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TMI Blog2024 (2) TMI 280X X X X Extracts X X X X X X X X Extracts X X X X ..... the reassessment proceedings for the Assessment Year 2015-2016 under Section 147 read with Section 144 read with Section 144B of the Income-tax Act, 1961; (b) For quashing the Notice of Demand under Section 156 of the Income-Tax Act, 1961, dated 31.03.2022 bearing no. ITBA/AST/S/156/2021-22/1042313074(1) pertaining to Assessment Year 2015- 2016; (c) For quashing the Notice for Penalty under Section 274 read with Section 271(1)(c) of the Income-Tax Act, 1961, dated 31.03.2022 bearing ITBA/PNL/S/271(1)(c)/2021-22/1042312815(1) pertaining to Assessment Year 2015-2016; (d) For a direction upon the Respondents to produce entire records pertaining to the reassessment proceedings of the Petitioner for the Assessment Year 2015-2016; (e) For a declaration that the entire reassessment proceedings have been conducted in gross violation of Principles of Natural Justice and also that the entire reassessment proceedings including the Impugned Order and the consequent Demand and Penalty Notices are in contravention of the Income-Tax Act, 1961, including Sections 144, 144B, 147, 148, 151, 156 and 271(1)(c); (f) For issuance of any other appropriate writ(s) or direction(s) or order(s) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning were supplied by the Revenue. The reason provided therein for reopening was: "Information received during course of action in case of one Ajay Kumar Sharma that the same was involved in providing accommodation entry through his bank account to certain beneficiaries. This was also confirmed in his statement on oath taken. The copy of the bank Statement reveals that the assessee has done bogus financial transactions worth Rs15,54,42,417/- with Shri Ajay Kumar Sharma." (Annexure 3). After writing multiple letters to the Revenue during 19.10.2021 and 30.12.2021, Revenue replied via notice under Section 142(1) stating that the reasons have already been provided i.e., details about the alleged transaction with Ajay Kumar Sharma. Moreover, the Revenue has refused to provide the copy of the documents to petitioner underlying 'reasons to believe' and hence petitioner was denied an opportunity to file effective and proper objection to reassessment proceedings. The further case of the petitioner is that the objections preferred by the petitioner to reassessment were rejected by the Revenue in vague and cryptic order dated 16.03.2022 at Annexure 10. Further, on 19.03.2022, a notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Respondent offends Article 14 of the Constitution of India and is unreasonable, unfair and vitiated in law. The recorded reason/impugned Assessment Order is silent under which provision of the Act the additions are sought to be made. The reasons cannot be supplemented by assessment Order or Affidavit. 6. On the question of maintainability, learned counsel submitted that the writ is maintainable in view of the judgment rendered by the Hon'ble Apex Court in the following judgments; 1. Calcutta Discount Co. Ltd. Vs. ITO reported in [1961] 41 ITR 191 (SC) 2. CIT Vs. A. Raman & Co. reported in [1968] 67 ITR 11 (SC) 3. ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC) 4. CIV Vs. Chhabil Dass Agarwal reported in (2014) 1 SCC 603 5. Magadh Sugar & Energy Ltd. Vs. State of Bihar reported in 2021 SCC Online SC 801 7. Per contra, Mr. R.N. Sahay, learned S.C. supported the impugned orders and has firstly contended that the petitioner approached this court directly where an alternate remedy to challenge the assessment order lies before statutory forum i.e., Commissioner (Appeals) under Section 246A of the Income Tax Act, 1961 and thus the writ petition should be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rported reasonable belief is formed that the Petitioner has done "bogus financial transaction" with said third party during the AY 2015-16. 9. In the instant case it is not the case of the department that Sri Ajay Kumar Sharma took name of the Petitioner that he has provided accommodation entry to him. As per the recorded reasons, Sri Sharma has stated that he provided accommodation entries to "certain persons"; however, the name of the Petitioner has never been taken by him. The date on which statement of Sri Sharma is recorded is not known to Assessing Officer and also whether it relates to the assessment year in question is also not known. Further, the date of statement of Sri Sharma is neither mentioned in the recorded reasons nor in the show cause notice nor in the Assessment Order. The Counter Affidavit is also silent, hence, on its basis no reasonable belief could be formed that the said statement relates to the assessment year in question in which the income has escaped the assessment. In the absence of date of statement, it is far-fetched to assume that it relates to the assessment year in question as held in ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unreasonable that the confession was made a few weeks or months before the report. To infer from the confession that it relates to the period from April 01, 1957 to March 31, 1958 and that it pertains to the loan shown to have been advanced to the assessee, in our opinion would be far-fetched." Further, in the case of PCIT Vs. M/s Coal Sale Co. Ltd., reported in 2022-VIL-185-Cal-DT, the