9911796707
TMI Blog2023 (9) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... port and the statement of Shri Himanshu Verma. The report of the Investigation Wing only suggested to the Assessing Officer to examine the details and to only thereafter determine whether there could be any justification for initiating the reassessment proceedings. The statement of Shri Himanshu Verma does not implicate the assessee in any manner. We find that the information received from Income Tax Officer, Ward 1(5) Chandigarh was denied by the Assissing Officer from being confronted to the assessee and not providing the copy of statement of Shri Himanshu Verma to assessee is in violation of the principles of natural justice as well as the provisions of section 142(3) of the Income Tax Act. Therefore, such information and statement of Shri Himanshu Verma cannot be used against assessee for making addition. CIT (Appeals) erroneously upheld the re-opening, which was based on wrong and irrelevant facts recorded under the reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening by the AO. We find that reopening of assessment under section 147 is based on wrong and irrelevant facts and the reopening is held to be bad. In view of abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lication of mind and without verifying the facts from the assessment record, just issued the approval by merely reiterating those very facts in the approval itself. Therefore, Ground is found to be carrying merit and, accordingly, this Ground is accepted. Violation of the principles of natural justice - no cross-examination of the searched person, whose statement was relied on by the AO to make additions, was allowed to the assessee - HELD THAT:- It is seen that the assessee's request for cross-examination wherein it has been pointed out to the Assessing Officer that no information had been provided to the assessee. Another letter was sent and the Assessing Officer was requested for the information under the Income Tax Officer, Ward 1(5) letter. These objections were disposed of by the AO i.e., after a period of almost four months and the assessee was denied cross- examination, stating that the desired information of enquiry and statement of Shri Himanshu Verma could not be provided. The assessee, further, vide letter again requested the Assessing Officer to provide to it the statement and cross-examination of Shri Himanshu Verma, but the same was not provided. Thus, evidently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us 202-206 d) Department s stand before us 206-208 e) Assessee's Rebuttal 208-215 f) Our findings on Groud No.4 215-230 g) Case Laws 230-244 4 Ground No. 5 244-245 244-256 a) Assessee's contentions before CIT(A) 245-247 b) CIT(A) s findings 247-249 c) Assessee's submissions before us 249-253 d) Department s stand before us 253 e) Our findings on Ground No.5 254-256 5 Ground No. 9 256 256-298 a) Assessee's contentions before CIT(A) 256-259 b) CIT(A) s Findings 260-273 c) Assessee s submissions before us 273-275 d) Department s stand before us 275-280 e) Assessee's Rebuttal 280-284 f) Our findings on Ground No. 9 284-289 g) Case Laws 288-298 II ITA No. 16/CHD/2023, ( Department s Appeal) 6 Grounds of appeal 298 298-358 a) Observations findings of the A.O. 299-301 b) Assessee s Contentions before the CIT(A) 301-340 c) CIT(A) s findings 340-348 d) Department s submissions before us 348-351 e) Assessee's stand before us 351-355 f) Our findings 355-358 Order Per A.D. Jain, Vice President: ITA 718/CHD/2022 ASSESSEE'S APPEAL This is an appeal filed by the assessee, which is a company, against the order dated 31.10.2022 passed by the learned Commissioner of Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without the authority of law and do not provide jurisdiction to the Assessing Officer to make reassessment under section 147 of the Income Tax Act. 8. That the learned Commissioner of Income Tax (Appeals)has wrongly upheld the reopening on the basis of wrong or irrelevant reasons recorded for the formation of belief of escapement of income chargeable to income tax, recorded by the Assessing Officer before issue of notice under section 148 of the Income Tax Act, 1961 and also the permission from the learned Principal Commissioner of Income Tax was taken by stating wrong irrelevant facts before him. 9. Whether any information based on the statement of the searched person can be relied upon without providing opportunity of cross examination of such person, as requested by the appellant. 10.That the learned Commissioner of Income Tax (Appeals) has wrongly made addition of Rs. 3,90,00,000/- under section 68 of the Income Tax Act. 11.That the learned Commissioner of Income Tax (Appeals) has erred on facts and in law in upholding the additions on account of wrongly alleged accommodation entries or credits received from wrongly alleged shell entities, merely following the investigation rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on account of wrongly alleged accommodation entries or credits received from wrongly alleged shell entities, merely following the investigation report and treating the vague and general information of the Investigation Wing as sacrosanct, ignoring the voluminous evidence to the contrary brought on record by the assessee . 8. Ground No. 3 states that the learned Commissioner of Income Tax (Appeals) has wrongly upheld the reassessment which was bad in law, being made without following the principles of natural justice, equity and fair play. The Ground corresponds to Original Ground No. 3 and Additional Ground No. 6 taken before the learned Commissioner of Income Tax (Appeals). 9. Ground No. 6 corresponds to Additional Ground No. 4 raised before the learned Commissioner of Income Tax (Appeals). As per this Ground, the initiation of reopening proceedings was wrongly upheld, since such initiation was based on information contained in the search material found during the search of a third party, which is contrary to the non-obstante clause contained in Sections 153A/153C of the Income Tax Act. 10. As per Ground No. 7, since there was no incriminating material available with the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey operation under sections 132 and 133A of the Income Tax Act was conducted at various premises of persons related to the Punjab Sand Mining Auction group of cases, on 16.02.2018. 14.4 The Assessing Officer observed that the case of the assessee company belongs to the Punjab Sand Mining Auction group of cases. 14.5 The Assessing Officer observed that in this case, information had been received from the Investigation Wing of the Department, that in the State Bank of India (erstwhile Bank of Patiala) Bank Account No. 65012097085, SME Branch, Third Floor, SCO Nos. 43-48, Bank Square, Sector 17, Chandigarh, the assessee company has total credit entries of Rs. 25,83,50,000/-, including cash deposit of Rs. 71 lacs, during the financial year 2011-12 (assessment year 2012-13). 14.6 The Assessing Officer observed that on perusal of the bank statement, it was found that there are multiple credit entries in this bank account, despite the fact that the assessee company, M/s Evershine Recreation Pvt. Limited, was not undertaking any business activity during the year and it was only a shell entity having no profit earning apparatus of its own. 14.7 The Assessing Officer observed that moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer required the assessee company to furnish the complete details of transactions undertaken by it with the Himanshu Group of companies during the year under consideration and copies of the Income Tax Return, Audit Report and bank account statement of the entities from whom the amount of Rs. 3,90,00,000/- had been received by it during the year, and also to produce the Directors of the Himanshu Group of companies for examination. 14.16 The Assessing Officer observed that in response, the assessee company had submitted that it had not entered into any transaction with the Himanshu Group of companies during the year under consideration. 14.17 The Assessing Officer observed that this plea of the assessee company had been considered, but it had not been found to be correct on merits. 14.18 The Assessing Officer observed that the assessee company had received an amount of Rs. 3,90,00,000/- from the companies of the Himanshu Group during the year under consideration, in its Bank Account No. 65012097085, in the State Bank of India (erstwhile Bank of Patiala), SME Branch, Third Floor, SCO Nos. 43-48, Bank Square, Sector 17, Chandigarh, that is, an amount of Rs.1,47,00,000/- fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried out any business activity during the year, but had raised huge unsecured loans. The Assessing Officer observed that the assessee company had also failed to furnish confirmations from the parties, its Audit Report, Income Tax Return and Bank Account Statement from the parties from whom the amount had been received, and it had also failed to prove the credit worthiness of these parties. 14.28 The Assessing Officer observed that moreover, the assessee company had not produced the Directors of the Himanshu Group of companies for examination. 14.29 The Assessing Officer observed that therefore, the amount of Rs.3,90,00,000/- credited by the assessee company in its bank account during the year under consideration was being held to be the unexplained cash credits of the assessee company within the meaning of Section 68 of the Income Tax Act, and the same was being added to the income of the assessee. 14.30 The Assessing Officer observed that further, the assessee company had also received an amount of Rs.2,48,00,000/- in its bank account no.65012097085 from M/s TJR Properties Private Limited during the year under consideration. 14.31 The Assessing Officer observed that during the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut application of his own mind and without verifying the facts from the record before issuing the notice under section 148 of the Income Tax Act. The assessee contended that even otherwise, the initiation of proceedings under section 148 of the Income Tax Act and the consequent assessment under section 147 of the Income Tax Act was contrary to law in the absence of any incriminating material to form the reasons recorded for the formation of belief of escapement of income chargeable to income tax, based on the report of the Investigation Wing of the Department, which report only suggested to the Assessing Officer to examine the details and only after such examination, to determine whether there could be any justification for initiation of action under section 147 of the Income Tax Act. 15.2 The assessee contended that thus, the issuance of notice under section 148 of the Income Tax Act and the consequent assessment under section 147 of the Income Tax Act was beyond the authority of law, which did not provide jurisdiction to the Assessing Officer to make re-assessment under section 147 of the Income Tax Act. The assessee contended that the Assessing Officer had erred in making additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficiary, whereas it is evident that there is no direct live link between the information received and the alleged escapement of income chargeable to tax. 15.7 The assessee contended that it was imperative on the assessing authority to have analyzed the information to take the case in the right direction, rather than proceeding to raise the issue on some vague suspicion. The assessee contended that in the absence of any such direct live link and necessary verification/examination by the Assessing Officer, it was evident that no application of mind had been exercised by the Assessing Officer at the time of initiating the proceedings under section 147 of the Income Tax Act. 15.8 The assessee urged that in this regard, reliance was being placed on the decisions in the cases of PCIT Vs Meenakshi Overseas Private Limited , 395 ITR 67(Del), PCIT Vs RMG Polyvinyl (I) Limited , 83 taxmann.com 348 (Del), CIT Vs Independent Media PRIVATE Limited , order dated 19.11.2015, passed by the Hon'ble Delhi High Court, in ITA No. 108/2015, Sabh Infrastructure Limited Vs ACIT , order dated 25.09.2017, passed by the Hon ble Delhi High Court in Tax WP(C) 1357/2016, PCIT-6 Vs Nandan-I-Tech Limited (fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the formation of belief of escapement of income chargeable to income tax were merely a change of opinion of the new Assessing Officer. 16.6 The learned Commissioner observed that the assessee had contended that this was so, since no adverse finding in respect of the credits received by the assessee company had been recorded by the Assessing Officer, whereas the original scrutiny assessment under section 143(3) of the Income Tax Act had been already completed on 15.09.2014. 16.7 The learned Commissioner observed that the assessee had contended that the action taken by the Assessing Officer under section 147 of the Income Tax Act was without jurisdiction, since there was no allegation that the escapement of income had occurred by reason of failure on the part of the assessee company to disclose fully and truly all material facts relevant for its assessment. 16.8 The learned Commissioner observed that the assessee had submitted that the assessee company had already furnished all the documentary evidences in respect of the six companies, from whom the advances had been received by it, before the Assessing Officer, during the original assessment proceedings and no adverse inference had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded on oath under section 132(4) of the Income Tax Act, that he had been providing accommodation entries to a number of conduits managed and controlled by him, against payment of commission at the rate ranging from 0.7% to 1.0%. 16.18 The learned Commissioner observed that in his statement, Shri Himanshu Verma had admitted that he had been running a network of seventy to eighty paper companies which, in fact, were not having any actual business and were being used only to give accommodation entries to parties. 16.19 The learned Commissioner observed that Shri Himanshu Verma had deposed in his statement that it was for this purpose, that he had made some employees as dummy Directors in these companies, and they used to sign the cheques and other documents to provide the accommodation entries to the parties. 