TaxTMI 
TaxTMI 
2023 (8) TMI 212
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....of Income Tax (Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal." 3. The assessee furnished its original return of income u/s 139(1) of the Act declaring net taxable income of Rs. 47,97,827 Thereafter an order u/s 153A read with section 143(3) of the Act was passed in this case on 30.12.2019 accepting the returned income of Rs. 47,97,827/-. 4. Vide an order passed by Hon'ble Delhi High Court on 20.2.13 various companies including Gulab Buildtech Private Ltd., Verma Buildtech & Promoters Pvt. Ltd, Renu Builders & Promoters Pvt. Ltd and D&S Developers Pvt. Ltd. Stood amalgamated in assessee company with effect from 14.2012. 5. The assessee company was issued a notice u/s 148 of the Act dated 31st March 2019 and in response to the assessee's request for providing reasons for reopening of the case, the copy of such reasons was provided to the assessee, according to which the allegation was that the erstwhile companies namely, Gulab Buildtech Pvt. Ltd., Verma Buildtech & Promoters Pvt. Ltd., Renu Builders & Promoters Pvt. Ltd....
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....n the appellant company w.e.f.1.4.2012, accordingly, proceedings u/s 148 were initiated by the AO in the case of the appellant company. As per the assessment order, the appellant has asked for the reasons for reopening and filed objections to reopening with the AO on 23.09.2019, which were disposed of by the AO on 15.10.2019. Thereafter, the appellant had filed writ petition on 19.12.2019 before the Hon'ble Delhi High Court, however, in the interim order of the Court, the assessment proceedings were continued to go on and finally the AO passed assessment order on 27.12.2019. 10. For the sake of ready reference the entire order of the AO is reproduced below:- "Assessment in this case was completed u/s 143(3) vide order dated 26.03.2015 at income of Rs. 4,56,640/-. Thereafter assessment was completed u/s 153A/143(3) of the Act vide order dated 30.03.2016 at total income of Rs. 47,97,827/- in respect of M/s BDR Builders & Developers Pvt. Ltd. and Rs. 21,41,0964/- in respect of M/s Renu Builders & Promoters totalling Rs. 69,39,791/-. Subsequently, action u/s 132 of the Act was carried out by the department in Himanshu Verma Group of cases on 29.03.2012 and on v....
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....explain the source of deposits in this account nor could he explain the purpose of transfer of the said amount to various entities. This amount was transferred to various entities including M/s. Gulab Buildtech Pvt. Ltd. to whom a sum of Rs. 5,65,50,000/- was transferred on 03.02.2012. Since these companies have been merged with the assessee company M/s. BDR Builders and Developers Pvt. Ltd., the accommodation entries received by them amounting in all to Rs. 17,95,50,000/- are to be assessed in its hands during the year under consideration as its unaccounted/undisclosed income under the provisions of Section 147 of the Act. Therefore, after recording reasons to believe that income to the tune of Rs. 17,95,50,000/- has escaped assessment and after obtaining sanction u/s 151 from the competent authority, notice u/s 148 of the Act was issued to the assessee on 31.03.2019 requiring the assessee to file the return of its income within 30 days from the service of the said notice. In response to this notice the assessee filed a letter dated 15.04.2019 filed the copy of the return filed on 05.04.2019 declaring total income of Rs. 47,97,830/-. Thereafter on the request of the asses....
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....ion entries is treated unexplained credits in the books of account of the assessee company and is being added to the income of the assessee as assessee's income from undisclosed sources u/s 68 of the Income Tax Act, 1961. 11. Aggrieved the assessee filed appeal before the ld CIT(A), who held that the initiations of proceedings u/s 147 of the Act are not valid in law. Hence, the revenue filed appeal before the Tribunal. 11A. Heard, the arguments of both the parties and perused the material available on record. We have perused the order of the ld CIT(A) in detail. For the sake of ready reference the said order adjudicating the issue is reproduced as under:- "6. Ground Nos. 1 to 5: I have considered the facts of the case and written submissions of the appellant. The various grounds taken by the appellant are adjudicated in subsequent para. 6.1 It is observed that four group companies viz M/s D & S Developers Pvt. Ltd. (DSDPL), M/s Verma Buildtech & Promoters Pvt. Ltd. (VBPL), M/s Renu Builders & Promoters Pvt. Ltd. (RBPL), and M/s Gulab Buildtech Pvt. Ltd.(GBPL) were amalgamated in the appellant company with the orders of Hon'ble Delhi High Court dated ....
