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TMI Blog2025 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... ch can be done only on the basis of subjective belief of escapement of income and that suspicion cannot take the place of belief. Thus, the consequent reassessment order deserves to be held bad in law and additions thereof deserves to be deleted. 1.2 That the Id. CIT(A) has further erred in confirming the reopening proceedings initiated u/s 148 after four years from the end of relevant assessment year. wherein assessment stood completed u/s 143(3) of the Act, after complete verification of all details. Appellant prays that re-opening proceedings so initiated by Id.AO, without establishing any failure on the part assessee to disclose fully and truly all facts or material necessary for its assessment, is contrary to the provisions of the Act as well as bad-in-law, and hence void ab For TJARIA initio and the consequent re-assessment order deserves to be quashed. 1.3 That the Id. CIT(A) has further erred in confirming the initiation of proceedings u/s 147 in a case of assessment already completed u/s 143(3) which tantamount to re-visiting a completed assessment without any evidentiary material on record, which is not permissible as per provision of law. Appellant thus prays that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation entries taken by the assessee from two allegedly bogus entities, that too solely on the basis of the suspicion communicated by Investigation Unit Kolkata and also erred in making addition without rebutting the various documentary evidences furnished during the re-assessment proceedings. Thus, the addition made merely on the basis of presumptions and assumptions and on incorrect facts deserves to be deleted; 4. On facts and in the circumstances of the case the Id.CIT(A) has erred in confirming the addition of Rs. 3,75,816/- made by Id.AO, by alleging the same as commission paid on such accommodation entry alleged to have been taken by the assessee Appellant prays such addition being made on assumptions and presumptions, based on absolutely incorrect facts, without any material on record deserves to be deleted.'' 2.1 Brief facts of the case are that the assessee is a public limited company and is engaged in the business of manufacturing PVC pipes, HDPE Pipes, POY, DTY, Blankets etc. Return of Income for the year under appeal was originally filed on 29.09.2013 declaring total income of Rs. NIL and MAT was paid on the book profits. The case was selected for complete scrutiny a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done merely to give a colour of authenticity to the transaction and by creating a façade of legitimate transactions. After carefully examining the material available with the Department Rs. 1,50,32,635/- shown as share application money received from M/s. Raj Rajeshwari Metals & Minerals Traders Pvt. Lted and M/s. Gloroious Merchandise Pvt. Ltd.as treated as unexplained income of the assessee introduced through coloured transactions and added to the total income of the assessee u/s 68 of the Act. A further addition of Rs. 3,75,816/- was made by the AO u/s 69C as unexplained expenditure on presumption that assessee had paid commission @ 2.5% for obtaining such accommodation entry. The relevant observation of the AO at para 8 of his order is reproduced as under:- ''8. Further, the assessee had taken bogus share application money at Rs. 1,50,32,635/- in his book from the entry providers, thus an amount of Rs. 3,75,816/- i.e. @ 2.5% of Rs. 1,50,32,635/- is being added u/s 69C of the I.T. Act as unexplained expenditure of the assessee'' 2.2 Aggrieved of the additions so made by AO, assessee preferred an appeal before ld. CIT(A) - 4, Jaipur who dismissed the appeal of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e application during the year under consideration. It was submitted by the Id. AR that though the appellant vide letter dated 07.10.2019 has filed the objections for issuance of notice u/s 148 after the receipt of reasons but the Id. AO has not passed any speaking order rejecting the objections, which is contrary to the decision of Hon'ble Supreme Court in the case of GKN Driveshaft (1) Ltd. reported in 259 ITR 19 and thus reassessment proceedings deserves to be held illegal and consequent reassessment order passed deserves to be held void-ab-inito. Other main legal issue raised by the Id. AR is that the reopening was done beyond four years in the instant case wherein already assessment uis 143(3) was completed and accordingly in view of proviso to section 147, the AO has to establish that there was failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. It was submitted by the Id. AR that in the scrutiny assessment proceedings, list of unsecured loans and other details as asked for by the Id. AO were submitted and there was no failure on the part of assessee to disclose truly and fully all material facts. It was submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where appellant allegedly deposited the cash and even in the final reassessment order no such specific details have been mentioned. It clearly reflects that reasons recorded were purely mechanical in nature and are generalized, without having any specific detail and evidence related to the appellant. Decision:- 1. Information was received by the Id. AO from the Income Tax officer (Inv.), Unit- 1 & AJU, Kolkata, vide letter no. 9301 dt. 06.03.2018. As per the information and material provided by the investigation wing, it was seen that the assessee company has accepted deposits from dummy companies in the form of RTGS/ Transfer through circulatory fashion of money. The transaction appears to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. Appellant received transfer from different shell companies' a/c having no business. Number of bank accounts of these shell companies/concerns were used for effectuating the routing of these entries. As regards reasons recorded is concerned, it is seen that the Id. AO has recorded the reasons after going through the material available with him. In the said material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Merchandise Pvt Ltd. (account no. 0515-AA1118-050 Indusind