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TMI Blog2020 (1) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... oduced the copy of the reasons recorded under section 148 of the I.T. Act. Thereafter, A.O. noted that assessee was provided copy of the reasons and objections raised have been disposed of. The assessee has filed submissions giving confirmation copy of the account and copy of the ITR in respect of the parties from whom share capital/share premium were raised during the year under consideration. The A.O. issued notices under section 133(6) of the I.T. Act for verification. Only one party responded. The assessee has not produced the Directors of the concerned parties. Therefore, the A.O. made addition of Rs. 7 crores under section 68 of the I.T. Act and also made addition of Rs. 14 lakhs on account of Commission paid @ 2%. The assessment order was passed under section 147/143(3) of the I.T. Act. The assessee challenged the reopening of the assessment as well as additions on merit before the Ld. CIT(A). The detailed submissions of the assessee are reproduced by the Ld. CIT(A), however, the Ld. CIT(A) dismissed the appeal of assessee. 3. Learned Counsel for the Assessee referred to proceedings recorded for reopening of the assessment, copy of which is filed at page-16 of the PB and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of SABH Infrastructure Ltd., vs. ACIT [2017] 398 ITR 198 (Del.) (HC) in which the Hon'ble Delhi High Court has directed the Revenue Department to adhere to the following guidelines in the matter of reopening of the assessment. "(i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the Assessing Officer for obtaining the approval of the Superior Officer should itself be provided to the assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the Assessing Officer to the assessee is to be avoided. (ii) the reasons to believe ought to spell out all the reasons and grounds available with the Assessing Officer for reopening the assessment - especially in those cases where the first proviso to section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the Assessing Officer on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material on record. It is well settled Law that validity of re-assessment proceedings shall have to be determined with reference to the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee filed copy of the reasons recorded for reopening of the assessment at pages 16 to 22 of PB. The same reads as under: 5.1. The reasons are un-dated. The A.O. in the assessment order has reproduced the same reasons without application of his mind to the relevant material and thereafter by referring to notice under section 133(6) and non-production of the Directors of the Investor Companies made the addition against the assessee. The A.O. in the reasons has mentioned that information was forwarded by Serious Fraud Investigation Office, Delhi which were received through Pr. CIT vide Letter Dated 05.01.2017. The A.O. has also referred to such report based on search and seizure in the case of third parties. The assessee made a request to the A.O. to supply complete copy of the reasons along with Annexures and Report of SFIO Dated 05.01.2017 and approval granted by Pr. CIT. The A.O, however intimated that since SFIO report is confidential, therefore, same cannot be provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, interest on loan and profit on sale of investment also. 2.1. An information was received from the O/o. CIT, Central-2, New Delhi, vide letter Dated 14.02.2014 mentioning therein that a search/survey operation under section 132/133A of the Income Tax Act, 1961 was conducted by the Investigation Wing at the business and residential premises of Shri Himanshu Verma and his Group on 29.03.2012 wherein after intensive and extensive inquiry and examination of documents seized during the course of search, it has been gathered that the said persons are involved in providing accommodation entries to the persons who were named in the report. During the course of inquiry made by the Investigation Wing, it also came to the notice that Shri Himanshu Verma was engaged in the business of providing accommodation entries through cheques/PO/DD in lieu of cash to large number of beneficiary companies through various paper and dummy companies floated and controlled by him. The cash received from the parties for providing accommodation entries was first deposited in the account of these dummy firms/companies in the guise of cash received against the bogus sales duly shown in the books of account. O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso noted that none of the parties explained as to why high premium was paid and parties have not explained source of the investment. The A.O. also noted that 26 parties filed copy of the ITR, balance sheet, P & L A/c and bank statement, but, it shows that their income shown is very meagre in the return of income. The assessee was asked to produce the persons/Principal Officers of these entities for verification. However, assessee did not produce the same. The A.O. also analysed the statement of Shri Himanshu Verma through whom amount have been received and the A.O. ultimately rejected the explanation of assessee on genuine share application money received from 38 parties and made addition of Rs. 11.05 crores. The A.O. further noted that assessee has paid commission in cash for arranging these entries, on which, addition was made of Rs. 22,10,000/- i.e., @ 2% of the amount in question which was also added to the returned income. 