DY.C.I.T., CENTRAL CIRCLE, AGRA vs. M/S VACMET PACKAGINGS (INDIA) PVT. LTD., AGRA

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH: AGRA

BEFORE SHRI A. D. JAIN, JUDICIAL MEMBER AND DR. MITHA LAL MEENA, ACCOUNTANT MEMBER

I.T.A No. 45/Agra/2015 (ASSESSMENT YEAR.-2005-06)

DCIT, Central Circle, Vs..M/s Vacmet Packagings (India) (P) Ltd., Agra. 4/117-B, Civil Lines, Church Road, Agra. PANNo.AAACV5120B (Revenue) (Assessee)

Revenue by Shri Inderjeet Singh, CIT.DR. Assessee by Shri Pankaj Gargh, AR.

Date of Hearing 24.05.2018 Date of Pronouncement 14.06.2018

ORDER PER, A. D. JAIN, JUDICIAL MEMBER:

This is Department’s appeal for Assessment Year 2005-06, taking the following grounds: “1. That Ld CIT (A) has erred in law and on facts by holding that the recording of reasons in this case is based on scanty and vague information and hence does not satisfy the requirements of section 147 without appreciating the fact that the Assessing officer, recorded the reasons on the basis of intimation received from DIT (Inv.-II) A.R.A.

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Jhandelwalan Extension, New Delhi through letter F.No. DIT (Inv.) -II/u/s 148/2011-12/7634 dated 23/03/2012. Copy of reasons enclosed as annexure. 2. That Ld. CIT (A) has erred in law and on facts that there was no information available with the AO despite having taken note of and recorded the information on page 7 of the impugned order. 3. That Ld. CIT (A) has erred in law and on facts in dealing with the information and giving a finding about the sufficiency of the information for the purpose of framing his belief even though the information was sufficient, specific and adequate. 4. That Ld. CIT (A) has erred in law and on facts in giving a finding that information was scanty and vague despite having recorded the letter of Addl. DIT (Inv.), Unit VI New Delhi on record as evident from para 5, 10 at page no. 52 of the Appeal order. 5. That Ld. CIT (A) has erred in law and on facts in holding that reopening u/s 147 in the present case under appeal is not valid without appreciating the fact that the AO had reason to believe that there is failure on part of the assessee to disclose fully and truly all the material facts necessary for the assessments with respect to the share holder and AO after obtaining prior approval of the CIT, Central, Kanpur for issuance of notice u/s 148, reopened the case.

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Ganpati Fincap Services (P) Ltd., Moderate Credit Corporation (P) Ltd., M/s KMC Portfolio (P) Ltd. in which Shri Aseem Gupta was one of the Directors. The accommodation entries were provided in the form of bogus expensed/share application money/unsecured loan. 10. That Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 5,50,00,000/- by ignoring the law that it was for the assessee to prove the genuineness to the satisfaction of A.O. Thus in order to prove the genuineness the assessee should have produced the representative of M/s Ganpati Fincap (P) Ltd., and M/s KMC Portfolio (P) Ltd. or the directors of the said companies. 11. That Ld. CIT (A) has erred in law and on facts in not giving a finding of facts based on the final accounts as well as the books of account rather than deciding the issue based on the oral narration of AO during the course of hearing before him which has no evidentiary value. 12. That Ld. CIT (A) has erred in law in quashing the assessment order framed u/s 143(3) by substituting his own satisfaction in place of AO's satisfaction required in term of section 68 of IT Act and thus passing perverse order. 13. That Ld. CIT (A) has erred in law and on facts in coming to conclusion that assessee had made full and true

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disclosure before the AO at the time of assessment u/s 153A of the IT. Act. 14. That Ld. CIT (A) has erred in law and on facts in deleting the addition of Rs. 5,50,00,000/- on account of share capital which was unexplained cash credit without appreciating the fact that the identity and creditworthiness of the investor company along with genuineness of the transactions were not proved to the satisfaction of the AO and as required u/s 68 of the IT. Act. 15. That CIT (A) has erred in law and facts in giving a finding of facts that the said sum of Rs. 5.50 crore is not found credited in books of account in total disregard of the balance sheet filed by the assessee. 16. That CIT (A) has erred in law and facts in ignoring the ratio of decision of Hon'ble Supreme Court in case of P. Mohankala (291 ITR 278) where the Hon'ble Supreme Court has held as under: "That the findings of fact arrived at by the authorities below are based on proper appreciation of facts and the material available on record and surrounding circumstances. The doubtful nature of transaction and the manner in which the sums were found credited in the books of accounts maintained by the assessee have been duly taken into consideration by the authorities below. The transactions though apparent were held to be not real ones, May be the money came by way of bank

