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TMI Blog2024 (5) TMI 950X X X X Extracts X X X X X X X X Extracts X X X X ..... very same AO. Thus in our considered view, A.O. has simply accepted the information given by DGIT which is reproduced in the reasons recorded, he has not formulated his own reason to belief that any income chargeable to tax has escaped assessment. A.O. ought to have seen the double entry of the loan transactions with bank entry details and then formulated his own reason to belief but simply followed the information given by DGIT, which is nothing but borrowed satisfaction and is against the provision of Section 147 of the Act. Therefore the same is liable to be quashed. As decided in Varshaben Sanatbhai Patgel [ 2015 (11) TMI 934 - GUJARAT HIGH COURT] held that in the absence of any details available on record, AO could not initiate assessment proceedings merely on the basis of information supplied by DGIT (Inv.) that assessee had made certain bogus purchases. Thus reopening of assessment itself is bad in law for having not recorded independent reason to believe that income has escaped assessment. Decided in favour of assessee. - SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER For the Appellant : Shri Parimalsinh B. Parmar Shri Kushal Fofaria, AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in its balance sheet under the head long term borrowings clearly shown the loans and advances from (i) related parties of Rs. 28,50,000/- and (ii) from other corporate bodies of Rs. 50,00,000/-. Thus there is no any new information available to the Assessing Officer for reopening the above assessment. The above objection was considered by the Assessing Officer but disposed of the same vide order dated 05.03.2022 stating that the assessee failed to file Return of Income in response to 148 notice within 30 days of receipt of the same. But whereas he filed the Return of Income nine months thereafter and the A.O. issued show cause notice dated 11.02.2022 on merit of the case. Therefore as per the direction given by the Hon ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (2003) 259 ITR 19 and Jurisdictional High Court in the case of Sahakari Khand Udyog Mandal Ltd. rejected the objections filed by the assessee. As the assessee failed to reply to the above show cause notice, the Assessing Officer treated the entire loan transaction as bogus unsecured loans and added Rs. 1,00,00,224/- as the income of the assessee and demanded tax thereon. 3. Aggrieved against the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the facts and circumstances of the appellant's case, the Ld CIT (A) has erred in upholding the addition u's. 68 made by the Assessing Officer to the extent of Rs. 50,00,000/- 2.1. Having regard to the facts and circumstances of the appellant's case, the Ld CIT (A) ought to have appreciated, in the present case that there was no justification for making addition uls. 68 for the following reasons- (a) The identity of the creditor was established in the facts of the case in as much as name and address of the creditor and PAN was available. (b) The genuineness of transaction is established in as much as the amount was received by banking channel and the details of the bank account of the creditor, their cheque number by which the amount was received was available. (c) The fact that the amount was received by banking channel established that the creditor has source for giving loan to the appellant and the appellant could not have details of such source. (d) This was the first year of incorporation of the appellant and in the circumstances, the appellant could not have generated any unaccounted funds which would result into source of loan received from the creditor. (e) Ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged u/s. 68 of the Act. Similarly, the assessee has not filed the original return within the due date prescribed u/s. 139(1) of the Act and also filed the Return of Income nine months after the issuance of 148 notice. Therefore the assessee s objection of reopening of assessment was clearly dismissed by the Ld. A.O. following Supreme Court Judgment in the case of GKN Driveshafts (India) Ltd. and Jurisdictional High Court in the case of Sahakari Khand Udyog Mandal Ltd. Therefore the reopening of assessment is correct in law and pleaded to dismiss the assessee appeal. 7. We have given our thoughtful consideration and perused the materials available on record. To adjudicate the Jurisdictional issue of reopening of assessment, it is necessary to reproduce the reasons recorded by the Assessing Officer which is running to three pages as follows: 1. Brief Details of the Assessee: In this case no return filed by the assessee for the A.Y. 2013-14. In the instant case, no regular assessment proceeding u/s 143(3)/147 of the Act was completed. 2. Brief details of the information collected / received by the A.O. A search seizure/survey action in the case of Banka Group was conducted on 21/05/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iii) Most of the companies have shown income under the head Other Income which shows that these companies have no Actual Business activities and only getting interest income under the head other income for providing bogus unsecured loan to different beneficiaries (iv) the admission of Sh. Mukesh Banka Vide his statement recorded u/s. 31/132(4) of the Act, on 30/05/2018 and 19/07/2018 that these companies are paper/ shell companies, controlled and managed by Sh. Mukesh Banka. (v) The directors of these companies are dummy directors of Sh. Mukesh Banka as per the statement of Sh. Mukesh Banka recorded u/s. 132(4) of the Act on 19/07/2018 (vi) These companies were found to be non-existent as per enquiry made by Inspector of Income-tax. Further, during the course of analysis and examination of the bank statements of paper/shell companies of Banka Group, the entire scheme of arrangement regarding the withdrawal of cash from various bank accounts of paper/ shell companies of Sh. Mukesh Banka was clearly established and substantiated. These findings got further authenticated from the statements of Sh. Mukesh Banka regarding the pattern of cash withdrawals from his various companies. Huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a fit case for issuing notice u/s. 148 of the Act. 7. Escapement of income chargeable to tax in relation to any asset (including financial interest in any entity) located outside India.: No such details as per record of this office. 