Income Tax Appellate Tribunal - Chandigarh
J.M.D. Astrological Consultancy ... vs Dcit, Panchkula on 2 January, 2017
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IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No. 849/CHD/2011
Assessment year: 2008-09
M/s J.M.D, Astrological Consultancy Vs. The CIT, Panchkula
Services Pvt. Ltd, Panchkula Range, Panchkula
PAN No. AABCJ4419N
(Appellant) (Respondent)
Appellant By : Sh. Tej Mohan Singh
Respondent By : Sh. Ravi Sarangal (CIT DR)
Sh. S.K. Mittal, DR
Date of hearing : 22 .12.2016
Date of Pronouncement : 05. 01.2017
ORDER
PER BHAVNESH SAINI, JM
This appeal by the assessee has been directed against the order of Ld. CIT(A), Panchkula dated 11.07.2011 for assessment year 2008-09 on the following grounds:
1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law as well as on facts in upholding the reopening of the assessment by issuance of notice under section 148 of the Act which is illegal, arbitrary & unjustified.2
2. That there was no reason to believe warranting invocation of the provisions of section 147 & 148 of the Act and as such the re-assessment framed is illegal, arbitrary & unjustified.
3. That the re-assessment has been framed and upheld by the Commissioner of Income Tax (Appeals) without considering and disposing of the objections raised against the reasons recorded and as such the order passed is illegal, arbitrary & unjustified.
4. That without prejudice to above legal position, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.31,00.000/- made on account of share application money received by the assessee-
company which is illegal, arbitrary &
unjustified.
5. That the Ld. Commissioner of Income Tax
(Appeals) has further erred in not considering the decision of the Apex Court and other decisions cited before her in the correct perspective in as much as it is a settled position of law that addition, if any, on account of share application money received is warranted, it is to in the hands of the person who had invested the amount and not in the hands of the receiver company and as such the addition upheld is arbitrary & unjustified.
2. We have heard Ld. Representatives of both the parties and perused the material on record. Brief facts of the case are that as per 3 information received from Addl. Director of Income Tax (Inv.), New Delhi dated 8.4.2009, the assessee received accommodation entries for Rs. 21 lakhs. The Assessing officer recorded the reasons and issued notice u/s 148 of the Income-tax Act, 1961 (in short 'the Act') and made the addition of Rs. 31 lakhs in the final assessment against which the assessee filed the appeal before Ld. CIT(A).
3. During the appellate proceedings, the assessee objected to the reopening on the ground that his case was reopened on the ground that no return was being filed by the assessee. The fact was that assessee was regularly filing the return of income. The assessee relied on decision in the case of Sagar Enterprises Vs. Assistant Commissioner (2002) 257 ITR 335 (Gujarat). The assessee also requested for copy of the statements recorded of the parties to whom search was conducted. It was further submitted that information from DIT (Inv.) was relied on by the Assessing officer without any verification. The Ld. CIT(A) noted that plea of the assessee that there was no reason to believe with the Assessing officer was devoid of any merit. The proper reasons were recorded by the Assessing officer which led to believe that income has escaped assessment. The assessee filed copy of the reasons in the appellate proceedings. The assessee company received accommodation entries from Delhi Companies leading to the belief of the Assessing officer that income amounting to Rs. 21 lakhs had escaped assessment. There is no denial of the fact that assessee's book showed credit from Delhi Companies and this is sufficient reason to believe that income has 4 escaped assessment. Ld. CIT(A) also noted that whether the assessee was regularly filing return would not make any difference to the facts which came to the notice of the Assessing officer from DIT (Inv.) that income had escaped assessment to the extent of Rs. 21 lakhs. The Ld. CIT(A) also noted that Assessing officer has properly recorded the reasons for issuance of notice u/s 148, therefore, this plea of the assessee on this ground were dismissed.
4. During the period under consideration, as per information received from DIT (Inv), the assessee received accommodation entries as under:-
S.No. Name of the Company Amount (Rs.)
