TMI Blog2020 (1) TMI 1358X X X X Extracts X X X X X X X X Extracts X X X X ..... Following the reasons for decision in the case of M/s. Ganesh Ganga Investments Pvt. Ltd.[supra] we set aside the Orders of the authorities below and quash the reopening of the assessment. In the result, all the additions stand deleted. - Decided in favour of assessee. - ITA.No.8066/Del./2019 - - - Dated:- 15-1-2020 - Shri Bhavnesh Saini, Judicial Member And Shri N.K. Billaiya, Accountant Member For Assessee : Shri Ashwani Kumar, C.A. Shri Rohit Jain, Advocate, Shri Deepesh Jain, C.A. And Shri Arpit Goel, C.A. For Revenue : Shri Ved Prakash Mishra, Sr. DR ORDER Bhavnesh Saini, This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-2, New Delhi, Dated 13.09.2019, for the A.Y. 2010-2011. 2. Briefly the facts of the case are that return of income for the A.Y. 2010-2011 was filed by the assessee. Notice under section 148 was issued on 27.03.2017 and served upon the assessee. In response to the notice under section 148, assessee filed copy of the return of income declaring loss of Rs.(-)95,916/- already filed on 15.10.2010. The A.O. issued statutory notices for completion of the assessment. Though the assessee attended the procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential in nature, therefore, same cannot be provided or part with as requested by assessee. Learned Counsel for the Assessee, therefore, submitted that A.O. has refused to supply all the Annexures referred to in the reasons, therefore, assessee was not able to file detailed objections to the reopening of the assessment. PB-13 is notice under section 148 in which A.O. has mentioned that notice have been issued after obtaining necessary satisfaction of Addl. CIT/Pr. CIT/Pr. CCIT. He has submitted that it is not clear from the notice as to which Authority has granted approval under section 151 of the I.T. Act. He has referred to PB-43 in which the approval of Addl. Commissioner of Income Tax is blank and that Pr. Commissioner of Income Tax while granting approval has mentioned Yes, I am satisfied . He has submitted that there is no application of mind before granting approval and such approval is not find valid by various Courts. The A.O. has not applied his mind to the facts and circumstances of the case, therefore, the reassessment order is invalid and bad in law. Since complete copy of the reasons along with Annexures have not been supplied to the assessee, therefore, there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SLP Dismissed in [2016] 237 Taxman 378 (SC). 03. United Electrical Co. (P.) Ltd., [2002] 258 ITR 317 (Del.) 04. Yum Restaurants Asia Pte Ltd., vs., DDIT [2017] 397 ITR 665 (Del.) 05. Hirachand Kanuga vs., DCIT [2015] 68 SOT 205 {Mum.). 3.2. He has also relied upon Judgment of Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Company vs., CIT [2009] 308 ITR 38 (Del.) (HC) in which the assessee challenged the validity of the reassessment proceedings under section 147. The Hon ble Delhi High court quashed the proceedings inter alia, held that if reasons are not served within the limitation period of six years, the proceedings initiated will be illegal . Learned Counsel for the Assessee, therefore, submitted that initiation of re-assessment proceedings and approval is invalid, bad in Law and as such liable to be quashed. 4. On the other hand, Ld. D.R. relied upon the Orders of the authorities below and submitted that reasons were supplied to the assessee. The crux of SFIO (Inv.) Wing of the Income Tax Department is mentioned in the reasons. The approval is valid in law because there is no requirement to use specific language while granting sanction/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arks have been mentioned by him despite his signature appeared thereon. The Pr. CIT while granting sanction/approval to reasons recorded for reopening of the assessment has simply mentioned Yes, I am satisfied . Such type of approval was not found valid in many cases. The ITAT Delhi C-Bench in the case of M/s. Ganesh Ganga Investments Pvt. Ltd., Delhi vs., ITO, Ward-10(1), New Delhi in ITA.No.1579/Del./2019 for the A.Y. 2010-2011 vide Order Dated 07.11.2019 quashed the reopening of the assessment in the similar circumstances. The entire order is reproduced as under : IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES C : DELHI Shri Bhavnesh Saini, Judicial Member And Shri Prashant Maharishi, Accountant Member ITA.No.1579/Del./2019 M/s. Ganesh Ganga Investments Pvt. Ltd. Versus The Income Tax Officer, For Assessee : Shri Raj Kumar, C.A. And Shri Rajeev Ahuja, Advocate Shri Sumit Goel, C.A. For Revenue : Ms. Parmit M. Biswas, CIT-DR 07.11.2019 ORDER Bhavnesh Saini, This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-4, New Delhi, Dated 26.12.2018, for the A.Y. 2010-2011. 