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TMI Blog2017 (9) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... ich form the basis of the reasons to believe that income has escaped assessment. The conclusion of the A.O, at best, are reproduction of the conclusion of the Investigation report. Thus, it is clearly a borrowed satisfaction. Appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... nt & Trading Company Pvt. Ltd., who have paid ₹ 5 lakhs to the assessee on behalf of M/s. Dupas Leasing & Financing Co. Ltd., being amount due to the assessee. PB-16 is letter of M/s. Hare Krishan Investment & Trading Company Pvt. Ltd., in which they have made payment of ₹ 5 lakhs to assessee on behalf of M/s. Dupas Leasing & Financing Co. Ltd., as due to the assessee. Learned Counsel for the Assessee, therefore, submitted that all amounts were outstanding for earlier years which have been repaid in the assessment year under appeal. Therefore, A.O. has merely copied the report of the Investigation Wing in the reasons and without applying the mind, reopened the assessment. In support of his contention, he has relied upon the decision of the Hon'ble Delhi High Court in the case of Pr. CIT vs. G And G Pharma India Ltd., (2016) 384 ITR 147 (Del.) and decision of Hon'ble Delhi High Court in the case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd., 395 ITR 677. He has, therefore, submitted that reopening of the assessment is bad in law in this case. He has also submitted that for repayment of loan of earlier year, Section 68 will not apply. 4. On the other hand, Ld. D.R. relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000 20.12.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.5,30,000 21.12.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.7,00,000 04.01.2000 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) Rs.5,00,000 01.10.1999 Hare Krishan Investment & Trading Co. Pvt. Ltd., (A/c. No.610CA with Vaish Coop New Bank, Kamla Nagar) Rs.5,00,000 01.10.1999 Lord Shiv Investment & Trading Co. Pvt. Ltd., (A/c.No.611CA with Vaish Coop New Bank Kamla Nagar. Rs.7,00,000 20.09.1999 Precision Agencies Pvt. Ltd., (A/c.No.43145 with SBI, Shakti Nagar) The said amounts are stated to be credited in assessee's bank accounts maintained with State Bank of India, Shakti Nagar, UCO Bank, Model Town and Bank of Baroda, Shalimar Bagh, new Delhi. Return of income filed also shows that assessee has bank account with Bank of Baroda, Shalimar Bagh and UCO Bank. On investigation made by the investigation wing it has been found that assessee is a beneficiary of taking the aforesaid accommodation entries of ₹ 34,50,200/-. In view of the above information, it is evident that the assessee company has introduced its ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing". 21. The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of ₹ 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... " 22. As rightly pointed out by the ITAT, 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. Clearly the source for all these conclusions, one after the other, is the Investigation report of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment. 27. Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment. 28.1. In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus: "11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to ₹ 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003-04. Details are contained in Annexure. As per information amount received is nothing but accommodation entry and assessee is a beneficiary." 28.2. The Annexure to the said proforma gave the Name of the Beneficiary, the value of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der: "Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes: 1. To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:...." 29.2. The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of ₹ 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of ₹ 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved." 30.2. The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that there was prima facie material for the AO to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments." 35. In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment." 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material which formed the basis for the reasons to believe that income had escaped assessment. The A.O. merely reproduced information received from Investigation wing and enquiries conducted by them and then, straightaway came to the conclusion that 'Income chargeable to tax has escaped assessment'. In the present case, as already noticed, the reasons to believe contained not the reasons but the conclusion of the A.O. There is no independent application of mind by the A.O. to the tangible material which form the basis of the reasons to believe that income has escaped assessment. The conclusion of the A.O, at best, are reproduction of the conclusion of the Investigation report. Thus, it is clearly a borrowed satisfaction. The issue is, therefore, covered in favour of the assessee by judgment of the Hon'ble Delhi High Court in the case of Pr. CIT vs. G And G Pharma India Ltd., (supra) and Meenakshi Oveseas Pvt. Ltd., (supra). The reopening of the assessment, thus, is bad in law and cannot be sustained in the facts and circumstances of the case. I, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I.T. Act ..... X X X X Extracts X X X X X X X X Extracts X X X X
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