TaxTMI 
TaxTMI 
2018 (7) TMI 1617
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....ed 29.03.2006 at a total loss of Rs. 1,29,550/-as against the declared returned loss of Rs. 1,53,053/-. Subsequently, information was received from the Investigation Wing of the Income Tax Department that the assessee company had allegedly received accommodation entries. The AO recorded reason to believe that assessee's income to the tune of Rs. 82,90,360/- chargeable to tax had escaped assessment due to the failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment. The notice of reassessment u/s 148 was issued on 30.03.2010. During the course of re-assessment proceedings, the assessee was asked to explain the nature and sources of credit entries in the assessee's bank account with State Bank of Patiala (A/c. No. 50086), Dariya Ganj, New Delhi. As per the AO, the assessee was not able to fully explain the nature and sources of the credit entries along with supporting evidences. The AO added the amount of credit entries at Rs. 1,62,80,585/- to the income of the assessee as unexplained credit u/s 68 of the Act and completed the assessment at Rs. 1,61,51,035/-. 2.1 Aggrieved, the assessee carried the matter to the Ld. First ....
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....iculars of income supported by audited accounts and as such action of the Assessing Officer is not in confirmity with proviso to sec. 147 and whole basis of reassessment is illegal, invalid and without jurisdiction. (iii) That there has been no proper and valid service of notice as required under the law and initiation of proceedings being barred by limitation, Assessing Officer has not legal basis to assume jurisdiction. 2(i) That on the facts and circumstances of the case, the CIT(A) is not justified in confirming action of the Assessing Officer u/s. 69A/68 of the Income Tax Act, 1961 and in confirming addition to the extent of Rs. 12,21,044/- being on account of commission @ 7.5% in respect of entries in the bank account of the assessee to the extent of Rs. 1,62,80,585/-. (ii) That there is no factual or legal basis for any addition and same is not sustainable under the law. (iii) That there is no factual or legal basis for considering credit entries in the bank account at Rs. 1,62,80,585/-. (iv) That in the alternative, estimation of commission @ 7.5% is highly arbitrary and excessive. 3. That on the facts and circumstances ....
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....ised Representative also submitted that the impugned bank account of State Bank of Patiala was closed on 24.08.2002 i.e. before the close of assessment year on 31.03.2003 and, therefore, its closing balance did not appear in the balance sheet. The Ld. Authorised Representative re-emphasized that there was no failure on the part of the assessee to disclose any material fact during the course of original assessment proceedings. The Ld. Authorised Representative also placed reliance on a number of judicial precedents to support the assessee's case that the assumption of jurisdiction for re-assessment after four years was not legally sustainable. 6. In response, the Ld. Sr. Departmental Representative placed reliance on the findings of concurrent findings of the AO and the Ld. CIT (A) and vehemently argued that this was a fit case for initiation of re-assessment proceedings as there were huge deposits in the assessee's impugned bank account with State Bank of Patiala which the assessee had failed to substantiate and fully explain even during the course of re-assessment proceedings. The Ld. Sr. DR further submitted that it was very much evident that there was a lapse on the part of t....
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....04." 7.1 Along with the reasons there is also one Annexure running in 5 pages in which the name of the assessee appears at pages 3 and 5. However, apart from the AO making a reference to the information received by the department from the Investigation Wing, there is no mention by the AO, as to how he has arrived at a conclusion that he had reason to believe that income has escaped assessment in the case of the assessee. After perusing the reasons recorded, we find that a mere reference is made to the information received from the investigation wing. The AO has mechanically issued notice u/s 148 of the Income Tax Act 1961 on the basis of information received by him from the investigation wing of the Income Tax Department. Therefore, we are of the considered view that the AO has not applied his mind so as to reach an independent conclusion that he had reason to believe that income had escaped assessment during the year under consideration. We draw our support from the judgment of the Hon'ble High Court of Delhi in ITA No. 545/2015 dated 8.10.2015 in the case of Pr. Commissioner of Income Tax -4 vs. G&G Pharma India Ltd. in which the Hon'ble Jurisdictional High Court has recapitul....
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....ssment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment." 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax I I v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer ( s u p r a ) as well as the decision of this Court in M/s Haryana Acrylic Manufacturing Co. (P) Ltd. v. CIT 308 ITR 38 (Del). The Court noted that a material change had been brought about to Section 147 of the Act with effect from 1st April 1989 and observed: "29. It is at once seen that the Amendment in Section 147 of the Act brought about a material change in law w.e.f. 1st April, 1989. Section 147(a) as it stood prior to ....
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....n 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 under 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 Supreme Court in the decisions discussed hereinbefore, 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. 13. Mr. Sawhney took the Court through the order of the CIT (A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the....