Income Tax Appellate Tribunal - Kolkata
M/S Shreyans Jain, Huf, Kolkata vs I.T.O.,Ward-36(2), Kolkata on 13 March, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
KOLKATA 'SMC' BENCH, KOLKATA
(Before Sri J. Sudhakar Reddy, Hon'ble Accountant Member)
ITA No. 1602/Kol/2019
Assessment Years: 2011-12
M/s. Shreyans Jain, HUF.............................................................................................................Appellant
18, R.N. Mukherjee Road
Dalhousie Square
6th Floor
Kolkata - 700 001
[PAN : AATHS 2107 P]
Vs.
Income Tax Officer, Wd-36(2), Kolkata.........................................................................Respondent
Appearances by:
Shri S.M. Surana, Advocate, appeared on behalf of the assessee.
Shri Jayanta Khanra, JCIT Sr. D/R, appearing on behalf of the Revenue.
Date of concluding the hearing : February 27th, 2020
Date of pronouncing the order : March 13th, 2020
ORDER
Per J. Sudhakar Reddy, AM :-
This appeal filed by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals) - 10, Kolkata, (hereinafter the "ld.CIT(A)"), passed u/s. 250 of the Income Tax Act, 1961 (the 'Act'), dt. 30/05/2019 for the Assessment Year 2011-12.
2. The ld. Counsel for the assessee challenges the reopening of assessment u/s 147 of the Act, as bad in law.
3. Heard rival contentions. The reasons recorded for reopening of assessment u/s 147 of the Act is as follows:-
2 ITA No. 1602/Kol/2019Assessment Years: 2011-12 M/s. Shreyans Jain, HUF 3.1. A perusal of these reasons demonstrate that the allegation is that income offered by the assessee to the tune of Rs.5,00,500/ Rs.5,00,500/- is "bogus income".
". Thus, this thi is not a case where the Assessing Officer alleges in his reasons that the income subject to tax has escaped assessment. It is his case that "bogus income" has been offered to tax. When the Assessing Officer believes that this amount of Rs.5,00,500/ Rs.5,00,500/- is not income at all, the question of income escaping assessment does not arise. This, in my view, cannot be a ground for reopening of assessment as it is against the mandate of the Act.
3.2. Moreover, the assessee has has, in the profit and loss account and balance bala sheet filed, disclosed these transactions and filed details pertaining to the same. This is clear from the computation of profit where the assessee has declared Rs.2,58,082.28/ Rs.2,58,082.28/- as profit from speculation, after setting off business loss. The schedules as well as the computation of income give the details. There is no dispute on the quantum of loss claimed by the assessee. Thus, this is a case where the reopening in question is made without prima facie verification of the information received by the Ass Assessing Officer and without application of mind to the information received from the investigation wing of the Department.
4. This Bench of the Tribunal in the case of Proficient Commodities Pvt. Ltd. vs. DCIT in ITA Nos. 2307 & 2308/Kol/2017, order dt. 02 02/11/2018,, under similar circumstances held as follows:-
"5.1. We find that this Bench of the Tribunal in the case of ACIT vs. M/s. Adhunik Cement Ltd. in ITA No. 1375/Kol/2017; Assessment Year 2009 2009-10, 10, under identical facts and circumstances held as follow follows:-
7.1. The Hon'ble Delhi High Court in the case of Commissioner of Income-tax, Income IV v.Insecticides (India) Ltd Ltd[2013] [2013] 357 ITR 330 (Delhi) upheld the order of the ITAT Delhi Bench in ITA Nos. 2332 2332-2333/Del/2010, holding as follows:-3 ITA No. 1602/Kol/2019
Assessment Years: 2011-12 M/s. Shreyans Jain, HUF "7. We may point out at this juncture itself that the Tribunal did not go into the question of merits. It only examined the question of the validity of the proceedings under Section 147 of the said Act. The Tribunal, in essence, held that the purported reasons for reopening the assessments were entirely vague and devoid of any material. As such, on the available material, no reasonable person could have any reason to believe tthat hat income had escaped assessment. Consequently, the Tribunal held that the proceedings under Section 147 of the said Act were invalid. I.T.A. No. 1375/Kol/2017 Assessment Year: 20092009-10 10 M/s. Adhunik Cement Ceme Ltd
8. The Tribunal gave detailed reasons for concluding that the proceedings under Section 147 were invalid. Instead of adding anything to the said reasons, we think it would be appropriate if the sasame are reproduced:-- "In the case at hand, as is seen from the reasons recorded by the AO, we find that the AO has merely stated that it has been informed by the Director of Income Income-tax (Inv.), New Delhi, vide letter dated 16.06.2006 that the above named ccompany was involved in giving and taking bogus entries/transactions during the relevant year, which is actually unexplained income of the assessee company. The AO has further stated that the assessee company has failed to disclose fully and truly all mater material facts and source of these funds routed through bank account of the assessee company. In the reasons recorded, it is nowhere mentioned as to who had given bogus entries/transactions to the assessee or to whom the assessee had given bogus entries or transactions.
