TMI Blog2024 (2) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... nd no tangible or cogent material on record leading to formation of such belief. As per the recorded reasons, Sri Sharma has stated that he provided accommodation entries to certain persons ; however, the name of the Petitioner has never been taken by him. The date on which statement of Sri Sharma is recorded is not known to Assessing Officer and also whether it relates to the assessment year in question is also not known. Date of statement of Sri Sharma is neither mentioned in the recorded reasons nor in the show cause notice nor in the Assessment Order. The Counter Affidavit is also silent, hence, on its basis no reasonable belief could be formed that the said statement relates to the assessment year in question in which the income has escaped the assessment. In the absence of date of statement, it is far-fetched to assume that it relates to the assessment year in question as held in ITO Vs. Lakhmani Mewal Das [ 1976 (3) TMI 1 - SUPREME COURT] It further transpires from records that the proceedings in the instant case is initiated for verifications and roving enquiry which is clearly impermissible under section 147/148 as held by this Court in the case of PCIT Vs. Maheswari Devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - HON BLE MR. JUSTICE RONGON MUKHOPADHYAY AND HON BLE MR. JUSTICE DEEPAK ROSHAN For the Petitioner : M/s. Kartik Kurmi, N.K. Pasari Sidhi Jalan, Advocates For the Respondents : Mr. R.N. Sahay, Sr. S.C Mr. Anurag Vijay, Jr. S.C PER DEEPAK ROSHAN, J Heard learned counsel for the parties. 2. The instant application has been preferred by the petitioner for the following reliefs: - (a) For quashing the Assessment Order dated 31.03.2022 bearing no. ITBA/AST/S/147/2021-22/1042312253(1) whereby an addition of Rs. 15,54,42,417/- has been made to the income of the Petitioner in the reassessment proceedings for the Assessment Year 2015-2016 under Section 147 read with Section 144 read with Section 144B of the Income-tax Act, 1961; (b) For quashing the Notice of Demand under Section 156 of the Income-Tax Act, 1961, dated 31.03.2022 bearing no. ITBA/AST/S/156/2021-22/1042313074(1) pertaining to Assessment Year 2015- 2016; (c) For quashing the Notice for Penalty under Section 274 read with Section 271(1)(c) of the Income-Tax Act, 1961, dated 31.03.2022 bearing ITBA/PNL/S/271(1)(c)/2021-22/1042312815(1) pertaining to Assessment Year 2015-2016; (d) For a direction upon the Respondents to produce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and further, the petitioner has been extended only 24 hours time to file its Show Cause Notice. 4. The detailed facts are that the petitioner was served notice ITBA/AST/S/147/2021-22/1042312253(1) under Section 148 dated 31.03.2021 from the respondent alleging that the income has escaped assessment for the relevant Assessment year. In the notice issued, there was no mention about the reason for reopening of the same. Later, on 27.09.2021, the respondent issued a notice under Section 142(1) whereby certain details were sought and reasons for reopening were supplied by the Revenue. The reason provided therein for reopening was: Information received during course of action in case of one Ajay Kumar Sharma that the same was involved in providing accommodation entry through his bank account to certain beneficiaries. This was also confirmed in his statement on oath taken. The copy of the bank Statement reveals that the assessee has done bogus financial transactions worth Rs15,54,42,417/- with Shri Ajay Kumar Sharma. (Annexure 3). After writing multiple letters to the Revenue during 19.10.2021 and 30.12.2021, Revenue replied via notice under Section 142(1) stating that the reasons have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding is carried out in gross violation of principles of natural justice. Only 24 hours time was extended to file objection/reply to Show Cause Notice (Draft assessment Order) and assessment Order was passed just in 24 hours. He contended that the Petitioner is entitled to a copy of the investigation report, statement of Shri Ajay Kumar Sharma etc. on the basis of which the reasonable belief is formed and also copy of approval U/s 151. Relying upon the aforesaid submissions, learned counsel contended that the procedure adopted by the Respondent offends Article 14 of the Constitution of India and is unreasonable, unfair and vitiated in law. The recorded reason/impugned Assessment Order is silent under which provision of the Act the additions are sought to be made. The reasons cannot be supplemented by assessment Order or Affidavit. 6. On the question of maintainability, learned counsel submitted that the writ is maintainable in view of the judgment rendered by the Hon ble Apex Court in the following judgments; 1. Calcutta Discount Co. Ltd. Vs. ITO reported in [1961] 41 ITR 191 (SC) 2. CIT Vs. A. Raman Co. reported in [1968] 67 ITR 11 (SC) 3. ITO Vs. Lakhmani Mewal Das reported in [19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of reasons communicated to the Petitioner it appears that there is no nexus between the material before the assessing authority and the formation of belief by him. There is no direct nexus or live link between the material on record and formation of belief and no tangible or cogent material on record leading to formation of such belief. In the instant case, solely on the basis of statement of Sri Ajay Kumar Sharma, who is claimed to be accommodation entry provider by the Respondent, the purported reasonable belief is formed that the Petitioner has done bogus financial transaction with said third party during the AY 2015-16. 