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TMI Blog2021 (4) TMI 537X X X X Extracts X X X X X X X X Extracts X X X X ..... st the assessee. The A.O noted that he received credible Information from the ADIT (Inv.), Unit-4(2), Kolkata dated 15.11.2017 in respect of M/s. DRS Enterprises Pvt. Ltd. (A/c. No.008808000000041), cash deposit of Rs. 6,60,57,000/- and M/s. Hanuman Traders Pvt. Ltd. (A/C. No.008808000000022), cash deposit of Rs. 59,16,68,000/-. According to the A.O, he issued summons to these two companies. However, it could not be served due to non-existence of the concerns at their respective given address. According to the A.O, as per the database available with department, these two concerns are interlinked and existing merely on paper having no real existence and are controlled and managed by well-known entry operators of Kolkata for the purpose of providing accommodation entries in the form of bogus share capital/share premium, pre-arrange bogus LTCG/STCL & unsecured loans etc. According to the A.O, he examined the bank statement of these two companies (M/s. DRS Enterprises Pvt. Ltd. and M/s. Hanuman Traders Pvt. Ltd.). He observed that these accounts have been frequently used for depositing unaccounted cash which were layered through several bank accounts for jamakharchi/shell concerns and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Bank. The funds were transferred from their account to Excel Financial Consultants Pvt. Ltd. who also maintained their account with Dhanalaxmi Bank. Summon U/s 131 was issued to Sri Rashmi Garg who is one of the director of the assessee company and liable to substantiate the amount of Rs. 25,00,000/-. But the summon was returned with postal comment "moved ". On verification of the Bank Statement of Excel Financial Consultants Pvt. Ltd. maintained with Dhanlaxmi Bank (A/c No. 060102000092816) it is found that there was total credits of Rs. 19,60,98,794/- into their accounts and then transferred to various A/cs through RTGS within that day or very next day. From the transaction it is found that only huge funds were routed through the assessee company's account for providing accommodation entries without any logic and unaccounted income of other business activities which the assessee company has brought back into its books of accounts through shell companies. From the cash trail it is found that Funds were transferred to M/s DRS Enterprises (P) Ltd. then transferred to Radharani Vyapaar's account after that finally transferred to assessee company's A/c. and all are maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he root of the impugned AO's action. Since it is a legal issue even though it has not been preferred before the Ld. CIT(A), this Tribunal has to adjudicate this issue first; And even though the Ld DR objected to this issue being raised for the first time without being raised before the First Appellate Forum, it is noted that a legal issue can be raised even for the first time before this Tribunal as held by the Hon'ble Supreme Court in National Thermal Power Corporation Ltd (NTPC) V/s. CIT (1998) 229 ITR 383 (SC). In order to examine the legal validity and the reasons recorded after reopening the assessment, let us have a look at the reasons recorded by the A.O for reopening the assessment u/s 147 of the Act which is given at Page 2 of the paper-book as under: "The assessee company filed its return of income for the A.Y. 2011-12 on 04.11.2011 declaring a total income of Rs. 3,410/- as business income. The assessee has not assessed on regular assessment. The said return was duly processed u/s 143(1) of the IT. Act'1961 on 24.01.2012. Subsequently, information has been received from the ADIT (inv.),Unit-4(2), Kolkata vide letter bearing No. DDIT(Inv )/Kol/Unit.4(2)/Umeshwar Singh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee has back to the books of the assessee. By the reason of the failure on the part of the assessee to disclose fully and truly all material fact necessary for assessment and from this material on record, there is enough reason to believe that income has escaped assessment in the hand of M/s. Excel Financial Consultant (P) Ltd. amounting to Rs. 25,00,000/- for the A.Y. 2011-12 as per provision of section 147 of the I.T. Act, 1961. Since more than four years have elapsed from the end of the relevant assessment year 2011-12 the case is put up to the Pr. CIT-5, Kolkata for his kind perusal and grant of sanction u/s 151(1) of the I.T. Act, if satisfied." 7. Having perused the reasons recorded by the AO before reopening and when the validity of the order u/s. 147 of the Act depends upon the AO rightly assuming jurisdiction as contemplated by law to make an order of assessment u/s. 147 of the Act, let us understand the settled position of law on the legal issue at hand. We note that before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record "reason to believe" that the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the AO was later reversed to 'reason to believe escapement of income'', by the Direct Tax Laws (Amendment) Act, 1989. The Hon'ble Apex Court as well as the Hon'ble jurisdictional High Court as well as other Hon'ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdictional fact and law (mixed question of fact and law) the reason to believe escapement of income (supra). 8. The AO, who is a quasi judicial authority is empowered to reopen the completed assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax which is the jurisdictional fact & law and sine qua non to assume jurisdiction to reopen a completed assessment. It must be kept in mind that 'reasons to believe' postulates foundation based on information and belief based on reason. Even if there is foundation based on information there must be some reason warrant holding the belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon'ble Supreme Court in Ganga Saran & Sons P. Ltd. Vs. ITO (1981) 130 ITR 1 (SC) held that the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccounts have been frequently used for depositing of unaccounted cash which were layered through the several bank accounts for jamakharchi/shell concerns ultimately to the bank accounts of the beneficiary. According to the A.O, the assessee company is one of the beneficiaries and has received a fund of Rs. 25,00,000/- from the two companies (M/s. DRS Enterprises Pvt. Ltd. and Hanuman Traders Pvt. Ltd.). Thereafter, the A.O noted that the assessee company has no real business activities since there are no purchase and sales found during the relevant F.Y and the assessee company has shown interest income of Rs. 20,93,972/- and there is no logic of receiving of Rs. 25,00,000/- from the aforesaid two shell companies (M/s. DRS Enterprises Pvt. Ltd. and Hanuman Traders Pvt. Ltd.). By this modus operandi, the assessee's unaccounted money has been brought back to the books of the assessee. After recording these reason the AO issued notice u/s 148 for re-opening the assessment of AY 2011-12. It is noted that after receiving reasons recorded by the Assessing Officer for reassessing the assessment, the assessee filed its objection and also filed an affidavit dated 10.11.2018 (page 8 of paper-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not "reason to believe". So the AO should have conducted reasonable enquiry and collected material which could make him believe, that in fact there is escapement of income, which in this case AO did not do, so the reopening based on the reasons recorded by him to re-open is bad in law. In this context, it has to be noted that the assessment year under consideration A.Y 2011-12 and as per the law in force, when there is a credit entry in the books of the assessee, as per section 68 of the Act, the assessee is duty bound when called upon by the Assessing Officer to explain the nature and source of the credit. In A.Y 2011-12, the assessee is not required as per law to find out the 'source of source' when it receives credit in its books. So, when the law applicable for A.Y 2011-12 obliges the assessee to only bring to the notice of the A.O the source of its credit in this case, M/s Radharani Vyapaar (P) Ltd., it is not obliged to find out from where M/s Radharani Vyapaar (P) Ltd. had received the money for investing in the assessee company i.e. in respect of M/s. Kokila Trading Co. and even M/s. DRS Enterprise. Therefore, the reasons recorded by the A.O to legally reopen the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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