3. The assessee challenged the reopening of the assessment as well as additions on merit before the Ld. CIT(A). It was contended that assessment framed on the basis of material / documents / information received from third party and without application of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he approval as under : "Form for recording the reasons for initiating proceedings u/s 147 and for obtaining the approval of the Ad CIT/CIT/CBDT 1. Name and address of the assessee M/s. Ganesh Ganga Investment P. Ltd., A-52, Top Floor Street No.l, Guru Nanak Pura, Laxmi Nagar, Delhi 110092 2. PAN AAACG2710J 3. Status Company 4. Ward/Circle Ward-10(1) 5. Asstt. Year in respect of which it is proposed to issue notice u/s 148 2010-11. 6. The quantum of income which has escaped assessment Rs. 2,45,00,000/- 7. Whether the provisions of section 147(a) or 147(b) are applicable or both the sections are applicable. 147(b) 8. Whether the assessment is proposed to be made for the first time. If the reply is affirmative, please state (a) Whether any voluntary return has already been filed. (b) If so, the date of filing of return Yes Yes 04.02.2011 9. If answer to item 8 is negative, please state (a) Income originally assessed NA (b) Whether it is a case of under assessment, at lower rate, assessment which has been made the subject of excessive relief or allowing excess loss/depreciation. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.) in which also similarly worded sanction under section 148 was not found valid. The assessee also relied upon Judgment of Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax vs., N.C. Cables Ltd., [2017] 88 taxmann.com 649 (Del.) in which also on similarly worded sanction, it was held that re-assessment was not valid. The assessee also submitted that since no right of cross-examination have been allowed to the statement of Shri Himanshu Verma, therefore, such statement cannot be read in evidence against the assessee. He has relied upon Judgment of Hon'ble Supreme Court in the case of M/s. Andaman Timber Industries vs., Commissioner of Central Excise, Kolkata-II reported in 281 CTR 241. 4. The Ld. CIT(A), however, did not accept the contention of assessee and confirmed the reopening of the assessment. The assessee also made submissions on merit to show that addition is wholly unjustified. However, the Ld. CIT(A) did not accept the contention of assessee and upheld the addition on merit as well. The appeal of assessee was accordingly dismissed. 5. The assessee in the present appeal challenged the reopening of the assessment under section 147/148 of the I.T. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case also relates to entry provided by Shri Himanshu Verma. Learned Counsel for the Assessee submitted that the A.O. issued notices to all the parties under section 133(6) of the I.T. Act. In response to the same, 26 parties filed reply supported by documentary evidences to prove genuine share application money have been received. The A.O. did not take help of any handwriting export before forming any opinion. If replies were not in order, assessee should have been confronted with the material so that assessee could rebut the same. Therefore, such fact could not be taken adversely against the assessee. The assessee never received notice Dated 11.12.2017 for production of the parties for examination. In reasons 06 parties are mentioned which belong to Shri Himanshu Verma, but, in his statement he says 08 parties, but, the A.O. made addition for 38 parties. A.O. made the addition only on the statement of Shri Himanshu Verma, but, the parties did not belong to him. Learned Counsel for the Assessee submitted that since approval is not in accordance with Law, therefore, reopening of the assessment is bad in Law and relied upon the same Judgments as were relied upon before Ld. CIT(A). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t material on record to justify the initiation of re-assessment proceedings. The assessee failed to prove that no notice Dated 11.12.2017 have been received. The Ld. D.R. relied upon the following decisions. 1. PCIT vs., Paramount Communication (P.) Ltd., 2017TIOL-253-SC-IT. 2. PCIT vs., Paramount Communication (P.) Ltd., [2017] 392 ITR 444 (Del.) (HC) 3. Aradhna Estate (P.) Ltd., vs. DCIT [2018] 91 taxmann.com 119 (Gujarat) (HC). 4. Pushpak Bullion (P.) Ltd., vs. DCIT [2017] 85 taxmann.com 84 (Gujarat) (HC). 5. Ankit Financial Services Ltd., vs. DCIT [2017] 78 taxmann.com 58 (Gujarat) (HC). 6. Aaspas Multimedia Ltd., vs. DCIT [2017] 83 taxmann.com 82 (Gujarat) (HC). 7. Ankit Agrochem (P.) Ltd., vs. JCIT [2018] 89 taxmann.com 45 (Rajasthan) (HC). 8. Yogendrakumar Gupta vs., ITO [2014] 227 Taxman 374 (SC). 