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आदेश/Order
This is an appeal by the assessee against the order dated 18.6.2018 of the Commissioner of Income Tax (Appeals), Patiala.
The only grievance of the assessee in this appeal relates to sustenance of addition of Rs. 2 lacs received from Shri Surat Singh S/o Shri Niranjan Singh made by the Assessing officer by treating it as an accommodation entry.
Facts of the case in brief are that the assessee filed his return of income on 14.7.2003 declaring an income of Rs. 1,26,310/- which was processed u/s 143(1) of the Income-tax Act, 1961 (in short 'the Act'). The Assessing officer received an information form DIT (Inv.), Delhi
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 2
that the assessee had received an entry of Rs. 2 lacs on 3.12.2010 from
M/s Kanodia Agency, but he had not disclosed the said amount in his
income tax return. He, therefore, reopened the assessment u/s 147 read
with section 148 of the Act. The Assessing officer observed that the
assessee had credited Rs. 2 lacs in his capital account. He asked the
assessee to intimate the nature of receipts and as to why the said
amount be not taken as his taxable income. In reply, the assessee
submitted that he had received Rs. 2 lacs from Shri Surat Singh S/o
Shri Niranjan Singh r/o WZ-1528, Rani Bagh, New Delhi through DD
No. 137408 on 3.12.2010. The assessee also furnished the copy of the
return of Shri Surat Singh, his PAN allotment letter, copy of
computation of wealth, copy of ration card and bank statement from
State Bank of Bikaner and Jaipur wherein Rs. 2,00,400/- had been
withdrawn by cheque on 3.12.2002. The Assessing officer, however, did
not find merit in the submissions of the assessee and made the addition
of Rs. 2 lacs.
Being aggrieved, the assessee carried the matter to the Ld. CIT(A)
and submitted as under:-
“It is a reply in addition to reply already filed on 29/08/2011. The assessee has applied on 15/12/2010 for the supply of copy of reasons for issue of a notice U/S 148. Thereafter reasons were supplied by the ITO and objections to the reasons were filed.
Within a period of 13 days, assessment order was passed by the ITO on 28/12/2010 without considering the objections to the reasons filed by the assessee. In the objections filed by the assessee it was dearly stated that the assessee has no relation whatsoever with the firm M/S Kanodia Agencies or Mr. Mahesh Garg (Managing Partner) of this firm on the statement of
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 3
which notice was issued U/S 148. What to talk of disposing of objections by passing a speaking order, a simple order has not been passed by the ITO to rebut the objections filed by the assessee. In the GKN Drive Shafts India Ltd. vs. ITO & others (2003) 179 CTR (SC) II, the Hon'ble Supreme Court has held that if the assessee desires and seeks for reasons for re-opening, the A.O is bound to furnish the reasons within a reasonable time and on receipt of the reasons, the assesses is entitled to file objections for issuance of notice and the A. O is bound to dispose of the same bypassing a speaking order.
The ITO has not applied her mind while issuing a notice U/S 148. While issuing a notice U/S 148, the ITO must have “reason to believe". Here the ITO solely based her believe on the information supplied by Directorate of Income Tax (Investigation Wing)without applying her mind. The hon'ble Supreme Court in the case of Assistant CIT vs. Dhariya Construction Company (2010) 236 CTR SC 226 has held that option given by the DVO is not per se information for the purpose of reopening assessment order U/S147. Solely relying upon and/or on the basis of the information in the form of DVO's report the AO is not justified in reopening the scrutiny assessment u/s 143(3). The same view was also taken recently by H.C. of Gujarat in the case of Akshar Infrastructure Pvt Ltd Vs ITO (2017) 299 CTR 507 and H.C. of Chattisgarh in the case of Smt. Kamla Ojha vs. ITO & others (2017) 299 CTR 507. From the facts stated above it is clear that the ITO has passed her order in haste and before the time was over to finalize the scrutiny.”
