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TMI Blog2013 (9) TMI 1230X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 29,921/-. 3. The facts of the case are that an information was received that the assessee has taken accommodation entry of ₹ 2,99,212/- on 18.07.2001 from M/s. Singhman Financial Services Limited in the form of capital gain. After recording the reasons to believe and after getting sanction under section 151 of the Act from the competent authority, the notice under section 148 of the Act was issued on 27.03.2009. In compliance to the notice, the assessee filed written reply on 21.04.2009 in which it was submitted that the return filed originally on 01.08.2002 may be treated to have been filed in compliance to notice under section 148 of the Act. The assessee also submitted before the A.O. that reasons are recorded in mechanical manner without applying mind. There are no material in the possession of the Department to prove the case. The assessee has purchased shares which were sold and earned long term capital gains. It is further stated that the assessment was reopened under section 147 of the Act on information received from D.D.I.T., Investigation Wing, Agra dated 13.03.2009 that the assessee has taken accommodation entry as above. The assessee explained that he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issions made before the Authorities below and submitted that the assessee has disclosed all the primary facts of long term capital gain in the return of income which have been accepted in proceedings under section 143(1) of the Act. No report dated 13.03.2009 was brought on record or provided to the assessee which is stated to have been received from the D.D.I.T., Agra. The A.O. did not apply his mind to any information. All information were vague and general and even the columns of the reasons recorded under section 148 are blank. No tangible material had come in to the possession of the Department to record reasons for reopening of assessment. There is no reason to have live link with the formation of belief. The A.O. did not examine any information, therefore, reopening of the assessment is bad in law. He filed copy of reasons under section 148 of the Act at page no.40 of the Paper Book. He has relied upon decision of Hon ble Delhi High Court in the case of CIT vs. Atul Jain, 212 CTR 42 (Del), decision of Hon ble Delhi High Court in the case of CIT vs. SFIL Stock Broking Limited, 233 CTR 69 (Del), decision of Hon ble Supreme Court in the case of Chhugamal Rajpal vs. S.P. Chaliha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per section 149 of the IT Act. ( 4). Whether there was any valid service of notice u/s. 148 of the IT Act upon the assessee. 7. It would be relevant to reproduce the relevant provisions of law dealing with the above legal issue of validity of initiation of re-assessment proceedings u/s. 147/148 of the IT Act. 7.1. Section 147 of the IT Act provides as under : 147. If the Assessing Officer, 1523[has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year: Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4 . - For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 7.2 Section 148 of the IT Act provides as under : 148 ( 1). Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- ( a) where a return has been furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end of the relevant assessment year unless the income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment.] Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. ( 2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. ( 3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such nonresident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the first re-assessment order dated 30.03.2006 was not aware of the entire gift amount of ₹ 15,00,000/- received by the assessee from the donor Shri Sanjay Mohan Agarwal. The AO thus examined all the material before him at the original re-assessment proceedings in respect of the gift received from Shri Sanjay Mohan Agarwal and the issue was also considered in detail by the ld. CIT(A) while deleting the impugned addition of ₹ 5,00,000/- on account of gift received from the same donor vide appellate order dated 24.04.2008. The AO on the basis of information received from investigation wing, Ghaziabad intended to again re-assess the income of assessee on account of part of the gift of ₹ 10,00,000/- received from same donor in same assessment year, and the letter of ADIT (Inv.), Ghaziabad was received on 21.03.2007. The AO asked the Branch Manager, Vijaya Bank to give some details and thereafter on 30.03.2007 allegedly issued notice u/s. 148 of the IT Act against the assessee. The AO recorded the following reasons for re-opening of the assessment which are reproduced as under : REASONS The Addl. Director of Income Tax (Inv.),Ghaziabad vide letter F. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approval for issue of notice u/s. 148 sent to CIT-II Agra vide letter F.No. ACIT/Cir.- 5/FZD/151/2006-07/dated 23.03.2007. 30.03.2007. Approval u/s. 151 of CIT-II for issue of notice u/s. 148 vide letter F.No. Proposal u/s.148/Addl. CIT/R- 5/FZD/2006-07/827 dated 29.03.2007. Notice u/s. 148 issued. The Inspector of Income-tax reported that assessee does not reside at the given address i.e., 33, Circular Road, Firozabad. He is accordingly directed to effect service by affixture. 03.04.2007. The Inspector of Income-tax returned notice with a report thereon after having affixed copy of notice u/s. 148. 09.04.2007. Envelop containing notice u/s. 148 received back and placed on record. 