TIJARIA POLYPIPES LIMITED,JAIPUR vs. DCIT CIRLCE 4, JAIPUR

fu/kZkj.ko"kZ@AssessmentYear : 2013-14 cuke TijariaPolypipes Ltd. The DCIT SP-1-2316, Ramchandrapura, RIICO Vs. Circle-4 Industrial Area, Sitapura, Jaipur– 302 022 Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCT 4796 M vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri Tarun Mittal, CA jktLo dh vksjls@Revenue by: Shri Anoop Singh,Addl.CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 21/01/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: : 30/01/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against order of the ld. CIT(A), Jaipur-4 dated 08-04-2024 for the assessment year 2013-14in the matter of section 143(3)/ 147 of the Act by raising the following grounds of appeal. ‘’1. On the facts and in the circumstances of the case and in law, Id. CTT(A) has erred in confirming the re-opening u/s 147 of the Act, of the assessment completed u/s 143(3) of the Income Tax Act, 1961, arbitrarily.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 1.1 That the Ld. CIT(A) has further erred in confirming the re-opening of assessment by ld.AO without recording any subjective belief as to escapement of income and in merely acting upon suspicion formed on the basis of so-called information received from some other officials, by completely ignoring the pre- requisite condition for re-opening of assessment which can be done only on the basis of subjective belief of escapement of income and that suspicion cannot take the place of belief. Thus, the consequent reassessment order deserves to be held bad in law and additions thereof deserves to be deleted. 1.2 That the Id. CIT(A) has further erred in confirming the reopening proceedings initiated u/s 148 after four years from the end of relevant assessment year. wherein assessment stood completed u/s 143(3) of the Act, after complete verification of all details. Appellant prays that re-opening proceedings so initiated by Id.AO, without establishing any failure on the part assessee to disclose fully and truly all facts or material necessary for its assessment, is contrary to the provisions of the Act as well as bad-in-law, and hence void ab For TJARIA initio and the consequent re-assessment order deserves to be quashed. 1.3 That the Id. CIT(A) has further erred in confirming the initiation of proceedings u/s 147 in a case of assessment already completed u/s 143(3) which tantamount to re-visiting a completed assessment without any evidentiary material on record, which is not permissible as per provision of law. Appellant thus prays that such re- opening being bad-in-law, the consequent re-assessment order deserves to be quashed.

2. On the facts and in the circumstances of the case Id. CIT(A) has grossly erred in confirming the reopening of assessment by not considering and appreciating the vital fact that, in the reasons recorded, appellant was alleged to have taken accommodation loan entries, whereas no such addition of unsecured loan was made in reassessment order and rather addition was finally made by Id.AO on allegation of unexplained share application money received from two parties. Appellant prays that since no addition was made on the issue on which satisfaction for re-opening was formed as same was found to be not existing, then Ld.AO was not justified in making any other addition and, thus action of Id.CTT(A) in confirming such addition is not in accordance with law and the consequent addition deserves to be deleted. Without prejudice to above on merits 3. On the facts and in the circumstances of the case and in law, Id.CIT(A) has erred in confirming the addition of Rs.1,50,32,635/- made by ld.AO on account of alleged unexplained share capital, which is contrary to the facts on record as no share capital or application money was received by appellant during the year under appeal. Appellant prays the addition so made by ld.AO and confirmed by Id.CIT(A) is totally unjustified and deserves to be deleted.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 3.1. On facts and in the circumstances Id.CIT(A) has erred in confirming the addition of Rs. 1,50,32,635/- made by ld.AO u/s 68 of the Act, by alleging that assessee has paid cash and in turn received accommodation entry in the shape of share capital received by the assessee, whereas actually the transaction alleged as bogus, were purely in the nature of trading transaction in the form of duly recorded in the books, which sales were duly accepted in assessment completed u/s 143(3) as also in re-assessment proceedings for the preceding year, the amount due recovered in the year under appeal cannot be doubted and cannot treated as non genuine. Thus the addition made merely on presumptions and surmises in a very casual manner, without proper verification of facts on record is most un-justified, bad in law and deserves to be deleted. 3.2 That the Id.CIT(A) has further erred in confirming addition of the trade debtors recovered during the year, by presuming the same to be accommodation entries taken by the assessee from two allegedly bogus entities, that too solely on the basis of the suspicion communicated by Investigation Unit Kolkata and also erred in making addition without rebutting the various documentary evidences furnished during the re-assessment proceedings. Thus, the addition made merely on the basis of presumptions and assumptions and on incorrect facts deserves to be deleted; 4. On facts and in the circumstances of the case the Id.CIT(A) has erred in confirming the addition of Rs. 3,75,816/- made by Id.AO, by alleging the same as commission paid on such accommodation entry alleged to have been taken by the assessee Appellant prays such addition being made on assumptions and presumptions, based on absolutely incorrect facts, without any material on record deserves to be deleted.’’ 2.1 Brief facts of the case are that the assessee is a public limited company and is engaged in the business of manufacturing PVC pipes, HDPE Pipes, POY, DTY, Blankets etc. Return of Income for the year under appeal was originally filed on 29.09.2013 declaring total income of Rs. NIL and MAT was paid on the book profits. The case was selected for complete scrutiny and after verification of the information as sought by AO from time to time which were furnished, and after considering the same, assessment TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR was completed u/s 143(3) vide order dated 12.03.2016, whereby disallowance of Rs.5,12,198/- was made u/s 14A of the Income Tax Act, 1961. Subsequently, on the basis of some information stated to have been received by AO from Income Tax Officer (Inv.), Unit-1 & AIU Kolkata, assessment of assessee was reopened by issue of notice u/s 148 dated 18.03.2019. In response to such notice, the assessee filed Return of Income and vide letter dt. 24.4.2019 a request was made for the supply of reasons recorded before issue of notice for reopening, which were provided to assessee vide letter dt. 30.9.2019. Assessee, vide letter dated 07.10.2019 (APB 64-68) objected the reopening of assessment on the ground that the assessee company had never taken any loan or share application money from the companies stated in the reasons recorded and in respect to two companies namely M/s Raj Rajeshwari Metals & Minerals Traders Pvt. Ltd and M/s Glorious Merchandise Pvt. Ltd. payments were received during the year against the sale made to both of these companies in immediately preceding year where the same stood accepted by the department in the order passed u/s 143(3). However, from the perusal of the assessment order it appears that AO without disposing off the objections so raised, proceeded to complete assessment and reassessment proceedings were concluded vide reassessment order TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR passed u/s 143(3)/147 on 10.12.2019 by making addition of Rs.1,50,32,635/- u/s 68 by alleging that assessee has obtained accommodation entry of share application of this amount. The narration as made by the AO in the assessment at para 7 of his order is reproduced as under:- ‘’7. In view of the facts discussed above, it is apparent on record that the assesse has failed to explain the genuineness of share application money received amounting to Rs.68,08,020/- taken from M/s. Rajeshwari Metails& Mineral Traders Pvt. Ltd. and Rs.82,24,615/- from M/s.Glorious Merchandise Pvt Ltd. which were reflected in the books/ papers got from the search operation as discussed above. Therefore, it is concluded that the transactions under consideration were sham transactions and aimed only to bring unaccounted money in the guise of unsecured loan and paper work has been got up and done merely to give a colour of authenticity to the transaction and by creating a façade of legitimate transactions. After carefully examining the material available with the Department, Rs.1,50,32,635/- shown as share application money received from M/s. Raj Rajeshwari Metals & Minerals Traders Pvt. Lted and M/s. Gloroious Merchandise Pvt. Ltd.as treated as unexplained income of the assessee introduced through coloured transactions and added to the total income of the assessee u/s 68 of the Act.

