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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 ..... ese additions as sustained by the ld. CIT(A) to the extent of ₹69,527/- is hereby deleted. Addition u/s 68 - when an addition made based on the reasons recorded for re-opening of assessment does not survive the question of making another addition on some other ground does not arise, as held in Jet Airways India Ltd. [ 2010 (4) TMI 431 - HIGH COURT OF BOMBAY] and Ranbaxi Laboratories[ 2011 (6) TMI 4 - DELHI HIGH COURT] Addition under Section 68 of the Act cannot survive, when the addition based on reasons recorded for re-opening does not survive - Borrowing in question was from a sister concern. The partners of the assessee firm and the director of the sister concern which is a company. The bank statement wherein the alleged bogus purchases were recorded, was the same bank statement in which the loans taken from the sister concern were credited. The auditor has mentioned the details of this loan in the Tax audit report. The balance sheet of the creditor company shows that it had the capacity to lend. The creditor company confirmed the loan. The directors of the creditor company, who were also the partners of the assessee firm, have appeared before the AO during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 59,00,000 without considering the fact that the impugned reassessment proceedings initiated by the Assessing Officer vide notice dated 24th March, 2018 issued under section 148 of the Act was without jurisdiction, illegal, invalid, bad-in-law and void ab-initio in as much as the said notice was defective all mandatory conditions precedent to the issue of notice under section 148 of the Act were not fulfilled and even the copy of sanction, if at all obtained under section 151 of the Act was not provided to the assessee. 2. That, the Learned Commissioner of Income Tax (Appeals)-14, Kolkata erred in confirming the addition of ₹ 59 Lakhs, made by the Assessing Officer u/s 68 of the Income Tax Act being the amount of unsecured loan received from M/s Hanuman Vintrade Pvt. Ltd., which was evidently an unconnected issue considering the reasons recorded u/s 148(2) of the Act, as there was no mention therein whatsoever regarding this unsecured loan transaction of ₹ 59,00,000. 3. That, on the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this proposition: i) Pr. CIT vs. SNG Developers Ltd. 404 ITR 312 (Del.) ii) Ankita A. Choksey vs. ITO (2019) 411 ITR 207 (Bom)(HC) He also relied on many other judgements, which we will be dealing with, as and when necessary. c) The ld. Counsel for the assessee refers to the order of the ld. CIT(A) [at page 18 para 3] and submits that only gross profit on purchases were directed to be added and that this was wrong for the reason that, the purchases were not undisclosed purchases but was only alleged bogus purchases. d) He argued that when the addition for which the re-opening was made is not sustained, then no further addition can be made on account of Section 68 of the Act or otherwise. e) On merits he submitted that the assessee never purchased any goods for the amount of ₹31,98,388/- from both these enterprises and it was much lesser amount of goods which were purchased and hence the disallowance on the ground that these w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the Bench, he submitted that the reasons recorded in the assessment order are the exact reasons recorded for reopening. He relied on the order of the ld. CIT(A) and submitted that the re-opening of assessments has to be sustained as the original return was processed u/s 143(1) of the Act and it is not a case of change of opinion. He argued that mere payment being made through banking channels does not prove genuineness of the purchases. On merits he relied on the order of the ld. CIT(A). 5. On addition made u/s 68 of the Act the ld. D/R submitted that the AO has given a table to the assessee for being filled up as can be seen from page 9 of the assessment order and that the assessee has not submitted the details as sought for and that the notice issued u/s 133(6) of the Act was not replied to. He argued that under these circumstances the addition was rightly made as the assessee has failed to prove the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 providing accommodation entries in the form of bogus bills. The statement of Branch Manager of Karur Vysya Bank, N.S. Road Branch, Kolkata was also recorded under oath wherein she admitted that Sanjeew Kumar Singh has been operating more that 43 bank accounts in the name of his family members/employees/concerns. Analysis of seized documents revealed strong evidences of providing bogus bills by Sanjeew Kumar Singh different beneficiaries using more than 80 bank accounts. It was admitted by Sri Sanjeew Kumar Singh and his associates that after the receipt of cheques in consideration of the purported sales by the impugned concerns controlled by Sri Sanjeew Kumar Singh, cash used to be withdrawn and returned to the accommodation entry seekers after adjusting the commission. As a result of search, more than 2500 beneficiaries has been identified and the total amount of accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cion 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 Officer for the issuance of a notice is not enough - there must be reasons on record which have led him/her to believe that a notice should be issued. After a foundation based on information is set up, there must still be some reasons which warrant the holding of a