TMI Blog2019 (3) TMI 1948X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of account holder of entry giving account and the Assessing Officer after going through the said information straightway derived its conclusion without application of his mind. In the instant case also, similar reasons along with similar wordings have been recorded and the AO while concluding the accommodation entries in the garb of share capital, has failed to apply its mind in support of its belief. Here in this case, the reasons recorded do not refer any evidence or any confession /statements of entry operator, cash payment by assessee, payment of commission etc. so as to support its belief that the assessee was beneficiary of the entry operating racket. There is also no whisper in the reassessment order against the contention of the assessee that the Income-tax authorities themselves have assessed the alleged entry operator u/s. 153C of the Act and the Income-tax Return filed by these group companies have been accepted in March, 2013. Assessee has submitted copies of assessment orders in the case of Mani Malal Delhi Properties (P) Ltd. for the assessment year 2007-08 u/s. 153C/153A where the ITR filed by this company stands accepted by ITO Central Circle 23 New Delhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law. 6. That the grounds of appeal are without prejudice to each other. 2. The brief facts of the case are that in this case original assessment was framed u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) on 08.12.2009 at an income of ₹ 2,18,162/- as against returned income of ₹ 1,08,405/-. Subsequently, after a lapse of four years, i.e., in the year 2013, information from Investigation Wing, New Delhi regarding some accommodation entry racket, operated by one Sh. Surender Kumar Jain group, was received along with list of beneficiaries of such accommodation entries. The name of the assessee-respondent was also reflected in the said list as one of the beneficiaries. The Assessing Officer, noting the modus operandi of entry provider, as reported by Investigation Wing, concluded that the assessee had taken such accommodation entries in the garb of share capital worth ₹ 4,60,00,000/- during the year under consideration from various companies. Based on the aforesaid information/details received from Investigation Wing, the Assessing Officer reopened the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le-man Annexure No. Page No. 20-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 068294 20-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 083775 21-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Mega Top Promotors Pvt. Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 011213 21-03-2007 6000000 Arun Ji A-66 49 21-03-2007 Nisha Holding Ltd. Jai Gajanan Enterprises Pvt. Ltd. UTI Ch. No. 083775 21-03-2007 6000000 Arun Ji A-66 49 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the part of the assessee to disclose fully and truly all material facts necessary for assessment attracting the first proviso read with Explanation 1 to section 147 of the I T Act. 6. It is, therefore, requested that the necessary approval may kindly be accorded as per the provisions of section 151 of the Income-tax Act 1961. Based on the aforesaid reasons recorded, the Assessing Officer, therefore, made an addition of ₹ 4,00,00,000/- as bogus share capital u/s. 68 of the IT Act and addition of ₹ 10,00,000/- on account of commission paid @ 2.5% for receiving alleged accommodation entries. The assessee carried the matter in appeal before the ld. CIT(A), who after considering the detailed submissions of the assessee and various case laws cited by the parties, deleted the addition by holding the reopening of case as void. Aggrieved by the impugned order, the Revenue is in appeal before the Tribunal, inter alia, on the grounds, mentioned herein above. 3. During the course of hearing, the ld. DR, relying upon the findings reached by the Assessing Officer, submitted that the ld. CIT(A) was not justified in holding the reassessment as invalid and consequently in dele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jarat) CIT v. SPL'S Siddhartha Ltd. [2012] 17 taxmann.com 138 (Delhi) DCIT, CIRCLE-3 (3), MUMBAI VERSUS M/S SHAPOORJI PALLONJI CO. LTD. [2015(7) I Ml 447 HAT MUMBAI) 4.2 The next contention of the ld. AR has been that there is non-application of mind by Assessing Officer on the information received in as much as, it did not strike to the AO that the name of Nisha Holdings is mentioned twice in the information which was ad verbatim used for drawing satisfaction. Further, AO mentions that income tax return for the AY 2007-08 was filed on 30-10-2007 at NIL Income. The AO did not bother even to verify the return of income filed by the assessee which had showed returned income at ₹ 1,08,412/-. All this shows that there is non-application of mind and the AO was mechanically persuaded by