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....hird party, unless there is specific finding in this regard. (vii) There is no valid basis to conclude that the income had escaped assessment. 7.1 The appellant had filed a writ petition before the Hon'ble High Court of Delhi on reopening of the case u/s 148 of the IT Act 1961. In the interim order dated 19.12.2019, the High Court had allowed to carry on the assessment proceedings but had put a restraint on the enforcement of assessment order. In the final order dated 09.01.2020, the Hon'ble High Court of Delhi had held as under: 1. "The petitioner has preferred the present writ petition to assail the notice issued under Section 148 of the Income Tax Act (hereinafter referred as the Act) dated 31.03.2019, relevant to the assessment year (AY) for 2012-13 and the order dated 15.10.2019 disposing of the objections preferred by the petitioner preferred to the said notice. 2. The petitioner also assails the re-assessment proceedings initiated by the aforesaid notice for the AY 2012-13. The writ petition was initially heard by this Court on 19.12.2019. The submission advanced on behalf of the petitioner on the said date was that the approval of....
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....IT (A). Demand, if any, raised in consequence of the said re-assessment order shall however not be enforced till the decision of the appeal by the CIT (A). We make it clear that we have made no observations on the merits of the case one way or another and all pleas and defences of the petitioner as well as the revenue are preserved. The CIT (A) shall pass an order dealing with all the submissions of the petitioner including in relation of the validity of the notice under Section 148 of the Act. We however vacate the interim order passed by us on 19.12.2019. Consequently, the re-assessment order becomes effective from today." Thus there is a direction in the above order of Hon'ble High Court Delhi that CIT(A) shall pass an order dealing with all the submissions of the petitioner including in relation of the validity of the notice under Section 148 of the Act. 8. Let us first observe the facts of the case regarding the material information available for initiation of proceedings u/s 148 of the IT Act 1961. 8.1 It is observed from the assessment records that there was communication of the information relating to three transactions from the investigation ....
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....e Madan during the F.Y. 2011-12 & 2012-13 respectively. These funds are forwarded to M/s. Sanya Hospitality Pvt. Ltd, Roop Kishore Madan. 14. As the territorial jurisdiction over the case of the assessee lies with you, the information is being forwarded to you for considering the re- opening of case of M/s. Gulab Buildtech Pvt. Ltd having PAN:- AACCG2042H for the A. Y. 2012-13 u/s 147 of the IT Act, 1961." c) The forwarding letter of Investigation wing dated 15.03.2019 w.r.t another transactions had been received in the office of DCIT, CC-15 Delhi on 20.03.2019. As per the contents of this letter, the investigation wing had mentioned that in the open enquiries conducted in the case of Sh.Manoj Sethi, on the basis of STR in his case, the incomplete reply to queries was submitted by him. There were cash deposits and huge debit/credit entries in his accounts and funds were immediately transferred after receipt of the same. The investigation wing observed from his bank account that "It is emphasised that the transactions discussed above are directly related to Sh. Manoj Sethi, Sh. Manoj Sethi either received the funds from the concerns and persons mentioned a....
