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TMI Blog2020 (10) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... s covered against the Revenue by the above decisions of the Tribunal as well. The A.O. has thus no justification to assume jurisdiction under section 147 of the I.T. Act, 1961, in a Lawful manner and as such the same are liable to be quashed. - Decided in favour of assessee. - ITA.No.1503/Del./2017 - - - Dated:- 14-10-2020 - Shri Bhavnesh Saini, Judicial Member And Shri O.P. Kant, Accountant Member For the Assessee : Shri Suresh K. Gupta, C.A. For the Revenue : Ms. Shalini Verma, Sr. D.R. ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-9, New Delhi, Dated 28.02.2015, for the A.Y. 2007-2008. 2. We have heard the Learned Representative of both the parties through video conferencing and perused the material available on record. 3. Briefly the facts of the case are that the return declaring income of ₹ 21,000/- was e-filed on 31.10.2007. The return was processed under section 143(1) at retuned income. Proceedings under section 147 of the Income Tax Act, 1961 were initiated after recording reasons that the assessee's income has escaped to the tune of ₹ 80 lakhs. Accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han Agarwal Glass Industries Ltd., Delhi vs., DCIT, Circle-8(1), New Delhi in ITA.No.5768/ Del./2016, Dated 21.09.2020 and reopening was held to be invalid. He has also relied upon Order of ITAT, Delhi A-Bench in the case of M/s. Behat Holdings Ltd., Delhi vs., ITO, Ward-4(3), New Delhi in ITA.No.8066/Del./2019, Dated 15.01.2020 in which on identical issue the reopening of the assessment have been quashed holding that approval by Pr. CIT is invalid. 5. On the other hand, the Ld. D.R. relied upon the Orders of the authorities below and submitted that though the Old Form for recording of the reasons have been used and by mistake Section 147(b) have been mentioned in the reasons, but, it will not vitiate the entire re-assessment proceedings as well as would not vitiate the sanction granted by the Addl. CIT. 6. We have considered the rival submissions. It is well settled Law that validation of re-assessment proceedings shall have to be determined with reference to the reasons recorded for reopening of the assessment. The Ld. CIT(A) filed copy of the reasons recorded for reopening of the assessment at pages 14 and 15 of the PB. The same read as under : 6.1. The above rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the sanction has recorded the word satisfied . 6. The grievance of the petitioner is that there is no proper sanction in view of non application of mind by the Joint Commissioner of Income Tax. The Assessing Officer has invoked a provision of law to sustain the impugned notice which is admittedly not in the statute and the Joint Commissioner has yet approved it. 7. Mr. Chanderpal, learned Counsel appearing for the Revenue tendered a copy of the letter dated 19th December, 2017 issued to the petitioner wherein the Assessing Officer has stated that the words 147(b) were inadvertently filled in the prescribed form, instead of Section 147 of the Act while obtaining the sanction from the Joint Commissioner of Income Tax. It is further submitted on behalf of the Revenue that the same is a curable defect under section 292B of the Act. Therefore, the impugned notice cannot be held to be bad for mere incorrect mentioning of section on account of the mistake. 8. There can be no dispute with regard to the application of Section 292B of the Act to sustain a notice from being declared invalid merely on the ground of mistake in the notice. However, the issue here is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation Wing of the Dept in the case of Shri Surendra Kumar Jain Group. During the course of post search investigation and preparation of appraisal report it has been evidently established that SH. S.K, Jain and his brother Sh. Virendra Jain are known entry providers and are in the business of providing accommodation entries to various beneficiary companies/entities/persons through cheques through a number of paper dummy companies in lieu of cash. These dummy companies are totally managed and controlled by Sh. Surendra Kumar Jain and his brother Sh. Virendra Jain. The company M/s Shri Balkishan Agarwal Glass industries Ltd. has also received accommodation entry from Sh. S. K. Jain during the F.Y.2004-05. Details of cheque/pay orders issued in the name of the assessee are reproduced below:- Bank Book Date From TO Bank Cheque/RTGS Cheque Date Amount Through Annexure No. Page No, AVAIL Shri Balkishan Agarwal Glass Industries Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PIONo. 974427 25-Nov-04 500000 Neeraj A-148 28 LOVELY Shri Balkishan Agarwal Glass industries Ltd. ABN PJONo, 17.8048 20-Dec-04 500000 Heeraj A 149 12 LOVELY Shri Balkishan Agarwal Glass Industries Ltd. ABN 28-Dec-04 500000 Neeraj A-149 18 5500000 The escapement of income has been clearly on account of failure on the part of the assessee to truly and fully disclose all the material fact necessary for assessment. Thus it is a fit case for initiation of proceedings u/s 148 of I.T.Act, 1961. Therefore, I have reason to believe that an income of Rs,55,00,0QQ/- lias escaped assessment within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reasons to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. The Delhi Bench of the Tribunal in the case of DCIT vs. M/s KLA Foods (India) Ltd. and Others, vide ITA No.2846/Del/2015, order dated 8th April 2019, has held that condition precedent for issue of notice for reassessment is that reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and is to be quashed. The Hon ble Delhi High Court in the case of PCIT vs. M/s