8. We have considered the rival submissions. It is well settled Law that validity of re-assessment proceedings is to be examined with reference to the reasons recorded for reopening of the assessment. The Counsel for Assessee has filed copy of the reasons recorded for reopening of the assessment at Page-15 of the Paper Book which reads as under : "M/s. Ganesh Ga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e list of entries that the assessee M/s Ganesh Ganga Investment P. Ltd. has taken following accommodation entries during the financial year 2009-10 :- S.No. Amount Conduit companies through which cheque issued. 1. 4000000 Shubh Propbuild P Ltd., 2. 4000000 Jaguar Softech P. Ltd., 3. 4000000 Join Fashion P. Ltd., 4. 4500000 Management Services P. Ltd., 5. 4000000 Greenvision Construction P. Ltd., 6. 4000000 USK Exim P. Ltd., TOTAL 2,45,00,000/- On the basis of the reports received from the Investigation Wing, I have downloaded the return from the ITD portal and verified the records and it is clear that the assessee company has not disclosed fully and truly all material facts necessary for its assessment for the assessment year under consideration as it emerges that transactions shown in the return are not genuine. Apart from the above the assessee company is not doing any real business and keeping in view the huge investments, disallowances u/s 14A read with rule 8D also applicable in the case. The statement given by Shri Himanshu Verma also establishes the link with the self-confessed "accommodation entry providers", whose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not genuine and its income had escaped assessment on that account. Therefore, the impugned action of the Assessing Officer could not be sustained. Even the Addl Commissioner had accorded his approval for action under section 147 mechanically. If the Addl. Commissioner had cared to go through the statement of said V 'perhaps he would not have granted his approval, which is mandatory in terms of proviso to subsection (1) of section 151 as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The Legislature has provided certain safeguards to prevent arbitrary exercise of powers by an Assessing Officer particularly after a lapse of substantial time from completion of assessment. The power vested in the Commissioner to grant or not to grant the approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. In the instant case, there had been no application of mind by the Addl. Commissioner before granting the approval. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. He also contended that the order under appeal is bad in law as the assessing officer has passed the order of assessment u/s 143(3) r/w. s. 147 of the Act without issuing notice u/s 143(2) of the IT Act. 9. The ld. AR drew our attention towards copy of proforma of obtaining approval u/s. 151 of the Act along with reasons recorded, which are placed at pgs. 16-18 of the assessee's paper book, submitted that in column 12 Addl. CIT has granted approval without application of mind by writing only 'Yes, I am satisfied'. The ld. AR submitted that as per decision of Hon Madhya Pradesh High Court in the case of CIT vs. M/s. S. Goyanka Lime and Chemicals Ltd. 231 Taxman 0073 (MP), where the Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice u/s. 148 of the Act and has only recorded so "Yes, I am satisfied" then, the reopening assessment has to be held as invalid. The ld. AR also placed reliance on the decision of ITAT, Delhi in the case of ITO vs. Virat Credit & Holdings Pvt. Ltd. in ITA No.89/Del/2012 dated 09.02.2018. The ld. AR submitted that as per decision of Hon'ble High Court of Bombay in WP (L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by ITAT, Bombay in the case of Shri Hirachand Kanuga vs. DCIT in ITA No.4261 & 4262/2012 dated 27.02.2015. 12. On these submissions, the ld. DR could not controvert the facts that the AO disposed of objections of the assessee by way of passing order on 12.12.2016 and impugned reassessment order u/s. 143(3) r/w s. 147 of the Act was passed only after 10 days of disposal of objections. These facts trigger the ratio of the decision of Hon'ble Bombay High Court in the case of Asian paints (supra), wherein their lordship directed that the AO to wait for four weeks to begin assessment after disposing of the objections of the assessee and non-compliance the same renders assessment proceedings void and bad in law. Present impugned reassessment order cannot be held sustainable and valid as the AO has passed the same immediately after 10 days of disposal of/dismissal of objection of the assessee which is clear violation of direction of Hon'ble High Court of Bombay in the case of Asian paints (supra) and legal contention of the assessee on this issue are found to be acceptable and we hold so. 13. The ld. AR drew our attention towards reasons recorded and submitted that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement of s. 147 of the Act that AO should apply independent mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. 15. The ld. AR submitted that as per ratio of the decision of Hon'ble High Court of Delhi in the case of PCIT vs. RMG Polyvinyl (I) Ltd. reported in 396 ITR 5 (Del), where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not be said to be tangible material as per se and, thus, reassessment on said basis was not justified. Finally, the ld. AR submitted that the impugned initiation of reassessment proceedings, notice and all consequent proceedings and orders are not valid and bad in law therefore, the same may kindly be quashed. 