TaxTMI 
TaxTMI 
2024 (11) TMI 1647
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....e is engaged in construction activity. It has filed its return of income on 13th October, 2016 declaring taxable income of Rs.35,36,520/-. This return was processed under section 143(1) of the Income Tax Act. The ld. Assessing Officer thereafter observed that he has received an information from Investigation Wing that the assessee had obtained bogus accommodation entry in the nature of bogus unsecured loan. According to him, this loan was obtained by the assessee in F.Y. 2014-15 relating to A.Y. 2015-16. He recorded the reasons for reopening of assessment under section 147 of the Income Tax Act and thereafter issued a notice under section 148 of the Income Tax Act on 30.03.2021. In response to the notice, assessee appeared and submitted the relevant details. 4. A perusal of the record would indicate that the assessee has obtained the short-term loan and had repaid it on the following dates:- Date Amount Cheque No. 02.04.2015 20,00,000 025478 27.04.2015 10,00,000 025481 19.05.2015 10,00,000 025487 08.06.2015 10,00,000 025490 31.03.2016 90,740 Provision of interest Date Amount Cheque No. 29.05.2015 10,0....
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....Private Limited was made. It is also not on record whether any scrutiny assessment in that case was undertaken. The material which enabled the Investigation Wing to form that opinion has never been supplied to the ld. Assessing Officer. The ld. Assessing Officer was only possessing the information or an opinion of an Investigating Officer on the Portal. Apart from that, he does not have any other material nor he tried to verify the material. When the assessee filed the copy of income tax return of M/s. New KMS Finance Private Limited, he has not thought it proper to issue a show-cause notice to that concern to verify whether it has given loan to the assessee. It is pertinent to observe that a short-time loan was taken by the assessee through account payee cheque and it was paid through banking channel. As against these materials, there is no effort at the end of the ld. Assessing Officer except the branding transaction as bogus. But how it is bogus has not been recorded. Therefore, in our opinion, the addition is not sustainable. 10. The ld. Counsel for the assessee has made a very detailed submission while challenging the reopening of assessment and we deem it appropriate to ta....
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....that there has been escapement of must have a rational connection with or relevant bearing on the information. Rational connection postulates that there must be a direct nexus or link line between the material coming to the notice of the Income Tax Officer and his view that there has been escapement of income of the assessee from assessment in the particular year. It is ot any and every material, howsoever vague and indefinite or distant, remote and farfetched which dould suggest escapement of the income of the assessee from assessment. The powers of the income tax officer to reopen assessment, though wide, are not plenary The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The live link or close nexus believing that income of the assessee the income Tax Officer and the belief which he should be there between the information before the Income Tax Officer and the belief which he has to prima facie form an opinion regarding the escapement of the income of the assessee. In support of this contention the assessee, Hon'ble Supreme Court in the case of Income Tax Officer, Calcutta and ....
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.... which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief Equate or not is not a matter for the Court to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of grounds which induce the income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income Tax Officer did not hold the belief that there had been such nondisclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearin....
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....if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about Orders made in judicial and quasijudicial proceedings. It is, therefore essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not ....
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....Any information in the case of assessee for the relevant assessment year in accordance with the risk management strategy formulated by the board from time to time: (ii) Any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or iii) any information received under an agreement referred in in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v)any information which requires action in consequence of the order of a Tribunal or a Court.] Whether it is "information to suggest" under amended law or "reason to believe" under erstwhile law the benchmark of "escapement of income chargeable to tax" still remains the primary condition to be satisfied before invoking powers u/s 147 of the Act. Merely because the revenue classifies a fact already on record as "information" may vest it with the power to issue a notice of re assessment u/s 148A(b) but would certainly not vest it with the power to issue a re-assessment notice u/s 14....
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....w KMS Finance Pvt. Ltd. M/s New KMS Finance Pvt Ltd had provided accommodation entry in the form of unsecured loan to different beneficiaries among which M/s Shanker Construction is one of them. M/s Shanker Construction had received loan of Rs.50,90,740/- during the year under consideration. As it has already been established that Mix New KMS Finance Pvt Ltd's source of fund was disclosed from bogus Kolkata based shell companies. Hence, there was no creditworthiness with M/s new KMS Finance Pvt Ltd to provide loan to different persons. Hence, the loan as accepted by M/s Shanker Construction for Rs.50.90,740/- is nothing but accommodation entry Thus, the loan taken by the assessee i.e. M/s Shanker Construction is to be treated as unexplained cash credit in the books of the assessee under the provision of section 68 of the Act. In this regard, enquiry was carried out on ITBA. e-filing portal and ITD database and on perusal of the ITR as filed by the assessee, it was observed that the assessee has not Page 2 of 4 ABOFS0800R- SHANKAR CONSTRUCTION A.Y. 2016-17 ITBA/AST/F/147(SCN)/2021- 22/1041820954(1) declared such loan in his ITR. In this regard, on perusal of the audit r....
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....received accommodation entries. It has not even been stated how is the Appellant alleged to be a beneficiary of accommodation entry of some Rs. 50,90,740/-. In absence of such basis details, the reasons are, it would be appreciated, completely vague and based on purely conjectures and surmises; It is evident that no independent application of mind or verification/enquiry has been done by the Assessing Officer prior to replying on some purported report downloaded while recording reasons to allege escapement of income in the hands of the Appellant. In absence of any enquiry by the Assessing Officer, the reasons cannot be stated to be reason to believe' of the Assessing Officer which is sina qua non for initiation of reassessment proceedings. In view of the aforesaid, the impugned reassessment proceeding, and consequential order are illegal and bad in law and liable to be quashed on the said ground alone. C. No tangible material was found It is submitted that that as required u/s 147/148 of the Act, the reasons recorded must demonstrate live link between the tangible material and the formation of the belief that income has escaped assessment. In....
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....on entry given (sic giver). The Assessing Officer adds that the said accommodation was 'a known entry operator', the source being 'the report of the Investigation Wing." [Para 20] The third and last part contains the conclusion drawn by the Assessing Officer that in view of these facts, the alleged transaction is not the bona fide one. Therefore, there is reason to believe that an income of Rs.5,00,000 has escaped assessment in the assessment year 2004-05 due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. [Para 21] As rightly pointed out by the Tribunal, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator" is even more mysterious. ....
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...." on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration. Reliance is also place in the decision of the Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax-4 vs. G and G Pharma India Ltd. reported in [2016] 384 ITR 147 (Delhi), wherein it was held the following: "12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were ....