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2020 (11) TMI 814

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....that the assessment made under section 147/144 on 11.12.2017 is barred by limitation of time, disregarding the provisions of section 153(2) which provide that, no assessment or reassessment shall be made after mine months from the end of the financial year in which notice under section 148 is served. And in this case, notice under section 148 was served in financial year 2016- 17, hence, the assessment could have been made upto 31.12.2017. 3) For that the Ld. CIT (Appeals)-2, Kolkata has erred on facts and in law by placing reliance on a decision of the Hon'ble Supreme Court, i.e. Banarasi Debi Vs. ITO, which has been distinguished and superseded in a subsequent decision in the case of R.K. Upadhyay Vs. Shanabhai P. Patel. 4) That the appellant craves leave to add to and/or alter, amend, modify or rescind the grounds hereinabove before or hearing of this appeal. 3. Brief facts of the case are that assessee company had filed its e-return for the assessment year 2009-10 i.e under consideration on 25-09-2009 showing returned income of Rs. 1,599/-. Based on information received from the DDIT (Inv), Unit-4(1), Kolkata that the assessee is a beneficiary of accommodation entries ....

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.... notice u/s. 148 was issued and served before 31.03.2016, the order u/s. 147 was barred by limitation as contained in provisions of section 153(2) of the Act and if the notice u/s. 148 was issued and served after 31.03.2016 then the notice u/s. 148 itself was barred by limitation u/s. 149 of the I.T Act, 1961. The AO however after considering the submissions made by the A/R proceeded to pass order u/s. 147/144 of the I.T Act, 1961 by making an addition of Rs. 4,08,00,000/- and by misinterpreting the provisions of section 148, 149 and 153(2) of the I.T. Act, 1961. The appellant had e-filed its original return of income for AY 2009-10 u/s. 13(1) on 25.09.2009. The said return was not selected for any scrutiny assessment. The limitation period of six years from the end of the relevant assessment year as contained in section 149(1) of the Act for the purposes of assessing the income of the appellant was to expire on 31.03.2016. The AO alleges that such notice u/s. 148 of the Act was issued and also dispatched to the appellant on 31.03.2016. But the said notice remained unserved. However, finally the said notice was served through e-mail on 22.09.2016 to the appellant. The issue w....

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....ression 'serve' appearing in section 143(2) of the Act." Similarly, it is the date of issue of the notice u/s. 148, and not actual receipt of notice by assessee which is relevant to return a finding as to whether re-assessment proceedings have been initiated within period of limitation. The Hon'ble Punjab & Haryana High Court in the case of CIT v. K.G Singhania (2012) reported in 24 Taxmann.com 208. It is further the contentions gain strength from the following decisions wherein the notice was issued within time but was served on the assessee after the expiry of the time limit, it held to be valid- R.K Upadhyaya V Shananhai Patel P.Patel (1987) 166 ITR 163 (SC); CIT v Sheo Kumari Debi (1986) 157 ITR 13 (Pat) (FB) and Jai Hanuman Trading Co P.Ltd (1977) 110 ITR 36 ( P & H ) (FB). Similarly, in framing an assessment time period/limitation period as prescribed in Act on date of issue of notice would apply and not on the date of service of such notice as held in the case of C.B Richards Ellis Mauritius Ltd v. ADIT (2012) 208 Taxmann 322 (Delhi). Further, in the case of CIT v. Major Tikka Khuswant Singh (1995) reported in 80 Taxman 88 (SC), it was held that issuance of notice within p....

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....tice u/s. 148 for the relevant assessment year ended on 31.03. 2016 and hence no notice u/s. 148 could have been served upon the appellant beyond 31.03.2016. The AO has mentioned in the order that "as you will appreciate that issuance of notice and service of the same are to different things. Notice was issued and handed over to the postal authority on 31st March, 2016. The said notice was returned unserved by the postal authority on 04.04.2016.And finally it was served on you through email on 22.09.2016 i.e in the Fin, Yr 2016-17. And none months form the end of the finance year 2016-17 is 31.12.2017. ....... And the matter was settled......" The AO has further mentioned that notice was issued on 31.03.2016 and no return of income was filed by the assessee in response to notice u/s. 148. Thereafter notice u/s. 142(1) were issued on 16.08.2017 for hearing on 29.08.2017, 29.08.2017 for hearing on 06.09.2017, 13.10.2017 for hearing 24.10.2017 and 25.10.2017 for hearing on 02.11.2017. The AR of the appellate company first time appeared on 03.11.0187 and filed a letter challenging the proceedings of reopening and it initiation. The next date of hearing was again fixed for 16.11.201....

