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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 ..... ence he knew that these are not unrecorded transactions. Thus, the entire premise on which the reopening is made, is bad in law Reopening is bad in law as the belief is based on wrong facts and inferences and against the facts on record. AO in the reasons recorded clearly states that the cash deposits are suspicious . Suspicion cannot be basis of recording reasons that income subject to tax has escaped assessment, for the purpose of reopening of assessment. The reasons recorded contradict the information in Form 3CD, wherein he noticed that the tax auditor has audited these transactions and draw some conclusions and that these were examined by the AO. When the entire transactions, bank accounts etc. are recorded in the books, the question of coming to a conclusion that the transactions are not truly disclosed, is a factual mistake. Moreover, it is clear that the entire reasons are recorded based on borrowed satisfaction from the office of the DDIT-Kolkata, rather than prima facie application of mind by the AO to the information received. The books of accounts were impounded by the investigation wing. The books of accounts were audited and the copies of the annual accounts and audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 CIT(A) dismissed the case as withdrawn.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 acquiescence by the authorised representative of the appellant if any to withdraw the appeal is wrong and unauthorized and hence not accepted by the assessee. Hence he submitted that the assessee has filed these appeals. 5.1. The ld. Counsel for the assessee, challenged the reopening of assessment for both the assessment years. He submitted that the reasons recorded for both the assessment years are identical and the figures mentioned in the reasons for reopening for both the Assessment Years is the same and a copy has been placed at page 55 of the paper book. He took this bench through the reasons and submitted that there is total nonapplication of mind by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 2011-12, he submitted that the books of account were impounded by the DDIT. The DDIT vide letter dt. 31/05/2018, forwarded the cash book, ledger and other books of accounts to the assessing officer and without considering the same, the assessing officer made a best judgement assessment u/s 144 of the Act, on the ground that the assessee has not produced books of accounts. He submitted that this is travesty of justice and hence bad in law. 5.5. For the assessment year 2012-13, on merits, he submitted that the assessee had taken two dilapidated properties on lease from the landlords and as a tenant and used the same for business and had incurred expenditure of Rs.7,89,910/- for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 DDIT(INV),Unit-1(l), Kolkata vide letter No. DDIT(Inv)/Unit-1(1)/Subodh/2017-18/8155 dt. 06.03.2018, that during the financial year 2010-11 relevant to the Assessment Year 2011-12, the assessee, Shri Subodh Chandra Das, PAN: AVNPD7603E made cash deposits and withdrawals amounting to Rs. 1.17 Crore and Rs. 1.06 Crore respectively in his bank account. Cash deposits range are from 3.69 lakhs to Rs. 37.00 lakh and cash withdrawals range are from Rs. 10.00 lakh to Rs. 35.00 lakh. From the information it is also evident that in para 17A of the Form 3CD, the Auditor himself accepted the fact that the assessee has made certain payments in cash by violation of section 40A(3) of the I.T. Act,1961. Being a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 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 report submitted by the ITO to the Commissioner and the order of the Commissioner was produced. In his report, the ITO did not set out any reason for coming to the conclusion that this was a fit case to issue notice under section 148. The material that he had before him for issuing notice under section 148 was not mentioned in the report. In his report he vaguely referred to certain communications received by him from the Commissioner Bihar and Orissa. He does not mention the facts contained in those communications. All that he said was that from those communications 'it appears that these persons (alleged creditors) were name-lenders and the transactions are bogus'. He had not even come to a prima facie concl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion 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' and affixed his signature thereunder. The Court was of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this was a fit case to issue notice under section 148. The important safeguards provided in section 147 and 151 were highly treated by the ITO as well as by the Commissioner. Both of them appeared to have taken the duty imposed on them under these provisions as of little importance. They substituted the forum for the substance. In the result this appeal was allowed, the order of the High Court was set aside and the impugned notice quashed. 11. The Hon ble Supreme Court in the case of Ganga Saran Sons (P.) Ltd. v. Incometax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that income subject to tax has escaped assessment, for the purpose of reopening of assessment. The reasons recorded contradict the information in Form 3CD, wherein he noticed that the tax auditor has audited these transactions and draw some conclusions and that these were examined by the Assessing Officer. When the entire transactions, bank accounts etc. are recorded in the books, the question of coming to a conclusion that the transactions are not truly disclosed, is a factual mistake. Moreover, it is clear that the entire reasons are recorded based on borrowed satisfaction from the office of the DDIT-Kolkata, rather than prima facie application of mind by the Assessing Officer to the information received. The books of accounts were imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 introduced its own unaccounted money in its bank by way of accommodation entries. Thus, the reassessment order was not valid. 15. The Hon ble Delhi High Court in the case of Pr. CIT vs. Meenakshi Overseas (P) Ltd. reported in [2017] 395 ITR 677 (Delhi), held as follows:- Section 68, read with section 147, of the Income-tax Act, 1961 - Cash credit (Accommodation entries) - Assessment year 2004-05 - Information was received from Director (Investigation) that during year under consideration, assessee had received accommodation entries from a beneficiary - Notice under section 148 was issued and an assessment order was passed by Assessing Officer treating credit received as unexplained income under section 68 - Whether since there was no independent appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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