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TMI Blog2023 (8) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... reasoned and logical order of the ld CIT(A). Decided against revenue. - ITA No. 1177/Del/2021 - - - Dated:- 16-3-2023 - DR. B. R. R. KUMAR, ACCOUNTANT MEMBER SH. YOGESH KUMAR US, JUDICIAL MEMBER For the Appellant : Dr. Rakesh Gupta, Adv. For the Respondent : Sh. Kanv Bali, Sr. DR ORDER Per Dr. B. R. R. Kumar, Accountant Member: This appeal has been filed by the Revenue against the order of the ld CIT(A)-26, New Delhi dated 23.02.2020 for AY 2012-13. 2. The revenue has raised the following grounds of appeal for AY 2012-13:- 1. On the facts and circumstances of the case the Ld. CIT (A) has erred in quashing the order by holding that the reason for reopening the case u/s 148 of the IT Act are either based on change of opinion or reason to suspect. 2. On facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting addition of Rs. 17,95,00,000/- made by AO on account of unexplained source of source of Share Capital and Share Premium u/s 68 of the Income Tax Act, 1961. 3. (a) The Ld. Commissioner of Income Tax (Appeals) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- The appellant company had been amalgamated with other group companies including M/s D S Developers Pvt. Ltd. (DSDPL), M/s Verma Buildtech Promoters Pvt. Ltd.(VBPL), M/s Renu Builders Promoters Pvt. Ltd.(RBPL), and M/s Gulab Buildtech Pvt. Ltd.(GBPL). 8. The AO received the information that: (i) M/s. GBPL has received entries of share capital of Rs. 7 crores from two companies of entry operator Sh. Himanshu Verma. (ii) M/s. GBPL has received entries of Rs. 5.655 crores from Mr. Roop Kishore Madan prop. Rhea Distribution Company who had huge cash credit amounts appearing in their bank accounts, which were immediately transferred out to various persons/entities. (iii) M/s. VBPL, M/s DSDPL M/S RBPL have received entries of Rs. 5.30 crores from Mr. Manoj Sethi, who had huge cash credit amounts appearing in his bank accounts, which were immediately transferred out to various persons/entities. 9. As the companies M/s. VBPL, M/s DSDPL, M/s RBPL M/s. GBPL (referred as merged entities) stand amalgamated in the appellant company w.e.f.1.4.2012, accordingly, proceedings u/s 148 were initiated by the AO in the case of the appellant company. As per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om this account to M/s. Verma Buildtech Promoters Pvt. Ltd., M/s. Renu Builders Promoters Pvt. Ltd. and M/s. D and S Developers Pvt. Ltd. respectively during the financial year 2011-12 relevant to assessment year 2012-13. All these three companies have already been merged with the assessee company M/S BDR Builders and Developers Pvt. Ltd. Since Shri Manoj Sethi could not explain the reasons for transferring these amounts to these merged companies it shows that these companies have taken accommodation entries by transferring their own funds in cash to the account of Sh. Sethi and then again getting the same amounts through the above bank account. Another information has been received from the Inv. Wing New Delhi that a sum of Rs. 45,00,00,000/- was received in account No. 040001000011 with ICICI Bank Ltd. New Delhi Sunder Nagar branch owned by Sh. Roop Kishore Madan during the assessment year 2012-13 which was immediately transferred to various entities. In spite of providing proper opportunities, Sh. Madan could not explain the source of deposits in this account nor could he explain the purpose of transfer of the said amount to various entities. This amount was transferre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tune of Rs. 7,00,00,000/- Rs. 4,50,00,000/-, Rs. 35,00,000/-, Rs. 5,65,50,000/- totalling in all to Rs. 17,95,00,00/-, Notice u/s 143(2) was issued on 30.10.2019. Notice u/s 142(1) along with questionnaire was issued on 22.11.2019 requiring the assessee to file the details as mentioned therein. In response to this notice the assessee vide its letter dated 20.12.2019 filed various details in respect of all these companies Including their balance sheets, computations of income, bank statements and enclosures to the balance sheets and copies of assessment orders the cases where assessments had already been completed but no documentary supportive evidence has been filed in respect of the creditworthiness of the parties from whom these accommodation entries were received not has the assessee-filed any evidence to prove the - genuineness of these transactions as per the provisions of Section 68 of the income tax Act, 1961. In view of these facts and the whole amount of Rs. 17,95,00,000/- received as accommodation entries is treated unexplained credits in the books of account of the assessee company and is being added to the income of the assessee as assessee's income from undi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than one entity is bad-in-law. (ii) The appellant had disclosed fully and truly all material facts and the case of M/s GBPL was assessed u/s 143(3) in 2015. (iii) The AO had made enquiries with regard to share capital received in M/s GBPL during the assessment made u/s 143(3) in 2015. (iv) The transactions of Mr. Roop Kishore Madan prop. Rhea Distribution Company, have all been examined in the assessment u/s 143(3) of M/s GBPL in 2015. (v) There is change of opinion of the AO, which is not valid ground for reopening u/s 148. (vi) The fact that Sh. Manoj Sethi and Sh. Roop Kishore Madan had deposited cash in their bank accounts there are many credit entries in these bank accounts, cannot automatically lead to inference that these entities are involved in transactions of accommodation entries. In the facts of the case, the reasons to believe are based on perverse inference and appellant cannot be held responsible for entries in the bank account of third party, unless there is specific finding in this regard. (vii) There is no valid basis to conclude that the income had escaped assessment. 