BRAND INDIA REAL ESTATE PRIVATE LIMITED,JAIPUR vs. INCOME TAX OFFICER WARD 6(1), JAIPUR

vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.

This is an appeal filed by the assessee against the order of ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi, dated 08.01.2025 passed under section 250 of the I.T. Act, 1961, for the assessment year 2012-13. The said order of the ld. CIT (A), NFAC arises against the order 21.11.2019 passed under section 147/143(3) of the Income Tax Act, 1961 by ITO Ward 6(1), Jaipur.

2. The assessee has raised the following grounds of appeal :-

1. That on the facts and in the circumstances of the case and in law the ld. CIT (A) grossly erred in confirming the addition of Rs. 50,00,000/- made by the ld. Assessing Officer by treating share capital and premium thereon received from the various parties as bogus and added to the total income of the assessee.

2. That on the facts and in the circumstances of the case and in law the ld. CIT (A) grossly erred in confirming the proceeding u/s 148 of the Act initiate by the ld. Assessing Officer when the assessee was already assessed u/s 143(3) of the Act and all material were provided before the ld. Assessing Officer.

3. That on the facts and in the circumstances of the case and in law the ld. CIT (A) grossly erred in re-opening and confirming the assessment on the basis of information received from Investigation wing, without providing the material evidence and statement recorded u/s 132 of the Act of Shri Mukwesh Banka during the search proceeding and without providing the opportunity of cross examination to the assessee appellant.

4. The appellant craves leave to add, alter, modify or amend any ground on or before the date of hearing.”

3. The brief facts of the case are that the assessee company filed its Return of Income under section 139(1) of the Income Tax Act, 1961 declaring income at Rs. (-) 9464/- on 21.03.2014 which was assessed under section 143(3) on 26.11.2014 at returned income. Later on, specific information was received from DDIT (Inv.) Unit 1(3), Kolkata regarding accommodation entries taken by the assessee company during the year under consideration. Thereafter, the case of the assessee was reopened under section 148 of the Income Tax Act, 1961, by issuing notice under section 148 dated 30.03.2019 solely on the basis of information received from DDIT (Inv.) Unit 1(3), Kolkata, after recording reasons to believe that income has escaped assessment. The notice was issued after taking necessary approval from the Principal Commissioner of Income Tax-2, Jaipur under section 151 of the IT Act, 1961. In the reasons recorded for reopening of the assessment it is alleged that assessee company had taken some accommodation entries from some paper/shell companies for the purpose of tax evasion.Thereafter, show cause notice was issued on 05.11.2019. In response to notice under section 148, the assessee filed its return of income on 08.11.2019 declaring the income as returned originally. The AO again issued show cause notice 13.11.2019 requiring the assessee to explain the amount of entry taken by the assessee along with documentary evidence i.e. copies of ITRs of the lenders, confirmation of money given by them and copies of their bank statements for the year under consideration, in support of its claim, from the following parties :-

S.No. Name of entry provider group Amount of entry taken by assessee 1. Paper/Shell companies of Mukesh Banka Group 1. Agrani Credit &Finvest Private Limited Rs. 10,00,000/- 2. Harsharatna Finance & Investment Private Limited Rs. 15,00,000/- 3. Newedge Realtors Private Limited Rs. 10,00,000/- 4. Snowfall Impex Private Limited Rs. 10,00,000/- 2. Ultimate Share Broking Private Limited & Other relates Rs. 15,00,000/- companies 3. M/s. Alves Securities Private Limited & Other related Rs. 10,00,000/- companies 4. M/s. Ability Securities Private Limited & Other related Rs. 20,00,000/- companies

5. M/s. Orchid Trexim Private Limited & Other related companies Rs. 15,00,000/- Total : Rs. 1,05,00,165/- Thereafter notice under section 143(2) of the IT Act, 1961 was issued on 18.11.2019 requiring the assessee to produce documentary evidences in support of the return filed by the assessee. However, no compliance was made by the assessee. In the course of assessment proceedings, the AO noted that the assessee company has issued 36,664 shares at Rs. 150/- per share having face value of Rs. 10/share at a premium of Rs. 140 per share thus the assessee company has introduced its own undisclosed income Rs. 55,00,000/- in the garb of share capital of including share premium from the following five companies which are proven paper/shell companies as per the reports of the investigation wing : S. No. Name of Company Shares Amount Allotted 1 Harsharatna Finance & Investment Pvt. Ltd 10,000 15,00,000 2 Liberal Infrastructure Private Limited 6,666 10,00,000 3 ShowfallimpexPvt. Ltd. 6,666 10,00,000 4 Newedge Realtors Pvt Ltd 6,666 10,00,000 5 Agrani Credit and Finvest Pvt Ltd 6,666 10,00,000 Total 36,664 55,00,000 During the reassessment proceedings the AO considered various documents available with him and completed the assessment under section 147/143(2) of the IT Act, 1961 vide his order dated 21.11.2019 by making an addition of Rs. 55,00,000/- and assessed the total income at Rs. 54,90,536/- against returned income of Rs. (-) 9,464/-. Being aggrieved by the order of AO, the assessee filed an appeal before the ld. CIT (A), who dismissed the appeal of the assessee by observing in para 6.1.1 of his order, as under :-

“6.1.1 Now before me in the appellate proceedings, the appellant filed written submission. I have gone through the written submission and the case laws relied upon by the appellant. The identity, the creditworthiness and genuineness of the transaction have not been proved before the AO and the before me in the appellate proceedings. Time and again, the appellant has mentioned that the statement was later on retracted by Mr. Mukesh Banka. The appellant should have made efforts to prove the financial transaction, the nature of work done by the companies and the creditworthiness of the companies giving share capital and share premium, but it has not been done in the submission of the appellant. Hon. Delhi High Court in famous decision of PCIT vs. N.R. Portfolio has confirmed the addition made by the AO on the identical issue of bogus share capital and premium. In this case SLP has been dismissed by Hon. Supreme Court. Hon. Supreme Court in the decision of PCIT vs. NRA Iron & Steel has confirmed the addition made by the Revenue in the cases of bogus share capital and share premium from the Shell Companies. Hence, relying upon two decisions as mentioned above, the addition of the AO is confirmed and appeal of the appellant is dismissed.”

Feeling dissatisfied from the above order of the ld. CIT (A), the assessee has come in appeal before the Tribunal on the grounds reproduced herein above. 4. Before us, the ld. AR of the assessee submitted the ground-wise written submissions as were made before the first appellate authority in support of its case, which are being reproduced hereunder :- “Submission of assessee on each ground of appeal

1. Ground No 1: - Regarding validity of reopening of the assessment.

1.1. In view of the proviso to section 147 of the IT Act, no action can be taken for reopening of an assessment after four years unless the AO has reason to believe that income had escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In absence of this pre-condition, the reopening is mere change of opinion.

1. The assessment proceeding of the assessee for the year under consideration was originally completed u/s 143(3) of I. Tax Act, 1961 vide order dated 26.11.2014 (Copy at PB Page 120-124). During the course of original assessment proceedings, the query on the issue on which the case is reopened i.e. share capital raised during the year, was duly raised in the questionnaire issued dated 04.11.2014 (Point No.8) (Copy at PB Page 15-16). The assessee duly replied (along with the documentary evidences such as share application form, bank account statement and financial statements of the applicants) for the same in reply dated 11.11.2014 and 24.11.2014 (Copy at PB Page 17-20). During the course of original assessment proceedings, the following documents relating to the identity, genuineness and creditworthiness of all the share investor companies were duly submitted: - (i) Share application containing the name/address/PAN of share Applicant Company and detail of payment received etc., which is itself a confirmation of finds given to the assessee company. (ii) Bank statement of share applicant showing the entry of payment made to assessee company. (iii) Acknowledgement of ITR of AY 2012-13. (iv) Audit report, audited balance sheet along with its annexure of 31.03.12.

After examination of the documents filed by the assessee and being satisfied with that the ld. AO did not raise any further query on this issue and accepted the share application received during the year as genuine. Thus, during the course of original assessment proceedings the issue, on which the reassessment proceeding was initiated, was duly raised, examined and verified by then AO. Therefore, after 31/03/2017 the reassessment proceeding in this case can be taken only if income chargeable to tax has escaped assessment for such assessment year by the reason of failure on the part of the assessee (i) to make the return u/s 139/142(1)/148 or (ii) to disclose fully and truly all material facts necessary for his assessment for that assessment year.

2. Also, the re-opening in this case is cover by the first proviso to section 147 of the IT Act, 1961. As per provisions of this section no action could be taken u/s 147 of the IT Act after expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment.

In the present case, during the course of original assessment proceedings the assessee had filed complete details of share application money received during the year along with supporting documents, wherein after scrutinizing the details so filed no adverse inference was drawn in respect of anyone. Thus, there was no failure on the part of the assessee to disclose any material, which was now in possession of ld. AO while initiating the re-assessment proceedings. In the reasons, as recorded by Ld. AO no whispering has been made that the assessee has failed to disclose fully and truly all material facts necessary for the assessment. In the material/reports etc., which relied by Ld. A.O. in the assessment order there is no positive material to show that the assessee had taken any accommodation entry. Hence such re-opening of a completed assessment, beyond a period of four years from the relevant assessment year, without pointing any default of the assessee to disclose all necessary facts, is illegal, unjustified.

3. Thus, the re-opening initiated vide notice dated 30.03.2019 to re-visit an already scrutinized and decided issue, under the grab of section 147 is legally bad in law and prohibited by various judicial pronouncements. The obligation of the assessee is to disclose fully and truly the primary or material facts during the course of assessment proceedings which has been done by the assessee during the course of assessment proceedings u/s 143(3) of Income Tax Act, 1961. The assessee has fulfilled its duties by disclosing fully and truly all material fact and documents/books necessary for assessment. It is not obligation of the assessee to indicate and state what the legal inference can be drawn from such facts. In the present case, there was no indication that the assessee had failed or omitted to disclose the material or primary facts and all these facts were already available on record. There is no allegation in the reasons so recorded that there was any subsequent factual information on the basis of which it was found that the assessee had not fully disclosed the primary facts or had falsified or disclosed incorrect primary facts.

b) The assessee not only filed the copy of its own annual report and audited P&L A/c and balance sheet along with return of income but also filed the ample detail & documents in respect of share application. Therefore, the observation of ld. AO that “the requisite full and true disclosure of all materials facts necessary for assessment has not been made as noted above” is completely perverse. Something which could be discovered by due diligence of ld. AO but not done than such fault could not be fasten on part of the assessee and the same do not empower to revenue authorities to play a second inning by taking the shelter of section 148 of I Tax Act. Without prejudice to above submission it is submitted that Hon’ble Supreme Court in CIT vs. Corporation Bank Ltd. (2002) 254 ITR 791 (SC) has held that disclosure in balance sheet also amounts to disclosure. c) From the assessment record of original assessment proceedings and as submitted in forgoing paras in is apparent that during the course of original assessment proceedings this issue by duly raised by ld. AO, replied by assessee and verified by then AO. Thus, this issue was duly examined during the course of original assessment proceeding and the finding of ld. AO that “It is evident from the above discussion that in this case, the issues under consideration were never examined by the AO during the course of regular assessment/reassessment.” is completely perverse, dehors the material available in the assessment record of original proceedings and perhaps made without actually examining the assessment record of original proceedings.

5. Thus, the re-opening after expiry of four years in absence of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment and in absence of any fresh material is illegal, unjustified and bad in law. The information received from some other authority without making own inquiry cannot constitute the new material. In this regard the reliance is placed on following judgments: - i) Hon’ble Rajasthan High Court in the case of CIT, Udaipur V/s Hindustan Zinc Ltd [2017] 393 ITR 264 Reopening of assessment - claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA - Held that:- The assessee had made true and full disclosure of all relevant facts relating to the claim of additional depreciation and also in respect of claim for grant of deduction under Section 80 IA. A separate audit report in the prescribed form 10CCB in support of the claim for deduction under Section 80IA/80IB was also duly submitted. The assessee had also submitted reply pursuant to all queries made by AO during the assessment proceedings under Section 143(3) of the Act. In this view of the matter, the contention sought to be raised by the Revenue about non-disclosure on the basis of the failure on the part of the assessee in mentioned bifurcated amount of additional depreciation allowable in the depreciation chart is absolutely baseless. It is to be noticed that all that has been said by the AO is that after scrutiny assessment, it was observed that assessee has made incorrect claim of additional depreciation on CPP whereas, the claim for additional depreciation on CPP was allowed by the AO while framing the assessment under Section 143(3) after conscious consideration of the material on record. It is not even the case of the Revenue that the formation of the belief regarding the escapement of the assessment by the AO is based on any new material coming on record. Apparently, the formation of the belief by the AO regarding escapement of the assessment is based on re-appreciation of the material already available on record at the time of scrutiny assessment which amounts to mere change of opinion. Obviously, in the garb of purported exercise of the power to reassess, the AO cannot be permitted to review his own order or the order passed by his predecessor. Thus, the finding arrived at by the ITAT that the reassessment proceedings initiated by the AO by mere change of opinion is patently illegal, cannot be faulted with.

The ITAT having arrived at the categorical finding that reopening of the completed assessment without any fresh material, merely on the basis of change of opinion of the AO, is without jurisdiction and erroneous, the appeal preferred by the Revenue has rightly been dismissed as having become infructuous. - Decided in favour of assessee ii) Parashuram Pottery Works Co. Limited Versus Income-Tax Officer, Circle I, Ward A, Rajkot [1977] 106 ITR 1 (SC) Hon’ble Supreme Court has specifically considered the issue and has held that the responsibility of the assessee is only to place the materials before the assessing officer and the assessee would not be responsible for the inferences made by the assessing authority on the basis of the materials that he has placed before the concerned authority. As further held by the Apex Court that a change in the opinion or a later decision on the legal aspects cannot be a reason for re-opening an assessment which has been concluded on the basis of the material which is made available in cases where the re-opening is attempted after 4 years, unless the assessee failed to disclose relevant information. iii) In the case of Calcutta discount Co. Ltd. vs. Income-tax Officer, Companies District I, Calcutta, (1961) 41 I.T.R.191 (SC), the Hon'ble Supreme Court while dealing with the ambit and scope of the provisions of Section 34 of the Indian Income Tax, 1922, which were similar to the provisions of Section 147 of the Act of 1961 explained the purports of Section 34,asunder:- “To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been underassessed. The second is that he must have also reason to believe that such “under- assessment”, has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years, from the end of the year in question.” The Hon'ble Supreme court further observed that it is duty of every assessee to disclose fully and truly all material facts necessary for his assessment. But, his duty does not extend beyond this. The Hon'ble Supreme Court opined that once all primary facts are before the Assessing Authority, he requires no further assistance by way of disclosure . It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. iv) In the matter of Income Tax Officer, I Ward Distt. VI, Calcutta V/s. LakhmaniMewal Das, (1976) 103 ITR 437, the Hon'ble Supreme Court has observed as under: “Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income- tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did not hold the belief that there had been such non-disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of the reasons for the belief. The expression “reason to believe” does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretense. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a court of law.” The Hon'ble Supreme Court further observed :- “As stated earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on 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 Income -tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts.” (emphasis supplied) (v) In Income Tax Officer Ward No. 16 (2) V. M/S Techspan India Private Ltd. &Anr. (2018) 4 SCR 328, the Hon’ble Supreme Court discussed the concept of change in opinion and held that:- “The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words ‘reason to believe’ in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of same facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said provision was incorporated in the scheme of the IT Act so as to empower the Assessing Authorities to re-assess any income on the ground which was not brought on record during the original proceedings and escaped his knowledge; and the said fact would have material bearing on the outcome of the relevant assessment order.

