TaxTMI 
TaxTMI 
2019 (5) TMI 1795
X X X X Extracts X X X X
X X X X Extracts X X X X
....n the legal issue then it goes to the root of the reassessment order framed pursuant to reopening itself. 3. The brief facts of the case necessary for adjudication of the legal issue are that the assessee had filed the original return of income on 03.07.2009 for AY 2009-10. Since the time period expired for issuance of notice u/s. 143(2) of the Act, therefore originally, no scrutiny assessment was framed. Therefore, the return of income filed by assessee stood accepted by the Department. Thereafter, the AO on 30.03.2016 issued notice u/s. 148 of the Act for reopening the assessment, and the reassessment order was passed on 28.12.2016. Since the legal challenge is in respect of the very action of the AO to invoke the jurisdiction to reopen the assessment, as stated above, we would like to first dispose of the said legal ground. 4. The Ld. AR assailed the decision of the AO to reopen the assessment based on letter from the ADIT (Inv.), Thane. According to Ld. Counsel, the AO without application of mind has proceeded to reopen the assessment only on the basis of a investigation report given by the ADIT (Inv.), Thane in respect of accommodation entries given in the form of share ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i Projects Pvt. Ltd. in ITA No. 4353/Del/2016 dated 16.12.2016 n) Tarun International Ltd. in ITA No. 5136/Del/2012 dated 05.11.2015 o) PCIT Vs. Meenakshi Overseas Ltd. 395 ITR 677(Del.) p) DCIT Vs. Greal Wall Marketing Pvt. Ltd. ITA No.660/Kol/2011 q) Shri Raj Kumar Goel Vs. ITO ITA No.1028/Kol/2017 r) Classic Flour & Food Processing Pvt. Ltd. Vs. CIT ITA Nos. 764 to 766/Kol/2014 s) PCIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) t) KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 u) PCIT Vs. Tupperware India Pvt. Ltd. (2016) 236 Taxman 494 v) DCIT Vs. National Bank for Agriculture and Rural Development ITA No.4964/Mum/2014 w) CIT Vs. Insecticides (India) Ltd. (2013) 357 ITR 330 (Del.) x) Hon'ble Calcutta High Court in the case of Pr. CIT Vs. G4G Pharma India Ltd. in ITA 545/2015 vide order dated 08.10.2015 6. The Ld. AR drew our attention to the decision of the Hon'ble High Court of Delhi in ACIT Vs. Meenakshi Overseas (P) Ltd. (2017) 82 taxmann.com 300 (Del) wherein it has been held as under: "22. As rightly pointed out by the ITAT, the 'rea....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes: 1. To plough b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....asons to believe read as under: "It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8 th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment withi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee‟s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction underSection 147 of the Act. " 34. Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non-existent and not creditworthy. On identical facts the Hon'ble Delhi High Court in the case of CIT vs Insecticides (India) Ltd (supra) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. The Hon'ble Delhi High Court has also come to the conclusion that the reasons recorded did not disclose the AO's mind regarding escapement of income. The Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon'ble Delhi High Court. Following the said decision we hold that initiation of reassessment proceedings is not valid. On this ground, the assessment is liable to be annulled." 8. The Hon'ble Bombay High Court in Pr.CIT Vs. Shodiman....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld be assessed or reassessed to confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to, income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices." . Therefore, the sentence being relied upon was made in the context of the change in law that under the amended provision 'reason to believe' that in case of escaped assessment, is sufficient to re-open the assessment. This unlike the earlier provision of Section 147(a) of the Act which required two conditions i.e. failure to disclose fully and truly all facts necessary for assessment and reason to believe that income has escaped as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the basis of re-opening . Assessment and its reasons which would evidence the linkage/nexus to the conclusion that income chargeable to tax has escaped Assessment This is a settled position as observed by the Supreme Court In S. Narayanappa v. CIT [1967] 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v. Lakhmani Merwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the Act, the AO did not make any addition on account of unexplained investment in construction. It is the plea of the assessee that when no addition is made on the grounds on which re-assessment proceedings are initiated then no other addition can be made in such reassessment proceedings. 