TaxTMI 
TaxTMI 
2017 (9) TMI 1229
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.... in law on reopening the assessment based on information received from Investigation Wing of Delhi which constitutes an opinion and not material which is necessary for reopening. 5. The Ld. Assessing officer has erred in law in issuing twice reasons to believe with a letter dated 22.04.2013 and letter dated 20.03.2014 by simply saying that some typographically mistakes have crept in therefore letter dated 22.04.2013 is withdrawn. Reasons to believe cannot be altered, changed or supplemented. 6. The Ld. Assessing officer has erred in law in disposed off the objections of the appellant on the very same day vide letter dated 24.03.2014 without application of mind which is totally unjustified and unwarranted. 7. The Ld. Assessing officer has no reasons to believe within the section of 147/148 of the I. T. Act, 1961 that the amount of Rs. 78,58,980/- was paid as booking amount by the appellant to M/s. AEZ Group (part of Aerens Group) for booking space at SF - 117 and G.F commercial. 8. The Ld. Commissioner of Income Tax (Appeals), has erred in law in sustaining the addition of Rs. 67,21,980/- under section 69A of the Income Tax Act, 1961." 3. The b....
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....essee has not paid the impugned amounts as stated in the reasons, however, assessee has paid on 21.04.2006 Rs. 1137000/- and on 21.06.2011 Rs. 20.63 lacs. Therefore, the assessee has paid total sum of Rs. 32 lacs. The assessee further explained by submitting the copy of agreement between the assessee and the builder. On 19.03.2014 assessee was issued a summon and on 20.03.2014 the assessee was further provided an altogether different reasons stating that there was typographical error in the original returns recorded. Such reasons are as under:- "Information has been received from ADIT (Investigation) Unit-III(3), New Delhi that a search and seizure operation was conducted on 17.08.2011 on AEZ group (part of Arerens Group). On the basis of material seized/ impounded during the course of search and survey operation and post survey conducted on several investors groups comprising of 23 investors to verify payment of such unaccounted money on booking. During the course of search/ survey operation it has been accepted by the investors that they have made cash payment for booking/ purchase of property in the above said project. The amount accepted by them to have been paid exact....
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....to Believe". (Refer page no-2 of PB) 4) "Reasons to Believe" was provided to the assessee vide letter dated 22.04.2013. (Refer page no-9 of PB). It was stated in this letter that Information was received from ADIT(Inv) Unit -11(3) that assessee had booked FF117, GF, Commercial Indirapuram Habitat Centre Project, Ghaziabad of AEZ Group(thereafter referred as "Indirapuram property"). Assessee made total payment of Rs. 78,58,980/- during financial year 2006-07. Out of this, Rs. 11,37,000/- was paid by cheque and Rs. 67,21,980/- was paid in cash. It was also specified in the letter that assessee had accepted the same. 5) Then, just before 8 days of passing of the assessment order, the Id. AO issued another "Reasons to Believe" vide letter dated 20.03.2014 citing the reason that while sending "Reasons to Believe" vide letter dated 22.04.2013, some typographically mistakes had been crept in. Therefore letter dated 22.04.2013 was withdrawn. (Refer pg. no-55 of PB) 6) In second letter of "Reasons to Believe", reasons of reopening were completely different. (Refer page no-56 of PB) 7) Assessee filed the objections against the said "Reasons to Believe" on ....
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....are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. The requirement of recording reasons is a check against arbitrary exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment is to be decided. The reasons recorded while reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well-settled that the question as to whether there was reason to believe, within the meaning of section 147 that income has escaped assessment, must be determined with reference to the reasons recorded by the Assessing Officer. The reasons which are recorded cannot be supplemented by affidavits. The imposition of that requirement ensures against an arbitrary exercise of powers under section 148." (EMPHASIS SUPPLIED) b. The above case has been followed by the Delhi High Court in the case of Signature Hotels (P.)....
