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2015 (11) TMI 1802

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..... cation. Merely discussing the modus operandi will not lead the A.O. to form a reasonable belief that income chargeable to tax of the assessee has escaped assessment. Hence in my view the reopening of the assessment is bad in law. - Decided in favour of assessee. - ITA No. 2408/Del/2014 - Dated:- 30-11-2015 - SHRI J. SUDHAKAR REDDY, J. Appellant by : Shri Somil Agarwal, Adv. Respondent by : Sh. T.Vasanthan, Sr.D.R. ORDER This is an appeal filed by the Assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-VI dated 10.2.2014 pertaining to the Assessment Year (A.Y.) 2004-05. 2. The assessee has challenged the reopening of the assessment on the ground that the reasons recorded demonstrate that the Assessing Officer ( .....

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..... s operating these accounts and the persons for whom such account holders s were working. These enquiries revealed inter alia the following. 2.1. Entries were being broadly taken for two purposes: a. 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. b. To inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. 2.2. The assessee who had unaccounted money (called as entry takers or beneficiaries) and wanted to introduce the same in the books of accounts without paying tax, approached another person (called entry operator) and handed over the cash (pl .....

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..... they were asked to sign. They were made directors of companies, partners of firms and proprietor of different concerns solely for operation of these accounts. Actually, many of them were not even aware of the tax implications etc. Their only concern was with the few thousand rupees given to them by the entry operators. 3. Summing up, the report as a result of these extensive enquiries carried out by the DIT (Inv.), New Delhi has assailed genuineness of transactions, whether shown by beneficiaries as inflow of Share Capital or receipt of Gifts or consideration for sale-purchase. It has also dealt a body blow to the creditworthiness of the persons/persons controlling the concerns who have given these credit entries! share capital/gifts/ sale .....

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..... ly show that these transaction do not appears to be genuine. Therefore, it appears that the aforesaid credit entries are covered under the provisions of section 68 of the I. T. Act. I therefore have reasons to believe that this amount of ₹ 7,00,000/- represents income of the assessee chargeable to tax which has escaped assessment for A. 2004-05. 4.1. The Hon ble Delhi High Court in the case of Principal Commissioner of Income Tax vs.G & G Pharma India Ltd. in ITA no. 545/2015 vide order dt. 8.10.2015 at para 12 and 13 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. 10 February 2003, from four entities which were termed as accommodation ent .....

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..... missing in the present case. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing .....

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