TaxTMI 
TaxTMI 
TaxTMI 
2018 (5) TMI 1325
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....31/03/2014. 2.1. A second search and seizure operation was conducted on the assessee u/s 132 of the Act on 11/03/2016. Thereafter a notice u/s 148 of the Act was issued to the assessee for the impugned Assessment Year 2009-10 on 22/03/2016. The assessee filed a reply to the same on 13/04/2016. The assessee contended that the notice for reopening of the assessment was issued only after a lapse of four years from the end of the Assessment Year and hence it was barred by limitation and that the notice was issued without jurisdiction of the competent authority. The assessee also filed a return of income in response to this notice issued u/s 148 of the Act on 06/05/2016. In reply to the assessee's request, the Assessing Officer vide his communication dt. 12/07/2016, briefly stated the reasons for reopening. Thereafter on 05/08/2016, he provided the assessee with a copy of the information received by the Assessing Officer from DDIT (Inv.) Unit-1(2), Guwahati on 22nd March, 2016, based on which reasons were recorded that the assessee's income subject to tax has escaped assessment and notice u/s 148 of the Act was issued on the same date i.e. 22/03/2016. The assessee filed objections for....
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....ts recorded on 11/03/2016 was correct. 3. That in the facts and circumstances of the case, the LdCIT(A) erred in holding that statements of ShriSandip Sharma and ShriDilip Kumar Khetan recorded on 11/03/2016 were not voluntary ignoring the fact that the blatant lie of ShriKhetan regarding the ownership of his mobile number was unearthed during the crossexamination itself, which has been discussed in the order itself rendering the whole statements given during the course of examination to be false. 4. The appellant craves the leave to make any addition, alteration and modification etc. of ground or grounds during the course of hearing of the appeal. 4. Shri G. Mallikarjuna, ld. CIT, D/R, argued that the ld. First Appellate Authority was wrong in holding that the reopening of the assessee was bad in law. He submitted that the reopening of the assessment was made based on information received from the investigation wing i.e. DDIT (Inv.) Unit-1(2), Guwahati (hereinafter the 'DDIT (Inv.)') on 22/03/2016. He submitted that the letter contained information that the assessee has raised bulk amount of capital and share premium from 15 companies based in Kolkata and these were not fo....
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.... two witnesses of the revenue during the course of crossexamination and submitted that it is not a case of retraction. He pointed out that it was during cross examination of the revenue witness, the facts have come out and to call it retraction, is factually and legally incorrect. Hence he argued that the propositions of law relied upon by the ld. D/R, on the issue of retraction, is not applicable to the facts of the case. He contended that the entire reopening was based on two statements made by Mr. Sandeep Kumar Sharma and Mr. Dilip Kumar Khetan and these two persons during the course of cross-examination have categorically stated that they have signed on the dotted line, under threat and coercion and that they do not know any of the contents recorded in the statements, by the investigation wing. They are further stated that in no way connected with any of the 15 companies either as Directors or shareholders. He argued that once this denial of the contents in the statement by the persons who gave the statements could not be rebutted by the revenue authorities, the material based on which the reopening was done becomes non-existing material and hence the reopening is bad in law. H....
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....s of the statements and they were forced to sign the same and denied the contents therein and hence the statements in question cease to be evidence ab initio and hence the reopening based on such statements is bad in law. He further pointed out that the Assessing Officer did not verify the information received by him from the DDIT(Inv.) and on the same day, based on this information issued notice u/s 148 of the Act and thus the reasons are recorded without application of mind. He further submitted that mandatory approved u/s 151 of the Act was not obtained. The ld. D/R, in reply submitted that the statement recorded u/s 131 is a valid statement and that the denial is wrong as the Assessing Officer has referred the matter to the DDIT(Inv.) and the DDIT(Inv.) has stated that these persons had also given similar statements. 5. Rival contentions heard. On careful consideration of the facts of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- The only issue that has to adjudicated by us is as to whether the ld. First Appellate Authority is right in holding that the reopening of assessment under facts and circums....
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....day on which the letter was received from DIT(Inv.) Unit 1(2) Gauhati dated 22.03.2016 and received as the same day by the A.O. 5.3. A perusal of the above recorded reasons demonstrates that the Assessing Officer has not alleged that there is a failure on part of the assessee truly and fully discloses all the material facts which are necessary for assessment. The case law on this matter is as follows: "The 'A' Bench of this Tribunal in the case of M/s. Beekay Steel Industries Ltd. vs. DCIT CC-XXX, Kolkata, in I.T.A. No. 105/Kol/2015, order dt. 31/05/2017, held as follows: 4.4. The Hon'ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy.CIT reported in (2015) 370 ITR 135 (Bom.), has held as follows:- "10. As stated above, the reasons supplied to the Petitioner do not disclose that there was any failure on the part of the Petitioner to provide all the material facts. That being the position, this ground could not have been taken up against the Petitioner at the time of disposing of the objections. Once this was not the basis for issuance of notice for Reassessment, it cannot be held against the Petitioner that the Petitioner had failed to make a true and full ....