A further addition of Rs.3,75,816/- was made by the AO u/s 69C as unexplained expenditure on presumption that assessee had paid commission @ 2.5% for obtaining such accommodation entry. The relevant observation of the AO at para 8 of his order is reproduced as under:- ‘’8. Further, the assessee had taken bogus share application money at Rs.1,50,32,635/- in his book from the entry providers, thus an amount of Rs.3,75,816/- i.e. @ 2.5% of Rs.1,50,32,635/- is being added u/s 69C of the I.T. Act as unexplained expenditure of the assessee’’ TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 2.2 Aggrieved of the additions so made by AO, assessee preferred an appeal before ld. CIT(A) – 4, Jaipur who dismissed the appeal of the assessee. 2.3 Being aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before this Bench raising the grounds of appeal mentioned hereinabove. 3.1 Apropos Ground No. 1 to 2 of the assessee wherein it is noticed that the ld CIT(A) has dismissed these grounds of appeal of the assessee by observing as under:- 4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In these grounds, the appellant has agitated against the reassessment proceedings initiated by the Id. AO and consequent reassessment order passed. As the same issue is involved in these grounds, these have been discussed together. Appellant company is engaged in business of manufacturing of PVC pipes, HDPE pipes, POY, DTY, etc. Return of income for the year under appeal was filed on 29.09.2013 declaring total income at NIL and MAT was paid on book profits. The case was selected for scrutiny and assessment was completed u/s 143(3) vide order dated 12.03.2016 whereby disallowance of Rs. 5,12,198/- was made u/s 14A of I.T. Act, 1961. Subsequently considering information received by Id. AO from ITO (Inv.), Unit-1 and AIU, Kolkata, the assessment was reopened by issue of notice u/s 148 dated 18.03.2019, in response to which the assessee filed return of income and requested for supply of reasons recorded, which were provided to the assessee vide letter dated 30.09.2019. The appellant objected to the reopening of assessment on the ground that it has never taken any loan or share application money from the companies stated in the reasons recorded and in respect of two companies namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and Mis Glorious Mercandise Pvt. Ltd. the payments were received during the year against sales made to these companies in the immediately preceding year which stood accepted by the department, as the order u/s 143(3) was passed in preceding year also. However, without disposing off the TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR objections by way of passing any order. Id. AO proceeded to complete the reassessment proceedings and the assessment order was passed by making addition of Rs. 1,50,32,635/- u/s 68 by alleging that assessee has obtained accommodation entry of share application during the year under consideration. It was submitted by the Id. AR that though the appellant vide letter dated 07.10.2019 has filed the objections for issuance of notice u/s 148 after the receipt of reasons but the Id. AO has not passed any speaking order rejecting the objections, which is contrary to the decision of Hon'ble Supreme Court in the case of GKN Driveshaft (1) Ltd. reported in 259 ITR 19 and thus reassessment proceedings deserves to be held illegal and consequent reassessment order passed deserves to be held void-ab-inito. Other main legal issue raised by the Id. AR is that the reopening was done beyond four years in the instant case wherein already assessment uis 143(3) was completed and accordingly in view of proviso to section 147, the AO has to establish that there was failure on the part of assessee to disclose fully and truly all material facts necessary for his assessment. It was submitted by the Id. AR that in the scrutiny assessment proceedings, list of unsecured loans and other details as asked for by the Id. AO were submitted and there was no failure on the part of assessee to disclose truly and fully all material facts. It was submitted that Id. AO at para 8 of the reasons recorded has just mentioned "I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the original assessment proceedings u/s 143(3) of the I.T.Act, and it is found that the assessee has not disclosed fully and truly all the material facts necessary for the regular assessment for the year under consideration." Ld. AR has submitted that Id. AO has failed to specify as to what exact material fact has not been disclosed truly and fully by the assessee. On the other hand as stated above, the appellant has filed confirmation of all unsecured loan taken and moreover as from none of the company mentioned in the reasons recorded, the appellant has taken any loan and accordingly name of these companies specifically that two companies would obviously not appear / included in the list of unsecured loan. Accordingly it was submitted that reopening of the completed assessment beyond a period of four years, without pointing out failure on the part of assessee to disclose fully and truly all material facts, is illegal, unjustified and such proceedings deserve to be quashed. Another important legal objection raised by the id. AR is that in the reasons recorded it was alleged that appellant has taken accommodation entry in the shape of unsecured loan whereas in the reassessment order no such addition of unsecured loan was made but it was observed that appellant has taken bogus share application money from these two companies and thus addition was made as unexplained share application money. Thus it is seen that no addition was made on the issue on which satisfaction was recorded before issuing notice u/s 148. It was further submitted that no independent application of mind was done by ld. AO while initiating reassessment proceedings in the reasons so recorded there TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR is only general mention about transaction totalling Rs. 1,50,32,635/-. It was not specified as to from which company how much amount was allegedly taken as loan. It was also pointed out by the Id. AR that Id. AO has made no effort to link the reasons recorded with material available on record, as in the reasons recorded it was alleged that appellant has introduced its unaccounted cash in the bank account of various dummy / paper companies, without specifying as to which are those companies where appellant allegedly deposited the cash and even in the final reassessment order no such specific details have been mentioned. It clearly reflects that reasons recorded were purely mechanical in nature and are generalized, without having any specific detail and evidence related to the appellant. Decision:-

1. Information was received by the Id. AO from the Income Tax officer (Inv.), Unit- 1 & AJU, Kolkata, vide letter no. 9301 dt. 06.03.2018. As per the information and material provided by the investigation wing, it was seen that the assessee company has accepted deposits from dummy companies in the form of RTGS/ Transfer through circulatory fashion of money. The transaction appears to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. Appellant received transfer from different shell companies' a/c having no business. Number of bank accounts of these shell companies/concerns were used for effectuating the routing of these entries. As regards reasons recorded is concerned, it is seen that the Id. AO has recorded the reasons after going through the material available with him. In the said material name of the two companies namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and Mis Glorious Merchandise Pvt. Ltd. was mentioned and the appellant did have transaction with these two companies during the year. In the appeal the appellant has stated that no unsecured loan or share capital was received from these two parties during the year, however in the reasons of reopening no such fact has been stated that the appellant received unsecured loan or share capital from these two parties. In the reasons of reopening the leamed AO has stated that credits were received from these two parties. At the stage of forming of the reasons of reopening the conclusive finding cannot be arrived at due to the limited records of the appellant available on the file of the assessing authority. At this stage there is no requirement to arrive at the conclusive nature of the transaction. At the same time there is no error or contradiction in the reasons of reopening. The appellant did receive the credits from these two companies and addition has also been made in the assessment order in this regard. For reference the reasons of reopening are extracted as under:- "Reasons for reopening of the case: 1 Brief details of the assessee; The assessee is a company Le M/s TijariyaPolypipes Ltd., A-130, Road No. 9D, VKI Area, Jaipur As per ITR filed on TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 29.09.2013 for the A.Y. 2013-14, the assessee has declared total Income of Rs. NIL and carried forwarded unabsorbed depreciation of Rs. 1,90,73,215/-

2. Brief details of information collected/received by the AO: The information has been received from the ITO(Inv.). Unit 1 & AIU, Kolkata vide letter No. 9301 dated 06.03.2018 in the case. As per credible information certain bank account transactions appeared suspicious. The transactions appear to be circular nature and the account appears to have been part of a chain of accounts used for routing large funds transfers. In course of verification, bank statements of numbers of accounts have been obtained. Bank account statement of the company (1) M/s Amulya Distributors Pvt. Ltd. (account no 0015-R26084-050 IndusInd Bank), (2) M/s Moonshine Distributors Pvt. Ltd. (account no. 0015-R25031-050 IndusInd Bank), (3) Shivganga Suppliers Pvt. Ltd. (account no. 0015- R25020-050 Indusind Bank) (4) Intime Distributors Pvt Ltd (account no. 0015-R26085-050 Indusind Bank) (5) M/s Glorious Merchandise Pvt Ltd. (account no. 0515-AA1118-050 Indusind Bank) (6) Shivshakti Tradelink Company (account no. 0515-AA1249-050 IndusInd Bank) (7) R R Enterprise (account no. 0515-AA1250-050 Indusind Bank) (8) Raj Rajeswari Metals & Minerals Traders Pvt Ltd (account no. 0515-AA1286- 050 IndusInd Bank) were verified as mentioned in the dissemination note. Erstwhile investigation officer issued summons u/s 131 of the Income Tax Act, 1961 to all the companies as mentioned in the information, but non of representative or directors appeared on behalf of the companies. Therefore, there transactions remained unexplained. As per database of shell companies, (1) M/s Moonshine Distributors Pvt. Ltd. (2) Shivganga Suppliers Pvt. Ltd. etc are shell companies. Profiling all the companies mentioned in the STR has been done. It is found that some of them are non-filer and some of them had no business as per Profit and Loss accounts and even do not paid any rent or had any fixed asset to run a business. Other proprietorship concerns are also non filer as per ITD database. These facts prove that none of these companies did any kind of business as declared by them. Further, they have regular transactions with each other and money circulation have been observed, Funds are deposited in cash in various companies account and the same is then transferred in a circulatory fashion to transfer the fund to beneficiaries. On perusal of the bank accounts of all the companies. It is observed that there are cash deposits and RTGS credits and transfers from different a/cs and simultaneously the said amount transferred to the different a/cs through RTGS/transfer Subsequently, funds were transferred to different current accounts. From the above, it can be inferred that the out of beneficiary companies took entries from the shell companies which do not have any real business and was operated only to bring their unaccounted money in the books. In this process these beneficiary companies gradually brought their unaccounted cash bank in the books without paying any tax.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 3. Analysis of information collected/received: As per information, the assessee company has introduced its unaccounted cash of Rs. 1,50,32,635/- in various dummy/paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax.