16.20 The learned Commissioner observed that in his statement, Shri Himanshu Verma had mentioned, in answer to Question No.15, that Neha Yadav, Daljeet Singh, Kayanat Khan, Mukesh Kumar, Saurav Malhotra, etc., were some of such employees, who were working as dummy Directors against payment of salary of amounts ranging from Rs.2000/- to Rs.5000/-. 16.21 The learned Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... four years from the end of the relevant assessment year, since all the material facts in respect of the credits received by the assessee company stood fully and truly disclosed by the assessee before the Assessing Officer during the original assessment proceedings. 16.30 The learned Commissioner observed that from the assessment record, it was found that the case of the assessee company had been selected for scrutiny through the Computer Aided Scrutiny Selection, for the reason large increase in unsecured loans . 16.31 The learned Commissioner observed that the issue of increase in unsecured loans had been examined by the Assessing Officer and the assessment had been completed on 15.09.2014, by passing an order under section 143(3) of the Income Tax Act. 16.32 The learned Commissioner observed that in this regard, it had been observed from the Office Note appended to the said assessment order dated 15.09.2014, that therein, it was clearly stated that the case had been examined on account of large increase in unsecured loans. 16.33 The learned Commissioner observed that the said credits of Rs.3,90,00,000/- had not been reflected by the assessee company in its Balance Sheet as on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in his possession that the assessee company had taken accommodation entries from Shri Himanshu Verma, for Rs. 3,90,00,000/-. 16.43 The learned Commissioner observed that the Assessing Officer had drawn such inference on the strength of specific information obtained consequent to the search and seizure action in the case of Shri Himanshu Verma. 16.44 The learned Commissioner observed that such information was based on the statements of Shri Himanshu Verma and other dummy Directors of the paper companies run by him, and on the various documents seized during the course of the search. 16.45 The learned Commissioner observed that thus, there was prima-facie material in the possession of the Assessing Officer to draw the inference that income had escaped assessment within the meaning of Section 147 of the Income Tax Act. 16.46 The learned Commissioner observed that at the stage of formation of belief of escapement of income under section 147 of the Income Tax Act, it is necessary for the Assessing Officer to have with him, the existence of material leading to the recording of prima-facie reasons for the formation of belief of escapement of income chargeable to income tax, but their su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the light of the information obtained. 16.56 The learned Commissioner observed that thus, the Assessing Officer had based his belief of escapement of income upon such tangible information. 16.57 The learned Commissioner observed that the material available with the Assessing Officer at the time of initiating proceedings for reopening the completed assessment of the assessee company under section 147 of the Income Tax Act showed that there was a live link between the assessee company and the alleged accommodation entries taken by it through the entities managed and controlled by Shri Himanshu Verma, with specific details of transactions and the belief formed. 16.58 The learned Commissioner observed that therefore, the Assessing Officer had a prima facie belief that income chargeable to tax had escaped assessment. 16.59 The learned Commissioner further observed that the assessee had contended that the reasons recorded for the formation of belief of escapement of income chargeable to income tax were merely a change of opinion of the new Assessing Officer, since no adverse finding in respect of the credits received by the assessee company had been recorded by the Assessing Officer in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ginal assessment proceedings, the Assessing Officer was not having jurisdiction to examine the same, as the case had been picked up for scrutiny through the Computer Aided Scrutiny Selection for the reason of large increase in unsecured loans; that thus, there was no question of change of opinion on this issue, since no opinion had been formed by the Assessing Officer in the first place during the original assessment proceedings. The learned Commissioner of Income Tax (Appeals) observed that reliance in this regard was being placed on the decision of the Hon ble Supreme Court in the case of Ess Ess Kay Engineering Co. Private Limited Vs CIT , 247 ITR 818 (SC). 16.61 The learned Commissioner of Income Tax (Appeals) further observed that the examination of the material available on record by the Assessing Officer, in the light of the findings of the search in the case of Shri Himanshu Verma, had revealed that the assessee company had received accommodation entries in the garb of advances on account of sale of commercial space. The learned Commissioner of Income Tax (Appeals) observed that thus, the decision of the Hon ble Delhi High Court in the case of Vedanta Limited Vs DCIT , 114 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original assessment proceedings, had come in possession of fresh material which prima-facie exposed the untruthfulness regarding the genuineness of the credits of Rs.3,90,00,000/- received by the assessee company during the year; that therefore, even if the issue of advance from the six paper companies had been examined by the Assessing Officer during the initial assessment proceedings, the later Assessing Officer had initiated re-assessment proceedings in accordance with the provisions of the Income Tax Act by forming his belief of escapement of income chargeable to tax, on the basis of tangible material which came to his possession subsequent to the completion of the original assessment proceedings, which led to the prima-facie inference that income chargeable to tax had escaped assessment; and that moreover, the provisions of clause (c) of Explanation 2 to Section 147 of the Income Tax Act are applicable to the facts of the case, as income chargeable to tax had been under-assessed. 16.64 The learned Commissioner of Income Tax (Appeals) further observed that the assessee company had been provided with a copy of the reasons recorded for the formation of belief of escapement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le information available before him, had recorded the facts while recording the reasons for the formation of belief of escapement of income chargeable to income tax; that the Assessing Officer had considered the information, had gone through the record and had thereafter recorded the reasons for the formation of belief of escapement of income chargeable to income tax, by forming his own independent belief; that such belief cannot be said to be a borrowed belief; and that further, it had also been found that the Assessing Officer had perused the return of income already filed by the assessee company, before framing the reasons recorded for the formation of belief of escapement of income chargeable to income tax. 16.67 The learned Commissioner of Income Tax (Appeals) also observed that the assessee company had contended that the reassessment ought to have been framed only under section 153C of the Income Tax Act and not under section 147/148 of the Income Tax Act; that the Assessing Officer had made the assessment under section 147/148 of the Income Tax Act, based on the findings in the case of Shri Himanshu Verma, as a result of search in his case on 29.03.2012; that the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the project, which is the subject-matter of the assessee s appeal. 17.3 The learned Counsel for the assessee has submitted that the assessee had raised a term loan from the Bank to finance the cost of the project and that the outstanding balance as on 31.03.2012 was amounting to Rs. 10,12,31,507/-, which is evident from the Balance Sheet of the assessee company, a copy whereof has been filed in the assessee s Paper Book ( APB , for short) at pages 68-76. 17.4 The learned Counsel for the assessee has contended that the re-opening of the completed assessment under section 148 of the Income Tax Act was done by the Assessing Officer on the basis of information received from a third party, without any verification thereof, which amounts to nothing but borrowed satisfaction, without application of mind by the Assessing Officer. 17.5 The learned Counsel for the assessee has submitted that Para 11 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax shows that the Assessing Officer has relied on the letter dated 04.02.2019 of the Income Tax Officer, Ward 1(5), Chandigarh, which states that a search had been conducted on 29.03.2012 on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relinquishing the rights in the property. 17.14 The learned Counsel for the assessee has contended that in fact, the assessee company had never entered into any transaction with Shri Himanshu Verma, who was not a Director in any of the said alleged six companies. 17.15 The learned Counsel for the assessee has submitted that the statements of the Directors of the alleged six companies were neither relied on by the Assessing Officer, nor provided to the assessee. 17.16 The learned Counsel for the assessee stated that reliance was being placed on the decision of the Hon ble Delhi High Court in the case of PCIT Vs Meenakshi Overseas Private Limited , 395 ITR 677 (Del). 17.17 The learned Counsel for the assessee contended that the reasons recorded for the formation of belief of escapement of income chargeable to income tax, as recorded by the Assessing Officer, do not, in fact, contain any reasons recorded for the formation of belief of escapement of income chargeable to income tax, but the conclusions of the Assessing Officer, one after the other. 17.18 The learned Counsel for the assessee has averred that there is no independent application of mind by the Assessing Officer to any tang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereof has been filed at APB 31-50, to which our attention was being drawn, requested the Assessing Officer to provide to the assessee, the information / basis of the letter dated 04.02.2019, of the Income Tax Officer, Ward 1(5), Chandigarh, and also requested for being provided with a copy of the statement of Shri Himanshu Verma, and for also being provided an opportunity to cross examine Shri Himanshu Verma. 17.26 The learned Counsel for the assessee stated that while disposing of the assessee s preliminary objections by virtue of letter / order dated 18.10.2019 (APB 53), the Assessing Officer stated that the information received from the Income Tax Officer, Ward 1(5), Chandigarh was not required to be provided to the assessee alongwith the copy of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, recorded under section 147 of the Income Tax Act. 17.27 The learned Counsel for the assessee submitted that this is in utter violation of the provisions of Section 142(3) of the Income Tax Act, as the documents relied on by the Assessing Officer were never provided to the assessee. 17.28 The learned Counsel for the assessee averred that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the Income Tax authorities could rely on it, they were bound to produce it before the assessee, so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him. We are clearly of the view that the letters dated 18th February, 1955, and 9th March, 1957, did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350/- was remitted by the assessee firm, and if these two letters are eliminated from consideration, it is obvious that there was no material evidence at all before the Tribunal which could support this finding. 17.31 In support of Ground No. 8, the learned Counsel for the assessee company contended before us that the reopening of the completed assessment in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it was seen that funds were used in e-auction of the sand mines. 17.37 The learned Counsel for the assessee stated that this is a wrong observation, as no such bank account was unearthed during the search, which bank account had not been disclosed. 17.38 The learned Counsel for the assessee stated that there is no mention of any bank account number, or the date on which the funds were utilized. 17.39 The learned Counsel for the assessee stated that the Sand Mining auction was undertaken in the financial year 2017-18, and this is not applicable to the assessee company, which has never invested any amount in sand mining. 17.40 The learned Counsel for the assessee stated that in Paras 7 and 8 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer relied on Shri Triloki Nath Singla s reply dated 16.06.2018, wherein, he did not mention the name of the company, though, according to the Assessing Officer, he was a Director in this company. 17.41 The learned Counsel for the assessee stated that while doing so, the Assessing Officer ignored the fact that Shri Triloki Nath Singla was not a Director in this company for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer under section 143(3) of the Income Tax Act during the original assessment. Reference has been made to APB, Pages 6 and 10. 17.48 As per the learned Counsel for the assessee, in Para 13 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer has stated that the assessee company is a shell company not undertaking any business. 17.49 The learned Counsel for the assessee states that this is contrary to the records submitted by the assessee before the Assessing Officer during the original assessment proceedings. 17.50 The learned Counsel for the assessee has referred to the copy at APB, Page 8, showing that the assessee has already purchased land and that Letter of Intent stands issued from the Government of Haryana. 