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TMI Blog2022 (2) TMI 1192X X X X Extracts X X X X X X X X Extracts X X X X ..... was received by him from the CIB, and without applying his mind to the said information/material had reopened the case of the assessee u/s.147 of the Act. In our considered view, the Assessing Officer by reopening the case of the assessee on the basis of a borrowed satisfaction, had thus, wrongly assumed jurisdiction u/s.147 of the Act, which, thus, on the said count itself on the said count itself cannot be upheld and is liable to be quashed - Addition made by the Assessing Officer has no plausible nexus with the reasons on the basis of which the case of the assessee was reopened. On the one hand, the Assessing Officer had alleged that the assessee had booked bogus purchases to suppress his real income, however, on the contrary, he had made the addition in his hands on the ground that the purchases in question were in the nature of unexplained investment. In our considered view, as the very addition made in the hands of the assessee militates against the very reason on the basis of which the case of the assessee was reopened, therefore, the addition on the said count also is liable to be struck down. - Decided in favour of assessee. - ITA No. 272/RPR/2016 - - - Dated:- 21-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasons to believe on the basis of which the case of the assessee was reopened u/s.147 of the Act, placed at Page 1 of the assessee s per book ( APB , for short). Adverting to the facts leading to the impugned addition, it was submitted by the Ld. AR that backed by the impugned information that the assessee in order to suppress its taxable income had booked bogus purchases of ₹ 9,53,492/-, the Assessing Officer had vide a notice u/s.142(1) of the Act, dated 17.03.2015 called upon the assessee to furnish certain information viz. (i) produce purchase register for verification a/w. purchase list containing names and addresses of the respective parties ; (ii) produce the books of account i.e. cash book, ledger, journal, purchase/sale register, vouchers, bank statements; and (iii) furnish statement of income including profit loss account, balance sheet a/w vouchers etc. It was submitted by the Ld. AR that in compliance to the aforesaid direction the assessee had vide his letter dated 26.03.2015 furnished the required information as was called, Page 5 to 6 of the APB. It was submitted by the Ld. AR that as the Assessing Officer had not furnished the details of the purchases o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition of ₹ 9,53,492/- pertaining to the same. Rebutting the challenge thrown by the assessee s counsel to the validity of the jurisdiction assumed by the A.O u/s 147 of the Act, it was submitted by the ld. D.R that as the case of the assessee was reopened by the A.O after due application of mind to the material/information available before him, therefore, he had validly assumed jurisdiction u/s 147 of the Act. 8. We have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements pressed into service by the ld. A.R. As the ld. A.R had assailed the validity of the jurisdiction assumed by the Assessing Officer for re-opening of the assessee s assessment u/s.147 of the Act, therefore, we would first deal with the sustainability of the same. On a perusal of the reasons to believe on the basis of which the case of the assessee was reopened by the Assessing Officer, we find that the same reads as under: The assessee has filed return of income on 22-09-2009 showing total income at ₹ 2,89,440/- after availing deduction under Chapter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon ble Supreme Court in the case of Anirudh Sinhji Karan Sinhji Jadeja Vs. State of Gujarat (1995) 5 SCC 302. In its aforesaid order, it was observed by the Hon ble Apex Court that if a statutory authority has been vested with a jurisdiction, then, he has to exercise it according to its own discretion. It was observed that if the discretion is exercised under the direction or in compliance with some other authorities instruction, then it will be a case of failure to exercise discretion altogether. In our considered view, the cases reopened on the basis of information received from the other departments are also governed by the aforesaid principle of making an independent inquiry and recording of satisfaction by the Assessing Officer issuing notice under Section 148 of the Act. Our aforesaid view is further supported by the order of a coordinate bench of the ITAT, C Bench, Mumbai in the case of Chetan Rajnikant Shah Vs. ITO, 24(1)(4), Mumbai, ITA No. 1948/Mum/2018, dated 22.02.2021. In its aforesaid order the Tribunal had after exhaustive deliberations observed as under : On a perusal of the aforesaid reasons to believe we find that though the A.O had referred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the material/information received by the A.O from the DGIT(Inv.), Mumbai on the basis of which the case of the assessee was sought to be reopened, but at the same time it is witnessed by a nonapplication of mind and failure to arrive at an independent and bonafide belief on the part of the A.O that the income of the assessee chargeable to tax had escaped assessment. Although, we are not oblivious of the fact that an A.O at the stage of recording the reasons to believe is not required to conclusively establish that the income of the assessee chargeable to tax had escaped assessment, but then, in the case before us we find that the A.O has not even recorded a satisfaction that as per him a case has been made out for issuing a notice under Sec. 148 of the Act. In our considered view, when the basic requirement that A.O must apply his mind to the material on record in order to have reasons to believe that the income of the assessee chargeable to tax had escaped assessment is found amiss, the reopening of the assessment cannot be held to be justified. Our aforesaid view is fortified by the judgment of the Hon ble High Court of Delhi in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be gathered that as to whether the A.O had applied his mind to the material that he talks about since he did not describe what those material was. Observing, that without forming a prima facie opinion, on the basis of the aforesaid material, it was not possible for the A.O to have simply concluded that it was evident that the assessee company had introduced its own unaccounted money in its bank by way of accommodation entries. Accordingly, the High Court was of the view that as the basic requirement that the A.O must apply his mind to the material in order to have reasons to believe that the income of the assessee had escaped assessment was missing, the reopening of the assessment was not justified. Further, we find that the Hon ble High Court of Delhi in the case of PCIT Vs. RMG Polyvinyl (I) Ltd. (2017) 396 ITR 5 (Del), relying on its aforesaid order in the case of Meenakshi Overseas Pvt. Ltd. (supra) had observed, that as the A.O in the case before them had merely acted upon the information received from the Investigation Wing without undertaking any further enquiry on his part thus, the link between the tangible material and the formation of the reasons to believe that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus, are of the considered view that as the A.O had acted mechanically on the information supplied by the Directorate of Income-tax(Inv.) that the assessee was a beneficiary of the alleged bogus/accommodation entries provided by the aforesaid entry provider, viz. Shri Praveen Kumar Jain, and had failed to apply his mind to the material available on his record, the reopening of the assessment by him u/s 147 of the Act could not be held to be justified. We, thus, in terms of our aforesaid observations quash the assessment framed by the A.O u/s. 147 r.w.s 143(3), dated 27.03.2015 for want of valid assumption of jurisdiction on his part. Thus, the Ground of appeal No. 1 is allowed in terms of our aforesaid observations. 10. Although we have quashed the assessment for want of jurisdiction on the part of the Assessing Officer, however, for the sake of completeness, we shall now deal with the merits of the addition made by the Assessing Officer which thereafter had been sustained by the CIT (Appeals). 11. As stated by the Ld. AR, and rightly so, we find that it is a matter of fact borne from the record that the Assessing Officer had neither in the reasons to believe nor in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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