TMI Blog2021 (2) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing the decision of Hon ble Bombay High Court in the case of Kalpana Shantilal Haria [ 2018 (1) TMI 195 - BOMBAY HIGH COURT] . Following the same reasons for decision, we set aside the Orders of the authorities below and quash the reopening of the assessment in both the assessment years under appeals. All additions stand deleted. Accordingly, appeals of the Assessee are allowed. - ITA. Nos. 3869 And 3870/Del./2018 - - - Dated:- 1-2-2021 - Shri Bhavnesh Saini, Judicial Member And Shri B.R.R. Kumar, Accountant Member For the Assessee : Shri Suresh K. Gupta, C.A. For the Revenue : Shri Prakash Dubey , Sr. DR ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-22, New Delhi, Dated 26.04.2018, for the A.Ys. 2009-2010 and 2010-2011. 2. We have heard the Learned Representatives of both the parties through video conferencing and perused the findings of the authorities below. 3. In both the appeals, the assessee challenged the initiation of re-assessment proceedings under section 147/148 of the I.T. Act, 1961, validity of sanction granted under section 151 of the I.T. Act, 1961 and addition of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in para 7 A.O. has mentioned Section 147(b) of the I.T. Act is applicable for reopening of the assessment, though such Section does not exist in the statute on the day of recording of the reasons for reopening of the assessment. Column Nos.8 and 9 above are Blank and did not provide any details. It did not say if assessee has filed any return earlier and whether assessee was assessed to tax prior to recording of the reasons, though the fact remain that assessee filed return of income voluntarily for the assessment year under appeal on 31.10.2007 through e-filing and such record was available with the A.O, therefore, non-mentioning of the correct fact would lead to the conclusion that no material was available before A.O. to come to the conclusion that there is escapement of income based on the facts. Similarly, the Addl. CIT, without pointing-out the mistake and error in the reasons recorded above, in a most mechanical manner granted sanction to the reopening of the assessment. It is a settled principle of Law that sanction granted by the higher authority for issuing of reopening notice has to be on due application of mind. It cannot be a mechanical approval without examinin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while taking a sanction from the Joint Commissioner of Income Tax but whether there was due application of mind by the Joint Commissioner of Income Tax while giving the necessary sanction for issuing the impugned notice. It is a settled principle of law that sanction granted by the higher Authority for issuing of a reopening notice has to be on due application of mind. It cannot be an mechanical approval without examining the proposal sent by the Assessing Officer. Prima facie, it appears to us that if the Joint Commissioner of Income Tax would have applied his mind to the application made by the Assessing Officer, then the very first thing which would arise is the basis of the notice, as the provision of law on which it is based is no longer in the statute. Non pointing out the mistake / error by the Joint Commissioner of Income Tax on the part of the Assessing Officer is prima facie evidence of non-application of mind on the part of the sanctioning authority while granting the sanction. 6.2. The ITAT Delhi G-Bench, New Delhi in the case of Shree Balkishan Agarwal Glass Industries Ltd., Delhi vs., DCIT, Circle-8(1), New Delhi (supra) following the Order of ITAT Delhi Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 500000 Neeraj A-148 22 AVAIL Shri Balkishan Agarwal Glass Industries Ltd, ABN PIO No. 947829 11-Nov-04 500000 Neeraj A-148 22 AVAIL Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 947830 11-Nov-04 500000 Neeraj A-148 23 GRAPH Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No. 947827 11-Nov-04 500000 Neeraj A-148' 23 GRAPH Shri Balkishan Agarwal Glass Industries Ltd. ABN PIO No! 947826 11-Nov-04 500000 Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 143(3) has been done earlier. The assessment record is being submitted for kind perusal and approval of the Addl. Commissioner of Income-tax, Range-8, New Delhi according to section 151(1) of the IT Act, 1961 for issuance of notice u/s 148 of the IT Act. Sd/- (Nishtha Tiwari) Dy. Commissioner of Income Tax Circle-8(1), New Delhi 24. We find, in the performa for recording reasons for initiating proceedings under section 148 and for obtaining approval of the Addl. CIT, the AO at para 7 of the performa has mentioned that the assessee has not filed the return voluntarily. The form for recording reasons for initiating the proceedings is reproduced hereunder for the sake of clarity:- 25. A perusal of the above shows that at clause 7(a) the AO has categorically mentioned that no return has been filed by the assessee. However, a perusal of the paper book page 1 shows that the assessee has duly filed its return of income on 31.3.2006 declaring total loss of ₹ 2,79,76,596/- vide receipt number 0851001128. A perusal of Page 3 of the paper book shows that the return was processed under section 143(1) on 26th July 2006. Thus, it is seen t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urn has been filed by the assessee and, thus, proceeded to reopen the assessment on wrong appreciation of facts on record. 