TaxTMI 
TaxTMI 
2026 (7) TMI 424
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....-13, and the additions made therein are illegal, bad in law, without jurisdiction and based on conjectures and surmises. 2. That the approval of the senior authority obtained, if any, is illegal and bad in law and also without any application of mind. As such, the notice issued under Section 148 and the assessment order passed are illegal, bad in law and without jurisdiction and are liable to be quashed. 3. That no notice under Section 143(2) of the Act was served within time as required under the provisions of the Act, hence the assessment order passed and the additions made are illegal, bad in law and the same are liable to be deleted. 4. That the reassessment has been made on the basis of mere change of opinion which is ex-facie perverse and hence, the assessment order and the additions made is illegal, bad in law and deserves to be annulled. 5. That the amount of paid-up capital and the share premium received by the Appellant Company is genuine and is not the income which has escaped assessment. Hence, the reassessment under Section 147 is factually incorrect and liable to be cancelled. 6. The additions made are illegal, unjust, and ....
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....that the Assessing Officer received an information from the Investigation Wing, Faridabad that the assessee has received accommodation entries by way of share premium amounting to Rs. 6,96,00,000/- from the various paper concerns controlled and operated by Shri Himanshu Verma. The AO finally made an addition of Rs. 6,96,00,000/- as accommodation entry towards share capital and share premium, under section 68 of the Act and further added commission income @ 2% for such entry under section 69C of the Act amounting to Rs. 13,64,160/-. 6. On appeal, the CIT(A) dismissed the assessee's appeal on both jurisdictional ground as well as on merits. Aggrieved, assessee is before us. 7. Assessee's main challenge is to the validity of invocation of section 147 of the Act. The learned Counsel of the assessee stated that the reason recorded by the AO do not follow the law mandated by the Act and the judicial precedents. The ld AR took us to the 'reasons recorded' at pages 32 to 37 of the paper book and pointed out that the reopening was made after four years and as the initial assessment was made u/s 143(3) of the Act, it was incumbent upon the AO to demonstrate that there was failure on th....
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....lled by Himanshu Verma, entry operator. Summons were issued to the director of the assessee company on 15.02.2019 and 28.02.2019 for personal deposition and calling for information and details to establish the genuineness of transactions made with these entities. However, there was no compliance of any sort from the assessee company. It was thus apparent that during the course of preliminary investigation itself assessee failed to explain the genuineness of share capital/ premium received (supra). iii) The Jurisdictional AO Ward 12(4), New Delhi applied his mind to the detailed information, which was altogether a new fact, recorded reasons on 11.03.2019 for initiating proceedings u/s 147 of the Income Tax Act and concluded that the information regarding accommodation entries was not there before the assessing officer at the time of original assessment u/s. 143(3) and it was case of escapement of income is the extent of Rs. 7,09,92,000/- (Ref. para 4.1 to 4.3). Thereafter, the competent authority i.e. Pr. CIT, Delhi-4 13.03.2019 having considered the reasons recorded by AO and discussing the case granted his approval u/s. 151(1) for issuing notice u/s. 148 with his hand wri....
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....inciple like in the following: a) In the case of Jayeshkumar Chhakaddas Shah v/s Gordhanji Mafaji Thakor, Civil Appeal No. 10521 of 2013 (SC), it was observed by the Hon'ble Apex Court that mere non-mention of a correct provision is not fatal to the application if the power to pass such an order is available with the court. b) In the case of J. Kumaradasan Nair Vs. IRIC Sohan 2009 AIR SCW 1921 (SC) it was observed by the Hon'ble Apex Court that when the provisions are meant to apply and in fact found to be applicable to the facts and circumstances of a case, then there is no reason as to why the court will refuse to apply the same only because a wrong provision or no provision has been mentioned. c) In the case of P.K. Palanisamy v. N. Arumugham, (2009) 9 SCC 173 (SC) the Hon'ble Apex Court held that mentioning of the wrong provision or not mentioning that provision will not make the order invalid, if the court and/or statutory authority have the requisite jurisdiction. The ld DR relied on the following Case Laws on Reopening: It is a settled legal position that at the stage of recording of reason, no final finding is require....