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....he end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year; ( c ) ...... The section 153 relates to time limit for completion of assessment, reassessment and re-computation says as under:- 153(1).... (2) No order of assessment, reassessment or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served; From the above, since the financial year in which notice u/s. 148 was issued ended on 31.03.2016, the reassessment order ought to have been made by the AO till 31.12.2016 and the impugned order u/s. 147/144 being passed on 11.12.2017 is barred by limitation. Alternatively, even if the contention of AO is assumed to be correct and the date of service of notice u/s. 148 of the Act is taken to be 22.09.2016 then also the impugned order passed u/s.147/144 has to be held to be bad in law as the period of six years from the end of the relevant assessment year i.e the last date for service of notice u/s. 148 for the relevant assessment year ended on 31.03.201....

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....prescribed that if the Assessing Officer has "reason to believe" that any income has escaped assessment for any assessment year, he may subject to provision of Section 148 to 153 of the Act, assess or reassess such income and other incomes which has come to his notice during reopened proceedings. So, when the Assessing Officer has to assess / reassess the income which has escaped assessment, then he can do so if he satisfies the conditions precedents prescribed in Section 147 which is also subject to law prescribed in Section 148 to 153 of the Act. The Parliament while prescribing the time limit for validity reopening an assessment by issuance of notice has stated so in Section 149 of the Act. Here one has to note the crucial words used by the Parliament when it prescribed under the sub-heading "Time Limit for notice" (for reopening) prescribed in Section 149 of the Act where sub-section (1) of Section 149 reads "No notice under section 148 shall be issued for the relevant assessment years. So, the Parliament has prohibited the Assessing Officer from issuing reopening notice after the prescribed period of time given in Section 149 of the Act. Here it has to be noted that Parliament....

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.... reassessment starts only after serving of notice u/s 148 of the Act i.e. nine (9) months from the end of financial year in which the notice u/s 148 of the Act was served upon the assessee. Therefore, admittedly in this case, the notice u/s. 148 of the Act was served upon the assessee by e-mail on 22.09.2016, so the limitation time of nine months starts from the end of financial year, so in this case the end of financial year after serving notice is 31.03.2017, so as per Section 153 of the Act, the Assessing Officer should frame the assessment before the expiry of nine months from the end of the financial year in which the notice u/s. 148 of the Act was served, therefore, in this case, the Assessing Officer has time to frame the assessment till 31.12.2017 and the Assessing Officer in the instant case has framed the assessment on 11.12.2017 that is well within the time prescribed by section 153(2) of the Act and, therefore, his framing of assessment after reopening is legal as per the statute. For this proposition of law, we refer to the decision of the Hon'ble Supreme Court in R. K. Upadhyaya Vs. Shanabhai P. Patel order dated 28.04.1987, 1987 AIR 1378 wherein the Hon'ble Supreme C....

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.... to believe' postulates foundation based on information and belief based on reason. According to him, even if there is foundation based on information, still there must be some reason warrant holding the belief that income chargeable to tax has escaped assessment. According to him, from a mere perusal of the reasons recorded by the AO in order to reopen the assessment would reveal that the basic requirement of law u/s. 147 has not been satisfied. Thereafter, he drew our attention to the reasons recorded for reopening which is placed at page 31 of the paper book, which reads as under: "The office has been informed that Investigation Wing has conducted enquiry on the basis of some credible information in respect of cash deposits in a manner of dubious A/cs. The A/cs stood in the name of certain concerns which are found to be fictitious/fake controlled by entry operators. The unaccounted cash of beneficiaries were transferred to the bank A/cs of the beneficiaries through these dubious A/cs of fake entities. The assessee has reportedly enjoyed bogus accommodation entries to the tune of Rs. 4.08 Crores in F. Y. 2008-09. In view of this, I have reason to belief that a sum of Rs. 4.....