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....fice shows that M/s. Gulab Buildtech Pvt. Ltd., M/s Verma Buildtech & Promoters Pvt. Ltd., M/s. Renu Builders & Promoters Pvt. Ltd and M/s. D & S Developers Pvt. Ltd. Merged with the assessee company M/s. BDR Builders and Developers Pvt. Ltd had taken accommodation entries to the tune of Rs. 12,30,00,000/- for the A.Y. 2012-13. You are requested to verify the source of cash and other credit entries with documentary evidences. Please submit your explanation for the above asked details on or before 29.03.2019 positively. This information is being asked u/s 133(6) of the Act and failure to comply to this will attract action under the provisions of the IT Act, 1961." (b) Reply of the appellant dated 29.03.2019 on the notice u/s 133(6) dated 26.03.2019: "In reference to your letter F.NO. ACIT/CC-15/2018-19 Dt. 26.03.2019 it is respectfully submitted that no accommodation entries amounting to Rs. 12,30,00,000/- for the A.Y. 2012-13 had been taken by the companies viz M/s. Gulab Buildtech Pvt. Ltd., M/s Verma Buildtech & Promoters Pvt. Ltd., M/s. Renu Builders & Promoters Pvt. Ltd and M/s D & S Developers Pvt. Ltd merged with the assessee company M/s. BDR Builde....
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....he AO on 31.03.2019, which was e-mailed on the mail id [email protected] of the appellant on 31.03.2019 at 5:11 pm. 8.3 The appellant had asked for the reasons recorded for reopening of its case u/s 148 of the IT act 1961, which were supplied by the AO vide letter dated 26.08.2019. The appellant had filed letter dated 23.9.2019 filing the objections to re-opening u/s 148.These objections have been disposed of by the AO vide letter dated 15.10.2019. The assessment order was passed on 27.12.2019 as reproduced in para 5.2 above. 8.4 The reasons forming the belief of the AO for reopening u/s 148 are as under: "1. Reasons for reopening of the assessment Assessment in this case was completed u/s 143(3) vide order dated 26.03.2015 at income of Rs. 4,56,640/-. Subsequently, action u/s 132 of the Act was carried out by the department in Himanshu Verma Group of cases on 29.03.2012 and on verification documents found and seized it was found that they were providing accommodation entries to the beneficiaries. The enquiries made further revealed that they had provided accommodation entries to M/s Gulab Buildtech Pvt. Ltd. merged with the assessee compa....
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....o various entities including M/s Gulab Buildtech Pvt. Ltd. to whom a sum of Rs. 5,65,50,000/- was transferred on 03.02.2012. Since these companies have been merged with the assessee company M/s BDR Builders and Developers Pvt. Ltd., the accommodation entries received by them amounting in all to Rs. 17,95,50,000/- are to be assessed in its hands during the year under consideration as its unaccounted/undisclosed income under the provisions of Section 147 of the Act. 2. Brief details of information collected/received by the AO In this case enquiries were made by the Investigation Wing and it was found that during the year under consideration M/s Gulab Buildtech Pvt. Ltd. M/s Verma Buildtech & Promoters Pvt. Ltd., M/s Renu Builders & Promoters Pvt. Ltd. and D and S Developers Pvt. Ltd. merged with the assessee company BDR Builders and Developers Pvt. Ltd. had taken accommodation entries to the tune of Rs. 7,00,00,000/-, Rs. 45,00,000/-, Rs. 4,50,00,000/- and Rs. 35,00,000 and Rs. 5,65,50,000/- totalling in all to Rs. 17,95,00,000/- which need be assessed in the hands of the assessee company M/s BDR Builders and Developers Pvt. Itd. during the year under consi....
