LAKSHMI NARAYAN COAL AND MINES LIMITED,GUWAHATI vs. INCOME TAX OFFICER, WARD-1(3), GUWAHATI

आदेश /O R D E R PER BENCH:- This assessee’s appeal for assessment year 2010-11 arises against the Commissioner of Income Tax (Appeals)-1, Guwahati’s order dated 09.01.2019 passed in case No.374795171250118 involving proceedings u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case file perused.

ITA No.174/Gau/2019 A.Y. 2010-11 Laxmi Narayan Coal & Mines Ltd. Vs. ITO Wd-1(3)Gau Page 2 culminating the sec. 69A addition of ₹3,24,00,000/- as unaccounted money deceitfully shown as share capital which forms subject-matter of the latter substantive ground raised in the instant appeal. Learned counsel at the outset files before us copy of the Assessing Officer’s re-opening reasons recorded as under:- “Reasons for belief: M/s Laxmi Narayan Coal and Mines Ltd., PAN: AABCL5784C, had e-filed their return of income on 07-07-2011, vide e-filing acknowledgement no. 230168701070711 showing a total income of Rs.88,800/-. As per, departmental records available it is seen that the assessee company was inivovled as a beneficiary company for transfer of funds deposited in the bank accounts of the Paper/Jamakhachi Companies. As such one information was received for the F.Y 20009-10 in which it was revealed that the assessee company “M/s Laxmi Narayan Coal and Mines Ltd.” was credited by an amount of Rs.20,00,000/- from, an another beneficiary company which was a company of similar in nature i.e. a Paper/Jamakharchi. The amount such credited to the accounts of the assessee company was routed through various bank accounts of other Paper/Jamakharchi companies. In view of the above discussion, I am satisfied that the there is escapement of income to the tune of rs.20,00,000/- within the meaning of section 147(b) of the Income-tax Act, 1961 in the case of the above-mentioned assessee for the A.Y 2010-11. A proposal is submitted to the Pr. Commissioner of Income Tax, Guwahati-I, Guwahati for his kind approval to issue notice u/s 148 for the A.Y 2010-11. Sd/- Sd/- Illegible D.K.Baruah ITO Wd-1(3), Ghy ITO, Ward-1(3), Guwahati The assessee’s case in that light of above extracted re-opening reasons is that the Assessing Officer has nowhere applied his mind so as to independently observe that the its income involving participation of paper / jamakharchi companies has escaped assessment. The Revenue’s case on the other hand is that the Assessing Officer had rightly set into motion the sec. 148/147 proceedings as per the department’s records and therefore, the same are liable to be upheld.

ITA No.174/Gau/2019 A.Y. 2010-11 Laxmi Narayan Coal & Mines Ltd. Vs. ITO Wd-1(3)Gau Page 3 (2004) 268 ITR 339 (Bom) that re-opening reasons have to be read on standard basis and no improvement can be made later. We go by the very analogy herein as well and notice that the Assessing Officer’s above extracted re-opening reasons recorded nowhere indicate as to in what manner the taxpayer’s income liable to be assessed had escaped assessment. This tribunal’s decision in ITA 660/Kol/2011 DCIT vs. Great Wall marketing (P) Ltd. decided on 03.02.2016 quashed a similar re-opening vide its following detailed discussion:- “8. We have heard the submissions of the learned counsel for the assessee both on the validity of initiation of re-assessment proceedings as well as the merits of the appeal. None appeared on behalf of the department. 8.1.We have considered the submissions of the learned counsel for the assessee. As far as the validity of initiation of re-assessment proceedings are concerned the reasons recorded by the AO for initiating proceedings u/s 148 are as follows :- “No.DCIT/Cir-6/reasons for reopening/09-10 Dated 22/04/2009 To The Principal Officer Greatwall Marketing (P) Ltd. clo Sri. S.M. Daga 11, Clive Row, Room No. 2 .z-. Fir. Kolkata- 700001. Sir. Sub: Recorded Reasons for Reopening in the case of Greatwall Marketing (P) Ltd. for Asst. Yr. 02-03 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 are 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 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 proceedings 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-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 is chargeable to tax has escaped assessment. It was submitted that ITA No.660/Kol/2011 Great Wall Marketing (P)Ltd. A.Yr.2002-03 10 information received by the AO was vague and

ITA No.174/Gau/2019 A.Y. 2010-11 Laxmi Narayan Coal & Mines Ltd. Vs. ITO Wd-1(3)Gau Page 4 uncertain and cannot be construed to be sufficient and relevant material on the basis of which reasonable person can form belief regarding escapement 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. 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 quash 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 recorded 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 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-existent and not creditworthy. On identical facts 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 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 Delhi High Court. Following the said decision we hold that initiation of re-assessment proceedings is not valid. On this ground, the assessment is liable to be annulled. 4. We adopt the above detailed reasoning mutatis mutandis to observe that the Assessing Officer’s above recorded reasons of re-opening are very well short of his due application of mind regarding the assessee’s taxable income having escaped assessment. There is not even an iota of material against the assessee to have derived any income with the help of jamakharchi companies which have nowhere referred in the above reasons. We

ITA No.174/Gau/2019 A.Y. 2010-11 Laxmi Narayan Coal & Mines Ltd. Vs. ITO Wd-1(3)Gau Page 5 accordingly conclude that the sec. 148 proceedings initiated in facts of the instant case are not sustainable. The same stand quashed. The assessee’s latter substantive grounds on merits (supra) is rendered infructuous.