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TMI Blog2025 (3) TMI 349X X X X Extracts X X X X X X X X Extracts X X X X ..... the penalty order was passed u/s 271 (1) (c) of the Act. After considering the contents of the condonation application filed along with affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication. 4. Facts of the case, in brief, are that the assessee M/s. Adhunik Infrastructure Development Pvt. Ltd. (earlier known as M/s Gauri Plasticulture Pvt. Ltd.) is a company engaged in trading of drip material and onions. It filed its return of income on 31.01.2013 declaring total income of Rs. 8,06,410/-. The Assessing Officer completed the assessment u/s 143 (3) of the Act on 11.03.2015 determining the total income of the assessee at Rs. 9,18,632/- wherein he made disallowance of Rs. 35,820/- u/s 14A of the Act Rs. 50,935/- on account of Miscellaneous expenses and Rs. 25,467/- on account of Legal and licence fees. Subsequently, on the basis of information obtained from the Investigation Wing, Kolkata, the Assessing Officer reopened the assessment by recording the following reasons: "Reasons for the reopening of the assessment in case of Gauri Plasticulture Pvt. Ltd. (Now Aadhunik Infrastructure Development Pvt. Ltd.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference). 5. I have carefully analysed and perused the information received. After analysing the information as well as AIR information, return of income filed and assessment records, therefore, I have reason to believe that the income of Rs. 50,00,000/- has escaped the assessment for A.Y 2012-13 in case of the assessee. 6. In this case the return of income was filed and regular assessment u/s 143 (3) was completed on 11.3.2015. Since more than four years have lapsed from the end of the assessment year in this case, the requirement to initiate the proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped the assessment because of failure on part of the assessee to disclose fully and truly all material facts necessary for this assessment. It has been noted that the assessee has not fully and truly disclosed the material facts necessary for the assessment as mentioned in para 2, 3and 4 above. 7. It is evident from the above facts that the assessee had not truly and fully disclosed the facts as mentioned in para 2, 3 and 4 above, necessary for the assessment for the year under consideration, thereby necessitating reopening u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edentials. The DDIT prepared a money trail of the above-mentioned entities. The money trail is enclosed along with this order. On perusal of the money trail, it was found that the cash was deposited into the company Cambridge Financials Pvt Ltd and the amount was then transferred to the different beneficiaries. M/s Aadhunik Infrastructure is one of such beneficiaries. Thus, it is clear that the company Cambridge Financials Pvt Ltd is used only for providing accommodation entries in the form of loans. During the year the assessee has taken such accommodation entry to the tune of Rs. 50,00,000/-. 9.2 Apart from the above transaction, it was found that the funds in the company Cambridge financials Pvt Ltd were channeled through the entities Swastik Commercials and M/s Kali Traders (Proprietor Subrata Roy) It has been proved without any doubt that above mentioned entities are not doing any business and such huge bank transactions in their accounts are nothing but to provide the accommodation entries through routing of funds. 9.3 Therefore, it is clear that the company Cambridge financials pvt ltd is used only for providing the accommodation entries and as such it has no other busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was done. To explain the source it would require the assessee to explain the corpus or fund from where such credits/receipts has been earned. 9.7 In the present case, the assessee has received loan to the extent of Rs. 50,00,000/- are treated as unexplained cash credits in the books. Further, the nature and source of such credits were not at all explained satisfactorily by the company. Further, for invoking deeming provisions under Section 68 of the act, there should be clearly identifiable receipts/credits in the books. It is amply proved beyond doubt that the assessee has shown the cash credits in the books which stands unexplained to the extent of Rs. 50,00,000/- and thus the corresponding loan received from Cambridge financials of Rs. 50,00,000/- in bank accounts stands unexplained. 9.8 In the cases where assessee has received loan from entities but the genuineness and creditworthiness were neither explained nor such money offered for taxation, the onus is on the assessee to prove that the funds credited in the books did not bear the character of income. In this case, the assessee had failed to prove this fact and I hold that the amount of loan received from Cambridge fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btaining approval of Pr. Commissioner of Income Tax. 8. During the appellate proceedings, it was stated by the Ld. AR that there was no material before the AO on the basis of which such belief could have been made and therefore, such reasons were arbitrary. Approval u/s 151 has been given in the mechanical manner. The written submission of the Ld. AR has been reproduced as above. 9. Facts of the case and material available on record have been gone through. The assessment record has been perused. It is noted from the record that the appellant engaged in trading in drip irrigation material and agricultural produce like onions. Income Tax Return in this case for the A.Y. 2012-13 declaring income of Rs. 8,06,410/-/- was furnished on 31.01.2013 which was processed u/s 143 (1) of the Act. The assessment u/s 143 (3) of the Income Tax Act was completed on 11.03.2015 assessing the total income of Rs. 9,18,632/- against returned income of Rs. 8,06,410/-. The AO in this case has recorded detailed reasons u/s 147 of the Act by inferring that the income of Rs. 50,00,000/- has escaped assessment. The AO has received information from Inv. Wing Kolkata in which the entire modus operandi, inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped assessment. Hon'ble Supreme Court in the case of Paramount Communication (P.) Ltd. Vs PCIT 2017-TIOL-253- SC-IT SLP has dismissed the SLP of assessee on the ground that Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record to initiate valid reassessment proceedings. Thus there was no borrowed satisfaction on the part of the AO. There was independent application of mind on the part of the AO. Further reliance is placed upon clause (b) of explanation 2 to provisions of section 147 of the Act as on the basis of the facts of the case the AO had the basis to believe that claim of exempt income u/s 10(38) of the Act in the return of income was not allowable. 