Income Tax Appellate Tribunal - Gauhati
Assistant Commissioner Of Income Tax, ... vs M/S. Sbm Motors (P) Limited, Guwahati on 23 April, 2024
| आयकर अपीलीय अिधकरण यायपीठ, गुवाहाटी|
IN THE INCOME TAX APPELLATE TRIBUNAL
"GUWAHATI" BENCH, GUWAHATI
(Heard from Kolkata Benches through web-based video conferencing platform)
BEFORE DR. MANISH BORAD, HON'BLE ACCOUNTANT MEMBER
&
SHRI SONJOY SARMA, HON'BLE JUDICIAL MEMBER
I.T.A. No. 10/GTY/2021
Assessment Year: 2012-13
Assistant Commissioner of Income M/s. SBM Motors (P) Limited
Tax, Circle-2, Guwahati Vs Village Sarusujai
Near Cigarette Co., Lalmati
Guwahati - 781029
[PAN: AANCS7823D]
अपीलाथ / (Appellant) यथ / (Respondent)
Assessee by : Shri Kishor Jain, FCA
Revenue by : Shri Arun Bhowmick, JCIT
सुनवाई क तारीख/ Date of Hearing : 20/03/2024
घोषणा क तारीख / Date of Pronouncement: 23/04/2024
आदेश/O R D E R
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The present appeal filed by the revenue is directed against the order of the Learned Commissioner of Income Tax (Appeals), Guwahati -1, (hereinafter the "ld. CIT(A)") dt. 22/09/2020, passed u/s 250 of the Income Tax Act, 1961 ("the Act'), for Assessment Year 2012-
13.
2. The revenue has taken the following grounds of appeal:-
"1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in allowing appeal of the assessee without appreciating the facts of the case.
2. On facts and circumstances of the case, the ld. CIT(A) erred in facts as well as in law in deleting the addition of Rs.2,00,00,000/- being the undisclosed income admitted by the assessee during the course of search holding that the reasons to believe recorded are mechanical based only on information received from the investigation wing and hence fall in the realm of borrowed satisfaction ignoring the facts that Investigation Wing is also an arm of the department for conducting enquiries.
I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 2
3. On facts and circumstances of the case, the Ld. CIT(A) erred in facts as well as in law holding that there was non-application of mind by the AO in forming the reason to believe and therefor subsequent issuing of notice under section 148 is bad in law.
4. The Appellant craves the leave to add/modify/alter any or all of the ground during the course of hearing/pendency of appeal."
3. Facts in brief are that the assessee is a private limited company engaged in the motor business. The assessee is connected with Mittal Group of cases which were subjected to search action u/s. 132 of the Act on 01/08/2016. During the post search period, the ld. Assessing Officer came across an information about the shell companies operated by entry operator Mr. Praveen Agarwal and while going through those information, it was noticed that the assessee has been a beneficiary of the accommodation entry through M/s. Kalyani Vincom Pvt. Ltd. and M/s. May Fair Barter Pvt. Ltd.. Subsequently, after recording the reasons, notice u/s 148 of the Act issued and the case of the assessee was reopened to be assessed u/s 147/143(3) of the Act. During the course of re-assessment proceedings, the ld. Assessing Officer noticed that during the year assessee has received accommodation entry of Rs.8.12 Crores from various companies alleged to be jamakharchi and shell companies. Thereafter the ld. Assessing Officer considering the submission of the assessee completed the assessment proceedings making the addition u/s 68 of the Act at Rs.8.12 Crores and assessed income at Rs. 8,16,58,375/-. Aggrieved the assessee preferred appeal before the ld. CIT(A) and apart from raising grounds on the merits of the case raised legal ground challenging the validity of reopening of assessment. It was I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 3 claimed by the assessee that ld. Assessing Officer has acted on a borrowed satisfaction and there is no independent application of mind. The assessee also submitted that case of the assessee has already been assessed u/s 143(3) of the Act and all the issues which have been raised in the reopening proceedings has already been examined during the assessment proceedings completed on 19/03/2015. It was thus claimed that there was now information available with the ld. Assessing Officer, the reopening is invalid and the proceedings deserves to be quashed. The ld. CIT(A) found merit in the contentions of the ld. Counsel for the assessee and after referring to plethora of decisions including that of the Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd. 256 ITR 1 (Del.)., the Hon'ble Gujarat High Court in the case of Fluorochemicals Ltd. vs DCIT reported as (2009) 319 ITR 282 (Guj.) and Hon'ble Supreme Court in the case of ACIT vs. Dhariya Construction Co. (2010) 328 ITR 515(SC), held in favour of the assessee quashing the assessment proceedings holding that the reopening proceedings are invalid and bad in law.
