2021 (12) TMI 822 - AT - Income Tax

Reopening of assessment u/s 147 - Eligibility of reason to believe - Reason to believe or Reasons to suspect - accommodation entry transaction - transaction of assessee with M/s. Bridge Building Pvt. Ltd. to be accommodation entry availed by the assessee in the form of bogus billing - statement of Shri Ajit Kumar Jindal recorded by the Investigation Wing wherein he admitted to be an accommodation entry provider through his entities in lieu of commission And the AO notes that the bank account number of M/s. Bridge Building Pvt. Ltd. wherein the assessee had transferred the amount - HELD THAT - It has to be kept in mind the assessee s scrutiny assessment u/s 143(3) was completed on 02.12.2016 and the information which the AO relies on is the statement of Shri Ajit Kumar Jindal was recorded as early as on 29.10.2014 (i.e. 2 years before). A reading of the reason recorded by the AO as discussed and analysed reveals that information from the Investigation Wing only says about the statement of Shri Ajit Kumar Jindal who on 29.10.2014 has admitted before them, that he is providing accommodation entry through his entities which includes M/s. Bridge Building Pvt. Ltd. The Investigation Wing on the strength of his admission has taken out the transaction made by Shri Ajit Kumar Jindal s entities viz. M/s. Bridge Building Pvt. Ltd. and found that assessee had transaction with M/s. Bridge Building Pvt. Ltd., so this information was passed on to the AO, who on receipt of it has jumped to the conclusion that since assessee had transacted with M/s. Bridge Building Pvt. Ltd. and then assessee is a beneficiary who availed for the bogus bills which was paid through bank to it and later got it back as cash as per the modus-operandi admitted by Shri Ajit According to us, when the AO receives information of such nature from investigation wing it certainly raises suspicion. Then the AO cannot and should not straight away issue notice u/s 148 of the Act and assume jurisdiction to reopen the assessment. Why because, there is subtle difference between reason to suspect and reason to believe . Information adverse may trigger reason to suspect then the AO to make reasonable enquiry and collect material, which would make him believe that there is in fact an escapement of income Simply because the assessee had transaction with M/s B B Pvt. Ltd., cannot be the basis to believe escapement of income, unless there is any material there to suggest that so called assessee s transaction was bogus the cheque given by assessee had been returned as cash to assessee. Thus in the facts discussed and based on the analysis of the reason recorded by the AO according to us, the AO could not have formed a belief that income chargeable to tax has escaped assessment. The information from Investigation Wing is only that Shri Ajit has admitted to be providing accommodation entry to Bathwal Group and to beneficiaries. However, when we examine the jurisdiction of AO, we have to look at the reasons recorded on a standalone basis. So in the absence of the list of beneficiaries attached to the reasons recorded on the statement of Shri Ajit, we do not find the name of assessee as beneficiary. Just because, the assessee had transaction with M/s B B Pvt. Ltd., cannot be a ground to believe that assessee s income has escaped assessment. - Decided in favour of assessee.

Issues Involved:
1. Delay in filing the appeal by the revenue.
2. Deletion of addition by CIT(A) amounting to ?4,70,08,000.
3. Jurisdiction of the Assessing Officer (AO) to reopen the assessment under Section 147 of the Income Tax Act.
4. Merits of the evidence provided by the assessee regarding the transactions.
5. Compliance with summons issued by the AO.

Detailed Analysis:

1. Delay in Filing the Appeal by the Revenue:
The revenue filed the appeal with a delay of 37 days. A condonation petition was filed, and the tribunal found the reasons for the delay reasonable. Therefore, the delay was condoned, and the appeal was admitted for hearing.

2. Deletion of Addition by CIT(A) Amounting to ?4,70,08,000:
The revenue contested the deletion of an addition of ?4,70,08,000 by the CIT(A). The CIT(A) had deleted the addition on the grounds that the necessary evidence was furnished by the assessee, which contradicted the findings of the AO. The tribunal examined whether the CIT(A) erred in deleting the addition without considering the merits of the case as elaborated by the AO.

3. Jurisdiction of the AO to Reopen the Assessment under Section 147 of the Income Tax Act:
The assessee raised a legal issue challenging the jurisdiction of the AO to reopen the assessment, which was completed earlier under Section 143(3) of the Act. The AO reopened the assessment based on information received from the investigation wing, which indicated that the assessee had received accommodation entries from a shell company, M/s. Bridge & Building Construction Company Pvt. Ltd., controlled by Shri Ajit Kumar Jindal. The tribunal focused on whether the AO had "reason to believe" that income had escaped assessment, a prerequisite for reopening an assessment under Section 147. The tribunal noted that the AO's reasons for reopening were based on a general statement by Shri Ajit Kumar Jindal, who admitted to providing accommodation entries. However, there was no specific mention of the assessee in the recorded reasons. The tribunal emphasized that "reason to believe" must be based on concrete information and not merely on suspicion. The tribunal found that the AO did not have sufficient material to form a belief that income had escaped assessment and thus quashed the reopening.

4. Merits of the Evidence Provided by the Assessee Regarding the Transactions:
The assessee argued that all necessary evidence regarding the transactions was furnished during the original assessment, and the department failed to controvert the same. The CIT(A) accepted this argument and deleted the addition. The tribunal examined whether the evidence provided by the assessee was sufficient and whether the CIT(A) rightly deleted the addition. The tribunal noted that the AO did not conduct a preliminary inquiry to verify the authenticity of the transactions and relied solely on the statement of Shri Ajit Kumar Jindal.

5. Compliance with Summons Issued by the AO:
The revenue argued that the assessee and the party did not comply with the summons issued by the AO, which hindered the proper examination of documentary evidence. The tribunal considered whether the non-compliance with the summons affected the validity of the AO's findings. The tribunal found that the AO's reasons for reopening the assessment were not substantiated by concrete evidence, and thus, the non-compliance with the summons did not justify the reopening of the assessment.

Conclusion:
The tribunal quashed the reopening of the assessment, holding that the AO did not have valid "reason to believe" that income had escaped assessment. Consequently, the appeal of the revenue was dismissed, and the cross-objection of the assessee was allowed. The tribunal emphasized the necessity of concrete evidence to justify the reopening of an assessment and the distinction between "reason to believe" and "reason to suspect." The order was pronounced on 17th December 2021.

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