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TMI Blog2019 (11) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by Pr. Commissioner of Income Tax is also invalid. We may also note that vide Order sheet Dated 23.08.2019 the case was re-fixed for hearing because the Ld. D.R. argued that approval have been granted by Commissioner of Income Tax after due discussion of the matter and perusal of the relevant information and thereafter approval in prescribed proforma sent to the A.O. and he has mentioned that I am satisfied. However, no record was produced. Therefore, this case was re-fixed for fresh hearing. However, on the date of hearing no such record have been produced for the inspection of the Bench. Therefore, satisfaction recorded by the Pr. Commissioner of Income Tax is invalid and without application of mind. Therefore, the reopening of the assessment is invalid and bad in Law and cannot be sustained in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 - Decided in favour of assessee. - ITA.No.1579/Del./2019 - - - Dated:- 7-11-2019 - Shri Bhavnesh Saini, Judicial Member And Shri Prashant Maharishi, Accountant Member' For the Assessee : Shri Raj Kumar, C.A. And Shri Rajee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... data complied / received from Investigation Wing, report and data complied/received by ITO, Ward-10(1), New Delhi, diaries and registers considered as incriminating material seized from Shri Himanshu Verma and any other documents which Department wanted to rely. It was further submitted that proceedings under section 147/148 of the I.T. Act, cannot be invoked for making inquiry or verification purposes. The assessee denied receipt of any accommodation entry from any such person. The A.O, however, rejected the objections of the assessee and proceeded to make assessment in the matter. The A.O. noted that in assessment year under appeal, assessee has received ₹ 11,05,00,000/- on account of share capital and share premium from 38 parties as noticed during the course of assessment proceedings. The summary of the same is reproduced in the assessment order. The assessee was asked to file complete postal address, PAN and other details of these 38 parties. The A.O. also issued notice under section 133(6) to all 38 share subscriber companies and asked for the details from them. The A.O. received replies from 26 companies. In 06 cases, although notice issued under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No right of cross-examination have been provided to the assessee to the statement of Shri Himanshu Verma and others. The assessee relied upon the following decisions. 3.1. In the case of Pr. CIT vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.) the Hon ble Delhi High Court held as under: In the present case too, the information received from the Inv. Wing cannot be said to be tangible material per se without a further enquiry being undertaken by the learned assessing officer 3.2. In the case of Pr. CIT vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), the Hon ble Delhi High Court held as under : Reassessment notice condition precedent recording of reasons to believe that income has escaped assessment mere reproduction of investigation report in reasons recorded absence of link between tangible material and formation of ceding illegal Income Tax Act, 1961, Sec.147, 148 3.3. In the case of Pr. CIT vs., G And G Pharma India Ltd., [2016] 384 ITR 147 (Del.), the Hon ble Delhi High Court held as under : Reassessment condition precedent application of mind by assessing officer t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e state Yes (a) Whether any voluntary return has already been filed. Yes (b) If so, the date of filing of return 04.02.2011 9. If answer to item 8 is negative, please state (a) Income originally assessed NA (b) Whether it is a case of under assessment, at lower rate, assessment which has been made the subject of excessive relief or allowing excess loss/depreciation. NO 10. Whether the provision of Sec. 150(1) are applicable. If the reply is in affirmative the relevant facts may be stated against Item No. 11 and 8 may also be brought out that the provisions of Sec. 150(2) would not stand in the way of initiating proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction in a mechanical manner and without application of mind. The assessee also relied upon Judgment of Hon ble Madhya Pradesh High Court in the case of Arjun Singh vs., ADIT [2000] 246 ITR 363 (M.P.) in which also similarly worded sanction under section 148 was not found valid. The assessee also relied upon Judgment of Hon ble Delhi High Court in the case of Pr. Commissioner of Income Tax vs., N.C. Cables Ltd., [2017] 88 taxmann.com 649 (Del.) in which also on similarly worded sanction, it was held that reassessment was not valid. The assessee also submitted that since no right of cross-examination have been allowed to the statement of Shri Himanshu Verma, therefore, such statement cannot be read in evidence against the assessee. He has relied upon Judgment of Hon ble Supreme Court in the case of M/s. Andaman Timber Industries vs., Commissioner of Central Excise, Kolkata-II reported in 281 CTR 241. 