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TMI Blog2021 (12) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... m, that he is providing accommodation entry through his entities which includes M/s. Bridge Building Pvt. Ltd. The Investigation Wing on the strength of his admission has taken out the transaction made by Shri Ajit Kumar Jindal s entities viz. M/s. Bridge Building Pvt. Ltd. and found that assessee had transaction with M/s. Bridge Building Pvt. Ltd., so this information was passed on to the AO, who on receipt of it has jumped to the conclusion that since assessee had transacted with M/s. Bridge Building Pvt. Ltd. and then assessee is a beneficiary who availed for the bogus bills which was paid through bank to it and later got it back as cash as per the modus-operandi admitted by Shri Ajit According to us, when the AO receives information of such nature from investigation wing it certainly raises suspicion. Then the AO cannot and should not straight away issue notice u/s 148 of the Act and assume jurisdiction to reopen the assessment. Why because, there is subtle difference between reason to suspect and reason to believe . Information adverse may trigger reason to suspect then the AO to make reasonable enquiry and collect material, which would make him believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and in law, the Ld.CIT(A) has erred in holding that all necessary evidences were furnished by the assessee regarding the transactions which is contrary to the findings of the AO in the assessment order. iii. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred has failed to appreciate the fact that by not complying with the summons issued by the AO, the assessee and the party ensured that proper examination of the documentary evidences is not done. 4. The relevant grounds of the cross-objection of the assessee are as under: i. For that the Ld.CIT(A) was justified in holding that all the necessary evidences were furnished by the assessee regarding the transaction at the time of original assessment and the department failed to controvert the same. ii. For that on the facts and in the circumstances of the case the CIT(A) was fully justified in deleting the addition. iii. For that the appeal is liable to be rejected since the department was not aggrieved by the second part of the order of Ld.CIT(A) holding the proceedings u/s 147 as bad in law. 5. At the outset it is noted that in the cross-objection the assessee has r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the scrutiny first assessment order on 02.12.2016 ), which has been reproduced by the AO from page 4 to 7 of the re-assessment order dated 28.12.2018. The Ld. A.R. took us through the question and answers of Shri Ajit Kumar Jindal and brought to our notice that he has not stated anything against the assessee company nor against its directors of the assessee and that the statement is against Shri Uday Shankar Mahawar Co., M/s. Dotex Merchandise Pvt. Ltd. and thus according to Ld. A.R., there is neither any entry provided nor given any bogus bills to the assessee whereas there are evidences has been placed on record to suggest that the M/s. Bridge Building Construction Co. Pvt. Ltd. was providing services to the assessee. It was pointed out to us that Shri Purshottam Vyas of M/s. Bridge Building Construction Co. Pvt. Ltd. was engaged in the complete supervision of the dispatch of Colliery through railways and this fact has been corroborated by third party M/s. Ultratech Cement Ltd. which fact is discernable from perusal of letter confirming the same which is placed at page no. 39 of Paper Book. It has also been brought to our notice that payment were given to M/s. Bridge Buil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year, he may, subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment: year) Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 10. Hon ble Bombay High Court in the case of Prashant S. Joshi (2010) 230 CTR 232 (Bom) has observed The AO must have reasons to believe that such is the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suspicion about income escaping the assessment . The former category consists of the facts which, if established to be correct, will have a cause effect relationship with the income escaping assessment. The later category consists of facts, which , if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. In order to validly reopen, the requirement is that there has to be some kind of cause effect relationship between reasons recorded and the income escaping assessment. While dealing with this matter it is useful to bear in mind the following observation of Hon ble Supreme Court in ITO vs. LakhmaniMewal Das [1976] 103 ITR 437 wherein the Hon ble Supreme Court has taken note of the additional condition precedent required as per first proviso u/s 147 for reopening the assessment after four (4) years . The relevant portion has held as follows: The reasons for the formation of the belief must have a rational connection with or relevant bearing of the formation of the belief . Rational connection postulates that there must be a direct nexus or live link between the material coming to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe these words are stronger than the words is satisfied . The belief entertained by AO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant material. The Court of course cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the AO in coming to the belief the Court can certainly examine whether the reason are relevant and have a bearing on the matter in regard to which he is required to entertain the belief before he can issue notice u/s 147(1). If there is no rational and intelligible nexus between the reasons the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the AO could not have reason to believe that any part of the assessee had escaped assessment refer 203 ITR 456 (SC) also). 