1 Bhavani Portfolio Pvt. Ltd 5,00,000/-
2 Campri Fical Service (P) Ltd 5,00,000/-
3 DU Securities Pvt Ltd. 6,00,000/-
4 Taurus Iron & Steel Co.(P) Ltd 5,00,000/-
Total 21,00,000/-
The assessee submitted that he has received share application money from seven companies i.e. Taurus Iron & Steel Co. Pvt. Ltd - Rs. 5,00,000/-, Thar Steel Pvt. Ltd - Rs.5,00,000/-, Campri Fiscal Services Pvt Ltd - Rs.500,000/-, Bhavani Portfolio Pvt Ltd - Rs. 5,00,000/-, Ritansh Developers & Financing Pvt. Ltd - Rs. 5,00,000/-, Maya Industries Ltd - Rs. 5,00,000/- and D.U. Securities Pvt. Ltd - Rs. 6,00,000/- totaling to Rs. 36 lakhs. The identity, creditworthiness and genuineness of the above companies except Ritnash Developers and 5 Financing Pvt. Ltd could not be proved during the enquiry at the assessment stage, as the summons issued u/s 131 were returned with the remarks 'Left without address", therefore, the Assessing officer made addition of Rs. 31,00,000/- u/s 69 of the Act.
5. The assessee challenged the above addition before Ld. CIT(A) and it was submitted that the assessee furnished list of share holders alongwith their complete details of share holdings supported by evidence. The shares have been allotted to these parties and confirmations from the share holders have been filed who have invested in assessee's company. The details of their PAN numbers and banks details with confirmation letters were filed. The parties are genuine and are registered companies having PAN numbers and bank accounts. It is incorrect to say that parties are bogus or non-existent. Their confirmations regarding their existence can be verified from the Registrar of Companies. It was therefore, submitted that assessee proved the identity of the share holders, their creditworthiness and genuineness of the transactions. The assessee relied upon the decision in the case of Vanita Jain 163 Taxman 325 (Delhi) and CIT Vs. Lovely Exports (P) Ltd 216 CTR 195 (SC).
6. The Ld. CIT(A), however, considering the explanation of the assessee did not accept the contention of the assessee and noted that even the identity of the share holders have not been proved what to say the capacity and genuineness. The Ld. CIT(A), therefore, held that onus upon the assessee to prove genuineness of credit have not been 6 discharged. The Ld. CIT(A) accordingly dismissed the appeal of the assessee on merits also.
7. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and submitted that assessee filed return of income for assessment year under appeal in October 2008, copy of acknowledgement is filed at page 1 of the paper book. He has submitted that reasons for reopening the assessment are recorded on 25.3.2010 in which no satisfaction have been recorded by the Assessing officer before issuing the notice u/s 148 of the Act because Assessing officer formed his belief that income chargeable to tax had escaped assessment mainly because assessee was not filing return of income which fact is incorrect. The Assessing officer did not make any inquiry on the report received form Addl. DIT (Inv), New Delhi before issuing notices u/s 148 of the Act. The Assessing officer has not applied his mind before recording reasons for reopening of the assessment. The assessee asked for a copy of statement of Shri Tarun Goel, C.A. which was not supplied to the assessee and no right was given to cross examine his statement. He has referred to various replies filed before the authorities below. The Ld. Counsel for the assessee therefore submitted that Assessing officer did not have any reason to believe that income chargeable to tax have escaped assessment. The Ld. Counsel for the assessee in support of his contention relied on the following decisions:-_
i) Decision of Delhi High Court in the case of CIT Vs. Atul Jan & Smt. Vaniti Jain [2008] 299 ITR 383(Delhi) 7
ii) Decision of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Smt. Paramjit Kaur [2009] 311 ITR 38(P&H)
iii) Decision of Delhi High Court in the case of CIT Vs. Sfil Stock Broking Limited [2010] 325 ITR 285 (Delhi)
iv) Decision of Delhi High Court in the case of Sarthak Securities Co. P. Ltd. [2010] 329 ITR 110 (Delhi)
v) Decision of Delhi High Court in the case of Signature Hotels P. Ltd. Vs. ITO and Another [2011] 338 ITR 51(Delhi)
vi) Decision of Gujarat High Court in the case Sagar Enterprises Vs. Assistant Commissioner [2002] 257 ITR 335 (Gujarat).
