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TMI Blog2025 (3) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act was issued and served on the assessee and thereafter the Assessing Officer issued a notice u/s 142(1) of the Act along with a questionnaire which was duly served on the assessee, in response to which the AR of the assessee filed the requisite details from time to time. The Assessing Officer completed the assessment u/s 143(3) of the Act on 31.01.2014 determining the total income of the assessee at Rs.13,17,230/- and agricultural income of Rs.7,22,800/-. 3. Subsequently, a search action u/s 132 of the Act was conducted in the premises of the assessee on 04.11.2017. Thereafter, the Assessing Officer reopened the assessment u/s 147 of the Act on 26.03.2018 by recording the following reasons: "02. In response to notices issued, Shri H.G. Sharma, CA Authorized Representatives attended from time to time and explained the return. During the course of assessment proceeding, the assessee has requested to provide the reasons for reopening of the case u/s 148 of the Act. The reasons recorded for reopening have been forwarded to assessee on 12/09/2018 which is reproduced as under: "Shri Manoj Chhajed is engaged in the business of construction, real estate, land development etc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of beneficiary without paying any taxes. The details of these companies are as under: Sr. No Name of the Company Address PAN Controller Director 1 M/s. Divyadrishti Traders Pvt Ltd 163, M G Road, 3rd Floor, Kolkata AABCD8146J Anuj Agarwal 1. Kinkar Bhattacharya 2. Sukanata Chatterjee 2 M/s. Divyadrishti Merchants Pvt Ltd AABCD8147K Parveen Agarwal 1. Umesh Singh 2. Ranjit Gupta 3 M/s. Abhilasha Exports Pvt Ltd. 95A, C R Avenue, Kolkata AAHCA5909J 4 M/s. Pushpanjali Commotrade Pvt Ltd 3, Saklat Place, Kolkata AAECP9727C 5 M/s. Parmeshwar Merchandise Pvt Ltd AAECP9821B 6 M/s. Sampark Advisory Services Pvt Ltd 2B, Grant Lane, Kolkata AAJCS1019D The investigation report revealed that the Directors of above said companies are of no means and they are residing in some chawl and not aware about said companies. They are known to the controllers of the companies and the controllers of the companies are key persons who are handling day to day affairs of these companies. In their statements before Investigation Directorate, Kolkata, they admitted that companies controlled by them are paper companies and no actual business activity is run by them. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used to sent the RTGS. Q.26 You are regularly paying interest on such accommodation entries. Do you receive back in cash the interest paid? Ans: The interest amount paid by cheque was received back in cash after deducting some commission by them. Q.27 Why were you obtaining unsecured loans from such bogus companies? Ans: The accommodation entries by way of unsecured loans were taken to purchase properties. I did not have the amounts in the bank accounts but had the cash. Therefore to purchase the properties, I had to do this exercise." The return of income for AY 2011-12 filed on 29/09/2011 by the assessee is in Form ITR-4. On going through the return, the assessee is found to be carrying on proprietary business in the name and style of M/s Siddhi Agency. The Balance-sheet as on 31/03/2011 of the proprietary business forming part of the return shows balance against Unsecured loans of Rs. 56,81,448/-. From the facts discussed herein above, I am satisfied that the assessee has routed his undisclosed income through the paper companies and Credit entries appearing in the bank account of Shri Manoj Chhajed from Kolkata based paper companies are in the form of accommodation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration the assessee has taken unsecured loans from various persons including individuals and the outstanding balance of unsecured loan was Rs.12,16,17,647/-. Further, during the course of search action in the case of Ashok B. Jain and others on 04.11.2017, the case of the assessee was also covered. It was found that the assessee has obtained accommodation entries in the form of unsecured loans from shell companies based in Kolkata and such unsecured loan entries are to the tune of Rs.10,42,46,375/-. It was proved by the Investigation Wing that these companies from whom the assessee obtained loans are shell companies and are not doing any business. Therefore, the case of the assessee was reopened u/s 147 of the Act. However, the Assessing Officer in the order passed u/s 143(3) / 147 of the Act had not made the addition of Rs.7,62,67,463/- which was returned back to these shell companies. Since the assessee in his statement recorded /s 132(4) of the Act at the time of search u/s 132 had admitted to the fact that he had taken accommodation entries from the Kolkata based companies by providing unaccounted cash and the assessee had explained the detailed modus operandi thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -11 by considering the totality of facts and circumstances. 