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TMI Blog2021 (3) TMI 881X X X X Extracts X X X X X X X X Extracts X X X X ..... s referred the matter to Pr. CIT who has approved the reopening of the assessment in which the Pr. CIT has mentioned approved as per proforma . However, no such proforma is also placed on record. It would show that the Pr. CIT has not gone into the assessment record of the assessee or the return of income before approving the reasons recorded for reopening of assessment because the assessee has already disclosed ₹ 95 lacs received from the Investor company in 04 transactions in assessment year under appeal, but, the A.O. in the reasons recorded has mentioned that assessee has received an amount of ₹ 50 lacs only in 02 transactions from the Investor Company. Pr. CIT merely approved the reasons without saying anything. Pr.CIT has recorded his satisfaction for reopening of the assessment in a most mechanical manner without considering even the assessment records or the return of income filed by assessee and his satisfaction appears to be in a ritualistic and formal rather than meaningful. Therefore, such approval under section 151 of the I.T. Act, 1961, is totally without application of mind and as such the satisfaction cannot be said to be valid in the eyes of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 15,00,000 RTGS 10/08/2009 Jammu Kashmir Bank Ltd., Moderate Credit Corp Ltd. 3.1. The A.O. after going through the ITR of the assessee found that share capital and share premium of the assessee has increased by ₹ 95 lacs in assessment year under appeal. The A.O. reopened the assessment under section 147 of the Income Tax Act, 1961 and issued notice under section 148, in response to which, assessee filed the return of income declaring NIL income. The A.O. noted that assessee has received ₹ 95 lacs from Modern Credit Corp Ltd., controlled by Shri Aseem Kumar Gupta. The assessee was, therefore, requested to produce the Director of the Investor company. The assessee filed reply before A.O. explaining therein that the Investor company has sufficient share capital and reserves to make investment in assessee company and amounts received through banking channel and have been reported to Register of Companies also. The assessee has disclosed all the facts in the return of income and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement referred to by the A.O. of Shri Aseem Kumar Gupta in the reasons recorded for reopening of assessment is irrelevant and cannot be considered as having any evidentiary value against the assessee so as to initiate the reassessment proceedings against the assessee. He has referred to PB-32 which is letter filed by the assessee before A.O. in respect of notice under section 148 of the Income Tax Act, 1961 in which assessee has prayed the A.O. to summon the Director of the Investor company under section 131 of the Income Tax Act, but, the A.O. did not summon the creditor to verify the transaction. PB-33 is another letter filed before A.O. in response to notice under section 148 of the Income Tax Act, 1961, in which assessee explained that it has filed copy of the balance sheet, copy of the income tax return, confirmation, share application form, memorandum of association, bank statements master data and PAN details of the Investor before the A.O. It was also explained that Investor company is registered as non-banking Finance company registered with Reserve Bank of India. He has submitted that no tangible material was found during the course of search in the case of Shri Ase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re A.O. which have not been doubted by the A.O. The A.O. did not summon the Director of the Investor company, therefore, no fault could be found with the assessee and as such no addition could be made even on merits against the assessee. 5. On the other hand, the Ld. D.R. relied upon the Orders of the authorities below and submitted that even if A.O. recorded reasons on 17.03.2017 for initiation of reassessment proceedings, it is still within the period of limitation as prescribed under the Law. The Pr. CIT has granted approval as per law even if Addl. CIT has referred the reason to the Pr. CIT for his approval under section 151 of the I.T. Act, 1961. There is no illegality in granting sanction to the reasons filed before Pr. CIT who is the Competent Authority in the matter. It is, therefore, submitted that reopening of the assessment is justified in the matter which is based on information received from CIT, Central-2, Delhi. The Ld. D.R. on merits relied upon the Orders of the authorities below. 6. We have considered the rival submissions. It is well settled Law that the validity of the reassessment proceedings is to be determined with reference to the reasons recorded for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entity. 2000000 RTGS 04/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 3000000 RTGS 08/08/2009 Corp. Bank, CP Moderate Credit Corp Ltd. 5000000 3. After going through the ITR of the assessee it is seen that it has received Share Capital Premium of ₹ 95 lakhs during the year. This amount is more than the amount reported by Sh Aseem Gupta and therefore this amount includes unaccounted cash of the assessee of ₹ 50 lakhs routed through M/s Moderate Credit Corp Ltd (an entity controlled by Shri Aseem Gupta). 4. Since Shri Aseem Gupta was involved in providing accommodation entries and in his statement on oath he has admitted using Moderate Credit Corp Ltd to route accommodation entries, therefore the amount received by the assessee in form of advance/loan/share capital/share premium from the entities controlled by Sh Aseem Gupta is nothing but an accommodation entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee prior to recording of the reasons. The A.O, therefore, recorded incorrect and wrong facts in the reasons recorded for reopening of the assessment as regards the amount escaped assessment. The assessee has disclosed all the primary facts in the return of income that it has received ₹ 95 lacs in assessment year under appeal as share capital money from the Investor company Moderate Credit Corp. Ltd. No tangible material is also referred in the reasons as to how the A.O. came to know that assessee has received accommodation entry of ₹ 50 lacs only. No tangible material is also referred to as to how Shri Aseem Kumar Gupta has controlled the Investor company Moderate Credit Corp. Ltd. The A.O. also wrongly recorded income chargeable to tax in a sum of ₹ 50 lacs has escaped assessment, despite A.O. has