8. The Ld. Counsel for the assessee further submitted that assessee furnished complete details of all the share holders before the authorities below which are copy of their certificate of incorporation, memorandum of association and share certificates etc. alongwith their confirmations and affidavits disclosing their PAN numbers and wards where they are assessed, confirming investment in assessee's company. He has, therefore, submitted that assessee has discharged onus to prove identity of share holders, their creditworthiness and genuineness of transactions. He has relied on the following decisions:-
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i) Order of ITAT, Chandigarh Bench in the case of ACIT Vs. Kisco Casting (P.) 34 Taxman.com 37 (Chandigarh -Trib.)
ii) Decision of Delhi High Court in the case of CIT Vs. Dwarkadhish Investment P. Ltd. [2008] 330 ITR 298 (Delhi)
iii) Decision of Delhi High Court in the case of CIT Vs. Value Capital Services P. Ltd [2008] 307 ITR 334 (Delhi)
iv) Decision of Delhi High Court in the case of CIT Vs. Kamdhenu Steel and Alloys Ltd. [2014] 361 ITR 220 (Delhi) The Ld. Counsel for the assessee, therefore, submitted that addition on merit is wholly unjustified, the same may be deleted.
9. On the other hand, Ld. DR relied upon the orders of the authorities below and submitted that Assessing officer recorded proper reasons for reopening of the assessment and made inquiries from the staff who have reported that assessee did not file the return of income. The statement of Shri Tarun Goel was recorded by Investigation Wing, Delhi, so the same could not be supplied to the assessee and even no cross- examination could be allowed. The Assessing officer received information from ADIT (Inv), New Delhi vide his letter dated 6/8 t h April 2009 that assessee had received accommodation entries from the above share holders. Therefore, Assessing officer was having reasons to believe that income chargeable to tax have escaped assessment. The Ld. DR placed on record copy of letter dated 6/8 t h April 2009 of ADIT 9 (Inv), New Delhi. The Ld. DR also placed on record the copy of statement of Shri Taurn Goel recorded by Investigation Wing at Delhi on 15.9.2008. The Ld. DR also filed copy of the reasons recorded for reopening of the assessment dated 25.3.2010. The Ld. DR therefore, submitted that Assessing officer was having reasons to believe that income chargeable to tax had escaped assessment. The Ld. DR further submitted that assessee failed to prove the identity of the share holders their creditworthiness and genuineness of the transactions. Therefore, onus u/s 68 of the Act has not been discharged by the assessee. The Ld. DR relied upon the decision of the Hon'ble Delhi High Court in the case of CIT v Navodya Castels Pvt. Ltd. 367 ITR 306 (Delhi) and order of ITAT, Kolkata Bench in the case of M/s Biskha Sales Pvt Ltd, Kolkata Vs. CIT(Kol-II), Koltaka in ITA 1493/Kol./2013 dated 19.9.2014 in support of his contention that huge racket is functioning in Kolkata for supplying bogus entries, therefore, proceedings u/s 263 of the Act were initiated in this case which have been confirmed by the Tribunal.
10. We have considered the rival submissions. It is well settled law that validity of re-assessment proceedings to be determined with reference to reasons recorded u/s 148 of the I.T. Act. Copy of the reasons as supplied by the Ld. DR dated 25.3.2010 are reproduced as under:-
"Name of the Assessee : M/s J.M. D. Astrological Consultancy Services (P)Ltd PAN No. : AABCJ 4419N Address : House No. 1456, Sector 4, Panchkula 10 Assessment Year : 2008-09 The Information was received from Addl. DIT, UNIT-IV, New Delhi vide his office letter No. Addl, DIT(Inv)/Unit- IV/Beneficiaries/2008-09/7, dated 06-04-2009 in which it was mentioned that:
A search u/s 132 of the IT, Act, 1961 was conducted at the office premises of Shri Tarun Goyal, CA at 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi by the Investigation Wing on 15-09-2008. During the course of search and later inquiries it was established that Sh. Tarun Goyal had floated nearly 90 Private Limited companies and firms for providing accommodation entries. The directors of these companies were his employees who worked in his office as peons, receptionists etc.. All the documents were got signed from these employees. A number of Bank Accounts in various banks were opened in the names of these companies and his employees in which huge cash deposits were made. Later cheques were issued to various beneficiaries, disguising the whole transaction as genuine. Thus the network of companies run by Sh. Tarun Goyal are not carrying out any genuine activity and are infact Sham companies. This is more apparent from activity fact that:
a. All the companies are operating from the office of Sh. Tarun Goyal addressed at 13/34, WEA, Arya Samaj Road, Karol Bagh, New Delhi and at his former office viz 203, Dhaka Chambers, 2069/39, Naiwala, Karol Bagh, New Delhi.
