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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P. M. Jagtap, Hon’ble Vice- & Shri A.T. Varkey, Hon’ble]
1 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 आयकर अपील�य अधीकरण, �यायपीठ –“A” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH: KOLKATA [Before Shri P. M. Jagtap, Hon’ble Vice-President and Shri A.T. Varkey, Hon’ble Judicial Member] I.T.A. No. 2364/Kol/2019 Assessment Year: 2014-15 DCIT, Circle-6(1), Kolkata Vs. M/s. Coal Sale Co. Ltd. [PAN: AABCC6040N] Appellant Respondent & C.O. No. 46/Kol/2019 Assessment Year: 2014-15 M/s. Coal Sale Co. Ltd. Vs. DCIT, Circle-6(1), Kolkata [PAN: AABCC6040N]
Cross-Objector Respondent
Date of Hearing (Virtual) 02.12.2021 Date of Pronouncement 17.12.2021 For the Appellant Shri P.P. Barman, Addl. CIT (DR) For the Respondent Shri Soumitra Choudhury, Advocate
ORDER PER SHRI A.T. VARKEY, JM: This is an appeal preferred by the revenue and cross-objection by the assessee against the order of Ld. CIT(Appeals)-2, Kolkata dated 17.07.2019 for assessment year 2014-15.
At the outset, it is noted that there is a delay of 37 days in revenue filing the appeal. However, we note that a condonation petition has been filed and after going through the contents of the same, we find the reasons given therein are reasonable for causing delay in the filing the instant appeal. Therefore we condone the delay and admit the appeal for hearing.
The relevant grounds of the appeal of the revenue are as under:
“i. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 4,70,08,000/- by not considering the merit of the case as elaborated by the AO in the assessment order.
2 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 ii. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in holding that all necessary evidences were furnished by the assessee regarding the transactions which is contrary to the findings of the AO in the assessment order. iii. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred has failed to appreciate the fact that by not complying with the summons issued by the AO, the assessee and the party ensured that proper examination of the documentary evidences is not done.” 4. The relevant grounds of the cross-objection of the assessee are as under:
“i. For that the Ld.CIT(A) was justified in holding that all the necessary evidences were furnished by the assessee regarding the transaction at the time of original assessment and the department failed to controvert the same. ii. For that on the facts and in the circumstances of the case the CIT(A) was fully justified in deleting the addition. iii. For that the appeal is liable to be rejected since the department was not aggrieved by the second part of the order of Ld.CIT(A) holding the proceedings u/s 147 as bad in law.” 5. At the outset it is noted that in the cross-objection the assessee has raised a legal issue wherein it challenges the jurisdiction of the AO to reopen the scrutiny assessment which has been completed earlier u/s 143(3) of the Act vide order dated 02.12.2016. Since it is a legal issue we have to examine it first. The AO has noted that the assessment for A.Y. 2014-15 was completed u/s 143(3) on 02.12.2016 wherein its income was assessed at Rs. 2,93,04,710/-. According to the AO, he received an information from the investigation wing of the department and therefore, he issued notice u/s 148 dated 15.03.2018 after recording reasons for reopening and thereafter having served the copy of the reasons recorded and thereafter reproducing the same in the assessment order as well as the statement of Shri Ajit Kumar Jindal which was recorded on 29.10.2014 by the DDIT (INV) UNIT, the AO was pleased to make an addition of Rs. 4,70,08,000/-. According to the AO, Shri Ajit Kumar Jindal was an accommodation entry provider facilitated accommodation entry to the assessee by providing false/bogus bill from his Shell/Paper Company, M/s. Bridge & Building Construction Company Pvt. Ltd. (hereinafter M/s. B&B Pvt. Ltd.)
Aggrieved the assessee preferred an appeal before the Ld.CIT(A) wherein also the assessee had raised this legal issue. However, the Ld.CIT(A) gave relief to the assessee on merits and directed deletion of addition. However, the Ld.CIT(A) did not adjudicate the
3 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 legal issue and kept it open, because he has already adjudicated the assessee’s case on merit and held that “I find force in the argument of the AR of the appellant relating to the grounds of appeal on legal issue, but relief has already been given on merit so the grounds of appeal relating to the legal issue does not require adjudication at this stage”. With this observation, he allowed the appeal of the assessee. This action of the Ld.CIT(A) has been challenged before us.
