TaxTMI 
TaxTMI 
2019 (12) TMI 680
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. Rs. 10 Lacs 6. Vanguard Jewels Ltd. Rs. 15 Lacs 7. Casper Enterprises Pvt. Ltd. (Ostwal Trading (India)Pvt. Ltd. Rs. 5 Lacs 8. Triangular Infocom Ltd. (Lexus Infotech Ltd. Rs. 15 Lacs 2.1 The Ld. CIT(A) has erred on facts and in law in confirming the above addition on the basis of statement of Sh. Praveen Jain by incorrectly holding that there was no need to provide opportunity for cross examination and ignoring the fact that Sh. Praveen Jain has retracted from his statement." 2. Briefly stated, the facts of the case are that the assessee filed its return of income declaring loss of Rs. 8,12,510 on 26.09.2009 which was processed U/s 143(1) of the Act. Subsequently, the AO issued notice U/s 148 of the Act dated 09.01.2015 which was duly served on the assessee and the assessment was completed wherein an addition of Rs. 1.10 crores was made U/s 68 of the IT Act on account of unexplained share capital. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) who has sustained the addition and now the assessee is in appeal before us. 3. In ground no. 1, the assessee has challenged the legality of the order passed by the Assessing Officer U/s ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed that the reasons recorded is not specific as to whether assessee has taken loan or advance or made purchases from these five companies whereas the fact is that assessee has neither taken any loan or advance or made any purchases from the above parties. The AO in the assessment order has also not made any addition on account of alleged loan/ advances/purchases rather he made addition on account of the share capital. This shows that AO has not examined the information alleged to be on record to verify the nature of receipt from these parties. This apart in the reasons there is nothing whatsoever to show as to which is the record which shows that there were bogus loan/advance/purchase to the extent stated therein. Neither any paper or any document or statement of any person has been referred in the reasons to have a reason to belief that loan/advance/purchase taken from five companies is bogus. Hence the reopening of assessment is illegal & bad in law. 5. In support, reliance was placed on the Co-ordinate Bench decision in case of M/s Merta Oil Mills Company Pvt. Ltd. Vs. ITO (ITA No.516/JP/16 order dt.11.05.2018). In that case, the AO has recorded the reasons stating that assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in law and deserved to be quashed. Such view is also supported by the various decisions of the Hon'ble High Courts and the Tribunals as stated (supra). Therefore, we quash the reopening of the assessment." 6. Further reliance was placed on the Coordinate Bench decision in case of Meta Plast Engineering Pvt. Ltd. Vs. ITO (ITA No.5780/Del/2014 order dt.06.04.2018). In that case, the reasons recorded by the AO do not suggest whether the assessee has received or provided the accommodation entries in as much as the reasons read that "bogus accommodation entries were provided/taken", it means there is no application of mind by the AO while recording reasons and thus the reopening of assessment was held bad in law. 7. Further reliance was placed on the Coordinate Bench decision in case of M/s Balaji Health Care Pvt. Ltd. Vs. The ITO(E) (ITA No.566 & 567/JP/2018 order dated 30.01.2019) wherein it was held that: "Material and information on the basis of which reasons have been recorded that income in the hands of the assessee has escaped assessment relates to search and seizure operation in case of Surendra Kumar Jain and Virendra Kumar Jain and the report of the Director of Inc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly, was information given by DGIT (Inv.), Mumbai that had no relation with reasons recorded. AO on basis of material on record could not have formed belief that there was any escapement of income chargeable to tax so as to validly assume jurisdiction u/s. 147. Reasons recorded for re-opening of assessment could not be supplemented in affidavit or by order rejecting objection. Material on basis of which belief that income chargeable to tax escaped assessment has been formed had to find place in reasons itself. Formation of belief that income has escaped assessment not being based upon record, substratum for reopening the assessment could not be said to be laid in reasons recorded. Thus, basic requirement for assumption of jurisdiction u/s 147 for reopening assessment was not satisfied. Impugned notice u/s 148 could not be sustained." In view of above, it was submitted that the reopening of the assessment u/s 147 is illegal and bad in law and the same be quashed. 9. Per contra, the ld DR is heard who has relied on the findings of the Assessing officer and submitted that the Assessing Officer was having credible information to hold the belief the assessee has obtained accommodatio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is found that assessee has taken accommodation entries in the nature of loan/advance/purchase bills from five entities. It has been stated therein that the assessee company is a beneficiary who has taken accommodation entry in the nature of loans and advances which is not genuine as the lender was not carrying on any genuine business activity and was providing accommodation entries in lieu of cash obtained from the beneficiaries. Firstly, what is relevant to determine is the material that is available on record on the basis of which the belief has been formed that income has escaped assessment. We find that the same has not been specified by the Assessing officer in the reasons so recorded, therefore what is the material in possession of the Assessing officer basis which the belief has been formed is not discernable from the reasons so recorded. The ld DR has submitted that there is credible information which has been received by the Assessing officer, however, as we have stated above, the said material has to be reflected in the reasons so recorded and the reasons cannot be supplemented as held by the Hon'ble Gujarat High Court in case of Varshaben Sanatbhai Patel Vs. ITO (supra)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not be supplemented in the affidavit or by the order rejecting the objections. The material, on the basis of which, the belief that income chargeable to tax has escaped assessment has been formed, has to find place in the reasons itself." 11. Further, we find that the transactions with the four entities which have been listed in the reasons so recorded are the transactions where these four entities have subscribed to the share capital of the assessee company and has thus contributed the money towards the share capital, a fact which is apparent from the assessment order wherein the addition has been made towards the unexplained share capital. However, in the reasons so recorded by the Assessing officer, it has been stated that the assessee has taken accommodation entries in the nature of loan/advance/purchase bill. The same thus reflects non- application of mind by the Assessing officer and lack of even basic verification before recording the reasons more so where the return of income is already on record and thus a case of borrowed satisfaction and not that of the Assessing officer. In case of PCIT-5, Mumbai v/s M/s. Shodiman Investments P Ltd. (ITA No. 1297 of 2015 - Mumbai HC v....