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2022 (1) TMI 1192
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....t have been reopened u/s. 147/148 as no valid reasons have been recorded by the Assessing Officer to establish any satisfaction on his part that any income belonging to the appellant has escaped assessment. 2.2 On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the assessment despite the fact that the provisions of section 148 of the Income Tax Act, 1961 are not at all applicable in the circumstances in as much as the case has been reopened solely to verify the disclosed investment. 3. On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the assessment despite the fact that the Ld. Assessing Officer has not given proper opportunity of being heard to the appellant and has not confronted the appellant with the material collected behind the back of the appellant upon which the Assessing Officer has relied in making the additions. 4.1 On the facts and circumstances of the case, the Ld. CIT(A) has erred, both on facts and in law, in sustaining the assessment of the appellant at income of Rs. 10,00,850/- as against the income of Rs. 850/- declared....
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....stained the addition. 5. Ld. Departmental Representative supported the orders of the assessee authorities below. 6. I have heard the Ld. Departmental Representative and perused the material available on record and gone through the orders of the authorities below. 7. Ground No. 1, 2 & 3 are against legality of the reopening of the assessment before the Ld. CIT(A). The assessee has made the following submissions in respect of these grounds. "VALIDITY OF ISSUE OF NOTICEU/S 148 and[ORDER PASSED U/S. 147/143(3) 1. The order passed by the Ld. Assessing Officer u/s. 147/143(3) is pot sustainable as the same is bad in law and contrary to the facts on account of following parameters:- A. Notice issued u/s. 148 is bad in law as the same has been issued based upon borrowed satisfaction; B. - The Ld. Assessing Officer has relied upon documents which do not constitute admissible evidences; C. The Ld. Assessing Officer has relied upon information collected at the back of the assessee without affording a proper opportunity to cross-examine. D. The addition made by the Ld. Assessing Officer are not sustainable as the assesses has submi....
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.... the civil appeal. The Department was not entitled to reopen the assessment." While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the A.O. has to apply his mind to the materials, conclude that he has reason to believe that income of the Assesses has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analyzing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity. * CIT Vs. Suren International (2013) 357 ITR 24 (Hon'ble Delhi High Court) wherein the court held as under:- "......................In the first instance, we do not find the reasons in law, at all. A bare perusal of the table of alleged accommodation entries included in the reasons as recorded, discloses 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 stateme....
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....ntry, assessing officer was not justified in mechanically reopening assessment on basis of such information. The Hon'ble WAT, Delhi Bench in the case of Mrs. Vinita Jain vs. (TO reported, in (2007) 158 Taxman 167 (Dei.) (Mag.) quashed the notice issued under section 148 as well as consequent assessment where assessment was reopened on the basis of report of the DDI, who believed that transaction of capital gain shown by the assessee was bogus. The Hon'ble Bench while quashing the notice observed that "Where Assessing Officer reopened assessee's assessment merely because DDW (Inv.) believed that transaction of capital gains shown by assessee was bogus and no separate reason disclosing satisfaction of Assessing Officer for formation of belief that income of assessee had escaped assessment had been recorded, notice issued under section 148 was to be quashed and assessment made in pursuance thereof was to be annulled". This decision of the Hon'ble ITAT was challenged by the Revenue before the Hon'ble Delhi High Court and stood reported in (2008) 299 ITR 383 (Del.). The Hon'ble High Court approved the findings as recorded by the Hon'ble ITAT....
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....o the appellant Assessee respectfully submits that there existed no 'material', which could lead to formation of 'belief' that any income of the assessee chargeable to tax had escaped assessment within meaning of section 147 of the Income tax Act, 1961. The Initiation of proceedings under section 147 is not based on an independent application of mind but on the "borrowed satisfaction" of ITO(HQ)(I & CI), Lucknow. * The Assessing Officer cannot find a convenient short cut to this legal, requirement of formation of belief followed by recording of reasons by vaguely referring to the "report" without 'spelling out of any of' those specific contents, allegations and there after efforts of his own, showing mental exercise' done on his 'part leading to the formation of belief as required for subjecting the assessee to re-assessment proceedings. At feast the "reasons recorded" in the present case do not show any satisfaction of the Assessing Officer issuing the notice. * In the case of Madan Lal Jindal Vs. 170 reported in (1973) 92 ITR S46 (Cat.) the Hon'ble High Court quashed the notice under section 148 where reopening was based on th....