6.2.2 However, during the course of search action under section 132 of the act in the case of assessee, the statement of the assessee was recorded u/s 132(4) of the Act. In the statement recorded under oath the assessee admitted to the fact that he had taken accommodation entries from Kolkata based companies by providing unaccounted cash to them through the mediators by Hawala Channels. In the statement recorded (reproduced in supra in para 3), the assessee explained the detailed modus operandi through which such accommodation entries were taken by routing the unaccounted cash. 6.2.3 Thus, it is clearly seen from the facts revealed in the statement that the assessee has duly admitted to the fact that it was in possession of unaccounted cash which was routed through the Kolkata entry operators as unsecured loans in its books of account. This means that the assessee was in possession of such cash at the time of credit of such entries in the books of account. This unaccounted cash ought to be brought to tax by making the addition equivalent to the total credits received in the books of account. 6.2.4 Further, it is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his statement recorded on oath, in response to question no.26. 6.3.2 Hence, it is a fact that the assessee has paid commission to these Kolkata based shell companies. However, as a quantum was not specified it can be assumed that atleast an amount equivalent to not less than 2% of the total entry amount, would have been paid from unaccounted cash for providing accommodation entry. Thus, the assessee would have incurred this commission expenditure calculated at the rate of 2% on the amount of accommodation entry taken of Rs.10,42,46,373/-, which comes to Rs.20,84,927/-. The same is also required to be added to the total income of the assessee. 6.4 Interest Expenditure claimed thereon: Further, it was also observed that the assessee has claimed interest expenditure on these accommodation loan entries in its ITR returns. This was confirmed by the assessee in his statement recorded on oath, in response to question no.26 (reproduced supra). It was confirmed by the assessee that the interest amount paid by cheque was received back by him in cash from the entry providers after deducting the agreed commission. Since, these accommodation, loan funds in reality represent assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para 6 Supra in this order, after giving reasonable, opportunity of being heard to the assessee." 6. The Assessing Officer thereafter passed the order u/s 143(3) r.w.s. 263 of the Act on 23.03.2022 determining total income of the assessee at Rs.10,78,45,690/-, the details of which are as under: Income assessed as per order u/s 143(3) r.w.s. 147 dated 28/12/2018 Rs. 2,92,96,142/- Add: (i) Addition u/s 68 on account of accommodation entries Rs. 7,62,67,463/- (ii) Addition u/s 69C on account of commission paid being unexplained Rs. 20,84,927/- (iii) Addition on account of interest expenditure Rs. 1,97,159/- Assessed Total Income 10,78,45,691/- Rounding off u/s 288A Rs. 10,78,45,690/- 7. The assessee filed an appeal before the Ld. CIT(A) against this order also. The Ld. CIT(A) in the consolidated order dated 10.10.2023 passed the order i.e. in respect of order passed u/s 143(3) r.w.s. 147 and u/s 143(3) r.w.s. 263 of the Act and dismissed both the appeals. 8. Aggrieved with such order of the Ld. CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds: Grounds raised by the assessee in ITA No.1178/PUN/2023 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure on loans and erred in making an addition of Rs. 20,84,927/- and further, Ld. Commissioner of Income Tax (Appeals) erred in confirming the same. 8. Ld. Assessing Officer erred in disallowing the interest expenditure claimed in the returns amounting to Rs.1,97,159/- and further, Ld, Commissioner of Income Tax (Appeals) erred in confirming the same. 9. The Appellant craves leave to add, alter, amend, vary or delete any of the aforesaid grounds. 9. The assessee has also filed an additional ground in ITA No.1178/PUN/2023 which reads as under: "The reassessment order passed by the Ld AO U/Sec. 143(3) r.w.s.147 of the Income Tax Act 1961 is bad in law and void ab-initio as once reassessment proceedings are initiated on the basis of report of Investigation wing Kolkata and incriminating material found in the search of appellant and then the provisions of Sec.153C of the Act are applicable which override the applicability of Sec. 147 and Sec. 148 of the Act." 10. The ld. Counsel for the assessee submitted that the additional ground raised is purely legal in nature which goes to the root of the matter and all necessary facts are already available on record and no new fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28.02.2023. 13. The Ld. Counsel for the assessee in his second plank of argument submitted that the additions were based entirely on the basis of the investigation report from the Kolkata Investigation Wing dt 27.04.2015 on the basis of searches on some shell companies which covers the year under consideration as per the provisions of section 153C of the Act as it fell within the 6 year limitation period. Referring to question No.24 of the statement of the assessee recorded u/s 132(4) of the Act, he drew the attention of the Bench to the same and submitted that the assessee was confronted with the statement of Shri Praveen Agarwal, Shri Anuj Agarwal and Shri Jeevendra Mishra recorded by the Investigation Wing, Kolkata. Referring to page 923 of the paper book-2, the Ld. Counsel for the assessee drew the attention of the Bench to the