TaxTMI 
TaxTMI 
2017 (5) TMI 1428
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....25th November, 2004. 5. It is stated that information was received from the Director of Income Tax (Investigation), New Delhi ['DIT(I)'] that during the year under consideration, the Assessee had received accommodation entries. Notice under Section 148 of the Act was issued after taking approval from the Additional Commissioner of Income Tax ('ACIT') under Section 151(1) of the Act. Notice under Section 148 of the Act was thus issued on 23rd/24th March, 2011 after recording the reasons for re-opening of the assessment. 6. The said reasons as recorded by the Assessing Officer ('AO') read as under: "Reasons for the belief that income has escaped assessment: In this case, information has been received from the Director of Income Tax, (Investigation) New Delhi that the Assessee has received amount of Rs. 5,00,000/- as follows: Beneficiary's Name Meenakshi Overseas P. Ltd. Beneficiary Bank Name State Bank of Hyderabad Beneficiary Bank Branch Karol Bagh Value of entre taken 500,000 Instrument no. by which entry taken 8628 Date on which entry taken 31.03.2004 Name of A/c Holder of entry giving account Shubham Electron....
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....the Assessee filed an appeal before the ITAT. In the first round, the ITAT by an order dated 18th March, 2015 held that the requisite sanction had not been obtained by the AO from the Competent Authority under Section 151 of the Act and, therefore, invalidated the re-opening of the assessment under Section 147/148 of the Act. The Revenue's appeal against the said order of the ITAT was allowed by this Court. The appeal of the Assessee was restored to the file of the ITAT to consider the other grounds relating to the validity viz., ground Nos. 1(a) to 1(d). 11. Therefore, in the impugned order dated 22nd March 2016, only those grounds were considered by the ITAT. 12. Perusing the reasons for re-opening of the assessment in the present case, the ITAT came to the conclusion that it was apparent that the AO proceeded to send a notice under Section 147/148 of the Act "solely on the basis of information received from the DIT(I)." After writing about information received, the AO "jumped to the conclusion that said tabulated instrument are in the nature of accommodation entry." This was done without further verification, examination or any other exercise. The ITAT also noted that the ....
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....e AO in the present case were based on a 'borrowed satisfaction' and on the directions of the Investigation Wing without any independent application of mind. The crucial link between the material and the formation of the belief was missing. Thirdly, it is submitted that in G&G Pharma (supra) this Court dealt with a similar instance of reopening of an assessment by the AO on the basis of the report of the DIT(I) without making any effort to discuss the material on the basis of which such belief was formed. The reopening was invalidated by this Court and its decision was accepted by the Revenue since no Special Leave Petition was filed by it. 16. Relying on the decision in Union of India v. Kaumudini Narayan Dalal (2001) 10 SCC 231, Commissioner of Income Tax v. Narendra Doshi (2004) 2 SCC 81, Berger Paints India Limited v. Commissioner of Income Tax, Calcutta (2004) 12 SCC 42 and Commissioner of Income Tax v. Shivsagar Estate (2004) 9 SCC 420 Mr. Goel submitted that once the Revenue did not challenge the correctness of the law laid down by the High Court and accepted it in case of one Assessee, it was not open to the Revenue to challenge its correctness in the case of another Ass....
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....words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing". 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... " 22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee ....
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.... objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the precondition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment. 28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus: "11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has int....
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....e present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes: 1. 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. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assess....
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....the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accou....