TaxTMI 
TaxTMI 
2025 (2) TMI 46
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.... prerequisite condition for re-opening of assessment which can be done only on the basis of subjective belief of escapement of income and that suspicion cannot take the place of belief. Thus, the consequent reassessment order deserves to be held bad in law and additions thereof deserves to be deleted. 1.2 That the Id. CIT(A) has further erred in confirming the reopening proceedings initiated u/s 148 after four years from the end of relevant assessment year. wherein assessment stood completed u/s 143(3) of the Act, after complete verification of all details. Appellant prays that re-opening proceedings so initiated by Id.AO, without establishing any failure on the part assessee to disclose fully and truly all facts or material necessary for its assessment, is contrary to the provisions of the Act as well as bad-in-law, and hence void ab For TJARIA initio and the consequent re-assessment order deserves to be quashed. 1.3 That the Id. CIT(A) has further erred in confirming the initiation of proceedings u/s 147 in a case of assessment already completed u/s 143(3) which tantamount to re-visiting a completed assessment without any evidentiary material on record, which is....
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.... confirming addition of the trade debtors recovered during the year, by presuming the same to be accommodation entries taken by the assessee from two allegedly bogus entities, that too solely on the basis of the suspicion communicated by Investigation Unit Kolkata and also erred in making addition without rebutting the various documentary evidences furnished during the re-assessment proceedings. Thus, the addition made merely on the basis of presumptions and assumptions and on incorrect facts deserves to be deleted; 4. On facts and in the circumstances of the case the Id.CIT(A) has erred in confirming the addition of Rs. 3,75,816/- made by Id.AO, by alleging the same as commission paid on such accommodation entry alleged to have been taken by the assessee Appellant prays such addition being made on assumptions and presumptions, based on absolutely incorrect facts, without any material on record deserves to be deleted.'' 2.1 Brief facts of the case are that the assessee is a public limited company and is engaged in the business of manufacturing PVC pipes, HDPE Pipes, POY, DTY, Blankets etc. Return of Income for the year under appeal was originally filed on 29.09.2013 dec....
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....transactions and aimed only to bring unaccounted money in the guise of unsecured loan and paper work has been got up and done merely to give a colour of authenticity to the transaction and by creating a façade of legitimate transactions. After carefully examining the material available with the Department Rs. 1,50,32,635/- shown as share application money received from M/s. Raj Rajeshwari Metals & Minerals Traders Pvt. Lted and M/s. Gloroious Merchandise Pvt. Ltd.as treated as unexplained income of the assessee introduced through coloured transactions and added to the total income of the assessee u/s 68 of the Act. A further addition of Rs. 3,75,816/- was made by the AO u/s 69C as unexplained expenditure on presumption that assessee had paid commission @ 2.5% for obtaining such accommodation entry. The relevant observation of the AO at para 8 of his order is reproduced as under:- ''8. Further, the assessee had taken bogus share application money at Rs. 1,50,32,635/- in his book from the entry providers, thus an amount of Rs. 3,75,816/- i.e. @ 2.5% of Rs. 1,50,32,635/- is being added u/s 69C of the I.T. Act as unexplained expenditure of the assessee'' ....
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....eedings and the assessment order was passed by making addition of Rs. 1,50,32,635/- u/s 68 by alleging that assessee has obtained accommodation entry of share application during the year under consideration. It was submitted by the Id. AR that though the appellant vide letter dated 07.10.2019 has filed the objections for issuance of notice u/s 148 after the receipt of reasons but the Id. AO has not passed any speaking order rejecting the objections, which is contrary to the decision of Hon'ble Supreme Court in the case of GKN Driveshaft (1) Ltd. reported in 259 ITR 19 and thus reassessment proceedings deserves to be held illegal and consequent reassessment order passed deserves to be held void-ab-inito. Other main legal issue raised by the Id. AR is that the reopening was done beyond four years in the instant case wherein already assessment uis 143(3) was completed and accordingly in view of proviso to section 147, the AO has to establish that there was failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. It was submitted by the Id. AR that in the scrutiny assessment proceedings, list of unsecured loans and other ....
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....corded it was alleged that appellant has introduced its unaccounted cash in the bank account of various dummy / paper companies, without specifying as to which are those companies where appellant allegedly deposited the cash and even in the final reassessment order no such specific details have been mentioned. It clearly reflects that reasons recorded were purely mechanical in nature and are generalized, without having any specific detail and evidence related to the appellant. Decision:- 1. Information was received by the Id. AO from the Income Tax officer (Inv.), Unit- 1 & AJU, Kolkata, vide letter no. 9301 dt. 06.03.2018. As per the information and material provided by the investigation wing, it was seen that the assessee company has accepted deposits from dummy companies in the form of RTGS/ Transfer through circulatory fashion of money. The transaction appears to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. Appellant received transfer from different shell companies' a/c having no business. Number of bank accounts of these shell companies/concerns were used for effectuating the r....