17.51 The learned Counsel for the assessee has contended that the Assessing Officer, in Para 14 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, has stated that the assessee had not disclosed, fully and truly, all material facts necessary for, in its return of income, ignoring the proviso to section 147 of the Income Tax Act, as per w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Versus Union of India , [2022] 447 ITR439 (All), Writ Tax No. 997 of 2022, this Court considered the prevailing state of affairs in assessment matters and in paragraphs 6 and 7 observed that the prevailing state of affairs clearly reflects that in the absence of any effective system of the accountability of the erring officers, the harassment of the assesses and breach of principles of natural justice by the officers is resulting in an uncontrolled situation. The practice of frequently violating the principles of natural justice, non-consideration of replies of assesses on one pretext or the other or rejecting it with one or two line orders without recording reasons for rejection, is gradually increasing, which needs to be taken care of immediately by the respondents at the highest level, otherwise the prevailing situation of arbitrary approach and breach of principles of natural justice may not only adversely affect the assesses who pay revenue to the Government, but also may develop a perception amongst people / assesses that it is difficult to get justice from the authorities in statutory proceedings . 17.55 The learned Counsel for the assessee company has also sought to plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e effect that whether a complete go-bye to the quasi- judicial function has been provided under the Income Tax Act, 1961, and participation of assessees in proceedings under Section 148A or 148 or 147 of the Income Tax Act, 1961 would remain an empty formality, inasmuch as the Assessing Officer would create liability on assessees only on the basis of data fed in the data base / portal of the Department and would not like to adjudicate the matter in accordance with law, so as to take the risk of initiation of disciplinary proceedings against himself. 17.64 The learned Counsel for the assessee finally stated that Assessing Officer, while recording his reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening, not only relied on wrong facts, but also used irrelevant facts to create a hype and sensationalize the reasons recorded for the formation of belief of escapement of income chargeable to income tax to influence the learned Principal Commissioner of Income Tax for seeking approval. DEPARTMENT S STAND BEFORE US 18. On the other hand, the learned CIT (DR) has contended that the assessee has submitted that the facts mentioned in the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umber, there is not even an iota of detail regarding the bank account of the assessee, in the assessment proceedings under section 143(3) of the Income Tax Act. 18.13 The learned CIT (DR) has contended that no bank statement or any other bank account, whatsoever, was ever furnished. 18.14 The learned CIT (DR) has asserted that given these facts, the entire case of the assessee falls apart and the bank account remains concealed / undisclosed in the original assessment proceedings. 18.15 The learned CIT (DR) has asserted that it has been stated that Shri Triloki Nath Singla was then the Director of the company during the original assessment proceedings and he had represented the case before the Assessing Officer. 18.16 The learned CIT (DR) has stated that thus, concealment has rightly been pointed out by the Assessing Officer, in his reasons recorded for the formation of belief of escapement of income chargeable to income tax, and in that sense, the background contained in Para nos. 1 to 7 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax becomes wholly relevant and valid. 18.17 The learned CIT (DR) has contended that this also expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount of Rs.3,90,00,000/- remained unexplained. 18.26 The learned CIT (DR) further submitted that in Para 13 of the reasons recorded, the Assessing Officer clearly mentioned that he was re-opening the case on the basis of Bank Account No. 65012097085, which was not disclosed, and the receipt of funds in the bank account from bogus companies. 18.27 The learned CIT (DR) has averred that both these facts are entirely correct and clearly show that the Assessing Officer had applied his mind. 18.28 The learned CIT (DR) has contended that it is also evident that there was failure on the part of the assessee to disclose material and true facts in the proceedings under section 143(3) of the Income Tax Act and also tangible new material received by the Assessing Officer, and that thus, the proviso to Section 147 of the Income Tax Act is clearly applicable, as observed by the learned Commissioner of Income Tax (Appeals). 18.29 The learned CIT (DR) further contends that whether the Assessing Officer had tangible material or not is clearly evident from the fact that the Bank Account No. 65012097085 came to surface for the first time before the Assessing Officer only after completion of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xamined in the original assessment proceedings, so as to enable the Assessing Officer to form a view on the matter. 18.35 The learned CIT (DR) has averred that secondly, fresh information had come in possession of the Assessing Officer in the post-search enquiries conducted on the Himanshu Group and the Mining Group, which gave a totally different perspective to the issue, which had never been examined in the original proceedings. 18.36 The learned CIT (DR) has asserted that the learned Commissioner of Income Tax (Appeals) has held that the reason for selection of the case was increase in large unsecured loans . 18.37 The learned CIT (DR) has submitted that the Learned Commissioner of Income Tax (Appeals) has held that however, the credit entries from shell companies were mentioned in advance against land Note-4 by the assessee, as per the Office Note. 18.38 The learned CIT (DR) has stated that the learned Commissioner of Income Tax (Appeals) has held that therefore, since it was not subject-matter of scrutiny, no opinion was formed by the Assessing Officer. 18.39 The learned CIT (DR) has sought to place reliance on Sri Kant Phul Chand Bhakkad (HUF) Versus JCIT , 137 taxmann.com 44 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that he had rejoined as Director on 23.10.2018. 18.51 The learned CIT (DR) has contended that in this regard, it is to be seen as to whether Shri Triloki Nath Singla was Director on the date of search on the Himanshu Group, as well as during the original assessment proceedings. 18.52 The learned CIT (DR) has averred that during both these relevant times, Shri Triloki Nath Singla was Director in the assessee company. 18.53 The learned CIT (DR) has maintained that it stands amply proved that there was material concealment before the Assessing Officer during the original assessment proceedings. 18.54 The learerd CIT (DR) submits that according to the assessee, the bank account was disclosed and all entries were from the same bank account, and as such, there was a full disclosure, and the re-assessment amounts to a change of opinion or non-application of mind by the later Assessing Officer. 18.55 The learned CIT (DR) contends that in this regard, it is stated that a wrong bank account number was filed during the assessment proceedings and no bank statement was ever filed. 18.56 The learned CIT (DR) has asserted that therefore, the Assessing Officer neither had the correct bank acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer had examined the issue of advances against sale of property by specific notice. 19.5 The learned Counsel for the assessee has averred that the assertion of the Department that the case was selected for limited scrutiny, is totally wrong, as is also evident from the notice issued under section 143(2) of the Income Tax Act, wherein, there is no reference to limited scrutiny. 19.6 The learned Counsel for the assessee has stated that otherwise too, the concept of limited scrutiny was introduced only with effect from assessment year 2015- 16 and so, it was not applicable for the year under consideration, i.e., for assessment year 2012-13. 19.7 The learned Counsel for the assessee has submitted that the details of the bank account were furnished by the assessee company before the Assessing Officer in the original assessment proceedings, on 19.08.2014. 19.8 The learned Counsel for the assessee has submitted that the Department has claimed that the bank account number submitted during the assessment proceedings was 65012097805 , whereas the actual account number is 65012097085 . 19.9 The learned Counsel for the assessee has maintained that this is nothing but an inadvert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Paras 2 to 5 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax recorded by the Assessing Officer, inter-alia, a search was conducted in the group of cases of Punjab Sand Mining Auctions, on 16.02.2018. In the search, it was discovered that in financial year 2017-18, the Government of Punjab had introduced a new policy of progressive bidding for the auction of sand mines in the state of Punjab. Under this policy, sand mines would be allotted to the highest bidders. Subsequently, e-auction was carried out. Shri Amit Bahadur, Shri Kulwinder Paul Singh, Shri Ajit Pal Singh, Shri Gurinder Singh and Shri Balraj Singh were amongst the H-1 Bidders. Shri Triloki Nath Singla and Shri Sahil Singla were the common links amongst these persons, as all the paper work on behalf of these persons was facilitated by Shri Triloki Nath Singla and Shri Sahil Singla. The search was mainly focused on the flow of funds used in the benami transactions involved in the e- auctions of the sand mines. The Department uncovered the entities which were used to route the funds which, in turn, were used in the acquisition of sand mines. The earnest money to particip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear under consideration before us is assessment year 2012-13, whereas Para 2 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening relates the fact that the new mining policy was framed by the Government of Punjab in the financial year 2017-18, which was relevant to the assessment year 2018-19. 25. Further, during the proceedings before us, no evidence or material of any financial transaction of the assessee company with the mining business of the sand mines is even claimed by the Department to be existing on the record of the case. 26. Then, just stating, without proving, in Para 4 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, that the Department uncovered the entities which were used to route the funds which in turn were used in the acquisition of sand mines, without pin-pointing such alleged entities does not, by itself, go to inculpate either Shri Triloki Nath Singla, or Shri Sahil Singla, or the assessee company in the matter. 27. Too, the alleged factum (Para 5 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, or even the date of utilization of funds has been mentioned, either in the reasons recorded by the Assessing Officer for the formation of belief of escapement of income chargeable to income tax, or anywhere else in the record, even till date. 33. The learned Counsel for the assessee company has contended that such wrong fact has been purposely used to sensationalize the reasons recorded for the formation of belief of escapement of income chargeable to income tax, to unduly influence the sanctioning authority and that this is not justified. 34. The learned CIT (DR), on the other hand, has stated that in fact, Paras 1 to 7 of the reasons recorded by the Assessing Officer for the formation of belief of escapement of income chargeable to income tax contain the background needed to point out and highlight the defaults detailed under Para 8 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax. 35. In this regard, the fact remains that however, no such allegedly unearthed bank account, as claimed in Para 6 of the reasons recorded by the Assessing Officer for the formation of belief of escapement of income chargeable to income tax, belong ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Paras 9 and 10 of the reasons recorded by the Assessing Officer. 40. In this regard, it is seen that while stating so in his written submissions, the learned CIT (DR) has not controverted the fact stated by assessee company, that Shri Triloki Nath Singla was not a Director in the assessee company during the period between 28.3.2017 and 23.10.2018. Moreover, the reasons of reopening of the completed assessment, recorded for the formation of belief of escapement of income chargeable to income tax do not claim that since Shri Triloki Nath Singla was Director in the original assessment proceedings, it is for this, as such, that the case is sought to be reopened. This remaining the undisputed factual position on record, it is not now open, in law, for the learned CIT (DR) to improve upon, or modify the reasons for the formation of belief of escapement of income chargeable to income tax, as already recorded by Assessing Officer. It is trite law, that the reasons recorded by the Assessing Officer for the formation of belief of escapement of income chargeable to tax are to be read as they are, and that they cannot be supplement later on, nor can anything which is not contained therein, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and it forms part of the assessee s paper book, lying at APB, Pages 295-297. 44. As per this Note, the assessee company was incorporated on 15.11.2006, with the object to carry on the business of real estate developers and to set up a commercial colony. The company was formed by respectable persons of means, for doing the business of real estate developers. To meet the object of the company, it wanted to develop a commercial colony at Chandi Mandir, in District Panchkula, Haryana. In furtherance thereof, the promoters of the company started purchase of land at Chandi Mandir. The promoters purchased lands worth Rs. 4,81,78,936/- (four crores, eighty one lacs, seventy eight thousand, nine hundred and thirty six rupees) upto 31.03.2001, and lands worth Rs. 87,92,500/- (eighty seven lacs, ninety two thousand and five hundred rupees) were purchased during the assessment year 2011-12. Further, during the year under consideration, that is, during the assessment year 2012-13, the assessee company took a bank loan of Rs. 10,00,00,000/- (ten crore rupees) from the State Bank of Patiala, and interest of Rs. 38,19,862 (thirty eight lacs, nineteen thousand, eight hundred and sixty two rupees) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er transferred by the company to any unknown person, or to any unrelated person, other than the money paid for the genuine business transactions entered into by the assessee company. 