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TMI Blog2023 (12) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... n respect of the contents mentioned therein, we are in agreement with the facts narrated by AO never disclosed the details of layers through which alleged money has been routed into the bank account of the assessee. AO has also never shared the information in respect of documentary evidence for the alleged transactions of accommodation entry. We also do not find conduct of any examination of the allegd layering of the transaction to unearth sequencing of the flow of money alleged by the Ld. AO escaping assessment. We also find ourselves in agreement with the contention of the Ld. Counsel that there is nothing specific stated in the reasons to believe as to the nature of the transaction of accommodation entry as alleged by the Ld. AO as to whether it is an income or an expense or an allowance or share capital or loan etc. Before the Ld. AO, assessee has evidently demonstrated by furnishing its books of account and bank statement that there is no such transaction or such amount of money which has routed into the books of the assessee or into the bank account from the alleged accommodation entry provider Mr. Sandeep Roy, proprietor of M/s. Sarika Trding Co. AO has merely on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal, Accountant Member For the Appellant : Shri S. Jhajharia, A.R For the Respondent : Shri Abhijit Kundu, CIT, DR ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of Ld. CIT(A), Kolkata-21 vide order no. ITBA/APL/S/250/2022- 23/1051004013(1) dated 20.03.2023 passed against the assessment order by ITO, Ward-12(4), Kolkata u/s.. 147/143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act ), dated 16.12.2019, for AY 2012-13. 2. Grounds raised by the assessee are reproduced as under: 1. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in upholding the jurisdiction assumed by the Ld. AO in respect of the proceedings initiated by notice u/s. 148 and the consequential order u/s..147 and in view of the facts and in the circumstances the action of the Ld. CIT(A) in affirming the action of the Ld. AO in such respect is bad in law and it may be held accordingly. 2. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in upholding the validity of the notice u/s. 148 and the consequential proceedings u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to Grounds No. 6 7 above, the appellant had not received any sum from such person (i.e. Sandeep Roy, Prop. Sarika Trading Co.) for any such amount or even any other sum and hence the allegation and consequential addition of Rs. 2,48,50,000/- is bad in law and addition so made may kindly be deleted accordingly. 9. For that in view of the facts and in the circumstances, the Ld. CIT(A) was wholly unjustified in affirming the action of the Ld. AO in charging interest of Rs. 79,46,820/- and Rs. 24,63,51,420/- u/s 234A 234B of the Act respectively and in view of the facts and in the circumstances the AO may kindly be directed accordingly to delete the same. Without prejudice, interest u/s 234B is chargeable only upto date of regular assessment and hence it may be held accordingly. 10. For that your petitioner craves the right to put additional grounds and/or to alter/ amend/ modify the present grounds at the time of hearing. 3. There are several events which took place prior to passing of the impugned assessment order and the appellate proceeding thereon. To have a bird s eye views of these several events, chronology of the same is tabulated as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing premium and nature of transactions, identity of investor and its genuineness. The assessment proceedings may be initiated at the earliest and to be completed without waiting time barring date. The A.O must provide Sufficient opportunity of being heard to the assessee in order to meet natural justice, equity and fairness. 3.2. In compliance to the directions given u/s 263 of the Act, ld. AO carried out the assessment proceedings and after examining the complete details of the share capital and share premium totalling to Rs. 79.14 Cr., was satisfied that the assessee has duly explained the source of share capital and share premium and there is no scope of invoking the provisions of Section 68 of the Act. Accordingly, vide order dated 30.12.2016 assessed the income at Rs. 1,17,342/-. 3.4. Again, second round of revisionary proceedings u/s 263 of the Act were commenced by ld. Pr. CIT calling for the assessment records forming part of the assessment order dated 30.12.2016 by show cause notice dated 16.01.2019 raising the following issues: (i) The A.O passed the order without carrying out detailed investigation/ verification/ independent enquiry regarding identity, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he requirement of the order being erroneous and prejudicial to the interest of the revenue within the meaning and scope of Section 263 of the Income Tax Act, 1961 7.1. The afore stated decisions postulate that when the officer is expected to make an inquiry of a particular item of income and if he does not make an inquiry as expected, that would be a ground for the Commissioner to interfere with the order passed by the Officer since such an order passed by the Officer is erroneous and prejudicial to the interests of the Revenue (K.A. Ramaswamy Chettiar V. CIT, (1996) 220 ITR 657). 