b. The directors of the company are none but former and present employees of Sh. Tarun Goyal. Sh. Tarun Goyal has been using them for merely signing all the documents, bank 11 cheques and also for transporting and exchanging cash and cheques in order to provide accommodation entries.
c. At the time of serch on15/9/2008 Tarun Goyal was recorded on oath. As per his statement, he has accepted that he provides accommodation entries and his various companies are used for this purpose. Sh. Tarun Goyal has also described the modus operandi for providing accommodation entries.
d. At the time of search on 15/9/2008, the statement on oath of the employees present at the premises of Sh. Tarun Goyal were recorded. These include Sh. Pramod Kunar, his peon; Sh. Harpreet Singh, Accountant. In their statements they stated that they were mere employees of Sh. Tarun Goyal and they were signing various documents related to many companies at his behest, as and when asked by Sh. Tarwi Goyal.
e. Later, more employees were traced namely, Ms. Usha and Ms. Ritu Saxena, former receptionists. In their statements recorded on oath, they have started that various bank accounts were opened in their names by Sh, Tarun Goyal, who himself operated these accounts and deposited cash in them. As such, they could not refuse the same as they were mere employees. All the passbooks, cheque-books, various important documents were in his total control.
f. The statements of the auditors of various companies of Sh. Tarun Goyal were recorded on oath after summons were issued to them. The auditors of various companies run by Sh. Tarun Goyal have confirmed that they had no knowledge about the directors of the companies and all the audits were done at the instructions of Sh. Tarun Goyal. One of the auditors has stated that proper records for transactions and contracts of shares, held as investment or purchased or sold could never be verified. In most cases, share certificates, 12 shares allotment advises and/or other related documents were not available for the auditor's verification and it could not be verified/ ascertained whether the shares were actually allotted to the company and whether they were held in the name of the company.
g. During the course of search, it was revealed that all the passbooks, cheque books, PAN cards etc. were always in possession of Sh, Tarun Goyal.
h. All the bank account opening forms are the handwriting of Sh. Tarun Goyal, and thus Sh. Tarun Goyal controlled and managed these companies as also operated all the bank accounts.
i All the books of accounts of all the companies have been retrieved from the computers/laptop of Sh. Tarun Goyal j. Sh. Tarun Soyal has given letters for the release of bank accounts of companies put under restraint after search. No such application was received from the so called directors of the companies.
k, Sh.Tarun Goyal appears in all the scrutiny assessments as well as appeals of his companies himself before various income tax authorities. From verification carried out in respective wards/circles where the above mentioned companies are assessed, it is evident that Sh. Tarun Goyal is appearing in all the income tax proceedings on behalf of all the companies. He is also not charging any fees for appearing in these cases A detailed list of the beneficiaries of accommodation entries has been prepared by the concerned ADIT (Inv.) for the assessment years 2004-05, 2005-06, 2007-08, 2008-09 and 2009-10. This list was forwarded by the Addl.DIT (Inv.), New Delhi Unit IV alongwith the letter No.7 dated 06-04-2009. On perusal of this list it is seen that a company in the name and 13 style of JMD Astrological Consultancy Service (P) Ltd. has received an accommodation entry of Rs. 21,00,000/- from three bogus companies run by Sh. Tarun Goyal. The PAN of the company is AABCJ4419N and the details of the registered office of the company was obtained from the website of Registrar of Company and following details were obtained :
1. Date of incorporation is 07-07-2004
2. The Registered office address is H. No, 1456 Sector-4, Panchkula, On perusal of records of this office, it is seen that the assessee has not filed their returns of income for any of the assessment years since the date of incorporation. Therefore, it is evident that the assessee is non-filer and as such the income has escaped assessment within the meaning of explanation (ii) (a) of section 147 of the Income tax Act.
Moreover, in the light of above mentioned facts, it is clear that the assessee has taken accommodation entries of Rs. .21.00 lacs in the assessment year 2008-09. In the light of the above .recorded reasons. I have reason to believe that income of more than Rs.21.00 lacs has escaped assessment for the A.Y. 2008-09 in the case of the assessee."
