TaxTMI 
TaxTMI 
TaxTMI 
2016 (4) TMI 1142
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....ving regard to facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts by not accepting the assessee submission that amount is received through proper banking channel, and even loan creditors never denied granting the loans to the assessee. 4. That having regard to facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts by not accepting the assessee submission that he should not be punished merely on the statement of third party where opportunity of cross examine to Shri Tarun Goyal (whose statement was taken by the investigation wing) and other directors of the other companies had not been provided during the course of assessment proceeding. 5. That having regard to facts and circumstances of the case, Ld. CIT (A) has erred in law and on facts in confirming the action of Ld. AO in treating Rs. 3,50,00,000/- as unexplained credit, because of the assessee failed to present the loan creditors before the Ld. A.O or failed to produce any documents of their identity / credit worthiness which is beyond his control, since Mr. Tarun Goyal and others are not cooperating with the assessee. This is bad in law and not sustainable on various l....
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....ith the details of the case. That the Investigating Department must have provided the names, addresses, and PAN No. of the Loan creditors, who could have summoned. That the Ld. AO must have the details of the Bank Accounts of the Loan Creditors. They could have summoned the required information from Banks of the Loan Creditors. That the Ld. AO fails to apply his mind and also Ld. CIT(A) failed gather information from third parties, in spite of the fact that all the resources of the information was available with the Ld. AO & Ld. CIT(A). 12. That the Appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 2. At the time of hearing, Ld. Authorised Representative of the Assessee filed the following concise/revised/additional legal grounds of appeal. "1(a) On the facts and circumstances of the case and in law, the notice u/s 148 issued in this case is bad-in-law, without jurisdiction and barred by limitation and accordingly, the notice u/s 148 issued and also thy assessment order passed on the foundation of such notice are liable to be quashed. On the f....
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.... this case after recording the reasons on the basis of the information received from Director of Income Tax (Investigation), New Delhi, that certain persons including the assessee company were beneficiaries of taking accommodation entries received from the private limited companies floated by Sh. Tarun Goyal during the period relevant to AY 2006-07. The findings of the "Investigation Wing" of the Department, were brought to the knowledge of all the Assessing Officers alongwith the data collected in the course of investigation. The modus operandi adopted by such beneficiaries of the services of accommodation entry providers was detected and the assessee was found to be the accommodation entry from such entry operator controlled by Sh. Tarun Goyal during the FY 2005-06 relevant to AY 2006-07 as per the following specific details of transaction:- S.No. Beneficiary Company Name of the entry operator Amount involved. (Rs.) 1. Banke Bihari Properties Pvt. Ltd. Bhavani Portfolio P. Ltd. 25,00,000/- 2. Banke Bihari Properties Pvt. Ltd. Countrywide Credit & Securities P. Ltd. 20,00,000/- 3. Banke Bihari Properties Pvt. Ltd. Deep Sa Drilling P. Ltd. 20,00,000/- 4. Banke B....
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....ring which are mentioned under para no. 2 of this order, as aforesaid. 5. At the time of hearing, Ld. Counsel of the assessee has only argued the legal ground that notice u/s. 148 issued in this case is contrary to the provisions of section 147 to section 151 of the Income Tax Act, 1961 by stating that action of the Assessing Officer is illegal. First of all, he draw our attention towards Page no. 1 of the Paper Book which is a copy of Notice dated 25.3.2013 issued u/s. 148 by the AO. Further he draw our attention towards page no. 17 to 21 which is a copy of the forwarding letter alongwith copy fo reasons for reopening the case u/s. 148 and stated that no proper reasons were recorded; no nexus between the materials relied upon and the belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148; no independent conclusion that there was escapement of income and no proper satisfaction / approval has been obtained from the Addl. CIT; Ld. Addl. CIT has granted the approval for reopening of the assessment in a mechanical manner and without due application of mind by writing the word "approved". To support his conten....
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....the parties and perused the relevant records available with us, especially the orders of the revenue authorities and the case law cited by the assessee's counsel on the issue in dispute. In our view, it is very much necessary to reproduce the reasons recorded by the AO before issue of notice u/s. 148 and the approval of the Ld. Addl. CIT, Range-2, New Delhi for reopening of assessment which reads as under:- "FORM FOR RECORDING THE REASONS FOR INITIATING PROCEEDINGS U/S. 148 AND FOR OBTAINING THE APPROVAL OF THE ADDL. COMMISSIONER OF INCOME TAX / COMMISSIONER OF INCOME TAX 1. Name & Address of the Assessee M/s Banke Bihari Properties Pvt. Ltd. 144/2, Ashram Mathura Road, New Delhi - 110 014 2. PAN AACCB6652Q 3. STATUS COMPANY 4. RANGE / WARD WARD-2(3), NEW DELHI 5. Assessment Year in respect of which it is proposed to issue notice u/s. 148. 2006-07 6. The quantum of income which has escaped assessment. Rs. 2,90,00,000/- 7. Whether the provisions of Section 147(a), 147(b) or 147(c) are applicable or all the Sections are applicable. Yes 8. Whether the assessment is proposed to be made for the first time. If the reply is in affirmative please state. ....
