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Income Tax Appellate Tribunal, DELHI ‘SMC-1’ BENCH,
Before: SHRI N.K. BILLAIYA, & MS. SUCHITRA KAMBLE
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against the order of the CIT(A)-24, Ghaziabad dated 23.08.2018 pertaining to assessment year 2009-10.
The grievance of the assessee is two-fold - firstly, the assessee is aggrieved by the issuance of notice u/s 148 of the Income tax Act, 1961 [hereinafter referred to as 'The Act' for short] which, according to him, is not as per the provisions of law and secondly, the assessee is aggrieved by the addition of Rs. 19,19,333/- made by the Assessing Officer in respect of cash found to be deposited in the Savings Bank Account.
Facts are that, as per the AIR information, it came to the knowledge of the Assessing Officer that the assessee has deposited a sum of Rs. 19.19 lakhs in his SB Account maintained with Bank of India, Mehroli, Ghaziabad. Accordingly, notice u/s 148 of the Act was issued alongwith other statutory notices. None attended the assessment proceedings and no return was filed in response to notice u/s 148 of the Act. The Assessing Officer proceeded to complete the assessment ex parte. Cash deposit of Rs. 19,19,333/- was treated as unexplained and added to the returned income of the assessee.
The assessee carried the matter before the ld. CIT(A) and questioned the validity of notice u/s 148 of the Act and furnished some additional evidences invoking Rule 46A of the I.T. Rules.
5. The ld. CIT(A) did not admit the additional evidences and confirmed the addition made by the Assessing Officer.
6. Before us, the ld. counsel for the assessee vehemently stated that reasons recorded by the Assessing Officer and approval given by the Additional CIT, are mechanical and devoid of any application of mind.
It is the say of the ld. counsel for the assessee that the Assessing Officer proceeded by assuming that no return of income was filed by the assessee prior to the issue of notice u/s 148 of the Act. It is the say of the ld. counsel for the assessee that the assessee had already filed return of income and by ignoring this fact, notice issued by the Assessing Officer u/s 148 of the Act is without any application of mind.
The ld. counsel for the assessee further pointed out that the approval given by the Additional CIT is undated and it is not known whether the approval was given prior to the issuance of notice u/s 148 of the Act.
8. Per contra, the ld. DR strongly supported the findings given by the lower authorities.
9. We have given thoughtful consideration to the orders of the authorities below and have gone through the evidences brought on record in the form of a paper book. The undisputed fact is that in the proforma for recording reasons for initiating proceedings u/s 148 of the Act under Item No. 8A, the question is “Whether any voluntary return had been filed” and the answer is mentioned as “No”. Whereas Exhibit Nos. 6 and 7 show that the return of income was field with Ward 2(1), Ghaziabad on 30.03.2010 and notice u/s 148 is dated 03.02.2016.
This clearly shows that the Assessing Officer issued notice mechanically without applying his mind. Such action of the Assessing Officer did not find any favour with the Hon'ble High Court of Delhi in the case of RMG Polyvinyl [I] Ltd 396 ITR 5. The relevant facts of that case are as under:
“4. Notice under Section 147 of the Act was issued by the AO to the Assessee on 25th March, 2011. The following reasons for the re- opening were furnished to the Assessee for reopening the assessment:
11. Reasons for the belief Information has been received from the that Information has income has escaped Investigation Wing of been received from the the Income-tax assessment. Department income has escaped that M/s Pine View Construction & Traders Investigation Wing of Pvt. Ltd. is a beneficiary of accommodation the Income-tax entries received from certain established assessment. entry operators identified by the Investigation Wing during the period relevant to A. Y 2004-05.
A comprehensive investigation was carried out by the Investigation Wing for identification of entry operators engaged in the business of money laundering for the beneficiaries and on the basis of investigation carried out and evidences collected, a detailed report has been forwarded.
In the instant case, the assessee is found to be the beneficiary of accommodation entry from such entry operators as per the transaction mentioned in the enclosed Annexure-'A' of Rs.1,56,00,000.
The accommodation entry provider; have given accommodation entries in the grab of share application money/ expenses/gift/purchase of shares etc. They have worked for commission.
