TaxTMI 
TaxTMI 
2020 (1) TMI 157
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....ok in light of Rule 18(6) of ITAT Rules. Judicial decisions relied upon were carefully perused. 4. Briefly stated, the facts of the case are that return of income declaring income of Rs. 1,92,74,350/- was filed by the assessee on 15.12.2006. Return was subjected to scrutiny assessment and the assessment was framed u/s 143(3) of the Act vide order dated 10.07.2008. 5. Subsequently, a notice u/s 148 of the Act was issued and served upon the assessee. Reasons for reopening the assessment read as under: "Reasons for issue of notice u/s 148 in the case of M/s Spice Global Pvt Ltd (A. Y. 2006-07) Assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 on 10.07.2008 by the DCIT, Circle 19(1), New Delhi at the returned income of Rs. 192,74,350/-, the return of income having been filed on 15.12.2006. Subsequently the jurisdiction over this case was transferred to f this Circle vide the Commissioner's of Income Tax, Delhi-Ill, New Delhi order I u/s 127 dated 01.09.2008. 2. It has been noticed that during the previous year relevant to the 'assessment year 2006-07 the assessee company has been found to have made transactions amounting to Rs. 3.05.22.660/- with ....
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....development. Accordingly bills/invoices had been issued in the names of these companies but in fact no actual services had been rendered by them to the beneficiaries. During the course of search it was found that Shri S.K Gupta did not have the necessary infrastructure or the requisite manpower to provide the actual services and thus it became evident that the companies controlled by him were merely engaged in the business of issuing accommodation bills to other entities TAT the other office premises of Shri S.K Gupta at 231 Gulmohar-1 Enclave, huge number of such accommodation invoices/bills issued by the '"T various Companies were found and seized during the course of search. Apart from these invoices/bills, there was no other evidence which was found from any of the premises which would suggest that actual services were being rendered by any of the companies controlled by Shri S.K Gupta. No documentary or written evidence in support of genuineness of these transactions was found during the course of search which leads to the obvious conclusion that the companies controlled by Shri S.K Gupta were engaged in the business of issuing accommodation bills only. The fact of pro....
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....rusal of the aforesaid reasons for reopening the assessment show that completed assessment has been reopened pursuant to the search and seizure action conducted at the business and residential premises of one Shri S.K. Gupta on 12.12.2006. Similar actions were conducted in the case of various companies owned / controlled by Shri S.K. Gupta and his family members. There is a reference to two companies, namely, M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. Nowhere in the reasons for reopening assessment there is a mention of what relationship Shri S.K. Gupta or any of his family members had with these two companies and whether they were shareholders having substantial interest, or MDs/Directors of these companies. 7. The reasons further show that huge number of accommodation invoices/bills issued by various companies in which Shri S.K. Gupta or his family members had interest were found and seized. Though there is a reference to the statement of Shri S.K. Gupta who has admitted in his statement that the bills were raised in names of various companies by his group concerns. Cheques were received but cash was returned to the respective parties or cheque payments were made to t....
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....filed alongwith supporting documentary evidences. It is the say of the ld. DR that the Assessing Officer did not make any enquiries and has accepted the bills/invoices. We fail to understand what prevented the Assessing Officer to make necessary enquiries as per provisions of law. Neither the Assessing Officer issued any notice u/s 133(6) of the Act nor he cared to summon the officers of the two companies u/s 131 of the Act. 12. A perusal of the assessment order framed u/s 143(3) r.w.s 147 of the Act shows that entire assessment order is devoid of any reference to the statement of Shri S.K. Gupta. It is not known as to what question Shri S.K. Gupta said that M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet Ltd. were providing accommodation bills. Further, we find that the entire transactions have been done through A/c payee cheques and it is not the case of the Revenue that the appellant has purchased the accommodation bills by making payments through cheques and receiving cash through back door. 13. It is pertinent to mention here that search operations at the premises of Shri S.K. Gupta were conducted on 12.12.2006 and original assessment order was framed u/s 143(3) of the Act....
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....ssessment... " 22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein....
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....he Act to reopen a past assessment. 28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus: "11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to Rs. 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003- 04. Details are contained in Annexure. As per information amount received is nothing but accommodation entry and assessee is a beneficiary." 28.2 The Annexure to the said proforma gave the Name of the Beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the Court observed: "14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per....
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....ose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:...." 29.2 The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded: "The transactions involving Rs. 27,00,000/-, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000/- has escaped assessment as defined by secti....
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.... New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that there was prima facie material for the AO to come to the conclusion that the Assessee had not made a full and true disclosure of all the material facts relevant for the assessment. 31. In Commissioner of Income Tax v. G&G Pharma (supra) there was a similar instance of reopening of assessment by the AO based on the information received from the DIT (I). There again the details of the entry provided were set out in the 'reasons to believe'. However, the Court found that the AO had not made any effort to discuss the material on the basis of which he formed prima facie view that inco....
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....that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment." 16. The Hon'ble High Court finally concluded as under: "36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in ....