2. Briefly the facts of the case are that assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee denied receipt of any accommodation entry from any such person. The A.O, however, rejected the objections of the assessee and proceeded to make assessment in the matter. The A.O. noted that in assessment year under appeal, assessee has received ₹ 11,05,00,000/- on account of share capital and share premium from 38 parties as noticed during the course of assessment proceedings. The summary of the same is reproduced in the assessment order. The assessee was asked to file complete postal address, PAN and other details of these 38 parties. The A.O. also issued notice under section 133(6) to all 38 share subscriber companies and asked for the details from them. The A.O. received replies from 26 companies. In 06 cases, although notice issued under section 133(6) of the I.T. Act were issued as per new name as well as old name of the company, but, the same were returned back un-served by the Postal Authorities. In the remaining 06 cases, no replies have been received. The A.O. noted that replies received from 26 parties under section 133(6) have been analysed and these companies furnished copy of the acknowledgment of ITR, balance sheet as on 31.03.2010, P L A/c, copy of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer 3.2. In the case of Pr. CIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), the Hon ble Delhi High Court held as under : Reassessment notice condition precedent recording of reasons to believe that income has escaped assessment mere reproduction of investigation report in reasons recorded absence of link between tangible material and formation of ceding illegal Income Tax Act, 1961, Sec.147, 148 3.3. In the case of Pr. CIT vs., G And G Pharma India Ltd., [2016] 384 ITR 147 (Del.), the Hon ble Delhi High Court held as under : Reassessment condition precedent application of mind by assessing officer to materials prior to forming reason to believe income has escaped assessment - No independent application of mind to information received from Directorate of Investigation and no prima facie opinion formedreassessment order invalid . 3.4. In the case of Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), the Hon ble Delhi High Court held as under : No independent application of mind by the Assessing officer but acting under information from Inv. Wing - Notice U/s. 147 to be quashed . 3.5. The assessee also submitted that assessment is barred by time. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. As per annexure. Sd/- H.K. Sharma Dated: 29.03.2017. ITO, Ward-10(1), New Delhi. 12. Whether the Addl. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of notice u/s.148. In view of the facts notice u/s.148 to be issued. 13. Whether the Pr. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of notice u/s.148. Yes I am satisfied that it is a fit case for issue of notice u/s.148 of the I.T. Act, 1961. Sd/-S.K. Mittal, Pr. Commissioner of I. Tax, New Delhi. 3.6. This approval is not valid in Law because it would show that approval have been granted without application of mind. Learned Counsel for the Assessee relied upon Judgment of the Hon ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd., vs. Commissioner of Income Tax 258 ITR 317 in which approval by Addl. Commissioner of Income Tax under section 151 was given in the following terms Yes I am satisfied that it is a fit case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. Learned Counsel for the Assessee reiterated the submissions made before the authorities below and referred to reasons recorded in this case for reopening of the assessment, copy of which is filed at page-15 of the PB. PB29 is approval/sanction granted by the Pr. Commissioner of Income Tax, New Delhi. PB-6 is balance-sheet to show that in preceding assessment year the share capital was of ₹ 3.01 crores and in assessment year in increased to ₹ 14.06 crores. Thus, about ₹ 11 crores have increased and this fact was also disclosed to the Revenue Department. Such details are filed in the return of income. No verification could be allowed in the garb of proceedings under section 148 of the Income Tax Act, 1961. The name of M/s. Management Services Pvt. Ltd., in the reason from whom alleged entry have been taken by the assessee do not figure in the appellate order because such party does not exist. M/s. Shubh Propbuild Pvt. Ltd., has been mentioned in the reasons do not belong to Shri Himanshu Verma. In assessment order name of M/s. Management Services Pvt. Ltd., do not appear. PB-13 of the assessment order referred to the statement of Shri Himanshu Verma in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not legally valid. He has relied upon Judgment of Hon ble Delhi High Court in the case of Commissioner of Income Tax vs., Kamdhenu Steel Alloys Ltd., 248 CTR 33 and other decisions as was relied upon before the authorities below. The amount received from 30 companies is ₹ 8.13 crores only out of total amount of ₹ 11.05 crores. Therefore, there is no other material on record to justify the addition. He has submitted that A.O. cannot ask to explain source of the source. Learned Counsel for the Assessee, therefore, submitted that reopening of the assessment is invalid and no addition could be made against the assessee even on merits. 