9911796707
TMI Blog2025 (3) TMI 348X X X X Extracts X X X X X X X X Extracts X X X X ..... made by the Investigation Wing of the department which is an arm of the Department. 3. That the Ld. CIT (A) was not justified in deleting the addition stating that the reason to believe in this case are based on 'borrowed satisfaction' ignoring the fact that the Investigation Wing is also an arm of the Department for conducting the enquiries. 4. The appellant craves the leave to add/modify/alter any of the ground during the course of hearing/pendency of appeal" 3. The brief facts are that the assessee is a limited company, engaged in the business of trading in shares and securities. The regular return of income for A.Y 2011-12 e-filed u/s 139(1) of the Act on 26.09.2011. The Return processed u/s 143(1) of the Act and subsequently was reopened beyond four years after taking necessary approval u/s 151 of the Act and notice u/s 148 of the Act duly issued and served upon the assessee. In response thereto, the assessee again e-filed the return on 20.04.2018 declaring nil income. Thereafter, the assessee sought the reasons recorded for reopening which were supplied and the ld. Assessing Officer has stated in the assessment order that the objections of the assessee were disposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or because the alleged sum merely included the funds received from sale of stock, repayment of loans, advances in the preceding year. The ld. CIT(A) dealing with the legal issue examined the reasons recorded and after a detailed discussion gave a finding that the reopening was carried out based on borrowed satisfaction and the Assessing Officer has not carried out any enquiry in order to record reasons to believe, which are sine qua non for issuance of notice u/s 148 of the Act. The ld. CIT(A) also dealt with the aspect of the approval given u/s 151 of the Act observing that it was merely a mechanical approval but there was not satisfaction of the ld. PCIT in explicit terms. Reliance also placed on plethora of decisions in support of the finding that reopening proceedings were bad in law/illegal, therefore, deserve to be quashed. Since the ld. CIT(A) allowed the assessee's appeal on legal grounds and deleted the impugned additions, grounds on merits were not dealt with. 5. Aggrieved, the revenue has now come in appeal before this Tribunal challenging the findings of the ld. CIT(A). The ld. Departmental Representative vehemently argued referring to the order of the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ird Stage, Le once at the point of creation of share capital and then again at the point of converting the inventories/investments/ loans and advances into funds for the legitimate business purpose. Liquidation of inventory of investments is the way of introducing one's own unaccounted funds in the guise of sale of unquoted investments. Assessment Proceedings As indicated above, the assessee had liquidated investments made as a result of bogus share capital raised in the assessment years2011-12, 2012-13 and 2013-14. When asked to furnish details of the same, nothing was produced. Elaborate details are available in the assessment order and hence, not being quoted. Ld. CIT(A) has relied on the order of Delhi High Court in the case of Kabul Chawla[2015 (9) TMI 80- Delhi High Court] wherein it is stated that the assessing officer while making assessment under section 153A of the Act make additions only on the basis of some incriminating material unearthed during the course search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the search." The assessee stated that assessment under 143(3) was already completed through the AY 2012-13. In the quoted judgement, it was also stated: "Completed assessments can be interfered with by the AO while making the assessment under Section 153A only on the basis of sone incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." Conclusion The Ld. CIT(A) has failed to appreciate the fact that the facts and circumstances of the cases quoted are entirely different from the facts and circumstances in the present case. In the instant case, statements of entry operator, Narendra Kumar Jain was also recorded on the date of search and the director, Anand Kumar Jain was also confronted with the same. No details whatsoever in support of the credits in the form of sale of unquoted investments in form of sale of unquoted investments were ever produced at the time of search, post-search and in the course of assessment proceedings. Mere payment received through barking ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts in issue but, at the same time, are weak and not conclusive of the facts admitted. They can always be retracted by an assessee by producing more positive evidences. Of course, there are occasions where the retractions made by the assessee's are not permitted by the revenue as the assessee's fail to prove such retractions on sufficient grounds. Therefore, whenever there is a retraction of admission by an assessee, the burden of proving the admission as incorrect is always on the assessee who can discharge the same by producing more reliable and cogent evidence in support of his contention. The statement of entry operator on the very date of search was a part of incriminatory material against the assessee." 