(ix) Bhot Industries Ltd V/s ACIT (2004) 267 ITR 161 (Bomb.), Reassessment—Full and true disclosure—Notice after expiry of four years—Assessments for the relevant years were completed under s. 143(3) after detailed investigation—Reliefs under ss. 80HH, 80HHA and 80-I were granted on the basis of particulars furnished by the assessee— Reasons recorded do not allege any failure on the part of the assessee to disclose fully and truly all material facts required for the assessments in question—Basic requirement for reopening of assessments beyond the period of four years from the end of the relevant assessment years thus not satisfied—Therefore, impugned notices under s. 148 issued on the basis that the claim for deduction under ss. 80HH, 80HHA and 80-I was not fully examined are quashed and set aside (x) CIT (Addl) V/s IFCI (2001) 248 ITR 192 (Del.) Reassessment—Validity—Change of opinion—Factual position noted by AAC and the Tribunal clearly goes to show that assessee had not failed or omitted to disclose the primary facts and that the ITO had considered the entire material at the time of original assessment—Therefore, Tribunal was right in holding that ITO had no jurisdiction to reopen the assessment (xi) CIT V/s Elgi Ultra Industries Ltd (2008) 296 ITR 573 (Mad.) Reassessment—Full and true disclosure—Notice after expiry of four years—In case where the assessment is completed under s. 143(3) the reopening of the assessment under s. 148 beyond the period of four years from the end of the relevant assessment year can be sustained only if it is established that there is a failure on the part of the assessee to disclose fully and truly all material facts—In this case there is no finding that there is failure on the part of the assessee to disclose fully and truly all material facts—All the material facts were available at the time of making original assessment—Therefore, Tribunal was justified in holding that the reopening of assessment is bad in law—No substantial question of law arises for consideration—CIT vs. Foramer France (2003) 185 CTR (SC) 512 : (2003) 264 ITR 566 (SC) and CIT vs. Elgi Finance Ltd. (2006) 205 CTR (Mad) 241 : (2006) 286 ITR 674 (Mad) followed.

(xii) The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. Aventis Pharma Ltd. vs. ACIT (2010) 323 ITR 570 (Bom)

(xiii) Other relied upon judgments on this issue: - a) CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 248 CTR 33 (Delhi)(High Court). b) CIT v. Multiplex Trading & Industrial Co Ltd (2015) 128 DTR 217 (Delhi)(HC) c) Pr. CIT v G. Pharma India Ltd.[2017] 384 ITR 147 (Delhi) (H C) d) CIT vs. Insecticides (India) Ltd. (2013) 357 ITR 300 (Del.)(HC) e) CIT v/s Meenakshi Oversea’s Pvt Ltd (2017) 395 ITR 677(Del) (HC) f) CIT vs. Fair Invest Ltd. (2013) 357 ITR 146 (Del.)(HC)

1.2 The information received from other authority cannot be considered as material for reopening:- 1. In view of submission made hereinabove, there was no failure on the part of the assessee to disclose any material, which was now in possession of ld. AO while initiating the re-assessment proceedings. Hence such re-opening of a completed assessment, beyond a period of four years from the relevant assessment year, without pointing any default of the assessee to disclose all necessary facts, is illegal, unjustified. The re-opening after expiry of four years in absence of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment and in absence of any fresh material is illegal, unjustified and bad in law. The information received from some other authority, which is not backed with any evidence and without making own inquiry on part of ld. AO cannot constitute the new material. It is well settle position of law that the ld. AO cannot be guided for his decisions by what the other officer preparing the report/information says. As per section 119 (1) (a) even the CBDT cannot issue directions or instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner.

2. In this regard the reliance is placed on latest judgement of Hon’ble Delhi High court in the case of SABH Infrastructure Limited[2017] 398 ITR 198, wherein the court gave the following finding: - “Analysis and Findings

11. Thus, it is also now well settled that the reasons to believe have to be self-explanatory. The reasons cannot be thereafter supported by any extraneous material. The order disposing of the objections cannot act as a substitute for the reasons to believe and neither can any counter affidavit filed before this court in writ proceedings.

12. In the present case, the reasons to believe contained the names of the very same five companies which were initially disclosed by the Petitioner during the assessment proceedings. The number of shares subscribed to by the said companies is the same and the amount received has been disclosed by the Assessee. There is no new material which has been found or mentioned in the reasons to believe which were not contained in the information provided by the Assessee prior to the conclusion of assessment under Section 143 (3) of the Act.

(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; (iv) the exercise of considering the Assessee’s objections to 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 for reopening of the assessment beyond what has already been disclosed.” Against the above decision, the revenue filed the SLP in Hon’ble supreme court which was rejected by the court and the case is reported in [2024] 461 ITR 339 (SC).

3. Further the reliance is also placed on the judgment in the case of Digital Mesh Softech India Pvt. Ltd., U.S. Technology International Private Limited Versus Union of India and Others [2024] 461 ITR 223 (Ker), wherein it was held that: - Re-opening of assessment u/s 147 - notice beyond period of four years - change in the opinion or a later decision on the legal aspects - reason for the re-assessment is that the assessee was not entitled to the exemption u/s 10B of the IT Act by reason of it not having an approval from the relevant authority, as provided in the explanation to the section - HELD THAT:- There is no contention that the assessee had originally withheld any information from the assessing authority. It is not contended that the assessee had suppressed any material or had not made available the approvals during the assessment or had induced the assessing authority to come to a wrong conclusion by any failure on the part of the assessee to disclose the relevant details. Apparently, what has occurred was a mistake on the part of the assessing authority in accepting the approval produced by the assessee to be an approval as required under Explanation 2 to Section 10B. It appears that later, the High Court of Delhi [2012 (9) TMI 627 - DELHI HIGH COURT] had held that the approval for the purpose of Section 10B can only be an approval granted by the Board constituted by the Central Government under the provisions of Industries (Development and Regulation) Act. This judgment of the Delhi High Court is the reason cited in respect of all the re-assessments. However, neither in the notices or the assessment orders, nor in the counter affidavit is it stated that the assessee had failed to disclose any relevant information or had produced any fraudulent material during the assessment proceedings. The Apex Court in Parashuram Pottery Works Co. L.t.d v. Income Tax Officer [1976 (11) TMI 1 - SUPREME COURT] has specifically considered the issue and has held that the responsibility of the assessee is only to place the materials before the assessing officer and the assessee would not be responsible for the inferences made by the assessing authority on the basis of the materials that he has placed before the concerned authority. As further held by the Apex Court that a change in the opinion or a later decision on the legal aspects cannot be a reason for re-opening an assessment which has been concluded on the basis of the material which is made available in cases where the re-opening is attempted after 4 years, unless the assessee failed to disclose relevant information. In the cases before us the respondents have no case that the income chargeable to tax during the relevant assessment years had escaped assessment because of the failure on the part of the assessee to disclose any relevant material. It apparently is a case where the assessing authority had gone wrong in granting exemptions which were not liable to be granted in terms of the provisions of the statutes. If that be so, the 1st proviso would prevent the authorities from reopening the assessment after 4 years from the close of the assessment year, unless the income had escaped assessment on account of the failure of the assessee.

4. Other cases: - a) Insecticides (India) Ltd. [2013] 357 ITR 330 (Delhi) b) Krown Agro Foods (P) Ltd. [2015] 375 ITR 460 (Delhi) c) RMG Polyvinyl (I) B Ltd. [2017] 83 taxmann.com 348 (Delhi)

1.3. The notice was issue solely based on information received from DDIT and the ld. AO has not applied his mind. The reasons recorded for reopening of assessment are erroneous and bad in law. The A.O. must have valid “reasons to believe” and the reasons must have the rational and a direct nexus and are intelligible and acceptable in law. In this case the AO had no reason to believe that any income chargeable to tax has escaped assessment in the hands of the assessee as required u/s 147 of the I.T. Act. Therefore, notice issued u/s 148 in bad in law, illegal and therefore deserves to be quashed, entire exercise of jurisdiction by the learned AO is without jurisdiction, and the assessment order deserves to be set aside and annulled.

1. From the reasons recorded for issue of notice u/s 148 of I. Tax Act (Copy at PB Page 132) it is clear that the case of the assessee was reopened solely based on information received DDIT (Inv.) Unit 1(3), Kolkatta. From the reasons recorded, it is well apparent that before initiating the reassessment proceeding, the ld. AO did not make any independent inquiries. In the reasons so recoded Page 2, Para 4 the ld. AO himself mention, “Since the enquiry has already been made by investigation unit, no further enquiry is required at this stage”. Thus, the reassessment proceedings were initiated by blindly relying on the information of report of some other authorities and even the ld. AO did not apply his own mind on such information to find out actual substance of such information from the income of the assessee.Hon’bleDelhe High Court in the case of PCIT V/s RMG Polyvinyl (I) Limited 396 ITR 5 has held as under: - Reopening of assessment - reasons to believe - accommodation entries addition - Held that:- 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. To compound matters further the in the assessment order the AO has, instead of adding a sum of ₹ 78 lakh, even going by the reasons for reopening of the assessment, added a sum of ₹ 1.13 crore. On what basis such an addition was made has not been explained. This Court is satisfied that no error was committed by the ITAT in holding that reopening of the assessment under Section 147 of the Act was bad in law. - Decided in favour of assessee.

2. It is further submitted that the validity of initiation of reassessment proceedings has to be judged with regard to the material available with the assessing officer and that too by framing the opinion strictly based on the documents and information in possession, that certain income has escaped assessment and not in a mechanical manner as has been done in the case in hand. The re- opening of the case based on the borrowed satisfaction on the information provided by some other official without in any manner recording his own independent satisfaction deserves to be held illegal. In this regard reliance is placed on judgment of full bench of Hon’ble Delhi High Court in the case ofCommissioner of Income Tax Vs. Kelvinator of India Ltd. reported as 256 ITR 1 has held that one of the pre conditions for reopening is that the Assessing Officer must have ‘reason to believe’ that income chargeable to tax has escaped assessment. The relevant extract of the observations of Hon’ble High Court in this regard are as under : “7. From a bare perusal of the provisions contained in s. 147 of the said Act, as it stood up to 31st March, 1989, it is evident that to confer jurisdiction under s. 147(a) of the Act two conditions were required to be satisfied viz., (i) the AO must have reason to believe that income chargeable to tax has escaped assessment; and (2) he must also have a reason to believe that such escapement occurred by reason of either (a) omission or failure on the part of the assessee to make a return of his income under s. 139; or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. The afore- mentioned requirements of law must be held to be conditions precedent for invoking jurisdiction of the AO to reopen the assessment under s. 147 of the said Act. It is trite that both the conditions afore-mentioned are cumulative. It is also a well settled principle of law that, in the event, it is found that any of the said two conditions is not fulfilled the notice issued by the AO would be wholly without jurisdiction. The expression "reason to believe" finds place both in cls. (a) and (b) of s. 147 of the Act. Sub-s. (2) of s. 148 of the Act mandates that before jurisdiction under s. 147 of the Act is invoked by the AO he is to record his reasons for doing so or before issuing any notice under s. 147 of the said Act. Therefore, formation of reason to believe and recording of reasons were imperative before the AO could reopen a completed assessment.”

From the perusal of above observations of Hon’ble High Court it is unambiguous clear that ‘reason to believe’ that income chargeable to tax has escaped assessment should be of Assessing Officer. It is Assessing Officer’s ‘reason to believe’ that taxable income has escaped assessment that forms bedrock for reopening assessment u/s. 147 of the Act. Information from other authority cannot in any manner be construed as Assessing Officer’s ‘reason to believe’ for initiating reassessment proceedings. The provisions of section 147 in unambiguous terms mandates that the ‘reason to believe’ for reopening assessment should be of Assessing Officer. In other words, the Assessing Officer should carryout independent exercise to examine fresh material in his possession to come to a conclusion that the assessment warrants reopening on account of escapement of income. In the present case, a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions of section 147 of the Act. The Assessing Officer has issued notice u/s. 148 on the basis of report of DDIT. Therefore, the notice issued u/s. 148 is bad in law and thus, the subsequent proceedings arising there from are vitiated

3. Hon'ble Gujarat High Court in the case of Seth Brothers Vs. CIT reported in 169 CTR 519 has laid down following principles for re-opening of the assessment u/s 148 of the Income Tax Act, 196 l : (Reproduced in 28 TW 57,79) “(a) There must be material for belief.

(b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. (c) Reason to believe must be honest and not based on suspicion, gossip, rumor or conjuncture. (d) Reasons referred must disclose the process of reasoning by which he holds ‘reasons to believe ' and changeof opiniondoes not confer jurisdiction to reassess. (e) There must be nexus between material and belief. (f) The reasons referred must show application of mind by the assessing officer.

The validity of initiation of reassessment proceedings has to be judged with regard to the material available with the officer at the point of lime of issue of notice u/s 148 and cannot be sought to be substantiated by reference to material that may have come to light subsequently in the course of reassessment proceedings.

3. In the light of finding of above judgments and of plethora of other judgments, it’s submitted that there was no material with the AO for having reasons to believe that the income as chargeable to tax, has escaped assessment.

4. In this regard, it is submitted that, in the pretended reason to believe of escapement of income it has been alleged that the assessee has taken accommodation entries to the extent of Rs. 1,05,00,165/- but from the reasons so recorded it is not clear that how such accommodation entries were introduced in books of accounts of assessee. There is no whispering in the reasons so recorded that whether such entries were in form of share application or unsecured loans or in other form. This shows that the ld. AO blindly relied on the information received from some other authority and before proceeding for re-assessment proceeding did not apply his own mind to verify the genuineness and correctness of such information. Even the Ld A.O. not bother to analyze the Balance Sheet of the assessee before initiating reassessment proceeding. Had the balance sheet of the assessee would have been analyzed in the light of the information received, it would be clear that the total size of the balance sheet of the assessee is only of Rs. 59,63,545/- (Copy of balance sheet at PB Page 8), comprising share capital & reserves Rs. 55,55,905/-, short term borrowings Rs. 4,00,000/- and trade payables Rs. 8,000/-,then how it can be beneficiary of the accommodation entry of Rs. 1,05,00,165/-.

The ld. AO maintained the same reasons to believe during almost entire assessment proceedings and in each & every show cause notices, issued during re-assessment proceedings, he intended for the addition of Rs. 1,05,00,165/- on a/c of alleged bogus unsecured loans obtained in the form of accommodation entries, while actually no such unsecured loans were ever taken by the assessee company. This happened in spite when the assessment proceedings had already been completed u/s 143(3) of the Act and the record of such proceeding was available to ld. AO. This position continued till the issuance of last show cause notice dated 13.11.2019 (Copy at PB Page 136-138) and all the sudden in the assessment order passed on 21.11.2019 i.e. only after seven days of last show cause notice the addition of Rs. 55,00,000/- was made on accounted of alleged accommodation entries in the garb of investment made by the various companies. This resulted perhaps because the ld. AO only applied his own mind only while passing the assessment order and prior to that he was blindly relying to the information received from the DDIT. Thus, the initiation and subsequent progress of reassessment proceeding was on the different footing & quantum and finally the addition was made of different footing & quantum. From initiation of the assessment proceeding and just before to its conclusion the ld. AO was in state of mind that the assessee is beneficiary of Rs. 1,05,00,165/- in the form of alleged accommodation entries (form of such accommodation entries not known)/bogus unsecured loans while in the assessment order addition of Rs. 55,00,000/- was made on accounted of alleged accommodation entries in the garb of investment made. Further in the present case, total sum of Rs. 1,05,00,165/- alleged to be received in the form of accommodation entries from following companies: - S. Name of Entry Provider Group Amount No. 1 Paper / Shall Companies of Mukesh Banka Group 1. Agrani Credit &Finvest Private Limited Rs. 10,00,055/- 2. Harsharatna Finance & Investment Private Rs. 15,00,055/- Limited 3. Newedge Realtors Private Limited Rs. 10,00,000/- 4. Snowfall Impex Private Limited Rs. 10,00,055/- 2 Ultimate Share Broking Private Limited & Rs. 15,00,000/- Other related companies 3 M/s Alves Securities Private Limited & Other Rs. 10,00,000/- related companies 4 M/s Ability Securities Private Limited & Other Rs. 20,00,000/- related companies 5 M/s Orchid Trexim Private Limited & Other Rs. 15,00,000/- related companies Total Rs. 1,05,00,165/- However, in fact, which is verifiable from the material available on record with ld. AO at the time of reopening of the assessment proceedings, during the year under scrutiny the assessee has not received any unsecured loans from the abovementioned parties. During the year under scrutiny, from the parties as appearing in the list provided by ld. AO the assessee has received share application money only from following parties: -