4. The Ld. CIT(A), however, did not accept the contention of assessee and confirmed the reopening of the assessment. The assessee also made submissions on merit to show that addition is wholly unjustified. However, the Ld. CIT(A) did not accept th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission paid by assessee for arranging share capital. Learned Counsel for the Assessee relied upon Order of the ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., vs. DCIT ITA.No.132/Del./2018 Dated 06.08.2018 in which in similar circumstances the re-assessment have been quashed which case also relates to entry provided by Shri Himanshu Verma. Learned Counsel for the Assessee submitted that the A.O. issued notices to all the parties under section 133(6) of the I.T. Act. In response to the same, 26 parties filed reply supported by documentary evidences to prove genuine share application money have been received. The A.O. did not take help of any handwriting export before forming any opinion. If replies were not in order, assessee should have been confronted with the material so that assessee could rebut the same. Therefore, such fact could not be taken adversely against the assessee. The assessee never received notice Dated 11.12.2017 for production of the parties for examination. In reasons 06 parties are mentioned which belong to Shri Himanshu Verma, but, in his statement he says 08 parties, but, the A.O. made addition for 38 partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h material to justify the addition on merit. The assessee also did not prove identity and creditworthiness of the Investors even if no cross-examination to the statement of Shri Himanshu Verma have been allowed. The Ld. D.R. relied upon Judgment of Hon ble Supreme Court in the case of Raymond Woollen Mills 236 ITR 34 (SC). He has submitted that information is prima facie relevant and there is sufficient material on record to justify the initiation of re-assessment proceedings. The assessee failed to prove that no notice Dated 11.12.2017 have been received. The Ld. D.R. relied upon the following decisions. 1. PCIT vs., Paramount Communication (P.) Ltd., 2017- TIOL-253-SC-IT. 2. PCIT vs., Paramount Communication (P.) Ltd., [2017] 392 ITR 444 (Del.) (HC) 3. Aradhna Estate (P.) Ltd., vs. DCIT [2018] 91 taxmann.com 119 (Gujarat) (HC). 4. Pushpak Bullion (P.) Ltd., vs. DCIT [2017] 85 taxmann.com 84 (Gujarat) (HC). 5. Ankit Financial Services Ltd., vs. DCIT [2017] 78 taxmann.com 58 (Gujarat) (HC). 6. Aaspas Multimedia Ltd., vs. DCIT [2017] 83 taxmann.com 82 (Gujarat) (HC). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In this way, the reserve surpluses and the capital account of a specific set of companies are enhanced with the help of the unexplained cash received by Himanshu Verma, which is routed to these companies through their dummy firm/companies. Once the funds of these companies have been enhanced sufficiently, accommodation entries through RTGS/ Cheque in the shape of the share capital, capital gains or loans as per the specific requirement of the recipient clients were provided to them in lieu of the cash received from them. In this way, the chain for providing an accommodation entry gets completed. It is noticed from the list of entries that the assessee M/s Ganesh Ganga Investment P. Ltd. has taken following accommodation entries during the financial year 2009-10 :- S.No. Amount Conduit companies through which cheque issued. 1. 4000000 Shubh Propbuild P Ltd., 2. 4000000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PB-29 is the sanction granted by Pr. Commissioner of Income Tax for reopening of the assessment in which it is mentioned as under : 13. Whether the Pr. Commissioner of I. Tax is satisfied on the reasons recorded by the ITO that it is a fit case for the issue of notice u/s.148. Yes I am satisfied that it is a fit case for issue of notice u/s.148 of the I.T. Act, 1961. Sd/-S.K. Mittal, Pr. Commissioner of I. Tax, New Delhi. 8.2. Learned Counsel for the Assessee relied upon Judgment of Hon ble Delhi High Court in the case of United Electricals Company (supra) in which the Addl. Commissioner of Income Tax similarly recorded the approval Yes I am satisfied that it is a fit case for issue of notice under section 148 of the I.T. Act. In this case the Hon ble Delhi High Court held as under : On a careful perusal of the statement made by V' it was found that facts mentioned in reasons were de hors the facts available on record. It was evident that the said statement was too general. It did not men ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilar view have been taken by Hon ble Madhya Pradesh High Court in the case of Mr. Arjun Singh vs., Asst. Director of Income Tax [2000] 246 ITR 363 (MP) (supra), copy of which is filed at page-97 of the paper book. The ITAT, Delhi Bench in the case of M/s. Pioneer Town Planners Pvt. Ltd., vs., DCIT (supra) in paras 7 to 22 on similar facts relating to entry provider Shri Himanshu Verma held as under : 7. Apropos these legal grounds , we have heard the arguments of both sides and carefully perused the relevant material placed on the record of the Tribunal. As agreed by both the parties, we have heard argument of both the sides on these legal grounds of the assessee, wherein the assessee has challenged to the initiation of reassessment proceedings and reopening of assessment u/s. 147/148 of the Act. The ld. AR submitted that the impugned order of assessment is invalid and unsustainable in law as the same has been passed by the AO without providing the reasonable time of four weeks for taking remedy against the order of disposal of preliminary objection against the incorrect assumption of jurisdiction by the AO u/s. 147 of the Act in violation of principles enunciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AR placed reliance on the decision of Hon'ble High Court of Delhi dated 31.08.2017 in WP(C) No. 614/2014 in the case of Yum Restaurants Asia Pte Ltd. vs. DDIT it was held that the glaring mistakes in the proforma for approval is the valid ground for quashing the assessment on the premise of non-application of mind by all the authorities involved in the process of recording reasons and providing satisfaction/s. 151 of the Act. Further placed reliance on the decision of ITAT, Mumbai in the case of GTL Ltd. vs. ACIT reported in 37 ITR (Trib.) 0376 (Mum.), notice u/s. 148 of the Act does not mention the fact that the same is issued after the satisfaction of the authority u/s. 151 of the Act, such non-mentioning of this fact renders the consequent assessment invalid in law, Relied on the judgment of DSJ Communication vs. DCIT 222 Taxman 129 (Bom.). 