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cheque and was paid through the process of banking transaction but that itself is of no consequence." 17. That on the facts and in the circumstances of the case Ld. CIT (A) has erred in law in deleting the addition of Rs. 5,50,00,000/- without realizing the fact that the assessee company has not discharged its burden of establishing the genuineness of the transaction to the satisfaction of AO as required u/s 68 of IT. Act. 18. That the order of the Ld. CIT (A) being erroneous in law and on facts needs to be vacated and the order of the A.O. be restored. 19. That the appellant craves leave to add or amend any one or more of the ground of the appeal as stated above as and when need for doing so may arise.” 2. Apropos Ground No.1, the AO recorded the following reasons (impugned order, page 59 to 60) on 26.03.2012, to form belief of escapement of income: “Information has been received from the Director of Income tax (Inv.)-II, ARA Centre, 2nd floor, E-2, Jhandewalan Extension, New Delhi vide his letter F.No. DIT(Inv.)-II/u/s 148/2011-12/7634 dt 23.3.2012 received through CIT(Central), Kanpur letter F.no.CIT(C)/KNP/148/2011-12/4107 dt. 23.3.2012 that the above assessee had taken accommodation entry of Rs.5,50,00,000/- from Shri Surendra KumarJain group of cases, where a search was conducted. The records of the assessee have been examined to verify the above

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information as well as the nature and genuineness of above amount received by assessee from above person. The records corroborate the information as received above. In view of these facts the exact nature and source of above amounts remain unexplained, and therefore, the above amounts are unexplained income of the assessee under the deeming provisions of the IT Act, 1961.

In view of above facts and circumstances of the case, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts relating to assessment in respect of receipt of Rs.5,50,00,000/-, such receipts/income have escaped assessment for the AY 2005-06. Therefore, I am satisfied that it is a fit case for issue of notice u/s 148 for AY 2005- 06 to reassess the above income.”

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to bring to tax the undisclosed income regarding the accommodation entries obtained by these persons”. After providing of above general information, a table has been made in the said letter of Addl. DIT (Inv.), New Delhi in which, name of the assessee company is mentioned. For a ready reference, this table made in the letter of the Addl. DIT (Inv.) New Delhi is reproduced as under -

S. Name of the beneficiary PAN Amount No. companies involved (Rs.)

After considering the information given in the above letter, the AO recorded reasons to believe mentioning that the records corroborated the above information and since the exact nature and source of amount of Rs.5.50 crore remained unexplained, it has been considered by him to be unexplained income of the assessee under the deeming provisions of the Act. Therefore, he recorded the reasons to believe that on account of failure on part of the assessee to disclose truly and fully all material facts relating to assessment in respect of the receipts of Rs.5.50 crore, such receipt/income had escaped assessment for A.Y.2005-06. For a ready reference, the reasons recorded by

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the AO for reopening of the assessment proceedings u/s 147 is reproduced as under :- “Information has been received from the Director of Income tax (Inv.)-II, ARA Centre, 2nd floor, E-2, Jhandewalan Extension, New Delhi vide his letter F.No. DIT(Inv.)-II/u/s 148/2011-12/7634 dt 23.3.2012 received through CIT(Central), Kanpur letter F.no.CIT(C)/KNP/148/2011-12/4107 dt. 23.3.2012 that the above assessee had taken accommodation entry of Rs.5,50,00,000/- from Shri Surendra KumarJain group of cases, where a search was conducted. The records of the assessee have been examined to verify the above information as well as the nature and genuineness of above amount received by assessee from above person. The records corroborate the information as received above. In view of these facts the exact nature and source of above amounts remain unexplained, and therefore, the above amounts are unexplained income of the assessee under the deeming provisions of the IT Act, 1961.

