TaxTMI 
TaxTMI 
2025 (4) TMI 1903
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....e assessee appellant. 3. That on the facts and in the circumstances of the case and in law, the Ld. Lower Authorities have grossly erred in not providing the opportunity of cross-examination to the assessee appellant and have also grossly erred in ignoring the retraction filed by Shri Mukesh Banka before the Investigation Wing. 4. That on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming addition of Rs. 1,40,00,000/- u/s. 68 of the Act on account of alleged accommodation entries received by the assessee appellant. 5. That on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming addition of Rs. 1, 40,000/- u/s. 69C of the Act on account of interest paid on the alleged accommodation entry by the assessee appellant. 6. That on the facts and in the circumstances of the case in law, the Ld. Commissioner of Income Tax (Appeals) grossly erred in confirming addition of Rs. 3, 50,000/- u/s. 69C of the Act on account of commission paid on the alleged accommodation by the assessee appellant. ....
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....u/s. 148 of the Act was issued vide dated 28.03.2019. After detailed deliberations on the issue between the assessee and the AO ultimately case of the assessee was assessed after making additions of Rs. 1,91,00,495/- u/s. 68 of the Act Rs. 1,91,004/- as interest on the amount of unsecured loans and Rs. 4,82,287/- as commission @ 2.5% on unsecured loans and interest thereon. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT(A) who in turned partly allowed the appeal of the assessee by reducing the amount of addition made u/s. 68 of the Act from Rs. 1,91,00,495/- to Rs. 1.4 Cr. Further relief was given on account of interest disallowance from Rs. 1,91,004/- to Rs. 1.4 lacs and commission disallowance was also reduced from Rs. 4,82,287/- to Rs. 3.5 Lacs. The assessee being not satisfied with the order of first appellate authority preferred the present appeal before us and there is no counter appeal by the department against the relief given by the Ld. CIT(A). 5. We have gone through the order of the AO, order of the Ld. CIT(A) and submissions of the assessee along with grounds taken before us. We have gone through the notice issued u/s. 1....
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.... him to touch upon any other issue for which no reasons have been recorded. This interpretation was regarded by the Parliament as being contrary to the legislative intent. Hence, the Explanation 3 came to be inserted to provide that the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently in the course of proceedings under section 147, though the reasons for such issue have not been included in the reasons recorded in the notice under section 148(2). [Para 8] The effect of section 147, as it now stands after the amendment of 2009, can, therefore, be summarised as follows : (i) the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year; (ii) upon the formation of that belief and before he proceeds to make an assessment, reassessment or recomputation, the Assessing Officer has to serve a notice on the assessee under sub-section (1) of section 148; (iii) the Assessing Officer may assess or reassess such income, which he has reason to believe, has escaped assessment and also any other income chargeable to tax which has escaped assessment and which c....
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....that the assessment or reassessment must be in respect of the income in respect of which he has formed a reason to believe that it has escaped assessment and also in respect of any other income which comes to his notice subsequently during the course of the proceedings as having escaped assessment. If the income, the escapement of which was the basis of the formation of the reason to believe, is not assessed or reassessed, it would not be open to the Assessing Officer to independently assess only that income which comes to his notice subsequently in the course of the proceedings under the section as having escaped assessment. If upon the issuance of a notice under section 148(2), the Assessing Officer accepts the objections of the assessee and does not assess or reassess the income which was the basis of the notice, it would not be open to him to assess income under some other issue independently. The Parliament, when it enacted the provisions of section 147 with effect from 1-4-1989, clearly stipulated that the Assessing Officer has to assess or reassess the income which he had reason to believe had escaped assessment and also any other income chargeable to tax which came to his n....
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....t . The words 'and also' are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by the Parliament. This view has been supported by the background which led to the insertion of the Explanation 3 to section 147. The Parliament must be regarded as being aware of the interpretation placed on the words 'and also', by the Rajasthan High Court in CIT v. Shri Ram Singh [2008] 306 ITR 343. The Parliament has not taken away the basis of that decision. While it is open to the Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of section 147(1), as they stood after the amendment of 1-4-1989, continue to hold the field. [Para 17] The question of law would, accordingly, stand answered against the revenue and in favour of the assessee. The appeal was, accordingly, to be dismissed. [Para 18] Further the jurisdictional Hon'ble High Court of Rajasthan in the case of CIT v. Shri Ram Singh [2008] 306 ITR 343, held as under: "8. On the other hand, learned counsel for the assessee submits, that the bare reading of the language of section 147, rath....