Assailing the action of Ld. CIT(A) according to Ld. A.R Shri Soumitra Choudhury, though the AO stated that the entry provider Shri Jindal has stated the assessee to be recipient of accommodation entry/or Jindal’s paper company M/s. Bridge & Building Construction Co. Pvt. Ltd. was providing bogus bills to the assessee in lieu of the commission was itself wrong allegation. The Ld AR took us through the statement recorded by the investigation wing as early as on 29.10.2014 (two years before the scrutiny first assessment order on 02.12.2016), which has been reproduced by the AO from page 4 to 7 of the re-assessment order dated 28.12.2018. The Ld. A.R. took us through the question and answers of Shri Ajit Kumar Jindal and brought to our notice that he has not stated anything against the assessee company nor against its directors of the assessee and that the statement is against Shri Uday Shankar Mahawar & Co., M/s. Dotex Merchandise Pvt. Ltd. and thus according to Ld. A.R., there is neither any entry provided nor given any bogus bills to the assessee whereas there are evidences has been placed on record to suggest that the M/s. Bridge & Building Construction Co. Pvt. Ltd. was providing services to the assessee. It was pointed out to us that Shri Purshottam Vyas of M/s. Bridge & Building Construction Co. Pvt. Ltd. was engaged in the complete supervision of the dispatch of Colliery through railways and this fact has been corroborated by third party M/s. Ultratech Cement Ltd. which fact is discernable from perusal of letter confirming the same which is placed at page no. 39 of Paper Book. It has also been brought to our notice that payment were given to M/s. Bridge & Building Construction Co. Pvt. Ltd. after deduction of TDS and the said company is also duly filing the tax return and other statutory return as stipulated by indirect taxation and the relevant records corroborates this fact which has been filed before the AO. According to Ld. A.R Shri Soumitra Choudhury, if the AO had made a preliminary enquiry, then, there was no occasion for
4 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 invoking the jurisdiction to reopen and the AO ought to have dropped it. According to Ld. A.R., a perusal of the reasons recorded by the AO to reopen the assessment would reveal that the same has not met the requirement of law and, therefore, the action of the AO to have reopened the assessment is without jurisdiction and, therefore, it is bad in law. Therefore, since reopening is itself bad in law, all the consequential action is null in the eyes of law, so he want us to quash the re-opening itself.
Per contra, the Ld. Addl CIT, DR Shri P B Barman vehemently opposes the submission of the assessee and submits that when the Investigation Wing report specifically stated that the assessee has taken bogus billing from accommodation entry provider in liu of commission which fact is evident from the statement of Shri Ajit Jindal who was an entry operator, therefore the present AO has rightly issued notice u/s. 148 of the Act and, therefore, he does not want us to interfere in the order of the Ld. CIT(A) upholding the action of reopening by the AO.
We have heard rival submissions and gone through the facts and circumstances of the case. Before we examine the legal issue one should bear in mind that the concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments should not be disturbed which is the Rule and exception to this Rule is that it can be done only when there is information or evidence/material before him regarding undisclosed income or the AO has information in his possession showing escapement of chargeable income and when Parliament allows such an action, which can be done only if the condition precedent stipulated therein is strictly satisfied.
Attention is sought to the provisions of section 147 of the Act which is reproduced here- under:-
"If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment: year)……… "
5 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15
Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” 10. Hon’ble Bombay High Court in the case of Prashant S. Joshi (2010) 230 CTR 232 (Bom) has observed ‘The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice u/s 147”. In other words, reasons have to be recorded for reopening the assessment prior to issuance of notice u/s 148 of the Act. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor any thing can be deleted from the reasons so recorded. The Hon’ble Bombay High Court in the case of Hindustan Lever [2004] 267 ITR 332 hasinteralia, observes that “………….. it is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reason not recorded by him. He has to speak through the reasons.” Their Lordship added that “The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion & the evidence………”. Therefore reasons are to be examined only on the basis of the reasons as recorded.