8. The first aspect which needs to be examined is as to whether the assessee is entitled to challenge the validity of initiation of proceedings u/s 147 of the Act in the present appeals in which he has challenged the validity of order passed u/s 263 of the Act. The ld. Counsel for the assessee submitted before us that it is open to an assessee in an appeal against the order u/.s 263 of the Act which seeks to revise an order passed u/s 147 of the Act, to challenge the validity of the order passed u/s.147 of the Act as well as initiation of proceedings u/.s 147 of the Act. In this regard the Ld. Counsel for the assessee placed before us two decisions one rendered by Lucknow Bench of ITAT in the case of Inder Kumar Bachani (HUF) vs ITO 99 ITD 621 (Luck) and ITAT Mumbai 'G' Bench in the case of M/s. Westlife Development Ltd. Vs Principal C.I.T. in ITA NO.688/Mum/2016. In both the decisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nce to another decision of the Hon'ble Supreme Court in the case of Sushil Kumar Mehta vs Gobind Ram Bohra, (1990) 1 SCC 193 and the decisions in the case of Indian Bank vs Manilal Govindji Khona (2015) 3 SCC 712. The ITAT Mumbai bench also held that if order of assessment passed u/s 147 of the Act was illegal and nullity in the eyes of law then that order cannot be revised by invoking powers u/s 263 of the Act by CIT. The Mumbai Bench has in this regard placed reliance on the decision of Hon'ble Delhi bench of the Tribunal in the case of Krishna Kumar Saraf vs CIT in ITA NO.4562/Del/2007 order dated 24.09.2015 wherein it was held as follows :- " 17. There is no quarrel with the proposition advanced by Id. DR that the proceedings u/s 263 are for the benefit of revenue and not for assessee. 18. However, u/s 263 the Id. Commissioner cannot revise a non est order in the eye of law. Since the assessment order was passed in pursuance to the notice U/S 143(2), which was beyond time, therefore, the assessment order passed in pursuance to the barred notice had no legs to stand as the same was non est in the eyes of law. All proceedings subsequent to the said notice are of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....laid down in these decisions and we do not wish to repeat the same. Suffice it to say the law is well settled that invalidity of the primary proceedings for want of proper jurisdiction can be challenged even in appellate proceedings arising out of a collateral proceeding. In view of the aforesaid legal position we admit the additional grounds for adjudication. 12. As far as the merits of the validity of initiation of proceedings u/s 147 of the Act for A.Y.2007-08 and 2008-09 are concerned the question for consideration is as to whether on the basis of the reasons recorded it can be said that there can arise any belief on the part of the AO that income chargeable to tax for the relevant assessment years has escaped assessment. In this regard the reasons recorded by the AO for initiating proceedings u/.s 147 of the Act for A.Y.2007-08 and 2008-09 has already been set out by an order in the earlier part of this order. The gist of the reasons recorded by the AO is that the assessee had made investments of about Rs. 4 crore in construction of hotel/resort at Mandarmoni, Purba Midnapore. It is the further allegation in the reasons recorded that to a notice u/s 133(6) of the Act,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s of two bank accounts are enclosed for your kind perusal." 14. In the light of the aforesaid reply the question that needs to be answered is as to how did the AO get information that the assessee had invested Rs. 4 crores in hotel at Mandarmoni, Purba Medinipur. Apparently there appears to be no basis for this conclusion arrived at by the AO in the reasons recorded. The ld. DR however sought to defend the action of the AO by submitting that there was a survey in the business premises of the assessee and in such survey there was evidence to show that the assessee had invested a sum of Rs. 4 crores in construction of a hotel at Mandarmoni. We are of the view that this submission of the ld. DR cannot be accepted. The law is well settled that the reasons recorded by the AO have to be tested on the basis of specific wordings of the reasons so recorded. No external material can be shown to justify the conclusion arrived at in the reasons recorded unless these materials are specifically referred to or incorporated in the reasons recorded. In the reasons recorded the AO has not disclosed the basis of this conclusion that the assessee made an investment of Rs. 4 crores in the cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reasons recorded by the Assessing Officer that there was actually no reason for him to have formed a belief about the escapement of any income of the assessee from the assessment, but the assessment was reopened by him to verify or examine certain particulars furnished by the assessee in the return of income, which according to the Assessing Officer, might have possibly involved introduction of her un accounted money by the assessee. It is thus clear that the assessment was reopened by the Assessing Officer on the basis of suspicion and in order to make fishing and roaming enquiries, which, in my opinion, is not permissible. It is a settled position of law that the assessment can be reopened under section 147/148 on the basis of 'reason to believe' and not 'reason to suspect'. As held by the Coordinate Bench of this Tribunal in the case of Deputy Director of inc me Tax (International Taxation )-21, Mumbai -vs.