TaxTMI 
TaxTMI 
2017 (6) TMI 1320
X X X X Extracts X X X X
X X X X Extracts X X X X
....: "On the facts and in the circumstances of the case, the CIT(A)-XI, New Delhi has erred both on facts and in law, in upholding the illegal order of the respondent on the following grounds and hence liable to be quashed because: 1. Reasons recorded are vague and scanty, without application of his own mind by Assessing Officer and without necessary approval of the Joint CIT and hence re-assessment proceeding are not in terms of section 146 to 151 of the Income Tax Act. 2. Objection specifically raised were not disposed of before passing the impugned order. 3. Re-assessment order passed in violation of natural justice without providing corroboration of the material and without providing cross examination asked and without proper show case notice. 4. Additions of Rs. 1,44,55,500/- u/s 68 by treating unexplained income. 5. Illegal additions and disallowances and consequent demands of Income Tax interest and penalties illegally raised." 3. The facts in brief of the case are that the assessee filed return of income on 30/11/2000 declaring total income of Rs. 41,645/- after adjusting earlier years losses of Rs. 9,71,706/-. The retur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....paper book containing pages 1 to 131 and submitted that the Assessing Officer merely referred to some DIT information and Annexure -A in mechanical manner without making any independent enquiry, even prima facie seeing correctness of the information and alleged escapement without even quantifying the income, he sought and even without identification of date on which the same was recorded, without having clarity about the nature of transaction, cause and effect relationship or any link between alleged information of belief. In support of the above contention, the Ld. counsel, relied on following decisions: "Hon'ble "C" Bench of ITAT, New Delhi in the case of the assesse itself has already held the re-assessment invalid in the similar facts and circumstances (Case Laws P 1-10) Page-2 -referred to the reasons which alleges escapement in " lacs" and Page 7 Para 9 onwards is the findings of the Bench. Hon'ble DHC in the case of CIT V. Supreme Polypropolene Pvt. Ltd. ITA 266/2011(Case Laws P 11-16) Page 4 & 5 last line Held the reasons are vague as AO recorded the reasons without giving any amount of income escaped. Page-16 Para-6 observation. (DHC)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Rs. 23,34,000/- 4.2.2 In support of the contention, that the Assessing Officer has not applied mind while reopening the assessment, the Ld. counsel, relied on following decisions: "(DHC) CIT V. Suren International P. Ltd., 357 ITR 24 (Case Law P 64-79) on para 14 of page -76. Income Tax Officer Vs. Comero Leasing & Financial Pvt. Ltd., ITA No. 4281 & 4949/2010 dated 14.08.2010 dated 14.08.2014 (Case Laws P 55-63) Para 7 & 8 on page 60-62." 4.2.3 The Ld. counsel further submitted that for reopening the assessment beyond four years, required satisfaction and approval of Joint Commissioner of Income-tax/Additional Commissioner of Income Tax, under section 151 of the Act, and which was conspicuously missing on the face of reasons supplied by the Assessing Officer. In support of the contention, the Ld. counsel relied on the following two decisions: "(DHC) CIT Vs. Atul Jain 299 ITR 383 (Case Laws P 38-44) Para 10 & 11 on page 41-42. Hon'ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. Vs. CIT, 285 ITR 317 (Delhi) (Case Laws P 80-85) page 83-85 para 14,15 & 19." 4.2.4 Further, the Ld. counsel submitted th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act by the Additional Director of Income Tax, admitted of having engaged in providing accommodation entries, which was evident from the statement of Sh. Vishal Aggarwal, placed on page 5458 of the Revenue's paper book. 4.4 Countering the argument of the Ld. counsel that approval of Addl. CIT was missing on the face of reasons supplied to the assessee, the Ld. Senior DR referred to page 45 of the Revenue's paper book and submitted that the Ld. Additional Commissioner of Income Tax after seeing the material and basis of reasons, recorded satisfaction and given sanction for issue of notice under section 148 of the Act, and which is available on record. He further submitted that the Assessing Officer moved letter for approval of the Addl. CIT on 23/03/2007 and the approval has been granted on 28/03/2007, which shows that the Addl. CIT has not acted in mechanical manner and sanction has been granted after due satisfaction by the Additional Commissioner of Income Tax. He further submitted that no such ground was taken before the Ld. CIT-(A) and therefore raising the ground first time before the Tribunal was not justified. 