Bank) (6) Shivshakti Tradelink Company (account no. 0515-AA1249-050 IndusInd Bank) (7) R R Enterprise (account no. 0515-AA1250-050 Indusind Bank) (8) Raj Rajeswari Metals & Minerals Traders Pvt Ltd (account no. 0515-AA1286- 050 IndusInd Bank) were verified as mentioned in the dissemination note. Erstwhile investigation officer issued summons u/s 131 of the Income Tax Act, 1961 to all the companies as mentioned in the information, but non of representative or directors appeared on behalf of the companies. Therefore, there transactions remained unexplained. As per database of shell companies, (1) M/s Moonshine Distributors Pvt. Ltd. (2) Shivganga Suppliers Pvt. Ltd. etc are shell companies. Profiling all the companies mentioned in the STR has been done. It is found that some of them are non-filer and some of them had no business as per Profit and Loss accounts and even do not paid any rent or had any fixed asset to run a business. Other proprietorship concerns are also non filer as per ITD database. These facts prove that none of these companies did any kind of business as declared by them. Further, they have regular trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from the ITO(Inv.), Unit-1 & AIU, Kolkata vide letter No. 9301 dated 06.03.2018 in this case. As per credible information certain bank account transactions appeared suspicious. The transactions appear to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. In course of verification, bank statements of number of accounts have been obtained. Bank account statement of the company (1) M/s Amulya Distributors Pvt. Ltd. (account no 0015-R26084-050 Indusind Bank), (2) M/s Moonshine Distributors Pvt. Ltd. (account no. 0015- R25031-050 IndusInd Bank), (3) Shivganga Suppliers Pvt. Ltd. (account no. 0015-R25020-050 IndusInd Bank) (4) Intime Distributors Pvt Ltd (account no. 0015-R26085-050 IndusInd Bank) (5) M/s Glorious Merchandise Pvt Ltd. (account no. 0515-AA1118- 050 IndusInd Bank) (6) Shivshakti Tradelink Company (account no. 0515-AA1249- 050 Indusind Bank) (7) R R Enterprise (account no. 0515-AA1250-050 Indusind Bank) (8) Raj Rajeswari Metals & Minerals Traders Pvt Ltd (account no. 0515- AA1286-050 Indusind Bank) were verified as mentioned in the dissemination note. Erstwhile investigation officer issued summons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no, such information is available in respect of the assessee 8. Applicability of the provisions of section 147/151 to the facts of the case: Provisions of Section 147/151 are applicable in the case of the assessee. In this case, a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 12.03.2016. Since, 4 years from the end of the relevant assessment year have expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped from assessment because or failure on the part of the assesses to disclose fully and truly all material facts necessary for the regular assessment for the assessment year under consideration. I have reason to believe that the above discussed income has escaped from assessment for the year under consideration and the reason for the same has already been recorded above in Para 6. I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the original assessment proceedings u/s 143(3) of the I.T Act, and it is found that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of a prudent person and it is on the basis of the reasons recorded by the AO that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination at the stage of a reopening of assessment. When the Court is concerned with a challenge to a notice under s.148, the issue is not as to whether it can be conclusively demonstrated that income had escaped assessment, but whether as a matter of fact, there was a reason to believe that this was so, to justify a recourse to the power under s.147." 1. The requirement, thus for reopening of assessment, is "reasonable belief. This expression is not synonymous with Assessing Officer having finally ascertained the fact by any legal evidence or conclusion. In this context, the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited [Supra] had observed as under :- "Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs." 12. Lastly, it is well settled that the validity of the notice of reopening would be judged on the basis of reasons recorded by the Assessing Officer for issuance of such notice. It would not be permissible for the Assessing Officer to improve upon such reasons or to rely upon some extraneous material to support his action. Reference in this respect can be made to the decision of this Court in the case of Aayojan Developers v. Income-tax Officer, reported in [2011] 335 ITR 234 (Guj)" 1. In the judgement in the case of Principal CIT vs. Paramount Communication Pvt. Ltd. (2017) 392 ITR 444 (Delhi), Hon'ble High Court of Delhi, has held as under- ''8......... While it is true that the court is conscious that the reassessment notice should not have been routinely issued, at the same time, the nature of power is wide enough that when there an escapement of income and the Revenue has information ruling that thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies belonging to B.C.&Co. were engaged in accommodation entries. 1. In the judgement in the case of ITO vs. Smt. Gurinder Kaur (2006) 102 ITD 0189: ITAT, Delhi'A' Bench, Hon'ble ITAT, has held:- The material before the AO-the letter received from the CIB-had a rational or live link with the formation of the belief that income chargeable to tax has escaped assessment in the assessee's case. The belief was bona fide held, it was not a pretence. The material gave rise to "reason to believe" and not merely "reason to suspect. No doubt as pointed out by the CIT(A), the list of 41 persons to whom K is supposed to have made gifts did not contain the name of the assessee. The AO had relied on the letter of the CIB which contained a clear statement that the Investigation wing has noticed that the assessee has purchased the gifts from K by paying cash including the premium. This letter constitutes relevant material for the formation of the belief, not mere suspicion, that income chargeable to tax has escaped assessment in the assessee's case. 1. It is to be noted that the AO had material