4. Aggrieved, the revenue is now in appeal before this Tribunal.
5. We have heard rival contentions and perused the material placed before us and carefully gone through the judgments referred and relied by both the sides. One of the legal grounds raised by the revenue is that the ld. CIT(A) erred in facts as well as in law holding that there was non-application of mind by the Assessing Officer in forming the reason to believe and, therefore, subsequent issuing of notice u/s 148 of the Act and the re-assessment proceedings are bad in law. We notice that subsequent to search carried out at Mittal Group of I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 4 cases on 01/08/2016 which included the assessee also, the case of the assessee for Assessment Year 2012-13 already stood scrutinised and assessed u/s 143(3) of the Act. Prima facie it seems that no additions has been made in the order framed u/s 153A/143(3) of the Act and even no information is available on record about the said assessment but being part of the block assessment, the assessment would have been framed. However, since the year under appeal falls under completed and unabated Assessment Year, the ld. Assessing Officer might not have made any addition but he certainly had a window available for reopening the assessment u/s 147 of the Act which the ld. Assessing Officer invoked after recording the reasons referring to certain information about entry operator managing many companies engaged in providing accommodation entries.
5.1. Based on such reasons, reopening has been carried out and additions have been made alleging unexplained cash credits during the year. Admittedly, the impugned addition is regarding cash credits received during the year and the same were duly appearing in the audited balance sheet which were part of the income tax scrutiny carried out u/s 143(3) of the Act and completed on 19/03/2015, accepting the returned income of the assessee. Thus, all the details relating to share capital received during the year and any other cash credits for the year, has been examined in the regular assessment proceedings. Further during the course of search had there been any other incriminating material, the same would have been referred to by the Assessing Officer for making the addition in the assessment u/s I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 5 153A r.w.s. 143(3) of the Act. But no such information was available with the Assessing Officer.
5.2. Now, the impugned addition has been made purely on the basis of information received from third party and the ld. Assessing Officer had not corroborated this information with the records available with him and has mechanically issued a notice u/s 148 of the Act and are re-assessed the assessment year in question. We find that the ld. CIT(A) has taken note of these facts and after referring to the plethora of decisions has come to the conclusion that the ld. Assessing Officer had no reasons to believe before recording reasons and even had not carried out any independent enquiry before carrying out the assessment proceedings. Findings of the ld. CIT(A) along with the various decisions (of which few are extracted) is reproduced below:-
"From a bare perusal of the above reasons, the following questions arise:
1. The AO had referred to certain finding / confessional statements made by One Sh.
Parveen Kumar Agarwal of Kolkatta during the course of search (DOS : 13/09/2012) conducted in his case by the investigation wing in Kolkatta. It is beyond comprehension and preposterous as to why, when the search was already conducted in 2012 on Sh. Parveen Kumar Agarwal, no adverse inference was drawn by the AO assessing the income of the Appellant originally in 2015.
2. The AO had referred to certain finding / confessional statements made by One Sh. Parveen Kumar Agarwal of Kolkatta during the course of search (DOS : 13/09/2012) conducted in his case by the investigation wing in Kolkatta. It is beyond comprehension and preposterous as to why, when the search was already conducted in 2012 on Sh. Parveen Kumar Agarwal, no recourse to reassessment proceedings was taken all along the years (i.e. from 2013 till 2018)? The AO had referred to certain finding / confessional statements made by One Sh. Basant Kumar Mittal of Guwahati during the course of search (DOS : 01/082016) conducted in his case by the investigation wing in Guwahati wherein. Sh. Mittal had purportedly accepted that he had routed his money to acquire ownership of the Appellant. It is beyond comprehension and preposterous as to why, when the search was already conducted in 2016 on Sh. Basant Kumar Mittal, no adverse inference was drawn by the officers of the investigation wing (i.e. the ones who had prepared the Appraisal report) or even by the AO of Sh. Basant Kumar Mittal or even by the AO during the period beginning on or after 01/08/2016 and prior to recording of reasons to believe?
