TaxTMI 
TaxTMI 
2020 (11) TMI 410
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.....2018. Thereafter the assessee wrote a letter to the AO on 28.04.2018, requesting for a copy of the reasons recorded for re-opening of the assessment, so as to enable it to file objections if any. On 02.08.2018 the AO sent a letter to the assessee which are supposed to be the reasons recorded. In reply the assessee filed objections on 20.08.2018. These objections were disposed off by the AO but in the assessment order itself. Thereafter the AO framed an assessment u/s 147 read with Section 143(3) of the Act on 28.12.2018 determining the total income of Rs.1,19,68,950/- inter alia making disallowance of purchases of Rs.31,98,388/- and making an addition u/s 68 of the Act of Rs.59 lakhs, being a loan taken from M/s. Hanuman Vintrade Pvt. Ltd. Aggrieved, the assessee carried the matter in appeal challenging both the re-opening of the assessment on legal grounds as well as on merits. The ld. CIT(A) partly allowed the appeal on merits. The legal grounds raised by the assessee were dismissed. Aggrieved, the assessee is before us on the following grounds: "1. That, on the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals)-14, Kolkata erred in co....
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...., a) The reasons furnished to the assessee, as those recorded for re-opening, are different from the reasons mentioned by the AO in the assessment order. That the assessee has objected to the re-opening by submitting that the purchases of TMT Rods from M/s. Vasukinath Enterprises was only for Rs.5,20,021/- only and not Rs.31,20,073/- and that the purchases from M/s. Tarama Merchants Pvt. Ltd. is of cement of Rs.78,315/- only and that both are genuine transactions recorded in the books of accounts of the assessee and that the payment made by cheques. He submitted that extracts of invoices, challans, ledger accounts, bank statements etc. were filed before the AO and despite this clarification on the figures with evidence the AO without any application of mind, reopened the assessment. It was submitted that the facts and figures recorded in the reasons were wrong and the facts and figures given in the assessment order are also different. Thus, he submits that it is a case of total non-application of mind by the AO and that the re-opening was based on wrong facts and hence the re-opening of assessment is bad in law. b) That the AO has not disposed off the objections r....
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....He submitted that the credits found in the bank account statement submitted to the AO, also contained the payments made for the purchase, and under those circumstances, the AO was wrong in recording that the copy of the bank statement evidencing the loan were not furnished. In the paper book the assessee filed copies of the Tax audit report and pointed out that the fact of the assessee taking a loan was brought out by the auditors at column 24A of the Tax audit report and it is not right on the part of the AO to state otherwise. He submitted that the addition is arbitrary as confirmation letter was filed and sources explained of the credit. 4. The ld. DR on the other hand opposed the contention of the ld. Counsel for the assessee and submitted that information was received from the Investigation Wing of the Department and based on this information the AO believed that the assessee has taken bogus bills from M/s. Vasukinath Enterprises and M/s. Tarama Merchants Pvt. Ltd. He submitted that a statement was recorded by the Investigation Wing of the Income Tax Department, Kolkata on 10.05.2016 and from this statement it is clear that the assessee firm had taken accommodation entries ....
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....ccommodation entries of bogus bills was found to be of Rs. 1410 crores during F.Y. 2009-10 to F.Y. 2015-16. Further, it has also been reported in the report that the statements of 7 brokers were recorded under oath wherein they admitted that they contacted the bill master Sri Sanjiw Kumar Singh on behalf of their clients for getting bogus bills. The statement of two beneficiaries were recorded on the spot who came to Shri Singh's office for getting bogus bills wherein they admitted the same fact of getting bogus bills from the bill master Sri Sanjiw Kumar Singh. The statements of Sri Subrata Kumar Das, Manager of Sanjiw Kumar Singh and his employees were recorded wherein they all admitted that they were doing work on behalf of Sanjiw Kumar Singh who is a bill master and has been involved in providing accommodation entries in the form of bogus bills in lieu of commission. He has no worthwhile business activity except providing bogus bills. The statements of some of dummy directors of paper entities were also recorded wherein they admitted that they were doing work of signing papers/cheques on instruction of Sanjiw Kumar Singh. The sta....
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.... submit as follows. It is humbly submitted that you have not forwarded the copy of the approval granted by the sanctioning authority u/s 151 of the Act. Therefore, the copy of the reasons sent is not complete in itself. You are requested to kindly send the copy of the approval granted by the Ld. Pr. Commissioner of Income Tax at the earliest so that we can also look into the same and make our submissions on such approval. Subject to above, it is submitted that the re-opening of our assessment on the basis of these reasons recorded by your honour u/s 148 of the Act is invalid due to the following reasons: 1. The Notice has been issued on the basis of borrowed reasons. There is no application of mind on the information received from Investigation Wing of the Income Tax Department before issue of the Notice under section 148 of the Act. On perusal of the reasons recorded by you it transpires that without verifying such information, your honour had reason to believe that Rs. 31,98,388 is actually our undisclosed income which has escaped assessment. This shows that you had a doubt / suspicion or reasons to suspect rather than a reason to believe that income am....