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....ed and worked in mechanical order and just followed the directions of senior authorities. 8. Mere stating the facts or finding of the case basis on which your office have reasons to believe is BAD in law. On what basis your office has reasons to believe that the transactions stated in the reasons are alleged transactions. It seems a blind faith had been placed on the (I & CI), Lucknow without application of mind to form a reason to read and obeyed as "HOLY GETTA' 9. A perusal of the assessment order makes it very dear that the Ld, Assessing Officer has given more, than due importance to information provided by the TTO(HQ)(I & CI), Lucknow and ignoring the submissions of the assessee. Appellant wish to draw your honor kind attention to the Following recent judgments on the issue as listed below:- 1. India Terminal Connector Systems Ltd., v. DOT (2011) 16 TAXMANN.COM 196 (Delhi) Where A.O. initiated reassessment proceedings on basis of information received from Investigation Wing that assessee was involved in giving and taking accommodation entries and reasons recorded by him were totally silent with regard to amount and nature of bogu....
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....tent ground inasmuch as there was no material on record to entertain a belief that assesses had raised bogus loam or share capital from "V" Ltd. -Held, Yes - Whether, therefore, assumption of power by Assessing Officer conferred u/s. 147 was without jurisdiction and it was liable to be cancelled-Held, yes 10. Thus the above, so called, report of the ITO(HQ)(I & CI), Lucknow, does not contain material, empowering the AO to issue notice u/s. 148. 11. The contention of the assessee, that the notice has been issued, application of mind, is duly established and proved as-the reasons recorded do not Contain the nature of income which 'has' escaped assessment. B. The Ld. Assessing Officer has relied upon documents which do not constitute admissible evidences; 12. The La. Assessing Officer, in the assessment order has extensively mentioned that during course of verification in the case of M/s. Mirzapur Chemical Works P. Ltd. it has been found that some companies have substantial investments. 13. The above information is too limited to form a belief moreover which is not supported by any material on record. 14. It is further subm....
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....n that no case is made out against anyone a warrant directing investigation against any person.," it said. "We are of the opinion that in the peculiar facts and circumstances of this case, no case is made out to direct investigation against political personalities, officers and others/the bench said and dismissed the application filed by common cause through Bhushan seeking an independent Supreme Court monitored investigation into the Birla-Sahara diaries. When Prashant Bhushan said that the SC did order registration of FIRs leading to an investigation on the basis or entries in the Jain Hawala diary case, the Bench said: "it was an intolerable irony. On the one hand, the Supreme Court said investigate and prosecute, one the other hand, it said no evidence so discharge. What role the Vineet Narain case played at that point of time, it is not for us to judge." Attorney general Mukui Rohatgi quickly picked the threads from the bench on the Jain hawala case which saw a number of top-ranking politicians being prosecuted after their names figured in the diary maintained by an alleged hawala operator, eventually all the accused were discharged for want of evidence. A tr....
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....lected by way UO(HQ)(I & CI), Lucknow has not been specified. * Who carried out the investigation and on whom the investigation was conducted. * Who has recorded the reasons and when. * The name and capacity of person(s) who's statement(s) were recorded, if any. * Contents of the statements) recorded, if any. * Nexus of the assessee with those statements) recorded, if any. * Allegations against the assessee in those statements) recorded, if any, 18. The proceedings u/s. 147 has been initiated based on the information received from report of the ITO(HQ)(I & CI), Lucknow. However, neither the report nor the-statement of the-directors was paraphrased or provided along with the reasons to the appellant during the course of assessment proceedings. 19. It is settled law that no evidence can be used against the assessee which has not been made subject to cross-verification. 20. The learned AO has erred on facts and in law by not providing the opportunity of cross examination to the assessee. 21. Kind attention is brought to the decision of Hon'ble Delhi HAT in case of Mod Adhesives P. Ltd. in....
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....y from two companies promoted by one 'S' and addition of such Share application money was made to assessee's income under section, 68 since addition made by lower authorities suffered from a primary infirmity in sense that same had been made without testing alleged evidence available with assessing officer in spite of specific request by assessee for cross examination of "S" addition made to income of assessee u/s. 68 on basis of statement of 's' was not justified & same was to be deleted, (Assessment Years 2000-01, 2001-02) " CIT V. PRADEEP KUMAR GUPTA (2008) 303 ITR 95 (DEL) In this case honorable Delhi high court held that the reassessment based on deposition of third party without allowing opportunity to assessee to cross examine third party is not valid. It has been held by the Hon'ble Supreme Court in Krishan Chand Cheliaran 125 ITR 713 (SC) that where any evidence in the form of statement of third party is used against the assessee without confronting the same to the assessee and without adequate opportunity of cross examination, it did not constitute any material evidence at all and therefore any addition based on such mate....