contradictorily mentioned in the reasons that assessee has received ₹ 95 lacs from the Investor company and ultimately in the reassessment order A.O. made addition of ₹ 95 lacs. Since the assessee has disclosed ₹ 95 lacs as share capital money received from the Investor company in the return of income already filed prior to initiation of reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs by recording reasons on 17.03.2017 the A.O. was not having any such statement of Shri Aseem Kumar Gupta available with him so as to believe that he controlled various companies to provide accommodation entries to the assessee and others. Thus, there is no tangible material available with the A.O. on the date of recording of the reasons for reopening of the assessment and whatever reasons were recorded are found to be wrong, incorrect and non-existing. Thus, there is a total non-application of mind on the part of the A.O. while recording the reasons for reopening of the assessment. It may also be noted here that assessee since beginning have been explaining that Investor is a NBFC Company and registered with Reserve Bank of India. Therefore, there is no question of it being controlled by any accommodation provider like Shri Aseem Kumar Gupta for which also no evidence has been brought on record while recording the reasons for reopening of the assessment. 6.2. The ITAT, Delhi C-Bench, Delhi in the case of Shri Karan Khurana, Delhi vs., ITO, Ward-48(2), New Delhi in ITA.No.1783/Del./2019 vide Order Dated 17.03.2021 considering an identical issue of wrong, incorrect and non-exis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat reopening is based on incorrect facts. It is well settled law that if wrong facts and wrong reasons are recorded for reopening of the assessment, such assessment is bad in law. In support of his contention he has relied upon order of the ITAT Delhi Bench in the case of M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in ITA No. 1579/Del/2019 dated 07.11.2019 only in paras 8.5 to 9 are reproduced as under : 8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if M/s. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of M/s. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus the same cannot be approved under the Law. It is well settled Law if wrong facts and wrong reasons are recorded for reopening of the assessment, reopening of the assessment would be invalid and bad in Law. We rely upon Judgment of Hon ble Punjab Haryana High Court in the case of Atlas Cycle Industries 180 ITR 319 (P H). It is well settled Law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment is justified, but, the same are distinguishable on facts of the present case. Considering the facts and circumstances of the case in the light of above discussion and decisions referred to in the Order, we are of the view that reopening of the assessment is bad in law and that sanction/approval granted by Pr. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. 14.1 Ld. Counsel for assessee in support of the above contention also relied upon following decisions: 1. Shamshad Khan vs. ACIT 395 ITR 265 (Del.) 2. Pr. CIT vs. M/s SNG Developers Ltd. 404 ITR 312 (Del.). 3. CIT vs. Atlas Cycle Industries 180 ITR 319(P H) 4. Siemens Information System Ltd. vs. ACIT 293 ITR 548 (Bom.). 15. On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that since the assessee did not disclose bank account so AO applied his mind to the information received from Investigation Wing. Exact amount cannot be determined at the time of initiation of reassessment proceedings. Prima facie opinion to be formed at the stage of initiation of reasse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... error at the initiation of the case by stating that his income was mentioned as ₹ 20,56,145 instead of ₹ 69,71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income i.e. ₹ 69,71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting ₹ 20,56,145 for ₹ 69,71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed. 19. Hon ble Bombay High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) but in the reason itself AO recorded that earlier reassessment has been done u/s 147/148 read with section 143(3) of the Act. The AO also incorrectly recorded that sanction for reopening of assessment is required under proviso to section 151(1) of the Act despite such proviso does not exist in the statute as it was amended in 2015. The AO, therefore, recorded wrong, incorrect and non-existing reasons for reopening of the assessment. It makes clear that there is a total nonapplication of mind on the part of the AO while recording the reasons for reopening of the assessment. The AO has recorded incorrect amount which escaped assessment. The reasons failed to demonstrate the live link between the alleged tangible material and the formation of belief that income chargeable to tax has escaped assessment. The decisions relied upon Ld. Counsel for assessee in the cases of Pr. CIT Vs. Meenakshi Overseas (P) Ltd. 395 ITR 677 (Del.), Pr. CIT Vs. RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. CIT vs. G G Pharma India Ltd. [2016] 384 ITR 147 (Del.) and Signature Hotels P. Ltd. Vs. ITO (supra) squarely apply to the facts and circumstances of the case. Considering the facts and circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Investor company in 04 transactions in assessment year under appeal, but, the A.O. in the reasons recorded has mentioned that assessee has received an amount of ₹ 50 lacs only in 02 transactions from the Investor Company. The Pr. CIT merely approved the reasons without saying anything. The Hon ble Delhi High Court in the case of Pr. CIT vs., N.C. Cables Ltd., (supra) held in Para-11 as under : 11. Section 151 of the Act clearly stipulates that the CIT (A), who is the competent authority to authorize the reassessment notice, has to apply his mind and form an opinion. The mere appending of the expression 'approved' says nothing. It is not as if the CIT (A) has to record elaborate reasons for agreeing with the noting put up. At the same time, satisfaction has to be recorded of the given case which can be reflected in the briefest possible manner. In the present case, the exercise appears to have been ritualistic and formal rather than meaningful, which is the rationale for the safeguard of an approval by a higher ranking officer. For these reasons, the Court is satisfied that the findings by the ITAT cannot be disturbed. 6.5. The Hon ble Madhya Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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