Calcutta High Court while dealing similar situations held in the following lines- "Further, the CIT(A) held that ...................................... The tribunal pointed out that the investigation wing on the strength of the admission made by Shri Jindal, jumped to the conclusion that since the assessee had transacted with M/s. Bridge & Building Construction Co. Ltd., the assessee is a beneficiary of bogus bills. The tribunal pointed out that in the reasons recorded for reopening, nowhere the assessee's name has been specifically mentioned by Shri Jindal nor there is anything adverse against the assessee. The assessee was found to have transacted with the said company through banking channel and faulted the assessing officer for reopening the assessment based on the statement of Shri Jindal w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows- "4.4 Bank accounts show that the assessee is involved in providing accommodation entries for bills of purchase Bank account show entries for transactions with the assessee company which during the year are net Rs.15,54,42,417/- Above facts show that the assessee could not substantiate financial transaction worth Rs.15,54,42,417/-with Shri Ajay kumar sharma by furnishing relevant documents. Also, the bank statements provided were revealed that the assessee has done financial transaction worth Rs.15,54,42,417/- with Shri Ajay Kumar Sharma. In view of these facts, it can be concluded that the assessee has done bogus financial transaction worth Rs.15,54,42,417/- in form of accommodation entry with Shri Ajay Kumar Sharma. Hence, in view of non-submission of any details amount of Rs.15,54,42,417/- is added to the total income of the assessee. Penalty proceeding u/s. 271(1)(c) are initiated for concealment of income." By bare perusal of the recorded reasons and aforesaid part of the impugned order it could be noticed that the recorded reasons have been supplemented by using the word "for bill purchase" which means amount has flown-out of books, not a case receipt of accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Supreme Court that "It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purposes of the section. To this limited extent the action of the Income Tax Officer in respect of income escaping assessment is open to challenge in the court of law." 15. Way back in the case of Ganga Saran & Sons P. Ltd. Vs. ITO reported in [1981] 130 ITR 1 (SC) it has been held by the Hon'ble Apex Court that "the important words under Section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words, it must be based on reasons which are relevant and material. In the said case it is further held by the Hon'ble Supreme Court that "The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the ITO in coming to the belief but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n as laid down by the Hon'ble Supreme Court in the case of ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC).". In the case of Raunaq and Co. Pvt. Ltd. Vs. ITO reported in [1986] 158 ITR 30 (Del), the Delhi High Court following the judgment of the Hon'ble Apex Court in the case of ITO Vs. Lakhmani Mewal Das reported in [1976] 103 ITR 437 (SC) held that "that the persons are name-lenders and that the transactions on that count are bogus, there is no further material or information available with the income tax officer when he formed the belief that. There is no indication that the name-lending was in connection with loans involved in the assessment under consideration, therefore the belief of the income tax officer was based on no material.............There is therefore no direct nexus or live link between the material which was before the income tax officer and the formation of belief of the income tax officer that the income has escaped assessment. In the absence of a direct nexus or live link, that will not constitute a relevant material for the purpose of re-opening of the assessment." 17. It further transpires that the impugned Assessment Order is passed on pure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns is necessary in both administrative and quasi-judicial orders affecting rights of parties prejudicially. Reasons give appearance that justice is being done, to prevent arbitrary exercise of power and to ensure that discretion has been exercised on relevant grounds and to facilitate judicial review and accountability and transparency. The reasons in support of decisions must be cogent, clear and succinct. Pretence of reasons or "rubber-stamp reasons" is not to be equated with a valid decision-making process. 18. As stated herein above that the recorded reason/impugned Assessment Order is silent under which provision of the Act the additions are sought to be made. It is well settled that the reasons cannot be supplemented by assessment Order or Affidavit. The recorded reason is totally silent whether the amount sought to be taxed is 'income' of the Petitioner and whether the addition is sought to be made on account of Cash Credit (Section 68), Unexplained Investments (Section 69), Unexplained Money (Section 69A), Amount of Investment, etc. not fully disclosed in books of account (Section 69B), Unexplained Expenditure, etc. (Section 69C). The requirement of each of the aforesaid s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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