8. Applicability of the provisions of section 147/151 to the facts of the case: In the instant case, no return of income was filed for the year under consideration accordingly, in this case, no assessment was made and the only requirement to initiate proceeding u/s 147 of the Act is the reason to believe which has been recorded in above para 6. It is pertinent to mention here that in this case the assessee has chosen not to file return of income for the year under consideration although the total income of the assessee had exceeded the maximum amount which is not chargeable to tax as discussed above and the assessee was assessable under the Act. In view of the above, the provisions of clause (a) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. In this case more than four years have lapsed form the end of asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces clarity in any order. Without the reasons, the order is lifeless. (ii) The concept of reasoned judgment has become an indispensable part of basic rule of law and, in fact, is a mandatory requirement of procedural law. (iii) It is only clarity of thoughts that leads to proper reasoning, which becomes a foundation of a just and fair decision. (iv) Insistence for recording of reasons is intended to subserve the wider principle that justice must not only be done but it must also seen to have been done. The reasons are requirement for ensuring judicial accountability. (v) Reasons reflect candidness on part of decision maker. The decision making process becomes transparent by virtue of reasons. In absence,, it is impossible to know whether the person deciding the issue is faithful to the doctrine of precedent or to the principles of incrementalism. (vi) Reasons in support of decisions must be cogent, clear and succinct. A pretense of reasons or rubber-stamp reasons cannot be equated with a valid decision-making process. (vii) Reasons also facilitate the process of judicial review by superior courts. 7. In light of the above discussion highlighting the indispensability of reasons in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly filed by the Income-tax Officer, Ward -1. Gandhinagar. On appreciation of contents of the same, we could note that the entire base for reopening assessment is on the premise that there was information supplied by the Investigation Wing and the Assessing Officer has made cursorily reference to high value transaction of Rs. 26,42,027/- as well as also referred to accommodation entry entered upon by the petitioner Company by way of bogus sales/purchases/ fictitious loans etc. Thus, it appears that the reasons for reopening of the assessment in the case of petitioner Company for annual assessment year 2014-15/2015-16 by the Assessing Officer is based on the borrowed satisfaction and the Assessing Officer has not applied his independent mind to arrive at the conclusion that there was failure on the part of the assessee to disclose fully and truly all material facts. In fact, the Assessing Officer is under obligation to arrive at such conclusion that the assessee has failed to disclose all material facts and has to form independent opinion resulting into reason to believe with regard to escapement of income chargeable to tax in case of the petitioner. During the course of hearing, lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source there cannot be any reassessment for the verification. The Assessing Officer reopened assessment beyond four years on the basis of information/data supplied by the office of the Principal Director of Income Tax (Investigation) that there appeared to be a deliberate change in the client code of assessee with the broker. Held that from the reasons recorded, it appeared that the impugned reopening proceedings were so the borrowed satisfaction. No independent opinion was formed. Even in the reasons recorded, there was no allegation that there was any failure on the part of the assessee in not disclosing truly and fully material facts necessary for assessment. Under the circumstances, the assumption of the jurisdiction to reopen the assessment beyond the period of four years in exercise of powers under section 147 was bad in law. 7.5. Further the Jurisdictional High court in the case of Varshaben Sanatbhai Patgel vs ITO reported in (2015) 64 taxmann.com 179 held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not laid in the reasons recorded but on material extraneous thereto. Under the circumstances, the basic requirement for assumption of jurisdiction under section 147 of the Act for reopening the assessment is not satisfied in the present case. The impugned notice under section 148 of the Act, therefore, cannot be sustained. 17. For the foregoing reasons, the petitions succeed and are, accordingly, allowed. The impugned notices all dated 26th March, 2014 issued under section 148 of the Act are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs in each of the petitions. 8. Ld. Sr. D.R. relied upon Jurisdictional High Court Judgment in the case of Pavan Kishanchand Tulsiani vs Union of India reported in (2023) 146 taxmann.com 396 wherein admittedly the MoU as well as Sauda-Chitthi seized by the department, wherein unaccounted cash has been paid for purchase of two lands. Considering the facts of the above case, the Hon ble High Court upheld the reopening of assessment is good in law, whereas in the present case the Assessing Officer has not formulated his own opinion and reason to believe that income has escaped assessment, but simply followed the ..... 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