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TMI Blog2018 (6) TMI 145X X X X Extracts X X X X X X X X Extracts X X X X ..... en no application of mind by the Additional Commissioner before granting the approval. In the present case Commissioner has simply mentioned “approved” to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon’ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings vis-à-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee’s appeal is allowed. - ITA No. 2421/Del/2017 - - - Dated:- 1-3-2018 - Shri H.S. Sidhu, Judicial Member Assessee by : Sh. AMIT GOEL, ADV. Revenue by : Sh. V.K. JIWANI, SR. DR ORDER The Assessee has filed the Appeal against the Order dated 06.3.2017 of the Ld. CIT(A)-33, New Delhi pertaining to assessment year 2005-06 and raised the following grounds:- 1. On the facts and circumstances of the case and in law, the AO erred in issuing notice u/s. 148 of the Act. The notice u/s. 148 issued in this case is illegal, void and without jurisdiction and accordingly the assessment order passed on the foundation of such notice is liable to be quashed. The Ld. CIT(A) ought to have held the reasses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch u/s 132 of the l.T.Act, 1961 was conducted at the office premises of Shri Tarun Goyal, Chartered Accountant at 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi by the Investigation Wing on 15.9.2008. Shri Tarun Goyal created a number of private limited Companies and firms for providing accommodation entries. The Directors of these companies were his employees who worked in his office as peons, receptionists etc. All the documents were got signed from these employees. A number of Bank accounts in various banks were opened in the names of these companies and his employees, in which huge case deposits were made. Later cheques were issued to various beneficiaries, disguising the whole transaction as genuine. During the course of search it was established that Shri Tarun Goyal has floated about 90 companies anies for the purpose of providing accommodation entries. All the companies floated by Tarun Goyal are not carrying out any genuine activity and are merely being used to provide accommodation entries. Hence all the companies of Shri Tarun Goyal are 'bogus'. All the companies are operating from the office of Shri Tarun Goyal from 13/34, WEA, Arya Samaj Road, Karol B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of M/s Geefcee Finance Ltd., The Karur Vishya Bank Ltd., Karol Bagh, New Delhi Current A/c No. 1592 for the period 1.4.2004 onward shows regular deposit of cash and the same has been transferred to the other bank accounts from these banks accounts the funds transferred to the beneficiary accounts including ABN Amro Bank. It is also evident from the another bank account of M/s Geefcee Finance Ltd., in HDFC Bank, Old Rajinder Nagar account No. 0026230001027 that huge / high value cheques have been deposited regularly and transferred regularly to the other accounts. There is no specific business of the company from where daily cash has been generated. AO further noted that further copies of the bank statements filed by the assessee of M/s Geefcee Finance Ltd vide its letter dated 19.3.2013 also revealed that there was high value cheque deposit or fund transfer through clearing in the accounts of M/s Geefcee Finance Ltd. immediately preceding dates on which date the fund has transferred by the company to M/s Tara Alloys. It can be seen from the following details: Bank account of M/s GeeFcee Ltd. in ABN Amro Bank Barakhamba Road shows on 25.3.2004 an amount of ₹ 10 lacs de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case. He stated that that notice u/s. 148 of the Act is illegal, void, and without jurisdiction and accordingly the assessment order passed on the foundation of such notice is liable to be quashed. First of all, he draw our attention towards Page no. 84-87 of the Paper Book which is a copy of Form for recording the reasons for initiating proceedings under section 148 of the Act and for obtaining the approval of the Addl. CIT, Range-16, New Delhi and stated that no proper reasons were recorded; no nexus between the materials relied upon and the belief formed for escapement of income; no application of mind; no proper satisfaction was recorded before issue of notice u/s. 148; no independent conclusion that there was escapement of income and no proper satisfaction / approval has been obtained from the Addl. CIT; Ld. Addl. CIT has granted the approval for reopening of the assessment in a mechanical manner and without due application of mind by writing the word Yes, I am satisfied that it is a fit case for reopening u/s. 147 . To support his contention he submitted that the issue in dispute is squarely covered in favour of the assessee by the ITAT decision dated 09.1.2015 in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance Ltd. having made investment of ₹ 40.80 lacs in the assessee company. Hence, there remains no basis for the AO to make the addition. In view of the above, Ld. AR of the assessee requested that addition in dispute may be deleted and appeal of the assessee may be allowed. 