the report of the investigation wing. Hence, such a re-assessment due to this reason too is not sustainable. Reliance on this point is placed on the following decisions :- Sarthak Securities Co. (P.) Ltd v. ITO [2010] 195 Taxman 262 (Delhi); Signature Hotels (P.) Ltd. v. ITO [2012] 20 taxmann.com 797 (Delhi); CIT v. Sfil Stock Broking Ltd. [2010] 325 ITR 285 (Delhi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axmann.com 403 (Delhi) CIT v. Atul Jain [2007] 164 TAXMAN 33 (DELHI) Hindustan Lever Ltd. v. R.B. Wadkar [2004] 137 TAXMAN 479 (BOM.) Varshaben Sanatbhai Patel v. ITO [2015] 64 taxmann.com 179 (Gujarat) ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) Light Carts PVT LTD v. ITO 2016 (2) TMI 224 - ITAT DELHI Based on the aforesaid contention, the ld. AR of the assessee submitted that the re-assessment proceedings have rightly been quashed by the ld. CIT(A). On merits also the ld. AR has made extensive arguments, but before dealing with them, we feel it appropriate to decide the appeal on legal aspects first. 5. We have heard the submissions of both the sides and have gone through the entire material available on record and we find no justification to interfere with the decision reached by the ld. CIT(A) on validity of reassessment. For ready reference, the findings reached by the ld. CIT(A) read as under : I have very carefully gone through the satisfaction note recorded by the AO as well as the written and oral submissions made by the appellant. The AO was present during the entire course of the hearing on 19th May 2015. It is settled now that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The table indicates the gross non-application of mind by the AO to the facts of the case and analysis of the same vis a vis the evidence on hand. This also suggests that the AO did not even look at the Balance Sheet of the appellant before issuing notice u/s 148. I agree with the argument of the appellant that the issue is not whether the correct figure is ₹ 4 crore or ₹ 4.6 crore but whether the AO has applied his mind or not before reopening the assessment which was completed u/s 143(3). The fact pointed out clearly evidences non application of mind by the AO. 7. The AO has estimated the rate of commission to the entry operators at the rate of 2 %. This also indicates that the suspicion of the alleged accommodation entry operator and its connection with the appellant is not well founded. 8. Copy of the reasons given to the appellant do not indicate that the permission of sanctioning authority as stipulated under section 151 of the Act was taken and application of mind by the sanctioning authority was made before according the sanction. 9. Copy of the reasons given to the appellant does not indicate that the AO applied mind on various parameters fixing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law including various case laws, as briefly summed up in the preceding paras, I am convinced that reopening in this case has not been made in accordance law. Reassessment made in consequence of the same is therefore, quashed. Ground no 2 3 of the appeal are, therefore, decided in favor of the appellant. GROUND NO. 4 The Ld. AO has erred on facts and in law in holding that the appellant did not offer any explanation about the nature or source of the sum of ₹ 4,00,00,000/- and has further erred in adding the same to the income of the appellant in gross violation of the principles of nature justice. AND GROUND NO. 5 The Ld. AO has erred on facts and in law in making an addition of ₹ 4,00,00,000/- under section 68 of the Income Tax Act, 1961 without mentioning any evidence/ documents against the appellant which indicate that the explanation given by the appellant was incorrect. The appellant has argued that the AO has primarily made the additions for the reason that the directors of the investing companies did not appear before him. He has not mentioned any evidence, whatsoever, indicating the alleged entry operator racket and evidence pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Properties (P) Ltd for the AY 2007-08 under section 153C/ 153 A of the Income Tax Act mention nothing incriminating against the aforesaid company and the ITR has been duly accepted by the AO in the Central Circle- 23, New Delhi. The fact that proceedings initiated u/s 153C ultimately did not result into any addition/incriminating findings indicate that the department had no evidence against these companies. Similarly, M/s Hill Ridge Investment Ltd was also assessed under section 153C for the AY 2007-08 on 28.03.2013 by the same AO in the Central Circle- 23, New Delhi and the ITR filed by this company was duly and properly accepted by the department. M/s Mega Top Promoters (P) Ltd was also assessed for the AY 2007-08 under section 143(3) on 04.12.2009 and the ITR of this company has been accepted by the AO. The appellant has reemphasized the fact that that the assessment was originally completed