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....td. (account no. 0015-R25031-050 IndusInd Bank), (3) Shivganga Suppliers Pvt. Ltd. (account no. 0015- R25020-050 Indusind Bank) (4) Intime Distributors Pvt Ltd (account no. 0015-R26085-050 Indusind Bank) (5) M/s Glorious Merchandise Pvt Ltd. (account no. 0515-AA1118-050 Indusind Bank) (6) Shivshakti Tradelink Company (account no. 0515-AA1249-050 IndusInd Bank) (7) R R Enterprise (account no. 0515-AA1250-050 Indusind Bank) (8) Raj Rajeswari Metals & Minerals Traders Pvt Ltd (account no. 0515-AA1286- 050 IndusInd Bank) were verified as mentioned in the dissemination note. Erstwhile investigation officer issued summons u/s 131 of the Income Tax Act, 1961 to all the companies as mentioned in the information, but non of representative or directors appeared on behalf of the companies. Therefore, there transactions remained unexplained. As per database of shell companies, (1) M/s Moonshine Distributors Pvt. Ltd. (2) Shivganga Suppliers Pvt. Ltd. etc are shell companies. Profiling all the companies mentioned in the STR has been done. It is found that some of them are non-filer and some of them had no business as per Profit and Loss accounts and even do not paid any rent or had any....
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....ion of money without paying any tax. Therefore it is a fit case for initiation of assessment proceeding for escapement of income by the assessee. 6. Basis of forming reason to believe and details of escapement of income: The information has been received from the ITO(Inv.), Unit-1 & AIU, Kolkata vide letter No. 9301 dated 06.03.2018 in this case. As per credible information certain bank account transactions appeared suspicious. The transactions appear to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. In course of verification, bank statements of number of accounts have been obtained. Bank account statement of the company (1) M/s Amulya Distributors Pvt. Ltd. (account no 0015-R26084-050 Indusind Bank), (2) M/s Moonshine Distributors Pvt. Ltd. (account no. 0015- R25031-050 IndusInd Bank), (3) Shivganga Suppliers Pvt. Ltd. (account no. 0015-R25020-050 IndusInd Bank) (4) Intime Distributors Pvt Ltd (account no. 0015-R26085-050 IndusInd Bank) (5) M/s Glorious Merchandise Pvt Ltd. (account no. 0515-AA1118- 050 IndusInd Bank) (6) Shivshakti Tradelink Company (account no. 0515-AA1249- 050 Indusind Bank) (....
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....it is a fit case for initiation of assessment proceeding u/s 147 of the IT Act, 1961 for escapement of income by the assessee. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India; As of now, no, such information is available in respect of the assessee 8. Applicability of the provisions of section 147/151 to the facts of the case: Provisions of Section 147/151 are applicable in the case of the assessee. In this case, a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 12.03.2016. Since, 4 years from the end of the relevant assessment year have expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped from assessment because or failure on the part of the assesses to disclose fully and truly all material facts necessary for the regular assessment for the assessment year under consideration. I have reason to believe that the above discussed income has escaped from assessment for the year under consideration and the reason ....
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....xercise power under s. 147 within a period of four years from the end of the relevant assessment year, the condition precedent to the exercise of the power is the existence of a reason to believe that any income chargeable to tax has escaped assessment. The expression 'reason to believe' must obviously be that of a prudent person and it is on the basis of the reasons recorded by the AO that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination at the stage of a reopening of assessment. When the Court is concerned with a challenge to a notice under s.148, the issue is not as to whether it can be conclusively demonstrated that income had escaped assessment, but whether as a matter of fact, there was a reason to believe that this was so, to justify a recourse to the power under s.147." 1. The requirement, thus for reopening of assessment, is "reasonable belief. This expression is not synonymous with Assessing Officer having finally ascertained the fact by any legal evidence or conclusion. In this cont....
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....ke down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs." 12. Lastly, it is well settled that the validity of the notice of reopening would be judged on the basis of reasons recorded by the Assessing Officer for issuance of such notice. It would not be permissible for the Assessing Officer to improve upon such reasons or to rely upon some extraneous material to support his action. Reference in this respect can be made to the decision of this Court in the case of Aayojan Developers v. Income-tax Officer, reported in [2011] 335 ITR 234 (Guj)" 1. In the judgement in the case of Principal CIT vs. Paramount Communication Pvt. ....
