TMI Blog2020 (10) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... elieve that he has applied his mind before recording the reasons requires for initiating the proceedings u/s 147/148. When AO was not even aware as to the actual profit earned by assessee from commodities and this fact has also not been verified by the Principal CIT from audited financial of the assessee, then it is difficult to believe as to how and under what circumstances he has made himself satisfied to proceed against the assessee u/s 147/148 of the Act. So, the entire process as to initiating the reopening is merely mechanical without any application of mind by the AO as well as sanctioning authority, Principal CIT, which has vitiated the entire proceedings. Reasons to believe recorded by the AO, which is replica of information received from the Investigation Wing, cannot be a tangible material per se sufficient to form reasons to believe; that even figures of buying, selling and profit booking qua commodity trading, are not in accordance with the audited financials of the assessee company which shows that there is absolutely no application of mind on the part of the AO - Decided in favour of assessee. Addition u/s 68 read with section 115BB - When assessee has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been granted in a mechanical manner. e) The reasons recorded indicate that the AO has acted on mere surmises and suspicion for making fishing and roving enquires. The requirement of law is reason to believe and not reason to suspect . f) There is no nexus between the reasons recorded and escapement of income. g) There is no failure on the part of the Assessee to disclose fully and truly all material facts necessary for assessment. 2. That the Ld. CIT (A) erred on facts and in law in confirming the addition of ₹ 1,31,08,895/- u/s 68 read with section 115BBE of I.T. Act as against profit of ₹ 1,49,19,900 declared on account of commodity trading. 2. Briefly stated the facts necessary for adjudication of the controversy at hand are : Original return of income of assessee at taxable income of ₹ 1,88,519/- was processed under section 143(1) of the Income-tax Act, 1961 (for short 'the Act'). Thereafter, the assessment was reopened after recording reasons after a period of four years on receipt of certain information form Investigation Wing of the Income-tax Department for initiation of proceedings u/s 147/148 of the Act for AY 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er :- Reasons recorded in the case of M/s. Gangeshwari Metals Pvt. Ltd. - A.Y. 2010-11 for initiating proceedings u/s 147/148 of the Income-tax Act, 1961 Name of the assessee M/s. Gangeshwari Metals Pvt. Ltd. PAN AAACM0267E Status Company Assessment Year 2010-11 The assessee company had filed return of Income on 17.09.2010 declaring a total income of Rs.l,88,519/-, which has been adjusted against brought forward losses and net taxable Income of Rs Nil has been returned. Even the Book Profit u/s 115JB has been declared at Rs Nit. The return was processed us 143(1} and the case of the year under consideration was not completed in scrutiny assessment. Investigation Wing, Unit-3(1), Kolkata. vide letter dated 17.03.2017 has forwarded a report on systematic evasion of taxes during the FY 2009-10 (AY 2010-11) through bogus commodity trading. As per this report, a survey action u/s 133A of the IT Act was conducted by Pr Director of Income Tax (Investigation). Ahmedabad at the premise of National Multi Commodity Exchange (NMCE) and backup of the NMCE trade was taken. After analysis of this data, 85 entities were identified who had booked contrived losses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken bogus profit as per following transactions during AY 2010-11 :- Total buying ₹ 37,26,450/- Total Selling ₹ 38,63,700/- Total Profit ₹ 1,37,250/- The above Information provided by the Investigation Wing was examined the regard to the record of the assessee. It is seen that the assessee has shown profit on commodity transaction in excess of the above mentioned amount. Further, it is seen that the above bogus profit has been taken to adjust the brought forward business losses and no tax has been paid by the assessee. Even in the MAT provisions no tax has been paid by the assessee. Thus by this process, the assessee gas introduced its unaccounted money into books of accounts, without paying any taxes, It is apparent that there has been a failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year 2010-11. Keeping in view the above facts, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year 2010-11, the income chargeable to tax to the extent of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded assessee is shown to have earned profit of ₹ 1,37,250/- from trading commodities allegedly as bogus profit during 2010-11 which is extracted as under :- Total buying ₹ 37,26,450/- Total Selling ₹ 38,63,700/- Total Profit ₹ 1,37,250/- 9. Ld. AR for the assessee to prove the fact that the reasons recorded are vague and factually incorrect taken us to the audited balance sheet, profit loss account and Schedule IX, Sales and Other Income, available at pages 13 to 32 of the paper book, particularly Schedule IX depicting sales and other income, available at page 27 of the paper book, which shows that assessee has booked profit from commodities at ₹ 149,19,900/- and not ₹ 1,37,250/-. This fact goes to prove that the AO has proceeded merely on the basis of report given by the Investigation Wing and has not preferred to verify the same from the audited financials brought before him by the assessee and in these circumstances, it is difficult to believe that he has applied his mind before recording the reasons requires for initiating the proceedings u/s 147/148 of the Act. 10. Aforesaid fact of non-application of mind by the AO i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Tribunal in holding that reopening of the assessment under section 147 was bad in law. No question of law arose. 14. So, in view of what has been discussed above and following the aforesaid decisions rendered by Hon'ble Delhi High Court, we are of the considered view that firstly reasons to believe recorded by the AO, which is replica of information received from the Investigation Wing, cannot be a tangible material per se sufficient to form reasons to believe; that even figures of buying, selling and profit booking qua commodity trading, recorded at page 2 of reasons to believe , are not in accordance with the audited financials of the assessee company which shows that there is absolutely no application of mind on the part of the AO before recording the reasons to believe; that in the third last para of reasons to believe, the AO recorded the fact that the income chargeable to tax to the extent of aforementioned accommodation entry amounting to ₹ 1,37,250/- has no nexus with the addition of ₹ 1,31,08,895/-; that when the assessee has shown to have earned the profit of ₹ 1,49,19,900/- on account of commodity trading, the addition on this account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 59,56,410/- and ₹ 89,63,490/- respectively was made and these documents are available at pages 75 to 118 of the paper book. Surprisingly, all these documents have not been examined nor controverted by the AO as well as ld. CIT(A). Moreover, all these transactions are proved to have been made through banking channels from the assessee's HDFC Bank statement, available at pages 119 to 133 of the paper book. 19. AO reported to have issued notices u/s 133 (6) on 07.12.2017 to NMCE Head Office, Ahmedabad and MCX but reply received thereto have never been confronted to the assessee nor copies thereof have been supplied. This issue was specifically raised by the assessee before the ld. CIT (A), as is evident from the submissions made to ld. CIT (A), available at pages 1 to 10 of the paper book, to direct the AO to supply copy of said replies but no cognizance has been taken by the ld. CIT (A) on the request of the assessee. 20. When assessee has specifically proved on record that it has earned profit of ₹ 59,56,410/- on commodity trading through R.K. Commodities (P) Ltd. registered with NMCE but AO has wrongly taken this amount as ₹ 41,45,405/- and treated th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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