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TMI Blog2024 (9) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion. Ground no. 1 of grounds of appeal of the assessee is allowed. - Shri Challa Nagendra Prasad, Judicial Member For the Assessee : Shri I.P. Bansal, Adv., Shri Vivek Bansal, Adv. And Shri Vishal Chechi, Adv. For the Revenue : Shri Ram Krishan Meena, Sr. DR ORDER This appeal is filed by the assessee against the order of the Ld.CIT(Appeals)-NFAC, Delhi dated 30.11.2023 for the AY 2012-13. The assessee raised the following grounds in its appeal: - 1. That under the facts and in circumstances of the case the Ld. CIT(A) erred in law as much us in fact in upholding the initiation of reassessment proceedings in as much as he has failed to appreciate that the reasons recorded to initiate the reassessment proceedings did not meet the requirement of law and therefore, reassessment proceedings were invalid. 2. That under the facts and in circumstances of the case the Ld. CIT (A) erred in law as much as in fact in upholding the initiation of reassessment proceedings in as much as he has failed to appreciate that without calling for the assessment record, the validity of reassessment proceedings could not be upheld as it was required to dispose of the ground of appeal of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement was also submitted; the purpose of withdrawal was also submitted and also the reason for redeposit of the said amount into the said account. Therefore, it has been wrongly observed by the Ld. CIT(A) at page 31 of the impugned order that these were not submitted. 9. That under the facts and in circumstances of the case the Ld. CIT(A) erred in law as much as in not accepting the ground relating to the invalidity of the assessment order on account of jurisdictional aspect u/s 127 of the Act. 10. That under the facts and circumstances of the case the Ld. CIT(A) has erred in law as much as in fact in holding that issue regarding levy of penalty u/s 271(1)(c) of the Act is premature, therefore, need not be to adjudicated. 11. That under the facts and circumstances of the case, the Ld. CIT(A) has erred in law as much as in fact in upholding the levy of tax demand of Rs. 18,06,250/- on an assessed income of Rs. 39,90,720/- which include interest u/s 234A, 234B, 234C. No such tax and interest is leviable as no income other than returned income arises in the hands of the assessee. 12. That the present appeal is being belatedly filed. The application for condonation of delay is bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act are vague. Ld. Counsel submits that in the reasons recorded the AO stated that an information was received from the office of ITO, Ward 33(1) that the assessee has deposited cash of Rs. 10 lakhs or more in savings bank account during the FY 2011-12 pertaining to AY 2012-13. Ld. Counsel for the assessee submits that the AO in the reasons recorded did not mention the exact amount of escapement and also did not mention in which bank account the assessee has deposited cash. The AO also did not mention on which date the assessee has deposited cash and the reasons recorded are completely vague about the transactions of cash deposits. Therefore, the Ld. Counsel submits that the case of the assessee was reopened on mere information available from accountable information management system regarding cash deposit of Rs. 10 lakhs or more in the savings bank account maintained by the assessee without any documentary evidence and enquiry and merely on suspecision. 5. The Ld. Counsel further referring to page 31 of the Paper Book which are the objections filed against reasons recorded u/s 147 of the Act submits that these objections were uploaded on 08.12.2019 by the assessee and the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be with AO that there is escapement of some income. At the time of issue of notice the AO is not required to conclusively establish that there is escapement of income is sufficient for issue of notice u/s 148. It is pertinent to mention that in the case of CIT v Nova Promoters Finlease (P) Ltd (ITA No. 342 of 2011) dated 15.02.2012, the Hon ble Delhi High Court, which is the jurisdictional High Court, held that as long as there is a live link between the material which was placed before the Assessing Officer at the time when reasons for reopening were recorded, proceedings u/s 147 would be valid. The Court also held- We are aware of the legal position that at the stage of issuing the notice u/s 148, the merits of the matter are not relevant and the Assessing Officer at that stage is required to form only a prima facie belief or opinion that income chargeable to tax has escaped assessment Here it would be worthwhile to mention that in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd. v. ACIT (2007) 291 ITR 500/161 Taxman 316 (Supreme Court). The Hon'ble Apex Court has held that: All that is required for the Revenue to assume valid jurisdiction u/s 148 is the existence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, necessary approval u/s 151 of the Act, 1961 is solicited for issuance of notice u/s 148 of the I.T. Act for the AY 2012-13. 8. Perusal of the reasons show that AO received information from the office of ITO, Ward 33(1) and according to which assessee has deposited cash of Rs. 10 lakhs or more in savings bank during the FY 2011-12 pertaining to AY 2012-13. Except this information the AO do not possess any other information to come to a conclusion that the income of the assessee for the AY 2012-13 had escaped assessment. The reasons are general and very vague. It appears that the AO is not even in possession of bank account of the assessee before recording reasons for reopening of assessment. The reasons recorded did not specify the exact amount of cash deposit made by the assessee and the name of the bank, the account number of the assessee and also the date of transaction. All these goes to show that the AO do not possess any credible information to form a belief that income had escaped assessment. 