assessment on such facts, including the fact that the CEO of the company could not explain the identity, creditworthiness and genuineness of the creditors during the course of survey, ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed on to him by the DDIT(Inv), Unit-4(1) without independent application of mind. Many other objections were taken. The AO rejected these objections as follows: "However on examination of the above said bank accounts it was found out that an amount of Rs. 9,99,999/-, deposited in the above said bank accounts in cash, was transferred to your Company routed through 21 nos. of Companies. During an Income Tax Proceedings the account holders of the alleged bank accounts with Oriental Bank of Commerce could not explain the source of such huge cash deposits and accepted that they were engaged in Jama-Kharchi business for providing accommodation entries in form of bogus share capital, unsecured loan etc. and thus introduction of the fund of Rs. 9,99,999/- in your company through the above said bank accounts/account holders during the FY 2008-09 relevant to the AY 2009-10 was nothing but your unexplained cash credit." 14. A perusal of the above takes us to a conclusion that the AO has merely relied on the report of the DDIT(Inv), Unit-4(1) without independent application of mind. The two bank accounts, in Oriental Bank of Commerce i.e. account Nos. 03921131001285 and 11011131000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... faith and should not be a mere pretence." b) Ganga Saran & Sons vs. ITO 130 ITR 1 (SC): "The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise the reasons which were lacking in material particulars would get supplemented, by the time the matter reaches the Court, on the strength of affidavit or oral submission advanced. [Para 20] Having recorded the finding that the impugned notice itself was beyond the period of four years from the end of the relevant assessment year and did not comply with the requirements of proviso to section 147, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the information gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs. 16.2 The Hon'ble Delhi High Court in the case of Principal CIT vs G&G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: "12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the AO. stated: 7 have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has, introduced its own unaccountedm money in its bank account by way of above accommodation entries'. The above conclusion is unhelpjul in understanding whether the AO. applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons and the evidence material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during F.Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, bad a paid up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company was recorded on 13.07.2016, however, he was not able to prove the identity of the subscriber companies, their creditworthiness & genuineness of the share transactions. Therefore, the provisions of section 68 of the I.T.Act, 1961 is required to be invoked in this case. In view of the above, I have reason to believe that Rs. 90,00,000/- chargeable to tax has escaped assessment for the A. Y. 2010-11." 20. Here also the assessee objected to the re-opening and then objections were disposed off by order dated 10.10.2017 by the AO. 21. A perusal of the reasons recorded, demonstrates the following: a) Investigation revealed that the assessee raised share capital amounting to Rs.90,00,000/-. b) The share subscriber companies were found to be non-existence at their registered address. c) Information received from investigation wing, Kolkata revealed that the share capital was routed through accommodation entry providers. d) Director in his recorded statement was not able to prove the identity, creditworthiness and genuineness of the subscriber companies and the share transaction during the course of survey. 22. We find that the reasons recorded are not support ..... X X X X Extracts X X X X X X X X Extracts X X X X
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