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TMI Blog2019 (8) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to disclose fully and truly all material facts necessary for assessment, is bad in law and liable to be quashed. Borrowed satisfaction by AO - The reopening of assessment cannot be held to be valid, even on this ground ,because if you go through reasons recorded by the AO, it is very clear that the AO has not applied his mind to the information received by him from the DGIT(Inv.). AO has merely issued reopening notice, on the basis of information received from the DGIT(Inv.). This is clearly breach of the settled position of law that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. Case followed M/S. SHODIMAN INVESTMENTS PVT. LTD., [ 2018 (4) TMI 1287 - BOMBAY HIGH COURT] - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... completed u/s 143(3) of the I.T.Act, 1961, on 11/09/2009, determining total loss at ₹ 9,77,188/- Subsequently, the case has been reopened u/s 147 of the I.T.Act, 1961, by issue of notice u/s 148, dated 28/03/2014, on the ground that income chargeable to tax had been escaped assessment, on account of accommodation entries of purchases obtained from suspicious/Hawala dealers from companies controlled and operated by Shri. Rajendra S.Jain. In response to notice, the assessee vide letter dated 26/04/2014 submitted that return filed u/s 139(1) on 29/10/2007 be treated as return filed in compliance to notice issued u/s 148 of the I.T.Act, 1961. Thereafter, the reasons for reopening has been communicated to the assessee. The assessee vide letter dated 08/06/2014 filed objections for reopening of assessment and the objections filed by the assesee has been disposed off vide order dated 07/10/2014. Thereafter, the case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act, were issued. In response, the assessee through its Authorized Representative appeared from time to time and filed various details as called for. During the course of assessment proceedings, the AO ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous judicial precedents, rejected ground taken by the assessee challenging reopening of the assessment, on the ground that the AO has reopened, assessment on the basis of information received from DGIT (Inv.), which clearly proovs escapement of income and also assessment has been reopened after period of four years, as per the provisions of section 149 r.w.s. 151 of the I.T.Act, 1961. Therefore, there is no error in reopening of assessment. As regards additions made towards purchases from four parties amounting to ₹ 1,81,69,414/-, the. Ld.CIT(A) has observed that although, search and seizure carried out by the investigation wing clearly established the fact that Shri Rajendra S.Jain was involved in providing accommodation entries, but fact remains that the statement of Shri Rajendra S.Jain was subsequently retracted along with affidavit. Therefore, the issue cannot be looked into in isolation with retracted statement. The Ld.CIT(A), further observed that the assessee has filed necessary details, including purchases bills and payment proof against purchases and also filed complete quantitative details of stock movement. The Ld.AO neither pointed out any mistakes in books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll settled position of law that reopening notice has been issued by the AO on his own satisfaction and not on borrowed satisfaction. In this regard, he relied upon, the following judicial precedents:- i) Tao Publishing (P.) Ltd. V DCIT,Circle-7,Pune [2015] 53 taxmann.com 146 (Bombay). ii) Sound Casting (P.) Ltd. Vs. DCIT [2013]33 taxmann.com 374(Bombay). iii) The Pr. Commissioner of Income Tax 5 vs. M/s. Shodiman Investments Pvt. Ltd. ITA NO, 1297 OF 2015 (Bombay High Court). iv) Shilpi Jewellers Pvt. Ltd. vs. Union of India &Ors. in Writ Petition No. 3540 OF 2018 (Bombay High Court). v) Shri Ostwal Diamond Pvt. Ltd. vs. ITO, Ward 2(5) in ITA No.3653/Mum/20l7 & 2270/Mum/2018 (Mumbai ITAT). vi) The Principal Commissioner of Income Tax-17 vs. M/s Mohommad Haji Adam & Co. in ITA NO. 1004 OF 2G16(Bombay High Court). vii) M/s AJM & Co. vs DCIT - 15(1)(1) in ITA No.4567/Mum/2017 (Mumbai ITAT). viii) Nitin Gupla vs Income Tax Officer, Ward-47(4) in ITA No.2266/Del/2017 (Delhi ITAT). ix) Hiralal Motilal Jewellers vs AC1T CircIe-43 in ITA No.1045/Kol/201 8 (Kolkata ITAT). x) Shanti vijay Jewels Ltd, vs. DCIT Rg 8(3) in ITA No.1045/Mum,2016 (Mumbai ITAT). xi) Indo Uniqu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r years from the end of relevant assessment year. Therefore, as argued by the Ld.AR for the assessee proviso to section 147of the Act, 1961 comes into operation and accordingly, the AO should allege that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In this legal background, if you gone through reasons recorded for reopening of assessment, which is part of paper book filed by the assesse, it is abundantly clear that nowhere in the reason recorded by the AO, there is allegation from the AO that there is a failure on the part of assessee to disclose fully and truly all material facts necessary for assessment. Unless, the AO allege that the assessee has not fully and truly disclosed all material facts for assessment in original assessment proceedings then, the assessment cannot be reopened after a period of four years from the end of relevant assessment years. This legal proposition is supported by the decision of Hon'ble Bombay High Court in the case of Sound casting Pvt.Ltd. Vs. JCIT [2012 250 CTR 119 (Bombay)], where the Hon'ble High Court held that when reopening of assessment has admittedly taken place bey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived from the DGIT(Inv.). This is clearly breach of the settled position of law that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. This legal proposition is supported by the decision of Hon'ble Bombay High Court in the case of Prl.CIT vs Shodiman Investments Pvt. Ltd . in Income Tax Appeal No.1297/2015, order dated 16/4/2018, where the legal position of law has been clearly reiterated and held that the AO cannot issue reopening notice, on the basis of borrowed satisfaction. This legal position has been reiterated by the Hon'ble Bombay High Court in the case of Shilpi Jewellers Pvt.Ltd. vs Union of India & Others in writ petition No. 3540/2018, order dated 08/02/2019, where similar observations has been made, in respect of reopening of assessment. Therefore, we are of the considered view that even on this count, reopening of assessment cannot be held to be valid. 10. In this view of the matter and respectfully following the decisions of Bombay High Court, discussed hereinabove, we are of the considered view that reopening of assessment is bad in law and hence, the reopening of assessment is quashed. 11. The assessee, as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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