The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment; all that is necessary is the formation of prima facie belief that an income has escaped the assessment; and it is not necessary the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the AO can form the belief that an income has escapement. Merely because some further investigation have not been carried out, which if made, could have led to detection to an
6 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 income escaping assessment, cannot be reason enough to hold the view that income has escaped assessment. It is also important to bear in mind the subtle but important distinction between factor which indicate an income escaping the assessment and the factors which indicates a legitimate suspicion ‘about income escaping the assessment.” The former category consists of the facts which, if established to be correct, will have a cause & effect relationship with the income escaping assessment. The later category consists of facts, which , if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. In order to validly reopen, the requirement is that there has to be some kind of cause & effect relationship between reasons recorded and the income escaping assessment. While dealing with this matter it is useful to bear in mind the following observation of Hon’ble Supreme Court in ITO vs. LakhmaniMewal Das [1976] 103 ITR 437 wherein the Hon’ble Supreme Court has taken note of the additional condition precedent required as per first proviso u/s 147 for reopening the assessment after four (4) years . The relevant portion has held as follows: “The reasons for the formation of the belief must have a rational connection with or relevant bearing of the formation of the belief . Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and the formation of his belief that there has been escapement of income of the assessee from the assessment in the particular year because of his failure to disclose fully & truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material & substitute its own opinion for that of the ITO on the point as to whether actions should be initiated for reopening assessment. At the same time we have to bear in mind that it is not that any or every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee.”
Sec. 116 of the Act also defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise their powers given to them in specified circumstances. If power conferred on a particular authority are arrogated by another authority without mandate of law, it will create chaos in the administration of law & hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires a thing to be done in a certain manner, it shall be done in that manner alone and the court would not expect its being done in some other manner. It was also held in the decision in State of Bihar vs .J.A.C. Saldanha & Ors. Reported in AIR 1980 SC 326 .
7 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 Satisfaction recorded should be ‘independent’ and not borrowed or dictated satisfaction. In the decisions reported in (1995) 5 SCC 302 it was held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to his own discretion. If discretion is exercised under the direction or compliance with some higher authorities instruction, then it will be a cases of failure to exercise discretion altogether.
In the case of Ganga Saran and Sons P. Ltd. v. ITO, [1981] 130 ITR 1 (SC) the Hon’ble Supreme Court held: “It is well settled as a result of several decision of this Court that two distinct condition must be satisfied before the AO can assume jurisdiction to issue notice u/s 147. First he must have reason to believe that the income of assessee has escaped assessment. – The important words under Section 147(a) are “has reason to believe” & these words are stronger than the words “is satisfied”. The belief entertained by AO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant & material. The Court of course cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the AO in coming to the belief the Court can certainly examine whether the reason are relevant and have a bearing on the matter in regard to which he is required to entertain the belief before he can issue notice u/s 147(1). If there is no rational and intelligible nexus between the reasons & the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the AO could not have reason to believe that any part of the assessee had escaped assessment refer 203 ITR 456 (SC) also). 18. Here it is important to understand one more aspect that information adverse may trigger “reason to suspect”, then the AO to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. The statutory mandate/condition precedent for an AO to exercise his power is that he should have reason to believe escapement of income. Before an AO proposed to reopen an assessment he should record his reasons as to how he has formed the belief about the escapement of income. In this respect, it is settled that “Reason to believe” postulates a foundation based on information and a belief based on reason. After a foundation based on information, is made there still must be some reason which should warrant the holding of a belief that income chargeable to tax has
8 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 escaped income. In this context it must be remembered that Hon’ble Supreme Court in M/s Ganga Saran & sons (P) Ltd. vs. 130 ITR 1 (SC) has held that the expression “Reason to believe” occurring in section 147 of the Act “is stronger” than the expression “is satisfied” and such jurisdictional requirement has to be met by the AO before he usurp the jurisdiction to re- open an assessment.