S. No. Name Amount

1 Harsharatna Finance & Investment Private Limited Rs. 15,00,000/- 2 Snowfall Impex Private Limited Rs. 10,00,000/- 3 Newedge Realtors Private Limited Rs. 10,00,000/- 4 Agrani Credit &Finvest Private Limited Rs. 10,00,000/- Total Rs. 45,00,000/- Share application of Rs. 10,00,000/- was also received from the company M/s Liberal Infrastructure Private Limited but against this company there was no material with Ld. A.O. of whatsoever nature and despite to that this sum was added as income of the assessee. On the basis of information given to ld. AO by DDIT, it alleged that accommodation entry from 8 entities have been received by the assessee and on the basis of that ld. AO had formed a reasoned to believe that: "I have pursued the information received and material available on record and I am satisfied that assessee company has taken accommodation entries of Rs. 1,05,00,165/- for the purpose of tax evasion.” This conclusion is unhelpful in understanding whether the Assessing Officer applied his mind to the materials that he talks about particularly since he did not describe what was those material was and what evidences were available therein to prove the reason to believe of ld. AO to be correct. Even the basis fact was not examined by ld. AO that whether any amount from such 8 entities were received to the assessee or not. From the material available on record, the fact crops out that out of from 8 entities listed & alleged in the reasons to believe the assessee received share application money from 4 entities only. This wrong believe recorded because of only a single reason that the ld. AO blindly relied on the information of DDIT and he did not apply his own mind thereon and also did not make any short of verification at his own end. In the considered view of the courts, in light of the law explained with sufficient clarity, the basic requirement that the Assessing Officer must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case. In the present case, it is apparent that ld. AO officer has not applied his mind to the information provided by the DDIT to the extent that even the amount received by the assessee was not even verified. Thus, the Ld. A.O. without examining above mentioned vital facts reopened the case of the assessee solely on the basis of some information which is not backed with any evidence/material and also not conclusive. Further in the assessment order, the ld AO first time stated about the statement of some Shri Mukesh Banka wherein it was mentioned that the various paper/shell companies were controlled and managed by him and these companies is pertaining to him. This fact was not mentioned in the reasons recorded and show cause notice issued by the Ld. AO. Further ld AO never shared the statement recorded of Shri Mukesh Banka or any documents which alleged that the Mukesh Banka has given accommodation entry to the assessee. The assessee by making its own efforts, through its known persons find out the correctness of the statement of Shri Mukesh Banka and on inquiry, it revealed that Shri Mukesh Bankaretracted from his statement and to this effect he filed an affidavit on 05.09.2019 (Copy at PB Page 125- 131). Thus, without further examining to Shri Mukesh Banka by the Ld. A.O. at his own and without providing the opportunity of cross examination to the assesseemade the addition more so when the retracted statement of Shri Mukesh Banka had no more evidentiary value against the assessee. The contents of the original statement of Shri Mukesh Banka are not known to the assessee as copy of his statement was not provided to the assesseeby Ld. A.O. and also could not be available to assessee. From the reasons so recoded as well as of assessment order, it is well apparent that the reopening was not belief of Ld. AO but the same reopened solely & blindly relying on the information received from some other authority, which is not backed with any evidences, and without further investigating the same. From the reasons it is clearly apparent that: - i) No exercise has been carried out at the end of ld. AO to find out that whether any direct evidence against the assessee was gathered or not. Even the statement of the Shri Mukesh Banka also not brought on record. ii) In the assessment order, ld AO mentioned about various companies and statement of Shri Mukesh Banka which is nowhere concerned with the case of the assessee. The assessee does not know Shri Mukesh Banka or other companies. From the reasons recorded as well as from the assessment order it is well apparent that there is no direct and conclusive evidence appears to be given by Shri Mukesh Banka or/and found to department as a result of search over him, which may prove that the share application money received by the assessee was not genuine. Therefore, this information may be sufficient to lead a suspicion and it is admitted fact that the reopening on the basis of suspicion is not permissible in the eyes of laws. For having the reason to belief, the ld. AO was supposing to make some inquiry regarding the allegation of escapement posed by him, which not made, therefore the reopening is solely on the basis of borrowed satisfaction. The validity of initiation of reassessment proceedings has to be judged with regard to the material available with the assessing officer and that too by framing the opinion strictly based on the documents and information in possession, that certain income has escaped assessment and not in a mechanical manner as has been done in the case in hand. The re-opening of the case based on the borrowed satisfaction on the information provided by some other official without in any manner recording his own independent satisfaction deserves to be held illegal. Hon’ble Supreme Court in the case of CIT vs Cartier Leaflin Private Limited (2023) 291 Taxman 446/146 taxmann.com 281 (SC) held the principle that to invoke revision 263 factually did not exist as there was due enquiry by the AO during the assessment proceedings leading to the assessment order.In this regard the reliance is also placed in the case of Khed Economic Infrastructure Pvt. Ltd. v/s DCIT 924 & 925/PUN./2023 dated 23.10.2023

5. It is an apparent from the record and also from the submission made hereinabove that ld. AO recorded wrong, incorrect and non-existent reasons in the reasons recorded for reopening of the assessment and, as such, did not apply his independent mind. The alleged amount of escapement has mentioned incorrect, the amount alleged to be received from certain entities which was actually not received and form & nature of alleged accommodation entries not mention in reasons so recorded. The AO without applying his mind to the information received from DDIT recorded wrong and incorrect facts in the reasons for reopening of the assessment. In view of above submission and also from material available on record it is clear that the ld. AO has recorded wrong, incorrect and non-existing facts in the reasons recorded for reopening of the assessment and has not applied his mind for forming the belief that income chargeable to tax has escaped assessment. It is well settled law that if wrong facts and wrong reasons are recorded for reopening of the assessment, such assessment is bad in law. In support of his contention we relied upon following judgments: - a) ITAT Delhi Bench in the case of M/s Ganesh Ganga Investments P. Ltd. Vs. ITO in dated 07.11.2019 only in paras 8.5 to 9 are reproduced as under: “8.5. The statement of Shri Himanshu Verma is also filed on record which did not find mention if MIs. Shubh Propbuild Pvt. Ltd., as mentioned in the reasons belong to Shri Himanshu Verma. There is no investor exist in the name of MIs. Management Services Pvt. Ltd., and no addition in respect of the same company have been made by the A.O. The A.O, therefore, recorded incorrect facts in the reasons for reopening of the assessment. Thus the same cannot be approved under the Law. It is well settled Law if wrong facts and wrong reasons are recorded for reopening of the assessment, reopening of the assessment would be invalid and bad in Law. We rely upon Judgment of Hon’ble Punjab & Haryana High Court in the case of Atlas Cycle Industries 180 ITR 319 (P&H). It is well settled Law that note already filed with return disclosing nature of capital receipt and no other tangible material found, therefore, reopening of the assessment under section 148 was quashed. We rely upon Judgment of Hon’ble Delhi High Court in the case of CIT vs., Atul Kumar Swami [2014] 362 ITR 693 (Del.) and Judgment of Hon’ble Allahabad High Court in the case of Kanpur Texel P. Ltd., 406 ITR 353 (Alld.). Similarly, in the case of CIT vs., Vardhaman Industries [2014] 363 ITR 625 (Raj.), the Hon’ble Rajasthan High Court has held that “reasons must be based on new and tangible materials. Notice based on documents already on record, 148 not valid.” In the instant case under appeal, the A.O. has reproduced the information received from Investigation Wing and reproduced the same in the reasons recorded under section 148 of the I. T. Act. This information shows that assessee has received the amount of credit from 06 parties, but, one of the partyie., MIs. Management Services Pvt. Ltd., do not exist and that MIs. Shubh Propbuild Pvt. Ltd., do not belong to Shri Himanshu Verma. It, therefore, appears that A.O. has not gone through the details of the information and has not even applied his mind and merely concluded that he has reason to believe that income chargeable to tax has escaped assessment. In the reasons A.O. has recorded that assessee has received accommodation entry of Rs.2.45 crores, but, ultimately made an addition of Rs. 11.05 crores without bringing any material against the assessee. The reasons to believe are, therefore, not in fact reasons, but, only conclusion of the A.O. In the case of Meenakshi Overseas Pvt. Ltd., (supra), the A.O. in the reasons has even mentioned that he has gone through the information received which is lacking in the present case. The A.O. being a quasi-judicial authority is expected to arrive at subjective satisfaction independently on his own. The A.O. however, merely repeated the report of the Investigation Wing in the reasons and formed his belief that income chargeable to tax has escaped assessment without arriving at his satisfaction. Thus, there is no independent application of mind by the A.O. to the report of Investigation Wing to form the basis for recording the reasons. The reasons recorded by the A.O. are also incorrect as noted above. The reasons failed to demonstrate the link between the alleged tangible material and the formation of reasons to believe that income chargeable to tax has escaped assessment. The decisions relied upon by the Learned Counsel for the Assessee in the cases of Pr. Commissioner of Income Tax vs., RMG Polyvinyl (I) Ltd., 396 ITR 5 (Del.), Pr. Commissioner of Income Tax vs., Meenakshi Overseas (P) Ltd., 395 ITR 677 (Del.), Pr. Commissioner of Income Tax vs., G and G Pharma India Ltd., 384 ITR 147 (Del.) and Sarthak Securities Co. (P) Ltd., 329 ITR 110 (Del.), clearly apply to the facts and circumstances of the case. Learned Counsel for the Assessee also relied upon Order of ITAT, Delhi Bench in the case of Pioneer Town Planners Pvt. Ltd., (supra) in which on identical facts reopening of the assessment have been quashed. The Ld. D.R. relied upon certain decisions in support of the contention that reopening of the assessment is justified, but, the same are distinguishable on facts of the present case. Considering the facts and circumstances of the case in the light of above discussion and decisions referred to in the Order, we are of the view that reopening of the assessment is bad in law and that sanction/approval granted by Pr. Commissioner of Income Tax is also invalid. We may also note that vide Order sheet Dated 23.08.2019 the case was re-fixed for hearing because the Ld. D.R. argued that approval have been granted by Commissioner of Income Tax after due discussion of the matter and perusal of the relevant information and thereafter approval in prescribed proforma sent to the A.O. and he has mentioned that I am satisfied. However, no record was produced. Therefore, this case was re-fixed for fresh hearing. However, on the date of hearing no such record have been produced for the inspection of the Bench. Therefore, satisfaction recorded by the Pr. Commissioner of Income Tax is invalid and without application of mind. Therefore, the reopening of the assessment is invalid and bad in Law and cannot be sustained in Law. We, accordingly, set aside the Orders of the authorities below and quash the reopening of the assessment under section 147/148 of the I. T. Act, 1961. Resultantly, all additions stands deleted. Since we have quashed the reopening of the assessment, therefore, there is no need to decide the addition on merit which is left with academic discussion only.”

b) In the case of M/s Key Components (P) Ltd. vs. ITO dated 12.02.2019 the reassessment proceedings have been quashed because the reopening was based on incorrect facts. The findings of Tribunal in para 6.3 to 7 are reproduced as under:

6.3 Considering the above discussion, it is clear that there is a total non-application of mind on the part of the AO while recording the reasons for reopening of the assessment. He has recorded incorrect amount, which escaped assessment. His conclusion was merely based on observations and information received from DIT(Inv.), New Delhi, which is not brought on record and his conclusion is merely based on doubts because he was not sure whether transaction in question is genuine or not. Therefore, the decisions relied upon by the Ld. Counsel for the assessee squarely apply to the facts and circumstances of the case. The decisions relied upon by the Ld. DR would not support the case of the Revenue. Since, there is a total lack of mind while recording the reasons for reopening of the assessment, therefore, assumption of jurisdiction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming jurisdiction under section 147/148 of the I.T. Act, 1961. We, therefore, hold that reopening of the assessment in the matter is bad in law and illegal, as such, same cannot be sustained in law. We, accordingly, set aside the orders of the authorities below and quash the reopening of the assessment. Resultantly, all additions stand deleted. c) Hon’ble Delhi High Court in the case of Pr. CIT Vs. SNG Developers Ltd., [2018] 404 ITR 312 (Del.) held as under: “Held, dismissing the appeal, that the reasons recorded by the Assessing Officer for reopening the assessment under section 147, issuing a notice under section 148 did not meet the statutory conditions. As already held by the Appellate Tribunal, there was a repetition of at least five accommodation entries and the total amount constituting the so-called accommodation entries would therefore, not work out to Rs. 95,65,510. It was unacceptable that the Assessing Officer persisted with his “beliefI that the amount had escaped assessment not only at the stage of rejecting the assessee’s objections but also in the reassessment proceedings, where he proceeded to add the entire amount to the income of the assessee.

Therefore, there was non-application of mind on the part of the Assessing Officer. The Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) and holding that the reopening of the assessment was bad in law.” d) Hon’ble Delhi High Court in the case of Shamshad Khan V/s. ACIT [2017] 395 ITR 265 (Del.) held as under: “Held, allowing the petition, that the form for recording the reasons for initiating the proceedings under section 148 of the Act for obtaining approval of the Commissioner itself proceeded on the erroneous basis that the quantum of income which had escaped assessment was Rs.28, 75,000 whereas the assessee had filed returns showing income of merely Rs.20,56, 145 and it was on this basis that the Additional Commissioner and the Commissioner granted their approval for reopening the assessment. Even though the assessee highlighted this fundamental error at the initiation of the case by stating that his income was mentioned as Rs.20,56, 145 instead of Rs.69, 71,191, this was summarily rejected stating that it was a clerical mistake and that the latter figure would be treated as his income. If the correct income ie. Rs.69, 71,191 was put before the Commissioner at the time of seeking his approval, he might have taken a different view. There was nothing on record to show that the clerical mistake of substituting Rs.20,56, 145 for Rs.69, 71,191 was ever brought to the notice of the Commissioner either before or after approval or sanction under section 151(1) of the Act. The initiation of the case for reopening of the assessment was erroneous and without application of mind especially since the Assessing Officer had not examined the return filed, which would have revealed that the assessee had filed regular returns, had sufficient opening balance in his account and the withdrawals therefrom substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in law and the notice issued under section 147 of the Act was to be quashed.” e) Hon’ble Bombay High Court in the case of Siemens Information Systems Ltd. Vs. ACIT & Others [2007] 293 ITR 548 (Bom.) held as under: “The petitioner had several EOU/STP units engaged in the business of export of software. In response to the notice for reopening the assessment for the assessment year 1999-2000, the petitioner, objecting to the issuance of the notice, stated that the reasons furnished by the authority had quoted the provisions of section 10A as amended by the Finance Act, 2000, with effect from the assessment year 2001-02 and as such could not have been made applicable to the assessment year 1999-2000 and the notice had been issued under the mistaken belief about the correct position of law. However, opportunity to show cause was given to the petitioner as to why the loss claimed should not be disallowed to be carried forward. On a writ petition : Held, allowing the petition, (i) that it would be clear from the reasons given that the authority proceeded on the presumption that the law applicable was the law after the amendment and not the law in respect of which the petitioner had filed the return for the year 1999-2000. This by itself clearly demonstrated that there was total non-application of mind on the part of the authority and consequently, the notice based on that reason would amount to non-application of mind. (ii) That the income derived by the assessee from an industrial undertaking to which section 1 0A applies could not be included in the total income of the assessee. Therefore, the petitioner was right infiling the return by excluding the income in terms of section 10A.”

6. In view of above submission it is clear that the vague belief has been framed on the basis of presumptions drawn by the DDIT, without establishing the allegation in any manner. No positive evidence had been brought on record to prove the fact that whether the assessee was part of vacuum of accommodation entry providers or had shown any transactions with such concerns and what was the nature of transaction which is now alleged to be bogus.

Thus, the reasons were recorded without arriving at the objective conclusion drawn after examining the so-called information/ evidences gathered. More particularly when the year under consideration was completed u/s 143(3) of the IT Act, 1961 after obtaining all necessary details including the confirmations and other particulars specifically regarding all the unsecured loans as well as share application money received by the assessee during the year and no adverse inference was drawn.

Further, it is submitted that the information given to ld. AO by the DDIT is vague and incomplete, and should have been consider objectively. The reasons recorded are without any basis as the said information does not comprise material based on which escapement of income could be alleged in the hands of assessee. Nevertheless, the said information only creates suspicion against the assessee but does not let alone giving rise to any 'reasons to believe' that the assessee had received any bogus entries. This mere suspicion cannot be the basis/foundation for holding any escapement of income for invoking section 147/148 of the IT Act, 1961. It is submitted that reopening is solely based on general information received from DDIT and admittedly having no positive evidences against the assessee. From bear reading of the reasons so recorded it is apparent that there was no evidence in the information supplied by the DDIT regarding the factum of the assessee having introduced its undisclosed income in the shape of alleged accommodation entries. Therefore, information received throws only doubt or suspicion and cannot be basis of 'reasons to believe'. Suspicion however strong cannot take the place of evidence as laid down by the Hon'ble Apex Court in the case of Dhakeswari Cotton Mills Ltd. Vs. CIT (1955) AIR 65 (1955 SCR 011941).Therefore, information received throws only doubt or suspicion and cannot be basis of 'reasons to believe'. Hon’ble Supreme Court in the case of Uma Charan Shaw & Bros Co Vs CIT 37 ITR 271 has held that suspicion cannot take the place of proof. Hon’ble Punjab & Haryana High Court in the case of CIT Vs Anupam Kapoor (2008) 299 ITR 179 (P & H) also held that suspicion, howsoever strong cannot take the place of legal proof. Further there is no whispering in the reasons so recorded that what sort of information was receive and what were the evidences from which it can be seen that the share application money taken by assessee is non-genuine. The ld. AO did not give his own remark that what short of analysis was did by him at his own end and as such, no separate inquiries were also made. Except to the information received from DDIT, Inv, Kolkata which is apparent from the reasons so recorded, the ld. AO was not having any other evidences and instead of collecting the evidences and making the inquiries at his own end, he adopted the short cut method and the case was reopen in mechanical manner. As such, because of blind belief on the report of DDIT the ld. AO recorded the wrong, incorrect and non-existing reasons. This resulted that in the reasons so recorded the amount of alleged escapement has mentioned wrong. This eventually led to wrong reasons to believe of ld. AO.

