TaxTMI 
TaxTMI 
2024 (7) TMI 838
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....all these appeals of the aforesaid assessee are heard together and being disposed of under this common order. 3. Appeal No. ITA 85/RPR/2024 for the assessment year 2011-12 has been taken up as the lead case and our adjudication and decision therein shall apply, mutatis mutandis to the remaining four appeals pertaining to assessment year 2012-13 to 2015-16. 4. The grounds of appeal raised in the ITA No. 85/RPR/2024 are extracted as under: 1) The order of CIT(A) is illegal, bad in law and void-ab-initio. 2) On facts and in the circumstances of the case and in law, CIT(A) has erred in holding that AO had validly assumed jurisdiction to initiate proceeding u/s 147 in respect of income which was already offered for taxation and as such there was no escapement of income within the meaning of section 147. 3) On facts and in the circumstances of the case and in law, CIT(A) has erred in sustaining/ confirming re-assessment order passed by the AO in spite of the fact that re-assessment order passed by the AO is illegal as much as it has been passed without complying with the rules of natural justice and without following mandatory provisions of law. 4) On facts and in the circumsta....
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..... 15 of 2021 dt. 25.08.2022", decision of Hon'ble ITAT, Chandigarh Bench in case of "Mahaluxmi Food Industries vs. ITO in ITA No. 711/CHD/2022 cit. 01.06.2023", decision of Hon'ble ITAT, Mumbai Bench in case of "Innovative Construction P. Ltd. vs. ACIT in ITA No. 1084/MUM/2019 dt. 11.12.2020" and decision of Hon'ble ITAT, Cochin Bench in case of "Heera Kerala Developers P. Ltd. Vs. ACIT in ITA No. 243/Coch/2019 dt. 30.06.2022" clearly applicable to the facts of the case brought to his knowledge and by following decision of Hon'ble ITAT, Chennai Bench in case of "Deputy Commissioner of Income Tax Corporate Circle Vs. M/s Shree Karthik Papers Ltd. for A.Y. 2006-07 in ITA No. 325/MDS/2015" which was decided in different context and before issuing CBDT circular no. 11/2019 dated 19.06.2019. 10) The assessee reserves the right to add, amend, or withdraw any ground/grounds of appeal at the time of hearing. 5. Brief facts of the case are that the assessee is a Private Limited company, engaged in production of Ingot moulds using the pig iron, iron scrap, CTD Bar etc. The assessee had claimed to have received commission income of Rs. 1.99 Crore during the FY 2010-11. As o....
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....ry report was also furnished. In this case it has been noticed by the undersigned that huge chunk of cash was deposited in the bank account of M/s Gitanjali Book Depot (A/c No. 10650500398 with ICICI Bank shyam Bazar, Kolkata) and subsequently transferred to the beneficiary assessee company M/s Mahavir Moulds India Pvt. Ltd., Raipur in the form of accommodation entries after layering these cash through different shell entities M/s Evergrow Suppliers Pvt. Ltd. and M/s Arion Commosales Pvt. Ltd. These concerns M/s Evergrow Suppliers Pvt. Ltd. and M/s Arion Commosales Pvt. Ltd. are dummy, not carrying any business activity and are not found at their given address. Hence, the addition of Rs. 55,00,000/- as unexplained cash credits said addition is confirmed and appeal on this ground is dismissed. 3.2.4 During the appellate proceedings, the appellant company furnished documentary evidence in form of books of account and Profit & Loss Account. It is stated by the assessee that the company has maintained it's book of account on mercantile system of accounting. Further it is also stated that the assessee company has maintained it's account with M/s Arion Commosales Pvt. Ltd. on t....