The assessee is a company incorporated on 11.09.1998. It is noticed that there is no return of come is available in the AST database of Income-tax Department.
Therefore. it is clear that the assessee has not filed return of income for the A. Y.
2004-05 and consequently has not offered any income for taxation.
Sources of the transactions are not explained. I, therefore, have reason to believe that on account failure on the part of the assessee to disclose truly and fully all the material facts necessary for assessment for the above assessment year, the income chargeable to tax to the extent of accommodation entry of Rs. 1,56,00,000 has escaped assessment within the meaning of section 147 of I.T. Act. 1961. To bring to tax the income which has escaped assessment, I proposed to issue notice u/s. 148 of the I.T. Act. 1961.
Since, four years has expired from the end of the relevant assessment year, and no scrutiny assessment was completed under Section 143(3) in this case for the said assessment year, the reasons recorded above for the purpose of reopening of assessment is put up kind satisfaction of Addl. Commissioner of Income Tax, Range-14, New Delhi in terms of the proviso of Section 151(2) of the I.T. Act, 1961.
As it transpired subsequently there were at least two glaring errors in the above reasons. The first error was that the AO proceeded on the basis that "no return of income is available in the AST database of Income-tax Department. Therefore, it is clear
that the assessee has not filed return of income for the A. Y. 2004-05 and consequently has not offered any income for taxation." In the assessment order dated 30th December, 2011 passed consequent upon the reopening of the assessment, the very first line states that "the Assessee had filed return declaring income of Rs.4,38,958 on 31/10/2004 which was processed under Section 143(1) of the Act on 04.01.2005."
The second glaring error in the reasons was that the total of the accommodation entries was set out as Rs.1.56 crore. In the same assessment order dated 30th December 2011 in para 2.3 it is stated as under:
"2.3 It is pertinent to mention here that in the reasons recorded there was some clerical error as certain single transactions were appearing in multiple and this resulted in working of the escaped income to the extent of Rs.1,56,00,000/-. However, the same has now been considered and stands corrected for the purposes of completion of proceedings."
7. In para 3.1 of the above assessment order, the AO has set out the information received from the Investigation Wing regarding the alleged bogus accommodation entries pertaining to 16 entities which sum in the aggregate works out to Rs. 78 lakhs.
Mr. Ruchir Bhatia, learned Senior Standing Counsel for the Revenue, relied on the decisions in Income-Tax Officer v. Selected Dalurband Coal Co. Pvt. Ltd. (1996) 217 ITR 597 and ITO v. Purushottam Das Bangur (1997) 224 ITR 362 to urge that at the stage of reopening of the assessment, the AO is not expected to undertake any detailed inquiry; it was sufficient if on the basis of the information received he was prima facie satisfied that a case was made out for reopening the assessment as income had escaped assessment.
However, in neither of the above cases are the facts similar to those in the present case. The two glaring errors in the reasons in the present case are, in fact, unusual. What the AO might have done if he was aware, even at the stage of consideration of reopening of the assessment that a return had in fact been filed by the Assessee and that the extent of the accommodation entries was to the tune of Rs.78 lakh and not Rs.1.56 crore would be a matter of pure speculation at this stage. He may or may not have come to the same conclusion. But that is not the point. The question is of application of mind by the AO to the material available with him before deciding to reopen the assessment under Section 147 of the Act.
As in the above case, even in the present case, the Court is unable to discern the link between the tangible material and the formation of the reasons to believe that income had escaped assessment. In the present case too, the information received from the Investigation Wing cannot be said to be tangible material per se without a further inquiry being undertaken by the AO. In the present case the AO deprived himself of that opportunity by proceeding on the erroneous premise that Assessee had not filed a return when in fact it had.”
As the facts of the case in hand are identical to the facts of the case considered by the Hon'ble High Court of Delhi [supra], we are of the considered opinion that the Assessing Officer has wrongly assumed jurisdiction and accordingly, notice u/s 148 of the Act is hereby quashed thereby quashing the assessment order.
In the result, the appeal of the assessee in is allowed.
The order is pronounced in the open court on 11.06.2020.