16. Replying to the above, the ld. DR submitted that the copy of proforma for obtaining approval u/s. 151 of the Act and reasons recorded by the AO are the internal departmental communication between the PCIT and ACIT and the PCIT being administrative head and senior to the ACIT has power to peruse the approval u/s. 151 of the Act and his sings thereon does not make the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has acted on suspicion only and not on any credible input available to him through DDIT (investigation) information or otherwise on the basis of any exercise or application of mind by himself. Therefore, the reassessment proceedings and all consequent orders are not sustainable and bad in law. Reiterating his earlier arguments, the ld. AR vehemently pointed out that the approval/sanction given in para 12 of the proforma is not a valid sanction as per ratio of the various decisions including decision of Hon'ble High Court of Madhya Pradesh in the case of S. Goyanka Lime and chemicals Ltd. (supra), which has been upheld by Hon'ble Supreme Court by dismissing SLP of the Revenue reported in 237 Taxman 378 (SC) therefore, initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act, reassessment proceedings and all consequent orders may kindly be quashed. 19. On careful consideration of above rival submissions, first of all, we may point out that from the proforma of approval u/s. 151 of the Act placed at pgs. 16-17 of the assessee paper book, it is clear that in column 12 the ACIT has granted approval for the issue of notice u/s. 148 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to believe that income has escaped assessment. 21. In view of decisions of Hon'ble High Court of Delhi in the cases of PCIT vs. Meenakshi Oversaes (supra), PCIT vs. G&G Pharma (I) Ltd. (supra) and decision in the case of PCIT vs. RMG Polyviny (I) Ltd. (supra), where information was received from investigation wing that assessee was beneficiary of accommodation entries but no further inquiry was undertaken by AO, said information could not be said to be tangible material per se and, thus, reassessment on said basis was not justified. In the case of Meenakshi Overseas (supra), their lordship speaking for the Hon'ble Jurisdictional High Court held that where the reasons recorded by the AO failed to demonstrate the link between the tangible material and the formation of the reasons to believe that income has escaped assessment then, indeed it is a borrowed satisfaction and the conclusion of the AO based on reproduction of conclusion drawn in the investigation report cannot be held as valid reason to believe after application of mind. In this judgment their lordship also held that where nothing from the report of investigation wing is set out to enable the reader to appreciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad in Law. We rely upon Judgment of Hon'ble Punjab & Haryana High Court in the case of Atlas Cycle Industries 180 ITR 319 (P&H). It is well settled Law that note already filed with return disclosing nature of capital receipt and no other tangible material found, therefore, reopening of the assessment under section 148 was quashed. We rely upon Judgment of Hon'ble Delhi High Court in the case of CIT vs., Atul Kumar Swami [2014] 362 ITR 693 (Del.) and Judgment of Hon'ble Allahabad High Court in the case of Kanpur Texel P. Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs., Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon'ble Rajasthan High Court has held that "reasons must be based on new and tangible materials. Notice based on documents already on record, 148 not valid." In the instant case under appeal, the A.O. has reproduced the information received from Investigation Wing and reproduced the same in the reasons recorded under section 148 of the I.T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the party i.e., M/s. Management Services Pvt. Ltd., do not exist and that M/s. Shubh Propbuild Pvt. Ltd., do n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we are of the view that reopening of the assessment is bad in law and that sanction/approval granted by Pr. Commissioner of Income Tax is also invalid. We may also note that vide Order sheet Dated 23.08.2019 the case was re-fixed for hearing because the Ld. D.R. argued that approval have been granted by Commissioner of Income Tax after due discussion of the matter and perusal of the relevant information and thereafter approval in prescribed proforma sent to the A.O. and he has mentioned that I am satisfied. However, no record was produced. Therefore, this case was re-fixed for fresh hearing. However, on the date of hearing no such record have been produced for the inspection of the Bench. Therefore, satisfaction recorded by the Pr. Commissioner of Income Tax is invalid and without application of mind. Therefore, the reopening of the assessment is invalid and bad in Law and cannot be sustained in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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