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....ever, the assessee failed to furnished details regarding purchases bill regarding Shiv Trading Co. Thereafter, another notice issued on 14.12.2023 and fixed the hearing on 27.12.2023, requesting once again to provide the same. Thus, the assessee failed to furnished details regarding purchases bill regarding Shiv Trading Co. 3.3.6 Considering the above discussion, the AO is justified in making bogus purchase from Shiv Trading Co. Hence, the addition of Rs. 50,885/- u/s 69C said addition is confirmed and appeal on this ground is dismissed. 3.4.1 During the appellate proceedings, the appellant company submitted the reply, after examine the related reply and case records. There was a credible information with Ld. AO received by the Investigation Wing, Kolkata in the name of M/S Evergrow Suppliers Pvt. Ltd. And M/S Gitanjali Book Depot. The Ld. AO has recorded proper reason for with reopening the case u/s 147 of the Income Tax Act, 1961. This reopening has been done after taking proper approval from the appropriate authority. The approving authority has also applied his mind while giving the approval. It is the case of the petitioner it was stated that there was no independent....
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....017] 392 ITR 444 (Delhi) has held that information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings. The SLP filed by the assessee against the said order has been dismissed by the Hon'ble Supreme Court which is reported in [2017] 84 taxmann.com 300 (SC). In similar situation, Hon'ble Gujarat High Court in the case of Aishwarya Dying Mills Pvt Ltd Vs DCIT [2018] 94 taxmann.com 430 (Gujarat) has held that AO's fishing inquiry is valid if he receives certain information from the Investigation Wing and forms an opinion before issuance of re-assessment notice. The SLP of the assessee in this case has been dismissed by the Hon'ble Supreme Court. Hon'ble Gujarat High Court in the case of Amit Polyprints (P.) Ltd. Vs DCIT [2018] 94 taxmann.com 393 (Gujarat) has held that 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, reassessment could not be held unjustified. In the same ....
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....ttled law that if the statute requires something to be done in a particular manner, then such act has to be done in that manner alone and the same cannot be compromised in any manner whatsoever. There is no statutory provision in section 151 that the power which is to be exercised by one authority, that can be exercised by another authority. That sub section (1) and (2) of section 151 are two different provisions. These provisions empower 2 different authorities to exercise their power in 2 different circumstances. Reliance on Hon'ble Mumbai Bench of ITAT, in case of ACIT vs Bharti Axa Life Ins co. where your honor is co-author. [Page 223 to 258 of PB-2] The relevant page is 241, para 4.9.2 Proforma seeking approval in this case is at page no.231 of PB-2 - Read this Hon'ble Mumbai ITAT has held that it is a breach of requirement of section 151 and the sanction is invalid and quashed the proceedings. There are so many other judgments in which it has been categorically decided that if the statute requires something to be done in a particular manner, then such act has to be done in that manner alone and the same cannot be compromised in any manner whatsoever. Ref....
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....reasons recorded by the AO. * It is NOWHERE in the reason. * When nothing has been done by AO of his own, then how he has formed any belief or he was satisfied that there is escapement of income. * The crucial link between the information received and formation of belief is missing. * And therefore it is clear cut a case of borrowed satisfaction. * For this, we rely on judgment of our own Bench in case of Shri Tarun Pugalia Jain vs ITO [Page 61-76 of PB-21 - relevant page is 67 & 68, para 9. - read it - your honor is the author of this judgment. * Again Mumbai Bench of ITAT has held that where the AO has merely referred the information received from investigation wing and there is nothing in the reason on the basis of which it can be said that there was independent formation of belief by the AO that there was escapement of income. * For this refer page no.77 to 88 - Chetan Rajnikant Shah - relevant page is 82 & 87. * In this case the reason is similar to the reasons given in the case of the assessee. * Observation of Hon'ble Mumbai ITAT - " On perusal.... .... * Our Bench has followed the judgment of Hon'ble SC in case of Anirudh Sinhji Karan Sinhji Jade....