7.1 The appellant had filed a writ petition before the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary even before the ITAT. Though, it is open to the petitioner to press this petition, to independently assail the notice under Section 148 of the Act irrespective of the fact that the assessment order has been passed, Mr. Balbir Singh, on instruction states that the appellant would be satisfied, if the appellant is permitted to raise all its pleas before the CIT (A), including in relation to the validity of the notice issued under Section 148 of the Act which may be decided on merits. He submits that in the meantime, the demand that may be raised by the petitioner in pursuance of the re-assessment order dated 27.12.2019, be not given effect to. 5. We are inclined to accept the submission of the Mr. Singh looking into the overall facts and circumstances of the case. We accordingly dispose of this petition with liberty to the petitioner to avail of its statutory right of appeal in respect of the re-assessment order dated 27.12.2019 before the CIT (A). Demand, if any, raised in consequence of the said re-assessment order shall however not be enforced till the decision of the appeal by the CIT (A). We make it clear that we have made no observations on the merits of the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR of Mr. RKM. There were cash deposits and huge credit entries in his accounts and funds were immediately transferred after receipt of the same. On the basis of the fact of incomplete details furnished by Mr. Roop Kishore Madan (RKM) prop. Rhea Distribution Company w.r.t transactions in his bank accounts, The Investigation Wing had recommended as under: 12. From the above table it is clear that the majority of the funds were transferred to the companies wherein Mr. Roop Kishore Madan has direct interest. In the absence any reply from the subject these transactions remained unexplained and are suspicious. Further, one of the above mentioned companies have not filed their ITRS for the A.Y. 2012-13 and some are Zero turnover and Zero tax paid companies. 13. Further, there are cash deposits of Rs. 1.8585 crores 1.661 crores in the Central Bank of India Account 3014813657 of Rhea Distribution Company Mr. Roop Kishore Madan during the F.Y. 2011-12 2012-13 respectively. These funds are forwarded to M/s. Sanya Hospitality Pvt. Ltd, Roop Kishore Madan. 14. As the territorial jurisdiction over the case of the assessee lies with you, the information is being forwarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised to consider to invoke the provisions of Section 147 r.w. Section 148 of IT Act, 1961 in the case of Sh. Manoj Sethi for F.Y. 2011-12 relevant to A.Y. 2012-13 and reopen the case of M/s. Verma Buildtech Promoters Pvt. Ltd. having PAN- AABCV9813C who has advanced/received the funds to/from Sh. Manoj Sethi [PAN- AAZPS6697N/AO, Circle-27(1), Delhi. There were similar information received in M/S RBPL M/s DSDPL wherein, the total transactions of three merged group entities in the appellant including M/s VBPL were at Rs 5.30 cr. 8.2 Thereafter, the AO had issued notices dated 26.03.2019 29.03.2019 u/s 133(6) of the IT act 1961 to the appellant and the respective replies of the appellant on these notices, read as under: (a)Notice u/s 133(6) on 26.3.2019:- Please refer to the above mentioned subject. In this regard, the information available with this office shows that M/s. Gulab Buildtech Pvt. Ltd., M/s Verma Buildtech Promoters Pvt. Ltd., M/s. Renu Builders Promoters Pvt. Ltd and M/s. D S Developers Pvt. Ltd. Merged with the assessee company M/s. BDR Builders and Developers Pvt. Ltd had taken accommodation entries to the tune of Rs. 12,30,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Gulab Buildtech Pvt. Ltd., M/s Verma Buildtech Promoters Pvt. Ltd., M/s. Renu Builders Promoters Pvt. Ltd and M/s D S Developers Pvt. Ltd merged with the assessee company M/s. BDR Builders and Developers Pvt. Ltd as mentioned in the said letter sent by your good self. The same facts have already been clarified to you in our earlier reply filed dated 29.03.2019 in response to your letter dated 26.03.2019 asking the similar information. All the above said companies have been regularly filing their income tax returns and have been duly assessed to income tax. Please take it on your records that all the future correspondence related to the company through e-mail be sent on [email protected]. 