before him for formation of reasonable belief of escapement which had live ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings are restored to the stage of disposal of objections and the assessing officer can pass the assessment order thereafter In the case of Home Finders Housing Ltd. v. Income-tax officer, Corporate Ward 2(3), Chennai [2018] 93 taxmann.com 371 (Madras) [2018] 404 ITR 611 (Madras)/[2018] 303 CTR 269 (Madras) (25-04-2018) it has been held by the Hon'ble Madras High Court that non-compliance of direction of Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer [2002] 125 Taxman 963 regarding disposing of objections by passing a speaking order, would not make reassessment order void ab initio. Relevant para of the order are as under- "19. The core question is as to whether non compliance of a procedural provision would ipso facto make the assessment order bad in law and non-est. The further question is whether it would be permissible to comply with the procedural requirement later and pass a fresh order on merits. 20. The learned counsel for the appellant by placing reliance on an order passed by the learned Single Judge in Mrs.Jayanthi Natarajan (cited supra) submitted that the order being one made without complying with the mandatory procedure, is non- est ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Ltd.'s case (supra) would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. The first issue is accordingly answered against the appellant." (Emphasis supplied) In the case of Saroj Jalan v. Union of India [2022] 143 taxmann.com 33. (Calcutta)[19-07-2022] it is held by the Hon'ble Calcutta High Court as under- 5. Mr. Bhattacharji, learned advocate appearing for the respondent income tax authonty, by the order of this Court dated 15th July, 2022. was asked to produce the record to establish as to whether the impugned assessment order and the aforesaid objection of the petitioner against notice under section 148 of the Act was considered and disposed of or not to which Mr. Bhattacharjee could not produce any specific record to show that before passing the impugned assessment order the aforesaid objection of the petitioner dated 8th July, 2021 was considered and disposed of. It is highly unfortunate that the assessing officer concerned through Mr. Bhattacharjee has produced irrelevant record in total non- application of mind since those documents have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards enunciated by the Honourable Supreme Court in GKN Driveshafts (India) Ltd. (supra) has been ignored by directly passing the impugned assessment order. Therefore, impugned assessment order is therefore not sustainable. 28. Therefore, the impugned order is set aside and the case is remitted back to the respondent to pass a fresh order disposing of the petitioner's objection in the light of the decision of Supreme Court in GKN Driveshafts (India) Ltd. (supra)." (Emphasis supplied) The appellant could have challenged the reasons of reopening by filing of objections before the Id. AO and if not satisfied with the order disposing objection then he could go before the Hon'ble High Court in Writ Petition as per the judgement of Hon'ble Supreme Court in the case of GKN Drivesharfts (India) Ltd. [2003] 259 ITR 19 and the judgement of Hon'ble Gujarat High Court in the case of Garden Finance Limited reported in 268 ITR 48. Extract from the Judgement of Hon'ble Gujarat High Court in the case of Garden Finance Limited [268 ITR 48] is as under:- "12. What the Supreme Court has now done in the GKN's case (supra) is not to whittle down the principle laid down by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Lucas TVS Itd. (Supra). Further the appellant has not filed the writ petition which is the ratio of judgements in GKN Drivesharfts (Supra) and Garden Finance (Supra). Further the status of filing of objections and disposal there off is not clearly shown by appellant. 1. Objection regarding no failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment as the case was reopened beyond four years is concerned, it is seen that appellant is having accommodation entry transactions with these two parties and same was not disclosed. It is clear that there was a failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment. This satisfaction is also clearly discernible from the reasons of reopening recorded by the learned AO. The objections in this regard are hereby rejected. In view of these facts and circumstances and considering the legal position on the issue under consideration, it is found that the reasons of reopening have been properly recorded and the notice under section 148 of the Act has been issued legally and the other objections of the appellant have also been dealt with in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax 19. [2021] 128 taxmann.com 229 (Gujarat) HIGH COURT OF GUJARAT BhanubenMansukhlalKhimashiav.Income Tax Officer Ward 3(1) 20. [2021] 129 taxmann.com 48 (Gujarat) HIGH COURT OF GUJARAT Kaushaliya SampatlalDudaniv.Income-tax Officer, Ward 1(3) 21. [2021] 129 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer, Ward 1(3) 22. [2022] 138 taxmann.com 50 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer 23. [2021] 131 taxmann.com 42 (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) 24. [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer 25. [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 969, 1969 AIR 1267, 1970 SCR (1) 22, AIR 1969 SUPREME COURT 1267 4. Ganesh Trading Co vs Moji Ram on 25 January, 1978, 1978 AIR 484, 1978 SCR (2) 614, AIR 1978 SUPREME COURT 484, 1978 2 SCC 91, 1978 REV LR 275, 1978 U J (SC) 162, 80 PUN LR 458, 1978 2 SCR 614, 1978 2 SCJ 98. 5. Collector Land Acquisition, Anantnag vs Mst. Katiji& Ors on 19 February, 1987, 1987 AIR 1353, 1987 SCR (2) 387, AIR 1987 SUPREME COURT 1353, 1987 21 STL 82, 1987 SCFBRC 147, (1987) 167 ITR 471, (1987) 1 ALL WC 675, (1987) 1 APLJ 41, (1987) 1 LS 28, 1987 RAJLR 132, 1987 HRR 213, 1987 (12) ECC 346, 1987 REV LR 169, 1988 ALL CJ 114, (1987) 13 ALL LR 306, (1987) IJR 287 (SC), 1987 UJ(SC) 2 29, (1987) 1 JT 537 (SC), 1987 BLJR 465, ILR 1987 KANT 2844, 1987 (1) ALL RENT CAS 288 (2), (1987) 13 ECC 27, (1987) 1 ALL RENTCAS 288(2), (1987) 28 ELT 185, (1987) 71 FJR 143, (1987) 1 LABLJ 500, (1987) 1 LANDLR 437, (1987) 100 MAD LW 676, (1987) 66 STC 228, 1987 (2) SCC 107, (1987) 1 SUPREME 253, (1987) 1 CIVLJ 552, (1987) 62 COMCAS 370. 