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....een done on new facts does not amount to change of opinion. The main proposition made by the Hon'ble Court was that crucial factual aspects which are relevant to the reopening of the assessment cannot be ignored in deciding the validity of reopening merely going on the basis as to what are the conditions to be fulfilled in order to reopen an assessment. [Reopening on information of accommodation entry from Inv. Report) Hon'ble Jurisdictional Delhi High Court in the case of Pratibha Finvest P Ltd Vs ITO [2013] 29 taxmann.com 420(Del) has held that Reopening of assessment on the basis of investigation report in case of search on third parties revealing accommodation entries received by assessee, was justified. [Bogus accommodation entry post original assessment] Hon'ble Jurisdictional Delhi High Court in the case of J MD Global P Ltd Vs PCTT [2019] 112 taxmann.com 204 (Delhi) 31.10.2019 has held that where Assessing Officer issued reassessment notice on basis of an information received from Investigation wing that assessee had received bogus accommodation entries in form of share capital, since Assessing Officer did not examine issue related to share cap....
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....etitioner company, in our view, there would be sufficient cause or justification for the AO to attribute the income to the petitioner. Thus, at this stage, there are sufficient "Reasons to Believe" that such income has escaped assessment and to reopen the assessment proceedings. Since there is relevant material to form reasonable belief in the background of the facts noted above, at this stage of the proceedings, where the AO has yet to finally adjudicate the issues, it is not for this Court to deal with the questions as to whether the reopening of the assessment would ultimately result in creating further demand. We are therefore of the opinion that the AO had sufficient tangible materials and was justified in issuing notice for assessment." [Prima-facie case] Rajat Export Import India Pvt. Ltd. Vs ITO [2012] 341 ITR 135 (Delhi)/ [2012] 252 CTR 307 (Delhi)/ [2012] 206 Taxman 50 (Delhi) "The information contained in the table itself constitutes reasons to believe, prima facie, the income chargeable to tax has escaped assessment in the hands of the petitioner. It must be noticed that the information contained in table was received by the Assessing Officer from DIT ....
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....18] 89 taxmann.com 45 (Rajasthan) where Hon'ble Rajasthan High Court held that where DIT informed that assessee-company had received share application money from several entities which were only engaged in business of providing bogus accommodation entries to beneficiary concerns, reassessment on basis of said information was justified. [Prima-facie case] Vasudev Fatandas Vaswani Vs ITO (2018-TIOL-2305-HC-AHM-IT) Where Hon'ble Gujarat High Court held that when issuing notice for re-opening assessment, the AO is only required to show reasonable belief that income escaped assessment & is not required to establish the same beyond. reasonable doubt. [Beneficiary of accommodation entry] AGR Investment Ltd. Vs Addl. CIT (333 ITR 146) (Delhi) The Hon'ble High Court upheld the notice u/s 148 and held that there was material on the basis of which notice u/s 148 could be issued as the Assessing Officer had specific information from office of DIT (Inv.) as regards transaction entered into by assessee company with a number of concerns which have made accommodation entries and they were not genuine transactions. Whether initiation of re-assessment ....
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....Tax Delhi 10 and Another, dated 26th September, 2011 and decision of Bombay High Court in Writ Petition No. 1017/2011. The Indian Hume Pipe Company Limited versus The Assistant Commissioner of Income Tax, dated 8th November, 2011 are two such cases. In the first case, the Assessing Officer in the original assessment had made additions of Rs. 19,86,551/- under Section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details etc. were not furnished, were to the extent of Rs. 52.84,058/- and not Rs. 19,86,551/-. In Indian Hume Pipe Company Limited (supra), after verification the claim under Section 54-EC was allowed but subsequently on examination it transpired that the second property was purchased prior to the date of sale. The aforesaid decisions/facts cases must be distinguished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did not appreciate the implications or did not apply the correct law. The second category will be a case of change of opinion and cannot be reopened for the reason that the assessee,....
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....ng undisclosed investments was not subject matter of earlier re-assessment proceedings and there was fresh material for A.O., it would not be a case of change of opinion. 3. SC in the case of ESS ESS Kay Engineering co. Pvt. Ltd. 247 ITR 818. This is a case of reopening. We have perused the documents. We find there was material on the basis of which the Income-tax Officer could proceed to reopen the case, it is not a case of mere change of opinion. We are not inclined to interfere with the decision of the High Court merely because the case of the assessee was accepted as correct in the original assessment for this assessment year. It does not preclude the Income-tax Officer to reopen the assessment of an earlier year on the basis of his findings of fact made on the basis of fresh materials in the course of assessment of the next assessment year. The appeal is dismissed. No order as to costs. 4. Delhi High Court Consolidated Photo and Finvest vs Asst. Commissioner of Income Tax, 281 ITR 394 Delhi. We have also seriously, considered the entire case law from which aforesaid paragraphs are relied on. In so far as the expressions "reason to believe" and "chang....
