9911796707
TMI Blog2025 (2) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... no independent application of mind neither by AO while initiation of reassessment proceedings by issue of notice u/s 148 nor by CIT(A) - 4, Jaipur while deciding the issue under consideration. They simply proceeded on borrowed satisfaction reached by some other officials and even without making any enquiry before reaching to the conclusion of escapement of income, which is apparent from the perusal of the reasons where no specific transaction with any of the company alleged as paper companies is specifically mentioned and on general observations that no such transaction was shown by the assessee and no tax was paid on such transaction, the case was reopened. Hence, in this view of the matter, we do not concur with the findings of the ld CIT(A) and this issue raised by the ld. AR of the assessee is allowed. Addition u/s 68 - assessee had paid cash and in turn received accommodation entry - As during the course of reassessment proceedings as well as in the present submission that the amounts received from these two companies is against the sales made to them in preceding years and AO while recording the reasons has alleged the same as the assessee's own money routed through RTGS i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by CIT(A) are on the basis of assumptions and presumptions deserves to be deleted. X X X X Extracts X X X X X X X X Extracts X X X X ..... addition so made by ld.AO and confirmed by Id.CIT(A) is totally unjustified and deserves to be deleted. 3.1. On facts and in the circumstances Id.CIT(A) has erred in confirming the addition of Rs. 1,50,32,635/- made by ld.AO u/s 68 of the Act, by alleging that assessee has paid cash and in turn received accommodation entry in the shape of share capital received by the assessee, whereas actually the transaction alleged as bogus, were purely in the nature of trading transaction in the form of duly recorded in the books, which sales were duly accepted in assessment completed u/s 143(3) as also in re-assessment proceedings for the preceding year, the amount due recovered in the year under appeal cannot be doubted and cannot treated as non genuine. Thus the addition made merely on presumptions and surmises in a very casual manner, without proper verification of facts on record is most un-justified, bad in law and deserves to be deleted. 3.2 That the Id.CIT(A) has further erred in confirming addition of the trade debtors recovered during the year, by presuming the same to be accommodation entries taken by the assessee from two allegedly bogus entities, that too solely on the basis o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, from the perusal of the assessment order it appears that AO without disposing off the objections so raised, proceeded to complete assessment and reassessment proceedings were concluded vide reassessment order passed u/s 143(3)/147 on 10.12.2019 by making addition of Rs. 1,50,32,635/- u/s 68 by alleging that assessee has obtained accommodation entry of share application of this amount. The narration as made by the AO in the assessment at para 7 of his order is reproduced as under:- ''7. In view of the facts discussed above, it is apparent on record that the assessee has failed to explain the genuineness of share application money received amounting to Rs. 68,08,020/- taken from M/s. Rajeshwari Metails& Mineral Traders Pvt. Ltd. and Rs. 82,24,615/- from M/s.Glorious Merchandise Pvt Ltd. which were reflected in the books/ papers got from the search operation as discussed above. Therefore, it is concluded that the transactions under consideration were sham transactions and aimed only to bring unaccounted money in the guise of unsecured loan and paper work has been got up and done merely to give a colour of authenticity to the transaction and by creating a façade of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Id. AO from ITO (Inv.), Unit-1 and AIU, Kolkata, the assessment was reopened by issue of notice u/s 148 dated 18.03.2019, in response to which the assessee filed return of income and requested for supply of reasons recorded, which were provided to the assessee vide letter dated 30.09.2019. The appellant objected to the reopening of assessment on the ground that it has never taken any loan or share application money from the companies stated in the reasons recorded and in respect of two companies namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and Mis Glorious Mercandise Pvt. Ltd. the payments were received during the year against sales made to these companies in the immediately preceding year which stood accepted by the department, as the order u/s 143(3) was passed in preceding year also. However, without disposing off the objections by way of passing any order. Id. AO proceeded to complete the reassessment proceedings and the assessment order was passed by making addition of Rs. 1,50,32,635/- u/s 68 by alleging that assessee has obtained accommodation entry of share application during the year under consideration. It was submitted by the Id. AR that though the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was alleged that appellant has taken accommodation entry in the shape of unsecured loan whereas in the reassessment order no such addition of unsecured loan was made but it was observed that appellant has taken bogus share application money from these two companies and thus addition was made as unexplained share application money. Thus it is seen that no addition was made on the issue on which satisfaction was recorded before issuing notice u/s 148. It was further submitted that no independent application of mind was done by ld. AO while initiating reassessment proceedings in the reasons so recorded there is only general mention about transaction totalling Rs. 1,50,32,635/-. It was not specified as to from which company how much amount was allegedly taken as loan. It was also pointed out by the Id. AR that Id. AO has made no effort to link