AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 1451
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.... u/s 148 of the Act are not validly recorded in accordance with law in as much as hypothesis stated in reasons "....PAN of M/s Jyoti Engineering Works is not available on AST... " vitiates the reasons completely as firstly there cannot be PAN of proprietary concern who is not an "assessee" under the Act and secondly, proprietor of said concern Date of Hearing 19.09.2018 Date of Pronouncement 26.09.2018 (assessee) not only had PAN but was also filing return in regular course as admitted in assessment order, which has been completely aborted in reasons recorded; 1.2. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law as in reasons recorded there is no independent application of mind and same is based on mere borrowed satisfaction only; 1.3. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law as basis of reasons recorded has been completely dropped and changed in final assessment order; 1.4. That on facts and circumstances of the case and ....
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....assessee) not only had PAN but was also filing return in regular course as admitted in assessment order, which has been completely aborted in reasons recorded; 1.2. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law as in reasons recorded there is no independent application of mind and same is based on mere borrowed satisfaction only; 1.3. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law as basis of reasons recorded has been completely dropped and changed in final assessment order; 1.4. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law in as much as no back "incriminating" material like investigation wing report, statement recorded (if any) as available , etc has been confronted to assessee thus making the reopening as nullity; 2. That on facts and circumstances of the case and in law, Id CIT-A erred in confir....
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....d and same is based on mere borrowed satisfaction only; 1.3. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law as basis of reasons recorded has been completely dropped and changed in final assessment order; 1.4. That on facts and circumstances of the case and in law, the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law in as much as no back "incriminating" material like investigation wing report, statement recorded (if any) as available , etc has been confronted to assessee thus making the reopening as nullity; 2. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the arbitrary addition of Rs. 955,090/- made by Ld AO, by rejecting defect free books of accounts and applying adhoc estimated rate of profit @ 18% without any basis/incriminating material (like comparable etc) (para 4.8 of assessment order) and without any requisite show cause notice and without objectively overruling documentary evidences placed on records (para 4.2 of assessment order) and that ....
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....ns recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law in as much as no back "incriminating" material like investigation wing report, statement recorded (if any) as available , etc has been confronted to assessee thus making the reopening as nullity; 2. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the arbitrary addition of Rs. 978,228/- made by Ld AO, by rejecting defect free books of accounts and applying adhoc estimated rate of profit @ 10% without any basis/incriminating material (like comparable etc) (para 4.8 of assessment order) and without any requisite show cause notice and without objectively overruling documentary evidences placed on records (para 4.2 of assessment order) and that too dehors the reasons recorded, which exercise is not permissible in eyes of laws. 3. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the arbitrary addition of Rs. 11,697/- on a/c of expenditure incurred from undisclosed sources as alleged commission paid to entry operator which is totally perverse. 4. That on facts and circumstances of the case and in law, Id C....
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....trary addition of Rs. 919,843/-- made by Ld AO, by rejecting defect free books of accounts and applying adhoc estimated rate of profit @ 9.5% without any basis/incriminating material (like comparable etc) (para 4.8 of assessment order) and without any requisite show cause notice and without objectively overruling documentary evidences placed on records (para 4.2 of assessment order) and that too dehors the reasons recorded, which exercise is not permissible in eyes of laws. 3. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the arbitrary addition of Rs. 15,925/-/- on a/c of expenditure incurred from undisclosed sources as alleged commission paid to entry operator which is totally perverse. 4. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the arbitrary addition of Rs. 2,923/- on a/c of ESIC payable. 5. That on facts and circumstances of the case and in law, Id CIT-A erred in confirming the additions made by Ld AO where no back material is adequately and lawfully confronted to assessee in due regard of principle of natural justice." 3. The main issue in all these five appeals contested by the assessee's i....
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....ti Engineering Works has received accommodation entries of Rs. 6,96,695/- from M/s Shree Shyam Trading Co., and Rs. 6,04,365/- from M/s. Shree Goverdhan International. As no further details were available on AST, the reasons were recorded by the predecessor of the Assessing Officer who passed the Assessment Order of the assessee and mentioned that income to the extent of Rs. 13,01,060/- chargeable to tax for the assessment in the case of M/s Jyoti Engineering Works had escaped assessment. Accordingly, after recording the reasons dated 05.05.2014, a notice u/s 148 was issued 28.03.2014. The reasons recorded are as under: "OFFICE OF THE INCOME TAX OFFICER WARD-19(3), ROOM NO. 809, BLOCK E-2, 8TH FLOOR, DR. S.P.MUKHERJEE, CIVIL CENTER, JLN MARG, MINTO ROAD, NEW DELHI -110002. F.No.ITO/Ward-19(3)/148/2014-15/49 Dated:05.05.2014 To, The principal officer, M/s Jyoti Engineering Works, 308/4-A, Ground Floor, Shahzada Bagh, Sarai Rohilla, Delhi-110035. Madam, Sub:- Reasons for issuing notice u/s 148 of the I. T. Act, 1961 for the Assessment Year 2007-08-reg. Kindly refer to your letter dated Nil (received in this office on 30.04.2014) on the above subject. Reasons of is....