6. [1980] 4 Taxman 83 (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. H.P. Sharma S. RANGANATHAN AND D.R. KHANNA, JJ The court held that action under section 147 is permissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 103 TAXMAN 562 (PAT.) HIGH COURT OF PATNA P.K. Haldar & Co. v. Commissioner of Income-tax It is held that in writ petition arising out of notice under section 148, Court is not supposed to go into sufficiency or otherwise or correctness of materials leading to notice, but merely to see whether there is any material before Assessing Officer on basis of which he came to form reasonable belief that income had escaped assessment. 15 [2002] 123 Taxman 756 (Calcutta) HIGH COURT OF CALCUTTA Ispat Industries Ltd. v. Deputy Commissioner of Income-tax It is held that Court will only find out whether there was any prima facie material to reopen case and sufficiency or correctness cannot be gone into by Court. 16 [2023] 153 taxmann.com 25 (Gujarat) HIGH COURT OF GUJARAT Akshat Pramodkumar Chaudhary v. Deputy Commissioner of Income-tax Where Assessing Officer had received information from Investigation wing that assessee received accommodation entry in penny scrip, which was bogus in nature and addition was required to be made to total income of assessee and on basis of said material before it, he was satisfied to harbour reasons to believe that there was escapement of income and on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dummy concern of a person who allegedly used dummy companies for routing his unaccounted money and, further, assessee also had certain amount of bogus share application, it could be said that there was material on basis of which notice under section 148 could be issued. 22 [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd. v. Assistant Commissioner of Income-tax Where reassessment notice was issued on basis of information received from DIT (Investigation) that a parent company of assessee at Singapore had made an investment of huge amount in assessee company but said investing company did not appear to be carrying out any regular business activities and was floated to act as a conduit to funnel funds into Indian companies, impugned notice was justified. 23 [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd. v. Assistant Commissioner of Income-tax, officer Circle 1(1) Initiation of reassessment proceedings on basis of information received from Investigation wing that assessee had received certain amount as a loan from a company, working as entry operator and earning bogus funds to provide advances to vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng pains to form his own belief in respect of such materials. 29 [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v. Deputy Commissioner of Income-tax Where Assessing Officer found that assessee was beneficiary of bogus donation and was able to lay its hand on a large number of material and had recorded statements of founder and director of said institution as well as other persons, who have deposed during survey and post-survey inquiries regarding bogus loan given by assessee to said institution, sufficient material was available with Assessing Officer for forming an opinion that income had escaped assessment. Re-assessment is based not on borrowed satisfaction 30 [2021] 128 taxmann.com 229 (Gujarat) HIGH COURT OF GUJARAT BhanubenMansukhlalKhimashiav.Income Tax Officer Ward 3(1) Where AO issued reopening notice on ground that an information was received from DIT (Investigation) that shares sold by assessee were of penny stock, thus, income on sale of said shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent enquiries and appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10(38), since such information was specific and AO made independent inquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified 35 [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer Where Assessing Officer issued reopening notice against assessee on ground that an information was received from NMS (Non filler monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. 36 [2021] 129 taxmann.com 68 (Gujarat) HIGH COURT OF GUJARAT VilasVrajlal Parekh HUF v. Income-tax Officer, Ward(1)3 Where AO issued reopening notice on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed on 25.9.2019 (APB 59) sought the copies of the reason recorded for initiation of proceedings u/s 148. In response, vide letter dt. 30.09.2019 (APB 60-63) AO supplied the copies of reasons recorded for reopening the case u/s 148. Thereafter vide letter dated 07.10.2019 (APB 64-68), assessee filed objections against the reopening of completed assessment wherein it was stated that assessee has not taken any unsecured loans to the tune of Rs. 1,50,32,635/- from the companies referred to in the reasons nor any share application money was received from them in the year under appeal. It was further contended that for the year under reference, assessment was already completed u/s 143(3) wherein during the course of assessment proceedings, the issue of unsecured loans was thoroughly examined by AO and necessary confirmations of the loans taken during the year were filed by the assessee and none of the companies referred in the reasons is appearing in the list of parties from whom loans were taken / repaid during the year nor any confirmation was filed of these parties were filed. Therefore, it was requested to drop the re-assessment proceedings so initiated based on such reasons. Desp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies as mentioned in the Reasons for reopening. Basically, assessee had made certain sales in F.Y. 2011-12 relevant to A.Y. 2012-13 to M/s Raj Rajeshwari Metal and Minerals Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. of Rs. 68,08,020/- and Rs. 82,24,615/- respectively. It is pertinent to note here that assessment for A.Y. 2012-13 stood completed u/s 143(3) (APB 127-137), which was also reopened subsequently u/s 147 (Re assessment order dated 30-12-2016 at APB 138-156) and in