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....#39;"' 2. No Reasons to believe within the meaning of section 147 of Income Tax Act. 1961. Ground No: 7 of Assessee's appeal 2.1 In original reasons to believe, ld. A0 did not provide any direct link or specific information about the material or evidence of total payment of Rs. 78,58,980/- which was the booking amount of Unit No. FF-117, GF, Commercial Indirapuram Habitat Centre Project. 2.2 In the same reasons, ld. AO made two contradictory statements. The last four lines of the 2nd para of original reasons are reproduced as under: "The same was also accepted by you during the course of post search enquiries conducted by the Investigation Wing. Thereafter, in responses to query letter dated 05/02/2013 of the undersigned, vide your letter dated 27/02/2013 you have accepted investment of Rs. 11.37 lakh only for the above property." 2.3 In the first line, ld. AO stated that the assessee accepted the total payment of Rs. 78,58,980/- made to the Aerens Group for Indirapuram property during post search enquiries which is not true because there was no search u/s 132 or survey u/s 133A was conducted on the assessee. Even assessee was ne....
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....er Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed here- in-before, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case." b) Commissioner of Income-tax - II v. Multiplex Trading & Industrial Co. Ltd- [2015] 63 taxmann.com 170 (Delhi-HC) 22.09.2015 "10 The first and foremost issue to be addressed is whether the Assessing Officer could assume jurisdiction to reopen the assessment based on the information received from the Investigation Wing of the department. It is now well settled that the Assessing Officer can reopen the assessment if he has reason to believe the assessee's income has escaped assessment. However, his reasons to believe must not be based on sur....
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....n received from the Director of Income-tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." e) Sarthak Securities Pvt. Ltd. vs. ITO [2010] 329 ITR 110 (DHC) "23. The Assessing Officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the Assessing Officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income, but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of believe must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of ....
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....racted sheets of the Hard Disk seized from the Corporate office of the AEZ Group.'' The Ld. Assessing officer recorded the reasons for reopening the case of assessee u/s 147 relying upon the extract of sheets of the hard disk seized from the corporate office of the AEZ Group. The said extract sheets of hard disk was never confronted before the assessee. 3.3 Ld. AO also did not consider the need of recording the statement of the person with whom the asseessee had entered into the agreement of purchase and had paid the sum of Rs. 11,37,000/- on 21.04.2006 and Rs. 20,63,000/- on 21.06.2011 by account payee cheques. 3.4 It is well settled law that without confronting the material, on which the reliance has been placed by the assessing officer, no adverse inference can be drawn against the assessee. For above proposition, reliance has been placed on the following judgements: a) Hon'ble ITAT Delhi in the case of Babcock Power (Overseas Projects) Ltd. v. DCIT reported in 131 Taxman 86 in 2013 has held that "7 We have considered the rival submissions and have perused the relevant material on which our attentions were drawn. After perusin....
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....on of sections 147 and 148 of the Act. The ITAT held the notice issued under sec. 148 and proceedings under sec. 147 as illegal and void abinitio. It was held that Assessing Officer having not followed procedure under sec. 153C, reassessment order was rightly quashed by the Learned CIT evident from the reasons recorded and the assessment order that the initiation of reopening proceedings was made by the Assessing Officer on the basis of information received from the Directorate of Income-tax on the basis of search & seizure operation conducted at the premises of Rock Land Group of Cases and the documents related to the assessee found during the course of search were made available to the Assessing Officer of the present assessee. We thus respectfully following the decision of Coordinate Bench of the ITAT in the case of ACIT vs. Arun Kapur - 140 TTJ 249 the present case for framing the assessment, if any, which excludes the application of sec. 147 of the Act, hence, notice issued under sec. 148 of the Act and assessment framed in furtherance thereto under sec. 147 read with section 143 accordingly quashed. The ground No.l is accordingly allowed." G. Koteswara Rao vs DCIT [2....