8.2.1 The AO had recorded reasons for opening on 29.03.2019 and had obtained the approval of PCIT-2 Delhi on 30.03.2019. The notice u/s 148 was issued by the AO on 31.03.2019, which was e-mailed on the mail id [email protected] of the appellant on 31.03.2019 at 5:11 pm. 8.3 The appellant had asked for the reasons recorded for reopening of its case u/s 148 of the IT act 1961, which were supplied by the AO vide letter dated 26.08.2019. The appellant had filed letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Manoj Sethi could not explain the reasons for transferring these amounts to these merged companies it shows that these companies have taken accommodation entries by transferring their own funds in cash to the bank account of Shri Sethi and then again getting the same amounts through the above bank account. Another information has been received from the Inv. Wing New Delhi that a sum of Rs. 45,00,000/- was received in account No. 040001000011 with ICICI Bank Ltd., New Delhi Sunder Nagar branch owned by Shri Roop Kishore Madan during the assessment year 2012-13 which was immediately transferred to various entries. In spite of providing proper opportunities, Shri Madan could not explain the source of deposits in this account nor could he explain the purpose of transfer of the said amount to various entities. This amount was transferred to various entities including M/s Gulab Buildtech Pvt. Ltd. to whom a sum of Rs. 5,65,50,000/- was transferred on 03.02.2012. Since these companies have been merged with the assessee company M/s BDR Builders and Developers Pvt. Ltd., the accommodation entries received by them amounting in all to Rs. 17,95,50,000/- are to be assessed in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17,95,50,000/-. I have reason to believe that income to the tune of Rs. 17,95,50,000/- has escaped assessment for the Assessment Year 2012-13 and case needs be re-assessed as per the provisions of section 147 of the Act. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India. NIL 8. Findings of AO on true and full disclosure of the material facts necessary for assessment under provio to section 147. The assessee had failed to disclose fully and truly all material facts which were necessary for correct assessment of its income. 9. Applicability of the provisions of section 147/151 to the facts of the case. Assessment in this case was completed u/s. 143(3) vide order dated 26.03.2015 at income of Rs. 4,56,640/-. Subsequently, action u/s. 132 of the Act was carried out by the department in Himanshu Verma Group of cases on 29.03.2012 and on verification documents found and seized it was found that they were providing accommodation entries to the beneficiaries. The enquiries made further revealed that they had provided accommodation entries to M/s. Gulab Builtech Pvt. Ltd. merg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the case u/s 148, the appellant had raised the legal ground that assessment proceedings initiated and assessment orders passed on the basis of combined reasons recorded for the cases of more than one entity are bad in law and without jurisdiction. 9.1 The AO had mentioned in the reasons that Assessment in this case was completed us 143(3) vide order dated 26.03.2015 at income of Rs. 4,56,640/- In the assessment order it had again mentioned that Assessment in this case was completed u/s 143(3) vide order dated 26.03.2015 at income of Rs. 4,56,640/- Thereafter assessment was completed w/s 153A/143(3) of the act vide order dated 30.3.2016 at total income of Rs 47,97,827/- in respect of M/s BDR Builders Pvt. Limited and Rs 21,41,964/- in respect of M/s Renu Builders promoters totalling to Rs 69,39,791 The AO had started the assessed income with Total income already assessed us 153A/143(3) vide order dated 30.3.2016 Rs 69,39,791/-And made additions of Rs 17,95,00,000/- u/s 68 on account of alleged accommodation entries in the reasons recorded. 9.2 It is observed that the amalgamation of M/s Gulab Buildtech Pvt. Ltd. M/s Verma Buildtech Promoters Pvt. Ltd., M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be legally wrong, as the alleged transactions are not part of books of M/s BDR prior to 01.04.2012. Therefore, any addition u/s 68 in these entities had to in their individual cases prior to 01.04.2012 and not in the hands of pre-merged M/s BDR. Making such addition u/s 68 in the hands of M/s BDR will not be legally correct as, these transactions are not part of books of M/s BDR prior to 1.4.2012. In my opinion, the A.O. was required to record separate reasons, issue separate notice u/s 148 and to pass separate assessment orders relating to transactions of GBPL, VBPL and other amalgamated entities, however, the assessment proceedings will be in the name PAN of M/s BDR. E.g. in respect of transactions of VBPL, the A.O. was required to record reasons, issue notice u/s 148 and pass assessment order in the name of BDR in the matter of erstwhile VBPL . Similarly in respect of transactions of GBPL, the A.O. was required to record reason, issue notice u/s 148 and pass assessment order in the name of BDR - in the matter of erstwhile GBPL . The combined recording of reasons and passing of common assessment order on M/s BRD is not as per law. 10. Regarding the reasons recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en completed by the ITO ward 10(4), New Delhi on 26.03.2015. As per the copies of letters filed by the appellant w.r.t assessment completed on 26.03.2015, it is observed that: The appellant had made submissions of details of this share capital along with relevant confirmation of account of these companies, bank statement, share certificates etc during the assessment proceedings u/s 143(3) in the year 2015. There is letter in response to notice u/s 133(6) from M/s Saffpro Technologies Pvt. Ltd to the ITO Ward 10(4) dated 29.01.2015 received in the office of ITO on 02.02.2015 with following contents: Sub: Information u/s 133(6) of the Income Tax Act, 1961 in the case of M/S Gulab Buildtech P Ltd. It is respectfully submitted that we are in receipt of your letter bearing no. F. No. ITO/Ward-10(4)/2014-15 dated 21.01.2015. We have to submit as under: 1. That the company has invested in the equity share capital of the company and has purchased 1,00,000 shares of Rs. 10/- each at a premium of Rs. 490/- each. 2. That the company has made payment to the company during the financial year 2011-12 for the purchase of above said equity shares of the company. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The change of opinion cannot be a valid ground for reopening of assessment proceedings u/s 148 of the IT Act 1961. 10.2 The second ground taken by the AO for reopening was regarding the entries of Rs. 5.655 cr received in M/s. GBPL from Mr. Roop Kishore Madan prop. Rhea Distribution Company. 10.2.1 There is no material or statement referred by the investigation wing in the information forwarded on 26.3.2019 Wherein it transpires, on the basis of material on record, that Sh. Roop Kishore madan is an entry operator or There is no admission in any statement made by Sh. Roop Kishore Madan that he is an entry operator or he had given entries to the appellant against any receipt of cash. There is no material on record that the appellant had made any unaccounted cash payments to Mr. Roop Kishore madan. The appellant had never been called by the Investigation Wing to explain the transactions with Mr. Roop Kishore madan. 10.2.2 During the course of appellate proceedings, the appellant had submitted the copy of assessment order u/s 143(3) of Sh. Roop Kishore Madan for AY 2012- 13 completed on 27.3.2015 (as verified from the assessment rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order that Sh. Roop Kishore madan is an entry operator and the beneficiary of its transactions should be brought to tax. There is neither any such finding in the assessment order completed on 27.3.2015 nor in the investigation report of the wing that Sh. Roop Kishore madan is an entry operator. From the copy of report of the investigation wing, it appears that there are even no inquiries made by the investigation wing with the appellant (even confirmed by the appellant) which can lead to the conclusion that the transactions of the appellant with Sh. Roop Kishore madan represent accommodation entries. It is further submitted that Sh. Roop Kishore madan is an existing assessee filing return of income in high income bracket. 10.2.6 Without prejudice to it, regarding these transactions, the appellant had submitted that M/s GBPL had continued transactions with Sh. Roop Kishore Madan Prop. M/s Rhea Distribution during the year under consideration and in the subsequent years. It is observed from the ledger account of M/s Rhea Distribution Company in the books of M/s GBPL that the appellant had received total amount of Rs. 8.685 cr. during the year from M/s Rhea Distribution Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scussion made above, the addition of Rs 5.655Cr. made by the AO on account of payments received from Mr. Roop Kishor madan prop. M/s Rhea Distribution Company is not sustainable even on merit. 10.3 The third issue raised by the AO is regarding the entries of Rs. 5.30 cr. received in M/s. VBPL and other merged entities from Mr Manoj Sethi. 10.3.1 There is no material or statement referred by the Investigation Wing in the information forwarded vide different letters: Wherein it transpires, on the basis of material on record, that Mr Manoj Sethi is an entry operator or There is no admission in any statement made by Mr Manoj Sethi that he is an entry operator or he had given entries to the appellant against any receipt of cash. There is no material on record that the appellant had made any unaccounted cash payments to Mr Manoj Sethi. The appellant had never been called by the investigation to explain the transactions with Mr Manoj Sethi. 10.3.2 It is further observed that Mr Manoj Sethi is an existing assessee and had filed the returned income of AY 2012-13 at Rs 2,93,79,060/-. In his assessment for AY 2012-13 completed u/s 143(3) on 31.3.