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Income Tax Appellate Tribunal, DELHI ‘C’ BENCH,
Before: MS. SUSHMA CHOWLASHRI N.K. BILLAIYA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER,
This appeal by the assessee is preferred against the order of the
Commissioner of Income Tax [Appeals] – XXXII, Delhi dated 31.07.2012
pertaining to assessment year 2006-07.
The substantive grievance of the assessee relates to the
assumption of jurisdiction u/s 147 of the Income-tax Act, 1961
[hereinafter referred to as 'The Act'] for framing the assessment order
u/s 143(3) r.w.s 147 of the Act and the other grievances relate to the
additions made in reassessment proceedings
The representatives of both the sides were heard at length, the
case records carefully perused and with the assistance of the ld.
Counsel, we have considered the documentary evidences brought on
record in the form of Paper Book in light of Rule 18(6) of ITAT Rules.
Judicial decisions relied upon were carefully perused.
Briefly stated, the facts of the case are that return of income
declaring income of Rs. 1,92,74,350/- was filed by the assessee on
15.12.2006. Return was subjected to scrutiny assessment and the
assessment was framed u/s 143(3) of the Act vide order dated
10.07.2008.
Subsequently, a notice u/s 148 of the Act was issued and served
upon the assessee. Reasons for reopening the assessment read as
under:
“Reasons for issue of notice u/s 148 in the case of M/s Spice Global Pvt Ltd (A. Y. 2006-07)
Assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 on 10.07.2008 by the DCIT, Circle 19(1), New Delhi at the returned income of Rs. 192,74,350/-, the return of income having been filed on 15.12.2006. Subsequently the jurisdiction over this case was transferred to f this Circle vide the Commissioner’s of Income Tax, Delhi-Ill, New Delhi order I u/s 127 dated 01.09.2008.
It has been noticed that during the previous year 2. relevant to the 'assessment year 2006-07 the assessee company has been found to have made transactions amounting to Rs. 3.05.22.660/- with M/s Camsoft (India) Pvt Ltd and M/s BT Technet Ltd of the group of companies managed and controlled by Sh. S. K. Gupta. The details of such transactions are as tabulated below:
Name of the company Particulars manaqed & stated in controlled by the Invoice Sh. S. K. Sr NO bill/invoice No/bill no Date Amount Gupta
Cam Soft (India) Pvt. Development 2005- 1 Ltd. of Software 06/09/52 30/09/2005 800000 Cam Soft Development 2005- (India) Pvt. 2 of Software 06/09/50 28/09/2005 3150000 Ltd. Software 2005- BT Technet usages 3 Ltd. charges 2006/07/53 25/07/05 3520032 Software 2005- usages BT Technet 5177693 7/10/2005 I charges 4 Ltd. 2006/10/83 Software usages 2005- 1924225 BT Technet 18/11/05 charges 5 Ltd. 2006/11/187 Software 2005- BT Technet usages 6 Ltd. charges 2006/12/192 8/12/2005 1397430 Software 2005- BT Technet usages 7 Ltd. charges 2006/01/201 4/1/2006 1917305 Software 2005- BT Technet usages 8 Ltd. 2006/02/219 5/2/2006 2028788 charges
Software 2005- usages 9 BT Technet Ltd. charges 2006/03/234 3/3/2006 2750469 Software 2005- usages 10 BT Technet Ltd. 2006/03/308 30/03/06 2819245 charges Software 2005- usages 11 BT Technet Ltd. 2006/12/192 8/12/2005 1318378 charges Software 2005- usages 12 BT Technet Ltd. 2006/11/187 18/11/05 1866105 charges BT Technet Ltd. Software 2005- usages 13 2006/01/201 1852990 charges 4/1/2006 Total 3052266
A such a search & seizure action was conducted on 12-12-2006 at business and residential premises of Shri S.K. Gupta along with various concerns in which he and his family members were interested. Similarly action u/s 132 of IT Act, 1961 was conducted in the case of various companies-— owned or controlled by him and also in the case of different individuals connected with the said companies. During the course of the search operation, it was found that a large number of companies were being operated and controlled by Shri S.K Gupta from his main office premises at H- 108, Connaught Place. M/s Cam so ft (India) Pvt Ltd and M/s BT Technet Ltd are two of such companies.