- Societe International De Telecommunication ( supra) cited by the Id. counsel for the assessee, unless the reasons to believe about the escapement of income exist, no recourse can be taken to the provisions of section 147. It was held that where an Assessing O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to believe that income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act were invalid. 8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the same are reproduced:- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named company was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all mate....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating proceedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we may rely upon the decision of Hon'ble jurisdictional Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 147 of the Act did indicate the source of the capital gain a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bank by way of accommodation entries'. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decision discussed, the basic requirement that the A.O. must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case. 13. A perusal of the reasons recorded demonstrate total non application of mind by the A.O. Thus applying the proposition laid down by the Jurisdictional High Court in G&G Pharma India (supra) we hold that the reopening of assessment is bad in law" 12. Per contra, the Ld. DR supporting the order of the authorities below submitted that the ADIT, (Inv.), Thane has conducted detailed investigation into the activities of ShriVikas Jain and family, who were engaged in floating paper companies and bringing in funds from Kolkata Companies and thereafter systematically laundering the unaccounted money of persons like assessee. According to the Ld. DR, when the AO was in receipt of the information from the ADIT, Thane, he noted that the assessee had obtained accommodation entry in the form of share capital from the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cer was justified in passing assessment order making additions under section 68 for share capital/premium received by assessee company. Hon'ble Supreme Court held the action of the AO valid and the question was answered in affirmative as Yes. 14. Purviben Snehalbhai Panchhigar vs. ACIT [101 taxmann.com 393 (Gujarat) Assessee filed his return claiming capital gain arising from sale of shares of company 'T' as exempt under section 10(38), in view of fact that said return was accepted under section 143(1) without scrutiny, AO was justified in initiating reassessment proceedings on basis of information received from Investigation Wing that company 'T' was a shell company and shares of the said company were basically used for providing bogus claim of long-term or short-term capital gain. Assessing Officer thus taking a view that assessee had raised a false claim for exemption of capital gain, initiated reassessment proceedings. Question was, whether since there was no scrutiny assessment, Assessing officer had no occasion to form any opinion on any of issue arising out of return filed by assessee - Held, yes. Another issue was whether, therefore, concept of change of....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Held, yes. 19. Balbir Chand Maini vs CIT P&H High court 2011] 12 taxmann. com 276 (Punjab & Haryana)/[2011] 201 Taxman 94 (Punjab & Haryana (MAG.)/2012] 340 ITR 161 (Punjab & Haryana)/ [2012] 247 CTR 468 (Punjab & Haryana) Assessee had purchased certain shares of a company at rate between Rs. 2.50 and Rs. 3.40 per share in month of April, 1997 and part of those shares were sold through a broker at Rs. 55 per share. AO recorded statement of broker who admitted to have purchased shares in question but failed to produce books of account and other relevant documents. The alleged sale of shares had not taken place through any stock exchange. Broker could not give details of purchaser of shares. Addition held to be justified. 20. Abhimanyu Soin Vs ACIT ITAT Chandigarh 2018 2018 TIOL-733ITAT-CHD Unnatural LTCG @ 3072% over a period of 1.5 years from scrip of the unlisted company whose even net worth was not known to the assessee, without expert advice was beyond the business logics and was valid reason to make addition for undisclosed income. When assessee fails to prove through evidences that purchase and sale transactions of shares are genuine, claim of exempte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e us, we need to look into the reasons recorded by the AO before proposing to reopen the assessment which we find placed at page 1194 - 1195 of the paper book no. 3, which is reproduced as under: 25. The legal issue that has been raised by the assessee in this appeal is against the jurisdiction to reopen the assessment by the AO u/s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the "Act"). In order to adjudicate the same, we need to look into the reasons recorded by the AO which is seen at pages 1194 and 1195 of the assessee's paper book which is reproduced as under: 26. 