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

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR

Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh xxu xks;y] ys[kk lnL;] ds le{k
BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No. 514/JPR/2025
fu/kZkj.k o"kZ@Assessment Years : 2012-13
Ward-6(1),
Jaipur.
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AADCP7925K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Siddharth Ranka, Adv. &

Ms. Satwika Jha, Adv.
jktLo dh vksjls@Revenue by : Shri Dharam Singh Meena, JCIT lquokbZ dh rkjh[k@Date of Hearing

: 12/08/2025

mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 29/09/2025

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.

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Brand India Real Estate Pvt. Ltd., Jaipur.

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

Rs. 15,00,000/-

Rs. 10,00,000/-

Rs. 10,00,000/-
2. Ultimate Share Broking Private Limited & Other relates companies
Rs. 15,00,000/-
3. M/s. Alves Securities Private Limited & Other related companies
Rs. 10,00,000/-
4. M/s. Ability Securities Private Limited & Other related companies

Rs. 20,00,000/-

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Brand India Real Estate Pvt. Ltd., Jaipur.

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
Allotted
Amount

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

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Brand India Real Estate Pvt. Ltd., Jaipur.

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
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

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Brand India Real Estate Pvt. Ltd., Jaipur.

(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.

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Brand India Real Estate Pvt. Ltd., Jaipur.

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.

defects and falseness was pointed during the course of original assessment proceedings as well as in re-assessment proceedings. During the original assessment proceeding the assessee submitted the complete detail of share application money received by it, detail of shares allotted to the share applicant and supporting documents to justify the same. The assessee submitted the reply of specific query raise on the issue, which was couple with the documentary evidence and no defect was point out in such reply and documents. Now it is not understandable that what more ld. AO is expecting from the assessee, which was supposed to be submitted for disclosing the fully and truly material facts of the transaction. Further also, from the reasons recorded it is also not apparent that what left on part of the assessee it was supposed to further filed to truly and fully disclosed material facts of the transaction.

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.

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Brand India Real Estate Pvt. Ltd., Jaipur.

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 juri iction 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.

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Brand India Real Estate Pvt. Ltd., Jaipur.

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 juri iction 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 juri iction 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

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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 juri iction 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 12
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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. 9. Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to re-assess and not the power to review. To check whether it is a case of change of opinion or not one has to see its meaning in literal as well as legal terms. The word change of opinion implies formulation of opinion and then a change thereof. In terms of assessment proceedings, it means formulation of belief by an assessing officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection.”
4086/Del/2013, the learned Appellate Tribunal held that mere change of opinion is not permissible under the law and reopening of assessment was incorrect and invalid as the reopening had been done merely on change of opinion and the Assessing Officer had no fresh material to form his opinion regarding escapement of assessment and to record the reasons for reopening the assessment of the assessee.
vii)
In Konark Life Space v. ACIT 2023 (2) TMI 466, the Hon’ble Court at Bombay held that the AO has not established that there was a failure on the part of the assessee to disclose all material facts. The Assessing Officer has no power to review. On the facts there is neither a new information received nor has reference been made to any new material on record. Accordingly, the notice under section 148 of the Act and all connected proceedings are quashed.
viii)
In the matter of M/s S. Ganga Saran & Sons (Pvt.) Ltd., Calcutta v/s. Income Tax Officer
&Ors., (1981) 3 SCC, 143, the Hon'ble Supreme Court held as under:-
“6. It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume juri iction to issue notice under Section 147(a). First, he must have reason to believe that the income of the assessee has escaped assessment and secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without juri iction. The important words under Section 147 (a) are “has reason to believe” and these words are stronger than the words “is satisfied”. The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have 13
Brand India Real Estate Pvt. Ltd., Jaipur.

weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any such escapement was by reason of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.”
(v)
CIT V/s Bhanji Lavji [1971] 79 ITR 582 (SC),
Held that:-Reassessment under s. 34(1)(a) of 1922 Act—Full and true disclosure—In original assessment, all primary facts were disclosed—It was stated that payments were received by cheques and transferred to Porbandar—ITO had passed an order in effect holding that assessee had no income in British India chargeable to tax—He could not now seek to reassess the assessee on the ground of failure to disclose fully and truly the facts necessary for assessment