50. It has further been stated that this company is a legal entity and it is operating like any other genuine company. 51. It has been stated that however, due to certain unavoidable circumstances, the proposed project of a commercial colony could not mature, though the licence for the commercial colony is still very much in existence. 52. It has further been stated in the Note, that even the Registrar of Companies and the MCA have identified certain shell companies after 2013 and even the Directors of these shell companies have been disqualified. 53. It has been stated that however, the assessee company has been treated as a legal and genuine company. 54. It has been stated that the definition of a shell company has not been prescribed in India, either in the Companies Act, or in any other Act. 55. It has been stated that however, as per the various definitions of shell company , a shell company is a company which does not conduct any activity other than in a pass-through capacity. 56. It has been sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee s bank account during the year under consideration. 63 It also remains undisputed that by virtue of Reply (APB-63-65) dated 30.10.2019 (stamped on APB-63 as having been received in the Office of the Assistant Commissioner of Income Tax, Central Circle-2, Chandigarh, on 04.11.2019) and Reply (APB-66-67) dated 19.12.2019 (stamped on APB-66 as having been received in the Office of the Assistant Commissioner of Income Tax, Central Circle-2, Chandigarh, on 19.12.2019 itself), the assessee company furnished detailed replies to the questions raised in the aforesaid Questionnaire, including the above issues. 64. With regard to the bank loan of Rs. 10,00,00,000/-, it was stated (APB-63) that this bank loan was received from the State Bank of Patiala, Sector 8-C, Chandigarh, on 21.01.2012 and interest of Rs. 12,31,507/- was due for the month of March, 2012 and, accordingly, loan of Rs. 10,12,31,507/- as on 31.03.2012 had been shown in the Balance Sheet as loan outstanding to Bank. A copy of loan sanction letter and bank account were attached. 65. Apropos the investment of Rs. 21,64,51,054/-, such investment under fixed assets was stated (APB-66) to be on account of net of charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to income tax are held to be wrong. 71. Now, coming to the assertion of the Assessing Officer under Para 10 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, that credit entries in the bank account of Rs. 25,83,50,000/-, including Rs. 25,00,000/- and Rs. 46,00,000/- in cash is claimed to be unaccounted because the said bank account was not disclosed and no business was undertaken during the year. 72. The contention of the learned Counsel for the assessee company, in this regard, was that the actual deposit was of Rs.27.83 crore. The learned CIT (DR) accepted the same and asserted that the same was due to oversight because of the large volume of the concerned data. 73. Here, we find that the observation of the Assessing Officer in the reasons recorded for the formation of belief of escapement of income chargeable to income tax, that the bank account was not disclosed during the year, is contrary to the facts on record, as discussed above. It is patent on record that the assessment for the year under consideration was completed under scrutiny assessment, by virtue of assessment order passed under section 143(3) of the Act, on 15.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the alleged Shri Himanshu Verma, that he, alongwith his partner, was providing accommodation entries through some seventy to eighty companies controlled by him. On this basis, the Assessing Officer concluded that sums received by the assessee from six such companies, amounting Rs. 3.90 crore, are the assessee s unexplained credits during the year. 76. The contention of the learned Counsel for the assessee about the information received by the Assessing Officer from the Income Tax Officer, Ward 1(5), Chandigarh is that the Assessing Officer did not provide the copy of such information or statement of Shri Himanshu Verma, either alongwith the copy of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, or during the assessment proceedings, despite specific request made by the assessee to the Assessing Officer in this regard. 77. He further stated that as per Question No. 8 reproduced in the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the reliance on the seventy to eighty companies is general and casual in nature, without the existence on record of any list of names of such companies. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the completed assessment, that funds of Rs. 3.90 crore have been received by the assessee in the same bank account which was not disclosed by the assessee during the post search enquiries, i.e., Account No. 65012097805 in SBI Chandigarh, the learned Counsel for the assessee stated that this observation of the Assessing Officer is totally wrong, because here it has been claimed by the Assessing Officer that the assessee had not disclosed the bank account in the post search enquiries, whereas the fact is that no enquiry letter was issued to the assessee company and the summons dated 05.04.2018, issued by the Additional director of Income Tax, Mohali, a copy whereof is at APB Page 110, was issued to Shri Triloki Nath Singla, and not to the assessee company. 84. The learned Counsel for the assessee further asserted that neither any notice was issued to the assessee company, nor was there any failure on the part of the assessee to disclose the bank account, and that moreover, as per the proviso to section 147 of the Act, where the original assessment is completed under section 147 of the Act, the failure is to be seen on the basis of all material facts furnished during the assessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch point we have already addressed. Therefore, the reopening of the assessment for the reason of the alleged failure of the assessee to disclose material facts in the return of Income is also held to be wrong. ASSESSMENT SHOULD HAVE BEEN COMPLETED UNDER SECT ION 153A/153C AND NOT UNDER SECTION 148 OF THE ACT 91. In this regard, the assertion on behalf of the assessee is that the entire decision of the Assessing Officer to reassess the income of the assessee company is based on material found / statement recorded during two independent searches conducted by the Income Tax Department. One of such actions is dated 16.02.2018 at the premises of Shri Triloki Nath Singla and Shri Sahil Singla, where it is alleged that bank accounts of Shri Triloki Nath Singla and Shri Sahil Singla were unearthed and this has formed the basis of reopening, and the second is the statement recorded of Sh. Himanshu Verma under section 132(4) of the Act, on 29.03.2012, and other material found during the search. 92. The contention of the learned Counsel for the assessee before us is that Section 153C of the Act begins with a non-obstante clause and, therefore, it has an overriding effect on Sections 147 148 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... placed on the order of the Chandigarh Bench of the ITAT in the case of Kaur Jain Spinning Weaving Mills Limited Versus ACIT , 128 taxman.com 147 (Chd), dated 16.04.2021, the Delhi ITAT decision in the case of Nawal Oils and Container Private Limited Versus Income Tax Officer , ITA No. 852/DEL/2019, order dated 04.03.2020, the Chandigarh ITAT decision in the case of Sanjay Singhal (HUF) Versus Deputy Commissioner of Income Tax , ITA Nos. 702 to 704/Chd/2018, dated 19.06.2020, the Jaipur ITAT decision in the case of Shri Kalyan Buildmart Private Limited Versus Assistant Commissioner of Income Tax , ITA Nos. 152 and 153/JP/2018, dated 28.06.2018, the Amritsar ITAT decision in the case of Arun Kumar Kapoor, Amritsar Versus Department Of Income Tax , ITA No. 147(ASR)/2010, and the Delhi High Court decision in the case of PCIT Versus Anand Kumar Jain (HUF) , in ITA No. 23/2021, dated 12.02.2021. 94. The findings of the learned Commissioner of Income Tax (Appeals) on this issue are that the Assessing Officer has made assessment under section 147/148 of the Act, based on the findings in the case of Shri Himanshu Verma as a result of search under section 132 of the Act in his case on 29.03. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrelevant facts relied on by the Assessing Officer for reopening the completed assessment. VIOLATION OF PRINCIPLES OF NATURAL JUSTICE 98. The next grievance of the assessee is that though the re-opening is stated to have been done on the basis of information received from the Income Tax Officer, Ward 1(5), Chandigarh, dated 04.02.2019 (APB20), having jurisdiction over the assessee prior to centralization, about search conducted on 29.03.2012 on Shri Himanshu Verma, either the detail of such information, or the statement of Shri Himanshu Verma was not provided to the assessee, either alongwith the reasons recorded for the formation of belief of escapement of income chargeable to income tax, or during the assessment proceedings, or even during the first appellate proceedings before the learned Commissioner of Income Tax (Appeals). 99. The learned Counsel for the assessee contends that after reply dated 19.12.2019 was filed by the assessee company, around ten days after the passing of the final re-assessment order, an incomplete extract of the approval accorded by the learned Principal Commissioner of Income Tax under section 151 of the Income Tax Act and a two page covering letter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily required to provide to the assessee, the copy of the statement of Shri Himanshu Verma and the information received from the Income Tax Officer, Ward 1(5), Chandigarh alongwith the reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening of the completed assessment. The refusal of the Assessing Officer to provide and make available to the assessee, the information and evidences gathered at the back of the Assessee is fatal to the case of the Department and the use of such information and evidence against the assessee unilaterally is not permissible under the law. This is in blatant contravention of the provisions of section 142(3) of Income Tax Act, which mandates the Assessing Officer to provide to the assessee, the information gathered on the basis of any enquiry, and proposed to be used against the assessee in the assessment. 105. We are also, in this regard, guided by the decision of the Hon ble jurisdictional Punjab and Haryana High Court in the case of Commissioner of Income Tax, Patiala II Versus Sham Lal , 127 ITR 816 (P H), wherein, it has been held that The assessee is, in law, entitled to rebut the material placed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without-calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the I.T. authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to crossexamine the manager of the bank with reference to the statements made by him. We are clearly of the view that the letters dated 18th February, 1955, and 9th March, 1957, did not constitute any material evidence which the Tribunal could legitimately take into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350/- was remitted by the assessee from Madras, and if these two letters are eliminated from consideration, it is obvious that there was no material evidence at all before the Tribunal which could support this finding . 107. The Hon ble Rajasthan High Court in the case of Micro Marbles Private Limited Versus Office of the Income Tax Officer , 2023 (1) TMI 282 (Raj), has held that In view of the above decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t grievance of assessee is that the assessment has been reopened on the basis of information dated 04.02.2019, received from the Income Tax Officer, Ward 1(5), Chandigarh, which contains the details of search conducted on Shri Himanshu Verma on 29.03.2012, and as per such information, six companies had provided accommodation entries of Rs. 3.90 crore to the assessee company, which six companies are controlled by Shri Himanshu Verma. 111. The learned Commissioner of Income Tax (Appeals) has observed that the Assessing Officer considered the information received alongwith the findings contained in the Appraisal Report and reconciled such information with the particulars as contained in the Income Tax Return of the assessee; that the information was received from the Income Tax Officer, Ward-1(5), Chandigarh, vide letter No. 5566 dated 04.02.2019, that the assessee had received credits from six paper companies of Shri Himanshu Verma, an accommodation entry provider; that thereupon, the Assessing Officer recorded reasons for the formation of belief of escapement of income from assessment. The grievance of the assessee is that the Assessing Officer did not apply his own mind while proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year under consideration, the cash deposits were actually re-deposits of cash withdrawn earlier from the same bank account during the year under consideration. Remarkably, in the re-assessment proceedings, these cash deposits have been accepted by the Assessing Officer as genuine deposits. The bank statement was available on record at the time of the original assessment proceedings. However, the reasons recorded for the formation of belief of escapement of income chargeable to income tax do not evince that this statement was perused or considered by the Assessing Officer before recording the reasons recorded for the formation of belief of escapement of income chargeable to income tax. 114. Though the Assessing Officer placed reliance on the statement of Shri Himanshu Verma, while recording the reasons for the formation of belief of escapement of income chargeable to income tax, it has been lost sight of that in such statement, he did not state the names of the alleged six companies. As per the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the statement further makes mention of there being middlemen/clients, though no name of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded for the formation of belief of escapement of income chargeable to income tax to believe that the income of the assessee had escaped assessment, was missing. G G Pharma is directly applicable hereto. In the present case also, as discussed, the Assessing Officer merely stated his conclusion at the very outset in the reasons recorded for the formation of belief of escapement of income chargeable to income tax recorded, without first forming a prima-facie opinion on the basis of the material. Rather, he did not even refer to the material available on record in the original assessment proceedings. 