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TMI Blog2023 (9) TMI 1527X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; g) Our findings on Ground Nos. 2 & 3, 6 to 8 & 11 107-108 Assessing officer's reasons recorded for the formation of belief of escapement of income chargeable to income tax to believe escapement of income 108-111 Wrong and irrrelevat facts 112-149 Assessment should have bene completed u/s 153A/ 153C and not undr us 148 of the Act. 150-156 Violation of Principles of Natural Justice 156-166 Borrowed satisfaction 166-172 Case laws 172-188 3 Ground No. 4 188 188-244 a) Assessee's contentions before CIT(A) 188-197 b) CIT(A)'s findings 197-202 c) Assessee's submissions before 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 be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961 after four years of completion of original assessment under section 143(3) of the Income Tax Act, without any allegation by the learned Assessing Officer that all material facts necessary for the assessment had not been disclosed fully and truly during assessment. 5. That the learned Principal Commissioner of Income Tax has wrongly granted approval without application of his mind and without verifying the facts from the record before granting approval for issue of notice under section 148 of the Income Tax Act,1961. 6. That the learned Commissioner of Income Tax (Appeals) has wrongly upheld the initiation of action under section 147 of the Income Tax Act on the basis of information contained in the search material found during search of a third party, which is contrary to law in view of the non-obstante clause in Section 153A/153C specifically prohibiting action under section 147 of the Income Tax Act. 7. That even otherwise, the initiation of proceedings under section 148 of the Income Tax Act and the consequent assessment under section 147 thereof is contrary to law in the absence of any incriminating material to form reason to believe based on the report of the Inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nos. 1, 5 and 7, taken by the assessee company before the learned Commissioner of Income Tax (Appeals), as follows: 4. Original Ground No.2 taken before the learned Commissioner of Income Tax (Appeals): "2. That the learned Assessing Officer has wrongly reopened the completed assessment under section 148 of the Income Tax Act." 5. Additional Ground No. 1 taken before the learned Commissioner of Income Tax (Appeals): "That the learned Assessing Officer has wrongly relied upon third party information without application of his own mind and without verifying the facts from the record before issuing notice under section 148 of the Income-tax Act, 1961." 6. Additional Ground No. 5 taken before the learned Commissioner of Income Tax (Appeals): "That even otherwise, the initiation o f proceedings under section 148 and the consequent assessment under section 147 is contrary to law in the absence of any incriminating material to form reason to believe based on the report of the Investigation Wing, which only directs the Assessing Officer to examine the details and only after examination, to determine whether there could be any justification for initiation o f action under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to income tax formed the basis of the re-opening, as also the approval from the learned Principal Commissioner of Income Tax was taken on the basis of wrong and irrelevant facts, and so, the re-opening has wrongly been upheld. 12. According to Ground No. 11, the reopening was wrongly upheld by the learned Commissioner of Income Tax (Appeals), without considering the material on record and relying on wrong allegations of accommodation entries and shell entities, and merely following the report of the Investigation Wing of the Department. 13. Ground Nos. 2, 3, 6 to 8 and 11 have been argued together by the parties, against the reopening of the completed assessment, under the umbrella of "borrowed satisfaction", "wrong and irrelevant facts and reasons", "violation of the principles of natural justice" and "assessment under sections 153 A/153C of the Income Tax Act". As such, these Grounds are being dealt with together. OBSERVATIONS AND FINDINGS IN THE ASSESSMENT ORDER 14. In the assessment order, the Assessing Officer observed that the assessee company had filed its return of income for the year under consideration, that is, assessment year 2012-13, at a total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee company on 30.03.2019, on obtaining approval dated 29.03.2019 from the learned Principal Commissioner of Income Tax (Central), Gurgaon. 14.11 The Assessing Officer observed that in response to the said notice issued under section 148 of the Income Tax Act, the assessee company filed its return of income on 18.04.2109, at a total income of Rs. Nil. 14.12 The Assessing Oficer observed that the assessee company filed its objections dated 20.06.2019 and 02.08.2019 against the reassessment proceedings. 14.13 The Assessing Officer observed that these objections were settled / disposed of by the Assessing Officer vide letter dated 08/21.10.2019; that a search and seizure operation under section 132(1) of the Income Tax Act was carried out on the Himanshu Verma Group of cases, on 29.03.2012 by the Investigation Wing, Delhi. 14.14 The Assessing Officer observed that during the search, it was unearthed that Shri Himanshu Verma was engaged in activities of providing accommodation entries to various beneficiaries by forming numerous corporate and non-corporate entities, where the directors / partners / proprietors were his employees and close associates. 14.15 The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n lieu of cash, through more than seventy to eighty companies, firms and sole proprietary concerns, to different parties. 14.20 The Assessing Officer observed that from such statement, it was very clear that Shri Himanshu Verma was engaged in the business of providing accommodation entries to various parties. 14.21 The Assessing Officer observed that Shri Himanshu Verma had also provided the list of the said seventy to eighty companies which were controlled and managed by him for providing the accommodation entries. 14.22 The Assessing Officer observed that the companies mentioned earlier were all those companies, through which, Shri Himanshu Verma had provided accommodation entries to the assessee company. 14.23 The Assessing Officer observed that Shri Himanshu Verma had also cited the names of the employees who were made Directors by him in his said companies. 14.24 The Assessing Officer observed that some of them were Shri Neeraj Kumar Singh (Director of White Collar Management), Shri Baljeet Singh Sandhu, (Director of Omexpo Enterprises and Shri Saurav Malhotra (Director of Saffron Logistics & Bliss Build Co. Private Limited). 14.25 The Assessing Officer observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Jagdish Rai Gupta had clearly stated that M/s TJR Properties Private Limited was not involved in any kind of business activity. 14.34 The Assessing Officer observed that further, Shri Jagdish Rai Gupta had denied any knowledge of any business transactions from bank transactions carried out by M/s TJR Properties Private Limited. 14.35 The Assessing Officer observed that thus, 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 under any circumstances. 14.36 The Assessing Officer observed that therefore, the amount of Rs. 2,48,00,000/- 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 company. 14.37 In this manner, the Assessing Officer made total addition of Rs. 6,38,00,000/- to the income of the assessee company. ASSESSEE'S CONTENTIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) 15. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the information supplied by the Investigation Wing of the Department about the alleged accommodation entries provided by a person to certain entities, without applying his own mind, has been held to be not justified, in the decisions in "PCIT Vs G.Pharma India Limited", 384 ITR 147 (Del), "CIT Vs Meenakshi Overseas PRIVATE Limited", 395 ITR 67 (Del), "Panchanan Hati Vs CIT", 115 ITR 336 (Cal), and "Calcutta Discount Company Limited Vs Income Tax Officer", 41 ITR 191 (SC). 15.4 The assessee submitted that the Assessing Officer's action of re-opening the completed assessment of the assessee company had been guided solely by the fact that there had been certain transactions between the assessee company and some persons. 15.5 The assessee submitted that the investigation conducted by the Investigation Wing of the Department could not be the final conclusion on which reliance could be rested by the Assessing Officer. 15.6 The assessee submitted that there had to be some live link between the information relied on by the Assessing Officer and the alleged escapement of income that while forming a belief that income chargeable to tax has escaped assessment, the informa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 26.03.2019, that income to the extent of Rs.25,83,50,000/- had escaped assessment. The learned Commissioner observed that thereafter, the Assessing Officer had received the approval of the learned Principal Commissioner of Income Tax, Gurgaon, under section 151 of the Income Tax Act, on 29.03.2019. The learned Commissioner observed that accordingly, notice under section 148 of the Income Tax Act had been issued by the Assessing Officer to the assessee company. The learned Commissioner observed that the assessee company had filed its Income Tax Return, in response to the said notice issued by the Assessing Officer under section 148 of the Income Tax Act, on 18.04.2019. 16.1 The learned Commissioner observed that the assessee company had furnished its objections to the said notice, which had been disposed of by the Assessing Officer by passing a speaking order. 16.2 The learned Commissioner observed that the assessee had submitted that no prima-facie reasons recorded for the formation of belief of escapement of income chargeable to income tax existed. 16.3 The learned Commissioner observed that the assessee had submitted that the Assessing Officer's reasons recorded for the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n contained in the search material found during the search of a third party, was contrary to law in view of the non-obstante clause in Sections 153A/153C of the Income Tax Act, specifically prohibiting action under section 147 thereof. 16.12 The learned Commissioner of Income Tax (Appeals) observed that the case of the assessee had been selected for scrutiny through the Computer Aided Scrutiny Selection, the reason for such selection being "large increase in unsecured loans", during the initial assessment proceedings. 16.13 The learned Commissioner observed that the issue of increase in unsecured loans had been examined by the Assessing Officer and assessment had been made on 15.09.2014, by passing order under section 143(3) of the Income Tax Act. 16.14 The learned Commissioner observed that further, on receiving information from the Income Tax Officer, Ward-1(5), Chandigarh, vide letter No. 5566, dated 04.02.2019, that the assessee company had received credits from six paper companies of Shri Himanshu Verma, an accommodation entry provider, the Assessing Officer had recorded his reasons for the formation of belief that income chargeable to income tax had escaped assessment. 16 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e company had taken advances, were included in the said list. 16.24 The learned Commissioner observed that the names of Dhanlaxmi Bank and Axis Bank were also mentioned in answer to Question No.15 by Shri Himanshu Verma, which Banks had been used by him to provide accommodation entries. 16.25 The learned Commissioner observed that through these bank accounts, the assessee had received the advances of Rs.3.90 crore from the said six paper companies. 16.26 The learned Commissioner observed that the Appraisal Report contained detailed findings and the details of the modus-operandi adopted by Shri Himanshu Verma for the purpose of providing accommodation entries to various beneficiaries. 