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.... Rs. 4,56,640/-. Subsequently, action u/s. 132 of the Act was carried out by the department in Himanshu Verma Group of cases on 29.03.2012 and on verification documents found and seized it was found that they were providing accommodation entries to the beneficiaries. The enquiries made further revealed that they had provided accommodation entries to M/s. Gulab Builtech Pvt. Ltd. merged with the assessee company M/s. BDR Builders and Developers through their companies M/s. Soffpro Technologies Pvt. Rs. 5,00,00,000/- and M/s. Mithilanchal Investment Finance Pvt. Ltd. Rs. 2,00,00,000/-. Thereafter as per enquiries made by the Wing a sum of Rs. 45,00,000/-, Rs. 4,50,00,000/- and Rs. 35,00,000/- totalling Rs. 5,30,00,000/- was transferred from this account to M/s. Verma Builtech & Promoters Pvt. Ltd. M/s. Renu Builders & Promoters Pvt. Ltd. and M/s. D and S Developers Pvt. Ltd.. respectively during the financial year 2011-12 relevant to assessment year 2012-13. In another case of Shri Roop Kishore Madan it was found that accommodation entries to the tune of Rs. 5,65,50,000/- were given by Shri Madan from his account No. 040001000011 maintained with ICICI Bank Ltd, Sunder Nagar Branch, N....
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....lling to Rs 69,39,791" The AO had started the assessed income with Total income already assessed us 153A/143(3) vide order dated 30.3.2016 Rs 69,39,791/-And made additions of Rs 17,95,00,000/- u/s 68 on account of alleged accommodation entries in the reasons recorded. 9.2 It is observed that the amalgamation of M/s Gulab Buildtech Pvt. Ltd. M/s Verma Buildtech & Promoters Pvt. Ltd., M/s Renu Builders & Promoters Pvt. Ltd. and D and S Developers Pvt. Ltd. was effective from 01.04.2012. Therefore, for the year under consideration AY 2012-13, these entities were independent existing entities. Their P & L account and balance sheet entries will get merged with M/s BDR w.e.f 01.04.2012 and before that period these entities have individual existence w.r.t to the transactions in their respective books of accounts. It is even evident from fact that the assessment u/s 143(3) of M/s GBPL for AY 2012-13 had been completed by the AO of M/s GBPL in March' 2015 (not the AO of M/s BDR), even after the amalgamation order of it with M/s BDR was passed by the Court in 2013. The abated assessment in M/s RBPL had been made u/s 153A on 31.03.2016 as independent entity determining the income....
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....ment order in the name of "BDR in the matter of erstwhile VBPL". Similarly in respect of transactions of GBPL, the A.O. was required to record reason, issue notice u/s 148 and pass assessment order in the name of "BDR - in the matter of erstwhile GBPL". The combined recording of reasons and passing of common assessment order on M/s BRD is not as per law. 10. Regarding the reasons recorded by the AO for reopening of the case u/s 148, following observations are made on these three pieces of information. 10.1 The first issue is regarding the allegation that M/s. GBPL has received entries of share capital of Rs. 7 crores from two companies [Rs 5 Cr. from M/s Saffpro Technologies Pvt. Ltd (STPL)& Rs 2 Cr from M/s Mithilanchal Investment Finance Pvt. Ltd. (MIFTL)] controlled by the entry operator Himanshu Verma. 10.1.1 The AO while passing the assessment order on 27.12.2019 had commented that in subsequent search on Mr. Himanshu Verma in 2012, it is observed that the appellant company had received subsequently the entries. Same wording had been used in the "Reasons to believe" note reproduced above. However the search on Mr Himanshu Verma on 29.3.2012 was much ....
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....hat we are in receipt of your letter bearing no. F. No. ITO/Ward-10(4)/2014-15 dated 21.01.2015. We have to submit as under: 1. That the company has invested in the equity share capital of the company and has purchased 1,00,000 shares of Rs. 10/- each at a premium of Rs. 490/- each. 2. That the company has made payment to the company during the financial year 2011-12 for the purchase of above said equity shares of the company. The copy of the share application forms is enclosed. 3. That the copy of bank statement with Axis Bank, Ashok Vihar, New Delhi having A/c No. 910020038535624 & Indusind Bank, Ashok Vihar, New Delhi having A/c No. 0143-A00829-050 is enclosed, highlighting an investment of Rs. 5,00,00,000/- (Rs, five crores only) made in the company. 4. That the complete set of the Income Tax Return filed with the department for AY 2012-13 is enclosed along with the copy of the audited balance sheet, profit and loss account with enclosures and audit report. 5. The perusal of copy of account of the assessee company would clarify that the shares were allotted on 30.03.2012 by the company. The original share certificate was surrendered ....