11. The Ld. DR relied upon copy of the letter of the Addl. DIT (Inv.) New Delhi dated 6/8 April, 2009 addressed to CIT-I Panchkula Haryana intimating that search u/s 132 was conducted in the case of Shri Tarun Goel, Chartered Accountant on 15.9.2008. He was examined by the Investigation party on the same day and his statement was recorded, copy of which is also placed on record by the Ld. DR in which he has accepted that he has provided accommodation entries to various companies by creating number of private limited companies and firms. 14 All his employees were involved in the same to provide bogus accommodation entries. The list of beneficiaries companies were attached with this letter and request was made to CIT-I Panchkula to transmit the same information to the respective Assessing officer of his charge so that further invigilation may be carried out by them and necessary action may be initiated against these beneficiaries. In the list / annexure of this letter for assessment year 2008-09, name of the assessee has been mentioned. Copy of the statement of Shri Tarun Goel is placed on record. However, in his statement there is no mention of name of the assessee company to whom he has allegedly provided any bogus accommodation entry. How the Additional DIT (Inv), New Delhi prepared the list of beneficiaries naming the assessee therein is not established. No basis is discussed as to how the list / annexure to the letter of ADIT (Inv.) was prepared. It is virtually a direction issued in the letter of Addl. DIT (Inv.) New Delhi to the Assessing officer to make further investigations so as to initiate action against the beneficiaries. The Assessing officer merely copied letter dated 6/8 April, 2009 in the reasons recorded u/s 148 of the I.T. Act and on mere perusal of list of beneficiaries, recorded the reasons for reopening of the assessment u/s 148 of the Act against the assessee without conducting any inquiry or recording of satisfaction.
12. The information in list of beneficiary did not indicate escapement of any income. The Assessing officer did not examine and conduct any enquiry on this information provided by ADIT (Inv.) and did not verify 15 the correctness of the same but accepted the information in mechanical manner. The Assessing officer reproduced the same information in the reasons even without satisfying himself about the correctness or otherwise of the report and issued notice u/s 148 was for escapement of income. There is no reference to any document except list of beneficiaries which could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The letters dated 6/8th April, 2009 may not pointer to escapement of any income particularly when in the statement of Shri Tarun Goel recorded by Investigating Wing and letter of ADIT (Inv.), New Delhi did not name the assessee for receiving any bogus accommodation entry.
13. The Assessing officer formed his belief that income chargeable to tax had escaped assessment because assessee did not file return of income. It is, therefore, apparent that fact of non-filling of return of income for assessment year under appeal had prompted the Assessing officer for arriving at the conclusion about escapement of income. However, the material on record showed that the assessee filed original return of income for assessment year under appeal in October 2008, copy of acknowledgement is filed at page 1 of the paper book and is also not disputed by the Ld. DR. The Assessing officer, therefore, recorded incorrect, irrelevant and non- existing reasons u/s 148 of the I.T. Act. The reasons, therefore, are vitiated and liable to be quashed as would not showed even prima facie case that the Assessing officer has any reason 16 to believe that income escaped assessment. It is not discernable as to whether Assessing officer has applied his mind to the report of the DIT (Inv.) New Delhi which is sole basis of recording of reasons for reopening of the assessment and independently arrived at a belief that income has escaped assessment, therefore, Assessing officer did not get jurisdiction to make re-assessment. There is, thus, no material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The re-assessment proceeding were invalid and are liable to be quashed.
13.1 The Hon'ble Delhi High Court in the case of CIT Vs. Atul Jan & Smt. Vaniti Jain [2008] 299 ITR 383(Delhi) held as under:-
"Held, dismissing the appeals, that the only information was that the assessee had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque for that amount. The information did not indicate the source of the capital gains which in this case were shares. There was no information which shares had been transferred and with whom the transaction had taken place. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer had not even recorded his satisfaction about the correctness or otherwise of the information for issuing a notice under section
148. What had been recorded by the Assessing Officer as his "reasons to believe" was nothing 17 more than a report given by him to the Commissioner. The submission of the report was not the same as recording of reasons to believe for issuing a notice. The Assessing Officer had clearly substituted form for substance and therefore the action of the Assessing Officer was not sustainable."
13.2 The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Smt. Paramjit Kaur [2009] 311 ITR 38(P&H) held as under:-
"Held, that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of "reasons to believe" and not on "reasons to suspect". The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid."
