TaxTMI 
TaxTMI 
2021 (2) TMI 1053
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....Appeal) erred in upholding action of the Assessing Officer in reopening the assessment under section 147 without making independent inquiry and without forming a proper reason to believe that the income has escaped assessment. 2. On the facts, and in circumstances of the case, and in law, learned Commissioner of Income-tax (Appeal) erred in upholding action of the Assessing Officer in adding Rs. 10,000,000/- to income of Your Appellant alleging unexplained cash credit without appreciating that the loans were well supported by the documentary evidence, and the Assessing Officer did not have any evidence to prove that the alleged loans were not genuine. 3. Your appellant craves leave to add to amend, alter modify, and /or delete any of the above grounds of appeal at or before final disposal of appeal." 2. Briefly stated, the assessee who is engaged in the business of trading in chemicals, dyes and solvents had filed his return of income for A.Y 2007- 08, declaring a total income of Rs. 1,30,220/-. Subsequently, on the basis of information received from the DGIT(Inv.), Mumbai, that the assessee as a beneficiary had received accommodation entries from two group con....
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.... assailed the assessment framed by the A.O under Sec. 143(3) r.w.s 147, dated 29.03.2015 before the CIT(A). However, the CIT(A) not finding favour with the contentions advanced by the assessee sustained the view taken by the A.O and dismissed the appeal. 6. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short 'A.R') for the assessee at the very outset of the hearing of the appeal assailed the validity of the reopening of the assessee's case under Sec. 147 of the Act. It was submitted by the ld. A.R that the A.O without any independent application of mind and formation of belief on his part had erred in mechanically reopening the case of the assessee by merely acting upon the information received from the office of the DGIT(Inv.), Mumbai. In order to buttress his aforesaid claim the ld. A.R took us through the 'reasons to believe' on the basis of which the case of the assessee was reopened. It was stated by the ld. A.R that the A.O had merely referred to the information that was received by him from the DGIT(Inv.), Mumbai, vide his letter dated 07.03.2014 and dispensing with the statutor....
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....ntioned lenders for verifying the authenticity of the loan transactions. It was the claim of the ld. A.R that adverse inferences as regards the genuineness of the aforesaid loan transactions was drawn by the A.O only on the basis of the general statements of Shri Praveen Kumar Jain, Shri Uttam G. Hinger and Shri. Nilesh Parmar, without placing on record any independent material which could prove that no genuine loans were raised by the assessee from the said respective parties. It was further averred by the ld. A.R that the aforementioned parties whose statements were relied upon by the A.O for dubbing the loans in question as unexplained cash credits under Sec. 68 of the Act were neither produced for cross-examination nor were the copies of their statements at any stage were made available to the assessee. It was submitted by the ld. A.R that the impugned statement of Shri. Praveen Kumar Jain recorded under Sec. 132(4) of the Act having been retracted by the latter thus, could not have thereafter been acted upon on a standalone basis for drawing of adverse inferences in the case of the assessee. On the basis of his aforesaid contentions it was the claim of the ld. A.R that except ....
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....ns to believe that income in respect of the said Accomodation Entries had escaped assessment for A.Y 2007-08, within the meaning of section 147 of the IT Act and as the same needs to be brought to tax the Assessment for A.Y 2007-08 needs to be reopened by issue of Notice u/s 148. Accordingly Notice u/s 148 issued. Yours faithfully Sd/- (Rita G. Tolani) Income-tax Officer-24(1)(4), Mumbai" On a perusal of the aforesaid reasons to believe we find that though the A.O had referred to the material/information on the basis of which the case of the assessee was sought to be reopened under Sec. 147 of the Act i.e the information received from the DGIT(Inv.), Mumbai, but then there is nothing discernible therefrom on the basis of which it could be gathered that there was any independent formation of a bonafide belief by the A.O that the income of the assessee chargeable to tax had escaped assessment. All that can be gathered from the aforesaid 'reasons to believe' is that the A.O by merely referring to the information received from the DGIT(Inv.), Mumbai, wherein it was conveyed that the assessee was a beneficiary of the accommodation entries ....
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....rded a satisfaction that as per him a case has been made out for issuing a notice under Sec. 148 of the Act. In our considered view, when the basic requirement that A.O must apply his mind to the material on record in order to have reasons to believe that the income of the assessee chargeable to tax had escaped assessment is found amiss, the reopening of the assessment cannot be held to be justified. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 (Delhi). In the aforesaid case, the Hon'ble High Court observed that the A.O had proceeded to send a notice u/s 147/148 of the Act solely on the basis of information received from the DIT(Inv.). It was noticed by the High Court that after writing about the nature of the impugned accommodation entry and without mentioning the nature of transaction which was effected for alleged accommodation entry as well as dispensing with the date of recording of the reasons, the A.O, without any further verification, examination or any other exercise had jumped to the conclusion that the assessee had received accommodation entries. The Hon'ble High....
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....he reopening of the assessment was not justified. Further, we find that the Hon'ble High Court of Delhi in the case of PCIT Vs. RMG Polyvinyl (I) Ltd. (2017) 396 ITR 5 (Del), relying on its aforesaid order in the case of Meenakshi Overseas Pvt. Ltd. (supra) had observed, that as the A.O in the case before them had merely acted upon the information received from the Investigation Wing without undertaking any further enquiry on his part thus, the link between the tangible material and the formation of the reasons to believe that the income of the assessee had escaped assessment was not discernible therefrom and accordingly the reopening of the assessment u/s 147 was to be held as bad in law. Further, in the case of CIT Vs. SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del), it was inter alia observed by the Hon'ble High Court that in the case before them the A.O had received information from the Dy. Director of IT (Inv.), Gurgaon that the assessee had raised a bogus claim of having earned long-term capital gains on account of sale/purchase of shares by obtaining entries. After deliberating on the facts, it was inter alia observed by the Hon'ble High Court that a mere reference to the i....