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TMI Blog2024 (8) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... obtained as per procedure. The sufficiency of the reasons is not the test for deciding the validity of a notice issued u/s 148 of the Income Tax Act. The correct test is whether the AO had a reason to believe that income chargeable to tax had escaped assessment. This principle is well established in judicial precedents and reason to believe does not mean that the AO should have finally ascertained the fact by legal evidence or conclusion. It only means cause or justification to believe that income has escaped assessment. The sufficiency or correctness of the material is not a matter for consideration at the stage of issue of notice. Therefore, AO's action of reopening the assessment was in line with the principles laid down in Pushpak Bullion (P.) Ltd [ 2017 (8) TMI 961 - GUJARAT HIGH COURT] where the reopening was justified based on tangible and specific information. AO had a valid reason to believe that income chargeable to tax had escaped assessment. The information received from the DDIT (Inv.) provided a substantial basis for the AO's belief, and his decision to reopen the assessment was justified. AO s action was not merely based on borrowed satisfaction but on specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 234A, 234B, 234C and 234D of the Act is accordingly deleted. Penalty u/s 271(1)(c) - With the deletion of the addition, the initiation of penalty proceedings under Section 271(1)(c) of the Act becomes unjustified - Ms. Suchitra Kamble, Judicial Member And Shri Makarand V. Mahadeokar, Accountant Member For the Assessee : Shri S.N. Soparkar, Sr.Advocate And Shri Parin Shah, AR For the Revenue : Shri Alpesh Parmar, Sr.DR ORDER PER SHRI MAKARAND V. MAHADEOKAR, AM: This appeal is filed by the Assessee as against the order dated 27/08/2022 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the Ld.CIT(A) in short] arising out of the assessment order dated 18/12/2017 by the Assessing Officer (AO) under section 143(3) r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) relevant to the Assessment Year (AY) 2010-11. Facts of the case 2. The assessee-company is engaged in the business of trading in gold, jewellery, Bullion and manufacturing of lagadies. The assessee-company filed its return of income for A.Y. 2010-11 on 14-10-2010 declaring total income of Rs. 19,75,190/- which was processe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee deliberately provided such documents to disguise the truth and confuse the department. The AO also issued notice to M/s.Vishnu Trading Co. u/s. 133(6) of the Act, but the same could not be served as it returned back. Relied on some judicial precedents and the observations, the AO treated this amount of Rs. 1,92,29,000/- as unexplained cash credit and added to the total income of the assessee. 3. The assessee preferred an appeal before the Ld.CIT(A), who dismissed the appeal of the assessee concluding that the assessee failed to offer any explanation as to the nature of entries and offered explanation related to M/s.Edelweiss Commodities Ltd. He also noted that the AO has brought on record validation of similar transactions of alleged entry providers in case of other assessees. 4. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us with following grounds of appeal: 1. Ld. CIT (A) National Faceless Appeal Centre (NFAC) erred in law and on facts dismissing ground challenging reopening of the assessment by AO on the basis of information received from DDIT (Inv) without independently forming belief that income chargeable to tax escaped assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) Ltd. Vs. ITO [2019] 110 taxmann.com 174 (Guj.), Aaspas Multimedia Ltd. Vs. DCIT [2017] 83 taxmann.com 82 (Guj.) and J.M.D. Global (P.) Ltd. [2019] 112 taxmann.com 204 (Delhi). 6. We have heard the rival contentions and considered the facts as well as the judicial precedents relied upon by the parties. In the case of Amar Jewellers Ltd.(supra), the Hon ble Gujarat High Court quashed the reopening of the assessment stating that the AO's belief that income had escaped assessment was based on incorrect premises and lacked tangible evidence linking the transactions to the assessee. The Court emphasized the need for the AO to form an independent belief based on concrete evidence. In the case of Nayar Metal Company (ITA No. 1374/Del/2015), the Tribunal found that the AO did not possess adequate information or material evidence at the time of issuing the notice under Section 148. The decision to reopen was based on a list provided by the CIT (Central-II) without independent verification or application of mind by the AO. In case of Navkar Enterprises (ITA No. 4722/Mum/2017), the Tribunal found that the AO was having a reason to suspect and AO without making preliminary enquiries reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion received from the DDIT (Inv.) provided a substantial basis for the AO's belief, and his decision to reopen the assessment was justified. The AO s action was not merely based on borrowed satisfaction but on specific information that required further investigation to ascertain the correctness of the transactions. Accordingly, Ground No.1 is dismissed, and the reopening of the assessment under Section 148 of the Act is upheld. The appeal of the assessee on this ground is dismissed. On Ground Nos. 2 to 4 7. On merits, the Ld.Sr.Counsel for the assessee stated that the alleged transaction is actually sales and the same was explained by the assessee during the course of reassessment and appellate proceedings. He also explained that the said transaction was credited to sale and account and already offered as income in profit and loss account. He argued that the already declared income cannot be regarded as unexplained cash credit. Since the assessee has already explained nature and source of amount credited in the books, the onus of the assessee stands discharged. The Ld. Counsel also explained that the assessee during the course of assessment has submitted copies of sales invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that income already offered for taxation cannot be taxed again as unexplained cash credit, as it would amount to double taxation. We further note that the AO did not reject the books of accounts or question the quantitative details of the stock. We also observe that the AO has not placed any conclusive evidence on record to prove that the credits in the assessee's bank account are accommodation entries. The addition of Rs. 1,92,29,000/- as unexplained cash credit cannot be sustained without such evidence. The assessee has provided sufficient documentary evidence, including sales invoices, sales register, item register showing quantitative details, and the bank book, to substantiate the transactions. We have noted the other judicial precedents relied on by the assessee can be distinguished on the basis of facts and circumstances but in case of Manoj Sharma (supra) it was held that the addition cannot be made when the quantitative details of purchase, sale and stock tally. 9.1. Furthermore, the failure to provide an opportunity for cross-examination of individuals whose statements were relied upon for making the addition violates the principles of natural justice, as establis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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