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.... sections 147 and 148 could not be rejected. [Para 11] In the light of the above, the writ petition was to be dismissed. [Para 12] 1. In the judgement in the case of Shalimar Buildcon (P) Ltd. vs. ITO(2011) 128 ITD 396: ITAT, Jaipur 'B' Bench, Hon'ble ITAT, has held:- Names of the companies were intimated to the AO by the Investigation Wing information was given that the companies belonging to B.C.&Co. were engaged in accommodation entries. 1. In the judgement in the case of ITO vs. Smt. Gurinder Kaur (2006) 102 ITD 0189: ITAT, Delhi'A' Bench, Hon'ble ITAT, has held:- The material before the AO-the letter received from the CIB-had a rational or live link with the formation of the belief that income chargeable to tax has escaped assessment in the assessee's case. The belief was bona fide held, it was not a pretence. The material gave rise to "reason to believe" and not merely "reason to suspect. No doubt as pointed out by the CIT(A), the list of 41 persons to whom K is supposed to have made gifts did not contain the name of the assessee. The AO had relied on the letter of the CIB which contained a clea....
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....jections against the reasons of reopening are not disposed by the Id. AO the assessee can challenge the same in writ petition. That itself does not per se in itself render the entire proceedings as illegal. In such several cases the view and the judgements of Hon'ble Courts have been that the assessing officer is directed to dispose off the objections. And in case in such matter, if the assessment order is also already passed, the assessment order is set aside and the proceedings are restored to the stage of disposal of objections and the assessing officer can pass the assessment order thereafter In the case of Home Finders Housing Ltd. v. Income-tax officer, Corporate Ward 2(3), Chennai [2018] 93 taxmann.com 371 (Madras) [2018] 404 ITR 611 (Madras)/[2018] 303 CTR 269 (Madras) (25-04-2018) it has been held by the Hon'ble Madras High Court that non-compliance of direction of Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer [2002] 125 Taxman 963 regarding disposing of objections by passing a speaking order, would not make reassessment order void ab initio. Relevant para of the order are as under- "19. The core question is as to whether non....
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....complying with the particular procedure. 25. The enactments like the Land Acquisition Act, 1894, contain mandatory provisions like Section 5A, the non compliance of which would vitiate the declaration under Section 6 of the Act. Even after quashing the declaration for non compliance of Section 5A, the Court would permit the conduct of enquiry and pass a fresh declaration within the period of limitation. 26. We therefore make the position clear that non compliance of the procedure indicated in the GKN Driveshafts (India) Ltd.'s case (supra) would not make the order void or non est. Such a violation in the matter of procedure is only an irregularity which could be cured by remitting the matter to the authority. The first issue is accordingly answered against the appellant." (Emphasis supplied) In the case of Saroj Jalan v. Union of India [2022] 143 taxmann.com 33. (Calcutta)[19-07-2022] it is held by the Hon'ble Calcutta High Court as under- 5. Mr. Bhattacharji, learned advocate appearing for the respondent income tax authonty, by the order of this Court dated 15th July, 2022. was asked to produce the record to establish as to whet....
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.... for a separate speaking order disposing of the objection of the petitioner. It is further submitted that, the reopening of the assessment was not inspired from change of opinion. 26. I have considered the submission of the learned counsel for the petitioner. Wide powers vested for reopening the assessment under section 148 read with section 147 of the Income Tax Act, 1961. 27. It is precisely for this reason, the Hon'ble Supreme Court had held that a speaking order should be passed after the assessee is furnished with reasons for reopening of the assessment. In this case, the safeguards enunciated by the Honourable Supreme Court in GKN Driveshafts (India) Ltd. (supra) has been ignored by directly passing the impugned assessment order. Therefore, impugned assessment order is therefore not sustainable. 28. Therefore, the impugned order is set aside and the case is remitted back to the respondent to pass a fresh order disposing of the petitioner's objection in the light of the decision of Supreme Court in GKN Driveshafts (India) Ltd. (supra)." (Emphasis supplied) The appellant could have challenged the reasons of reopening by filin....