7. The Ld. D.R. on the other hand relied upon the Orders of the authorities below and submitted that A.O. dealt with the objections of the assessee, but, for re-assessment proceedings no manner is provided as to how sanction is to be granted. A.O. recorded details in the reasons on which Pr. Commissioner of Income Tax was satisfied. Therefore, reopening of the assessment is valid because information was received from Investigation Wing that assessee has received accommodation entries. The name of assessee was appearing. Sufficiency of rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... processed u/s 143(1). Information was forwarded to this office through the Addl.CIT, Range-10, New Delhi that search seizure action was conducted by Inv. Wing at the office of Sh. Himanshu Verma where various incriminating documents/materials were seized during the course of search. During the post search investigation and perusal of seized documents it was observed that Sh. Himanshu Verma was engaged in the business of providing accommodation-' entries by providing cheques/PO/DD in lieu of cash to a large number of beneficiary companies thorough various paper and dummy companies floated and controlled by them. It was also evidently established by the Investigation Wing that Sh Himanshu Verma is known entry providers and is the actual controller of more than 100 companies/proprietary firms/partnership firms. They control these entities through various persons by appointing them as directors/partners/proprietors apart from nominating them as authorized signatories for maintaining the bank accounts of these entities but in fact all these persons act only as their stooges. The cash received from the recipient parties for providing the accommodation entries was first deposite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tments, 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 business is to help assessees bring back their unaccounted money into their books of account. Thus, there is a direct link between the information/available with the department and the income escaping assessment. I have, therefore, reasons to believe that income to the extent of ₹ 2,45,00,000/- has escaped assessment relevant to A.Y.2010-11. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act 1961. Moreover, as the case pertains to a period beyond four years from the end of relevant assessment year, for issuing the notice u/s 148, necessary approval / sanction may kindly be accorded by the Pr. Commissioner of Income Tax, Delhi-4, New Delhi in view of the amended provision of section 151 w.e.f 01.06.2015. Sd/- H.K. Sharma, Dated : 27.03.2017. ITO, Ward-10(1), New Delhi. 8.1. PB-29 is the sanction granted by Pr. Commissioner of Income Tax for reopening of the assessment in which it is mentioned as under : 13. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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. The petition was, thus, allowed and impugned notice was quashed. 8.3. The Hon ble Supreme Court approving the Judgment of Hon ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur (MP) vs., S. Goyanka Lime Chemicals Ltd., [2015] 46 taxmann.com 313 held as under : SLP dismissed against High Court s ruling that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid. 8.4. Similar view have been taken by Hon ble Madhya Pradesh High Court in the case of Mr. Arjun Singh vs., Asst. Director of Income Tax [2000] 246 ITR 363 (MP) (supra), copy of which is filed at page-97 of the paper book. The ITAT, Delhi Bench in the case of M/s. Pioneer Town Planners Pvt. Ltd., vs., DCIT (supra) in paras 7 to 22 on similar facts relating to entry provider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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) No.3063/2017 in the case of Smt. Kalpana Shantilal Haria vs. ACIT dated 22.12.2017, sanction for issuing a reopening notice cannot be mechanical but has to be on due application of mind. Sanction accorded despite mention of non-existent section in the notice is prima facie evidence of non-application of mind on the part of the sanctioning authority. Their lordship in this judgment categorically held that such defect cannot be cured u/s. 292B of the Act. 10. The ld. AR placed reliance on the decision of Hon'ble High Court of Delhi dated 31.08.2017 in WP(C) No. 614/2014 in the case of Yum Restaurants Asia Pte Ltd. vs. DDIT it was held that the glaring mistakes in the proforma for approval is the valid ground for quashing the assessment on the premise of non-application of mind by all the authorities involved in the process of recording reasons and providing satisfaction/s. 151 of the Act. Further placed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 date in the reasons recorded which shows casual approach of the AO