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2015 (11) TMI 1801

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..... ng the judgment of the Hon’ble High Court of Delhi in the case of Pr. Commissioner of Income Tax-4 vs. G&G Pharma India Ltd. [2015 (10) TMI 754 - DELHI HIGH COURT] we hold that the reopening of the case of the assessee for the assessment year is bad in law and we accordingly quash the reassessment proceedings. - Decided in favour of assessee. - ITA No: 2813/Del/2011, CO. No. 142/Del/2013 - Dated:- 27-11-2015 - SHRI G.D. AGRAWAL AND SHRI SUDHANSHU SRIVASTAVA, JJ. Appellant by : Ms. Rakhi Vimal, Sr. DR Respondent by : Shri R. Santhanam, Advocate & Shri Deepak Oswal, FCA ORDER PER BENCH Revenue has filed this appeal against the impugned order dated 28.2.2011 passed by the Ld. CIT(A) - XVIII, New Delhi for assessment year 2003-04. The four grounds of appeal taken by the Department relate to the deletion of addition of Rupees Thirty Six Lacs by the Ld. CIT (A) whereas in the CO, the assessee has challenged the assumption of jurisdiction u/s 147 of the Income Tax Act, 1961 (hereinafter called the Act). Both the parties agreed that the issue regarding the assumption of jurisdiction u/s 147 of the Act has to be adjudicated prior to the adjudication on the merits of the case. .....

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..... the I.T. Act 1961 . 3. As per the AO, the reasons as reproduced above were provided to the assessee. In response to various notices, the assessee filed copies of confirmatory letters, ITR and Balance Sheets of the various parties. However, since the assessee did not produce these parties for cross examination and in light of the findings of the DIT (Inv), the contention of the assessee was not accepted and ₹ 36,00,000/- were added to the income of the assesee as being accommodation entries . 4. The appeal before the Ld. CIT (A) was decided in favour of the assessee on the ground that the assessee had provided proof of identity and proof of credit worthiness of the parties and therefore the addition made was legally unsustainable. 5. In the present CO before us, the Ld. Counsel for the assessee drew our attention towards reasons recorded (reproduced herein above) and submitted that the AO has mechanically proceeded to assume jurisdiction u/s 147 of the Act and has accordingly issued notice u/s 148 of the Act. Ld. AR contended that the AO simply proceeded on the information of the investigation wing without analysing and applying his mind towards the nature of transactions. He .....

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..... actions are bogus. The AO came to the conclusion that there were reasons to believe that income of the Assessee had escaped assessment. The Supreme Court disagreed and observed that the AO had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be ' bogus transactions'." It was further explained by the Supreme Court that: Before issuing a notice under S. 148, the ITO must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of S. 147 are satisfied, the ITO has no j .....

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..... ction 143(3) of the Act, after the expiry of four years. However, this proscription is not applicable where the income of an Assessee has escaped assessment on account of failure on the part of the Assessee to make a return or to disclose fully and truly all material facts necessary for his assessment. Thus, in order to reopen an assessment which is beyond the period of four years from the end of the relevant assessment year, the condition that there has been a failure on the part of the Assessee to truly and fully disclose all material facts must be concluded with certain level of certainty. It is in the aforesaid context that this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. (supra) explained that the ratio of the decision in Phool Chand Bajrang Lai (supra) may not be entirely applicable since the same was in respect of Section 147(a) as it existed prior to the amendment. 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 February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated : I have .....

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..... that he has not applied his mind to the materials which were before him. In our view, without forming a prima facie opinion on the basis of only the report of the Investigation Wing of the Income Tax Department, it was not legal for the AO to have simply concluded that he has reason to believe that income chargeable to tax has escaped assessment. Unless the basic jurisdictional requirement is satisfied, a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. In the circumstances and respectfully following the judgment of the Hon ble High Court of Delhi in the case of Pr. Commissioner of Income Tax-4 vs. G&G Pharma India Ltd. (supra) we hold that the reopening of the case of the assessee for the assessment year is bad in law and we accordingly quash the reassessment proceedings. 9. In the result the CO filed by the assessee is allowed. ITA 2813/Del/2011 10. In view of our findings in the CO filed by the assessee, the appeal filed by the revenue is dismissed. 11. In the final result the CO of the assessee is allowed and the appeal of the Department is dismissed. Order pronounced i .....

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