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TMI Blog2017 (6) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, the CIT(A)-XI, New Delhi has erred both on facts and in law, in upholding the illegal order of the respondent on the following grounds and hence liable to be quashed because: 1. Reasons recorded are vague and scanty, without application of his own mind by Assessing Officer and without necessary approval of the Joint CIT and hence re-assessment proceeding are not in terms of section 146 to 151 of the Income Tax Act. 2. Objection specifically raised were not disposed of before passing the impugned order. 3. Re-assessment order passed in violation of natural justice without providing corroboration of the material and without providing cross examination asked and without proper show case notice. 4. Additions of Rs. 1,44,55,500/- u/s 68 by treating unexplained income. 5. Illegal additions and disallowances and consequent demands of Income Tax interest and penalties illegally raised." 3. The facts in brief of the case are that the assessee filed return of income on 30/11/2000 declaring total income of Rs. 41,645/- after adjusting earlier years losses of Rs. 9,71,706/-. The return was processed under section 143(1) of the Income-tax Act, 1961 (in short the Act). Subse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to some DIT information and Annexure -A in mechanical manner without making any independent enquiry, even prima facie seeing correctness of the information and alleged escapement without even quantifying the income, he sought and even without identification of date on which the same was recorded, without having clarity about the nature of transaction, cause and effect relationship or any link between alleged information of belief. In support of the above contention, the Ld. counsel, relied on following decisions: "Hon'ble "C" Bench of ITAT, New Delhi in the case of the assesse itself has already held the re-assessment invalid in the similar facts and circumstances (Case Laws P 1-10) Page-2 -referred to the reasons which alleges escapement in " lacs" and Page 7 Para 9 onwards is the findings of the Bench. Hon'ble DHC in the case of CIT V. Supreme Polypropolene Pvt. Ltd. ITA 266/2011(Case Laws P 11-16) Page 4 & 5 last line Held the reasons are vague as AO recorded the reasons without giving any amount of income escaped. Page-16 Para-6 observation. (DHC) CIT vs. Insecticides (India) Ltd. ITA 608/2012 dated 30.05.2013 (Case Laws P 17-25) Para 8 Page 22 onwards. &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal P. Ltd., 357 ITR 24 (Case Law P 64-79) on para 14 of page -76. Income Tax Officer Vs. Comero Leasing & Financial Pvt. Ltd., ITA No. 4281 & 4949/2010 dated 14.08.2010 dated 14.08.2014 (Case Laws P 55-63) Para 7 & 8 on page 60-62." 4.2.3 The Ld. counsel further submitted that for reopening the assessment beyond four years, required satisfaction and approval of Joint Commissioner of Income-tax/Additional Commissioner of Income Tax, under section 151 of the Act, and which was conspicuously missing on the face of reasons supplied by the Assessing Officer. In support of the contention, the Ld. counsel relied on the following two decisions: "(DHC) CIT Vs. Atul Jain 299 ITR 383 (Case Laws P 38-44) Para 10 & 11 on page 41-42. Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. Vs. CIT, 285 ITR 317 (Delhi) (Case Laws P 80-85) page 83-85 para 14,15 & 19." 4.2.4 Further, the Ld. counsel submitted that the reasons recorded by the Assessing Officer were not as per law for the reasons of lacking inherent clarity as under: "Alleged reasons are not as per law for the reasons of inherent lacking of clarity as: -How DIT enquiries are connected to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval of Addl. CIT was missing on the face of reasons supplied to the assessee, the Ld. Senior DR referred to page 45 of the Revenue's paper book and submitted that the Ld. Additional Commissioner of Income Tax after seeing the material and basis of reasons, recorded satisfaction and given sanction for issue of notice under section 148 of the Act, and which is available on record. He further submitted that the Assessing Officer moved letter for approval of the Addl. CIT on 23/03/2007 and the approval has been granted on 28/03/2007, which shows that the Addl. CIT has not acted in mechanical manner and sanction has been granted after due satisfaction by the Additional Commissioner of Income Tax. He further submitted that no such ground was taken before the Ld. CIT-(A) and therefore raising the ground first time before the Tribunal was not justified. 