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2015 (11) TMI 1801

..... nd - HELD THAT:- After perusing the reasons records we find that 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 any tangible material. The AO has mechanically issued notices u/s 148 on the basis of information received by him from the investigation wing of the Income Tax Department. Therefore, we are of the considered view that the AO has not applied his mind so as to give an independent conclusion that he had reason to believe that income had escaped assessment during the year under consideration. 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. [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 .....

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..... transferred through clearing in two or more stages. The beneficiary in turn deposits these instruments in his bank accounts and the money comes to his regular books of account in the form of gift, share application money, loan etc. through banking channels and the transaction looks genuine. It is noticed from the list of entries that the assessee M/s Roopali Marketing Ltd. has taken the following accommodation entries from the following person(s) as per details hereunder:- In view of the report received from the DIT (lnv.) New Delhi, and in view of the facts narrated above it is clear that the assessee has not disclosed fully and truly all material facts necessary for its assessment for that assessment year. I have therefore, reason to believe that the sum of ₹ 92,00,000/- chargeable to tax has escaped assessment. Thus, the same is to be brought to tax under section 147/148 of 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 exami .....

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..... n to believe that income had escaped assessment during the year under consideration. We draw our support from the judgment of the Hon ble High Court of Delhi in ITA No. 545/2015 dated 8.10.2015 in the case of Pr. Commissioner of Income Tax -4 vs. G&G Pharma India Ltd. in which the Hon ble Jurisdictional High Court has recapitulated the jurisdictional requirement for reopening of the assessment u/s 147/148 of the Act as under:- 9. The Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were namelenders and the transactions 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 transacti .....

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..... een brought about to Section 147 of the Act with effect from 1st April 1989 and observed: 29. It is at once seen that the Amendment in Section 147 of the Act brought about a material change in law w.e.f. 1st April, 1989. Section 147(a) as it stood prior to 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has reason to believe that income of an Assessee has escaped assessment. However, the proviso to Section 147 of the Act provides a complete bar for reopening an assessment, which has been made under Section 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. .....

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..... e 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 materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. 8. In the present case also it is seen that the AO has merely relied on the report of the investigation wing but it is apparent 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 inc .....

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