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TMI Blog2020 (3) TMI 1478X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer received information from DDIT (Inv.), Unit-1, Kolkata [DDIT], and based on this information he recorded reasons for reopening the assessments and thereafter reopened the assessment for both the assessment years u/s 147 of the Act, by issuing notice u/s 148 of the Act. Thereafter, he completed the assessment for the assessment year 2011-12 on 13/12/2018 determining the gross total income at Rs.11,20,501/- interalia making addition of Rs.7,24,475/-, as undisclosed profit and for the assessment year 2012-13, determined the total income at Rs.49,64,207/- interalia making addition u/s 68 of the Act and disallowing claim of expenditure. Aggrieved assessee carried the matter in appeal. 3.1. For the assessment year 2011-12, the ld. CIT(A) dismissed the case as withdrawn. For the assessment year 2012-13, the ld. CIT(A) granted part relief. 4. Aggrieved with both the orders, the assessee is in appeal before us. 5. The ld. Counsel for the assessee, submitted that the ld. CIT(A) was wrong in recording that the assessee has chosen to withdraw the appeal. He submitted that payment of disputed demand does not take away the right of the assessee to pursue an appeal and alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the DDIT and that he is not come to a conclusion by himself by conducting a prima facie verification of the information to come to a conclusion that there is a escapement of income subject to tax by conducting a prima facie enquiry. He further submitted that the ld. Pr. CIT has not recorded proper satisfaction while granting approval u/s 151 of the Act and that he has simply recorded "fit case", and that this does not satisfy the requirements of law and hence the re-opening is bad in law. 5.2. For all the above propositions, the ld. Counsel for the assessee relied on a number of case law, which I would be considering as and when necessary. 5.3. He submitted that the reasons recorded are the same for both the assessment years and even the figures of cash deposits recorded are the same for both the years which shows no-application of mind to the information received by the Assessing Officer and that it is recorded that cash deposits are between Rs.3.69 Lakhs to Rs.37 Lakhs and that cash withdrawals range from Rs.12 Lakhs to Rs.35 Lakhs, which is a huge range, which also shows lack of application of mind to the information received. 5.4. On merits, for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reason that the ld. CIT(A) had dismissed the appeal for the assessment year 2011-12 as withdrawn and as the assessee disputes this conclusion of the ld. CIT(A). He submitted that the ld. CIT(A) may be directed to dispose off the appeal on merits. He further pointed out that the issues may be sent back to the file of the lower authorities for fresh adjudication for the reason that the books of accounts were available with the Department for the Assessment Year 2011-12 and hence passing an order u/s 144 of the Act may not be proper. 6.1. For the assessment year 2012-13, he submitted that the issue may be set aside to the ld. CIT(A) on merits for verification of the evidences filed by the assessee as it appears that factual conclusions have to be drawn. 7. We have heard rival contentions. On careful consideration of the facts and circumstances of the case, perusal of the papers on record, orders of the authorities below as well as case law cited, we hold as follows:- 8. We first take up the challenge to the reopening of assessment for both the assessment years, made by the assessee. The reasons recorded are expected for ready reference:- "Information was received from the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e areas, cash transactions are inevitable. The Assessing Officer also records that the tax auditor has noted the fact of these cash transactions in his audit report in From No. 3CD. Hence he knew that these are not unrecorded transactions. Thus, the entire premise on which the reopening is made, is bad in law. This proves total non-application of mind by the Assessing Officer to the information that came into his possession prior to recording reasons that income escaped assessment. It proves that the Assessing Officer has come to believe that the income subject to tax has escaped assessment based on wrong facts and inferences. Such re-opening is bad in law. 10. The Hon'ble Supreme Court in the case of Chhugamal Rajpal v. S.P. Chaliha reported in [1971] 79 ITR 603 (SC), has held as follows:- "When instant appeal came up for hearing on the last occasion, as the court found the affidavit filed by the ITO to be vague and indefinite, the court directed the counsel for the department to produce records of the ITO to show that the ITO had complied with the requirements of section 148 and section 151(2) of the Act. When the appeal was taken up for hearing on the 18-1-1971, only the repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that by reason of the assessee's omission to disclose fully and truly all material facts necessary for his assessment for the accounting year in question, income chargeable to tax has escaped assessment for that year; nor could it be said that he, as a consequence of information in his possession, had reasons to believe that the income chargeable to tax had escaped assessment for that year. The court was not satisfied that the ITO had any material before him which could satisfy the requirements of either clause (a) or clause (b) of section 147. Therefore, he could not have issued a notice under section 148. Further, the report submitted by him under section 151(2) did not mention any reason for coming to the conclusion that it was a fit case for the issue of a notice under section 148. The court was also of the opinion that the Commissioner had mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under section 148. To question No. 8 in the report which read 'whether the Commissioner is satisfied that it is a fit case for the issue of notice under section 148' he just noted the word 'Yes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppreciate how the assessee could be said to be under an obligation to disclose to the ITO in the course of its assessment as to how a director, who was in sole charge of the management of the business of the assessee and who was being paid remuneration for the services rendered by him to the assessee, had utilised the amount of remuneration received by him. It is, thus, clear that in the instant case neither the ITO had reason to believe that income of the assessee had escaped assessment nor was he right in concluding that the assessee omitted or failed to disclose fully and truly any material facts relating to its assessment. Hence, section 147(a) was not applicable and the impugned notice issued by the ITO under section 148 was without jurisdiction." 11.1. Applying the propositions of law laid down in the above case law to the facts of the case on hand, we have to hold that the reopening is bad in law as the belief is based on wrong facts and inferences and against the facts on record. 12. Further the Assessing Officer, in the reasons recorded clearly states that the cash deposits amounting to Rs.1.17 Crores, are "suspicious". Suspicion cannot be basis of recording reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on a single date, i.e., 10-2-2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the Assessing Officer stated that he had also perused various materials and report from Investigation Wing and on that basis it was evident that the assessee-company had introduced its own unaccounted money in its bank account by way of above accommodation entries. The above conclusion is unhelpful in understanding whether the Assessing Officer applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the Assessing Officer, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the assessee, which must have been tendered along with the return, which was processed under section 143(3).Without forming a prima facie opinion, on the basis of such material, it was not possible for the Assessing Officer to have simply concluded that the assessee company has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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