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....y receipt of cash. * There is no material on record that the appellant had made any unaccounted cash payments to Mr. Roop Kishore madan. * The appellant had never been called by the Investigation Wing to explain the transactions with Mr. Roop Kishore madan. 10.2.2 During the course of appellate proceedings, the appellant had submitted the copy of assessment order u/s 143(3) of Sh. Roop Kishore Madan for AY 2012- 13 completed on 27.3.2015 (as verified from the assessment records of Sh. Roop Kishore Madan) in which * His returned income for AY 2012-13 was at Rs 25,71,810/-. * On the basis of AIR/ITS information, the AO had made addition of Rs 9.73 Cr on account of cash deposits in his accounts and of Rs 24.51 cr on account of addition in his capital account. * There is no finding in this assessment order made u/s 143(3), considering all cash/credit entries in his bank account, that he is an entry operator. 10.2.3 Thus there was no material or statement of Mr. Roop Kishore Madan or the appellant, in this information forwarded by the investigation wing, to arrive at the conclusion by the AO, that Mr. Roop Kishore Madan is a....
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....existing assessee filing return of income in high income bracket. 10.2.6 Without prejudice to it, regarding these transactions, the appellant had submitted that M/s GBPL had continued transactions with Sh. Roop Kishore Madan Prop. M/s Rhea Distribution during the year under consideration and in the subsequent years. It is observed from the ledger account of M/s Rhea Distribution Company in the books of M/s GBPL that the appellant had received total amount of Rs. 8.685 cr. during the year from M/s Rhea Distribution Company, whereas, the AO had made addition of only the amount of one entry of Rs. 5.655 cr. As suggested by the Investigation Wing. The appellant had claimed that these transactions were investigated during the original assessment u/s 143(3) of M/s GBPL completed on 26.3.2015 and had further submitted the following documents during assessment as well as appellate proceedings: * Confirmation of ledger account of M/s Rhea Distribution Prop Sh. Roop Kishore madan * Copy of ITR of Sh. Roop Kishore madan for AY 2011-12 & 2012-13 * Bank statement of Sh. Roop Kishore Madan highlighting the payments * bank statement of the appellant sh....
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....in any statement made by Mr Manoj Sethi that he is an entry operator or he had given entries to the appellant against any receipt of cash. * There is no material on record that the appellant had made any unaccounted cash payments to Mr Manoj Sethi. * The appellant had never been called by the investigation to explain the transactions with Mr Manoj Sethi. 10.3.2 It is further observed that Mr Manoj Sethi is an existing assessee and had filed the returned income of AY 2012-13 at Rs 2,93,79,060/-. In his assessment for AY 2012-13 completed u/s 143(3) on 31.3.2015, the AO had made addition of Rs 20.86 Cr. (out of total unsecured loans of Rs 53.77 Cr shown by him) on 31.03.2015. Further addition of Rs 3.9 cr. had been made on account of cash deposits made by him in the bank accounts. The total income had been assessed at Rs. 35.97 Cr. There i is no finding in this assessment order made u/s 143(3), considering all cash/credit entries in his bank account, that he is an entry operator. 10.3.3 Thus there was no material or statement of Mr. Manoj Sethi or the appellant, in this information forwarded by the Investigation Wing, to arrive at the conclusion by....