16.27 The learned Commissioner observed that the Assessing Officer had considered the said information alongwith the findings as contained in the Appraisal Report and had reconciled the said information with the particulars contained in the Income Tax Return. 16.28 The learned Commissioner observed that the assessee company had contended that it had submitted all the documentary evidences in respect of the said six companies, from whom the advances were received by it, before the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Commissioner observed that on the strength of such facts, it could not be said that all the material facts in respect of the said credits received by the assessee company during the year under consideration had been fully and truly disclosed by the assessee before the Assessing Officer in the course of the original assessment proceedings. 16.38 The learned Commissioner observed that moreover, it was evident that no opinion had been formed by the Assessing Officer during the original assessment proceedings in respect of such credits. 16.39 The learned Commissioner observed that subsequently, the Assessing Officer had come in possession of tangible information through the letter of the Income Tax Officer Ward-1(5), Chandigarh, that the credits of Rs. 3,90,00,000/- were, in fact, in the nature of accommodation entries received by the assessee company from paper companies run by Shri Himanshu Verma. 16.40 The learned Commissioner observed that thus, in the said letter, alongwith the annexure of Appraisal Report in the case of Shri Himanshu Verma and the bank account statement of the assessee company for the year under consideration, there was prima-facie credible informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng, the Assessing Officer is not required to establish escapement of income, as held by the Hon'ble Supreme Court in its decision in the case of "Shri Krishana Private Limited Vs CIT", 221 ITR 538 (SC). 16.50 The learned Commissioner observed that what is necessary to reopen an assessment is not the final verdict, but a prima-facie reason. 16.51 The learned Commissioner observed that clearly, in this case, the Assessing Officer was having prima facie tangible material to believe that income chargeable to tax had escaped assessment. 16.52 The learned Commissioner observed that it was not a case where the Assessing Officer had acted mechanically merely on the basis of information received from the Investigation Wing of the Department, or from the Income Tax Officer, Ward-1(5) Chandigarh. 16.53 The learned Commissioner observed that the Assessing Officer's action of re-opening the completed assessment of the assessee company was based on specific information giving details of the accommodation entries received by the assessee company through the entry provider, with amount, identity involved and details of the modus operandi adopted. 16.54 The learned Commissioner observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ilure 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, any part of his income chargeable to tax has escaped assessment; that therefore, the case of the assessee company was squarely covered by the proviso to Section 147 of the Income Tax Act; that the Assessing Officer initiated re-assessment proceedings because fresh tangible material had come to his knowledge or possession, which material exposed the untruthfulness and lack of genuineness of the credits of Rs. 3,90,00,000/- received by the assessee company during the year under consideration, and introduced by it in the books of account, in the guise of advances against sale of land; that in such a situation, it could not be dubbed to be a case of change of opinion or as one of the drawing of a different inference by the Assessing Officer from the same facts as were earlier available, but that it was a case of the Assessing Officer having acted on the fresh information which came into his possession. 16.60 The learned Commissioner of Income Tax (Appeals) stated that reliance was being placed on the judgement of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erved that thus, in the case of the assessee company, the Assessing Officer had initiated the reassessment proceedings on the basis of tangible material which was in his possession, received by him subsequent to the passing of the original assessment order, which material was specific, relevant and reliable, and after recording the reasons recorded for the formation of belief of escapement of income chargeable to income tax for formation of his own belief that in the original assessment proceedings, the assessee company had not disclosed truly and fully, all material facts necessary for its assessment and, therefore, income chargeable to tax had escaped assessment. 16.63 The learned Commissioner of Income Tax (Appeals) stated that reliance was being placed on the judgment rendered by the Hon'ble Supreme Court in the case of "Phool Chand Bajrang Lal and another Vs Income Tax Officer and another", 203 ITR 456 (SC), wherein, it was held that the jurisdiction of the Income Tax Officer to re-assess income arises if he has, in consequence of specific and relevant information, coming into his possession subsequent to the previously concluded assessment, reason to believe that income char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer's belief of escapement of income; that it had been further noted that the Assessing Officer had not merely relied on the information received from the Income Tax Officer / the Investigation Wing, but he had independently considered the facts of the case in the light of Shri Himanshu Verma's statement recorded on oath under section 132(4) of the Income Tax Act, the contents of the Appraisal Report, the copy of the bank statement of the assessee company and the particulars of the Income Tax Return furnished by the assessee, before drawing his own independent belief; that thus, there was application of mind by the Assessing Officer before recording the reasons recorded for the formation of belief of escapement of income chargeable to income tax under section 147 of the Income Tax Act; that the Assessing Officer had made available all the relevant material to the assessee company through the copy of the reasons recorded for the formation of belief of escapement of income chargeable to income tax; and that the Assessing Officer had disposed of the objections raised by the assessee in a detailed manner, vide letter dated 18.10.2019, having comprehensively dealt with the objection ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded under section 132(4) of the Income Tax Act and the documents found during the search under section 132 of the Income Tax Act, in the case of Shri Himanshu Verma, conducted on 29.03.2012, which had been used by the Assessing Officer as a corroborative evidence, did not belong to the assessee company at all; that the words "belong to" have to be construed in a narrower sense, as they are different from the words "relate to" or "pertain to"; and that the preamended provisions of Section 153C of the Income Tax Act are applicable to the facts of the present case. 16.68 The learned Commissioner of Income Tax (Appeals) observed that reliance was being placed on the decision in the case of "Shailesh S. Patel Vs Income Tax Officer, Ward-5, Palanpur", 97 taxmann.com 570 (Ahd); and that therefore, there was no merit in the plea of the assessee that the assessment in this case should have been framed under section 153C and not under section 147/148 of the Income Tax Act. ASSESSEE'S SUBMISSIONS BEFORE US 17. Before us, the learned Counsel for the assessee has submitted that during the year in question, the assessee had purchased land for a commercial complex at Chandi Mandir, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... list of companies alleged to be controlled and managed by Shri Himanshu Verma. 17.8 The learned Counsel for the assessee has submitted that in Para 10 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer has placed reliance on the statement of Shri Himanshu Verma. 17.9 The learned Counsel for the assessee has contended that in this statement, the names of the alleged six paper companies were not mentioned by Shri Himanshu Verma. The learned Counsel for the assessee has submitted that though this statement mentions that there were middlemen/clients, no name of any such middleman or his statement was relied on, much less provided to the assessee. 17.10 The learned Counsel for the assessee company has contended that neither the names of the Directors of the alleged six companies, nor their statements were considered by the Assessing Officer. 17.11 The learned Counsel for the assessee has submitted that though Shri Himanshu Verma had stated that he was controlling seventy to eighty companies, this averment was merely a general reply and no list of the said seventy to eighty companies was produced or even referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Counsel for the assessee company contended that in the decision in the case of "RMJ Polyvinyl Limited", 396 ITR 5 (Del), it has been held by the Hon'ble Delhi High Court, that the information received from the Investigation Wing of the Department cannot be considered to be any tangible material per se, when there is no further enquiry having been undertaken thereon by the Assessing Officer and there is no live link between the tangible material and the Assessing Officer's reasons recorded for the formation of reason belief of escapement of income chargeable to income tax. 17.21 The learned Counsel for the assessee submitted that reliance was also being placed on the decision of the Hon'ble Delhi High Court in the case of "PCIT-4 Versus G & G Pharma India Limited", 384 ITR 147 (Del). 17.22 The learned Counsel for the assessee submitted that reliance was also being placed on the decision of the Hon'ble Delhi High Court in the case of "Sabh Infrastructure Versus ACIT", 398 ITR 198 (Del). 17.23 The learned Counsel for the assessee contended that reliance was further being placed on the order of the Chandigarh Bench of the Tribunal in the case of "Smt. Anju Jindal Versus ACIT", o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of "Commissioner of Income Tax, Patiala II Versus Sham Lal", 127 ITR 816 (P&H), wherein, it has been held that the Tribunal was right in law in sustaining the annulment of the assessments and in not substituting the annulment order by an order setting aside the assessments. It was held therein, that the assessee is, in law, entitled to rebut the material placed before him if he so chooses and any material placed on the record without notice to the assessee with regard thereto cannot be relied upon by the Revenue, and that it would thus be seen that in view of the finding of the Tribunal that the material placed on the record in violation of the principles of natural justice could not be relied upon and that in fact, there was no material to come to the conclusion that the assessee was a partner in the firm, the only correct course open to the Tribunal was to annul the assessment order passed by the Income Tax Officer. 17.30 The learned Counsel for the assessee company has further sought to place reliance on "Micro Marbles Private Limited Versus Office of the Income Tax Officer", 2023 (1) TMI 282 (Raj); "Sabh Infrastructure Versus ACIT", 398 ITR 198 (Del); "Tata Capital Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e financial year 2011-12, relevant to the assessment year 2012-13 in the assessee's case. 17.32 The learned Counsel for the assessee stated that there is no connection whatsoever of the assessee company with the Sand Mining Auction and the H1 bidders, Sh Amit Bahadur, Sh Kulwinder Paul Singh, Sh. Ajitpal Singh, Sh. Gurinder Singh and Sh. Balraj Singh. 