AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 1142
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....pon the presumption and incorrect facts. 3. 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 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 cooperatin....
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....red them and relied only on the information of third party, i.e Investigating Department of 1. Tax without going with 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 a....
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....he case of NTPC Limited 229 ITR 383 and proceed to decide the additional grounds first. 6. The brief facts of the case are that the proceedings u/s. 147/148 were initiated in 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. 25,0....
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....ated 03.12.2013 has dismissed the appeal of the Assessee. 4. Aggrieved with the aforesaid order of the Ld. CIT(A), Assessee is in Appeal before the Tribunal for challenging the legal issue raised as well as the addition in dispute raised in the Additional Grounds filed during the hearing 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 t....
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....ered the facts of the case and after due consideration of the facts has given a direction for reopening of the case by writing the word "approved". Therefore, he stated that, it cannot be said that the sanction was granted mechanically or without application of mind. 7. We have heard both 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. 2....
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....floated by Shri Tarun Goyal. Entry operators were identified after thorough investigation on the basis of definitive analysis of their identity, creditworthiness and the source of the money ultimately received by the beneficiaries, In the instant case, the assessee is found to be the beneficiary of accommodation entry from such entry operator controlled by Shri Tarun Goyal during 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 ....
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....ve 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's letter dated 15.9.2010. 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 unde....
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....edings were not valid and were liable to the quashed." (ii). In the case of CIT vs. Atul Jain reported in 299 ITR 383 it has been held as under:- "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 not indicate the source of the capital gains which in this case were shares. There was no information 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 a....
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.... 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 . 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....
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....e for the issue of notice which means that the satisfaction of the Commissioner is paramount for which the least that is expected from the Commissioner is application of mind and due diligence before according sanction to the reasons recorded by the AO. In the present case, the order sheet which is placed on record show that the Commissioner has simply affixed "approved" at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon'ble Supreme Court (supra) that on AO's 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 carefull....
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.... is of the opinion that the AO's belief is well reasoned and bonafide, he is to accord his sanction to the issue of notice u/s. 148 of the Act. In the instant case, we find from the perusal of the order sheet which is on record, the Commissioner has simply put "approved" and signed the report thereby giving sanction to the AO. Nowhere the Commissioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 8. Hon'ble Delhi 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 ....
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....t has been held as under:- "5. We have considered the rival submissions and carefully perused the orders of the lower authorities and also the material evidences brought on record from both sides. We have also the benefit of perusing the order sheet entries by which the Ld. CIT has granted sanction. Let us first consider the relevant part of the provisions of Sec. 151 of the Act. 151. (1) In a case where an assessment under sub-section (3) of section 143 or section 147 has been made for the relevant assessment year, no notice shall be issued under section 148 [by an Assessing Officer, who is 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....
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....e Shri Nitin J. 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 beneficiary of such loans, expenses and gifts. The modusoperandi was to collect cash from the parties to whom loans were given and cash was deposited into account of Shri Nitin J. Rugani and cheques were issued to the beneficiary of the loan transaction. In order to ensure that the money reached by cheques to the beneficiary Shri Nitin J. Rugani kept blank cheques of the third parties. The assessee 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 pro....
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.... 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 Commissioner to grant or not to grant approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. We are constrained to observe that in the present case there has been no application of mind by the Additional Commissioner 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. ....