the reasons recorded with material available on record, as in the reasons recorded it was alleged that appellant has introduced its unaccounted cash in the bank account of various dummy / paper companies, without specifying as to which are those companies where appellant allegedly deposited the cash and even in the final reassessment order no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iyaPolypipes Ltd., A-130, Road No. 9D, VKI Area, Jaipur As per ITR filed on 29.09.2013 for the A.Y. 2013-14, the assessee has declared total Income of Rs. NIL and carried forwarded unabsorbed depreciation of Rs. 1,90,73,215/- 2. Brief details of information collected/received by the AO: The information has been received from the ITO(Inv.). Unit 1 & AIU, Kolkata vide letter No. 9301 dated 06.03.2018 in the case. As per credible information certain bank account transactions appeared suspicious. The transactions appear to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. In course of verification, bank statements of numbers of accounts have been obtained. Bank account statement of the company (1) M/s Amulya Distributors Pvt. Ltd. (account no 0015-R26084-050 IndusInd Bank), (2) M/s Moonshine Distributors Pvt. Ltd. (account no. 0015-R25031-050 IndusInd Bank), (3) Shivganga Suppliers Pvt. Ltd. (account no. 0015- R25020-050 Indusind Bank) (4) Intime Distributors Pvt Ltd (account no. 0015-R26085-050 Indusind Bank) (5) M/s Glorious Merchandise Pvt Ltd. (account no. 0515-AA1118-050 Indusind Bank) (6) Shivshakti Trade ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific information was received from the ITO(Inv.) Unit-1 & AIU, Kolkata. The information is specific and after going through this it is found that no further inquiries is necessary before recording satisfaction for issuance of notice. 5. Findings of the AO: During investigation made by the department it was found that some companies did not do any kind of business as declared by them and they have regular transactions with each other and money circulation have been observed. Funds are deposited in cash in various companies accounts and the same is then transferred in a circulatory fashion to transfer the fund to beneficiaries. The assessee is also one of such beneficiaries who have deposited its cash in various dummy/paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax. Therefore it is a fit case for initiation of assessment proceeding for escapement of income by the assessee. 6. Basis of forming reason to believe and details of escapement of income: The information has been received from the ITO(Inv.), Unit-1 & AIU, Kolkata vide letter No. 9301 dated 06.03.2018 in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to different current accounts. From the above, it can be Inferred that the out of beneficiary companies took entries from the shell companies which do not have any real business and was operated only to bring their unaccounted money in the books. In this process these beneficiary companies gradually brought their unaccounted cash bank in the books without paying any tax. The assessee is also one of such beneficiaries who have deposited its cash in various dummy/paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax. Apart from above, I have also gone through the assessment records and ITR filed for the year under consideration by the assessee but nowhere this transaction has been shown by the assessee. Therefore it is a fit case for initiation of assessment proceeding u/s 147 of the IT Act, 1961 for escapement of income by the assessee. 7. Escapement of income chargeable to tax in relation to any assets (including financial interest in any entity) located outside India; As of now, no, such information is available in respect of the assessee 8. Applicability of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, at the point of time of initiating the reassessment proceedings, existence, and not adequacy of reasons, is material. This view is supported by the decision in case of Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (SC), CARTIER SHIPPING CO. LTD. 40 DTR 459 (Mumbai Trib), Praful Chunilal Patel 148 CTR (Guj.). The sufficiency of reasons cannot be looked into by courts and there must be recording of prima facie belief has also been held in cases of Raymond woollen mills 236 ITR 34 (SC), Phool Chand Bjaranglal 203 ITR 456 (SC), K R Sadayappan 63 ITR 219 (SC). In case of Multi Screen Media (P) Ltd. 324 ITR 54 (Bom) the Bombay High Court after considering the decision in case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) has observed as under: "where the AO purports to exercise power under s. 147 within a period of four years from the end of the relevant assessment year, the condition precedent to the exercise of the power is the existence of a reason to believe that any income chargeable to tax has escaped assessment. The expression 'reason to believe' must obviously be that of a prudent person and it is on the basis of the reasons recorded by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rn at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)); Raymond Woollen Mills Ltd. v. ITO (236) ITR 34 (SC)]." 1. In the case of Raymond Woollen Mills Limited v. Income Tax Officer & Ors. [Supra], the Apex Court held and observed as under: "In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice was issued." 1. In the judgement in the case of Sterlite Industries (India) Ltd. Vs. ACIT & Anr.