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TMI Blog2020 (11) TMI 410X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the AO on 28.04.2018, requesting for a copy of the reasons recorded for re-opening of the assessment, so as to enable it to file objections if any. On 02.08.2018 the AO sent a letter to the assessee which are supposed to be the reasons recorded. In reply the assessee filed objections on 20.08.2018. These objections were disposed off by the AO but in the assessment order itself. Thereafter the AO framed an assessment u/s 147 read with Section 143(3) of the Act on 28.12.2018 determining the total income of Rs.1,19,68,950/- inter alia making disallowance of purchases of Rs.31,98,388/- and making an addition u/s 68 of the Act of Rs.59 lakhs, being a loan taken from M/s. Hanuman Vintrade Pvt. Ltd. Aggrieved, the assessee carried the matter in appeal challenging both the re-opening of the assessment on legal grounds as well as on merits. The ld. CIT(A) partly allowed the appeal on merits. The legal grounds raised by the assessee were dismissed. Aggrieved, the assessee is before us on the following grounds: "1. That, on the facts and circumstances of the case, the Learned Commissioner of Income Tax (Appeals)-14, Kolkata erred in confirming the addition of Rs. 59,00,000 without cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erent from the reasons mentioned by the AO in the assessment order. That the assessee has objected to the re-opening by submitting that the purchases of TMT Rods from M/s. Vasukinath Enterprises was only for Rs.5,20,021/- only and not Rs.31,20,073/- and that the purchases from M/s. Tarama Merchants Pvt. Ltd. is of cement of Rs.78,315/- only and that both are genuine transactions recorded in the books of accounts of the assessee and that the payment made by cheques. He submitted that extracts of invoices, challans, ledger accounts, bank statements etc. were filed before the AO and despite this clarification on the figures with evidence the AO without any application of mind, reopened the assessment. It was submitted that the facts and figures recorded in the reasons were wrong and the facts and figures given in the assessment order are also different. Thus, he submits that it is a case of total non-application of mind by the AO and that the re-opening was based on wrong facts and hence the re-opening of assessment is bad in law. b) That the AO has not disposed off the objections raised by the assessee and hence the assessment is bad in law. He relied on the following case laws for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umstances, the AO was wrong in recording that the copy of the bank statement evidencing the loan were not furnished. In the paper book the assessee filed copies of the Tax audit report and pointed out that the fact of the assessee taking a loan was brought out by the auditors at column 24A of the Tax audit report and it is not right on the part of the AO to state otherwise. He submitted that the addition is arbitrary as confirmation letter was filed and sources explained of the credit. 4. The ld. DR on the other hand opposed the contention of the ld. Counsel for the assessee and submitted that information was received from the Investigation Wing of the Department and based on this information the AO believed that the assessee has taken bogus bills from M/s. Vasukinath Enterprises and M/s. Tarama Merchants Pvt. Ltd. He submitted that a statement was recorded by the Investigation Wing of the Income Tax Department, Kolkata on 10.05.2016 and from this statement it is clear that the assessee firm had taken accommodation entries by way of bogus bills and based on such concrete information, reasons for re-opening has been recorded and the assessment was legally re-opened. On a query from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 brokers were recorded under oath wherein they admitted that they contacted the bill master Sri Sanjiw Kumar Singh on behalf of their clients for getting bogus bills. The statement of two beneficiaries were recorded on the spot who came to Shri Singh's office for getting bogus bills wherein they admitted the same fact of getting bogus bills from the bill master Sri Sanjiw Kumar Singh. The statements of Sri Subrata Kumar Das, Manager of Sanjiw Kumar Singh and his employees were recorded wherein they all admitted that they were doing work on behalf of Sanjiw Kumar Singh who is a bill master and has been involved in providing accommodation entries in the form of bogus bills in lieu of commission. He has no worthwhile business activity except providing bogus bills. The statements of some of dummy directors of paper entities were also recorded wherein they admitted that they were doing work of signing papers/cheques on instruction of Sanjiw Kumar Singh. The statement of Sri Sanjiw Kumar Singh was recorded under oath wherein he admitted that he had no business activity in any of his concerns/companies. These concerns/companies are merely paper concerns which are used for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the copy of the approval granted by the Ld. Pr. Commissioner of Income Tax at the earliest so that we can also look into the same and make our submissions on such approval. Subject to above, it is submitted that the re-opening of our assessment on the basis of these reasons recorded by your honour u/s 148 of the Act is invalid due to the following reasons: 1. The Notice has been issued on the basis of borrowed reasons. There is no application of mind on the information received from Investigation Wing of the Income Tax Department before issue of the Notice under section 148 of the Act. On perusal of the reasons recorded by you it transpires that without verifying such information, your honour had reason to believe that Rs. 31,98,388 is actually our undisclosed income which has escaped assessment. This shows that you had a doubt / suspicion or reasons to suspect rather than a reason to believe that income amounting to the aforesaid amount has escaped assessment. We submit that a mere statement of facts in the form of a report is not a substitute for reasons that are required to be recorded before issuing a notice under section 148 of the Act. Mere satisfaction of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mind to arrive at the reason to believe that income chargeable to tax has escaped assessment." 2. The amount of our income believed by you to have escaped assessment as per your letter dated 02.08.2018 is Rs. 31,98,388. It has been alleged by you that we had made bogus purchases of Rs. 31,20,073 from M/s. Vasukinath Enterprises and Rs. 78,315 from M/s. Tarama Merchants Pvt. Ltd. It is humbly submitted that during the Financial year 2010-11, we had purchased TMT Rods amounting to Rs. 5,20,021 (and not Rs. 31,20,073 as mentioned in your letter) from M/s. Vasukinath Enterprises and purchased Cement amounting to Rs. 78,315 from M/s. Tarama Merchants Pvt. Ltd. for use in construction in our Real Estate business. All the aforesaid transactions are duly disclosed in our Books of accounts for the relevant year. Payments to both the parties were made by us through account payee cheques and copy of all the relevant documentary evidences viz. Ledger extract, Invoice, Delivery Challan and Bank statements are enclosed herewith for your kind verification. We are not aware whether these 2 parties are involved in providing bogus bills etc. or not, but we state and submit that ours were genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated in the Annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of Section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established 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 Rs. 