(vi)
DCIT v/s Purolator [2012] 343 ITR 155 (Del),
Held:- Reassessment—Income escaping assessment—Disclosure of material facts—Obligation of assessee—Extent of that obligation—Held, it is the obligation of the assessee to disclose fully and truly the primary or material facts but it is not his obligation to indicate and state what 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—All these facts were available on record—It is the AO who had failed to draw correct legal inferences at the time of original assessment from the said primary facts and this is not an error or omission on the part of the respondent-assessee—It was not alleged that the assessee had suppressed, misrepresented or falsified the record/facts—It was also not alleged 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—Hence, Tribunal rightly set aside the reassessment order

(vii)
Kimplas Trenton Fittings Ltd V/s ACIT [2012] 340 ITR 299 (Bom.),
Reassessment—Full and true disclosure—Notice after expiry of four years—Juri ictional condition under s. 147 in such a case is that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year—
Assessee had brought the primary facts to the notice of the AO both in a note appended to the computation of income and in its aforesaid letter—Error on the part of the AO cannot legitimately be the basis for reopening assessment beyond four years unless there is a failure of the assessee to disclose truly all material facts—In the circumstances, it not possible to come to 14
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the conclusion that there was a failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment—Hence, impugned notice under s. 148 is set aside

(viii) Desai Bros. Ltd v/s DCIT (2005) 272 ITR 335 (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.

(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 juri iction 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.

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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)
(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 v/s Meenakshi Oversea’s Pvt Ltd (2017) 395 ITR 677(Del) (HC) f)
The information received from other authority cannot be considered as material for reopening:-

“Analysis and Findings

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believe and not merely reasons to suspect that income has escaped assessment. In this case, the reasons failed to mention what facts or information was withheld by the Petitioner. Merely relying upon the statement of Mr. Navneet Kumar Singhania that the companies in question were ‘paper companies’, by itself, is insufficient to reopen the assessment, unless the AO had further information that these companies were non-existent after making further inquiries into the matter. It is clear that the AO did not make any inquiry or investigation, if these companies were in fact ‘paper companies’. No effort has been made to establish the connection between the statement of Mr. Navneet Kumar Singhania and the five companies.
16. Mr. Chaudhary’s submission that this Court cannot dictate the manner and content of what is to be written in the reasons to believe is correct as a legal proposition. However, the Court has to examine the reasons to believe to see if it satisfies the rigour of the provisions. The observations of this court in Multiplex (supra) are relevant in this respect and are set out below:
“24. In our view, the question whether the Assessee could have been stated to disclosed fully and truly all material facts have to be examined in the light of facts of each case and also the reasons that led the AO to believe that income of an Assessee has escaped assessment. In a case where the primary facts have been truly disclosed and the issue is only with respect to the inference drawn, the AO would not have the juri iction to reopen assessment. But in cases where the primary facts as asserted by the Assessee for framing of assessment are subsequently discovered as false, the reopening of assessment may be justified".”
17. In the facts of this case, the primary facts have not been shown to be false. The five companies do exist. They did subscribe to the share capital of the Petitioner. They did pay the money to the Petitioner. All the five companies are assessed to tax. These are the primary facts.
The reasons to believe rely upon a letter received from the Investigation Wing and Mr.
Chaudhary submits that this letter was in fact an investigation report. The report does not form part of the reasons and neither was it annexed to the reasons. Interestingly, even the counter affidavit is silent as to the material which has not been disclosed by the Petitioner. The counter affidavit merely states that the information was specific and the information would be provided to the Petitioner during the assessment proceedings. Thus, if the Revenue had any basis to show that the primary facts were incorrect, the same ought to have been set out in the reasons to believe. That has not been done in the present case.
18. Thus, the Petitioner cannot be said to have failed to disclose fully and truly all the material facts. This being a juri ictional issue, the assumption of juri iction under Sections 147 and 148
of the Act was erroneous. The notice dated 20th March, 2015 and the subsequent order dated 1st
February, 2016 deserve to be and are hereby quashed.

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(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).

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.

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issued u/s 148 in bad in law, illegal and therefore deserves to be quashed, entire exercise of juri iction by the learned AO is without juri iction, and the assessment order deserves to be set aside and annulled.

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

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(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 juri iction 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.

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

23
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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.
No.
Name of Entry Provider Group
Amount
1
Paper / Shall Companies of Mukesh Banka
Group

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

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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

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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 I.T.A.
Nos.923, 924 & 925/PUN./2023 dated 23.10.2023

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 ITA No. 1579/Del/2019 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 27
Brand India Real Estate Pvt. Ltd., Jaipur.