sactions. It is also nowhere mentioned as to on which dates and through which mode the bogus entries and transactions were made by the assessee. What was the information given by the Director of IncomeIncome-tax tax (Inv.), New Delhi, vide letter dated 16.06.2006 ha hass also not been mentioned. In other words, the contents of the letter dated 16.06.2006 of the Director of IncomeIncome-tax tax (Inv.), New Delhi have not been given. The AO has vaguely referred to certain communications that he had received from the DIT(Inv.), New D Delhi;
elhi; the AO did not mention the facts mentioned in the said communication except that from the informations gathered by the DIT (Inv.), New Delhi that the assessee was involved in giving and taking accommodation entries only and represented unsecured mone money of the assessee company is actually unexplained income of the assessee company or that it has been informed by the Director of Income Income-tax tax (Inv.), New Delhi vide letter dated 16.06.2006 that the assessee company was involved in giving and taking bogus entries/transactions ries/transactions during the relevant financial year. The AO did not mention the details of transactions that represented unexplained income of the assessee company. The information on the basis of which the AO has initiated proceedings u/s 147 of the Act are undoubtedly vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which a reasonable person could have formed a belief that income had escaped assessment. In other words, the reasons recorded by the AO are ttotally otally vague, scanty and ambiguous. They are not clear and unambiguous but suffer from vagueness. The reasons recorded by the AO do not disclose the AO's mind as to what was the nature and amount of transaction or entries, which had been given or taken by the assessee in the relevant year. The reasons recorded by the AO also do not disclose his mind as to when and in what mode or way the bogus entries or transactions were given or taken by the assessee. From the reasons recorded, nobody can know what was th thee amount and nature of bogus entries or transactions given and taken by the assessee in the relevant year and with whom the transaction had taken place. As already noted above, it is well settled that only the reasons recorded by the AO for initiating procproceedings eedings u/s 147 of the Act are to be looked at or examined for sustaining or setting aside a notice issued u/s 148 of the Act. The reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No addition can be made to those reasons. Therefore, the details of entries or amount mentioned in the assessment order and in respect of which ultimate addition has been made by the AO, cannot be made a basis to say that the reasons recorded by the AO were with reference to those amounts mentioned in the assessment order. The reasons recorded by the AO are totally silent with regard to the amount and nature of bogus entries and transactions and the persons with whom the transactions had taken place. In this respect, we ma mayy rely upon the decision of Hon'ble jurisdictional 4 ITA No. 1602/Kol/2019 Assessment Years: 2011-12 M/s. Shreyans Jain, HUF Delhi High Court in the case of CIT v. Atul Jain [2000] 299 ITR 383, in which case the information relied upon by the AO for initiating proceedings u/s 1 147 of the Act did indicate the source of the capital gain and nobody knew which shares were transacted and with whom the transaction has taken place and in that case there were absolutely no details available and the information supplied was extremely scantyty and vague and in that light of those facts, the Hon'ble Jurisdictional Delhi High Court held that initiation of proceedings u/s 147 of the Act by the AO was not valid and justified in the eyes of law. The recent decision of Hon'ble jurisdictional High Court ourt of Delhi in the case of Signature Hotels (P.) Ltd. (supra) also supports the view we have taken above."
9. We do not see any reason to differ with the view expressed by the Tribunal. No substantial question of law arises for our consideration. The ap appeals peals are dismissed.
There shall be no order as to costs.
7.2. The Hon'ble Delhi High Court in the case of Principal CIT vs G&G Pharma India Ltd.. in ITA 545/2015 vide order dt. 08.10.2015 at paras 12 and 13 was held as follows:
"12. In the present case, after setting out four entries, stated to have been received by the assessee on a single date i.e. 10th Feb. 2003, from four entries which were received by the assessee on a single date i.e. 10th F Feb.
eb. 2003, from four entries which were termed as accommodation entries, which information was given to him by the Director Investigation, the A.O. stated: 'I have also perused various materials and report from Investigation Wing and on that basis it is evi evident dent that the assessee company has, introduced its own unaccounted money in its bank account by way of above accommodation entries'. The above conclusion is unhelpful in understanding whether the A.O. applied his mind to the materials that he talks about p particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the A.O., if he had in fact undertaken the exercise, to make a referenc reference to the manner in which those very entries were provided in the accounts of the assessee, which must have been tendered along with the return, which was filed on 14th November, 2004 and was processed u/s 143(3) of the Act. Without forming a prima facie opinion, inion, on the basis of such material, it was not possible for the A.O. to have simply concluded: 'it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries'. In the considered view of the C Court, ourt, in light of the law explained with sufficient clarity by the Supreme Court in the decision discussed, the basic requirement that the A.O. must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case.