17.33 The learned Counsel for the assessee averred that in Para 3 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer has tried to convey that Shri Triloki Nath Singla is the common link between the H1 bidders, as the paper work for them is handled by him. The learned Counsel asserted that this is a fact which is totally irrelevant to the reopening of the assessee's case. 17.34 The learned Counsel for the assessee submitted that as per Para 4 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the search action was mainly focused on the flow of funds used in the benami transaction involved in the e-auction, and the earnest money was paid by five persons, who have no connection whatsoever with the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchased land at Chandi Mandir and had obtained Letter of Intent from the Government of Haryana after deposit of Change of Land Use Fees of Rs. 17.44 crore. 17.44 The learned Counsel for the assessee stated that the assessee company's total investment in fixed assets as on 31.03.2022 was of Rs. 28.29 crore. Our attention was drawn to APB, Page 71 in this regard. 17.45 The learned Counsel for the assessee averred that in Para 10 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, the total credits in the Bank are mentioned at Rs. 25,83,50,000/-. 17.46 The learned Counsel for the assessee has contended that this is wrong, as in fact, the total amounts of credit in the Bank were of Rs.27,83,50,000/- In this respect, he drew our attention to page 113 of the order passed by the learned Commissioner of Income Tax (Appeals). According to the learned Counsel for the assessee, reliance by the Assessing Officer, in Para 11 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, on the information received from the Income Tax Officer, Ward 1(5),Chandigarh, about the search on Sh Himanshu Verma, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court in the case of "CIT vs. Atlas Cycle Industries", 180 ITR 319 (P & H), wherein, it has been held that "we are of the view that the Tribunal was right in cancelling the reassessment, as both the grounds on which the reassessment notice was issued, were not found to exist, and the moment such is the position, the Income Tax Officer does not get the jurisdiction to make a reassessment". 17.53 The learned Counsel for the assessee has also sought to place reliance on the decision of the Hon'ble Bombay High Court in the case of "Sagar Enterprises Versus ACIT", (2002) 257 ITR 335 (Guj) and in the decision in "Dhiraj Lal Girdharilal Versus Commissioner of Income Tax, Bombay", 78 ITR 657 (Bom), wherein, it has been held that it is well established that when a court of fact acts on material, partly relevant and partly irrelevant, it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its finding; and that such a finding is vitiated because of the use of inadmissible material and thereby, an issue of law arises. 17.54 The learned Counsel for the assessee has further sought to place reliance on the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed under section 143 (1) of the Income Tax Act, 1961, by intimation, or assessed by scrutiny under section 143 (3) of the Act. 17.56 It was held that further, the reasons to believe that income chargeable to tax has escaped assessment must be correct on facts. 17.57 It was held that if the facts, as recorded in the reasons are not correct and the assessee points this out in its objections, the order on the objections must deal with it and prima facie, establish that the facts stated by the Assessing Officer in the reasons are correct. 17.58 It was held that without dealing with the assertion of the assessee that the correct facts are not as recorded in the reasons, it would be safe to draw an adverse inference against the Revenue. 17.59 It was held that even in cases where the return of income has been accepted in the assessment under section 143 (1) of the Income Tax Act, 1961, the assessment can be reopened under section 147 only when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. 17.60 It was held that the mere fact that the return has been processed under section 143 (1) does not give the Assessing Officer a carte blanch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therwise too, irrelevancy of facts will not make facts wrong, unless the re-opening is based on wrong material facts. 18.3 The learned CIT (DR) has submitted that Para nos. 1 to 7 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax build a background to point out defaults committed by the relevant persons. 18.4 The learned CIT (DR) has contended that in Para 8 of the reasons recorded by the Assessing Officer for formation of belief of escapement of income chargeable to tax, the entire premise on which the reopening is based, has been narrated. 18.5 The learned CIT (DR) has averred that the whole dispute is regarding disclosure of Bank Account No.65012097085. 18.6 The learned CIT (DR) has asserted that though the assessee admits that the account was concealed before the DDIT, it contends that such concealment was not a valid reason for re-opening. 18.7 The learned CIT (DR) has contended that the assessee company claims that this bank account was truly disclosed in the original assessment proceedings 18.8 The learned CIT (DR) has submitted that this claim is false and baseless. 18.9 The learned CIT (DR) has contended that as see ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... becomes applicable. 18.19 The learned CIT (DR) has averred that in such a scenario, no case law can come to the rescue of the assessee. 18.20 The learned CIT (DR) has contended that the assessee has pointed out that there is a difference of Rs.2 crore between the credit entries as mentioned in the reasons recorded for the formation of belief of escapement of income chargeable to income tax and as stated by the assessee. 18.21 The learned CIT (DR) has stated that however, this is only a case of oversight in totaling or calculation. 18.22 The learned CIT (DR) has contended that when the huge bank account statement runs into numerous pages, such mistakes of calculation are normal, but the fact remains that the said bank account was not disclosed. 18.23 The learned CIT (DR) has maintained that therefore, the Assessing Officer is within his rights to assume that all the credit entries are unaccounted, especially for forming the reasons recorded for the formation of belief of escapement of income chargeable to income tax, for which, only a prima facie satisfaction is required. The learned CIT (DR) has sought to place reliance on "Raymond Woollen Mills Versus Income Tax Officer & ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The learned CIT (DR) has submitted that such information received in case of search on a third party is tangible material, as held by various Courts. Reliance has been sought to be placed on: (i) "Yogendra Kumar Gupta Versus Income Tax Officer (Supreme Court)", 51 taxmann.com 383 (SC) ii) "Paramount Communication (Private) Limited Versus PCIT (Supreme Court)", [2017] 84 taxmann.com 300 (SC) iii) "Amit Polyprints (Private) Limited Versus DCIT (Gujrat High Court)", [2018] 94 taxmann.com 393(Guj) iv) "Ankit Financial Services Limited Versus DCIT (Gujrat High Court)", [2017] 78 taxmann.com 58(Guj) v) "Aaspas Multimedia Limited Versus DCIT (Gujrat High Court)", [2017] 83 taxmann.com 82 (Guj) vi) "Meghavi Minerals (Private) Limited Versus Income Tax Officer (Gujrat High Court)", [2019] 110 taxmann.com 174(Guj) vii) "Ankit Agrochem (Private) Limited Versus JCIT (Rajasthan High Court)", [2018] 89 taxmann.com 45(Raj) viii) "Pushpak Bullion (Private) Limited Versus DCIT (Entry Receiver) (Gujrat High Court)", [2017] 85 taxmann.com 84 (Guj) ix) "Jayant Security & Finance Limited (Gujrat High Court)", [2018] 91 taxmann.com 181(Guj) x) "Avirat star Homes Venture (Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anies were submitted. 18.42 The learned CIT (DR) has stated that it is not disputed that the assessee company received these amounts. 18.43 The learned CIT (DR) stated that the information only proves a limited point of such transactions. 18.44 The learned CIT (DR) has contended that however, in the absence of any confirmation or Income Tax Return details or any enquiry, the credit worthiness of these companies was never examined by the Assessing Officer in the original proceedings. 18.45 The learned CIT (DR) has submitted that the fresh information revealed that these companies were shell companies and, therefore, they were not creditworthy. The learned CIT (DR) averred that so, the assessee's claim that the issue was examined is entirely false. 18.46 The learned CIT (DR) has contended that also, whereas the issue of loans was examined by the Assessing Officer by obtaining confirmations, no such enquiry/query was raised by the Assessing Officer in respect of these companies, which did not form part of "borrowings". 18.47 The learned CIT (DR) has contended that thus, the Assessing Officer also did not intend to examine anything on the lines of the credit worthiness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (DR) contends that the assessee states that the statement of the bank account of the assessee company was on record. 18.60 The learned CIT (DR) has submitted that there is no evidence in the entire assessment record, or even in the assessee's Paper Book, that the bank account statement was ever filed. 18.61 The learned CIT (DR) has maintained that all the case laws sought to be relied on by the assessee are distinguishable, since the disclosure of primary facts in the present case was wrong and incomplete, fresh tangible material surfaced after the original assessment year, and the issue never got examined in the original assessment proceedings. 18.62 The learned CIT (DR) has also contended that according to the assessee, no such addition was made in the other years. 18.63 The learned CIT (DR) has stated that in this regard, none of the six companies is a subject-matter of investigation in the other years, as available from the assessment orders submitted. 18.64 The learned CIT (DR) has stated that so, the facts are entirely different and in none of the other years, funds received by the assessee from these companies were in question. ASSESSEE'S REBUTTAL 19. By wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has stated that further, the complete books of account and records were produced before the Assessing Officer during the assessment proceedings, and the same were duly examined by the Assessing Officer at that relevant time, as evident from the assessment order, and, thus, complete details were available. 19.12 In sum, it has been requested by the learned Counsel for the assessee, that in view of the fact that the Department has miserably failed to rebut, much less successfully, the assessee's averments made with regard to the assessee's Grounds of Appeal nos. 2, 3, 6 to 8 and 11, these Grounds of Appeal be accepted and the very initiation of the reassessment proceedings and the reassessment proceedings, culminating in the order under appeal be declared null and void ab initio and cancelled as such. OUR FINDINGS ON GROUND NOS. 2, 3, 6 TO 8 AND 11 20. We have heard the parties on these issues and have examined the material placed on record with regard thereto. The question is as to whether or not the completed assessment was reopened on the basis of the information received from a third party, without any verification by the Assessing Officer, without following the principles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or bidding for the sand mines. 23. The contention of the learned Counsel for the assessee before us is that mining business was done by one of the Ex-Directors, only in the assessment year 2018-19, and not in the year under consideration, that is, assessment year 2012-13, and that too, only in his personal capacity, and that the assessee company has no connection at all with the mining business, and no financial transaction with such mining business was carried out by the assessee company even in the assessment year 2018-19. The Department has remained unable to refute this factual assertion of the assessee. The assessee company has not been shown to have carried out any financial transaction with the mining business in the assessment year under consideration. In fact, there is even no specific allegation by the Department against the assessee company in this regard. No connection of the assessee company with the mining business stands established. There is only a general and vague averment of the Assessing Officer, which averment actually amounts to nothing other than a mere unsubstantiated conclusion of the Assessing Officer, and not his reason to believe escapement of income ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... involve either Shri Triloki Nath Singla, or the assessee company, in any manner. 