AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 496
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....isdiction and against the facts and circumstances of the case. ii) No valid material and ground justifying the reason recorded. The reasons are wholly, irrelevant, general, vague and wrong. iii) Reasons recorded based on borrowed satisfaction. 3. Because considering the facts of the case and the legal position the assessment deserves to be quashed. The Ld. CIT(A) has arbitrarily erred in confirming the Assessing Officer's action of issuing notice u/s 148 by holding the same to be in accordance with the provisions of law. 4. Because the Ld. CIT(A) has wrongly, illegally and arbitrarily confirmed the addition of Rs. 7,00,000/- made by the Assessing Officer u/s 68 of the Income Tax Act treating the receipt of share application money to be an unexplained cash investment. 5. Because the Ld. CIT(A) has erred both in law and on facts in rejecting the appellant's submission and the documents filed to prove the identity of the share applicant, their creditworthiness and genuineness of transaction. The Ld. CIT(A) has arbitrarily and wrongly held that genuineness of the transaction of share application money and the creditworthiness of the ....
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.... 2. That the accounts of the assessee company were audited by the chartered accountant and the entire balance sheet was correctly and rightly feeded in the return e-filed. As the balance sheet was before your goodself at the time of reasons recorded and the initiation of proceedings u/s 147 of the Act. 3. That the reason recorded by your goodself for having a belief that income has escaped assessment. The assessee has invested a sum of Rs. 7,00,000/- during the assessment year 2010-11, consideration which not been reflected by him in income tax return is not disclosed on the picture of amount. Therefore, source of Rs. 7,00,000/- is not disclosed before the Department. 4. That on perusal of the reason recorded, considering the balance sheet and on comparing the figures it apparently seems that the reasons have been recorded on mere surmises, incorrect presumption and wrong assumption of facts. In the reason recorded it is not even mentioned that how and on what basis/information/material whether or not in your possession, if any, your goodself is satisfied and has formed a belief that income of Rs. 7,00,000/- has escaped assessment. 5. That the ....
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.... assessment made in pursuance thereof was to be annulled". It was submitted by the appellant that, this decision of the Hon'ble ITAT was challenged by the Revenue before the Hon'ble Delhi High Court and stands reported in (2008) 299 ITR 383 (Del). The Hon'ble High Court approved the findings as recorded by the Hon'ble ITAT. ii) Hon'ble Allahabad High Court in the case of Indra Prastha Chemicals (P) Ltd vs. CIT reported in 271 ITR 113 wherein the facts of the case are that a notice u/s 148 of the Act was issued by the Assessing Officer on the basis of the report submitted by the Inspector of Income tax, the Hon'ble High court quashed the notice as the report submitted by the Inspector did not have any relevant material to point out that any income has escaped assessment. 9. That formation of the required belief by the Assessing Officer is a condition precedent. Without such belief, he will have no jurisdiction to initiate proceedings u/s 147 of the Act. The fulfillment of this condition is not a mere formality but it is mandatory. Any failure to fulfill that condition would vitiate the entire 148 proceedings as has been held by the ....
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....Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291ITR 500 wherein it was held that where the Assessing Officer had issued only intimation u/s 143(1) of I.T. Act, there being no assessment u/s 143(1) of I.T. Act, the principle relating to change of opinion shall not be applicable if assessment proceedings are undertaken u/s 147 of I.T. Act. Further, Hon'ble Jaipur High Court in the case of Kishore Textiles vs. ITO (1995) 82 Taxman 312 (JP) (AT) held that where original assessment was made u/s 143(1) of I.T. Act in a summary manner, and hence where returned income was accepted in a mechanical manner without even writing a formal order, there is no question of change of opinion of the Assessing Officer and hence reopening of the assessment was valid. As it is evident that the assessee in his return of income has not disclosed the of all the parties from whom share allotted application, invested amount, purchased have been made in the year under consideration and the mode of payment being adopted by the assessee for making payment to these purchase/invested parties. Therefore, it could not be understood as to/ how the assessee is claiming that he has disclosed all the material facts i....
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....ised by assessee are not found tenable . Accordingly the request to drop the proceedings initiated u/s 147/148 of I.T. Act, is hereby rejected." Sd/- (KALIM AHMAD) Income Tax Officer Ward-3(5), Hathras. 5. The assessee filed written submissions (APB 24-39, relevant portion at APB 25, para 2 to page 27, para 10, as also reproduced in the impugned order at page 5 para 2 to page 7 para 10), contending, inter alia, that: "2. That on receipt of reason recorded objection regarding validly/issuance of notice u/s 148 of the Income Tax Act was filed. The Assessing Officer has summarily rejected the objection filed by passing a separate order mainly giving emphasis on section 147 of the Income Tax Act whereas section 147 of the Income Tax Act itself says "if the Assessing Officer has reason to believe". In the present case this basic requirement of section 147 of the Income Tax Act is absent as there is no own reason to believe of the Assessing Officer. 3. That in the assessment framed u/s 147 read with section 143(3) of the Income Tax Act, the Assessing Officer has mentioned at page 2 that search and survey action was conducted by the Income Tax Depart....
