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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
Before: Sh. Amit ShuklaDr. B. R. R. Kumar
ORDER
Per Dr. B.R.R. Kumar, Accountant Member:
The present appeal has been filed by the revenue against the order of the ld. CIT(A)-XII, New Delhi dated 17.06.2014.
Following grounds have been raised by the assessee: “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in assuming the jurisdiction u/s 147 that too without complying with mandatory conditions as envisaged u/s 147 to 151 more so when jurisdiction was assumed by Ld. A who was not having the valid jurisdiction over the assessee.
2. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in assuming jurisdiction over the assessee is bad in law and against the facts and circumstances of the case.
2 Styric Chem (P) Ltd.
3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.10,00,000/- on account of share capital u/s 68 of the Income Tax Act and has further erred in making the double addition in this regard.
4. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making the addition of Rs.10,00,000/- on account of share capital is bad in law and against the facts and circumstances of the case.
5. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in charging interest u/s 234A, 234B and 234D of Income Tax Act, 1961.”
The only issue to be taken up by us at this juncture is whether the notice issued u/s 147 of the Income Tax Act meets the requirements of the guidelines to be followed as enunciated by the provisions of the Act and the judgments in force.
The reasons recorded by the Assessing Officer are as under: “Return of income in this case was filed on 30.10.2005 declaring total income of Rs.44,22,545/-. Subsequently, the case was proceeded u/s 143(1) on 22.02.2006 at Rs.44,22,545/-. The Directorate of Income Tax (Inv.), New Delhi has carried out a detailed enquiry about the persons/companies engaged in the business of providing accommodation entries to various companies. These persons used to issue cheques in lieu of cash received after deducting their commission and these cheques were generally issued as share application money/unsecured loans.
3 Styric Chem (P) Ltd. The information regarding entry operators and their beneficiaries has been passed on to AO that the assessee company is one of the beneficiaries and took entry from the entry operator as detailed below: Value of Instrument Date of Name of Bank Branch of A/c No. entry no. by which account from entry entry taken which entry holder of which giving giving entry taken entry entry bank account taken giving given account 500000 151129 07.10.04 Keshav Karol Umesneh 625 Sehkari Bagh Securities Pvt. Ltd. 500000 151129 07.10.04 Umesneh Karol Keshav 625 Securities Bagh Sehkari Pvt. Ltd. These accommodation entries involving total amount of Rs.10,00,000/- represent the assessee’s own unaccounted money. The escapement of income has been on account of failure on the part of the assessee to truly and fully disclose all the material facts necessary for assessment. In view of the above, I have reasons to believe that an income of Rs.10,00,000/- has escaped assessment within the meaning of section 147 of the IT Act, 1961.”
During the arguments before us, the ld. AR argued that from the perusal of the reason, it can be found that the Assessing Officer has not applied his mind while recording the reasons. He pointed out that the return for the assessment year 2005-06 has been filed by the assessee on 30.10.2005 declaring a total income of Rs.44,22,545/- and the case was processed u/s 143(1) of the Act whereas the notice u/s 147 of the Act was issued on 30.03.2012 and as per the reason recorded which have been supplied to the assessee as well as reproduced in the assessment order do not reflect the approval of the Additional Commissioner of Income Tax as per the provisions of Section 151(1) of the Act. He pointed out to the glaring mistake in the 4 Styric Chem (P) Ltd. reasons recorded that while an amount of Rs.5,00,000/- only has been received by the assessee as per the bank statement of Umesneh Securities Pvt. Ltd. the reasons recorded shows that the assessee has received Rs.10,00,000/- as accommodation entry. He further pointed out that the value of the entry taken, the instrument number by which entry taken, date of which entry taken, name of the account holder of entry giving account, branch of the entry given bank, account number of entry giving account have all been wrongly mentioned in the reasons recorded by the Assessing Officer.
6. On the other hand, the ld. DR strongly supported the order of the Assessing Officer with regard to recording of the reasons. He has submitted that the reasons have been duly recorded on application of mind based on the investigation and after obtaining necessary approval from the Addl. CIT as required under the Act. Hence, he argued that the reasons recorded cannot be disputed.
We have perused the record and the reasons recorded by the Assessing Officer as mentioned in the assessment order and as supplied to the assessee. The same have been reproduced above. From the reading of the reasons, we find that the value of the entry taken has been mentioned as Rs.5,00,000/- twice along with the similar instrument number being 151129. The name of the account holder for each entry namely Keshav Sehkari and Umesneh Securities Pvt. Ltd. have been mentioned. Regarding the branch of entry giving bank, the reason mentioned Umesneh Securities Pvt. Ltd. and Keshav Sehkari. Not only this, the Assessing Officer has also mentioned same
5 Styric Chem (P) Ltd. account number ‘625‘ for both the entries under the column account number entry giving account. Thus, the Assessing Officer has committed a number of mistake in the reasons recorded for issue of notice u/s 148 of the Act. He also mentioned that he has reasons to believe that an income of Rs.10,00,000/- represents the assessee’s own unaccounted income which has escaped assessment whereas the amounts received as per the bank statements is only of Rs.5,00,000/-. This shows as absolute lack of application of mind on the part of the Assessing Officer which makes the assessment null and void ab initio. The amount of Rs.10,00,000/- is not supported by any correct cheque number whereas the allegation is that the assessee has received accommodation entry to the tune of Rs.10,00,000/-. In our considered opinion, the basis of reopening itself is based on wrong facts therefore, the same cannot be upheld. In Hindustan Lever Limited v. R.B. Wadkar, ACIT (2004) 268 ITR 332 (Bom.), a Division Bench has enumerated the following conditions with respect to recording of reasons which should form the unimpeachable code for the Assessing Officers: 1. The reasons are required to be read as they were recorded by the Assessing Officer; 2. No substitution or deletion is permissible; 3. No additions can be made to those reasons; 4. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him, 5. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year:
6 Styric Chem (P) Ltd.
The reasons recorded should be clear and unambiguous and should not suffer from any vagueness; 7. The reasons recorded should be self explanatory and should not keep the assessee guessing for the reasons; 8. Reasons provide the link between conclusion and evidence; 9. The reasons must be based on evidence; 10. The Assessing Officer, in the event of challenge to the reasons must be able to justify the same based on material available on record; 11. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence; 12. That vital link is the safeguard against arbitrary reopening of the concluded assessment;
Since, the reasons recorded by the Assessing Officer suffered from infirmity, therefore, we quash the reassessment made by the Assessing Officer without jurisdiction.
In the result, the appeal of the assessee is allowed. (Order Pronounced in the Open Court on 19/09/2019).