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....oesn't require any interference. 9. We have considered the submissions, and have gone through the judgments cited at the Bar, so also the impugned judgment of the learned Tribunal. 10. a look at the judgment of the learned Tribunal shows, that it substantially proceeds on its earlier judgment, in the case of Maruti Guar Gum (P) Ltd., dated. 13th Aug., 2004. Since learned counsel for the Revenue pointed out, that appeal against that judgment has already been filed, and is pending before this Court, we requisitioned that file, and have gone through that order also, and find, that that order basically proceeds on the basis, that the reasons for reopening were consistently demanded by the assessee, but were not supplied, and then it has been found on merits, by holding, that otherwise also, the facts are, that the assessee had received rent in connection with leased godowns and factory premises, the claim of depreciation was made by the assessee in the returns of income, therefore, in the opinion of the Tribunal, no income chargeable to tax can be said to have escaped assessment. Then reference is made to judgment of Punjab & Haryana High Court, in Atlas Cycle Ind....
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.... we have been able to decipher the reasons, appear to have existed in the mind of the learned Tribunal, though succinctly expressed, on a subsequent occasion, in Dr. Devendra Gupta's case. 14. It is in the above situation, that the question as framed is required to be examined by us. Before proceeding further we may gainfully quote the relevant provisions of section 147, which read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)" 16. With this, a look at the judgment cited by Mr. Bissa, being in Rajesh Jhaveri's case, and Jagan Nath Singhal's case, do show, that those judgments are sl....
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....was found, that the material on the basis of which the reason to believe was entertained, did also exist, at the time of passing of the original order of assessment, and it was not the case of the AO, that when he made the original assessment order, he was not aware of the true legal position. 20. Then we come to the judgment of Punjab & Haryana High Court, in Atlas Cycle Industries' case, which is a case, precisely on the point, inasmuch as, in that case, the Tribunal referred for the opinion of the High Court, the question viz., whether on the facts and in the circumstances of the case the Tribunal was right in law in cancelling the reassessment made by the ITO. 21. Dealing with this question, it was held by the High Court, that the Tribunal was right in cancelling the reassessment, as the two grounds, on which the reassessment notice was issued, were not found to exist, and the moment such is the position, ITO does not get the jurisdiction to make reassessment. Of course for this proposition, reliance was placed on Bankipur Club Ltd.'s case, and another judgment of Hon'ble the Supreme Court, in CIT vs. A. Raman & Co., which in turn, again was a case....
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....le to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year)." 26. But then if it were to be so read, the word "also" becomes redundant, and to make sense of the sentence, the section would be required to be read by ignoring the words "also", as well, in which event, the section would read as under: "147. If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the r....
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....ssment under section 148/147 were initiated by the AO, on non-existing facts. Because ultimately the assessee has been able to explain the income, which was believed to have been escaped assessment, was explainable. It is further held, that the AO was justified in initiating the proceedings under section 147/148, but then, once he came to the conclusion, that the income, with respect to which he had entertained "reason to believe" to have escaped assessment, was found to have been explained, his jurisdiction came to a stop at that, and he did not continue to possess jurisdiction, to put to tax, any other income, which subsequently came to his notice, in the course of the proceedings, which were found by him, to have escaped assessment. 6. In view of the above judicial pronouncements on the subject, it is observed that the Ld. AO has further erred in re opening the assessment without recording any subjective belief as to escapement of income and has merely acted upon suspicion formed on the basis of so-called information received from some other officials, by completely ignoring the prerequisite condition for re-opening of assessment which can be done only on the basis of subject....
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.... entity Amount M/s. Alves Securities (P.) Ltd. Rs. 11,00,000/- M/s. Nector Business (P) Ltd. Rs. 50,00,165/- M/s. Harshita Finance and Investment (P) Ltd Rs. 15,00,0055/- Total Rs. 76,00,220/- In view of the above it is observed that such additions made merely on the basis of information received from other officials in a very casual manner, without verifying the facts with a very casual approach and is absolutely unwarranted. 10. It is further observed that the AO has grossly erred in making addition of Rs. 1,91,004/- by presuming the same to be Interest paid at 1 percent per month for one month, on the amount alleged to have been received by the assessee as accommodation entry, in the shape of unsecured loans arbitrarily by not appreciating the basic fact, that the assessee had not received any such amount as unsecured loan from any of the entities during the year under appeal. Thus question of making any payment of interest does not arise more so no such interest was claimed by the assessee in its Profit and Loss account. 11. So in view of the above discussions, despite of the fact that the assessee submitted clearly that he issued shares for ....