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.... the appellant during the assessment proceedings w.r.t these transactions. The AO had presumed these entries of Rs 5.3 cr received from Mr Manoj Sethi as accommodation entries just on the suspicion of investigation wing. The AO had neither brought any material on record to prove that Mr. Manoj Sethi is an entry operator nor that these are really accommodation entries received by M/s VBPL and other merged entities. 10.3.7 Without prejudice to it, the appellant had claimed that there were loans given to Mr Manoj Sethi from three group companies (now merged with the appellant) of the appellant, which had been received back in the year under consideration. It is observed from the detail submitted by the appellant that these amounts advanced by various group companies in FY 2010-11 to Mr. Manoj Sethi were mainly received back in the FY 2011-12 as per the following table: Name Date of receipt Particulars of cheque/RTGS Bank Amount(Rs) Date of repayment Particulars of cheque/RTGS Bank Amount(Rs) I. Vemia Buildtech and Promoters Pvt. Ltd 21.03.2011 HDFCH1108 0700094 HDFC Bank 1,00,00,000/- 13.07.2011 UTIBH1119 4009022 HDFC Bank ....
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.... Manoj Sethi of the accounts of these three entities in his books of accounts. * Copy of the bank statements of these entities reflecting the transactions with Mr Manoj Sethi. Copy of the bank statements of Mr Manoj Sethi reflecting the transactions with these entities. 10.3.9 From the above discussion, it is observed that (i) The AO had mechanically adopted the figures of transactions (for recording reasons as well as making addition in reassessment) of Mr Manoj Sethi at Rs 5.3 Cr with M/s VBPL& other entities, as suggested by the Investigation wing, whereas there are total receipts of Rs 11.25 Cr in the three entities as mentioned in above table (now merged with the appellant company) with Mr Manoj Sethi. (ii) The AO had not brought any adverse evidence/statement from where the conclusion, that the amounts received from Mr Manoj Sethi are accommodation entries, can be arrived at. (iii) The appellant had discharged the primary burden to prove identity, creditworthiness and genuineness of these transactions, by filing the copy of return acknowledgement/ confirmation/bank statement of Sh Manoj sethi. The AO had not rebutted these primary ....
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.... given the names of specific alleged entry providers and even the details of alleged entries to rebut the allegations of the AO & was given very little time to respond. The AO had not given proper opportunity to the appellant and was pre-decided in mind, without considering the reply of the appellant, on the basis of information received from the investigation wing. The AO had issued notices u/s 133(6) as a formality. Thus the conclusion of the AO to form "reasons to belief" is on the basis of the borrowed satisfaction and wrong inference of investigation report that the appellant had received accommodation entries. There is no independent finding of the AO to reach at the conclusion that the appellant had taken accommodation entries. 11.1 The appellant cannot be held responsible for incomplete submissions made by Sh. Roop Kishore madan and Sh Manoj Sethi (referred as entities) to the investigation wing w.r.t. his transactions unless there is nexus established between these entities & the appellant for introducing the unaccounted money of the appellant in the books of appellant through them. Further the doubted bank credit amounts of these entities have already been assess....
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.... Investigation Wing, in the reasons recorded by the AO and added by the AO in reassessment proceedings were at Rs 5.655 cr. Whereas factually the total transactions as per books were at Rs. 8.685 cr. * Entries of Rs. 5.30 cr in M/s VBPL & other merged entities, from Sh. Manoj Sethi. The total transactions of three merged group entities in the appellant as worked by Investigation Wing and added by the AO were at Rs 5.30 cr., whereas factually the total transactions as per books w.r.t these three merged entities were at Rs. 11.25 cr. 12.3 As discussed in the above, the facts are summed as under: (i) There is nothing in the report of Investigation Wing forwarded, regarding transactions with both these entities (Mr Manoj Sethi & Mr roop Kishore Madan) with the merged entities of the appellant, which suggest that these entities are involved in providing accommodation entries in general and in particular to the merged entities of the appellant. (ii) It is observed that, the assessment u/s 143(3) had been completed in the case of these two entities in March 2015, wherein, the AIR transactions (considered STR by the Investigation wing) as reflected in th....