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....orted in 268 ITR 48- challenge to the reassessment proceedings is to be done in two stages (1) challenging the reasons of reopening and (ii) challenging the assessment order. The order of the AO on the challenge to the reasons of reopening is not an appealable order. Appellant's challenge to the order of the assessing officer not disposing/rejecting the objections against the reasons of reopening and appellant's challenge to the assessment order are two separate proceedings. The CIT(A) does not have power to set aside the matter to the Id. AO whereas setting aside is the ratio of judgments in Home Finders Housing Ltd. (Supra). Saroj Jalan(Supra), Lucas TVS Itd. (Supra). Further the appellant has not filed the writ petition which is the ratio of judgements in GKN Drivesharfts (Supra) and Garden Finance (Supra). Further the status of filing of objections and disposal there off is not clearly shown by appellant. 1. Objection regarding no failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment as the case was reopened beyond four years is concerned, it is seen that appellant is having accommodation entry transactions ....
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....ME COURT OF INDIA Ajay Gupta v. Income-tax Officer 10. [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH EtiamEmediaLtd.v. Income-tax Officer-2(2) 11. [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd.v.Assistant Commissioner of Income-tax 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) 13. [2012] 18 taxmann.com 83 (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singh v. Income tax Officer 14. [1995] 83 TAXMAN 194 (MAD.)HIGH COURT OF MADRASPanchugurumurthyv.Commissioner of Income-tax 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v....
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.... (1990) 2 CALLT 1 The court observed that Rules of procedure are tools to achieve justice and are not hurdles to obstruct the pathway to justice. Where the outcome and fairness of the procedure have been followed, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvertently omitted in a particular case. 2. Temple Of Thakurji vs State Of Rajasthan And Ors. on 30 September, 1997, AIR 1998 RAJ 85, 1997(2) WLN 535. When sustained justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done due to some technical omission. 3. Jai Jai Ram Manohar Lal vs National Building Material Supply, on 17 March, 1969, 1969 AIR 1267, 1970 SCR (1) 22, AIR 1969 SUPREME COURT 1267 4. Ganesh Trading Co vs Moji Ram on 25 January, 1978, 1978 AIR 484, 1978 SCR (2) 614, AIR 1978 SUPREME COURT 484, 1978 2 SCC 91, 1978 REV LR 275, 1978 U J (SC) 162, 80 PUN LR 458, 1978 2 SCR 614, 1978 2 SCJ 98. 5. Collector Land Acquisition, Anantnag vs Mst. Katiji& Ors on 19 Febru....
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....e The Reasons for Reopening of the assessment 12. [1999] 236 ITR 34 (SC) SUPREME COURT OF INDIA Raymond Woollen Mills Ltd. v. Income-tax Officer The Hon'ble SC held that in determining whether commencement of reassessment was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of material is not a thing to be decided at this stage. 13 [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd. v. Assistant Commissioner of Income-tax Since no scrutiny assessment had taken place in instant case and there was prima facie material based on which reopening notice was issued within four years, sufficiency or correctness of material would not be considered at stage of issue of notice under section 148. 14 [1999] 103 TAXMAN 562 (PAT.) HIGH COURT OF PATNA P.K. Haldar & Co. v. Commissioner of Income-tax It is held that in writ petition arising out of notice under section 148, Court is not supposed to go into sufficiency or otherwise or correctness of materials leading to notice, but merely to see whether t....
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....re scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified. 20 [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was beneficiary of accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified. 21 [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH EtiamEmediaLtd.v. Income-tax Officer-2(2) Where Assessing Officer had specific information from DIT (Investigation) that assessee company was merely a dummy concern of a person who allegedly used dummy companies for routing his unaccounted money and, further, assessee also had certain amount of bogus share application, it could be said that there was material on basis of which notice under section 148....
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....ufficient enough to reopen assessment. 27 [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 Where evidence found during search in case of third party was sufficient to form belief that LTCG shown by assessee was in nature of accommodation entries and income to that extent had escaped assessment, issue of notice under section 148 was justified. 28 [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer Where Assessing Officer had information in form of accounts/documents received from Investigation wing that 'U' was a company run, managed and operated by entry providers and it was a penny stock and assessee had entered into transaction with 'U' to claim bogus capital gains, it could not be said that Assessing Officer, on absolutely vague or unspecific information initiated proceedings of reassessment without taking pains to form his own belief in respect of such materials. 29 [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v. Deputy Commissioner of ....
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....0 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer Where assessee sold shares and claimed exemption under section 10(38) and Assessing Officer issued a reopening notice on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since said information was specific with regard to transactions of penny stock entered into by assessee and Assessing Officer made independent enquiries and applied his mind to information and upon due satisfaction and materials gathered during enquiries, finally formed a belief that income had escaped assessment, impugned reopening notice issued against assessee was justified. 34 [2021] 131 taxmann.com 42 (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) Where AO issued a reopening notice on ground that an information was received that shares sold by assessee were of penny stock, thus, income on sale of said shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent inquiries and applied his mind and upon due satisfaction to such information finally formed a belief....
