TaxTMI 
TaxTMI 
TaxTMI 
2020 (11) TMI 402
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....he assessee filed a letter stating that the return already filed u/s 139 may be treated as the return filed in response to the notice u/s 148 of the Act. However, another letter dated 7th August, 2018 was issued to the assessee requesting him to file the return in response to notice u/s 148 of the Act. The assessee ultimately filed its return on 13th August, 2018 declaring a loss of Rs. 4,053/-. Subsequently, the AO issued notice u/s 143(2) and 142(1) of the IT Act and copies of the reasons recorded were also handed over to the assessee. 3. During the course of assessment proceedings, the AO noted that the information was received in the case that the assessee has received accommodation entries from M/s Ambaranuj Finance and Investments Pvt. Ltd. of Rs. 25 lakhs and M/s Zen Tradex Pvt. Ltd. of Rs. 14 lakhs. During the course of assessment proceedings, the assessee filed confirmations from the above two companies and it was submitted that it had taken loans from these two parties. In order to verify the genuineness of these two parties, summons u/s 131 were sent to the above two parties on the address available at ROC website as well as on e-mail id. It was made clear in the summon....
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....by the AO without application of independent mind on the material, if any, provided by the Inv. Wing of the department. In view of the above defects in the compliances the resultant reassessment proceedings are required to be set aside. 3.1 The validity of reassessment proceedings have been confirmed by Ld CIT(A) on basis of a finding of fact given by the Ld CIT(A) that the information from the investigation wing was specific which contains names of companies, cheques number and date of accommodation entries. The above finding is factually incorrect looking into the reasons recorded and on that ground the reassessment proceedings and the impugned assessment order both need be quashed as the reasons being vague, incoherent and indicative of lack of application of independent mind by the AO. 4. The Ld. CIT(A) has erred both in law and in facts of the case in upholding the impugned reassessment proceedings ignoring the fact that the sanction u/s 151 of IT Act as provided with the copy of the reason recorded shows mechanical satisfaction by the Pr CIT, Delhi-7, New Delhi and the Ld. CIT(A) have held that such mechanical satisfaction are procedural infirmity which does not invalid....
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....e to add, delete, modify / amend the above grounds of appeal with the permission of the Hon'ble appellate authority. 6. The ld. counsel for the assessee, at the outset, submitted that the jurisdiction to make assessment in this case was assumed on the basis of the seized material from Shri Anand Kumar Jain and Shri Naresh Kumar Jain. Referring to the provisions of section 153C(1)(b) of the IT Act, he submitted that the power to take cognizance of the material seized from third party are exclusively available and such exclusivity rules out action against the assessee under the provisions including u/s 147/148 of the IT Act. For the above proposition, he relied on various decisions as mentioned in the synopsis. He accordingly submitted that since the AO, in the instant case, has not issued notice u/s153C(1) in order to proceed with the case but initiated reassessment proceedings u/s 147, therefore, the notice issued u/s 148 being not in accordance with law, such reassessment should be quashed as void ab initio. 7. The ld. Counsel for the assessee, in his second plank of argument, submitted that there is lack of independent application of mind by the AO. Referring to the copy of re....
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....id decision has held that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist and, therefore, the Income-tax Officer did not get jurisdiction to make reassessment. He also relied on various other decisions mentioned in the written synopsis according to which the condition precedent for issue of notice for reassessment is that the reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is to be quashed. 10. In his third alternate argument, the ld. Counsel for the assessee submitted that since there is no specific reference of the seized material from persons searched and how the same was considered for formation of belief is a case of nonapplication of mind. He submitted that there is a general mention of various unspecific seized material including seized papers and digital evidences and also certain statements of individuals connected to Jain brothers. He submitted that in absence of identification of any particular seized material and considering of its contents, no person of ordinary intelligence could hav....