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 ITA No. 366/Del/2016 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:

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Brand India Real Estate Pvt. Ltd., Jaipur.

“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 juri iction under section 147/148 of the I.T. Act, 1961, is bad and illegal. The AO was not justified in assuming juri iction 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 29
Brand India Real Estate Pvt. Ltd., Jaipur.

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.”

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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.

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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 32
Brand India Real Estate Pvt. Ltd., Jaipur.

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.

33
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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 juri iction 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 34
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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.

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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 ITA No. 290/2004(2016) 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, ITA no. 2246 &
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, ITA no. 2075/del/2018, 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 ITA No 2178/Kol/2017
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 36
Brand India Real Estate Pvt. Ltd., Jaipur.

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 juri iction 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 juri ictional fact necessary to usurp juri iction 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:
Shri Raj Kumar Goel Vs. ITO ITA No.1028/Kol/2017
(referred to page 5-8 para 11)
(iv)
Classic Flour & Food Processing Pvt. Ltd. Vs. CIT ITA Nos. 764 to 766/Kol/2014(page
7 para 12 to 16) v)
KSS Petron Pvt. Ltd. Vs. ACIT ITA No. 224/Mum/2014
(referred to page 3 para 8-11) vii)
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

37
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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 ITA No. 71/JP/2017 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)
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 38
Brand India Real Estate Pvt. Ltd., Jaipur.

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.

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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.

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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:

41
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to “reasons for the proposed supersession”. The most that could be said for the stock reason is that it is a general description of the process adopted in arriving at a conclusion. … … … …

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.”

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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

43
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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 &
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.

44
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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 &
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.”

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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)

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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.

Total
36,664/-
55,00,000/-

Out of the amount of Rs. 55,00,000/-, on allotment of shares the amount of Rs. 3,66,640/- adjusted in share Capital and balance amount of Rs. 51,33,360/- adjusted towards Share premium. However, the Ld. AO made the addition of Rs 55,00,000/- by considering the share application money received as undisclosed income of the assessee. The ld. AO has not specified the section under which addition of receipt the share application money was made.
2. During the course of assessment proceedings u/s 143(3) which was completed vide order dated 26/11/2014 and the assessee submitted the following documents to prove the identity, creditworthiness and genuineness –
a)
Form of Application of Equity Shares b)
Bank Statement reflecting the payment to assessee for share application c)
Copy of ITR filed for AY 2012-13

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d)
Copy of Director Report, Auditor Report and Audited financial statement for the year ended on 31/03/2012
The copies of above documents are submitted at PB Page 21-119. 3. The assessee has submitted sufficient documents before the ld AO to prove identity, creditworthiness and genuineness of share capital. All the share capital/share application was received through a/c payee cheques and verifiable from bank statement of assessee as well as bank statement of the party. The onus u/s 68 of the assessee is to prove the identity, capacity and genuineness of the transactions has been discharged which may be seen from the followings:- i)
Identity:-

The assessee proved the identity of all the parties by filing their ITR, Balance sheet etc. and the parties are duly in existence and the existence of the parties can be verified from the official website of Income Tax and MCA. The ld. AO also not doubted the identity of the above-named parties.

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 48
Brand India Real Estate Pvt. Ltd., Jaipur.

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.

49
Brand India Real Estate Pvt. Ltd., Jaipur.

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.
8. The case of the assessee squarely covered from the judgement of Hon’ble ITAT, Jaipur
Bench, Jaipur, in the case of Multimetals Ltd V/s DCIT, ITA Nos. 1024 to 1026, 1100 to 1104 &
1230/JP/2018 & CO 38 & 39/JP/2018 order dated 29.01.2019 ,wherein tribunal by placing the reliance on its earlier judgment in the case of Kota Dal Mills ITA No. 997 to 1002/JP/2018 &
1119/JP/2018 dated 31.12.2018 give the following findings: -

At Page 54 of the order: - “the addition made by the Assessing Officer on the basis of the information/report of the DDIT (Investigation), Kolkata as well as the statements of Shri Anand
Sharma and Shri Ankit Bagri without giving an opportunity of cross examination is not sustainable as the addition is solely based on the statement and information which is nothing but summary of statements recorded by the DDIT(Inv), Kolkata.”

