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TMI Blog2021 (11) TMI 671X X X X Extracts X X X X X X X X Extracts X X X X ..... risdiction u/s.147. If the reasons recorded are silent or there is no reference of any material, then other extraneous material referred subsequently cannot justify acquiring of jurisdiction for reopening u/s 147. Any annexure or report discussed in the assessment order which is not part of the reasons recorded cannot be construed as material forming belief u/s.147. The formation of reasons to believe can only be seen on the reason recorded in writing by the Assessing Officer before issuance of notice u/s.148 Even if the information received from Investigation Wing was a valid information and material available with the Assessing Officer, then at least Assessing Officer after applying his mind should have brought on record at the time of recording the reasons that assessee has received accommodation entry in the nature of share capital or any bogus entry by any entry provider - The reasons recorded itself goes to show that it is purely based on borrowed satisfaction and without application of mind and such an approach has been frowned by the Hon ble Jurisdictional High Court in the cases of PCIT vs. Meenakshi Overseas P. Ltd.. [ 2017 (5) TMI 1428 - DELHI HIGH COURT] and PCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment Year 2009-10. 3. The facts in brief qua the legal issue raised by the assessee in both the years are that, for the Assessment Year 2007-08 the assessee has its filed return of income u/s.139 on 30.10.2007 declaring income of ₹ 40,00,030/- which was processed and accepted u/s.143(1). Likewise for the Assessment Year 2009-10, the assessee has filed return of income on 30.09.2009 u/s.139(1) declaring income of ₹ 52,90,460/- which was processed u/s.143(1). Thereafter, on the basis of information that the assessee has received accommodation entry of ₹ 1,25,00,000/- in Assessment Year 2007-08 and ₹ 50 lac in Assessment Year 2009-10 from Shri Surender Kumar Jain Group cases who was an entry operator, the cases were reopened u/s 147. 3.1 The reasons recorded for Assessment Years 2007-08 and 2009-10 are incorporated as under: Reasons recorded u/s 148(2) before issue of notice u/s 148(1) of the Income Tax Act, 1961 1. Name address of the assesses M/s J.D. Sons Steels Pvt. Ltd., B-17,1st Floor. Nehru Ground, NIT, Faridabad. 2 PAN No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. In view of above, I have reason to believe that income chargeable to lax amounting to ₹ 50,00,000/- and any other income which subsequently comes to notice has escaped assessment for assessment year 2009-10 within the meaning of section 147 of the Income Tax Act. Accordingly, a notice u/s 148 is being issued for the assessment year 2009-10. (Pariktshit Singh, IRS) Asstt. Commissioner of Income Tax, Circle - II, Faridabad . 4. In the impugned assessment order, the ld. Assessing Officer has incorporated certain extracts of report of Investigation Wing, New Delhi on the outcome of such proceedings in the case of Shri Surender Kumar Jain and Shri Virender Kumar Jain and also discussed general modus operandi carried out by these two persons through various entity. Thereafter, Assessing Officer has also extracted certain information pertaining to assessee. Thus, Assessing Officer came to the conclusion that assessee has taken bogus accommodation entry in the form of share application money/share capital. After detailed discussion, he has made an addition of ₹ 1,25,00,000/- in the Assessment Year 2007-08 and ₹ 50 lacs in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... angur (1997) 224 ITR 362 (SC) the Hon'ble Supreme Court has clearly held that letter from Deputy Director (Investigation) constitutes information and reasons to believe that income have escaped assessment. In fact herein the Hon'ble Supreme Court has also held that merely because the notice was sent on the next day of the receipt of the information from the DDIT (lnv.) does not mean the ITO has not applied his mind. In view of this I have no hesitation in holding that the AO had valid reasons to believe that income had escaped assessment and that the approval u/s 151 was accorded in a mechanical manner. Reliance is also placed on the Judgment of the Hon'ble Supreme Court in the case of PHOOL CHAND BAJRANG LAL AND ANOTHER VS. ITO ANOTHER 203 ITR 456 (SC) the head note for which reads as below: Sufficiency of reasons for reopening assessments is not for the court to judge. Section: 147(a) -failure to disclose truly and fully material facts - cash loans - originally accepted as genuine subsequent information from ,4.0. of a company that its M.D. has confessed - he or his company has not advanced any loan to any person during the relevant period - subsequent inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. (iv) Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the 'Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to full and true disclosure of material facts . 9. Coming to the specific facts of the case the AO has recorded the reasons on the basis of the information received from the Investigation Wing. A perusal of the reasons recorded by the AO clearly shows that the appellant has taken accommodation entries from Sh. Surinder Kumar Jain Group of cases during the F.Y. 2006-0?. Tne quantum of entries i.e. 50 Lacs has been specifically mentioned and thus to this extent the appellant's reliance on a judgment of Delhi High Court in the case of CIT vs. Ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iciency of reasons for reopening assessments is not for the court to judge. Section: 147(a) - failure to disclose truly and fully material facts - cash loans -originally accepted as genuine subsequent information from A.O. of a company that its M.D. has confessed - he or his company has not advanced any loan to any person during the relevant period - subsequent information is definite, specified and reliable. Sufficiency of reasons for formation of belief is not for the court to judge. Reassessment notices are valid. [Applied/followed in- 208 ITR 196 (RAJ) : 208 ITR 266 (DEL): 209 ITR 01 (BOM) :209 ITR 135(BOM) : Assam Forest Products (P) Ltd. - Vs.