5. Findings of the AO: During investigation made by the department it was found that some companies did not do any kind of business as declared by them and they have regular transactions with each other and money circulation have been observed. Funds are deposited in cash in various companies accounts and the same is then transferred in a circulatory fashion to transfer the fund to beneficiaries. The assessee is also one of such beneficiaries who have deposited its cash in various dummy/paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax. Therefore it is a fit case for initiation of assessment proceeding for escapement of income by the assessee.

1. In the case of Nova Promoters &Finlease P. Ltd (2012) 342 ITR 169 (Delhi), the Hon'ble Delhi High Court held that prima facie belief of AO is enough that income escaped assessment is enough at the stage of reopening and merits of the matter are not relevant. In the case of Peass Industrial Engineers (P) Ltd (2016) Taxmann.com 106 (Gujarat), it was held on the basis of tangible material in the form of specific information received from Investigation Wing regarding bogus transactions, re-opening u/s 147 is justified.

1. What is to be seen at the stage of recording the reasons is existence of belief based on faithful appreciation of material which has link to an income escaping assessment, but not the established fact of escapement of income by detailed investigation or legal analysis. In other words, at the point of time of initiating the reassessment proceedings, existence, and not adequacy of reasons, is material. This view is supported by the decision in case of Rajesh Jhaveri Stock Brokers (P) Ltd. 291 ITR 500 (SC), CARTIER SHIPPING CO. LTD. 40 DTR 459 (Mumbai Trib), Praful Chunilal Patel 148 CTR (Guj.). The sufficiency of reasons cannot be looked into by courts and there must be recording of prima facie belief has also been held in cases of Raymond woollen mills 236 ITR 34 (SC), Phool Chand Bjaranglal 203 ITR 456 (SC), K R Sadayappan 63 ITR 219 (SC). In case of Multi Screen Media (P) Ltd. 324 ITR 54 (Bom) the Bombay High Court after considering the decision in case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC) has observed as under: "where the AO purports to exercise power under s. 147 within a period of four years from the end of the relevant assessment year, the condition precedent to the exercise of the power is the existence of a reason to believe that any income chargeable to tax has escaped assessment. The expression 'reason to believe' must obviously be that of a prudent person and it is on the basis of the reasons recorded by the AO that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination at the stage of a reopening of assessment. When the Court is concerned with a challenge to a notice under s.148, the issue is not as to whether it can be conclusively demonstrated that income had escaped assessment, but whether as a matter of fact, there was a reason to believe that this was so, to justify a recourse to the power under s.147."

1. The requirement, thus for reopening of assessment, is "reasonable belief. This expression is not synonymous with Assessing Officer having finally ascertained the fact by any legal evidence or conclusion. In this context, the Supreme Court in TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR the case of Rajesh Jhaveri Stock Brokers Private Limited [Supra] had observed as under :- "Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO (1991 (191) ITR 662] for initiation of action under section 147 (a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)); Raymond Woollen Mills Ltd. v. ITO (236) ITR 34 (SC)]."

1. In the case of Raymond Woollen Mills Limited v. Income Tax Officer & Ors. [Supra], the Apex Court held and observed as under: "In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income- tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs."

1. In the judgement in the case of Principal CIT vs. Paramount Communication Pvt. Ltd. (2017) 392 ITR 444 (Delhi), Hon'ble High Court of Delhi, has held as under- ‘’8……… While it is true that the court is conscious that the reassessment notice should not have been routinely issued, at the same time, the nature of power is wide enough that when there an escapement of income and the Revenue has information ruling that this escapement is also relatable to suppression of material facts (which could include false claims), the power to reopen concluded assessment can validly be exercised. The consideration which ought to weigh with the Revenue and are considered valid are the existence of tangible material or information in the light of the judgment in CIT v. Kelvinator of India [2010] 320 ITR 561 (SC)"

1. In the judgement in the case of AGR Investment Ltd. vs. Additional CIT &Anr (2011) 333 ITR 146, Hon'ble High Court of Delhi, has held as under:- "It is also noticeable that there was specific information received from the office of the DIT (INV-V) as regards the transactions entered into by the assessee- company with number of concerns which had made accommodation entries and they were not genuine transactions. As we perceive, it is neither a change of opinion nor does it convey a particular interpretation of a specific provision which was done in a particular manner in the original assessment and sought to be done in a different manner in the proceeding under section 147 of the Act. The reason to believe has been appropriately understood by the Assessing Officer and there is material on the basis of which the notice was issued."

1. In the judgement in the case of Sterlite Industries (India) Ltd. Vs. ACIT &Anr.(2008) 302 ITR 275, Hon'ble High Court of Madras, has held:- The definite stand of the department was that the previous sanction from the Commissioner had been obtained and credible information had been received related to the year 2000-01. It was also stated that an adjudication order dated 22- 8-2007 had already been passed and dispatched to the assessee but he did not receive the same. [Para 9] In the instant case, it was only required to see whether there was any prima facie material available on the basis of which the department could reopen the file. In view of the counter-affidavit and the impugned notice, the case of the revenue for invoking the power under sections 147 and 148 could not be rejected. [Para 11] In the light of the above, the writ petition was to be dismissed. [Para 12] TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 1. In the judgement in the case of Shalimar Buildcon (P) Ltd. vs. ITO(2011) 128 ITD 396: ITAT, Jaipur 'B' Bench, Hon'ble ITAT, has held:- Names of the companies were intimated to the AO by the Investigation Wing information was given that the companies belonging to B.C.&Co. were engaged in accommodation entries.

1. In the judgement in the case of ITO vs. Smt. Gurinder Kaur (2006) 102 ITD 0189: ITAT, Delhi'A' Bench, Hon'ble ITAT, has held:- The material before the AO-the letter received from the CIB-had a rational or live link with the formation of the belief that income chargeable to tax has escaped assessment in the assessee's case. The belief was bona fide held, it was not a pretence. The material gave rise to "reason to believe" and not merely "reason to suspect. No doubt as pointed out by the CIT(A), the list of 41 persons to whom K is supposed to have made gifts did not contain the name of the assessee. The AO had relied on the letter of the CIB which contained a clear statement that the Investigation wing has noticed that the assessee has purchased the gifts from K by paying cash including the premium. This letter constitutes relevant material for the formation of the belief, not mere suspicion, that income chargeable to tax has escaped assessment in the assessee's case.

1. It is to be noted that the AO had material before him for formation of reasonable belief of escapement which had live nexus with the material in his possession for assuming the valid jurisdiction for reopening u/s. 147.

1. Objections to reopening:- As regards not dealing the objection against reassessment proceedings is concerned, the status is not clear. There is no date mentioned on the objection letter (PB Page 64) and there is no acknowledgement stamp of office of the AO on such letter The filing status is not ascertainable. Further, if the same was filed, it is not the case that the appellant had requested the Id. AO for the copy of the order disposing objections and in reply it was communicated that such order was not passed. It cannot be conclusively said from the documents placed on record that the objections were not disposed off by the Id. AO. The powers of the CIT Appeal are coterminous with that of AO and the objections have been dealt with in this order as well. In the objection letter (PB Page 64), the appellant has incorrectly stated that appellant has not received any amount from these companies during the year (second para on Page 3 of objections letter at PB page 66). Further the appellant has wrongly referred in the objection letter to the share application money and the unsecured loan as having been mentioned in the reasons of reopening, whereas TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR there is no such conclusion in the reasons of reopening. The objections to the reasons of reopening are referring to / in context of incorrect facts The appellant has also contended in the objections letter that exact amount is not mentioned by the learned AO in the reasons of reopening whereas it is seen that this contention is incorrect as in para 3 of the reasons of reopening the exact amount received by the appellant from these shell/bogus companies has been mentioned (PB page 61). Further as per the legal procedure established through the judgements of Hon'ble High Courts and Hon'ble Supreme Court is that in case the objections against the reasons of reopening are not disposed by the Id. AO the assesse can challenge the same in writ petition. That itself does not per se in itself render the entire proceedings as illegal. In such several cases the view and the judgements of Hon'ble Courts have been that the assessing officer is directed to dispose off the objections. And in case in such matter, if the assessment order is also already passed, the assessment order is set aside and the proceedings are restored to the stage of disposal of objections and the assessing officer can pass the assessment order thereafter In the case of Home Finders Housing Ltd. v. Income-tax officer, Corporate Ward 2(3), Chennai [2018] 93 taxmann.com 371 (Madras) [2018] 404 ITR 611 (Madras)/[2018] 303 CTR 269 (Madras) (25-04-2018) it has been held by the Hon'ble Madras High Court that non-compliance of direction of Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer [2002] 125 Taxman 963 regarding disposing of objections by passing a speaking order, would not make reassessment order void ab initio. Relevant para of the order are as under- "19. The core question is as to whether non compliance of a procedural provision would ipso facto make the assessment order bad in law and non-est. The further question is whether it would be permissible to comply with the procedural requirement later and pass a fresh order on merits.