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.... that Arion Commosales pvt ltd has received money from Evergrow suppliers pvt ltd and then it has given money to the assessee Mahavir Moulds. * It simply means in the bank statement of Arion Commosales, there is credit entry of Evergrow suppliers and then corresponding debit entry of Mahavir Moulds. * IS IT SO? - Only material available with AO from Kolkata is Page 6 to 24 of PB-1. * FOR AY 2012-13 & AY 2015-16, REFER PAGE NO 2 OF PB-1 - FORMAT FOR GRANT OF APPROVAL - IT IS MENTIONED IN COLUMN 7 THAT AO HAS INVOKED EXP. 2, CLAUSE (a) TO SEC. 147 - IT APPLIES IN A CASE WHERE ASSESSEE HAS NOT FILED ITR. * IN THIS CASE, ASSESSEE HAS FILED ITR AND IT IS 0N RECORD. * IT SHOWS NON-APPLICATION OF MIND & CASUAL APPROACH OF THE AO WHILE RE-OPENING THE CASE. * Further, AO has sought approval on wrong facts that assessee has not filed ITR. * Notice u/s 148 issued on wrong facts - not valid - Reliance on Ankita C. Choksey [411 ITR 207, Bom.] APPROVAL GRANTED BY PCIT MECHANICALLY - PCIT DID NOT APPLY HIS MIND * Refer page 3 of PB-1 - reasons recorded - column 13 - approval by PCIT. * "Yes. I am satisfied on the reasons recorded by the AO. Sanction granted u/s 151 of the IT A....
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....CIT vs V. Ramaiah - Karnataka HC (Page 13-18 of PB-2) * Assessee requested AO supply the reasons/materials etc on 09/01/2019- page no..... PB- 1- after completion of assessment * Non compliance of principle of natural justice CHALLENGE TO INVOCATION OF SECTION 147 IN THIS CASE * Section 147 can be invoked only when income chargeable to tax has escaped assessment. * It simply means that AO has to make out a case that income chargeable to tax has escaped assessment. * In this case, AO is invoking Explanation 2, clause (b) - refer approval page 2-3 of PB-1. * Read clause (b) - It is not applicable. * Assessee has not understated the income. Assessee has shown the impugned amount as income in its books of accounts. The returned income is Nil. This fact can be borne out from the assessment order page no 1 para 1. * The AO has made out the assessment without considering the impugned amount as income. As per AO, there is business loss of Rs. 1.99 crores and income to be taxed u/s 68 is Rs. 55.00 lakhs. He, then, did not allow the business loss to be set off against income which is taxed u/s 68.[ AO's order page 4, para 4] * This is how AO has made out a case that t....
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....the books of accounts- No inquiry of any sort was made by AO - He simply rejected the income which the assessee had offered for taxation. ALTERNATIVE GROUND-SET OFF OF BUSINESS LOSS WITH INCOME TAXED U/s 68 FOR AY 2011-12 and AY 2012-13 * AO has already computed business loss of Rs. 1.99cr for AY 2011-12 and similarly AYs also. [Ao's order page 4, para 4] - Humbly submitted Hon'ble Bench should not improve upon assessment order. * Business loss can be set off against income taxed u/s 68. * Section 115BBE is effective from AY 2013-14 * Guj. HC judgment Fakir Mohd. Haji Hasan came in the year 2000 * It was overruled by Guj. HC in 2009 in Radhe Developers (205, para 14) and in 2013 in Shilpa Dyeing (191, para 10) * Kerala HC - Kerala Sponge Iron came in 2015 * It was by overruled by Kerala HC in 2019 in Vijaya Hospitality (184 para 14, 15) and in 2022 in case of Bhima Jewellers (176, para 13). * Strong reliance on D.P. Sandhu's case and United Commercial Bank Vs CIT - refer page 205, para 4 of Radhe Developers [329 ITR 001] - "suffice it to state that the Act does not envisage taxing any income under any head NOT specified in section 14 of the Act." F....
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.... Ld. AO at the time of recording the reasons to believe, Ld. AR drew our attention to the copy of reasons recorded dated 26.02.2018 at page no. 4 of the assessee's PB, the same for completeness of the facts have been extracted as under: 11. Ld. AR further took us to page no. 25 of the assessee's PB comprising of a letter dated 03.12.2018 by the Ld. AO to the ADIT (Inv.) Unit -3(4), Kolkata requesting to provide the cash / fund trail in the present case, so as to make use of such information in the assessment proceedings. In response, Ld. ADIT(Inv.), Kolkata had provided the information vide his letter dated 06.12.2018 showing trail of fund and the name of different beneficiaries along with relevant AY's and the quantum of accommodation entries each assessee has benefited with. Copies of letter from Ld. AO and response of the Ld. ADIT(Inv.), Kolkata are extracted as under: 12. Referring to the aforesaid documents, Ld. AR made a conjoint reading of the aforesaid documents, wherein Ld. AR had specifically pointed out the observations of Ld. AO from the reasons recorded, highlighting the lines that "On the basis of inquiry report of the ADIT(Inv.), Unit-3(4), Kolkata, it has been not....
