M/S KAPOOR RICE & GENERAL MILLS,NARWANA vs. ITO, W-2, JIND

The present appeal has been preferred by the assessee against the order dated 30.4.2019 of the Commissioner of Income Tax (Appeals), Hisar [hereinafter referred to as ‘CIT(A)’].

The assessee in this appeal has taken following grounds of appeal:-

The brief facts relating to the issue are that the Assessing Officer got information from the Investigation Wing based on the statement of -Chd-2019 M/s Kapoor Rice & General Mills, Nirwana 3 one Shri Vipin Garg based at Erode (Tamilnadu), wherein, he had stated that he had used his bank accounts for providing accommodation entries. Since an amount of Rs. 5,75,000/- was found deposited in the accounts of the assessee through the concern of Shri Vipin Garg, hence, the said information was passed on by the Investigation Wing to the Assessing Officer. The Assessing Officer forming his belief on the said information reopened the assessment of the assessee for the year under consideration. A copy of the reasons recorded for reopening of the assessment has been placed on page 2 of the paper book, contents of which for the sake of ready reference are reproduced as under:-

The Ld. Counsel for the assessee, at the outset, has submitted that the Assessing Officer did not apply his mind to the information received from Investigation Wing. He did not make any independent enquiry to satisfy himself that income of the assessee had escaped assessment. That the Assessing Officer merely on the basis of information received from the Investigation Wing regarding the receipt of an amount of Rs. 5,75,000/- formed the opinion that the said amount was the own money of the assessee routed through Shri Vipin Garg. He did not choose to verify the Income Tax Return and other documents -Chd-2019 M/s Kapoor Rice & General Mills, Nirwana 5 and accounts of the assessee to form an independent view that the said amount was an accommodation entry and that the income of the assessee to that extent has escaped assessment. The Ld. counsel, at this stage, has invited our attention to the Income Tax Return filed by the assessee for the assessment year under consideration u/s 139 of the Act dated 24.9.2011, wherein, the assessee has declared a total income of Rs. 4,07,796/-. The Ld. Counsel for the assessee has submitted that the aforesaid amount was received from concern M/s Radha Krishna Traders, Erode (Tamilnadu) on account of sale price and that the goods were supplied to the said concern in their office at Haryana. The Assessing Officer had not doubted the corresponding purchase of the goods which were sold to the said concern. Inviting our attention to the reasons recoded, the Ld. counsel pointed out that the Assessing Officer in the reasons recorded has mentioned that the assessee had not filed his return of income for the assessment year under consideration, whereas, the assessee had filed the return u/s 139 of the Act dated 24.9.2011. The Ld. Counsel has further submitted that the Assessing Officer has failed to apply his mind to the facts of the case after receipt of the information from the Investigation Wing. He, formed his belief of escapement of income merely on the basis of the suspicion, whereas, the assessee had duly filed his return of income and had also taken into account the said amount received from M/s Radha Krishna Traders and corresponding sales made. That the accounts of the assessee were duly -Chd-2019 M/s Kapoor Rice & General Mills, Nirwana 6 audited and there were no allegation of any bogus purchases made by the assessee in respect of which the sales in question were made.

The Ld. DR, on the other hand, has submitted that since the Assessing Officer had received information from the Investigation Wing that the assessee had received accommodation entries from one Shri Vipin Garg and even the said Vipin Garg had made a statement in relation to the assessment of his income that he was involved in accommodation entries, hence, the Assessing Officer has rightly formed the belief that the income of the assessee has escaped assessment.

I have considered the rival submission of the Ld. Representatives of the parties. No doubt, the Assessing Officer had received information from the Investigation Wing about certain entries made / provided by one Shri Vipin Garg, at Tamilnadu, as per the information, the assessee had received an amount of Rs. 5,75,000/- from the concern belonging to said Vipin Garg. However, in my view, the said information, though relevant, but was needed to be examined and verified with the accounts as well as the Income-tax return filed by the assessee. However, the Assessing Officer wrongly recorded that assessee had not filed any return of income. This fact recorded by the Assessing Officer itself shows that the Assessing Officer has not consulted the relevant record pertaining to the Income-tax return of the assessee and without consulting the relevant record, the Assessing Officer formed the belief on the basis of the information received from -Chd-2019 M/s Kapoor Rice & General Mills, Nirwana 7 the Investigation Wing. The said information, in my view, should have been verified after correlating with the records of the assessee and thereafter the Assessing Officer could have formed the belief that the said amount shown to have been received by the assessee from a concern of Shri Vipin Garg was, in fact, an accommodation entry or not. Under the circumstances, it is apparent that the Assessing Officer had failed to properly apply his mind and the belief formed by the Assessing Officer regarding escapement of income of the assessee was based on mere suspicions only. Therefore, the reopening of the assessment without a reasonable belief formed by the Assessing Officer by applying his mind, cannot be held valid. Therefore, assessment framed u/s 147 of the Act, being bad in law, is hereby quashed.