(2008) 302 ITR 275, Hon'ble High Court of Madras, has held:- The definite stand of the department was that the previous sanction from the Commissioner had been obtained and credible information had been received related to the year 2000-01. It was also stated that an adjudication order dated 22- 8-2007 had already been passed and dispatched to the assessee but he did not receive the same. [Para 9] In the instant case, it was only required to see whether there was any prima facie material available on the basis of which the department could reopen the file. In view of the counter-affidavit and the impugned notice, the case of the revenue for invoking the power under sections 147 and 148 could not be rejected. [Para 11] In the light of the above, the writ petition was to be dismissed. [Para 12] 1. In the judgement in the case of Shalimar Buildcon (P) Ltd. vs. ITO(2011) 128 ITD 396: ITAT, Jaipur 'B' Bench, Hon'ble ITAT, has held:- Names of the companies were intimated to the AO by the Investigation Wing information was given that the companies belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the unsecured loan as having been mentioned in the reasons of reopening, whereas there is no such conclusion in the reasons of reopening. The objections to the reasons of reopening are referring to / in context of incorrect facts The appellant has also contended in the objections letter that exact amount is not mentioned by the learned AO in the reasons of reopening whereas it is seen that this contention is incorrect as in para 3 of the reasons of reopening the exact amount received by the appellant from these shell/bogus companies has been mentioned (PB page 61). Further as per the legal procedure established through the judgements of Hon'ble High Courts and Hon'ble Supreme Court is that in case the objections against the reasons of reopening are not disposed by the Id. AO the assessee can challenge the same in writ petition. That itself does not per se in itself render the entire proceedings as illegal. In such several cases the view and the judgements of Hon'ble Courts have been that the assessing officer is directed to dispose off the objections. And in case in such matter, if the assessment order is also already passed, the assessment order is set aside and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was posted on 24 May 1993. Though there were five days left to pass the order, within the period of limitation, two days were Saturday and Sunday. The Supreme Court on the facts and circumstances of the case quashed the proceedings without remitting it for passing fresh orders. The learned Single Judge was therefore not correct in quoting Sona Builders's case (supra) for giving an indication that in case there is a procedural irregularity, it would vitiate the entire proceedings. 24. In case an order is passed without following a prescribed procedure, the entire proceedings would not be vitiated. It would still be possible for the authority to proceed further after complying with the particular procedure. 25. The enactments like the Land Acquisition Act, 1894, contain mandatory provisions like Section 5A, the non compliance of which would vitiate the declaration under Section 6 of the Act. Even after quashing the declaration for non compliance of Section 5A, the Court would permit the conduct of enquiry and pass a fresh declaration within the period of limitation. 26. We therefore make the position clear that non compliance of the procedure indicated in the GKN Driveshaf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity of hearing to the petitioner or its authorised representatives and any further proceeding with the impugned assessment proceeding will depend upon the final outcome of the aforesaid objection of the petitioner which has to be considered accordingly and by passing a reasoned and speaking order." Emphasis supplied) In the case of Lucas TVS Ltd. v. Assistant Commissioner of Income-tax [2024] 160 taxmann.com 228 (Madras) [13-12-2023] it is held by the Hon'ble Madras High Court as under.- "25. It is submitted that after the reasons were furnished to the petitioner, the petitioner did not ask for a separate speaking order disposing of the objection of the petitioner. It is further submitted that, the reopening of the assessment was not inspired from change of opinion. 26. I have considered the submission of the learned counsel for the petitioner. Wide powers vested for reopening the assessment under section 148 read with section 147 of the Income Tax Act, 1961. 27. It is precisely for this reason, the Hon'ble Supreme Court had held that a speaking order should be passed after the assessee is furnished with reasons for reopening of the assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ordinarily the procedure to be followed would be as indicated in the GKN case, that is, after receiving reasons, the assessee shall lodge his preliminary objections before the Assessing Officer against the notice for reassessment and the Assessing Officer will decide the objections by a speaking order so that an aggrieved assessee can challenge the order in a writ petition. 1. As per the judgement of Hon'ble Supreme Court in the case of GKN Drivesharfts (India) Ltd. [2003] 259 ITR 19 and the judgement of Hon'ble Gujarat High Court in the case of Garden Finance Limited reported in 268 ITR 48- challenge to the reassessment proceedings is to be done in two stages (1) challenging the reasons of reopening and (ii) challenging the assessment order. The order of the AO on the challenge to the reasons of reopening is not an appealable order. Appellant's challenge to the order of the assessing officer not disposing/rejecting the objections against the reasons of reopening and appellant's challenge to the assessment order are two separate proceedings. The CIT(A) does not have power to set aside the matter to the Id. AO whereas setting aside is the ratio of judgments in Home ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... com 25 (Gujarat) HIGH COURT OF GUJARAT Akshat Pramodkumar Chaudhary v. Deputy Commissioner of Income-tax 6. [2022] 139 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT Amar JewellersLtd.v.Assistant Commissioner of Income-tax 7. [2018] 94 taxmann.com 393 (Gujarat) HIGH COURT OF GUJARAT Amit Polyprints (P.) Ltd.v.Deputy Commissioner of Income-tax 8. [2018] 91 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Aradhna Estate (P.) Ltd.v.Deputy Commissioner of Income-tax, Circle-1(1) 9. [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer 10. [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH EtiamEmediaLtd.v. Income-tax Officer-2(2) 11. [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd.v.Assistant Commissioner of Income-tax 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) 13. [2012] 18 taxmann.com 83 (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singh v. Income tax Officer 14. [1995] 83 TAXMAN 194 (MAD.)HIGH COURT OF MADRASPanchugurumurthyv.Commissioner of Income-tax 15. [2016] 72 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s (Kotah) Ltd. v. Commissioner of Income-tax It is also noted that the ld. DR has filed the synopsis of the case laws as to the appeal filed by the assessee. Synopsis of case laws 1. OWNERS AND PARTIES INTERESTED IN M.V. "VALIPERO" ETC.ETC Vs. FERNANDEO LOPEZ & ORS on 19 September, 1989, 1989 AIR 2206, 1989 SCR SUPL. (1) 187, AIR 1989 SUPREME COURT 2206, 1989 (4) SCC 671, (1990) 1 MAD LW 520, (1989) 4 JT 10 (SC), (1990) 2 CALLT 1 The court observed that Rules of procedure are tools to achieve justice and are not hurdles to obstruct the pathway to justice. Where the outcome and fairness of the procedure have been followed, there is no reason to discard the result simply because certain details which have not prejudicially affected the result have been inadvertently omitted in a particular case. 2. Temple Of Thakurji vs State Of Rajasthan And Ors. on 30 September, 1997, AIR 1998 RAJ 85, 1997(2) WLN 535. When sustained justice and technical consideration are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done due to some technical omission. 3. Jai Jai Ram Manoh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... handed over for service to the proper officer, which in fact of the present case would be the date on which the said notices were actually handed over to the post office for the purpose of booking for the purpose of effecting service on the assessee. 11. [2011] 12 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT KanubhaiM. Patel (HUF) v. Hiren Bhatt or His Successors to Office The Reasons for Reopening of the assessment 12. [1999] 236 ITR 34 (SC) SUPREME COURT OF INDIA Raymond Woollen Mills Ltd. v. Income-tax Officer The Hon'ble SC held that in determining whether commencement of reassessment was valid, it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of material is not a thing to be decided at this stage. 13 [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd. v. Assistant Commissioner of Income-tax Since no scrutiny assessment had taken place in instant case and there was prima facie material based on which reopening notice was issued within four years, sufficiency or correctness of material would not be considered at stage of issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate (P.) Ltd.v.Deputy Commissioner of Income-tax, Circle-1(1) Where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transactions were scrutinised by Assessing Officer during original assessment, reassessment could not be held unjustified. 20 [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer SLP dismissed against order of High Court that where a reopening notice was issued on ground that assessee was beneficiary of accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified. 21 [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH EtiamEmediaLtd.v. Income-tax Officer-2(2) Where Assessing Officer had specific information from DIT (Inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 for reasons that information was received from Competent Authority, Kolkata that one 'K' was very known entry operator and instant assessee was also a beneficiary of 'K' to extent of Rs. 183 lakhs pertaining to assessment year 2012-13, reasons were sufficient enough to reopen assessment. 27 [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 Where evidence found during search in case of third party was sufficient to form belief that LTCG shown by assessee was in nature of accommodation entries and income to that extent had escaped assessment, issue of notice under section 148 was justified. 28 [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer Where Assessing Officer had information in form of accounts/documents received from Investigation wing that 'U' was a company run, managed and operated by entry providers and it was a penny stock and assessee had entered into transaction with 'U' to claim bogus capital gains, it could not be said that Assessing Officer, on absolutely vague or unspecific information initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mind to said information and upon due satisfaction, formed an opinion that LTCG on sale of penny stock shares had escaped assessment, impugned reopening notice was justified. 33 [2022] 138 taxmann.com 50 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer Where assessee sold shares and claimed exemption under section 10(38) and Assessing Officer issued a reopening notice on ground that an information was received from AIMS module that shares sold by assessee were of penny stock, since said information was specific with regard to transactions of penny stock entered into by assessee and Assessing Officer made independent enquiries and applied his mind to information and upon due satisfaction and materials gathered during enquiries, finally formed a belief that income had escaped assessment, impugned reopening notice issued against assessee was justified. 34 [2021] 131 taxmann.com 42 (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) Where AO issued a reopening notice on ground that an information was received that shares sold by assessee were of penny stock, thus, income on sale of said shares could not be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REME COURT OF INDIA Honda Siel Power Products Ltd. v. Deputy Commissioner of Income-tax The court held that assessee having not pointed out during assessment proceedings about expenses incurred relatable to tax free income there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified. 