In view of above facts and circumstances of the case, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material facts relating to assessment in respect of receipt of Rs.5,50,00,000/-, such receipts/income have escaped assessment for the AY 2005-06. Therefore, I am satisfied

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that it is a fit case for issue of notice u/s 148 for AY 2005- 06 to reassess the above income.”

As the above reasons recorded by the AO has been found to be solely based on the letter of the Addl. DIT (Inv.), New Delhi, I have examined this letter carefully and after examining this letter in the hearing held on 18.07.2014, I have enquired from the AO whether any supporting material or document was received that was seized during the course of search operation of Sri Surendra Kumar Jain Group (S.K. Jain Group) or subsequently collected from this group during enquiry to show that the amount of Rs.5,50,00,000/- was actually paid by them in form of accommodation entry of share capital / share application money to the assessee company. On my enquiry, the AO informed that only the above mentioned letter was received and no other supporting material was made available by the Investigation Wing, New Delhi, giving the details of the amount of Rs.5,50,00,000/- as to how the above accommodation entry was provided to the assessee company. Therefore, it is clear that at the time of recording of reasons to believe, the material available with the AO was only a letter without supported by any investigation report of ADIT or any supporting evidence or document to corroborate the information provided in the said letter. Therefore, in my opinion, such information without any supporting document or report can be said to be general and vague information only and not definite and relevant information because neither the basis for drawing the

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conclusion as given in the said information is discussed in the letter of the Addl. DIT (Inv.), New Delhi nor supporting documents on the basis of which information is provided in the said letter is made available. The AO in the reasons to believe recorded by him, has mentioned in the second para that the records of the assessee have been examined to verify the above information as well as the nature and genuineness of the above amount received by the assessee from above person and the records corroborate the information as received above. However, when I enquired from the present AO to show from record as to where this amount has been recorded as received by the assessee from Surendra Kumar Jain Group and how, the nature and genuineness of the above amount was verified to reach to the conclusion that this amount is in the nature of accommodation entry, the present AO expressed his inability to show any document to establish that Rs. 5.50 crore was received from Shri Surendra Kumar Group. He also informed that no other material except the letter from the Addl. DIT(Inv.) New Delhi was received on the basis of which reasons were recorded. While calling for the remand report, 1 have specifically asked the AO to provide copy of information and supporting evidences received from the Directorate of Income Tax (Inv.) referred to in the reasons recorded, which were collected during the search of Shri Surendra Kumar Jain Group, the AO instead of producing any such evidence or record from where the necessary verification was made before recording of reasons to believe, furnished a remand report stating in a general manner that the

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notice issued u/s 148 was rightly issued as per law after recording reasons, examining and verifying from the records no such record was shown. It is also mentioned in the report of the AO that after examination and verification with the records, there was strong reason to believe that income had escaped assessment. The AO also mentioned in his remand report that Sri S.K. Jain is an entry provider but no details about the activities of Sri S.K. Jain was provided on the basis of which, it has been concluded that Sri S.K. Jain is an entry provider. All the above facts emerged during the hearing of the appeal proceedings after discussion made with the AO and examining the documents produced by him, I have found that the reassessment proceeding was initiated only on the basis of a letter received from Investigation Wing providing only a general and vague information about providing of accommodation entry to the assessee of Rs. 5.50 crore by Shri Surendra Kumar Jain Group without there being any supporting documents to prima facie show that the information provided was related to the assessee under appeal or not. It could not be even shown that the assessee has actually received any amount from Shri Surendra Kumar Jain Group by giving the details of cheque nos. and dates of cheques issued in the name of assessee for providing accommodation entry by Shri Surenda Kumar Jain Group. Therefore, I hold that such information given in this letter can be said to b only general and vague information because on my enquiry made from the AO, he failed to show any material or document to corroborate the information mentioned