The ld. AO did not make any independent inquiries either prior to reopening of the case or during the re-assessment, proceedings and he solely relied on the information submitted by DDIT and only on such information, the addition made on presumption and assumption basis. This fact is itself proves from the reasons so recorded as well as assessment order wherein each and every finding has been given on the basis of information passed on by DDIT. It is well settle position of law that the ld. AO cannot be guided for his decisions by what the other officer preparing the report/information says. As per section 119 (1) (a) even the CBDT cannot issue directions or instructions to an AO so as to require any income tax authority to make a particular assessment or to dispose of a particular case in a particular manner. The SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said that an assessment order is the result of a judicial proceedings. According to the Apex Court, an assessment proceeding is a judicial proceeding. Obviously, no one can have influence or say in the course of judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried away under some report.Hon’ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-“ that one who hears must decide the case.”

From the plain reading of reasons so recorded as well as assessment order and discussion made therein your honour will find that there is nothing positive material in the assessment order which prove that the share capital and premium thereon is not genuine and unaccounted money of the assessee. It is settled law that the AO is quasi-judicial authority and should be governed in his function by judicial consideration and must conform to the rules of natural justice and must proceed without bias as held by Hon’ble Supreme Court in the case of Tin Box Co. Vs CIT 249 ITR 216 (SC). It is also settled law that the AO must act honestly on the material before him and not vindictively, capriciously, or arbitrarily as held by Hon’ble Supreme Court in the case of Gurumukh Singh Vs CIT 12 ITR 393, 427 (FB), DakeshwariCotton Mills Ltd Vs CIT 26 ITR 775. The taxing authority should not act in a manner as might indicate that scales are weighted against the assessee CIT V/s Simon Carves Ltd (1976) 105 ITR 212,218 (SC). But in our case, the ld AO has brushed aside all the principles of law and framed a high-pitched assessment purely based on presumption and assumption without applying his independent mind in judicial perceptions and making proper inquiries, therefore, the assessment order deserves to be declared bad in law and deserves to be annulled.Being a quasi judicial authority, the ld. AO is duty bound to assess the income on the basis of material, documents and evidences available with him. For treating an amount credited in books of accounts as income of the assessee he is required to disprove the contention of the assessee and to prove his contention to be correct with full proof documentary evidence which has not been done in the instant case and merely on the basis of certain presumptions/assumptions, the huge additions were made in the returned income of the assessee. The finding in the assessment order confirms the belief of the assessee that the order was not made in according to law because no positive evidence was given by ld. AO to prove his finding to be correct. The A.O appears to have either been guided by the information given by some other authorities or have a mind set to assess the income of the assessee at a predetermined figure, other than based on consideration of any material on record. While, completing the assessment the ld. AO neither appreciated the facts of the case properly nor the provisions of Income tax Act and passed the order u/s 143(3) r.w.s. 147 of Income Tax Act on presumption, assumption, surmises and conjectures, based purely on no evidence or on irrelevant presumptions.

7. Thus, the entire assessment proceedings is bad in law and deserve to be quashed as the same was initiated solely on the basis of report of DDIT and without making the independent inquiry by ld. AO at his own hands or even applying his own mind on the information so received. There is catena of judicial pronouncements on this issue which clearly supports the assessee's case on the lack of jurisdiction with the Ld. Assessing Officer who had merely adopted reasons to believe on the basis of the report of other authorities and that there is total non-application of mind in recording to reasons for assumption of jurisdiction. Reliance is placed on the following judgements: a) Rajasthan High Court in the case of Commissioner of Income Tax, Udaipur Vs. M/s. Shree Rajasthan Syntex Ltd.313 ITR 231(Raj) has held as under : - After a thorough analysis of the facts of the case and the law applicable, this Court found unjustified the process of re-opening by the AO on the basis of the assessments made in relation to the lessee at Mumbai; and the order of the ITAT was upheld, inter alia, with the following observations: - ".....Thus the net result which comes to is that simply be- cause after the Assessing Officer here had formed a particular opinion on a particular set of documents simply because the Assessing Officer at Mumbai had formed a different opinion on the same set of documents the action was sought to be initiated here for re-assessment which, in our view, has rightly been found by the learned Tribunal that it was a "borrowed satisfaction" under the opinion of the Assessing Officer at Mumbai and has rightly D.B. Income Tax Appeal No.16/2012 been found to be not sufficient to confer power on the Assessing Officer to initiate reassessment proceedings. Likewise, we may just take another hypothesis that if the Assessing Officer at Mumbai had not allowed depreciation al- lowance to the lessee and would have come to the conclusion on the basis of these very lease deeds about the lessor being contin- uing as owner it is not in dispute that the reassessment proceed- ings would not have been initiated here. This obviously makes it clear that reassessment proceedings had been initiated only on account of the opinion arrived at by the Assessing Officer at Mum- bai.

Thus, question No.1, as framed in three appeals is answered in the affirmative, i.e., against the Revenue and in favour of the assessee." b) Pr. Commissioner Of Income Tax vs. G & G Pharma India Ltd- ITA 545/2015 (Delhi HC)-08.10.2015 "12 Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed here- in- before, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the assessee escaped assessment is missing in the present case." b) Commissioner of Income-tax - II v. Multiplex Trading & Industrial Co. Ltd- [2015] 63 taxmann.com 170 (Delhi-HC) 22.09.2015 "10 The first and foremost issue to be addressed is whether the Assessing Officer could assume jurisdiction to reopen the assessment based on the information received from the Investigation Wing of the department. It is now well settled that the Assessing Officer can reopen the assessment if he has reason to believe the assessee's income has escaped assessment. However, his reasons to believe must not be based on surmises, conjectures or occasioned by change in opinion but must be based on some tangible and credible material on the basis of which a reasonable belief could be formed that income of an assessee has escaped assessment c) CIT vs. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (DHC) "Held that, in the present case, the first sentence of the so-called reasons recorded by the Assessing Officer was mere information received from the Deputy Director of Income-tax (Inv.). The second sentence was a direction given by the very same Deputy Director of Income-tax (Inv.) to issue a notice under section 148 and the third sentence again comprised a direction given by the Additional Commissioner of Income-tax to initiate proceedings under section 148 in respect of cases pertaining to the relevant ward. It was clear that the Assessing Officer referred to the information and the two directions as 'reasons' on the basis of which he was proceeding to issue notice under section 148. These could not be the reasons for proceeding under section 147/148. From the so-called reasons, it was not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Therefore, the reassessment was not valid." d) Signature Hotels Pvt. Ltd. vs. ITO &Anr. [2011] 338ITR 51 (DHC) "15. 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." e) Sarthak Securities Pvt. Ltd. vs. ITO [2010] 329 ITR 110 (DHC) "23. "Reassessment - Notice - Condition precedent - Formation of belief that income escaped assessment - Assessing Officer treating share application money as bogus accommodation entries - Payments through banking channel and companies investing money genuine -No independent application of mind by Assessing Officer but acting under information from investigation wing - Notice to be quashed -Income Tax Act, 1961, ss. 147, 148." f) In the case of ACIT v. Dhariya Construction Co ( 2010) 328 ITR 515 (SC) it was held that the opinion of DVO per se is not an information for the purpose of reopening assessment under section 147 of the Act. g) In the case of PCIT v. Manzil DineshkumarShah[2018] 95 Taxmann.com 46 (Guj) HC), the Court held that; even the assessment which is completed u/s 143(1) cannot be reopened without proper 'reason to believe'. If the reasons state that the information received from the VAT Dept that the assessee entered into bogus purchases "needed deep verification", it means the AO is reopening for doing a 'fishing or roving inquiry' without proper reason to believe, which is not permissible. Court also observed that, before closing, we can only lament at the possible revenue loss. The law and the principles noted above are far too well settled to have escaped the notice of the Assessing Officer despite which if the reasons recorded fail the test of validity on account of a sentence contained, it would be for the Revenue to examine reasons behind it. (Tax A No. 541 of 2018, dt. 7 - 5. 2018) h) In case of Deepraj Hospital (P) Ltd. v. ITO, 41/AGRA/2017, AY: 2010-11 Dtd: 01/06/2018 (Agra)(Trib), the Tribunal held that; If the reopening is based on information received from the investigation dept, the reasons must show that the AO independently applied his mind to the information and formed his own opinion. If the reopening is done mechanically, it is void. Also, if the reasons refer to any document, a copy should be provided to the assessee. Failure to do so results in breach of natural justice and renders the reopening void. i) Hon’ble Delhi High Court in case of Pr. CIT vs. Meenakshi Overseas Pvt. Ltd. ITA 692/2016 dated May 26, 2017, (2017) 99CCH 0028 DelHC; 395 ITR 677; 154 DTR 0100 (Del); (2017) 395 ITR 0677 (Delhi)) has held that 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. j) In Delhi High Court in case of Agya Ram vs. CIT 386 ITR 0545 (Delhi) dated 01.08.2016 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.” k) Kolkata ITAT bench ‘SMC’ in Subodh Chandra Das vs. ITO, & 2247/Kol/2019, Mar 4, 2020 has held that reopening is bad in law, where there is non application of mind by Assessing Officer to information received from investigation wing l) Delhi ITAT bench ‘SMC’ in Goel was (P) Ltd. vs. ITO, Jan 7, 2020 has held that mere information received from DDIT(Inv) cannot constitute valid reasons for initiating reassessment proceedings in the absence of anything to show that AO had independently applied his mind to arrive at a belief that the income had escaped assessment. m) The Hon’ble Delhi High in case of Yum Restaurants Asia Pte. Ltd. vs. Deputy Director Income Tax, W.P.(C) 614/2014, Aug 31, 2017; 397 ITR 0665 (Delhi), has held that where authorities appeared to have concurred with reasons for reopening assessment without applying their mind, reopening of assessment would be invalid n) Hon’ble High Court of Delhi in case of CIT vs. Batra Bhatta Company, IT appeal no. 109 of 2008, Aug 8,2008; 13 DTR 0115; (2008) 220 CTR 0531; (2010) 321 ITR 0526 has held that mere belief of the AO that certain issue requires ‘much deeper scrutiny’, in the absence of any material or reason for such belief, is not enough for invoking S. 147. o) ITAT Kolkota in the case of M/s. Devansh Exports vs ACIT order dated 15/10/2018 : - 5. We have heard rival submissions and gone through the facts and circumstances of the case. The main grievance of the assessee is against the action of the AO in reopening regular assessment completed u/s. 143(3) of the Act on 15.03.2013. According to Ld. Counsel for the assessee, the AO without application of mind after receipt of letter from DIT(Inv.), Kolkata has simply reopened the assessment. According to Ld. Counsel, before the AO decides to reopen the assessment, he has to satisfy the condition precedent to assume jurisdiction and for that he took our attention to the expression used in sec. 147 of the Act which states that AO should have ‘reason to believe’ escapement of income. According to ld Counsel, the expression “reason to believe” postulates a foundation based on information and belief based on reasoning. According to ld Counsel, even after there is a foundation based on information is there, still there must be some reasons warrant holding a belief that income chargeable to tax has escaped assessment, which expression used by Parliament is stronger than the expression ‘satisfied’ and in the present case such requirement as contemplated by law has not been met in the ‘reason recorded’ by the AO before venturing to re-open the assessment which vitiates the re-opening itself. According to Ld. Counsel, even if the information given by the DIT (Inv.) is adverse against the assessee, at the most it may trigger “reason to suspect”; then AO has to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. Without doing so, the jurisdictional fact necessary to usurp jurisdiction to reopen the regular assessment cannot be made by the AO. For the said proposition, the Ld. AR drew our attention to following case laws: i) PCIT Vs. Meenakshi Overseas Ltd. 395 ITR 677(Del.) (referred to para 19 till para37). ii) DCIT Vs. Greal Wall Marketing Pvt. Ltd.

(referred to page10 para 11) iii) Shri Raj Kumar Goel Vs. ITO (referred to page 5-8 para 11) (iv) Classic Flour & Food Processing Pvt. Ltd. Vs. CIT to 766/Kol/2014(page 7 para 12 to 16) v) PCIT Vs. Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bom) page 4para 12 to 14) vi) KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014 (referred to page 3 para 8-11) vii) PCIT Vs. Tupperware India Pvt. Ltd. (2016) 236 Taxman 494 (referred to page 3para 6 and 9) viii) DCIT Vs. National Bank for Agriculture and Rural Development ITA No.4964/Mum/2014 (referred to page 10- 13 para 12). p) In the case of Smt. Kanta Chaudhary v/s ITO, Ward 7(3), Jaipur (ITA No. 878/JP/2018 vide order dated 06.12.2018) it was held that: - "5. We have heard the rival contentions and perused the material available on record. On perusal of the reasons so recorded by the AO before issuance of notice u/s 148 of the Act, we find that on the basis certain information received from the Investigation Wing Mumbai, the AO has not just formed an opinion but has finally concluded that the assessee has benefitted by obtaining accommodation entries from M/s New Planet Trading Co Ltd. Further, the AO has stated that since the assessee has not filed the return of income as per AST system of the department, he has reasons to believe that income has escaped assessment. To our mind, such an approach of the AO where, based on information received in context of a third party, even before issuance of notice u/s 148 has concluded that assessee has obtained accommodation entries and income to that extent has escaped assessment is not a correct approach in the eyes of law. In the instant case, it is an undisputed fact that the assessee has filed her return of income on 31.07.2007 where she has shown purchases of Rs 36,64,300 and which are the only purchases during the year and which are alleged to be accommodation entry as per the reasons issued u/s 148 of the Act. The assessee has shown the corresponding sales of Rs 39,44,220 and reported a grossprofit of Rs 3,41,752. As held by the Bombay High Court in case of M/s Shodiman Investments, the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment. In other words, unless the AO carries out the further examination after receipt of initial information from the Investigation wing, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed her return of income. The AO should have examined her return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. In the entirety of facts and circumstances of the case, the notice issued under section 148 cannot be sustained and the same is held to be bad in law. In the result, the reassessment proceedings are hereby quashed and set-aside. The grounds on merit have thus become infructous and are not adjudicated upon." q) Other cases relied on this issues: - (i) M/s Dwarka Gems Ltd. Vs DCIT order dated 27/03/2018 (Jaipur)(Trib). (ii) Nirmala Agarwal Vs ACIT ITA No. 995 & 996/JP/2016 order dated 11/04/2018 (2018) 58 Taxworld 280 (Jaipur)(Trib). (iii) M/s Karwasra Developers Pvt. Ltd. ITA No. 393/JP/2016 order dated 11/06/2018 (Jaipur)(Trib). (iv) Dynacraft Air Controls Vs. Sneha Joshi &ors. (2013) 355 ITR 102 (Bom)(HC). (v) CIT Vs. Eco Media (P) Ltd. (2012) 81 CCH 85 (Mad.)(HC)

1.4 The sanction of higher authority as required u/s 151 of the Act either not granted or if granted, it was without examining the record and in mechanical manner.