These companies had ostensibly been created for providing a variety of services ranging from consultancy to advertising to Software development. Accordingly bills/invoices had been
issued in the names of these companies but in fact no actual services had been rendered by them to the beneficiaries. During the course of search it was found that Shri S.K Gupta did not have the necessary infrastructure or the requisite manpower to provide the actual services and thus it became evident that the companies controlled by him were merely engaged in the business of issuing accommodation bills to other entities TAT the other office premises of Shri S.K Gupta at 231 Gulmohar—1 Enclave, huge number of such accommodation invoices/bills issued by the '“T various Companies were found and seized during the course of search. Apart from these invoices/bills, there was no other evidence which was found from any of the premises which would suggest that actual services were being rendered by any of the companies controlled by Shri S.K Gupta. No documentary or written evidence in support of genuineness of these transactions was found during the course of search which leads to the obvious conclusion that the companies controlled by Shri S.K Gupta were engaged in the business of issuing accommodation bills only.
The fact of providing accommodation entries gets further strengthened by the statements and inquires conducted by the department. Shri S.K Gupta has admitted in his statement recorded in the, course of search proceedings that bills were raised in the names of various companies by his group concerns, the cheques were received but cash was returned to the respective parties or cheque payments were made to them
through other group entities. Sh Gupta has admitted that his group concerns/companies were engaged in providing accommodation entries of the following nature:
Providing accommodation sales / expenses bills to the (i) beneficiary companies
(ii) Providing accommodation investment entriesin the forms of share capital and/or loans to the beneficiary companies
(ii) During the course of the assessment proceedings also, it was proved beyond doubt that the companies/concerns of S.K Gupta Group were engaged in the accommodation entry business and not doing any genuine u sale & purchase as claimed in the final account statements annexed with their respective returns of income. The said concerns/companies found to have not maintained any regular books of account, sale & purchase and expenses vouchers, as such the book results shown by them were rejected by taking recourse to provisions of section 145 (3) of IT Act 1961. These concerns/companies have failed to establish that any genuine business activity was being carried out other than the accommodation entry business.
No physical evidence of supporting infrastructure was found by the investigation wing at the time of search or subsequently during the assessment proceedings. As a result it became clear that the concerns / companies of SK Gupta Group of cases have not done any genuine business and they were simply engaged in providing accommodation entries in the form of sales / expenses bills and investment entries of
share capital / loans.
The undersigned has, therefore, reasons to believe that the transactions amounting to Rs. 3,05,22,660/- claimed to have been carried out by the assessee company with M/s Camsoft (India) Pvt Ltd and BT Technet Ltd during the previous year relevant to the assessment year 2006 07 are of the nature of accommodation entries and that income to this extent has escaped assessment.
Dated the 8th of June, 2010 (D. K.Chauhan) Dy. Commissioner of Income Tax Central Circle-9, New
A perusal of the aforesaid reasons for reopening the assessment
show that completed assessment has been reopened pursuant to the
search and seizure action conducted at the business and residential
premises of one Shri S.K. Gupta on 12.12.2006. Similar actions were
conducted in the case of various companies owned / controlled by Shri
S.K. Gupta and his family members. There is a reference to two
companies, namely, M/s CFAM Soft [India] Pvt Ltd and M/s BT TechNet
Ltd. Nowhere in the reasons for reopening assessment there is a
mention of what relationship Shri S.K. Gupta or any of his family
members had with these two companies and whether they were
shareholders having substantial interest, or MDs/Directors of these
companies.
The reasons further show that huge number of accommodation
invoices/bills issued by various companies in which Shri S.K. Gupta or
his family members had interest were found and seized. Though there
is a reference to the statement of Shri S.K. Gupta who has admitted in
his statement that the bills were raised in names of various companies
by his group concerns. Cheques were received but cash was returned
to the respective parties or cheque payments were made to them
through other group entities. But, there is no reference to which the
companies Shri S.K. Gupta was referring to.
As mentioned elsewhere, on the strength of the statement of Shri
S.K. Gupta and some material seized from his premises, the Assessing
Officer formed a belief that the transactions with M/s CFAM Soft
[India] Pvt Ltd and M/s BT TechNet Ltd. done by the assessee were not
genuine transactions but only accommodation bills were taken from
them and hence reopening was justified.