6. On the contrary, Ld. DR relied upon the order passed by the authorities below and stated that the reasons for reopening and in turn Ld. Addl. CIT has granted the approval for the same, by due application of mind. He further stated that approval granted by the Addl. CIT is not mechanical on the contrary the Addl. CIT has fully considered the facts of the case and after due consideration of the facts has given a direction for reopening of the case by writing the word Yes, I am satisfied that it is a fit case for reopening u/s. 147 . Therefore, he stated that, it cannot be said that the sanction was granted mechanically or without application of mind. Moreover, on the merits of the case, Ld. DR relied upon the orders of the authorities below and stated that AO as well as Ld. CIT(A) both have rightly observed that the it is a camouflage just to introduce its own fund through entry operator, hence, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reasons for the belief that income has escaped assessment. As per Annexure A Dated : 23-3-2012 Sd/- (Dharam Singh) Income Tax Officer, Ward 16(1), Delhi 11. Whether the Commissioner of Income-tax is satisfied on the reasons recorded by the Assessing Officer that it is a fit case for the issue of notice under section 148 Yes, I am satisfied that it is a fit case for reopening under section 147. Dated : 23-3-2012 Sd/- (Sunita Singh) Addl. CIT, Range 16(1) New Delhi INCOME TAX DEPARTMENT M/S TARA ALLOYS LTD. AY 2005-06 ANNEXURE A As per the report of the Investigation Wing of the Department, Delhi, during the investigation in certain cases of Accommodation entry operators It was revealed that certain persons were using services of these accommodation entry operators to channelize their own unaccounted money in their regular books of accounts by routing the same through the accounts of Accommodation entry providers. The findings of the Investigation Wing of the Department, were brought to the knowledge of all Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. Even otherwise, a perusal of the above demonstrates that the Addl. CIT has written Yes, I am satisfied that it is a fit case for reopening u/s. 147 which establishes that he has not recorded proper satisfaction / approval, before issue of notice u/s. 148 of the I.T. Act. Thereafter, the AO has mechanically issued notice u/s. 148 of the Act, on the basis of information allegedly received by him from the Directorate of Income Tax (Investigation), New Delhi. Keeping in view of the facts and circumstances of the present case and the case law applicable in the case of the assessee, I am of the considered view that the reopening in the case of the assessee for the asstt. Year in dispute is bad in law and deserves to be quashed. My view is supported by the following judgments/decisions:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer, when he recorded the reasons. There should be a link between the reasons and the evidence/material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to ₹ 5 lakhs during F.Y. 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. (iv) Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid up capital of ₹ 90 lakhs and was incorporated on January 4, 1989, and was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries. The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries . In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : Provided that, after the expiry of four years from the end of the relevant assessment year, no such notice shall be issued unless the Chief Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of [Joint} Commissioner, after the expiry of four years from the end of the relevant assessment year, unless the [Joint} Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice.} [Explanation.-For the removal of doubts, it is hereby declared that the Joint Commissioner, the Commissioner or the Chief Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148,need not issue such notice himself.} 6. A simple reading of the provisions of Sec. 151(1) with the proviso clearly show that no such notice shall be issued unless the Commissioner is satisfied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) of the 1. T. Act on 31st March, 1998 by DCIT-Spl. Rg. 40, Mumbai. It is seen from records that the aforesaid points have not been verified in the assessment. I have therefore reason to believe that by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, income has escaped assessment within the meaning of proviso to Sec. 147 and explanation 2 (c)(i) of the income-tax Act, 1961. 