TaxTMI 
TaxTMI 
2024 (11) TMI 952
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....03.2015 as admittedly only stated/purported search based information is made as basis to infer escapement of income, same could only be done if at all under special and specific provision of sec 153C of 1961 Act; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside; 1.2 Impugned Assessment order dated 23.03.2016 passed u/s 147/143 is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 25.03.2015 which lacks valid/requisite legal foundation and there under; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside. 1.3 Impugned Assessment order dated 23.03.2016 passed u/s 147/143 is invalid being based on invalid notice issued u/s 148 of 1961 Act dated 25.03.2015 which is based on mechanical /borrowed "satisfaction" and without any valid "tangible" material and thereunder; therefore first appeal order dated 14.03.2024 is also invalid. Both order may please be quashed and set aside. PART-2 GROUNDS ON MERITS: ABRITRARY AND NON APPLICATION OF MIND ON PART OF LD AO AND LD CIT-A 2. That Impugned Assessment order dated....
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....08, declaring income of INR 1,954/-. The same was processed u/s 143(1) of the Income Tax Act, 1961 ("the Act"). Thereafter, the case of the assessee was re-opened and notice u/s 148 of the Act was issued on 25.03.2015 and duly served upon the assessee. In response to the notice u/s 148 of the Act, the assessee company stated that the return of income already filed, to be treated as return filed in response to notice u/s 148 of the Act. Thereafter, notice u/s 143(2) and 142(1) of the Act was issued to the assessee. In response to the notice issued u/s 143(2) of the Act, the Director the company, Shri Ashok Garg alongwith Ld.AR on behalf of the assessee attended the proceedings. Thus, Assessing Officer ("AO") framed the assessment u/s 143 r.w.s. 147 of the Act vide assessment order dated 23.03.2016 and made addition of INR 25,00,000/- i.e. share application money received by the assessee as accommodation entry from M/s. Tauraus Iron & Steel Co. Pvt. Ltd.. Further, a sum of INR 50,000/- was added to the income of the assessee as commission expenses. Thus, the AO assessed income of the assessee at INR 25,51,950/- against the income disclosed by the assessee at INR 1,954/-. 4. Aggrie....
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....f assessment is based on the search. He submitted that therefore, the AO was having information about escapement of income. There is no embargo under the law that the AO cannot proceed u/s 147 of the Act, dehors the information or material is based on the search proceedings. In respect of addition that it fails the test of genuineness and creditworthiness. For this, he re-iterated the contents of written submissions. For the sake of clarity, written submissions filed by the Revenue is reproduced as under:- "In the above case, it is humbly submitted that the following material facts and relevant case laws may kindly be considered with regard to issue of accommodation having been taken by the assessee from non-descript entities being operated, managed and controlled by an accommodation entry provider Mr. Tarun Goyal. Factual Matrix & Background: There was a search conducted at the premises of Mr. Tarun Goyal resulting in the seizure of large number of incriminating documents. Inquires during the post search investigations established that Mr. Tarun Goyal was engaged in providing accommodation entries. He had floated and operated large number entities for the purpose....
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....formation contained in letter of Directorate of Investigation, the ITO could have formed opinion that there was reason to believe that income chargeable to tax had escaped assessment and he was justified in his action and merely because notice was issued on very next day of receipt of letter it did not mean that ITO did not apply his mind to the information. Further, the Hon'ble Jurisdictional Delhi High Court in the case of Paramount Communications Ltd. Vs Pr. CIT 392 ITR 444(Del) has held that the information by the investigation or the other authority is valid material for initiating reassessment proceedings. This judgment of Delhi High Court has been approved in by Hon'ble Supreme Court in 250 Taxmann 100 (SC). Hon'ble Calcutta High Court in a recent decision delivered on 13.09.2022 in the case of PCIT 1 Kolkata Vs Arshia Global Tradecom P Ltd in ITAT/175/2021 [IA No:GA/02/2021] has categorically held that when sufficient material evidence has been passed on to the AO by Inv. Wing and reassessment having been done on new facts does not amount to change of opinion. The main proposition made by the Hon'ble Court was that crucial factual aspects w....
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....Material [information/reasons would not be considered at the stage of issue of notice u/s 148: This is the proposition held by the Hon'ble Delhi High Court in the case of Saif II Mauritius company Ltd Vs ACIT [2023] 148 taxmann.com 446 [Delhi] order dated 23.03.2022. Therefore, the AO had a prima-facie case on the basis of specific and credible information about the assessee to record reasons for reopening of the assessment. The important question is......... Whether there was relevant material on which a reasonable person could have formed a belief which definitely was there in this case? Whether or not, the material would conclusively establish the escapement is not important. This aspect has to be examined subsequently in the reassessment proceedings. It is noted that the AO has applied his mind to the information available independently to arrive at the belief on the basis of material which was available with him. Hence, the AO had validly assumed jurisdiction u/s 148 of the Act by recording the reasons to believe in accordance with the provisions of the Act u/s 147 of the Act and, therefore, the ground of appeal on this....
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....ed by the AО оn 22.03.2010; upon its receipt, the assessee reiterated its earlier return on 21.04.2010. Since its response led to objections as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision under Section 124(3) (a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the reassessment proceedings. The impugned order is consequently set aside; the question of law urged by the Revenue is answered in its favour. The matter is remitted for consideration on the merits of the appeal concerning the additions made in the reassessment proceedings. 7. The Appeal is allowed is above terms." In view of the above as the assessee did not raise objections at the initial stage and therefore the above decision of Hon'ble Delhi High Court is clearly applicable to the case of the assessee. c. In addition to the above it is further submitted that the assertion of the assessee that the assessment in his case should have been made u/s 153C is legally not tenable as in this case there is no satisfaction of the AO of the searched person where such AO has record....