117. In Sabh Infrastructure Versus ACIT (supra), it was held that there needs to be reasons recorded for the formation of belief of escapement of income chargeable to income tax to believe and not merely reason to suspect that income has escaped assessment. It was held that the reasons recorded for the formation of belief of escapement of income chargeable to income tax failed to mention as to what facts or information were with-held by the assessee and mainly relying on the Investigation Report, which did not form part of the reasons recorded for the formation of belief of escapement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to income tax as to how the Assessing Officer had reached this conclusive finding, or the basis thereof. 120. Apropos Raymond Woollen Mills Versus Income Tax Officer and Others (supra), therein, it was held, inter-alia, that the Court cannot strike down the reopening of the case in the facts of that case; that it would be open to the assessee to prove that the assumption of facts made in the notice was erroneous; that the assessee might also prove that no new facts came to the knowledge of the Income Tax Officer after completion of the assessment proceedings. The matter was remanded to the Assessing Officer holding, further, that in determining whether commencement of reassessment proceedings was valid, it has only to be seen whether there was prima-facie some material on the basis of which the department could reopen the case, and that the sufficiency or correctness of the material was not a thing to be considered at that stage. 121. We find that this decision, in the facts of the present case, works in favour of, rather than against the assessee. It was in a writ petition, which was the subject matter in Raymond Woollen Mills Limited (supra), that it was held that the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Communication (supra), is distinguishable. Even the SLP there-against was dismissed. 125. Pushpak Bullions Private Limited Versus DCIT (supra), is also not attracted, as in the present case, as against in Pushpak Bullions Private Limited (supra), no specific question was raised to Shri Himanshu Verma with regard to the assessee company. Reference was made to seventy to eighty companies, without linking the six companies from whom the advance against sales was allegedly received, without giving the list of the seventy to eighty companies and also without stating that the six companies were out of those seventy to eighty companies. 126. In Jayant Security Finance Limited Versus ACIT (supra) after completion of assessment, it came to the notice of the Investigation Wing that advances of Rs.10.25 Cr had been received by the assessee from M/s East West Finvest India Limited during assessment year 2010-11. M/s East West Finvest India Limited worked as an entry provider and earned bogus funds to provide advances to various persons. The assessment had been completed on 08.03.2012. In the case at hand, the assessment was completed on 15.09.2014, whereas the information was available with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-opening constituted a change of opinion. The original assessment in that case was completed on 15.09.2010, and the enquiry by the Investigation Wing was carried out on 15.10.2015. On the other hand, in the present case, the original assessment order contains elaborate findings of the Assessing Officer, showing the unambiguous formation of opinion by the Assessing Officer in the original assessment proceedings. Then, as against the factum of conducting of enquiry by the Investigation Wing after the completion of assessment in that case, in the case at hand, the statement of Shri Himanshu Verma was recorded on 29.03.2012 and it was available to the Department at the time of passing of the original assessment order on 15.09.2014. Moreover, the proceedings in Chetan Sabharwal (supra), were writ proceedings, whereas no such request for exercise of extra ordinary jurisdiction is there in the present case. 130. Having thus considered the rival contentions in the light of the decisions cited by both the parties, we find that the learned Commissioner of Income Tax (Appeals) has erred in upholding the Assessing Officer reliance on a third party opinion without application of his own mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessee company with Sh. Himanshu Verma and his group Companies, as he has not mentioned anything about the nature of the transaciton made, in the reasons recorded by the Assessing Officer. We also find that the Assessing Officer has himself assessed this company as a genuine company in the assessment orders under section 143(3) read with section 147 of the Income Tax Act, 1961, for the assessment years 2011-12 to 2018-19 and the Assessing Officer has wrongly alleged, in the reasons recorded by him, without any incrimitnating material on record, that the Assessee company was a shell company. 131. Therefore, finding merit therein, Ground nos. 2, 3, 7, 8 and 11 are allowed and Ground No. 6 is rejected as infructuous. GROUND NO.4 132. The grievance of the assessee by way of Ground No.4 is that the learned Commissioner of Income Tax (Appeals) has erred in upholding the re-opening of the completed assessment after four years of such completion of original assessment under section 143(3) of the Income Tax Act, without there being any allegation by the Assessing Officer that all material facts necessary for the assessment had not fully and truly been disclosed by the assessee duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company during the original scrutiny assessment proceedings, in the year 2014, and even the amounts received from the said companies were the same. 133.8 The assessee stated that all the companies from whom the alleged unexplained credits had been received by the assessee company were assessed to tax. 133.9 The assessee stated that the allegation that the companies were paper companies, without any further enquiry into the facts, was, by itself, a reason insufficient to reopen the completed scrutiny assessment. 133.10 The assessee stated that beside there being no such allegation of failure on the part of the assessee to make a full and true disclosure of the material facts during the original assessment proceedings, the Assessing Officer had also overlooked the fact that due enquiry into the alleged unexplained credits had been conducted by the Assessing Officer in the original assessment proceedings and that he had framed the original assessment under scrutiny after detailed enquiry into the identity, genuineness and credit worthiness of the respective entities. 133.11 The assessee stated that therefore, it was not open to the Assessing Officer to re-examine the same issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material facts, resulting in the Assessing Officer proceeding on the basis of facts which were incorrect and wrong. 133.20 It was stated that the reasons recorded for the formation of belief of escapement of income chargeable to income tax and the documents on record are of paramount importance and they have to be examined to determine whether the assessee company had stated incorrect and wrong material facts during the original assessment proceedings. 133.21 It was stated that neither the Assessing Officer, while recording the reasons recorded for the formation of belief of escapement of income chargeable to income tax, nor the learned Principal Commissioner of Income Tax, while giving his approval under section 151 of the Income Tax Act, had leveled any allegation against the assessee company regarding any failure on its part to disclose fully and truly all material facts necessary for its assessment, during the original assessment proceedings under section 143(3) of the Income Tax Act. 133.22 It was stated that when all the transactions and bank accounts, etc., were recorded in the books and the bank statement was already on record, the conclusion that the transactions were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er observed that on the strength of such facts, it cannot be said that all the material facts in respect of the said credits received during the year were fully and truly disclosed by the assessee. 134.7 The learned Commissioner observed that the Assessing Officer acquires jurisdiction to reopen an assessment under section 147 of the Income Tax Act, on the basis of tangible information in his possession, subsequent to which, he has reasons for the formation of belief of escapement of income chargeable to income tax, which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, part of his income chargeable to Income Tax has escaped assessment. 134.8 The learned Commissioner observed that therefore, the case of the assessee was squarely covered by the proviso to section 147 of the Income Tax Act, wherein, it is provided that where an assessment under sub-section (3) of Section 143 or this Section has been completed for the relevant assessment year, no action shall be taken under this Section after the expiry of four y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for his assessment for that assessment year. 135.2 It has been claimed that all material facts were duly disclosed by the assessee during the original assessment proceedings and there is no justification to avail the extended period of six years without any allegation that there is any failure and without even demonstrating that the proviso to section 147 is exercised for such failure. 135.3 It has been stated that the issue of advance against sale of commercial space from six companies aggregating Rs. 3.90 crore stood examined by Assessing Officer in completed assessment under section 143(3) of the Act. 135.4 It has been stated that the Assessing Officer issued a notice dated 10.09.2014, copy at APB, Page 15 and that the assessee had submitted the desired documents before the Assessing Officer as per reply dated 15.09.2014, copy at APB, Pages 16-17, alongwith copy of Allotment Letter addressed to the investor, Agreement to Sell, Income Tax Return and copy of bank statement of the investor. 135.5 It has been stated that these complete primary facts relating to the transactions of advance against sale received from these six companies, were filed by the assessee before the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion Society Versus ACIT ITA Nos. 710 and 711(ASR)/2014 and ITA No.705(ASR)/2014 February 25, 2016 xi) Priti Paras Savla Versus Income Tax Officer Ward (3)(2)(4) 440 ITR 472 (Guj) DEPARTMENT S STAND BEFORE US 136. On the other hand, the Department contends that whole the dispute is regarding the bank account of the company, 65012097085 , not disclosed during the assessment proceedings. 136.1 The learned CIT (DR) had submitted that the account number mentioned in the assessment proceedings is different from the account number stated in the reasons recorded for the formation of belief of escapement of income chargeable to income tax. 136.2 It has been argued that apart from a wrong bank account number, not even an iota of detail is there on record regarding the bank account of the assessee in the assessment proceedings under section 143(3) of the Income Tax Act. 136.3 It has been claimed that the learned Commissioner of Income Tax (Appeals) has correctly observed that the six credits of Rs. 3.90 crores were not reflected by the assessee in its balance sheet as on 31.03.2012, as long term borrowings, but they were shown as advance against land adjusted against fixed assets. 136.4 The l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee has contended that moreover, in the assessment order dated 15-9-2014, there is a specific finding of the Assessing officer that books of account were produced, copies of account of deposits were produced and were verified, and no discrepancy was found. 137.9 The learned Counsel for the assessee has contended that this important finding of fact cannot be ignored, because verification of any loan can be done from the bank account, which is part of books of account. 137.10 The learned Counsel for the assessee has submitted that the assessee is maintaining only one bank account with the State Bank of Patiala and the balance therein as on 31.03.2012 was Rs. 13,85,196/-, as evident from the Schedule of Cash and Bank Balance, lying at page 73 of the APB, annexed with the Balance Sheet as on 31.03.2012, at APB, Pages 68-76 and the same tallies with the bank balance as per the bank statement filed at APB, Page 88, for Account No. 65012097085. 