TMI Blog2021 (2) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... Directorate of Income-tax(Inv.) that the assessee was a beneficiary of the alleged bogus/accommodation entries provided by the aforesaid entry provider, viz. Shri Praveen Kumar Jain, and had failed to apply his mind to the material available on his record, the reopening of the assessment by him u/s 147 of the Act could not be held to be justified. A.O had failed to independently apply his mind to the material available on his record and mechanically acting on the information supplied by the Directorate of Income-tax (Inv.) had reopened the case of the asseessee u/s 147 of the Act, the same, thus, cannot be sustained and is liable to be vacated, Accordingly, in the absence of valid assumption of jurisdiction by the A.O u/s 147 of the Act, the consequential assessment framed by him u/s 143(3) r.w.s 147, dated 29.03.2015 cannot be sustained and is quashed. Appeal of the assessee is allowed - ITA No.1948/Mum/2018 - - - Dated:- 22-2-2021 - Shri Shamim Yahya, Accountant Member And Shri Ravish Sood, Judicial Member Appellant by : Shri M ehul S hah, A.R Respondent by : Ms. Shreekala Pardeshi, D.R ORDER PER RAVISH SOOD , JM The present appeal filed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the assessment proceedings it was observed by the A.O that the assessee had during the year under consideration claimed to have raised loans from the aforementioned concerns i.e M/s Natasha Enterprises and M/s Mohit International of ₹ 50 lacs each. It was noticed by the A.O that an amount of ₹ 72 lac was repaid by the assessee to M/s Mohit International in the subsequent year while for the balance amount of ₹ 28 lac of the aggregate amount of loans so raised was outstanding on 31.03.2007. On being queried as to why the balance amount of ₹ 28 lacs was outstanding, it was stated by the assessee vide his letter filed on 12th March, 2015 that on account of certain on-going litigation coupled with financial constraints faced by the assessee the payment of the balance amount had been withheld. However, the A.O was not persuaded to subscribe to the aforesaid claim of the assessee. Observing that the assessee had failed to prove that he had raised genuine loans from the aforementioned parties the A.O treating the explanation of the assessee as an afterthought and a cookedup story, rejected the same. The A.O drawing support from certain excerpts of the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the aforesaid investigating agency could not be sustained and was liable to be struck down on the said count itself. In order to support his aforesaid contention reliance was placed by the ld. A.R on certain judicial pronouncements. It was further averred by the ld. A.R that as the A.O had failed to incorporate his satisfaction for reopening the assessment thus, the issuance of notice under Sec. 148 was not valid. Adverting to the merits of the case, it was submitted by the ld. A.R that both the lower authorities were in error in treating the loans received by the assessee from the aforementioned concerns, viz. M/s Natasha Enterprises and M/s Mohit International as unexplained credits in the hands of the assessee. It was submitted by the ld. A.R that the assessee in the course of the proceedings before the lower authorities had substantiated the genuineness and veracity of the respective loan transactions by placing on record supporting documents, viz. confirmations of both the lender s; PAN Numbers; and the copy of the bank account substantiating the factum of having received the loans in question through account payee cheques. It was further submitted by the ld. A.R that the fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had failed to substantiate the genuineness of the loan transactions in question, the A.O, thus, had rightly treated the same as unexplained cash credits within the meaning of Sec.68 of the Act. It was submitted by the ld. D.R that as no infirmity emerged from the orders of the lower authorities thus, the appeal of the assessee being devoid of any force did not merit acceptance. 8. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. As the assessee has assailed the validity of the jurisdiction assumed by the A.O for reopening his case under Sec. 147 of the Act thus, we shall first deal with the same. On a perusal of the reasons to believe stated to have been recorded on 19th March, 2014 on the basis of which the case of the assessee was reopened u/s 147 of the Act, the same, as conveyed to the assessee by the A.O vide his letter dated 21st January, 2015 read as under: Information was received vide letter No. DGIT(Inv.)/Information/P/2012-13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Praveen Kumar Jain, however, he had not even done the bare minimum by pointing out the nature of the impugned accommodation entries that were allegedly stated to have been received by the assessee as a beneficiary. On a careful perusal of the reasons to believe , it can safely be gathered that the A.O had merely referred to the information that was received by him from the DGIT(Inv.), Mumbai and had dispensed with the statutory obligation that was cast upon him as regards formation of an independent and a bonafide belief that the income of the assessee chargeable to tax had escaped assessment. As observed by us hereinabove, the A.O by not even referring to the nature of the accommodation entries i.e as to whether they were accommodation entries in the nature of sales or unsecured loans or share application money, which as per the impugned information shared by the DGIT(Inv.), Mumbai were stated to have been received by the assessee as a beneficiary from Shri. Praveen Kumar Jain thus, clearly reveals that he had failed to apply his mind to the material on record to arrive a bonafide reason to believe that the income of the assessee chargeable to tax had escaped assessment. In sum a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l on the basis of which the A.O forms the reasons to believe, but the process of arriving at such satisfaction/belief cannot be a mere repetition of the report of the Investigation wing. As observed by the Hon ble High Court, the reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that the income of the assessee chargeable to tax had escaped assessment. Also, a similar view was earlier taken by the Hon ble High Court of Delhi in the case of PCIT Vs. G G Pharma India Ltd. (2016) 384 ITR 147 (Del). In the case before the Hon ble High Court, it was observed that the A.O in his reasons to believe after setting out four entries which were stated to have been received by the assessee on a single date i.e 10th February, 2003 from four entities which were termed as accommodation entries, which information was received from the Directorate of Investigation, had therein stated : I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion supplied by the Directorate of IT(Inv.) about the alleged bogus/ accommodation entries provided by certain individuals/companies without applying his own mind, he was not justified in invoking jurisdiction under Sec. 147. 9. As observed by us at length hereinabove, the A.O in his reasons to believe in the case of the assessee before us had merely referred to the information that was received by him from the DGIT(Inv.), Mumbai that the assessee as a beneficiary had received accommodation entries from two concerns, and dispensing with even the bare minimum requirement of pointing out the nature of the impugned accommodation entries i.e as to whether they were accommodation entries in the nature of sales or unsecured loans or share application money, on the basis of vague and scanty information and without any further verification, examination or any other exercise had jumped to the conclusion that the income of the assessee in respect of the accommodation entries had escaped assessment for the year in question. Accordingly, in the backdrop of the aforesaid factual matrix it can safely be held that the A.O had blatantly failed to apply his mind to the material available o ..... 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