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....490154(1) Notice Under Section 148 Of The Income Tax Act, 1961 Sir/ Madam/ M/s, Whereas I have reasons to believe that your Income chargeable to Tax for the Assessment Year 2012-13 has escaped Assessment within the meaning of section 147 of the Income Tax Act, 1961. I, therefore, propose to assess/ re-assess the income/ loss for the said Assessment Year and I hereby require you to deliver to me within 30 days from the service of this notice, a return in the prescribed form for the said Assessment Year. This notice is being issued after obtaining the necessary satisfaction of the PCIT 1, JAIPUR कोष मà¥à¤²à¥€ वणà¥à¤¡ INCOME TAX DEPARTMENT SUNIL VERMA ITO WD 2(2), JPR (In case the document is digitally signed please refer Digital Signature at the bottom of the page) Document 2 GOVERNMENT OF INDIA MINISTRY OF FINANCE INCOME TAX DEPARTMENT OFFICE OF THE INCOME TAX OFFICER ITO WD 2(2), JPR To. SHRI SALASAR BALAJI DEVELOPERS PRIVATE LIMITED A-13-14 SHYAM NAGAR,BENAR ROAD NADI KA PHATAK, JHOTWARA JAIPUR 302012,Rajasthan India PAN: AY: Dated: Notice No : ITBA/AST/F/142(1)/2019-20/101827141....
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....er will be decided on ment u/s 144 of I.T Act, 1961 and an addition of Rs. 2,01,00,440/- will be made on the basis of available information. 7. In view of decision of Hon'ble Apex Court in the court in the case of GKN Driveshafts reported in 259 ITR 19. Reasons recorded for re-opening of case u's 147 of the I.T Act, 1961 provided as under :- 1. Brief details of the Assessee; The assessee has filed return of income on 13.09.2012 declaring total income at Rs. 401360/-, This case was taken up for scrutiny by GASS and accesoment u/o 143(3) wao completed on 3.2.2015 at returned income. 2. Brief details of information collected/ received by the AO. The information was received from the office of the DDIT (Inv.). Unit-4(2). Kolkata vide letter No. DDIT (Inv.)/U-4(2)/Kol/Babylon/2018-19/7534 dated 27.2.2019. As per the information the assessee has received Rs. 25,00,000/- during F.Y. 2011-12 relevant to A.Y. 2012-13 through Transfer/ RTGS. The mechanism was operated by well known entry operator Sh. Gopal Banka and Shri Manohar Lal Nargalia through the company M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABCB2826R). The company is used for providing accommodation ent....
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....ated 26.2.2019 the assessee is in receipt of Rs. 2,01,00,440/- (Rs. 2500000 + 1100000 + 16500440) through accommodation entry from M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABCB2826R), M/s Alves Securities Pvt. Ltd. (PAN: AAJCS6641B) and paper/sheil companies managed/ controlled by Sh. Mukesh Banka whereas the assessee filed return for A.Y. 2012-13 declaring income at Rs. 491360/-, Hence the amount of accommodation entry Rs. 2,01,00,440/- is not verifiable. 3. Findings of the AO: The assessee has taken accommodation entries of Rs. 2,01,00,440/- (Rs. 2500000 + 1100000 + 16500440) from the entities which are managed and controlled by the M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABCB2826R), M/s Alves Securities Pvt. Ltd. (PAN: AAJCS6641B) and paper/shell companies managed/ controlled by Sh. Mukesh Banka. These companies are used to for providing accommodation entries. The assessee is a beneficiary of accommodation entry. 4. Basis of forming reason to believe and details of escapement of income: The assessee has taken credit entry in the form of accommodation entry from the entities which are managed by M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABCB2826R)....
