TMI Blog2018 (5) TMI 1951X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee. - ITA No. 516/JP/2016 - - - Dated:- 11-5-2018 - SHRI VIJAY PAL RAO AND SHRI BHAGCHAND, JJ. Appellant by : Shri P.C. Parwal (CA) Respondent by : Smt. Seema Meena (JCIT) ORDER BHAGCHAND, J. This is an appeal filed by the assessee emanates from the order ofthe ld. CIT(A)-2, Jaipur dated 19/02/2016 for the A.Y. 2007-08. 2. The assessee company is engaged in trading of soya deoiled cakeand allied products. The assessee filed return of income on 15/11/2007showing income of ₹ 16,250/-. Notice U/s 148 of the Income Tax Act, 1961 (in short the Act) was issued on 25/3/2014. The return filed on18/11/2007 was treated as for return of income against the notice U/s 148of the Act. A search and survey action was carried out in the case of Shri Praveen Kumar Jain, Mumbai (entry provider) and his group by the DGIT (Inv.) Mumbai on 01/10/2013. During that search/survey, various incriminating documents were seized and impounded. Those persons we reengaged in providing accommodation entries. The Assessing Officer issued notice U/s 148 of the Act by recording the reasons and finalized the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und during search operation in case of Praveen Jain group of cases. The primarily condition for initiating action u/s147 is that AO must have reason to believe that any income chargeable to tax has escaped assessment. This satisfaction must be of AO himself and not a borrowed satisfaction. Reason to belief cannot be at the instance of audit party or investigation conducted by others or third party statement etc. In the present case, the reasons says that assessee has suppressed its profits by taking accommodation entry of ₹ 75,00,000/- in the nature of bogus purchases from five companies. Whereas in the present case, assessee has not made any purchases from the above parties but has received share application money to whom shares are also allotted. This shows that the AO has not examined the information received by him to verify whether assessee has made any purchases from these parties and whether the same is reflected in the accounts or not. The Ld. CIT(A) held that it is a clerical error ignoring that recording of reasons is foundation for reopening of assessment and if the reasons recorded are wrong, incorrect or vague, all consequent proceeding are also illegal and inval ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P)Ltd. gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted. Resultantly, the initiation of proceedings under s. 147 and issuance of notice under s. 148 of the Act are quashed. Banke Bihar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vani Portfolio P. Ltd. 25,00,000/- 2. Banke Bihari Properties Pvt. Ltd. Countrywide Credit Securities P. Ltd. 20,00,000/- -----------so on-------- The assessee has received unexplained sums from the entry operators as per the above details as per information available with the undersigned. As explained above, the identity, creditworthiness and genuineness of transactions with the reasons found to be entry operator cannot be established. I therefore, have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year, the income chargeable to tax amounting to ₹ 2,90,00,000/- has escaped assessment within the meaning of section 147 of the Act. Since four years has expired from the end of the relevant assessment year, and the assessee has not filed any return of income, the reasons recorded above for the purpose of opening of assessment is up for kind satisfaction of the Addl. CIT, Range-2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on 31.03.2002 from Mis. Shashi Sales Marketing Pvt. Limited Through Corporation Bank Paschim Vihar A/c No.-52351. In reality these accommodation represent the assessee own unaccounted money. The assessment in this case was completed u/s 143(1) on 27.01.2003. These entries are not shown in the return of income filed on 31 October, 02. In view of the above, I have reasons of believe that the income of ₹ 2,00,000/- has escaped assessment for the A. Year 2002-03. Therefore the case is re- opened u/s 147 of the Income Tax act for the assessment year 2002-2003. Assessment was accordingly framed u/s 147/143(3) of the IT Act, 1961 by making addition on account of unexplained credit. Findings of the case:- AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. The reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax(Investigation), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etails as per information available with the undersigned. As explained above, the identity, creditworthiness and genuineness of transactions with the persons found to be entry operators cannot be established. I therefore have reasons to believe that the income chargeable to tax amounting to ₹ 22,00,000/-, which is the assessee' sown income, has escaped assessment within the meaning of Section 147 of the Act. Since four years have since expired from the end of the relevant assessment year, and no scrutiny assessment was completed in the case of the assessee for the said assessment year, the reasons recorded above for the purpose of reopening of assessment are put up for kind satisfaction of Addl. CIT, Range -15, New Delhi interns of Section 151 of the Act. Accordingly, a notice u/s 148 was issued to assessee and assessment was framed u/s147/143(3) of the IT Act, 1961 by making addition on account of unexplained credit. Findings of the case:- The reopening is based entirely by making a reference to the information received from the investigation wing. The reasons are at best vague and the satisfaction of the AO is not based on an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed u/s 143(1). Subsequently, the DDIT (Inv.)informed the AO of the assessee that during the course of investigation, one SG, proprietor of M/s RK had stated on oath that the transactions through certain bank account were only paper transactions in which the party was intending to take bills paid in cash and issue cheques/drafts showing the said amounts as sale of shares. It was further informed that the assessee was neither a share broker nor a member of any stock exchange and that it was doing the work of giving entries. Further, information was given that the entry of ₹ 20.70 lacs in bank account was nothing but entry taken by paying cash. Thereafter on the basis of the aforesaid in formation, a notice under section 148 was issued by the AO to the assessee, which was allegedly the beneficiary of the bogus claim of long term capital gain shown on sale/purchase of shares. Accordingly, reassessment was completed. On these facts, it was held that the first sentence of the so called reasons recorded by the AO was mere information received from DDIT (Inv.). The second sentence was a direction given by the very same DDIT to issue a notice u/s 148 and the third sentence again com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded does not provide any such details. Further, the reasons state that the amount is of bogus purchases and thereby assessee suppressed the profit whereas the AO himself has accepted while passing the order that these amounts are not in respect of bogus purchases. Thus, the issue is not of sufficiency or correctness of material but it is a case of vague/irrelevant material on which AO proceeded to reopen the assessment. In view of above, the assessment made by the AO is illegal and bad in law and be quashed. 6. On the other hand, the ld DR has relied on the orders of the authorities below. 7. We have heard both the sides on this issue. We have considered the case laws relied upon by both the sides. We have also gone through the reasons recorded by the Assessing Officer for issuing the notice U/s 148 of the Act on 25/3/2014. It is noticed that the Assessing Officer received information from DGIT (Inv), Mumbai. The details of the entry provider company and nature of entry and amount was provided. However, while recording the reasons, the Assessing Officer has written that the assessee has obtained entries of bogus purchases. Further in finally r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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