TaxTMI 
TaxTMI 
2025 (3) TMI 348
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....ct that the case was reopened on the basis of the enquiry made by the Investigation Wing of the department which is an arm of the Department. 3. That the Ld. CIT (A) was not justified in deleting the addition stating that the reason to believe in this case are based on 'borrowed satisfaction' ignoring the fact that the Investigation Wing is also an arm of the Department for conducting the enquiries. 4. The appellant craves the leave to add/modify/alter any of the ground during the course of hearing/pendency of appeal" 3. The brief facts are that the assessee is a limited company, engaged in the business of trading in shares and securities. The regular return of income for A.Y 2011-12 e-filed u/s 139(1) of the Act on 26.09.2011. The Return processed u/s 143(1) of the Act and subsequently was reopened beyond four years after taking necessary approval u/s 151 of the Act and notice u/s 148 of the Act duly issued and served upon the assessee. In response thereto, the assessee again e-filed the return on 20.04.2018 declaring nil income. Thereafter, the assessee sought the reasons recorded for reopening which were supplied and the ld. Assessing Officer has stated ....
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....ly all material facts. On merits, grounds raised stating that the addition u/s 68 of the Act is uncalled for because the alleged sum merely included the funds received from sale of stock, repayment of loans, advances in the preceding year. The ld. CIT(A) dealing with the legal issue examined the reasons recorded and after a detailed discussion gave a finding that the reopening was carried out based on borrowed satisfaction and the Assessing Officer has not carried out any enquiry in order to record reasons to believe, which are sine qua non for issuance of notice u/s 148 of the Act. The ld. CIT(A) also dealt with the aspect of the approval given u/s 151 of the Act observing that it was merely a mechanical approval but there was not satisfaction of the ld. PCIT in explicit terms. Reliance also placed on plethora of decisions in support of the finding that reopening proceedings were bad in law/illegal, therefore, deserve to be quashed. Since the ld. CIT(A) allowed the assessee's appeal on legal grounds and deleted the impugned additions, grounds on merits were not dealt with. 5. Aggrieved, the revenue has now come in appeal before this Tribunal challenging the findings of the ld. ....
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....ole process is done and it is done over a period of more than two and sometimes three assessment years. At the first stage and at the third Stage, Le once at the point of creation of share capital and then again at the point of converting the inventories/investments/ loans and advances into funds for the legitimate business purpose. Liquidation of inventory of investments is the way of introducing one's own unaccounted funds in the guise of sale of unquoted investments. Assessment Proceedings As indicated above, the assessee had liquidated investments made as a result of bogus share capital raised in the assessment years2011-12, 2012-13 and 2013-14. When asked to furnish details of the same, nothing was produced. Elaborate details are available in the assessment order and hence, not being quoted. Ld. CIT(A) has relied on the order of Delhi High Court in the case of Kabul Chawla[2015 (9) TMI 80- Delhi High Court] wherein it is stated that the assessing officer while making assessment under section 153A of the Act make additions only on the basis of some incriminating material unearthed during the course search or requisition of documents or un....
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....hat the AO would be able to reopen the assessments for those years for which the assessment already stood completed at the time of the search, only if some incriminating material was unearthed during the search." The assessee stated that assessment under 143(3) was already completed through the AY 2012-13. In the quoted judgement, it was also stated: "Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of sone incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." Conclusion The Ld. CIT(A) has failed to appreciate the fact that the facts and circumstances of the cases quoted are entirely different from the facts and circumstances in the present case. In the instant case, statements of entry operator, Narendra Kumar Jain was also recorded on the date of search and the director, Anand Kumar Jain was also confronted with the same. No details whatsoever in support of the credits in ....