7.2. In my considered opinion, this is a case of lack of enquiry on the part of the AO. The decision on this issue could be taken only after examining and verifying the facts / submission of the AR on this score. Not collecting the full facts and not taking enquiry to logical end which could enable AO to take decision based on the totality of facts makes this order erroneous in so far as prejudicial to the interest of revenue After having considered the position of law and facts and circumstances of the instant case, I am of the considered opinion that the assessment order passed by the A.O is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses are bogus or in the nature of accommodation entries. We also find that ld. Pr. CIT has merely given directions but for coming to this conclusion he ought to have first discussed that what details remained to be called for by ld. AO. Ld. Pr. CIT ought to have conducted the preliminary enquiry and had found some discrepancies or some glaring fact which could indicate that the alleged share capital and share premium are bogus in nature. In the first round of revisionary proceedings, ld. Pr. CIT/ld. CIT(A) has given detailed directions. Even though the assessee filed complete details in the first round of assessment proceedings but again in the second round of proceedings carried out subsequent to the order u/s 263 of the Act again the details have been filed. It has been properly demonstrated to the satisfaction of ld. AO that all the share applicants have sufficient net worth to make the investment in the equity share capital of the assessee company. The assessee has also satisfied ld. AO with complete documentary evidences that identity of each of the share applicants cannot be doubted as they are registered with Registrar of Companies and are regularly filing income tax return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ests of the Revenue. We, therefore quash the impugned order u/s 263 of the Act dated 12.03.2019 and restore the assessment order u/s 143(3) r.w.s. 263 of the Act dated 30.12.2016. Thus, all the grounds raised by the assessee are allowed. 6. Meanwhile, a reassessment proceeding u/s. 147 was initiated by issuing notice u/s. 148 on 26.03.2019. It is important to note at this juncture that second revision order u/s. 263 had already been passed on 12.03.2019 setting aside the first effect giving assessment order u/s. 263/143(3) dated 30.12.2016. Thus, an effect giving assessment proceeding was already lying pending before the Ld. AO pursuant to second revision order on 12.03.2019. It is also important to note the date of passing of second effect giving assessment order u/s. 263/144 which is dated 06.12.2019 and immediately after ten days of passing this order, the same incumbent AO has passed the reassessment order u/s. 143(3) read with 147 on 16.12.2019. In the impugned reassessment order, Ld. AO has taken note of this fact of passing of an order u/s. 263/144 on 06.12.2019, determining total income at Rs. 79,15,95,340/-. 6.1. In the impugned assessment order Ld. AO observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in lakhs were deposited in the bank account of M/s. Sarika Trading Co. and routed through related accounts and finally remitted back through RTGS to the assessee. The series of transactions didn t seem to be normal transactions and there was no business rationale and financial logic behind that. This could not be verified from the return of income of the assessee as the assessee did not file its return or income. Further, it was also could not be verified from the related bank statements of the assessee. Accordingly, proceedings u/s. 147 of I. T. Act was initiated against the assessee as stated above. 6.3. Ld. AO thus completed the reassessment by taking the already assessed income of Rs. 79,15,95,340/- vide second effect giving assessment order u/s. 263/144 dated 06.12.2019 and added to it Rs. 2,48,50,000/- in respect of accommodation entry as unaccounted income, thereby assessing the total income at Rs. 81,64,45,340/-. 6.4. Aggrieved, assessee went in appeal before the Ld. CIT(A), who confirmed the addition so made. Aggrieved, assessee is now in appeal before the Tribunal. 