18. Here it is important to understand one more aspect that information adverse may trigger reason to suspect , then the AO to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. The statutory mandate/co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was also accepted and confirmed by the said entry operator namely Shri Ajit Kr Jindal in his statement recorded u/s 132(4) of the I.T. Act 1961 on oath. A detailed list of beneficiaries has also been provided along with the statement under oath of Shri Ajit Kr. Jindal along with the shared information wherein the name assessee company i.e. name M/s Coalsale Company Limited is mentioned. 3. It is found form the statement of Ajit Kr. Jindal that he has facilitated pre-arranged accommodation entries of bogus billing to various beneficiaries through different paper/ bogus/ shell companies controlled by him viz. M/s Bridge Building Pvt. Ltd. It is clear from his sworn statement that such entries are also given to the assessee company through said paper/ shell company viz. M/s Bridge Building Pvt. Ltd. While explaining the modus it is stated by the entry operator that bogus bills are issued b; companies controlled by him against which cheques are issued by the interested parties which is rotated in few layers after which cash is withdrawn returned back to the concerned party after deducting his commission. 4 . It is found from the facts available in the form of shared state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 4 years from the end of the relevant year has not expired in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above. 20. From a perusal of the first para of the reasons recorded it is noted that the AO has recorded that the assessment in this case was completed u/s 143(3) of the Act which is a fact and has nothing to do with escapement of income. In the second para the AO refers to some information from DDIT (Inv.) Unit 3(2) with regard to the search and seizure operation in the case of a third party i.e. Shri Ajit Kumar Jindal. The AO further refer that the said person was engaged in facilitating pre-arranged accommodation entries of bogus billing and has further referred to some list of beneficiaries in which the assessee s name is there. [Please Note: However, it was brought to our notice that neither the alleged statement formed part of the reasons recorded nor the alleged list beneficiaries was therein. And the fact that the AO has also not recorded in the reasons that he had gone through the said statement and the list of the beneficiaries and that the name of the assessee appeared in the alleged list. So acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that there is no rational and intelligible nexus between the reasons and the belief, the conclusion would be inevitable that AO could not have reason to believe that any part of the assessee s income had escaped assessment. Keeping this principle also in mind when we examine the validity of jurisdiction of the AO to re-open we have to see whether there was reasons to believe (escapement of income). Reason to believe postulates a foundation based on information and a belief based on reasons. After a foundation based on information, is made, there still must be some reason which should warrant holding a belief that income chargeable to tax has escaped assessment. So firstly we have to see whether in the reasons recorded by the AO there was any information on which a foundation could be based upon; and if this condition is satisfied i.e. a foundation based on information is there, then the next step, is to see whether there is reasons which should warrant holding the belief that income chargeable to tax has escaped assessment. Here, it has to be kept in mind the assessee s scrutiny assessment u/s 143(3) was completed on 02.12.2016 and the information which the AO relies on is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of law is Reason to believe and not Reasons to suspect . So when AO receives, such information, then it can be the starting point of preliminary enquiry and the AO cannot straight away assume jurisdiction to reopen, so according to us, the AO erred in jumping to the conclusion that assessee s income has escaped assessment on receipt of the information that a company run by Shri Ajit Jindal had transaction with assessee. Simply because the assessee had transaction with M/s B B Pvt. Ltd., cannot be the basis to believe escapement of income, unless there is any material there to suggest that so called assessee s transaction was bogus the cheque given by assessee had been returned as cash to assessee. Thus in the facts discussed and based on the analysis of the reason recorded by the AO according to us, the AO could not have formed a belief that income chargeable to tax has escaped assessment. Simply because Shri Ajit stated once that he is an entry provider doesn t mean that all his actions through his controlled companies are doing only wrong things. It has to be kept in mind that the maxim Falsus in uno falsus in omnibus meaning false in one thing is false in everyth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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