TMI Blog2020 (7) TMI 372X X X X Extracts X X X X X X X X Extracts X X X X ..... on to consider the issue whether notice issued by the Assessing Officer to reopen assessment on the basis of information received from INV Wing could be said to be tangible material, the Hon'ble High Court held that information received from INV Wing could not be said to be tangible material per se without a further enquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income has escaped assessment. Thus the assessee succeeds on both the counts - reopening is devoid of any application of mind and additions are solely based upon assumptions, conjectures and surmises. - Decided in favour of assessee. - ITA No. 8761/DEL/2019 - - - Dated:- 10-7-2020 - Shri N.K. Billaiya, Accountant Member, And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Ajay Wadhwa, Adv For the Revenue : Shri Jagdish Singh Dahiya, Sr. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal the assessee has challenged the validity of the assessment order framed u/s 143(3) r.w.s 147 of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] and addition of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed u/s 131(1A) of the I.T. Act, 1961. Most of the persons whose statements were recorded, stated that they were made proprietor / partner in the said concern by one Shri Kishori Sharan Goyal. The statement of Shri Kishori Sharan Goyal was recorded u/s 131 of the I.T. Act, 1961, during the course of search proceeding on 17.02.2016. His statement was again recorded on oath on 28.03.2016 and 16.06.2016. Shri Kishori Sharan Goyal admitted in his statement that these firms were controlled and managed by him only and these firms were not doing any real business and were mere paper concerns. 3. I have studied statements of Shri Kishori Sharan Goyal recorded on oath on 17.02.2016, 28.03.2016 and 16.06.2016. Shri Kishori Sharan Goyal has admitted in his statement recorded on 17.02.2016 u/s 131 of the I.T. Act that he used to earn commission from bogus billing . He explained bogus billing business as operating various firms which are not doing any real business but are indulging in providing accommodation entries for bogus purchases and bogus sales. He stated that he used to take cheques from the interested businessmen (who were iinterested in booking bogus purchases) which would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d these bank statements. Although Shri Kishori Sharan Goyal has stated in his j statement that no cash was deposited in the bank accounts, the statements of both the above accounts show heavy cash deposits. Both these statements show debit entries of ₹ 10,00,000/- each on 05.03.2011 for transfer of funds to A K . The statement of Sai Kripa Enterprises with OBC, Pitampura Delhi shows transfer of ₹ 10,00,000/- on 05.03.2011 to the assessee through cheque no. 770656. The statement of Balaji Enterprises with OBC Gurgaon shows transfer of ₹ 10,00,000/- on 05.03.2011 to the assessee through cheque no. 771654. It shows that a total amount of ₹ 20,00,000/- was transferred to the account of M/s A K Lumbers Ltd. for bogus sales against which M/s A K Lumbers Ltd. provided unaccounted cash to Shri Kishori Sharan Goyal. Apart from this M/s A K Lumbers Ltd. would also have paid commission @ 1% to Shri Kishori Sharan Goyal for taking entry of bogus sales which amounts to ₹ 20,000/-. Thus, M/s A K Lumbers Ltd. provided total unaccounted cash of ₹ 20,20,000/- to Shri Kishore Sharan Goyal during the F.Y. F.Y. 2010-11. 6. In view of above facts, I have reason t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 10. The entire additions revolve around the enquiries made through an Inspector who, in his report, stated that the transporters were not available on the given address. Transactions took place in the year 2011 and the enquiries were made by the Inspector in the year 2018. If after a lapse of 7 years the parties are not available at the given address, in our view, the assessee cannot be found faulted with. 11. Had the Assessing Officer applied his mind, then he would have not believed the theory of the Investigation Wing that the appellant is engaged in providing accommodation entries as the total turnover of the appellant is ₹ 37.58 crores and the quarrel is only in respect of sales made to the two parties totalling to ₹ 94.28 lakhs. 12. At this point, it would be pertinent to mention that sales made to these two parties were duly recorded in the books of account under the head Sales and the Assessing Officer has made same addition once again u/s 68 of the Act. Once the assessee has himself included the amount as its income, the action of the Assessing Officer is nothing but double addition of the same amount. At the most, the Assessing Officer should h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Anand Prakash cannot be seen as a busybody or an informer or a stock witness wholly unconnected with the assessed concerned. Learned Counsel for the Revenue had drawn our attention to Phool Chand Bajrang Lal v. Income-Tax Officer where the ITO had learnt that the party from whom that assessed had allegedly borrowed ₹ 50,000/- in cash had not actually done so. Information pertaining to the false nature of these transactions was exchanged between the respective Income-Tax Officers. Their Lordships opined that - Acquiring fresh information, specific in nature and reliable in character, relating to a concluded assessment which went to expose the falsity of the statement made by the assessed at the time of the original assessment was different from drawing a fresh inference from the same facts and material available with the Income-tax Officer at the time of the original assessment proceedings . This decision, however, does not empower the AO to rely only on the deposition of a third party in order to upset the Return filed by an assessed. 5. This is where the failure of the Revenue to produce Shri Anand Prakash for cross-examination by the assesseds, assumes fatal con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under section 143(3) of the Income- Tax Act, 1961. The Hon'ble Bombay High Court in the case of Siemens Information System Ltd., vs. ACIT Others (2007) ITA.No.4271/Del./2019 Shri Devki Nandan Bindal, Delhi. 293 ITR 548 (Bom.) held that when notice for reassessment basing on non-existing reasons and provisions inapplicable at relevant time - Not constituting reasons to believe. Notice invalid. The Hon'ble Punjab and Haryana High Court in the case of CIT vs., Atlas Cycle industries (1989) 180 ITR 319 (P H) held as under : Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment. 11.1. The Hon'ble Bombay High Court in the case of Ankita A. Choksey vs. Income Tax Officer And Others (2019) 411 ITR 207 (Bon.) held that Condition precedent for issue of notice for reassessment is that the reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is to be quashed. 11.2. In the instant cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of sales. Sales are supported by C Forms, VAT Nos and Sales Tax numbers of the parties, further supported by the certificates from the forest department. All these have not been examined by the Assessing Officer and had he examined these documents/evidences or made necessary enquiries, he may not have issued notice u/s 148 of the Act but for non-application of mind, the assessment was reopened. 21. The Hon'ble High Court of Delhi in the case of RMG Polyvinyl Ltd 396 ITR 5 had the occasion to consider the issue whether notice issued by the Assessing Officer to reopen assessment on the basis of information received from INV Wing could be said to be tangible material, the Hon'ble High Court held that information received from INV Wing could not be said to be tangible material per se without a further enquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income has escaped assessment. 22. Considering the underlying facts in issues, we are of the considered opinion that the assessee succeeds on both the counts reopening is devoid of any application of mind and additions are solely based upo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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