The above questions are some of the pertinent questions, which the undersigned is unable to gauge. Nonetheless, from a perusal of the "reasons to believe", recorded by the AO (and as reproduced earlier), for issuance of notice under Section 148 of the Act, it is noted that I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 6 the AO has completely relied on the sanctity of the investigation done by the Investigation Wing and on the information supplied by the Investigation Wing. The AO has, at any point of time, not even referred to original assessment proceedings completed in the case of the Appellant under section 143(3) of the Act in which this very issue of Share Capital was examined by the then AO. There is nothing on material to suggest that some independent home-work was done on the part of the AO or any limited enquiry was conducted by the AO or any application of mind was made by the AO to come to the conclusion that income had indeed escaped assessment in the case of the Appellant. Thus, without any independent enquiries of her own, solely relying on the aforesaid information supplied by the Investigation Wing, the AO concluded that income had escaped assessment in the case of the Appellant.
Thus, the satisfaction arrived at by the AO that income had escaped assessment in the case of the Appellant was not that of the AO but was completely that of the Investigation Wing that income had escaped assessment in the case of the Appellant. In other words, the satisfaction arrived at by the AO that income had escaped assessment in the case of the Appellant was borrowed from the Investigation Wing. Any notice issued under Section 148 of the Act on the basis of borrowed satisfaction is bad in law and, consequentially, the ensuing proceedings are bad in law.
In support of my conclusion, I derive strength from the judicial pronouncements cited below.
In the case of Calcutta Discount Co. Ltd. [(1961) 41ITR 191 (SC)], the Hon'ble Supreme Courtanalysed the phrase "reason to believe" and observed as under:
"It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else to tell the assessing authority what inferences, whether of facts or law, should be drawn."
In the case of CIT vs. Greenworld Corporation [(2009) 314 ITR 81 (SC)], it was held by the Hon'ble Supreme Court that the assessment order passed on the diktats of the higher authority, being wholly without jurisdiction, was a nullity.
In the case of Assistant Commissioner of Income-tax vs. Dhariya Construction Co. [2010 (2) TMI 612 - SUPREME COURT OF INDIA; Other Citation: [2010] 328 ITR 515], it was held, as follows, by the Hon'ble Supreme Court:
"1. Having examined the record, we find that in this case, the Department sought reopening of the assessment based on the opinion given by the District Valuation Officer (DVO). The opinion of the DVO per se is not an information for the purposes of reopening assessment under section 147 of the Income-tax Act, 1961. The Assessing Officer has to apply his mind to the information, if any, collected and must form a belief thereon. In the circumstances, there is no merit in the civil appeal. The Department was not entitled to reopen the assessment.
2. Civil appeal is, accordingly, dismissed. No order as to costs."
In the case of CIT vs. G & G Pharma India Limited [ITA 545/2015 dated 08.10.2015], the Hon'ble Delhi High Court, held as hereunder:
"The Assessee's further appeal was allowed by the ITAT by the Impugned order dated 9th January 2015. The ITAT set out in the impugned order the reasons recorded by the AO for the reopening of the assessment by the AO by the letter dated 15th September 2010, and I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 7 came to the conclusion that, apart from making a mere reference to information received from the investigation wing, the AO mechanically issued notice under Section 148 of the Act, without coming to an independent conclusion that he has reason to believe that the income has escaped assessment during the AY in question."
In the case of Commissioner of Income Tax vs. Kelvinator India Limited [2002 (4) TMI 37
- Delhi High Court; Other Citation: [2002] 256 ITR 1, 174 CTR 617, 123 TAXMANN 433], the Hon'ble Delhi High Court, held as hereunder:
"What would constitute "reason to believe" is no longer res Integra.
In Calcutta Discount Co. Ltd.'s case [1961] 41 ITR 191, the apex court clearly held that once the primary facts are before the assessing authority he requires no further assistance by way of disclosure. It was observed by the apex court that:
"It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what infer ences-whether of facts or law-he would draw from the primary facts."