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....bank from which the accommodation entry was provided, name of the bank in which the accommodation entry was credited and the date of transaction is missing in the reasons. The date of transaction is important to verify whether the transaction falls in the year under consideration which is extremely important piece of information to justify independent application of mind. Referring to the decision of the Delhi bench of the Tribunal in the case of M/s Superior Buildwell Pvt Ltd., vide ITA No.3301/Del/2017, he submitted that the Tribunal has quashed the reassessment proceedings on account of incorrect facts and not mentioning the names of the entities in the reasons recorded. 13. The ld. Counsel for the assessee, in his another plank of argument submitted that there is ambiguity of the nature of deemed escapement of income and also there is contradictions in the proforma for obtaining sanction u/s 151. Referring to copy of the form for recording reasons for initiating proceedings u/s 147 and for obtaining the approval of Addl.CIT/CIT, copy of which is placed at page 88 of the paper book, , the ld. Counsel for the assessee drew the attention of the Bench to clause 8 of the same where....
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....Writ Petition No.2858/2016 dated 13.07.2017 where it has been held that issuance of notice u/s 142(1)/143(2) before supplying the reasons and considering objection of the petitioner and passing reasoned order thereon does not meet the requirement of law. Such legal infirmity leads to the inevitable invalidation of all the proceedings that took place pursuant to notice u/s 148. 18. The ld. Counsel for the assessee, in his another plank of argument, submitted that there is error in quantification of income escaping assessment. He submitted that the credit entries accepted by the assessee totaled to Rs. 39 lakhs whereas the reasons recorded shows escaped income of such entries at Rs. 39,00,055/-. The difference of Rs. 55/- in the bank charges paid by the lender while transferring the funds was also considered as income escaping assessment. Therefore, on this count also the reassessment proceedings should be quashed due to non-application of mind. He submitted that the AO in the instant case, has issued notice u/s 147 on the basis of borrowed satisfaction solely relying on information from the Investigation Wing without verifying the facts applicable in the instant case. He has not ap....
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....nd four years time has passed from the end of the relevant assessment year, no reopening of assessment is possible unless there is allegation by the AO of any failure on the part of the assessee to disclose fully and truly all material facts necessary for the completion of the assessment. 20. Referring to the recent decision of the Hon'ble Supreme Court in the case of NDTV vs. DCIT vide CA No.1008/2020, order dated 3rd April, 2020, he submitted that the Hon'ble Supreme Court in the said decision has quashed the reassessment proceedings for not mentioning the first proviso either in the reasons recorded or in the notice issued u/s 148 of the IT Act. Referring to the decision of the Hon'ble Delhi High Court in the case of BPTP Ltd. vs. PCIT, vide Writ Petition No.13802/2018, order dated 11.01.2020, he submitted that the Hon'ble High Court in the said decision has held that if the AO has failed to perform a statutory duty, he cannot review his decision and reopen on a change of opinion. The reopening is not an empty formality. There has to be relevant tangible material for the AO to come to the conclusion that there is escapement of income and there must be a live link with such mate....
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....r dated 28th December, 2017 and there is no adverse finding given by the AO regarding the activities of the above lender company. There is no mention of the lender engaged in providing accommodation entry. Similarly, in the case of loan borrowed from another company i.e., M/s Zen Tradex Pvt. Ltd., the said lender company is engaged in the business as finance company which has given loan to the assessee company after arranging funds and due to this there is credit of identical funds in the bank account of the lender company. It is the allegation of the AO that the assessee did not produce the directors and summons remained uncomplied with and identical amounts were transferred to the accounts of these lender companies on the same date before transfer of the same to the assessee company. Controverting the above allegations of the AO, the ld. Counsel submitted that no show cause notice was issued to the assesseee before such inferences were drawn and, therefore, it amounts to denial of principle of natural justice. Further, the assessee had repaid the loans and had no control over the directors of the lender companies after the loans were repaid with interest. The AO had enough power ....
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....dated 29.11.2013, he submitted that in the instant case, provisions of section 153C are not applicable and the AO has correctly initiated proceedings u/s 147 on the basis of the information available with him which the ld. CIT(A) has upheld. 26. So far as the argument of the ld. Counsel regarding lack of independent mind by the AO on the information of Investigation Wing is concerned, he submitted that the AO had duly applied his mind before reopening the assessment u/s 147 and he issued notice u/s 148 only after analyzing the information received from the Investigation Wing. There is complete application of mind by the AO in this case. Referring to the decision of the Hon'ble Supreme Court in the case of Raymond Woolen Mills Ltd., Vs ITO, 236 ITR 34, he submitted that the Hon'ble Supreme Court in the said decision has held that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 27. Referring to the decision of the Hon'ble Supreme Court in....