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in the letter of the investigation Wing New Delhi. It is settled law that no valid reasons to believe under the provisions of section 147 can be drawn on the basis of general and vague information. The decision in the case of Signature Hotels (P.) Ltd. vs. Income tax Officer [2012] 20 taxmann.com 797 (Delhi), the Hon'ble High Court of Delhi has quashed the assessment proceeding reopened u/s 147 just on the basis of an annexure providing the details of companies receiving accommodation entry without reference to any document or statement. In this decision, analyzing the basic features of a valid reopening of assessment proceeding u/s 147, it has been held as under: “Section 147 is wide enough but it is not plenary. One has to consider and examine the crucial expression ‘reason to believe’ used in the said section. The Assessing Officer must have ‘reason to believe’ that an income chargeable to tax has escaped assessment. This is mandatory and the ‘reasons to believe’ are required to be recorded in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ Court, but existence of belief is the subject- matter of the scrutiny. A notice under section 148 can be quashed if the 'belief is not bona fide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which in the instant case was available with the Assessing Officer, when he recorded the reason. There should be a link between the reasons and the evidence/material available with the Assessing Officer. However, for initiation of proceedings, it is not necessary that

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the material should conclusively prove the escapement The ‘reasons to believe’ would mean cause or justification of the Assessing Officer to believe that the income has escaped assessment and does not mean that the Assessing Officer should have finally ascertained the said fact by legal evidence or reached a conclusion, as this is determined and decided in the assessment order, which is the final stage before the Assessing Officer. The Assessing Officer reopened assessment of the assessee on the basis of information received from the DIT (Investigation) that amount received by the assessee from company 'S' was nothing but accommodation entry and the assessee was the beneficiary. Held that the reason given by the assessee did not satisfy the requirements of section 147. The reasons and the information referred to were extremely scanty and vague. There was no reference to any document or statement except an 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 indicate escapement of income. Further, it was 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

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giving his approval. Therefore, the proceedings under section 148 were to be quashed” In the present case also, reasons have been recorded only on the basis of a letter of the investigation wing providing a table giving the name of the assessee that it has received accommodation entry without reference to any document or statement and hence, the above decision of the Delhi High Court is fully applicable in case of the present assessee. Therefore, the recording of reasons in this case is also held to be based on scanty and vague information and hence, does not satisfy the requirements of section 147.

“6.2.2 As regards to second Issue relating to validity of reopening of assessment proceeding u/s 147 after completion of original assessment of the assessee (appellant) u/s 153A vide order dated 30.12.2011, I have examined whether, there was any failure on part of the assessee to disclose fully and truly all the material facts necessary for the assessments of the assessment year under consideration. The issue under consideration in the impugned assessment order for which, assessment proceeding was reopened u/s 147 is receipt of accommodation entry of Rs.5.50 crore by the assessee from Shri Surendra Kumar Jain Group in form of share application money. However, this information was denied by the assessee during the assessment proceeding and it was informed that it has in fact received Rs.5 crore as share application money from a company, M/s Moderate Credit Corporation Ltd. The AO

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without making any enquiry from M/s Moderate Credit Corporation Ltd. and without establishing any relationship of this company with Sri Surendra Kumar Jain Group, has concluded that inquiry revealed by the ADIT (Inv.) New Delhi, that M/s Moderate Credit Corporation Ltd. was also a non- existent company formed by a Chartered Accountant, Sri Aseem Gupta (this person was also searched separately). The AO also mentioned in the assessment order that denial of Sri Aseem Gupta of not making any transaction with the assessee company during the year under consideration is not acceptable particularly when he has not appeared for confrontation of his earlier statements. AO did not establish any relationship between Sri Aseem Gupta and Shri Surendra Kumar Jain Group, the person mentioned as entry provider in the information received by him. In the information used for reopening of assessment proceeding, there is no mention of Shri Aseem Gupta. After discussing about the details of receipt of share application money from M/s Moderate Credit Corporation Ltd. and modus operandi of Sri Aseem Gupta, the AO finally made addition of Rs.5.50 crore concluding that this amount found credited in the assessee's books of account is nothing but the assessee's own undisclosed cash introduced in the business through accommodation entries in the garb of share application money received through cheques on commission basis from Shri Surendra Kumar Jain Group of cases, New Delhi wherein a search was conducted u/s 132(1). Looking to the above facts discussed in the assessment order, it