In the case of Piramal Enterprises Ltd. vs. DCIT [Writ Petition N0.2958 of 2016 dated 15.02.2017], the Hon'ble Bombay High Court held as under:
"Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessment. In the present case the Assessing Officer prima facie has not done the bare necessary/rudimentary enquiry into the material received before he concludes that income chargeable to tax has escaped assessment."
In the case of Sarthak Securities Co. Pvt. Ltd. vs. Income-tax Officer [2010 (10) TMI 92 - Delhi High Court; Other Citation: [2010] 329 ITR 110, [2010] 236 CTR 362], it was held, as follows, by the Hon'bie Delhi High Court:
"19. In this context, we may refer with profit to a Division Bench decision of this Court in ITA No.1056/2009 (The Commissioner of Income Tax III v. SFIL Stock Broking Ltd.) decided on 27th April, 2010 wherein the Bench was dealing with the validity of the proceedings under Section 147 of the Act. The Bench reproduced the initial issuance of notice and thereafter referred to the reasons for issue of notice under Section 148 which was provided to the assessee. Thereafter, the Bench referred to the decisions in CIT v. Atul Jain, 299 ITR 383 (Del), Rajesh Jhaveri Stock Brokers Pvt. Ltd (supra), Jay Bharat Maruti Ltd. v. CIT, 223 CTR 269 (Del) and CIT v. Batra Bhatta Company, 174 Taxman 444 (Del) and eventually held thus: -
"9. In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice under Section 148 and the third sentence again comprises of a direction given by the Additional Commissioner of Income Tax to I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 8 initiate proceedings under Section 148 in respect of cases pertaining to the relevant ward. These three sentence are followed by the following sentence, which is the concluding portion of the so-called reasons:
"Thus, I have sufficient information in my possession to issue notice u/s 148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above."
10. From the above, it is clear that 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. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so- called reasons, it is 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. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration." [Emphasis is ours].
In the case of Signature Hotels (P) Ltd. vs. Income Tax Officer and Anr. [2011 (7) TMI 361 - Delhi High Court], it was held, as follows, by the Hon'ble Delhi High Court:
"17. In these circumstances, we feel the judgments of the Delhi High Court in Commissioner of Income Tax versus SFIL Stock Broking Limited, [2010] 325 ITR 285 (Delhi) and Sarthak Securities Company Private Limited versus Income Tax Officer, 2010 (329) ITR 110 (Delhi), in which CIT versus Lovely Exports (P) Limited, (2009) 216 CTR 195 (SC) has been applied and followed, are applicable. We may notice here that the respondent in their counter affidavit have stated that Swetu Stone Pvt. Ltd. is unidentifiable and, therefore, the aforesaid decisions should not be applied and the ratio of the decision dated 7th January, 2011 in Writ Petition (Civil) No. 7517/2010, AGR Investment Limited versus Additional Commissioner of Income Tax and Another should be applied. In the said decision, decisions in the case of Sarthak Securities Company Private Limited (supra) and SFIL Stock Broking Limited (supra) was distinguished by giving the following reasons:
"22 In SFIL Stock Broking Ltd. (supra), the bench has interfered as it was not discernible whether the assessing officer had applied his mind to the information and independently arrived at a belief on the basis of material which he had before him that the income had escaped assessment. In our considered opinion, the decision rendered therein is not applicable to the factual matrix in the case at hand. In the case of Sarthak Securities Co. Pvt. Ltd. (supra), the Division Bench had noted that certain companies were used as conduits but the Assessee had, at the stage of original assessment, furnished the names of the companies with which it had entered into transaction and the assessing officer was made aware of the situation and further the reason recorded does not indicate application of mind. That apart, the existence of the companies was not disputed and the companies had bank accounts and payments were made to the Assessee company through the banking channel. Regard being had to the aforesaid fact situation, this Court had interfered. Thus, the said decision is also distinguishable on the factual score."
In the case of Commissioner of Income Tax vs. SFIL Stock Broking Ltd. [2010 (4) TMI 102
- Delhi High Court], it was held, as follows, by the Hon'ble Delhi High Court:
I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 9 "9. In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (investigation) to issue a notice under Section 148 and the third sentence again comprises of 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.