SNG Developers Limited, 404 ITR 312, has held that condition precedent for issue of notice for reassessment is that the reason to believe that income has escaped assessment must be based on correct facts. Notice based on wrong facts is without jurisdiction and has to be quashed. The above decision of the Hon ble High Court was challenged by the Revenue before the apex court and the apex court dismissed the SLP vide SLP No.42379/2007, order dated 9th February 2018. Since, in the instant case, although the assessee has filed return of income which was processed u/section 143(1), howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at sanction have been granted by the Pr. CIT without recording reasons quashed the reopening of the assessment. The findings of the Tribunal in paras 5 and 6 are reproduced as under : 5. We have considered the rival submission and perused the material on record. It is well settled Law that validity of re-assessment proceedings shall have to be determined with reference to the reasons recorded for reopening of the assessment. Learned Counsel for the Assessee filed copy of the reasons recorded for reopening of the assessment at pages 16 to 22 of PB. The same reads as under: 5.1. The reasons are un-dated. The A.O. in the assessment order has reproduced the same reasons without application of his mind to the relevant material and thereafter by referring to notice under section 133(6) and non-production of the Directors of the Investor Companies made the addition against the assessee. The A.O. in the reasons has mentioned that information was forwarded by Serious Fraud Investigation Office, Delhi which were received through Pr. CIT vide Letter Dated 05.01.2017. The A.O. has also referred to such report based on search and seizure in the case of third parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Appellant) (Respondent) For Assessee : Shri Raj Kumar, C.A. And Shri Rajeev Ahuja, Advocate, Shri Sumit Goel, C.A. For Revenue : Ms. Parmit M. Biswas, CIT-DR Date of Hearing : 10.10.2019 Date of Pronouncement : 07.11.2019 ORDER PER BHAVNESH SAINI, J.M. This appeal by Assessee has been directed against the Order of the Ld. CIT(A)-4, New Delhi, Dated 26.12.2018, for the A.Y. 2010-2011. 2. Briefly the facts of the case are that assessee company filed its return of income on 04.02.2011 for the A.Y. 2010-2011 declaring loss of ₹ 9,616/- which was processed under section 143(1) of the I.T. Act, 1961. The assessee declared income from brokerage and commission, interest on loan and profit on sale of investment also. 2.1. An information was received from the O/o. CIT, Central-2, New Delhi, vide letter Dated 14.02.2014 mentioning therein that a search/survey operation under section 132/133A of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 section 133(6) of the I.T. Act were issued as per new name as well as old name of the company, but, the same were returned back un-served by the Postal Authorities. In the remaining 06 cases, no replies have been received. The A.O. noted that replies received from 26 parties under section 133(6) have been analysed and these companies furnished copy of the acknowledgment of ITR, balance sheet as on 31.03.2010, P L A/c, copy of the bank statement. The A.O. however, did not accept the replies filed by the 26 investor companies on the reasons that replies have been received in bunch for similar style of envelopes and posted from three post offices. The A.O. also noted that none of the parties explained as to why high premium was paid and parties have not explained source of the investment. The A.O. also noted that 26 parties filed copy of the ITR, balance sheet, P L A/c and bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to materials prior to forming reason to believe income has escaped assessment - No independent application of mind to information received from Directorate of Investigation and no prima facie opinion formed reassessment order invalid . 3.4. In the case of Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), the Hon ble Delhi High Court held as under : No independent application of mind by the Assessing officer but acting under information from Inv. Wing - Notice U/s. 147 to be quashed . 3.5. The assessee also submitted that assessment is barred by time. The assessee further submitted that approval under section 151 have been granted in a most mechanical manner without applying independent mind by the Pr. Commissioner of Income Tax. He has submitted that Pr. Commissioner of Income Tax has recorded in the approval as under : Form for recording the reasons for initiating proceedings u/s 147 and for obtaining the approval of the Ad CIT/CIT/CBDT 1. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In view of the facts notice u/s.148 to be issued. 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. 3.6. This approval is not valid in Law because it would show that approval have been granted without application of mind. Learned Counsel for the Assessee relied upon Judgment of the Hon ble Delhi High Court in the case of United Electrical Co. Pvt. Ltd., vs. Commissioner of Income Tax 258 ITR 317 in which approval by Addl. Commissioner of Income Tax under section 151 was given in the following terms Yes I am satisfied that it is a fit case for issue of notice under section 148 of the I.T. Act. The Hon ble Delhi High Court considering the similarly worded approval did not approve the same and held that in the present case, there has been no application of mind by Addl. Commissioner of Income Tax before granting the approval. The as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax, New Delhi. PB-6 is balance-sheet to show that in preceding assessment year the share capital was of ₹ 3.01 crores and