while recording the reasons. The ld. AR submitted that as per decision of Hon ble Jurisdictional High Court of Delhi in the case of PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677 (Del) if the reasons failed to demonstrate the link between the tangible material and formation of the reasons to believe that the income has escaped assessment then, it would amount to borrowed satisfaction and it has to be presumed that there is no independent application of mind by the AO to the tangible material which forms the basis of the reason to believe that income has escaped assessment. The ld. AR submitted that from the three pages of reasons recorded, it is discernable that in first four paras the AO has noted facts of the information received from DDIT (investigation), Faridabad, in para 6 modus operandi of entry providers has been noted thereafter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roval 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 same as mechanical and without application of mind and the same cannot be termed or alleged as invalid or bad in law. The ld. DR submitted that in column 12 of approval the ACIT Shri Sarabjeet Singh has granted valid approval by noting that Yes, I am satisfied which is sufficient to comply with the provisions of s. 151 of the Act. He also submitted that if there is any defect therein the same is rectifiable u/s. 292B of the Act and thus, the reassessment proceedings and orders cannot be challenged on this count. The ld. DR further submitted that the format/proforma for granting approval u/s. 151 of the Act has been designed by the Department and there is no role of AO in framing and designing the same and the allegation of non-application of mind on the basis of such proforma or words used by the approving authority cannot be made. 17. The ld. DR submitted that the team of Revenue officers work under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act by writing that Yes, I am satisfied which is not sufficient to comply with the requirement of s. 151 of the Act. As per ratio of the decision of High Court of Madhya Pradesh in the case of CIT v. M/s. S. Goyanka Lime and Chemical Ltd. (supra), where the JCIT/ACIT has only recorded Yes, I am satisfied then, it has to be held that the approving authority has recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice u/s. 148 of the Act for reopening of assessment and in this situation initiation of reassessment proceedings and reopening of assessment has to be held as invalid and bad in law. Therefore, we are inclined to hold that the reopening of assessment and notice u/s. 148 of the Act are bad in law and consequently all subsequent proceedings in pursuant thereto are also bad in law and the same cannot be held as valid and sustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 how the conclusions flow there from then there is no independent application of mind by the AO to the tangible material which form the basis of the reasons to believe that income has escaped assessment. 22. In the present case, as we have noted above, the conclusion recorded by the AO in para 9 10 of the reasons is based on the information received from the director of investigation wing and the AO without making any effort to examine and discuss the material received from the Investigation Wing and without application of the mind to the same formed a reason to believe that income had escaped assessment. This shows that the AO proceeded to initiate reassessment proceedings on the basis of borrowed satisfaction without any application of mind and exercise on the information received from the Investigation Wing of the Department. Therefore, we have no hesitation to hold that the AO proceeded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of the information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of ₹ 2.45 crores, but, ultimately made an addition of ₹ 11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained 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 the addition on merit which is left with academic discussion only. 9. In the result, appeal of Assessee allowed. 5.2. Considering the facts of the case in the light of above decisions, it is clear that all the documents and Annexures referred to in the reasons have not been supplied to the assessee and that approval granted by Pr. CIT is invalid. Therefore, reopening of the assessment is wholly invalid and void abinitio. Resultantly, the reopening of the assessment is liable to be quashed. Following the reasons for decision in the case of M/s. Ganesh Ganga Investments Pvt. Ltd., vs., ITO, Ward-10(1), New Delhi (supra), we set aside the Orders of the authorities below and quash the reopening of the assessment. In the result, all the additions stand deleted. 6. In the result, appeal of Assessee allowed. Order pronounced in the open Court. - - TaxTMI - TMITax - Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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