27. 15. Having perused the reasons recorded by the AO before reopening and when the validity of the order u/s. 147 of the Act depends upon the AO rightly assuming jurisdiction as contemplated by law to make an order of assessment u/s. 147 of the Act, let us understand the settled position of law on the legal issue at hand. We note that before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record "reason to believe" that the income chargeable to tax for that assessment year has escaped assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....', by the Direct Tax Laws (Amendment) Act, 1989. The Hon'ble Apex Court as well as the Hon'ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdictional fact and law (mixed question of fact and law) the reason to believe escapement of income (supra). 16. The AO, who is a quasi judicial authority is empowered to reopen the completed assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax which is the jurisdictional fact & law and sine qua non to assume jurisdiction to reopen a completed assessment u/s. 143(3) or 143(1) of the Act. Why we said even assessments wherein intimation u/s.143(1) of the Act has been done, requires the satisfaction of the condition precedent because the assessee has no control over the department in respect of assessment to be completed by scrutiny u/s. 143(3) or 143(1) of the Act and, therefore, if the return of income of an assessee is processed u/s. 143(1) and intimation he receives thereafter from the Department, he cannot be kept in a disadvantageous position vis-à-vis a case wherein the return of income of an assessee has ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o exercise discretion altogether. The Hon'ble Supreme Court at para 13 has taken note of Wade & Forsyth in Administrative Law, 7th Edition at pages 358 and 359 under the heading "SURRENDER, ABDICATION, DICTATION" and sub-heading "Power in the wrong hands" as below: "Closely akin to delegation, and scarcely distinguishable from it in some cases, is any arrangement by which a power conferred upon one authority is in substance exercised by another. The proper authority may share its power with someone else, or may allow someone else to dictate to it by declining to act without their consent or by submitting to their wishes or instructions. The effect then is that the discretion conferred by Parliament is exercised, at least inpart, by the wrong authority, and the resulting decision is ultra vires and void. So strict are the Courts in applying this principle that they condemn some administrative arrangements which must seem quite natural and proper to those who make them.......". "Ministers and the Departments had several time fallen foul of the same rule, no doubt equally to their surprise.......". The Hon'ble Supreme Court thereafter in para 14 in that case held "the present....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch is a Vikas Jain's company, which forms part of the funds shown to have been received by the assessee. Thereafter, the AO concludes "as mentioned by ADIT (Inv.), Thane investigation proved that the companies were created by Mr. Vikas Jain and his associates just to give accommodation entries and the investment of funds are not genuine investment. These companies were not having any proper funds of their own but received funds from Kolkata based and apparently operators run companies." Thus, according to AO, the companies of Shri Vikas Jain are mere layers in the chain to launder unaccounted funds for the beneficiaries. Thereafter, the AO states that since the assessee has shown investments from the companies mentioned in the list (1 to 23) given in the first page, it is quite clear that the assessee has taken above benefit of accommodation entries from companies found to be of no worth. Thereafter, the AO says that source of funds are not genuine and the infusion of funds through share capital is just a façade to regularize unaccounted money. Then the AO concludes that the assessee has taken accommodation entries from companies operated by Shri Vikas Jain to the tune of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that companies of Shri Vikas Jain are accommodation entry provider and not genuine). Then the AO taking note that assessee had received Rs. 1.22 cr. from two of the Shri Vikas Jain's companies, the said sum is accommodation entry. (This conclusion goes on to show that AO had made this finding based on the information which according to his own words (supra) has proved that Shri Vikas Jain's companies are accommodation entry providers and no preliminary enquiry was conducted by the AO to even call for the sec. 131 statement of Shri Vikas Jain statement which would show that Shri Vikas Jain was approached by the assessee or not, etc). Thereafter the AO says that since Rs. 1.22 cr. has been given by Shri Vikas Jain Companies to assessee it is accommodation entry and thereafter the final conclusion in his own words "but total share application money received by the assessee during the AY 200910 is