6. Considering the facts and circumstances of this case as appears from record and submission of the parties and the aforesaid judgments relied upon by the petitioner, I am of the considered view that the impugned assessment order dated 31st March, 2022 being Annexure P-11 to the writ petition passed is in clear violation of the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. (supra) and the same is not sustainable in law since it was passed without considering and disposing objection of the petitioner by passing a speaking order which he was obliged to do in view of the decision of the Apex Court in the case of GKN Driveshafts (India) Ltd. (supra) before proceeding any further in the impugned reassessment proceeding.

7. In view of the discussion made above impugned assessment order is quashed and the matter is remanded back to the assessing officer concerned to first dispose of the aforesaid objection of the petitioner against impugned notice under section 148 of the Income-tax Act by passing a reasoned and speaking order and after giving an opportunity of hearing to the petitioner or its authorised representatives and any further proceeding with the impugned assessment proceeding will depend upon the final outcome of the aforesaid objection of the petitioner which has to be considered accordingly and by passing a reasoned and speaking order." Emphasis supplied) In the case of Lucas TVS Ltd. v. Assistant Commissioner of Income-tax [2024] 160 taxmann.com 228 (Madras) [13-12-2023] it is held by the Hon'ble Madras High Court as under.- "25. It is submitted that after the reasons were furnished to the petitioner, the petitioner did not ask for a separate speaking order disposing of the objection of the petitioner. It is further submitted that, the reopening of the assessment was not inspired from change of opinion.

26. I have considered the submission of the learned counsel for the petitioner. Wide powers vested for reopening the assessment under section 148 read with section 147 of the Income Tax Act, 1961.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 28. Therefore, the impugned order is set aside and the case is remitted back to the respondent to pass a fresh order disposing of the petitioner's objection in the light of the decision of Supreme Court in GKN Driveshafts (India) Ltd. (supra)." (Emphasis supplied) The appellant could have challenged the reasons of reopening by filing of objections before the Id. AO and if not satisfied with the order disposing objection then he could go before the Hon'ble High Court in Writ Petition as per the judgement of Hon'ble Supreme Court in the case of GKN Drivesharfts (India) Ltd. [2003] 259 ITR 19 and the judgement of Hon'ble Gujarat High Court in the case of Garden Finance Limited reported in 268 ITR 48. Extract from the Judgement of Hon'ble Gujarat High Court in the case of Garden Finance Limited [268 ITR 48] is as under:- "12. What the Supreme Court has now done in the GKN's case (supra) is not to whittle down the principle laid down by the Constitution Bench of the Apex Court in Calcutta Discount Co. Ltd.'s case (supra) but to require the assessee first to lodge preliminary objection before the Assessing Officer who is bound to decide the preliminary objections to issuance of the re-assessment notice by passing a speaking order and, therefore, if such order on the preliminary objections is still against the assessee, the assessee will get an opportunity to challenge the same by filing a writ petition so that he does not have to wait till completion of the re- assessment proceedings which would have entailed the liability to pay tax and interest on re-assessment and also to go through the gamut of appeal, second appeal before Income-tax Appellate Tribunal and then reference/tax appeal to the High Court." …….

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR The order of the AO on the challenge to the reasons of reopening is not an appealable order. Appellant's challenge to the order of the assessing officer not disposing/rejecting the objections against the reasons of reopening and appellant's challenge to the assessment order are two separate proceedings. The CIT(A) does not have power to set aside the matter to the Id. AO whereas setting aside is the ratio of judgments in Home Finders Housing Ltd. (Supra). Saroj Jalan(Supra), Lucas TVS Itd. (Supra). Further the appellant has not filed the writ petition which is the ratio of judgements in GKN Drivesharfts (Supra) and Garden Finance (Supra). Further the status of filing of objections and disposal there off is not clearly shown by appellant.

1. Objection regarding no failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment as the case was reopened beyond four years is concerned, it is seen that appellant is having accommodation entry transactions with these two parties and same was not disclosed. It is clear that there was a failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment. This satisfaction is also clearly discernible from the reasons of reopening recorded by the learned AO. The objections in this regard are hereby rejected. In view of these facts and circumstances and considering the legal position on the issue under consideration, it is found that the reasons of reopening have been properly recorded and the notice under section 148 of the Act has been issued legally and the other objections of the appellant have also been dealt with in the paragraphs above. Accordingly grounds of appeal

No. 1 to 1.3 are hereby dismissed.’’ 3.2 During the course of hearing, the ld. AR of the assessee submitted that reassessment proceedings-initiated u/s 148 is bad in law and consequent reassessment order passed deserves to be quashed. The ld. AR reiterated the same written submission as made before the ld. CIT(A) and it is not imperative to repeat. 3.3 On the other hand, the ld. DR supported the of the ld. CIT(A) and submitted the following case laws as to the reopening of assessment u/s 147 & 148 of the Act TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Case laws compilation regarding reopening of assessment u/s 147/148 of the I.T. Act, 1961 Sr. No. Name of the case 1. [1999] 236 ITR

34. (SC) SUPREME COURT OF INDIARaymondWoollen Mills Ltd.v. Income-tax Officer 2. [2023] 148 taxmann.com 446 (Delhi) HIGH COURT OF DELHI Saif II Mauritius Company Ltd.v. Assistant Commissioner of Income-tax 3. [1999] 103 TAXMAN 562 (PAT.)HIGH COURT OF PATNAP.K. Haldar &Co.v.Commissioner of Income-tax 4. [2002] 123 Taxman 756 (Calcutta) HIGH COURT OF CALCUTTA Ispat Industries Ltd. v. Deputy Commissioner of Income-tax 5. [2023] 153 taxmann.com

25. (Gujarat) HIGH COURT OF GUJARAT Akshat Pramodkumar Chaudhary v. Deputy Commissioner of Income-tax 6. [2022] 139 taxmann.com 198 (Gujarat) HIGH COURT OF GUJARAT Amar JewellersLtd.v.Assistant Commissioner of Income-tax 7. [2018] 94 taxmann.com 393 (Gujarat) HIGH COURT OF GUJARAT Amit Polyprints (P.) Ltd.v.Deputy Commissioner of Income-tax 8. [2018] 91 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Aradhna Estate (P.) Ltd.v.Deputy Commissioner of Income-tax, Circle-1(1) 9. [2023] 152 taxmann.com 573 (SC) SUPREME COURT OF INDIA Ajay Gupta v. Income-tax Officer 10. [2019] 101 taxmann.com 231 (Madhya Pradesh) HIGH COURT OF MADHYA PRADESH EtiamEmediaLtd.v. Income-tax Officer-2(2) 11. [2020] 115 taxmann.com 338 (Delhi) HIGH COURT OF DELHI Experion Developers (P.) Ltd.v.Assistant Commissioner of Income-tax 12. [2018] 91 taxmann.com 181 (Gujarat) HIGH COURT OF GUJARAT Jayant Security & Finance Ltd.v.Assistant Commissioner of Income-tax, officer Circle 1(1) 13. [2012] 18 taxmann.com

83. (Delhi) IN THE ITAT DELHI BENCH Ms. Rainee Singhv.Income- tax Officer 14. [1995]

83. TAXMAN 194 (MAD.)HIGH COURT OF MADRASPanchugurumurthyv.Commissioner of Income-tax 15. [2016] 72 taxmann.com 302 (Gujarat) HIGH COURT OF GUJARAT Peass Industrial Engineers (P.) Ltd. v. Deputy Commissioner of Income-tax 16. [2020] 114 taxmann.com 718 (Gujarat) HIGH COURT OF GUJARAT Purnima Komalkant Sharma v. Deputy Commissioner of Income-tax, Circle 1 17. [2022] 139 taxmann.com 409 (Gujarat) HIGH COURT OF GUJARAT Pushpa Uttamchand Mehta v. Income-tax Officer 18. [2023] 153 taxmann.com 282 (Kolkata - Trib.) IN THE ITAT KOLKATA BENCH 'A' Tarasafe International (P.) Ltd. v.Deputy Commissioner of Income-tax 19. [2021] 128 taxmann.com 229 (Gujarat) HIGH COURT OF GUJARAT BhanubenMansukhlalKhimashiav.Income Tax Officer Ward 3(1) 20. [2021] 129 taxmann.com

48. (Gujarat) HIGH COURT OF GUJARAT Kaushaliya SampatlalDudaniv.Income-tax Officer, Ward 1(3) 21. [2021] 129 taxmann.com 119 (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar Parekh v.Income-tax Officer, Ward 1(3) 22. [2022] 138 taxmann.com

50. (Gujarat) HIGH COURT OF GUJARAT Nishant Vilaskumar TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Parekh v.Income-tax Officer 23. [2021] 131 taxmann.com

42. (Gujarat) HIGH COURT OF GUJARAT Sameer Gulabchand Shah HUF v. Income-tax Officer, Ward 1(3) 24. [2021] 127 taxmann.com 679 (Gujarat) HIGH COURT OF GUJARAT Silverdale Inn (P.) Ltd. v. Income Tax Officer 25. [2021] 129 taxmann.com