-CIT : 211 ITR 447 (SC): 214ITR 669 (RAJ) : 221ITR 538 (SC) :226 ITR 352 (6UH): 237ITR 549 (BOM):248 ITR 493 (P H) :ITO - VS- Selected Dalurband Coal Co.Pvt. Ltd. 217ITR 597 (SC) :253 ITR 83 (DEL) 257 ITR 481 (Guj)] 12. And reliance is placed on Honable Madras High Court in the case of STERLITE INDUSTRIES (INDIA) LTD. v ASSISTANTCOMMISSIONER OF INCOME- TAX AND ANOTHER [2008]302 ITR275 (MAD.) The head note for which reads as under: Reassessment -Notice-Validity of Notice - Information From Enforcement Directorate showing pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tablish that bogus accommodation entries in garb of share application money were taken by the assessee. In so far as forming a belief of income escaping assessment and subsequently recording of reasons is concerned, it is seen from above that there was more than sufficient material on record to form the belief that assessee s income had escape assessment for the relevant year. The Investigation report was not some frivolous, cryptic, mundane paper on the basis of which the AO had formed a belief. It was a voluminous report running into hundreds of pages wherein the assessee s role as a beneficiary and the amount taken through various bogus companies of the entry operator Sh. S.K Jain was established unambiguously and corroborated by statements recorded and bank inquiries conducted by the wing. So, with this background, availability of material on record for forming a prima facie belief of escapement of income is not even questionable. Moreover, it is a settled law that for reopening of assessment, the AO is required only to form a prima facie belief that the income has escaped assessment and no conclusive proof is required for the same. It is during the course of assessment that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to what does the assessee means by Application of mind . Also, it would be appreciated by the Hon ble Bench that reopening proceedings provided in the statue are for bringing to tax the income of the taxpayer in case it has escaped assessment. The AO can very well drop the proceedings if he/she is satisfied after inquiry and investigation in the case that no income has escaped assessment which is not the case with scrutiny proceedings wherein there is no provision of dropping the proceedings, once the case is selected for scrutiny. So, belief of AO regarding income escaping assessment, recording of reasons, application of mind should not be taken to hyper-technical level such that it can work as vehicle to vitiate the whole proceedings and resultant assessment which is otherwise very strong on merit. 9. Ld. DR has also relied upon catena of judgments in his written synopsis which on perusal of the same are not relevant. The judgments relied upon by the ld. DR are reproduced hereunder: 1. Aradhna Estate (P.) Ltd.Vs DCIT f20181 91 taxmann.com 119 (Gujarat) Where Hon ble Gujarat High Court held that where reassessment proceedings were initiated on basis of inform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn to be wholly perverse. 7. Indu Lata Ranqwala Vs DCIT [2017]80taxmann.com102(Delhi)/[2016] 384 ITR 337 (Delhi)/[2016] 286 CTR 474 (Delhi) Where Hon ble Delhi High Court held that where initial return of income is processed under section 143(1), it is not necessary in such a case for Assessing Officer to come across some fresh tangible material to form 'reasons to believe' that income has escaped assessment. 8 Krishna Developers And Co Vs DCIT (2018-TIOL-51- SC-IT) Where Hon ble Supreme Court held that reopening on the basis of very same reasons on which the AO initially desired to make additions but had failed, was justified, if the original assessment was declared as invalid as having been completed without service of notice on the assessee within the statutory period. 9 Thakorbhai Maganbhai Patel Vs ITO [2017] 78 taxmann.com 201 (SC)/[2017] 245 Taxman 333 (SC) Where Hon ble Supreme Court dismissed SLP against High Court's ruling where reopening of assessment u/s 147 was held to be valid despite the AO not passing speaking order against objections filed by the assessee. 10. Thakorbhai Maqanbhai Patel Vs ITO [201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee with a finance company were bogus as said company was engaged in providing accommodation entries, it being a fresh information, he was justified in initiating reassessment proceeding in case of assessee. 14 Raymond Woollen Mills Ltd. v. ITO And Others [236 ITR 34] Where Hon'ble Supreme Court held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 15 R.K. Malhotra ITO Vs Kasturbhai Lalbhai [1977] 109 ITR 537 (SC) (Copy enclosed) where Hon ble Supreme Court held that the intimation which the Income-tax Officer received from the audit department would constitute information within the meaning of section 147(b). 16 CIT Vs P.V.S. Beedies (P.) Ltd. M9991 103 Taxman 294 (SO/[1999] 237 ITR 13 (SC/[1999] 155 CTR 538 (SC) Where Hon ble Supreme Court held that Audit party had merely pointed out a fact which had been overlooked by Assessing Officer and this was not a case of informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any discussion of any investigation report as referred to by the Assessing Officer in the assessment order or any reference of any material from the reasons recorded. It is not clear from the reasons recorded as to what is nature of the accommodation entry; and secondly, from which entity or companies, the assessee had received alleged accommodation entry. It is also not clear, whether it is on account of share application money or loan or any other kind of credit entry from any such entity. It is a well trite law that the reasons recorded at least should disclosed the prima facie material which has proximate or live link nexus with such information or material that the income chargeable to tax has escaped assessment. The Assessing Officer can assume jurisdiction for reopening the assessment only on the basis of material referred to in the reasons recorded and reasons recorded alone is the edifice or foundation of jurisdiction u/s.147. If the reasons recorded are silent or there is no reference of any material, then other extraneous material referred subsequently cannot justify acquiring of jurisdiction for reopening u/s 147. Any annexure or report discussed in the assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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