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....g to Ld. AR, if the general modus-operandi of entry providers in Kolkata is based as a foundation for forming the belief that income has escaped assessment, then whichever company in Kolkata has raised share capital / loans will be proceeded against which will be arbitrary exercise of power, which has no sanction of law. Therefore, according to Ld. AR, the AO erred in concluding that assessee enjoyed bogus accommodation entries to the tune of Rs. 4.08 Crores without carrying out any preliminary enquiry/verification or examination or any other exercise after receipt of information. According to Ld. AR, the AO had not conducted any preliminary enquiry to base his belief that the said sum of Rs. 4.08 crore is fall out of accommodation entry and that share capital was the unaccounted money of the assessee. According to Ld. AR, even though the AO mentioned in the reasons recorded that there was number of dubious accounts fictitious / fake concerns, however, has not named anyone so the information is totally vague. It was pointed out by the Ld. AR that in the reason recorded the AO did not mention the name of any entry operator, and that there is no mention whether any statement of any e....

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....para 12 to 14) vi) KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 (referred to page 3 para 8- 11) vii) PCIT Vs. Tupperware India Pvt. Ltd. (2016) 236 Taxman 494 (referred to page 3 para 6 and 9) viii) DCIT Vs. National Bank for Agriculture and Rural Development ITA No.4964/Mum/2014 (referred to page 10- 13 para 12) ix) CIT Vs. Insecticides (India) Ltd. (2013) 357 ITR 330 (Del.) x) Hon'ble Calcutta High Court in the case of Pr. CIT Vs. G4G Pharma India Ltd. in ITA 545/2015 vide order dated 08.10.2015 (para 12 and 13) 9. The Ld. AR drew our attention to the decision of the Hon'ble High Court of Delhi in ACIT Vs. Meenakshi Overseas (P) Ltd. (2017) 82 taxmann.com 300 (Del) wherein it has been held as under: "22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodatio....

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....orms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment. 28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus: "11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to Rs. 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003-04. Details are contained in Annexure....

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....ision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes: 1. 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. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:...." 29.2 The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficia....

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....t 18.11.96 305002 5,00,000   Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to be....

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....as emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment." 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a ....

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.... Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon'ble Delhi High Court. Following the said decision we hold that initiation of re-assessment proceedings is not valid. On this ground, the assessment is liable to be annulled." 11. The Hon'ble Bombay High Court in Pr.CITVs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) it has been held as under: "9. We find that at the time of re-opening of the Assessment, the Assessing Officer did not provide the reasons recorded in support of the re-opening notice in its entirety, to the Respondent-Assessee. This was contrary to and in defiance of the decision of the Apex Court in GKN Driveshafts v. ITO [2002] 125 Taxman 963/ [2003]259 ITR 19. The entire objects of reasons for re- opening notice as recorded being made available to an Assessee, is to enable the Assessing Officer to have a second look at his reasons recorded before he proceeds to assess the income, which according to him, has escaped Assessment. In fact, non furnishing of reasons wo....

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....erefore, the sentence being relied upon was made in the context of the change in law that under the amended provision 'reason to believe' that in case of escaped assessment, is sufficient to re-open the assessment. This unlike the earlier provision of Section 147(a) of the Act which required two conditions i.e. failure to disclose fully and truly all facts necessary for assessment and reason to believe that income has escaped assessment Thus, the observations being relied upon must be read in the context in which it rendered. On so reading the submission, will not survive. 11. Further, a reading of the entire decision, it is clear that the reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned counsel is ignoring the fact that 6the words 'whatever reasons' is qualified by the words 'having reasons to believe that income has escaped assessment'. The words whatever reasons only means any tangible material which would on application of the facts on record lead to reasonable belief that income chargeable, to tax has escaped, assessment This material which, forms t....

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.... not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does- not indicate the amount which according to the Assessing Officer, has escaped Assessment. This is an evidence of a fishing enquiry and not a reasonable belief that income chargeable to tax has escaped assessment. 14. Further, the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT (Inv.). The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-openi....

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.... of proceedings u/.s 147 of the Act. In this regard the Ld. Counsel for the assessee placed before us two decisions one rendered by Lucknow Bench of ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife Development Ltd. Vs Principal C.I.T. in ITA NO.688/Mum/2016. In both the decisions a view has been taken by the Tribunal that when an Assessment order passed u/s 147 of the Act was illegal the CIT cannot invoke the jurisdiction u/s 263 of the Act against such void or non-est order. In the second decision cited the Hon'ble Mumbai bench of the Tribunal has specifically framed the following questions :- " 1.Whether the assessee can challenge the validity of an assessment order during the appellate proceedings pertaining to examination of validity of order passed u/s 263? 2. Whether the impugned assessment order passed u/s 143(3) dated 24-10-2013 was valid in the eyes of law or a nullity as has been claimed by the assessee? 3. If the impugned assessment order passed u/s 143(3) was illegal or nullity in the eyes of law, then, whether the CIT had a valid jurisdiction to pass the impugned order u/s 263 to revise ....

