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TMI Blog2018 (7) TMI 230X X X X Extracts X X X X X X X X Extracts X X X X ..... ible and, relevant material and as such reasons record do not constitute valid reason to believe for initiating proceedings u/s 147 of the Act. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... dents and the capitation fees has not been accounted for in the regular books. On perusal of the documents, the AO observed that Sh. Bhikam Singh, F/o Dr. Pramod Kr. Rathore had given total fees of ₹ 22 lacs to Santosh Medical College for his son Dr. Pramod Kr. Rathor's admission in MDS (Periodonitics) Course. Out of this fees of ₹ 22 lacs, ₹ 12 lacs was the regular fees and remaining ₹ 10 lacs was capitation fees. AO issued notice u/s. 142(1) of the I.T. Act, 1961 on 24.6.2015 and in response to these notices no one attended. A summon u/s. 131 of the Act dated 15.9.2015 to the assessee Sh. Bikham Singh was issued and duly served upon the assessee. In response thereof, the A.R. of the assessee attended the proceedings from time to time and furnished the ITR copy of the assessee filed on 31.3.2011, for the AY 2010-11. On perusal of the ITR, it was notice that the PAN and address as mentioned in ITR is different from the assessee's PAN and address. Accordingly, the A.R. of the assessee was requested to file new return u/s. 148 of the Act. Assessee filed his return u/s. 148 of the Act on 21.1.2016. Notice u/s. 143(2) was issued and served to the assessee on 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore action u/s. 147 of the Act was illegal, invalid and untenable. It was further stated that lower authorities wrongly made/upheld the addition of ₹ 19,00,000/- representing the alleged donation/ capitation fee etc. paid by the assessee for admission in the course of MBBS to Santosh Group of Institution and also failed to appreciate that addition had been made on arbitrary assumptions and, presumptions and overlooking the evidence and explanation tendered by the assessee. It was further submitted that the addition has been made without providing any cross examination to the assessee and therefore third party evidence and statement could not be a ground to make an addition in the hands of the assessee. On the issue of initiation of proceedings u/s. 147 of the Act on the basis of no material much less any tangible and, relevant material and as such reasons record do not constitute valid reason to believe for initiating proceedings u/s. 147 of the Act, he relied upon the decision in the case of CIT vs. Kelvinator of India Ltd. 320 ITR 561 (SC); ACIT vs. Rajeh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (SC) and CIT vs. Batra Bhatta & Co. 321 ITR 526 (Del). On initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, he requested to quash the re-assessment. 5. On the contrary, Ld. DR relied upon the orders of the authorities below and stated that Assessing Officer issued the notice u/s. 148 after due application of mind. She further stated that the AO has followed due procedure before issuing the notice u/s 148 of the I.T. Act, 1961. The Assessing Officer had tangible material in the form of information received from the Investigation Wing. The Assessing Officer did not proceed to any hearsay, conjecture or surmises. 6. I have heard both the parties and carefully considered the same. I note that in this case the AO while recording the reasons for the belief that income has escaped assessment has recorded the reasons as under:- "From for recording the reasons for initiating procedure u/s. 147 of the I.T. Act. 1 Name and address of the assessee Sh. Bhikam Singh, C-97, Jagatpuri, Mandoli Road, Shahdara, Delhi 2 Permanent Account No. Not Available 3 Status Individual 4 District/circle/Range Circle 56(1), New Delhi 5 Assessment year in respect of which it is proposed to be issued notice u/s. 148 of the Income Tax Act. 2010-11 6 Whether the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Income tax Act, Act, 1961." 6.1 After perusing the aforesaid reasons recorded, I find that it is a case where action has been taken mechanically on the basis of information received from investigation wing, and, not on an independent application of mind and therefore on this ground, the proceedings are without jurisdiction. It is apparent from the fact that according to the AO, Investigation Wing has informed that assessee has paid cash in dispute for admission in the course of MBBS to Santosh Medical College, Ghaziabad. It is also noted that in the reasons recorded, the AO has made vague remarks that assessee has income chargeable to tax which has escaped assessment. The AO has not even specified as to what is the amount of alleged income escaping assessment, which shows that AO has merely recorded certain unsubstantiated allegations on the basis of some information received, which is against the principle laid down by the Hon'ble Delhi High Court in the case of CIT vs SFIL Stock Broking Ltd. (2010) 325 ITR 285 (Del), wherein it was observed that reassessment proceedings were initiated on the basis of information received from investigation wing regarding alleged accommodat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nn.com 348 (Hon'ble Delhi High Court) 11. There can be no manner of doubt that in the instant there was a failure of application of mind by the AO to the facts. In fact he proceeded on two wrong premises - one regarding alleged non-filing of the return and the other regarding the extent of the so-called accommodation entries. 12. Recently, in its decision dated 26th May, 2017 in ITA NO.692/20l6 (Principal Commissioner of Income Tax-6 v. Meenakshi Overseas Pvt. Ltd.), this Court discussed the legal position regarding reopening of assessments where the return filed at the initial stage was processed under Section 143(1) of the Act awl not under Section 143(3) of the Act. The reasons for the reopening of the assessment in that case were more or less similar to the reasons in the present case, viz., information was received from the Investigation Wing regarding accommodation entries provided by a 'known' accommodation entry provider. There, on facts, the Court came to the conclusion that the reasons were, in fact, in the form of conclusions "one after the other" and that the satisfaction arrived at by the AO was a "borrowed satisfaction" and at best &q ..... X X X X Extracts X X X X X X X X Extracts X X X X
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