68. (Gujarat) HIGH COURT OF GUJARAT VilasVrajlal Parekh HUF v.Income-tax Officer, Ward(1)3 26. [2021] 133 taxmann.com 397 (Gujarat) HIGH COURT OF GUJARAT Zaveri & Company (P.) Ltd.v.Deputy Commissioner of Income-tax 27. [1980]

4. Taxman

83. (Delhi) HIGH COURT OF DELHI Commissioner of Income-tax v. H.P. Sharma S. RANGANATHAN AND D.R. KHANNA, JJ 28. [2006] 151 Taxman

41. (Delhi) HIGH COURT OF DELHI Consolidated Photo &Finvest Ltd. v. Assistant Commissioner of Income-tax 29. [2009] 315 ITR

84. (Bombay) HIGH COURT OF BOMBAY Yuvraj v. Union of India 30. [2011] 197 Taxman 415 (Delhi) HIGH COURT OF DELHI Honda Siel Power Products Ltd. v. Deputy Commissioner of Income-tax. 31. [2012] 21taxmann.com438 (Delhi)HIGH COURT OF DELHIMoney Growth Investment & Consultants (P.) Ltd.v.Income-tax Officer 32. [2014] 41taxmann.com21 (Delhi)HIGH COURT OF DELHIOPG Metals &FinsecLtd.v.Commissioner of Income-tax 33. [2021] 128taxmann.com369 (Jaipur - Trib.)IN THE ITAT JAIPUR BENCH 'A'Smt. Uma Mandalv.Income Tax Officer, Ward 5(4), Jaipur 34. [1997]

90. Taxman 553 (SC) SUPREME COURT OF INDIA AssociatedStoneIndustries (Kotah) Ltd. v. Commissioner of Income-tax It is also noted that the ld. DR has filed the synopsis of the case laws as to the appeal filed by the assessee.

Synopsis of case laws 1. OWNERS AND PARTIES The court observed that Rules of procedure INTERESTED IN M.V. "VALIPERO" are tools to achieve justice and are not hurdles ETC.ETC Vs. FERNANDEO LOPEZ to obstruct the pathway to justice. Where the & ORS on 19 September, 1989, outcome and fairness of the procedure have 1989 AIR 2206, 1989 SCR SUPL. been followed, there is no reason to discard (1) 187, AIR 1989 SUPREME the result simply because certain details which COURT 2206, 1989 (4) SCC 671, have not prejudicially affected the result have (1990) 1 MAD LW 520, (1989) 4 JT been inadvertently omitted in a particular case. 10 (SC), (1990) 2 CALLT 1 2. Temple Of Thakurji vs State Of When sustained justice and technical Rajasthan And Ors. on 30 consideration are pitted against each other, TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR September, 1997, AIR 1998 RAJ 85, cause of substantial justice deserves to be 1997(2) WLN 535. preferred for the other side cannot claim to 3. Jai Jai Ram Manohar Lal vs National have vested right in injustice being done due to some technical omission. Building Material Supply, on 17 March, 1969, 1969 AIR 1267, 1970 SCR (1) 22, AIR 1969 SUPREME COURT 1267 4. Ganesh Trading Co vs Moji Ram on 25 January, 1978, 1978 AIR 484, 1978 SCR (2) 614, AIR 1978 SUPREME COURT 484, 1978 2 SCC 91, 1978 REV LR 275, 1978 U J (SC) 162, 80 PUN LR 458, 1978 2 SCR 614, 1978 2 SCJ 98.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR RANGANATHAN AND D.R. as had been subject-matter of completed assessment proceedings. It was further held KHANNA, JJ that principle that a mere change of opinion 7. [2006] 151 Taxman 41 (Delhi) HIGH cannot be a basis for reopening completed COURT OF DELHI Consolidated assessments would have no application where Photo &Finvest Ltd. v. Assistant order of assessment does not address itself to Commissioner of Income-tax aspect which is basis for reopening of 8. [2009] 315 ITR 84 (Bombay) HIGH assessment. COURT OF BOMBAY Yuvraj v. Union of India 9. [2011] 197 Taxman 415 (Delhi) The court held that merely because material lies embedded in material or evidence, which HIGH COURT OF DELHI Honda Siel Assessing Officer could have uncovered but Power Products Ltd. v. Deputy did not uncover, is not a good ground to deny Commissioner of Income-tax. or strike down a notice for reassessment.