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..... Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of no consequence. Further, the decision of Hon'ble Madras High Court in the case of CIT Vs. Gitsons Engineering Co. 370 ITR 87 (Mad) clearly holds that the objection in relation to non service of notice could be raised for the first time before the Tribunal as the same was legal, which went to the root of the matter. 19. While exercising powers u/s 263 Id. Commissioner cannot revise an assessment order which is nonest in the eye of law because it would prejudice the right of assessee which has accrued in favour of assessee on account of its income being determined. If Id. Commissioner revises such an assessment order, then it would imply extending/ granting fresh limitation for passing fresh assessment order. It is settled law that by the action of the authorities the limitation cannot be extended. Because the provisions of limitation are provided in the same. 20. In view of above discuss....

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....der. The gist of the reasons recorded by the AO is that the assessee had made investments of about Rs. 4 crore in construction of hotel/resort at Mandarmoni, PurbaMidnapore. It is the further allegation in the reasons recorded that to a notice u/s 133(6) of the Act, the Assessee had in reply admitted investment of only Rs. 3.38 crores in construction of hotel and that source of funds for such construction was out of share capital and secured loan. It is also not disputed that the value of investments as stated by the assessee in its reply to the notice u/s 133(6) of the Act, was duly shown as the investment in construction of hotel with the balance sheet of the assessee. The AO has however inferred that there is a difference in the value of investment in construction of hotel as shown in the books of account and as per the information in possession of the AO which is a sum of Rs. 4 crores. Another reason given by the AO is that the difference in the amount of investment in construction might have been met by the Assessee out of income not disclosed. It has also been mentioned that the source of investment with regard to the actual cost of construction requires investigation. 13. ....

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....ted in the reasons recorded. In the reasons recorded the AO has not disclosed the basis of this conclusion that the assessee made an investment of Rs. 4 crores in the construction of a hotel at Mandarmoni. We find that in this regard that Hon'ble Bombay High Court in the case of Hindustan Lever Ltd., Vs. R.B.Wadkar (2004) 268 ITR 0332 the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the AO to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the AO to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the AO to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the AO. The reasons ....

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....nless the reasons to believe about the escapement of income exist, no recourse can be taken to the provisions of section 147. It was held that where an Assessing Officer ventures to initiate reassessment proceedings with an object of finding some material about the escapement of income, such reassessment cannot legally stand and the law doe s not permit the Assessing Officer to conduct inquiries after the initiation of reassessment ITA No. 671 / KOL/2015 Assessment year: 2008 - 2009 proceedings, to find if there is an escapement of income. It was held that the scope of section 147 cannot encompass such an action under which certain examination is to be conducted for forming a reason to believe as to the escapement of income. If the facts of the present case including especially the reasons recorded by the Assessing Officer for reopening the assessment a reconsidered in the light of the decision of the Coordinate Bench of this Tribunal in the case of Deputy Director of income Tax (International Taxation)-21, Mumbai - vs.- Societe International De Telecommunication (supra), I am of the view that the initiation of reassessment proceeding itself was bad in law and the assessment comp....

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....ned income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to whohad given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents of the letter dated 16.06.2006 of the Director of Income-tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually une....

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....h case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken above." 9. We do not see any reason to differ with the view expressed by the Tribunal. No substantial question of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs. 14. The Jurisdictional High Court in the case of Principal CIT vs G&G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: "12. In the present case, after setting out four entries, stated to have been received by the assessee on a single ....

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....money of beneficiaries like assessee was introduced back in assessee's companies as share capital through entry operators. So, he rightly reopened the assessment of assessee for AY 2009-10 after issuing notice u/s. 148 of the Act, since there was escapement of income because assessee had raised share capital which has not been enquired into when the return was filed. Therefore, the action of AO is legal and justifiable and should not be interfered with. 16. Having heard both parties and after taking into consideration the judicial precedents and contentions raised before us by both the parties, we admit this legal issue as per Rule 27 of ITAT Rules, 1963 raised by the assessee in support of the decision of ld. CIT(A) to find the order of AO to be without jurisdiction. So, in order to appreciate the alternate legal ground raised before us, we need to look into the reasons recorded by the AO before proposing to reopen the assessment which we find placed at page 31 of the paper book, which is reproduced as under: "The office has been informed that Investigation Wing has conducted enquiry on the basis of some credible information in respect of cash deposits in a manner of dubious A/....