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is clear that the basis for making addition in the impugned assessment order is receipt of share application money of Rs.5 crore from M/s Moderate Credit Corporation Ltd. because no details was available with the AO about receipt of any money amounting to Rs.5.50 crore from Shri Surendra Kumar Group. The director of the assessee company, Sri R.N. Agarwal who attended the hearing on 18.07.2014 denied having received any such amount and he also expressed his ignorance about Shri Surendra Kumar Jain Group. On enquiring from the AO to show supporting evidence or any document collected by him showing entry of receipt of Rs.5.50 crore from Shri Surendra Kumar Jain Group made in the books of account of the assessee company, the AO expressed his inability to produce any supporting evidence or document. Considering these facts and circumstances of the case and finding that the basis for making of addition in the impugned assessment order is receipt of share application money of Rs.5 crore from M/s Moderate Credit Corporation Ltd., I have examined the assessment record of A.Y. 2005-06 relating to the proceeding u/s 153A. On going through the said assessment record, I have found that during the course of the assessment proceeding, the assessee company on being enquired by the AO to establish the genuineness of receipt of share application money shown by it, a letter dated 18.11.2011 was filed in which, following details / documents relating to receipt of share capital from M/s Moderate Credit Corporation Ltd. was filed.

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"As regards share capital received from M/s Moderate Credit Corporation Ltd., 54/5 Swami Vivekanand Road, Santragachi, Howrah, West Bengal-711104. (a) Copy of conformation from the investor company. (P-111 to 114) (b) Copy of letter attaching the signature of the Director by ABN Amro Bank. (P-115). (c) Copy of relevant pages of Bank Statement with ABN Amro Bank from where the cheque have been issued to the assessee company. (P-116 to 120). (d) Copy of assessment order u/s 143(3) of the Act. (P-121 to 122) (e) Copy of balance sheet from which the share capital and Reserve & Surplus of the investor company can be verified. (P- 123) (f) Copy of company Master Details taken from the Registrar of Companies site giving the present status of the assessee company, present address, the date of last AGM and the Balance Sheet as on 31.03.2010 (P-124)," In the order sheet maintained by the AO in the assessment folder of A.Y. 2010-11 for all seven years from A.Y. 2004-05 to A.Y. 2010-11 under scrutiny with him relating to search assessment years u/s 153A, the AO has recorded on 19.12.2011 that Sri Pankaj Gargh (Adv.) attended on behalf of the assessee company and filed written submission regarding share application money which have been verified. In subsequent hearing on 21.12.2011, the AO has recorded that Shri Pankaj

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Gargh (Adv.) attended on behalf of the assessee and filed required information which have been examined in the lights of books of account and seized material. In earlier hearing held on 15.09.2011, 11.11.2011, 23.11.2011 & 13.12.2011 also, it has been mentioned that seized material were examined. On 28.12.2011, the AO has recorded in the order sheet that Shri Pankaj Gargh (Adv.) attended on behalf of the assessee and produced the books of accounts which have been examined. After examination of seized material, books of account and verification of the details filed in respect of receipt of share application money, assessment order for A.Y. 2005-06 has been passed u/s 153A vide order dated 30.12.2011 with approval of the JCIT, Central Range, Kanpur. In this assessment order, it has been mentioned by the AO that “the relevant details in this regard and bank statement have been filed. After considering the material seized from the assessee, material available on record and also the submissions replies of the assessee, the assessment is completed at return income i.e. Rs.62,72,403/-". In this order, it has also been mentioned that books of accounts were produced which were examined on test check basis. Considering these facts and circumstances of the case and looking into the facts that the original assessment order u/s 153A was passed after examination of books of account, seized material and details / replies filed by the assessee, specially the details relating to share application money, it can be very well said that there is no failure on part of the assessee to disclose fully and truly all material facts necessary for its assessment for

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A.Y. 2005-06, particularly the details relating to receipt of share application money of Rs.5 crore from M/s Moderate Credit Corporation Ltd., which have also been verified by the AO and accepted. It is judicially settled that when there is no failure on part of the assessee to disclose fully and truly all the material facts necessary for the assessments of a particular assessment year, no valid reopening u/s 147 can be done after four years. It has been held by the Hon'ble Madras High Court in the case of Commissioner of Income-tax vs. Tamil Nadu Transport Development Finance Corpn. Ltd. [2008] 306 ITR 136 (Madras) under similar circumstances as under :- In the original assessment proceedings, the Assessing Officer had considered all the details filed by the assessee and only thereafter had completed the assessment under section 143(3). Based on those details and other documents filed along with the return, the assessment was completed. There was no failure on the part of the assessee to disclose fully and truly all material facts. The finding by the authorities below was that the revenue had failed to prove that there was a failure on the part of the assessee to disclose any material facts necessary for assessment. Hence, they had rightly come to the conclusion that when the assessment was made under section 143(3), no action could be taken under section 147 after the expiry of four years from the end of relevant assessment year unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.