10. Shri Pravinchandra R Patel, It is held that the date of issue would be the Vadodara vs Dcit, Central Circle-2, date on which the same were handed over for Vadodara on 13 January, 2022, service to the proper officer, which in fact of (ITAT, Ahmedabad). the present case would be the date on which 11. [2011] 12 taxmann.com 198 the said notices were actually handed over to the post office for the purpose of booking for (Gujarat) HIGH COURT OF GUJARAT KanubhaiM. Patel (HUF) the purpose of effecting service on the v. Hiren Bhatt or His Successors to assessee. Office The Reasons for Reopening of the assessment 12. [1999] 236 ITR 34 (SC) SUPREME The Hon’ble SC held that in determining COURT OF INDIA Raymond whether commencement of reassessment was Woollen Mills Ltd. v. Income-tax valid, it has only to be seen whether there was Officer prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of material is not a thing to be decided at this stage. 13 [2023] 148 taxmann.com 446 (Delhi) Since no scrutiny assessment had taken place HIGH COURT OF DELHI Saif II in instant case and there was prima facie Mauritius Company Ltd. v. Assistant material based on which reopening notice was Commissioner of Income-tax issued within four years, sufficiency or correctness of material would not be considered at stage of issue of notice under section 148. 14 [1999] 103 TAXMAN 562 (PAT.) It is held that in writ petition arising out of HIGH COURT OF PATNA P.K. notice under section 148, Court is not Haldar & Co. v. Commissioner of supposed to go into sufficiency or otherwise or TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Income-tax correctness of materials leading to notice, but merely to see whether there is any material before Assessing Officer on basis of which he came to form reasonable belief that income had escaped assessment. 15 [2002] 123 Taxman 756 (Calcutta) It is held that Court will only find out whether there was any prima facie material to reopen HIGH COURT OF CALCUTTA Ispat case and sufficiency or correctness cannot be Industries Ltd. v. Deputy gone into by Court. Commissioner of Income-tax 16 [2023] 153 taxmann.com 25 Where Assessing Officer had received (Gujarat) HIGH COURT OF information from Investigation wing that GUJARAT Akshat Pramodkumar assessee received accommodation entry in Chaudhary v. Deputy Commissioner penny scrip, which was bogus in nature and of Income-tax addition was required to be made to total income of assessee and on basis of said material before it, he was satisfied to harbour reasons to believe that there was escapement of income and on such basis, he had exercised his powers under section 148, no fault could be found in such reassessment proceedings. 17 [2022] 139 taxmann.com 198 Where pursuant to survey under section 133A (Gujarat) HIGH COURT OF conducted by Investigating Wing on BAS, he GUJARAT Amar Jewellers Ltd. admitted on oath that he was engaged in v.Assistant Commissioner of business of providing accommodation entries Income-tax to beneficiaries in lieu of commission and had named applicant as one of recipients of accommodation entries and Assessing Officer after examining facts formed belief that income chargeable to tax had escaped assessment, proceedings of reassessment initiated in cases of applicant were justified. 18 [2018] 94 taxmann.com 393 Where reassessment proceedings were (Gujarat) HIGH COURT OF initiated on basis of information received from GUJARAT Amit Polyprints (P.) Investigation wing that assessee had received Ltd.v.Deputy Commissioner of certain amount from shell companies working Income-tax as an accommodation entry provider, reassessment could not be held unjustified. 19 [2018] 91 taxmann.com 119 Where reassessment proceedings were (Gujarat) HIGH COURT OF initiated on basis of information received from GUJARAT Aradhna Estate (P.) Investigation wing that assessee had received Ltd.v.Deputy Commissioner of certain amount from shell companies working Income-tax, Circle-1(1) as an accommodation entry provider, merely because these transactions were scrutinised TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR by Assessing Officer during original assessment, reassessment could not be held unjustified. 20 [2023] 152 taxmann.com 573 (SC) SLP dismissed against order of High Court that where a reopening notice was issued on SUPREME COURT OF INDIA Ajay ground that assessee was beneficiary of Gupta v. Income-tax Officer accommodation entry in form of long-term capital gain (LTCG) on sale of shares which was claimed as exempt under section 10(38), since said transactions of sale and purchase of shares were admitted by assessee and it had not brought on record anything to suggest that reassessment proceedings were being undertaken in arbitrary manner, impugned reopening notice was justified. 21 [2019] 101 taxmann.com 231 Where Assessing Officer had specific (Madhya Pradesh) HIGH COURT information from DIT (Investigation) that OF MADHYA PRADESH assessee company was merely a dummy EtiamEmediaLtd.v. Income-tax concern of a person who allegedly used Officer-2(2) dummy companies for routing his unaccounted money and, further, assessee also had certain amount of bogus share application, it could be said that there was material on basis of which notice under section 148 could be issued. 22 [2020] 115 taxmann.com 338 (Delhi) Where reassessment notice was issued on HIGH COURT OF DELHI Experion basis of information received from DIT Developers (P.) Ltd. v.Assistant (Investigation) that a parent company of Commissioner of Income-tax assessee at Singapore had made an investment of huge amount in assessee company but said investing company did not appear to be carrying out any regular business activities and was floated to act as a conduit to funnel funds into Indian companies, impugned notice was justified. 23 [2018] 91 taxmann.com 181 Initiation of reassessment proceedings on (Gujarat) HIGH COURT OF basis of information received from Investigation GUJARAT Jayant Security & wing that assessee had received certain Finance amount as a loan from a company, working as Ltd.v.AssistantCommissioner of entry operator and earning bogus funds to Income-tax, officer Circle 1(1) provide advances to various person, was justified. 24 [2012] 18 taxmann.com 83 (Delhi) IN Validity of reassessment where AO had THE ITAT DELHI BENCH Ms. received information from investigation wing Rainee Singh v.Income-tax Officer regarding a bogus claim of long-term capital TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR gains. 25 [1995] 83 TAXMAN 194 The Hon’ble High Court held that on going (MAD.)HIGH COURT OF MADRAS through the materials on record, produced by Panchugurumurthy v. Commissioner the department, it was clear that sufficient of Income-tax reasons had been recorded by the competent authority and the statutory approval had been obtained from the appropriate authority. Consequently, the general and vague allegation of mala fides and want of sufficient basis for the proposed action under section 148 had no basis in law. Further, as held earlier, the action initiated under section 148 could not be said to be prima facie illegal to warrant the interference of the Court. 26 [2016] 72 taxmann.com 302 Where Assessing Officer had reopened (Gujarat) HIGH COURT OF assessee's assessment for assessment year GUJARAT Peass Industrial 2012-13 for reasons that information was Engineers (P.) Ltd. v. Deputy received from Competent Authority, Kolkata Commissioner of Income-tax that one 'K' was very known entry operator and instant assessee was also a beneficiary of 'K' to extent of Rs. 183 lakhs pertaining to assessment year 2012-13, reasons were sufficient enough to reopen assessment. 27 [2020] 114 taxmann.com 718 Where evidence found during search in case of (Gujarat) HIGH COURT OF third party was sufficient to form belief that GUJARAT Purnima Komalkant LTCG shown by assessee was in nature of Sharma v. Deputy Commissioner of accommodation entries and income to that Income-tax, Circle 1 extent had escaped assessment, issue of notice under section 148 was justified. 28 [2022] 139 taxmann.com 409 Where Assessing Officer had information in (Gujarat) HIGH COURT OF form of accounts/documents received from GUJARAT Pushpa Uttamchand Investigation wing that 'U' was a company run, Mehta v. Income-tax Officer managed and operated by entry providers and it was a penny stock and assessee had entered into transaction with 'U' to claim bogus capital gains, it could not be said that Assessing Officer, on absolutely vague or unspecific information initiated proceedings of reassessment without taking pains to form his own belief in respect of such materials. 29 [2023] 153 taxmann.com 282 Where Assessing Officer found that assessee (Kolkata - Trib.) IN THE ITAT was beneficiary of bogus donation and was KOLKATA BENCH 'A' Tarasafe able to lay its hand on a large number of International (P.) Ltd. v.Deputy material and had recorded statements of TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Commissioner of Income-tax founder and director of said institution as well as other persons, who have deposed during survey and post-survey inquiries regarding bogus loan given by assessee to said institution, sufficient material was available with Assessing Officer for forming an opinion that income had escaped assessment. Re-assessment is based not on borrowed satisfaction 30 [2021] 128 taxmann.com 229 Where AO issued reopening notice on ground (Gujarat) HIGH COURT OF that an information was received from DIT GUJARAT (Investigation) that shares sold by assessee BhanubenMansukhlalKhimashiav.Inc were of penny stock, thus, income on sale of ome Tax Officer Ward 3(1) said shares could not be allowed as exempt under section 10(38), since such information was specific and AO made independent enquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified. 31 [2021] 129 taxmann.com 48 Where AO issued reopening notice against (Gujarat) HIGH COURT OF assessee on ground that an information was GUJARAT Kaushaliya received from AIMS module that shares sold SampatlalDudaniv.Income-tax by assessee were of penny stock, since such Officer, Ward 1(3) information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was justified. 32 [2021] 129 taxmann.com 119 Where AO issued a reopening notice against (Gujarat) HIGH COURT OF assessee on ground that an information was GUJARAT Nishant Vilaskumar received from AIMS module that shares sold by Parekh v.Income-tax Officer, Ward assessee were of penny stock, since such 1(3) information with regard to transactions of penny stock entered into by assessee was specific and AO had made independent enquiry and applied his mind to said information and upon due satisfaction, formed an opinion that LTCG on sale of penny stock shares had escaped assessment, impugned reopening notice was justified. 33 [2022] 138 taxmann.com 50 Where assessee sold shares and claimed (Gujarat) HIGH COURT OF exemption under section 10(38) and Assessing TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR GUJARAT Nishant Vilaskumar Officer issued a reopening notice on ground Parekh v.Income-tax Officer that an information was received from AIMS module that shares sold by assessee were of penny stock, since said information was specific with regard to transactions of penny stock entered into by assessee and Assessing Officer made independent enquiries and applied his mind to information and upon due satisfaction and materials gathered during enquiries, finally formed a belief that income had escaped assessment, impugned reopening notice issued against assessee was justified. 34 [2021] 131 taxmann.com 42 Where AO issued a reopening notice on ground that an information was received that (Gujarat) HIGH COURT OF shares sold by assessee were of penny stock, GUJARAT Sameer Gulabchand thus, income on sale of said shares could not Shah HUF v. Income-tax Officer, be allowed as exempt under section 10(38), Ward 1(3) since such information was specific and AO made independent inquiries and applied his mind and upon due satisfaction to such information finally formed a belief that income had escaped assessment, impugned reopening notice was justified 35 [2021] 127 taxmann.com 679 Where Assessing Officer issued reopening (Gujarat) HIGH COURT OF notice against assessee on ground that an GUJARAT Silverdale Inn (P.) Ltd. v. information was received from NMS (Non filler Income Tax Officer monitoring system) that assessee had received cash deposits of certain amount in a bank account but had not disclosed same in its return, since assessee had failed to submit supporting evidences and source of income with regard to said cash deposits, impugned reopening notice issued against assessee was justified. 36 [2021] 129 taxmann.com 68 Where AO issued reopening notice on ground (Gujarat) HIGH COURT OF that an information was received from AIMS GUJARAT VilasVrajlal Parekh HUF module that shares sold by assessee were of v.Income-tax Officer, Ward(1)3 penny stock, since information was specific with regard to transactions of penny stock entered into by assessee and AO made independent enquiries and applied his mind to such information and upon due satisfaction formed a belief that income had escaped assessment, impugned reopening notice was TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR justified. 37 [2021] 133 taxmann.com 397 Where Assessing Officer issued a reopening (Gujarat) HIGH COURT OF notice on ground that an information was GUJARAT Zaveri & Company (P.) received from Deputy Director (Investigation) Ltd.v.Deputy Commissioner of that assessee company had entered into Income-tax transactions of trading in penny stocks of two companies which were used for providing accommodation entries in respect of bogus LTCG and contrived losses, impugned reopening notice issued on basis of such specific information outlining systematic evasion of tax by assessee and fresh material in hands of Assessing Officer was justified. 38 [1965] 57ITR185 (SC) SUPREME It is held that The date of sale or transfer is the COURT OF INDIA Alapati date when the sale or transfer takes place, Venkataramiah v. Commissioner of and for the purpose of determining that date, Income-tax entries in the account books are irrelevant. Further ENTRIES IN ACCOUNT BOOKS ARE NOT RELEVANT. 39 [2012] 20 taxmann.com 5 (SC) The court held that assessee having not SUPREME COURT OF INDIA pointed out during assessment proceedings Honda Siel Power Products Ltd. v. about expenses incurred relatable to tax free Deputy Commissioner of Income-tax income there was omission and failure on its part to disclose fully and truly material facts and hence reopening of assessment was justified. 40 [2017] 79 taxmann.com 267 (SC), Larsen & Toubro Ltd. v. State of Jharkhand. 41 [2022] 140taxmann.com510 (Allahab It is held that notice under section 148 had ad) HIGH COURT OF ALLAHABAD been issued by Assessing Officer to assessee, Distributors India (South) after conducting an investigation and going v. Union of India through income tax return and other related documents of assessee and after forming reason to believe that assessee had received payments under section 194J, but it had not shown said receipts in his P&L account which resulted in income having escaped assessment, reopening of assessment was justified.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 3.4 We have heard the parties and perused the materials available on record. It is noted that in the present case, assessee filed its return of income in response to notice u/s 148 on 20.09.2019 and vide letter dt. 24.09.2019 e-filed on 25.9.2019 (APB 59) sought the copies of the reason recorded for initiation of proceedings u/s 148. In response, vide letter dt. 30.09.2019 (APB 60-63) AO supplied the copies of reasons recorded for reopening the case u/s 148. Thereafter vide letter dated 07.10.2019 (APB 64-68), assessee filed objections against the reopening of completed assessment wherein it was stated that assessee has not taken any unsecured loans to the tune of Rs. 1,50,32,635/- from the companies referred to in the reasons nor any share application money was received from them in the year under appeal. It was further contended that for the year under reference, assessment was already completed u/s 143(3) wherein during the course of assessment proceedings, the issue of unsecured loans was thoroughly examined by AO and necessary confirmations of the loans taken during the year were filed by the assessee and none of the companies referred in the reasons is appearing in the list of parties from whom loans were taken / repaid during the year nor any confirmation was filed of these parties were filed. Therefore, it was requested to drop the re-assessment proceedings so initiated based on TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR such reasons. Despite the specific objections so filed by the assessee against the initiation of reassessment proceedings, AO without passing any speaking order in writing, proceeded to conclude the pending reassessment proceedings by issuing notices u/s 142(1) wherein certain details were asked. It was stated that the AO on 20.09.2019 has passed an order for the disposal of the objections against the reasons recorded for issue of notice u/s 148 but the fact is that till that date no such objections were filed and immediately after uploading the same, the AO has withdrawn the said order (APB 69-73).The narration as made by the AO in his order dated 20-09-2019 is reproduced as under:- ‘’This office letter of order disposing of objections to the notice u/s 148 dated 20-09-2019 is wrongly sent on your portal. So it treated ‘’Null and Void’’ In response to which the assessee had filed requisite details vide letters dt 05.11.2019 and 03.12.2019(APB 76& 83) and further requested for the disposal of the objections raised against the reasons recorded. In the replies so filed it was also submitted that the payment was received from two companies out of the 8 companies referred in the reason recorded, but the same was against the supply of goods i.e. the sale made to them that too in the preceding assessment year. It was also stated that the TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR assessment for the preceding assessment year was completed u/s 143(3) wherein the sales made to these companies have been accepted and no doubts were raised about such sales. Thus, payment received as sales consideration which arises on account of sale accepted by the revenue cannot be treated as an accommodation entry. During the year under appeal, only the pending consideration was received through banking channels for which the copies of the sales invoices and the ledger accounts were submitted by the assessee. The AO has taken note of the facts of sales is proved from the perusal of the query letter dt. 28.11.2019 wherein the details related to the sales made to these companies were sought. However, no separate speaking order was passed for the disposal of the objections raised by the assessee against the reopening of completed assessment before completing the reassessment proceedings. Further, it is noted from the record that assessee has not received any such amount as loan/share capital during the year under consideration from any of such companies as mentioned in the Reasons for reopening. Basically, assessee had made certain sales in F.Y. 2011-12 relevant to A.Y. 2012-13 to M/s Raj Rajeshwari Metal and Minerals Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. of Rs.68,08,020/- and Rs.82,24,615/- respectively. It is pertinent to note here that assessment for A.Y. 2012-13 stood completed TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR u/s 143(3) (APB 127-137), which was also reopened subsequently u/s 147 (Re assessment order dated 30-12-2016 at APB 138-156) and in none of the proceedings i.e. either in original assessment proceedings or in reassessment proceedings, sales made to these two companies was doubted by the department, i.e. sales were accepted as such. It is noted that during the year under consideration, the assessee has only received the sum receivable from these two parties against the sales made to them in immediately preceding year and the submission in this regard was made before ld. CIT(A) who rejected the plea of assessee by relying upon certain judicial pronouncements and held at page 29 that “As regards not dealing the objection against reassessment proceedings is concerned, the status is not clear. There is no date mentioned on the objection letter (PB Page 64) and there is no acknowledgement stamp of office of the AO on such letter. The filing status is not ascertainable. Further, if the same was filed, it is not the case that the appellant had requested the ld. AO for the copy of the order disposing objections and in reply it was communicated that such order was not passed. It cannot be conclusively said from the documents placed on record that the objections were not disposed off by the ld. AO. The powers of the CIT Appeal are coterminous with that of AO and the objections have been dealt with in this order as well.” With regards to TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR above observations of ld. CIT(A), it is mentioned by the assessee that though the letter raising objections was undated, however the same was furnished Online (copy of acknowledgement placed on record) and therefore filing status thereof cannot be doubted. Also as stated in above that AO had mistakenly uploaded one order disposing objections and withdrawn the same soon thereafter no further order was passed, and therefore it was clear that objections have not been disposed off thereafter. Further, it is noted that Ld. CIT(A) has further stated that powers of CIT appeal are coterminous with that of AO and the objections have been dealt with in appellate order as well. The ld. AR submitted that the assessing officer was dutybound to dispose off objections by passing separate speaking order whether assessee makes request for the same or not. At this juncture, we take into consideration the decision of Hon’ble Supreme Court in the case of GKN Driveshafts (India) Ltd. reported in 259 ITR Page 19, wherein it has been heldthat, “…..on receipt of the reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order…..”