8.2 The ld. CIT(A) at page 40 of the appellate order after going through the assessment record of all the above assessees noted that as per record, letter dated 19.03.2007 was received by the AO on 21.03.2007 forwarding report of Addl. DIT (Inv.), Ghaziabad dated 16.03.2007 providing the details of accommodation entries of bogus gifts received by all eight assessees. Though names of some of these persons were not mentioned correctly in the said report, these names were got ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the gift by the donor from the assessee. These facts, therefore, would clearly show that all information and details of gift received from Shri Sanjay Mohan Agarwal, donor were furnished to the Revenue Department not only in the original return of income, but in the first re-assessment proceedings u/s. 148 of the IT Act which culminated into assessment order dated 30.03.2006. Thus, information of gifts were verified and examined by the AO and part addition was made of gift of ₹ 5,00,000/- which was ultimately deleted by the ld. CIT(A). The AO in the remand report dated 30.04.2012 confirmed that no record relating to investigation in the case of Sanjay Mohan Agarwal have been found in the office of Investigation Wing, Ghaziabad. The ld. CIT(A) in the order sheet dated 20.06.2012 on filing the evidence by the assessee found that the assessee suitably established identity of the donor, his creditworthiness and genuineness of the gift in the matter. It was also found that the AO could not produce any evidence to prove that the evidence filed by the assessee were false. From the material claimed to be collected from the investigation of Shri Sanjay Mohan Agarwal also made it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial or evidence that prima facie showed or establishes nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. 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 also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings wee not valid and were liable to be quashed. 8.4 Considering the facts of the case in the light of above decision, it is clear that there was no specific or reliable information received from investigation wing, Ghaziabad about escapement of income and no record of the donor was available with the investigation wing to prove that he was providing accommodation entries. Even according to the ld. CIT(A), the names of some of the assessees were not correctly mentioned in the report of Investigation Wing, Ghaziabad. The AO merely called for the names of the assessees from Vijaya Bank. Therefore, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. The assessee has filed copy of reasons recorded under section 148 of the Act at page no.40 of the Paper Book and the same reads as under :- To Ramesh Prasad, HUF Professor Colony, Agra. Assessment Year 2002-03 REASONS FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT, 1961 The assessee has taken the following entries of long term capital gain/short term capital gain. The report received from the DDI Wing vide F.No.ADIT(Inv.)/Agra/Accom.Entries/2008-09/290 dated 13.3.2009 also confirms the fact that on enquiries it has been found that the bank accounts from which money has been transferred to various beneficiaries have been operated by certain stock brokers who have been providing entries to the beneficiaries by showing the transaction made by them in Purchase sale of shares of certain companies from certain persons, which in fact never took place. These amounts are found credited in the bank account no-------- --------- of ------------------ bank on ----------------. These transactions shown by bank draft from one of such brokers are actually the assessee s income from undisclosed sources in the form of fictitious entries in the form of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that the evidences filed by the assessee were false. These facts, therefore, clearly support the contention of the ld. Counsel for the assessee that the reasons for reopening of the assessment were incorrect and without any basis or material. The assessee has not introduced any unaccounted income in the form of long term capital gain. There was no new information available to the A.O. to prove that the assessee has received any bogus accommodation entry or has introduced any unaccounted money. Thus, the reasons recorded for reopening of the assessment were incorrect and based on no material. Whatever is recorded in the reasons for reopening of the assessment was not supported by any tangible material. The ld. Counsel for the assessee relied upon the following decisions :- i) Decision of Hon ble Delhi High Court in the case of CIT vs. Atul Jain, 212 CTR 42 (Del) in which it was held as under :- The only information with the AO is that the assessees had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). One do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as saying that there were reasons for the issue of the notice. The Commissioner had mechanically accorded permission. The important safeguards provided in section 147 and 151 were lightly treated by the Officer and the Commissioner. The Income Tax Officer could not have had reason to believe that income had escaped assessment by reason of the appellant-firm 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. iv) Decision of Hon ble Delhi High Court in the case of CIT vs. Orient Craft Limited, 354 ITR 536 (Delhi) in which it was held as under :- Held, dismissing the appeal, that the reasons disclosed that the Assessing Officer reached the belief that there was escapement of income on going through the return of income filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This was nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer. The reasons recorded by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without examining any report or information, acted upon the said vague and general information which is bad in law. There was no reference to any document or material with the alleged report of the Investigation Wing, thus the same could not be regarded as material or evidence that prima facie showed nexus or live link, discloses escapement of income. It is, therefore, clear that the A.O. did not apply his own mind to the vague information and did not examine the basis or material, if any, to support such information. The above decisions squarely apply in favour of the assessee in proving reassessment is bad in law including decision of Division Bench of I.T.A.T., Agra in the case of DCIT vs. Late Shri Satish Prakash Mittal Others (supra). The decisions relied upon by the ld. Departmental Representative would not support the case of the Revenue as the same are clearly distinguishable on facts of the case. Therefore, there was not prima facie belief available to the A.O. to say that there was any escapement of income. There is no reason to believe as required under section 147 of the Act. Considering the above discussion, I am of the view that there was no justification for the A. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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