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....formation and the evidences were produced before the Assessing Officer in the original assessment itself. Therefore, the Ld. AR submitted that the reasons recorded u/s 148 to assume jurisdiction u/s 148 of the Act are not validly recorded in accordance with law and accordingly all the subsequent actions founded on such reasons namely notice issued u/s 148 , the order passed by the Assessing Officer and the CIT(A) are void ab initio and deserves to be quashed. 7. The Ld. DR submitted that the Assessing Officer has rightly recorded the reasons and the re-opening is just and proper. The Ld. DR also relied upon the orders of the Assessing Officer and CIT(A). But the Ld. DR could not distinguish the facts of the assessee's case and that of the Tribunal decision in case of Rajendra Prasad (supra). 8. We have heard both the parties and perused all the relevant material available on record. It is pertinent to note here that the facts of the case in case of Rajendra Prasad (Supra) and in the present case are identical in nature. In fact, the name of the accommodation entries provider are exactly the same. The Ld. DR also could not point out any distinguishing factor with the order of the ....
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....ation in respect to annexure A, B & C is also enclosed. 6. The information of accommodation entry includes A.Y. 2006-07 also, which is a time barring year for taking action u/s 148 of the Act 7. This information is forwarded to you for early dissemination to various field offices in Delhi (Soft copy also enclosed).'' It is evident from the assessment order passed by the ACIT, Centra! Circle-10, New Delhi on 28.03.2013 that Sh. Rakesh Gupta & Sh. Vishesh Gupta and Sh. Navneet Jain & Sh. Vaibhav Jain during the course of search proceedings, in post search proceedings and in assessment proceedings u/s 153A of ( Tax Act admitted that they have given accommodation entries to the parties whose lists have been provided by them to the ACIT, Central Circle-10, New Delhi. Therefore, the assessment of the Firms/concerns/individuals for A.Y. 2006-07, whose names were appearing in the said list of accommodation entries provided by Sh. Rakesh Gupta & Sh. Vishesh Gupta, Sh. Navneet Jain & Sh. Vaibhav Jain and whose territorial jurisdiction was lying with this Ward, were reopened u/s 147 of I.Tax Act and notices u/s 148 of I.Tax Act were issued. After making necessary verification an....
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....hargeable to tax that has escaped assessment, which will come to the notice of this office during assessment proceedings shall also be added back. Thus, I have reasons to believe that it is a fit case for initiation of proceedings u/s 147 of the Act. Proposal in the prescribed form for the A.Y. 2007-08 (F.Y. 2006-07) is submitted herewith for kind consideration and necessary approval u/s 151(2) of the I. Tax Act, 1961 as [getting barred by limitation on 31.03.2014. [Pawan Kumar Vashist] Income Tax Officer Ward-39 (3), New Delhi" 6. A perusal of the above clearly shows that the Assessing Officer has borrowed the findings. Moreover, the entries pertain to assessment year 2006-07 as is clearly evident from the reasons recorded mentioned hereinabove. It can be further seen that there is a reference to some verification and disposing off the objections filed by most of the assessees against reopening of their cases u/s 147 of the Act. On the strength of the fate of the other assessees, the Assessing Officer formed a belief that the assessee has also made bogus purchases and the same has to be treated as income of the assessee for assessment year 2006-07. 7. In the penultimate p....
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....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 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." 10. On identical set of facts in the case of Sapra Metal company 2910/DEL/2016, the Bench had occasion to consider the reopening of the assessment on the basis of very same information which was considered in the case in hand and while quashing the reopening, the bench had considered the following judgment of the Hon'ble Jurisdictional High Court in the case of Sarthak Securities Pvt. Ltd 329 ITR 110. The Hon'ble High Court has held as under: " In the case at hand, as is evincible, the assessing officer was aware of the existence of four companies with whom the assessee had enter....
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....neficiary. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the W.P. (C) NO. 8067/2010 Page 13 information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment. The company was incorporated on 4th January, 1989 and was also allotted a permanent account number in September, ....