However, as noted above, in the present case, no such speaking order was ever passed despite the fact that assessee has filed objections in writing, TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR which fact is proved beyond doubt and in various subsequent proceedings the fact of pendency of disposal of such objections was intimated to the AO which was evident from the subsequent correspondence filed (APB 76- 126). It is noted that the assessee duly complied with the procedure laid down by the Hon’ble Apex court in the case of GKN Driveshafts (Supra) by filing the return of income in response to notice u/s 148 and thereafter upon receiving the copies of the reasons recorded, filed objections against the initiation of reassessment proceedings (APB 64-68). Thus it was the duty of the AO that before proceeding further in the matter, objections so filed should have been disposed-off first which AOhas failed to do. Moreover, ld. CIT(A) tried to justify such mistake of AO stating that CIT (Appeals) has power as coterminous to that of AO and objections have been dealt with in appellate order. Courts have even held that disposing off objections in assessment order itself would not absolveAO from passing separate speaking order. Thus, disposal of objections by ld.CIT(A) in the appellate order was not sufficient. Thus, due process of law has not been followed in the present caseand the re-opening the assessment proceedings u/s 148 of the Income Tax Act, 1961, deserves to be held illegal and consequent reassessment order passed deserves to be held void ab-initio. We also take into consideration the judgement of Hon’ble Rajasthan High Court in TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR the case of M/s K.C. Mercantile Ltd. (Presently Known As Genus Innovation Limited) vs. Deputy Commissioner of Income Tax Circle-2, Jaipur (Case Law Paper Book 01-31)in wherein the high court held that: “7. We have heard the counsel for the parties.

8. Before proceeding with the matter, it is not out of place to mention that the law declared by the Supreme Court in GKN Driveshafts (supra) clearly held that the preliminary objection is to be decided as the first, it cannot be decided subsequently. The argument which has been canvassed by the assessee is required to be considered very seriously more particularly in view of the observations made by the Supreme Court in the case of KSS Petron Private Ltd (supra) which is followed in Hotel Blue Moon (supra), the law declared by the Supreme Court is taken in true spirit whether it will open a second inning in his own. Section 153(3) is to be read very cautiously as 153 powers are given to the Department, the Court has to look into whether the law declared by the Supreme Court is given away or protected. In the present case, as the Assessing Officer has clearly ignored the law declared by the Supreme Court, in that view of the matter, the issues which are raised in the matter, the Tribunal ought not to have remitted back for reassessment since period of limitation has already expired as the authority will get extended time of limitation beyond 9 months which is not the object of the Income Tax Act.

We also take into consideration the decision of ITAT Jaipur Bench in the case of Girraj Prasad Gilara HUF vs Income Tax Officer, Ward 6(5), Jaipur in it is held as under:- “Thus the requirement of disposing off the objections against the notice issued under section 148 by a separate and speaking order is a mandatory requirement in view of the judgment of the Hon’ble Supreme Court in case of GKN Driveshafts (India) Ltd. vs. ITO (supra), the failure of the AO to dispose off the objections TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR renders the reassessment order not sustainable in law. In the case in hand there is complete failure on the part of the AO to dispose off the objections against notice u/s 148 of the Act and not merely a procedural irregularity of separate and speaking order. Accordingly, in the facts and circumstances of the case and specifically involving the issue of addition of Rs. 2,71,317/-, we find that in this case the AO does not deserve a second inning. Accordingly, without remitting the matter to the record of the AO, the reassessment order passed by the AO is set aside being invalid.”