7. Before us, Ld. Counsel elaborated on the chronology of several events tabulated above to po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to demonstrate various layers through which the money has ultimately reached the hands of the assessee from or through M/s. Sarika Trading Co. According to the Ld. Counsel, if the general modus operandi of the said entry provider Mr. Sandeep Roy is taken as the basis for forming reasons to believe that income has escaped assessment then it only tantamount to exercise of arbitrary powers which are without sanction of law. According to him, in the reasons to believe, Ld. AO has not named any one while referring to large number of dubious account, fictitious/fake concerns. The reasons also do not mention anything about entry operator or any statement of such borrower recorded in any of the proceeding whereby involvement of the assessee has been identified. He further submitted that Ld. AO has not even mentioned the nature of alleged accommodation entry as to whether it is income or expenses or allowance or whether it is in the nature of share capital or loan. This reflects nothing but non-application of mind by the Ld. AO. According to Ld. Counsel, Ld. AO has failed to establish the live link between the information received and escapement of income from assessment in the hands of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ited Balance Sheet as at 31.03.2012. From this Balance Sheet, it was pointed out that there is a change in the shareholders fund including share capital, reserves and surplus since share capital including share premium was raised by the assessee during the year. However, there is no change in the short term borrowings of Rs. 13,90,000/- when compared with the immediately preceding year. This figure is unchanged. Apart from these borrowings, there are no other borrowings by the assessee reported in its audited Balance sheet. Further, total revenue from operations during the year as reported in the P L Statement is of Rs. 1,23,960/- with the net result of loss for the year of Rs. 74,252/-. Accordingly, the accommodation entry alleged by the Ld. AO of Rs. 2,48,50,000/- received by the assessee during the year cannot be linked to any of the three components in the audited financial statements of the assessee. The borrowings are unchanged. The revenue is not of that magnitude and the share capital and share premium has already been exhaustively examined and verified as well as accepted in the first effect giving assessment order passed u/s. 263/143(3) dated 30.12.2016. 7.6. For eas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alaxmi Electronics, etc. The credits so received are immediately transferred to various current deposit accounts with the branch i.e. M/s. Luckydhan Distributors, M/s. Salasar Garments, M/s. Dhara Suppliers, M/s. Fairlawn Commercial etc. There is no common business relation found as per branch s observations in all the above accounts ence it seems that the huge funds are just routed from one account to another without any economic rationale. Besides that there is lrge value round amount cash deposits in the account followed by debits by way of transfer to above mentioned C/D accounts with the same branch. Most of the deposits are just below Rs. 10 lacs which indicates the intention of avoiding reporting to the regulartory authority. During current FY 2012-13 the credit debit turnover in this account is Rs. 4.73 crores Rs. 4.72 crores. Nearly 40% of the total credit turnover is by way of cash deposits. All these transactions without any economic rationale creates the ground of suspiciion. Considering the same as suspicious, we are filing this STR. Details of enquiries made: The matter has been investigated. Notices u/s. 131 was issued to the banks for obtaining ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding before him to give effect to the set aside revisionary order. However, with this pendency in hand, he initiated another proceeding by taking note of information received from the Investigation Wing to record the reasons to believe and issue notice u/s. 148. It is important to note that within a period of ten days, the same incumbent AO has passed two assessment orders, first on 06.12.2019 pursuant to revisionary order u/s. 263 and the second one which is the impugned reassessment order u/s. 147/143(3) dated 16.12.2019. Certainly such an act by the Ld. AO of having two parallel proceedings for the same assessment year is contrary to the decision taken by Hon ble Supreme Court in the cases of S. M. Overseas Pvt. Ltd. (supra) and Trustees of HEH Nizam Supplemental Family Trust (supra). Accordingly, notice issued u/s. 148 during the pendency of set aside assessment proceeding and subsequent reassessment order passed is bad in law. 9.5. On the merits of the case, it is an undisputed fact that there is no change in short term borrowings and the revenue from operations is a small/meagre amount of Rs. 1,23,960/-. Thus, the alleged amount of accommodation entry received by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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