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TMI Blog2020 (1) TMI 1366X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the expiry of four years from the end of the relevant A.Y 2008-09, given that there was no original return of income filed by the assessee and consequent assessment, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment in terms of proviso to section 147 of the Act which is not applicable in the instant case. Assumption of jurisdiction and initiation of the proceedings under Section 147 of the Act to reopen the assessment proceedings are vitiated and does not satisfy the requirement of law - Decided in favour of assessee. - ITA. No. 170/JP/2019 - - - Dated:- 5-1-2020 - Shri Sandeep Gosain, JM And Shri Vikram Singh Yadav, AM For the Assessee : Shri Vinod Kumar Gupta (CA) For the Revenue : Smt. Monisha Chaudhory (Addl.CIT) ORDER PER: VIKRAM SINGH YADAV, A.M. The assessee has filed the present appeal against the order of ld. CIT(A)-II, Jaipur dated 19.11.2018 pertaining to assessment year 2008-09 wherein the assessee has taken the following grounds of appeal:- 1. The impugned addition and disallowances made in the order u/s 147/143(3) of the act dated 02.02 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was Power of Attorney holder of the seller Shri Nishikant Khopkar, therefore, the registry documents were presented by the assessee for registration as Power of Attorney holder. The AO got certain CIB information that the assessee has sold a property for sale consideration of ₹ 7,00,000/- whose value taken for the purpose of stamp duty valuation has been taken at ₹ 7,17,286/- and on this basis, AO entertained a reason to believe that income to the extent of ₹ 7,17,286/- has escaped the assessment and the case of assessee was reopened u/s 148 after recording of reasons dated 25.03.2015. 4. It was submitted by the ld AR that after recording the above mentioned reasons, the AO obtained copy of registered sale deed from the office of Sub-Registrar-2, Jaipur, by issuing notice u/s 133(6) dated 03.08.2015. The addition of ₹ 7,17,286/- was made by the AO on the ground of alleged undisclosed capital gain earned by the assessee on sale of property for ₹ 7,00,000/-, whose value for the purpose of stamp duty valuation has been taken at ₹ 7,17,286/- holding the assessee to be the owner of the property and invoking section 50C of the Act. 5. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough to draw a conclusion that the income has escaped the assessment. To convert reason to suspect into reason to believe some tangible material was needed. Therefore, to reach to such a decisive finding the AO was expected to obtain the said registered sale deed, before recording the reasons, from sub-registrar or from the assessee, but nothing of this sort was done. This shows that the AO merely gone by the report of CIB. In this regard reliance is placed on the decision of Hon ble Delhi High Court in the case of Meenakshi Overseas Pvt Ltd vs ITO (2017) 395 ITR 677 (Delhi) wherein the Hon ble High Court held as under: The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation that assessee has sold an immovable property and thus had received sale consideration for transfer of property which was not disclosed to the department in absence of any return of income and therefore, it is a clear case of escapement of income and the AO was justified in initiating the proceedings u/s 148 which have been rightly upheld by the ld CIT(A). He accordingly supported the order passed by the lower authorities and has relied upon the findings of ld. CIT(A) wherein at para 2.3, it was held as under:- 2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. Assessee challenged the reopening proceedings. Assessing officer has information that assessee received sale consideration for transfer of property and same was not disclosed in return of income. Therefore, I upheld the action of Assessing Officer in reopening the case. This ground of appeal is dismissed. 11. We have heard the rival contentions and perused the material available on record. It is a settled legal proposition that the satisfaction of the Assessing Officer for assumption of jurisdiction U/s 147 of the Act should be discernable from the reasons so r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the AO and the nexus thereof with formation of belief that the income has escaped assessment. It has been contended by the ld AR that the information so referred in the reasons recorded is only the CIB report received by the Assessing officer, a fact which is corroborated by the Assessing officer where he had subsequently issued a notice u/s 133(6) to Sub-Registrar-2 to obtain copy of the sale deed. It is an admitted fact that the said notice u/s 133(6) was issued on 3.08.2015 subsequent to recording of reasons by the AO on 25.03.2015. Therefore, we find that as on the date of recording of reasons by the AO, only piece of information in possession of the AO was the CIB report that the assessee has sold certain immoveable property and the AO was not even having a copy of the sale deed or the specifics of the immoveable property, which to our mind, raises a question mark on the tangible nature of such information in terms of whether it is real or actual rather than imaginary and whether it actually relates to the assessee or not. Where the AO still wishes to rely on the report of CIB, given that such report is more of a generic report and not containing exact specifics of of imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was conducted and P C Agarwal, so called mediator in these transactions. Given that search proceedings in respect of these two persons have formed the basis for the present reassessment proceedings in the hands of the assessee, it was essential to at least examine the statements of these three persons and seized material if any found during the course of search which in any ways indicate that these two persons have carried out certain transactions with the assessee and prima facie these transactions are suspected to be accommodation entries and not actual transactions. However, there is nothing in the reasons so recorded that the Assessing officer has gone through the statements so recorded during the course of search and the seized material to show prima facie linkage of assessee s undisclosed income being routed back in form of share capital. This shows that the Assessing officer has merely gone by the report of the DIT, Investigation Wing and the said report even didn t have the statements of these persons which either find mention in the report or as enclosures when the same was forwarded to the Assessing officer. Therefore, it transpires that there is no further examination wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not the bonafide one. Therefore, I have reason to be believe that an income of ₹ 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... 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 there from. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. Subsequently, the Hon ble Delhi High Court in case of RMG Polyvinyl Ltd. (supra) has held as under:- 12.Recently, in its decision dated 26th May, 2017 in ITA No. 692/2016 Pr. CIT v.Meenakshi Overseas, this Court discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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