statement of Shri Praveen Agarwal, wherein there is a reference of search and seizure action u/s 132 of the Act on 10.11.2012. Therefore, the case of the assessee is re-assessed on the basis of search in case of other person and therefore, the provisions of section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w. For the above proposition, he relied on the following decisions: i) ITO vs. Kayathwal Estates Pvt. Ltd. (2022) 442 ITR 507 (SC) ii) Vibrant Securities Pvt Ltd. vs. ITO (2023) 455 ITR 58 (Bom) iii) Gateway Leasing Pvt. Ltd. vs. ACIT (2020) 426 ITR 228 (Bom) 15. The Ld. Counsel for the assessee in his fourth plank of argument submitted that the re-assessment order u/s 143(3) r.w.s. 147 of the Act is invalid since the same is mere change of opinion and the same cannot be reopened without independent verification and application of mind to the information received. Referring to the original assessment order u/s 143(3) dated 31.01.2014, he submitted that the issue of loans has already been scrutinized during the original assessment proceedings, therefore, in absence of any fresh tangible material, the re-assessment proceedings initiated are merely based on change of opinion. He submitted that the Assessing Officer in the instant case has relied solely upon the Investigation Wing report, which is mainly talking about the long term capital gain on penny stocks and nowhere the issues are reported regarding loans / accommodation entries. Therefore, it is clear that the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of ACIT vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC), he submitted that the Hon'ble Supreme Court in the said decision has held that while examining the requirement of the issue of notice u/s 148 of the Act all that is required for issue of such notice u/s 147 of the Act is "reason to believe" that the income has escaped assessment. He submitted that in the instant case the reasons recorded by the Assessing Officer clearly suggests that the reopening was on the basis of investigation carried out by the Investigation wing at Kolkata as well as the admission of the assessee during search proceedings carried out in his case. The Assessing Officer has reproduced the relevant portion of the assessee"s statement recorded u/s 132(4) of the Act wherein the assessee has accepted that he gave equivalent amount of cash through one Shri Sushil Agarwal in lieu of RTGS in his bank account. He had also stated that he was having cash with him but he needed amount in bank accounts for purchasing the properties and therefore, he obtained accommodation entries. 19. So far as the issue of change of opinion is concerned, the Ld. DR drew the attention of the Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the said decision has held that if the reasons sufficiently indicate that there was no full and true disclosure by the assessee, same is sufficient for meeting the requirement provided u/s 147 of the Act. 22. So far as the argument of the Ld. Counsel for the assessee that the Assessing Officer could have issued notice u/s 153A or 153C of the Act instead of u/s 147 of the Act is concerned, he submitted that the year under consideration falls beyond the block period of six years prior to year of search as prescribed u/s 153A of the Act and therefore, the Assessing Officer could have issued notice u/s 153A of the Act only for the assessment year 2012-13 and onwards. Therefore, the only option available with the Assessing Officer for assessment year 2012-13 was to reopen the assessment u/s 147 of the Act. He also relied on the following decisions: (i) CIT vs. Kabul Chawla (2016) 380 ITR 573 (Del) (ii) PCIT vs. Abhisar Buildwell P. Ltd. vide MA No.680 of 2023 in Civil Appeal No.6580 of 2021, judgment date 12.05.2023 (iii) Smt. Samanthapudi Lavanya vs. ACIT vide ITA No.704/VIZ/2019, order dated 27.04.2021 (iv) Nilesh Bharani vs. DCIT vide ITA No.612/MUM/2020, order dated 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt Ltd. (2018) "11. Further, a reading of the entire decision, it is clear that the reasonable belief on the basis of tangible material could be, prima facie, formed to conclude that income chargeable to tax has escaped assessment. Mr. Mohanty, learned Counsel is ignoring the fact that the words 'whatever reasons' is qualified by the words 'having reasons to believe that income has escaped assessment. The words whatever reasons only means any tangible material which would on application to the facts on record lead to reasonable belief that income chargeable to tax has escaped assessment. This material which forms the basis, is not restricted, but the material must lead to the formation of reason to believe that income chargeable to tax has escaped Assessment. Mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. In fact, this would be evident from the fact that in para 16 of the decision in Rajesh Jhaveri Stock Brokers Pvt., Ltd., (supra), it is observed that the word 'reason' in the 'reason to believe' would mean cause or justification. Therefore, it can only be the basis of forming the belief H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided by law meaning thereby, a superior forum and not by the very authority, who is alleged to have exerted force." 