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 were not valid and were liable to be quashed." 4. We request you to please provide us with the copy of the sanction letter and/or evidence of such approval/sanction obtained by you from the Ld. Principal Commissioner of Income Tax- 16, Kolkata. 5. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation to the effect that the assesses teas one of the beneficiaries of bogus purchases arranged through paper concerns as discussed above operated Shri Sanjiw Kumar Singh who was involved In providing accommodation entries in the form of bogus bills to various parties in lieu of commission. Thus, Rs. 19,29,589/- was debited in the profit and loss account to deflate the profit to evade the tax and thereby causing loss to the revenue. Therefore, I have reason to believe that by way of claiming bogus purchases of Rs. 19,29,589/-, the assesses had reduced income to this extent; hence the income of Rs. 19,29,589/- chargeable to tax has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961." 10. A perusal of the above demonstrates that the reasons recorded were not provided to the assessee when they were originally sought for, in the manner in which they were recorded. In the reasons recorded as given in the assessment order, the bogus bills are stated to be Rs.19,29,589/- and whereas in the letter given to the assessee as the reasons recorded for re-opening of the assessment, the bogus bills are stated to be Rs.31,20,073/- and Rs.78,350/-. The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction on the part of the AO regarding escapement of any income." 8. The Revenue then went in appeal before the ITAT which was dismissed by the impugned order. The ITAT concurred with the CIT (A) that the jurisdictional requirement for re-opening of the assessment under Section 147 read with Section 148 of the Act had not been satisfied. In particular, the ITAT observed that the AO "has not given details what was stated by the socalled entry operators in respect of the entries related to the assessee". Further, from the table of accommodation entries produced by the Assessee, the ITAT found that "there are five instances, where entries have been repeated". 12. In a recent decision in Principal Commissioner of Income Tax-6 v. Meenakshi Overseas (P) Ltd. [2017] 82 taxmann.com 300 (Delhi), this Court observed as under: "22. As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s recorded in the reasons are not correct and the assessee points out the same in its objections, then the order on objection must deal with it and prima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the Revenue. 7. Thus, we are of the view that even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanc to issue a reopening notice. The condition precedent of reason to believe that income chargeable to tax has escaped assessment on correct facts, must be satisfied by the Assessing Officer so as to have jurisdiction to issue the reopening notice. In the present case, the Assessing Officer has proceeded on fundamentally wrong fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as failed to disclose fully and truly all material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 has also not been mentioned. In other words, the contents of the letter dated 16.06.2006 of the Director of Income-tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New Delhi; the AO did not mention the facts mentioned in the said communication except that from the information gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act did indicate the source of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scanty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken above." 9. We do not see any reason to differ with the view expressed by the Tribunal. No substantial question of law arises for our consideration. The appeals are dismissed. There shall be no order as to costs. 7.2. The Hon'ble Delhi High Court in the case of Principal CIT vs G&G Pharma India Ltd. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows: "12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: '(i) Section 147 of the Income-tax Act, 1961, is wide but not plenary. The assessing Officer must have 'reasons to believe' that income chargeable to tax has escaped assessment. This is mandatory and the 'reason to believe' are required to be recorded in writing by the Assessing Officer. (ii) A notice u/s 148 can be quashed if the 'belief' is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer when he recorded the reasons. There should be a link between the reasons and the evidence material available with the Assessing Officer. (iii) The reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during F.Y.2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the submissions of the learned counsel for the assessee both on the validity of initiation of re-assessment proceedings as well as the merits of the appeal. None appeared on behalf of the department. 8.1. We have considered the submissions of the learned counsel for the assessee. As far as the validity of initiation of re-assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows :- "No.DCIT/Cir-6/reasons for reopening/09-10 Dated 22/04/2009 To The Principal Officer Greatwall Marketing (P) Ltd. c/o Sri. S.M. Daga 11, Clive Row, Room No. 2 .z-. Fir. Kolkata- 700001. Sir. Sub: Recorded Reasons for Reopening in the case of Greatwall Marketing (P) Ltd. for Asst. Yr. 02-03 Ref: Your letter dated 02/04/09 Please refer to the above. As per information received from investigation wing New Delhi the introduced share capital during the year. had been received from corporate bodies which are non existent and whose capacity to invest ( credit worthiness ) could not be established . Therefore I have reasons to believe that unexplained cash credit had been introduced in your books of accounts in the name of introducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted in the earlier part of the order does not show, what was the information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non-existent and not creditworthy. On identical facts the Hon'ble Delhi High Court in the case of CIT vs Insecticides (India) Ltd (supra) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. The Hon'ble Delhi High Court has also come to the conclusion that the reasons recorded did not disclose the AO's mind regarding escapement of income. The Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon'ble Delhi High Court. Following the said decision we hold ..... X X X X Extracts X X X X X X X X Extracts X X X X
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