9911796707
TMI Blog2019 (12) TMI 680X X X X Extracts X X X X X X X X Extracts X X X X ..... Neena Jeph (JCIT) ORDER PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-2, Udaipur dated 28.09.2018 for the Assessment Year 2009-10 wherein the assessee has taken the following grounds of appeal:- "1. The Ld. CIT(A) has erred on facts and in law in upholding the validity of the order passed by AO u/s 147 of the IT Act, 1961. 2. The Ld. CIT(A) has erred on facts and in law in confirming an addition of ₹ 1.10 Crores u/s 68 by treating the share capital money received from the following parties as unexplained:- S.No. Name of the Company Amount 1. Olive Overseas Pvt. Ltd. (Realgold Trading Co. Pvt. Ltd.) ₹ 10 Lacs 2. Blazer Venture Pvt. Ltd. ₹ 15 Lacs 3. Sepia Venture Pvt. Ltd. ₹ 25 Lacs 4. Alka Diamond Industries Ltd. ₹ 15 Lacs 5. Kumaon Engineers Co. Pvt. Ltd. ₹ 10 Lacs 6. Vanguard Jewels Ltd. ₹ 15 Lacs 7. Casper Enterprises Pvt. Ltd. (Ostwal Trading (India)Pvt. Ltd. ₹ 5 Lacs 8. Triangular Infocom Ltd. (Lexus Infotech Ltd. ₹ 15 Lacs 2.1 The Ld. CIT(A) has erred on facts and in law in confirming the above addition on the basis of stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has failed fully and truly all material facts necessary for this assessment. I have reason to believe that income of ₹ 75,00,000/- chargeable to tax has escaped assessment within the meaning of section 147 of the income tax Act 1961." 4. The ld. AR submitted that from the reasons so recorded, it can be noted that AO has reopened the assessment on the basis of information available on record that in search of Praveen Jain Group, Mumbai, it is divulged that assessee has taken accommodation entries of ₹ 75,00,000/- in the nature of loan/advance/purchase bill from five companies which is not genuine. It was clear from above that in the reasons recorded, the AO has not specified from whom he has received the information, how such information related to the assessee and whether in search of Praveen Jain Group, any material/ evidence was found that assessee has taken alleged accommodation entries. It was further submitted that the reasons recorded is not specific as to whether assessee has taken loan or advance or made purchases from these five companies whereas the fact is that assessee has neither taken any loan or advance or made any purchases from the above parties. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer has categorically recorded in the reasons that the assessee has suppressed its profits by taking accommodation entries of bogus purchases. The intimation from DGIT (Inv), Mumbai was about the bogus investment/share applications. Thus, the Assessing Officer has not at all applied his mind while recording the reasons. The facts on record clearly establishes that the Assessing Officer has not applied his mind so as to come to a conclusion that he has reason to believe that the income has escaped assessment for the year under consideration. The reasons recorded are vague and are not based on any tangible material as well as on the facts acceptable in the eyes of law. The reasons recorded also suggest that the Assessing Officer has mechanically issued notice U/s 148 of the Act even not bothering regarding the nature of information received from the DGIT (Inv), New Delhi. Such vagueness in the reasons recorded make reopening bad in law and deserved to be quashed. Such view is also supported by the various decisions of the Hon'ble High Courts and the Tribunals as stated (supra). Therefore, we quash the reopening of the assessment." 6. Further reliance was placed on the Coor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Gujarat High Court in case of Varshaben Sanatbhai Patel Vs. ITO (2016) 129 DTR 261 (Guj.) wherein it was held as under: "A perusal of the reasons recorded reveals that the AO on verification of the details available on record has noticed that there were bogus purchases. However, from the reasons there is nothing whatsoever to show as to which is the record which shows that there were bogus purchases to the extent stated therein. No details have been mentioned by the AO as to what is the basis on which he says the purchases are bogus. AO for purpose of reopening assessment placed reliance upon material from external source that did not form part of record. It was settled legal position that substratum for formation of belief that income liable to tax has escaped assessment had to form part of reasons recorded. Apparently, substratum for formation of belief, as indicated in order rejecting objections as well as affidavit-in- reply, was information given by DGIT (Inv.), Mumbai that had no relation with reasons recorded. AO on basis of material on record could not have formed belief that there was any escapement of income chargeable to tax so as to validly assume jurisdiction u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO is comprehensible as that of an honest and reasonable person based upon reasonable grounds as said by Hon'ble Supreme Court in case of Sheo Nath Singh v. AAC [1971] 82 ITR 147 (SC)." 10. We have heard the rival contentions and purused the material available on record. It is a settled legal proposition that the reasons are required to be read as they were recorded by the Assessing officer. No substitution or addition is permissible. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons. The material on basis of which belief has been formed that income chargeable to tax has escaped assessment had to find place in reasons itself and there has to be a nexus between the material and formation of belief that income has escaped assessment. In the instant case, in the reasons so recorded, the Assessing officer stated that on verification of record, it is found that assessee has taken accommodation entries in the nature of loan/advance/purchase bills from five entities. It has been stated therein that the assessee company is a beneficiary who has taken accommodation entry in the nature of loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons is that the formation of belief is based upon the information which is received from the DGIT (Inv.), Mumbai. It is settled legal position as held by a catena of decisions that the substratum for formation of belief that income liable to tax has escaped assessment has to form part of the reasons recorded. In the present case, the substratum for formation of belief, as indicated in the order rejecting the objections as well as the affidavit-in-reply, is the information given by the DGIT (Inv.), Mumbai, which got no relation with the reasons recorded, which are stated to be based upon the material available on record. Under the circumstances, the Assessing Officer, on the basis of the material on record, could not have formed belief that there was any escapement of income chargeable to tax so as to validly assume jurisdiction under section 147 of the Act. As held by the Supreme Court in a catena of decisions, the reasons recorded cannot be supplemented in the affidavit or by the order rejecting the objections. The material, on the basis of which, the belief that income chargeable to tax has escaped assessment has been formed, has to find place in the reasons itself." 11. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th. This view of the Tribunal is in accordance with the settled position in law." As held by the Bombay High Court, the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment. In other words, unless the AO carries out the further examination after receipt of initial information, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed its return of income and the AO should therefore have examined its return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. Even the ld CIT(A) has stated that stubble distinction of credit entries are not adequately appreciated by the AO. Similar view has been taken by the Coordinate Benches in case of Merta Oil Mills Company (supra), Meta Plast Engineering Pvt. Ltd (supra) and Balaji health Care Pvt ltd (supra). 12. Further, for assumption of jurisdiction, in the reasons so recorded by the Assessing officer, he has stated that assessee has failed to fully and trul ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
