TaxTMI 
TaxTMI 
2017 (6) TMI 131
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....ation entries. The initiation of reassessment was done on the basis of report received from the Investigation Wing that the assessee was the beneficiary of Rs. 10 lac through accommodation entries received from M/s S.J. Capital Ltd. Such a view was canvassed on the bedrock of statements on oath u/s 131 of Shri Mahesh Garg of M/s S.J. Capital Ltd., recorded on 10.9.2003 and 22.9.2003, in which he admitted to have been involved in providing accommodation entries. The assessee raised objections against the initiation of reassessment proceedings, which came to be dismissed vide order dated 03.12.2010. Thereafter, the AO issued notice u/s 142(1) read with section 143(2) for proceeding further in the matter. The assessee was supplied a copy of such statements u/s 131 of Shri Mahesh Garg and also an affidavit signed by Shri Mahesh Garg on 06.02.2004 which was filed before the Addl. DIT (Inv.). During the course of assessment proceedings, the assessee was called upon to explain as to why the sum of Rs. 10 lac be not added to its income. Summons were issued by the AO u/s 131 to M/s S.J. Capital Ltd., but, the same could not be served as the party did not exist at the given address. The asse....
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....d to be as under: 2.1 Entries were being broadly taken for two purposes: 01. 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. 02. To inflate expenses in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. 2.2 The assessees who had unaccounted money (called as entry takers or beneficiaries] and wanted to introduce the same in the books of accounts without paying tax, approached another person (called as entry operator) and handed over the cash (plus commission) and had taken cheques/DDs/POs. The cash was being deposited by the entry operator in a bank account either in his own name or in the name of relative/friends or other person hired by him, for the purpose of opening bank account. In most' of these bank accounts the introducer was the main entry operator and the cash deposit slips and other instruments were filled by him. The other persons (in whose name the A/c is opened) only used to sign the blank cheque book and hand over the same to the main entry operator. The entry operator then used to....
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.... 7-Jan-03 S J CAPITAL LTD BOP PREET VIHAR 500000 7-Jan-03 S J CAPITAL LTD TOTAL 1000000 5.1 Further, enquiries by the Investigation Wing revealed that one Shri MAHESH GARG, Slo Shri R.S. GARG, R/o G-8/94, SEC.15, ROHINI, New Delhi was controlling a number of bank accounts in various names & was using various persons enlisted in his affidavit dated 6.2.04 to operate these accounts. In this regard, statements on oath u/s 131 of the I. T. Act, 1961 of Shri Mahesh Garg was recorded on 10.9.2003 and 22.09.2003 by the Addl. D.I.T. (Inv.), Unit-l, New Delhi. Following is the gist of the statements & letters containing admissions relevant to this case: - (i) Statements were given on oath by Shri Mahesh ........ Addl. D.I.T. (Inv.), Unit-I, New Delhi on 22.9.2003 in which he has admitted to have indulged in giving entries. He has also admitted that he is controlling various persons who sign on his behest to provide the accommodation entry. (ii) Sh. Mahesh Garg in his statement dated 10.9.2003 has elaborated the modus operandi adopted by them in giving accommodation entries in his answer to question 4, 5 and 6. (iii) Shri Mahesh Garg h....
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....ings. 7. The ld. AR then argued that the mere fact of receipt of report of the Investigation Wing cannot entitle the AO to go ahead with the initiation of reassessment proceedings. In my considered opinion, this contention is unfounded in the facts and circumstances prevailing in the instant case. It can be seen that the Investigation Wing of the Department carried out investigation on accommodation entry providers. Statement of Shri Mahesh Garg of M/s S.J. Capital Ltd. was recorded by the Addl. DIT (Inv.) in which he admitted to have opened bank accounts in the name of various individuals, firms and companies which were being used for providing accommodation entries. Signed list of such entities was also given by Shri Mahesh Garg. Statements of persons, who were working for him and were shown as directors in many companies controlled by him, were also recorded by the Investigation Wing. Extensive enquiries conducted by the DIT (Inv.) brought to light the racket of accommodation entries and its beneficiaries through share capital, receipt of gifts or consideration for sale purchase. Name of the assessee company found specific mention in such list given by Shri Mahesh Garg during t....
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....isclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In that case, the ITO was held to have rightly initiated the reassessment proceedings on the basis of subsequent information, which was specific, relevant and reliable. 10. The ld. AR has drawn my attention towards certain decisions in which initiation of reassessment on the basis of report of the Investigation Wing has been held to be invalid. In the like manner, the ld. DR has also brought to my notice certain decisions in which view has been taken in favour of the Revenue. On going through such decisions, it is observed that the predominant view is in favour of upholding the initiation of reassessment proceedings on the basis of the report of the Investigation Wing indicating the receipt of accommodation entries by the ass....