28. The above apart, there is also not even an iota of evidence on record to prove that the earnest money to participate in the e-auction, on behalf of Shri Amit Bahadur, Shri Kulwinder Paul Singh and Shri Ajit Pal Singh, was paid by Shri Sahil Singla, as alleged by the Department. 29. These allegations of the Department, therefore, go entirely unsubstantiated and unproved, and they thus remain nothing else but merely bald assertions, not worthy of, or entitled to, any credence or sustainability under the law, whatsoever. The same are, accordingly, rejected. 30. As such, we are unable to find any justification in the action of the Assessing Officer in reopening the assessee's completed assessment for assessment year 2012-13, based on Paras 2 to 5 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax recorded for forming belief of escapement of income chargeable to tax. Hence, these reasons recorded for the formation of belief of escapement of income chargeable to income tax are found to be wrong and irrelevant for the reopening of the completed assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, any mention of any such bank account of either the assessee company, or Sh. Triloki Nath Singla, or Sh. Sahil Singla, which account was statedly unearthed by the Department in the search proceedings, or in the post search investigations. 36. As such, the contention of the learned Counsel for the assessee, that wrong facts were used by the Assessing Officer under Para 6 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, to justify the reopening of assessment, has also remained irrefuted and unrebutted. 37. So far as regards the observations of the Assessing Officer in Paras 7 and 8 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, recorded for reopening of the assessment, that Shri Triloki Nath Singla was asked vide summons dated 05.04.2018, issued under section 131(1)(A) of the Income Tax Act by the Additional Director of Income Tax (copy appended at APB-110) to submit the details of the companies in which he is Director and also asked to furnish the details of bank accounts of those companies, the contention of the learned Counsel for the assessee is that Sh. Triloki Nath ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds the assertion of the Assessing Officer under Para 9 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, that the assessee company is a shell entity having no profit earning apparatus of its own and that there are multiple instances of credit entries and cash deposits in the bank account statement, the contention of the learned Counsel for the assessee company has been that this assertion of the Assessing Officer is wrong, because the assessee company had already purchased a piece of land in Chandi Mandir for a commercial project and had paid Change of Land Use fees of Rs. 17.44 crore to the Government of Haryana, and that the assessee company had been allotted a Letter of Intent for such commercial project. In this respect, it is patent on the record that the assessee company had invested an amount of Rs. 28.29 crore in fixed assets, as per Note 7 of the Balance Sheet of the assessee company, as on 31.03.2012, that is, for the year under consideration, i.e., assessment year 2012-13, with regard to the fixed assets of the assessee company, a copy of which Note 7 to the Balance Sheet of the assessee company has been placed at APB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the year under consideration. Further, an amount of Rs. 19,03,575/- (nineteen lacs, three thousand, five hundred and seventy five rupees) was paid to the Government of Haryana by the assessee company during the year under consideration, as processing fee for the grant of approval of a commercial colony at Chandi Mandir, District Panchkula, on twelve acres of land owned by the assessee company, located on the Shimla Highway. The assessee company also provided a bank guarantee of Rs. 9.00 crores (nine crore rupees) to the Director, Town and Country Planning, Haryana, from the State Bank of Patiala, for grant of Letter of Intent. On 05.11.2011, a Letter of Intent was granted to the assessee company by the Government of Haryana, allowing the setting up of the commercial colony by the assessee company. However, due to certain problems created by the National Highway Development Authority of India (NHAI), and a slump in the market, the proposed commercial company project remained from being developed by the assessee company and correspondence in this regard is still going on with the National Highway Development Authority (NHAI). 45. It has further been stated in the Note, that thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moreover, for a company to be genuine, it is not necessary that there should be trading or manufacturing activity in the company. 58. It has been stated that real estate developers generally book the income or sales on the completion of the project, otherwise, for the rest of the years, the turnover is shown as Nil. 59. It has been stated that since the very incorporation of the assessee company, no transaction was ever done by it to rotate any undisclosed money or any black money, nor was any transaction done to either inflate the turnover, or to divert the bank loans during the year, and that only genuine business transactions of real estate were done. 60. It has been stated that however, loans or advances were received or given to relatives or friends or sister concern, as and when required, and that such transactions cannot, by any stretch of imagination, render the genuine and legal assessee company to be either a paper company, or a shell company. 61. It has been stated that no Director or shareholder of the assessee company is fictitious, that the Directors and shareholders of the assessee company are respectable persons of means and repute, and that therefore, there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 25,83,50,000/-, this was stated (APB-66) to be, inter alia, on account of loan from the State Bank of Patiala, amounting to Rs. 10,00,00,000/- during the year, received in the assessee's bank account. It was stated that in addition, the credit entries were of unsecured loan/advance received during the year, and that the sources, credibility and genuineness of these credits were being submitted alongwith the reply. 67. About the deposit of Rs. 71,00,000/- in the bank account during the year, it was submitted (APB-64- 65), that the cash deposits of Rs. 25,00,000/- on 16.12.2011 and of Rs. 46,00,000/- on 05.03.2012 were made out of cash withdrawals from the bank account of the company on 02.05.2011, of Rs.12,00,000/-, on 09.05.2011, of Rs. 8,00,000/-, on 11.11.2011, of Rs. 30,00,000/-, on 12.11.2011, of Rs. 20,00,000/-, and on 21.02.2012, of Rs. 4,75,000/-, and that this bank account is already available on the record of the Department. It was stated that all such transactions were fully explained during the original assessment, and also disclosed in the audited financial statements / Balance Sheet of the company for this year, already submitted with the Department. 68. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings by the Assessing Officer. However, later, ignoring the verification so conducted by the Assessing Officer during the original assessment, and without refuting the Replies (supra) furnished by the assessee company in response to the Questionnaire (supra) issued to the assessee by the Assessing Officer in the original assessment proceedings, as also in the face of the scrutiny assessment order dated 15.09.2014, while recording the reasons for the formation of belief of escapement of income chargeable to income tax without referring to such verification, the Assessing Officer formed a reason that the entire credit of Rs. 25.83 crore is unexplained. The Assessing Officer observed that in the normal course of business, such a huge quantum of funds is not received by the companies which are not undertaking any business activity. Such observation in the reasons recorded has evidently been made by the Assessing Officer in stark oblivion of the fact, as discussed, that the source of the cash deposits was explained by the assessee to be out of withdrawals of cash from the same bank account, amounting to Rs. 74.75 lac, as detailed at page 136 of the impugned order, and as also acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edly engaged in the business of providing accommodation entries, it cannot be presumed that the six companies which had advanced money to the assessee company for purchase of commercial space were out of the said seventy to eighty companies. 79. It has been submitted that further, without linking it with the statements of the Directors of these six companies and without referring to the assessments of these six companies, there is no justification in the allegation leveled by the Assessing Officer. 80. The learned Counsel for the assessee company has further asserted that the complete details of the transaction entered into by the assessee company with these companies were filed by the assessee before the Assessing Officer during the assessment completed for the year, under section 143(3) of the Act, vide the assessment order dated 15.09.2014 and these details were available on assessment records. However, these details were not at all referred to by the Assessing Officer. 81. Per contra, the learned CIT (DR), in his submissions, has claimed that these six shell companies are operated by Shri Himanshu Verma. However, the learned CIT (DR) has not been able to put forward any coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessee company is found to be correct, as indeed, no notice/summons was issued to the assessee company which was not replied to by the assessee. Therefore, the averment of the Assessing Officer under Para 12 of the reasons recorded is wrong and irrelevant. 86. So far as regards the assertions of the Assessing Officer under Para 13 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening the completed assessment, the Assessing Officer has stated in this para, that the assessee is a shell company not undertaking any business, that there was an attempt by the Director of the company to not disclose the bank account no. 65012097085 during post search enquiries, and receipt of funds from bogus and shell companies. 87. In view of our discussion in the earlier paragraphs, which discussion is not being repeated here, the finding of the Assessing Officer under Para 13 of the reasons, is wrong. 