in assessment year in increased to ₹ 14.06 crores. Thus, about ₹ 11 crores have increased and this fact was also disclosed to the Revenue Department. Such details are filed in the return of income. No verification could be allowed in the garb of proceedings under section 148 of the Income Tax Act, 1961. The name of M/s. Management Services Pvt. Ltd., in the reason from whom alleged entry have been taken by the assessee do not figure in the appellate order because such party does not exist. M/s. Shubh Propbuild Pvt. Ltd., has been mentioned in the reasons do not belong to Shri Himanshu Verma. In assessment order name of M/s. Management Services Pvt. Ltd., do not appear. PB-13 of the assessment order referred to the statement of Shri Himanshu Verma in which name of M/s. Shubh Propbuild Pvt. Ltd., does not appear. The A.O, therefore, recorded incorrect reasons and did not apply his mind to the material on record. The A.O. has not gone through the record and the balance Company do not belong to the assessee. The statement of Shri Himanshu Verma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 8.13 crores only out of total amount of ₹ 11.05 crores. Therefore, there is no other material on record to justify the addition. He has submitted that A.O. cannot ask to explain source of the source. Learned Counsel for the Assessee, therefore, submitted that reopening of the assessment is invalid and no addition could be made against the assessee even on merits. 7. The Ld. D.R. on the other hand relied upon the Orders of the authorities below and submitted that A.O. dealt with the objections of the assessee, but, for re-assessment proceedings no manner is provided as to how sanction is to be granted. A.O. recorded details in the reasons on which Pr. Commissioner of Income Tax was satisfied. Therefore, reopening of the assessment is valid because information was received from Investigation Wing that assessee has received accommodation entries. The name of assessee was appearing. Sufficiency of reasons is not required at this stage of formation of re-assessment proceedings. The A.O. cannot do any roving enquiry at initial stage. The assessee failed to prove creditworthiness of the Investor Companies as they were having meagre income. The assessee did not prove genuinene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 04.02.2011 declaring loss of Rs.(-) 14,162/-. The return was processed u/s 143(1). Information was forwarded to this office through the Addl.CIT, Range-10, New Delhi that search seizure action was conducted by Inv. Wing at the office of Sh. Himanshu Verma where various incriminating documents/materials were seized during the course of search. During the post search investigation and perusal of seized documents it was observed that Sh. Himanshu Verma was engaged in the business of providing accommodation-' entries by providing cheques/PO/DD in lieu of cash to a large number of beneficiary companies thorough various paper and dummy companies floated and controlled by them. It was also evidently established by the Investigation Wing that Sh Himanshu Verma is known entry providers and is the actual controller of more than 100 companies/proprietary firms/partnership firms. They control these entities through various persons by appointing them as directors/partners/proprietors apart from nominating them as authorized signatories for maintaining the bank accounts of these entities but in fact all these persons act only as their stooges. The cash received from the recipient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eturn are not genuine. Apart from the above the assessee company is not doing any real business and keeping in view the huge investments, disallowances u/s 14A read with rule 8D also applicable in the case. The statement given by Shri Himanshu Verma also establishes the link with the self-confessed accommodation entry providers , whose business is to help assessees bring back their unaccounted money into their books of account. Thus, there is a direct link between the information/available with the department and the income escaping assessment. I have, therefore, reasons to believe that income to the extent of ₹ 2,45,00,000/- has escaped assessment relevant to A.Y.2010-11. Thus, the same is to be brought to tax under section 147/148 of the I.T. Act 1961. Moreover, as the case pertains to a period beyond four years from the end of relevant assessment year, for issuing the notice u/s 148, necessary approval / sanction may kindly be accorded by the Pr. Commissioner of Income Tax, Delhi-4, New Delhi in view of the amended provision of section 151 w.e.f 01.06.2015. Sd/- H.K. Sharma, Dated : 27.03.2017. ITO, Ward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time from completion of assessment. The power vested in the Commissioner to grant or not to grant the approval is coupled with a duty. The Commissioner is required to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. The said power cannot be exercised casually and in a routine manner. In the instant case, there had been no application of mind by the Addl. Commissioner before granting the approval. The petition was, thus, allowed and impugned notice was quashed. 