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....s of said report was not justified. The AO had simply relied on the report of the Investigation Wing in a mechanical manner, which clearly indicates it is a case of non application of mind and borrowed satisfaction. (v) The AO had issued notices u/s 133(6) to form "Reasons to believe" of "Escapement of Income" independently. However, it is observed from these 133(6) notices that the AO had already presumed these two entities as "entry operators" as it had mentioned in the notices u/s 133(6), without any valid basis. The AO had not mentioned, even the names of these entities and amount of transactions with individual entities, with whom the transactions of merged entities of appellant have been presumed to be "Accommodation Entries" and had given very little time to the appellant to respond to these notices. In the absence of the names of the alleged entities and alleged amounts of transactions with these individual entities, there was no occasion with the appellant to satisfy the AO about genuineness of these transactions. In such a situation, non submissions of details of these transactions, not confronted to the appellant in the notice u/s 133(6), cannot form the valid b....
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....ommissioner of Income Tax 378 ITR 421 (Del) it was held that "therefore, even if it is assumed that, in fact, the Assessee's income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional pre-condition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise." 33. In Rustagi Engineering Udyog (P) Limited (supra), it was held that "...the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee's income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act." 34. Recently in Agya Ra....
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.... objections was that figure of Rs. 95,65,510/- itself was wrong. The A.O. rejected the objections of the assessee and passed the assessment order making addition of Rs. 95,65,510/-. On appeal, the CIT(A) quashed the reopening as the reasons were held to be recorded without application of mind. On appeal by revenue, the ITAT confirmed the order of CIT(A). On further appeal by ITAT, the Hon'ble High Court upheld the order of CIT(A) and ITAT quashing the reopening. The relevant portion of judgment is reproduced as under:- "22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation re....
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.... those in the present case. The two glaring errors in the reasons in the present case are, in fact, unusual. What the AO might have done if he was aware, even at the stage of consideration of reopening of the assessment that a return had in fact been filed by the Assessee and that the extent of the accommodation entries was to the tune of Rs. 78 lakh and not Rs. 1.56 crore would be a matter of pure speculation at this stage. He may or may not have come to the same conclusion. But that is not the point. The question is of application of mind by the AO to the material available with him before deciding to reopen the assessment under Section 147 of the Act.. 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. 13. As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the....
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....nd furthermore the management structure of these companies. We are not in agreement with this submission of the revenue. It is apparent from the records of the case that the revenue was aware of the entities which subscribed to the convertible bonds. It has been urged that these are bogus companies, but we are not concerned with that at this stage. The issue before us is whether the revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso Section 147 of the Act. This can only be done if the revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts. 27. The High Court held that there was no "true and fair disclosure" in view of the law laid down by this Court in Phool Chand's case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Limited vs. Deputy Commissioner Income Tax and Another (2012) 340 IT....
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....ails of the subsidiaries in its final accounts, balance sheets, and profit and loss account for the relevant period as was mandatory under the provisions of the Indian Companies Act, 1956. It is not disputed that the assessee had obtained an exemption from the competent authority under the Companies Act, 1956 from providing such details. in its final accounts, balance sheets, etc. As such it cannot be said that the assessee was bound to disclose this to the Assessing Officer. The Assessing Officer before finalising the assessment of 03.08.2012 had never asked the assessee to furnish the details. 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerned it does not appear to be correct. There is material on record to show that on 08.04.2011 NNPLC had sent a communication to the Deputy Director of Income Tax Inves....
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.... the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example - "I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account books and the documents. His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority if he had pursued investigation on the basis of what has been disclosed. The Explanation to the section, give....
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....his stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No.1. However, that cannot lead to the conclusion that there is nondisclosure of true and material facts by the assessee. 34. It is interesting to note that whereas before this Court the revenue is strenuously urging that the assessee is guilty of nondisclosure of material facts, before the High Court the case of the revenue was just opposite. We may quote a portion of the counter affidavit filed by the revenue in response to the writ petition filed by the assessee before the High Court which reads as follows: It is evident from these facts that second proviso to Section 147 is clearly attracted in this case and first proviso to Section 147 is....