4.5 We have heard the rival submissions and perused t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessee was related to the investigation, nothing is coming out from the reason recorded. It cannot be said that AO could have formed the belief that income of the assessee has escaped assessment. There was no material having any link, let alone live link with the reason recorded and formation and belief as to the ingenuity of the transactions by the assessee. According to the reason recorded some report has been received from DIT(lnv.) that the assessee company was involved in giving and taking bogus entries/transactions during the financial year 1998-99. We find that there is absolutely no material on the basis of which a belief could be formed as to the escapement of the assessee's income. It is not clear from the "reason" as to what was report and what was the evidence on the basis of which the report purportedly mentioned that assessee company was involved in giving and taking accommodation entries. In the reasons, it is also not mentioned about the persons from or to whom accommodation entries were taken or given by the assessee and in respect of what amount It is thus, apparent that Assessing Officer did not acply his own mind to the information and examine the basis and mate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pies of Statements Received of Mr. Harish Kumar Agarwal, Ms. Manju Agarwal, and of Mr. Vishal Agarwal and Mr Mikas Agarwal. a) Sh. Harish Agarwal in the statement recorded on oath before Addl. DIT (Inv.) Unit-V on 05.04.05 had categorically denied that he was doing any business, or he was director in any company, partner/prop, of any firm. He further denied that he had invested in any company in Share Application Money, or given any gift or loan. He further stated that his son Sh. Vishal Agarwal was looking after the affairs of bank account and other details. b) Smt. Manju Agarwal : The same type of statement was repeated by her during the statement recorded on oath before Addl. DIT (Inv.) Unit-V on 5.4.05. c) Statement of Sh, Vishal Agarwal was recorded by the AddI.DIT(Inv.)Unit-V on oath on 05-04-2005 where he had given the names of the banks as well as of companies used by him for the purposes of accommodation entries and which contained die name of M/s Hopewin Ad mark & Counseltancy Services Pvt Ltd. and further gave the list of entities used with bank accounts for the purposes of accommodation entries. Whereas the following facts came to lig....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rease in investment from Rs. 2.00 lacs to Rs. 12.50 lacs in this year and cash and bank balances too have increased from Rs. 15,825/- to Rs. 7,47,885/-. Further information has been received from DIT (Inv.)-I , New Delhi vide F.No. DTT(Inv )-I/20O6-07/AR./1536 dt 31.01 2007 whereby the Supplementary list has been sent showing the Accommodation Entries with details and the beneficiaries of such accommodation entries . The name of the above assessee also appears in the same with entries pertaining to Financial Year 1999-2000 i.e relevant to A.Y 2000-2001. The list of such entries are Annexed as Annexure -I.- In the wake of the information gathered by the Directorate of Income Tax (Inv.),New Delhi that the assessee was involved in giving and taking accommodation entries and represented unexplained income of the assessee company and also keeping in view the information gathered during the course of assessment proceedings for A.Y. 1999-2000 as discussed above and further verification made with the return of income of AY 2000-01 as discussed above, I am of the view that the assessee company has failed to disclose fully and truly all material facts and the sourc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the above work, what is/was getting? Ans. - I was getting an average being a commission of Rs. 0.25 paise on cash transaction & 0.52 paise on transfer transaction out of which 0.25 paise were paid to person giving cash transfer. Q. No. 13- Please give in detail of business of accommodation entry? Ans. - Any person who approach for accommodation entry was/were use to give cash in lieu of P.O./D.D./Cheques and that cash is routed through bank accounts of other person to them by way of transfer in my account to their account. Q. No. 14 - Do you want to say anything? Ans. - I was using the following accounts for the purpose of accommodation entries, Sh. Harish Kumar Agarwal, M/s. Agarwal Sales Corp., SBBJ, Harish Kumar & Sons (HUF), KSBL & Sangali Bank, Smt. Maju Agarwal, SBBJ & FBL, Vikas Agarwal, SBBJ & FBL, Arpit Sales Corp., KSBL, P.K. Investment, FBL, Amit Jain, FBL, Mukesh Jain, FBL, Parmanand Bhardwaj, SBBJ, Hopewin Admark & Counseltancy Services Pvt. Ltd., SBBJ, SCB." 4.5.4 It is evident from the answer to question No. 14, that the bank accounts of the assessee company were also used by Sh. Vishal Aggarwal for the purpo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to agree with the findings of the Income-tax Appellate Tribunal. It constitutes reference to tangible material "outside" the record, i.e., information based upon the investigation of the Commissioner of Central Excise with respect to the purchases made by the assesses. However, as far as the second issue is concerned, the court is of the opinion that even the rectified order does not address the issues squarely. Thus, arguendo such arguments could be validly raised. At the same time, the court notices that for both the assessment years 2004-05 and 2005-06, the note discloses the source