88. The assertion of the Assessing Officer under Para 14 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax is that the assessee company had not disclosed fully and truly all materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er is satisfied that any money, bullion, jewellery, or other valuable article or thing seized or requisitioned, belongs to, or any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, such books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and the Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of such other person in accordance with the provisions of section 153A of the Income Tax Act. The said section very clearly lays down that the provisions of section 153C of the Income Tax Act are to be applied in such cases notwithstanding anything contained in sections 139, 147, 148, 151 and 153 of the Income Tax Act. Applying the said provisions to the facts of the present case, wherein certain documents / information were found during the course of search, on the basis of which, additional income was to be assessed in the hands of the assessee company, then, for making the aforesaid addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer as corroborative evidence which did not belong to the assessee company at all; that the preamended provisions of section 153C of the Act are applicable to the facts of the present case; that reliance was being placed on the ITAT Ahmedabad Bench in the case of "Shailesh S. Patel Versus Income Tax Officer", 97 taxmann.com 570; and that therefore, there was no merit in the argument of the learned Counsel for the assessee, that the assessment should have been framed under section 153C and not under sections 147/148 of the Income Tax Act. 95. Before us, the learned Counsel for the assessee has contended that the amendment in section 153C of the Income Tax Act, 1961, brought in by the Finance Act 2015 would be applicable retrospectively; that hence, if any material was found relating to the assessee during the course of search on a third party, then the correct course of action would have been to proceed against the assessee under section 153C of the Income Tax Act. Reliance in this regard has been placed on the Supreme Court judgment in the case of "Income Tax Officer Versus Vikram Sujit Kumar Bhatia", 413 ITR 417 (SC), dated 06.03.2023, and the Supreme Court judgment in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 02.08.2019, filed by the assessee against the re-assessment proceedings, the assessee made a specific request to the Assessing Officer in this regard, for being supplied the information received by the Assessing Officer (APB-49). However, vide order dated 18.10.2019 (APB 50-54), the Assessing Officer rejected such request of the assessee and disposed of the assessee's objections, observing that the information received from the Income Tax Officer, Ward-1(5), Chandigarh, was not required to be provided to the assessee. 101. The learned CIT (DR), in his written submissions, under Para 16.1 thereof, has stated that "as regards, provisions of statement, it is to be seen, if the assessee had with him the statement of Shri Himanshu Verma or not." Under Para 16.2, the learned CIT (DR) states that "On Page 86 of Learned CIT(A) order, as per assessee's submissions, it is stated: There is not even a whisper about the name of the appellant company in the statement of Shri Himanshu Verma, received from the ADIT (Inv) Unit 6(3)". 102. In Para 16.3 of the learned CIT (DR)'s submissions, it has been stated that: "The above admission of the assessee show that throughout the reassessment pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the Tribunal that the material placed on the record in violation of the principles of natural justice could not be relied upon and that in fact there was no material to come to the conclusion that the assessee was a partner in the firm, the only correct course open to the Tribunal was to annul the assessment order passed by the Income Tax Officer." 106. Reliance is also placed on the decision of the Hon'ble Supreme Court of India in the case of "Kishinchand Chellaram versus Commissioner of Income Tax, Bombay City II", 125 ITR 713 (SC), wherein, it has been held that "The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter dated 18th February, 1955, said to have been addressed by the Manager of the Punjab National Bank Limited to the Income Tax Officer. Now, it is difficult to see how this letter could at all be relied upon by the Tribunal as a material piece of evidence supportive of its finding. In the first place, this letter was not disclosed to the assessee by the Income Tax Officer and even though the AAC reproduced an extract from it in his order, he did not care to produce it before the assessee or give a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eable to income tax becomes inevitable and in the event such documents are not supplied, it would be a flagrant violation of the principles of natural justice. Accordingly, the impugned notice dated 30.03.2021 and the order dated 18.08.2021 dismissing the objections of the petitioner are hereby quashed and all consequential proceedings including the assessment order dated 29.03.2022 are declared to be illegal, null and void with liberty to the respondents to take up a fresh exercise for reassessment, if necessary, in accordance with law". 108. The Hon'ble Delhi High Court, in the case of "Sabh Infrastructure Versus ACIT", 398 ITR 198 (Del), has held that "Where the reasons recorded for the formation of belief of escapement of income chargeable to Income Tax make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons recorded for the formation of belief of escapement of income chargeable to income tax". 109. The Hon'ble Bombay High Court, in the case of "Tata Capital Financial", 443 ITR 127 (Bom), has held that "In the circumstances, the Revenue is directed to adhere to the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer has formed his reasons recorded for the formation of belief of escapement of income chargeable to income tax merely on surmises and conjectures, where in fact, no prima-facie reason to believe existed. 112. Here, it is seen that neither in the Appraisal Report, nor in the statement of Shri Himanshu Verma, the name of the assessee company has been mentioned. In fact, in the Appraisal Report itself, there is a recital that "This Appraisal Report is only advisory in nature and should be only used as a guideline". 113. It remains an undisputed fact that the Assessing Officer did not carry out any further investigation and he just went by the Appraisal Report as it is. Shri Himanshu Verma had stated that he was engaged in providing accommodation entries to various beneficiaries; that his modus-operandi was to provide accommodation entries either in the form of share application money, or as share capital, and/or as unsecured loans in lieu of cash, through a number of corporate and non corporate paper entities formed by him. The cash received was first deposited in the accounts of the six paper companies, as cash received against bogus sales/reflected in the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the assessee. Not even the statements of the Directors of the six companies were considered, rather, what to talk of statements, not even the names of such Directors were mentioned. The facts of the case are, in view of these observations, on parity with those in "PCIT Vs Meenakshi Overseas Private Limited" (supra), wherein, it was held that where the reasons recorded for the formation of belief of escapement of income chargeable to income tax to believe contain not the reasons recorded for the formation of belief of escapement of income chargeable to income tax, but the conclusions of the Assessing Officer and there is no independent application of mind by the Assessing Officer to the material which forms the basis of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, such conclusions of the Assessing Officer are, at best, a borrowed satisfaction. CASE LAWS 115. In "RMG Polyvinyl" (supra), it has been held that the information received from the Investigation Wing of the Department cannot be said to be tangible material per-se, without further enquiry being undertaken by the Assessing Officer the tangible material and the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome chargeable to income tax so recorded, and merely the statement of Shri Naveen Kumar Singhania that the companies in question were paper companies, was insufficient to reopen the assessment, unless the Assessing Officer had any further information after making further enquiries into the matter and the relevant findings. Likewise, in the case before us, as dwelt upon earlier, the Assessing Officer did not carry out any investigation what-so-ever with regard to the material available. He merely relied upon the investigation Report, i.e,. the Appraisal Report and the statement of Shri Himanshu Verma, which too, were never confronted to the assessee, despite specific request. Therefore, the case at hand is directly in line with the facts and the ratio of "Sabh Infrastructure" (supra). 118. In "Anju Jindal Versus ACIT" (supra), the position remains much the same. The reasons recorded for the formation of belief of escapement of income chargeable to income tax therein were recorded simply by relying on the report and the conclusion drawn by the Investigation Wing, without any preliminary enquiry and investigation and establishing the necessary nexus between the material and the for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts had come to the knowledge of the assessing authority after completion of the assessment proceedings. It was for this purpose, that the matter was remanded. In the present case, on the other hand, the proceedings are in the stream of appeal and not by way of a writ petition, which is an extraordinary remedy, not to be exercised in the normal course and which the Courts are loath to so exercise. Rather, herein, what we have seen above is that the assumption of jurisdiction to reopen the completed assessment was based on wrong facts, where the issue had been verified thread-bare in the original assessment proceedings. Therefore, "Raymond Woollen Mills" (supra), is not applicable to the case at hand. 122. In "Yogendra Kumar Gupta Versus Income Tax Officer" (supra), the company, on whom, the search had been conducted by the CBI in some bribery case, admitted specifically that they had provided accommodation entries to the assessee. The original assessment proceedings having been completed after examination of receipt of amount from the company, the completed assessment was reopened. 123. The facts are palpably different from the case at hand in as much as in the present case, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Security & Finance Limited Vs ACIT" (supra) is, thus, also not applicable, on facts. 127. "R.K. Malhotra, Income Tax Officer Versus Kasturbhai Lal Bhai" (supra) is, again, of no help to the department. The issue involved therein was as to whether an Audit Objection can be considered as information. The Supreme Court reversed the judgment of the Gujarat High Court. Later on, it was over-ruled by the Supreme Court in "Indian & Eastern Newspaper Society Versus CIT", 119 ITR 996 (S.C). While doing so, the question as to whether the view expressed by an internal Audit Party of the Income Tax Department on a point of law is to be regarded as information for the purpose of initiating proceedings under section 147(b) of the Income Tax Act and as to whether the Income Tax Officer was legally justified in re-opening the assessments on the basis of the view expressed by the internal Audit Party and received by him subsequent to the original assessment, was answered in favour of the assessee. Therefore, "R.K. Malhotra" (supra) is also not attracted. 128. In "RBS Product Limited Versus ACIT" (supra), the assessee had received share capital from M/s Shail Investments Private Limited and M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 148 of the Income Tax Act. We find that: * The learned Commissioner of Income Tax (Appeals) has gone wrong in upholding the initiation of the re-opening of the completed assessment on the basis of information contained in search material found during search of a third party. Since there was no incriminating material, the initiation, completion and consequential upholding of the re-assessment proceedings is not sustainable in law. The reasons recorded for the formation of belief of escapement of income chargeable to income tax are based solely on the Investigation Wing's report 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. (Ground No.2,7 & 11) * 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SESSEE'S CONTENTIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) 133. The assessee submitted before the learned Commissioner of Income Tax (Appeals), that since the issue of advance against sales with six companies of Rs. 3.90 Crores was examined by the Assessing Officer during the original assessment proceeding and all primary facts/documents were filed before the Assessing Officer, it was not required to give any further assistance to the Assessing Officer to decide as to what inference should be drawn from the facts of the case. 133.1 The assessee submitted that doubt, if any, of alleged accommodation entries could have been raised by the Assessing Officer at the stage of the original assessment, on the basis of the primary documents/facts already in his possession. 