137.11 On the claim of the learned CIT (DR) that the issue of advance against sale of commercial space amounting to Rs. 3.90 crore was never examined during the original assessment proceedings completed on 15.09.2014 under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee has placed his reliance on the judgments of the Hon ble Gujarat High Court in the cases of Kayathwala Estate Private Limited (supra) and Priti Paras Savla (supra) and the Supreme Court judgment in the case of Lakhmani Mewal Das (supra), on the issue that where information was available with the Department prior to the date of completion of the original assessment, it can be said that the same information was received later on. In addition, the learned Counsel for the assessee submitted that both the issues raised by the learned CIT (DR), i.e., disclosure of wrong bank account number and Limited Scrutiny of original return, were never a part of the reasons for the formation of belief of escapement of income chargeable to income tax, recorded by the Assessing Officer, and that it is not open to supplement / improve the reasons recorded for the formation of belief of escapement of income chargeable to income tax, as held by the Hon ble Bombay High Court in the case of Indivest Pte. Ltd versus AD DIT , 350 ITR 120 (Bom). OUR FINDINGS ON GROUND No.4 138. On this issue, the Department has stressed that the issue is of advances against sale of commercial space to the extent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om whom such advances are received, and the assessee company filed reply dated 15.09.2014 (APB, Pages 16- 17), alongwith enclosures. For ease of reference, the letter issued by the Assessing Officer and the reply filed by the assessee company are scanned and reproduced as follows: 138.4 It was also a claim of the Department before us, that the case was for limited scrutiny and was meant to verify the unsecured loans only, and not the advances. This assertion is also found to be incorrect because of the Notice issued by the Assessing Officer to the assessee under section 143(2) of the Act. This Notice does not state that it is meant for limited scrutiny (APB, Page 752). It is scanned and reproduced hereunder. In addition, the assessee has rightly contested that the concept of limited scrutiny was introduced for the first time only in the assessment year 2015-16, and that this concept was not applicable to the year under consideration, i.e., assessment year 2012-13. This assertion also does not stand controverted by Department. 138.5 The Department has stressed that the bank account number disclosed by the assessee alongwith reply dated 19.08.2014 (APB-10) is not correct, since the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee company by the Investigation Wing, as claimed by the Assessing Officer in para 12 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax. The Additional Director of Income Tax, Ludhiana, vide summons dated 05.04.2018, issued under section 131 of the Act, asked Shri Triloki Nath Singla to produce details of the bank account of the company where Shri Triloki Nath Singla or his son Shri Sahil Singla is a Director. In fact, the Department has not denied that as on 05.04.2018, i.e., the date of the summons, neither Shri Triloki Nath Singla, nor Shri Sahil Singla were Directors in the assessee company. 138.8 In sum, keeping in consideration the above facts, we do not find there to exist any failure on the part of the assessee to disclose the bank account during the original assessment proceedings or the post-search investigation. In fact, in the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer has nowhere alleged that the bank account of the assessee was not disclosed during the original assessment proceedings. It is trite law that the reasons recorded for the format ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the proviso to Section 147 was not applicable, due to which, the extended period of six years was not available. 139.5 In Avirat Star Homes Venture Private Limited (supra), again, the return filed was processed under section 143(1) of the Income Tax Act and so, the proviso to Section 147 was not applicable, nor was the extended period of six years available. 139.6 The same is the position with regard to Anderson Biomed Private Limited Versus ACIT others (supra). In that case, funds were received from a foreign entity and so, the matter was covered by the second proviso to Section 147, as per which, the first proviso shall not apply in case the amount has been received from a foreign company. These are nowhere the facts of the case at hand. 139.7 In Shrikant Phulchand Bhakkad (HUF) (supra), the case had been selected for scrutiny under Computer Aided Scrutiny Selection for a limited purpose, to examine whether the share capital was genuine and from disclosed sources. The proviso to Section 147 was not applicable, the notice under section 148 of the Act having been issued within four years of the assessment completed on 25.12.2018, i.e., on 31.03.2021. Besides, as discussed, the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 . 139.11 In the Gujarat High Court judgment in the case of Kayathwal Estate Private Limited (supra), wherein SLP is also dismissed by the Hon ble Supreme Court on 14.02.2022, under similar facts, the Hon ble High Court has held that After careful examination of the reasons recorded for the formation of belief of escapement of income chargeable to income tax recorded and the order of disposing of the objection, we find that on 08.10.2014, the scrutiny assessment was concluded. The search action carried out on 01.10.2013 in the case of Mr. Pravin kumar Jain. In the reasons recorded for the formation of belief of escapement of income chargeable to income tax recorded, it is nowhere mention that on which date the information was received by the department. Thus, we are of the considered view that the information as mentioned in the reasons recorded for the formation of belief of escapement of income charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly be at the cost of the national exchequer and must necessarily result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in other spheres of human activity. So far as income-tax assessment orders are concerned, they cannot be reopened on the scope of income escaping assessment under Section 147 of the Income Tax Act of 1961 after the expiry of four years from the end of the assessment year unless there be omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. As already mentioned, this cannot be said in the present case. The appeal is consequently allowed; the judgment of the High Court is set aside and the impugned notices are quashed. 139.15 In the Supreme Court judgment in the case of Income Tax Officer, Ward-I, Distt. VI, Calcutta and Others Versus Lakhmani Mewal Das (supra), it was held that Whether the assessment can be reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d SEBI order dated 30-11-2017. The Hon ble High Court held that after disclosure of primary facts with regard to purchase and sales of scrip of M/s. Aarya Global, the Assessing Officer could have made further inquiry with regard to the truthfulness of the transaction and reliability of the company. The Assessing Officer, being an expert in the subject, could have inferred from the price of purchase and sales of the scrip that the transaction is bogus. It is pertinent to note that the Assessing Officer was investigating the transaction of penny stock Company, i.e., KGN Industries. The record indicates that the report of SEBI imposing penalty was pronounced on 30.11.2017. Therefore, it cannot be said that the revenue was unaware with regard to alleged bogus trading undertaken by M/s. Aarya Global and connected persons and their beneficiaries. Under such circumstances, the contention raised by the revenue is not acceptable. 139.18 These decisions, as discussed, are squarely applicable to the facts of the present case. 139.19 In view of the above, we hold that there is no failure on the part of assessee company to disclose all material facts during the original assessment completed und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of Chhugamal Rajpal Vs S.P.Chaliha 79 ITR 603 (SC) and that of the Hon ble Delhi High Court in the case of United Electrical Co. (Private) Limited Vs CIT , 258 ITR 317 (Del). 145. The assessee contended that the learned Principal Commissioner of Income Tax had treated the provisions of Section 151 of the Income Tax Act lightly, having taken the duty imposed on him under the said provision, as of little importance. 146. The assessee contended that the learned Principal Commissioner of Income Tax had substituted the form for the substance. 147. The assessee submitted that reliance was being placed on the decision of the Hon ble Supreme Court in the case of CIT Vs S. Goyanka Lime Chemical Limited , 64 taxmann.com 313 (SC), wherein the SLP filed by the Department against the decision of the Hon'ble Madhya Pradesh High Court was dismissed. COMMISSIONER OF INCOME TAX (APPEALS) S FINDINGS 148. The learned Commissioner of Income Tax (Appeals) has held that a detailed proposal was sent by the Assessing Officer seeking approval to reopen the assessment under section 147 of the Income Tax Act to the Principal Commissioner of Income Tax. 148.1 The learned Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company did not invest any amount in the sand mining business, either in the assessment year 2012-13, or in the assessment year 2018-19. 149.5 The learned Counsel for the assessee company has contended that the mention of deposit of amount of Rs.25,83,50,000/- is wrong, as the total deposit was of Rs.27,83,50,000/-, which was explained during the assessment proceedings completed under scrutiny on 15.09.2014 and there is no reference to such verification or original assessment completed. 149.6 The learned Counsel for the assessee has averred that as per information received, the assessee had taken accommodation entries of Rs.3.90 crores from six shell companies of the Himanshu Group, and that the funds of Rs.3.90 Crores had been received in the same bank account which was not disclosed to the Department. 149.7 The learned Counsel for the assessee has averred that this is a wrong finding recorded by the learned Principal Commissioner of Income Tax, because the assessee is maintaining only one bank account with the State Bank of India and this account was duly disclosed to the Assessing Officer during the original assessment proceedings. 149.8 The learned Counsel for the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the sand mines. 151.2 However, as discussed herein above, the record nowhere shows any numerous bank accounts owned by Shri Triloki Nath Singla or by Shri Sahil Singla to have been unearthed in the search and post-search investigation. It stands firmly established on record that there was only one bank account involved, which was with the State Bank of India and which had been duly disclosed before the Assessing Officer in the original assessment proceedings and the same had been duly taken into consideration by the Assessing Officer while passing the original assessment order dated 15.09.2014 under scrutiny proceedings. The Department has remained unable to counter this factual position, as submitted by the assessee and which position stands established on record. Thus, the assessee is correct in contending that the Assessing Officer had mentioned wrong facts before the learned Principal Commissioner of Income Tax while seeking his approval and that the learned Principal Commissioner of Income Tax, without application of mind and without verifying the facts from the assessment record, just issued the approval by merely reiterating those very facts in the approval itself. 151.3 T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er violation of the principles of natural justice. 153.9 The assessee further submitted that the inference drawn by the Assessing Officer was only on the basis of material collected at the back of the assessee, for which, no opportunity of cross-examination was provided to the assessee. 153.10 The assessee urged that therefore, the said documents and information relied on by the Assessing Officer could not legally have been used against the assessee for the purpose of either drawing any adverse inference against the assessee, or for making any addition in the hands of the assessee. 153.11 Reliance was placed by the assessee on Andaman Timber Industries Versus CCE rendered by the Hon'ble Supreme Court, on 02.09.2015, in Civil Appeal No. 4228 of 2006, CIT Versus SMC Share Broker Limited , 288 ITR 345 (Del), Shri Sunil Parkash Versus ACIT-15(2), Mumbai , 2017(3) TMI 434-ITAT Mumbai, Income Tax Officer Versus Smt. Neelam Chawla 2007 (12 TMI 477-ITAT (Delhi) , and Commissioner of Income Tax Versus Rajesh Kumar , 306 ITR 27 (Delhi). COMMISSIONER OF INCOME TAX (APPEALS) S FINDINGS 154. The learned Commissioner of Income Tax (Appeals) has observed that as seen from the assessment recor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been considered, as available on record, before drawing logical inferences. 154.9 The learned Commissioner of Income Tax (Appeals) observed that the incriminating material found in the course of search proceedings under section 132 of the Income Tax Act in the case of Shri Himanshu Verma, including his statement, had been used to corroborate the observations / findings to reach to the conclusion, by the Assessing Officer. 154.10 The learned Commissioner of Income Tax (Appeals) observed that therefore, it was not the Assessing Officer who had remained unable to discharge the onus cast on him, rather, it was the assessee who had failed to discharge the onus cast on it to explain the credits introduced during the year under consideration. 154.11 The learned Commissioner of Income Tax (Appeals) observed that the statement of Shri Himanshu Verma had not been used as a primary evidence against the assessee. 154.12 The learned Commissioner of Income Tax (Appeals) observed that therefore, the statements of Shri Himanshu Verma and others had not been primarily relied upon by the Assessing Officer to draw inference against the assessee. 154.13 The learned Commissioner of Income Tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Axis Bank were also mentioned in his statement, in answer to Question No.15, by Shri Himanshu Verma, which banks had been used by him to provide accommodation entries. 154.23 The learned Commissioner of Income (Appeals) observed that it was through these bank accounts, that the assessee had received the advances of Rs.3.90 Crores. 154.24 The learned Commissioner of Income Tax (Appeals) observed that the statement of Shri Himanshu Verma had been further corroborated by the statements, recorded under oath, under section 131 of the Income Tax Act, of the various dummy Directors of the six share applicant companies. 