none of the proceedings i.e. either in original assessment proceedings or in reassessment proceedings, sales made to these two companies was doubted by the department, i.e. sales were accepted as such. It is noted that during the year under consideration, the assessee has only received the sum receivable from these two parties against the sales made to them in immediately preceding year and the submission in this regard was made before ld. CIT(A) who rejected the plea of assessee by relying upon certain judicial pronouncements and held at page 29 that "As regards not dealing the objection against reassessment proceedings is concerned, the status is not clear. There is no date mentioned on the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 148 and thereafter upon receiving the copies of the reasons recorded, filed objections against the initiation of reassessment proceedings (APB 64-68). Thus it was the duty of the AO that before proceeding further in the matter, objections so filed should have been disposed-off first which AO has failed to do. Moreover, ld. CIT(A) tried to justify such mistake of AO stating that CIT (Appeals) has power as coterminous to that of AO and objections have been dealt with in appellate order. Courts have even held that disposing off objections in assessment order itself would not absolve AO from passing separate speaking order. Thus, disposal of objections by ld.CIT(A) in the appellate order was not sufficient. Thus, due process of law has not been followed in the present case and the re-opening the assessment proceedings u/s 148 of the Income Tax Act, 1961, deserves to be held illegal and consequent reassessment order passed deserves to be held void ab-initio. We also take into consideration the judgement of Hon'ble Rajasthan High Court in the case of M/s K.C. Mercantile Ltd. (Presently Known As Genus Innovation Limited) vs. Deputy Commissioner of Income Tax Circle-2, Jaipur (Case La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and circumstances of the case and specifically involving the issue of addition of Rs. 2,71,317/-, we find that in this case the AO does not deserve a second inning. Accordingly, without remitting the matter to the record of the AO, the reassessment order passed by the AO is set aside being invalid." It is felt that order passed by AO without disposing objections raised by assessee is contrary to the decision of Hon'ble Supreme Court and order so passed deserves to be quashed. With regards to reopening of assessment, which was already completed u/s 143(3) of the Income tax Act, it is noted that assessment u/s 143(3) was completed after due verification of complete details filed by the assessee, including related to the unsecured loans taken/ repaid during the year under appeal and therefore reopening of assessment beyond 4 years was not in accordance with law more particularly when AO could not establish any fault on the part of assessee in disclosing fully and truly all material facts necessary for assessment. The relevant extracts of section 147 are reproduced hereunder for ready reference: "Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant assessment year have expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped from assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for the regular assessment for the year under consideration" However, going further, AO has simply mentioned that "I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the original assessment proceedings u/s 143(3) of the I.T. Act, and it is found that the assessee has not disclosed fully and truly all the material facts necessary for regular assessment for the year under consideration." In fact, ld. CIT(A) has also affirmed such finding of AO without bringing on record or pin pointing any specific material fact which was not disclosed truly and fully by the assessee and it was necessary for completion of assessment. It is noted that on the other hand, assessee had filed confirmations for all the unsecured loans taken / repaid during the year under consideration in the course of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as accommodation entry is mere change of opinion which cannot be permitted under the eyes of law. In other words, no new material was brought on record for reopening the case rather merely relying upon some information from Investigation Wing, Kolkata that too on the basis of search conducted in case of a third party reopening of completed assessment was made. Thus, reopening amounts to mere change of opinion. The Jaipur bench of ITAT under the similar circumstances in following cases has quashed the notice issued u/s 148 of the Act where purchases have been considered and trading additions were made in original assessment proceedings 1. M/s Dwarka Gems Ltd. in ITA No. 71/JP/2017 vide orders dt. 27/3/2018, copy at Case Law Paper Book pages 32-39. 2. Nirmala Agarwal Vs. ACIT in ITA Nos. 995 & 996/JP/2016 vide orders dt. 11.04.2018 copy at Case Law Paper Book pages 40-53 Further, it is noted that assessee has challenged the reopening of assessment without recording any subjective belief as to escapement of income and merely on suspicion formed on the basis ofso-called information received from some other officials. It is noted that that the issue ought to have been considered ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pressed the same view. (ii) 63 DTR 212 - CIT vs. AdhunikNiryatIspat Ltd. (Delhi) [DOD: 28.07.2011] Reassessment - Scope - Issue not subject-matter of reasons to believe - Assessment reopened on the ground that the assessee had accepted accommodation entries from some parties in the garb of share capital - However during the reassessment proceedings, the AO also made certain additions of the credits received from some other parties though on that basis the assessment was not reopened - Reasons which persuaded the AO to reopen the assessment proceedings ands on the basis of which additions were made were not found valid and those additions were deleted by the Tribunal - Since the grounds for reopening the assessment do not exist any longer and no additions were ultimately made on that account, the additions in respect of other items which were not part of "reasons to