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.... income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated." Therefore, the first and foremost condition for initiation of proceedings under Section 153C of the Act is for the AO of the searched person to be satisfied that any assets or documents seized belong to the Assessee (being a person other than the searched person). The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong. Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets o....
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.... to some other person. The second step is after such satisfaction is arrived at-that the document is handed over to the Assessing Officer of the person to whom the said document 'belongs'. In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to for the petitions that the first step it has above. Section 132(44)(1) clearly stipulates that when, inter alla, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(1). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and co....
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....r has been proceeded under Section 132A, is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Thus, there are two stages: The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 1324 against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 1534. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the ....
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....Nova Promoters and Finlease P.ltd. [2012] 342 ITR 169 [Delhi] "The ratio of a decision is to be understood and appreciated in the background of the facts of that case. So understood, it will be seen that where the complete particulars of the share applicants such as their names and addresses, income tax file numbers, their creditworthiness, share application forms and share holders' register, share transfer register, etc, are furnished to the Assessing Officer and the Assessing Officer has not conducted any inquiry into the same or has no material in his possession to show that those particulars are false and can not be acted upon, then no action can be made in the hands of the company under section 68 and the remedy open to the Revenue is to go after the share applicants in accordance with law. We are afraid that we can not apply the ration to a case, such as the present, where the Assessing Officer is in possession of material that discredits and impeaches the particulars furnished by the assessee and also establishes the link between self confessed accommodation entry providers', whose business is to help assessee's bring into their books of account their unaccounted ....
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....er work to camouflage the bogus nature of the transactions is to be treated as unexplained credit u/s 68 Hon'ble High Court of Delhi CIT Vs Focus Exports P Ltd [228 Taxman 88] Where the assessee failed to offer a reasonable and acceptable explanation regarding the source and nature of credit, the AO is entitled to draw inference that the receipt are that of an assessable nature. Hon'ble ITAT Ahmedabad Bench CIT Vs Navodaya Castles P Ltd in Appeal No.320/2012 20.It is well settled that in order to discharge the onus the assessee must prove the identity of the cash creditor, capacity of the cash creditor to advance money towards capital, genuineness of the transactions. It the assessee has adduced evidences to establish the prima facie, the aforesaid onus shifts to the Department. However, mere furnishing of particulars or the mere fact of payment by account payee cheque or the mere submission confirmation letter by the share applicant is by itself, not enough to shift the onus to the department although these facts may along with other facts be relevant in establishing the genuineness of the transactions. Hon'ble Jurisdictional High Court of Delhi  ....
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....shifts on the deponent. Hon'ble Supreme Court State of J&K Vs Bakshi Gulam Mohd. AIR 1967 [SC] 122 Right to cross examine is not an absolute right and it depends not only on the circumstances of the case but also on the statue concerned. Hon'ble Madras High Court T. Devasahaya Nadar Vs CIT [1965] 51 ITR 20 [Mad] It is not an universal Rule that any evidence upon which the department may rely should have been subjected to cross examination. If the AO refuses to produce an informant for cross examination by the assessee there can not be any violation of natural justice. Hon'ble Jurisdictional High Court of Delhi Nath International Sales Vs UOI AIR 1992 Del 295 The right of hearing does not include a right to cross examine. The right to cross examine must depend upon the circumstances of each case and also n the statue concerned. Hon'ble ITAT Bombay GTC Industries Ltd Vs ACIT [1998] 60 TTJ [Bomb-Trib] It was held that where statement of third parties are only the secondary and subordinate material which were used to buttress the main matter connected with the amount of addition, denial or opportunity to cross examine did not amount to violation of n....
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....rred with the findings of the department that Jain Brothers are accommodation entry providers. It is also clear from the perusal of assessment order that the findings of Investigation Wing have been confirmed by assessment unit that Jain Brothers are engaged in the business of providing accommodation entries in view of commission. This finding has also been upheld by learned CIT(A) & Hon'ble ITAT. Hon'ble SMC Bench ITAT Delhi Sanjeev Kumar Aggarwal HUF [ ITA Nos. 6346/ Del/ 2019 Order dated 17.5.2022 The claim of the assessee about genuineness of the transaction having been made with a non descript/paper company not found engaged in any actual business but providing accommodation entries, was rejected. 9. I have heard Ld. Authorized Representatives of the parties and perused the material available on record and gone through the orders of the authorities below. The challenge to the assessment order is two folds; one, being against legality of re-opening of assessment and two, the AO has borrowed opinion on the facts since no independent inquiry has been made. The assessee in this regard has raised multiple grounds. It is submitted by the Ld. Counsel for the assessee ....
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....s mutandis to Section 153C proceedings also. In the facts of the case before the Hon'ble Karnataka High Court, the ld AO in his order dated 24.12.2010 for assessment year 2005-06 had held in para 4.2 that reasons formed to reopen the assessment on the basis of assessee's voluntary depositions and seized materials are in order and further that assessee's objection on that aspect has been rejected by his order dated 07.06.2010. Admittedly, no proceedings were initiated u/s 153C of the Act thereon and hence there was patent nonapplication of mind on the part of the ld AO. Accordingly assessment was duly quashed by the Hon'ble Karnataka High Court. It is further noted that the Special Leave Petition (SLP) preferred by the revenue against this decision was dismissed by the Hon'ble Supreme Court in SLP (Civil) Diary No. 7976/23 dated 27.03.2023. 6. In view of the aforesaid observations and respectfully following the judicial precedents relied upon herein above, we hold that the ld CIT(A) had rightly quashed the reassessment proceedings u/s 147 of the Act in the facts and circumstances of the instant case. We do not find any infirmity in the said order. Accordingly, the grounds r....