TaxTMI 
TaxTMI 
2025 (2) TMI 1258
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...."]''Yes" I am satisfied that it is a fit case for issue of notice under Section 148 of the Act" shows that the PCIT has not applied his mind while according sanction for issue of notice under Section 148 of the Act when all relevant material was before him?" 2. The principal question which stands posited for our consideration is whether the Assessing Officer [AO] was justified in invoking Section 148 of the Income Tax Act, 1961 [Act] basis the report which had been received from the Investigation Wing. The assessee appears to have principally asserted that this was clearly a case of "borrowed satisfaction" since full and true disclosures had been made in the Return of Income [ROI] itself. According to learned counsel for the assessee, the inclusion of share capital in Assessment Year [AY] 2010-11 had been disclosed by the assessee itself at approximately INR 11 Crores. In view of the aforesaid, it was contended that the estimation of the income liable to tax which had escaped assessment was wholly incorrect. 3. It was further averred that the AO had proceeded solely on the basis of borrowed satisfaction. Learned counsel for the respondent assessee submitted that on a ....
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....he cash received from the recipient parties for providing the accommodation entries was first deposited in the accounts of these dummy firms/ companies in the disguise of the cash received against the bogus sales, duly shown in the books of accounts. From there, this cash 6 AY was transferred to the different paper companies floated by Sh. Himanshu Verma through a complex trail of transactions, so as to hide the actual sources of funds of the last set of recipient companies of Sh. Himanshu Verma. In this way, the reserve & surpluses and the capital account of a specific set of companies are enhanced with the help of the unexplained cash received by Himanshu Verma, which is routed to these companies through their dummy firm/companies. Once the funds of these companies have been enhanced sufficiently, accommodation entries through RTGS/Cheques in the shape of the share capital, capital gains or loans as per the specific requirement of the recipient clients were provided to them in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed. It is noticed from the list of entries that the assessee M/s Ganesh Ganga I....
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....orms part of the "reasons to believe". The AO had also alluded to the statement of one Mr. Himanshu Verma, which is stated to have been recorded by the Investigation Wing and had ultimately come to conclude that there was a direct link between the information available with the Department and income having escaped assessment. This is therefore not a case where the AO has proceeded merely by treating the report of the Investigating Wing as constituting an ipse dixit and on the basis of which the requisite opinion was formed. The recordal of reasons in support of the formation of opinion is clearly demonstrative of due application of mind. 7. The Tribunal, however, has doubted the invocation of Section 148 of the Act by observing as follows: "8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus ....
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....as escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment....
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....ent. As we view the reasons which were recorded by the AO, we come to the firm conclusion that this could not have justifiably been characterized as a case of borrowed satisfaction. As is ex facie manifest from a reading of the reasons so recorded, it is apparent that the report of the Investigation Wing only prompted the AO to scrutinize the ROI and the reassessment power was thereafter exercised basis the commonality of entities which were found in the return as submitted and the report of the Investigation Wing. The AO also appears to have borne in consideration the statement of Mr. Himanshu Verma which was recorded in the course of investigation and the fact that some of the accommodation entry providers whose particulars were disclosed in that statement, were also found to be investors in the respondent. On an overall conspectus of the aforesaid, we are of the considered opinion that the Tribunal clearly erred in interfering with the exercise of power conferred by Section 148 by the AO. 10. Insofar as the issue of borrowed satisfaction is concerned and when the invocation of the reassessment power could be said to be unjustified, we deem it apposite to allude to the followi....
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....or approval read thus (page 56 of 338 ITR): "11. Reasons for the belief that income has escaped assessment.' Information is received from the DIT (Inv.- I), New Delhi that the assessee has introduced money amounting to Rs. 5 lakhs during the financial year 2002-03 relating to the assessment year 2003-04. Details are contained in annexure. As per the information amount received is nothing but accommodation entry and assessee is a beneficiary." 28.2 The annexure to the said pro forma gave the name of the beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the court observed (page 59 of 338 ITR): "The first sentence of the reasons states that information had been received from Director of Income tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during the financial year 2002-03 as per the details given in the annexure. The said annexure, reproduced above, relat....
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....rchase of assets etc., in the form of gifts, share application money, loans, etc. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee :........." 29.2 The details of six entries were then set out in the above "reasons". These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded: "The transactions involving Rs. 27,00,000, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee-company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000 has escaped assessment as defined by section 147 of the Inco....
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.... (b) to Explanation 2 of this section. Submitted to the Additional Commissioner of Income tax, Range- 12, New Delhi for approval to issue notice under section 148 for the assessment year 1997-98, if approved." 30.2 The Assessing Officer was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the chartered accountant that the assessee-company was involved in the giving and taking of bogus entries. The Assessing Officer thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the court came to the conclusion that there was prima facie material for the Assessing Officer to come to the conclusion that the assessee had not made a full and true disclosure of all the material facts relevant for the assessment. 31. In Principal CIT v. G and G. Pharma India Ltd. (supra) there was a similar instance of reopening of assessment by the Assessing Officer based on the information received from the DIT (I). There again the details of the entry provided were....
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.... 16, 2016, in W. P. (c) No. 9659 of 2015 (Rajiv Agarwal v. Asst. CIT (2017) 395 ITR 255 (Delhi)) it was emphasised that "even in cases where the Assessing Officer 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". 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the Assessing Officer one after the other. There is no independent application of mind by the Assessing Officer to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the Assessing Officer are at best a reproduction of the conclusion in the investigation report. Indeed it is a "borrowed satisfaction". The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment." 11. That only leaves us to examine whether the approval as granted would satisfy the requirements o....