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....the FY 2005-06 relevant to AY 2006-07 as per the following specific details of transactions. Theasesseehas received unexplained sums from the entry operators as per the above details as per information available with the undersigned. As explained above, the identify, creditworthiness and genuineness of transactions with the reasons found to be entry operator cannot be established. I therefore, have reasons to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment for above assessment year, the income chargeable to tax amounting to Rs. 2,90,00,000/- has escaped assessment within the meaning of section 147 of the Act. Since four years has expired from the end of the relevant assessment year, and the assessee has not filed any return of income, the reasons recorded above for the purpose of opening of assessment is up for kind satisfaction of the Addl CIT, Range-2, New Delhi in terms of the provisions to section 151(2) of the IT Act, 1961. Dated: 22.03.2013 Sd/- (PAWAN MEENA) ITO, WARD 2(3), NEW DELHI 12. Whether the Addl. CIT/CIT/CBDT is satisfied on the reasons recorded by the AO that it is a fi....
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.....2010. In our view the reasons are vague and are not based on any tangible material as well as are not acceptable in the eyes of law. The AO had mechanically issued notices u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Investigation, Jhandewalan, New Delhi. Keeping in view of the facts and circumstances of the present case and the law applicable in the case of the assessee, we are of the considered view that the reopening in the case of the assessee for the asstt. year in dispute is bad in law and deserves to be quashed. We draw our support from the judgments of the Hon'ble High Court of Delhi in the following cases:- (i) Signature Hotels (P)_ Ltd. vs. ITO and another reported in 338 ITR 51 (Del) has under similar circumstances as follows:- "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s.143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s.148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections....
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....ion which shares had been transferred and with whom the transaction had taken place. The AO did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The AO had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice u/s 148. What had been recorded by the AO as his "reasons to believe"was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The AO had clearly substituted form for substance and therefore the action of the AO was not sustainable." 9. In view of above, we are of the considered view that above issue is exactly the similar to the issue involved in the present appeal and is squarely covered by the aforesaid decisions of the Hon'ble High Court of Delhi. Hence, respectfully following the above precedent, we decide the legal issue in dispute in favor of the Assessee and against the Revenue and accordingly quash the reassessment proceedings. The other issues are not dealt with as the same have become academic in nature. 10. I....
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....nt 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 . 14. In the circumstances, the conclusion reached by the ITAT cannot be said to be erroneous. No substantial question of law arises. 15. The appeal is dismissed." (C) ITAT, 'E' Bench, New Delhi in the case of ITO vs. M/s NC Cables Ltd. in ITA No. 4122/Del/2009 (AY 2001-02) and in Cross Objection No. 388/Del/2009 in the matter of M/s NC Cables Ltd. vs. ITO, vide order dated 22.10.2014, the Tribunal has held as under:- "10.2. The Mumbai 'E' Bench of the Tribunal in ITA 611/Mum/2004 Amarlal Bajaj (supra) order dt. 24.7.2013 has considered the legal position and held as follows. "5. We have considered the rival submissions and carefully perused the orders of the lower authorities and also the material evidences brought on 8 record from both sides. We have also the be....
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....report the Commissioner against the question "whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 merely noted "Yes" and affixed his signature there under. On these facts, the Hon'bIe Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon'ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellant-firm's failure to disclose material facts and if the 9 Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO. "Intimation has been received from DCIT-24(2), Mumbai vide his letters dt. 22nd February, 2002 that one Shri Nitin 1. Rugmani assessed in his charge had arranged Hawala entries in arranging loans, expenses, gifts. During the year Shri Amar G. Bajaj, Prop. Of Mohan Brothers, 712, Linking Road, Khar (W), Mumbai-52 was the b....
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....elhi High Court in the case of' United Electrical Co. Pvt. Ltd. Vs CIT 257 has held that "the proviso to sub-section (1) of section 151of the 10 Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some inbuilts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment". The Hon'ble High Court further observed that "what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the proviso to sub-section (1) of section 151 of the Act as the action under section 147 was being initiated after the expiry of four years from the end of the relevant assessment year. The power vested in the....
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....s below the rank of Assistant Commissioner [or Deputy Commissioner], unless the [Joint] Commissioner is satisfied on the reasons recorded by such Assessing Officer that it is a fit case for the issue of such notice] : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint] Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint] Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.] [Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under sectio....
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....see Shri Amar G. Bajaj had taken benefit of such entries of loans, commission and bill discounting of Rs. 8,00,000/-, 11,21,243/- and 9,64,739/- respectively. The assessment was completed u/s. 143(3) of the I.T. Act on 31st March, 1998 by DCIT-Spl. Rg. 40, Mumbai. It is seen from records that the aforesaid points have not been verified in the assessment. I have therefore reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income has escaped assessment within the meaning of proviso to Sec. 147 and explanation 2 (c)(i) of the income-tax Act, 1961." 7. In the light of the above mentioned reasons, in our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material o....
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....mmissioner before granting the approval". 9. The observations of the Hon'ble High Court are very much relevant in the instant case as in the present case also the Commissioner has simply mentioned "approved" to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon'ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee's appeal is allowed. 10. As we have held that the reassessment is bad in law, we do not find it necessary to decide other issues which are on merits of the case." (E). Hon'ble High Court of Madhya Pradesh in the case of CIT vs. S. Goyanka Lime & Chemicals Ltd. reported in (2015) 56 taxmann.com 390 (MP) has held as under:- "7. We have considered the rival contentions and we find that while according sanction, the Joint Commissioner, Income Tax has only recorded so "Yes, I am Satisfied". In the case of ARjun Singh vs. Asstt. DIT (2000) 246 ITR 363 (MP), the same question has been considered by a Coordinate Bench of this Court and the followin....