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In view of above settled judicial position, reassessment proceeding in case of the assessee cannot be reopened u/s 147 because this assessment proceeding has been reopened after four years but the AO has not brought on record details of any failure on part of the assessee to disclose fully and truly all the material facts necessary for the assessments of AY 2005-06 i.e. the assessment year under consideration and hence, reopening u/s 147 in the present case under appeal has not been found to be legally valid.” 6. The Department contends that the ld CIT (A) has erred in law and on facts by holding that the recording of reasons in this case is based on scanty and vague information and hence does not satisfy the requirement of section 147, without appreciating the fact that the Assessing Officer recorded the reasons on the basis of intimation received from DIT (Inv.-II) A.R.A. Jhandelwalan Extension, New Delhi through letter F.No. DIT (Inv.) -II/u/s 148/2011-12/7634 dated 23/03/2012. Reliance has been placed on ‘CIT vs. India Terminal Connector System 7. Ltd.’, ITA No. 643/2011, order dated 21.03.2012 and on ‘Rajat Export Import India Pvt. Vs. ITO’, W.P.(C) 8341/2011, order dated 18.01.2012, both passed by the Hon’ble Delhi High Court. 8. The ld. Counsel for the assessee, on the other hand, has placed strong reliance on the impugned order. 9. Having considered the rival contentions in the light of the material on record, we find that as per the reasons recorded by the AO, the AO has formed his

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belief of escapement of income on the basis of the information received from the Investigation Wing of the Department, that the assessee had taken accommodation entry of Rs.5.50 crore from the Shri Surendra Kumar Jain group, where a search had been conducted and on the fact, as stated by the AO, that the assessee’s records corroborated this information. 10. The assessee, as stated in written submissions (impugned order, pages 11 and 12) dated 22.05.2014, vide letter dated 21.02.2013, asked for a copy of the reasons. The reasons were provided to the assessee more than ten months thereafter. The assessee filed objections (assessment order page 3) dated 14.02.2013, challenging the validity of the reopening proceedings on the ground that there existed no material on record to lead to the formation of belief of escapement of income and that the proceedings had been initiated merely on the basis of alleged information received from the Investigation Wing. The AO did not dispose of the objections by an independent speaking order. It was only in the assessment order (4th page thereof), that the AO observed as follows: “The objection raised by the assessee against issuance of notice u/s 148 is not acceptable because at the time of recording reasons the definite information as received from the DIT(Inv.) New Delhi was in possession that the assessee has got accommodation entries worth Rs.5,50,00,000/- from Shri Surendra Kumar Jain group of cases (the entry operator) where search was

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conducted. Hence the objection raiseo hereby rejected. The decision quoted by the assessee are not helpful for raising the objection. The initiation of proceedings u/s 147 and issuance of notice u/s 148 was legally correct and justified.” 11. Before the ld. CIT(A), by way of written submissions (impugned order, pages 11-12) dated 22.05.2014, the assessee contended that the rejection of the objections by the AO was general and vague, as no definite information was in the possession of the AO; that the AO did not even have any knowledge of the name of the company from whom the amount was allegedly received by the assessee; that the reasons had been recorded by the AO casually, mechanically and solely following the alleged information received from the Investigation Wing, without there being any relevant or adverse material, or corroborative evidence in the possession of the AO to point out that any income had escaped assessment, as ascertained by inspection of the Department’s file on 25.03.2013, particularly when there had been no transaction of the assessee with the person named in the reasons. 12. The ld. CIT(A) issued letter (impugned order, pages 34 to 36) dated 23.05.2014, asking for the AO’s comments on the written submissions of the assessee. The ld. CIT(A), inter alia, stated therein that as per the reasons recorded, the assessee had taken accommodation entry of Rs.5.50 crore from the Surendra Kumar Jain group, where the search had been conducted, but the details of the

