AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2019 (2) TMI 1408
X X X X Extracts X X X X
X X X X Extracts X X X X
....he information received by the ld.Assessing Officer. He submitted that there is no independent application of mind on the material by the Assessing Officer before recording of reasons that income subject to tax has escaped assessment. He pointed out that the information received from the Forward Markets Commission did not contain any allegation whatsoever against the assessee that the assessee had indulged in taking accommodation entries or booking bogus loss. He contended that the Assessing Officer has failed to come to a prima facie conclusion that income of the assessee has escaped assessment for the Assessment Year in dispute. He pointed out that serious allegation were made by the Forward Markets Commission which enquired into the affairs of National Multi-Commodity Exchange of India Ltd. (NMCEI), against one Shri Kailash Gupta, MD & CEO of NMCEI and that no allegation was made against the assessee or its Directors and that on such information, no reasonable person would conclude that income subject to tax has escaped assessment. 3.1. On merits he submitted that the assessee carries on its activities on the floor of NMCEI and the transactions were duly confirmed by the exch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch conducted enquiries into the affairs of NMCEI. He took this bench through the order of the Assessing Officer and submitted that all the arguments made by the assessee were considered by both these authorities. He relied on the order of the Assessing Officer and argued that the order of the Assessing Officer be upheld and the appeal of the assessee be dismissed. 5. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- We first consider the issue as to whether re-opening of assessment is bad in law. The reasons recorded by the Assessing Officer for re-opening of the assessment for the Assessment Year 2010-11 is as follows:- "In this case the assessee had filed its ITR for A.Y. 2010-11 on 29.09.2010 disclosing total income of Rs. 58,23,420/-. In the case of the assessee information was received from the Forward Market Commission (FMC), the regulatory authority of commodity exchange that the assessee M/s. Proficient Commodities Private Limited had taken accommodation entries inform of bogus losses through Nati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this statement. In fact, NMCE has, in its action taken report, not framed any charges on account of this statement. A small token fee ofRs.10,000/- was levied for non-production of bank books of HDFC. There is no allegation of wrong doing on the part of the assessee company in this audit report. When FMC audit does not find fault with the transactions of the assessee company and when the assessee company is not named in the FMC report, to base the reason on such information without verification, is bad in law. The assessee has produced all evidence to prove that the transactions are genuine and that he had participated as an arbitrager. There is no proof of cash changing hands. The FMC audit had cleared the transactions of the company. A plain look at the reasons demonstrates that the re-opening was based on the information which was never examined or verified by the Assessing Officer before recording reasons for reopening of assessment. On these facts, we examine the legal position. 5.1. We find that this Bench of the Tribunal in the case of ACIT vs. M/s. Adhunik Cement Ltd. in ITA No. 1375/Kol/2017; Assessment Year 2009-10, under identical facts and circumstances held as f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....acts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis 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 tran....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Delhi High Court in the case of Principal CIT vs G&G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: "12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the A.O. stated: 'I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has, introduced 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 entri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during F.Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S,was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate 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 we....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mation received from investigation wing New Delhi the introduced share capital during the year. had been received from corporate bodies which are non existent and whose capacity to invest ( credit worthiness ) could not be established . Therefore I have reasons to believe that unexplained cash credit had been introduced in your books of accounts in the name of introduction of share capital and receipt of share application money. In absence of satisfactory identity and credit worthiness of the other parties. the entire introduced capital and share application money will be treated as your income for that year. I will therefore continue the proceedings for reassessment of your return u/s 147. Statutory notices u/s 143(2) and 142(1) are enclosed herewith. Yours faithfully. Sd/- ( Sanjay Mukherjee) DCIT /Cir-6/Kol " 8.2. The submissions of the learned counsel for the assessee before us was that the reasons recorded by the AO were mere information received from D.I.T.(Investigation), New Delhi. There was no independent application of mind by the AO based on which it can be said that he arrived at the satisfaction that the income of the assessee is chargeable to tax has es....