At Page 92 and 93 of the order: - “The Assessing Officer has not brought any material on record to controvert the correctness of the evidence filed by the assessee rather all these records was subjected to the scrutiny assessment in the case of the loan creditor, therefore, once the department has accepted financial statement of the loan creditors then the same cannot be denied while examining genuineness of the transaction in the hand of the assessee. Hence, by following the earlier order of this Tribunal in the case of Kota Dall Mill (supra) wherein the issue of loan taken from M/s Jalsagar Commerce Pvt. Ltd. was examined and decided in favour of the assessee, we delete the addition made by the Assessing Officer in this regard.”
At Page 106 of the order: -“Thus, the Tribunal in the case of Kota Dall Mill (supra) has examined all the relevant details including the funds available with Teac Consultants Pvt. Ltd., which is sufficient for advancement of loan to the assessee. Further the ld. CIT(A) has deleted the addition on the basis that the Assessing Officer has not brought any material on record to controvert thedocumentary evidence filed by the assessee even the statement of allegedentry operator was not in possession of the Assessing Officer. The findingof the ld. CIT(A) in the case under consideration is identical as in the caseof Kota Dall Mill (supra), therefore, following the earlier order of thisTribunal, we do not find any error or illegality in the order of the ld.
CIT(A)qua this issue. Hence, the appeal of the revenue is dismissed.”

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Brand India Real Estate Pvt. Ltd., Jaipur.

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 ITA
No 24/2014 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.
11. Ultimately, the question as to whether the source of investment or of credit has been satisfactorily explained or not remains within the realm of appreciation of evidence; and the Courts have consistently held that such a matter does not give rise to any substantial question of law. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986) 159 ITR 78 (SC), the Hon'ble Supreme Court held as under:-
"13. In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under s. 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the alleged loans. There was no effort made to pursue the so- called alleged creditors. In those circumstances, the assessee could not do any thing further. In the premises, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises."

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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."
14. The ratio of the decisions aforesaid directly applies to the present case too. Herein, as noticed, the appellate authorities have returned the findings of fact in favour of the assessee after due appreciation of the evidence on record, on relevant considerations, and on sound reasonings. These findings have neither been shown suffering from any perversity nor appear absurd nor are of such nature that cannot be reached at all. Thus, no case for interference in the findings of the appellate authorities is made out.
In the result, the appeal fails and is, therefore, dismissed.”
(iii)
Barkha Synthetics Ltd. vs. Asstt. CIT (005) 197 CTR (Raj) 432. Substantial question of law—Cash credit vis-a-vis share application money—Tribunal found that 6 out of 7 companies from which the share application money had been received were genuinely existing and no enquiry was conducted in respect of the source of share application money at the time of making the investment in the assessee-company and thus the assessee has discharged its initial burden except in one case—As regards individual investors, the Tribunal found that identity of 9 out of 10 investors has been established and they have confirmed the fact of making investment in the shares of the assessee-company and no further enquiry was directed by the AO—Thus, additions were sustained only in respect of investments said to have been made by U, an individual investor and by W Ltd., for the reason that such investments were not proved—
Finding of the Tribunal is essentially a finding of fact which is not vitiated in law—No substantial question of law arise for consideration.

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(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)
(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—
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)
ITAT Jaipur/Jodhpur i)
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 juri ictional 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.’

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Brand India Real Estate Pvt. Ltd., Jaipur.

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 ITA No. 4670/Del/2007, 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.

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59
Brand India Real Estate Pvt. Ltd., Jaipur.

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 Juri ictional 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.’’

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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
ITA No 24/2014 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

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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 juri ictional 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 62
BOMBAY TRIBUNAL (A) ITA No. 3644 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. 147. The assessee-company had fully discharged the burden of proof, onus of proof and explained the 63
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source of share capital and advances received by established the identity, creditworthiness and genuineness of transaction by banking instruments with documentary evidences. The further stand of the assessee had been that the assessee-company substantiated the details with the documentary evidences as extracted from the website of Ministry of Corporate Affairs,
Government of India before the Assessing Officer. These facts had not been rebutted on behalf of the Revenue.

(para 2.4)

In view of the facts and circumstances of the present case as well as considering the decisions as discussed above on the similar issue, ITAT was not inclined to interfere with the findings of the CIT(A) who had rightly deleted the entire impugned additions of Rs.40 lakhs made by the Assessing Officer u/s 68 of the Act on account of share capital subscription received by the assessee-company.

(para 2.5)

Conclusion:

When Assessee-company had substantiated details with documentary evidences as extracted from website of Ministry of Corporate Affairs, Government of India before AO, then additions made by AO u/s 68 on account of share capital subscription received by assessee- company was rightly deleted.