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....h. The assessee also expressed its inability to produce the directors of the alleged creditor companies. Thus, the assessee failed to discharge the onus cast on him to substantiate the genuineness of the transaction and the identity and capacity of the loan creditors. 30. So far as the argument of the ld. Counsel that the assessment in the case of M/s Ambaranuj Finance and Investments Pvt. Ltd., was completed u/s 153A/143(3) and no adverse findings were given by the AO is concerned, he submitted that the assessment in the hands of the lender company has no bearing on the assessability of the transaction in the hands of the assessee as being accommodation entries and the transactions have to be examined in the hands of the beneficiary which is the assessee in the instant case. Relying on various decisions, he submitted that the addition made by the AO and sustained by the CIT(A) is fully justified. 31. The ld. Counsel for the assessee, in his rejoinder, strongly challenged the arguments advanced by the ld. DR. So far as the argument of the ld. DR that the AO has validly invoked the provisions of section 147 on the basis of the information found from the material seized from a thir....
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....at assuming jurisdiction u/s 147 by the AO is not valid on the basis of the material seized from third party and the correct section under which action could be taken by the Revenue is section 153C alone. 33. So far as the decision of the Pune Bench of the Tribunal in the case of Sushil Kumar S. Nadkarni (supra) is concerned, he submitted that in fact, the above judgement supports the case of the assessee that post amendment, the powers u/s 153C only can be exercised as the requirement of the amended section has been met. He accordingly submitted that the argument advanced by the ld. DR for non applicability of section 153C is not in accordance with law in view of the specific amendment brought in the statute book. 34. So far as the argument of the ld. DR that the AO has applied his mind on the basis of the information received from the Investigation Wing is concerned, he submitted that the ld. DR does not dispute the factual inconsistencies in the reasons recorded since he could not controvert the contradictory stand of the AO wherein in the reasons he records that only summary assessment was done whereas in the assessment order passed u/s 147/143(3) he mentions that the origina....
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....T/CIT as under:- 37. We find, the AO in the assessment order at para 1 has mentioned as under:- "The assessee company filed the return of income for AY 2011-12 declaring loss of Rs, 20,53,019/- on 17.8.2011. The case was scrutinized u/s 143 (3) on 10.3.2014 determining an income of Rs. 20,06,714/-. Thereafter, on the basis of information received regarding the search & seizure operation in the case of entry provider Sh. Anand Kumar Jain and Sh. Naresh Kumar Jain (the Jain Brothers) and the assessee being beneficiary of Rs. 39,00,055/-, the reasons were recorded for reopening u/s 147 of the Act. Subsequently notice u/s 148 of the Income Tax Act, 1961 was issued on 26/03/2018 after obtaining prior approval of the Pr. CIT-7, New Delhi and served through email as well as post. In response thereto, the assessee filed a letter stating that the return already filed u/s 139 may be treated as return filed in response to notice u/s 148. However, another letter dated 7.8.2018 was issued to the assessee requesting him to file the return in response to notice u/s 148 issued by this office. Ultimately, the assessee filed his return of income on 13.10.2018 declaring loss of Rs. 4,053/-. Therea....
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.... by the AO that the assessee has not disclosed fully and truly all the material facts is not sufficient. The AO has to give details as to which fact or the material was not disclosed by the assessee leading to its income escaping assessment. Otherwise reopening is not valid. The Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing Company vs. CIT, 308 ITR 38, order dated 1st July, 2020, has held as under:- "19. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year; and (b) unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee: (i) to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148; or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year. Condition (a) is admittedly sati....
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....t the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above." 39. The various other decisions relied on by the ld. Counsel also support his case to the proposition that where there is no allegation in the reasons recorded that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment u/s 147 of the Act, the notice issued u/s 148 after a period of four years from the end of the relevant assessment year in a case where original assessment has been framed u/s 143(3) of the Act is illegal and invalid since proceedings are without jurisdiction. 40. Since, in the instant case, t....