TaxTMI 
TaxTMI 
TaxTMI 
2016 (3) TMI 923
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....ed on record before us. The Ld. AR pointed out from the reason recorded by the AO, available at pages 5 & 6 of assessee's paper book, are merely a reproduction of vague information received from Director of Income Tax (Investigation) New Delhi. The Ld. AR further pointed out that the AO proceeded to make additions without verifying and examining the facts and details sent by the Investigation Wing & without application of mind in a mechanical manner. Therefore, the AO did not assume valid jurisdiction to initiate proceedings u/s 147 of the Act and for issuing notice u/s 148 of the Act. The Ld. AR placed his reliance on the recent decision of Hon'ble High Court of Delhi in the case of Pr. CIT vs. G & G Pharma dated 8.10.2015 in ITO no. 545/2015 wherein dismissing the appeal of the revenue, the tribunal order reported as 2015-TIOL-191-ITAT-Delhi has been upheld. The Ld. AR also placed reliance on the order of the Tribunal in the case of ACIT u/s Shri Devesh Kumar dated 31.10.2014 passed in ITA no. 2068/Del/2010 for AY 2004-05 and vehemently pointed out that in the reasons recorded the AO has not even mentioned date of recording of reasons which shows action of the AO u/s 147 / 148 of....
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.... by this Court in ITA No. 643 of 2011 (CIT v. India Terminal Connector System Ltd.) where, according to Mr. Sawhney, in similar circumstances, the appeal of the Revenue was allowed and the matter was remanded to the ITAT for examination of the case on merits. He also relied upon the decision of the Supreme Court in Phool Chand Bajrang Lal v. Incometax Officer (1993) 203 ITR 456 SC. The main thrust of the submission of Mr. Sawhney is that, as was in the case of India Terminal Connector System (supra), in the present case as well, there was specific information regarding the name of the entry provider, the date on which the entry was taken, the cheque details as well as the amount credited to the account of the Assessee. He accordingly submitted that this by itself constituted sufficient material for the AO to form an opinion that the "assessee company has introduced his own unaccounted money in its bank account by way of accommodation entries". 8. Mr. Kapil Goel, learned counsel for the Assessee, placed reliance on other decisions of this Court including CIT v. Pradeep Kumar Gupta (2008) 303 ITR 95; the decision dated 27th March 2015 in W.P.(C) No. 5330 of 2014 (Krown Agro Foods ....
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....ion of the DVO per se is not an information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment." 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as the decision of this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. v. CIT 308 ITR 38 (Del). The Court noted that a material change had been brought about to Section 147 of the Act with effect from 1st April 1989 and observed: "29. It is at once seen that the Amendment in Section 147 of the Act brought about a material change in law w.e.f. 1st Ap....
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....e been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case. 13. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the a....
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....see has a right to participate in the reassessment proceedings and to satisfy revenue authorities that there was no escapement of taxable income by the assessee. 13. In the case of Raymond Woollen Mills (supra), Hon'ble Apex Court considered the fact that there was a charge of under-valuation of closing stock against the assessee company, therefore, it was held that court can only consider whether there was a prima facie case for reassessment; sufficiency of material cannot be considered. 14. In the case of Rajesh Zhaveri (supra), Hon'ble Apex court held that formation of belief within subjective assessment of AO is required. In this case, the claim of the assessee towards bad debts was examined during the reassessment proceedings. In this case, the return of income was processed u/s 143(1) of the Act. 15. In the light of facts and circumstances of the present case, we respectfully hold that the benefit of the ratio of the above decisions are not available for the revenue in the present case as the AO proceeded to record reason to believe as required for issuance of notice u/s 148 of the Act in a mechanical manner only after mentioning detailed reason from Investigation Wi....
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....ion, we are inclined to hold that in the extant case the AO proceeded to initiate proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act on the basis of information received from Investigation Wing of the department in the form of a CD prepared by Shri Sanjay Shah and Shri Vishesh Prakash, ITOs of Unit V, New Delhi. Subsequently, the AO reproduced details gathered from the CD and without application of independent mind, held that the assessee was beneficiary of accommodation entries amounting to Rs. 4,51,000. In the main part of reason to believe, there is no mentioning of nature of transaction to establish and fortify the fact that the impugned transactions were in the nature of accommodation entries. We also observe that there is no mentioning of date therein and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed u/s 143(1)(a) of the Act on 15.3.2005 for forming a belief that the income of the assessee had escaped assessment. 20. Under these facts and circumstances, we are in agreement with the observation and conclusion of the CIT(A) that there was no material on record to show that the AO had app....