believe" cannot be made. It is also noted that the validity of initiation of reassessment proceedings has to be judged with regard to the material available with the AO and that too by framing the opinion strictly based on the documents and information in possession, that certain income has escaped assessment and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d down by the Supreme Court in Chhugamal Rajpal which is clearly applicable to the facts of these appeals. (ii) Seth Brothers Vs. CIT169 CTR 519(Guj) wherein the Hon'ble High Court has laid down following principles for the re-opening of the assessment u/s 148 of the Income Tax Act, 1961: (Reproduced in 28 TW 57,79) "11 (a) There must be material for belief (b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. (c) Reason to believe must be honest and not based on suspicion, gossip, rumour or conjuncture. (d) Reasons referred must disclose the process of reasoning by which he holds 'reasons to believe' and change of opinion does not confer jurisdiction to reassess. (e) There must be nexus between material and belief. (f) The reasons referred must show application of mind by the assessing officer. The validity of initiation of reassessment proceedings has to be judged with regard to the material available with the officer at the point of time of issue of notice u/s 148 and cannot be sought to be substantiated by reference to material that may have come to light subsequently in the course of reassessment proceedings. In the light of wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his view of the matter, we do not concur with the findings of the ld CIT(A) and this issue raised by the ld. AR of the assessee is allowed. 4.1 Apropos Ground No. 3 to 3.2 of the assessee, wherein it is noticed that the ld. CIT(A) has dismissed the grounds of the assessee by observing as under:- ''5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In these grounds, the appellant has objected to the addition of Rs. 1,50,32.635/-so made by the Id. AO by considering the transaction from impugned two parties as unexplained. During the assessment proceedings the learned AO provided opportunity to the appellant to prove the identity and genuineness and creditworthiness of two parties namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. with respect to the credit entries received from these two parties. The appellant explained that there is no loan taken from these two parties but the payments were received as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was also submitted that in any case, the goods were not supplied at the address at which the Inspector made enquiry but it was supplied at the different address namely "Commerce House", 2-A G.C. Avenue, 8th Floor, Calcutta-700013 as mentioned in the sales invoice itself and no any enquiry was made at this address. Decision:- It is seen that as per the report of ITO (Inv.), Unit-1 and AIU, Kolkata the impugned two parties were part of the parties providing accommodation entries. It is further noticed that the appellant has done transaction with these two parties and has received payment during the year under consideration, though these payments were stated to be recovery of outstanding dues of sales made in the preceding years. However it is noticed that appellant was not able to support his claim of sale with clinching evidence of physical transportation of the goods. The appellant has claimed that truck details etc. are mentioned on invoices however such details are not mentioned. Further there are no normal course stampings on invoices. And also there are no acknowledgements of material having been received by the buyers. The financial data/ITR of these companies as analy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has adduced evidence to establish the aforesaid facts does the onus shift on to the Department. It is not enough to establish the identity of the creditors. Mere production of the confirmation letters before the Income-tax Officer would not by itself prove that the loans have been obtained from those loan creditors or that they have creditworthiness. The appellant has not been able to prove the sales to these parties. For the same the appellant has not produce the verifiable documents like the truck bilti, challan, weighment slips. State Govt. taxes slips on crossing border, etc. It is a known fact that mal practice of accommodation billing exists whereby in several cases bogus billing is done by the parties. The mere fact that invoice has been raised on payment is received through banking channel does not make the transaction to be genuine and does not prove the creditworthiness and identity of the parties. In the case of Commissioner of Income Tax, Jaipur-ll v. Bright Future Gems [2017] 88 taxmann.com 476 (Rajasthan) [HON'BLE HIGH COURT OF RAJASTHAN] entire bogus purchases were disallowed and upheld. The reasons like nonavailability of the said two suppliers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e absconding. The Tribunal only on the statement of M.P. Sharma who was power of attorney holder of Vinayak overseas has given the finding. In our view, the finding is perverse. The view taken by the Tribunal is required to be reversed. 8. Apart from that merely voucher of the import export chanals or chanals of the custom clearance will not prove physical delivery of the material (precious stones). There is nothing on record to certify the stones which were verified by any of the value. In our view it is all paper transactions for the purpose of taking benefit of the export and tax benefits. 