40 [2017] 79 taxmann.com 267 (SC), Larsen & Toubro Ltd. v. State of Jharkhand. 41 [2022] 140taxmann.com510 (Allahabad) HIGH COURT OF ALLAHABAD Distributors India (South) v. Union of India It is held that notice under section 148 had been issued by Assessing Officer to assessee, after conducting an investigation and going through income tax return and other related documents of assessee and after forming reason to believe that assessee had received payments under section 194J, but it had not shown said receipts in his P&L account which resulted in income having escaped assessment, reopening of assessment was justified. 3.4 We have heard the parties and perused the materials available on record. It is noted that in the present case, assessee filed its return of income in response to notice u/s 148 on 20.09.2019 and vide lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason recorded, but the same was against the supply of goods i.e. the sale made to them that too in the preceding assessment year. It was also stated that the assessment for the preceding assessment year was completed u/s 143(3) wherein the sales made to these companies have been accepted and no doubts were raised about such sales. Thus, payment received as sales consideration which arises on account of sale accepted by the revenue cannot be treated as an accommodation entry. During the year under appeal, only the pending consideration was received through banking channels for which the copies of the sales invoices and the ledger accounts were submitted by the assessee. The AO has taken note of the facts of sales is proved from the perusal of the query letter dt. 28.11.2019 wherein the details related to the sales made to these companies were sought. However, no separate speaking order was passed for the disposal of the objections raised by the assessee against the reopening of completed assessment before completing the reassessment proceedings. Further, it is noted from the record that assessee has not received any such amount as loan/share capital during the year under considerati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal are coterminous with that of AO and the objections have been dealt with in appellate order as well. The ld. AR submitted that the assessing officer was dutybound to dispose off objections by passing separate speaking order whether assessee makes request for the same or not. At this juncture, we take into consideration the decision of Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. reported in 259 ITR Page 19, wherein it has been heldthat, "…..on receipt of the reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order….." However, as noted above, in the present case, no such speaking order was ever passed despite the fact that assessee has filed objections in writing, which fact is proved beyond doubt and in various subsequent proceedings the fact of pendency of disposal of such objections was intimated to the AO which was evident from the subsequent correspondence filed (APB 76- 126). It is noted that the assessee duly complied with the procedure laid down by the Hon'ble Apex court in the case of GKN Driveshafts (Supra) by filing the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act. 9. In that view of the matter, on issue No. 1 and 2, the order of reassessment passed by the Tribunal is declared null and void. The questions are answered in favour of assessee and against the Department. 10. The appeal of the assessee is allowed." We also take into consideration the decision of ITAT Jaipur Bench in the case of Girraj Prasad Gilara HUF vs Income Tax Officer, Ward 6(5), Jaipur in ITA No. 354/JP/2019wherein it is held as under:- "Thus the requirement of disposing off the objections against the notice issued under section 148 by a separate and speaking order is a mandatory requirement in view of the judgment of the Hon'ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (supra), the failure of the AO to dispose off the objections renders the reassessment order not sustainable in law. In the case in hand there is complete failure on the part of the AO to dispose off the objections against notice u/s 148 of the Act and not merely a procedural irregularity of separate and speaking o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that assessment year:" Hence, from perusal of provisions as contained in proviso to section 147, it is apparent that in normal circumstances, an assessment already completed u/s 143(3) can be reopened within 4 years only and reopening beyond 4 years is permissible only if there is failure on the part of assessee in disclosing fully and truly all the material facts necessary for assessment. The Bench noted that in the instant case also, assessment was already completed u/s 143(3) vide order dated 12.03.2016 (APB 55- 58), thus the re-opening proceedings initiated vide notice dated 18.03.2019 is governed by the first proviso to sec 147 of the I T Act, 1961, whereby no action could be taken u/s 147 of the I T Act after expiry of four years from the end of relevant assessment year, unless it is established that an income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment. We also noticed that in the instant case, AO at para 8 of Reasons recorded (APB 60-63), i.e. "Applicability of the provisions of section 147/151 to the facts of the case" has stated that "Since 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the default of failure committed by the assessee. Failure to do so would vitiate notice and the entire proceedings". In the case of DCIT v. Hyundai Motor India Ltd. 148 ITD 333 (Chen) and CIT Vs. Cholamandalam Investment & Finance Company Ltd., 309 ITR 110 (Mad) by placing reliance on the decision of the Hon'ble Apex Court in the case of CIT Vs. Kelvinator India Ltd [320 ITR 561 SC] it is held that since during the original assessment proceedings all the requisite details were filed by the assessee and after considering such details, the claims made by the assessee were duly accepted. The issues which have already been considered in the original assessment cannot be re-appreciated in reassessment proceedings under the garb of income escaping assessment. If the Assessing Officer has not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of assessee. It is further noted that during the course of assessment proceedings u/s 143(3), after proper verification of the books of account and other records the assessment was completed after making disallowance u/s 14A and any further action u/s 148 al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration the following case laws: (i) Ram Singh 306 ITR 343 (Rajasthan) Reassessment - Income escaping assessment - Income believed to have escaped investment explained by assessee - Tribunal rightly holding reassessment proceedings initiated on non-existing facts and invalid - Income Tax Act, 1961, ss. 147, 148. Hon'ble Court in this case has inter alia held that: 29. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." By following the aforesaid judgment, hon'ble jurisdictional high in the case of MS Prime Chem Oil Ltd. Vs. ACIT in DBITA No. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under Section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his "reasons to believe" is nothing more than a report given by him to the Commissioner of Income Tax. As held by the Supreme Court in Chhugamal Rajpal, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, had supplied all relevant details; in assessment order which were verified and moreover, in reasons supplied to assessee there was no allegation that it had failed to disclose fully and truly all material facts necessary for assessment and because of its failure there had been an escapement of income chargeable to tax, reopening of assessment after expiry of four years from end of relevant assessment year was without jurisdiction. Hence in view of the facts and circumstances and the case laws discussed hereinabove, it is felt that since there was no independent application of mind neither by AO while initiation of reassessment proceedings by issue of notice u/s 148 nor by ld. CIT(A) - 4, Jaipur while deciding the issue under consideration. They simply proceeded on borrowed satisfaction reached by some other officials and even without making any enquiry before reaching to the conclusion of escapement of income, which is apparent from the perusal of the reasons where no specific transaction with any of the company alleged as paper companies is specifically mentioned and on general observations that no such transaction was shown by the assessee and no tax was paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money not only from these two companies but not from any of the companies. Thus addition per-se being on wrong facts deserves to be out-rightly deleted. The Id. AR has further explained that appellant had made sales to these two parties in the preceding year and these parties were appearing as debtors at the end of FY 2011-12. In FY 2012-13 relevant to AY 2013-14, the appellant has merely received the outstanding amount from these two companies through banking channel. It was submitted that Id. AO is not justified in making the addition in AY 2013-14 when the sales have been duly declared and accepted in the preceding year, which tantamounts to double taxation on same income. Sales made in the preceding year to these two companies are supported by the sales invoice containing complete name and address at which goods were delivered, and details of transporter, truck number etc. mentioned in the invoice itself. As regards Inspector's report is concerned wherein the Inspector stated to have visited, the office address of the one of the company, it was submitted that the matter is related to FY 2011-12 and 2012-13 and it may be possible that after such a long gap, the office addre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gally acceptable, as the onus is on the appellant. In the case of Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Hon'ble Calcutta High Court) it was held that production of even confirmatory letters from the lender parties before the Income-tax Officer in support of the loan alone would not suffice the loan as genuine. In the case of CIT v. Precision Finance (P.) Ltd. 11994] 208 ITR 465/11995] 82 Taxman 31 (Hon'ble Calcutta High Court) it was held that "It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a nongenuine transaction genuine." In the case of CIT v. United Commercial & Industrial Co. (P) Ltd. [1991] 1871TR 596/56 Taxman 304 (Hon'ble Calcutta High Court) it was held that the primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to be bogus after making in depth enquiries by the AO. During the course of assessment the AO has recorded Statements of concerned parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment proceeding it has been gathered that the assessee has failed to produce the owners of the two concerns. The reasons like non- availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted, statement of Sh. Mohan Prakash Sharma Power of Attorney holder of M/s Vinayak Overseas stating of giving accommodation entireties only and nature and volume of transaction appearing in their bank accounts leads the AOto the conclusion that the purchases were bogus. …… …… 7. Before considering the matter, it will not be out of place to mention here that question which is posed for our consideration is whether the purchases which has been done from Vinayak Overseas is genuine or not. The Assessing Officer while observing at page 12 referred hereinabove and which was already considered by the CIT (A) has confirmed the finding and Vinay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal confirmed the addition invoking the provisions of Section 68 holding that once the credit entry has been made in the books of account in the names of various parties and if the genuineness of these cash credits could not be proved, the Assessing Officer was justified in making the addition of Rs. 1,12,500. 