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TMI Blog2019 (11) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of 16 parties have not been mentioned in the information supplied by the Investigation Wing, then there were no reason for the A.O. to say that both these amounts are accommodation entries received by the assessee in assessment year under appeal. These facts clearly show that A.O. recorded incorrect facts in the reasons recorded for reopening of the assessment. There is no independent application of mind by the A.O. to any tangible material which form the basis of reasons to believe that income chargeable to tax has escaped assessment. The conclusion of the A.O. are at best re-production of the conclusion of investigation report. A.O. in the reasons has not recorded as to from whom assessee has received unaccounted money. The A.O. has merely referred to Annexure-A in the reasons which is credit side of the bank account of the assessee which ultimately found to be correct that the entire bank deposits are not accommodation entries. There were no proceeding pending before the A.O. at the time of recording of reasons, thus, there was no reason for assessee to establish the creditworthiness of the Investors as is noted in the reasons. - Decided against revenue - ITA.No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d share premium. The gist of the same is reproduced in the assessment order. The assessee company has also filed details of paid-up capital and share premium for the year under consideration along with complete address PAN details and amount of share capital allotted to them and also filed confirmation of share holders, copies of their Income Tax Ack. receipt and share application forms and copy of the bank statement showing amounts have been given through cheques. It was submitted that all the share applicants are income tax assessees and in all cases amounts have been received through the account payee cheques only. The assessee relied upon Judgment of Hon ble Supreme Court in the case of CIT vs., M/s Lovely Exports (P) Ltd., [2009] 319 ITR (St.) 5 (SC). The A.O, however, did not accept the contention of assessee and noted that summons under section 131 have been issued to the Investors to attend the O/o. Assessing Officer personally, but, none of the Investor attended, but, documents have been filed through post. The A.O. noted that the verification from the Investors could not be done, therefore, documentary evidences and confirmations filed by assessee were rejected. The A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors, no addition could be made against the assessee because A.O. did not make further enquiry into the matter on the documentary evidences filed by assessee. The assessee relied upon Judgments of Hon ble Delhi High Court in the cases of CIT vs., Victor Electrodes Ltd., [2010] 42 DTR 152 (Del.) and CIT vs., Winstral Petrochemicals (P) Ltd., [2010] 233 CTR 392 (Del.) as well as CIT vs., Dwarkadhish Investment (P) Ltd., [2010] 45 DTR 281 (Del.). Several other case Law were also relied upon. The Ld. CIT(A) asked the A.O. to file remand report. However, no remand report was furnished. Reminder was further issued and ultimately, remand report Dated 13.12.2013 was received from the A.O. In the remand report A.O. has reproduced the contentions of earlier remand report and also attached copies of statements of various persons recorded on 16.01.2004 by Addl. DIT (Inv.). The A.O. reiterated the addition made by A.O. at assessment stage. The assessee also filed rejoinder in which it was also explained that A.O. himself has stated that statement of 08 parties have been recorded. The parties have also filed confirmations. Since all documentary evidences have been filed and A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment. He has submitted that perusal of the reasons recorded by the A.O. clearly show that A.O. has simply acted upon the information received from Investigation Wing and did not apply his own mind to the said information. The contents of the reasons recorded by the A.O. for reopening of the assessment proceedings are summarized as under : i. Introduction about the Investigation carried by Investigation Wing. ii. Modus operandi of entry providers. iii. Summing-up enquiry of Investigation Wing iv. Information received from Investigation Wing. v. Conclusion reached by the A.O. that assessee has taken accommodation entries vi. Statement that income of assessee has escaped assessment. 