13. A perusal of the reasons recorded demonstrate total non application of mind by the A.O. Thus applying the proposition laid down by the Jurisdictional High Court in G&G Pharma India (supra) we hold that the rreopening eopening of assessment is bad in law"
7.3. The Hon'ble Delhi High Court in the case of Signature Hotels (P) Ltd. vs ITO and another,, reported in 338 ITR 51 (Delhi) has under similar circumstances held as follows:
"For the A.Y. 2003 2003-04, 04, the return of income of the assessee company was accepted u/s 143(1) of the Income-tax Act,, 1961 and was not selected for scrutiny. Subsequently, the Assessing Officer issue issuedd notice u/s 148 which was objected by the assessee. The Assessing Officer rejected the objections. The assessee company filed writ petition and challenged the notice and the order on objections. The Delhi High Court allowed the writ petition and held as under: '(i) Section 147 of the Income-tax tax Act, 1961, is wide but not plenary. The assessing Officer must have 'reasons to believe' that income chargeable to tax has escaped assessment. This is mandatory a and nd the 'reason to believe' are required to be recorded in writing by the Assessing Officer.
(ii) A notice u/s 148 can be quashed if the 'belief' is not bona fide, or one based on vague, irrelevant and non non-specific specific information. The basis of the belief should shou be discernible from the material on record, which was available with the Assessing Officer when he recorded the reasons. There should be a link between the reasons and the evidence material available with the Assessing Officer.5 ITA No. 1602/Kol/2019
Assessment Years: 2011-12 M/s. Shreyans Jain, HUF
(iii) The reassessment p proceedings roceedings were initiated on the basis of information received from the Director of Income Income-tax tax (Investigation) that the petitioner had introduced money amounting to Rs.5 lakhs during F.Y.2002 F.Y.2002-03 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 ce 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 indicat indicate escapement of income.
(iv) 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, bad a paid up capital of Rs. 90 lakhs and was incorp 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 the quashed. 7.4. In the case of CIT vs Atul Jain reported in 299 ITR 383 it has been held as follows:
"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 A.O. did not verify the correctness of information received by him but merely accepted the truth of the vague information in a mechanical manner. The A.O. had not even recorded his satisfaction about the correctness or otherwise of the informat information ion for issuing a notice u/s 148. What had been recorded by the A.O. as his 'reasons to believe' was nothing 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 A.O. had clearly substituted form for substance and therefore the action of the A.O. was not sustainable"
Applying the proposition of law laid down in these cases to the facts of the case we hold that the reopening is bad in law as the reason reasonss recorded are without independent application of mind."
5.2. We also note that the coordinate bench of this Tribunal in ITA No. 660/Kol/2011 for AY 2002 2002-03 03 in the case of DCIT Vs. Great Wall Marketing (P) Ltd. vide order dated 03.02.2016 has held as unde under:
" 8. We have heard the submissions of the learned counsel for the assessee both on the validity of initiation of re re-assessment assessment proceedings as well as the merits of the appeal. None appeared on behalf of the department.
8.1.We have considered the subsubmissions missions of the learned counsel for the assessee. As far as the validity of initiation of re re-assessment assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows ::-
"No.DCIT/Cir-6/reasons 6/reasons for reopening/09 reopening/09-10 0 Dated 22/04/2009 To The Principal Officer Greatwall Marketing (P) Ltd.
c/o Sri. S.M. Daga 11, Clive Row, Room No. 2 .z .z-. Fir.
Kolkata- 700001.
Sir.
Sub: Recorded Reasons for Reopening in the case of Greatwall Marketing (P) Ltd. for Asst. Yr. 02 02-03 03 Ref: Your letter dated 02/04/09 Please refer to the above.
As per information received from investigation wing New Delhi the introduced share capital during the year. had been received from corporate bodies which a are 6 ITA No. 1602/Kol/2019 Assessment Years: 2011-12 M/s. Shreyans Jain, HUF non existent and whose capacity to invest ( credit worthiness ) could not be established . Therefore I have reasons to believe that unexplained cash credit had been introduced in your books of accounts in the name of introduction of share capital and receipt ceipt of share application money. In absence of satisfactory identity and credit worthiness of the other parties. the entire introduced capital and share application money will be treated as your income for that year.