154.25 The learned Commissioner of Income Tax (Appeals) observed that Shri Mukesh Yadav, Director of the companies Cornelius Marketing and Softpro Technology, had admitted in his statement recorded on 30.04.2012 that he had been working as an employee with Shri Himanshu Verma against a monthly salary of Rs.6000/-, for signing various papers and operating certain bank accounts, without noting their actual contents. 154.26 The learned Commissioner of Income Tax (Appeals) observed that in his statement, Shri Mukesh Yadav had admitted that he was not aware of any business tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the amount of additions, it had to be held that there was no denial of the principles of natural justice, if the witnesses were not allowed to be cross-examined by the assessee. 154.36 The learned Commissioner of Income Tax (Appeals) then reproduced the order of the Hon'ble Bombay High Court, at pages 229-230 of his order. 154.37 The learned Commissioner of Income Tax (Appeals) placed reliance on the decision of the Hon'ble Supreme Court in the case of State Bank of India Versus S. K. Sharma , AIR 1996 SC 364. 154.38 Therein, it was held that the interest of justice clearly demands that the guilty should be punished and the technicalities and irregularities which do not occasion failure of justice are not allowed to defeat the ends of justice. 154.39 It was held that the principles of natural justice are but the means to achieve the ends of justice and that they cannot be perverted to achieve the opposite end. 154.40 The learned Commissioner of Income Tax (Appeals) further placed reliance on the decision of the Hon'ble Madras High Court in the case of T. Devasahaya Nadar Versus CIT , 51 ITR 20 (Mad). 154.41 In that case, it was held that it cannot be laid down as a g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r been done. 155.3 The learned Counsel for the assessee has contended that the assessee had, vide letter dated 19.12.2019, requested the Assessing Officer to provide a copy of the statement and also to allow to the assessee, cross-examination of Shri Himanshu Verma and had offered to pay the requisite cost for the same. 155.4 The learned Counsel for the assessee has contended that however, neither were the statements provided to the assessee, nor cross-examination of Shri Himanshu Verma was allowed. 155.5 Reliance has been placed by the learned Counsel for the assessee on the decision of the Hon'ble Supreme Court in the case of CIT-7, New Delhi Versus M/s Odeon Builders P Limited , 418 ITR 315 (SC) and on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries Versus Commissioner of Central Excise, Calcutta-II , 281 CTR 241 (SC). DEPARTMENT S STAND BEFORE US 156. The learned CIT DR has, on the other hand, submitted before us, that it has to be seen, in this regard, if the assessee had with it the statement of Shri Himanshu Verma or not. 156.1 The learned CIT (DR) has contended that in its submissions before the learned Commissioner of Income Tax ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such large sums to the assessee company. 156.12 The learned CIT (DR) has contended that therefore, these amounts ought to have been added to the income of the assessee, as has rightly been done. 156.13 The learned CIT (DR) has contended that had the statement of Shri Himanshu Verma been the sole basis of assessment, the assessee would have been well within its rights to be confronted with such statement. 156.14 The learned CIT (DR) has contended that however, since the statement of Shri Himanshu Verma was used by the Assessing Officer only as a piece of information to conduct detailed enquiries, the information was not required to be confronted to the assessee. 156.15 Reliance has been sought to be placed, by the learned CIT (DR), on the decision of the Mumbai Bench of the Tribunal in the case of GTC Industries Limited Versus ACIT , 65 ITD 380 (Mum),and the decision of the Hon'ble Delhi High Court in the case of CIT Versus Kuwer Fibres (Private) Limited , 77 taxmann.com 345 (Del). 156.16 The learned CIT (DR) has further claimed that the request for cross-examination of Shri Himanshu Verma was made by the assessee company only at the fag end of the year. ASSESSEE'S REBUTTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t APB, Page 53, last lines. 157.10 The learned Counsel for the assessee has submitted that vide letter dated 19.12.2019, the assessee requested the Assessing Officer to provide a copy of the statement and cross-examination of Shri Himanshu Verma. 157.11 The learned Counsel for the assessee has contended that however, the same were not provided to the assessee. 157.12 The learned Counsel for the assessee has contended that from the above facts patent on record, it is evident that the demand for the documents and the statement was made by the assessee on 20.06.2019 and 02.08.2019, and finally, on 19.12.2019, but nothing was provided to the assessee by the Assessing Officer. The learned Counsel for the assessee has contended that as such, there is no justification or basis to allege that the request was made by the assessee only at the fag end of the year. 157.13 The learned Counsel for the assessee has emphasized that moreover, even the statement of Shri Himanshu Verma was not provided to the assessee, which should have been done by the Assessing Officer without any request. OUR FINDINGS ON GROUND NO. 9 158. In this regard, it is seen that in Para 11 of the reasons recorded by the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , is nothing other than an act of approbation and reprobation, in as much as while stating that the statement itself was not utilized by the Assessing Officer to form the reasons recorded for the formation of belief of escapement of income chargeable to income tax, it is, in a round about and manner, being accepted, while dubbing it to be not the statement, but the information contained therein, which was used by the Assessing Officer to form the reason of his belief. This is nothing other than circumlocution. The statement contains nothing but the information. So, the information is the statement itself. 158.5 It has further been contended by the Department that the statement of Shri Himanshu Verma was used only as information to form a reasonable belief of escapement of income. This, again, takes the case of the Department no further. If, admittedly, the statement was indeed utilized as information for formation of the belief of the Assessing Officer, the same, again, was liable to be confronted to the assessee, allowing the opportunity of cross-examination of Shri Himanshu Verma to the assessee company, in compliance of the settled principle of natural justice, i.e., audi altera ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat even without calling the Manager of the Bank in evidence to prove the letter dated 18.02.1955, it could be taken into account as evidence; that however, before the Income Tax Authorities could rely on it, they were bound to produce it before the assessee, so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the Manager of the Bank with reference to the statement made by him; and that there was neither any explanation regarding what happened when the Manager appeared in obedience to the summons referred to in the letter, nor what statement he had made. 159.2 In the present case too, the Income Tax Authorities were bound to allow the assessee to cross examine Shri Himanshu Verma, which was illegally not done in gross and utter violation of the principles of natural justice. 159.3 In Andaman Timber Industries (supra), the Hon'ble Supreme Court held that not allowing the assessee to cross examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the order impugned, was a serious flaw, which made the order a nullity, in as much as it amounted to violation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the appeal of the assessee had been allowed, observing that the entire disallowance was based on third party information gathered by the Investigation Wing of the Department, which information had not been independently subjected to further investigation by the Assessing Officer, who had not provided the copy of such statement to the appellant, thus denying opportunity of cross-examination to the appellant, who had prima-facie discharged the initial burden of substantiating the purchases through various documentations, including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, and CAT Registration of the sellers and their Income Tax Returns. 160. In totality, the purchases made by the appellant from M/s Padmesh Realtors Private Limited was found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/- was directed to be deleted. 161. GTC Industries Limited (supra), is not applicable. Therein, the Assessing Officer had made independent investigation and had not relied blindly on the information. The statement recorded was indirect/secondary evidence. There was twin branding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor cross-examination of Shri Himanshu Verma was ever allowed to the assessee, inspite of the fact that the assessee had all through been requesting for such cross-examination / statement / information. 169. Accordingly, Ground No. 9 is accepted. 170. Thus, Ground Nos. 2 to 9 (except Ground No.6) and 11, which are on legal issues, are accepted. 171. Ground No. 10 is on the merits of the addition of Rs.3.90 crores. No argument with regard thereto was addressed. 172. In view of Ground Nos. 2 to 9 (except Ground No.6) and 11 having been adjudicating in favour of the assessee, nothing further survives for adjudication. 173. Accordingly, the appeal of the assessee in ITA 718/CHD/2022 is partly allowed, as above. ITA 16/CHD/2023 DEPARTMENT S APPEAL 174. This is cross-appeal filed by the Department, to the above appeal of the assessee. The Department has taken following Grounds of appeal:- i) Whether ld. CIT(A) has erred in deleting the addition of Rs. 2,48,00,000/- made u/s 68 of the Income Tax Act, 1961 by holding that credit received in the account of M/s TJR Properties Pvt. Ltd. was found explained, ignoring the fact that the M/s TJR Properties Pvt. Ltd. is a shell company? ii) Wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee submitted before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer had wrongly made addition of Rs.2.48 crore. 184. The assessee submitted before the learned Commissioner of Income Tax (Appeals) that this amount of Rs.2.48 crores was received by the assessee company from its sister concern, M/s TJR Properties Private Limited through banking channel during the year under consideration. 185. The assessee contended before the learned Commissioner of Income Tax (Appeals) that while making this addition, the Assessing Officer had wrongly held that it was a shell company which existed only on paper and had no profit earning apparatus as such, because this company was not carrying on any kind of business activity, whatsoever. 186. The assessee submitted before the learned Commissioner of Income Tax (Appeals) that being carried away by presumptions, conjectures and surmises, the Assessing Officer had mentioned a company called M/s Evershine Resorts Private Limited and had declared it to be a shell company that existed only on paper and had no proper earning apparatus as such, because this company was not carrying on any kind of business activity whatsoever. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income Tax (Appeals) that Shri Jagdish Rai Gupta was under a lot of emotional stress coupled with work pressure as he had to handle his vast joint family business alone, henceforth. 195. The assessee contended before the learned Commissioner of Income Tax (Appeals) that thus, he could not get actively involved in the affairs of his other companies, i.e., M/s TJR Properties Private Limited and M/s Evershine Resorts Private Limited during this extremely rough patch of his life. 196. The assessee contended before the learned Commissioner of Income Tax (Appeals) that therefore, Shri Jagdish Rai Gupta requested the other Directors to manage the bank and other operations of the assessee company for the time being, just to lessen his workload and stress. 197. The assessee contended before the learned Commissioner of Income Tax (Appeals) that Shri Jagdish Rai Gupta had denied knowledge of any bank transactions carried out by the company only in the recent past/at this stage due to this extreme stress. 198. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer, while reproducing the statement of Shri Jagdish Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cause during the search, he did not have access to the books of account of the assessee company. 206. The assessee contended before the learned Commissioner of Income Tax (Appeals) that also, it was not a memory test going on, especially since these questions were being asked under immense stress and duress and it is not possible for anyone to remember these details by heart in such circumstances. 207. The assessee contended before the learned Commissioner of Income Tax (Appeals) that further, Shri Jagdish Rai Gupta had categorically intimated to the search team that the books of account were with Shri Triloki Nath Singla. 208. The assessee contended before the learned Commissioner of Income Tax (Appeals) that these books were found and seized from the office premises of the firm of Shri Triloki Nath Singla. 209. The assessee contended before the learned Commissioner of Income Tax (Appeals) that inspite of the fact that Shri Triloki Nath Singla was also covered in this search operation, no question was put to him regarding the bank entries of the assessee company. 210. The assessee contended before the learned Commissioner of Income Tax (Appeals) that this clearly indicated a malaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement/information received from the Investigation Wing of the Department, to the assessee company. 219. The assessee contended before the learned Commissioner of Income Tax (Appeals) that thus, the assessee company was never put to notice regarding this issue decided against it, so as to allow the assessee company to rebut the allegation leveled against it. 220. