TMI Blog2021 (11) TMI 853X X X X Extracts X X X X X X X X Extracts X X X X ..... ese details are factually incorrect. The assessee had filed his return of income on September 18, 2007 and duly acknowledged by the Assessing Officer in para No. 2 of the assessment order. As the return is originally filed by the assessee and no assessment was made earlier therefore, the assessee's case falls in section 147(b) of the Act. Thus, the case was reopened on incorrect fact which shows non-application of mind by the learned Assessing Officer. Hence, the proceeding is itself bad in law. See RMG POLYVINYL (I) LTD. [ 2017 (7) TMI 371 - DELHI HIGH COURT] . Thus reasons recorded by the Assessing Officer suffer from an infirmity of being misconceived in law and, therefore, initiation of proceeding thereupon is bad in law. - Decided in favour of assessee. - I.T.A. No. 1459/Ahd/2017 - - - Dated:- 23-9-2021 - Pawan Singh (Judicial Member) And Dr. A. L. Saini (Accountant Member) For the Assessee : Himanshu Gandhi , Chartered Accountant For the Department : Ms. Anupama Singla , Senior Departmental representative ORDER DR. A. L. SAINI (ACCOUNTANT MEMBER). - 1. Captioned appeal filed by the assessee pertaining to the assessment year 2007-08, is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an individual and his case was reopened under section 147 of the Income-tax Act on the basis of information received from the Investigation Wing, Mumbai on various groups which are involved in providing accommodation entries by way of issuing non-genuine bills. On examination of the above, the Assessing Officer had reason to believe that the abovenamed assessee is a beneficiary of non- genuine transactions of ₹ 2,87,71,098 from Seven Star during the financial year 2006-07. In view of the above, the Assessing Officer had reason to believe that the assessee had earned income exceeding ₹ 1,00,000 on the above non-genuine transaction, which was not shown in the return of income filed for the assessment year 2007-08. Thus, the above income exceeding ₹ 1,00,000 has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly, all material facts necessary for assessment for the assessment year 2007-08. The assessee's case was reopened with the prior approval of the Additional Commissioner of Income-tax, Range-9, Surat, vide his approval dated March 28, 2014 vide letter dated March 28, 2014. In the assessee's case, the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was dismissed by the learned Commissioner of Income-tax (Appeals) and on the merits he restricted the addition from 25 per cent. to 15 per cent. of purchases ; observing as follows : Looking at facts and circumstances of the case, I am of opinion that the estimation of 25 per cent. done by the learned Assessing Officer is rather high. It would be reasonable and just to estimate that the assessee has earned income/profit at 12.5 per cent. over these impugned purchases. Hence, the learned Assessing Officer is directed to add the same instead of the disallowance of purchases, as per table below : Assessment year Disallowance @ 25% made in the assessment order (in rupees)-directed to be deleted Estimated income from the transactions-directed to be added to returned income of assessee 2007-08 71,92,775 35,96,388 7. Aggrieved by the order of the learned Commissioner of Income-tax (Appeals), the assessee is in appeal before us. 8. The learned counsel for the assessee submits that there is no whisper in the reasons recorded, of any tangible material which came to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned Departmental representative for the Revenue relied upon the decision of the hon'ble Gujarat High Court in the case of Peass Industrial Engineers Pvt. Ltd. v. Dy. CIT [2016] 73 taxmann.com 185 (Guj) and Pushpak Bullion Pvt. Ltd. v. Deputy CIT [2017] 85 taxmann.com 84 (Guj). 10. We have considered the submissions of both the parties and carefully gone through the documents furnished and the case law relied upon, and perused the fact of the case including the findings of the learned Commissioner of Income-tax (Appeals) and other materials brought on record. There was search proceedings under section 132 of the Act in the case of Shri Rajendra Jain Group of Mumbai on October 3, 2013. From various incriminating documentary evidence collected and the statement of Shri Rajendra Jain Group during the course of search, the Investigation Wing in its report concluded that this group was in the activity of providing accommodation entries and bills to enable others to account as purchases, sales, or loan, etc., the said Shri Rajendra Jain Group also provided list of beneficiaries of accommodation entries. As per list, it was found by the Assessing Officer that the assessee has recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,70,788 Total 2,87,71,098 In view of the above, I have reason to believe that the assessee has earned income exceeding ₹ 1,00,000 on the above non-genuine transaction, which is not shown in the return of income filed for the assessment year 2007-08. Thus the above income exceeding ₹ 1,00,000 has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly, all material facts necessary for assessment for the assessment year 2007-08. Hence, notice under section 148 of the Income-tax Act is being issued to verify the genuineness of the above transactions made by the assessee during the assessment year 2007-08. I am therefore, satisfied that this is a fit case for invoking the provisions of -section 147 of the Income-tax Act for the assessment year 2007-08. 12. We note that as per the above reason recorded, the case of the assessee had reopened for the following purposes : (a) As per information from Investigation Wing, Mumbai some parties are involved in providing accommodation entries for purchases. (b) It was alleged that the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. Before closing, we can only lament at the possible revenue loss. The law and the principles noted above are far too well-settled to have escaped the notice of the Assessing Officer despite which if the reasons recorded fail the test of validity on account of sentence contained, it would be for the Revenue to examine reasons behind it. The above decision of the Gujarat High Court in the case of Pr. CIT v. Manzil Dineshkumar Shah [2018] 406 ITR 326 (Guj) ; [2018] 95 tax mann.com 46 (Guj) were challenged by the Department before the Supreme Court. The hon'ble Supreme Court in Pr. CIT v. Manzil Dinesh Kumar Shah [2019] 411 ITR (St.) 5 (SC) ; [2019] 101 taxmann.com 259 (SC) vide order dated January 4, 2019 has dismissed special leave petition, and confirmed the findings of the Gujarat High Court. 13. We note that in the assessee's case, under the guise of reopening of the assessment, the Assessing Officer wants to have a roving inquiry ; as observed hereinabove. Even as per the Assessing Officer in the reasons recorded, has specially mentioned that for the purpose of verification of the claim, it is necessary to reopen the assessment. Under the circumstances, it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the total of the accommodation entries was set out as ₹ 1.56 crores. In the same assessment order dated December 30, 2011 in para 2.3 it is stated as under : '2.3 It is pertinent to mention here that in the reasons recorded there was some clerical error as certain single transactions were appearing in multiple and this resulted in working of the escaped income to the extent of ₹ 1,56,00,000. However, the same has now been considered and stands corrected for the purposes of completion of proceedings.' 7. In para 3.1 of the above assessment order, the Assessing Officer has set out the information received from the Investigation Wing regarding the alleged bogus accommodation entries pertaining to 16 entities which sum in the aggregate works out to ₹ 78 lakhs. 8. Mr. Ruchir Bhatia, learned senior standing counsel for the Revenue, relied on the decisions in ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996] 217 ITR 597 (SC) and ITO v. Puroshottam Das Bangur [1997] 224 ITR 362 (SC) to urge that at the stage of reopening of the assessment, the Assessing Officer is not expected to undertake any detailed inquiry ; it was sufficient if on the basis of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the court came to the conclusion that the reasons were, in fact, in the form of conclusions 'one after the other' and that the satisfaction arrived at by the Assessing Officer was a 'borrowed satisfaction' and at best 'a reproduction of the conclusion in the investigation report'. 13. As in the above case, even in the present case, the court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the Assessing Officer. In the present case the Assessing Officer deprived himself of that opportunity by proceeding on the erroneous premise that the assessee had not filed a return when in fact it had. 14. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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