1. As apparent from the submission made hereinabove, it is apparent that the reasons recorded by the ld. AO are wrong, incorrect and non-existent reasons in the reasons recorded for reopening of the assessment and, as such, did not apply his mind. As per provisions of section 151 of Income Tax Act, 1961 the mandatory sanction for issue of notice is require to take from the higher authority. In the instant case such sanction had been taken or not is not provided to the assessee, therefore in the interest of justice it is requested that the copy of such sanction may kindly be obtained from ld. AO. In the copy of reasons recorded, as provided by ld. AO at last para (Copy at PB Page 144-149) it is mentioned that “----necessary sanction to issue notice u/s 148 is being obtained separately from Pr. Commissioner of Income Tax as per provisions of section 151 of the Act.” Therefore, from the reasons so recorded it is not clear that such sanction was obtained or not or granted or not prior to issue of notice u/s 148 of the Act. Since, the copy of approval taken from this higher authority was never provided to the assessee. The reasons are always recorded in a specific format and the such format also contain the satisfaction and approval of the higher authority. Since, the copies of reasons in specific format have not been provided to the assessee, therefore the assessee was not provided the opportunity to examine the same and also deprived by the opportunity to analysis the approval and sanction of the higher authority. Therefore, the same is also in gross violation to the law laid down by Hon’ble Apex court in the case of GKN Driveshafts (India) Ltd. Vs. ITO 259 ITR 19 (SC)

However, if just for sake of argument if it is presume that such sanction was grant than still from the reasons so recorded it is apparent that the higher authority granted such sanction in mechanical manner without examining the record and applying their own mind. Had before granting the sanction the assessment record or/and other evidences placed on record would have been examined and analyze by the higher authority than perhaps they would considered that it is not fit case for issuance of notice u/s 148 of the Act and perhaps did not sanction the proposed of re-assessment.

2. Learned AO while recording the reasons under the heading “1. Brief details of information collected/received by AO 2. Analysis of information collected/received” held that the specific information was received from DDIT (Inv.), Unit 1(3), Kolkata regarding accommodation entries taken by the assessee during the year under consideration. There is no whispering in the reasons so recorded that what sort of information was receive and what were the evidences therewith which proves that information is correct. The ld. AO did not give his own remark that what short of analysis was did by him at his own end and as such, no separate inquiries were also made. Except to the information received from DDIT, which is apparent from the reasons so recorded, the ld. AO was not having any other evidences and instead of collecting the evidences and making the inquiries at his own end, he adopted the short cut method and the case was reopen in mechanical manner. This is apparent from the finding given under the heading “Enquiries made by the A.O. as sequel to information collected/received” wherein he held that since the enquiry has already been made by Investigation Unit, no further enquiry is required at this stage. As such, because of blind belief on the report of DDIT the ld. AO recorded the wrong, incorrect and non-existing reasons. This resulted that in the reasons so recorded the amount of escapement has mentioned wrong, the amount alleged to be received from certain entities was actually did not received and form & nature of alleged accommodation entries not mentioned. This eventually lead to wrong reasons to believe of ld. AO which is “I have perused the information received and material available on record and I am satisfied that assessee company has taken accommodation entries of Rs. 1,05,00,165/- for the purpose of tax evasion.”

Before granting the sanction by the higher authorities the above mention vital issues were not ever taken into consideration and even its appears that the record of proceeding was not bother to be examined. Had before granting the sanction the assessment record or/and other evidences placed on record would have been examined, called for and analyze by the higher authority than they perhaps considered that it is not a fit case to issue the notice u/s 148 of the Act and perhaps did not sanction the proposed of re-assessment.

The information received from DDIT which was the underlining material based on which proceedings under Section 147 of the Act were triggered was even did not correlated with the return of income, Balance Sheet and recorded of assessment proceedings completed u/s 143(3) of I. Tax Act. This is itself apparent from the reasons so recorded wherein the alleged amount of escapement has mentioned incorrect, the amount alleged to be received from certain entities was actually did not received and form & nature of alleged accommodation entries not mention in reasons so recorded. Therefore, the correlation between the underlying material and the information which was already available with ld. AO in the balance sheet an assessment record of the assessee was clearly not made.

Therefore, the formation of belief by ld. AO and also sanctioned by higher authorities, that income of the assessee chargeable to tax had escaped assessment, was unreasonable and irrational, as it could not be related to the underlining information, something which is discernible from a bare reading of the order recording reasons. Therefore the higher authority who accorded sanction for triggering the process under Section 147 of the Act, simply rubber- stamped the reasons furnished by ld. AO for issuance of notice under Section 148 of the Act without applying the mind.

3. The provisions of Section 151(1) of the Act required the higher authority to satisfy himself as to whether it was a fit case in which sanction should be accorded for issuance of notice under Section 148 of the Act and, thus, triggering the process of reassessment under Section 147. The sanction should had been granted after analyzing the entire record & evidences, which had not been done in the intent case. The satisfaction arrived at by ld. AO should be discernible from the sanction-order passed under Section 151 of the Act.

4. In this context, the reliance in made on following decisions – a) Supreme Court in Chhugamal Rajpal vs. S.P. Chaliha, (1971) 1 SCC 453 being apposite are extracted hereafter : “… Further the report submitted by him under Section 151(2) does not mention any reason for coming to the conclusion that it is a fit case for the issue of a notice under Section 148. We are also of the opinion that the Commissioner has mechanically accorded permission. He did not himself record that he was satisfied that this was a fit case for the issue of a notice under Section 148. To Question 8 in the report which reads “whether the Commissioner is satisfied that it is a fit case for the issue of notice under Section 148”, he just noted the word “yes” and affixed his signatures thereunder. We are of the opinion that if only he had read the report carefully, he could never have come to the conclusion on the material before him that this is a fit case to issue notice under Section 148. The important safeguards provided in Sections 147 and 151 were lightly treated by the Income Tax Officer as well as by the Commissioner. Both of them appear to have taken the duty imposed on them under those provisions as of little importance. They have substituted the form for the substance. “ b) Judgment of the Division Bench of this Court in The Central India Electric Supply Co. Ltd. vs. Income Tax Officer, Company Circle – X, New Delhi &Anr., (2011) 333 ITR 237. “19. In respect of the first plea, if the judgments in Chuggamal Rajpal’s case (supra); Chanchal Kumar Chatterjee’s case (supra); and Govinda Choudhury &Sons’s case (supra) are examined, the absence of reasons by the assessing officer does not exist. This is so as along with the proforma, reasons set out by the assessing officer were, in fact, given. However, in the instant case, the manner in which the proforma was stamped amounting to approval by the Board leaves much to be desired. It is a case where literally a mere stamp is affixed. It is signed by a Under Secretary underneath a stamped ‘Yes’ against the column which queried as to whether the approval of the Board had been taken. Rubber stamping of underlying material is hardly a process which can get the imprimatur of this Court as it suggests that the decision has been taken in a mechanical manner. Even if the reasoning set out by the ITO was to be agreed upon, the least, which is expected, is that an appropriate endorsement is made in this behalf setting out brief reasons. Reasons are the link between the material placed on record and the conclusion reached by an authority in respect of an issue, since they help in discerning the manner in which conclusion is reached by the concerned authority. Our opinion is fortified by the decision of the Apex Court in Union of India v. M.L. Capoor and Ors. MANU/SC/0405/1973 : AIR 1974 SC 87 wherein it was observed as under:

This is completely absent in the present case. Thus, we find force in the contention of learned Counsel for the Appellant that there has not been proper application of mind by the Board and if a proper application had taken place, there would have been no reason to re-open the closed chapter in view of what we are setting out hereinafter.”

1.5 The material/statements so relied are not forming part of the reasons so recorded, even of assessment order and also the copies of the same was not provided to the assessee.

1. In the reasons so recorded for re-assessment proceeding, the ld. AO replied on certain information received from DDIT. However, the contents of such information in detailed are not forming part of the reasons so recorded, therefore the reasons so recorded cannot be considered as complete and thus not a valid reasons in the eye of law. In the reason so recorded the ld. AO simply mention that “Detailed report has been prepared by these units after making investigation and inquiry and it has been proved that certain paper/shell companies and their bank accounts have been used for providing accommodation entries in the nature of bogus unsecured loan for in other forms. The assessee is one of such beneficiary and has obtained accommodation entries………”. However, the actual contents of such report such as detail of investigation/inquiries made, evidences gathered and adverse evidences found against the assessee are not apparent from the reasons so recorded. Therefore, the reasons so recorded are not couple with any evidences/documents/statements, hence the same is invalid reasons and consequence to that the entire subsequent proceeding is invalid.

2. During the course of reassessment proceeding, the ld. AO issued to show cause notices to the assessee (Copies of the same are at PB Page 133-134, 136-138). From such show cause notices it is well apparent that the copies of any single evidences/documents/statements, in whatsoever form did not provided to the assessee.

3. Finally, in the assessment order, though not appears to be as a result of own inquiry of ld. AO and appears to be on basis of inquiries made by DDIT, the ld. AO made whispering regarding certain inquiries, material, documents, evidences, analysis and statement of some Shri Mukesh Banka. However, the same are not forming part of the assessment order.

4. Thus, no evidences/documents/statements etc. either not apparent in the reasons so recorded, did not provide to assessee during assessment proceeding and even not forming part of the assessment order. It’s appears that entire finding in the assessment order is based on the information received from DDIT/ITO (Investigation) and at his own the ld. AO is not possessing any evidences/documents/statements.

5. It is settled law that all the inquiries or material including statements of the parties, if any available with the AO, relying on which the assessment pretended to be framed and which was gathered behind the back of the assessee is to be provided to the assessee and opportunity to confrontation and cross examination to the witness is to be provided to the assessee. In the case of the assessee no such opportunity was provided to the assessee. As we understand no any such evidence/material/report/statement, for the obvious reason that the same were not available with Ld. A.O. himself, were not provided to the assessee and even not brought on record too.

6. If the Assessing Officer proposes to act on such material as he might have gathered as a result of his private enquiries behind the back of the assessee, he must disclose the substance of all such material, though not the sources thereof (Dal Chand & Sons v CIT (1944) 12 ITR 458 (Lah)) to the assessee and if this is not done, the principles of natural justice stand violated (KishinchandChellaram v CIT (1980) 125 ITR 713 (SC); ITO (Addl) v Ponkunnam Traders (1976) 102 ITR 366 (Ker); International Forest Co. V. CIT (1975) 101 ITR 721 (J&K); STO v Uttareswari Rice Mills (1973) 89 ITR 6 (SC); Motipur Zamindari Co. Pvt. Ltd. v. Ag ITO (1972) 83 ITR 778 (Pat); CIT v East Coast Commercial Co. Ltd. (1967) 63 ITR 449 (SC), HarmukhraiDulichand v CIT (1928) 3 ITC 198 (Cal.). This requirement of pre-communication to the Assessee did not find mention in the pre- 1961 Act, but courts had held on principles of equity, justice and good conscience that the material gathered behind the back of the Assessee should be communicated the assessee (Gunda Subbayya v CIT (1939) 7 ITR 21 (Mad). Under the 1961 Act, this requirement is statutorily enacted. (See Section 142 (3). The object is to give the assessee an opportunity of giving his explanation and disabusing the Assessing Officer of any wrong impression that he might have formed against the assessee. (Gunda Subbayya v CIT (1939) 7 ITR 21 (Mad). That Hon’ble Supreme Court of India in SurajmalMohta& Co. Vs. A.V. Visvanath Sastry (1954) 26 ITR 2 (SC) has observed that the proceedings before the Income Tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at. In other words, Assessee would have a right to obtain copies of the records and all relevant documents before he is called upon to lead evidence in rebuttal. This right has not been taken away by any express provision of the Income Tax Act. Furthermore, Hon’ble Apex Court in M. Chockalingam and M. Meyyappan Vs. CIT, Madras (1963) 48 ITR 34 (SC) has observed that the Authorities acting under the Income Tax Act have to act judicially and one of the requirements of judicial action is to give a fair hearing to a person before deciding against him. That Ld. AO had not afforded opportunity for confrontation and cross- examination of witnesses by Appellant is violation of principle of natural justice. The purpose of appeal would also frustrated if violation of the principle of natural justice is taken place during initial proceedings of assessment itself. The Hon’ble Apex Court in Ram Chandran Vs. Union of India 1986 SCC (4) 12 has observed that “in principle, there ought to be an observance of natural justice called equally at both stages.........If natural is violated at the first stage, the right of appeal is not so much a true right of appeal as a corrected initial hearing, instead of fair trial followed by appeal, the procedure is reduce to unfair trial followed by fair trial”. That the principles of natural justice have been elevated to the status of Fundamental Rights guaranteed in the constitution of India as is evident from the decision of the Full Bench of the Hon’ble Supreme Court in the case of Union of India Vs. Tulsiram Patel AIR 1985 SC 1416 at 1460, holding that the principles of natural justice have thus come to be recognized as being a part of the guarantee contained in Article-14 of the Constitution of India because of the new and dynamic interpretation given by the Hon’ble Supreme Court to the concept of equality which is the subject matter of that Article and that violation of the principles of natural justice by a State action is a violation of Article-14. That it has been held by Hon’ble High Court of Andhra Pradesh in E. Vittal and another & Rajan B. Patel Vs. Appropriate Authority and Others (1996) 221 ITR 760 (AP) that where a Statutory Authority relies upon a document in a proceeding but denies a copy of the same to the affected party, he violates the principles of natural justice as the opportunity of being heard should be an effective opportunity but not an empty formality. That it is well settled that no evidence of document can be relied upon unless it is shown to the Assessee, as held by Hon’ble Apex Court in KishanchandChellaram V. CIT (1980) 125 ITR 713 (SC). Similarly, the requirement of cross-examination as the requirement of rule of natural justice has also been underlined by the Hon’ble High Court of Bombay in VasanjiGhela and Co. V. CST (1977) 40 STC 544. It is trite law that cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him. The reliance is also placed on the judgment of Hon’ble ITAT Jaipur Bench ‘A’ in Smt. Sunita Dhadda V. Dy. Commissioner of Income Tax (2013) 33 Taxmann.com 639 (Jaipur – Tribunal) and order of Hon’ble ITAT Jaipur in the case of Prateek Kothari in ITA No.

159/JP/16 dated 16.12.2016 for the assessment year 2012-13 in support of the contentions raised above. As held in State of Punjab Vs Bhagat Ram AIR 1974 SC 2335; Gargi Din Jwala Prasad Vs CIT (1974) 96 ITR 97 (ALL). The learned AO violated the rule of audi alteram partem, which means that no one shall be condemned unheard, corollary of which is that he should be given reasonable notice of the nature of the case to be met, there are other rules of common law to the same effect. Reliance is placed on Peerless General Finance & Investment Co. Ltd Vs DCIT (1999) 236 ITR 671, 682. (Cal) In view of the above submission, we submit that the ld. AO assessed the income of the assessee without providing the reasonable opportunity. The Assessing Officer is not absolved of the obligation to comply with the fundamental rules of justice, which have come to be known in administrative law as the principles of jurisprudence. Compliance with the audi alteram partem rule of natural justice is an indispensable requirement of a valid assessment order. kindly see,Jagadambika Pratap Narain Singh (Raja) v. CBDT (1975) 100 ITR 698 (SC), Government of India v. Maxim A Lobo (1990) 83 CTR (Mad) 103; CIT v. VimladenBhagwandas Patel (Smt.) (1979) 118 ITR 134 (Guj); Gangadharan Pillai (P) v. ACED (1980) 126 ITR 356 (Ker); A Sociedade de Fomento Industrial Pvt. Ltd. v. Lahiri (KC) (1983) Tax LR 2664 (Goa); MallappaKallappaUgare v. Ag ITO (1973) 91 ITR 529 (Mys); State Bank of Patiala v Union of India (1973) 91 ITR 630 (P&H); CIT v Sham Lal (1981) 127 ITR 816 (P&H); Jai Prakash Singh v CIT (1978) 111 ITR 507 (Gau); Thomakutty (MO) v CIT (1958) 34 ITR 501 (Ker); Koyammankutty v ITO (1965) 58 ITR 871 (Ker); Menon (TCN) v ITO (1974) 96 ITR 148 (Ker.).

As we understand and as appears from the assessment order that no proper independent inquiries were carried out by ld. AO to controvert the direct material/evidence brought on record by the assessee to prove the derivatives transaction are genuine. The entire finding/action which were discussed in the assessment order on the basis of which the huge additions was made in the income of the assessee is only based on some incomplete & incorrect information given by some other authorities. Thus, the ld. AO made the addition only on the basis of some inquiries/analysis/conclusion made by some other authorities. The SC in the case of Rajesh Kumar vs DCIT (2006) 157 Taxman 168 (SC) has said that an assessment order is the result of a judicial proceedings. According to the Apex Court, an assessment proceeding is a judicial proceeding. Obviously, no one can have influence or say in the course of judicial proceedings that a particular decision should be taken in a particular way or manner affecting the independence of the decision-making authority. The AO must decide the issue before him on a proper appreciation of evidence adduced during the course of assessment proceedings and not to be swayed and carried away under some report. Hon’ble Apex Court has held in the case of Dakeshwari Cotton Mills Ltd Vs CIT 26 ITR 775-“that one who hears must decide the case.”