11. On the issue of validity of reopening and initiation reassessment proceedings u/s. 147 of the Act the ld. AR also pointed out that as per ratio of the decision of Hon'ble Bombay High Court in the case of Asian Paints Ltd. 296 ITR 90 (Bom), the AO to wait for four weeks to begin assessment after disposing of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me has escaped assessment then, it would amount to borrowed satisfaction and it has to be presumed that there is no independent application of mind by the AO to the tangible material which forms the basis of the reason to believe that income has escaped assessment. The ld. AR submitted that from the three pages of reasons recorded, it is discernable that in first four paras the AO has noted facts of the information received from DDIT (investigation), Faridabad, in para 6 modus operandi of entry providers has been noted thereafter, in para 7 8, it has been arisen that either during survey or post survey proceedings the assessee company has not submitted satisfactory explanation to prove identity, genuineness and creditworthiness of share capital/premium introducers and thus, the same is from paper companies of entry operator and then, he recorded satisfaction that the assessee company taken bogus/ accommodation entries. The ld. AR vehemently pointed out that thereafter in last para 9 10, the AO, without applying mind to the information received from the Investigation Wing, recorded that he has reason to believe that the an income has escaped assessment which clearly shows that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 151 of the Act. He also submitted that if there is any defect therein the same is rectifiable u/s. 292B of the Act and thus, the reassessment proceedings and orders cannot be challenged on this count. The ld. DR further submitted that the format/proforma for granting approval u/s. 151 of the Act has been designed by the Department and there is no role of AO in framing and designing the same and the allegation of non-application of mind on the basis of such proforma or words used by the approving authority cannot be made. 17. The ld. DR submitted that the team of Revenue officers work under the supervision and guidance of PCIT and the Department is very careful about the compliance of the provision of the Act as well as directions of Hon'ble Supreme Court, Hon'ble High Court and CBDT Circulars and also towards working of the Revenue Officers in the cases of initiation of reassessment proceedings and framing of reassessment orders. The ld. DR submitted that the proforma of approval u/s. 151 of the Act is being followed all over India and the ACIT applied his mind to the all material placed before him by the AO prior to granting approval u/s. 151 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Chemical Ltd. (supra), where the JCIT/ACIT has only recorded Yes, I am satisfied then, it has to be held that the approving authority has recorded satisfaction in a mechanical manner and without application of mind to accord sanction for issuing notice u/s. 148 of the Act for reopening of assessment and in this situation initiation of reassessment proceedings and reopening of assessment has to be held as invalid and bad in law. Therefore, we are inclined to hold that the reopening of assessment and notice u/s. 148 of the Act are bad in law and consequently all subsequent proceedings in pursuant thereto are also bad in law and the same cannot be held as valid and sustainable. 20. So far as legal contention of the ld. AR on behalf of the assessee regarding non-application of mind by the AO, while recording reasons for reopening of assessment, is concerned from careful perusal and reading of the three pages of reasons recorded, we observe that in first four paras the AO has noted facts of the information received from DDIT (Investigation), Faridabad, further, in para 6 modus operandi of entry providers has been noted thereafter, in para 7 8, it has been arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t income has escaped assessment. 22. In the present case, as we have noted above, the conclusion recorded by the AO in para 9 10 of the reasons is based on the information received from the director of investigation wing and the AO without making any effort to examine and discuss the material received from the Investigation Wing and without application of the mind to the same formed a reason to believe that income had escaped assessment. This shows that the AO proceeded to initiate reassessment proceedings on the basis of borrowed satisfaction without any application of mind and exercise on the information received from the Investigation Wing of the Department. Therefore, we have no hesitation to hold that the AO proceeded to initiate reassessment proceedings u/s. 147 of the Act and to issue notice u/s. 148 of the Act on the basis of borrowed satisfaction and without any application of mind and examination of the so called material and information received from the investigation wing to establish any nexus, even prima facie, with the such information. Therefore, in our considered opinion the initiation of reassessment proceedings u/s. 147 of the Act, notice u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of ₹ 2.45 crores, but, ultimately made an addition of ₹ 11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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