TaxTMI 
TaxTMI 
2019 (11) TMI 334
X X X X Extracts X X X X
X X X X Extracts X X X X
....0 ITR 561 SC), that too after four years and therefore rendering the whole re-assessment bad in law, also on the basis of borrowed satisfaction, presumption and surmises. 3. Briefly stated the facts are that the assessee filed its return of income for the A.Y. 2008-09 on 27.09.2008 declaring total income of Rs. 10,15,730/. The assessee trades in sarees and saree fabrics. The return was processed u/s.143(1) of the Act. Thereafter, the assessment was completed u/s. 143(3) by the Assessing Officer (AO) on 03.09.2010 determining the total income at Rs. 10,65,910/-. Thereafter, the return was revised to Rs. 10,15,730/- after giving effect to the order of the CIT(A). Subsequently, the AO received information from the Investigation Wing of the Department that the assessee had taken accommodation entry amounting to Rs. 10,00,000/- from M/s. Kunal Gems, a concern controlled by Mr. Praveen Kumar Jain. On the basis of the above information, the AO reopened the assessment by issuing notice u/s.148 dated 30.03.2015 to the assessee. In response to the said notice, the assessee vide letter dated 02.04.2015 requested the AO to treat the original return filed on 27.09.2008 as the return filed in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion entries of unsecured loans on the above group. Thus, there was a definite failure on the part of the assessee to disclose truly and fully the above information before the AO in original assessment completed u/s. 143(3) on 03.09.2010. In CIT v. Kelvinator of India Ltd (2010) 320 ITR 561 (SC), it is held that the AO has power to reopen the assessment if there is tangible material to conclude, prima facie that there has been escapement of income. However, the Court cautioned that the power of assessment is not one of review and that it does not admit of information of a second opinion. The scope of the phrase "reason to believe" was examined by the Supreme Court previously in M/s. Phool Chand Bajrang Lal and Anr. v. Income Tax Officer and Anr., (1993) 203 ITR 456 (SC). In Phool Chand, the court made observations which remain undisturbed in Kelvinator: "Thus, where the transaction itself on the basis of subsequent information, is found to be a bogus transaction, the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the "true" and "full" facts in the case and the I.T.O. would have the jurisdiction to reopen the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng out any genuine business and in fact they were providing accommodation entries. As per the said findings, the assessee was one of the beneficiaries of accommodation entries in the form of unsecured loans of Rs. 10,00,000/- from M/s. Kunal Gems of Shri Praveen Kumar Jain group. The AO further noted that the accommodation entries to various beneficiaries have been given in cheque/RTGS which have been routed through the bank account of the bogus concerns of Praveen Kumar Jain group. Against the cheque/RTGS, equivalent amount of cash is received from those beneficiaries through the Angadias and the recorded transactions are routed through banks and the same get reflected in the regular books of accounts of the benami concerns of Praveen Kumar Jain group. With the above observations, the AO made an addition of Rs. 10,00,000/- as unexplained cash credit u/s. 68 of the Act. Further, he disallowed the interest of Rs. 58,849/- to M/s. Kunal Gems against the above loans. 10. In appeal, the ld. CIT(A), confirmed the addition made by the AO after examining (i)the statement recorded on oath u/s.132(4) dated 01.10.2013 of Shri Praveen Kumar Jain, (ii)the statement of Shri Nilesh Parmar, pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3/2005, 56/2005, 305/2006) of Delhi High Court. 13. We have heard the rival submissions and perused the relevant material available on record. At this moment, we discuss the case laws relied on by the ld. DR. In the case of McDowell & Co. Ltd (supra), the issue was tax avoidance and the Hon'ble Supreme Court held that - "Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by restoring to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges. Courts are now concerning themselves not merely with the genuineness of a transaction, but with the intended effect of it for fiscal purposes. No one can now get away with a tax avoidance project with the mere statement that there is nothing illegal about it." In the case of Divine Leasing & Finance Ltd (supra), it is held that if the Revenue merely issues summons u/s.131 and does not pursue the matter further, the assessee does not become responsible for the same, even if the creditors do not appear and addition cannot be made u/s.68 of the Act. In the instant case, the AO has mad....