9. We can understand that they will not be available at one point of time. When the parties from whom the wool was purchased are not nomadics, it cannot be said that they have no permanent address and if they are the genuine parties, they should have some address. No person in the name of such party was found particularly when the summons were issued under Section 131 to those parties. If the transactions are genuine and if the parties have migrated somewhere else, their latest address should have been supplied and the burden is on the assessee to prove the genuineness of the transaction, when the assessee claimed that the purchases are genuine." Though the Id. AO has apparently due to typographical error used the term share application money/unsecured loan, but the fact remains that the amount received is credit which is treated as unexplained. The genuine existen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature." In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)(08-02-1963] it is held by the Hon'ble Supreme Court as under- "It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... armonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assessee CIT v. R.S. Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct, (Emphasis Supplied) The appellant has not discharged the primary onus cast on it as even the complete documentation itself has not been produced before the learned AO. The nature of credit itself is not proved by the appellant. Further, these parties are found to be non- existent and bogus in different enquiries at different times. During field enquiries it was found that for several years in past also no such company was known to be existing at given address. Considering these facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company has introduced its unaccounted cash of Rs. 1,50,43,035/- in various dummy/ paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax.'' 4. Enquiries made by the AO as sequel to information collected / received: The specific information was receive from the ITO (Inv). Unit-I & AIU, Kolkata. The information is specific and after going through this it is found that no further inquiries is necessary before recording satisfaction for issuance of notice.'' In this case, it was reiterated by the assessee that they had made sales in F.Y. 2011-12 relevant to A.Y. 2012-13 to M/s Raj Rajeshwari Metal and Minerals Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. of Rs. 68,08,020/- and Rs. 82,24,615/- respectively, which aggregated to Rs. 1,50,32,635/-. The Sales so made by the assessee were subjected to verification by AO during scrutiny assessment proceedings of A.Y.2012-13 completed u/s 143(3), wherein no adverse inference whatsoever was drawn with regards to trading results or regarding parties to whom sales was effected nor any doubts were raised against the Debtors outstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perusal of bank accounts of all the companies, it is observed that there are cash deposits and RTGS credits and transfers from different a/cs and simultaneously the said amount transferred to the different a/cs through RTGS/transfer…." Thus it is clear from these observations that there is no specific information which substantiates the allegation of AO as to how assessee has routed his unaccounted income. Similarly, AO, though had named 8 companies in the reasons recorded, however eventually has treated only 2 companies as "shell companies". All these facts show that AO has relied upon only generalized information for making such a huge addition. Going further, AO observes that "….the assessee have paid interest to all other persons/firms from where he has taken unsecured loan except to the companies which reflects in the said report." We appreciate that these remarks also strengthen the case of assessee and are self-explanatory that sum received by assessee were not in the nature of loan as has been alleged by the AO. It is noted that assessee is a public limited company and has to make different compliances under various Government departments, i.e. Excise, Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red loan or share application money from these two companies was received and only payment received was against the sales made to them. In support of the same copy of sale invoices issued containing complete name, addresses at which goods were delivered, details of transporter, Truck No. etc. and the amount of VAT charged on the same were furnished, which remained uncontroverted. Rather the AO has based her allegations on the strength of judgment of Hon'ble Apex court given in the case of NRA Iron & Steel Pvt. Ltd. which case is not applicable to the facts of the present case in appeal as the assessee in the present case has never received any unsecured loan or share application money and the amount under reference was received against the sales made. Further it is noticed that no effort was made by the Department to make verification at the address given in the sale invoices which is incidentally be the different from the address at which the spot enquiry was made by the Inspector of DDIT, Investigation Wing, Kolkata. All these facts further prove that the transaction carried out by the assessee with these two companies were genuine transactions and were already accepted by the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , deleted. In the result ground No. 2 of the appeal of the assessee is allowed." It is noted that the assessee's case is on a better footing where the notices issued u/s 133(6) were served upon the respective parties. However, it is well known fact that usually people have a fear of ongoing inquiries and litigation by the Income Tax Department, thus non-compliance of notices u/s 133(6) could be for any reason and no adverse view be taken in the case of assessee for this reason. It is also submitted by the ld.AR that Address as mentioned in the Inspector's report is "27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012", whereas the