7. The reliance is also paced on the following judgements: - a) Signature Hotels Pvt. Ltd. vs. ITO &Anr. [2011] 338ITR 51 (DHC) "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 the annexure, which has been quoted above. The annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. The 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." b) Sarthak Securities Pvt. Ltd. vs. ITO [2010] 329 ITR 110 (DHC) "23. The Assessing Officer was aware of the existence of four companies with whom the assessee had entered into transaction. Both the orders clearly exposit that the Assessing Officer was made aware of the situation by the investigation wing and there is no mention that these companies are fictitious companies. Neither the reasons in the initial notice nor the communication providing reasons remotely indicate independent application of mind. True it is, at that stage, it is not necessary to have the established fact of escapement of income, but what is necessary is that there is relevant material on which a reasonable person could have formed the requisite belief. To elaborate, the conclusive proof is not germane at this stage but the formation of believe must be on the base or foundation or platform of prudence which a reasonable person is required to apply. As is manifest from the perusal of the supply of reasons and the order of rejection of objections, the names of the companies were available with the authority. Their existence is not disputed. What is mentioned is that these companies were used as conduits. In that view of the matter, the principle laid down in Lovely Exports [P.] Ltd. 's case (supra) gets squarely attracted. The same has not been referred to while passing the order of rejection. The assessee in his objections had clearly stated that the companies had bank accounts and payments were made to the assessee- company through banking channel. The identity of the companies was not disputed. Under these circumstances, it would not be appropriate to require the assessee to go through the entire gamut of proceedings. It is totally unwarranted." c) ANDAMAN TIMBER INDUSTRIES V/S COMMISSIONER OF CENTRAL EXCISE,KOLKATA-II 2016 (15) SCC 785 (SC). d) Commissioner of Income Tax v. Ashwani Gupta, 2010 322 ITR 396 (Del). e) H.R. Mehta V. Assistant Commissioner of Income Tax v. Ashwani Gupta, 387 ITR 561 f) KISHINCHAND CHELLARAM V. COMMISSIONER OF INCOME-TAX [1980] 125 ITR 713 (SC)

g) T.S. VENKATESAN V. ASSISTANT COMMISSIONER OF NCOME-TAX [2000] 74 ITD 298 (CAL.)

In view of above submission this is to submit that initiation of reassessment proceedings and also order passed u/s 143(3) r.w.s. 147 of Income Tax Act, 1961 is bad in law, void-ab initio and deserve to be annulled or/and quashed.

2. Ground No 2: - On the facts and in the circumstances of the case and in law the ld. AO erred in making addition of Rs. 55,00,000/- by treating the share capital and premium thereon received from various parties as undisclosed income of the assessee on presumption, assumption, without material or irrelevant material and without providing the opportunity of confrontation and cross examination.

ii) Creditworthiness All the investors are Income Tax assessee and duly filing the Income Tax return and Balance sheets. There is sufficient source of funds with all the investors to investment share capital/share application in the assessee company. The assessee submitted the copies of bank account/their balance sheets. The bank statement shows the huge transaction of high value in the accounts of the companies and high other investment in their balance sheets.These companies were having sufficient shareholder funds, from earlier years, in their audited balance sheet and funds in their bank account to purchase the shares of the assessee company. These companies were having their own independent funds and having their independent source to invest in the shares of the assessee company. Apart from the investment made in the shares of assessee company, the investor parties were also having investments in shares of other companies or loans & advances or advance assets/investments which is much more than to the amount invested in the assessee company, therefore from the bank statement and financials of the investors their creditworthiness is duly proved. The ld AO in the assessment order equated the creditworthiness with the current year profitability of the shareholder.Examining the creditworthiness of the party by taking into the income of a single year is not correct. If this is presumed to be the right manner, then in each case, where a person accumulated the wealth from previous earnings or various other sources and rotated such wealth for making new investments etc. he will never considered as capable to make such new investment. It is not possible that each once having the income in each year in commensurate to his previous accumulated wealth. Therefore, for considering the creditworthiness of the income of a person his previous earning, wealth etc. is also to be taken into consideration and on the basis of income of a single year it may not be considered that such person is not capable to make the investment. If the lender is able to demonstrate from the balance sheet that she was having sufficient funds available with it to invest, then creditworthiness can be said to have been established. The Hon’ble Delhi High Court in case of CIT vs. Ms. Mayawati – 338 ITR 0563 (Del)has held that the capacity of any person does not mean how much they earn monthly or annually, but the term capacity has wide meaning and the same can be perceived by how wealthy a person is. iii) Genuineness In the case of company allottee the assessee has submitted the Share Application Form received from investor companies against the share application received from the companies. The share application is supported by Board Resolution passed in the investor companies. The assessee company has allotted the shares to the investor companies. The proper returns were filed before the ROC against allotment of the shares to these companies. Shares certificates were issued against the allotment of the shares to these companies. Furtherthere is no direct corroborative evidence against the assessee were in possession of ld. AO.Thesefactsshow that after allotment of shares by the appellant company share certificates were dispatched to the subscriber companies.Therefore, the genuineness of the transactions cannot be doubted.

4. As apparent from the assessment order and also the notice issued during the course of assessment proceedings, no inquiry from the companies, from whom the share application money was received by assessee, was made either by Ld. A.O. or any other authority. The inquiry appears to be made by some other authority in the case of other companies from whom the assessee did not receive any share application and also not in the case of companies from whom such shareholder companies received the funds. From the chain of source of funds as provide in the assessment order, it is apparent that even there is no cash deposit in bank account of any of the company and there is no evidence of routing of alleged undisclosed income of the assessee in the form of share application. Under section 68 of Income Tax Act, 1961 the onus of the assessee is to prove the source of credit entry and there is no onus of assessee to prove the source of source or source of all channel sources.

The Ld. AO in the assessment order discussed the financial statement of some other companies from which no share application money was received nor any transaction were carried out with them. These financial statements/transactions are not relevant with the case of the assessee. Further it is settled law source of source is not required to be explained as assessee has sufficiently proved the identity, creditworthiness and genuineness of the share application money received.From the assessment order also, it is apparent that all the companies were having sufficient wealth in the form of share capital etc.

7. The Ld. A.O. doubted the creditworthiness of the investor companies for the reasons of not having any business activities and not having any source of income. However, the Ld. A.O. failed to appreciate the fact that the assessee company was also not having any source of income as well as business activities and in such a situation the assessee company cannot be have any source of undisclosed income. Therefore, the allegation of having been undisclosed income by the assessee company is not in accordance with the own finding of the Ld. A.O., which he gave in respect of investor companies. The investor companies were incorporated much prior to investment made in assessee company and having their sufficient net worth much prior to investment made in assessee companies which has been assessed and accepted as genuine by Income Tax department. Once the net worth of a company has been accepted as genuine and out of that net worth, something is being invested in shares of assessee companies by realizing the funds from previous investments (which has been accepted as genuine) than the for the investment in shares of assessee cannot be hold that the shareholder company has no creditworthiness.

9. On this issue the assessee also places the reliance of following judgements: - Rajasthan High Court: - (i) CIT-1, Jaipur V/s M/s. ARL Infratech Ltd, whereinHon’ble Rajasthan High Court has recently confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB vide order dated 28/09/2016 regarding deletion of addition made u/s 68 of Income Tax Act, 1961. (ii) Commissioner of Income-tax, Jaipur –II Versus MoraniAutomotives (P.) Ltd. No.- D.B. IT Appeal No. 619 of 2011 Dated.- October 23, 2013 (Rajasthan High Court). The findings of Hon’ble Rajasthan High Court was as under:- 10. The points as sought to be raised by the appellant-revenue in the present case are all the matters relating to appreciation of evidence. The relevant factors have been taken into account and considered by the appellate authorities before returning the findings in favour of the assessee. Even as regards the three referred share capital contributors, it is noticed that they are existing assessees having PA numbers; and are being regularly assessed to tax. The appellate authorities cannot be said to have erred in deleting the additions in their regard too at the hands of assessee-company.

12. In the case of CIT v. Chandra Prakash Rana [2001] 48 DTR 271 (Raj.), this Court noticed similar nature grounds urged on behalf of the revenue and found the same not leading to any substantial question of law. This Court noticed, observed, and held as under:- "7. Learned counsel for the appellant (Revenue) contended that firstly Tribunal erred in accepting the explanation offered by assessee in relation to source of income. His second submission was that what was offered by assessee was no explanation and hence should not have been accepted and lastly learned counsel made sincere attempt on his part after taking us through factual scenario of the explanation and contended that it can never be taken as satisfactory explanation for deleting the addition made by AO. We do not agree to this submission for more than one reason. 8. In the first place, it is a pure question of fact, what to say question of law, much less substantial question of law. Secondly, this Court cannot again in this appeal undertake the examination of factual issues nor can draw factual inferences on the basis of explanation offered by assessee. Thirdly, once the explanation is accepted by the two appellate Courts i.e. CIT(A) and Tribunal in this case, then in such event, a concurrent finding recorded on such explanation by two appellate Courts is binding on the High Court. 9. Perusal of impugned finding quoted supra would go to show that Tribunal did examine the explanation offered by assessee in detail and then recorded a finding for its acceptance. Such finding when challenged does not constitute a substantial question of law within the meaning of s. 260A ibid in an appeal arising out of such order. 10. In our opinion, therefore, once the CIT(A) and Tribunal accepted the explanation of assessee and accordingly, deleted certain additions made by AO holding the transaction of shares to be genuine, then it would not involve any substantial issue of law as such. In other words, this Court in its appellate jurisdiction under s. 260A ibid, would not again de novo hold yet another factual inquiry with a view to find out as to whether explanation offered by assessee and which found acceptance to the CIT(A) and Tribunal is good or bad, or whether it was rightly accepted, or not. It is only when the factual finding recorded had been entirely de hors the subject, or that it had been based on no reasoning, or based on absurd reasoning to the extent that no prudent man of average judicial capacity could ever reach to such conclusion, or that it had been found against any provision of law, then a case for formulation of substantial question of law on such finding can be said to have been made out. 11. In our view, no such error could be noticed by us in the impugned order because as observed supra, the Tribunal did go into the details of explanation offered by assessee and then accepted the explanation by placing reliance on the documents filed by assessee. As a consequence thereof, the additions made by AO came to be deleted."

13. In CIT v. Shree Barkha Synthetics Ltd. [2004] 270 ITR 477 (Raj.), in a similar nature matter, this Court observed that the Tribunal having found that the companies from which the share application money had been received by the assessee-company were genuinely existing and the identity of the individual investors were also established and they had confirmed the fact of making investment, the finding that assessee had discharged initial burden and addition under Section 68 could not be sustained, was essentially a finding of fact. This Court said,- "19. A perusal of the aforesaid finding goes to show that deletion has been made on appreciation ofevidence, which was on record Finding that there was existence of investors and their confirmation has been obtained, were found to be satisfactory. All these conclusions are conclusions of fact based on material on record and, therefore, cannot be said to be perverse so as to give rise to question of law, which may be required to be considered in this appeal under s.260A of the IT Act."

(iv) CIT vs. First Point Finance Ltd. (2006) 206 CTR (Raj) 626 : (2006) 286 ITR 477 (Raj HC). Income—Cash credit—Share application money—Tribunal found that the investors are genuinely existing persons and they have filed confirmations in respect of investments made by them and their statements were also recorded—Amount of share capital/share application money could not be treated as unexplained cash credits and no addition could be made under s. 68—No substantial question of law arises. (v) Commissioner of Income Tax Vs. Bhaval Synthetics (Raj HC) (2013) 84 DTR 0449 (Raj) Held that even in case of doubt about subscribers to increased share capital, amount of share capital could not be regarded as undisclosed income of company—Amount referable to share application could not be attributed to assessee and could not be assessed in its hands— Appeal dismissed (vi) Commissioner of Income Tax Vs. Akj Granites (P) Ltd. (RajHC) (2008) 301 ITR 0298 held that in respect of share applications received from different places accompanied with share application money, no presumption can be drawn that same belong to the assessee and cannot be assessed in his hands as his undisclosed income unless some nexus is established that share application money for augmenting the investment in business has flown from assessee’s own money—No substantial question of law arises—Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 followed. (vii) Commissioner of Income-Tax, Central, Jaipur VersusSupertech Diamond Tools (Pvt) Ltd. (Raj HC) D. B. IT Appeal No. 74 of 2012 Dated: - 12 December 2013.

(viii) Commissioner of Income-tax - I, Jaipur Versus AL Lalpuria Construction (P.) Ltd (Raj HC) D.B. IT Appeal Nos. 256 of 2010 AND 26 & 39 of 2011 Dated: - 25 February 2013.

(ix) Commissioner of Income-tax, Ajmer Versus HS. Builders (P.) Ltd. D.B. INCOME Tax (Raj HC) APPEAL NO. 48 OF 2006 Dated: - 03 March 2012.

(x) CIT Vs Jai Kumar Bakliwal(2014) 101 DTR (Raj) 377 : (2014) 267 CTR (Raj) 396. No liability to prove source of source (xi) Aravali Trading Co Vs Income Tax Officer (2008) 8 DTR (Raj) 199.Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

(xii) CIT VsHeeraLalChaganLal Tank (2002) 157 ITR 281 (Raj) Burden of the assessee stands discharged when the identity of the creditors is established and he confirms the loans.

B) ITAT Jaipur/Jodhpur i) Shalimar Buildcon (P) Ltd. vs ITO (2011) 128 ITD 0396 (Jaipur)In this case Hon’ble ITAT Jaipur Bench has relied on its old decision in the case of Hotel GaudavanITA No. 1162 and 1137/JP/2008 and addition on account of share capital was deleted. 28.5 On identical issue, the Tribunal, Jaipur Bench in the case of Hotel Gaudavan (P) Ltd. (supra) has held as under : "6. As regards the issue on merit in the Departmental appeal, we concur with the views of the learned CIT(A) that the AO has not considered the explanation of the assessee. The amount under consideration of Rs. 1.89 crore has been received by the assessee as share application money from M/s Jalkanta Technical & Financial Service (P) Ltd. (JTFSPL) after a proper resolution passed by the board of directors of the aforesaid company through banking channel. M/s JTFSPL is having permanent account and filing its return of income regularly. The AO has nowhere mentioned that money belongs to the assessee company and therefore, provisions of s. 68 cannot be invoked. The learned CIT(A) has rightly relied upon the decision of Hon’ble Delhi High Court in the case of CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 which has been confirmed by the Hon’ble Supreme Court of India. The learned CIT(A) has also relied upon the decision of Hon’ble jurisdictional High Court in the case of Barkha Synthetics Ltd. vs. Asstt. CIT (2005) 197 CTR (Raj) 432 and also the decision of Tribunal, Jodhpur Bench in the case of Uma Polymers (P) Ltd. vs. Dy. CIT (dt. 27th Feb., 2006) [reported at (2006) 101 TTJ (Jd)(TM) 124—Ed.] where it has been held that the assessee has to prove the existence of the shareholders which in the present case is not under dispute. Therefore, the assessee has discharged the burden and therefore the AO was not justified in making any addition under s. 68 of the Act. The learned counsel for the assessee has referred to the decision of Hon’ble Supreme Court of India in the case of Divine Leasing & Finance Ltd. dt. 21st Jan., 2008, the copy of which is placed on record where it has been observed by the Supreme Court as under : ‘Can the amount of share money be regarded as undisclosed income under s. 68 of IT Act, 1961 ? We find no merit in this SLP for the simple reason that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law. Therefore, we find no infirmity in the order of the learned CIT(A), with the impugned judgment.’ The said decision of Hon’ble Supreme Court of India has been followed by the Tribunal, Delhi Bench in the case of ITO vs. Bhor Mal Dhansi Ram Ltd. in dt. 3rd March, 2006. The copy of the said decision of Tribunal, Delhi Bench is placed on record. The learned counsel for the assessee Shri H.M. Singhvi, chartered accountant has also relied upon the decision of Hon’ble Supreme Court of India on the said issue in the case of CIT vs. Lovely Exports (P) Ltd. (2008) 216 CTR (SC) 195 : (2008) 6 DTR (SC) 308 wherein it has been held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the Department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company." 28.6 The Hon’ble Delhi High Court in the case of CIT vs. Divine Leasing & Finance Ltd. (supra) had an occasion to consider the addition on account of share application money. We are reproducing the held portion from the decision of Hon’ble Delhi High Court as mentioned in (2007) 207 CTR (Del) 38 (supra). "Income—Cash credit—Share application money—Burden of proof can seldom be discharged to the hilt by the assessee—If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay duty-bound, to carry out thorough investigations—But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company—If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders registers, share application forms, share transfer register etc. it would constitute acceptable proof or explanation by the assessee—Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices— Tribunal has noted that the assessee company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange—Complete details were furnished—Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company’s own income from undisclosed sources." 28.7 The Hon’ble apex Court in the case of CIT vs. Lovely Exports (P) Ltd. (supra) held that if the share capital money is received by the assessee company from alleged bogus shareholders then the Department is free to proceed to reopen the individual assessments of such shareholders in accordance with law. Such share application money cannot be regarded as undisclosed income of the assessee company.