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....sold only in known circles. To sum up we can say that though admissions constitute a substantive piece of evidence under the income-tax laws and are relevant to the determination of liability to tax as they are quite relevant to the facts in issue but, at the same time, are weak and not conclusive of the facts admitted. They can always be retracted by an assessee by producing more positive evidences. Of course, there are occasions where the retractions made by the assessee's are not permitted by the revenue as the assessee's fail to prove such retractions on sufficient grounds. Therefore, whenever there is a retraction of admission by an assessee, the burden of proving the admission as incorrect is always on the assessee who can discharge the same by producing more reliable and cogent evidence in support of his contention. The statement of entry operator on the very date of search was a part of incriminatory material against the assessee." 6. On the other hand, the ld. counsel for the assessee vehemently argued supporting the detailed findings of the ld. CIT(A) asserting that firstly there was no proper approval u/s 151 of the Act and secondly the Assessing Officer fail....
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....e reason to believe that income chargeable to tax has escaped assessment coming within the meaning of section 147 read with proviso thereto, by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As the time limit for issue of notice as provided u/s 149 is expiring on 31/3/2018, your honour is requested to sanction permission u/s 151 read with proviso thereto to issue notice u/s 148 of the Income Tax Act, 1961. 7.1 Now, in the above reasons recorded, the assessee is stated to have received accommodation entries of Rs. 20.13 crore during F.Y 2010-11 from penny stock company. Now, going through para 6 of the assessment order, the Assessing Officer himself observed that prior to the merger of the assessee company as per the share holding position of M/s Frankdeal Traders Pvt. Ltd. as on 31.03.2009, there total share capital and security premium in M/s Frankdeal Traders Pvt. Ltd. stood at Rs. 20.13 crore. The ld. Assessing Officer has himself admitted that the same and has referred in the reasons recorded that Rs. 20.13 crore was received upto 31.03.2009 itself and that too by another company namely M/s Frankdeal....
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....the original return of income filed by the Appellant under Section 139 of the Act. d. That on 22.11.2017, there was a search in the case of the Appellant and a number of other companies at the office premises at 560, G.S. Road, Christian Basti, Opp. VIP World Showroom, Near News Live, Guwahati - 781005. At the time of search and post search investigation, it was seen that Shri Anand Kumar Jain became the director of M/s. Frankdeal Traders Pvt. Ltd. on 27.12.2010 and M/s. Frakdeal Traders Pvt. Ltd. was merged with the Appellant (i.e. M/s. Capseal Vyapar Pvt. Ltd.) wherein Shri Anand Kumar Jain and his family members are directors. e. That, on the day of the search and seizure operation on 22.11.2017, the statement of an entry operator based in Kolkata, Shri Narendra Kumar Jain was again recorded under Section 131 of the 1.T. Act. 1961 at the office of the Assistant Director of Income Tax (Inv.), Unit- 2(1), Kolkata. In the said statement also Sh. Narendra Kumar Jain has admitted that the share allottee companies of the said M/s. Frankdeal Traders Pvt. Ltd. belonged to him and his associates. The company was formed by him and had raised bogus share capital including....
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....4992M received accommodation entries of Rs. 20,13,00,000/- during the F.Y 2010-11 relevant to the A.Y 2011-12 from penny stock company/paper company. In view of the above, I have reason to believe that income chargeable to tax has escaped assessment coming within the meaning of section 147 read with proviso thereto, by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As the time limit for issue of notice as provided u/s 149 is expiring on 31/3/2018, your honour is requested to sanction permission u/s 151 read with proviso thereto to issue notice u/s 148 of the Income Tax Act, 1961. i. That, from a perusal of the above "reasons to believe" recorded by the A0 (and as reproduced above), for issuance of notice under Section 148 of the Act, it is seen that the AO has completely relied on the sanctity of the investigation done by the Investigation Wing and on the information supplied by the Investigation Wing. In the aforesaid "reasons to believe" recorded by the AO and reproduced as above, it is clear that the A0 has categorically referred again and again only to the information supplied by the I....