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.... not provided by the investigation wing, therefore, the Ld. AO have directly issued a letter u/s 133(6) of the Act, to ICICI Bank, Kolkata on 07.12.2018, requesting for account statement of M/s Gitanjali Book Depot for the FY 2010-11 to 2014-15, in response of which the branch manager has provided the copies of bank statement partially for the period 02.12.2010 to 13.04.2012. Copy of the letter by Ld. AO to ICICI Bank, Kolkata has been furnished before us in the paper book of the assessee, which is extracted as under: 13. Ld. AR further placed his contention that all the aforesaid documents and the events occurred indicates that the Ld. AO has recorded the reasons only on the basis of narrative information received from the investigation wing, Kolkata, which too was not complete in absence of supporting documents, so as to enable the Ld. AO to look into/ notice the veracity of the information which was the sole basis to form a valid belief leading to income escaped assessment. It was, therefore, the submission, that Ld. AO had taken an action entirely on the basis of half-baked information provided by the investigation wing of the department, therefore, the same has to be termed a....
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....se of Anirudh Sinhji Karan Sinhji Jadeja Vs. State of Gujarat (1995) 5 SCC 302. In its aforesaid order, it was observed by the Hon'ble Apex Court that if a statutory authority has been vested with a jurisdiction, then, he has to exercise it according to its own discretion. It was observed that if the discretion is exercised under the direction or in compliance with some other authorities instruction, then it will be a case of failure to exercise discretion altogether. In our considered view, the cases reopened on the basis of information received from the other departments are also governed by the aforesaid principle of making an independent inquiry and recording of satisfaction by the Assessing Officer issuing notice under Section 148 of the Act. Our aforesaid view is further supported by the order of a coordinate bench of the ITAT, "C" Bench, Mumbai in the case of Chetan Rajnikant Shah Vs. ITO, 24(1)(4), Mumbai, ITA No. 1948/Mum/2018, dated 22.02.2021. In its aforesaid order the Tribunal had after exhaustive deliberations observed as under : "On a perusal of the aforesaid reasons to believe we find that though the A.O had referred to the material/information on the basis of whi....
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....y the A.O from the DGIT(Inv.), Mumbai on the basis of which the case of the assessee was sought to be reopened, but at the same time it is witnessed by a non-application of mind and failure to arrive at an independent and bonafide belief on the part of the A.O that the income of the assessee chargeable to tax had escaped assessment. Although, we are not oblivious of the fact that an A.O at the stage of recording the reasons to believe is not required to conclusively establish that the income of the assessee chargeable to tax had escaped assessment, but then, in the case before us we find that the A.O has not even recorded a satisfaction that as per him a case has been made out for issuing a notice under Sec. 148 of the Act. In our considered view, when the basic requirement that A.O must apply his mind to the material on record in order to have reasons to believe that the income of the assessee chargeable to tax had escaped assessment is found amiss, the reopening of the assessment cannot be held to be justified. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of Delhi in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (2017) 395 ITR 677 (Delhi). In the ....
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.... A.O had applied his mind to the material that he talks about since he did not describe what those material was. Observing, that without forming a prima facie opinion, on the basis of the aforesaid material, it was not possible for the A.O to have simply concluded that it was evident that the assessee company had introduced its own unaccounted money in its bank by way of accommodation entries. Accordingly, the High Court was of the view that as the basic requirement that the A.O must apply his mind to the material in order to have reasons to believe that the income of the assessee had escaped assessment was missing, the reopening of the assessment was not justified. Further, we find that the Hon'ble High Court of Delhi in the case of PCIT Vs. RMG Polyvinyl (I) Ltd. (2017) 396 ITR 5 (Del), relying on its aforesaid order in the case of Meenakshi Overseas Pvt. Ltd. (supra) had observed, that as the A.O in the case before them had merely acted upon the information received from the Investigation Wing without undertaking any further enquiry on his part thus, the link between the tangible material and the formation of the reasons to believe that the income of the assessee had escaped ass....