7. In the light of the above mentioned reasons, in our considerate view, Section 147 and 148 are charter to the Revenue to reopen earlier assessments and are, therefore protected by safeguards against unnecessary harassment of the assessee. They are sword for the Revenue and shield for the assessee. Section 151 guards that the sword of Sec. 147 may not be used unless a superior officer is satisfied that the AO has good and adequate reasons to invoke the provisions of Sec. 147. The superior authority has to examine the reasons, material or grounds and to judge whether they are sufficient and adequate to the formation of the necessary belief on the part of the assessing officer. If, after applying his mind and also recording h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issioner has simply mentioned approved to the report submitted by the concerned AO. In the light of the ratios/observations of the Hon'ble High Court mentioned hereinabove, we have no hesitation to hold that the reopening proceedings visa-vis provisions of Sec. 151 are bad in law and the assessment has to be declared as void ab initio. Ground No. 1 of assessee's appeal is allowed. 10. As we have held that the reassessment is bad in law, we do not find it necessary to decide other issues which are on merits of the case. 10.3 No contrary judgment or order is brought to our notice. This being a Co-ordinate Bench order, we are required to follow the same. 10.4 The decision cited by the Ld. DR does not pertain to the issue of contravention of provisions of S. 151 of the Act. These judgments are on other aspects relating to reopening. Thus respectfully following the decision of the Coordinate Bench in the matter, we hold that the reopening is bad in law for the reason that the Ld. CIT(A), Delhi has not recorded his satisfaction as contemplated u/s. 151 of the Act. (D) ITAT, Mumbi Bench E in the case of Amarlal Bajaj vs. ACIT reported in (2013) 37 taxmann.com 7 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner has simply affixed approved at the bottom of the note sheet prepared by the ITO technical. Nowhere the CIT has recorded his satisfaction. In the case before the Hon ble Supreme Court (supra) that on AO s report the Commissioner against the question whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148 merely noted Yes and affixed his signature there under. On these facts, the Hon ble Supreme Court observed that the important safeguards provided in sections 147 and 151 were lightly treated by the officer and the Commissioner. The Hon ble Supreme Court further observed that the ITO could not have had reason to believe that income had escaped assessment by reasons of the appellantfirm's failure to disclose material facts and if the Commissioner had read the report carefully he could not have come to the conclusion that this was a fit case for issuing a notice under section 148. The notice issued under section 148 was therefore, invalid. It would be pertinent here to note the reasons recorded by the AO. Intimation has been received from DCIT-24(2), Mumbai vide his letters dt. 22nd February, 2002 that one Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner has recorded a satisfaction note not even in brief. Therefore, it cannot be said that the Commissioner has accorded sanction after applying his mind and after recording his satisfaction. 8. Hon ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd. Vs CIT 258 ITR 317 has held that the proviso to sub-section (1) of section151of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-builts safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle with the completed assessment . The Hon ble High Court further observed that what disturbs us more is that even the Additional Commissioner has accorded his approval for action under section 147 mechanically. We feel that if the Additional Commissioner had cared to go through the statement of the said parties, perhaps he would not have granted his approval, which was mandatory in terms of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the basis of the aforesaid principle, the mechanical way of recording satisfaction by the Joint Commissioner, which accords sanction for issuing notice under section 148, is clearly unsustainable and we find that on such consideration both the appellate authorities have interfered into the matter. In doing so, no error has been committed warranting reconsideration. (F.) Hon ble Supreme Court of India in the case of CIT vs. S. Goyanka Lime Chemical Ltd. reported in (2015) 64 taxmann.com 313 (SC) in the Head Notes has held that Section 151, read with section 148 of Income Tax Act, 1961 Income escaping assessment Sanction for issue of notice (Recording of satisfaction) High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid Whether Special Leave Petition filed against impugned order was to be dismissed Held, Yes (in favour of the Assessee). 9. In view of above, I am of the considered view that the above legal issue is exactly the similar and identical to the issue involved in the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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