133.2 The assessee stated that however, on the basis of the documents filed/facts disclosed, the Assessing Officer did not doubt the genuineness of the transactions of the assessee company during the scrutiny assessment proceedings. 133.3 The assessee stated that the other fact relied on by the Assessing Officer while re-opening the completed assessment was a completely wrong assumption that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being any allegation, in the reasons recorded for the formation of belief of escapement of income chargeable to income tax, of failure on the part of the assessee to make a full and true disclosure of material facts during the original assessment proceedings. 133.12 The assessee contended that the reopening of the completed assessment was an abuse of power by the Assessing Officer, since the Assessing Officer, inspite of having been in possession of full and true particulars furnished by the assessee, makes no reference to them. 133.13 It was stated that a mere change of opinion based on just conjectures or surmises is not sufficient. 133.14 The assessee stated that there has to be reason to believe and not merely reason to suspect escapement of income, based on a mere change of opinion. 133.15 The assessee stated that the Assessing Officer had recorded his reasons for the formation of belief of escapement of income chargeable to income tax by wrongly alleging that the bank account had not been disclosed by the assessee company during the post search investigations, whereas the fact of the matter was that the assessee company had never been part of any post search investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed was a factual mistake. 133.23 The assessee stated that the Assessing Officer did not bother to examine the information/documents already available on record. 133.24 The assessee stated that had the Assessing Officer perused the material already available on record, he could never have come to the conclusion that it was a case fit for notice under section 148 of the Act being issued. 133.25 The assessee also stated that in the absence of compliance of the statutory requirements of the case for issuance of notice under sections 147 and 148 of the Act, particularly when it was being issued beyond the period of four years, the notice and the proceedings initiated stand vitiated for want of strict compliance of the requirements as stipulated under section 147 of the Income Tax Act. COMMISSIONER OF INCOME TAX (APPEALS)'S FINDINGS 134. In this regard, the learned Commissioner of Income Tax (Appeals) has observed, inter alia, that from the assessment record, it was found that the case of the assessee had been selected for scrutiny through Computor Aided Scrutiny Selection, reason being "large increase in unsecured loans". 134.1 The learned Commissioner has observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year". 134.9 It was observed that the Assessing Officer had initiated the re-assessment proceedings after recording reasons for the formation of belief of escapement of income chargeable to income tax, for the formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income chargeable to tax had escaped assessment. 134.10 The learned Commissioner observed that reliance was being placed on the decision of the Hon'ble Supreme Court in the case of "Phool Chand Bajrang Lal & another Vs Income Tax Officer & another", 203 ITR 456 (S.C.), wherein, it has been held that the jurisdiction of the Income Tax Officer to reassess income arises if he has, in consequence of specific an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee before the Assessing Officer during the original assessment proceedings. 135.6 The learned Counsel for the assessee invited the attention of the Bench to the fact that the Assessing Officer has reopened the assessment on the allegation that the bank account was not disclosed by the assessee to the Additional Director of Income Tax in response to the summons issued to Shri Triloki Nath Singla (Para 8 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax). 135.7 The learned Counsel for the assessee has contended that further, under Para 14 of the reasons recorded for the formation of belief of escapement of income chargeable to income tax, it was alleged by the Assessiong Officer that it is evident that the assessee had not disclosed fully and truly all material facts in its return of income, or that facts, as noted above, could not be discovered by the Assessing officer in the assessment proceedings under section 143(3) of the Act. 135.8 The learned Counsel for the assessee has contended that nowhere in the entire reasons recorded for the formation of belief of escapement of income chargeable to income tax, the disclosure of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they were shown as advance against land adjusted against fixed assets. 136.4 The learned CIT (DR) has contended that this being so, obviously, the assessee's credits of Rs. 3.90 crore were never examined by the Assessing Officer during the original assessment proceedings. 136.5 The learned CIT (DR) has submitted that otherwise too, under the Computor Aided Scrutiny Selection, done for the limited purpose to examine share capital, the Assessing Officer was not having jurisdiction to examine such credits shown as advance against land. 136.6 The learned CIT (DR) has maintained that this being so, the learned Commissioner of Income Tax (Appeals) has correctly concluded that all material facts with respect to the said credits had not been fully and truly disclosed by the assessee company in the original assessment proceedings. ASSESSEE'S REBUTTAL 137. In rebuttal, the learned Counsel for the assessee company submitted that the details of the bank account were furnished by the assessee before the Assessing Officer during the original assessment proceedings, copy at APB, Page 10 and details of the bank account furnished by assessee along with reply dated 19.08.2014 and the follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Rs. 3.90 crore was never examined during the original assessment proceedings completed on 15.09.2014 under section 143(3) of the Act, the Assessing Officer issued a letter dated 10.09.2014, APB, Page 15, seeking further information (that is, details of documents / evidences related to the alleged companies in assessment under section 148 of the Act). The assessee filed reply dated 15.09.2014 (APB, Pages 16-17) along with a copy of Allotment letter to the Investor, placed at APB, Pages 122-131, Agreement to Sell, copy at APB, Pages 132-139, ITR, copy at APB, Page 140, and copy of Bank statement of Investor, at APB, Pages 153- 154. Thus, the complete primary facts relating to the transaction of advance against sale received from these six companies were filed before the Assessing Officer during original assessment proceedings. 137.12 On the issue of the original assessment being under Computor Aided Scrutiny Selection for limited scrutiny, the learned Counsel for the assessee referred to APB, Page 752, that is, the copy of notice under section 143(2) of the Act, which does not mention that the case is selected in Limited Scrutiny and when the Assessing Officer has specifically c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.4 138. On this issue, the Department has stressed that the issue is of advances against sale of commercial space to the extent of Rs. 3.90 crore received from six companies. 138.1 On this issue, it is seen that the balance in the assessee's bank statement (APB-88) was the same as that shown in the Balance Sheet as on 31.03.2012, i.e., of Rs.13,85,196/-, as shown in the Schedule of Cash and Bank Balance forming part of the Balance Sheet (APB73), as scanned and reproduced hereunder: 138.2 Thus, the assessee's assertion that it was maintaining only one bank account during the year, is found to be correct. We further find that in the assessment order dated 15.09.2014, passed by the Assessing Officer in scrutiny assessment proceedings under section 143(3) of the Income Tax Act, the Assessing Officer has made specific mention of the books of account and other relevant records as called for by him and having been produced before him by the assessee company. In the Office Note contained in the assessment order, the Assessing Officer stated that the case had been selected for verification of large increase of unsecured loans. He confirmed that copies of account of the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has stressed that the bank account number disclosed by the assessee alongwith reply dated 19.08.2014 (APB-10) is not correct, since the last four digits of the account number have been mentioned as "7805" in place of "7085", and that so, the bank account detail cannot be considered to have been filed. This, however, is, again, found to be not sutainable in view of the fact that in the copy of account of Shri Harish Aggarwal as standing in the books of the assessee company, as filed before the Assessing Officer in the assessment proceedings, the correct bank account has been mentioned, that is, "65012097085". It has not been denied that such account statement of Shri Harish Aggarwal, as existing in the books of the assessee company, was part of the assessment record at the time of the original assessment proceedings. Therein, the correct bank account number, as above, was mentioned. Remarkably, it is not the case of the Department that the bank statement was called for, for mentioning the incorrect account number and that such a request was refused / returned by the bank on account of wrong bank account number. The said account statement of Shri Harish Aggarwal, as existing in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank account of the assessee was not disclosed during the original assessment proceedings. It is trite law that the reasons recorded for the formation of belief of escapement of income chargeable to income tax have to be taken as they are and they cannot be improved upon subsequently. 138.9 So far as regards the Assessing Officer's finding that the statement of Shri Himanshu Verma was recorded by the Income Tax Department on 29.03.2012, but it was received by the Assessing Officer on 04.02.2019, the same cannot be accepted because such information was available with the Income Tax Department on 15.09.2014, the date of the passing of the original Assessment Order under section 143(3) of the Act, after verification of advance against sale of property from six persons. Therefore, as rightly claimed on behalf of the assessee company, the extended period of six years under the proviso to section 147 of the Act is not available to the Department on this account also. CASE-LAWS 139. The decision in "Amit Poly Prints (Private) Limited" (supra), is not applicable. Therein, the original assessment had not been completed in scrutiny assessment proceedings. The proviso to Section 147 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable, 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 case of the assessee before us was not selected under Computer Aided Scrutiny Selection, under limited scrutiny. 139.8 "Devi Electronics Private Limited" (supra) is, again, not applicable since therein also, the return filed was processed under section 143(1). 139.9 In "Yuvraj Vs Union of India & another" (supra), the notice under section 148 was issued within four years from the end of the relevant assessment year. "Yuvraj" (supra) too, is, therefore, not applicable. 139.10 In "NDTV vs. DCIT" (supra), the Hon'ble Supreme Court has relied upon the Constitutional Bench judgment in the case of "Calcutta Discount Co. vs Income Tax Officer", 41 ITR 191 (SC) and it has been held that the assessee is only required to disclose primary facts during assessment and while explaining Explanation 1 to section 147 of the Act, it has been held that "There can be no doubt that the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 chargeable to income tax, cannot be termed as tangible material, as at the time of scrutiny assessment, it was very much available with the department." 