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information collected in the said search had not been discussed in the assessment order and that there was no discussion correlating the investment of Rs.5 crore as share capital, received by the assessee from ‘M/s Moderate Group Corporation (P) Ltd.’, as declared by the assessee, which issue had been examined in the assessment proceedings u/s 153A of the Act and accepted as genuine, with the accommodation entry of Rs.5.50 crore stated as received by the assessee from the Surendra Kumar Jain group. The ld. CIT(A) asked the AO to, inter alia, provide a copy of the information and supporting evidence received from the Investigation Wing, as collected in the search conducted on the Surendra Kumar Jain group, and as referred to in the reasons recorded. 13. As available in para 5.3 of the order under appeal, the AO could not provide this information to the CIT(A). The assessment record for the year under consideration also could not be produced. No report was filed by the AO on the written submissions of the assessee. 14. Vide letter (impugned order, page 38) dated 27.06.2014, the ld. CIT(A) again asked the AO to, inter alia, provide a copy of the report of the Investigation Wing and the supporting evidence and to submit his report on the assessee’s written submissions alongwith the assessment record. 15. The assessee filed further written submissions (impugned order, pages 43 to 47) dated 14.07.2014.

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(1) In the letter received by the AO from the ADIT (Inv), only general information has been given.

(2) The reasons were based only on the letter received. (3) No supporting material/ report was received by the AO with the letter.

(4) The letter does not contain any basis for the conclusion stated therein.

(5) The information in the letter is only general and vague information. (6) There is no definite or relevant information. (7) The record does not show the alleged amount to have been received

by the assessee from the Surendra Kumar Jain group.

(8) The AO could not show how the nature and genuineness of the amount was verified to conclude it to be a mere accommodation entry.

(9) In the remand report, the AO merely stated, in a general manner, that the notice u/s 148 of the Act was rightly issued. (10) No record, stated to have been verified, was shown to the CIT(A) by

the AO. No details of the activities of Shri Surendra Kumar Jain,

alleged to be an entry operator, were provided by the AO to the CIT(A). (11) The assessee was not shown to have actually received any amount

from the Surendra Kumar Jain group.

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(12) No details of cheques or dates of cheques issued in favour of the assessee by the Surendra Kumar Jain group were provided. (13) ‘Signature Hotels’, (supra) quashed reopening proceedings based merely on information providing details of companies receiving accommodation entries, without referring to any document or statement. (14) ‘Signature Hotels’, (supra) is squarely applicable to the facts of the present case. (15) The reasons recorded are based on scanty and vague information. (16) The recording of the reasons does not satisfy the requirements of section 147 of the Act. 19. The Department has not been able to rebut the elaborate findings of fact and law recorded by the ld. CIT(A), as discussed. As such, it cannot at all be said that the ld. CIT(A) has not appreciated the fact that the AO recorded the reasons on the basis of the information received from the DIT(Inv)-II, through letter dated 23.03.2012. Ground No. 1 raised by the Department, therefore, has no merit. Reliance by the Department on ‘India Terminal Connector System Ltd.’ 20. (supra), it is seen, is misplaced. The question before their Lordships in that case was as to whether the Tribunal was right in setting aside the reassessment proceedings on the ground that the AO had failed to prove and establish that the

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assessee had been unable to disclose fully and truly all material facts at the time of the original assessment. The Tribunal had quashed the re-assessment proceedings on the basis that the original assessment was completed u/s. 143(3) of the IT Act and the share application money was duly reflected. 21. There is, in fact, no dispute, as none can be, to the proposition that information received from the Investigation Wing of the Department is information on the basis of which, the AO can initiate reassessment proceedings. The issue actually is as to whether the information received by the AO was not scanty and vague information, as held by the CIT(A), whether the AO applied his mind to the information received and if the reasons recorded evince such application of mind by showing a direct nexus or live link between the information received and the reasons recorded. Likewise, ‘Rajat Export Import India Pvt. Ltd.’, (supra) is also a decision 22. rendered in the peculiar facts of that case and it is not applicable to the present case at all. In ‘Meenakshi Overseas’ (supra), under similar facts and circumstances, 23. relying on ‘Signature Hotels (P) Ltd. Vs. ITO and Another’, 338 ITR 51 (Del) (supra), it has been held that the reasons must be self-evident and they must speak for themselves; that the tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons; and

