TaxTMI 
TaxTMI 
2015 (6) TMI 804
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....come Tax Act. The assessment order passed u/s 143(3)/147 is bad in law. 3.0 That the Ld. CIT(A) has erred in law and on facts in rejecting the contentions of the appellant that AO's jurisdiction u/s 147 without recording the valid reasons to believe that income has escaped assessment & without complying the mandatory requirements in regard to section 147/148 of the Income Tax Act. 4.0 That the reopening u/s 147 beyond 4 years is bad in law especially when original assessment was made u/s 143(3) and the transactions of loans were queried and answered. The reassessment is based on change of opinion & is bad in law. 5.0 The reopening u/s 147 was based on hearsay, surmises & assumptions & AO had no material to form an independent view about the alleged escapement of income. 6.0 That the learned CIT(A) has grossly erred in law in rejecting the appellant's contentions that the amount of Rs. 25,00,000/- has been received on account of loans/ICD's from the parties and the same had been repaid along with interest in subsequent years. 7.0 That the learned CIT(A) has grossly erred in law and on facts and in the circumstances of the appellant's case in upholding the disallowance....
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.... by the Investigation wing of the Department on certain persons engaged in providing accommodation entries to beneficiaries of their services, in return of commission. It has been revealed that many persons were using services of accommodation entry operators to channelize their own unaccounted money in their regular books of accounts by routing the same through the accounts of Accommodation entry providers. 2. The modus operandi of these entry providers and beneficiaries of their services, was detected as under: 2.1 Entries were being broadly taken for two purposes: a) To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. b) to inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. 2.2 The assessees who had unaccounted money (called as entry takers or beneficiaries) and wanted to introduce the same in the books of accounts without paying tax, approached another person (called as entry operator) and handed over the cash (plus commission) and had taken cheques/DDs/POs. The cash w....
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....s from various parties amounting to Rs. 25,00,000. As per the findings of the Investigation Wing the parties who have transferred funds to the account of the assessee are involved in giving bogus entries. The persons involved in these bogus transactions are:- Beneficiary's Bank/Account No. Value of entry taken Instrument no. by which entry taken/date Name of account holder of entry giving account Bank from which entry given/account no. of entry giving account Canara Bank, Kamla Nagar 500000 184330/25.10.2002 Kohinoor Oil Mills Ltd. KVB, Karol Bagh/CA2991 Canara Bank, Kamla Nagar 500000 184332/29.10.2002 Kohinoor Oil Mills Ltd. KVB, Karol Bagh/CA2991 Canara Bank, Kamla Nagar 500000 184334/09.11.2002 Kohinoor Oil Mills Ltd. KVB, Karol Bagh/CA2991 Canara Bank, Kamla Nagar 500000 585840/20.11.2002 Shimmer Marketing Pvt. Ltd Federal Bank, Karol Bagh/596 Canara Bank, Kamla Nagar 500000 724823/21.11.2002 Aries Pisces Finsec Services Pvt. Ltd. Vijaya Bank, Ramnagar/2150 All the entries were transferred to the ac....
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....for repayment of above loans is also attached herewith as annexure 3 of this reply. Please also note that necessary tax has been deducted at source on interest paid on the above unsecured loans and timely deposit in Govt. account. Let me know if anything more required in this regarding we shall be glad to furnish the same. In continuation of our reply dated 26.10.2010, we are submitting following information in respect of aforesaid subject matter. A. Kohinoor Oil Mills Ltd. i. The copy of affidavit from Director of Kohinoor Oil Mills Ltd. for granting loan to us in financial year 2002-03. ii. The copy of ITR acknowledgement for assessment year 2003- 04. iii. The copy of balance sheet alongwith P & L A/c for relevant financial year. B. Shimmer Marketing Pvt. Ltd. i. The copy of affidavit from Director of Shimmer Marketing Pvt. Ltd. for granting loan to us in financial year 2002-03. ii. The copy of ITR acknowledgement for assessment year 2003- 04. iii. The copy of balance sheet alongwith P & L A/c for relevant financial year. Let me know if more information required in this regard we shall be glad to furnish the same." However, the AO did not fi....