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....gs about expenses incurred relatable to tax free income there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified. 40 [2017] 79 taxmann.com 267 (SC), Larsen & Toubro Ltd. v. State of Jharkhand. 41 [2022] 140taxmann.com510 (Allahabad) HIGH COURT OF ALLAHABAD Distributors India (South) v. Union of India It is held that notice under section 148 had been issued by Assessing Officer to assessee, after conducting an investigation and going through income tax return and other related documents of assessee and after forming reason to believe that assessee had received payments under section 194J, but it had not shown said receipts in his P&L account which resulted in income having escaped assessment, reopening of assessment was justified. 3.4 We have heard the parties and perused the materials available on record. It is noted that in the present case, assessee filed its return of income in response to notice u/s 148 on 20.09.2019 and vide letter dt. 24.09.2019 e-filed on 25.9.2019 (APB 59) sought the copies of the reason recorded for initiation of proceedings u/s 148. In response, vide l....
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....also stated that the assessment for the preceding assessment year was completed u/s 143(3) wherein the sales made to these companies have been accepted and no doubts were raised about such sales. Thus, payment received as sales consideration which arises on account of sale accepted by the revenue cannot be treated as an accommodation entry. During the year under appeal, only the pending consideration was received through banking channels for which the copies of the sales invoices and the ledger accounts were submitted by the assessee. The AO has taken note of the facts of sales is proved from the perusal of the query letter dt. 28.11.2019 wherein the details related to the sales made to these companies were sought. However, no separate speaking order was passed for the disposal of the objections raised by the assessee against the reopening of completed assessment before completing the reassessment proceedings. Further, it is noted from the record that assessee has not received any such amount as loan/share capital during the year under consideration from any of such companies as mentioned in the Reasons for reopening. Basically, assessee had made certain sales in F.Y. 2011-12 relev....
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....essing officer was dutybound to dispose off objections by passing separate speaking order whether assessee makes request for the same or not. At this juncture, we take into consideration the decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. reported in 259 ITR Page 19, wherein it has been heldthat, ".....on receipt of the reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order....." However, as noted above, in the present case, no such speaking order was ever passed despite the fact that assessee has filed objections in writing, which fact is proved beyond doubt and in various subsequent proceedings the fact of pendency of disposal of such objections was intimated to the AO which was evident from the subsequent correspondence filed (APB 76- 126). It is noted that the assessee duly complied with the procedure laid down by the Hon'ble Apex court in the case of GKN Driveshafts (Supra) by filing the return of income in response to notice u/s 148 and thereafter upon receiving the copies of the reasons recorded, filed objections against the initi....
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....hich is not the object of the Income Tax Act. 9. In that view of the matter, on issue No. 1 and 2, the order of reassessment passed by the Tribunal is declared null and void. The questions are answered in favour of assessee and against the Department. 10. The appeal of the assessee is allowed." We also take into consideration the decision of ITAT Jaipur Bench in the case of Girraj Prasad Gilara HUF vs Income Tax Officer, Ward 6(5), Jaipur in ITA No. 354/JP/2019wherein it is held as under:- "Thus the requirement of disposing off the objections against the notice issued under section 148 by a separate and speaking order is a mandatory requirement in view of the judgment of the Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (supra), the failure of the AO to dispose off the objections renders the reassessment order not sustainable in law. In the case in hand there is complete failure on the part of the AO to dispose off the objections against notice u/s 148 of the Act and not merely a procedural irregularity of separate and speaking order. Accordingly, in the facts and circumstances of the case and specifically involving the issue of....
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....proviso to section 147, it is apparent that in normal circumstances, an assessment already completed u/s 143(3) can be reopened within 4 years only and reopening beyond 4 years is permissible only if there is failure on the part of assessee in disclosing fully and truly all the material facts necessary for assessment. The Bench noted that in the instant case also, assessment was already completed u/s 143(3) vide order dated 12.03.2016 (APB 55- 58), thus the re-opening proceedings initiated vide notice dated 18.03.2019 is governed by the first proviso to sec 147 of the I T Act, 1961, whereby no action could be taken u/s 147 of the I T Act after expiry of four years from the end of relevant assessment year, unless it is established that an income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment. We also noticed that in the instant case, AO at para 8 of Reasons recorded (APB 60-63), i.e. "Applicability of the provisions of section 147/151 to the facts of the case" has stated that "Since 4 years from the end of the relevant assessment year have expired in this case....