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....r purpose. The person proceeded against must know that he is being required to meet the allegations which might lead to a certain action being taken ayahs him. If that is made known the requirements are met. In the case of Nagulakonda Venkata Subba Rao v. CIT (1957) 31 ITR 781 (AP) it was held that in discharge of their duties, the officers receive a good deal of information which is not at all evidence according to the, accepted notions of law. Consequently, it is only fair and just that the accuracy or otherwise of such information be ascertained by giving the assessee an opportunity to prove that the officer is misinformed. 26. In the following cases it has been observed that in fact, it is incumbent upon the tax officer to apprise the assessee of the data on which he based his conclusions and, then, to give the assesses an opportunity of rebutting the same. If there is nothing in the records to show that the assessee had been apprised of the data and an opportunity to rebut it, the resultant assessment cannot be upheld (Dayaram Surajmal v. CIT (1960) 38 ITR 12 (Mys); Bhagwanjibhai Jairambhai v. CST (1961) 12 STC 502 (MP); Aswini Kumar Dutt v. CTO, 61 CWN 950 (Cal). It ....
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....nt prove that it is the taxing provision and if a receipt is in the 'nature of income',, the burden to prove that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. In the case of Durgaprasad More (Supra), the Hon'ble High Court went on to add that a party who relies on a recital in a Deed has to establish the truth of this recital, otherwise it will be very easy to make self serving statements in-document either executed or taken by a party Who relied on those recitals. If all that an assesses who wants to evade tax has to have some recitals made in a document either executed by him or executed to evade tax The Horrible Court-further held that the Taxing Authorities we have heard both the parties and perused the material available on record not required while looking at the documents produced before them. They, were entitled to look in to the surrounding circumstances to find out the reality of the recitals made in those documents. 4.4. In yet-another case of casting of onus viz. Jamnaprasad Kanhaiyalal Vs. CIT 130 ITR 244 (SC), Hon'ble Apex Court while considering the scope of immunity u/s. 24 of F. No. (2) Ac....
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....hich is not self evident, The onus, as a determining factor of the whole case can only arise if the Tribunal, which is vested with the authority to determine, finally all questions of fact, finds the evidence pro & con, so evenly balanced that it can come to no conclusion, then, the onus will determine the matter, Needless to say that the onus is heavy or light, depending on the facts and circumstances of each case. There cannot be any doubt that onus as a determining factor comes into play where, either there is no evidence on either side, or where it is equally worthless or where it is equally - balanced. It is imperative to mention here that where such is not the case and all available evidence is considered, without reference to the onus and without relying on the circumstances that onus lies on a particular party, the issue is determined on facts and the onus cannot be said to have influenced the decisions. However, in the instant case, the appellant has miserably failed to lead evidence and hence, onus is a determining factor. 4.7. The Hon'ble Supreme Court, in the case of Chuharmal v. CIT [1988] 172 ITR 250/38 Taxman 190 highlighted the fact that the principle o....
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....heory of surrounding circumstances and human probabilities - Assessee alleged that without bringing said case to notice of parties, revenue had caused prejudice to is case all in violation of principles of natural justice and of rule 11 - Whether since decision of Supreme Court in Sumati Dayal case (supra) ms cited by Tribunal only for purpose of reiterating well settled and established position of law, it could not be said to have caused prejudice to assessee held, yes Whether when a transaction is sham and not genuine as in instant case, then it could not be considered to be a part of tax planning or legitimate avoidance of tax liability - Held, yes - Whether further since issues in instant case were purely questions of facts on which there were concurrent findings of authorities below, if was to he held that, there was no question of law to be considered - Held, yes in favour of revenue. 14. So far as the principle laid down in the matter of Omar Salay Mohamed Sait (supra) is concerned there can be no dispute about the proposition laid down therein. However we have not been shown how the Tribunal was in breach of the same. We Smt. Kiran Navin Doshi find that the Tribuna....
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....Mc Dowell and Azadi Bachao or between McDowell and Mathuram Agarwal." 15. The aforesaid observations of the Supreme Court makes it very dear that a colourable device cannot be a part of tax planning. Therefore where a transaction is sham and not genuine as in the present case then it cannot he considered to be a part of tax planning or legitimate avoidance of tax liability. The Supreme Court in fact concluded that there is no conflict between its decision in the matter of McDowell Smt. Kiran Navin Doshi ((supra)) Azadi Bachao (supra) and Mathuram Agarwal (supra). In the present case the purchase and sale of shares, so as if a fake long term and short term capital loss found as a matter of fact by all the three authorities to be a sham. Therefore authorities came to a finding that the same was not genuine. So far as the question Nos. (ii), (iii), (iv) and (v) are concerned, we hold that these are pure questions of facts and as there are concurrent finding of the authorities below, no question of law arises for this court to interfere. 4.9. Similarly, in the case of KHANDELWAI, (sic) CO. v. ASSISTANT COMMISSIONER OF INCOME-TAX [1996] 55 TTJ 261 (JR.), it was observe....