In the light of the aforesaid well settled principles governing the reopening of assessment, we need to examine as to whether the AO has rightly invoked the reopening jurisdiction. For that we have to examine whether there was reason to believe escapement of income and whether such requirement has been met by the AO in the reasons recorded in the instant cases or not. For that we have to look at the reasons recorded by the AO for reopening the assessment in case of the assessee / M/s. Coalsale Company Limited for AY 2014-15 u/s 147 of the Act. The reasons recorded by the AO to reopen are as under:
“1. The Assessee company M/s Coalsale Company Limited is engaged in trading of coal Assessment u/s 143(3) of the I T Act was completed on 02/12/2016. Income was assessed at Rs. 2,93,04,710/- thereby raising demand of Rs. 44,70,380/-. 2. Subsequently information received from DDIT (INV) UNIT-3(2) KOLPCATA that during the course of search & seizure operation carried out against Kolkata base “Bathwal Group” and one Entry Operator Shri Ajit Kumar Jindal, it was found that the said entry operator was engaged in facilitating pre-arranged accommodation entries o: bogus billing to various beneficiaries on commission through shell companies managed and controlled by him viz. 1. Aravinda Infrastructure Pvt. Ltd. 2. BBC Projects Services Pvt. Ltd. 3. Bridge & Building Construction Co. Pvt. Ltd. 4. Silverlak Marking Pvt. Ltd which was also accepted and confirmed by the said entry operator namely Shri Ajit Kr Jindal in his statement recorded u/s 132(4) of the I.T. Act 1961 on oath. A detailed list of beneficiaries has also been provided along with the statement under oath of Shri Ajit Kr. Jindal along with the shared information wherein the name assessee company i.e. name M/s Coalsale Company Limited is mentioned. 3. It is found form the statement of Ajit Kr. Jindal that he has facilitated pre-arranged accommodation entries of bogus billing to various beneficiaries through different paper/ bogus/ shell companies controlled by him viz. M/s Bridge & Building Pvt. Ltd. It is clear from his sworn statement that such entries are also given to the assessee company through said paper/ shell company viz. M/s Bridge & Building Pvt. Ltd. While explaining the modus it is stated by the entry operator that bogus bills are issued b; companies controlled by him against which cheques are issued by the interested parties which is rotated in few layers after which cash is withdrawn & returned back to the concerned party after deducting his commission. 4 . It is found from the facts available in the form of shared statement and information that the assessee has engaged concerned entry operator namely Shri Ajit Kumar Jindal to avail accommodation entry of bogus billing It is also found that the statement of same Entry operator was also recorded earlier on 29-10-2014 m which he had accepted the fact of being engaged in providing bogus accommodation entry in lieu of commission through some companies controlled by him and that of his being director of few such companies including M/s. Bridge & Building Pvt. Ltd.
9 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 5. It is clear from the information available on record as discussed above that the assessee M/s Coalsale Company Limited, assessed to this charge, has availed accommodation 'entry of Bogus Billing through shell companies amounting to Rs. 470.08 lakh (Rs. 267.58 + Rs. 202.50 Lakh) during F.Y. 2013-14 which is facilitated by accommodation Entry Operator Shri Ajit Kumar Jindal through his shell company namely Bridge & Building Construction Pvt. Ltd. The said entry operator Shri Ajit Kumar Jindal & Others same has also accepted on oath in his statements recorded u/s 132(4) that the company M/s Bridge & Building Construction Company Pvt. Ltd. is controlled and managed by him and is involved in providing Bogus Billing to the beneficiaries in lieu of Commission. Importantly, Ajit Kr. Jindal is a director of M/s Bridge & Building Construction P/t. Ltd from February, 2003 till date who is a legally competent person to comment about the affairs of the said company and who himself has accepted in his sworn statement that this is a paper company which is used as an instrument of facilitating pre- arranged accommodation entry by him. It has been found that the assessee company M/s Coalsale Company Limited has availed the bogus - billing accommodation entry through Bridge & Building Construction via bank account no. 60102000065812 of IDBI Bank Brabourne Road. 6. Based on the above facts, the undersigned has reasons to believe -that transactions have been made by M/s Coalsale Company Limited in order to adjust the income/Losses in their return of income which needs to be added to in their income. Hence the undersigned considers the above case fit for issue of Notice u/s 148 of the I.T. Act for Assessment Year 2014-15. 7. In this case a return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 02/ 12/2016. Since, 4 years from the end of the relevant year has not expired in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above.”