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that where the link between the information made available to the AO and the

formation of belief is absent, the reasons are not sustainable. It has further been

held that where there is no independent application of mind by the AO to the

tangible material which forms the basis of the reasons and the reasons fail to

demonstrate the link between the tangible material and the formation of the reasons

to believe escapement of income, the reasons are unsustainable.

escapement of income are not self-evident. They do not show any tangible material

which leads to the formation of such a belief. No report of the Investigation Wing,

as referred to in the letter received by the AO from the Investigation Wing, was

ever provided to the AO. The AO, in the reasons, states to have made verification

from the record. If such verification was indeed made, that would constitute the

link between the information and the formation of the belief of escapement of

income. However, no such record was produced before the ld. CIT(A) by the AO.

Even before us, nothing has been produced. Such link, much less live link, between

the information, which too, even by itself, has not been proved to be either definite,

or reliable information, not scanty and vague information as established by the ld.

CIT(A), and the belief of escapement of income, is conspicuous by its absence.

There is no independent application of mind by the AO even to the mere

conjectural recital in the letter received by him. The reasons, as such, in keeping

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with ‘Signature Hotels’ (supra), as relied on in ‘Meenakshi Overseas’ (supra), are unsustainable in law. In “Sabh Infrastructure Limited” [order dated 25.09.2017, in W.P.(C) 25. 1357/2016] the Hon’ble Delhi High Court has, vide para 19 of the report, laid down guidelines, as follows, for matters of re-opening of assessment: (i). while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided;

(ii). the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment – especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof;

(iii). where the reasons make a reference to another document, whether as a letter or report, such document and/or relevant portions of such report should be enclosed along with the reasons;

the exercise of considering the Assessee’s objections to (iv) the reopening of assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons

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for reopening of the assessment beyond what has already been disclosed.” Thus, in deference to “Sabh Infrastructure Limited” (supra), it is incumbent 26. on the AO, while communicating the reasons for the reopening of the assessment, to provide the standard form, used for obtaining approval of the superior officers. Merely stating the reasons in a letter addressed by the AO, is not enough. Then, the reasons to believe escapement of income need to spell out all the reasons and grounds available with the AO for reopening the assessment. The reasons must also paraphrase any investigation report, which may form the basis of the reasons and any enquiry conducted by the AO thereon, as also the conclusions thereof. Further, and this is most relevant for the case at hand, where the reasons make a reference to any document, such document and / or relevant portion thereof must be enclosed along with the reasons. The Hon’ble High Court has underlined that consideration of the assessee’s objections to the reopening of assessment is not a mechanical ritual, but it is a quasi-judicial function. It has been mandated that the order disposing of the objections should deal with each objection, giving proper reasons for the conclusion and no attempt should be made to improve or add to the reasons, as recorded and disclosed. 27. In the case of the present assessee, it remains undisputed that though the reasons recorded by the AO for belief of escapement of income contain reference to material forming the basis thereof, such material, despite written requisition by

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the CIT(A) to the AO, was never supplied by the AO to the CIT(A), much less to the assessee alongwith the reasons. The objections were disposed of merely ritualistically, in the assessment order itself, rather than by way of a separate speaking order preceding the assessment order, as noted hereinabove. This is in direct contravention of the principles of natural justice, as reiterated in “Sabh Infrastructure Limited” (supra). Therefore, the reasons recorded by the AO are found to be not in accordance with law. 28. In view of the above, the grievance sought to be raised by the Department by way of Ground No.1 is found to be shorn of merit and it is rejected. The CIT(A)’s action in holding the recording of the reasons to be based on scanty and vague information, not satisfying the requirements of section 147 of the Act, is confirmed. Since the reasons recorded by the AO for formation of belief of escapement of income, thus, remain to be no reasons in the eye of the law, nothing further survives for adjudication, nor was anything else argued. 29. In the result, the appeal is dismissed.

Order pronounced in the open court on 14/06/2018. Sd/- Sd/- (DR. MITHA LAL MEENA) (A.D. JAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 14 /06/2018 *AKV* Copy forwarded to:

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