(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 juri iction 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 64
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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)
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 65
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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 ITA No. 2027/Bang/2016 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.
CIT(A).

01
72
2. Copy of ITR, Computation and Audit Report for the AY 2012-
2013. 73
86
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 11.11.2014 and 24.11.2014. 89
92
5. Copy of Application for purchase of Equity
Share byHarsharatna Finance & Investment Pvt Ltd.

93
93

66
Brand India Real Estate Pvt. Ltd., Jaipur.

94
94
7. Copy of ITR and Audit Report of Harsharatna Finance &
Investment Pvt Ltd for the AY 2012-2013. 95
116
8. Copy of Application for purchase of Equity Share byLiberal
Infrastructure Pvt Ltd.

117
117
9. Copy of Bank Statement of Liberal Infrastructure Pvt. Ltd.
reflecting the payment to the Assessee company for purchase of Shares.

118
118
10. Copy of ITR and Audit Report of Liberal Infrastructure Pvt
Ltd for the AY 2012-2013. 119
134
11. Copy of Application for Purchase of Equity Share bySnowfall
Impex Pvt Ltd.

135
135
12. Copy of Bank Statement of Snowfall Impex Pvt Ltd reflecting the payment to the Assessee company for purchase of Shares.

136
136
13. Copy of ITR and Audit Report of Snowfall Impex Pvt Ltd for the AY 2012-2013. 137
151
14. Copy of Application for Purchase of Equity Share by New
Edge Realtor Pvt Ltd.

152
152
15. Copy of Bank Statement of New Edge Realtor Pvt Ltd reflecting the payment to the Assessee company for purchase of Shares.

153
153
16. Copy of ITR and Audit Report of New Edge Realtor Pvt Ltd for the AY 2012-2013. 154
168
17. Copy of Application for Purchase of Equity Share byAgarani
Credit and Finvest Pvt Ltd.

169
169
18. Copy of Bank Statement of Agarani Credit and Finvest Pvt
Ltd reflecting the payment to the Assessee company for purchase of Shares.

170
170

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Brand India Real Estate Pvt. Ltd., Jaipur.

194
200
22. Copy of Notice issued dated 30.03.2019 u/s 148 of the Act.

201
201
23. Copy of Show-cause notice dated 05.11.2019. 202
203
24. Copy of reply to the SCN dated 05.11.2019 filed on 07.11.2019. 204
204
25. Copy of Show-cause notice dated 13.11.2019. 205
207
26. Copy of Reply to the notice u/s 148 of the Act along with the ITR filed in compliance to notice issued u/s 148 of the Act.

208
211
27. Copy of notice issued u/s 143(2) dated 18.11.2019 along with the Reason Recorded for initiation of proceeding u/s 148 of the Act.

212
218
28. Copy of objection dated 24.11.2019 filed against the initiation of proceeding u/s 148 of the Act.

219
223

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 :

69
Brand India Real Estate Pvt. Ltd., Jaipur.

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 70
Brand India Real Estate Pvt. Ltd., Jaipur.

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

71
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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 juri iction 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 juri iction 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 juri iction. 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 ITA No. 878/JP/2018 dated 06.12.2018 wherein it was held as under :-

72
Brand India Real Estate Pvt. Ltd., Jaipur.

"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 73
Brand India Real Estate Pvt. Ltd., Jaipur.

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 74
Brand India Real Estate Pvt. Ltd., Jaipur.

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 75
Brand India Real Estate Pvt. Ltd., Jaipur.

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 juri ictional High Court in the case of PCIT Vs. M/s.
Esspal International P. Ltd. DB ITA no. 25/2024 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

76
Brand India Real Estate Pvt. Ltd., Jaipur.

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.”
Export Pvt. Ltd. (2008) 216 CTR (SC) 195 and our Juri ictional High Court’s decision in the case of PCIT Vs. M/s. Esspal International P. Ltd. DB ITA no.
25/2024 as referred herein above even on merits addition cannot be sustained. In terms of these observations, the appeal of the assessee is allowed.
7. Since we have quashed the reopening of the assessment and even the addition is deleted on merit, Ground no. 3 has become infructuous and there is no need to adjudicate the same.

In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 29/09/2025. ¼ xxu xks;y ½

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(GAGAM GOYAL)

(Dr. S. Seethalakshmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 29/09/2025
*Santosh
आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू

77
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सहायक पंजीकार@Aेेजज. त्महपेजतंत