8. The appellant has discharged the primary onus as the appellant has filed the required details before AO, CIT(A) as well as the Hon'ble ITAT. h. The entire case is based on the findings as per the investigation report of Kolkata, which has detailed reporting about the capital gains in Penny Stocks. Nowhere, the report talks about the issue of unsecured loans on account of which additions in the year under consideration are made in the present case. Hence, it cannot be said that the AO was in possession of tangible material to have reason to believe that the income has escaped the assessment." 24. He accordingly submitted that the re-assessment proceedings being not in accordance with law have to be quashed. 25. 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 on behalf of the assessee. We have also considered the various decisions cited before us by both si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the preceding paragraphs. A perusal of the reasons so recorded, nowhere shows that there is any allegation of any failure on part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. 27. It is an admitted fact that the assessment year involved in the instant case is assessment year 2011-12 and the original assessment was completed u/s 143(3) of the Act. As mentioned earlier, it is also an admitted fact that in the entire set of reasons, there is no allegation by the Assessing Officer of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment. Under these circumstances, we have to see as to whether the reopening of the assessment u/s 147 of the Act is valid when the original assessment was completed u/s 143(3) of the Act, the reasons recorded do not contain any allegation by the Assessing Officer of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment and such reopening is beyond a period of four years from the end of the relevant assessment year. 28. We find the Hon'ble Supreme Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing Officer that there was any such failure on the part of the assessee. The consequence is clear that the Assessing Officer had not satisfied himself on this important jurisdictional aspect and therefore must be deemed to have arbitrarily proceeded to initiate the reassessment proceedings by issuing the notice impugned, which makes it unsustainable. 13. In Hindustan Lever Ltd. V/s. R. B. Wadkar, Assistant Commissioner of Income-Tax and Ors. 1, it was held : "......The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d vs ACIT (supra) has observed as under: "27 At this stage, we may briefly refer to the relevant legal provisions. 28 Section 147 of the Act deals with "income escaping assessment". Section 147 says that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147 of the Act 28.1 The first proviso to section 147 is important. As per this proviso, where an assessment under subsection (3) of section 143 or section 147 has been made for the relevant assessment year, no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 48 of the Act, which deals with issue of notice where income has escaped assessment. As per sub-section (1), before making the assessment, re-assessment or recomputation under section 147, a notice in the prescribed form is required to be served upon the assessee by the Assessing Officer, calling upon him to file return of income in terms of such notice within the period specified and in such event the return so filed would be construed to be a return filed under section 139. As per sub-section (2) of the said section, the Assessing Officer shall before issuing any notice under section 148, record his reasons for doing so. 31.2 In GKN Driveshafts (India) Ltd. (supra), Supreme Court held that when a notice under section 148 of the Act is issued, the proper course of action for the assessee is to file the return and if he so desires, to seek the reasons for issuing the notice. If sought for, Assessing Officer is bound to furnish the reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to the notice in which event the Assessing Officer would be under an obligation to dispose off the same by passing a speaking order 32 Reverting back t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns which led to formation of the belief that income chargeable to tax has escaped assessment must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exists reasonable grounds for the Income Tax Officer to form the above belief that would be sufficient to clothe him with jurisdiction to issue notice. However, sufficiency of the grounds is not justiceable. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant. To this limited extent, initiation of proceedings in respect of income escaping assessment is open to challenge in a court of law. 32.3 Dilating further, Supreme Court held that reasons for formation of the belief must have a rational connection with or relevant bearing on the formation of the belie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons furnished by Respondent No. 2 for re-opening of assessment under section 147 of the Act. After referring to the information received following search and seizure action carried out in the premises of Shri Naresh Jain, it was stated that information showed that Petitioner had traded in the shares of M/s. Scan Steels Ltd., and was in receipt of Rs. 23,98,014.00 and therefore, Respondent No. 2 concluded that he had reasons to believe that this amount had escaped assessment within the meaning