26. We further find the Hon ble Delhi High Court in the case of BPTP vs PCIT, vide Writ Petition No.13803/2018, order dated 11th January 2020, has held that if the AO has failed to perform its statutory duty, he cannot review his decision and reopen on a change of opinion. The reopening is not an empty formality. There has to be relevant tangible material for the AO to come to the conclusion that there is escapement of income and there must be a live link with such material for the formation of the belief. Mearly using the expression failure on the part of the assessee to disclose fully and truly all material facts is not enough. The reasons must specify as to what is the nature of default or failure on the part of the assessee. Similarly The Hon ble Bombay High Court in the case of Anand Developers vs. ACIT, vide Writ Petition No. 17/2020, order dated 18th February, 2020 has held that a mere bald assertion by the AO that the assessee has not disclosed fully and truly all material facts is not sufficient. The AO has to give details as to which fact or th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 provided to the assessee. Thus, the complete Annexures to the reasons were not provided to the assessee and A.O. has also failed to provide copy of the report dated 05.01.2017 to the assessee which is the basis for reopening of the assessment. Assessee cannot be given surprise to file objections without providing all the relevant material. The report Dated 05.01.2017 is the basis for reopening of the assessment and since it is not confronted and provided to assessee, the assessee may not be able to file proper objections to the reopening of the assessment. Thus, the direction given in the case of SABH Infrastructure Ltd., vs., ACIT (supra), have not been applied because it is the duty of the A.O. to provide all the documents and reports which are part of the reasons to the assessee before taking steps into the matter. Further the Addl. CIT while granting or forwarding copy of the reasons to the Pr. CIT for his approval did not mention any fact in the proforma which is blank and no remarks h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential 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. On the basis of the material available on record, the A.O. after recording reasons for reopening of the assessment, issued notice under section 148 to the assessee on 31.03.2017 which was served upon the assessee. The assessee objected to the reopening of the assessment and requested to provide copy of the approval of Competent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 ₹ 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 mind by the A.O, therefore, whole assessment is invalid and bad in law. It was further submitted that assessee has shown all the amounts in his books of account and return of income filed with the Department. The A.O. has reopened the assessment by mentioning in the reasons that assessee has received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment 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 ₹ 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 Yes (a) Whether any voluntary return has already been filed. Yes (b) If so, the date of filing of return 04.02.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax before granting the approval. The assessee also relied upon Judgment of Hon ble Supreme Court in the case of Commissioner of Income Tax vs., S. Goyanka Lime Chemical Ltd., [2015] 64 taxmann.com 313 (SC) approving the Judgment of Hon ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur vs., S. Goyanka Lime Chemical Ltd., [2015] 56 taxmann.com 390 (M.P.) in which the Departmental SLP has been dismissed on the same reason because the Joint Commissioner of Income Tax recorded satisfaction in a mechanical manner and without application of mind. The assessee also relied upon Judgment of Hon ble Madhya Pradesh High Court in the case of Arjun Singh vs., ADIT [2000] 246 ITR 363 (M.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 reassessment 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. The statement of Shri Himanshu Verma was not subjected to cross-examination on behalf of assessee, despite making a request to the A.O. [PB-19]. In the statement of Shri Himanshu Verma filed on record, no such companies have been mentioned, therefore, no adverse inference could be drawn against the assessee. The assessee did not receive any notice for production of the parties before A.O. There is no evidence on record of any payment of commission paid by assessee for arranging share capital. Learned Counsel for the Assessee relied upon Order of the ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., vs. DCIT ITA.No.132/Del./2018 Dated 06.08.2018 in which in similar circumstances the re-assessment have been quashed which 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving meagre income. The assessee did not prove genuineness of the transaction in the matter. The A.O. made enquiry from Investors and assessee did not produce parties before A.O. Even a premium have been charged for allotment of shares for which no reasons have been explained. The companies are having meagre income only. Apart from statement of Shri