9. In the instant case it is not the case of the department that Sri Ajay Kumar Sharma took name of the Petitioner that he has provided accommodation entry to him. As per the recorded reasons, Sri Sharma has stated that he provided accommodation entries to certain persons ; however, the name of the Petitioner has never been taken by him. The date on which statement of Sri Sharma is recorded is not known to Assessing Officer and also whether it relates to the assessment year in question is also not known. Further, the date of statement of Sri Sharma is neither m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated to a loan to the assessee and not to someone else much less to the loan of Rs. 2,500/- which was shown to have been advanced by that person to the assessee-respondent. There is also no indication as to when that confession was made and whether it relates to the period from April 01, 1957 to March 31, 1958 which is the subject matter of assessment sought to be re-opened. The report was made on February 13, 1967. In the absence of the date of alleged confession it would not be unreasonable that the confession was made a few weeks or months before the report. To infer from the confession that it relates to the period from April 01, 1957 to March 31, 1958 and that it pertains to the loan shown to have been advanced to the assessee, in our opinion would be far-fetched. Further, in the case of PCIT Vs. M/s Coal Sale Co. Ltd., reported in 2022-VIL-185-Cal-DT, the Calcutta High Court while dealing similar situations held in the following lines- Further, the CIT(A) held that ...................................... The tribunal pointed out that the investigation wing on the strength of the admission made by Shri Jindal, jumped to the conclusion that since the assessee had transacted with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Rs. Rs. 155442417/- with Shri Ajay Kumar Sharma. In view of the above, provisions of clause (a) of 147 of the Income Tax Act, 1961 is applicable to facts of this case and I have reason to believe that the income of Rs.155442417/- has escaped of assessment for the F.Y. 2014-15 relevant to the A.Y. 2015-16. Hence, this is a fit case for issue of Notice U/s. 148 of the Income Tax Act, 1961. The relevant portions of the impugned Assessment Order reads as follows- 4.4 Bank accounts show that the assessee is involved in providing accommodation entries for bills of purchase Bank account show entries for transactions with the assessee company which during the year are net Rs.15,54,42,417/- Above facts show that the assessee could not substantiate financial transaction worth Rs.15,54,42,417/-with Shri Ajay kumar sharma by furnishing relevant documents. Also, the bank statements provided were revealed that the assessee has done financial transaction worth Rs.15,54,42,417/- with Shri Ajay Kumar Sharma. In view of these facts, it can be concluded that the assessee has done bogus financial transaction worth Rs.15,54,42,417/- in form of accommodation entry with Shri Ajay Kumar Sharma. Hence, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wide, are not plenary. The words of the statute are reason to believe and not reason to suspect . The re-opening of assessment after lapse of many years is a serious matter. The expression reason to believe does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. In the said case of Lakhmani Mewal Das it is further held by the Hon ble Supreme Court that It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purposes of the section. To this limited extent the action of the Income Tax Officer in respect of income escaping assessment is open to challenge in the court of law. 15. Way back in the case of Ganga Saran Sons P. Ltd. Vs. ITO reported in [1981] 130 ITR 1 (SC) it has been held by the Hon ble Apex Court that the important words under Section 147(a) are has reason to believe and these words are stronger than the words is satisfied . The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciate how the conclusion therefrom In the case of CIT Vs. Chandball Rice Mills Pvt. Ltd. reported in [1993] 203 ITR 368 (Cal), the Calcutta High Court held that even assuming that the loan creditor made a confessional statement that he made bogus entries to accommodate others, it has to be established that the confessional statement by the loan creditor relates to the transaction in question as laid down by the Hon ble Supreme Court in the case of ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC). . In the case of Raunaq and Co. Pvt. Ltd. Vs. ITO reported in [1986] 158 ITR 30 (Del), the Delhi High Court following the judgment of the Hon ble Apex Court in the case of ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC) held that that the persons are name-lenders and that the transactions on that count are bogus, there is no further material or information available with the income tax officer when he formed the belief that. There is no indication that the name-lending was in connection with loans involved in the assessment under consideration, therefore the belief of the income tax officer was based on no material .There is therefore no direct nexus or live ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out authority of law and bad in law. The impugned order is thus unreasoned, non-speaking and therefore not sustainable in law. At this stage, it is also profitable to refer that judgment rendered in the case of Kranti Associates Pvt. Ltd. Vs. Masood Ahmed Khan reported in 2011 (273) ELT 345 (SC); wherein it has been held by the Hon ble Apex Court that recording of reasons is necessary in both administrative and quasi-judicial orders affecting rights of parties prejudicially. Reasons give appearance that justice is being done, to prevent arbitrary exercise of power and to ensure that discretion has been exercised on relevant grounds and to facilitate judicial review and accountability and transparency. The reasons in support of decisions must be cogent, clear and succinct. Pretence of reasons or rubber-stamp reasons is not to be equated with a valid decision-making process. 18. As stated herein above that the recorded reason/impugned Assessment Order is silent under which provision of the Act the additions are sought to be made. It is well settled that the reasons cannot be supplemented by assessment Order or Affidavit. The recorded reason is totally silent whether the amount sought ..... 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