4.5 We have heard the rival submissions and perused the relevant material on record. Before us, the Ld. counsel has submitted that the Tribunal 'C' Bench, New Delhi in the case of the assessee for assessment year 1999-2000 has held the reassessment invalid in similar facts and circumstances. We find that in the said order, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuity of the transactions by the assessee. According to the reason recorded some report has been received from DIT(lnv.) that the assessee company was involved in giving and taking bogus entries/transactions during the financial year 1998-99. We find that there is absolutely no material on the basis of which a belief could be formed as to the escapement of the assessee's income. It is not clear from the "reason" as to what was report and what was the evidence on the basis of which the report purportedly mentioned that assessee company was involved in giving and taking accommodation entries. In the reasons, it is also not mentioned about the persons from or to whom accommodation entries were taken or given by the assessee and in respect of what amount It is thus, apparent that Assessing Officer did not acply his own mind to the information and examine the basis and material of information In the background of aforesaid discussion and precedent assumption of jurisdiction in this case u/s 147 on the basis of reasons" recorded is vitiated and so is the impugned reassessment order. In the light of the facts of the present case discussed above, the decision dated 7th January, 2010 of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enied that he had invested in any company in Share Application Money, or given any gift or loan. He further stated that his son Sh. Vishal Agarwal was looking after the affairs of bank account and other details. b) Smt. Manju Agarwal : The same type of statement was repeated by her during the statement recorded on oath before Addl. DIT (Inv.) Unit-V on 5.4.05. c) Statement of Sh, Vishal Agarwal was recorded by the AddI.DIT(Inv.)Unit-V on oath on 05-04-2005 where he had given the names of the banks as well as of companies used by him for the purposes of accommodation entries and which contained die name of M/s Hopewin Ad mark & Counseltancy Services Pvt Ltd. and further gave the list of entities used with bank accounts for the purposes of accommodation entries. Whereas the following facts came to light from the perusal of the IT Return filed by the assessee Co. on 30.11.2000 for A.Y. 2000-01. Sh. Harish Agarwal & Smt Manju Agarwal w/o Sh. Harish Agarwal are directors of the company as per Return of Income filed . And the verification of the return for A.Y. 2000- 01 had been signed by Sh. Harish Kumar Agarwal as director and the balance sheet, P & L A cs were signed by the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pertaining to Financial Year 1999-2000 i.e relevant to A.Y 2000-2001. The list of such entries are Annexed as Annexure -I.- In the wake of the information gathered by the Directorate of Income Tax (Inv.),New Delhi that the assessee was involved in giving and taking accommodation entries and represented unexplained income of the assessee company and also keeping in view the information gathered during the course of assessment proceedings for A.Y. 1999-2000 as discussed above and further verification made with the return of income of AY 2000-01 as discussed above, I am of the view that the assessee company has failed to disclose fully and truly all material facts and the sources of these funds routed through bank accounts of the assessee company. I therefore, have reasons to believe that the income in lacs has escaped assessment within the meaning of the section 147 of the I.T. Act. 1961 for the assessment year 2000-2001 and this is a fit case of initiation of proceedings u/s 147 of the Act. The assessee had filed his return with DCIT company circle 25(4) New Delhi, for AY. 2000- 01 (i.e relevant entries as mentioned above pertaining to Financial Year 1999-2000 ) on 30.11.2000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... you want to say anything? Ans. - I was using the following accounts for the purpose of accommodation entries, Sh. Harish Kumar Agarwal, M/s. Agarwal Sales Corp., SBBJ, Harish Kumar & Sons (HUF), KSBL & Sangali Bank, Smt. Maju Agarwal, SBBJ & FBL, Vikas Agarwal, SBBJ & FBL, Arpit Sales Corp., KSBL, P.K. Investment, FBL, Amit Jain, FBL, Mukesh Jain, FBL, Parmanand Bhardwaj, SBBJ, Hopewin Admark & Counseltancy Services Pvt. Ltd., SBBJ, SCB." 4.5.4 It is evident from the answer to question No. 14, that the bank accounts of the assessee company were also used by Sh. Vishal Aggarwal for the purpose of accommodation entries. 4.5.5 In the case of Commissioner of Income Tax Vs. M/s Insecticide (India) Ltd. (supra), the Hon'ble High Court upheld the finding of the Tribunal that the reasons recorded by the Assessing Officer are totally vague, scanty and ambiguous, silent with regard to amounted nature of bogus entries and transactions and the persons with whom the transaction had taken place. In the case of CIT versus Atul Jain (supra) also the Hon'ble High Court found the information available with the Assessing Officer as scanty and vague. In the case of G & G Pharma India Ltd (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., Directorate of Revenue Intelligence, Local Unit at Jaipur, sending information based upon the Commissioner of Central Excise's investigations. To require the Revenue to disclose further details regarding the nature of documents or contents thereof would be virtually rewriting the conditions in section 147. After all, section 147 merely authorizes the issuance of notice to reopen with conditions. If the court were to dictate the manner and contents of what is to be written, the statutory conditions would be added as it were. In this context, it needs to be emphasized that the