From a perusal of the first para of the reasons recorded it is noted that the AO has recorded that the assessment in this case was completed u/s 143(3) of the Act which is a fact and has nothing to do with escapement of income. In the second para the AO refers to some information from DDIT (Inv.) Unit 3(2) with regard to the search and seizure operation in the case of a third party i.e. Shri Ajit Kumar Jindal. The AO further refer that the said person was engaged in facilitating pre-arranged accommodation entries of bogus billing and has further referred to some list of beneficiaries in which the assessee’s name is there. [Please Note: However, it was brought to our notice that neither the alleged statement formed part of the “reasons recorded” nor the alleged list beneficiaries was therein. And the fact that the AO has also not recorded in the reasons that he had gone through the said statement and the list of the beneficiaries and that the name of the assessee appeared in the alleged list. So according to Ld. A.R. this para only states about a hearsay that assessee is a beneficiary]
Para 3 it is noted to be the modus-operandi adopted by the entry provider. The AO in para 3 observes that Shri Ajit Kumar Jindal being an entry provider, gives bogus bills through his shell companies to the beneficiaries and cheques given to these shell
10 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 companies are later returned back as cash to the beneficiaries after deduction of commission..
A perusal of para 4, it is noted that the AO states that the assessee has availed the service of entry provider Shri Ajit for providing it with bogus billing from his company, M/s. Bridge & Building Pvt. Ltd. and again repeated about the admission made by Shri Ajit Kumar Jindal that he was an entry provider.
The AO in para 5 refers to the transaction of assessee with M/s. Bridge & Building Pvt. Ltd. to the tune Rs. 470.08 lakhs and alleges it to be accommodation entry availed by the assessee in the form of bogus billing. This according to AO is based on the statement of Shri Ajit Kumar Jindal recorded by the Investigation Wing on 29.10.2014 wherein he admitted to be an accommodation entry provider through his entities in lieu of commission. And the AO notes in this para the bank account number of M/s. Bridge & Building Pvt. Ltd. wherein the assessee had transferred the amount.
In para 6 the AO states on the aforesaid facts, he has reason to believe that assessee has made transaction in order to adjust the income/loss in its return of income (RoI), which needs to be added to their income and in para 7 he says that Explanation 2(c) is attracted and he has taken the approval of Add./Jt.CIT for sanction to issue notice u/s 148 of the Act.
So on the strength of the aforesaid reasons recorded the AO has assumed jurisdiction to reopen the assessment made u/s 143(3) of the Act dated 2.12.2016. So when we have to adjudicate as to whether the AO had validly assumed the reopening jurisdiction, then we have to examine the ‘reasons recorded’ by him as it is on a standalone basis and see whether the reasons stated therein are relevant and have a bearing on the matter in regard to which he is required to entertain the belief before he assumed the reopening jurisdiction by issuance of notice u/s 148 of the Act. And the essential test is when we examine the reasons recorded by the AO to reopen, if we find that there is no rational and intelligible nexus between the reasons and the belief, the conclusion would be inevitable that AO could not have reason to believe that any part of the assessee’s income had escaped assessment. Keeping this principle also in mind when we examine the validity
11 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 of jurisdiction of the AO to re-open we have to see whether there was ‘reasons to believe’ (escapement of income). Reason to believe postulates a foundation based on information and a belief based on reasons. After a foundation based on information, is made, there still must be some reason which should warrant holding a belief that income chargeable to tax has escaped assessment. So firstly we have to see whether in the reasons recorded by the AO there was any information on which a foundation could be based upon; and if this condition is satisfied i.e. a foundation based on information is there, then the next step, is to see whether there is reasons which should warrant holding the belief that income chargeable to tax has escaped assessment. Here, it has to be kept in mind the assessee’s scrutiny assessment u/s 143(3) was completed on 02.12.2016 and the information which the AO relies on is the statement of Shri Ajit Kumar Jindal was recorded as early as on 29.10.2014 (i.e. 2 years before). A reading of the reason recorded by the AO as discussed and analysed reveals that information from the Investigation Wing only says about the statement of Shri Ajit Kumar Jindal who on 29.10.2014 has admitted before them, that he is providing accommodation entry through his entities which