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TMI Blog2017 (3) TMI 1706X X X X Extracts X X X X X X X X Extracts X X X X ..... 148 was issued merely at the behest of Investigation Wing. The AO has not made any independent enquiry. Further the reasons recorded did not indicate any independent application of mind. The principle of natural justice have been violated. 3. The brief facts of the case are that return of income for the AY 2006-07 was filed on 19.6.2006, declaring income at Rs. NIL. The same was processed u/s. 143(1) of the I.T. Act on 27.9.2006. Subsequently a letter dated 26.3.2013 was received from the office of the Chief Commissioner of Income Tax, Delhi-I, New Delhi therein forwarding letter dated 19.3.2013 received from the Commissioner of Income Tax, Central II, New Delhi alongwith CD containing the details of the accommodation entries provided by Sh. Rakesh Gupta, Sh. Vishesh Gupta, Sh. Navneet Jain and Sh. Vaibhav Jain was appearing. After going through the complete list and indentifying the parties, after recording the reasons, the AO has made an addition of ₹ 8,57,330/- on account of bogus purchase and completed the assessment at an income of ₹ 8,57,330/- u/s. 143(3)/147 of the I.T. Act, 1961 vide his order dated 07.3.2014. 3. Aggrieved by the order of the AO, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Delhi High Court in the case of Signatures Hotel. In my view, it will be relevant to refer to the reasons recorded by the AO which reads as under:- Subsequently a letter bearing F.No. Addl.OT(HQ)/(Coord.)/ Accommodation entry/2012-13/15016 dated 26/03/2013 was received from the office of the Chief Commissioner of Income Tax, Delhi-1, New Delhi therein forwarding letter tearing F-No. C1T(C)- II/2012-13/3898 teed.19/03/2013 received from the Commissioner of Income Tax, Central-II, New Delhi along with a CD containing the details of accommodation entries provide by Shri Rakesh Gupta Sh. Vishesh Gupta and Sh. Navneet Jain Sh. Vaibhav Jain and directing this office to take necessary action as per section 148 in respect entries pertaining to A.Y. 2006-07, which in time barring on 31/03/2013. The information provided by the GIT, Gentral-11, New-Delhi vide his letter dated 19/03/2013 reads as under:- Kindly find enclosed herewith letter dated 13/03/2013 of ACIT, Central Circle-10 duly forwarded by the Addl. C1T, Central Range- IV, alongwith its enclosures on the subjection mentioned above. 2. The assessment of search and seizure cases of Sh. Rakesh Gupta, S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame is appearing in the said list has taken accommodation entries from Shri Rakesh Gupta and Shri Vishesh Gupta and Shri Navneet Jain and Sh. Vaibhav Jain pertaining to AY 2006-07. In view of the above, I have reasons to believe that income chargeable to tax o M/s Sapra Metal Co., amounting to ₹ 8,57,331/- for the FY 2005-06 relevant to AY 2006-07 has escaped assessment and it is a fit case for initiation of proceedings u/s. 147 of the Act. Proposal in the prescribed form for the AY 2006-07 (FY 2005-06) is submitted herewith for kind consideration and necessary approval u/s. 151(2) of the I.T. Act, 1961 as the same is getting barred by limitation on 31.3.2013. If approved, notice u/s. 148 of the Act may be issued. SD/- (Veena Rastogi) ITO, Ward 39(2), New Delhi 8. After perusing the aforesaid reasons, I find that the facts and circumstances of the present case are similar to that case of Unique Metal Industries (supra) and Signatures Hotel, the legal issue of reopening in the Assessee s Appeal is squarely covered by the Order dated 28.10.2015 of this Bench passed in the case of Unique Metal Industries vs. ITO in ITA No. 1372/Del/2015 dated 28.10.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclosed as annexure-B. The list of accommodation entry recipients, has been obtained from Sh. Navneet Jain Sh. Vaibhav Jain. It does not give year wise bifurcation. Hard copy of the lost is enclosed as annexure-C, duly signed by Sh. Vaibhav Jain. Thus, the firms mention in the list B have provided accommodation entries to the firms mentioned in list C . 5. The soft copy of the information in respect to annexure A, B C is also enclosed. 6. The information of accommodation entry includes A.Y. 2006-07 also, which is a time barring year for taking action u/s 148. 