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....ould vitiate notice and the entire proceedings". In the case of DCIT v. Hyundai Motor India Ltd. 148 ITD 333 (Chen) and CIT Vs. Cholamandalam Investment & Finance Company Ltd., 309 ITR 110 (Mad) by placing reliance on the decision of the Hon'ble Apex Court in the case of CIT Vs. Kelvinator India Ltd [320 ITR 561 SC] it is held that since during the original assessment proceedings all the requisite details were filed by the assessee and after considering such details, the claims made by the assessee were duly accepted. The issues which have already been considered in the original assessment cannot be re-appreciated in reassessment proceedings under the garb of income escaping assessment. If the Assessing Officer has not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of assessee. It is further noted that during the course of assessment proceedings u/s 143(3), after proper verification of the books of account and other records the assessment was completed after making disallowance u/s 14A and any further action u/s 148 alleging Sales of preceding year as accommodation entry is mere chang....
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.... 306 ITR 343 (Rajasthan) Reassessment - Income escaping assessment - Income believed to have escaped investment explained by assessee - Tribunal rightly holding reassessment proceedings initiated on non-existing facts and invalid - Income Tax Act, 1961, ss. 147, 148. Hon'ble Court in this case has inter alia held that: 29. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." By following the aforesaid judgment, hon'ble jurisdictional high in the case of MS Prime Chem Oil Ltd. Vs. ACIT in DBITA No. 220/2017 vide order dt. 17.4.2018 has also....
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....that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under Section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his "reasons to believe" is nothing more than a report given by him to the Commissioner of Income Tax. As held by the Supreme Court in Chhugamal Rajpal, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, therefore, the action of the Respondent....
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....e, in course of original assessment proceedings, had supplied all relevant details; in assessment order which were verified and moreover, in reasons supplied to assessee there was no allegation that it had failed to disclose fully and truly all material facts necessary for assessment and because of its failure there had been an escapement of income chargeable to tax, reopening of assessment after expiry of four years from end of relevant assessment year was without jurisdiction. Hence in view of the facts and circumstances and the case laws discussed hereinabove, it is felt that since there was no independent application of mind neither by AO while initiation of reassessment proceedings by issue of notice u/s 148 nor by ld. CIT(A) - 4, Jaipur while deciding the issue under consideration. They simply proceeded on borrowed satisfaction reached by some other officials and even without making any enquiry before reaching to the conclusion of escapement of income, which is apparent from the perusal of the reasons where no specific transaction with any of the company alleged as paper companies is specifically mentioned and on general observations that no such transaction was shown by the ....
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....s not received any share capital or share application money not only from these two companies but not from any of the companies. Thus addition per-se being on wrong facts deserves to be out-rightly deleted. The Id. AR has further explained that appellant had made sales to these two parties in the preceding year and these parties were appearing as debtors at the end of FY 2011-12. In FY 2012-13 relevant to AY 2013-14, the appellant has merely received the outstanding amount from these two companies through banking channel. It was submitted that Id. AO is not justified in making the addition in AY 2013-14 when the sales have been duly declared and accepted in the preceding year, which tantamounts to double taxation on same income. Sales made in the preceding year to these two companies are supported by the sales invoice containing complete name and address at which goods were delivered, and details of transporter, truck number etc. mentioned in the invoice itself. As regards Inspector's report is concerned wherein the Inspector stated to have visited, the office address of the one of the company, it was submitted that the matter is related to FY 2011-12 and 2012-13 and it may be ....
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.... a mere self-serving statement and excuse which is not legally acceptable, as the onus is on the appellant. In the case of Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Hon'ble Calcutta High Court) it was held that production of even confirmatory letters from the lender parties before the Income-tax Officer in support of the loan alone would not suffice the loan as genuine. In the case of CIT v. Precision Finance (P.) Ltd. 11994] 208 ITR 465/11995] 82 Taxman 31 (Hon'ble Calcutta High Court) it was held that "It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a nongenuine transaction genuine." In the case of CIT v. United Commercial & Industrial Co. (P) Ltd. [1991] 1871TR 596/56 Taxman 304 (Hon'ble Calcutta High Court) it was held that the primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to ....
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....rom M/s. Vinayak Overseas and M/s JVH Gems. The purchases from above parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment the AO has recorded Statements of concerned parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment proceeding it has been gathered that the assessee has failed to produce the owners of the two concerns. The reasons like non- availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted, statement of Sh. Mohan Prakash Sharma Power of Attorney holder of M/s Vinayak Overseas stating of giving accommodation entireties only and nature and volume of transaction appearing in their bank accounts leads the AOto the conclusion that the purchases were bogus. ...... ...... 7. Before considering the matter, it will not be out of place to mention here that question which is posed for our consideration is whether the purchases which has been done from Vinayak Overseas is genuine or not. The Assessing Officer while observing at page 12 referred her....
