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TMI Blog2021 (3) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... panies Act, 1956 albeit under the name Synfonia Pharmaceuticals Pvt. Ltd. On 31.03.2015, the assessee changed its name to Synfonia Tradelinks Pvt. Ltd. 2.2. The income tax return for the assessment year [in short 'AY'] 2010-2011 along with the balance sheet as on 31.03.2010 was filed by the assessee, on 23.09.2010. 2.3. Insofar as the succeeding year was concerned, which is also the AY in issue i.e. AY 2011-2012, the income tax return was filed on 29.08.2012 by the assessee along with the balance sheet as on 31.03.2011. Returns for the aforementioned AY(s) were filed via electronic mode. 2.4. On 31.03.2018, which was the last date on which the limitation was to expire, a notice under Section 148 of the Act was issued by respondent no.1, wherein respondent no.1 inter alia stated that he had reason to believe that income chargeable to tax qua AY 2011-2012 had escaped assessment within the meaning of Section 147 of the Act. Accordingly, the assessee was directed to file a return in the prescribed form for the said AY as respondent no.1 proposed to assess/re-assess the income/loss for the concerned AY. 2.5. The record shows that the assessee had, perhaps, written to respondent no.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions. Respondent no.1 vide order dated 08.10.2018 rejected the objections preferred by the assessee. This order was handed over to the chartered accountant of the assessee on 12.10.2018. 3. It is in these circumstances that the assessee was propelled to move this court by way of the instant writ petition. The court, while issuing notice dated 26.11.2018, which was accepted by the counsel for the revenue, made the following observations: "Issue Notice. Mr. Deepak Anand, Jr. Standing Counsel accepts notice. This Court is of the opinion that the petitioner/applicant's grievance is with respect to non-application of mind by the concerned officer (A.O.) to issue the impugned notice under Sections 147/148 is prima facie warranted and justified. In these circumstances, the respondents are hereby restrained from passing a final order in the re-assessment proceedings during the pendency of the present writ petition. The Revenue is directed to produce the original file for consideration on the next date of hearing. List on 11th February, 2019. Dasti." 4. Since then, respondent no.2 has filed a counter-affidavit on behalf of the revenue. Submissions made on behalf of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has referred to the report of the ADIT, there is no discussion qua the said report in the order recording reasons. Therefore, it is difficult to discern from the order recording reasons as to what was the basis of the formation of belief by respondent no.1 that the assessee's income chargeable to tax had escaped assessment. v. Respondent no.1 erred in rejecting the objections raised by the assessee by relying upon a purported statement of one, Mr. Pradeep Kumar Jindal, who had allegedly provided accommodation entries to the assessee without furnishing a copy of the statement made by the said person. vi. Respondent no. 2, via the counter-affidavit, has attempted to justify the issuance of notice under Section 148 of the Act by adverting to matters which are not found in the order recording reasons for initiating proceedings under Section 147 of the Act. The revenue cannot supply reasons by way of counter-affidavit which were not available at the time of issuance of a notice under Section 148 of the Act. vii. We may note, at this juncture, that the grounds set forth hereafter are the grounds incorporated in the writ petition which were not articulated during the submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew Delhi subsequent analysis of report of investigation wing, data of transactions and verification of ITR lead to an irresistible conclusion that the assessee company has taken accommodation entry at least up to the amount of Rs. 26,93 ,500/- Considering the above referred credible information, and enquiries and analysis subsequent to the information. I have reason to believe that an amount at least of Rs. 26,93,500/- & Commission @ 2.5% amounting to Rs. 67,338/- (Total Rs. 27,60,838/-) has escaped assessment in case the of M/s SYNFONIA TRADELINKS PVT. LTD for the A. Y 2011-12 within the meaning of Section 14 7/148 of Income-tax Act, 1961." 7.2. The submission advanced was that the assessee had taken accommodation entries from, one, Mr. Pradeep Kumar Jindal in lieu of cash via dummy companies/entities which was reflected in the balance sheets of the assessees as unsecured loans. It was contended that this fact was discovered upon search being conducted at the premises of Mr. Pradeep Kumar Jindal on 18.11.2015. 7.3. Mr. Singh attempted to explain away the assertion made in the order recording reasons "Thus the assessee company has taken bogus share capital/share premium account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the statements of Mr. Pradeep Kumar Jindal and his associates i.e. Shri Laxman Singh Satyapal and Ms. Meera Mishra) to the authorized representative of the assessee at the proceedings held before the respondent no.1 on 12.10.2018. Analysis and Reasons: - 9. We have heard the learned counsel for the parties and perused the record. Before we proceed further, it would be helpful if we were to set forth certain well-established principles enunciated by the courts over the years vis-à-vis initiation of proceedings under Section 147 of the Act. (i) The reasons which lead to the formation of opinion or belief that the assessee's income chargeable to tax has escaped assessment should be inextricably connected. In other words, the reasons for the formation of opinion should have a rational connection with the formation of the belief that there