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....n and forming a belief the Assessing Officer was not sure about the nature of transaction as in the reason recorded the Assessing Officer has mentioned "the assessee has invested a sum of Rs. 7,00,000/- ......" whereas the addition has been made treating the receipt of share application money to be bogus and unexplained. 8. That as no investment as per reason recorded has been made by the assessee company it can very fairly be said that reason recorded does not exist in the Assessment Order and hence the assessment framed u/s 147 read with section 143(3) of the Income Tax Act deserves to be quashed. Hon'ble Bombay High Court in the case of CIT vs. Jet Airways (I) Ltd reported in 331 ITR 236 has held that "Power to assess such other income only if income referred to in notice of reassessment has been assessed". 9. That reason recorded and consequent issue of notice u/s 148 of the Income Tax Act is also wrong and bad in law as it is not the own belief of the Assessing Officer but it is based on the information received from Commissioner of Income Tax, Aligarh. Under these facts as mentioned above the assessee company presume that even the Assessing Officer has n....
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....i Vijay Gupta as middleman. You are once again requested to furnish counter comments on the above documents. You may also furnish any other material which you want to furnish in addition to documents required by this office in earlier letters or any witness to whom you want to produce on 14.06.2016." 8. The assessee filed written submissions (APB 68 to 70, i.e., impugned order, pages 19 to 20) dated 16.06.2016, is as under: "Re: Appeal of M/s Deepraj Hospital (P) Ltd, C/o Shyam Press, Aligarh Road, Hathras. Sub: Notice u/s 250(4) of the Income Tax Act, 1961 and Rule 46A of the Income Tax Rules, 1962 In connection with enquiries at the appellate stage for A.Y. 2010-11 - regarding - Sir, With reference to the papers attached alongwith the above mentioned notice dated 09.06.2015, the parawise submission per serial number of the notice is as under:- 1. (i) That during the course of entire assessment proceedings the assessee asked for the material to be provided which has been used against the assessee as mentioned in the Assessment Order while making the impugned addition u/s 68 of the Income Tax Act for so called bogus share app....
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.... the assessee as on the entire page no where the name of assessee company is noted and hence from this paper it cannot be presumed that the assessee company as given any cash. As regards the name of Mr. Vivek Bansal as mentioned on the impugned annexure, the submission of the assessee is same as mentioned in para 2. No adverse inference can be drawn against the assessee from this paper. 4. Similarly the transaction as noted on page no. 36 and back side of page no. 36 of Annexure A-24, as mentioned in the notice, does not in any way can be co-related with any transaction of the assessee as on the entire page no where the name of assessee company is noted and hence no adverse inference can be drawn against the assessee from this paper. Considering the facts of the case and the submission as mentioned above not a single paper as attached with the notice u/s 250(4) can be used as an evidence against the assessee for making the impugned addition. That though already submitted during the course of assessment proceedings and before Ld. CIT(A) the assessee further wish to submit as under:- i) Reason recorded for initiating proceedings are totally wrong a....
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....ls of cash received by this company. On the basis of these documents it is clearly established that assessee has taken accommodation entry in the guise of share application money in lieu of cash." 10. The assessee filed a rejoinder (impugned order, pages 21-22) to the remand report, reiterating the aforesaid submissions made before the AO vide reply dated 16.06.2016. It was stated in the rejoinder that: "i. Annexure "A" is not a seized document. Seems to be prepared by the department itself and hence cannot be relied upon. ii. So called Cash Book Page No. l Annexure "A-13" cannot be relied upon as on the entire paper name of assessee is not mentioned and hence there cannot be any theory of the department that the assesses has given any cash. iii. Page 36 of Annexure "A-24" cannot be relied upon as on the entire paper name of assessee not mentioned. iv. No relation or any transaction either with Mr. Surendra Kumar Jain or with Mr. Vivek Bansal or with Mr. Vijay Gupta. It was specifically mentioned in the written submission filed during remand proceeding that department has not given any opportunity to get Mr. Vivek Bansal / Mr. Vijay Gupta conf....