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....ed and determined by the assessing officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening computed assessments would be applicable only to situations where the assessing officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the assessing officer either generally or in the form of a reply to the questionnaire served ....
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....thority is not required to give reasons when it agrees with the finding unless statute or rules so requires." It was further held that there is no requirement to provide elaborate reasoning to arrive at a finding of approval when the PCIT is satisfied with the reasons recorded by the AO. 5. Virbhadra Singh Vs Deputy Commissioner, Circle Shimla [2017] 88 taxmann.com 888 (Himachal Pradesh) Where the competent authority was in agreement with the reasons assigned by the Assessing Officer, so placed before him, which came to be considered and sanction accorded with proper application of mind, by recording "I am satisfied that it is a fit case for issuance of notice u/s 148", the issuance of notice under section 147/148 was held to be valid. 6. That the Hon'ble Delhi Court in the case of Experion Developers (P.) Ltd. v. ACIT [2020] 115 taxmann.com 338 (Delhi) in WP (C) NOS. 11302, 11303 OF 2019 CM APPL NOS. 46536 ΤΟ 46539 & 46540 ΤΟ 46542 OF 2019 FEBRUARY 13, 2020, While discussing Section 151 of the Income-tax Act, 1961-Income escaping assessment - Sanction for issue of notice (Recording of reasons) held that where necessary sanctio....
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.... Mohad. AIR 1967 [SC] 122, und Nath International Sales Vs UOI AIR 1992 Del 295 that the right to hearing does not include a right to cross examine. The right to cross examine must depend upon the circumstances of each case and also on the statue concerned. Further reliance was also made on T. DevasahayaNadar Vs CIT [1964] 51 ITR 20 [Mad.] and GTC Industries Ltd. Vs ACIT [1998] 60 JTJ [Bomb-Trib] 308. Further reliance is also taken on the following decisions: Durga Prasad More 82 ITR 540; Sumati Dayal 214 ITR 801 and McDowell & Co. 154 ITR 148. So far as the reliance by the appellant on several judgments presuming to be in its favour it is submitted that in those case the direct evidences, as available in this case were not available before the Hon'ble Benches hence, they are not applicable in this case. As the facts are always distinct and separate in each case the principles of one case cannot be applied blindly to another case. In Union of India Vs Major Bahadur Singh [2006] 1SCC 368 [Para 9 & 11] the Hon'ble Supreme Court held that the observations made in a judgment must be read in the context in which they appear to have been stated....
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....Singh, Mahinder Singh M/s Ish Buildcon (P) Ltd 87 Kanal, 10 Marla, Samyapur, Ballabgarh 15,31,25,000 23.08.2010 2.2 This information originated from the survey operation u/s 133A of the Income Tax Act, 1961 carried out on the premises of Shriji Group of concerns on 21.11.2013. The DDIT(Inv-I), Faridabad in the above quoted letter(s) has stated that the source of the funds for the purchase of this property by the assessee company remains unverified. 2.3. As per report received from DDIT(Inv-I), Faridabad M/s Ish Buildcon Pvt. Ltd. has also entered into sale / purchase agreement in respect of one more property as detail as under:- S. No Name and address of the seller Name and address the buyer Land of particulars Price/value of total agreement Date of Agreement 1. Dalip Singh M/s. Ish Buildcon (P) Ltd. 2 Acre, 1 3,79,19,375 14.03.2011 2.4. It may also be mentioned that as per the survey report dated 15.06.2015, the assessee company has taken accommodation entries during A.Y. 2012-13 as per Sr. No. Date on which fund received No. of shares Amount of share capital Amount of premium Total Nam....
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.... 3500000 Saffron Logistics Pvt. Ltd. AANCS7939J Himanshu Verma 20. 14.05.2011 10000 100000 4900000 5000000 Timely E Net Solution Pvt. Ltd. AADCT4113F Himanshu Verma 21. 23.11.2011 4000 40000 1960000 2000000 Timely E Net Solution Pvt. Ltd. AADCT4113F Himanshu Verma 22. 23.11.2011 6000 60000 2940000 3000000 Timely E Net Solution Pvt. Ltd. AADCT4113F Himanshu Verma 23. 26.12.2011 10000 100000 4900000 5000000 Bliss Buildcon Pvt. Ltd. AAECB4597Q Himanshu Verma Total 1392000 68208000 69600000 2.5. It has also been mentioned in the survey report that in spite of repeated opportunities the assessee company did not submit any satisfactory explanation or reply to prove identity, genuineness and creditworthiness of the above mentioned share capital/premium. 2.6 Furthermore, in the post-survey investigation it was found that the many of the entities which have introduced bogus share capital/premium are controlled and managed by an accommodation entry operator Sh. Himanshu Verma of Delhi. It is rele....
