TaxTMI 
TaxTMI 
2021 (11) TMI 671
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....nk between information/material and the formation of these escapement of income. Apart from that, the assessee has challenged the additions made u/s.68 for sums aggregating to Rs. 1,25,00,000/- in the Assessment Year 2007-08; and Rs. 50 lac in Assessment Year 2009-10. 3. The facts in brief qua the legal issue raised by the assessee in both the years are that, for the Assessment Year 2007-08 the assessee has its filed return of income u/s.139 on 30.10.2007 declaring income of Rs. 40,00,030/- which was processed and accepted u/s.143(1). Likewise for the Assessment Year 2009-10, the assessee has filed return of income on 30.09.2009 u/s.139(1) declaring income of Rs. 52,90,460/- which was processed u/s.143(1). Thereafter, on the basis of information that the assessee has received accommodation entry of Rs. 1,25,00,000/- in Assessment Year 2007-08 and Rs. 50 lac in Assessment Year 2009-10 from Shri Surender Kumar Jain Group cases who was an entry operator, the cases were reopened u/s 147. 3.1 The reasons recorded for Assessment Years 2007-08 and 2009-10 are incorporated as under: Reasons recorded u/s 148(2) before issue of notice u/s 148(1) of the Income Tax Act, 1961 ....
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....RS) Asstt. Commissioner of Income Tax, Circle-II, Faridabad. 4. In the impugned assessment order, the ld. Assessing Officer has incorporated certain extracts of report of Investigation Wing, New Delhi on the outcome of such proceedings in the case of Shri Surender Kumar Jain and Shri Virender Kumar Jain and also discussed general modus operandi carried out by these two persons through various entity. Thereafter, Assessing Officer has also extracted certain information pertaining to assessee. Thus, Assessing Officer came to the conclusion that assessee has taken bogus accommodation entry in the form of share application money/share capital. After detailed discussion, he has made an addition of Rs. 1,25,00,000/- in the Assessment Year 2007-08 and Rs. 50 lacs in the Assessment Year 2009-10. 5. Before the ld. CIT (A), the assessee has challenged the validity of re-assessment proceedings and the reasons recorded by the Assessing Officer which have been rejected by the ld. CIT (A) after observing and holding as under: "ITA No.1060-D-2015 10. Ground Nos. 1, 2 and 3. Taking up the first issue raised by the appellant is regarding the validity of the reassessmen....
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....not applied his mind. In view of this I have no hesitation in holding that the AO had valid reasons to believe that income had escaped assessment and that the approval u/s 151 was accorded in a mechanical manner. Reliance is also placed on the Judgment of the Hon'ble Supreme Court in the case of PHOOL CHAND BAJRANG LAL AND ANOTHER VS. ITO &ANOTHER 203 ITR 456 (SC) the head note for which reads as below: "Sufficiency of reasons for reopening assessments is not for the court to judge. Section: 147(a) -failure to disclose truly and fully material facts - cash loans - originally accepted as genuine subsequent information from ,4.0. of a company that its M.D. has confessed - he or his company has not advanced any loan to any person during the relevant period - subsequent information is definite, specified and reliable. Sufficiency of reasons for formation of belief is not for the court to judge. Reassessment notices are valid. [Applied/followed in- 208 ITR 196 (RAJ) : 208 ITR 266 (DEL): 209 ITR 01 (BOM) :209 ITR 135(BOM) : Assam Forest Products (P) Ltd. - Vs.-CIT : 211 ITR 447 (SC): 214ITR 669 (RAJ) : 221ITR 538 (SC) :226 ITR :52 (GUH): 237ITR 549 (BOM):248 ITR 493....
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.... true material facts. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts". 9. Coming to the specific facts of the case the AO has recorded the reasons on the basis of the information received from the Investigation Wing. A perusal of the reasons recorded by the AO clearly shows that the appellant has taken accommodation entries from Sh. Surinder Kumar Jain Group of cases during the F.Y. 2006-0?. Tne quantum of entries i.e. 50 Lacs has been specifically mentioned and thus to this extent the appellant's reliance on a judgment of Delhi High Court in the case of CIT vs. Insecticides (India) Ltd. 357 ITR 330 (Delhi), Ranbaxy Lab vs CIT 306 ITR 343 (Del) can be clearly distinguished from the case of the instant case. The reasons recorded by the AO are as below: "There is an information with the Assessing Officer received from the DIT(lnv.)-ll, New Delhi that assessed has obtained accommodation entires for Rs. 50,00,000/- during the financial year 2008-09 relevant to As....
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....ciency of reasons for formation of belief is not for the court to judge. Reassessment notices are valid. [Applied/followed in- 208 ITR 196 (RAJ) : 208 ITR 266 (DEL): 209 ITR 01 (BOM) :209 ITR 135(BOM) : Assam Forest Products (P) Ltd. - Vs.-CIT : 211 ITR 447 (SC): 214ITR 669 (RAJ) : 221ITR 538 (SC) :226 ITR 352 (6UH): 237ITR 549 (BOM):248 ITR 493 (P&H) :ITO - VS- Selected Dalurband Coal Co.Pvt. Ltd. 217ITR 597 (SC) :253 ITR 83 (DEL) 257 ITR 481 (Guj)] 12. And reliance is placed on Honable Madras High Court in the case of STERLITE INDUSTRIES (INDIA) LTD. v ASSISTANTCOMMISSIONER OF INCOME- TAX AND ANOTHER [2008]302 ITR275 (MAD.) The head note for which reads as under: Reassessment -Notice-Validity of Notice - Information From Enforcement Directorate showing possible inflation of purchases - notice valid -Income- tax Act, 1961, ss. 147,148. 13. Perusal of the assessment order specially para 2.2 to para 2.6 also clearly show that the AO had sufficient reasons to reopen the assessment proceedings u/s 147. Thus in view of the above facts and judicial precedents I have no hesitation in holding that the AO has rightly reopened the assessment proceedings and the ap....