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....e addition on the basis of admission by seven investors out of 23 investors. Admission or statement by third party cannot be the basis for making an assessment/reassessment. 7. When assessee disclosed and explained the total investment with necessary evidences, then addition of Rs. 67.21.980/- u/s 69A of the Income Tax Act. 1961 is not valid. Ground no. 8 of assessee's appeal 7.1 Ld. AO made the addition of Rs. 67,21,980/- as deemed income u/s 69A of I.T Act. The impugned addition was made in spite of the fact that assesee completely explained the investment made in FF117, GF, Commercial Indirapuram Habitet Centre vide letter dated 27/02/2014 (Refer pg. no-37 of PB). 7.2 Assessee also furnished the copy of bank statement of relevant period and statement of affairs disclosing the impugned investment. (Refer pg. No- 104-106 and 110 of PB). 7.3 Copy of agreement between Indirapuram Habitat Centre Private Limited and assessee, Smt. Taruna Verma was also provided vide letter dated 10/02/2016 to substantiate the total investment made by the assessee. (Refer pg. no 75 to 100 of PB) 7.4 Assessee also vide letter dated 24/03/2014 explained be....
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....ement u/s 131 of I.T Act, 1961 that since assessee has refused to give statement, therefore she has no evidence to adduce in support of her claim was clearly unjustified because assessee had provided sufficient documentary evidences in support of her claim. 10. Now, the onus shifted to the ld. AO to justify the impugned addition made by him. Simply non recording of statement cannot be made basis of making addition as unexplained investment. 11. Considering all the above facts and explanations, the impugned addition made by the ld. AO and affirmed by the ld. CIT(A) was totally invalid and deserves to be deleted." 7. The ld Departmental Representative relied upon the order of the lower authorities. 8. We have carefully considered the rival contentions. The issue before us is twin fold: one with respect to the reopening of the assessment challenged by the assessee vide ground No. 1 to 6 of the appeal of the assessee and ground No. 7 and 8 are related to the merits of the case of the assessee. In the present case the original reasons recorded by the ld Assessing Officer on 22.04.2013 shows that information was received that assessee has made total payment of Rs.....
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....details of payment made by the assessee to the builder did not match. Assessee has already paid a sum of Rs. 32 Lacs whereas the reasons mentioned by the assessing officer states that assessee has only paid Rs. 11.37 Lacs. Therefore, it is apparent that Ld. assessing officer has initiated reassessment proceedings without application of mind to the facts of the case to the information supplied by the investigation wing. The issue is squarely covered by the decision of the Hon'ble Delhi High Court in case of principle Commissioner of income tax versus G & G Pharma Ltd 384 ITR 147 (Delhi) wherein it has been held that:- 10. In Asst. CIT v. Dhariya Construction Co. [2010] 328 ITR 515 (SC), the Supreme Court in a short order held as under : "Having examined the record, we find that in this case, the Depart ment sought reopening of the assessment based on the opinion given by the District Valuation Officer, the opinion of the District Valuation Officer per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, col lected and must form a belie....
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....id context that this court in Haryana Acrylic Manufacturing Co. (P.) Ltd. (supra) explained that the ratio of the decision in Phool Chand Bajrang Lal (supra) may not be entirely applicable since the same was in respect of section 147(a) as it existed prior to the amendment." 12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date, i.e., February 10, 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the Assessing Officer stated : "I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries". The above conclusion is unhelpful in understanding whether the Assessing Officer applied his mind to the materials that he talks about particularly since he did not describe what Page No : 0153 those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the Assessing Off....
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.... The Ld. assessing officer even did not care to provide the correct reasons recorded by the revenue instead of that he provided the reasons incorporating them in the letter dated 22/04/2013. In view of this on the solitary ground itself, the appeal of the assessee deserves to be allowed. 12. In fact, in this present case the Ld. assessing officer has grossly ignored the direction of the Hon'ble Supreme Court in case of GKN driveshaft India Ltd versus ITO. 259 ITR 19 wherein it has been held that:- "We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under section 148 of the Income-tax Act is issued, the proper course of action for the noticee is to file a return and if he so desires, to seek reasons for issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by....