court would interpret the statute as they stand in their own terms, but at the same time being conscious of the rights of the citizens. So viewed, Kelvinator (supra) strikes just balance. To add further conditions to the nature of discussion/reasons that the officer authorizing the notice would have to discuss in the note or decision would be beyond the purview of the courts and would not be justified. For the above reasons, this court is of the opinion that the impugned order- and the consequential order of January 5, 2017 cannot be sustained. They are accordingly set aside. The question of law urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not at the stage of recording reasons. At the stage of recording reasons, the Assessing Officer should have a prima facie relevant material and sufficiency or correctness of the material is not required to be examined at the stage of recording reasons. The Assessing Officer has recorded reasons on the basis of material available before him and not under the direction of any of the higher authority. In the above circumstances, we are of the opinion that contention of the Ld. counsel that the Assessing Officer has not applied mind, is not correct and liable to be rejected. The Ld. counsel has relied on the decision of the Tribunal in the case of ITO Vs. Comero Leasing and Financial Private Limited (supra) wherein the Tribunal has followed the decision of the Hon'ble Delhi High Court in the case of CIT Vs. Suren International Private Limited (supra). In the said case in the list of transactions, the instrument number through which entries were obtained, was mentioned and few entries having same instrument number were repeated in the list of entries allegedly obtained as accommodation entry. The Tribunal (supra) noted that item No. 2 & 3, 4 & 5, 6 & 7, 8 & 9, and 10 & 11 were consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons recorded by the Assessing Officer are neither scanty nor vague nor recorded in mechanical manner and (ii) reasons recorded are with due application of mind (iii) reasons recorded are with necessary approval of the Additional CIT 4.11 Hence, we hold that the reassessment proceeding are in terms of section 147 to 151 of the Act. Accordingly, ground No. 1 challenging the validity of reassessment is dismissed. 5. In ground No. 2 the assessee has challenged the jurisdiction on the ground that objections raised by the assessee agitating the jurisdiction were not disposed off by the Assessing Officer, before passing the impugned order. 5.1 In support of the ground, the Ld. counsel of the assessee referred to letter dated 24/12/2007 of the assessee, which is available on page 16 of the assessee's paper book, and submitted that the Assessing Officer was required to dispose off the objection of the assessee in view of the decision of the Hon'ble Supreme Court in the case of GKN Driveshaft India Ltd Vs. ITO (2003) 259 ITR 19(SC). The Ld. counsel submitted that not disposing off the objection of the assessee has rendered the entire reassessment proceedings illegal. 5.2 The Ld. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Justice and thus the order of the Assessing Officer is a nullity. 6.1 Before us, the Ld. counsel in support of the grounds raised relied on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE, 127 DTR 0241. The Ld. counsel further submitted that third-party statement cannot be basis of reopening of the assessment relying on the decision of the Hon'ble Delhi High Court in the case of CIT versus Sh. Pradeep Gupta 207 CTR 115(Del). 6.2 The Ld. Senior DR, on the other hand, submitted that the assessee did not ask for any such material from the Assessing Officer. As regarding the cross examination, the Ld. counsel submitted that it was the admission of the authorized signatory himself and he had not retracted from the statement. It was not a third-party who gave statement, but it is authorized signatory, who was looking after the affairs of the assessee company. 6.3 We have heard the rival submissions and perused the relevant material on record. On perusal of the record, we find that notice under section 143 (2) and 142 (1) of the Act were issued on 14/08/2007, which are available on page 3 to 6 of the paper book of the assessee , but no complia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances, the ground of the assessee that it is deprived of natural Justice for not providing cross-examination and proper show cause notice is not sustainable in law. Accordingly, the ground No. 3 of the appeal is dismissed. 7. In support of ground No. 4, the Ld. counsel submitted that no enquiry was made in respect of the transactions based on which the case was reopened and additions are made. The submission of the Ld. counsel are reproduced as under: "4. General questioner was issued by the AO vide letter dated 14.08.2007 and again on 04.12.2007. The assessee fully discharged its onus by placing on record extensive documents and details of the requisite parties with their complete address, confirmation, affidavits and Income tax particulars. But nothing contrary was brought on record by Ld. AO to disprove any of the explanation. AO out rightly rejected the explanation without assigning any reason to it. All transactions are duly recorded in the books and are explained to be held in the normal course of business. The Ledger, confirmation and details of all transactions held with M/s. Onyx Exim & Sales (P) Ltd. was given. The Ledger, confirmation and details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investor and also the last one with regard to the establishment of genuineness of the transaction. 