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....er should redo the assessment with regards to the tax on sale of assets as the documents produced by the dealer have not been examined by the assessing officer. As such, the consideration is not manifest in the assessment order. The dealer is entitled to reasonable opportunity to produce all records in support of their claim. Therefore, the tax levied on the sale of assets is set aside and the matter is remanded for fresh consideration of the assessing officer after affording an opportunity of personal hearing to the petitioner/dealer." In the case of Calcutta Discount Co. Ltd. [(1961) 41 ITR 191 (SC)], the Hon'ble Supreme Court analysed the phrase "reason to believe" and observed as under: "It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else to tell the assessing authority what inferences, whether of facts or law, should be drawn." In the case of CIT vs. Greenworld Corporation [(2009) 314 ITR 81 (SC)], it was held by the Hon'ble Supreme Court that the assessment order passed on the diktats of the higher authority, being wholly without jurisdiction, was....
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....s. Shri Devesh Kumar, Prop Dinesh Steels [2014 (11) TMI 215 - ITAT DELHI], the Hon'ble ITAT Delhi held as under: "19. In the light of aforesaid discussion, we are inclined to hold that in the extant case the AO proceeded to initiate proceedings u/s 147 of the Act and to issue notice u/s 148 of the Act on the basis of information received from Investigation Wing of the department in the form of a CD prepared by Shri Sanjay Shah and Shri Vishesh Prakash, ITOs of Unit V, New Delhi. Subsequently, the AO reproduced details gathered from the CD and without application of independent mind, held that the assessee was beneficiary of accommodation entries amounting to Rs. 4,51,000. In the main part of reason to believe, there is no mentioning of nature of transaction to establish and fortify the fact that the impugned transactions were in the nature of accommodation ITA 2068/Del/2010 entries. We also observe that there is no mentioning of date therein and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed u/s 143(1)(a) of the Act on 15.3.2005 for forming a belief that the income of the assessee had escaped assessment. ....
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....duced hereunder: "Sanction for issue of notice 151 (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself." In this rega....
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....he Act, by the AO, in the instant case, cannot be said to be based on application of mind by the Hon'ble Pr. CIT and, hence, cannot be sustained. Only because the Appellant has raised an additional ground of appeal on this issue, the undersigned has made the aforesaid legal comments on the issue at hand and it may be re-iterated that, the undersigned has great reverence for the then Hon'ble Pr. CIT and does not, in any way, wish to comment upon the acumen or wisdom of the then Hon'ble Pr. CIT. Here it would be pertinent to refer to the ratio of the judgments cited below, wherein the Hon'ble Courts have held that a mere mechanical satisfaction by the sanctioning authority by usage of words like "yes", "satisfied", "Yes, I am satisfied" etc. do not connote an independent recording of satisfaction and thus the consequential reassessment proceedings are bad in law. The Hon'ble Supreme Court in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in [(2015) 64 taxmann.com 313 (SC)] in the Head Notes has held that "Section 151, read with section 148 of Income Tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (....
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....rbed. 12. The substantial questions of law framed are answered in favour of the assessee and against the Revenue. The appeal is dismissed." 7.2 We further note that the Coordinate Bench of this Tribunal in the case of 'M/s Shankar Logistics (P) Ltd vs. DCIT' passed in I.T.A. No.829/Kol/2023 dated July 08, 2024 while relying upon the various decisions of higher Courts and even of the hon'ble Supreme Court has held that since the assessment has been reopened after four years of the end of relevant assessment year, therefore, the reopening of the assessment is bad in law and also discussed the true sense of applicability of 'reason to believe' for escapement of income to reopen an assessment by an Assessing Officer. The relevant part of the order of the Tribunal is reproduced as under: "5. We find force in the contention raised by the ld. counsel for the assessee. We find that the Assessing Officer has reopened the assessment merely based on the information received from investigation wing without verifying the veracity and truthfulness of such information. The information was wrong and the Assessing Officer reopened the assessment on the basis of borrowed satisfa....
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....of an honest and reasonable person based upon reasonable grounds and that the Income-tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. Such an action of the Assessing Officer regarding formation of belief of escapement of assessment and thereby in starting proceedings u/s 147 is open to challenge in a court of law. The entire law as to what would constitute "reason to believe" has been summed up by the hon'ble Supreme Court in the case of "Income Tax Officer v Lakhmani Mewaldas" (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s 148 of the Ac....