9. In that view of the matter, we are of the opinion that the view taken by the CIT (A) is required to be upheld and view taken by the Tribunal is required to be reversed. In that view of the matter, we are of the opinion that it is a bogus purchase and in our opinion, the finding which has been arrived by the Tribunal is not in consonance with the provisions of law, therefore, it is required to be reversed" In the case of Indian Woolen Carpet Factory V/s ITAT and Others (2002) 260 ITR 658 (Raj)/178 CTR 4420 (Raj) (https://indiankanoon.org/doc/942953/) entire bogus purchases were disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchased by these parties is not proved which is claimed to have taken place in the earlier year. Such sale is found to be sham and thus books of accounts are not reliable and liable to be rejected for the earlier year in which such sales are reflected and such sale amount will get reduced from the sales leading to increase in closing stock. Further, without prejudice, the credit has been received in the year under appeal and the identity and genuineness and creditworthiness are not proved irrespective of the claim of the appellant that the money has been received with respect to the sales made in earlier year, these factors are not proved. The argument of the appellant that the sales were accepted in the immediately preceding year assessment is not borne out of the record that whether the sales were examined in the immediately preceding year. Merely because the fact that in case the assessment has taken place in the earlier year in which such transactions have been recorded in the books of account does not render these transactions automatically to be explained as during the assessment only limited issues can be examined and the appellant has not shown with the documents tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove judgements of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib.) as under- "3.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v. P. Mohankala [2007] 291 ITR 278/161 Taxman 169, A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is well-settled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same is unexplained credit in terms of section 68 of the Act. The law is now settled by the judgment of Hon'ble Supreme Court of India in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd. SLP (Civil) No. 29855 of 2018) decided on 05.03.2019 wherein it was held that the taxpayer failed to establish the credit worthiness of investor companies and it was further held that the taxpayer failed to establish the investor's identity, as a few investors were found to be non-existent. Therefore, since the taxpayer failed to discharge the onus required under section 68 of the Act, the assessing authority's action of adding the receipt of share capital/ share premium as income in the hands of the taxpayer as unexplained credits u/s 68 was upheld. Thereby addition of Rs. 1,50,32,635/- made u/s 68 of 1.T. Act, 1961 by the Id. AO is hereby upheld. These grounds of appeal are dismissed.'' 4.2 During the course of hearing, the ld. AR of the submitted that the ld. CIT(A) was not justified in confirming the addition of Rs. 1,50,32,635/- as made by the AO. The ld. AR of the assessee reiterated the same arguments as made before the lower authorities. 4.3 On the other hand, the ld. DR sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nking channels, being the sum outstanding from debtors which includes the payment received from above stated two companies. It was argued by the ld. AR that AO has exceeded his jurisdiction in taxing the amount in the year of recovery when Sales was already declared and accepted as such in the preceding year and such action of AO amounts to double taxation of same income in A.Y. 2012-13 as well as A.Y. 2013-14, which is against the principle of taxation. It is further submitted by the ld AR that eventually, AO has made addition of Rs. 1,50,32,635/- by holding the same as accommodation entries in the shape of Share Application Money, which is not only clearly contrary to the reasons recorded but also contrary to the fact on record as no fresh share application money was taken during the year, which is evident from face of Balance Sheet itself (APB 06-49), where there is no change in the figure of Share capital/ application money as compared to preceding year. Also, no loan is appearing from any of the companies as mentioned in the Reasons recorded. At this juncture, the ld. AR invited our attention to para 4 page 10 of assessment order titled as "Some important facts", where AO has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en by the auditor. In the scenario, an addition made by AO, without rebutting any of the documentary evidences submitted by assessee and without bringing any document in support of his allegation is absolutely arbitrary and deserves to be deleted. It is also noted from the records that, assessee has not received any credit entry during the year in the shape of unsecured loan or share application money from these two companies as has been alleged by AO rather assessee has received the sales consideration money in lieu of sales made in immediately preceding year, i.e. A.Y. 2012-13. As noted above, assessment for A.Y. 2012-13 was completed u/s 143(3) after thorough examination of details furnished by assessee, which was again subject to reopening and both in proceedings u/s 143(3) and in 147, sales of assessee was accepted as such, no action could be taken in AY. 2013-14, where assessee has merely received payment against outstanding balances of debtors and no transaction of loan or share application has taken place. During the course of assessment proceedings, assessee furnished copies of ledger accounts of respective parties as appearing in its books of accounts for F.Y. 2011-12 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the sales made is nothing but taxation of an income twice which is not permissible under any provisions of Income Tax Act. Regarding noncompliance of notice u/s 133(6), reliance is placed on the judgment of Delhi Benches of ITAT in the case of Phool Singh vs ACIT, ITANo.2901/Del/2014 (Case Law Paper Book pages 60-68), wherein purchases made by assessee from certain supplier was doubted for the reason that notices issued to them u/s 133(6) returned unserved. In this case, it was categorically held that: ".......assessee is regularly purchasing material from the above party and in the past the assessment under section 143(3) were made in case of the assessee wherein purchases from these parties are accepted. The purchases are made from the party through account payee cheques and the proper adequate bills supporting purchases were submitted. The assessee has submitted the confirmed copy of the account from the books of the supplier and also stated that he is assessed to income tax