139.12 In the Hon'ble Punjab and Haryana High Court's judgment in the case of "CIT vs. ITW India Limited" (supra), it was held, dismissing the appeal of the Revenue, that the assessee had done his duties and it was for the Assessing Officer to draw the correct inference from the primary facts and not the responsibility of the assessee and there was no default on its part. 139.13 In the Hon'ble Punjab and Haryana High Court judgment in the case of "Duli Chand Singhania" (supra), it was held that "The entire thrust of the findings recorded by the Assessing Officer in his order dated March 13, 2003, is to justify his satisfaction about the escapement of income. According to him, it was a clear case of escapement of income as defined in Explanation 2 to section 147 as the assessee had been allowed excessive relief under section 80-O of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otices 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 reopened if some of the Income Tax Officers were found to be mere namelenders - majority of the learned judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee-respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We may now deal with the first ground mentioned in the report of the Income-tax Officer to the Commissioner of Income-tax. This ground relates to Mohansingh Kanayalal, against whose name there was an entry about the payment of Rs. 74, annas 3 as interest in the books of the assessee, having made a confession that he was doing only name-lending. There is nothing to show that the above confession related to a loan to the assessee and not to someone else, much less to the loan of Rs. 2,500 which was shown to have been advanced by that person to the assessee-respondent. The live lin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ussed, 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 under secion 143(3) of the Act. The issue of the alleged advances from customers amounting Rs. 3.90 crore was examined by the Assessing Officer in the original assessment proceedings. The statement of Shri Himanshu Verma was available with the Income Tax Department on 29.03.2012, whereas the assessment was completed on 15.09.2014. In the reasons recorded for the formation of belief of escapement of income chargeable to income tax for reopening, the Assessing Officer has failed to demonstrate the failure on the part of assessee during the assessment proceedings, and also the satisfaction required under the proviso to section 147 was missing. As such, the benefit of the extended period of six years is not available to the Assessing Officer. GROUND No. 5 140. Ground No.5 states that the learned Pricipal Commissioner of Income Tax had wrongly granted approval for issuance of notice u/s 148 of the Income Tax Act without application of mind and without veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner 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 Income Tax observed that the proposal of the Assessing Officer and the material available on record were examined thoroughly by the Principal Commissioner of Income Tax and a detailed satisfaction note was recorded by him, which forms part of the Paper Book. The learned Commissioner of Income Tax (Appeals) has reproduced the said Satisfaction Note at page 246 of the order under appeal, as follows: 148.2 The learned Commissioner of Income Tax (Appeals) has observed that the approval to reopen the assessment under section 147 of the Income Tax Act was accorded by the Principal Commissioner of Income Tax after taking into consideration all the facts and material available on record, in detail. 148.3 The learned Commissioner of Income Tax observed that thus, it can be said that the Principal Commissioner of Income Tax has applied his mind on the issues involved and has accorded his approval in accordance with the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 assessee has asserted that the learned Principal Commissioner of Income Tax has not seen the assessment record and the verification conducted by Assessing Officer during the assessment proceedings, because no reference to such verification has been made by the learned Principal Commissioner of Income Tax. 149.9 The learned Counsel for the assessee has urged that the learned Principal Commissioner of Income Tax has simply relied on the information passed on by the Investigation Wing of the Department through the Income Tax Officer, Ward 1(5), Chandigarh, who had jurisdiction over the case prior to its centralization. 149.10 The learned Counsel for the assessee has averred that the learned Principal Commissioner of Income Tax has failed to apply his mind and has erred in granting the approval without verifying the fact that the entire reasons recorded by the Assessing Officer 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 ..... ner 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 Therefore, Ground No. 5 is found to be carrying merit and, accordingly, this Ground is accepted. GROUND NO. 9 152. Ground No.9 challenges the Action of the learned Commissioner of Income Tax (Appeals) in upholding the re-assessment, whereas no cross-examination of the searched person, whose statement was relied on by the Assessing Officer to make additions, was allowed to the assessee, in violation of the principles of natural justice. This ground corresponds to original Ground No.3 and Additional Ground No.6 raised by the assessee before the learned Commissioner of Income Tax (Appeals), raking up the issue of violation of the principles of natural justice. ASSESSEE'S CONTENTIONS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) 153. Before the learned Commissioner of Income Tax (Appeals), the assessee contended that the information relied upon by the Assessing Officer was not confronted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -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 record, the addition had been made by the Assessing Officer on the strength of enquiries conducted under section 133(6) of the Income Tax Act and by making independent analysis of the documents to arrive at the conclusion that the assessee had failed to prove the identity, credit worthiness and genuineness in respect of the credits of Rs.3.90 crores. 154.1 The learned Commissioner of Income Tax (Appeals) observed that the statements of Shri Himanshu Verma and other Directors of the applicant companies, alongwith other material found in the course of search, was used as corroborative material by the Assessing Officer, to strengthen his findings. 154.2 The learned Commissioner of Income Tax (Appeals) observed that as per the requirement of Section 68 of the Income Tax Act, the primary onus which lay on the assessee had not been discharged by the assessee, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) observed that the statement had been used only as a corroborative evidence. 154.14 The learned Commissioner of Income tax (Appeals) observed that however, the statement of Shri Himanshu Verma, recorded under section 132(4) of the Income Tax Act on 29.03.2012, had been gone into. 154.15 The learned Commissioner of Income Tax (Appeals) observed that therein, he had admitted that he had been providing accommodation entries through a number of conduits managed and controlled by him against payment of commission at the rate of 0.75% to 1.5%. 154.16 The learned Commissioner of Income Tax (Appeals) observed that it was admitted by Shri Himanshu Verma in his statement recorded under oath that he had been running a network of seventy to eighty paper companies which, in fact, were not having any actual business and that they were being used only to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 transaction about the companies in which he was Director. 154.27 The learned Commissioner of Income Tax (Appeals) observed that similar statements had been given under oath, under section 131 of the Income Tax Act, by Shri Daljeet Singh, Director of M/s Rising Portfolio India Private Limited, recorded on 02.05.2012, Shri Niraj Kumar, Director of M/s Rhythem Exim and M/s White Collar, recorded on 03.05.2012, Neha Yadav, on 30.04.2012, Shri Kayanat Khan, on 30.04.2012, Shri Saurav Malhotra, on 03.05.2012 and Shri Vinod Kumar Ojha, on 30.04.2012. 154.28 The learned Commissioner of Income Tax (Appeals) observed that the statement of Shri Himanshu Verma had been further corroborated by the various documents which had been found and seized from Shri Himanshu Verma during the search operation, which documents had been confronted to him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut 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 general proposition of law that the Income Tax Department cannot rely upon any evidence which has not been subjected to cross-examination. 154.42 It was held that the Income Tax Officer occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice and such Rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it. 154.43 It was held that the Assessing Officer is not bound to divulge the source of his information. 154.44 It was held that there is no denial of natural justice if the Income Tax Officer refuses to produce an informant for cross-examination, though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries 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 (Appeals), as recorded at page 86 of the order under appeal, the assessee stated before the learned Commissioner of Income Tax (Appeals), that there was not even a whisper about the name of the assessee company in the statement of Shri Himanshu Verma, received from the Additional Director of Income Tax (Investigation), Unit-6(3). 156.2 The learned CIT (DR) has contended that this admission of the assessee shows that throughout the reassessment proceedings, the statement in question was available with the assessee. 156.3 The learned CIT (DR) has contended that further, the statement of Shri Himanshu Verma only states that the Himanshu Verma group was operating shell companies. The learned CIT (DR) has contended that the Assessing Officer noted that the six companies were some of those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 157. The learned Counsel for the assessee, in his rebuttal, has contended that the learned CIT (DR) has remarked that the statement of Shri Himanshu Verma was used by the Assessing Officer only as information to conduct enquiries. 157.1 The learned Counsel for the assessee has contended that this is totally wrong. 157.2 The learned Counsel for the assessee has contended that in fact, no enquiry whatsoever was conducted by the Assessing Officer before the reopening of the completed assessment. 157.3 The learned Counsel for the assessee has contended that the case of the assessee was reopened on the basis of the statement of Shri Himanshu Verma only. 157.4 The learned Counsel for the assessee has contended that enquiry, if any conducted by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer for the formation of belief of escapement of income chargeable to income tax, the Assessing Officer has observed, inter alia, that the Income Tax Officer, Ward 1(5), Chandigarh had passed on information that a search had been conducted in the case of the Himanshu group of cases, who was engaged in activities of providing accommodation entries. This fact had been admitted by Shri Himanshu Verma in his statement recorded on oath, stating that he was managing and controlling a number of companies/firms/sole proprietary concerns exclusively for the purpose of providing accommodation entries to different parties. The Assessing Officer, after reproducing Question No.8 and the answer thereto, as asked of and replied to by Shri Himan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 alteram partem - hear the other party. In other words, nobody can be condemned unheard. This would apply here, since the assessee, by not being provided with the opportunity of cross-examination, has been shut out at the threshold and the matter has been decided against it unilaterally. 