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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI RAJESH KUMAR & SHRI PAVAN KUMAR GADALE
Per Rajesh Kumar, Accountant Member:
The present appeal has been preferred by the assessee against the order dated 30.08.2019 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12.
The grounds raised
by the assesse are reproduced below:
1. The Authorities below have erred in reopening the assessment u/s.148 without any tangible material.
2. The Authorities below have erred in making addition u/s.68 amounting to Rs.2,30,00,000 as ‘ Unexplained cash credit’ despite the appellant discharging its onus of explaining ‘Nature and Source’ of receipt of share capital & premium amount. Yash Ventures Pvt. Ltd. vs. ITO
3. The Authorities below have erred in passing the order u/s.250 without complying to the provision of Sub Section 6A of sec 250 of the Income Tax Act. Without prejudice to the above, the authorities below have erred in not setting off current year’s expenses against the addition made. The Authorities below have erred in making addition u/s.68 without supplying copies of statements of third parties referred to in the investigation report.
The issue raised in ground no. 1 is against the order of CIT(A) upholding the re-opening of assessment u/s 147 of the Act by ignoring the fact that there was complete non application of mind by the AO and also there being no tangible fresh materials before the AO.
The facts in brief are that the case of the assesse was reopened on the basis of report of Investigation Wing, Jodhpur. The Investigation wing of Jodhpur carried out a search action u/s 132(1) of the Act on Varaha Infra Group and also on Shri Jagdish Purohit & his associates. During the course of recording of statement u/s 132(4) of the Act, Mr Purohit admitted that he was providing accommodation entries through several entities. So basically the case of the assesse was re-opened on the basis of statement of the Shri Jagdish Purohit and his associates. The statement was stated to be not provided to the assessee at all. The AO recorded the reasons u/s 148(2) of the Act that the assesse has received Rs.2,30,00,000/- during the year as share application money which has escaped assessment and accordingly issued notice u/s 148 of the Act and finally the assessment was framed u/s 143(3) r.w.s. 147 of the Act vide order dated 28.12.2016 making an addition of Rs.2,30,00,000/-as unexplained cash credits. Yash Ventures Pvt. Ltd. vs. ITO
In the appellate proceedings before the ld. CIT(A) the assesse challenged the jurisdiction of the AO u/s 147 of the Act , however the ld CIT(A) dismissed the appeal by holding that the re-opening was rightly done on the basis of report from Investigation Wing ,Jodhpur.
Having heard both the sides and perusing the material on records including the decisions cited by the ld AR, we find that the case was reopened on the basis of report from Investigation Wing, Jodhpur that assesse is beneficiaries of accommodation entries. We note that the AO in the reasons recorded u/s 148(2) of the Act formed a belief in the second last para that income to the tune of 9,48,28,000/- has escaped assessment which represented the share application received by the assesse from entry providers and hence the assessment is being reopened. We further note that during the year the assesse has received share application only of Rs.2,30,00,000/- (including share premium). Having considered these facts , we find that the AO has completely failed to apply his mind on the information received from Investigation Wing Jodhpur because of the reason that in the reasons recorded u/s 148(2) of the Act , the AO has noted that a sum of Rs.9,48,28,000/- has escaped assessment on account of receipt of share application money by the assesse whereas the factual position is that the assesse has received only Rs.2,30,00,000/- (including share premium of Rs.2,07,00,000/-. Thus is clear from the above that reasons have been recorded without application of mind and without verification of information on records,. Such vague and Yash Ventures Pvt. Ltd. vs. ITO unsubstantiated information can not constitute reasons to believe that income has escaped assessment. It also clear from the above that AO has not conducted any inquiry after receiving the report from Investigation Wing Jodhpur and by merely relying on the report re-opened the assessment u/s 147 of the Act. In our opinion this is a case of borrowed satisfaction which is incorrect and against the settled legal position and re-opening done on the basis of borrowed satisfaction cannot be sustained. The provisions of section 147 of the Act mandates that the satisfaction of AO is imperative and must for recording reasons on the basis of some tangible materials before reopening the case. Under these facts and circumstances, we are of the considered view that the re- opening of assessment has not been done validly for the reasons that it is based upon borrowed satisfaction and without any tangible materials. The case of the assesse find supports from the decision of jurisdictional High court in PCIT Vs Shodiman Investments Pvt Ltd. (2018)93taxmann.com153(Bombay) wherein it has been held that re-opening has to be done on the basis of own satisfaction of the AO and not on borrowed satisfaction. Similarly Hon’ble Delhi High Court in PCIT Vs Meenakshi Overseas (Pvt) Ltd (2017) 82 taxmann.com 300(Delhi) has held that re-assessment merely on the basis of information from DIT(Investigation) that assesse had received accommodation entries without independent application of mind by the AO to the tangible materials and reasons failed to demonstrate link between the tangible material and formation of belief that income has escaped assessment is not justified. Similar ratio has been laid down in other decisions namely VarshabenSanatbhai Patel Vs ITO (2015) 64 Yash Ventures Pvt. Ltd. vs. ITO taxmann.com179(Guj) and Akshar Builders & Developers Vs ACIT (2019)103 taxmann.com162 9Bombay). Considering the facts of the case in the light of ratio laid down by the various judicial forums, the re-opening of assessment and consequent order is held to be invalid and is accordingly quashed.
Since we have allowed the appeal of the assessee on legal issues, therefore, we are not adjudicating the grounds raised on merits.
In the result, the appeal of the assesse is allowed. Order pronounced in the open court on 29th October, 2021.