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit in the bank accounts of Sh. Manoj Sethi and the subsequent transfer of this money to various entities. As per the investigation wing, Mr Manoj Sethi could not explain the source of deposits, nature purpose of all the transactions and identity/ genuineness/ creditworthiness of these transactions. It is further observed that the AO had neither done any enquiry/investigation w.r.t. these entries received from Mr Manoj Sethi nor referred to any adverse statement of Mr Manoj Sethi against the appellant or his bank account transactions nor analysed appreciated the documents submitted by the appellant during the assessment proceedings w.r.t these transactions. The AO had presumed these entries of Rs 5.3 cr received from Mr Manoj Sethi as accommodation entries just on the suspicion of investigation wing. The AO had neither brought any material on record to prove that Mr. Manoj Sethi is an entry operator nor that these are really accommodation entries received by M/s VBPL and other merged entities. 10.3.7 Without prejudice to it, the appellant had claimed that there were loans given to Mr Manoj Sethi from three group companies (now merged with the appellant) of the appellant, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30.01.2010 HDFCH1003 0618294 HDFC Bank 50,00,000/- 26.05.2011 UTIBH1114 6075100 HDFC Bank 35,00,000/- 02.03.2010 HDFCH1006 1987657 HDFC Bank 1,80,00,000/- 18.08.2011 Ch No. 578243 HDFC Bank 1,95,00,000/- Total 2,30,00,000/- 2,30,00,000/- The outstanding loans receivable from Mr Manoj Sethi in these entities are available from the audited balance sheets of these three entities as on 31.3.2011. The amounts received by these entities in FY 2011-12 are verifiable from the bank statements of FY 2011-12. It is observed that the AO had added back the amount of Rs 5.30 cr received in M/s VBPL other entities, whereas the total amount of transactions with these entities are at Rs. 11.25 Cr. The AO had not even bothered to look in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th high returned income, whose assessment for AY 2012-13 had been completed u/s 143(3) after taking into account all the bank transactions in March 2015. The primary evidences submitted by the appellant regarding these loan transactions proving identity of creditor, genuineness of transaction and creditworthiness of the creditor had not been rebutted by the AO with any adverse evidence on record in reassessment made in Dec., 2019. In these facts circumstances of the case, it is held that the amounts received by the above three merged entities from Mr Manoj Sethi are not accommodation entries, but are the repayment of loan amounts by Mr. Manoj Sethi, which had been advanced by these entities in earlier year. Without prejudice to it, once an existing credible assessee had given confirmation of amounts paid by him to any entity, any action on account allegation of any credits in his accounts should be taken in his case only and the same had been done in the assessment u/s 143(3) of Sh. Manoj sethi in March, 2015. Once the unexplained amounts in the account of Mr Manoj Sethi had been taxed in his hands, the amounts transferred to various entities from these accounts are application o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foundation on which the AO had interpreted these entities as Entry Operators . The reopening cannot be done on the basis of suspicion but should be based on prima facie facts of belief based on tangible material for escapement of income . The appellant had disclosed all these transactions in the audited accounts and these have even been assessed in the assessment made u/s 143(3) on 27.3.2015 in M/s GBPL. As per the assessment order, assessment u/s 153A had been completed in M/S BDR M/s RBPL (as merged entity) on 30.3.2016. 12. Conclusion: On the basis of above discussion, following observations are made w.r.t reopening of assessment for the year under consideration u/s 148. 12.1 The first reason given for reopening u/s 148 was that M/s GBPL (now merged with appellant w.e.f.1.4.2012) had received entries of Rs. 7 crores from entry operator Mr. Himanshu Verma. 12.1.1 As discussed in the above para 10.1.2, this information was available with the AO of M/s GBPL much before passing the order u/s 143(3) on 26.03.2015. The AO had concluded the assessment u/s 143(3) after considering this information and making requisite enquiry on this issue. There are no new facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution Company were also verified to be genuine. (iii) The Investigation Wing had suggested reopening in the case of both these entities on the basis of same information in STR which had already been considered in the AIR received by the AO's of both these entities. This fact is even evident from the reassessment of these entities made in 2019, wherein, no further additions except the additions as made in the original order u/s 143(3) in March, 2015 were reiterated. Therefore, the information forwarded by the Investigation Wing with respect to these entities was same as considered in the assessment of these two entities made u/s 143(3) in March, 2015 itself. There is no allegation in the assessment made u/s 143(3) made in the March, 2015 or in the reassessment made in the Dec, 2019 in both these two entities that they are providing accommodation entries to anyone. (iv) The Investigation Wing had suggested reopening in the case of both these entities and advised the AO to consider reopening of the case of the appellant also as successor of merged group entities of the appellant. The reopening in the case of these two entities