TaxTMI 
TaxTMI 
TaxTMI 
2015 (6) TMI 804
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....(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 of Rs. 25,00,000/- on account of unexplained investment u/....
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....iding 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 was being deposited by the entry operator in a bank account either in his own name or in t....
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....g 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 account of the assessee maintained at Canara Bank, Kamla Nagar, New Delhi." 5. The assessee raised the objection against the reopening and submitted to the AO as under: "We have received reasons for issue of not....
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....d 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 find merit in the submissions of the assessee and made the addition of Rs. 25,00,000/- on account of cash credit. 6. Being aggrieved the assessee carried the matter to the ld. CIT(A) and furnished the written submission which are incorporated by the ld. CIT(A) in para 4 of the impugned order and are reproduced verbatim as under: "Based on the aforesaid reopening of the AO and the corr....
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.... 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 information, as was required by the AO. The AO being satisfied had accepted these transactions of obtaining loans front all the parties as per Tax Audit Report, as genuine as the assessee had always believed it to be so. Thereafter, the loans from these parties were repaid in subsequent periods i.e. assessment year 2004-05 and 2005-06. Thereafter assessee had no dealings/business relations of obtaining ICD f....
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....d 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 to disclose fully and truly the material facts necessary for the computation of income cannot be held to be valid in law and needs to be cancelled on this primary ground only. There is not even an allegation in the reasons that assessee has failed to disclose fully & truly all material facts for the computation of its income." 7. The reliance was placed on the following case laws: (i) CIT vs. Bhaji Lavji, 79....
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....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 Mills Ltd. Vs ITO (1999) 236 ITR 34 (SC) * S. Narayanappa Vs CIT (1967) 63 ITR 219 (SC) * Ganga Saran & Sons (P) Ltd. Vs ITO (1981) 130 ITR 1 (SC) * Phool Chand Bajrang Lal Vs ITO (1993) 203 ITR 456 at 477 (SC) 9. The ld. CIT(A) observed that whereas the reason to believe cannot be equated with the reason to suspect. It is equally not necessary that there should be ample evidence on record to establish the actual escapement of income so as to form a reasonable belief that the income of the assessee has escaped assessme....
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....d 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 contended that the assessee filed the details, such as affidavits from the Directors of the lending companies as well as copies of acknowledgment of income-tax return etc. and the details pertaining to the loans transactions were given in Annexure 'H' of Tax Audit Report wherein names, addresses, PAN, Ward Nos. etc. of all the persons from whom loans exceeding Rs. 20,000/- were obtained or repaid during the year. It was stated that the reopening of the completed assessment u/s 147/148 of the Act was a change of opinion, because there was no failure on the part of ....
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.... 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 summons u/s 131 of the Act which returned back with the remarks of the Postal Authority 'left without address'. The AO made the addition of Rs. 25,00,000/- by observing that that the loans received in the said amount by the assessee were on account of bogus entries. In the present case, it is an admitted fact that the reassessment proceedings were initiated by the AO only on the basis of information received from the Investigation Wing and no independent inquiry was made by the AO. It is also noticed that during the course of original assessment proceedings the AO, vide notice u/s 142(1) of the Act date....
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.... 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 function to take benefit of its own wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion." The aforesaid order has been affirmed by the Hon'ble Supreme Court in the case of CIT Vs Kelvinator of India Ltd. 320 ITR 561. 15. In the present case, also the AO while framing the original assessment, specifically, asked the assessee to furnish the details of the unsecured loans and the assessee gave the details by disclosing the name of the persons from whom loans were received and also fur....