28.8 The Hon’ble High Court in the case of First Point Finance Ltd. (supra) held that burden of proof on the assessee company lies to the extent of making out a case that investor exists and thereafter it is not for the assessee to further prove where they have brought money from to invest with it. 28.9 The Hon’ble Delhi High Court in the case of CIT vs. United Bio-tech (P) Ltd. 2010 TIOL- 533-HC-Del held that in case the identity of the share applicants has been established and it is found that the said applicants are corporate assessees who are assessed to tax with IT Department then there is no case of any substantial question of law. In the instant case, the share applicants are corporate assessees. 28.10 The Hon’ble Delhi High Court in the case of CIT vs. Samir Bio-tech (P) Ltd. (supra) held that if investments have been shown by the share applicants in their audited balance sheet then the addition cannot be made under s. 68 of the Act. 28.11 In view of the legal position as discussed above, the AO was not justified in making the addition of Rs. 1.10 crore without bringing on record any material for the addition. Simply on the basis of information which is not substantiated in the course of assessment proceedings against the assessee, the AO could not have added the amount. (ii) The Honb’le ITAT, Jaipur Bench, Jaipur in its judgment the case of M/s JadauJewellers& Manufacturers Pvt. Ltd., B-1, Trimutri Circle, Govind Marg, Jaipur in dated 14.12.2015 gave the following findings:- “.6.1 On facts also, the assessee has produced before the Assessing Officer copy of share application, confirmation of the cash creditors, copy of PAN, copy of Board resolution, copy of Director’s report, auditor’s report, copy of balance sheet, copy of P&L account, copy of bank account in all the cases to prove the identity, genuineness and creditworthiness of the cash creditors. The ld Assessing Officer made addition on the basis of investigation conducted by the ITO, Investigation Wing, Kolkata but the ld Assessing Officer of the assessee has not clarified what inquiry had been conducted and what evidences collected which goes against the assessee. The notice U/s 131 issued by the ITO, Investigation Wing, Kolkata were served in case of Vidya Agencies Pvt. Ltd. and ShivarpanMercantiles Pvt. Ltd., but compliance could not be made on the given date because concerned officer was on leave. In case of Middleton Goods Pvt. Ltd. And Lactrodryer Marketing Pvt. Ltd., notices were served on the assessee and in compliance to the notice, the party submitted all the documents in the IT office. The case law referred by the ld CIT(A) i.e. decision of Hon’ble Delhi High Court in the case of Nipun Builders and Developers Pvt. Ltd. Vs. CIT and Vijay Power Generator Ltd. Vs CIT (supra) are not squarely applicable on the facts of the case as there was short time available with the Assessing Officer as well as Investigation Wing of Kolkata. The copy of inquiry has not been provided by the Assessing Officer to the assessee. As per findings of the Hon'ble Delhi High Court in the case Nipun Builders and Developers Pvt. Ltd. Vs. CIT (supra), the Investigation Officer at Kolkata had not deputed Inspector to enquire the whereabouts of the company. The case laws referred by the assessee are squarely applicable on the facts and circumstances of the appellant’s case, therefore, we reverse the order of the ld CIT(A) on technical ground as well as on merit also….” (iii) Uma Polymer (P) Ltd. , 101 TTJ 124, JodhpurIncome—Cash credit—Share application money—In respect of share capital money, the assessee-company has to prove only the existence of the person in whose name share application is received—No further burden is cast on the assessee to prove whether that person himself has invested the money or some other person has made the investment in his name—Burden to prove that the money did not belong to him but to somebody else is on the Revenue—Distinction between a public company and a private company is not very material for this purpose—AO treated the investments made by ten shareholders in the assessee-company as bogus and made addition under s. 68 —Not justified— In all the cases except that of V, AO had obtained the bank statements of the shareholders which clearly show that the accounts were regularly maintained and the shareholders had made deposits—Further, the shareholders are also assessed to tax—Simply because scrutiny assessments were not made in the case of shareholders, such assessments could not be made in the course of assessment of the assessee—Having regard to the information collected by the AO from the banks, identity of the shareholders was fully established—If any shareholder is found to have made unexplained investment, then addition of such investment is required to be made in the hands of the shareholder and not in the account of the assessee—U had invested in the share capital through cheque except for a small sum which was returned to her—Her bank account shows several entries, both credit and debit, which have no relation with the amount invested with the assessee-company—Merely because she has not submitted her returns after the asst. yr. 1984-85, it cannot be said that she was not assessed to tax—Though V has not been shown to be assessed to tax, he had made major part of investments towards share capital through cheques and his identity is not doubted—Accordingly, share capital advanced by U and V is also to be accepted as genuine—Therefore, no addition of share capital money could be made in the hands of the assessee-company. (iv) The ld. Jaipur Tribunal in the case of DCIT V M/s Kamdhenu Steel and Alloys Ltd. 2014-TIOL-709-ITAT- Case relates to search and issue of shares on premium. Held that the assessee had submitted the particulars of registration of the applicant company, the confirmation from the share applicants, bank account details from which payment through account payee cheques, so the assessee had discharged its initially onus. (v) M/s. ARL Infratech Ltd. vs. The ACIT Jaipur. The findings of Hon’ble ITAT was as under:-

Before, we proceed to decide the issue on merits, we would like to discuss the scheme of the Act and precedents on the issue involved in this appeal as under:-

‘’In cases where share application money is found recorded in the books of an assessee which may represent credit in the books and the share applicant is identified, that amount cannot be added in the assessee's hands u/s 68 of the Act. The Hon'ble Rajasthan High Court has repeatedly reiterated the above legal position. These cases are: (i) CIT vs. Shree Barkha Synthetics Ltd. 182 CTR 175 (Raj.) (ii) Barkha Synthetics Ltd. vs. ACIT (2005), 197 CTR 432 (Raj).13 In coming to the above conclusion, the Hon'ble Jurisdictional High Court has considered at length the relevant decisions on the issue like CIT vs. Steller Investment Ltd. (2000) 164 CTR (SC) 287 = 251 ITR 263 (SC) which has confirmed the decision of Hon'ble Delhi High Court reported in (1992) 192 ITR 287. The Hon'ble Court has gone to the extent of stating that even if it be assumed that the subscriber to the sharecapitalare not genuine, nevertheless, under no circumstances can the amount of share capital be regarded as undisclosed income of the assessee. In this case, the share subscriber is identified. There can be no dispute regarding the above stated legal position. The following decisions also lay down the same ratio:-

(i) CIT vs. Lovely Exports (P) Ltd. (2008) 6 DTR 308 (SC) (ii) CIT vs. Dolphin Conpack Ltd. (2006) 283 ITR 190 (Del.) (iii) CIT vs. Gujarat Heavy Chemicals Ltd. (202) 256 ITR 795(SC) (iv) CIT vs. Kwick Travels (1992) 199 ITR (St.) 85 (SC)

This issue has been dealt at length by the Third Member in the case of Uma Polymers (P) Ltd. vs. DCIT, (2006) 101 TTJ (Jd.) T.M. 126 = (2006) 284 ITR (AT) 1 Jodhpur.’’ 2.6 Adverting, the facts of the given case, we are of the considered opinion that all the share applicants stand identified. The assessee has provided PANs of the share applicants. The mode of payment has also been made explained. There is no direct or indirect relation between the assessee company and the share applicants. The statements recorded during survey has got no evidentiary value and the law is very much settled on this issue. In any case, even under the provisions of Section 68 of the Act, the assessee cannot be forced to prove the source of the source. The law on this subject is also settled by numerous decisions. The alleged report of the Inspector of the Department who is stated to have visited at the given addresses of the share applicants was never put or confronted to the assessee. The cumulative effects of these reasons is that the impugned addition cannot be added in the hands of the assessee company. Accordingly, we order to delete the entire additions and allow the appeal of the assessee.

3.0 In the result, the appeal of the assessee stands allowed.

The department filed appeal before Hon’ble Rajasthan High Court. Hon’ble Rajasthan High Court confirmed the findings of Hon’ble ITAT by deciding the appeal of revenue in DB vide order dated 28/09/2016 (C) Other High Courts (i) 2014 (8) TMI 605 - MADRAS HIGH COURTThe Commissioner of Income Tax Versus Pranav Foundations Ltd.T. C. (A). No. 262 of 2014 Dated - 12 August 2014 Addition u/s 68 – Share application and share premium amount credited but not proved - Whether the Tribunal was right in upholding the order of the CIT(A) who deleted the addition made u/s 68, being the share application money and share premium amount credited by the assessee which was not proved – Held that:- Following the decision in CIT v. Lovely Exports (P) Ltd. [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - all the four parties, who are subscribers of the shares, are limited companies and enquiries were made and received from the four companies and all the companies accepted their investment - the assessee has categorically established the nature and source of the sum and discharged the onus that lies on it in terms of Section 68 of the Act - When the nature and source of the amount so invested is known, it cannot be said to be undisclosed income - the addition of such subscriptions as unexplained credit under Section 68 of the Act is unwarranted – Decided against Revenue.

(ii) CIT vs. Illac Investment (P) Ltd. (2007) 207 CTR (Del) 687;assessee-company has satisfactorily established the identity of the share subscribers and deleted the addition under s. 68, no substantial question of law arises for consideration.

(iii) CIT vs. Divine Leasing & Finance Ltd. (2007) 207 CTR (Del) 38; Income—Cash credit—Share application money—Burden of proof can seldom be discharged to the hilt by the assessee—If the AO harbours doubts of the legitimacy of any subscription he is empowered, nay dutybound, to carryout thorough investigations—But if the AO fails to unearth any wrong or illegal dealings, he cannot obdurately adhere to his suspicions and treat the subscribed capital as the undisclosed income of the company—If relevant details of address and identity of the subscribers are furnished to the Department along with copies of the shareholders register, share application forms, share transfer register, etc. it would constitute acceptable proof or explanation by the assessee—Department would not be justified in drawing an adverse inference only because the creditor/subscriber fails or neglects to respond to its notices—Tribunal has noted that the assessee-company is a public limited company which had received subscriptions to the public issue through banking channels and the shares were allotted in consonance with the provisions of Securities Contract (Regulation) Act, 1956, as also the rules and regulations of Delhi Stock Exchange—Complete details were furnished—Tribunal has further found that the AO has not brought any positive material or evidence which would indicate that the shareholders were benamidars or fictitious persons or that any part of the share capital represented company’s own income from undisclosed sources—As regards receipt of share capital on issue of rights shares to five companies, these companies were duly incorporated under the Sikkimese Companies Act and were assessed under the Sikkimese Taxation Manual—Their share subscriptions were also received through banking channels and found to be valid by the jurisdictional AO—Therefore, no addition could be made under s. 68 (iv) CIT v/s Value Capital services P Ltd. 307 ITR 334 (Delhi) held that there is additional burden on the department to show that even if share applicants did not have the means to make investment, the investment made by them actually emanated from the coffers of the assessee so as to enable it to be treated as undisclosed income of the assessee.

(v) CIT v/s STL Extrusion (P) Ltd. 333 ITR 269 (MP) Income—Cash credit—Share application money—Assessee has duly established the identity and source of credits—Additions not sustainable.

(vi) CIT v/s Arunanda Textiles (P) Ltd. , 333 ITR 116 (Karnataka) Share application money—Assessee able to identify the shareholders—It is not for the assessee-company to establish but it is for the Department to enquire with the investors about the capacity to invest the amount in the shares.

(vii) Bhav Shakti Steel Mines (P) Ltd. vs. CIT (2009) 18 DTR (Del) 194Income—Cash credit—Genuineness—CIT(A) not only found that the identity of each of the shareholders stood established, but also examined the fact that each of them were income-tax assessees and had disclosed the share application money in their accounts which were duly reflected in their IT returns as well as in their balance sheets—Tribunal was not therefore justified in coming to the conclusion that the CIT(A) had not considered the matter in the right perspective—Order passed by Tribunal remanding the matter for examining the share applicants set aside and that of CIT(A) restored (D) Other Benches of ITAT (i) ITO V M/s. Reliance Marketting Pvt. Ltd. 2015-TIOL-319-TAT-Delidentity of the creditors/share applicants by furnishing their PAN number and copy of acknowledgment of Income-tax Return. The amount on account of share application was received through banking channel, copies of the confirmation alongwith affidavit of the parties were furnished. The assessee also furnished the copy of share application forms, copy of Form no.2 filed with Register of Companies (ROC), showing allotment of shares to the applicants. Therefore, the assessee discharged the onus cast upon it, (ii) INCOME TAX OFFICER vs. MS. SUPERLINE CONSTRUCTION P. LTD. ITAT, BOMBAY TRIBUNAL (A)

TO 3648, 3650, 3651Mum/201430th November, 2015(2015) 45 CCH 0281 MumTrib. Addition—Addition on account of bogus share application money—Assessee was in business of builder and developer—Assessment was completed u/s 143(3) r.w.s. 147—Re-assessment proceedings were initiated on basis of information received from Directorate of Income-tax (Investigation) without recording AO’S own satisfaction and information was accepted in mechanical manner—After reopening of assessment u/s 147, AO made addition of Rs.40 lakhs received by assessee from various corporate entities—Addition was made by AO on account of bogus share application money under provisions of s 68— CIT(A) deleted addition made by AO—Held, in case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC), it was held that If share application money was received by assessee company from alleged bogus shareholders whose name were given to AO then department was free to proceed to reopen their individual assessments in accordance with law but it could not be regarded as undisclosed income of assessee company—It was submitted by assessee that AO had failed to appreciate statements of any person recorded u/s 143(3) r.w.s. 147—That assessee-company had fully discharged burden of proof, onus of proof and explained source of share capital and advances received by established identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences—Assessee company substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO—These facts had not been rebutted on behalf of Revenue—ITAT was not inclined to interfere with findings of CIT(A) who thus rightly deleted entire impugned additions of Rs.40 lakhs made by AO u/s 68 on account of share capital subscription received by assessee-company Held: It was pointed out in the case of CIT vs. M/s. Lovely Exports (Pvt) Ltd, reported in [2008] 216 CTR 195 (SC) that if the share application money is received by the assessee company from alleged bogus shareholders whose name are given to the AO then the department is free to proceed to reopen their individual assessments in accordance with law but it cannot be regarded as undisclosed income of assessee company. (para 2.3) In this background, it was submitted on behalf of the assessee that the Assessing Officer failed to appreciate that there was no documentary evidence against the assessee-company to support such impugned additions. It was further submitted by the assessee that the Assessing Officer failed to appreciate that the statements of any person recorded u/s 143(3) r.w.s.

(iii) Meera Engineering & Commercial Co. (P) Ltd. vs. Asstt. CIT (1997) 58 TTJ (Jab) 527 Income—Cash credits—Genuineness of share capital of company—All the 51 shareholders filed their affidavits and confirmatory letters and 24 of them filed their replies also to notice under s. 133(6)—Names of parties purchasing the shares with amount subscribed were furnished before AO—All documents clearly show that shareholders do exist— Assessee-company had discharged its onus of explaining the cash credits as required under law—If the company is able to establish that shareholders existed and they have invested money for purchase of shares burden of company to prove the credit is discharged—Identity of shareholders not in dispute— Assessee is not required to prove credit-worthiness of shareholders—Addition deleted (iv) Allen Bradley India Ltd. vs. Dy. CIT (2002) 74 TTJ (Del) 604 : (2002) 80 ITD 43 (Del);Income—Cash credit—Subscription to share capital and loan—In case of limited companies jurisdiction of AO would be limited only to see whether identity of shareholders is established and whether they exist or not—Once identity is established, then, possibly no further enquiries need to be made—Since the shareholders of assessee-company were in existence, they were assessed to tax, complete details were available, share capital money as well as loan were received through account payee cheques and they were cleared through proper banking channels, AO was not justified in disbelieving the capital invested by the shareholder companies— Similarly, AO was not justified in disbelieving the loan taken from DTL as the cheques were cleared through bank channels and confirmation and supporting evidence was filed—CIT(A) was justified in deleting the additions.

(v) 2017 (3) TMI 1047-ITAT AHMEDABAD Income Tax Officer, Ward 8 (1), Ahmedabad Versus Seven Star Aviation Services Pvt. Ltd Addition u/s 68 - share application money and unsecured loan received. Held that:- When the depositors are regular tax payers and the advances made by such depositors as also share application monies paid by such shareholders are duly accepted in their personal assessments, there cannot be any occasion to hold that these amounts are unexplained in the hands of the company. The credit worthiness or identity cannot be an issue in such a situation.