7.1. The perusal of above reasons would show that A.O. has straightaway concluded that assessee had taken accommodation entries. The A.O. has not brought anything on record on the basis of which any nexus could have been established between the material and escapement of income. In the instant case, the reasons recorded do not show any application of mind nor the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2006 referred to in the reasons is not available on record. The Ld. D.R. placed on record copies of statements recorded by A.O. at remand proceedings as well as filed copy of statement of Shri Govind Ram Saini referred to in the reasons Dated 13.05.2005. The Ld. D.R. submitted that specific information was received that income chargeable to tax has escaped assessment. In this case return is only processed under section 143(1), therefore, reopening of the assessment is justified. The Ld. D.R. relied upon following decisions : i. Judgment of Hon ble Supreme Court in the case of ACIT vs., Rajesh Jhaveri Stock Brokers Pvt. Ltd., [2007] 291 ITR 500 (SC). ii. Central Provindes Manganese Ore Co. Ltd., vs. JTO [1991] 191 ITR 662 (SC) iii. Raymond Woollen Mills Ltd., vs. ITO [1999] 236 ITR 34 (SC) iv. Phool Chand Bajrang Lal vs., ITO [1003] 203 ITR 456 (SC) v. Calcutta Discount Co., Ltd., vs. ITO [1961] 41 ITR 191 (SC). 8.1. The Ld. D.R, therefore, submitted that reopening of the assessment is justified in the matter. 9. We have considered the rival submissions. It is we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds were transferred through clearing in two or more stages. The beneficiary in turn deposited these instruments in his bank accounts and the money came to his regular books of account in the form of gift, share application money, loan etc through banking channels. 2.3. The operators gave the account holders amounts ranging from ₹ 1000 to 2000 per month. These account holders were masons, plumbers, electricians, peons, drivers etc, whose earnings are not sufficient for a living. They earned normally ₹ 3 to 5 thousand per month in their normal work and by working for the entry operators earned extra income of ₹ 2 to 4 thousand per month. Their signatures were taken on blank gift deeds, cheque books, share application money etc. In fact these persons signed all types of papers they were asked to sign. They were made directors of companies, partners of firms and proprietor of different concerns solely for operation of these accounts. Actually, many of them were not even aware of the tax implications etc. Their only concern was with the few thousand rupees given to them by the entry operators. 3. Summing up, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06 which is the basis of recording reasons for reopening of the assessment is not available in assessment record. In the letter Dated 13.03.2006 referred to in the reasons, the Investigation Wing. Referred to the statement of Shri Govind Ram Saini which is the basis for reopening of the assessment. However, in his statement there is no reference to the assessee for providing any accommodation entry. The A.O. in the re-assessment order also mentioned that information provided by the assessee at re-assessment proceedings stated that details of accounts as reflected in the statement provided showing transaction in bank account of ₹ 10,24,42,961/-. Therefore, contention of Learned Counsel for the Assessee is correct that this is the amount which has appeared at credit side of the bank account of the assessee. The A.O. has taken the entire amount deposited in the Bank account of the assessee as accommodation entry without verifying any fact. The assessee explained before A.O. that the amount in his Bank account reflected on credit side pertain to sales, share application money, income and amount received back from the parties i.e., paid for purchases. Therefore, A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ording of reasons, thus, there was no reason for assessee to establish the creditworthiness of the Investors as is noted in the reasons. The A.O. merely on doubts or suspicion recorded the reasons that amount of ₹ 10,24,42,961/- represents income of assessee chargeable to tax which has escaped assessment. The issue is, therefore, covered by Judgment of Hon ble Delhi High Court in the case of G and G Pharma India Ltd., Meenakshi Overseas Pvt. Ltd., and RMG Polyvinyle (I) Ltd., (supra). Considering the totality of the facts and circumstances of the case, we are of the view that assumption of jurisdiction under section 147/148 by the A.O. is invalid and bad in law and is liable to be quashed. In view of the above discussion, we set aside the Orders of the authorities below and quash the reopening of the assessment in the matter which resulted into deletion of all the additions. The Cross Objection of assessee is accordingly allowed. Since Ld. CIT(A) has already deleted addition on merit based on documentary evidences on record, on which, A.O. has also not made any investigation, therefore, the same is left with academic discussion only and there is no need to de ..... X X X X Extracts X X X X X X X X Extracts X X X X
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