Rs. 11,50,00,000/-". Therefore, the AO states that he has reasons to believe that income of Rs. 11,50,00,000/- or more has escaped assessment. This final conclusion of Rs. 11.50 cr. escaping assessment and Rs. 1.22 cr. discussed till the final conclusion above goes on to show that AO influenc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to the tune of Rs. 14.50 cr from Kolkata based companes since banks did not fund him, the AO taking note that assessee received Rs. 1.22 cr from Shri Vikas Jain companies concluded that assessee has taken accommodation entry (that too without any incriminating statement by shri Vikas jain against assessee or any statement is referred to against the assessee or AO has taken the deposition of Shri Vikas Jain). The information provided by ADIT Thane at best can only raise suspicion in the mind of the AO (which fact we have pointed out earlier) which is not sufficient/requirement of law for reopening of assessment. It has to be kept in mind that the 'reasons to believe' is not synonymous to 'reason to suspect'. 'Reason to suspect' based on an information can trigger an enquiry so that it can be found out whether there is any substance or material to substantiate that there is merit in the information adduced by the ADIT(Inv.) and after post enquiry the AO has to take an independent decision whether to re-open the assessment or not. And at the cost of repetition we say that the AO should not act on dictate of any other authority like in this case from ADIT (Inv.) because then it would ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h would make him believe, that there is escapement of income. As stated earlier, it has to be remembered that information is not synonymous to truth. At the cost of repetitions, we note that AO simply on the basis of the investigation report of ADIT (Inv.) has jumped into conclusion that there is an escapement of income which is erroneous since it does not satisfy the jurisdictional fact and law for reopening as envisaged u/s. 147 of the Act. The AO simply taking note of the ADIT(Inv.) letter has borrowed the satisfaction without independent application of mind to form reason warrant holding a belief that income chargeable to tax has escaped assessment. Just because a letter has been received from the ADIT(Inv.) the AO cannot reopen the assessment even if original assessment was u/s. 143(1) of the Act. In the light of the above, the AO based on the reasons recorded as set out above could not have initiated a fishing enquiry to find out the veracity of the information given by the ADIT(Inv.). The reasons recorded by AO does not stand the test as laid by plethora of judicial precedence as discussed above which is sine qua non to assume jurisdiction u/s 147 of the Act, therefore, in t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....missioner has mechanically accorded permission which does not satisfy due care and circumspection and application of mind supposed to be exercised by a superior authority before according approval to AO. If only he had read the report and applied the mind on the reasons recorded by the AO justifying reopening, he would not have granted the permission. The safeguard against reopening u/s 151 of the Act has been done by the superior authority very lightly and as held by the Hon'ble Supreme court in Chugamal Rajpal (supra), the authority substituted form over substance. Thus, we hold that the sanction granted by the Commissioner u/s 151 is invalid and so, the notice of the AO for reopening u/s. 148 is bad in law and has to be necessarily struck down. Since the assessee succeeds on the legal issues raised by it before us, therefore, the merits of the case is not being looked into/adjudicated because it has become academic in nature. 33. Therefore, respectfully applying the propositions of law laid down in the judgments cited above to the facts of the case, we have no other alternative but to hold that the reopening of the assessments is bad in law and we quash the impugned reopening....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were not coming from the banks, so he floated these companies for generating funds and for backward integration. He brought a total fund of Rs. 14.50 Crores in these companies from Kolkata based companies.. Assessee M/s SD finstacks Pvt Ltd now known as M/s Vined Commodities Ltd (PAN: AMACM7130L) has received funds to the tune of Rs.1,22,00,000/- from M/s Dhanvarshe Fabrication FVL Lid aid M/s Pung Dye Chem Pvt Ltd which is a Vikas Jain's company, which form part of the funcs shown to have been received by the assessee. Analysis of return of the assessee shows infusion of funds through share capital during A.YS. 2009-10 in the following manner: NAME OF THE COMPANY PAN AY AUTHORISE © CASITAL ISSUED CAPITAL SHARE SEELK APPLIC ATION UNSEC ΠΥ PREMI UM UREO AN S.D. FINSTOCKS AAECA 2009-10 20000003 560000 115000 PRIVATE LIMITED QCO Now known as Vinod Commodities 0 As mentioned by ADIT (lav) v2, Thane, investigations proved that the companies were created Mr. Vikas Jain & his associates just to give accommodation entries and the investments.cf fu....