During the course of original assessment proceedings, the Assessing Officer raised specific queries in relation to transactions done with the aforementioned two companies and reply of the assessee reads as under:
Dear Sir, The captioned case is fixed for hearing before your goodself today. As required vide your questionnaire dated, we are pleased to submit as under:
The detail of addition to Fixed Assets, as required vide query no. 11 of the questionnaire, alongwith copies of all the bills is enclosed herewith and marked as Annexure-I.
The required copies of Acknowledgements alongwith necessary detail towards filing of quarterly TDS Return on form no 26Q for all the four quarters are enclosed herewith and collectively marked as Annexure-II, as required by your goodself vide query no. 19 of the questionnaire.
The required detail of major expenses in the case of following is enclosed herewith and marked as Annexure-III: Computer Maintenance Expenses Consultancy charges Electricity/ DG running expenses Office Maintenance expenses Recruitment & Training Expenses Software Royalty Transportation charges
Vehicle expenses Travelling expenses The relevant bills and vouchers in connection with the above expenses are produced for your necessary verification and perusal please.
We hope your goodself will find the above in order. In support of the above all the Books of Accounts and vouchers are produced for your necessary verification and perusal please.”
Exhibits 23 to 34 of the paper books are copies of invoices/bills
supporting the genuineness of the transactions. Vide letter dated
30.04.2008, the assessee also filed a confirmation in connection with
the payment of software charges from M/s BT TechNet Ltd.
It can be seen that specific queries were raised during the
original assessment proceedings to which specific replies were filed
alongwith supporting documentary evidences. It is the say of the ld.
DR that the Assessing Officer did not make any enquiries and has
accepted the bills/invoices. We fail to understand what prevented the
Assessing Officer to make necessary enquiries as per provisions of law.
Neither the Assessing Officer issued any notice u/s 133(6) of the Act
nor he cared to summon the officers of the two companies u/s 131 of
the Act.
A perusal of the assessment order framed u/s 143(3) r.w.s 147 of
the Act shows that entire assessment order is devoid of any reference
to the statement of Shri S.K. Gupta. It is not known as to what
question Shri S.K. Gupta said that M/s CFAM Soft [India] Pvt Ltd and
M/s BT TechNet Ltd. were providing accommodation bills. Further, we
find that the entire transactions have been done through A/c payee
cheques and it is not the case of the Revenue that the appellant has
purchased the accommodation bills by making payments through
cheques and receiving cash through back door.
It is pertinent to mention here that search operations at the
premises of Shri S.K. Gupta were conducted on 12.12.2006 and original
assessment order was framed u/s 143(3) of the Act vide order dated
10.07.2008. This means that the Assessing Officer had sufficient time
to gather information relating to search conducted at the premises of
Shri S.K. Gupta and yet the Assessing Officer accepted the transactions
without making any enquiry.
In our considered opinion, reasons for reopening the assessment
are nothing but change of opinion which is not permissible as per the
ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator
of India Ltd 320 ITR 561 as no new tangible material was in possession
of the Assessing Officer. Therefore, notice u/s 148 of the Act is bad in
law and assessment framed pursuant to the notice is also bad in law.
It would be pertinent to refer to the judgment of the Hon'ble
High Court of Delhi in the case of Meenakshi Overseas Pvt. Ltd 395 ITR
677, the relevant part of which reads as under:
“19. A perusal of the reasons as recorded by the AO reveals that there are three parts to it. In the first part, the AO has reproduced the precise information he has received from the Investigation Wing of the Revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material.
Coming to the second part, this tells us what the AO did with the information so received. He says: "The information so received has been gone through." One would have expected him to point out what he found when he went through the information. In other words, what in such information led him
to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that "the abovesaid instruments are in the nature of accommodation entry which the Assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver)". The AO adds that the said accommodation was "a known entry operator" the source being "the report of the Investigation Wing".
The third and last part contains the conclusion drawn by the AO that in view of these facts, "the alleged transaction is not the bonafide one. Therefore, I have reason to be believe that an income of Rs. 5,00,000 has escaped assessment in the AY 2004-05 due to the failure on the part of the Assessee to disclose fully and truly all material facts necessary for its assessment... "
As rightly pointed out by the ITAT, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the Assessee on his paying "unaccounted cash" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be "a known entry operator"
is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom.
Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. Otherwise the link goes missing.
The reopening of assessment under Section 147 is a potent power not to be lightly exercised. It certainly cannot be invoked casually or mechanically. The heart of the provision is the formation of belief by the AO that income has escaped assessment. The reasons so recorded have to be based on some tangible material and that should be evident from reading the reasons. It cannot be supplied subsequently either during the proceedings when objections to the reopening are considered or even during the assessment proceedings that follow. This is the bare minimum mandatory requirement of the first part of Section 147 (1) of the Act.
At this stage it requires to be noted that since the original assessment was processed under Section 143 (1) of the Act, and not Section 143 (3) of the Act, the proviso to Section 147 will not apply. In other words, even though the reopening in the present case was after the expiry of four years from the end of the relevant AY, it was not necessary for the AO to show that there was any failure to disclose fully or truly all material facts necessary for the assessment.
The first part of Section 147 (1) of the Act requires the AO to have "reasons to believe" that any income chargeable to tax has escaped assessment. It is thus formation of reason to believe that is subject matter of examination. The AO being a quasi judicial authority is expected to arrive at a subjective satisfaction independently on an objective criteria. While the report of the Investigation Wing might constitute the material on the basis of which he forms the reasons to believe the process of arriving at such satisfaction cannot be a mere repetition of the report of investigation. The recording of reasons to believe and not reasons to suspect is the pre- condition to the assumption of jurisdiction under Section 147 of the Act. The reasons to believe must demonstrate link between the tangible material and the formation of the belief or the reason to believe that income has escaped assessment.
Each case obviously turns on its own facts and no two cases are identical. However, there have been a large number of cases explaining the legal requirement that requires to be satisfied by the AO for a valid assumption of jurisdiction under Section 147 of the Act to reopen a past assessment.
28.1 In Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra), the reasons for reopening as recorded by the AO in a proforma and placed before the CIT for approval read thus:
"11. Reasons for the belief that income has escaped assessment.- Information is received from the DIT (Inv.-1), New Delhi that the assessee has introduced money amounting to Rs. 5 lakh during the F.Y. 2002-03 relating to A.Y. 2003- 04. Details are contained in Annexure. As per information amount received is nothing but accommodation entry and assessee is a beneficiary."
28.2 The Annexure to the said proforma gave the Name of the Beneficiary, the value of entry taken, the number of the instrument by which entry was taken, the date on which the entry was taken, Name of the account holder of the bank from which the cheque was issued, the account number and so on.
28.3 Analysing the above reasons together with the annexure, the Court observed:
"14. The first sentence of the reasons states that information had been received from Director of Income-Tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lacs during financial year 2002-03 as per the details given in Annexure. The said Annexure, reproduced above, relates to a cheque received by the petitioner on 9th October, 2002 from Swetu Stone PV from the bank and the account number mentioned therein. The last sentence records that as per the information, the amount received was nothing but an accommodation entry and the assessee was the beneficiary. 15. The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is 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 giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment."
28.4 The Court in Signature Hotels Pvt. Ltd. v. Income Tax Officer (supra) quashed the proceedings under Section 148 of the Act. The facts in the present case are more or less similar. The present case is therefore covered against the Revenue by the aforementioned decision.
29.1 The above decision can be contrasted with the decision in AGR Investment v. Additional Commissioner of Income Tax (supra), where the 'reasons to believe' read as under:
"Certain investigations were carried out by the Directorate of Investigation, Jhandewalan, New Delhi in respect of the bogus/accommodation entries provided by certain individuals/companies. The name of the assessee figures as one of the beneficiaries of these alleged bogus transactions given by the Directorate after making the necessary enquiries. In the said information, it has been inter-alia reported as under: "Entries are broadly taken for two purposes:
To plough back unaccounted black money for the purpose of business or for personal needs such as purchase of assets etc., in the form of gifts, share application money, loans etc. 2. To inflate expense in the trading and profit and loss account so as to reduce the real profits and thereby pay less taxes. It has been revealed that the following entries have been received by the assessee:...."
