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TMI Blog2017 (11) TMI 856X X X X Extracts X X X X X X X X Extracts X X X X ..... ct treating the amount of gifts received as income from undisclosed sources; b) Rs. 12,000/- being the alleged commission paid for obtaining accommodation entries as unexplained expenditure u/s. 69C of the Act. All the above actions being arbitrary, erroneous and untenable must be quashed with directions for relief." In substance, all the above grounds challenge the sustenance of addition of Rs. 6,00,000/- u/s. 69A and Rs. 12,000/- u/s. 69C made by the Assessing Officer in the reassessment proceedings u/s. 147/143(3) of the IT Act. 2. The brief facts of the case are that the AO received an information from DDIT (Inv.), Unit-II(2), New Delhi vide letter dated 31.03.2009 that during the year under consideration, the assessee received accommodation entries in his books of account of Rs. 3,00,000/- on 15.01.2002 and Rs. 3,00,000/- on 07.02.2002 from Sh. Harish Pawar, Prop. of M/s. Amit Impex India on payment of certain amount as commission. On the basis of this information, the AO issued notice u/s. 148 to the assessee after recording the reasons for reopening of the case. Since, the amounts of entries noted above stood credited in the bank accounts of assessee through Manager ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. CIT(A) rightly confirmed the assessment order and sustained the additions. 5. After hearing the submissions of both the parties in the light of relevant record on file, we find no substance in the contention of the assessee that the assessment has been made without disposing of the objections of assessee. In this regard, we find that the ld. CIT(A) has rightly dealt with this issue. It is not discernible either from the assessment order or from the remand report that the assessee did file any such objections before the AO, which he claims to have been filed. The AO categorically denied any objection filed by the assessee on record. The ld. CIT(A) also examined the case records of the assessee, where no such objections to the reasons recorded were found. Moreover, the assessee itself has failed to file even the copy of any such objection either before the ld. CIT(A) or before us. Therefore, ld. CIT(A) was justified to reject this contention of the assessee. 6. As regards the contention of the assessee regarding invalid reasons recorded by the AO for forming a belief of escapement, we find considerable substance in this submission of the assessee. It is notable that the ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 25. At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147will not apply. In other words, even though the reopening in the present case was after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ates that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000/- has escaped assessment as defined by section 147 of the Income Tax Act. Therefore, this is a fit case for the issuance of the notice under section 148." 29.3 The Court was not inclined to interfere in the above circumstances in exercise of its writ jurisdiction to quash the proceedings. A careful perusal of the above reasons reveals that the AO does not merely reproduce the information but takes the effort of revealing what is contained in the investigation report specific to the Assessee. Importantly he notes that the information obtained was 'fresh' and had not been offered by the Assessee till its return pursuant to the notice issued to it was filed. This is a crucial factor that went into the formation of the belief. In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee. He does not also examine the return already filed to ascertain if the entry has been disclosed therein. 30.1 In Commissioner of Income Tax, Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry provided were set out in the 'reasons to believe'. However, the Court found that the AO had not made any effort to discuss the material on the basis of which he formed prima facie view that income had escaped assessment. The Court held that the basic requirement of Section 147 of the Act that the AO should apply his mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. Likewise in CIT-4 v. Independent Media P. Limited (supra) the Court in similar circumstances invalidated the initiation of the proceedings to reopen the assessment under Section 147 of the Act. 32. In Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del) it was held that "therefore, even if it is assumed that, in fact, the Assessee‟s income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional pre-condition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise." 33. In Rustagi Engineering Udyog (P) Limited (supra), it was held t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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