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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 ..... reject this contention of the assessee. 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. Assessing Officer has formed his belief of escapement of income simply by relying on the information received from Investigation Wing that the assessee has taken accommodation entry from Sh. Harish Pawar, prop. M/s. Amit Impex (India) through its bank account. A perusal of the reasons recorded shows that the Assessing Officer appears to have simply concluded on the said information to form the belief of escapement of income, without applying his own mind and bringing on record any tangible material to record his satisfaction. It is worthwhile to note that though the AO has observed in the assessment order that the alleged donor, Shri Harish Pawar in his statement recorded by the Investigation Wing had deposed that the bank account of its proprietary concern, M/s. Amit Impex was being used for providing only accommodation entries, but no such fact regarding deposition of alleged donor is found mentioned in the reasons recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 s cheque, the AO asked the assessee to explain the accommodation entries received. In response, the assessee filed two gift deeds dated 07.02.2002 for ₹ 3,00,000/- each signed by Shri Harish Pawar. The AO observed that Harish Pawar in his statements recorded on oath on 12.03.2009 denied to have filed any return of income and admitted that the bank accounts of M/s. Amit Impex (India) were used for providing accommodation entries and therefore, the creditworthiness of the alleged donor stood doubtful. The AO was also of the view that the alleged gifts having been given out of love and affection, relationship of assessee with the donor, occasion of gift could not be proved on the part of the assessee and the assessee utterly failed to prove the creditworthiness of the donor and genuineness of the transaction. Therefore, in view of the above facts and statements of the donor, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 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. Assessing Officer has formed his belief of escapement of income simply by relying on the information received from Investigation Wing that the assessee has taken accommodation entry from Sh. Harish Pawar, prop. M/s. Amit Impex (India) through its bank account. A perusal of the reasons recorded shows that the Assessing Officer appears to have simply concluded on the said information to form the belief of escapement of income, without applying his own mind and bringing on record any tangible material to record his satisfaction. It is worthwhile to note that though the AO has observed in the assessment order that the alleged donor, Shri Harish Pawar in his statement recorded by the Investigation Wing had deposed that the bank account of its proprietary concern, M/s. Amit Impex was being used for providing only accommodation entries, but no such fact regarding depos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rement 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 the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment. 26. The first part of Section 147 (1) of the Act requires the AO to have reasons to believe that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment. 28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision. 29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice 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, New Delhi v. Highgain Finvest (P) Limited (2007) 164 Taxman 142 (Del) relied upon by Mr. Chaudhary, the reasons to believe read as under: It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8 th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 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 that ...the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years. Although the AO may have entertained a suspicion that the Assessee‟s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason to suspect - is the precondition for exercise of jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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