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....udes that income chargeable to tax has escaped assessment. The evidence of the same is the absence in the reason of any amount being determined by the Assessing officer as having escaped assessment. This prima facie determination of income escaping assessment would indicate application of mind to arrive at the reason to believe that income chargeable to tax has escaped assessment." 2. The amount of our income believed by you to have escaped assessment as per your letter dated 02.08.2018 is Rs. 31,98,388. It has been alleged by you that we had made bogus purchases of Rs. 31,20,073 from M/s. Vasukinath Enterprises and Rs. 78,315 from M/s. Tarama Merchants Pvt. Ltd. It is humbly submitted that during the Financial year 2010-11, we had purchased TMT Rods amounting to Rs. 5,20,021 (and not Rs. 31,20,073 as mentioned in your letter) from M/s. Vasukinath Enterprises and purchased Cement amounting to Rs. 78,315 from M/s. Tarama Merchants Pvt. Ltd. for use in construction in our Real Estate business. All the aforesaid transactions are duly disclosed in our Books of accounts for the relevant year. Payments to both the parties were made by us through account payee cheques and copy of....
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....he Hon'ble High Court had held as under: "Held, allowing the petition, that the reassessment proceeding were initiated on the basis of information received from the Director of Income Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during the financial year 2002-03 as stated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it cou....
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....fit and loss account to deflate the profit to evade tax and thereby causing loss to the revenue. Perusal of 360 degree profiting did not reveal the transaction. The assesses had a fraudulent claim of expenditure amounting to Rs. 19,29,589/- inform of bogus purchase procured from the paper concerns of Sri Sanjiw Kumar Singh during financial year relevant to the A. Y. 2012-13. Information to the effect that the assesses teas one of the beneficiaries of bogus purchases arranged through paper concerns as discussed above operated Shri Sanjiw Kumar Singh who was involved In providing accommodation entries in the form of bogus bills to various parties in lieu of commission. Thus, Rs. 19,29,589/- was debited in the profit and loss account to deflate the profit to evade the tax and thereby causing loss to the revenue. Therefore, I have reason to believe that by way of claiming bogus purchases of Rs. 19,29,589/-, the assesses had reduced income to this extent; hence the income of Rs. 19,29,589/- chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961." 10. A perusal of the above demonstrates that t....
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....h December, 2010 making an addition of Rs. 95,65,510 to the declared income of the Assessee. 7. The Assessee then went in appeal before the CIT (A), who by order dated 19th August, 2011 allowed the appeal filed by the Assessee. The CIT (A) held that the re-opening of the assessment was "without any satisfaction, without verifying the information received from Directorate of Investigation" and that the "AO has not applied his mind. There is no satisfaction on the part of the AO regarding escapement of any income." 8. The Revenue then went in appeal before the ITAT which was dismissed by the impugned order. The ITAT concurred with the CIT (A) that the jurisdictional requirement for re-opening of the assessment under Section 147 read with Section 148 of the Act had not been satisfied. In particular, the ITAT observed that the AO "has not given details what was stated by the socalled entry operators in respect of the entries related to the assessee". Further, from the table of accommodation entries produced by the Assessee, the ITAT found that "there are five instances, where entries have been repeated". 12. In a recent decision in Principal Commissioner of I....
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.... Assessment. This basic condition precedent is applicable whether the return of income was processed under Section 143(1) of the Act by intimation or assessed by scrutiny under Section 143(3) of the Act. [See Asst. Commissioner of Income Tax v/s. Rajesh Jhaveri Stock Brokers (P) Ltd., (SC) 291 ITR 500 and PCIT v/s. M/s. Shodimen Investments (Bombay) 2018 (93) Taxman.Com 153]. Further, the reasons to believe that income chargeable to tax has escaped Assessment must be on correct facts. If the facts, as recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue. 7. Thus, we are of the view that even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to beli....
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....ection 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 material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents....
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....timate 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 and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the....
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....n by the Jurisdictional High Court in G&G Pharma India (supra) we hold that the reopening of assessment is bad in law" 7.3. The Hon'ble Delhi High Court in the case of Signature Hotels (P) Ltd. vs ITO and another, reported in 338 ITR 51 (Delhi) has under similar circumstances held as follows: "For the A.Y. 2003-04, the return of income of the assessee company was accepted u/s 143(1) of the Income-tax Act, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issued notice u/s 148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: '(i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The assessing Officer must have 'reasons to believe' that income chargeable to tax has escaped assessment. This is mandatory and the 'reason to believe' are required to be recorded in writing by the Assessing Officer. (ii) A notice u/s 148 can be quashed if the 'belief' is not bona fide, or one based on vagu....
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....ieve' was nothing more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The A.O. had clearly substituted form for substance and therefore the action of the A.O. was not sustainable" Applying the proposition of law laid down in these cases to the facts of the case we hold that the reopening is bad in law as the reasons recorded are without independent application of mind." 5.2. We also note that the coordinate bench of this Tribunal in ITA No. 660/Kol/2011 for AY 2002-03 in the case of DCIT Vs. Great Wall Marketing (P) Ltd. vide order dated 03.02.2016 has held as under: " 8. We have heard the submissions of the learned counsel for the assessee both on the validity of initiation of re-assessment proceedings as well as the merits of the appeal. None appeared on behalf of the department. 8.1. We have considered the submissions of the learned counsel for the assessee. As far as the validity of initiation of re-assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows :- ....
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....he decision of ITAT, Kolkata 'C' Bench in the case of M/s. Controlla Electrotech (P)Ltd vs DCIT in ITA Nos.1443 & 1444/Kol/2014 wherein on identical facts the Tribunal was pleased to quash the reassessment proceedings. On merits the learned counsel for the assessee relied on the order of CIT(A). 9. We have given a careful consideration of the submissions made by the learned counsel for the assessee. It is clear from the reasons recorded by the AO that the AO acted only on the basis of a letter received from Investigation Wing, New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which dates and through which mode the bogus entries were made by the assessee. The reasons recorded which are extracted in the earlier part of the order does not show, what was the information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt 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 n....