11. Keeping in view above facts and discussion, it is held that the AO has drawn his satisfaction u/s 147 of the Act in accordance with the provisions of the Act and accordingly the same is held as valid. Notice u/s 148 issued on the strength of such reasons is also held as valid. Therefore, it is observed that there is no merit in these grounds of appeal taken by the appellant. Ground Nos. 2, 3, 4 and 6 of the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from the party concerned and thereafter has accepted the unsecured loan. Referring to page 42 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the questionnaire issued by the Assessing Officer dated 22.07.2014 wherein at clause (10) the Assessing Officer has asked the assessee to furnish the addresses of unsecured loan givers. Referring to the reply dated 12.08.2014 filed by the assessee, copy of which is placed at pages 45 to 48 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the reply so given which contains the details of interest paid to Cambridge Financial Services Pvt. Ltd. at Rs. 4,20,369/- and the loan of Rs. 1,15,00,000/- received by the assessee from the said company on three occasions. Referring to the questionnaire issued by the Assessing Officer on 16.12.2014, copy of which is placed at pages 49 and 50 of the paper book, he drew the attention of the Bench to clause (5) of the details to be furnished wherein the Assessing Officer has asked the assessee to furnish the name, address & PAN of the unsecured loan givers. Referring to the reply dated 19.12.2014, copy of which is placed at pages 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v), Kolkata can at best be 'reason to suspect' but it cannot be 'reason to believe'. He submitted that the money trail mentioned by DDIT (Inv), Kolkata was never enclosed along with the reasons nor available from the record of the department at the time of inspection. Even the so- called annexure which is mentioned by the Assessing Officer in the body of the assessment order was never enclosed and also not available at the time of inspection. Relying on various decisions, he submitted that the reopening proceedings initiated by the Assessing Officer and upheld by the CIT(A) / NFAC are not in accordance with law and therefore, the same should be quashed. 12. So far as the merit of the case is concerned, he submitted that the entire amount was received through proper banking channel, the lender party has responded to the notice issued u/s 133 (6) of the Act, the amount of Rs. 50 lacs was given after encashing the investment in Reliance Liquidity Fund, the PAN number, bank account of the loanee and copy of income tax return, etc. were furnished at the time of original assessment proceedings. Therefore, when the assessee has established the identity and creditworthiness of the loan cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that the grounds raised by the assessee challenging the addition on merit should be dismissed. 15. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed by both the sides. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case has completed the assessment u/s 143 (3) of the Act on 11.03.2015 determining the total income of the assessee at Rs. 9,18,632/- as against the returned income of Rs. 8,06,410/-. In the said order, the Assessing Officer, after considering the submissions made by the assessee from time to time and after obtaining information u/s 133 (6) of the Act from Cambridge Financial Services Pvt. Ltd. had accepted the unsecured loan of Rs.1,15,00,000/-. Subsequently, the Assessing Officer on the basis of information obtained from the DDIT (Inv), Kolkata that the assessee has obtained unsecured loan from a company which do not possess any financial credentials, reopened the assessment by recording the reasons which have already been reproduced in para 4 of the order above. We find the Assessing Officer rejecting the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor and genuineness of the transaction by filing the requisite details as called for by the Assessing Officer from time to time. Further, the Assessing Officer has also directly obtained information u/s 133 (6) of the Act from Cambridge Financial Services Pvt. Ltd. and even the information obtained from the Investigation Wing reveals that the DDIT (Inv) has suggested the Assessing Officer to reopen the assessment and complete the assessment by obtaining information from the said loan creditor. In our considered opinion, once the Assessing Officer had obtained the information u/s 133 (6) of the Act from the said loan creditor, it is not understood as to what purpose it would serve to again call for the same information from the said loan creditor and complete the assessment. In the instant case, as mentioned earlier, the assessee had filed all the requisite details as called for by the Assessing Officer from time to time and the Assessing Officer after considering the details filed by the assessee and after obtaining the information u/s 133 (6) of the Act from the loan creditor i.e. Cambridge Financial Services Pvt. Ltd. had completed the assessment u/s 143 (3) of the Act. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The re-opening of an Assessment is an exercise of extra-ordinary power on the part of the Assessing Officer, as it leads to unsettling the settled issue/assessments. Therefore, the reasons to believe have to be necessarily recorded in terms of Section 148 of the Act, before re-opening notice, is issued. These reasons, must indicate the material (whatever reasons) which form the basis of re-opening Assessment and its reasons which would evidence the linkage/ nexus to the conclusion that income chargeable to tax has escaped Assessment. This is a settled position as observed by the Supreme Court in S. Narayanappa v/s. CIT 63 ITR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO v/s. Lakhmani Merwal Das 103 ITR 437 had laid down that the reasons to believe must have rational connection with or relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very ..... X X X X Extracts X X X X X X X X Extracts X X X X
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