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.... to give it a colour of loans or share application money so that the money can be utilised in business without the risk of detection of the underlying unaccounted income. This has indeed become a menace and needs to be checked. Not only that this causes, the abetment of tax avoidance but it also results in money laundering which is a crime. In order to check this menace of 'Entry business' the Investigation Wing has been carrying out search and seizure operations on various entry operators from time to time. Apparently this case is also of a similar kind. The requirement u/s 147 is that the AO should have "reasons to believe" that any income chargeable to tax has escaped assessment. Therefore, we have to decide whether the material in possession of the AO was sufficient to from a reason to believe. Without doubt, the AO had received a report from the Investigation Wing of the Department which had comprehensively detailed the relevant facts. These facts were obtained by carrying out search and seizure operation and subsequent investigation. The provisions of search and seizure are ultimate tools in the hands of the Department and the facts gathered as a result of a ....
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....mencement of assessment proceedings is valid, the court has only to see whether there is prima facie some material on the basis of which the Department opened the case. The sufficiency or correctness of the material is not a thing to be considered at this stage as held by the Supreme Court in the case of Raymond Woollen Mills Ltd. Vs. ITO [1999] 236 ITR 34 (SC), and also as held in the case of Great Arts Pvt. Ltd Vs ITO [2002] 257 ITR 639 (Delhi). The assessee cannot challenge sufficiency of belief - ITO Vs. Lakhmani Mewal Das [1976] 103 ITR (SC). In another case Hon'ble SC in case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd (2007) 291 ITR 500 has held that at the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer. In view of the above, I am of the firm opinion that AO's action of issuing notice u/s 148 is based on bonafide belief and his action is....
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....TA No.331/Agr/2012, ITAT, Agra. 4. 'CIT vs. Active Traders (P.) Ltd.', 214 ITR 583 (Calcutta High Court). 5. 'M/s Pragati Financial Management Pvt. Ltd. Vs. The CIT-II', ITA 178 of 2016, GA 997 of 2016 (Calcutta High Court). 6. 'Anil Kumar Singhal vs. ITO', IT Appeal Nos. 408 & 413/Agr/2012, ITAT Agra. 7. 'Acorus Unitech Wireless Pvt. Ltd. Vs. ACIT', Judgment dated 28.02.2014, passed by the Hon'ble Delhi High Court in WP (C) 1957/2013. 15. Heard. A bare perusal of the ld. CIT(A)'s order, as extracted hereinabove, shows that the ld. CIT(A) has gone by the mere factum of receipt of material by the AO from the Investigation Wing of the Department. In 'Meenakshi Overseas' (supra), under similar facts and circumstances, relying on 'Signature Hotels (P) Ltd. Vs. ITO', 338 ITR 51 (Del), it has been held that the reasons must be self-evident and they must speak for themselves; that the tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons; and that where the link between the information made available to the AO and the formation of belief is absent, the reasons are not s....
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....eived from the Investigation Wing. The Hon'ble High Court refused to accept the assessee's contention that it was a case of a mere change of opinion. The Writ Petition was dismissed as having no merit. 18. In the case at hand, however, the issue raised is altogether different. Here, the challenge of the assessee is that since in the reasons recorded, the AO has not spelt out as to what he did with the information received by him from the Investigation Wing, the reasons are hit by the vice of non-application of mind to the information so received. 19. From the above, it is evident that there is no parity whatsoever between 'Brij Mohan Agarwal' (supra) and the present case. Accordingly, 'Brij Mohan Agarwal' (supra) is of no help to the Department. 20. Now, in a situation like the present one, as is trite, where there is a cleavage of opinion between different High Courts on an issue and none of the decisions has been rendered by the jurisdictional High Court, the view in favour of the assessee needs to be followed. Hence, in deferential keeping with 'Meenakshi Overseas' (supra), the reasons recorded by the AO to form belief of escapement of income are found to be no reasons ....
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....e to any document, such document and / or relevant portion thereof must be enclosed along with the reasons. The Hon'ble High Court has underlined that consideration of the assessee's objections to the reopening of assessment is not a mechanical ritual, but it is a quasi judicial function. It has been mandated that the order disposing of the objections should deal with each objection, giving proper reasons for the conclusion and no attempt should be made to improve or add to the reasons, as recorded and disclosed. 23. In the case of the present assessee, it remains undisputed that though the reasons recorded by the AO for belief of escapement of income contain reference to material forming the basis thereof, such material, despite written request by the assessee to the AO in this regard, was never supplied by the AO to the assessee. This is in direct contravention of the principle of natural justice, as reiterated in "Sabh Infrastructure Limited" (supra). As noted, in the present case, the alleged material was only supplied to the assessee in the remand proceedings, where too, the objections of the assessee were not met. The ld. CIT(A) also did not deal with these objections of t....