8.3. The Hon ble Supreme Court approving the Judgment of Hon ble Madhya Pradesh High Court in the case of Commissioner of Income Tax, Jabalpur (MP) vs., S. Goyanka Lime Chemicals Ltd., [2015] 46 taxmann.com 313 held as under : SLP dismissed against High Court s ruling that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid. 8.4. Similar 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice u/s. 148 of the Act and has only recorded so Yes, I am satisfied then, the reopening assessment has to be held as invalid. The ld. AR also placed reliance on the decision of ITAT, Delhi in the case of ITO vs. Virat Credit Holdings Pvt. Ltd. in ITA No.89/Del/2012 dated 09.02.2018. The ld. AR submitted that as per decision of Hon'ble High Court of Bombay in WP (L) No.3063/2017 in the case of Smt. Kalpana Shantilal Haria vs. ACIT dated 22.12.2017, sanction for issuing a reopening notice cannot be mechanical but has to be on due application of mind. Sanction accorded despite mention of non-existent section in the notice is prima facie evidence of non-application of mind on the part of the sanctioning authority. Their lordship in this judgment categorically held that such defect cannot be cured u/s. 292B of the Act. 10. The ld. 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 profor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nders assessment proceedings void and bad in law. Present impugned reassessment order cannot be held sustainable and valid as the AO has passed the same immediately after 10 days of disposal of/dismissal of objection of the assessee which is clear violation of direction of Hon'ble High Court of Bombay in the case of Asian paints (supra) and legal contention of the assessee on this issue are found to be acceptable and we hold so. 13. The ld. AR drew our attention towards reasons recorded and submitted that there is no date in the reasons recorded which shows casual approach of the AO while recording the reasons. The ld. AR submitted that as per decision of Hon ble Jurisdictional High Court of Delhi in the case of PCIT vs. Meenakshi Overseas P. Ltd. 395 ITR 677 (Del) if the reasons failed to demonstrate the link between the tangible material and formation of the reasons to believe that the income 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned initiation of reassessment proceedings, notice and all consequent proceedings and orders are not valid and bad in law therefore, the same may kindly be quashed. 16. Replying to the above, the ld. DR submitted that the copy of proforma for obtaining approval u/s. 151 of the Act and reasons recorded by the AO are the internal departmental communication between the PCIT and ACIT and the PCIT being administrative head and senior to the ACIT has power to peruse the approval u/s. 151 of the Act and his sings thereon does not make the same as mechanical and without application of mind and the same cannot be termed or alleged as invalid or bad in law. The ld. DR submitted that in column 12 of approval the ACIT Shri Sarabjeet Singh has granted valid approval by noting that Yes, I am satisfied which is sufficient to comply with the provisions of 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Hon'ble Supreme Court by dismissing SLP of the Revenue reported in 237 Taxman 378 (SC) therefore, initiation of reassessment proceedings u/s. 147 of the Act, notice u/s. 148 of the Act, reassessment proceedings and all consequent orders may kindly be quashed. 19. On careful consideration of above rival submissions, first of all, we may point out that from the proforma of approval u/s. 151 of the Act placed at pgs. 16-17 of the assessee paper book, it is clear that in column 12 the ACIT has granted approval for the issue of notice u/s. 148 of the Act by writing that Yes, I am satisfied which is not sufficient to comply with the requirement of s. 151 of the Act. As per ratio of the decision of High Court of Madhya Pradesh in the case of CIT v. M/s. S. Goyanka Lime and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Jurisdictional High Court held that where the reasons recorded by the AO failed to demonstrate the link between the tangible material and the formation of the reasons to believe that income has escaped assessment then, indeed it is a borrowed satisfaction and the conclusion of the AO based on reproduction of conclusion drawn in the investigation report cannot be held as valid reason to believe after application of mind. In this judgment their lordship also held that where nothing from the report of investigation wing is set out to enable the reader to appreciate how the conclusions flow there from then there is no independent application of mind by the AO to the tangible material which form the basis of the reasons to believe that 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14] 363 ITR 625 (Raj.), the Hon ble Rajasthan High Court has held that reasons must be based on new and tangible materials. Notice based on documents already on record, 148 not valid. In the instant case under appeal, the A.O. has reproduced the information received from Investigation Wing and reproduced the same in the reasons recorded under section 148 of the I.T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the party i.e., M/s. Management Services Pvt. Ltd., do not exist and that M/s. Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of the information and 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., (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, 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 of the I.T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide the addition on merit which is left with academic discussion only. 9. In the result, appeal of Assessee allowed. 5.2. Considering the facts of the case in the light of above decisions, it is clear that all the documents and Annexures referred to in the reasons have not been supplied to the assessee and that approval granted by Pr. CIT is invalid. Therefore, reopening of the assessment is wholly invalid and void abinitio. Resultantly, the reopening of the assessment is liable to be quashed. Following the reasons for decision in the case of M/s. Ganesh Ganga Investments Pvt. Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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