29.2 The details of six entries were then set out in the above 'reasons'. These included name of the beneficiary, the beneficiary's bank, value of the entry taken, instrument number, date, name of the account in which entry was taken and the account from where the entry was given the details of those banks. The reasons then recorded:
"The transactions involving Rs. 27,00,000/-, mentioned in the manner above, constitutes fresh information in respect of the assessee as a beneficiary of bogus accommodation entries provided to it and represents the undisclosed income/income from other sources of the assessee company, which has not been offered to tax by the assessee till its return filed. On the basis of this new information, I have reason to believe that the income of Rs. 27,00,000/- has escaped assessment as defined by section 147 of the Income Tax Act. Therefore,
this is a fit case for the issuance of the notice under section 148."
29.3 The Court was not inclined to interfere in the above circumstances in exercise of its writ jurisdiction to quash the proceedings. A careful perusal of the above reasons reveals that the AO does not merely reproduce the information but takes the effort of revealing what is contained in the investigation report specific to the Assessee. Importantly he notes that the information obtained was 'fresh' and had not been offered by the Assessee till its return pursuant to the notice issued to it was filed. This is a crucial factor that went into the formation of the belief. In the present case, however, the AO has made no effort to set out the portion of the investigation report which contains the information specific to the Assessee. He does not also examine the return already filed to ascertain if the entry has been disclosed therein.
30.1 In Commissioner of Income Tax, New Delhi v. Highgain Finvest (P) Limited (2007) 164 Taxman 142 (Del) relied upon by Mr. Chaudhary, the reasons to believe read as under:
"It has been informed by the Additional Director of Income Tax (Investigation), Unit VII, New Delhi vide letter No. 138 dated 8 th April 2003 that this company was involved in the giving and taking bogus entries/ transactions during the
financial year 1996-97, as per the deposition made before them by Shri Sanjay Rastogi, CA during a survey operation conducted at his office premises by the Investigation Wing. The particulars of some of the transaction of this nature are as under: Date Particulars of cheque Debit Amt. Credit Amt 18.11.96 305002 5,00,000
Through the Bank Account No. CA 4266 of M/s. Mehram Exports Pvt. Ltd. in the PNB, New Rohtak Road, New Delhi. Note: It is noted that there might be more such entries apart from the above. The return of income for the assessment year 1997-98 was filed by the Assessee on 4th March 1998 which was accepted under Section 143 (1) at the declared income of Rs. 4,200. In view of these facts, I have reason to believe that the amount of such transactions particularly that of Rs. 5,00,000 (as mentioned above) has escaped the assessment within the meaning of the proviso to Section 147 and clause (b) to the Explanation 2 of this section. Submitted to the Additional CIT, Range -12, New Delhi for approval to issue notice under Section 148 for the assessment year 1997-98, if approved."
30.2 The AO was not merely reproducing the information received from the investigation but took the effort of referring to the deposition made during the survey by the Chartered Accountant that the Assessee company was involved in the giving and taking of bogus entries. The AO thus indicated what the tangible material was which enabled him to form the reasons to believe that income has escaped assessment. It was in those circumstances that in the case, the Court came to the conclusion that there was prima facie material for the AO to come to the conclusion that the Assessee had not made a full and true disclosure of all the material facts relevant for the assessment.
In Commissioner of Income Tax v. G&G Pharma (supra) there was a similar instance of reopening of assessment by the AO based on the information received from the DIT (I). There again the details of the entry provided were set out in the 'reasons to believe'. However, the Court found that the AO had not made any effort to discuss the material on the basis of which he formed prima facie view that income had escaped assessment. The Court held that the basic requirement of Section 147 of the Act that the AO should apply his mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. Likewise in CIT-4 v. Independent Media P. Limited (supra) the Court in similar circumstances invalidated the initiation of the
proceedings to reopen the assessment under Section 147 of the Act.
In Oriental Insurance Company Limited v. Commissioner of Income Tax 378 ITR 421 (Del) it was held that "therefore, even if it is assumed that, in fact, the Assessee�s income has escaped assessment, the AO would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. In absence of the jurisdictional pre- condition being met to reopen the assessment, the question of assessing or reassessing income under Section 147 of the Act would not arise."