has been an escapement of income chargeable to tax (See: ITO v. Lakhmani Mewal Das, 1976 3 SCC 757] (ii) The expression "reason to believe" is stronger than the word "satisfied". The belief should be based on material that is relevant and cogent. (See: Ganga Saran & Sons Pvt. Ltd. v. ITO, 1981 3 SCC 143]. (ii) (a) The assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he had made investments in the form of share capital, share premium, loans and advance in lieu of cash via front/non-listed companies controlled by dummy directors to the tune of nearly Rs. 100 crores which included the assessee. It is in this context that in the order recording reasons, the following table is set out: S.No. Beneficiaries Name of Entry Provider Date Amount (Rs.) i. Synfonia Pharmaceuticals Pvt. Ltd. Name changed to Synfonia Tradelinks Pvt. Ltd. Dume Footwears Pvt. Ltd. 09.06.2010 17,00,000 ii. Synfonia Pharmaceuticals Pvt. Ltd. Dume Footwears Pvt. Ltd. 09.06.2010 5,00,000 iii. Synfonia Pharmaceuticals Pvt. Ltd. Dume Footwears Pvt. Ltd. 22.06.2010 1,00,000 Synfonia Pharmaceuticals Pvt. Ltd. Focus Industrial Resources Ltd. 24.05.2010 43,500 Synfonia Pharmaceuticals Pvt. Ltd. Pawansut Holdings Ltd. 24.05.2010 3,50,000 Total 26,93,500/- The table extracted above, as noted in the earlier part of the judgment, is followed by the following assertion which is made in the order recording reasons: "Thus, the assessee company has taken bogus share capital/share premium from the said ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these figures is Rs. 25,95,277/- and not Rs. 26,93,500/- which, according to respondent no. 1, is the unexplained credit in the books of accounts of the assessee and, hence, required to be added under Section 68 of the Act. Therefore, for Mr. Singh to say that these are inadvertent errors and hence should be ignored, in our opinion, is an argument that is completely misconceived. As indicated above, if the information received (from the investigation wing) was that the accommodation entries, in lieu of cash, were taken in the form of share capital and share premium they could certainly not be linked to unsecured loans received in AYs 2010-2011 and 2011-2012. 9.6. It is pertinent to note that in the objections filed by the assessee, an attempt has been made to explain the purported accommodation entries by stating therein that the advances had been given to the 5 companies adverted to in the order recording reasons which were received back on the dates given in the said order. The assessee also went on to state, in its objections, that the opening balance (as on 01.04.2010) and closing balance (as on 31.03.2011) of the share premium account (Rs. 3,66,16,800/-) and the share cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads "whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148", he just noted the word "yes" and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance." [Emphasis is ours] 10.1. Also see the observations made in the judgment of the Division Bench of this Court in The Central India Electric Supply Co. Ltd. vs. Income Tax Officer, Company Circle - X, New Delhi & Anr., (2011) SCC OnLine Del 472 : (2011) 333 ITR 237. "19. In respect of the first plea, if the judgments in Chuggamal Rajpal's case (supra); Chanchal Kumar Chatterjee's case (supra); ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind force in the contention of learned Counsel for the Appellant that there has not been proper application of mind by the Board and if a proper application had taken place, there would have been no reason to re-open the closed chapter in view of what we are setting out hereinafter." [Emphasis is ours] 10.2. We may also note that apart from respondent no.2, the order, according sanction also bears an endorsement of the ACIT. For the sake of convenience, the said endorsement is set forth hereafter: "On perusal of information received from the investigation wing & reasons recorded by AO, I am satisfied that Rs. 27,60,838/- has escaped taxation. Approval for reopening may be granted." 10.3. There is no explanation by the revenue as to why approval of ACIT was taken in the instant case. Even if we were to assume for the moment that the approval of the ACIT was rightly taken, a bare perusal of the endorsement would show that there is no application of mind as to whether the information received by the AO had any nexus with the formation of honest belief that the assessee's taxable income had escaped. What is glaring is that the ACIT notes that income to the tune of Rs. 27,60,83 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in the writ petition is concerned, that the notice issued under Section 148 was barred by limitation, we are of the view that this submission advanced on behalf of the assessee is not sustainable. As noticed above, the limitation provided under Section 149 of the Act for issuance of notice commences from the date when the notice is issued and not when the notice served. The record presently, before us shows that the notice was issued on 31.03.2018. Therefore, this submission made on behalf of the petitioner is rejected. 10.7. The other argument advanced on behalf of the assessee that the notice under Section 148 was issued by an AO Ward No.22(4) while the order recording reasons was issued by another officer is not borne out from the record. 10.8. This brings us to another ground raised in the writ petition, which is, that there was a huge time lag between the issuance of the impugned notice under Section 148 of the Act and the date when the order recoding reasons was furnished to the authorized representatives of the petitioner. While the assessee is, in our view, right in contending that if the time lag is huge, it does point in the direction that the order was ante-dated ..... X X X X Extracts X X X X X X X X Extracts X X X X
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