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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 ..... assessment. In the instant case, as mentioned earlier, the assessee had filed all the requisite details as called for by the AO from time to time and the AO 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. Therefore, in our opinion, so far as the assessee is concerned, there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of the assessment. A perusal of the earlier reasons recorded shows that the AO has simply reopened the assessment on the basis of the information obtained from the Investigation Wing and there is no application of mind. We find in the case of Punia Capital (P.) Ltd. [2023 (2) TMI 717 - BOMBAY HIGH COURT] has held that where the Assessing Officer sought to reopen assessment of assessee after period of four years on ground that assessee had transacted funds with certain company which had been conclusively proven to be a shell company, since Assessing Officer had reopened assessment solely on basis of 'reason to bel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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.) for A.Y. 2012-13. 1. The Assessee M/s Adhunik Infrastructure Development Pvt Ltd (earlier known as M/s Gauri Plasticulture Pvt. Ltd) is engaged in trading of drip material and onions. The assessee company had filed its return of income for A.Y 2012-13 on 31/01/2013 declaring total income of Rs. 8,06,410/-. The assessment u/s 143 (3) of the Income Tax Act was completed on 11/03/2015 assessing the total income of the assessee of Rs. 9,18,632/- against return income of Rs. 8,06,410/-. 2. The information has been received from the Dy. Director of Income Tax (inv.) Unit 2(2), Kolkata vide letter No. DDIT(Inv.)/U-2(2)/Kol./S-10173279 &10274973/2018-19/2016, dated 01.03.2019 received in this office on 8.03.2019. Facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose 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/s 147 of the Act. It is pertinent to mention here that even though the assessee has produced the copy of B/S, P/L account, return of income etc, the requisite material facts as mentioned in the above reasons for reopening were embedded in such a manner that material evidence could not be discovered by the A.O and could have been discovered with due diligence, accordingly attracting provision of explanation 1 of section 147 of the Act. 8. In this case, more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has to be obtained as per the provisions of section u/s 151 of the IT Act from the Pr. Commissioner of Income Tax.-2, Nashik. Therefore, neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 business Therefore, the loan received by the assessee company M/s Aadhunik Infrastructure pvt Ltd is bogus and just an accommodation entry provided by the Cambridge finacials pvt ltd. Therefore, the amount of Rs 50,00,000/- shown in the books of the assessee as loan is treated as bogus and added back to the total income of the assessee u/s 68 of the Act. 9.4 The provision of section 68 is attracted when any sum is found credited in the books of accounts of the assessee. The word "any sum" are wide enough to cover the transactions appearing in the books of accounts of an assessee and, therefore, if the assessee offers no explanation about the nature and sources of the unsecured loans, then such loan is nothing but the deemed incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 financials pvt ltd to the extent of Rs. 50,00,000/- represented income from undisclosed sources and unexplained credits in the books of the assessee. 9.9 The assessee has taken loans amounting to Rs. 50,00,000/- is remained unexplained. Therefore, the amount of Rs. 50,00,000/- is treated as unexplained credits u/s 68 of the Income Tax Act, 1961 and added to the Total Income of the assessee. Penalty proceedings are separately initiated u/s 271 (1) (c) of the Act for furnishing inaccurate particulars of income." 6. Aggrieved with such order of the Assessing Officer, the assessee filed appeal before the CIT(A) / NFAC challenging the validity of re-assessment proceedings as well as the addition on merits. However, the Ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed 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, investigation report in respect of accommodation entries given by certain entry operators in garb of facilitating fund trail to the non genuine paper entities, names of such entry providers along with entire material were enclosed. Thus on the basis of above tangible material the AO inferred that the appellant has obtained bogus accommodation entry. 10. Thus, the information received by the AO was having complete modus operandi and other factual details in respect of accommodation entries received by the appellant through entry operators in the garb of exempt income. The AO has gone through the return of income furnished by the appellant on 31.01.2013 u/s 139 of the Act and considered the particulars of the income as reflected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 appellant are dismissed." 