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....3 declaring total income of Rs. 4,91,360/- on 13/09/2012, the same processed u/s 143(1). The case of the assessee company selected for scrutiny & case was assessed under section 143(3) on 03/02/2015 at Rs. 4,91,360/-, Thereafter, the case was reopened for re- assessment proceedings, the gist of grounds is discussed as under :- As per information was received from the office of the DDIT (Inv.). Unil-4(2), Kolkata vide letter No. DDIT (Inv.)/U- 4(2)/Kol/Babylon/2018-19/7534 dated 27.2.2019. As per the information the assessee has received Rs. 25,00,000/- during F.Y. 2011-12 relevant to A.Y. 2012-13 through Transferf RTGS. The mechanism was operated by well known entry operator Sh. Gopal Banka and Shri Manohar Lal Nangalia through the company M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABC82826R). The company is used for providing accommodation entries. The assessee has taken accommodation entry from these companies. Further, the information was received from the ofice of the DDIT (Inv;), Unit-1(3), Kolkata vide letter No. DDIT (Inv.)/U- 1(3)/Kol/ALVES/2018-19/9035 dated 28.2.2019. As per the information the assessee has received Rs. 11,00,000/- during F.Y. 2011-12 relevan....
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..... In response to the said notices & show cause notice the AR of the assessee company vide email dated 03/09/2019, have raised certain objections, all the objections have been dealt with in compliance to the observations of the Hon'ble Apex Court in the case of GKN Driveshafts (India) Ltd Vs ITO -259 ITR 19. The objections made by the assessee company briefly Document 7 discussed as under :- 2.1 . That point no. 1, the AR of the assessee company informed about filing of ITR. 2.2 That point no. 2, the AR of the assessee company informed regarding business premises of the assessee company. . 2.3 That point no. 3, the AR of the assessee has informed about filling of computation of Income. 2.4 That point no. 4, the AR of the assessee company informed regarding providing copies of bank statements. 2.4 That point no. 5, the AR of the assessee company denied to taken any accommodation entry & objected as alleged transactions stating that :- The assessee has not taken entry any accommodation entries from the entities mentioned in the notice. However, the assessee has received share application money amounting to Rs. 25,00,000/- from M/s Babylon Trading & Investmen....
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....unts. Reply of assessee company Document 8 with regards to accommodation entries from Mukesh Banka group not found acceptable. The facts of case discussed in the forthcoming paras. 4.0 In the case of the assessee company information's received from the office of the DDIT (Inv.), Unit-4(2), Kolkata vide letter No. DDIT (Inv.)/U-4(2)/Kol/Babylon/2018- 19/7534 dated 27.2.2019, DDIT (Inv.), Unit-1(3), Kolkata vide letter No. DDIT (Inv.)/U-1(3)/Kol/ALVES/2018-19/9035 dated 28.2.2019 and DDIT(Inv), Unit- 1(3) vide letter No. DDIT(Inv)/Unit-1(3)/Kol/Banka/Information/2018-19/8077 dated 26.2.2019 the assessee is in receipt of Rs. 2,01,00,440/- (Rs. 2500000 + 1100000 + 16500440) through accommodation entry from M/s Babylon Trading & Investment Pvt. Ltd. (PAN: AABCB2826R), M/s Alves Securities Pvt. Ltd. (PAN: AAJCS6641B) and paper/shell companies managed/ controlled by Sh. Mukesh Banka whereas the assessee filed return for A.Y. 2012-13 declaring income at Rs. 491360/ -. Hence the amount of accommodation entry Rs. 2,01,00,440/- is not verifiable. 4.1 The Hon'ble Supreme Court of India has held in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (SC) t....
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....is hereby construed that the department is in possession of definite information regarding escapement of income to fulfill / satisfied the conditions precedent for invoking of provisions u/s 147 /148. As the assessee has stated in point 16 of objections that " this is nothing but a case of " borrowed satisfaction" which renders the entire proceedings of reopening to be illegal and void -ab- initio is " . The contention of the assessee that the AO issued notice on borrowed satisfaction is not acceptable. The department has various sources of information and investigation is one of them, the information received from the Investigation / Central wing was consideration carefully and proper remedial action initiated as per provisions of Income-tax Act after application of mind. 4.8 Accordingly the AO had reasons to believe that there is income which is escaped assessment. Hence the issuance of notice u/s 148 is lawful and based on evidences and issued after recording reasons as per law within the meaning of section 147 of the I.T.Act, 1961. 4.9 On a comprehensive consideration of the facts and circumstances of the case and above discussion, the objections raised by the assessee ag....