Himanshu Verma, there is enough material to justify the addition on merit. The assessee also did not prove identity and creditworthiness of the Investors even if no cross-examination to the statement of Shri Himanshu Verma have been allowed. The Ld. D.R. relied upon Judgment of Hon ble Supreme Court in the case of Raymond Woollen Mills 236 ITR 34 (SC). He has submitted that information is prima facie relevant and there is sufficient 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., 2017- TIOL-253-SC-IT. 2. PCIT vs., Paramount Communication (P.) Ltd., [2017] 392 ITR 444 (Del.) (HC) 3. Aradhna Estate (P.) Ltd., vs. DCI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the different paper companies floated by Sh. Himanshu Verma through a complex trail of transactions, so as to hide the actual sources of funds of the last set of recipient companies of Sh. Himanshu Verma In this way, the reserve surpluses and the capital account of a specific set of companies are enhanced with the help of the unexplained cash received by Himanshu Verma, which is routed to these companies through their dummy firm/companies. Once the funds of these companies have been enhanced sufficiently, accommodation entries through RTGS/ Cheque in the shape of the share capital, capital gains or loans as per the specific requirement of the recipient clients were provided to them in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed. It is noticed from the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 8.2. Learned Counsel for the Assessee relied upon Judgment of Hon ble Delhi High Court in the case of United Electricals Company (supra) in which the Addl. Commissioner of Income Tax similarly recorded the approval Yes I am satisfied that it is a fit case for issue of notice under section 148 of the I.T. Act. In this case the Hon ble Delhi High Court held as under : On a careful perusal of the statement made by V' it was found that facts mentioned in reasons were de hors the facts available on record. It was evident that the said statement was too general. It did not mention any name much less the name of the assessee. It was not the stand of the revenue that a list of the creditors, which included the name of the assessees, was furnished by V' subsequently and the same was forwarded to the Assessing Officer of the assessee. Applying the aforenoted settled principles govern ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under : 7. Apropos these legal grounds , we have heard the arguments of both sides and carefully perused the relevant material placed on the record of the Tribunal. As agreed by both the parties, we have heard argument of both the sides on these legal grounds of the assessee, wherein the assessee has challenged to the initiation of reassessment proceedings and reopening of assessment u/s. 147/148 of the Act. The ld. AR submitted that the impugned order of assessment is invalid and unsustainable in law as the same has been passed by the AO without providing the reasonable time of four weeks for taking remedy against the order of disposal of preliminary objection against the incorrect assumption of jurisdiction by the AO u/s. 147 of the Act in violation of principles enunciated by Bombay High Court in the case of Asian Paints Ltd. 296 ITR 90. He further submitted that the Impugned orders of authorities below need be set aside as the reassessment proceedings have been initiated without obtaining a subjective satisfaction by the Pr. CIT Delhi-7, New Delhi as the approval u/s 151 is mechanical and without application of mind. 8. The ld. AR vehemently pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of ITAT, Mumbai in the case of GTL Ltd. vs. ACIT reported in 37 ITR (Trib.) 0376 (Mum.), notice u/s. 148 of the Act does not mention the fact that the same is issued after the satisfaction of the authority u/s. 151 of the Act, such non-mentioning of this fact renders the consequent assessment invalid in law, Relied on the judgment of DSJ Communication vs. DCIT 222 Taxman 129 (Bom.). 11. On the issue of validity of reopening and initiation reassessment proceedings u/s. 147 of the Act the ld. AR also pointed out that as per ratio of the decision of Hon'ble Bombay High Court in the case of Asian Paints Ltd. 296 ITR 90 (Bom), the AO to wait for four weeks to begin assessment after disposing of the objection and non-compliance of the same renders assessment proceedings void. He submitted that in the present case the objections of the assessee vide dated 29.11.2016 filed before the AO were disposed of/dismissed by the AO by the order dated 12.12.2016 and he passed impugned reassessment order u/s. 143(3) r/w s. 147 of the Act on 22.12.2016 which is clear violation of directions given by Hon'ble High Court in the case of Asian Paints (supra) and on this count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, in para 7 8, it has been arisen that either during survey or post survey proceedings the assessee company has not submitted satisfactory explanation to prove identity, genuineness and creditworthiness of share capital/premium introducers and thus, the same is from paper companies of entry operator and then, he recorded satisfaction that the assessee company taken bogus/ accommodation entries. The ld. AR vehemently pointed out that thereafter in last para 9 10, the AO, without applying mind to the information received from the Investigation Wing, recorded that he has reason to believe that the an income has escaped assessment which clearly shows that the AO proceeded to initiate initiatory assessment proceedings and reopening of assessment without having any valid satisfaction on the basis of borrowed satisfaction as there was no independent application of mind to the tangible material received from Investigation Wing, which could form the basis reason to believe that income has escaped assessment. 