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....rivolous, cryptic, mundane paper on the basis of which the AO had formed a belief. It was a voluminous report running into hundreds of pages wherein the assessee's role as a beneficiary and the amount taken through various bogus companies of the entry operator Sh. S.K Jain was established unambiguously and corroborated by statements recorded and bank inquiries conducted by the wing. So, with this background, availability of material on record for forming a prima facie belief of escapement of income is not even questionable. Moreover, it is a settled law that for reopening of assessment, the AO is required only to form a prima facie belief that the income has escaped assessment and no conclusive proof is required for the same. It is during the course of assessment that the AO is required to do so by way of further investigation and inquiries. Further, the objection raised by the assessee regarding non-application of mind by the AO while recording reasons is also baseless and devoid of merit. It can be appreciated in this background that a nationwide search was carried out by the investigation wing on the S. K Jain group and busted the accommodation entry operating racket prevalent i....
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.... scrutiny proceedings wherein there is no provision of dropping the proceedings, once the case is selected for scrutiny. So, belief of AO regarding income escaping assessment, recording of reasons, application of mind should not be taken to hyper-technical level such that it can work as vehicle to vitiate the whole proceedings and resultant assessment which is otherwise very strong on merit. 9. Ld. DR has also relied upon catena of judgments in his written synopsis which on perusal of the same are not relevant. The judgments relied upon by the ld. DR are reproduced hereunder: 1. Aradhna Estate (P.) Ltd.Vs DCIT f20181 91 taxmann.com 119 (Gujarat) Where Hon'ble Gujarat High Court held that where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinized by Assessing Officer during original assessment, reassessment could not be held unjustified. 2. Pushpak Bullion (P.) Ltd. Vs DCIT f20171 85 taxmann.com 84 (Gujarat) Where Hon'ble Gujarat High Court held ....
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....income has escaped assessment. 8 Krishna Developers And Co Vs DCIT (2018-TIOL-51- SC-IT) Where Hon'ble Supreme Court held that reopening on the basis of very same reasons on which the AO initially desired to make additions but had failed, was justified, if the original assessment was declared as invalid as having been completed without service of notice on the assessee within the statutory period. 9 Thakorbhai Maganbhai Patel Vs ITO [2017] 78 taxmann.com 201 (SC)/[2017] 245 Taxman 333 (SC) Where Hon'ble Supreme Court dismissed SLP against High Court's ruling where reopening of assessment u/s 147 was held to be valid despite the AO not passing speaking order against objections filed by the assessee. 10. Thakorbhai Maqanbhai Patel Vs ITO [2017] 79 taxmann.com 409 (Delhi)/[2017] 392 ITR 444 (Delhi) Where Hon'ble Delhi High Court held as follows: "It is true that in the communications, the petitioner has requested for supply of documents. However, the petitioner also raised the objections to the Assessing Officer exercising the powers of reassessment. In true spirit if these communications were examined, the Assessing O....
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....edings 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. 15 R.K. Malhotra ITO Vs Kasturbhai Lalbhai [1977] 109 ITR 537 (SC) (Copy enclosed) where Hon'ble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute "information" within the meaning of section 147(b). 16 CIT Vs P.V.S. Beedies (P.) Ltd. M9991 103 Taxman 294 (SO/[1999] 237 ITR 13 (SC/[1999] 155 CTR 538 (SC) Where Hon'ble Supreme Court held that Audit party had merely pointed out a fact which had been overlooked by Assessing Officer and this was not a case of information on a question of law. Reopening of case under section 147(b) on basis of factual information given by internal audit party was valid in law. 17 ACIT Vs Raiesh Jhaveri Stock Brokers (P.) Ltd [2007] 161 Taxman 316 (SC)/[2007] 291 ITR 500 (SC)/[2007] 210 CTR 30 (SC) Where Hon'ble Supreme Court held that so long as the conditions of section 147 are fulfilled, the Asses....
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....count of share application money or loan or any other kind of credit entry from any such entity. It is a well trite law that the reasons recorded at least should disclosed the prima facie material which has proximate or live link nexus with such information or material that the income chargeable to tax has escaped assessment. The Assessing Officer can assume jurisdiction for reopening the assessment only on the basis of material referred to in the reasons recorded and reasons recorded alone is the edifice or foundation of jurisdiction u/s.147. If the reasons recorded are silent or there is no reference of any material, then other extraneous material referred subsequently cannot justify acquiring of jurisdiction for reopening u/s 147. Any annexure or report discussed in the assessment order which is not part of the reasons recorded cannot be construed as material forming belief u/s.147. The formation of reasons to believe can only be seen on the reason recorded in writing by the Assessing Officer before issuance of notice u/s.148. This proposition has been held so by the Hon'ble Jurisdictional High Court in the case of CIT vs. Insecticidies India Pvt. Ltd. as reported in (2013) 357 ....