u/s 143(3) after due verification of enhancement of the share capital. The appellant has submitted that the issue with respect to investment through share capital etc. has been one of the most controversial issues in the recent times. Judicial interpretation on the same has consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those companies by the AO. Some of the companies were assessed u/s 143(3) and their affairs were duly accepted by the respective AO. No evidence of any nature like any statement of the alleged entry operator Surendra Kumar Jain was confronted with the appellant. No evidence of any other nature which led the AO to re-open the assessment was ever brought to the notice of the appellant leave alone asking for any explanation on the same. The AO was duly given copies of the bank accounts of the investing companies and no cash deposit was found to have been made in those bank accounts which clearly lead to the conclusion that these entities had the credit worthiness and the source was fully explained. Considering all these facts and circumstances of the case, it is submitted that the additions made by the AO u/s 68 of the Act are absolutely pre-mediated and have no merit whatsoever. I have gone through entire facts and circumstances of the case. It is undisputed that the appellant was earlier assessed u/s 143(3) and this aspect of enhancement of the share capital was verified by the AO. It is also true that the appellant was never confronted with any evidence of accommodation e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the arguments made therein are applicable to this ground as well. In addition to the arguments given in the ground no. 4 5 the appellant submitted that the AO has no evidence whatsoever for payment of commission at the rate of 2.5 % which he has estimated. It is all the more ironical that the A.O. has no clue about the recipient of the commission when the entire case was allegedly based upon evidences gathered from the alleged accommodation entry operator. The addition of ₹ 10, 00,000/- therefore deserves to be deleted according to the appellant. I have allowed ground number 4 5. This is directly connected and consequential to the same issue. This addition of ₹ 10,00,000/- is, therefore also directed to be deleted. 6. We also find that the Assessing Officer has acted mechanically on the information of investigation wing about the alleged accommodation entries and has drawn his conclusions without applying his mind or making any enquiry in the matter before forming the belief of escapement. In the case of CIT vs. Meenakshi Overseas Pvt. Ltd. (supra) in the identical facts, similar reasons were recorded by the Assessing Officer on the basis of information of In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying unaccounted cash is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be a known entry operator is even more mysterious. Clearly the source for all these conclusions, one alter the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment.- Information is received from the DIT (Inv.-l), New Delhi that the assessee has introduced money amounting to ₹ 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003-04. Details are contained in Annexure. As per information _ amount received is nothing but accommodation entry and assessee is a beneficiary. 28.2 The Annexure to the said proforma gave the Name of the Beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the Court observed: 14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to ₹ 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure. reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the fact that there was reference in the notice of any satisfaction of competent authority as contemplated u/s. 151 even after issuance of notice after four years from the end of assessment year; that there is no reference of any evidence such as statement or confession of the alleged entry operator against the assessee; that there is absence of any particular fact which the assessee failed to disclose fully and truly regarding the share capital at the time of original assessment; that the satisfaction note of the Assessing Officer is solely based on information of investigation Wing; and that in the assessments of alleged entry operator group u/s. 153C, the returns filed by them stood accepted by the department itself and after considering various Authorities cited by the ld. AR and the ld. CIT(A), we find no infirmity in the decision of the ld. CIT(A) while holding the reopening proceedings as void and illegal. Therefore, without going into the merits of addition, the decisions of ld. CIT(A) deserves to be upheld on the legal aspect of the case. The decisions cited by the ld. DR are found no applicable in the instant case, having been based on different set of facts. 9. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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