7. The information is forwarded to you for early dissemination to various field officers in Delhi (Soft copy also enclosed). On examining the list of accommodation entries provided by Sh. Rakesh Gupta Sh. Vishesh Gupta dn Sh. Navneet Jain Sh. Vaibhav Jain pertaining to A.Y. 2006-07, it is noted that the following accommodation entries have been taken by the assessee namely M/s Unique Metal Industries:- Sl. No. Accommodation entry provided by Name of party to whom accommodation entry is provided Amount of Accommodation ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been reopened on the basis of the letter received from the ld. CIT, Central-2, New Delhi with the direction to take necessary action as per section 148 of the Act. As per this, accommodation entries were obtained by various persons from Sh. Rakesh Gupta and Sh. Vishesh Gupta as well as Sh. Navneet Jain and Sh. Vaibhav Jain. Copy of this list was forwarded in a CD to the Assessing Officer. Thus this list contained the name of the assessee. The Assessing Officer reopened the assessment on the basis of this information. The basis given by the Assessing Officer in the reasons is that these persons have admitted that they have given accommodation entries to the parties whose lists have been provided by them. From the above facts it is apparent that the Assessing Officer at that point of time when he recorded the reasons was not having the copy of the statement or any other material in which these people have alleged to have provided accommodation entries to the assessee. This position gets also corroborated from the facts stated by the Assessing Officer himself in the reassessment order in para 3 page 5 which read as under:- Here it is pertinent to mention that in the intervenin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of the transactions. As per provision of section 147 an assessment can be reopened if the Assessing Officer has reasons to believe that any income chargeable to tax has escaped assessment. The reasons to believe has to be that of the Assessing Officer and further there have to be application of mind by the Assessing Officer though the reasons to believe does not mean that the Assessing Officer should have finally ascertained the fact that income has escaped assessment but at the same time, it also means that the Assessing Officer is required to examine the facts on the basis of the information and satisfy himself that the taxable income has escaped assessment. In the present case, on going through the reasons it is quite evident that the Assessing Officer was also not aware of the nature of the accommodation entries. In the reasons recorded he has simply mentioned the name of the party and the amount and nowhere has stated the nature of such entry. This also shows that the Assessing Officer has made no effort to look into the return of the assessee which was available with him. This fact gets further supported from the sheet appended to the reasons and quoted on page 4 of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi High Court has held that under the circumstances narrated hereinabove the reopening cannot be said to be a valid reopening. The Hon ble Court has held as under:- In the case at hand, as is evincible, the AO was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the AO was made aware of the situation by the Investigation Wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a belief whether or not any income had escaped assessment. Company SS Ltd. had applied for and was allotted shares in the petitioner company on payment by cheque of ₹ 5 lacs. SS Ltd. is an incorporated company and the petitioner has pleaded and stated that the said company has a paid-up capital of ₹ 90 lacs. The company was incorporated on 4th Jan., 1989 and was also allotted PAN in September, 2001. The facts indicated above do not show that SS Ltd. is a non-existing and a fictitious entity/person. For the reasons stated above, writ of certiorari is issued quashing the proceedings under s. 148 12. In the case of CIT vs. SFIL Stockbroking Co. (2010) 325 ITR 285 (Del) also the Hon ble High Court has quashed the reopening proceedings on the ground that from the reasons it is not discernible as to whether the AO has applied his mind to the information and independently arrived at a belief that income has escaped assessment. The Hon ble Court has held as under:- The first sentence of the so-called reasons recorded by the AO is mere information received from the Dy. Director of IT (Inv.). The second sentence is a direction given by the very same Dy. Director to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax has escaped assessment. This is mandatory and the reason to believe are required to be recorded in writing by the Assessing Officer. (ii) A notice u/s.148 can be quashed if the belief is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing 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 es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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