of section 147 of the Act. 36 First of all it would be evident from the materials on record that Petitioner had disclosed the above information to the Assessing Officer in the course of the assessment proceedings. All related details and information sought for by the Assessing Officer were furnished by the petitioner. Several hearings took place in this regard where-after the Assessing Officer had concluded the assessment proceedings by passing assessment order under section 143 (3) of the Act. Thus it would appear that Petitioner had disclosed the primary facts at its disposal to the Assessing Officer for the purpose of assessment. He had also explained whatever queries were put by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 31.03.2011, it had paid up capital amounting to Rs.25,78,300/-, and share premium reserve amounting to Rs.23,86,71,700/-. Information were also sought for, by issuing letters to various parties by invoking Section 133 (6) of the I.T. Act. Replies received in response to the same are placed on record. On examination of accounts, supporting details / documents furnished in respect of assessee company"s accounts and computation disclosed in the return of income one area has been noted, which is enumerated below" 31. We find the Assessing Officer reopened the assessment by recording reasons which have already been reproduced in the preceding paragraphs. A perusal of the reasons recorded by the Assessing Officer nowhere shows that there is any allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. Since the assessment year involved in the instant case is 2011-12 and the original assessment was completed u/s 143(3) of the Act and there is no allegation of any failure on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 80 IB (10) of the Act as from index II of the flats sold registered with the Registrar show that three flats have been sold to the same family. It is on the basis that, this sale was post insertion of section 80IB(10)(f) of the Act w.e.f. 1st April, 2010. However, we find that during regular assessment proceedings, for the subject Assessment Year 2011-12, the Petitioner had at the instance of the Assessing Officer given complete details with regard to the purchase of the flat, the date of agreement of purchase of the flats and also date of possession to the Assessing Officer. The same was examined by the Assessing Officer. At that time, the Assessing Officer was satisfied that the flats were sold prior to the amendment of 2010. It is consequent to the above that the Assessing Officer passed an order dated 26th March, 2014 under Section 143 (3) of the Act and accepted Petitioner's claim for deduction under Section 80 IB (10) of the Act. Thus, in view of the above, the full and true disclosure at the time of regular assessment, the impugned notice is without jurisdiction. 8. It may be pointed out that at the hearing, the Respondent contended that the assessment was re-opene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safe-guard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced." Thus, the submission of Mr. Mohanty not being a part of the reasons recorded, cannot be read into them, in the facts of this case. 9. Therefore, in facts of this case, the reasons in support of the impugned notice not having alleged/ particularized any failure on the part of the Petitioner to disclose fully and truly all material facts necessary for the assessment, the impugned notice is without jurisdiction. 10. Accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is engaged in the business of production / acquisition and sale of television programmes / files, distribution of satellite channels and acting as advertising agent of SET Satellite (Singapore) Ple. Ltd. for canvassing for sale of advertisement time slots to Indian advertisers. " 11) During the course of the assessment proceedings, the petitioner was called upon to furnish details specifically with reference to the expenditure incurred by it on advertisements, sales promotion and market research by a communication dated 3rd December, 2004 of the Assessing officer. In response to the communication, the petitioner by a letter dated 28th December, 2004 furnished details of the selling and distribution expenses, including those incurred on marketing research and studies. A copy of those communications together with the details submitted by the petitioner have been annexed to the proceedings before the Court. Hence during the course of the assessment proceedings, the Assessing Officer was apprised of the circumstance that the business of the petitioner consisted in the collection of subscriptions from subscribers of television channels and for procuring advertisements. The fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed for the reasons recorded in the judgment. In the present case also, assessment is sought to be reopened beyond a period of four years from the end of expiry of the relevant assessment year, A.Y. 2003-04. For the reasons already recorded while allowing the companion Writ Petition, the present Writ Petition is made absolute in terms of prayer clause (a) by quashing and setting aside the notice dated 25th March, 2009 and the order dated 29th September, 2009." 