with ITO Ward 25/4 New Delhi. Further regarding the address supplied by the assessee on which notices under section 133(6) remained unserved, assessee supplied the same address which is also shown i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entry in the shape of unsecured loan / share application money and nothing is stated about the claim of the assessee that the sales were made to these parties which fact remained uncontroverted. Further as noted above in these paras no new fact was brought on record rather AO has reproduced the reasons recorded at the time of initiation of reassessment proceedings that too in identical words. Further the other judgments relied upon of Hon'ble Delhi High Court in case of CIT Vs. N.R. Portfolio Pvt. Ltd., Hon'ble Guwahati High Court in case of Nemichand Kothari Vs. CIT, Hon'ble Supreme Court in case of CIT Vs. P. Mohan Kala, Sumati Dayal Vs. CIT are all related to section 68 of the Act and not relevant to the fact of the case in hand and thus are totally distinguishable to the fact and not applicable. It is time and again submitted during the course of reassessment proceedings as well as in the present submission that the amounts received from these two companies is against the sales made to them in preceding years and AO while recording the reasons has alleged the same as the assessee's own money routed through RTGS in the shape of accommodation entries and while completing the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above." We also take into consideration the decision of Hon'ble Apex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018(Case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the necessary documentary evidences, therefore, the Bench does not concur with the findings of the ld. CIT(A) and addition so sustained is directed to be deleted. Thus ground No. 3 to 3.2. of the assessee is allowed. 5.1 Apropos Ground No. 4 of the assessee, it is noticed that the ld. CIT(A) dismissed this ground of the assessee by observing as under:- ''6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In this ground of appeal, the appellant has challenged the addition of Rs. 3,75,816/- made by Id. AO by alleging the commission @ 2.5% being paid for obtaining accommodation entry. It was submitted that no accommodation entry of share application money has been taken by the appellant and rather no share application money or share capital has been raised by the appellant during the year under consideration and accordingly there is no question of payment of commission. I have considered the argument of the Id. AR and facts on record. As I have upheld th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se relating to commission amount of Rs. 3,75,816/- paid by the assessee for obtaining accommodation entry. Hence, the same is directed to be deleted. 6. In the result, the appeal of the assessee deserves to be allowed Sd/- (राठौड़ कमलेशजयन्तभाई) लेखा सदस्य/Accountant Member PER :NARINDER KUMAR, JUDICIAL MEMBER. I have gone through the draft order received from Learned Brother. I find it to be a fit case to discuss the contentions, actually put forth in the course of arguments, by Learned AR for the appellant, and Learned DR for the Department, and record reasons and findings on the issues raised. 2. Appellant-assessee claimed to be engaged in the business of manufacturing of PVC Pipes, HDPE Pipes, POY, DTY, Blankets etc. has come up in appeal against impugned order whereby Learned CIT(A) has dismissed the appeal preferred while challenging assessment order dated 10.12.2019 passed by Learned Assessing Officer, under section 143(3) read with section 147 of Income Tax Act, 1961 (in short "the Act"). 3. Vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not proved, the assessee does not stand discharged of the onus on him. That is how, additions came to be made to the income of the assessee. As noticed above, Learned CIT(A) upheld the two additions and thereby dismissed the appeal filed by the assessee. Contentions & Discussion 8. While arguing the appeal, Learned AR for the appellant has submitted that the subject amount was as against sales of the previous year, but received in the year under consideration, and that the Assessing Officer had checked the account books of the assessee including ledger accounts, and further that the invoices contained all relevant details, and as such, the Assessing Officer should not have reopened the case by issuing notice under section 148 of the Act. On the other hand, Learned DR for the department has submitted that addition under section 68 of the Act was made finding that the subject entry was not on account of sales, and further that while discussing the ground raised on behalf of the appellant, CIT(A) had discussed the version of the assessee as regards sales part and held the sales to be sham, and as such, there is no merit in the contention raised on behalf of the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order passed by the Assessing Officer was without jurisdiction. In support of his contention, Learned AR has referred to decisions, by giving title of the decided cases with reference to the citations where the same stand reported, as noticed above at page 21 and 22 of the draft order from Learned Brother. In the written submission, some portions from the decisions have been extracted here and there, on the issue. In other words, full text thereof has not been provided. However, separate compilation has been provided with full text so as to cite decisions by Hon'ble Courts and by Co-ordinate Benches of ITAT. On the other hand, Learned DR for the department has submitted that case could be re-opened and assessment order passed even beyond 4 years period due to non-disclosure or concealment of material particulars by the assessee. In this regard, Learned DR has provided synopsis of the case laws, as available above at page 22 to 30 of the draft order received from Learned Brother. In other words, full text thereof has not been provided. 15. Admittedly, assessment stood already completed under section 143(3) of the Act on 12.3.2016. Assessment pertains to the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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