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the assessee was not given any opportunity to cross-examine the witness, i.e., Shri Jagdish Rai Gupta, though his statement had been made the basis of the impugned addition of Rs.2.48 crore by the Assessing Officer. 221. The assessee contended before the learned Commissioner of Income Tax (Appeals) that this was a serious flaw which made the assessment order a nullity in as much as it amounted to violation of the principles of natural justice, because of which, the assessee company had been adversely affected. 222. The assessee contended before the learned Commissioner of Income Tax (Appeals) that further, it was not permissible to admit the oral hear-say evidence of Shri Jagdish Rai Gupta unless an opportunity of cross-examination was gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to it. 231. The assessee contended before the learned Commissioner of Income Tax (Appeals) that all opportunities must be given to the assessee company in order to lead any evidence that the assessee company might feel necessary to rebut the case against it. 232. The assessee contended before the learned Commissioner of Income Tax (Appeals) that thus, no reliance could be placed on the statement of Shri Jagdish Rai Gupta. 233. It was stated by the assessee, that further, in addition, as regards the contention of the Assessing Officer that Shri Jagdish Raj Gupta had denied any knowledge of any business transactions or bank transactions carried out by M/s TJR Properties Private Limited, the Assessing Officer had staged the said somersault after receiving an illegal and unauthorized diktat from the Deputy Director of Income Tax (Investigation), Mohali, in the case of M/s TJR Properties Private Limited, and then he had changed his track and had started finding faults in the statement of Shri Jagdish Rai Gupta, recorded under duress and stress, during the search operation, by picking stray threads from here and there and purposely assigning wrong meanings to a few words and also by hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , assessment year 2012-13 and re-assessment of both the companies for assessment year 2012-13 had been done in December, 2019 by the same Assessing Officer, the identity of M/s TJR Properties Private Limited could not be doubted under any circumstance by the Assessing Officer. 244. The assessee contended before the learned Commissioner of Income Tax (Appeals) that still, to establish the genuineness and credit worthiness of the transaction with M/s TJR Properties Private Limited, the assessee had submitted before the Assessing Officer during the re-assessment proceedings, the confirmation from M/s TJR Properties Private Limited, the copy of account of the assessee company in the books of account of M/s TJR Properties Private Limited, the acknowledgements of returns of income of M/s TJR Properties Private Limited and the copies of bank statements and balance sheet of M/s TJR Properties Private Limited. 245. The assessee contended before the learned Commissioner of Income Tax (Appeals) that no corner had been left un-dealt with by the assessee company, in respect of proving the identity, credit worthiness and genuineness of M/s TJR Properties Private Limited, during these re-assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2012-13 had been done in December, 2019 by the same Assessing Officer. 254. The assessee contended before the learned Commissioner of Income Tax (Appeals) that thus, the identity of M/s TJR Properties Private Limited could not have been doubted by the Assessing Officer, under any circumstances. 255. The assessee contended before the learned Commissioner of Income Tax (Appeals) that for assessment year 2012-13, the Assessing Officer had himself assessed the business receipts of M/s TJR Properties Private Limited, put at about Rs. 5 crores, in assessment completed under section 153A read with Section 143(3) of the Income Tax Act, which the said company had received from sale of showroom site owned by M/s TJR Properties Private Limited. 256. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the amount in question, i.e. Rs.2.48 crore, had been given to the assessee company through banking channel by M/s TJR Properties Private Limited, out of the aforesaid sale proceeds of its showroom site. 257. The assessee contended before the learned Commissioner of Income Tax (Appeals) that thus, the genuineness and credit worthiness of M/s TJR Propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 264. The assessee contended before the learned Commissioner of Income Tax (Appeals) that till such date, the Assessing Officer had been satisfied that all transactions were through banking channels only. 265. The assessee contended before the learned Commissioner of Income Tax (Appeals) that till such date, the Assessing Officer had had no doubt whatsoever that these transactions were absolutely genuine transactions. 266. The assessee contended before the learned Commissioner of Income Tax (Appeals) that till the said date, i.e., till 27.12.2019, the Assessing Officer had no doubt that these transactions stood duly accounted for in the books of account of the company. 267. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer had himself proposed no addition in the case of M/s TJR Properties Private Limited, in the Deviation Note sent by him to the Deputy Director of Income Tax (Investigation), Mohali, on 16.12.2019. 268. The assessee contended before the learned Commissioner of Income Tax (Appeals) that this fact stands established beyond any shadow of doubt, by the fact that the said Deviation Note was prepared by the Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, in an utterly arbitrary and blatant violation of the provisions of the Income Tax Act. 274. The assessee contended before the learned Commissioner of Income Tax (Appeals) that it was thus, that the Assessing Officer had staged a somersault and had made the additions by assigning flimsy reasons therefor, as if, it was the Deputy Director of Incme Tax (Investigation), Mohali, and not he, that is, the Assessing Officer, who was the actual assessing authority. 275. The assessee contended before the learned Commissioner of Income Tax (Appeals) that further, the Deputy Director of Income Tax (Investigation), Mohali, had also categorically herself conceded that she had remained unable to carry out any further investigation in the case of the assessee company to ascertain the true facts, due to paucity of time. 276. The assessee contended before the learned Commissioner of Income Tax (Appeals) that inspite of this categoric admission made by the Deputy Director of Income Tax (Investigation), she, with a malafide intention, with a biased, pre-determined and predoctored mind-set, had sent the unauthorized, unwarranted and illegal diktat to the Assessing Officer, on 27.12.2019. 277. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted for by the assessee company in its books of account, and no addition at all was proposed by the Assessing Officer. 282. The assessee contended before the learned Commissioner of Income Tax (Appeals) that no addition as such was proposed by the Assessing Officer after his perusal of the statements of the Directors, recorded during the search and post-search investigations, his perusal of the replies filed by the company, including its books of account, his perusal of a detailed note filed on the comparison of the assessee company with the socalled shell company, and his perusal of the submission of cogent and reliable documentary evidences. 283. The assessee contended before the learned Commissioner of Income Tax (Appeals) that when once the Assessing Officer had himself made addition of all the credits received in the bank accounts of M/s TJR Properties Private Limited during the year under consideration, which also included the amount in question, i.e., the amount of Rs.2,48,00,000/-, by treating all the credits received in the bank accounts of M/s TJR Properties Private Limited during the relevant year as income of M/s TJR Properties Private Limited, then, under no provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and relevant evidence, or partly on evidence and partly on suspicions, conjectures or surmises, and if the Assessing Officer does anything of this sort, his findings should be declared as liable to be set aside. 289. The assessee contended before the learned Commissioner of Income Tax (Appeals) that therefore, the entirely genuine company (lender) had been illegaly declared as a shell company, merely on the basis of surmises and conjectures, just to declare the genuine credits received by the assessee company during the year under consideration, from M/s TJR Properties Private Limited, as addition of unexplained credits, without application of his own mind by the Assessing Officer and only on the diktat of a third party, that is, the Deputy Director of Income Tax (Investigation), Mohali, which requires to be deleted. COMMISSIONER OF INCOME TAX (APPEALS) S FINDINGS 290. While deleting the addition of Rs.2.48 crore made by the Assessing Officer, the learned Commissioner of Income Tax (Appeals) observed that the ground of appeal had been taken by the assessee company against the addition of Rs.2.48 crore made by the Assessing Officer on account of unexplained credit under section 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tax (Appeals) observed that during the course of the search, the statement of Shri Jagdish Rai Gupta, Director of M/s TJR Properties Private Limited, was recorded on oath under section 132(4) of the Income Tax Act. 290.8 The learned Commissioner of Income Tax (Appeals) observed that Shri Jagdish Rai Gupta had clearly stated in his statement under oath, that M/s TJR Properties Private Limited was not involved in any kind of business activity. 290.9 The learned Commissioner of Income Tax (Appeals) observed that further, Shri Jagdish Rai Gupta had denied any knowledge of any business transactions or bank transactions carried out by M/s TJR Properties Private Limited, in his statement. 290.10 The learned Commissioner of Income Tax (Appeals) observed that M/s TJR Properties Private Limited was a shell company and the amount received by the assessee company from M/s TJR Properties Private Limited was not at all genuine and its credit worthiness could not be proved in any circumstances. 290.11 The learned Commissioner of Income Tax (Appeals) observed that therefore, after consideration of the facts and circumstances of the case, the amount of Rs.2.48 crore credited in its bank account b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstances of the case, it had been observed that the assessee company had received an amount of Rs.2.48 crore from M/s TJR Properties Private Limited. 290.19 The learned Commissioner of Income Tax (Appeals) observed that the credits received by M/s TJR Properties Private Limited during the year under consideration had been separately examined, in the light of the findings recorded by the Assessing Officer during the assessment, as well as during the remand proceedings, while adjudicating upon for the year under consideration. 290.20 The learned Commissioner of Income Tax (Appeals) observed that while adjudicating the appeal in the case of M/s TJR Properties Private Limited for the year under consideration, the credits received in the bank accounts by M/s TJR Properties Private Limited during the year under consideration had been found to have been explained, vide order dated 30.09.2022, passed in Appeal No. 157/2019-20. 290.21 The learned Commissioner of Income Tax (Appeals) observed that therefore, there was no logic in treating the amount of Rs.2.48 crore as unexplained, since the same had been transferred out of the explained credits of M/s TJR Properties Private Limited. 290 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HE ASSESSEE'S STAND BEFORE US 292. The learned Counsel for the assessee has contended before us that during the year under consideration, that is, in the assessment year 2012-13, the assessee company had received an amount of Rs.2.48 crore from M/s TJR Properties Private Limited i.e., a group company. 292. 1 The learned Counsel for the assessee has contended that the Assessing Officer, under the observation and finding that M/s TJR Properties Private Limited was a shell company having no income earning apparatus of its own, had made the addition of the amount of Rs.2.48 crore, under section 68 of the Income Tax Act, in respect of the credits received by the assessee company from M/s TJR Properties Private Limited. 292.2 The learned Counsel for the assessee has contended that while rightly deleting the addition wrongly made, the learned Commissioner of Income Tax (Appeals) has observed that the credits received in the bank account from M/s TJR Properties Private Limited clearly stands explained and that there is no logic in treating the amount of Rs.2.48 crore as unexplained, since the same has been transferred out of the explained credits of M/s TJR Properties Private Limited. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report received and had not made the necessary further enquiries, like any enquiry into the bank accounts, or the other particulars available with him, but he rather based his entire findings on the report. 293. The Hon'ble High Court held that this could not be considered as primary material. It was held that the assessee company had discharged the onus initially cast upon it by providing the basic details, which were not suitably enquired into by the Assessing Officer. The SLP against the said decision is stated to have been dismissed on 28.09.2018, by the Supreme Court. 294. The learned Counsel for the Assessee has thus submitted before us that in these facts and circumstances, the Appeal filed by the Department, having no merit whatsoever, be ordered to be dismissed and the order passed by the learned Commissioner of Income Tax (Appeals) be sustained. OUR FINDINGS 295. We have heard the parties and have perused the material on record. While dealting with Ground Nos. 2, 3, 7, 8 and 11 of the Assessee s appeal, we have held (para 130 at pages 185 to 187) of this order, that the learned Commissioner of Income Tax (Appeals) has gone wrong in upholding the initiation of the re-o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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