TaxTMI 
TaxTMI 
2018 (12) TMI 1140
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....ear 2004-2005 M/s Top Chem India Pvt.Ltd. is assessed to tax with Ward 16(3). New Delhi . Enquiries of Investigation Wing , Delhi of the Department have unearthed huge accommodation entry racket being operated by various groups of operators. The investigation wing has compiled a report & data of the beneficiaries of such entries . I have gone through the report and data sent by the investigation wing. The report clearly indicates that accommodation entries have been taken to plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc and even describes the modus operandi of this scam. The investigation Wing's list of Beneficiaries (of such accommodation entries), gives comprehensive details of Beneficiary's Name, Beneficiary Bank Name, Beneficiary's Bank Branch, Account No. of Beneficiary in which entry is received (in most of the cases), Value of entry taken , instrument No, by which entry is taken, date on which entry taken, name of account holder of entry giving account, bank, from which entry given, branch of entry giving bank and account No.....
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....ssee from these four parties should not be treated as income of the assessee. However, none appeared before the Assessing Officer nor any reply was filed. The Assessing Officer, therefore, held that the assessee miserably failed to adduce evidence regarding the genuineness of the transactions and credit worthiness of the parties concerned. He, therefore, made addition of Rs. 58.50 lakhs to the total income of the assessee u/s 68 of the IT Act, 1961. 4. Before CIT(A), the assessee challenged the validity of jurisdiction and the addition on merit. It was argued that the notice u/s 148 was issued in a mechanical manner. Further, the notice was not properly served on the assessee since it was sent to a wrong address. Relying on various decisions, it was submitted that reopening of the assessment by the Assessing Officer is void ab initio. So far as the merit of the case is concerned, it was submitted that the assessee has filed confirmation of the parties, copies of their accounts, etc. Therefore, the Assessing Officer was not justified in making the addition. Various decisions were also brought to the notice of the CIT(A). Various details were also filed before the CIT(A) to the pr....
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....ant some alleged statements /information for which no opportunity provided to rebut the same and there was not even a show cause notice specifically proposing to make any addition nor any effective opportunity of hearing and Ld. CIT (A) has erred in upholding the unlawful action of the AO and hence, the impugned order passed in violation of natural justice is liable to be quashed. 6. The respondent has not discharged its onus of proof in any manner and has chosen to make illegal addition perversely and all the additions should therefore be set aside and quashed. 7. On the facts and in the circumstances of the case Ld. CIT (A) has erred both on facts and in law in upholding the impugned order passed by the respondent by making illegal additions to the tune of Rs. 58,50,000/- by treating income on account of unexplained cash credit u/s. 68 is totally unsustainable and liable to be deleted. 8. The respondent is also wrong in raising illegal demands of tax, interest and penalties mechanically and perversely and all the demands as well as penalty notice be quashed. 9. That the appellant craves the leave to add, modify, amend or delete any of the groun....
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....e assessee as accepted in form for recording of the alleged reasons. Referring to clause (8) of the annexure, he submitted that the Assessing Officer has mentioned the assessment status 'not known' as record is not traceable. Therefore, without going through the returns and balance sheet of the assessee, the conclusion reached by the Assessing Officer that the assessee has failed to disclose fully and truly all material facts can by no stretch of imagination be recorded as reasons to believe. Relying on the decision of the coordinate Bench of the Tribunal in the case of G & G Pharma India Ltd. vs. ITO, ITA No.3149/Del/2013, order dated 09.01.2015 (ITAT, Delhi) which has since been upheld by the Hon'ble jurisdictional High Court, he submitted that the reassessment proceedings initiated on the basis of the report of the Investigation Wing is not justified. Further, the approval of the CIT was not sought in the instant case and the approval from the Addl. CIT was obtained and the Addl. CIT had not applied his mind and in a mechanical manner has given his approval. Therefore, the proceedings are void on this ground also as the recording of the satisfaction by the Addl. CIT in Point....
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...., 2011, the evidence of which is placed on page 2 of the paper book filed by the assessee. Since service by post is a valid mode of service as per the provisions of section 282 of the Income-tax Act, therefore, the assessee cannot claim that there was no service of notice. Referring to para 4 of the order of the CIT(A), she submitted that the ld.CIT(A) has given justifiable reasons for upholding the validity of service. Therefore, the same should be upheld. So far as wrong mention of address is concerned, she submitted that this is a minor typographical error since the notice u/s 142(1) was issued on the same address which has been replied by the assessee, therefore, assessee cannot claim that the notice u/s 148 was issued on a wrong address. Even otherwise, the minor typographical error in the notice cannot constitute an error big enough to invalidate the notice and provisions of section 292B and 292BB of the Act will come to the rescue of the Department and the assessee cannot take advantage of the same. So far as the argument of the ld. counsel for the assessee that the reassessment proceedings are barred by limitation is concerned, she submitted that the Assessing Officer in th....
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....by the A.O. that it is a fit case for the issue of notice u/s 148 of the IT Act, 1961." 11. A perusal of the above shows that the Assessing Officer has not verified the assessment records of the assessee as it was not traceable. Therefore, before coming to the conclusion on the basis of the report of the Investigation Wing, it cannot be said that he has applied his mind independently especially when the assessment records of the assessee were not traceable. When it is clearly mentioned in the form that assessment records are not traceable, we also fail to understand as to how the approving authority i.e., the Addl. CIT in the instant case, was satisfied on the reasons recorded by the Assessing Officer that it is a fit case for issue of notice u/s 148. We find the Hon'ble Delhi High Court in the case of G & G Pharma India Ltd. (supra) has held as under:- "9. The Court at the outset proposes to recapitulate the jurisdictional requirement for reopening of the assessment under Section 147/148 of the Act by referring to two decisions of the Supreme Court. In Chhugamal Rajpal v. SP Chaliha (1971) 79 ITR 603, the Supreme Court was dealing with a case where the AO had recei....
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.... a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II 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 (supra) 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 1st April 1989 required the AO to have a reason to believe that (a) the income of the Assessee has escaped assessment and (b) that such escapement is by reason of omission or failure on the part of the Assessee to file a return or to disclose fully and truly all material facts necessary for his assessment for that year. After the Amendment, only one singular requirement is to be fulfilled under Section 147(a) and that is, that the AO has rea....
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....pany 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 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 CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent t....