belief so as to necessitate the issuance of a notice under section 148. Reliance is placed on the judgement of Hon ble Delhi High Court in the case of CIT vs. Atul Jain [2008] 299ITR 383 (Delhi). Reference is also made to the decision of Punjab Haryana High Court in the case of CIT vs. Smt. Paramjit Kaur [2008] 168 TAXMAN 39 (Punj Har). In this case the Hon ble High Court quashed the reassessment proceedings where the reasons recorded on the basis of information received from department s survey wing that a Demand draft got prepared by the assessee was not accounted for in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments 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 business purchases. Hence we deny your allegation that we had taken bogus bills of Purchases and reduced our taxable income in any way whatsoever. There has been no suppression or ambiguity on our part whatsoever. Hence your allegation is solely based on your assumptions, surmises and conjectures. Thus the reasons recorded under section 148(2) are vague and based upon incorrect facts. It has no live link with the allegation of escapement of income. Utmost this is a case of suspicion and/or doubts. The reason to believe must have a live link with the formation of belief that the income has escaped assessment. The Hon ble Third Member Bench of Mumbai ITAT in the case of Telco Dadajee Dhackjee Limited vs. DCIT - ITA No. 4613/Mum/2005 also held as under: In this case the original assessment was made u/s 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We further submit that we should be given the copy of the information received by your office from DDIT Investigations, Kolkata on the basis of which our assessment is sought to be reopened. We hereby again state and submit that since the issue of Notice under section 148 of the Act is without jurisdiction, illegal and void, the proceedings initiated in this case may kindly be dropped. We would also request you to please pass a speaking order on the aforesaid objections before proceeding further in the matter of re-assessment. 9. The AO in the assessment order stated that the reasons for re-opening are as follows: 3.1 Receipt of specific information from the Investigation Wing, Kolkata: In this case, information was received that the assessee has indulged in bogus purc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to this extent; hence the income of ₹ 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 ₹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 ₹31,20,073/- and ₹78,350/-. The assessee objected stating that the figures are wrong and this fact is accepted by the ld. CIT(A) who states that the actual purchases was only ₹5,98,336/-; as the sales are also reflected in VAT return and sales tax return filed with the Central and State Authorities respectively. The G.P. of 11.62% of this amount was directed to be added. 11. The above clearly demonstrates that the re-opening is bad in law for the following reasons: a) Non-furnishing of the reasons recorded in the manner it was recorded prior to reopening the assessment so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther, 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 unaccounted cash is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be a known entry operator is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. 23. Thus, the crucial link between the information made available to the AO a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 facts to come to the reasonable belief conclusion that income chargeable to tax has escaped assessment. Further, even when the same is pointed out by the Petitioner, the Assessing Officer in its order disposing off the objection does not deal with factual position asserted by the Petitioner. Thus, it would safe to conclude that the Revenue does not dispute the facts stated by the Petitioner. On the facts as found, there could be no reason for the Assessing Officer to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Income-tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be suffici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee on a single date i.e. 10th Feb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the A.O. stated: 'I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has, introduced its own unaccounted money in its bank account by way of above accommodation entries'. The above co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (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 ₹ 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 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. (iv) Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 introduction of share capital and receipt of share application money. In absence of satisfactory identity and credit worthiness of the other parties. the entire introduced capital and share application money will be treated as your income for that year. I will therefore continue the proceedings for reassessment of your return u/s 147. Statutory notices u/s 143(2) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that initiation of re- assessment proceedings is not valid. On this ground, the assessment is liable to be annulled. 6. Applying the propositions of law laid down in these case-law to the facts of this case we hold that the re-opening is bad in law as the Assessing Officer has not independently applied his mind to the material and has recorded reasons which are vague and based on bo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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