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.... the A.O had acted mechanically on the information supplied by the Directorate of Income-tax(Inv.) that the assessee was a beneficiary of the alleged bogus/accommodation entries provided by the aforesaid entry provider, viz. Shri Praveen Kumar Jain, and had failed to apply his mind to the material available on his record, the reopening of the assessment by him u/s 147 of the Act could not be held to be justified." We, thus, in terms of our aforesaid observations quash the assessment framed by the A.O u/s. 147 r.w.s 143(3), dated 27.03.2015 for want of valid assumption of jurisdiction on his part. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations. 14. Ld. AR taking his arguments on the issue further, had alternatively submitted that, even if it is presumed that the Ld. AO had formed a belief on the basis of material information available with him, but nothing could be conclusively brought on record as to how the cash deposited in the account of M/s Gitanjali Book Depot was further transferred to M/s Evergrow Suppliers Pvt. Ltd., and the same was further remitted in the account of M/s Arion Commosales Pvt. Ltd., which, thus, finally has brought int....
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....t the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the revenue. 7. Thus, we are of the view that even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, re-opening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanc to issue a re-opening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong facts to come to the reasonable belief conclusion that income chargeabl....
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....s to the assessee, which has been used against the assessee. If such information is not provided to the assessee, there was gross non-compliance of principle of natural justice. 18. Backed by aforesaid submissions, it was the contention by the Ld. AR that (i) that the reasons recorded are based on incorrect facts, (ii) that the reasons recorded without independent inquiry by the Ld. AO qua the facts which are the foundation of reasons to believe, (iii) that the reasons to believe are formed on the basis of borrowed satisfaction, (iv) that after recording of the reasons the relevant material regarding cash/ fund trail was not available with the Ld. AO for which he had requested the investigation wing, Kolkata to supply the same for completion of the assessment, (v) that the requisite information which was used against the assessee and has to be suo moto provided was not provided to the assessee even up to the completion of assessment and there after even on the request on the assessee, (vi) On merits nothing could be conclusively proved that the assessee had received any amount which was deposited in cash in the bank account of M/s Gitanjali Book Depot to route the same under layer....
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....e same was supplied to the Ld. AO on 06.12.2018, such fact on record shows that the relevant information regarding deposit of cash and thereafter its transmission through dummy entities under chain transactions to the beneficiary assessee was not in possession of the Ld. AO when the reasons are recorded on 26.02.2018. Moreover, as the Ld. AO had issued a communication u/s 133(6) to ICICI bank, Kolkata on 07.12.2018 seeking copy of statement of account no. 106505000398 of M/s Gitanjali Book Depot House for the FY 2010-11 to 2014-15, displays that such information could not be made available by the investigation wing also, therefore, the Ld. AO adopted the possible course of action available with him to approach the bank, under such a scenario it can not be said that the requisite information was available with the Ld. AO to verify and convincingly establish that the huge cash are deposited in the account of M/s Gitanjali Book Depot and the same have been rooted to the benefit of the assessee. Further, on perusal of the bank statement of M/s Arion Commosales Pvt. Ltd. for the relevant period, from whom the assessee company had received the commission income, which was alleged by the ....
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.... by the Ld. AO was merely a report from the investigation wing along with bank statement of M/s Arion Commosales Pvt. Ltd. The reasons recorded are showing the conviction of Ld. AO that he had noticed certain information about cash deposits from the bank statement of M/s Gitanjali Book Depot and he has reason to believe that such cash was received by the assessee in the garb of accommodation entries through M/s Evergrow Suppliers Pvt. Ltd., whereas as per facts born from records the bank statement of M/s Gitanjali Book Depot was never available with the Ld. AO, which later he obtained through proceedings u/s 133(6) directly from bank after 9 months from the date of recording of reasons. Under such facts, it can be conclusively opined that the Ld. AO had formed the reason to believe without application of mind to the material/information which was though claimed to be noticed but eventually was not available with him. Thus, the proceedings invoked u/s 147 by issuing the notice u/s 148 for reopening of the case of the assessee by merely referring to the information that was received by him from the investigation wing are found to be invalid in the eyes of law. As per the settled posi....