2.18 In the present case, in order to establish the creditworthiness, it was shown that Rs. 1,44,55,500/- received from 91 persons by way of cheque. When the identity of the persons fails, it will be impractical at this stage to go for other two criteria i.e. creditworthiness of the investor and the genuineness of transaction. Furthermore there was cash/cheque introduction of identical amount before issue of the cheque and hence the genuineness of the transaction is far from established. 2.19 On these materials, no one can form an opinion that these applicants had any income exigible to tax under Income tax Laws. Since it is not known whether all such investors did have any source of income or business which could be derived and which could help them to invest Rs. 1,44,55,500/- by way of credit. Therefore, on the basis of material produced, it was not just possible for any reasonable man to form an opinion with regard to creditworthiness of the investor. There is no material evidence on record to establish that the amount was held by the investors to prove their creditworthine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontainers P Ltd in ITA No.2283/Del/09 dated 11/08/09, referring the decision of Lovely Exports (Supra) and Divine Leasing & Finance (Supra) has held as below:- "In our view, Hon'ble Delhi High Court and Hon'ble Supreme Court while rendering judgments in the above cases were not dealing with the case of Hawala Operators and Bogus Entry Providers." 2.31 Applying the above tests in the present case, it appears to me that there cannot be any two opinions, having regard to the material produced with regard to identity, the creditworthiness of the subscriber as well as to the question of genuineness of transaction, the same could not be established by the appellant and hence the AO has rightly added Rs. 1,44,55,500/- and such decision of the AO is sustained." 7.6 We find that on one hand the assessee is claiming that it has filed the required documents before the Assessing Officer whereas the Ld. Commissioner of Income-tax (Appeals) has held that the assessee has not filed any evidence supporting the identity and creditworthiness of the payer, and genuineness of the transaction. The Ld. CIT-(A) has even observed that no correct addresses of the investor was provided. 7.7 Befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luding enquiries from the banks of parties transacted. The assessee shall be afforded sufficient opportunity of hearing. Accordingly the ground No. 4 of the appeal is allowed for statistical purposes. 8. In the result, appeal of the assessee is allowed partly for statistical purposes. ITA No. 1720/Del/2012 for AY: 2001-02 9. Now we take up the appeal of the assessee having ITA No. 1720/Del/2012 for assessment year 2001-02. The concise grounds of appeal raised by the assessee are as under: "On the facts and in the circumstances of the case, the CIT (A)-XI, New Delhi has erred both on facts and in law, in upholding the illegal Order of The respondent on the following grounds and hence liable to be quashed because: 1. Reasons recorded are vague and scanty, without application of his own mind by AO and without necessary approval of the Joint CIT and hence re-assessment proceeding are not in terms of section 147 to 151 of the Income Tax Act. 2. Objection specifically raised were not disposed of before passing the impugned order. 3. Re-assessment order passed in violation of natural justice without providing corroboration of the material and without providing cross exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any stamp of acknowledgement by the Assessing Officer and therefore there is no evidence as those papers were filed before the Assessing Officer. We find that, in the assessment order for assessment year 2001-02, there is a mention of letter of final opportunity dated 18/11/2008 issued by the Assessing Officer and in response the assessee filed letter dated 18/12/2008. There is no reference of letter dated 25/11/2008 and 12/12/2008 filed by the assessee. In the circumstances it cannot be concluded that the assessee filed any objections before the Assessing Officer and thus issue of disposing off the same, also does not arise. Accordingly, we dismiss the ground No. 2 of the appeal. 13. The ground No. 3 raised in the appeal, is identical to the ground No. 3 raised in ITA No. 3777/Del/2012 for assessment year 2000-01, which we have already decided in aforesaid paras 6 to 6.3. Thus, following our finding in said para, we dismiss the ground of the appeal. 14. In ground No. 4, the assessee has challenged addition of Rs. 1,54,80,753/- under section 68 by treating as unexplained income. The facts of the addition made during the year under consideration are identical to the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X
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