I will therefore continue the procee proceedings dings for reassessment of your return u/s 147. Statutory notices u/s 143(2) and 142(1) are enclosed herewith.
Yours faithfully.
Sd/-
( Sanjay Mukherjee) DCIT /Cir /Cir-6/Kol "
8.2. The submissions of the learned counsel for the assessee before us was that the reasons recorded by the AO were mere information received from D.I.T.(Investigation), New Delhi. There was no independent application of mind by the AO based on which it can be said that he arrived at the satisfaction that the income of the assessee iiss chargeable to tax has escaped assessment. It was submitted that information received by the AO was vague and uncertain and cannot be construed to be sufficient and relevant material on the basis of which reasonable person can form belief regarding escape escapement ment of income. Reliance was placed by the learned counsel for the assessee on the decision of the Hon'ble Delhi High Court in the case of CIT vs Insceticides (India) Ltd 357 ITR 330 and CIT vs SFIL Stock Broking Ltd Ltd.. 325 ITR 285 (Delhi). In both the aforesaid decisions the reasons recorded by the AO for initiating proceedings u/s 148 of the Act the Hon'ble Delhi High Court upheld the order of the Tribunal quashing the proceedings. Reliance was also placed on the decision of ITAT, Kolkata 'C' Bench in the case of M/s. Controlla Electrotech (P)Ltd vs DCIT in ITA Nos.1443 & 1444/Kol/2014 wherein on identical facts the Tribunal was pleased to q quash uash the reassessment proceedings. On merits the learned counsel for the assessee relied on the order of CIT(A).
9. We have given a careful consideration of the submissions made by the learned counsel for the assessee. It is clear from the reasons record recorded ed by the AO that the AO acted only on the basis of a letter received from Investigation Wing, New Delhi. The reasons recorded does not give as to who has given the bogus entries to the assessee. The reasons recorded also does not mention as to on which da dates and through which mode the bogus entries were made by the assessee. The reasons recorded which are extracted in the earlier part of the order does not show, what was the information given by DIT(Inv.),New Delhi. The date of the information received by the AO were not spelt out in the reasons recorded. The involvement of the assessee is also not spelt out, except mentioning the corporate bodies who had subscribed to the share capital of the assessee were non non-existent existent and not creditworthy. On identical fa facts cts the Hon'ble Delhi High Court in the case of CIT vs Insecticides (India) Ltd (supra) has taken a view that the reasons recorded were vague and uncertain and cannot be construed as satisfaction on the basis of the relevant material on the basis of which a reasonable person can form a belief that income has escaped assessment. The Hon'ble Delhi High Court has also come to the conclusion that the reasons recorded did not disclose the AO's mind regarding escapement scapement of income. The Hon'ble Delhi High Court ultimately held that initiation of proceedings u/s 148 of the Act was not valid and justified in the eyes of law. The facts and circumstances in the present case are identical to the case decided by the Hon'ble 'ble Delhi High Court. Following the said decision we hold that initiation of rere- assessment proceedings is not valid. On this ground, the assessment is liable to be annulled."
6. Applying the propositions of law laid down in these case case-law law to the facts of this case we hold that the re re-opening opening is bad in law as the Assessing Officer has not independently applied his mind to the material and has recorded reasons which are 7 ITA No. 1602/Kol/2019 Assessment Years: 2011-12 M/s. Shreyans Jain, HUF vague and based on borrowed satisfaction. Hence this ground of the assessee for both the he Assessment Years are allowed."
5. Similar view has been taken by this Bench of the Tribunal in the case of Neeraj Umashankar Murarka in ITA No. 1653/Kol/2019, order dt. 15th January, 2020.
20206. Applying the propositions of law laid down in the above case-law to the facts of this case, I uphold the contention of the assessee that the reopening of assessment is bad in law. Hence, I quash the reopening of assessment and allow this appeal of the assessee.
7. In the result, appeal of the assessee is allowe allowed.
Kolkata, the 13th day of March, 2020.
Sd/-
[J. Sudhakar Reddy] Accountant Member Dated : 13.03.2020 {SC SPS} Copy of the order forwarded to:
1. M/s. Shreyans Jain, HUF 18, R.N. Mukherjee Road Dalhousie Square 6th Floor Kolkata - 700 001
2. Income Tax Officer, Wd-36(2), 36(2), Kolkata
3. CIT(A)-
4. CIT- ,
5. CIT(DR), Kolkata Benches, Kolkata.
True copy By order Assistant Registrar ITAT, Kolkata Benches