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....hed accommodation entry provider) is exactly same as filed by assessee its ITR for the A.Y. 2012-13. It is further gathered from the ROC website that the share premium charged from above 10 companies is Rs. 490/- per share as against Rs. 90 as premium charged from promoters/director of the assessee company and their family members. 3.3 It is also relevant to mention here that a search operation was also conducted on 29.03.2012 by the Investigation Wing on Shri Himanshu Verma group. During search, it was established that Shri Himanshu Verma was controlling many paper entities for providing various kind of accommodation entries to difference beneficiaries in lieu of unaccounted cash after charging fixed percentage of commission. During the investigation in the case of Shri Himanshu Verma his complete modus operandi of providing various kind of accommodation entries was established. The name of 23 companies to whom shares were allotted in AY 2012-13 as detailed above are appearing in the list of paper companies controlled by Shri Himanshu Verma. 3.4 It may be mentioned that on an earlier occasion, information was received from Investigation Division, Faridabad in whi....
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....roup. 3.7 The above discussion makes it very clear that the assessee company has been involved in taking accommodation entry for routing its unaccounted income in the books through hawala operators. Further, during the investigation made at Faridabad as well as during the reassessment proceedings, the assessee could not explain the sources of funds used for purchasing above mentioned immovable properties. Moreover, as per information available with this office assessee company has received accommodation entries amounting to Rs. 6,96,00,000/- from companies controlled by Himanshu Verma and the same was used for the above mentioned immovable properties part payment. Thus, the source of Rs. 6,96,00,000/- remained unexplained and thus income to the extent of at least Rs. 6,96,00,000/- has escaped assessment. 3.8 During the AY 2012-13, the assessee company has received bogus share capital/share premium of at least Rs. 6,96,00,000/- from the shell compaies controlled by Shri Himanshu Verma, a well established accommodation entry operator shares were allotted during the year @ 500/- per share (Rs 10 face value plus Rs. 490 per equity share). 3.9 Further, it is e....
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....nd the ITR was processed u/s 143(1) of the Act. Thereafter case was selected for scrutiny. under CASS and the case was assessed u/s 143(3) of the Act at retuned income. However, in this case it is pertinent to mention here that above information i.e. assessee company has received accommodation entries from the companies managed and controlled by Sh. Himanshu Verma, an established accommodation entry provider was available with the AO at the time of scrutiny assessment u/s 143(3) of the IT Act, 1961. This information was received in this office later. Hence, in this case I have reason to believe that an amount at least of Rs. 7,09,92,000/- has escaped assessment. 4.4 In this case, four years but not more than six years have elapsed from the end of the assessment year under consideration and income chargeable to tax which has escaped assessment is more than Rs. 1 lakh necessary sanction to issue notice u/s 148 of the Act is being obtained separately from the Pr. Commissioner of Income Tax, Delhi under amended provisions of section 151 of the Act w.e.f. 01.06.2015. (Faqir Chand) Income Tax Officer Ward-12(4), New Delhi 10. The admitted fact is that the reopening i....
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....d assessment. The language of section 147 requires the Assessing Officer to have a reason to believe and not a reason to suspect. The reason to believe that income of an assessee has escaped assessment must be bona fide and reasonable. It is also settled that the material on which the Assessing Officer forms his opinion must not be the same material which had been considered at the time of the initial assessment, as in that case, the proceedings under section 147 of the Act would amount to reviewing the assessment order merely on a change of opinion, which is not permissible. 11. By virtue of the proviso to section 147 of the Act, an assessment, which has been concluded under section 143(3) of the Act-that is, the return filed by the assessee was scrutinised and verified by the Assessing Officer-cannot be reopened after the expiry of four years from the end of the relevant assessment year unless the condition as specified under the proviso to section 147, is met; that is, the income of an assessee has escaped assessment on account of failure on the part of the assessee to make a return, either under section 139(1) of the Act or pursuant to a notice under section 142(1) of ....