6. On the other hand, the ld. counsel for the assessee vehemently argued supporting the detailed findings of the ld. CIT(A) asserting that firstly there was no proper approval u/s 151 of the Act and secondly the Assessing Officer failed to make proper application of mind before recording the reasons to believe and therefore, such reopening based on improper approval u/s 151 of the Act and based on borrowed satisfaction and reasons to suspect has rightly been quashed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As the time limit for issue of notice as provided u/s 149 is expiring on 31/3/2018, your honour is requested to sanction permission u/s 151 read with proviso thereto to issue notice u/s 148 of the Income Tax Act, 1961. 7.1 Now, in the above reasons recorded, the assessee is stated to have received accommodation entries of Rs. 20.13 crore during F.Y 2010-11 from penny stock company. Now, going through para 6 of the assessment order, the Assessing Officer himself observed that prior to the merger of the assessee company as per the share holding position of M/s Frankdeal Traders Pvt. Ltd. as on 31.03.2009, there total share capital and security premium in M/s Frankdeal Traders Pvt. Ltd. stood at Rs. 20.13 crore. The ld. Assessing Officer has himself admitted that the same and has referred in the reasons recorded that Rs. 20.13 crore was received upto 31.03.2009 itself and that too by another company namely M/s Frankdeal Traders Pvt. Ltd., which was not merged with the assessee company upto 31.03.2009. The very basis of the allegation is that the assessee company has received accommodation entry of Rs. 20.13 crore is factually incorrect. Further, we observe that in the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch and post search investigation, it was seen that Shri Anand Kumar Jain became the director of M/s. Frankdeal Traders Pvt. Ltd. on 27.12.2010 and M/s. Frakdeal Traders Pvt. Ltd. was merged with the Appellant (i.e. M/s. Capseal Vyapar Pvt. Ltd.) wherein Shri Anand Kumar Jain and his family members are directors. e. That, on the day of the search and seizure operation on 22.11.2017, the statement of an entry operator based in Kolkata, Shri Narendra Kumar Jain was again recorded under Section 131 of the 1.T. Act. 1961 at the office of the Assistant Director of Income Tax (Inv.), Unit- 2(1), Kolkata. In the said statement also Sh. Narendra Kumar Jain has admitted that the share allottee companies of the said M/s. Frankdeal Traders Pvt. Ltd. belonged to him and his associates. The company was formed by him and had raised bogus share capital including premium which was later on sold to Shri Anand Jain Group so that the group could acquire unsecured loans/advance and share capital in the group concerns. Thereafter, on account of a purported search in the case of one Sh. Narender Kumar Jain, it was purportedly found by the Revenue that the said Sh. Narender Kumar Jain had admitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts necessary for the assessment. As the time limit for issue of notice as provided u/s 149 is expiring on 31/3/2018, your honour is requested to sanction permission u/s 151 read with proviso thereto to issue notice u/s 148 of the Income Tax Act, 1961. i. That, from a perusal of the above "reasons to believe" recorded by the A0 (and as reproduced above), for issuance of notice under Section 148 of the Act, it is seen that the AO has completely relied on the sanctity of the investigation done by the Investigation Wing and on the information supplied by the Investigation Wing. In the aforesaid "reasons to believe" recorded by the AO and reproduced as above, it is clear that the A0 has categorically referred again and again only to the information supplied by the Investigation Wing. There is nothing on material to suggest that some independent home-work was done on the part of the AO or any limited enquiry was conducted by the A0 or any application of mind was made by the AO to come to the conclusion that income had indeed escaped assessment in the case of the Appellant. Thus, without any independent enquiries of his own, solely relying on the aforesaid information supplied by the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r affording an opportunity of personal hearing to the petitioner/dealer." In the case of Calcutta Discount Co. Ltd. [(1961) 41 ITR 191 (SC)], the Hon'ble Supreme Court analysed the phrase "reason to believe" and observed as under: "It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else to tell the assessing authority what inferences, whether of facts or law, should be drawn." In the case of CIT vs. Greenworld Corporation [(2009) 314 ITR 81 (SC)], it was held by the Hon'ble Supreme Court that the assessment order passed on the diktats of the higher authority, being wholly without jurisdiction, was a nullity." In the case of CIT vs. G & G Pharma India Limited [ITA 545/2015 dated 08.10.2015], the Hon'ble Delhi High Court, held as hereunder: The Assessee's further appeal was allowed by the ITAT by the impugned order dated 9th January 2015. The ITAT set out in the impugned order the reasons recorded by the AO for the reopening of the assessment by the AO by the letter dated 15th September 2010, and came to the conclusion that, apart from making a mere reference to information r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout application of independent mind, held that the assessee was beneficiary of accommodation entries amounting to Rs. 4,51,000. In the main part of reason to believe, there is no mentioning of nature of transaction to establish and fortify the fact that the impugned transactions were in the nature of accommodation ITA 2068/Del/2010 entries. We also observe that there is no mentioning of date therein and it can safely be presumed that the AO had not examined the assessment record of the assessee which was processed u/s 143(1)(a) of the Act on 15.3.2005 for forming a belief that the income of the assessee had escaped assessment. 