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....7 or exercise of Revisional jurisdiction by CIT under section 263 of the Act. Therefore, the Parliament in its wisdom has provided safeguards for exercise of the reopening of assessment jurisdiction to AO; and revisional jurisdiction of CIT by providing condition precedent which is sine qua non for assumption/usurpation of jurisdiction. In the case of reopening of assessment, the reason to believe escapement of income is the jurisdictional fact and law (mixed question of fact and law) and for revisional jurisdiction the order of the AO should be erroneous as well as prejudicial to the revenue. Unless the condition precedent is not satisfied, the AO or the CIT can exercise their reopening jurisdiction or revisional jurisdiction respectively. The legislative history is that in respect to the reopening u/s. 147 of the Act, the Parliament by Direct Tax Laws (Amendment) Act 1987 w.e.f. 01.04.1989 had substituted "for reason to believe escapement of income" to 'for reasons to be recorded by him in writing, is of the opinion'' which gave unbridled subjective satisfaction to the AO was later reversed to 'reason to believe escapement of income'', by the Direct Tax Laws (Amendment) Act, 1989....

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.... 20. From the aforesaid understanding of law governing the issue at hand, we have to examine the reasons already set out above and test whether the condition precedent necessary to usurp the re-opening jurisdiction can be discerned from perusal of the reasons recorded by the AO in the instant case (supra). From the gist of the reasons recorded by the AO, we understand that the AO was informed that investigation wing has conducted enquiry and accordingly he came to know that accounts which stood in the name of certain concerns are fictitious/fake and they are controlled by entry operators. Further the unaccounted cash of beneficiaries were transferred to the back accounts of the beneficiaries through these dubious Accounts of fake entities. Thereafter, the Assessing Officer concludes that the assessee has reportedly enjoyed bogus accommodation entries to the tune of Rs. 4.08 crores in F.Y. 2008-09 and therefore he has reason to belief that Rs. 4.08 crores which is the unaccounted money of the assessee has escaped assessment. An analysis of the reason recorded shows that Assessing Officer got information about the investigation wing study/report about entry operators modus of openin....

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....n reason, the first limb itself is vague and cannot be qualified as a foundation for a prudent person to form a belief that income of assessee has escaped assessment. So, the reasons recorded by AO to reopen is not sufficient to satisfy the requirement of law as laid in section 147 of the Act and, therefore, the assessee succeeds on the legal issue raised by it. 21. For completeness coming to the argument of the Ld. AR, about borrowed satisfaction, it is evident from a reading of the reasons recorded by AO to justify reopening of assessment, show that the AO has taken note of the contents of the information given by Investigation Wing (no details given) as gospel truth against the assessee [without any verification or enquiry] to form a conclusion about escapement of income without independent application of mind by himself is nothing but an action taken by AO based on the strength of borrowed belief of an unknown Investigation Wing's report and not that of AO, which vitiates the very assumption of jurisdiction by AO to re-open the assessment, which finding of us will be clear when we analyze the reasons recorded in detail infra. The information on which the Assessing Officer has ....

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....arlier) which is not sufficient/requirement of law for unscrupulous persons in suspected transactions to convert the unaccounted cash of beneficiaries which were transferred to the bank accounts of the beneficiaries through the dubious bank accounts of fake entities can only raise suspicion in the mind of the AO (which fact we have pointed out earlier) which is not sufficient/requirement of law for reopening of assessment. It has to be kept in mind that the 'reasons to believe' is not synonymous to 'reason to suspect'. 'Reason to suspect' based on an information can trigger an enquiry so that it can be found out whether there is any substance or material to substantiate that there is merit in the information adduced by the Investigation Wing and after post enquiry the AO has to take an independent decision whether to re-open the assessment or not. And at the cost of repetition we say that the AO should not act on dictate of any other authority like in this case from a report from unknown Investigation Wing because then it would be borrowed satisfaction of the jurisdictional fact & law which is not permitted by law and consequently vitiate the assumption of jurisdiction by AO to reo....