7. So far as the merit of the case is concerned, he sustained the addition by observing as under: "5. Ground Nos. 1,5 and 7 The appellant's submission and the order of the AO has been gone through. The appellant company took unsecured loan from the Cambridge Financial Limited of Rs. 50,00,000/-, An investigation was completed by the Investigation Unit, Kolkata of the department. The enquiry was carried out in the case of M/s Swastik Commercials on analysis of financials of above concern. It was found that these proprietary concerns were not carrying any actual business and did not have any financial credentials. There was a fund trail as the fund transferred from M/s Swastic Commercial and M/s Kali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee 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 to 52 of the paper book, he drew the attention of the Bench to the reply wherein the assessee had given name, address and PAN of the unsecured loan givers. Referring to the notice issued u/s 133 (6) of the Act to Cambridge Financial Services Pvt. Ltd., copy of which is placed at page 62 of the paper book, the Ld. Counsel for the assessee drew the attention of the Bench to the same and submitted that the Assessing Officer has asked the said party to submit the bank account, source of cash deposits, if any, before issue of cheque, capital account of the said company, statement of affairs, copy of income tax return, computation of income, etc. Referring to pages 63 to 66 of the paper book, the Ld. Counsel for the assessee drew th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntire 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 creditor and genuineness of the transaction, the addition could not have been made u/s 68 of the Act. He accordingly submitted that both on legally and factually the grounds raised by the assessee should be allowed. He also relied on the following decisions: 1. Hindustan Lever Ltd. v. R.B. Wadkar [2004] 137 Taxman 479 (Bombay) 2. Siemens Information System Ltd. v. ACIT [2008] 172 Taxman 315 (Bombay) 3. Idea Cellular Ltd. v. DCIT [2008] 301 ITR 407 (Bombay) 4. Punia Capital (P.) Ltd. v. ACIT [2023] 149 taxmann.com 53 (Bombay) 5. Marico Ltd. v. ACIT-(3)(2) [2019] 111 taxmann.com 253 (Bombay) 6. CIT vs ICICI Bank [2013] 31 taxmann.com 53 (Bombay) 7. Kapstone Constructions (P.) Ltd. v. ACIT [2023] 153 taxmann.com 305 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m 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 various explanations given by the assessee made addition of Rs. 50 lacs u/s 68 of the Act. When the assessee challenged the validity of re-assessment proceedings as well as the addition on merit, we find the CIT(A) rejected both the contentions of the assessee, the reasons of which have already been reproduced in the preceding paragraphs. 16. It is the submissions of the Ld. Counsel for the assessee that when all primary facts were given to the Assessing Officer including the bank account details, income tax return details, confirmation copies, audited financial accounts of Cambridge Financial Services Pvt. Ltd., etc., therefore, there was absolutely no failure on the part of the assessee to disclose fully and truly all the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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. Therefore, in our opinion, so far as the assessee is concerned, there was no failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of the assessment. A perusal of the earlier reasons recorded shows that the Assessing Officer has simply reopened the assessment on the basis of the information obtained from the Investigation Wing and there is no application of mind. 18. We find the Hon'ble Bombay High Court in the case of Sesa Sterlite Ltd. vs. ACIT (2019) 417 ITR 334 (Bom) has held that where in case of assessee, carrying on business of mining and trading of iron ore, assessment was completed u/s 143 (3), in absence of any independent material on record, assessment could not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer. 13. In this case, the reasons as made available to the Respondent- Assessee as produced before the Tribunal merely indicates information received from the DIT (Investigation) about a particular entity, entering into suspicious transactions. However, that material is not further linked by any reason to come to the conclusion that the Respondent-Assessee has indulged in any activity which could give rise to reason to believe on the part of the Assessing Officer that income chargeable to tax has escaped Assessment. It is for this reason that the recorded reasons even does not indicate the amount which according to the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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