had been suggested by the Investigation Win ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of these parties show transactions of more amounts with these two entities than those worked by Investigation Wing same worked amounts added by the AO in the assessment order. It is very much evident that the AO had not applied his mind and based his every action merely on the report of the Investigation Wing. 12.4 The legal position on various relevant issues arising in the 148 proceedings is as under: (i) In the case of Pr. CIT v Meenakshi Overseas Pvt. Ltd. (2017) (5) TMI 1428, Delhi, reopening u/s 148 was made on the basis of information received form investigation wing. The Hon'ble High Court held that such reopening which was based merely on the information received from Investigation. Wing without independent application of mind by A.O. amounted to borrowed satisfaction and such reopening was liable to be quashed. The relevant portion of the judgment is reproduced as under:- 31. In Commissioner of Income Tax v. G G Pharma (supra) there was a similar instance of reopening of assessment by the AO based on the Information received from the DIT (1). There again the details of the entry provided were set out in the 'reasons to belleve'. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. 36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no Independent application of mind by the AO to the tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'. The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment. 37. For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYS in question does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act. 13. In view of the said decision, the Court has no hesitation in concluding in the present case that the reasons recorded by the AO for reopening the assessment under Section 147 of the Act do not meet the requirement of the law. The ITAT was, therefore, perfectly justified in confirming the order of the CIT (A) and holding the reopening of the assessment to be bad in law. 14. The question framed is, accordingly, answered in the negative i.e. in favour of the Assessee and against the Revenue. (iii) In the case of Pr. CIT RMG Polyvinyl (I) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law. 16. No substantial question of law arises from the impugned order of the ITAT. (iv) In the case of New Delhi Television Limited vs DCIT (2020) (4) TMI 133 Supreme Court, the Hon'ble apex court held as under: - Question No.2 24. Coming to the second question as to whether there was failure on the part of the assessee to make a full and true disclosure of all the relevant facts. The case of the assessee is that it had disclosed all facts which were required to be disclosed 25. The revenue has placed reliance on certain complaints made by the minority shareholders and it is alleged that those complaints reveal that the assessee was indulging in round-tripping of its funds. According to the revenue the material disclosed in these complaints clearly shows that the assessee is guilty of creating a network of shell companies with a view to transfer its untaxed income in India to entities abroad and then bring it back to India thereby avoiding taxation. We make it clear that we are not going into this aspect of the matter because those complaints have not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the assessing officer. The assessing officer knew who were the entities who had subscribed to other convertible bonds and in other proceedings relating to the subsidiaries the same assessing officer had knowledge of addresses and the consideration paid by each of the bondholders as is apparent from assessment orders dated 03.08.2012 passed in the cases of M/s. NDTV Labs Ltd. and M/s. NDTV Lifestyle Ltd. Therefore, in our opinion there was full and true disclosure of all material facts necessary for its assessment by the assessee. 29. The fact that stepup coupon bonds for US$ 100 million were issued by NNPLC was disclosed; who were the entities which subscribed to the bonds was disclosed; and the fact that the bonds were discounted at a lower rate was also disclosed before the assessment wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y laid down by a Constitution Bench of this Court in Calcutta Discount Co. Ltd. vs. Incometax Officer, Companies District 1, Calcutta and Another AIR 1961 SC 372, wherein it was held as follows: (8)... The words used are omission or failure to disclose fully and truly all material facts necessary for his assessment for that year . It postulates a duty on every assessee to disclose fully and truly all material facts necessary for his assessment. What facts. are material, and necessary for assessment will differ from case to case. In every assessment proceeding, the assessing authority will, for the purpose of computing or determining the proper tax due from an assessee, require to know all the facts which help him in coming to the correct conclusion. From the primary facts in his possession, whether on disclosure by the assessee, or discovered by him on the basis of the facts disclosed, or otherwise assessing authority has to draw inferences as regards certain -the other facts, and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee- to