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....t in spite of that the assessee failed to prove the genuineness of the transactions or the credits. Therefore, the Tribunal confirmed the addition invoking the provisions of Section 68 holding that once the credit entry has been made in the books of account in the names of various parties and if the genuineness of these cash credits could not be proved, the Assessing Officer was justified in making the addition of Rs. 1,12,500. 9. We can understand that they will not be available at one point of time. When the parties from whom the wool was purchased are not nomadics, it cannot be said that they have no permanent address and if they are the genuine parties, they should have some address. No person in the name of such party was found particularly when the summons were issued under Section 131 to those parties. If the transactions are genuine and if the parties have migrated somewhere else, their latest address should have been supplied and the burden is on the assessee to prove the genuineness of the transaction, when the assessee claimed that the purchases are genuine." Though the Id. AO has apparently due to typographical error used the term share application mon....
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....ability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature." In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)(08-02-1963] it is held by the Hon'ble Supreme Court as under- "It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the....
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....he creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee CIT v. R.S. Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct, (Emphasis Supplied) The appellant has not discharged the primary onus cast on it as even the complete documentation itself has not been produced before the learned AO. The nature of credit itself is not proved by the appellant. Further, these parties are found to be non- existent and bogus in different enquiries at dif....
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....ee (APB 60-63). The narration as mentioned at page 2 of ACIT, Circle-4, Jaipur order is as under:- ''3. Analysis of information collected / received: As per information, the assessee company has introduced its unaccounted cash of Rs. 1,50,43,035/- in various dummy/ paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax.'' 4. Enquiries made by the AO as sequel to information collected / received: The specific information was receive from the ITO (Inv). Unit-I & AIU, Kolkata. The information is specific and after going through this it is found that no further inquiries is necessary before recording satisfaction for issuance of notice.'' In this case, it was reiterated by the assessee that they had made sales in F.Y. 2011-12 relevant to A.Y. 2012-13 to M/s Raj Rajeshwari Metal and Minerals Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. of Rs. 68,08,020/- and Rs. 82,24,615/- respectively, which aggregated to Rs. 1,50,32,635/-. The Sales so made by the assessee were subjected to verification by AO during scrutiny assessment proceedings of A.Y.2012-13 compl....
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....leted solely on the basis of information received from investigation wing without application of mind. It is also noted that AO at page 11 of the order has observed that"...On perusal of bank accounts of all the companies, it is observed that there are cash deposits and RTGS credits and transfers from different a/cs and simultaneously the said amount transferred to the different a/cs through RTGS/transfer...." Thus it is clear from these observations that there is no specific information which substantiates the allegation of AO as to how assessee has routed his unaccounted income. Similarly, AO, though had named 8 companies in the reasons recorded, however eventually has treated only 2 companies as "shell companies". All these facts show that AO has relied upon only generalized information for making such a huge addition. Going further, AO observes that "....the assessee have paid interest to all other persons/firms from where he has taken unsecured loan except to the companies which reflects in the said report." We appreciate that these remarks also strengthen the case of assessee and are self-explanatory that sum received by assessee were not in the nature of loan as has been all....
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....blish the identity, genuineness and creditworthiness of the "INVESTOR". In reply, assessee vide letter dt. 03.12.2019 (APB 83-85) has clearly submitted that no unsecured loan or share application money from these two companies was received and only payment received was against the sales made to them. In support of the same copy of sale invoices issued containing complete name, addresses at which goods were delivered, details of transporter, Truck No. etc. and the amount of VAT charged on the same were furnished, which remained uncontroverted. Rather the AO has based her allegations on the strength of judgment of Hon'ble Apex court given in the case of NRA Iron & Steel Pvt. Ltd. which case is not applicable to the facts of the present case in appeal as the assessee in the present case has never received any unsecured loan or share application money and the amount under reference was received against the sales made. Further it is noticed that no effort was made by the Department to make verification at the address given in the sale invoices which is incidentally be the different from the address at which the spot enquiry was made by the Inspector of DDIT, Investigation Wing, Kolkata.....