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.... to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly satisfied inasmuch as the original assessment was completed under section 143(3) of the said Act. Condition (b) deals with a special kind of escapement of income chargeable to tax. The escapement must arise out of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148. This is clearly not the case here because the petitioner did file the return. Since there was no failure to make the return, the escapement of income cannot be attributed to such failure. This leaves us with the escapement of income chargeable to tax which arises out of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. If it is also found that the petitioner had disclosed fully and truly all material facts necessary for its assessment, then no action under section....
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....ailure on the part of the assessee to disclose fully and truly all the necessary material facts required for assessment in view of the 1st proviso to Section 147 of the Act. In this case no tangible materials have come to the possession of the Assessing Officer subsequent to the Assessment Order u/s 143(3). Re-opening is done based on the same material and record and hence it is bad in law. As far as the contention, that there is a change in opinion is concerned, we are unable to agree with the ld. Counsel for the assessee as there was neither a query on this issue by the Assessing Officer during the original assessment proceedings, nor there was a reply by the assessee. Hence there was no opinion formed. Thus, the question of change of opinion does not arise. 4.9. In any event, as we have held that the re-opening is bad in law as it does not fulfill the requirement of the Proviso to Section 147 of the Act, and as no tangible material has come to the possession of the Assessing Officer, we quash the assessment and allow the appeal of the assessee." 5.4. Applying the propositions of law laid down in these decisions, to the facts of the case, we have to necessarily hold that the....
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....A. 418 of 2012, held as follows:- "I am in agreement with the submission of the learned counsel for the assessee that statement recorded under Section 14 of the Code of Criminal Procedure cannot be treated as substantive evidence when the maker does not depose of such facts on oath during trial. Hence, there is no direct evidence on record connecting the assesse with the alleged crime." The Hon'ble Karnataka High Court in the case of CIT vs. R.N. ThippaShetty reported in [2010] 230 CTR (Kar) 265, held as follows:- "It is further pertinent to mention here that once the statements said to have been recorded under s. 132(4) of the Act were withdrawn, then there existed no material on record to warrant reopening of the case against the assessee under s. 148 of the Act. If the very basis on which reopening was ordered did not exist, there was no question for reopening of the case. This material aspect of the matter has not been considered by the AO, who proceeded to direct reopening of the case, without there being any legally admissible evidence available on record. Thus the very issuance of notice under s. 148 of the Act is found to be illegal and absolutely without jurisdiction....
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....the DDIT (Inv.) to the A.O. and the same was received by the A.O. at Kolkata on the same day from Gauhati. The reasons for reopening were recorded the same day i.e. 22.03.2016. The letter of the DDIT (Inv.) say that post search investigation are in progress. Addresses of the alleged paper companies from whom bogus share capital is alleged to have been generated, evidence based on which such allegation is made, copies of the alleged statements of the two persons were not with the A.O. at the time of reopening of assessments. No enquiry or prima facie verification was made. The case law on this issue is as follow: 7.1. The Hon'ble Delhi High Court in the case of Commissioner of Income-tax, IV v.Insecticides (India) Ltd[2013] 357 ITR 330 (Delhi) upheld the order of the ITAT Delhi Bench in ITA Nos. 2332-2333/Del/2010, holding as follows:- "7. We may point out at this juncture itself that the Tribunal did not go into the question of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on....
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.... of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are totally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was the amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s....
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....its own unaccounted money in its bank account by way of above accommodation entries'. The above conclusion is unhelpful in understanding whether the A.O. applied his mind to the materials that he talks about particularly since he did not describe what 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 A.O., if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the assessee, which must have been tendered along with the return, which was filed on 14th November, 2004 and was processed u/s 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the A.O. 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 decision discussed, the basic requirement that the A.O. must apply his mind to the materials in order to have reasons to believe that t....
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.... escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, bad a paid up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to the quashed. 7.4. In the case of CIT vs Atul Jain reported in 299 ITR 383 it has been held as follows: "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 A.O. did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The A.O. had not even recorded his satisfaction about the correctness or oth....