9. In the case of Nisha Goel Vs. ITO in ITA No.2767/Del/2023 dated 04.06.2024 the coordinate bench of the Tribunal almost on identical facts held that the assessment made u/s 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the contrary, when it is pointed out to the Assessing Officer that SHPL had not assigned any policy to Rajiv Agarwal, the said fact was completely overlooked. Similarly, in the case of Vijay Laxmi Agarwal, the Assessing Officer failed to take into account the fact that the assessee had paid a sum of Rs. 2,08,000/-, which was more than surrender value of the policy, for assignment of the policy in her favour. This too was completely ignored by the Assessing Officer. 13. Following the said decision and also the decision of the jurisdictional High Court in the case of PCIT Vs. Meenakshi Overseas Pvt. Ltd. (395 ITR 677) the coordinate bench of the Tribunal in the case of RN Khemka Enterprise Pvt. Ltd. Vs. ITO (ITA No.7244/Del/2019) dated 12.08.2021 held that if there is non-application of mind in recording reasons, the AO could not be said to have reason to believe to justify reopening of assessment. While holding so the Tribunal observed as under: - 30. We find that Hon ble Delhi High Court in the case of Pr. CIT vs Meenakshi Overseas Pvt. Ltd. reported in 395 ITR 677 (Del.) has quashed the reassessment proceedings on the ground that the reasons recorded by the AO failed to demonstr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hing from that report is set out to enable the reader to appreciate how the conclusions flow there from. 23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing. 24. The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on. 28.3 Analysing the above reasons together with the annexure, the Court observed: 14. The first sentence of the reasons states that information had been received from Director of Income- Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000/ - has escaped assessment as defined by section 147 of the Income Tax Act. Therefore, this is a fit case for the issuance of the notice under section 148. 29.3 The Court was not inclined to interfere in the above circumstances in exercise of its writ jurisdiction to quash the proceedings. A careful perusal of the above reasons reveals that the AO does not merely reproduce the information but takes the effort of revealing what is contained in the investigation report specific to the Assessee. Importantly he notes that the information obtained was fresh and had not been offered by the Assessee till its return pursuant to the notice issued to it was filed. This is a crucial factor that went into the formation of the belief In the present case, however, the AO has made no effort to set out the portio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income Tax v. G G Pharma (supra) there was a similar instance of reopening of assessment by the AO based on the information received from the DTT (I). There again the details of the entry provided were set out in the reason to believe'. However, the Court found that the AO had not made any effort to discuss the material on the basis of which he formed prima facie view that income had escaped assessment. The Court held that the basic requirement of Section 147 of the Act that the AO should apply his mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. Likewise in CIT-4 v. Independent Media P. Limited (supra) the Court in similar circumstances invalidated the initiation of the proceedings to reopen the assessment under Section 147 of the Act. 32. In Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del) it was held that therefore, even if it is assumed that, in fact, the Assessee s income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional pre-condition being met to reopen the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law. 38. The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs. 31. We find, following the above decision, the Coordinate Benches of the Tribunal are taking the consistent view that when there is nonapplication of mind by the AO to the report of the Investigation Wing, such reassessment proceedings are not in accordance with law and such reopening proceedings have been quashed. Since, in the instant case, the AO has not applied his mind as there is non-identification of the deponents, non-mentioning of middleman if any, absence of details in the form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had not filed a return when in fact it had. 14. To compound matters further the in the assessment order the AO has, instead of adding a sum of Rs. 78 lakh, even going by the reasons for reopening of the assessment, added a sum of Rs. 1.13 crore. On what basis such an addition was made has not been explained. 15. The ratio of the above decisions clearly applies to the facts of Assessee case. There is complete non application of mind by the AO while recording the reasons for reopening of assessment. Therefore, in view of the above discussion, we quash the reassessment made u/s 143(3) read with section 147 of the Act. Ground nos. 1 to 3 are allowed. 10. This decision applies to the facts of the assessee s case as the AO did not possess any credible information before recording reasons that the income had escaped assessment since the reasons are general and vague and there is complete non application of mind by the AO in recording reasons for reopening assessment. Thus, the reassessment made u/s 143(3) r.w.s. 147 of the Act is hereby quashed in view of the above discussion. Ground no. 1 of grounds of appeal of the assessee is allowed. 11. Since the reassessment order is quashed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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