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....s were duly reported in Annexure 'H' of the Tax Audit Report, a copy of which is being filed before your honour. All these companies are mainly unrelated concerns. The name of three companies identified by The AO as entry providers is also included in the list of 50 entities. These loans are generally repayable on demand and are repaid front time to time as per the mutual understanding with parties along with interest. The loan of Rs. 25 lakhs was arranged front these three parties during the year under consideration and has been reported as such in the Tax Audit Report. Further the amount of loan was also repaid along with interest after making TDS in the subsequent years. During the course of assessment proceedings, the Assessing Officer has issued a specific questionnaire being questionnaire dated 4.4.2005 under which he had required the assessee to file confirmation for the increase in unsecured loans, copy of which is enclosed. The assessee, in response to this questionnaire vide its letter dated 9.12.2005 filed complete details of loan obtained during the year along with copy of income-tax return, copy of balance sheet of each creditors and all such other inform....
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....enditure not only in this year but also in subsequent year. The fact that these loans have been repaid subsequently is also not disputed by the AO. Under these circumstances, the conclusion drawn by the AO, based on some general findings of another wing of the department has no bearing on the genuine transactions of loan undertaken by the assessee, it is respectfully submitted. It is respectfully submitted that on account of the facts narrated above, as the transactions of obtaining loan having been included in the Tax Audit Report, the confirmation of loans having been filed at the original assessment stage by way of Income-tax Returns and Balance Sheets of the Creditors. It cannot he held that the assessee was, in any way, involved in obtaining bogus entries for the amount of Rs. 25 lakhs, especially when seen in the light of the fact that total amount during the year as inter-corporate loan/ICDs is more than 5 crores and the total loan from these three alleged entry operators, is just 5% of the total loan amount received by the assessee. It is respectfully submitted that the reopening done without even an allegation that the assessee has failed in its statutory obligation ....
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.... the production before the AO of books of accounts and other evidence does not exonerate the assessee from the duty to make full and true disclosure, if some material necessary for assessment lay embedded in books of accounts or other evidence which the AO could have uncovered with due diligence but did not. Then, production of account books or other evidence will not tantamount to full and true disclosure of material facts. The ld. CIT(A) referred to the provisions contained in Explanation 1 below proviso to section 147 of the Act and observed that the AO should have material on the basis of which he could form a bonafide belief that the income assessable to tax has escaped assessment for the relevant assessment year. The ld. CIT(A) made the reference to the following case laws: • Johri Lal (HUF) Vs CIT (1973) 38 ITR 439 (SC) • ITO Vs Lakhmani Mewal Das (1976) 103 ITR 437 (SC) • CIT Vs TSPLP Chidambaram Chettiar (1971) ITR 467 (SC) • HA Hanji & CO. Vs ITO (1979) 120 ITR 593 (Cal.) • Sheo Singh Vs AAC (1971) 82 ITR (SC) • Sri Krishna (P) Ltd. Vs ITO (1966) 221 ITR 538 (SC) • Raymond Woollen M....
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....t on the ground that there was failure on the part of the assessee to disclose truly or fully material facts necessary for computation of income. It was pointed out that at the original assessment stage, the AO raised a specific query with regard to the confirmation of these unsecured loans (a reference was made to page no. 101 of the assessee's paper book) and the same was responded with similar details (a reference was made to page no. 102 of the assessee's paper book). It was stated that in the reasons for reopening the AO stated that information was received from the Investigation Wing that the assessee obtained bogus entries of Rs. 25,00,000/- from 3 parties. It was further stated that the assessee clarified that those amounts were not accommodation entries, but represented the intercorporate loans obtained by the assessee, which had been repaid in subsequent year through normal banking channel alongwith interest after making TDS as per the provisions of law. It was contended that the assessee submitted the details of repayment of loan i.e. cheque nos., dates on which the loans were repaid and this fact was noted by the AO at page no. 3 of the assessment order. It was also con....
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.... the decision of the Hon'ble Jurisdictional High Court in the case of CIT Vs Priyanka Ship Breaking Co. Pvt. Ltd. 211 Taxman 20 (Del). 13. In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the case was reopened after recording the reason and as there was escapement of income, the reassessment proceedings were rightly initiated by the AO and confirmed by the ld. CIT(A). The reliance was placed on the judgment of the Hon'ble Jurisdictional High Court in the case of CIT Vs Nova Promoters and Finlease (P) Ltd. (2012) 342 ITR 169 (Del). 14. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the original assessment in assessee's case was completed u/s 143(3) of the Act on 30.03.2006 and the assessment was framed at an income of Rs. 4,28,28,277/- after making certain additions/disallowances. Thereafter, on the basis of information received by the AO from Investigation Wing that the assessee was engaged in receiving the bogus entries, the assessment was reopened. The AO identified 3 parties and issued....
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....d to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality should be favoured. In the event it is held that by reason of section 147 the Income-tax Officer may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. An order of assessment can be passed either in terms of subsection (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi judicial functi....