includes M/s. Bridge & Building Pvt. Ltd. Accordingly to Shri Ajit Kumar Jindal his entities gives bogus bills in lieu of commission and the cheques given by the beneficiaries are returned back as cash. Taking note of this statement which was recorded when the Income Tax Department searched him along with “Bathwal Group” he has made the admission of being an entry provider. The Investigation Wing on the strength of his admission has taken out the transaction made by Shri Ajit Kumar Jindal’s entities viz. M/s. Bridge & Building Pvt. Ltd. and found that assessee had transaction with M/s. Bridge & Building Pvt. Ltd., so this information was passed on to the AO, who on receipt of it has jumped to the conclusion that since assessee had transacted with M/s. Bridge & Building Pvt. Ltd. and then assessee is a beneficiary who availed for the bogus bills which was paid through bank to it and later got it back as cash as per the modus-operandi admitted by Shri Ajit. According to us, from the discussion made, we note from the reasons recorded that nowhere assessee’s name has been said by specifically said by Shri Ajit Kumar Jindal adversely. And since the assessee had transacted with M/s B & B Ltd. which is through banking channel, the AO relying on Shri Ajit Kumar Jindal’s general statement that he is also an entry provider, has assumed that assessee is a beneficiary of accommodation entry. According to us, when the AO
12 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 receives information of such nature from investigation wing it certainly raises suspicion. Then the AO cannot and should not straight away issue notice u/s 148 of the Act and assume jurisdiction to reopen the assessment. Why because, there is subtle difference between ‘reason to suspect’ and ‘reason to believe’. Information adverse may trigger “reason to suspect” then the AO to make reasonable enquiry and collect material, which would make him believe that there is in fact an escapement of income. However the essential condition precedent to re-open, the requirement of law is “Reason to believe” and not ‘Reasons to suspect”. So when AO receives, such information, then it can be the starting point of preliminary enquiry and the AO cannot straight away assume jurisdiction to reopen, so according to us, the AO erred in jumping to the conclusion that assessee’s income has escaped assessment on receipt of the information that a company run by Shri Ajit Jindal had transaction with assessee. Simply because the assessee had transaction with M/s B & B Pvt. Ltd., cannot be the basis to believe escapement of income, unless there is any material there to suggest that so called assessee’s transaction was bogus & the cheque given by assessee had been returned as cash to assessee. Thus in the facts discussed and based on the analysis of the reason recorded by the AO according to us, the AO could not have formed a belief that income chargeable to tax has escaped assessment. Simply because Shri Ajit stated once that he is an entry provider doesn’t mean that all his actions through his controlled companies are doing only wrong things. It has to be kept in mind that the maxim “Falsus in uno falsus in omnibus’ meaning false in one thing is false in everything has no application in India as held by Hon’ble Supreme Court in Gangadhar Behera vs. State of Orissa (2002) 8 SCC 381. Here in this case the information from Investigation Wing is only that Shri Ajit has admitted to be providing accommodation entry to “Bathwal Group” and to beneficiaries. However, when we examine the jurisdiction of AO, we have to look at the ‘reasons recorded’ on a standalone basis. So in the absence of the list of beneficiaries attached to the reasons recorded on the statement of Shri Ajit, we do not find the name of assessee as beneficiary. Just because, the assessee had transaction with M/s B & B Pvt. Ltd., cannot be a ground to believe that assessee’s income has escaped assessment. Without any other material as discussed the conclusion drawn by the AO merely on receipt of the aforesaid information does not muster the requirement of law to validly form the reason to believe escapement of income. According
13 ITA No. 2364/Kol/2019 & C.O. 46/Kol/2019 M/s. Coal Sale Co. Ltd., AY 2014-15 to our considered opinion the jurisdictional requirement ‘reason to believe’ escapement of income has not been met in the reason recorded in the instant case. Therefore, the assessee succeeds in its legal challenge, so we quash it.
In the result, the appeal of the revenue is dismissed and the cross-objection of the assessee is allowed.
Order is pronounced in the open court on 17th December, 2021.
Sd/- Sd/-
(P.M. Jagtap) (A. T. Varkey) Vice-President Judicial Member Dated: 17th December, 2021
Biswajit, Sr. PS
Copy of the order forwarded to: 1. Appellant- DCIT, Circle-6(1), Kolkata. 2. Respondent – M/s. Coal Sale Co. Ltd., 4th Floor, 2, Brabourne Road, Kolkata – 700001. 3. The CIT(E)- Kolkata (sent through e-mail) 4. CIT- Kolkata 5. DR, Kolkata Benches, Kolkata (sent through e-mail)