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TMI Blog2014 (7) TMI 713X X X X Extracts X X X X X X X X Extracts X X X X ..... t be sustained merely based on inferences drawn by circumstance – Decided in favour of Assessee. - ITA No. 1078/Del/2013 - - - Dated:- 23-5-2014 - Shri B. C. Meena And Shri A. T. Varkey,JJ. For the Appellant : Ashwani Taneja, Adv. For the Respondent : Satpal Singh, Sr. DR ORDER Per A. T. Varkey, Judicial Member This is an appeal preferred by the assessee against the order of the ld CIT(A)-IX, New Delhi dated 14.01.2013 for the Assessment Year 2002-03. 2. The grounds of appeal are as follows:- 1. That having regard to the facts and circumstances of the case, ld CIT(A) has erred in law and on facts in confirming the action of ld Assessing Officer in framing the impugned assessment order without assuming jurisdiction as per law and without serving the mandatory notice u/s 148 of the Income Tax Act, 1961. 2. That having regard to the facts and circumstances of the case, ld CIT(A) has erred in law and on facts in confirming the action of ld A.O. framing the impugned assessment order without complying with mandatory conditions as envisaged u/s 147 to 151 of the Income Tax Act, 1961. 3. That having regard to the facts and circumstances of the case, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... individuals/ companies. The name of the assessee figures as ne of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. The amount involved is ₹ 4,00,000/- which has been received from the following parties:- i) M/s Weal Iron Steel Co. (P) Ltd. ii) M/s. Winsose Portfolio (P) Ltd. 7. The ld AR submitted that on the basis of the above vague reasoning the reopening of the assessment have been done, which according to him is not in consonance with the law; and the said reasons does not in any manner reveals that the said transactions is an accommodation entry. The ld AR took pains to convince us that there is no mention of any material whatsoever on the basis of which the Assessing Officer has made such a serious allegation and reached at a pre-determined conclusion to reopen the assessment without any tangible material. So according to the ld AR, the reasons are absolutely vague and without material or basis to support its authenticity. The ld AR stated that therefore there is no cause and effect relationship established in these reasons recorded by the Assessing Officer, to reopen the assessment; and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he above stated two companies with relevant supporting evidences and asked to discharge its onus u/s 68 of the Act. Inspite granting several opportunities, the assessee failed to do so. So the Assessing Officer made enquiries with the bankers about the purported share applicants, which revealed that during the stated financial year, there were huge deposits of cash in their respective bank accounts. On further verification to trace the link of money transferred to the account of the assessee in the garb of share application, it was found that these parties in turn had received money from a firm M/s. Gupta Gupta, who had deposited cash in its bank account prior to issuing cheque to these two parties. In fact, the Assessing Officer had issued summons to M/s Gupta Gupta, to verify the veracity of claim which were received back unserved from the postal authorities with the remark that no such firm exists in this address. And according to the ld DR, the assessee had failed to even produce the parties for verification of claim of assessee. Thus according to ld DR, after serving the notice on 28.03.2007, and after providing the requisite opportunity to assessee to submit all the desir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich had made accommodation entries and they were not genuine transactions. It was neither a change of opinion nor did it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceedings under section 147 of the Act. The reason to believe had been appropriately understood by the Assessing Officer and there was material on the basis of which the notice was issued. In exercise of the jurisdiction under article 226 of the Constitution, the sufficiency of reasons for formation of the belief could not be considered. It was open to the assessee to participate in the reassessment proceedings and put forth its stand in detail to satisfy the Assessing Officer that there was no escapement of taxable income. 10. In the light of the said decision of the jurisdictional High court the ld DR, prays that the ld CIT(A) has rightly upheld the reopening of the assessment and it may not be interfered with. 11. We have heard both the parties. The Assessing Officer has referred to the information which he received from Directorate of Investigation and as regards the transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cknowledgement of filing return of income of the two persons for the Assessment Year 2001-02 only and not of Assessment Year 2002-03. Even in that year, these persons had declared loss for the said year. The entries in their respective bank accounts shows huge amount of cash deposits/ transfer of funds and immediate issue of cheque/ pay order of almost identical amount. (copies enclosed for kind reference). The summons issued to the part from whom these two persons had allegedly received money in their bank account before claimed investment in share capital of the assessee company during previous year, was not found at the given address. The assessee did not even produced the said persons during the course of assessment proceedings for necessary verification. Both these applicants have the same address, account in the same bank, similar kind of transaction in the bank account, same date of filing return of income for the assessment year 2001-02, almost identical income, applied for identical number of shares on the same date. In view of the above, it is submitted that the assessee has failed to discharge its onus u/s 68 of the IT Act, 1961, and wish to escape from the main issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 12 of Paper Book as non admissible because it was undated, no reference number was there nor was there any resolution number. However on a perusal of the said resolution, we find in the body of the resolution it is specifically stated that the meeting was held on 22.08.2009 at 03.30 PM at there registered office. Coming to the next observation of AO and CIT(A) in respect to absence of the resolution number ,we would like to point out that there is no requirement under the companies Act, that a resolution of a company should be numbered. In case the Assessing Officer, had any doubts about the veracity of the said document he should have exercised his powers u/s 131 and summoned the minute‟s book maintained by the company and cross-checked the genuinity of the document. And In this case Assessing Officer has not cared to do so. Here we find that the Assessing Officer has recorded all his doubts suspicion in to the assessment order and in the remand report to discard/discredit the said resolution cannot be countenanced in the absence of proper enquiry. 18. It may be remembered that even if the reopening is sustained, the primary burden that income has escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two types of cases have been indicated. One in which the Assessing Officer carries out the exercise which is required in law and the other in which the Assessing Officer 'sits back with folded hands' till the assessee exhausts all the evidence or material in his possession and then comes forward to merely reject the same on the presumptions. The present case falls in the latter category. Here the Assessing Officer after noting the facts, merely rejected the same. This would be apparent from the observations of the Assessing Officer in the assessment order to the following effect:- ''Investigation made by the Investigation Wing of the department clearly showed that this was nothing but a sham transaction of accommodation entry. The assessee was asked to explain as to why the said amount of ₹ 1,11,50,000/- may not be added to its income. In response, the assessee has submitted that there is no such credit in the books of the assessee. Rather, the assessee company has received the share application money for allotment of its share. It was stated that the actual amount received was ₹ 55,50,000/- and not ₹ 1,11,50,000/- as mentioned in the notice. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ificates by auditors etc. Unfortunately, the Assessing Officer chose to base himself merely on the general inference to be drawn from the reading of the investigation report and the statement of Mr. Mahes Garg. To elevate the inference which can be drawn on the basis of reading of such material into judicial conclusions would be improper, more so when the assessee produced material. The least that the Assessing Officer ought to have done was to enquire into the matter by, if necessary, invoking his powers under Section 131 summoning the share applicants or directors. No effort was made in that regard. In the absence of any such finding that the material disclosed was untrustworthy or lacked credibility the Assessing Officer merely concluded on the basis of enquiry report, which collected certain facts and the statements of Mr.Mahesh Garg that the income sought to be added fell within the description ofS.68 of the Income Tax Act 1961. Having regard to the entirety of facts and circumstances, the Court is satisfied that the finding of the Tribunal in this case accords with the ratio of the decision of the Supreme Court in Lovely Exports (supra). The decision in this case is bas ..... 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