13.3 The Hon'ble Delhi High Court in the case of CIT Vs. Sfil Stock Broking Limited [2010] 325 ITR 285 (Delhi) held as under:-
"Held, dismissing the appeal, that the first sentence of the reasons recorded by the Assessing Officer was mere information received from the 18 Deputy Director of Income-tax (Investigation). The second sentence was a direction given by the same Deputy Director of Income-tax (Investigation) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. The Assessing Officer referred to the information and the two directions as reasons on the basis of which he was proceeding to issue notice under section 148 . These could not be the reasons for proceeding under section 147/148 of the Act. As the first part was only an information and the second and the third parts of the reasons were mere directions, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. There was no substantial question of law for consideration."
13.4 The Hon'ble Delhi High Court in the case of Sarthak Securities Co. P. Ltd. [2010] 329 ITR 110 (Delhi) held as under:-
"Held, allowing the petition, that the formation of belief was a condition precedent as regards the escapement of the tax pertaining to the assessment year by the Assessing Officer. The Assessing Officer was required to form an opinion before he proceeded to issue a notice. The validity of reasons, which were supposed to sustain the 19 formation of an opinion, was challengeable. The reasons to believe were required to be recorded by the Assessing Officer. Once the ingredients of section 147 were fulfilled, the Assessing Officer was competent in law to initiate the proceedings under section 147 . The Assessing Officer was aware of the existence of the four companies with whom the assessee had entered into transaction. Both the orders showed that the Assessing Officer was made aware of the situation by the investigation wing and there was no mention that these companies were fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicated independent application of mind. Though conclusive proof was not germane at this stage the formation of belief must be on the base or foundation or platform of prudence which a reasonable person was required to apply. From the perusal of the reasons recorded and the order of rejection of objections, the names of the companies were available with the authority and their existence was not disputed. The assessee in its objections had stated that the companies had bank accounts and payments were made to the assessee through banking channel. The identity of the companies was not disputed. Under these circumstances, the initiation of proceedings under section 147 and issuance of notice under section 148 of the Act were to be quashed."20
13.5 The Hon'ble Delhi High Court in the case of Signature Hotels P. Ltd. Vs. ITO and Another [2011] 338 ITR 51(Delhi) held as under:-
"Held, allowing the petition, that the reassessment proceedings were initiated on the basis of information received from the Director of Income- tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed."21
13.6 The Hon'ble Gujarat High Court in the case of Sagar Enterprises v Assistant Commissioner in [2002] 257 ITR 335 (Gujarat) held as under :-
"Held, that it was apparent that the fact of non- filing of the return for the assessment year 1991- 92 had weighed with the respondent for arriving at the satisfaction about the failure on the part of the assessee and escapement of assessment of income. However, the material on record showed that the return had been filed. In such circumstances, it could not be said with certainty as to which fact would have weighed with the officer concerned and once it was shown that an irrelevant fact had been taken into consideration, to what extent the decision was vitiated would be difficult to say. Moreover the Income-tax Officer had stated that the payment which was stated to be undisclosed income relevant for the assessment year 1991-92 could have been made during the financial year 1990-91 relevant to the assessment year 1991-92 and hence, "to cover up that probability, protective addition was made in the assessment year 1992-93" . The first appellate authority decided the appeal for the assessment year 1992- 93 on January, 1996, and the reasons had been recorded thereafter on August 18, 1997. The notice of reassessment was not valid and was liable to be quashed."
13.7 The Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Atlas Cycles Ltd [1989] 180 ITR 319 (P&H) has held as under:- 22
"Held, (i) that the Tribunal was right in cancelling the reassessment as both the grounds on which the reassessment notice was issued were not found to exist, and, therefore, the Income-tax Officer did not get jurisdiction to make a reassessment ."
14. Considering the facts and circumstances of the case and in the light of the above discussion and the case laws referred to above, we are of the view that the reopening of the assessment is not valid in this case. We accordingly set aside the orders of the authorities below and quash the proceedings u/s 148 of the I.T. Act.
15. In the result all the additions made in the re-assessment order are deleted. Since we have quashed the reopening of the assessee u/s 148 of the I.T. Act, we do not propose to decide the issue on the merit because it is left for academic discussion only.
15. In the result appeal of the assessee is allowed.
Order pronounced in the Open Court.
Sd/- Sd/-
(ANNAPURNA GUPTA) (BHAVNESH SAINI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 05 January, 2017
Rkk
Copy to:
1. The Appellant
2. The Respondent
3. The CIT
4. The CIT(A)
5. The DR
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