35. We find the Hon"ble Bombay High Court in the case of Marico Ltd. vs. ACIT in Writ Petition No.1917 of 2019, order dated 21.08.2019 from para 10 of the order has observed as under: "10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018 makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it would necessarily follow, as held by our Court that the Assessing Officer has accepted the Petitioner"s/Assessee"s submissions, so as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction under Section 80IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9 th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v/s. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tome. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to under gone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 2019 is quashed and set aside. 13. Petition allowed." 36. The various other decisions relied on by the Ld. Counsel for the assessee in the case law compilation also support the case of the assessee to the proposition that the re-assessment proceedings initiated beyond the period of four years from the end of the relevant assessment year is invalid where the original assessment was completed u/s 143(3) of the Act and there is no allegation of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of assessment in the reasons recorded. In this view of the matter, we are of the considered opinion that the re-assessment proceedings initiated by the Assessing Officer are not in accordance with law. 37. We further find during the course of original assessment proceedings, various details were called for from the nine shareholder companies who have filed the requisite details and the Assessing Officer on the basis of their replies such as their PAN, bank statements, confirmations, audited financial statements, etc. has completed the assessment u/s 143(3) accepting the genuineness of such investments by them in the share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to tax under the Act so as to escape assessment. It is also petitioner's case that the reasons recorded are vague indicating that there is no material on record whereof a valid belief could be formed that income chargeable to tax has escaped assessment and the reassessment proceedings have been initiated merely to make fishing and roving enquiries which is not permissible under the Act. It is settled law that if, the jurisdictional conditions are not satisfied, the assessment cannot be reopened. 5. Mr Pardiwalla submitted as under: (a) It is a well settled principle of law that the existence of a valid "reason to believe" is a sine qua non for the exercise of jurisdiction under section 147 of the Act. The courts have held that the expression "reason to believe" postulates a bonafide belief that there must exist objective reasons for that belief. (b) The reasons as recorded do not disclose any tangible material on the basis of which a prudent person could have formed a reasonable belief and come to a conclusion that any income has escaped assessment as there is no live link between the reasons as recorded and the material on record for forming a belief that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehest of the higher authority and is not based on the formation of a belief by respondent no.1. Respondent no.1 himself has not formed any belief that any income has escaped assessment. As held in Principal Commissioner of Income Tax -5 Vs. Shodiman Investments (P) ltd. the settled position in law is that reopening notice has to be issued by the AO on his own satisfaction and not on borrowed satisfaction. The reasons indicate that the AO has not applied his mind but has merely issued the reopening notice on the basis of letter dated 27th March 2014 issued by him for taking necessary action as the time limit of four years for issue of notice u/s 148 of the Act will expire on 31 st March 2014, and relied on a list in respect of companies who have received the share premium during AY 2009-10. (f) The AO in the reasons to believe only says that when assessee has been incorporated only on 15th March 2007 and assessee company not having proven track record, could not command such a huge share premium in the open market particularly when it has returned income of (-) Rs.87,362/-. According to the AO, there has been underassessment of income received in the garb of share application mone ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sheet, profit and loss account schedule and annexures, details of shareholding patterns of the company and securities premium / share premium received and to justify charging of the same with separate documentary evidences. Petitioner, vide its letters dated 19th July 2011 and provided all the documents and materials. In its letter dated 12th September 2011, petitioner also stated that it had charged share premium of Rs.12841.86 per equity share of face value of Rs. 10/- each on 16,730 equity shares that was issued to a Mauritius resident. Petitioner also provided the documents relating to Foreign Inward Remittance Certificate and forms filed with RBI. After considering all those documents, the assessment order dated 21st December 2011 came to be passed. 