AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 765
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....hase and adding the same to the income of the assessee. 3. That on the Facts and Circumstances of the Case and in Law, the Assessing Officer erred in not giving the appellant Opportunity to Cross Examine Shri Vishesh Gupta, whose statement has been used against the appellant and additions have been made. 4. That on the Facts and Circumstances of the Case and in Law, the Assessing Officer erred & not giving the Opportunity to Assessee to saw Books of Accounts of the Appellant. 5. That The A.O has failed to appreciate That In Page No. 11 & 16 Sh. Rakesh Gupta & Sh. Vishesh Gupta have admitted in Assessment Proceedings before ACIT, central circle 10, New Delhi on 04.02.2013 and 12.02.2013 resp. Submitted that they were making actual sales 10 % of their Total Sales." 3. Briefly stated, the facts of the case are that the assessee is a partnership firm engaged in the business of trading in ferrous and non ferrous metals etc. filed return of income on 19.09.2007 declaring income of Rs. 94,810/- which was processed u/s 143(1) of the Income-tax Act, 1961 [hereinafter referred to as 'The Act'] and return was accepted as such. 4. Thereafter, reassessme....
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....ding accommodation entries given by the aoove entry. 3. The list gives the name of the firm which has provided the accommodation entry along with the name and address of the recipients of accommodation entry. 4. Sh. Navneet Jain & Sh. Vaibhav Jain has provided accommodation entry through thirty seven paper entries. The list of the firms giving accommodation entry is enclosed as annexure-B. The list of accommodation entry recipients has been obtained from Sh. Navneet Jain & Sh. Vaibhav Jain. It does not give year wise bifurcation. Hard copy of the list is enclosed annexure-C, duly signed bySh. Vaibhav Jain. Thus, the firms mention in the list 'B' have provided accommodation entries to the firms mentioned in list 'C'. 5. The soft copy of the information in respect to annexure A, B& C is also enclosed. 6. The information of accommodation entry includes A. Y. 2007- 08 also, which is a time barring year for taking action u/s 148. 7. The information is forwarded to you for early dissemination to various field offices in Delhi (Soft copy also enclosed)" On examining the list of accommodation entries provided by Sh. Rake....
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.... S/Shri Rakesh Gupta, Vishesh Gupta, Navneet Jain and Vaibhav Jain pertaining to Assessment Year 20017-08. 12. These facts culminate into issuance of notice u/s 148 of the Act clearly show the non application of mind by the Assessing Officer in as much as the name of the appellant is Raj Metal Company whereas the information relates to N.J. Metal Udyog. 13. The Hon'ble Supreme Court in the case of Sheo Nath Singh 82 ITR 148 had the occasion to construe the expression "Reason to believe" and the Hon'ble Supreme Court observed as under: "There can be no manner of doubt that the words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct and circumstantial evidence but not on mere suspicion gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for this belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investiga....
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....in these cases for A. Y. 2006-07 (v) Any other detail/document you may deem fit that need to be confronted with the parties whose cases have been reopened u/s 148 of I. Tax Act. 4. In response to these letters, the ACIT, Central Circle-10, New Delhi vide his letter dated 20.12.2013, received by this office on 27.12.2013, forwarded his reply along with supporting documents, which were running into 92 pages. After going through the reply forwarded by the ACIT, Central Circle-10, New Delhi and the annexure enclosed therein, this office was of the view that the purchase bills provided by the 11 firms/concerns controlled and managed by Sh. Rakesh Gupta and Sh. Vishesh Gupt or their family members is nothing but bogus purchase bills/accommodation bills. " 9. The above facts stated by the Assessing Officer makes it abundantly clear that at the time of formation of the belief to reopen assessment the Assessing Officer not having the above said information. Only that he was having the letter along with list which was forwarded by the CIT, Central-2, New Delhi. 10. The above observation of the Assessing Officer also shows that it was letter dated 20.12.2013 received b....
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....he return and in a mechanical way, on receipt of the letter from the CIT, Central - 2, New Delhi the assessment has been reopened. It is a settled position of law that there must be material for formation of a belief that income has escaped assessment. Further reasons referred to must disclose process of reasoning by which the Assessing Officer holds reason to believe. There must be nexus between such material and belief. Further and most importantly the reasons referred to must show application of mind by the Assessing Officer. It is also a settled law that the validity of the initiation of the reassessment proceeding is to be judged with reference to the material available with the Assessing Officer at the point of time of the issue of notice under section 148. In the present case, as is evident from the assessment order, the Assessing Officer was having nothing except the list provided by the CIT, Central-2, New Delhi about the list of accommodation entries. Beyond that he was not having the copies of the statement of any of these persons. He was not having copy of the assessment orders and other details or document which would have enabled the Assessing Officer to apply his min....
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....opening of the assessment on the ground that the AO did not independently apply his mind to the information received from the Director of Income Tax (Inv.). The relevant observation of the Court reads, as under:- "The first sentence of the reasons states that information had been received from Director of IT (Inv.) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure relates to a cheque received by the petitioner on 9th Oct., 2002 from SS Ltd. from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. The aforesaid reasons do not satisfy the requirements of s. 147. The reasons and the information referred to its extremely scanty and vague. There is no reference to any document or statement, except Annexure, Annexure cannot be regarded as a material or evidence that prima facie shows or established nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it i....
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....rmation and the second and the third parts of the beginning para of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the, AO had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, the Tribunal has arrived at the correct conclusion on facts. There is no substantial question of law, which arises for consideration." 13. In view of the above discussed facts of the present case, the reopening of the assessment is without application of mind and examination of the facts and accordingly the reopening is held to be invalid and accordingly the same is quashed. Accordingly the reopening is held to be bad in law and ground Nos.2 and 3 are allowed." 15. Similar view was taken by this Tribunal in ITA No. 1429/DEL/2015 order dated 30.11.2015 in the case of Radhey Shyam and Company wherein also, reasons recorded for reopening the assessment are identically worded as in the case of the present appeal and the coordinate bench held as under: "5. I found that the issue regarding the validity of t....
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....t does not give year wise bifurcation. Hard copy of the list is enclosed as annexure-C, duly signed by Sh. Vaibhav Jain. Thus, the firms mention in the list 'B' have provided accommodation entries to the firms mentioned in list 'C'. 5. The soft copy of the information in respect to annexure A, B & C is also enclosed. 6. The information of accommodation entry includes A.Y. 2006-07 also, which is a time barring year for taking action u/s 148. 7. This information is forwarded to you for early dissemination to various field offices in Delhi (Soft copy also enclosed)." On examining the list of accommodation entries provided by Sh. Rakesh Gupta & Sh. Vishesh Gupta and Sh. Navneet Jain & Sh. Vaibhav Jain pertaining to A.Y. 2006-07, it is noticed that the following accommodation entries have been taken by the assessee namely M/s Unique Metal Industries:- Sl. Accommodation entry provided by Amount, 1. Shree Shyam Trading Co. M/s Unique Metal Industries Rs. 2,44,399/- 2. Vishnu Trading Co. Rs. 8,12,542/- 3. Shree Bankey Bihari Rs. 3,28,368/- Total amount of entries = ....