TaxTMI 
TaxTMI 
2021 (8) TMI 941
X X X X Extracts X X X X
X X X X Extracts X X X X
....ords carefully perused and judicial decisions relied upon by both the sides duly considered. 4. Briefly stated, the facts of the case are that the assessee filed its original return of income on 28.09.2011 declaring income at Rs. 43,06,620/-. Assessment was completed u/s 143(3) of the Act vide order dated 13.03.2014. 5. Pursuant to the information received from the Office of the ADIT, INV. Wing, Unit 2(1), New Delhi, the Assessing Officer reopened the completed assessment by issuing notice u/s 148 of the Act. Reasons for reopening assessment read as under: 1. Brief details of the Assessed: The assessee M/s Lakchmi Chand Tejoo Mai. 876. Kucha Kabil Attar. Chandm Chowk. Delhi. 110006 has PAN : AAAFL3353P. The last return of the assessee was filed on 30.10.2017 for A.Y. 2017-18 which has not been processed so far. 2. Brief details of information collected/ received by the A0: A letter dated 15.03.2018 was received in this office through the Office of Pr. CIT Delhi-16, New Delhi, from Asst. Director of Income Tax (Inv.) Unit- 2(1), New Delhi. As per the letter, it is noted that a search and seizure operation was executed on 18.1 1.2015 oil Sh. Pradeep Kumar Jind....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has to be added to taxable income of the beneficiary assessee. In view of this commission of Rs. 5,12,500/- is also the income of the assessee. Thus the total income escaped taxation comes to be Rs. 2,10,12,500/-( Rs. 2,05,00,000/- + Rs. 5,12,500/-). Enquiries made by the AO as sequel to information collected/ received: Enquiries made by the undersigned clearly shows that the assessee LakchmiChand Tejoo Mai has been a beneficiary of accommodation entries provided by Sh. Pradeep Kumar Jin dal. There is a 'live link' between the information available with the depart, ,* at and the enquiries made by the department in this case. 5. Findings of the AO: In view of the above discussion and analysis of the material and enquiries made by undersigned clearly shows that the assessee has been a beneficiary of the accommodation entries provided by Sh. Pradeep Kumar Jindal or his associated entities in different layers. 6. Basis of forming reason to believe and details of escapement of income: As per enquiries made by investigation wing of the department and the undersigned from the system and the material available in this case 1 have reasons for belief that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sioner of Income Tax Delhi under amended provisions of section 151 of the Act w.e.f. 01 06.2016. Sd/- Dated: 21.03.2018 {Dr. Bhageerath Choudhary) Assistant Commissioner of Income Tax Cir -47(1), New Delhi Place: New Delhi 6. The main challenge put forth by the ld. counsel for the assessee relates to the details provided by the ADIT, INV which is at Para 3 of the reasons. The ld. counsel for the assessee vehemently stated that 11 entries have been shown in the information and it can be seen that there are repetition of same entries/amounts and the Assessing Officer has, in fact, at para -6 of his order considered only 4 entries where total unsecured loan amount comes to Rs. 75 lakhs and information is in respect of amount of Rs. 2.05 crores. 7. Strong reliance was placed on the decision of the Hon'ble Jurisdictional High Court in the case of RMG Poly Viynl India Ltd ITA No. 29/2017 & CM No. 1009/2017 order dated 07.07.2017. 8. Further reliance was placed on the decision of the co-ordinate bench in ITA No. 4991/DEL/2014 and 4853/DEL/2014 and also on the decision of the Hon'ble High Court of Delhi in the case of Synfonia Trade Links Pvt Ltd....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oses that the same entries have been repeated six times. This is clearly indicative of the callous manner in which the reasons for initiating reassessment proceedings are recorded and we are unable to countenance that any belief based on such statements can ever be arrived at. The reasons have been recorded without any application of mind and thus no belief that income has escaped assessment can be stated to have been formed based on such reasons as recorded." 11. There can be no manner of doubt that in the instant there was a failure of application of mind by the AO to the facts. In fact he proceeded on two wrong premises - one regarding alleged non-filing of the return and the other regarding the extent of the so-called accommodation entries. 12. Recently, in its decision dated 26th May, 2017 in ITA No.692/2016 (Principal Commissioner of Income Tax-6 v. Meenakshi Overseas Pvt. Ltd.), this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act and not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or les....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (ii) The expression "reason to believe" is stronger than the word "satisfied". The belief should be based on material that is relevant and cogent. (See: Ganga Saran & Sons Pvt. Ltd. v. ITO, 1981 3 SCC 143]. (ii) (a) The assessing officer should have reasons to believe that the taxable income has escaped assessment. The process of reassessment cannot be triggered based on a mere suspicion. The expression "reason to believe" which is found in Section 147 of the Act does not have the same connotation as "reason to suspect". The order recording reasons should fill this chasm. The material brought to the knowledge of the assessing officer should have nexus with the formation of belief that the taxable income of the assessee escaped assessment; the link being the reasons recorded, in that behalf, by the assessing officer. (iii) The AO is mandatorily obliged to record reasons before issuing notice to the assessee under Section 148(1) of the Act. This is evident from the bare perusal of sub-section (2) of Section 148 of the Act. (iv) No notice can be issued under Section 148 of the Act by the A.O. after the expiry of four years from the end of the relevant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....otal 26,93,500/- The table extracted above, as noted in the earlier part of the judgment, is followed by the following assertion which is made in the order recording reasons: "Thus, the assessee company has taken bogus share capital/share premium from the said entries providers amounting to Rs. 26,93,500/-." 9.3. Furthermore, respondent no.1 in no uncertain terms, has indicated in the order recording reasons that the information which triggered the initiation of proceedings qua the assessee under Section 147 of the Act was received upon a search being carried out at the residence of Mr. Pradeep Kumar Jindal. While a general statement had been made that Mr. Pradeep Kumar Jindal had provided accommodation entries in the form of share capital/share premium, loans and advances, in lieu of cash, qua a large number of beneficiaries through his front companies, insofar as the assessee was concerned, it was emphasized that the accommodation entry was reflected in its books in the form of bogus "share capital and share premium". 9.4. Respondent no.1, in paragraph 4 of the order recording reasons, in no uncertain terms alludes to the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....een given to the 5 companies adverted to in the order recording reasons which were received back on the dates given in the said order. The assessee also went on to state, in its objections, that the opening balance (as on 01.04.2010) and closing balance (as on 31.03.2011) of the share premium account (Rs. 3,66,16,800/-) and the share capital account (Rs. 24,15,200/-) remained unchanged. In other words, the emphasis was that there was no increase in the share capital or the share premium account, as alleged, or at all. In the order passed by the assessing officer dated 08.10.2018, whereby, the objections of the assessee were rejected; none of this has been dealt with. Therefore, in our view, while the assessing officer may suspect that the taxable income of the assessee escaped assessment, he could not have formed a belief qua the same based on the material which is, presently, on record. 9.7. Therefore, in our opinion, the formation of belief by respondent no.1 that income of the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlining information; something which is discernible from a bare reading of....