158.6 Again, it is wrong to state that the Assessing Officer has not based his order on the statement of Shri Himanshu Verma. As discussed, it is the statement of Shri Himanshu Verma which solely forms the basis of, firstly, the reasons recorded by the Assessing Officer for the formation of belief of escapement of income chargeable to income tax, and then, on the basis of these very reasons recorded for the formation of belief of escapement of income chargeab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the principles of natural justice, because of which, the assessee was adversely affected. 159.4 It was held that the order of the learned Commissioner of Income Tax (Appeals) was based on the statements given by the two witnesses. 159.5 It was held that even when the assessee disputed the correctness of the statements and wanted to cross examine the witnesses, the Adjudicating Authority did not grant this opportunity to the assessee. 159.6 It was held that in the order passed by the Adjudicating Authority, he had specifically mentioned that no such opportunity was sought by the assessee. 159.7 It was held that however, no such opportunity was granted and the said plea was not even dealt with by the Adjudicating Auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 60. 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/double branding of the company. 162. These are not the facts of the case at hand. Herein, as noted, the assessment was passed solely and mainly on the basis of the statement of Shri Himanshu Verma without allowing cross-examination to the assessee, despite specific request by the assessee in this regard. 163. In "Kuwer Fibres (Private) Limited" (supra), the statement recorded was during the search on the assessee itself. Therefore, the statements were rightly held as supposed to be with the assessee. Here, on the other hand, the information received, i.e., the statement of Shri Himanshu Verma was third party information. The statement was recorded in a search conducted on a third party. However, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artly 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) Whether ld. CIT(A) erred in deleting the addition of Rs. 2,48,00,000/- by not appreciating the facts that genuineness and creditworthiness of M/s TJR Properties Pvt. Ltd. has not been established during assessment as well as appellate proceedings? OBSERVATIONS AND FINDINGS OF THE A.O. 175. The sole issue raised by the Department is that the learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs.2.48 crore received by the assessee company from M/s TJR Properties Private Limited. The Assessing Officer's findings stand reproduced in the earlier part of this order. 176. As reiterated, the Assessing Officer held that M/s TJR Properties Private Limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 assessee averred before the learned Commissioner of Income Tax (Appeals) that however, the assessee company had not received even a single penny from this company during the year under consideration. 187. The assessee averred before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer had made frivolous additions in a mechanical and stereo typed manner. 188. The assessee averred before the learned Commissioner of Income Tax (Appeals) that this was highlighted by the fact that the Assessing Officer had recorded his irrelevant and unlinked observation about the company from whom no money had been received by the assessee company d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rai Gupta in the final re-assessment order, had purposely not reproduced these words (i.e., "in the recent past/at this stage"), so as to substantiate his false averments, and had wrongly declared M/s TJR Properties Private Limited to be a shell entity. 199. The assessee stated before the learned Commissioner of Income Tax (Appeals) that Shri Jagdish Rai Gupta had deposed in his statement that "here I would like to state that M/s TJR Properties Private Limited was created in January, 2008 and this company had purchased one showroom in Sector 5, Panchkula, but we had sold the showroom later on. I do not remember the exact date of sale of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 malafide intent on the part of the Investigation Wing of the Depertment. 211. The assessee stated before the learned Commissioner of Income Tax (Appeals) that no inference could be drawn against the assessee company on the basis of the statement of Shri Jagdish Rai Gupta. 212. The assessee contended before the learned Commissioner of Income Tax (Appeals) that neither any Appraisal Report, nor any copy of statement of Shri Jagdish Rai Gupta, nor any information, nor any communication received from the Deputy Director of Income Tax (Investigation) Mohali, was given to the assessee company during the entire re-assessment proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 granted to the assessee company. 223. The assessee contended before the learned Commissioner of Income Tax (Appeals) that as to which way lies the truth in Shri Jagdish Rai Gupta's deposition could have been revealed only if he had been subjected to cross-examination by the assessee company. 224. The assessee contended before the learned Commissioner of Income Tax (Appeals) that as a matter of fact, the right to cross examine a witness always is an indispensible right and the opportunity of such crossexamination is one of the cornerstones of natural justice. 225. The assessee contended before the learned Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 hiding certain vital parts of these recorded statements, to weave and fortify his false and concocted story. 234. The assessee contended before the learned Commissioner of Income Tax (Appeals) that it is established law that a statement has to be read in totality and it cannot be bisected or dissected. 235. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the admission must go whole hog, as it were on the point at issue and the admission has to be taken as a whole. 236. The assessee contended before the learned Commissioner of Income Tax (Appeals) that conjectures and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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-assessment proceedings. 246. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer, on his part, simply chose to ignore these submissions without any further enquiry/acknowledgement in this regard. 247. The assessee contended before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer had also not declared any of these evidences, documents and details, etc., submitted by the assessee company, to be false or fake. 248. The assessee contended before the learned Commissioner of Income Tax (Appeals) that even no adverse infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 Properties Private Limited could not be doubted under any circumstances by the Assessing Officer, especially when he had himself reassessed, under section 153A read with Section 143(3) of the Income Tax Act, the income of M/s TJR Properties Private Limited for the assessment year 2012-13, out of which, an amount of Rs.2,49,61,007/- had been assessed as taxable income from business, as profit on sale of the said showroom site during the assessment year 2012-13, and that too, during the same period, i.e., in December, 2019. 258. The assessee contended before the learned Commissioner of Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Assessing Officer on 24.12.2019 and was sent to the Deputy Director of Income Tax (Investigation), Mohali, on 26.12.2019, at 6.00 PM, vide letter No. 1733, in the case of M/s TJR Properties Private Limited. 269. The assessee contended before the learned Commissioner of Income Tax (Appeals) that in this Deviation Note, the Assessing Officer had categorically admitted that there was no document or reasoning supplied to him by the Investigation Wing of the Department, due to which, the credit entries in the bank accounts of the assessee company could be treated as unexplained. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee contended before the learned Commissioner of Income Tax (Appeals) that the Assessing Officer, without application of his own mind, in the haste of adherence to these illegal instructions of a third party, by throwing all laws of the land to the wind, in the case of M/s TJR Properties Private Limited, declared the entirely genuine company as a shell company and made addition of all the credits received in the bank account of M/s TJR Properties Private Limited. 278. The assessee contended before the learned Commissioner of Income Tax (Appeals) that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell 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 of the Income Tax Act could he have again declared the same amount of Rs.2,48,00,000/- as unexplained cash credits of the assessee company, which was paid to the assessee company by M/s TJR Properties Private Limited out of the sale proceeds of Rs.5 crore received on the sale of its showroom site and other credits received during the year under consideration. 284. The assessee contended before the learned Commissioner of Income Tax (Appeals) that this had resulted into double taxation, which was not permitted under the Income Tax Act, 1961. 285. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, 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 68 of the Income Tax Act. 290.1 The learned Commissioner of Income Tax (Appeals) observed that a search and seizure operation under section 132(1) of the Income Tax Act had been carried out at the premises of the assessee, on 16.02.2018. 290.2 The learned Commissioner of Income Tax (Appeals) observed that during the course of the assessment proceedings, it was observed by the Assessing Officer, that the assessee company had received an amount of Rs.2.48 crore from M/s TJR Properties Private Limited. 290.3 The learned Commissioner of Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ai 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 by the assessee company 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 company accordingly and that penalty proceedings under section 271(1)(c) of the Income Tax Act were being initiated for concealment of income by the assessee company, on this issue. 290.12 The learned Commissioner of Income Tax (Appeals) observed that the assessee company had submitted du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. 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. 290.22 The learned Commissioner of Income Tax (Appeals) observed that in view of the fact that the source of the amount of Rs.2.48 crore had been duly explained, the addition of Rs.2.48 crore was being deleted, and that, accordingly, the ground of appeal was being allowed. DEPARTMENT'S SUBMISSIONS BEFORE US 291. The Department contends that the learned Commissioner of Income Tax (Appeals) has erred in deleting the addition of Rs.2.48 crore received by the assessee company from M/s TJR Properties Private Limited. 291.1 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aratus 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. 292.3 The learned Counsel for the assessee has contended that the learned Commissioner of Income Tax (Appeals), while deleting the addition erroneously made by the Assessing Officer, has rightly observed that M/s TJR Properties Private Limited is also assessed with the same Assessing Officer as that of the assessee company. 292.4 The learned Counsel for the assessee has contended that the learned Commissioner of Income Tax (Appeals), while deleting the addition erroneously made by the Assessing Officer, hes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-opening of the completed assessment on the basis of information contained in the search material found during the search of a third party, since there was no incriminating material; that so, the initiation, completion and consequential upholding of the re-assessment proceedings is not sustainable in law; that the reasons recorded for the formation of belief of escapement of income chargeable to income tax by the Assessing Officer are based solely on the Investigation Wing's report and the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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