9 As held by the Division Bench of this Court in Aroni Commercials Ltd. Vs. Deputy Commissioner of Income Tax2(1) the settled law is once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 Sept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor was there any tangible material which would have otherwise given jurisdiction to re-open the assessment even when the re-opening was sought to be made within a period of four years. Paragraphs 24 to 30 of SLS Energy (Supra) read as under: "24. In the present case neither the reasons recorded nor the order disposing of the objections in any manner reflects that there was any doubt with regard to existence of the entities in whose favour the allotment of shares had been made upon receipt of share money as also the amount of premium paid on the said shares. 25. By virtue of the impugned notice dated 23rd March, 2015, the assessing officer seeks to reopen the assessment for the assessment year 2010-11, which is within a period of four years. Admittedly, no scrutiny assessment under section 143(3) of the Act has taken place in the present case. Even in a case where no scrutiny assessment has taken place, reassessment can be ordered only if the assessing officer has reason to believe that income chargeable to tax had escaped assessment. The Apex Court in Asstt. CIT v. Rajesh Jhaveri Stock Brokers(P.)Ltd.[2007] 161 Taxman 316/291 ITR 500 (SC) has clearly held that notice for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tum of transaction having taken place between two companies. In any case the assessing officer appears to have not been in doubt regarding the transaction having taken place between the said two companies with regard to allotment of preference shares and receipt of the share premium amount inasmuch as what was sought to be questioned, was not in fact the transaction, but only the receipt of the share premium amount which was said to be excessive and much beyond the intrinsic value of the shares of the Petitioner company. 29. This can be guessed from the fact that the assessing officer had only flagged the share premium amount of Rs.6,79,32,00,000/- which according to him was chargeable to tax that had escaped assessment and did not question the amount of Rs. 68 lakhs received by the Petitioner company representing the value of Rs. 68 lakhs shares of the face value of rupee 1 per share. Had the Assessing Officer any real doubts regarding the transaction itself, then there was no justification for him to question only the transaction with regard to the extent of the amount of premium charged for the said shares. 30. We therefore of the opinion that there was neither any basis for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO has not applied his mind and arrived at his own satisfaction but on borrowed satisfaction. Paragraphs 12 to 14 of Shodiman Investments (P) Ltd. (Supra) read as under: "12. 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. CIT [1967] 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. Lakhmani Merwal Das [1976] 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 comi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of original assessment proceedings and no new tangible material exist for coming to bonafide belief as contemplated u/s 147 of the Act, therefore, such reopening of the assessment in our opinion was merely based on change of opinion which is not in accordance with law as contemplated by the recent decision of the Hon"ble Bombay High Court in the case of Godrej Projects Development Pvt. Ltd. Vs. ITO (supra). In view of the detailed reasoning given by the Hon"ble Bombay High Court in this case, which is squarely applicable to the facts of the present case, we hold that the re-assessment proceeding initiated by the Assessing Officer is merely on account of change of opinion and therefore, is not sustainable. Accordingly, on this ground also, the re-assessment proceedings are quashed." 32. Since the assessment year involved is assessment year 2011-12 where the original assessment was completed u/s 143(3) of the Act and the reasons so recorded do not contain a whisper of any failure on the part of assessee to disclose fully and truly all material facts necessary for completion of the assessment and such reopening is beyond a period of four years from the end of the releva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 6. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal. 35. After hearing both sides, we find the Ld. PCIT invoked the jurisdiction u/s 263 of the Act on the ground that the Assessing Officer in the order passed u/s 143(3) / 147 of the Act has made addition of Rs.2,79,78,912/- being the net amount of accommodation entries instead of making addition of Rs.10,42,46,375/- which was the total accommodation entries obtained. Further, the commission @ 2% of such accommodation entries which comes to Rs.20,87,927/- and which the assessee would have incurred for obtaining the accommodation entries was not added by the Assessing Officer u/s 69C of the Act. Since we have already quashed the re-assessment proceedings in the preceding paragraphs, therefore, the order passed u/s 263 of the Act by the Ld. PCIT becomes infructuous and therefore, the same is liable to be dismissed. We, therefore, hold that the order passed by Ld. PCIT u/s 263 has become infructuous. Accordingly, the grounds raised by the assessee are allowed. 36. In the result, both the appeals filed by the assessee are allowed. Order pronounced in the open Court on 19th February, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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