supply of material was made to that company at the address i.e. "Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013" which was also appearing on the copies of the sale invoices (APB 86-126) submitted during the course of assessment proceedings. It therefore appears that field enquiry has been conducted by the inspector at the wrong address and adverse inference drawn on the basis of such report is not justified. Moreover, no result of the inquiry carried out in the case of Glorious Merchandise Pvt. Ltd. has been brought on record, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ying upon the information received from Investigation Unit and some enquiries made, without even providing assessee an opportunity to cross examine. Hon'ble Apex court in the case of CCE Vs. Andaman Timber Industries, (324) ELT 641 (Case Law Paper Book pages 69-75) has held as under: "6. According to us, 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 impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was invited to paper book pages 86 to 126, wherein assessee has furnished the copies of invoices of both the parties i.e M/s Glorius Merchandise Private Limited (APB 86-107) &M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. (APB 108-126). On perusal of invoices, it is clearly evident that Truck No. are clearly mentioned in the Dispatch Document No. & Transporter Name in "Dispatched through" details. Further Invoices are duly verified and properly stamped by the authorized signatory. It is further relevant to state that ld. CIT(A) has also failed to acknowledge the fact that Address as mentioned in the Inspector's report for one of the party i.e. M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. is "27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012", whereas the supply of material was made to that company at the address i.e. "Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013" which was also appearing on the copies of the sale invoices (APB 108-126). Thus, the allegation of ld. CIT(A) that assessee has not provided new address of the parties is infructuous and it clearly depicts that ld. CIT(A) has confirmed the additions so made by AO by solely relying up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that firstly, no transaction in the nature of unsecured loan / share application money was entered into by Assessee Company during the year under consideration with the two companies from which it was alleged that assessee has received share application money. It is also an uncontroverted fact that the sales were made to these two parties in preceding year and assessee has received outstanding amount in the year under appeal. It was also submitted that sale made by assessee in F.Y. 2011-12 is completely genuine as has been stated in ground of appeal No. 2 above, and assessee has not taken any loan/share capital as has been alleged. Thus, in view of the same there arises no question of any commission payment. Secondly, the ld. AR submitted that this addition also is solely based upon the information received from third party absolutely uncorroborated in much as there is no material available on record to rebut the documentary evidences furnished by assessee. It is therefore submitted that the addition of Rs. 3,75,816/- so confirmed by ld. CIT(A) are on the basis of assumptions and presumptions deserves to be deleted. 5.3 On the other hand, the ld. DR supported the order of the ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the case was earlier completed on 12.3.2016 under section 143(3) of the Act, after addition of Rs. 5,12,198/-. However, the case was re-opened under section 148 of the Act, after seeking approval of the competent authority. It was re-opened on receipt of information that the assessee was found to have received a credit entry from shell/dummy/paper companies and introduced his own unaccounted cash by routing it through a web of dubious companies and by way of suspicious transactions. 7. The assessee filed his return of income on 20.9.2019, in response to the notice under section 148 of the Act, and declared current year loss of Rs. 1,90,14,577/-. Notice under section 143(2) of the Act was then served, followed by notice under section 142(1) and subsequent notices. In the assessment proceedings, the assessee was called upon to establish identity and creditworthiness of share holders/investors and also genuineness of the transactions. The assessee submitted his reply dated 3.12.2019. Same has been reproduced at page 7 and 8 of the assessment order by way of scanning. Learned Assessing Officer discussed the version put forth by the assessee in the reply and recorded his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly uploaded as if relating it to the appellant. 10. The fact remains that the order disposing of the objections was withdrawn. 11. As regards Ld. CIT(A) having dealt with the issue of non disposal of objections by the Assessing Officer, Learned DR has contended that when CIT(A) discussed the issue of re-opening and referred to case law as regards his powers co-terminus with that of Assessing Officer, the order does not become invalid. 12. In this regard, suffice it to state that when as per requirement of the law, the objections filed by the assessee were to be disposed of by the Assessing Officer, same were required to be disposed of by the said Officer, before framing of the assessment, and not by Learned CIT(A). Therefore, there is no merit in the explanation put forth on behalf of the department on this issue. 13. The fact remains that this is a case where the Assessing Officer failed to dispose of the objections filed by the assessee as to the re-opening of the matter. Consequently, it is held that the Assessing Officer proceeded to conduct assessment proceedings in an arbitrary manner and without following the requirement of law. This fact adversely affects the framin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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