tell the assessing authority what inferences - whether of facts or law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. (11) If from primary facts more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? A careful analysis of this judgment indicates that the Constitution Bench held that it is the duty of the assessee to disclose full and truly all material facts which it termed as primary facts. Nondisclosure of other facts which may be termed as secondary facts is not necessary. In light of the above law, we shall deal with the facts of the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e permitted to blow hot and cold at the same time. 35. We are clearly of the view that the revenue in view of its counter affidavit before the High Court that it was not relying upon the nondisclosure of facts by the assessee could not have been permitted to orally urge the same. Even otherwise we find that the assessee had fully and truly disclosed all material facts necessary for its assessment and, therefore, the revenue cannot take benefit of the extended period of limitation of 6 years. We answer Question No.2 accordingly. (v) The head note of decision in the case of CIT vs Usha International Limited 2012(9) TMI 767- Delhi High Court is as under: - Change of opinion - Whether assessment proceedings can be validly reopened under Section 147 of the Act, even within four year, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment - Held that:- As decided in CIT Versus Kelvinator Of India Limited [2002 (4) TMI 37 DELHI HIGH COURT] an assessment order passed undersection 143(3) must be presumed to be one passed after full scrutiny and formation of opinion on the points ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , if the original assessment was made u/s 143(3), thus the issue is concluded by the judgment of the Full Bench of this court in Kelvinator (supra). So long as the assessee has furnished full and true particulars at the time of original assessment and so long as the assessment order is framed under section 143(3) it matters little that the assessing officer did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. Again the answer to this question stands concluded by the judgment of the Full Bench of this court in Kelvinator (supra). It is that section 114(e) of the Evidence Act can be applied to an assessment order framed under section 143(3) provided that there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. 12.5 In these facts circumstances of the case and the legal position cited above, 12.5.1 It is held as under: (a) The AO should have recorded the reasons for reopening in each of merged entities where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions total transactions in two entities are different in satisfaction (in addition as well) than as per the actual transaction amounts as provided by the appellant during assessment as well as appellate proceedings. The finding of Investigation wing was that Shri Manoj Sethi could not explain the reasons for transferring these amounts to these merged companies and the conclusion drawn by the AO is it shows that these companies have taken accommodation entries by transferring their own funds in cash to the bank account of Shri Sethi and then again getting the same amounts through the above bank account. This conclusion is without any tangible material on record. (iii) The AO had mentioned in para 9 that In another case of Shri Roop Kishore Madan it was found that accommodation entries to the tune of Rs. 5,65,50,000/- were given by Shri Madan from his account No. 040001000011 maintained with ICICI Bank Ltd, Sunder Nagar Branch, New Delhi to M/s. Gulab Buildtech Pvt. Ltd on 03.02.2012 Here also the conclusion drawn by the AO that Sh. Madan had provided accommodation entries is not based on any tangible material. The amount of transactions m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on entries on the basis of report of investigation wing, which is based on far fetched suspicion only. Even the two notices issued u/s 133(6) by the AO, at the fag end of time barring date, to form his independent opinion was merely a paper formality, as it did not mention the name of these alleged entities and nature of transactions of merged entities of the appellant, with these two entities, thus denying the appellant proper opportunity to respond. The merged entities of the appellant cannot be held responsible for incomplete submission of details by these two entities before investigation wing (which has ultimate powers to get the information), particularly when the assessment of these two entities had been completed u/s 143(3) in the past (March 2015) considering their all bank transactions. Non submission of details cannot automatically lead to the conclusion that these entities are entry operators, particularly when these are filing high income returns and the investigation wing is the ultimate wing of department having all powers to get any information. The suspicion cannot be valid reason for reopening assessment u/s 148. There must be some prima-facie facts or informatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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