These three sentences are followed by the following sentence, which is the concluding portion of the so-called reasons:-
"Thus, I have sufficient information in my possession to issue notice u/s 148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above."
10. From the above, it is clear that 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. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so- called reasons, it is 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. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration. The appeal is dismissed."
The first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice under Section 148 and the third sentence again comprises of 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. These three sentence are followed by the following sentence, which is the concluding portion of the so-called reasons:-
"Thus, I have sufficient information in my possession to issue notice u/s 148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above."
10. From the above, it is clear that 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. We are afraid that these cannot be the reasons for proceeding under Section 147/148, of the said Act. The first part is only an information and the second find the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so- called reasons, it is 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. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration."
11. In view of the above discussion, facts of the case in hand, vis a vis the judicial decisions mentioned hereinabove, I have no hesitation in holding that reopening of the assessment is without any application of mind and examination of the facts. According, reopening is held to be invalid and the same is quashed. Ground No. 1 is accordingly allowed.
I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 10
12. Since the reopening has been held to be invalid, I do not find it necessary to dwell into the merits of the case."
In case of Commissioner of Income-tax II vs. Kamdhenu Steel & Alloys Ltd. [2011 (12) TMI 394 - Delhi High Court;Other Citation: [2014] 361 ITR 220], it was held, as follows, by the Hon'ble Delhi High Court:
"43. Furthermore, after extracting the aforesaid particulars, the AO recorded following reasons:
"3. In view of the above information, it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries. Therefore, I have reasons to believe that the income amounting to Rs. 43,65,776/- has escaped assessment, which is required to be assessed to tax under the provision of Section 147 of the I.T. Act, 1961."
44. It is clear from the above that the AO acted mechanically on the Information supplied by the Directorate of Income Tax (Investigation) without applying his own mind. He did not even care to see the apparent mistake in the particulars where three entries were repeated twice each. Almost on identical facts, a Division Bench of this Court set aside such a notice under Section 147/148 of the Act in the case Sarthak Securities Co. (P.) Ltd. v. ITO[2010] 329 ITR 110/195 Taxman 262 (Delhi). After taking note of various judgments delineating the scope of Section 148 of the Act as well as law regarding undisclosed income under Section 68 of the Act, the Court held that:
"The obtaining factual matrix has to be tested on the anvil of the aforesaid pronouncement of law. In the case at hand, as is evincible, the assessing officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly expose that the assessing officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial .notice; nor the communication providing reasons remotely indicate Independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of belief must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports (P) Ltd. (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted."
45. Similar view is taken by another Division Bench of this Court In CIT v. SFIL Stock Broking Ltd.[2010] 325 ITR 285. In that case also, the AO had recorded the reasons to believe in similar manner, viz., more information received from the Deputy Director of Income Tax (Investigation) and the Court took the view that these were no reasons within the meaning of Section 148 of the Act. Following discussion in this behalf needs to be noted:
I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 11 "9. In the present case, we find that the first sentence of the so-called reasons recorded by the Assessing Officer is mere information received from the Deputy Director of Income Tax (Investigation). The second sentence is a direction given by the very same Deputy Director of Income Tax (Investigation) to issue a notice under Section 148 and the third sentence again comprises of 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.
These three sentence are followed by the following sentence, which is the concluding portion of the so-called reasons: -
"Thus, I have sufficient information in my possession to issue notice u/s 148 in the case of M/s SFIL Stock Broking Ltd. on the basis of reasons recorded as above."
10. From the above, it is clear that 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. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning, paragraph of the so-called reasons are mere -; directions. From the so-called reasons, it is 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. Consequently, we find that the Tribunal has arrived at the correct conclusion on facts. The law is well settled. There is no substantial question of law which arises for our consideration.
The appeal is dismissed."
46. In view of that, we need not go into the merits of the addition made by the AO. As pointed out above, the CIT(A) had deleted the addition on merits and the Tribunal has simply remitted the case back to the AO.