of the information, i.e., Directorate of Revenue Intelligence, Local Unit at Jaipur, sending information based upon the Commissioner of Central Excise's investigations. To require the Revenue to disclose further details regarding the nature of documents or contents thereof would be virtually rewriting the conditions in section 147. After all, section 147 merely authorizes the issuance of notice to reopen with conditions. If the court were to dictate the manner and contents of what is to be written, the statutory conditions would be added as it were. In this context, it needs to be emphasized that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e reasons. Further, in the return of income filed, information related to nature of the sums received as for share application money or loans, is not contained and no scrutiny assessment was completed in the case of the assessee, prior to issue of the notice under section 148 of the Act. Therefore, no information was available on record, with which, the Assessing Officer could tally, whether particular entry reflected in the accounts of the assessee or that entry was a debit entry etc. Actually the Assessing Officer is supposed to verify the information in details in the process of reassessment proceedings and not at the stage of recording reasons. At the stage of recording reasons, the Assessing Officer should have a prima facie relevant material and sufficiency or correctness of the material is not required to be examined at the stage of recording reasons. The Assessing Officer has recorded reasons on the basis of material available before him and not under the direction of any of the higher authority. In the above circumstances, we are of the opinion that contention of the Ld. counsel that the Assessing Officer has not applied mind, is not correct and liable to be rejected. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecorded in the file at the relevant place. 4.8 We agree with the contention of the Ld. Senior DR about the practice of discussing the matters with higher authorities. Further, the decisions relied upon by the Ld. counsel of the assessee are distinguishable on facts as in the present case there was statements of the person looking after the affairs of the assessee company, admitted of having engaged in accommodation entry. 4.9 Thus, in our opinion, in the instant case, the Addl. CIT has applied his mind to the material and then arrived at a conclusion. 4.10 In view of our discussion, we summarise that (i) reasons recorded by the Assessing Officer are neither scanty nor vague nor recorded in mechanical manner and (ii) reasons recorded are with due application of mind (iii) reasons recorded are with necessary approval of the Additional CIT 4.11 Hence, we hold that the reassessment proceeding are in terms of section 147 to 151 of the Act. Accordingly, ground No. 1 challenging the validity of reassessment is dismissed. 5. In ground No. 2 the assessee has challenged the jurisdiction on the ground that objections raised by the assessee agitating t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n were not acceptable. In the facts & circumstances, we find that the assessee raised objections not as per the decision of the Hon'ble Supreme Court in GKN Driveshaft India Ltd.(supra). Since in the year under consideration, no objections have been filed effectively by the assessee, therefore, disposing off such objections specifically also does not arise. Accordingly, the ground of the assessee is dismissed. 6. In ground No. 3 the assessee has raised the issue that incriminating material was not made available for rebuttal of show cause notice issued proposing the addition and no crosss-examination was provided, which is in violation of natural Justice and thus the order of the Assessing Officer is a nullity. 6.1 Before us, the Ld. counsel in support of the grounds raised relied on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries vs. CCE, 127 DTR 0241. The Ld. counsel further submitted that third-party statement cannot be basis of reopening of the assessment relying on the decision of the Hon'ble Delhi High Court in the case of CIT versus Sh. Pradeep Gupta 207 CTR 115(Del). 6.2 The Ld. Senior DR, on the other hand, submitted that the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rized signatory of the assessee company, no question of providing cross-examination arises as they are not third-party witnesses. Further, the Assessing Officer has made addition under section 68 of the Act not only on the basis of the statements but due to failure on the part of the assessee in discharging its onus of establishing identity and creditworthiness of the persons who paid money and genuineness of the transaction carried out. The assessment proceedings are to be completed by the Assessing Officer in limited time period but the assessee sought adjournment again and again & delayed in replying to queries of the Assessing Officer. In view of the circumstances, the ground of the assessee that it is deprived of natural Justice for not providing cross-examination and proper show cause notice is not sustainable in law. Accordingly, the ground No. 3 of the appeal is dismissed. 