TaxTMI 
TaxTMI 
2024 (6) TMI 1502
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....llant that the proceedings have been initiated by the AO without application of independent mind on the material available with him. In view of the above defects in the compliances the resultant reassessment proceedings are required to be annulled. (Tax Effect Rs.55,45,826/-) 3. The Ld. CIT(A) has erred both in law and in facts of the case in upholding the impugned reassessment proceedings ignoring the fact that the sanction u/s 151 of IT Act has been mechanically accorded by the sanctioning authority. (Tax Effect Rs.55,45,826/-) 4. The Ld. CIT(A) has erred both in law and on facts in confirming the estimated addition of Rs.1,19,66,989/- ignoring the fact that the estimation by the AO is arbitrary, without any Basis and, therefore, the same needs be set aside. (Tax Effect Rs.35,45,360/-) 5. The Ld. CIT(A) has erred both in law and on facts in confirming addition of Rs.64,74,000/- being cash deposits in the bank account having considered the same as unexplained deposit and bringing to tax under the head income from other sources and without prejudice, not bringing on record any reason how the nature of credits in cash is different from other credi....
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.... Polyvenyl (I) Ltd. (396 ITR 5) and Synfonia Trade Links Pvt. Ltd. in WP(c) 12544/2018. 4. Ld. Counsel further submits that the reopening of assessment is also bad in law for the reason that reopening is based on incorrect facts. Ld. Counsel submits that it is settled law that if wrong facts and wrong reasons are recorded for reopening of assessment such reopening is bad in law. Ld. Counsel submits that the AO computation of escaped income is apparently based on incorrect facts and, therefore, such factual errors show the non-application of mind. Reliance was placed on the decision of Pr. CIT Vs. M/s SNG Developers Ltd. (404 ITR 312) (Del.). Ld. Counsel submits that the SLP filed by the Revenue has also been dismissed by the Apex Court. Ld. Counsel also placed reliance on the decision of the Delhi High Court in the case of CIT Vs. Suren International Pvt. Ltd. (357 ITR 24), where proceedings were quashed as the AO wrongly quantified the escaped income. Further he also placed reliance on the decision of the coordinate bench of the Tribunal in the case of M/s Hitech Constructions Pvt. Ltd. Vs. ITO in ITA No.1605 & 1606/Del/2019. 5. Ld. Counsel further submits that in the reason....
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....t proceedings. 7. Ld. Counsel further submits that from the variation in the quantification of income in reason recorded based on the information available in ITS and which were found to be incorrect by the Ld AO at the time of passing of assessment order, it is evident that the AO has relied upon the unverified information which was found in the assessment as incorrect information. The jurisdictional Dell High Court in the case of Sh Rajiv Agarwal vs ACIT 395 ITR 0255 (Del) held that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment." The co-ordinate Bench of Hon'ble ITAT in decision of M/s R N Khemka P Ltd in ITA No.7244/Del/2019 dt: 12.08.2021 in para 32 at page 51 therein on identical facts has quashed the reassessment proceedings on ground of Non-verification of unverified information received f....
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....e AO nowhere stated which branch of the HDFC Bank and the account number of bank account in which the cash deposits of Rs.1,25,46,000/- is made. It is very much clear that while recording the reasons for reopening the AO is not in position of even the bank statement where he has alleged that the assessee made cash deposits to the tune of Rs.1,25,46,000/-. Perusal of the assessment order also reveals that ultimately on verification of bank statement the AO could only find that the cash deposits were only to the tune of Rs.64,67,000/-. This clearly shows that the AO has not applied his mind for recording reasons that the income had escaped assessment to the tune of Rs.1,25,46,000/-. There is complete nonapplication of mind by the AO. It appears that AO has not cross verified the information which he possessed with that of the bank statement before recording the reasons as there are factual inconsistencies in the reasons recorded. The proceedings-initiated u/s 148 and the reasons suggests that reopening was attempted on mere suspicion that the income to the tune of Rs.1,25,46,000/- had escaped assessment. 12. In the case of Rajiv Aggarwal Vs. ACIT (395 ITR 255) held as under: - ....
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.... 19 to 38 read as under: - "19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material. 20. Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the above said instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing". ....
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....the original assessment was processed under Section 143 (1) of the Act, and not Section 143(3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi-judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the precondition to the assumption of jurisdiction under Section 147of the Act. The reasons to believe mus....
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....es escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment." 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under: "Certain investigations were carried out by the Di....
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.... of the belief In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee. He does not also examine the return already filed to ascertain if the entry has been disclosed therein. 30.1 In Commissioner of Income Tax, New Delhi v. Highgain Finvest (P) Limited (2007) 164 Taxman 142 (Del) relied upon by Mr. Chaudhary, the reasons to believe read as under: "It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-1997, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt Credit Amt 18,11.96 305002 5,00,000 Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: I....
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.... assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional precondition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise." 33. In Rustagi Engineering Udyog (P) Limited (supra), it was held that "...the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. "Although the AO may have entertained a suspicion that the Assessee's income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. " 34. Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to believe "should have a link with ar. objective fact in the form of information or materials o....
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....e form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the considered opinion that there is complete non-application Of mind by the AO to the information received from the Investigation Wing. Therefore, in view of the decision of the Hon'ble Delhi High court in the case of Pr. CIT vs Meenkashi Overseas Pvt. Ltd. (supra), the reassessment proceedings are not in accordance with law. 32. We further find the Hon'ble Delhi High Court in the case of Sh Rajiv Agarwal vs ACIT, reported in 395 ITR 0255 (Del) has held that even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment." ....
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....ly academic in nature at this stage. 17. In the result, appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 04/06/2024 ============= Document 1 Annexúre-A Ms. NISHA GOEL. CU 59 VISHAKHA ENCLAVE PITAMPURA DELHI 110088. PAN: AIFPG0671A Reasons for reopening the case U/s 147 of the Income Tax Act. 1961 for A. Y. 2012-13 1. The assessee is an Individual who has made cash deposits of Rs.1,25,46,000/- in HDFC Bank Ltd. during the year under consideration. The assessee has not filed return of income for A.Y. 2012-13. 2. In this case, the information regarding assessee's non-filing of return of income for A.Y. 2012-13 was shown under the category of NMS. As per the information obtained from Individual Transaction Statement generated from ITD System, the assessee has entered in to following financial transactions during F.Y. 2011-12. · Made cash deposits of Rs.1,25,46,000/- in HDFC Bank Ltd. 3. On perusal of the information collected from ITS, it is observed that the assessee has made cash deposits of Rs.1,25,46,000/- in HDFC Bank Ltd during the year under consideration. 4. After obtaining information under....