14. Further placing reliance on the decision of Hon'ble High Court of Delhi in the case of PCIT vs. G G Pharma India Ltd. reported in 384 ITR 147 (Del), the ld. AR submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icers work under the supervision and guidance of PCIT and the Department is very careful about the compliance of the provision of the Act as well as directions of Hon'ble Supreme Court, Hon'ble High Court and CBDT Circulars and also towards working of the Revenue Officers in the cases of initiation of reassessment proceedings and framing of reassessment orders. The ld. DR submitted that the proforma of approval u/s. 151 of the Act is being followed all over India and the ACIT applied his mind to the all material placed before him by the AO prior to granting approval u/s. 151 of the Act in column 12 of the proforma. Therefore, allegations made by the ld. AR are not sustainable and tenable and the same may kindly be dismissed. 18. Placing rejoinder to the above, the ld. AR submitted that in the reasons para 6 the information of DDIT (Investigation) has been given and reference of various entry providers such as Shri Himanshu Verma, Shri Praveen Aggarwal etc. who are engaged in providing accommodation entries through dummy companies with dummy directors. The ld. AR submitted that in the table given in para 3 is taken along with para 6 of the reasons recorded the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as valid and sustainable. 20. So far as legal contention of the ld. AR on behalf of the assessee regarding non-application of mind by the AO, while recording reasons for reopening of assessment, is concerned from careful perusal and reading of the three pages of reasons recorded, we observe that in first four paras the AO has noted facts of the information received from DDIT (Investigation), Faridabad, further, in para 6 modus operandi of entry providers has been noted thereafter, in para 7 8, it has been arisen that either during survey or post survey proceedings the assessee company has not submitted satisfactory explanation to prove identity, genuineness and creditworthiness of share capital/premium introducers and thus, the same is from paper companies of entry operator and then, he recorded satisfaction that the assessee company taken bogus/accommodation entries. Thereafter, the AO in last para 9 10, without applying mind to the information received from the Investigation Wing states/writes that he has reason to believe that the income has escaped assessment. The text and words used by the AO in the reasons recorded for reopening of assessment clearly show tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sitation to hold that the AO proceeded to initiate reassessment proceedings u/s. 147 of the Act and to issue notice u/s. 148 of the Act on the basis of borrowed satisfaction and without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with the such information. Therefore, in our considered opinion the initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act, reassessment proceedings and all consequent proceeding and orders, including impugned reassessment and first appellate order, are bad in law and thus, not sustainable and we hold so. Accordingly, on the basis of foregoing discussion, grounds No.2, 3, 4 and additional ground of the assessee are allowed and impugned proceedings, notice u/s. 148 of the Act and all consequent orders are quashed. 8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopeni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the totality of the facts and circumstances of the case and that wrong Section have been mentioned in the reasons and some of the Columns material for re-assessment are left Blank and that Addl. CIT did not record how he was satisfied on wrong facts and wrong reasons would clearly show that reopening have been done in the matter without application of mind based on wrong facts and as such the reopening of the assessment cannot be justified. It may also be noted here that the Learned Addl. CIT, Range-12, Delhi while granting sanction under section 151 of the I.T. Act has mentioned in the reasons that Yes, I am satisfied that this is a fit case for reopening under section 147. Such a satisfaction was not found valid by ITAT, Delhi Benches in the cases of Shree Balkishan Agarwal Glass Industries Ltd., Delhi vs., DCIT (supra) and M/s. Behat Holdings Ltd., Delhi vs., ITO, Ward-4(3), New Delhi (supra), based on several decisions of the Hon ble High Courts. Thus, the issue is covered against the Revenue by the above decisions of the Tribunal as well. The A.O. has thus no justification to assume jurisdiction under section 147 of the I.T. Act, 1961, in a Lawful manner and as such th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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