7. In support of ground No. 4, the Ld. counsel submitted that no enquiry was made in respect of the transactions based on which the case was reopened and additions are made. The submission of the Ld. counsel are reproduced as under: "4. General questioner was issued by the AO vide letter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated with the AO at the assessment stage. This leads to an inescapable conclusion that the appellant was not interested to comply with the direction of the Department rather it wants to base its argument only on Court decision and not on factual evidence." 7.3 Further, in para-2.17 to 2.20 also, he emphasized on not providing the evidence in respect of identity, creditworthiness and genuineness of the transaction as under: "2.17 The essential question before me is a question of establishment of the identity, credit worthiness of the subscriber and the genuineness of the transaction. The identity of the subscriber, in this case has not been established, yet let us examine the next point i.e. the creditworthiness of the investor and also the last one with regard to the establishment of genuineness of the transaction. 2.18 In the present case, in order to establish the creditworthiness, it was shown that Rs. 1,44,55,500/- received from 91 persons by way of cheque. When the identity of the persons fails, it will be impractical at this stage to go for other two criteria i.e. creditworthiness of the investor and the genuineness of transaction. Furthermore there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h this submission no fruitful enquiry could be caused by the Department. It goes without saying that such persons have not sufficient creditworthiness as such identity itself remains to be verified, the onus automatically shifts from the Department to the appellant and now it is the appellant to establish before the Department, creditworthiness of such investors who have invested fund. All such material evidence never brought on record in the case of Lovely Exports Pvt. Ltd. (supra) and hence such cases are distinguishable for the limited purpose of adjudicating the present case." 7.5 Finally, he upheld the addition made by the Assessing Officer with following observations: "2.30 The jurisdictional ITAT in recent case of ITO Ward 6(3) Vs Mayank Containers P Ltd in ITA No.2283/Del/09 dated 11/08/09, referring the decision of Lovely Exports (Supra) and Divine Leasing & Finance (Supra) has held as below:- "In our view, Hon'ble Delhi High Court and Hon'ble Supreme Court while rendering judgments in the above cases were not dealing with the case of Hawala Operators and Bogus Entry Providers." 2.31 Applying the above tests in the present case, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the paper book) (iv) Copy of affidavit by the director (page 53 of the paper book) (v) Copy of order under section 143 (1) of the Act( page 54 of the paper book) (vi) Copy of acknowledgement of the return filed(page 55 of the paper book) (vii) Copy of balance sheet and profit and loss account( page 56 and 57 of the paper book) 7.8 In view of the contradictory claims regarding the filing of the documentary evidences in support of identity and creditworthiness of the payer and genuineness of the transaction, in the interest of Justice, we feel it appropriate to restore the issue to the file of the Assessing Officer for deciding the merit of the issue of addition under section 68 of the Act, afresh with the direction to the assessee to produce all the above documents, before the Assessing Officer. The Assessing Officer may carry out the enquiries which deemed fit in the facts and circumstances of the case including enquiries from the banks of parties transacted. The assessee shall be afforded sufficient opportunity of hearing. Accordingly the ground No. 4 of the appeal is allowed for statistical purposes. 8. In the result, appeal of the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Driveshaft India Ltd Vs. Income Tax Officer (2003) 259 ITR 19(SC). 12.1 The Ld. Senior DR, on the other hand, submitted that no such objections were filed before the Assessing Officer and the letter filed by the assessee before the Tribunal are not bearing any acknowledgement by the office of the Assessing Officer. He further submitted that the assessee has not produced any other documentary evidence to establish that the assessee filed any objection before the Assessing Officer against the reassessment proceedings. 12.2 We have heard the rival submission and perused the relevant material on record. The pages 161 to 162 of the assesses paper book , is a letter dated 25/11/2008 containing objections to the notice issued under section 148 of the Act. The pages 163 to 172 is a letter dated 12/12/2008 explaining the accommodation entries. The Ld. counsel of the assessee has submitted that these objections were filed before the Assessing Officer, but the Ld. Senior DR pointed out that those papers are not bearing any stamp of acknowledgement by the Assessing Officer and therefore there is no evidence as those papers were filed before the Assessing Officer. We find that, in the assess....