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....e Assessing Officer. 15. In CIT vs. Jansampark Advertising and Marketing (P) Ltd. (2015) 375 ITR 373 (Del), the assessment was reopened and addition u/s 68 was made on the ground that the assessee was in receipt of accommodation entries. Setting aside the order passed by the Tribunal, the Hon'ble High Court held that the initiation of reassessment was valid. 16. In Bright Star Syntex Pvt. Ltd. VS. ITO (2016) 387 ITR 231 (Bom), the AO initiated the reassessment on the basis of some information indicating the assessee as a beneficiary to accommodation entry. The assessee challenged the initiation of reassessment by way of a writ. Dismissing the petition, the Hon'ble High Court held that at the stage of initiation of reassessment, the AO is not required to have conclusive evidence that income chargeable to tax has escaped assessment. As the reasons recorded for reopening established a link between the material available and the conclusion reached by the AO for reopening the assessment, the Hon'ble High Court refused to interfere by observing that the expression `reason to believe' cannot be read to mean that the AO should have finally established beyond doubt that income chargea....
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..... The ld. AR raised yet another legal issue challenging the initiation of reassessment proceedings. Referring to the approval of the Addl. CIT to the reasons recorded by the Assessing Officer, it was submitted that the Addl.CIT simply mentioned: "Yes, I am satisfied" which, in his opinion, was insufficient to divulge the application of mind by the Addl.CIT. It was, ergo, prayed that the reassessment be quashed on this score. 21. I am not persuaded to concur with the submission advanced on behalf of the assessee in this regard. It can be seen from the accompanying reasons running into three pages which comprehensively record about the racket operated by entry providers in giving accommodation entries to various assessees. The report of Investigation Wing received by the Assessing Officer clearly brought out the fact of the assessee having received accommodation entry from M/s S.J. Capital Ltd. The reasons further record that Shri Mahesh Garg of M/s S.J. Capital Ltd. admitted to have given accommodation entries, inter alia, to the assessee. It was under such circumstances of the reasons were crying hoarse about the escapement of income, that the Addl. CIT gave his concurrence to the....
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....i Trilok Chand Bansal, recorded by the Investigation Wing of the Department in the year 2003, submitted that he was an employee of Shri Mahesh Garg and that further Shri Mahesh Garg himself opened bank accounts in his name and made him to sign blank cheques, blank papers, etc. These facts cast doubt over the genuineness of the transaction. 25. On the other hand, there is an important factor which cannot be lost sight of is that the assessee purchased such shares for a sum of Rs. 5 lac in the preceding year on 17.01.2002 and reflected the same in its balance sheet. Such shares were sold in the instant year on 10.12.2002, again, for a sum of Rs. 5 lac. In fact, the purchase transaction made in the preceding year has been squared up in the instant year. This factor though supports the genuineness of the transaction, but cannot lead to a positive conclusion about the genuineness of the transaction of sale of shares in the instant year as there is a possibility of shares not having been actually sold. It is more so because Shri Mahesh Garg of M/s S.J. Capital Ltd. himself admitted of providing accommodation entries alone. 26. At this stage, it is relevant to mention that the assessee ....
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....ended amongst others: 'that on the same ground, proceedings were taken earlier which resulted in favour of the assessee by the decision of the Tribunal and that decision of the Tribunal was accepted as no further appeal was filed by the Department thereagainst.' It is apparent from the factual position recorded from this case that the earlier reassessment proceedings on the same issue were decided in favour of the assessee by the order of the Tribunal and such decision by the Tribunal was accepted by the Revenue. Since the Department once again sought to revalue the goods for the purpose of excise duty, the Hon'ble Supreme Court held that non-allowing of opportunity of cross-examination was fatal to the proceedings. These observations of the Hon'ble Supreme Court are required to be seen in the context in which these were made, namely, the earlier proceedings taken against the assessee on the same ground were decided by the Tribunal in the assessee's favour which had attained finality. It is found that the facts of the instant case are entirely different. It is not a case in which the earlier reassessment was settled in the assessee's favour and the Department sought to reop....
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....epresentatives, and it was claimed that the assessment so made should be held to be null and void. The Hon'ble Supreme Court held that an omission to serve notice or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions. It was further laid down that any such omission or defect may render the order irregular, depending upon the nature of the provision not complied with but certainly not void or illegal. The broad principles that emerge from the judgments of the Hon'ble Supreme Court as noted above are that an irregularity is a deviation which does not take away the foundation or the authority for the proceedings, whereas the nullity is a proceeding which is taken without any foundation. A proceeding is a nullity when the authority taking up the proceeding has no jurisdiction. The test to determine whether the order passed is invalid or irregular, is to see whether order is for lack of jurisdiction or procedural fault. In the case of a total lack of jurisdiction, any order passed by an authority can be null and void but when the jurisdiction is improp....