TMI Blog2020 (1) TMI 157X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer accepted the transactions without making any enquiry. In our considered opinion, reasons for reopening the assessment are nothing but change of opinion which is not permissible as per the ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Ltd [ 2010 (1) TMI 11 - SUPREME COURT] as no new tangible material was in possession of the Assessing Officer. Therefore, notice u/s 148 of the Act is bad in law and assessment framed pursuant to the notice is also bad in law. The notice issued u/s 148 of the Act is bad in law and hence the same is set aside. The assessment so framed is quashed. Merits of the case the assessee has purchased software from M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. The ld. DR vehemently stated that after the completion of assessment of these two companies, the Assessing Officer came to know that these two companies were providing accommodation bills and the assessee is one of the beneficiaries. However, we find that during the course of assessment proceedings also, the assessee filed confirmations from these two companies relating to the transactions done with them. The Assessing Officer did not even co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mentary evidences brought on record in the form of Paper Book in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 4. Briefly stated, the facts of the case are that return of income declaring income of ₹ 1,92,74,350/- was filed by the assessee on 15.12.2006. Return was subjected to scrutiny assessment and the assessment was framed u/s 143(3) of the Act vide order dated 10.07.2008. 5. Subsequently, a notice u/s 148 of the Act was issued and served upon the assessee. Reasons for reopening the assessment read as under: Reasons for issue of notice u/s 148 in the case of M/s Spice Global Pvt Ltd (A. Y. 2006-07) Assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 on 10.07.2008 by the DCIT, Circle 19(1), New Delhi at the returned income of ₹ 192,74,350/-, the return of income having been filed on 15.12.2006. Subsequently the jurisdiction over this case was transferred to f this Circle vide the Commissioner s of Income Tax, Delhi-Ill, New Delhi order I u/s 127 dated 01.09.2008. 2. It has been noticed that dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 BT Technet Ltd. Software usages charges 2005-2006/01/201 4/1/2006 1917305 8 BT Technet Ltd. Software usages charges 2005-2006/02/219 5/2/2006 2028788 9 BT Technet Ltd. Software usages charges 2005-2006/03/234 3/3/2006 2750469 10 BT Technet Ltd. Software usages charges 2005-2006/03/308 30/03/06 2819245 11 BT Technet Ltd. Software usages charges 2005-2006/12/192 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as found from any of the premises which would suggest that actual services were being rendered by any of the companies controlled by Shri S.K Gupta. No documentary or written evidence in support of genuineness of these transactions was found during the course of search which leads to the obvious conclusion that the companies controlled by Shri S.K Gupta were engaged in the business of issuing accommodation bills only. The fact of providing accommodation entries gets further strengthened by the statements and inquires conducted by the department. Shri S.K Gupta has admitted in his statement recorded in the, course of search proceedings that bills were raised in the names of various companies by his group concerns, the cheques were received but cash was returned to the respective parties or cheque payments were made to them through other group entities. Sh Gupta has admitted that his group concerns/companies were engaged in providing accommodation entries of the following nature: (i) Providing accommodation sales / expenses bills to the beneficiary companies (ii) Providing accommodation investment entriesin the forms of share capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or any of his family members had with these two companies and whether they were shareholders having substantial interest, or MDs/Directors of these companies. 7. The reasons further show that huge number of accommodation invoices/bills issued by various companies in which Shri S.K. Gupta or his family members had interest were found and seized. Though there is a reference to the statement of Shri S.K. Gupta who has admitted in his statement that the bills were raised in names of various companies by his group concerns. Cheques were received but cash was returned to the respective parties or cheque payments were made to them through other group entities. But, there is no reference to which the companies Shri S.K. Gupta was referring to. 8. As mentioned elsewhere, on the strength of the statement of Shri S.K. Gupta and some material seized from his premises, the Assessing Officer formed a belief that the transactions with M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. done by the assessee were not genuine transactions but only accommodation bills were taken from them and hence reopening was justified. 9. During the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per provisions of law. Neither the Assessing Officer issued any notice u/s 133(6) of the Act nor he cared to summon the officers of the two companies u/s 131 of the Act. 12. A perusal of the assessment order framed u/s 143(3) r.w.s 147 of the Act shows that entire assessment order is devoid of any reference to the statement of Shri S.K. Gupta. It is not known as to what question Shri S.K. Gupta said that M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. were providing accommodation bills. Further, we find that the entire transactions have been done through A/c payee cheques and it is not the case of the Revenue that the appellant has purchased the accommodation bills by making payments through cheques and receiving cash through back door. 13. It is pertinent to mention here that search operations at the premises of Shri S.K. Gupta were conducted on 12.12.2006 and original assessment order was framed u/s 143(3) of the Act vide order dated 10.07.2008. This means that the Assessing Officer had sufficient time to gather information relating to search conducted at the premises of Shri S.K. Gupta and yet the Assessing Officer accepte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying unaccounted cash is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be a known entry operator is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen a past assessment. 28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus: 11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to ₹ 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003- 04. Details are contained in Annexure. As per information amount received is nothing but accommodation entry and assessee is a beneficiary. 28.2 The Annexure to the said proforma gave the Name of the Beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the Court observed: 14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, it has been inter-alia reported as under: Entries are broadly taken for two purposes: 1. To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:.... 29.2 The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded: The transactions involving ₹ 27,00,000/-, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other source ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of ₹ 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of ₹ 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved. 30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe should have a link with an objective fact in the form of information or materials on record... It was further emphasized that mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments. 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. 16. The Hon'ble High Court finally concluded as under: 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with his findings given in the case of these two companies nor did he make any enquiry in respect of the confirmations filed by the two companies. 20. As mentioned elsewhere, the assessee is into the business of call centre services and the nature of business activities is such that it requires latest and upgraded software. If the assessee did not purchase any new upgraded software and has only taken accommodation bills, then we fail to understand how the assessee generated revenue of ₹ 5.33 crores in F.Y. 2004-05 which jumped to ₹ 12.45 crores during the year under consideration. There is not even an iota of evidence produced on record by the Assessing Officer to demonstrate that even the sales of call centre services are bogus. 21. The Assessing Officer has accepted the net profit as per the books of account and merely on surmises and conjectures, treated the purchase of software as bogus yet allowing depreciation on software which is evident from the fixed assets schedule at page 8 of the paper book. In our considered view, since there is no demonstrative evidence brought on record to justify that the software purchase is bogus, we d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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