TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 158
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....er the Ld. CIT(A) was justified by upholding the addition on a/c of gift of Rs. 501000/- u/s 68 without properly considering the evidence on record or any contrary material on record to draw any adverse inference. 3. Whether the Ld. CIT(A) was justified by not adjudicating upon Ground no. 2 i.e. addition of Rs. 25050/- made by the AO on a/c of the above alleged gift just on surmises and conjectures." Legal Ground nos. 1 to 1(c) of the assessee 3. The ld. Assessee's Representative (AR) and Ld. Departmental Representative (DR) agreed to that the legal objections of the assessee contained in ground no. 1 to 1(c) should be heard first and hence, we have heard arguments of both the side on the said legal grounds and also carefully perused the materials placed on record before us. 4. The Ld. AR placing reliance of the prepositions laid down Hon'ble High Court of Delhi in the case of Sarthak Securities u/s 270 329 ITR 110 (Delhi), CIT vs. Vineeta Jain 299 ITR 383 (Delhi), CIT vs. Insecticides (India) Ltd. 357 ITR 330 (Delhi) and orders of ITAT Delhi in the case of ITO vs. On Exims Pvt. Ltd. (2013) 57 TTJ 633 (ITAT-Delhi) and ACIT vs. Shri Devesh Kumar in ITA no. 2068/Del/2010 ....
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....rian) INCOME TAX OFFICER WARD 20(2), NEW DELHI" 7. Further, from above it is apparent that the AO has simply relied on the list of so called beneficiaries and noted that as the assessee also appear in the list and without any verification from the assessment records of the assessee for AY 2004-05 proceeded to issue notice u/s 148 of the Act in a mechanical manner even without mentioning details of so called alleged entry and its nature. On vigilant reading of reasons recorded, as reproduced it is vivid that the AO proceeded to issue notice only on the basis of vague information which was a list of so called beneficiaries without any verification, examination or application of mind to the details and information received. 8. In the light of above when we analyse the preposition laid down by ITAT Delhi "A" Bench in the case of G & G Pharma u/s ITO reported as - 2015-TIOL-191-ITAT-Del, as relied by the Ld. AR, then we observe that reopening of assessments u/s 147/148 of the Act can be considered as bad in law when the AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped assessment during the year, mere a refe....
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....on made by the investigation Wing of the Department has found that assessee is a beneficiary of ITA No. 3149/Del/2013 taking the aforesaid accommodation entries. I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. Therefore, I have reasons to believe that the income of the assessee company amounting to Rs. 20,00,0001- has escaped assessment. The escapement of income has been clearly on account of failure on the part of the assessee company to truly and fully disclosed all material facts necessary for assessment thus, it is fit case for initiation of proceedings u/s 147 of the income tax act,1961." 8. We have perused the aforesaid reasons recorded by the AO for reopening the assessment in dispute and we are of the considered view that the AO has not applied his mind so as to come to an independent conclusion that he has reason to believe that income has escaped during the year. A mere reference is made to certain information received from the Investigation Wing which was supplied to the assessee vide AO....
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....d the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to the quashed." (b). In the case of CIT vs. Atul Jain reported in 299 ITR 383 it has been held as under:- ITA No. 3149/Del/2013 "Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did no....
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....ormation 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 Pvt. Ltd. v. ACIT); the decision dated 4th August 2015 in ITA No. 486 of 2015 (CIT v. Shri Govind Kripa Builders P.Ltd.) and the decision dated 24th August 2015 in ITA No. 226 of 2015 (CIT v. Ashian Needles Pvt. Ltd.) 9. The Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had received certain communicati....
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....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 April, 1989. Section 147(a) as it stood prior to 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has reason to believe that income of an Assessee has escaped assessment. Howev....
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....on 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 assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity....
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....tion of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid." 8. That the CIT(A) has also allowed relief to the assessee following the above decision of Hon'ble Jurisdictional High Court. The facts of the assessee's case clearly show that the Assessing Officer had not examined the information received from Investigation Wing before recording his own satisfaction of escapement of income. Though he has mentioned in the reasons recorded that he has examined the information and details so available. Because had he examined the details and information, he would have certainly known that the information is factually incorrect and incomplete. In view o....
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.... Enforcement Directorate, the documents seized by the Enforcement Directorate from the premises of Andaleeb Sehgal and Hamdaan Exports were also before the Assessing Officer when he recorded the reasons. The seized documents included facsimile transmission of messages with respect to different business transactions entered into by Indrus. Some of the documents were found to have been addressed to the assessee and Andaleeb Sehgal, which according to the Assessing Officer indicated that the assessee, while being present in India, took strategic decisions from the Indian soil and rendered services on behalf of Indrus. According to 7 ITA-2395/Del/2012 the Assessing Officer, these documents established that the operations of Indrus were managed from the premises of Andaleeb Sehgal in India and since certain messages were addressed to the assessee at the address of Andaleeb Sehgal, the business connection between the assessee and Indrus was established." 9. Thus, in the above mentioned case, there was material before the Assessing Officer which enabled him to reach a prima facie conclusion with regard to the business connection of the assessee in India. Therefore, on the facts, the deci....