In Rustagi Engineering Udyog (P) Limited (supra), it was held that "...the impugned notices must also be set aside as the AO had no reason to believe that the income of the Assessee for the relevant assessment years had escaped assessment. Concededly, the AO had no tangible material in regard to any of the transactions pertaining to the relevant assessment years.
Although the AO may have entertained a suspicion that the Assessee’s income has escaped assessment, such suspicion could not form the basis of initiating proceedings under Section 147 of the Act. A reason to believe - not reason
to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. "
Recently in Agya Ram v. CIT (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or materials on record..." It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments."
In the decision of this Court dated 16th March 2016 in W.P. (C) No. 9659 of 2015 (Rajiv Agarwal v. CIT) it was emphasized that "even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment."
The Hon'ble High Court finally concluded as under:
“36. In the present case, as already noticed, the reasons to believe contain not the reasons but the conclusions of the AO one after the other. There is no independent application of mind by the AO to the
tangible material which forms the basis of the reasons to believe that income has escaped assessment. The conclusions of the AO are at best a reproduction of the conclusion in the investigation report. Indeed it is a 'borrowed satisfaction'.
The reasons fail to demonstrate the link between the tangible material and the formation of the reason to believe that income has escaped assessment.
For the aforementioned reasons, the Court is satisfied that in the facts and circumstances of the case, no error has been committed by the ITAT in the impugned order in concluding that the initiation of the proceedings under Section 147/148 of the Act to reopen the assessments for the AYs in question does not satisfy the requirement of law.
The question framed is answered in the negative, i.e., in favour of the Assessee and against the Revenue. The appeal is, accordingly, dismissed but with no orders as to costs.”
In another case of RMG Polyvinyl India Ltd the Hon'ble
Jurisdictional High Court in 396 ITR 5 has held as under:
“Information received from Investigation Wing could not be said to be tangible material per se without a further inquiry being undertaken by the Assessing Officer to establish link between tangible material and formation of reason to believe that income
had escaped assessment and consequently, re assessment was unjustified.”
Considering the facts of the case in hand in the light of judicial
discussions discussed hereinabove, we are of the considered opinion
that the notice issued u/s 148 of the Act is bad in law and hence the
same is set aside. The assessment so framed is quashed.
For the sake of completeness of the adjudication, we will now
address to the merits of the case. As mentioned elsewhere, the
assessee has purchased software from M/s CFAM Soft [India] Pvt Ltd
and M/s BT TechNet Ltd. The ld. DR vehemently stated that after the
completion of assessment of these two companies, the Assessing
Officer came to know that these two companies were providing
accommodation bills and the assessee is one of the beneficiaries.
However, we find that during the course of assessment proceedings
also, the assessee filed confirmations from these two companies
relating to the transactions done with them. The Assessing Officer did
not even confront the assessee with his findings given in the case of
these two companies nor did he make any enquiry in respect of the
confirmations filed by the two companies.
As mentioned elsewhere, the assessee is into the business of call
centre services and the nature of business activities is such that it
requires latest and upgraded software. If the assessee did not
purchase any new upgraded software and has only taken
accommodation bills, then we fail to understand how the assessee
generated revenue of Rs. 5.33 crores in F.Y. 2004-05 which jumped to
Rs. 12.45 crores during the year under consideration. There is not
even an iota of evidence produced on record by the Assessing Officer
to demonstrate that even the sales of call centre services are bogus.
The Assessing Officer has accepted the net profit as per the
books of account and merely on surmises and conjectures, treated the
purchase of software as bogus yet allowing depreciation on software
which is evident from the fixed assets schedule at page 8 of the paper
book. In our considered view, since there is no demonstrative
evidence brought on record to justify that the software purchase is
bogus, we do not find any merit in the additions made by the Assessing
Officer and accordingly, we direct the Assessing Officer to delete the
impugned additions.
Before parting, the ld. DR tried to buttress his submissions by
filing a gist of unreported cases. The ld. counsel for the assessee was
not in a position to distinguish the facts of his case with the facts of
unreported decisions. Therefore, we decline to accept the gist of
unreported cases.
In the result, the appeal of the assessee in ITA No.
4993/DEL/2012 is allowed.
The order is pronounced in the open court on 31.12.2019.
Sd/- Sd/-
[SUSHMA CHOWLA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 31st December, 2019
VL/