(vi) 2016 (10) TMI 920 - ITAT HYDERABADM/s. HariomConcast and Steel Pvt. Ltd. Versus Income Tax Officer, Ward-2 (2) ,HyderabdAddition for shares issued on premium. Held that:- Share premium cannot be brought to tax invoking the provisions of Section 68, unless there is a link with either quid pro quo transaction or investing by assessee-company in their accounts so as to receive it back as share capital. No such evidence was brought on record.

(iii) CIT Vs Orissa Corporation (P) Ltd (1986) 159 ITR 79 (SC) 13. In the assessment order the section under which the addition made has not been mentioned. Therefore, the addition made by Ld. A.O. in sustainable in the eyes of law. In this regard the reliance in placed on the following cases: - i) 2021 (12) TMI 584 - ITAT JODHPUR MR. NEERAJ PALIWAL VERSUS I.T.O. WARD-2, RAJSAMAND. Unexplained cash credit - addition of cash deposit in bank account - non mentioning of relevant section to make addition - HELD THAT:- AO as well as that of the CIT(A) that they have not specifically mentioned as to under which section of the Act the additions have been made. As relying on SMT. SUDHA LOYALKA, C/O M/S RRA TAXINDIA VERSUS ITO, WARD 35 (2) , NEW DELHI [2018 (7) TMI 1892 - ITAT DELHI] sustaining of impugned addition is not justified as non-mentioning the precise provision of law makes the impugned addition bad in law. ii) Shree Ramareddy Ramesh -vs.- ITO 2020 (3) TMI 1385 - ITAT BENGALURE wherein it has been held as under: "About the third amount of ₹ 30,21,961/-, we find that this is a fact that no section is mentioned by the AO or CIT (A) for making this addition and for this reason alone, the addition is bad in law as per the tribunal order cited by the learned AR Of the assessee having been rendered in the case of Smt. Sudha Loyalka vs. ITO (Supra) wherein it was held that non mentioning the precise section makes the addition bad in law."

To support the contention so raised in the written submission, reliance was placed on the following evidence/ records : PAPER BOOK INDEX S.NO. PARTICULAR Page No.. From To 1. Copy of Written Submission dated 17.10.2024 filed before Ld. 01 72 CIT(A). 2. Copy of ITR, Computation and Audit Report for the AY 2012- 73 86 2013. 3. Copy of notice dated 04.11.2014 issued u/s 142(1) of the Act. 87 88

4. Copy of Reply to the notice dated 04.11.2014 filed on 89 92 11.11.2014 and 24.11.2014.

5. Copy of Application for purchase of Equity Share 93 93 byHarsharatna Finance & Investment Pvt Ltd.

6. Copy of Bank Statement of Harsharatna Finance & 94 94 Investment Pvt Ltd reflecting the payment to the assessee company for purchase of Shares.

7. Copy of ITR and Audit Report of Harsharatna Finance & 95 116 Investment Pvt Ltd for the AY 2012-2013. Copy of Application for purchase of Equity Share byLiberal 8. 117 117 Infrastructure Pvt Ltd. Copy of Bank Statement of Liberal Infrastructure Pvt. Ltd. 9. 118 118 reflecting the payment to the Assessee company for purchase of Shares. 10. Copy of ITR and Audit Report of Liberal Infrastructure Pvt 119 134 Ltd for the AY 2012-2013. 11. Copy of Application for Purchase of Equity Share bySnowfall 135 135 Impex Pvt Ltd. 12. Copy of Bank Statement of Snowfall Impex Pvt Ltd reflecting 136 136 the payment to the Assessee company for purchase of Shares. 13. Copy of ITR and Audit Report of Snowfall Impex Pvt Ltd for 137 151 the AY 2012-2013. 14. Copy of Application for Purchase of Equity Share by New 152 152 Edge Realtor Pvt Ltd. Copy of Bank Statement of New Edge Realtor Pvt Ltd 15. 153 153 reflecting the payment to the Assessee company for purchase of Shares. Copy of ITR and Audit Report of New Edge Realtor Pvt Ltd 16. 154 168 for the AY 2012-2013. 17. Copy of Application for Purchase of Equity Share byAgarani 169 169 Credit and Finvest Pvt Ltd. 18. Copy of Bank Statement of Agarani Credit and Finvest Pvt 170 170 Ltd reflecting the payment to the Assessee company for purchase of Shares.

19. Copy of ITR and Audit Report of Agarani Credit and Finvest 171 191 Pvt Ltd for the AY 2012-2013.

Copy of Reply to the notice u/s 148 of the Act along with the 26. 208 211 ITR filed in compliance to notice issued u/s 148 of the Act. 27. Copy of notice issued u/s 143(2) dated 18.11.2019 along with 212 218 the Reason Recorded for initiation of proceeding u/s 148 of the Act. 28. Copy of objection dated 24.11.2019 filed against the initiation 219 223 of proceeding u/s 148 of the Act.

5. On the other hand, the ld. DR relied on the orders of the lower authorities.

6. We have heard the rival contentions, perused the material on record and gone through the orders of the lower authorities. For the sake of convenience, we first take ground no. 2 for adjudication, which is purely a legal ground and challenge to very initiation of reassessment proceedings. Ground no. 2 relates to challenging the order of the ld. CIT (A) confirming the proceedings under section 148 of the Act initiated by AO when the assessee was already assessed under section 143(3) of the Act and all the material were provided before the AO. In this case assessment had already been completed u/s 143(3) of the Income Tax Act, 1961 wherein the very issue of raising fresh share capital was examined and proceedings u/s 148 have also been initiated on the basis of information received from Investigation wing of Kolkata about these share capital as accommodation entry and the appellant has challenged the very initiation of reassessment proceedings on following counts :-

i. In case of proceedings u/s 143(3), reassessment beyond four years can only be taken if there was no full and true disclosure by the assessee during assessment. ii. On change of opinion reassessment can not be initiated. iii. No independent enquires were undertaken by AO Therefore, it would be appropriate to deal with the reasons recorded by the AO while reopening the case. Reasons as recorded by AO is appearing on page 213- 218 of the Paper Book filed by the assessee reveal that the AO mentioned following in such recording :- Brief details of the information collected/ received by the AO :

The specific information was received from DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 6430 dated 18.12.2018, DDIT (Inv.) Unit 2(3), Kolkata vide his letter No. 1966-97 dated 07.03.2019, DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 9031 dated 28.02.2019, DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 9108 dated 28.02.2019 and from ITO (Inv.) Unit 2, Kolkata vide his letter No. 1894 dated 26.02.2019 regarding accommodation entries taken by the assessee during the year under consideration. Analysis of information collected/received : The specific information was received from DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 6430 dated 18.12.2018, DDIT (Inv.) Unit 2(3), Kolkata vide his letter No. 1966-97 dated 07.03.2019, DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 9031 dated 28.02.2019, DDIT (Inv.) Unit 1(3), Kolkata vide his letter No. 9108 dated 28.02.2019 and from ITO (Inv.) Unit 2, Kolkata vide his letter No. 1894 dated 26.02.2019 regarding accommodation entries taken by the assessee during the year under consideration.

Enquiries made by AO as sequel to information collected/ received : Since the enquiry has already been made by Investigation unit, no further enquiry is required at this stage. Based on the information received from the DDIT (Inv.) Unit 2, the ld. AO formed an opinion about concealment of income and notice u/s 148 was issued by him. Against the reasons the assessee objected before the AO that they have not obtained any unsecured loans as alleged in the reasons recorded but in fact companies referred subscribed to its share capital for which the necessary verification has been done after scrutinizing the details so filed, no adverse inference was drawn in respect of anyone. Thus, there was no failure on the part of the assessee to disclose any material, and accordingly, assessment has already been completed on 26.11.2014 and therefore, the said issue again cannot be taken up as settled by the legal precedents. The fact that the AO mentioned unsecured loan in the reasons for reopening shows that he mechanically issued notice under section 148 of the Act, based on information allegedly received by him from the Directorate of Income Tax (Investigation) without proper application of mind and independent analysis and investigation even though all the information was available on record. In the column seeking details about enquiries conducted by the ld. AO, it has been mentioned that since all enquiries have been undertaken by DDIT, Kolkata and hence no such enquiry was needed at that time by him. It shows that no efforts were made by the AO about sanctity of information so received by him and no independent satisfaction about concealment was recorded by him. The assessee contended that in the scrutiny assessment which was completed u/s 143(3) on 26.11.2014 in the case of the appellant for the A.Y 2012- 13 wherein all the information related to the share capital had been provided by the appellant and after due application of mind, the assessment order was passed. Even though ld. A/R of the assessee contended before the ld. CIT(A) that the reasons were recorded for unsecured loans and additions were made for share capital, but without considering the submission, he confirmed the order of the AO. The Bench also noted that in the original assessment u/s. 143(3) which was passed vide order dated 26.11.2014 reveals that the AO had made complete verification of details and records furnished including details in respect of share capital. The judicial principle as set out in the judgment of the Hon'ble Supreme Court in the case of Calcutta Discount Co. Ltd. (41 ITR 191) wherein the Apex Court held that "Both the conditions, (1) the income-tax officer having reason to believe that there has been underassessment and (2) his having reason to believe that such underassessment has resulted from nondisclosure of material facts, must co-exist before the Income-tax officer has jurisdiction to start proceedings after the expiry of four years”. In the present case, the reassessment proceedings was initiated solely on the basis of report of DDIT (Inv.) Unit 1(3), Kolkata and without making the independent inquiry by the AO at his own hands or even without applying his own mind on the information so received. There is catena of judicial pronouncements on this issue which clearly supports the assessee’s case on the lack of jurisdiction with the AO who had merely adopted reasons to believe on the basis of the report of other authorities and that there is total non-application of mind in recording the reasons for assumption of jurisdiction. Reliance is placed on the decision of Coordinate Bench of the Tribunal, Jaipur in the case of Smt. Kanta Chaudhary vs. ITO, Ward 7(3) Jaipur in dated 06.12.2018 wherein it was held as under :-

"5. We have heard the rival contentions and perused the material available on record. On perusal of the reasons so recorded by the AO before issuance of notice u/s 148 of the Act, we find that on the basis certain information received from the Investigation Wing Mumbai, the AO has not just formed an opinion but has finally concluded that the assessee has benefitted by obtaining accommodation entries from M/s New Planet Trading Co Ltd. Further, the AO has stated that since the assessee has not filed the return of income as per AST system of the department, he has reasons to believe that income has escaped assessment. To our mind, such an approach of the AO where, based on information received in context of a third party, even before issuance of notice u/s 148 has concluded that assessee has obtained accommodation entries and income to that extent has escaped assessment is not a correct approach in the eyes of law. In the instant case, it is an undisputed fact that the assessee has filed her return of income on 31.07.2007 where she has shown purchases of Rs 36,64,300 and which are the only purchases during the year and which are alleged to be accommodation entry as per the reasons issued u/s 148 of the Act. The assessee has shown the corresponding sales of Rs 39,44,220 and reported a grossprofit of Rs 3,41,752. As held by the Bombay High Court in case of M/s Shodiman Investments, the material in possession of the AO has to be further linked by any reason to come to conclusion that the assessee has indulged in any activity which could give rise to reason to believe that income chargeable to tax has escaped assessment. In other words, unless the AO carries out the further examination after receipt of initial information from the Investigation wing, how can he conclude that income has escaped assessment. It is a fact that the assessee has filed her return of income. The AO should have examined her return of income and carried out initial investigation before coming to the conclusion that income has escaped assessment. In the entirety of facts and circumstances of the case, the notice issued under section 148 cannot be sustained and the same is held to be bad in law. In the result, the reassessment proceedings are hereby quashed and set-aside. The grounds on merit have thus become infructous and are not adjudicated upon."

Thus, in totality of facts discussed herein above and considering the judicial precedents, supra, the reassessment proceedings initiated are hereby quashed on account of non application of independent mind by AO, formation of belief on borrowed satisfaction of other Wing of the department and change of opinion. Accordingly the proceedings u/s 148 are held to be void ab initio and consequentially the notice u/s 148 as well as assessment and appeal orders of lower authorities are quashed. Thus Ground no. 2 is allowed.

As regards Ground no. 1 relates to the share application money / share capital, the Apex Courtin the case of CIT vs. Lovely Exports Pvt. Ltd. (2008) 216 CTR (SC) 195 come to the rescue of the assessee on themerits because to prove the identity, creditworthiness and genuineness ofthe transaction the assessee has placed on record copy of Form of application for equity shares, copy of bank statement, copy of ITR, Computation and Audit Report for the year under consideration and earlier year, copy of financial statement of the investor company. Copies of bank statements evidencing the investment of share application money through banking channels. Thus, the assessee discharged its onus as per provision of section 68 of the IT Act. Now onus is on AO to disprove the genuineness of the investments on that aspect except statement of Shri Mukesh Banka, no contrary material is placed on record. Further, the AO did not point out any specific instance or any information in the statements recorded by the Investigation Wing in the case of Shri Mukesh Banka which reveals the alleged involvement of assessee in taking accommodation entries. In the absence of any specific information about the assessee against the evidence on record it is not correct to make addition merely on the basis surmises and presumptions of a statement of the third party Shri Mukesh Banka. The evidence placed on record clearly proves the identity, capacity and genuineness of the transactions were proved and thus the criteria as prescribed in section 68 has been fulfilled and it does not warrant the source of source to be proved. The decision cited by the AO does not match with the facts of the case. Considering that aspect of the matter, once the credential of the investor is proved about the identity, genuineness and creditworthiness of the investor there is no reason to sustain the addition. We get strength to our view from the decision of the Apex Court in the case Lovely Exports (Supra) wherein it has been held that where the Revenue urges that the amount of share application money has been received from bogus shareholders then it is for the Income Tax Officer to proceed by reopening the assessment of such shareholders and assessing them to tax in accordance with law. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. Thus, it is very much clear from the provision of section 68 as prevailing for year under consideration the ld. AO can make addition u/s 68 only under two circumstances, (i) the assessee does not offer any explanation about nature and source of such credit or (ii) Explanation offered by Appellant is not up to the satisfaction of Ld. AO. Therefore, here we note that the assessee provided all the documentary evidences so as to prove the identity, credit worthiness and genuineness of the transaction by placing all the records such as PAN, Application made for Shares, Financial Statements and Bank statements of the investor companies which were not at all doubted by ld. AO. But all such vital evidence has been ignored solely on the basis of statements of third party recorded by some other officials during the course of search operation conducted and that too that statement was retracted. Thus, even otherwise the Bench noted that so far as merits of the case of the assessee, the revenue emphasized on the statement of Shri Mukesh Banka recorded in the search. That statement was retracted by him vide retraction statement filed on 04.09.2019 before the ld. DDIT, Kolkata. Therefore, even if we consider the merits of the dispute, the same has already been verified in the first round in an order passed u/s. 143(3) of the Act and based on the search of Banka Group the reliance was placed on the statement of Shri Mukesh Banka who has retracted the statement. Thus, even on these merits, our jurisdictional High Court in the case of PCIT Vs. M/s. Esspal International P. Ltd. DB dated 03/09/2024 held that merely based on the retracted statement no addition can be made. The relevant finding of binding judicial precedent is reproduced herein below:

11. Now it is a matter of record that Shirish Chandrakant Shah had retractedhis statements given before the Assessing Officer. Even otherwise, anadmission by the assessee cannot be said to be a conclusive piece ofevidence. The admission of the assessee in absence of any corroborativeevidence to strengthen the case of the Revenue cannot be made the basisfor any addition. Therefore, the substantial questions of law framed by theappellant pertained to an open issue which stands concluded by thedecision of the Hon'ble Supreme Court; one such decision was rendered in M/s Pullangode Rubber Produce Co. Ltd. v. State of Kerala And Another"(1973) 19ITR18.

12. Therefore, we hold that no substantial question of law arises between theparties and while so, the present Income Tax Appeal is not maintainable.

13. For the foregoing reasons, D.B. Income Tax Appeal No.25/2024 is dismissed.”

Respectfully following the finding of Apex Court in the case of CIT vs. Lovely Export Pvt. Ltd. (2008) 216 CTR (SC) 195 and our Jurisdictional High Court’s decision in the case of PCIT Vs. M/s. Esspal International P. Ltd. DB as referred herein above even on merits addition cannot be sustained. In terms of these observations, the appeal of the assessee is allowed.