TaxTMI 
TaxTMI 
2017 (9) TMI 813
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....ties credited in assessee's Bank Account maintained with State Bank of India. The above information and enquiries made by the Investigation Wing led to the belief that the transaction is clearly an accommodation entry and belief was formed that assessee had taken accommodation entry of Rs. 34,50,200 in lieu of unaccounted income of the assessee. The A.O. accordingly, recoded reasons under section 148 of the I.T. Act and issued notice upon assessee which was served. The assessee stated that return already filed may be treated as return having been filed in response to notice under section 148 of the I.T. Act. While carrying out the enquiries in the case of entry operations, the Investigation Wing, New Delhi, had recorded statement of Shri Pradeep Kumar Jindal under section 131 of the I.T. Act on 15th April, 2004, in which, he had admitted that through the various companies floated by him, he had carried out the business activities of providing bogus accommodation entries. The A.O. after giving an opportunity of being heard to the assessee, made addition of Rs. 34,50,200 under section 68 of the I.T. Act and also made addition of Rs. 3,450 on account of commission for providing such a....
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....ubmitted that at the stage of reopening of the assessment, only prima facie case is to be seen. He has relied upon the decision of Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd., vs. ITO (1999) 236 ITR 34 (SC) in support of the proposition that at the stage of reopening of the assessment, prima facie some material is to be seen which is the basis for reopening of the assessment but sufficiency or correctness of such material could not be considered. He has also relied upon the decision of Hon'ble Supreme Court in the case of Yogendra Kumar Gupta vs. ITO (2014) 227 Taxman 374 (SC) in which it was held as under : "Where subsequent to completion of original assessment, Assessing Officer, on basis of search carried out in case of another person, came to know that loan transactions of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee." 4.1. Ld. D.R. further submitted that under section 68, the credits in the books of account have to be seen, may be which is the repayment of the loan. 5. I have co....
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....introduced its own unaccounted money in its bank by way of accommodation entry. Prima facie, the investigations and enquiries made by the Investigation Wing indicate that the above transaction is sham transaction of accommodation entry taken by the assessee in order to reduce its taxable income. In view of the above facts, I am of the considered opinion that the above transaction reflects the undisclosed income of the assessee introduced in the garb of such sham transaction. Considering the facts of the case, I have reason to believe that income to the extent of atleast Rs. 34,50,200/- has escaped assessment and this is a fit case for initiation of proceedings under section 147 of the Income Tax Act, 1961. Submitted for kind perusal and approval as per provisions of Section 151(2) of the Act. Sd/-Arun Kumar Dt.28.03.07" 5.1. Learned Counsel for the Assessee has filed copies of the ledger account and letters of various parties who are mentioned in the reasons recorded above who have allegedly provided accommodation entry to assessee to show that either the amounts were opening balance or the amounts have been repaid to the assessee in the asses....
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....nclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the asse....
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....eficiary." 28.2. The Annexure to the said proforma gave the Name of the Beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3. Analysing the above reasons together with the annexure, the Court observed: "14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any doc....
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....lue of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded: "The transactions involving Rs. 27,00,000/-, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000/- has escaped assessment as defined by section 147 of the Income Tax Act. Therefore, this is a fit case for the issuance of the notice under section 148." 29.3. The Court was not inclined to interfere in the above circumstances in exercise of its writ jurisdiction to quash the proceedings. A careful perusal of the above reasons reveals that the AO does not merely reproduce the information but takes the effort of revealing what is contained in the investigation report specific to the Assessee. Importantly he notes that....
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....al was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that there was prima facie material for the AO to come to the conclusion that the Assessee had not made a full and true disclosure of all the material facts relevant for the assessment. 31. In Commissioner of Income Tax v. G&G Pharma (supra) there was a similar instance of reopening of assessment by the AO based on the information received from the DIT (I). There again the details of the entry provided were set out in the 'reasons to believe'. However, the Court found that the AO had not made any effort to discuss the material on the basis of which he formed prima facie view that income had escaped assessment. The Court held that the basic requirement of Section 147 of the Act that the AO should apply his mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. Likewise in CIT-4 v. Independent Media P. Limited (supra) the Court in similar circumstances invalidated the initiation of the proceedings to reopen the assessment under Section 147 of the Act. ....
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....hat income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs". 5.2. The report of the Investigation Wing might have constituted material on the basis of which the A.O. formed the reasons to believe, the process of arriving at such satisfaction, would not be a mere repetition of the report of Investigation Wing. In the assessee's case, the crucial link between the information mad....