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TMI Blog2019 (8) TMI 1768X X X X Extracts X X X X X X X X Extracts X X X X ..... on information received from Director of Investigation (Inv) Mumbai without making his own inquiry, thus, the re-opening is based on borrowed satisfaction. Denial of natural justice - The third party statement cannot be relied without allowing cross-examination. The assessment records showed that the assessee has demanded cross-examination but same was not allowed. The assessee has filed affidavit from Shri Bhanwarlal M. Jain wherein he has retracted for his statement recorded under section 132(4) of the Act. His affidavit was not examined. Thus, non allowing opportunity of cross examination renders assessment proceeding as invalid as held by the Hon`ble Supreme Court in the case of Andaman Timber Industries [ 2015 (10) TMI 442 - SUPREME COURT ] held that not allowing the assessee to cross examine witnesses by Adjudicating Authority though statements of those witnesses were made basis of impugned order, amounted to serious flaw which makes impugned order nullity as it amounted to violation of principle of natural justice. - Decided in favour of assessee. - I.T.A. No. 776 & 1180/AHD/2017 - - - Dated:- 27-8-2019 - SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI O.P.MEENA, AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of diamonds are bogus, hence, the income of the assessee has escaped assessment, the case were reopened u/s.147 of the Act after obtaining necessary satisfaction of the competent authority. The notice under section 148 of the Act was issued on 19.03.2015 and served upon the assessee. The assessee company vide letter dated 17.04.2015 has requested to treat the original return of income filed on 10.09.2011 as the return filed in response to said notice under section 148 of the Act. 4. The assessee has carried the matter before CIT (A). Wherein the assessee has challenged the validity of reopening of assessment and issue of notice under section 148 of the Act of the Act. The assessee has contended that the assessment has been reopened merely on the basis of information received from DIT (Inv)-II, Mumbai regarding accommodation entries without any independent enquiries. Therefore, the assessment has been reopened on borrowed satisfaction without pointing out any failure on the part of the assessee in making the true and full disclosure of all material facts. The AO was duty bound to demonstrate that there was failure on the part of assessee to disclose all materials facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed at Paper Book Page No. 34, and submitted that the AO had reopened the assessment solely based on the information received from Director of Investigation (Inv)-II, Mumbai, who had informed him that the assessee has taken accommodation entry of ₹ 11,07,73,186/- from M/s. Rose Gems Pvt. Ltd. and no real transaction has taken place. Therefore, the reasons are recorded mechanically without application of mind. The reasons further stated that a search under section 132(1) was carried out in the case of Shri Bhanwarlal M. Jain, which is leading entry provider of Mumbai. This group involves in providing accommodation entries of bogus purchase/ sales through benami concerns. The assessee M/s. Albers Diamond Pvt. Ltd. is one of the beneficiary and received accommodation entries from the said party of ₹ 11,07,73,186/-. However, no independent enquiries were made by the AO before issue of notice under section 148 of the Act. The learned counsel for the assessee contended that reasons recorded clearly shows that the AO has not applied his mind to the information received by him from Investigation Wing, and issued notice under section 148 of the Act as no independent inquiry w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Central Excise Kolkata-II [2015] 13 STD 805 (SC) ( Civil Appeal No. 4228 of 2006) dated September, 2, 2015. (SC). The learned counsel for the assessee further supported his view by placing reliance in the case of DCIT v. Sanghvi Exports International Pvt. Ltd. [I.T.A.No. 3305/Mum/2017 Mumbai ITAT [PB-63-71], M/s. Gopinath Gems v. ITO Ward 3(3)(1) Surat [I.T.A.No. 624 to 629 7637/SRT/2018 dated 01.05.2019] Copy filed PB-18). The learned counsel for the assessee further relied in the case of Shilpi Jewellers Pvt. Ltd. v. Union of India[ Writ Petition 3540 of 2018 dated 8.02.2019 ] (PB-1-8) of Hon`ble Bombay High Court, wherein the Hon`ble High Court observed in para 9 as:9. In the objections, the assessee had also questioned the quantification of the escaped income of ₹ 33.34 crores. In reply to the petition, the Assessing Officer stated that the same emerges from the information received by him from Investigation Wing. This clearly reflects non-application of mind on the part of the Assessing Officer recording reasons. The ld. Counsel contended that the AO has not applied his mind and he has merely acted and initiated reassessment proceedings and issued noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng notice u/s. 148 of the Act. The ld. D.R. further stated that Ld.CIT(A) has placed reliance on the order of Hon'ble Supreme Court in the case of Phool Chand Bajrang Lal vs. ITO, 203 ITR 456 (SC) wherein the Hon`ble Supreme Court was considering the question of reassessment beyond four years in the case of an assessee firm, and had held that in the case of acquiring fresh information specific in nature and reliable relating to the concluded assessment which went to falsify the statement made by the assessee at the time of original assessment and therefore, he would be permitted under the law to draw fresh inference from such facts and material. The learned D.R. submitted that CIT (A) has relied in the case of Dishman Pharmaceuticals and Chemicals Ltd. vs. DCIT (OSD) [2012] 346 ITR 228 (Guj.) wherein has held that there is no set format in which such reasons must be recorded. It is not the language but the contents of such recorded reasons, which assumes importance. Therefore, contended reopening of assessment based on receipt of information from Investigation Wing was held to be valid. On merit, the learned D.R. submitted relied on the order of the AO and submitted that the CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction, as the above reasons did not indicate any enquiry or examination of assessment records by the AO. Thus, the basis of the reasons of the AO was merely framed his opinion on the information provided by the DIT (Inv.)-II, Mumbai. We further find that the assessment has been reopened on the basis of statement given by third party. It is also noticed that in the reassessment order the AO at various instances depicted his reliance on information received from Director of Investigation (Inv) Mumbai without making his own inquiry, thus, the re-opening is based on borrowed satisfaction. Further, the said statement was retracted and an affidavit was filed before the AO. The learned counsel for the assessee has placed reliance in the case of Pr. CIT v. M/s. Shodiman Investments Pvt. Ltd. I.T.A.No. 1297 of 2015 dated 16.04.2018 of Hon`ble Bombay High Court wherein in para 14, the Hon`ble High Court observed Further , the reasons clearly shows that the Assessing Officer has not applied his mind to the information received by him from the DDIT(Inv) . The Assessing Officer has merely issued a re-opening notice on the basis of intimation regarding re-opening notice from DDIT (Inv.). Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made on the basis of statement of persons who were not allowed to be cross examined by the assessee, addition were held as a not sustainable. We find that that the AO has not provided the statement of Shri Bhanwarlal M. Jain to the assessee. The third party statement cannot be relied without allowing cross-examination. The assessment records showed that the assessee has demanded cross-examination but same was not allowed. The assessee has filed affidavit from Shri Bhanwarlal M. Jain wherein he has retracted for his statement recorded under section 132(4) of the Act. His affidavit was not examined. Thus, non allowing opportunity of cross examination renders assessment proceeding as invalid as held by the Hon`ble Supreme Court in the case of Andaman Timber Industries v. Commissioner of Central Excise Kolkata-II [2015] 13 STD 805 (SC) ( Civil Appeal No. 4228 of 2006) (PB-83)dated September, 2, 2015. (SC) held that not allowing the assessee to cross examine witnesses by Adjudicating Authority though statements of those witnesses were made basis of impugned order, amounted to serious flaw which makes impugned order nullity as it amounted to violation of principle of natural justice. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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