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....department 'his stoic' silence of the assesses also blunts the assessees's argument that Shri Hukamchand's statement was recorded at its back. It may have been recorded at its back, but the results thereof were informed to the assessee and that is what the assesses was asked to explain and failed to do so. Thus, now we are not assuming but are concluding that the purchases of Rs. 86,500 were, in fact bogus. In case of bogus 'mines, in our opinion, what could be the best remedy, has been discussed above. The Assessing Officer has simply done that. We are unable to appreciate - Shri Singhvi's contention. Had there been suppression of safes, probably, depending, on the facts of the case, the addition to the extent of g.p. rate would have been suppression of sales, probably depending on the facts of the case, the addition to the extent of g.p. rate would have been sufficient But in case of bogus purchases we do not see a better solution than the one adopted by the Assessing Officer. 12. But what about the quantitative record which is said to have tallied? In the instant case the assessee has maintained the stock register but the same has been test-check....
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....i Software (P.) Ltd. v. Commissioner of Income-tax [2008] 299 ITR 324 (RAJ.), it was held as under: "8. The Tribunal considered the matter in paragraph 8 of its order thus: We have cam fully considered the rival submissions of the parties material available on record purchases totaling to Rs. 4,37,048 were not fund recorded in the seized books of account of the assessee-company. No surrender was made on behalf of the company by any of the directors of the assessee-company. The surrender was made by Shri Mahesh Toshnimi, one of the directors of the company in his individual capacity and not on behalf of the assessee-company add the same was considered in his personal assessment. Under the law, the company is a separate juridical person. The surrender made by Shri Mahesh Toshniwai, in his individual capacity not binding on the assessee-company. -Shri Mahesh Toshniwai in his personal statements; has nowhere stated that the surrender was made on behalf of the assesses-company. We also find that even in the return filed in response to a notice under section 148, the assessee-company did not include the said amount of bogus purchases. The assessee-company has not placed any material as t....
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....as issued. Therefore, the Initial dispute was with regard to genuineness of the transaction regarding purchase of wool from me parties the assessee had failed to discharge the onus to prove the genuineness of the transactions were found bogus, 4.12 In Sanjay Oilcake industries vs. Commissioner of Income-tax [2009] 316 ITR 274 was held as under. "12. Thus, it is apparent that both CIT(A) and the Tribunal have concurrently accepted the finding of the AO that the apparent sellers who had issued sate bills were not traceable. That I will received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to Smt. Kiran Navin Doshi have been made by making payments thereof by account payee cheques, the cheques have been deposited. In bank accounts of ostensibly in Me mine of the apparent sellers, thereafter entire amounts have been Withdrawn by bearer firms and there is no trace or identity of the person withdrawing the amount from the bank accounts. In light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from one recorded by CIT(A) and the Tribunal concurrently....
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.... Smt. Kiran Navin Doshi the names of the family members of the partners of the assesses - firm, as different, individuals could not have hit Upon the same idea of acquiring gold in the year of account relevant for the asst, yr, 1978-79 and declaring such gold under the Amnesty Scheme and getting the gold valued by the same valuer on the same day and filing their returns under the Amnesty Scheme on the same day, i.e. 30th March, 1987, and subsequently getting the gold, the ornaments to the assessee-firm in the same veer of account without the planning, controlling and coordination of a central, agency and that agency in the surrounding circumstances appears to be only the assessee-firm. The apex Court has held in the case of Jamnaprasad Kanhaiyalal (supra) that there is no doubt taxation in faxing the person to whom the income actually belonged with the persons who falsely declared them in their returns filed under the 'Voluntary Disclosure Scheme. That is a risk which an assessee resorting to unfair 'tax saving device's has necessarily to run and an assesses who has resorted to such devices has to thank himself for it. As regards the issue of cross-examination,....
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....he creation of Court. It is part of legal and statutory justice and not a part of natural justice, therefore, it cannot be hid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature." 4.16. To sum up, I would like to quote the landmark case of State Bank of India v. S.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed: "Justice means justice between the parties. The interest of justice guilty demand. 'that the guilty should be punished and that technicalities and irregularities which (sic) hut occasion failure of justice are mat allowed to defeat the ends of justice. Principles of natural justice ore but the me....