20. Under these facts and circumstances, we are in agreement with the observation and conclusion of the CIT(A) that there was no material on record to show that the AO had applied her independent mind in forming a belief which may result in the required reason to believe as per provisions of section 147 and 148 of the Act. We also held that the CIT(A) was right in following the ratio of the decision of apex court in the case of CIT vs Sun Engineering Works Pvt. Ltd. and the decision of Hon'ble Jurisdictional High Court of Vipin Khanna vs CIT (supra), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Officer, that it is a fit case for the issue of such notice. (3) For the purposes of sub-section (1) and sub-section (2), the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner or the Joint Commissioner, as the case may be, being satisfied on the reasons recorded by the Assessing Officer about fitness of a case for the issue of notice under section 148, need not issue such notice himself." In this regard, an image of the relevant portion of the "Form for recording the reasons for initiating proceedings under sec. 148 and for obtaining the approval of the C.I.T./ Addl. C.I.T., as available in the assessment folder is reproduced hereunder for reference: From a perusal of the aforesaid relevant portion of the "Form for recording the reasons for initiating proceedings under sec. 148 and for obtaining the approval of the C.I.T./ Addl. C.I.T., as available in the assessment folder, the following facts are vivid: 1. In response to query in Column No. 11 of the prescribed proforma i.e. "Whether the Addl. CIT is satisfied on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion by the sanctioning authority by usage of words like "yes", "satisfied", "Yes, I am satisfied" etc. do not connote an independent recording of satisfaction and thus the consequential reassessment proceedings are bad in law. The Hon'ble Supreme Court in the case of CIT vs. S. Goyanka Lime & Chemical Ltd. reported in [(2015) 64 taxmann.com 313 (SC)] in the Head Notes has held that "Section 151, read with section 148 of Income Tax Act, 1961 - Income escaping assessment - Sanction for issue of notice (Recording of satisfaction) - High Court by impugned order held that where Joint Commissioner recorded satisfaction in mechanical manner and without application of mind to accord sanction for issuing notice under section 148, reopening of assessment was invalid - Whether Special Leave Petition filed against impugned order was to be dismissed-Held, Yes (in favour of the Assessee)." In the case of The Central India Electric Supply Co. Ltd vs. ITO, [333 ITR 237 (2011)], it was held/averred, as follows, by the Hon'ble Delhi High Court: "Where a mere stamp is affixed and signed by a Under Secretary underneath a stamped "Yes" against the column which queried as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer. The relevant part of the order of the Tribunal is reproduced as under: "5. We find force in the contention raised by the ld. counsel for the assessee. We find that the Assessing Officer has reopened the assessment merely based on the information received from investigation wing without verifying the veracity and truthfulness of such information. The information was wrong and the Assessing Officer reopened the assessment on the basis of borrowed satisfaction without correlating the same with the facts of the case. Even there is no allegation that the income of the assessee has escaped assessment due to non-disclosure of the facts necessary for the assessment and since the assessment has been reopened after four years of the end of relevant assessment year, hence, the exception provided under 1st Proviso to section 147 is attracted. The issue is covered by various decisions of the higher courts and even of the hon'ble supreme court. Hon'ble Supreme Court in the case of "Dr. Jagmittar Sain Bhagat & Ors vs Dir. Health Services, Haryana" in Civil Appeal No.5476 of 2013 decided on July 11, 2013, while relying upon another decision of the Hon'ble Supreme Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ani Mewaldas" (1976) 103 ITR 437. Reliance in this respect can also be placed on the decision of the Hon'ble Punjab & Haryana High Court in the case of 'CIT vs Paramjit Kaur' (2008) 311 ITR 38 (P&H), wherein, making identical observations, the Hon'ble High Court has held that in the absence of sufficient material to form satisfaction of the Assessing Officer that income of the assessee had escaped assessment, the issuance of notices u/s 148 of the Act was not valid." 7.3 Now, going through the decisions of the various Hon'ble Courts referred supra and also of the Tribunal in the case of 'M/s Shankar Logistics (P) Ltd vs. DCIT' (supra) and taking into consideration the facts of the instant case, we are of the considered view that the reopening proceedings in the case of the assessee has been carried out on poor reasons that too based on borrowed satisfaction and clearly there is no application of mind by the Assessing Officer who was duty bound to first carry out an enquiry by way of examining Income Tax Return of the assessee company as well as M/s Frankdeal Traders Pvt. Ltd. of the present year and past years and then to look at the information provided in the aud ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