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.... putting a premium on a perfunctory discharge of duties by the assessing authority and permitting him to take advantage of his own wrong The first proviso to section 147 can be resorted to only if the assessee has not discharged the duty. Where the assessee has discharged his duty and the assessment completed under section 143 (3) is reopened with in the period of 4 years from the end of the assessment year, the assessing officer has to either show that the disclosure is not full and true or he has come into possession of some "tangible material", to borrow with respect the expression used by the Supreme Court in Kelvinator (supra), to come to the conclusion that there is escapement of income. The material must have a live link with the formation of the belief regarding escapement of income. When there is no failure on the part of the assessee to furnish full and true particulars and there is no tangible material on the basis of which the assessing officer can allege escapement of income, the only consequence would be that the assessing officer was exercising the power of review on the very same materials which he is presumed to have examined. This would amount to abuse of the powe....
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....ome and not w.r.t income of M/s BDR. The addition cannot be made to assessed income of M/s DBR u/s 68 w.r.t these entities, as the books of these entities are not part of M/s BDR for this year. The action of the AO on this account is not legally tenable and is without application of mind. (b) There are many other mistakes in the "reasons to believe" recorded by the AO (i) The status of assessment and returned income cited is that of M/s BDR and not of the individual entities wherein alleged accommodation entries have been received. (ii) The AO had mentioned at S.No. 9 that "Subsequently, action u/s 132 of the Act was carried out by the department in Himanshu Verma Group of cases on 29.03.2012" Whereas this had happened before the filing of return by all these alleged merged entities. (iii) The AO had mentioned at para 9 that "As per enquiries made a sum of Rs. 45,00,000/-, Rs. 4,50,00,000/- and Rs. 35,00,000/- totalling Rs. 5,30,00,000/- was transferred from this account to M/s Verma Buildtech & Promoters Pvt Ltd, M/s Remu Builders & Promoters Pvt. Ltd. and M/s D and S Developers Pvt. Ltd. respectively during the financ....
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....on his own, without any tangible material on record and had recorded wrong figures of transactions in reasons as well as in the assessed income. These facts indicate that he had formed his opinion on the borrowed satisfaction, on suspicion and without application of mind. (c) The first point of reopening by the AO was regarding accommodation entries received by M/s GBPL on account of share capital from two companies. The information collected by the investigation wing in 2012, was available with the AO of M/s GBPL while making assessment u/s 143(3) on 27.3.2015. The information received by the present AO in 2019 is not a new information. As the AO in March, 2015 had passed assessment in M/s GBPL u/s 143(3) after considering & verifying this information, the reopening on this ground will tantamount to change of opinion, which cannot be held to be a valid ground for reopening u/s 148. (d) The loan transactions of the in M/s GBPL and M/s VBPL & other amalgamated entities amalgamated with the appellant company with two entities Sh. Roop Kishore Madan (prop. M/s Rhea Distribution Company) and Sh. Manoj Sethi) have been presumed by the AO to be accommodation entries onl....
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....nsactions with these two entities. 12.5.2 Thus the reopening of proceedings u/s 148 made by the AO is on the basis of "Change of Opinion" in one transaction and "Suspicion" in other two transactions w.r.t different merged entities of the appellant. The reasons have been not been validly recorded in each merged entity individually as they existed as standalone entities during the year under consideration. The reasons are either based on "change of opinion" or "reason to suspect" without any tangible material on record. Even the figures of transactions mentioned in reasons are partly wrong. The addition had been made on account of these transactions u/s 68 to the returned income of M/s BDR, whereas these transactions are not part of books of M/s BDR in the year under consideration as the merger of these entities is w.e.f.1.4.2012. The reason recorded by the AO cannot be construed as "reason to believe". The reasons to believe for escapement of income recorded by the AO are based on borrowed satisfaction without any application of mind. The reliance is placed on judicial pronouncements cited above. In view of the factual and legal position as discussed above, the reopening pr....