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.... view of this the addition made by the learned assessing officer of Rs. 2657303 from Suresh HYP Enterprises cannot be sustained and hence, deleted. In the result ground No. 2 of the appeal of the assessee is allowed." It is noted that the assessee's case is on a better footing where the notices issued u/s 133(6) were served upon the respective parties. However, it is well known fact that usually people have a fear of ongoing inquiries and litigation by the Income Tax Department, thus non-compliance of notices u/s 133(6) could be for any reason and no adverse view be taken in the case of assessee for this reason. It is also submitted by the ld.AR that Address as mentioned in the Inspector's report is "27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012", whereas the supply of material was made to that company at the address i.e. "Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013" which was also appearing on the copies of the sale invoices (APB 86-126) submitted during the course of assessment proceedings. It therefore appears that field enquiry has been conducted by the inspector at the wrong address and adverse inference drawn on the basis of such report is not ....
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....nsported, but the AO brushed aside the same without any cogent reason. We find that it is a matter of fact that the AO made addition by relying upon the information received from Investigation Unit and some enquiries made, without even providing assessee an opportunity to cross examine. Hon'ble Apex court in the case of CCE Vs. Andaman Timber Industries, (324) ELT 641 (Case Law Paper Book pages 69-75) has held as under: "6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has spec....
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....tamping on invoices. In this regard it was submitted that observations of ld. CIT(A) are not in parity with evidence adduced before him. The attention of the Bench was invited to paper book pages 86 to 126, wherein assessee has furnished the copies of invoices of both the parties i.e M/s Glorius Merchandise Private Limited (APB 86-107) &M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. (APB 108-126). On perusal of invoices, it is clearly evident that Truck No. are clearly mentioned in the Dispatch Document No. & Transporter Name in "Dispatched through" details. Further Invoices are duly verified and properly stamped by the authorized signatory. It is further relevant to state that ld. CIT(A) has also failed to acknowledge the fact that Address as mentioned in the Inspector's report for one of the party i.e. M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. is "27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012", whereas the supply of material was made to that company at the address i.e. "Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013" which was also appearing on the copies of the sale invoices (APB 108-126). Thus, the allegation of ld. CIT(A) that asses....
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.... have further presumed that a commission of the above mentioned amount @ 2.5% might have been paid by assessee as a consideration for arranging such accommodation entry. The ld. AR submitted that firstly, no transaction in the nature of unsecured loan / share application money was entered into by Assessee Company during the year under consideration with the two companies from which it was alleged that assessee has received share application money. It is also an uncontroverted fact that the sales were made to these two parties in preceding year and assessee has received outstanding amount in the year under appeal. It was also submitted that sale made by assessee in F.Y. 2011-12 is completely genuine as has been stated in ground of appeal No. 2 above, and assessee has not taken any loan/share capital as has been alleged. Thus, in view of the same there arises no question of any commission payment. Secondly, the ld. AR submitted that this addition also is solely based upon the information received from third party absolutely uncorroborated in much as there is no material available on record to rebut the documentary evidences furnished by assessee. It is therefore submitted that the ad....
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....e assessee was found to have taken bogus share application money of Rs. 1,50,32,635/-in his books from the entry providers. Said addition of Rs. 3,75,816/-was made being 2.5% of Rs. 1,50,32,635/-, as unexplained expenditure of the assessee. 6. It may be mentioned here that the case was earlier completed on 12.3.2016 under section 143(3) of the Act, after addition of Rs. 5,12,198/-. However, the case was re-opened under section 148 of the Act, after seeking approval of the competent authority. It was re-opened on receipt of information that the assessee was found to have received a credit entry from shell/dummy/paper companies and introduced his own unaccounted cash by routing it through a web of dubious companies and by way of suspicious transactions. 7. The assessee filed his return of income on 20.9.2019, in response to the notice under section 148 of the Act, and declared current year loss of Rs. 1,90,14,577/-. Notice under section 143(2) of the Act was then served, followed by notice under section 142(1) and subsequent notices. In the assessment proceedings, the assessee was called upon to establish identity and creditworthiness of share hold....
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.... Officer. Learned DR does not dispute this factual position regarding subsequent disposal of the objections by the Assessing Officer and ultimate withdrawal of the said order disposing of the objections. The only submission put forth by Learned DR in this regard is that the same was withdrawn, as it pertained to some other case and was inadvertently uploaded as if relating it to the appellant. 10. The fact remains that the order disposing of the objections was withdrawn. 11. As regards Ld. CIT(A) having dealt with the issue of non disposal of objections by the Assessing Officer, Learned DR has contended that when CIT(A) discussed the issue of re-opening and referred to case law as regards his powers co-terminus with that of Assessing Officer, the order does not become invalid. 12. In this regard, suffice it to state that when as per requirement of the law, the objections filed by the assessee were to be disposed of by the Assessing Officer, same were required to be disposed of by the said Officer, before framing of the assessment, and not by Learned CIT(A). Therefore, there is no merit in the explanation put forth on behalf of the department on this issue....