The Ld. CIT(A), however, did not find merit in the submissions of
the assessee and dismissed the appeal by observing as under:-
“The Ld. AR has cited the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts India Ltd vs. ITO; however, from the records and the Assessment Order it is clear that the copy of the reasons for reopening were provided to the Appellant and the appellant claim on this ground is unfounded. The other submission of the appellant is that the Ld AO has not applied her own mind and relied only on the report from the investigation wing; the Ld AR has
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 4
also cited Assistant CIT vs. Dhariya Construction Company (2010) 236 CTR SC 226andother decisions. I have carefully considered the appellant's submissions and the case laws cited, the findings of the LD AO and contextualized these to the facts of the case. I find no merit in the submissions of the Ld AR on this ground of appeal. The Ld AO in the recording the reasons has clearly brought on record the information that was received from the investigation wing regarding receipt of adjustment entries giving details of the modus-operandi of the entry operator, the details of statements recorded; their lack of net- worth/ means etc. Thereafter the Ld. AO further has brought on record how this information has led to the formation of the reason to believe that the Appellant while crediting the receipt to his Capital account has failed to offer the receipt as his income thereby establishing that income has escaped assessment. The belief is clearly of the Ld AO and is in line with whatever a prudent person would infer from the transaction. (Copy of Reasons for initiating proceedings u/s 148 are reproduced at annexure A). Therefore find no merit in the submission of the Ld AR with regards to the reopening u/s 148 r/w 147 of the Act. Appeal on this ground of appeal is dismissed.”
Now the assessee is in appeal. The Ld. Counsel for the assessee
drew my attention towards page No. 22 of the assessee’s paper book
which is copy of the reasons recorded by the Assessing officer for
reopening the assessment, which reads as under:-
“As per list supplied by the Directorate Shri Sukhvinder Kumar & Sons (Huf) i.e. the assessee had also received an entry of Rs. 2 lac from M/s Kanodia Agencies during the F.Y. 2002-03 relevant to assessment year 2003-04. Statement of Shri Mahesh Garg Managing Partner of M/s Kanodia Agencies was recorded by the Investigation wing. Sh. Mahesh Garg in his statement admitted that the draft given were accommodation entries only which were got issued after receiving cash from the beneficiaries.
The assessee received Rs. 2,00,000/- during the F.Y. 2002-03 relevant to assessment year 2003-04.
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 5
This amount has been credited to capital account on 3.12.2002 with the abreviation “DD No. 137408. However, this amount has not been offered for taxation by the assessee. Thus, it was the income of the assessee which was credited to the capital account through accommodation entry.”
The Ld. counsel for the assessee submitted that the reasons recorded
for reopening of the assessment by the Assessing officer were that the
assessee received an entry from M/s Kanodia Agency, however, the
assessee had not received any such entry rather the amount of Rs. 2
lacs was received from Shri Surat Singh and all the informations
relating to the receipt of the said amount was furnished before the
Assessing officer. Therefore, the addition made by the Assessing
officer and sustained by the Ld. CIT(A) was not justified and even the
reopening was not valid as the reasons recorded were not in existence
as the assessee had not received any loan or entry from M/s Kanodia
Agency. Reliance was placed on the judgement of the Hon'ble
Jurisdictional High Court in the case of CIT Vs. Atlas Cycles Industries, [1989] 180 ITR 319.
In her rival submissions, the Sr. DR supported the orders of the
authorities below.
I have considered the rival submissions of both the parties and
perused the material available on the record. In the present case, it is
an admitted fact that the Assessing officer reopened the assessment u/s
147 read with section 148 of the Act by recording the reasons that the
assessee had received a sum of Rs. 2 lacs from M/s Kanodia Agency
which is evident from the copy of the reasons recorded placed at page
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 6
No.22 of the assessee’s paper book. However, the said reasons were in
not in existence as the assessee had not received any loan or entry from
M/s Kanodia Agency rather the amount was received from Shri Surat
Singh and the assessee furnished all the relevant documents relating to
the receipt of loan of Rs. 2 lacs to prove the identity, creditworthiness
of Shri Surat Singh and genuineness of the transactions. On the similar
issue, the Hon'ble Jurisdictional High Court in the case of CIT Vs.
Atlas Cycles Ltd (supra) held as under:-
“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.”
In the present case also, the re-assessment notice was issued on
the ground which was not found to exist, therefore, the Assessing
officer did not get the jurisdiction to make the re-assessment.
Accordingly the same is quashed.
In the result, the appeal of the assessee is allowed.
(Order pronounced in the Open Court on 06/03/2019).
Sd/- (एन.के. सैनी/ N.K. SAINI) उपा�य� /VICE PRESIDENT
Dated : 06 .03.2019 “आर.के.” आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��यथ�/ The Respondent 3. आयकर आयु�त/ CIT 4. आयकर आयु�त (अपील)/ The CIT(A) 5. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड� फाईल/ Guard File
ITA No. 1205-Chd-2018- Sh. Sukhwinder Singh & Sons (HUF), Lehragaga, Sangrur 7
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar