AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2021 (3) TMI 881
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from CIT, Central-2, Delhi, Dated 15.03.2012. The information stated that Shri Aseem Kumar Gupta, C.A. had provided accommodation entries to several beneficiaries after taking unaccounted cash from the beneficiaries which was routed through different entities by layering of accounts. All these entities were controlled by Shri Aseem Kumar Gupta who has stated on oath during search proceedings as well as during assessment proceedings that cash and other unexplained deposits in the bank accounts controlled by him belong to the beneficiaries and should be taxed in their hands. In his statement on oath he has specifically provided the names of such entities used to provide accommodation entries and as per information assessee-company has received the following amounts. Accommodation entry received (Rs.) Mode Date Bank Entry providing entity. 20,00,000 RTGS 04/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 30,00,000 RTGS 08/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 30,00,000 RTGS 10/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 15,00,000 RTGS 10/08/2009 Jammu & Kashmir Bank Ltd., Moderate Credit Corp ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....9, vide his letter Dated 25.12.2011, copy of which is filed in which Shri Aseem Kumar Gupta retracted from his earlier statement recorded during the course of search in his case and explained that his statement has been recorded under due influence and coercion. He has, therefore, withdrawn from his statement with regard to entries provided to the third parties routed through the bank accounts of third parties. Learned Counsel for the Assessee submitted that the A.O. received the information from CIT, Central-2, Delhi on 15.03.2012, but, the A.O. recorded the reasons for reopening of assessment only on 17.03.2017 i.e., after considerable period of 05 years. In the meantime, even before recording the reasons for reopening of the assessment and information provided by the CIT, Central-2, Delhi, Shri Aseem Kumar Gupta has retracted from his statement vide his letter Dated 25.12.2011, therefore, the statement referred to by the A.O. of Shri Aseem Kumar Gupta in the reasons recorded for reopening of assessment is irrelevant and cannot be considered as having any evidentiary value against the assessee so as to initiate the reassessment proceedings against the assessee. He has referred to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....limited 258 ITR 317 (Del.), CIT vs., Goyanka Limes 237 Taxman 378 [SC] and CIT vs., NC Cables Ltd., [2017] 98 CCH 18 [Del.] [HC]. The Learned Counsel for the Assessee, therefore, submitted that there is a total non-application of mind by the A.O. while recording the reasons for reopening of assessment and there is also non-application of mind on the part of the Pr. CIT while granting approval to the reasons recorded. He has submitted that there is no reference to the retraction statement of Shri Aseem Kumar Gupta in the impugned order. It would also show that there is a total nonapplication of mind on the part of the A.O. and non-consideration of the relevant material at the time of forming the belief that income chargeable to tax has escape assessment. Learned Counsel for the Assessee on merits also submitted that Investor company is NBFC and assessee produced all documentary evidences before A.O. which have not been doubted by the A.O. The A.O. did not summon the Director of the Investor company, therefore, no fault could be found with the assessee and as such no addition could be made even on merits against the assessee. 5. On the other hand, the Ld. D.R. relied upon the O....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ough different entities by layering of accounts. All these entities were controlled by him. Sh Aseem Gupta has stated on oath (during Search proceedings as well as during assessment proceedings) that cash & other unexplained deposits in the bank accounts controlled by him belong to beneficiaries and should be taxed in their Hands. In his statement on oath he has specifically provided the names of such entities used to provide accommodation entries. As per the information the assessee company received the following amounts : Accommodation entry received (Rs.) Mode Date Bank Entry providing entity. 2000000 RTGS 04/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 3000000 RTGS 08/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 5000000 3. After going through the ITR of the assessee it is seen that it has received Share Capital & Premium of Rs. 95 lakhs during the year. This amount is more than the amount reported by Sh Aseem Gupta and therefore this amount includes unaccounted cash of the assessee of Rs. 50 lakhs routed through M/s Moderate Credit Corp Ltd (an entity contr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he controlled the Investor companies. The A.O. as per information believed that assessee has received Rs. 50 lacs as accommodation entry from Moderate Credit Corp. Ltd., The A.O, however, has mentioned in the reasons as well as assessment order that the assessee has in fact received Rs. 95 lacs from the Investor company in assessment year under appeal which is also found mentioned in the ITR filed by the assessee prior to recording of the reasons. The A.O, therefore, recorded incorrect and wrong facts in the reasons recorded for reopening of the assessment as regards the amount escaped assessment. The assessee has disclosed all the primary facts in the return of income that it has received Rs. 95 lacs in assessment year under appeal as share capital money from the Investor company Moderate Credit Corp. Ltd. No tangible material is also referred in the reasons as to how the A.O. came to know that assessee has received accommodation entry of Rs. 50 lacs only. No tangible material is also referred to as to how Shri Aseem Kumar Gupta has controlled the Investor company Moderate Credit Corp. Ltd. The A.O. also wrongly recorded income chargeable to tax in a sum of Rs. 50 lacs has esca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons for reopening of assessment because the A.O. did not refer to the retraction statement of Shri Aseem Kumar Gupta in the reasons. Therefore, statement recorded on oath of Shri Aseem Kumar Gupta would have no evidentiary value against the assessee because he himself has retracted from his statement recorded on oath. Therefore, on the day of initiation of reassessment proceedings by recording reasons on 17.03.2017 the A.O. was not having any such statement of Shri Aseem Kumar Gupta available with him so as to believe that he controlled various companies to provide accommodation entries to the assessee and others. Thus, there is no tangible material available with the A.O. on the date of recording of the reasons for reopening of the assessment and whatever reasons were recorded are found to be wrong, incorrect and non-existing. Thus, there is a total non-application of mind on the part of the A.O. while recording the reasons for reopening of the assessment. It may also be noted here that assessee since beginning have been explaining that Investor is a NBFC Company and registered with Reserve Bank of India. Therefore, there is no question of it being controlled by any accommodati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In support of his contention he has relied upon following decisions: • Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. 395 ITR 677 (Del.) • Pr. CIT vs. RMG Polyvinyl (I) Ltd. 396 ITR 5 (Del.) • Pr. CIT vs. G&G Pharma India Ltd. 384 ITR 147 (Del.) • Signature Hotels P. Ltd. Vs. ITO 338 ITR 51 (Del.) 13. Ld. Counsel for assessee submitted that it is, therefore, clear that reopening is based on incorrect facts. It is well settled law that if wrong facts and wrong reasons are recorded for reopening of the assessment, such assessment is bad in law. In support of his contention he has relied upon order of the ITAT Delhi Bench in the case of M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in ITA No. 1579/Del/2019 dated 07.11.2019 only in paras 8.5 to 9 are reproduced as under : "8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The L....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Ld. Counsel for the assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. DR would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted." 14.1 Ld. Counsel for assessee in support of the above contention also relied upon following decisions: 1. Shamshad Khan vs. ACIT 395 ITR 265 (Del.) 2. Pr. CIT vs. M/s SNG Developers Ltd. 404 ITR 312 (Del.). 3. CIT vs. Atlas Cycle Industries....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs. 28,75,000 whereas the assessee had filed returns showing income of merely Rs. 20,56,145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs. 20,56,145 instead of Rs. 69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. Rs. 69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs. 20,56,145 for Rs. 69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om Investigation Wing, the reopening of the assessment would be unjustified and is liable to be quashed. 19.2. In the present case, the AO recorded wrong facts on many count in the reasons recorded for reopening of the assessment i.e. AO recorded incorrect amount of Rs. 58,40,171/- credited in HSBC account, Noida despite he has admitted in the assessment order that it was Rs. 30,74,006/-. The AO in the reasons also recorded incorrect fact that no assessment has been completed in this case u/s 143(3) but in the reason itself AO recorded that earlier reassessment has been done u/s 147/148 read with section 143(3) of the Act. The AO also incorrectly recorded that sanction for reopening of assessment is required under proviso to section 151(1) of the Act despite such proviso does not exist in the statute as it was amended in 2015. The AO, therefore, recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It makes clear that there is a total nonapplication of mind on the part of the AO while recording the reasons for reopening of the assessment. The AO has recorded incorrect amount which escaped assessment. The reasons failed to dem....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Tax Act, 1961. The Addl. CIT has referred the matter to Pr. CIT who has approved the reopening of the assessment in the matter vide Order Dated 21.03.2017 [PB 68] in which the Pr. CIT has mentioned "approved as per proforma". However, no such proforma is also placed on record. It would show that the Pr. CIT has not gone into the assessment record of the assessee or the return of income before approving the reasons recorded for reopening of assessment because the assessee has already disclosed Rs. 95 lacs received from the Investor company in 04 transactions in assessment year under appeal, but, the A.O. in the reasons recorded has mentioned that assessee has received an amount of Rs. 50 lacs only in 02 transactions from the Investor Company. The Pr. CIT merely approved the reasons without saying anything. The Hon'ble Delhi High Court in the case of Pr. CIT vs., N.C. Cables Ltd., (supra) held in Para-11 as under : "11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as ....