47. There is another recent judgment dated 21.7.2011 of this Court in Signature Hotels (P) Ltd. v. ITO [W.P.(C) No. 8067 of 2010 on dated 21-7-2011]. That was also a case where the notice was issued on the basis of information received from Directorate, Income Tax (Investigation). The Court first set out the approach that is to be adopted in such cases, by mentioning as under in para 12:
"12. In these circumstances, we are examining the reasons given by the Assessing Officer in the proforma seeking permission/approval of the Commissioner and whether the same satisfy the pre-conditions mentioned in Section 147 of the Act."
48. On examination, the Court set aside the notice under Section 148 of the Act and in the process, discussion therein is as under:
"14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary.
15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act The reasons and the information referred to is extremely scanty and vague. There is no I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 12 reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of incomes Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment."
Similar views have been expressed in the following judicial pronouncements wherein it has been held that reopening u/s 148 based on information from Investigation Wing, in the absence of application of mind by the AO, is bad in law:
a. CIT vs. Kamdhenu Steels & Alloys Ltd. &Ors. [(2012) 248 CTR ( Del ) 33, (DHC)] b. CIT vs. Insecticides [(India) Ltd. (2013) 357 ITR 330 (Del.)] c. ITO vs. On Exim Pvt. Ltd. [(2013) 157 TTJ 633 (ITAT, Delhi)] d. ACIT vs. Shri Devesh Kumar [(ITA NO. 2068/Del/2010) dated 31.10.2014.
(ITAT Delhi)] e. Narmadha Chemicals (P.) Ltd. vs. ACIT [(2013) 357 ITR 45 (Mad)] f. CIT vs. Gangeshwari Metal P. Ltd. [(2014) 361 ITR 10 (Del)] g. CIT vs. Multiplex Trading & Industrial Co. Ltd. [(2015) 128 DTR 217 (Delhi - HQ] In view of the above discussion, I hold that the conditions precedent for invoking the provisions of Section 147 of the Income Tax Act, 1961 were totally absent in this case. Hence, the impugned order passed by the assessing officer under Section 147/143(3) of the Income tax act, 1961 is wholly without jurisdiction and therefore not valid and is hereby quashed. In view of the above, the above ground of appeal is, accordingly, allowed."
6. Respectfully following the ratio laid down by various Hon'ble Courts referred in the findings of the ld. CIT(A), we find that the basic conditions of reopening which are missing in the instant case are that there was no material or reason to believe, no circumstances existed for arriving at an opinion, reason to believe are based on suspicion, gossip, rumors and conjectures and the reasons recorded do not disclose the process of reasoning by which the Assessing Officer can hold that there was reason to believe and further since the assessment proceedings had already been completed u/s 143(3) of the Act, and the issues referred to in the reasons recorded for reopening have already I.T.A. No. 10/GTY/2021 Assessment Year: 2012-13 M/s. SBM Motors (P) Limited 13 been examined during the regular scrutiny proceedings u/s 143(3) of the Act and no new material is available except third party information, the reopening in the instant case can be merely termed as a change of opinion which certainly cannot confer jurisdiction to the Assessing Officer for reopening and lastly there was no material available on record with the Assessing Officer which can draw a nexus with the impugned addition. Therefore, since there is no proper reason to believe no independent application of mind, no independent enquiry been conducted and considering the fact that the issue already stands examined in the first round of assessment proceedings impugned issuance of notice u/s 148 of the Act and, reopening of the assessment for the instant year under appeal is held to be invalid, bad in law and void ab initio. Thus, no infirmity is called for in the finding of the ld. CIT(A). Ground Nos. 2 & 3 raised by the revenue is dismissed. Other grounds raised are general in nature.
7. In the result, appeal of the revenue is dismissed.
Order pronounced in the Court on 23rdApril, 2024.
Sd/- Sd/-
(SONJOY SARMA) (DR. MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Kolkata, Dated 23/04/2024
*SC SrPs
I.T.A. No. 10/GTY/2021
Assessment Year: 2012-13
M/s. SBM Motors (P) Limited
14
आदेश क ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. संबंिधत आयकर आयु / Concerned Pr. CIT
4. आयकर आयु (अपील)/ The CIT(A)-
5. िवभागीय ितिनिध ,आयकर अपीलीय अिधकरण, गुवाहाटी /DR,ITAT, Guwahati,
6. गाड फाईल /Guard file.
आदेशानुसार/ BY ORDER, TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Guwahati