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TMI Blog2018 (12) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... dicated. - Decided in favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer to treat the original return filed on 29th October, 2004 as the return filed in response to notice u/s 148 of the IT Act. The assessee also requested for a copy of the reasons which was duly handed over by the Assessing Officer to the AR of the assessee. The Assessing Officer issued notice u/s 143(2) of the IT Act which was duly served on the assessee. During the course of assessment proceedings, the assessee filed confirmation of the parties, copies of their accounts, etc. The Assessing Officer asked the assessee to produce the four parties, namely, M/s. Pararm Enterprises, M/s.Arpit Sales, M/s. Keshavi Sehkari & M/s. P.K.Investments for his examination for verifying the genuineness of the transactions against which the assessee appeared before the Assessing Officer. However, none of the parties were produced for his examination. He, therefore, asked the assessee to explain as to why a sum of ₹ 58.50 lakhs received by the assessee from these four parties should not be treated as income of the assessee. However, none appeared before the Assessing Officer nor any reply was filed. The Assessing Officer, therefore, held that the assessee miserably failed to adduce evi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to the facts and circumstances of the case, Ld. A.O. has erred in framing impugned assessment order without assuming jurisdiction as per law and without complying with the mandatory conditions of section 147 to 153 of the Income Tax Act, 1961 and reopening of the case is bad in law and beyond the jurisdiction of the Ld. A.O and Ld. CIT (A)-XIX erred in upholding the validity of jurisdiction. 4. That having regard to the facts and circumstances of the case, Ld. A.O. has erred in framing impugned assessment order without removing the objection raised by the appellant regarding illegal assumption of jurisdiction by Ld. A.O. without passing a speaking order and Ld. CIT (A) ought to have been set aside and failure to do so has vitiated the impugned order, therefore impugned order is liable to be set aside and quashed. 5. AO has erred in passing the impugned order by obtaining behind the back of the appellant some alleged statements /information for which no opportunity provided to rebut the same and there was not even a show cause notice specifically proposing to make any addition nor any effective opportunity of hearing and Ld. CIT (A) has erred in upholding the unlawful ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, he ignored the fact that non-service of proper notice within limitation period is a jurisdictional defect which cannot be cured even by section 292B of the IT Act. 7. Referring to the reasons recorded by the Assessing Officer, copy of which is placed at page 8 of the paper book, he submitted that the Assessing Officer had recorded reasons without application of mind and without having any tangible material. The alleged reasons recorded in writing is an annexure to some inter- Departmental communication even without date and without application of mind by the Assessing Officer. Referring to the last para of the reasons recorded, he submitted that the Assessing Officer has jumped to the conclusion without any enquiry or without any application of mind. He inferred that the receipt was capital receipt in nature without even verifying the income-tax return and balance sheet of the assessee as accepted in form for recording of the alleged reasons. Referring to clause (8) of the annexure, he submitted that the Assessing Officer has mentioned the assessment status 'not known' as record is not traceable. Therefore, without going through the returns and balance sheet of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties in the books of assessee, etc. Copy of the confirmatory statements filed by the parties before the Assessing Officer and copy of the affidavit/statement affirming the transactions were also filed. Not a single document has been proved to be false or untrue. Since the transaction was duly explained and recorded in the books of the assessee, therefore, without any independent enquiry made by the Assessing Officer, the documents/evidences could not have been rejected for mere non-production of the creditors. He accordingly submitted that the addition made by the Assessing Officer and upheld by the CIT(A) should be deleted. 9. The ld. DR, on the other hand, heavily relied on the order of the Assessing Officer and CIT(A). So far as the grounds relating to validity of the reassessment proceedings are concerned, she submitted that the notice was served by speed post on 20th March, 2011, the evidence of which is placed on page 2 of the paper book filed by the assessee. Since service by post is a valid mode of service as per the provisions of section 282 of the Income-tax Act, therefore, the assessee cannot claim that there was no service of notice. Referring to para 4 of the order o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Investigation Wing of the Department that the assessee has received income from unknown sources as capital receipt and, thus, the assessee has ploughed back unaccounted money of ₹ 63.50 lac in its business through the channel of accommodation entries. A perusal of the form for recording the reasons for initiating proceedings u/s 148 and for obtaining the approval of Addl. CIT, copy of which is placed at page 7 of the paper book shows that at clause 8 of the column it is mentioned as under:- "8. Whether the Assessment is proposed to be made for first time. If the reply is in affirmative, lease state: Not known as record is not traceable" 10.1 Similarly, clause 12 of the form reads as under:- "12. Whether the Addl.CIT is satisfied on the reasons recorded by the ITO that it is a fit case for issue of notice u/s 148. Yes, I am satisfied on the reasons recorded by the A.O. that it is a fit case for the issue of notice u/s 148 of the IT Act, 1961." 11. A perusal of the above shows that the Assessing Officer has not verified the assessment records of the assessee as it was not traceable. Therefore, before coming to the conclusion on the basis of the report of the Investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irements under Section 147 and therefore could not have issued notice under Section 148. 10. In ACIT v. Dhariya Construction Co.(2010)328 ITR 515 the Supreme Court in a short order held as under: "Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the DVO. Opinion of the DVO per se is not an information for the purposes of reopening assessment under s. 147 of the IT Act, 1961. The AO has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment." 11. The above basic requirement of Sections 147/148 has been reiterated in numerous decisions of the Supreme Court and this Court. Recently, this Court rendered a decision dated 22nd September 2015 in ITA No. 356 of 2013 (Commissioner of Income Tax II v. Multiplex Trading and Industrial Co. Ltd.) where the assessment was sought to be reopened beyond the period of four years. This Court considered the decision of the Supreme Court in Phool Chand Bajrang Lal v. Income-tax Officer (supra) as well as the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 that the AO must apply his mind to the materials in order to have reasons to believe that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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