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 
2016 (3) TMI 1368
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee read as under: "1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the initiation of the reassessment proceedings and the reassessment order are bad both on facts and in law and liable to be quashed as the statutory conditions and procedure prescribed under the statute have not been complied with. 3 (i) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned A.O. are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and are contrary to the facts. (ii) On the facts and circumstances of the case, CIT(A) has erred both on facts and in law in rejecting the contention of the assessee that the reassessment order passed by the A.O. is bad and liable to be quashed as the same has been reopened on the basis of the reasons which are v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion so made on the basis of material collected at the back of the assessee is bad in law & liable to be deleted. 11. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in rejecting the contention of the assessee that the addition made by the learned AO is untenable in the eye of law having been made without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the assessee and without following the principle of natural justice. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal." 4. Ground Nos. 1 and 12 are general in nature and need no adjudication at our end. 5. Ground Nos. 2 and 3 challenging the validity of reopening of assessment are legal grounds. 6. We have heard the arguments of the ld. DR and have carefully perused the relevant material placed on record before us. The ld. Counsel for the assessee has drawn our attention towards the order of the ITAT Delhi, SMC - 2 Bench dated 28.10.2015 passed in ITA No. 1372/Del/2015 for A.Y 2006-07 in the case of Unique Metal Industries Vs. ITO for A.Y 2006-07 and submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... "Kindly find enclosed herewith letter dated 13.03.2013 of ACIT, Central Circle-10 duly forwarded by the Addl. CIT, Central Range-IV, along with its enclosures on the subject mentioned above. 2. The assessment of search cases of Sh. Rakesh Gupta, Sh. Vishesh Gupta, Sh. Navneet Jain & Sh. Vaibhav Jain are under process with the ACIT, Central Circle-10. During the assessment proceedings u/s 153A in the aforesaid cases, details regarding accommodation entries given by the above entry providers has been obtained by the Assessing Officer. 3. The list of accommodation entry recipients has been obtained from Sh. Rakesh Gupta and Sh. Vishesh Gupta. Hard copy of the list is enclosed as Annexure A, duly signed by Sh. Vishes Gupta. The list given the name of the firm which has provided the accommodation entry along with the name and address of the recipients of accommodation entry. 4. Sh. Navneet Jain & Sh. Vaibhav Jain has provided accommodation entry through thirty seven paper entities. The list of the firms giving accommodation entry is enclosed as annexure-B. The list of accommodation entry recipients, has been obtained from Sh. Naveneet Jain & Sh. Vaibhav Jain....
X X X X Extracts X X X X
X X X X Extracts X X X X
....osal in the prescribed form for the AY 2006-07 (F.Y. 2005-06) is submitted herewith for kind consideration and necessary approval u/s 151(2) of the I.T. Act, 1961 as the same is getting barred by limitation on 31/03/2013. If approved, notice u/s 148 of the act may be issued. Sd/- (Pawan Kumar Vashist) Income Tax Officer Ward 39(3), New Delhi 9. From the first order of the Tribunal in the case of Unique Metal Industries Vs. ITO [supra] it i s vivid that the Tribunal in the similar facts, circumstances a nd situation of the case, satisfaction note held as under: "8. On going through the above reasons it is evident that this assessment has been reopened on the basis of the letter received from the ld. CIT, Central-2, New Delhi with the direction to take necessary action as per section 148 of the Act. As per this, accommodation entries were obtained by various persons from Sh. Rakesh Gupta and Sh.Vishesh Gupta as well as Sh. Navneet Jain and Sh. Vaibhav Jain. Copy of this list was forwarded in a CD to the Assessing Officer. Thus this list contained the name of the assessee. The Assessing Officer reopened the assessment on the basis of this information. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o reopen assessment the Assessing Officer was not having the above said information. Only that he was having the letter along with list which was forwarded by the CIT, Central-2, New Delhi. 10. The above observation of the Assessing Officer also shows that it was letter dated 20.12.2013 received by him on 27.12.2013 on the basis of which the Assessing Officer could make a view that the purchase bills provided by these persons or their family members is nothing but bogus purchase bills. At the time of recording of the reasons the Assessing Officer apparently was not having any idea about the nature of the transactions entered into by the assessee. In the reasons recorded there is no mention about the nature of the transactions. As per provision of section 147 an assessment can be reopened if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The reasons to believe has to be that of the Assessing Officer and further there have to be application of mind by the Assessing Officer though the reasons to believe does not mean that the Assessing Officer should have finally ascertained the fact that income has escaped assessment bu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cept the list provided by the CIT, Central-2, New Delhi about the list of accommodation entries. Beyond that he was not having the copies of the statement of any of these persons. He was not having copy of the assessment orders and other details or document which would have enabled the Assessing Officer to apply his mind and form a belief that income has escaped assessment. In fact this information was not with the Assessing Officer till fag end of the reassessment proceedings, a fact admitted by the Assessing Officer himself in the assessment order. The judgment relied upon by the learned AR also supports the case of the assessee. In the case of Sarthak Securities Pvt. Ltd. vs. ITO (2009) 329 ITR 110 the Hon'ble jurisdictional Delhi High Court has held that under the circumstances narrated hereinabove the reopening cannot be said to be a valid reopening. The Hon'ble Court has held as under:- "In the case at hand, as is evincible, the AO was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the AO was made aware of the situation by the Investigation Wing and there is no mention that th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is extremely scanty and vague. There is no reference to any document or statement, except Annexure. 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 AO did not apply his own mind to the information and examine the basis and material of the information. The AO accepted the plea on the basis of vague information in a mechanical manner. The CIT also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the AO did not independently apply his mind to the information received from the Director of IT (Inv.) and arrive at a belief whether or not any income had escaped assessment. Company SS Ltd. had applied for and was allotted shares in the petitioner company on payment by cheque of Rs. 5 lacs. SS Ltd. is an incorporated company and the petitioner has pleaded and stated that the said company has a paid-up capital of Rs. 90 lacs. The company was incorporated on 4th Jan., 1989 and was also allotted PAN in September, 2001. The facts indicated above do not ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n and vigilant perusal of the orders of the Tribuna l including that of the Unique Metal Industries [supra] the AO had recorded similarly worded reasons and name of the parties form which the assessee alleged to have made bogus purchases were also same ex cept the amount mentioned therein in the reasons recorded in the tabular f orm are same as in the case of the present assessee. Therefore, we have no alternative but to follow the decisions of the Tribunal in the case of the order of the Tribunal in the case of Unique Me tal Industries [supra] and other as mentioned hereinabove. Therefore, we are of the considered opinion that the initiation of rea ssessment proceedings as well a s issuance of notice u/s 148 of the Act was not valid and the same was void ab initio and thus we quash the same and subsequently the assessment order passed in pursuance thereto is also quashed. Accordingly, Ground Nos. 2 and 3 of the assessee are allowed. On merits 11. The remaining issues on merits are sustenance of addition made by the ld. CIT(A) to the extent of 20% purchases made by the assessee during F.Y. 2005-06 pertaining to A.Y 2006-07, from the order of the Tribunal in the case of Uni....