It is felt that order passed by AO without disposing objections raised by assessee is contrary to the decision of Hon’ble Supreme Court and order so passed deserves to be quashed. With regards to reopening of assessment, which was already completed u/s 143(3) of the Income tax Act, it is noted that assessment u/s 143(3) was completed after due verification of complete details filed by the assessee, including related to the unsecured loans taken/ repaid during the year under appeal and therefore reopening of assessment beyond 4 years was not in accordance with law more particularly when AO could not establish any fault on the part of assessee in disclosing fully and truly all material facts necessary for assessment. The relevant extracts of section 147 are reproduced hereunder for ready reference: “Income escaping assessment.

Hence, from perusal of provisions as contained in proviso to section 147, it is apparent that in normal circumstances, an assessment already completed u/s 143(3) can be reopened within 4 years only and reopening beyond 4 years is permissible only if there is failure on the part of assessee in disclosing fully and truly all the material facts necessary for assessment. The Bench noted that in the instant case also, assessment was already completed u/s 143(3) vide order dated 12.03.2016 (APB 55- 58), thus the re-opening proceedings initiated vide notice dated 18.03.2019 is governed by the first proviso to sec 147 of the I T Act, 1961, whereby no action could be taken u/s 147 of the I T Act after expiry of four years from the end of relevant assessment year, unless it is established that an income chargeable to tax has escaped assessment by the reason of failure on the part of the assessee to truly and fully disclose all material facts required for making assessment. We also noticed that in the instant case, TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR AO at para 8 of Reasons recorded (APB 60-63), i.e.“Applicability of the provisions of section 147/151 to the facts of the case” has stated that “Since 4 years from the end of the relevant assessment year have expired in this case, the requirement to initiate proceedings u/s 147 of the Act are reason to believe that income for the year under consideration has escaped from assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for the regular assessment for the year under consideration”However, going further,AO has simply mentioned that“I have carefully considered the assessment records containing the submissions made by the assessee in response to various notices issued during the original assessment proceedings u/s 143(3) of the I.T.Act, and it is found that the assessee has not disclosed fully and truly all the material facts necessary for regular assessment for the year under consideration.”In fact, ld. CIT(A) has also affirmed such finding of AO without bringing on record or pin pointing any specific material fact which was not disclosed truly and fully by the assessee and it was necessary for completion of assessment. It is noted that on the other hand, assessee had filed confirmations for all the unsecured loans taken / repaid during the year under consideration in the course of assessment proceedings, and none of the company appearing in the reasons recorded from whom it is alleged TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR that assessee has taken accommodation entry of unsecured loans, is in the list of parties from whom loans were taken, as the assessee had not taken any unsecured loans from any of those entities. Thus there was no failure on the part of the assessee in truly and fully disclosing any material which was now in possession of AO, having bearing on the assessment of income of the assessee. 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 not justified and the proceedings thus deserve to be quashed. This contention of the assessee is supported by the decision of the Hon’ble Chennai High Court in the case of Fenner (India) Ltd. Vs. CIT (241 ITR 672 (Mad) wherein ithas been held as under: “In cases where the initiation of proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default of failure committed by the assessee. Failure to do so would vitiate notice and the entire proceedings”. In the case of DCIT v. Hyundai Motor India Ltd. 148 ITD 333 (Chen) and CIT Vs. Cholamandalam Investment & Finance Company Ltd., 309 ITR 110 (Mad) by placing reliance on the decision of the Hon’ble Apex Court in the case of CIT Vs. Kelvinator India Ltd [320 ITR 561 SC] it is held that since during the original assessment proceedings all the requisite details TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR were filed by the assessee and after considering such details, the claims made by the assessee were duly accepted. The issues which have already been considered in the original assessment cannot be re-appreciated in reassessment proceedings under the garb of income escaping assessment. If the Assessing Officer has not given any finding after considering the evidence on record, it cannot be said that the income had escaped assessment on account of concealment of assessee.It is further noted that during the course of assessment proceedings u/s 143(3), after proper verification of the books of account and other records the assessment was completed after making disallowance u/s 14A and any further action u/s 148 alleging Sales of preceding year as accommodation entry is mere change of opinion which cannot be permitted under the eyes of law. In other words, no new material was brought on record for reopening the case rather merely relying upon some information from Investigation Wing, Kolkata that too on the basis of search conducted in case of a third party reopening of completed assessment was made. Thus, reopening amounts to mere change of opinion. The Jaipur bench of ITAT under the similar circumstances in following cases has quashed the notice issued u/s 148 of the Act where purchases have been considered and trading additions were made in original assessment proceedings TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 1. M/s Dwarka Gems Ltd. in vide orders dt. 27/3/2018, copy at Case Law Paper Book pages 32-39.

2. Nirmala Agarwal Vs. ACIT in & 996/JP/2016 vide orders dt. 11.04.2018 copy at Case Law Paper Book pages 40-53 Further, it is noted that assessee has challenged the reopening of assessment without recording any subjective belief as to escapement of income and merely on suspicion formed on the basis ofso-called information received from some other officials. It is noted that that the issue ought to have been considered objectively and not on the so-called information received from some other official, therefore, the action of the AO in reopening the completed assessment is without independent application of mind and deserves to be held bad in law. From the perusal of the reassessment order , we found that no efforts have been made by lower authorities AO/CIT(A) even to link the reasons recorded with the material available on record where the satisfaction was recorded that the assessee had introduced its unaccounted cash in the bank account of various dummy/ paper companies and gradually brought back into its books of accounts in the form of RTGS / transfer through circulatory fashion without paying any tax. It is noted that allegation of bogus accommodation loans being taken, as made in reasons recorded was changed to bogus share application money without appreciating the fact TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR that no fresh share application money was received during the year under appeal. All this shows the casual approach taken by the AO in completing the reassessment proceedings without even appreciating the belief of escapement of income recorded at the time of reopening the assessment. We take into considerationthe following case laws: (i) Ram Singh 306 ITR 343 (Rajasthan) Reassessment – Income escaping assessment – Income believed to have escaped investment explained by assessee – Tribunal rightly holding reassessment proceedings initiated on non-existing facts and invalid – Income Tax Act, 1961, ss. 147, 148.

Hon’ble Court in this case has inter alia held that: 29. To clarify it further, or to put it in other words, in our opinion, if in the course of proceedings under section 147, the AO were to come to conclusion, that any income chargeable to tax, which, according to his "reason to believe", had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the AO entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the AO may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147." By following the aforesaid judgment, hon’bejurisdictional high in the case of MS Prime Chem Oil Ltd. Vs. ACIT in DBITA No. 220/2017 vide order dt. 17.4.2018 has also expressed the same view.

(ii) 63 DTR 212 – CIT vs. AdhunikNiryatIspat Ltd. (Delhi) [DOD: 28.07.2011] Reassessment – Scope – Issue not subject-matter of reasons to believe – Assessment reopened on the ground that the assessee had accepted accommodation entries from some parties in the garb of share capital – However during the reassessment proceedings, the AO also made certain additions of the credits received from some other parties though on that basis the assessment was not reopened – Reasons which persuaded the AO to reopen the assessment proceedings ands on the basis of which additions were made were not found valid and those additions were deleted by the Tribunal – Since the grounds for reopening the assessment do not exist any longer and no additions were ultimately It is also noted that the validity of initiation of reassessment proceedings has to be judged with regard to the material available with the AO 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, which has been done in the case in hand. There is no specific enquiry from the parties who are alleged as bogus entry providers and who are further alleged to have given bogus loan through these intermediary shell companies. Thus, re-opening of the case based on the borrowed satisfaction on the information provided by some other official without carrying independent verification of the information with reference to return of income and financial affairs of the assessee and without recording her own independent satisfaction on the basis of such independent verification deserves to be held illegal.In this regard we place reliance onfollowing judgements: (i) CIT Vs. Atul Jain (Delhi) reported in 299 ITR 383 where in Hon'ble High Court has dismissed the appeal of Revenue by stating below reasons:- Lookedat in the light of the decisions placed before us and the law laid down therein, it is necessary to appreciate the information available with the Assessing Officer in the present case. The only information is that the assessed had taken a bogus entry of capital gains by paying cash along with some premium for taking a cheque of that amount. The information does not indicate the source of the capital gains (which in this case are shares). We do not know which shares have been transacted and with whom has the transaction taken place. There are absolutely no details available and the information supplied is extremely scanty and vague. In TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR so far as the basis for the reasons is concerned, even this is absent. The Assessing Officer did not verify the correctness of the information received by him but merely accepted the truth of the vague information in a mechanical manner. The Assessing Officer has not even recorded his satisfaction about the correctness or otherwise of the information or his satisfaction that a case has been made out for issuing a notice under Section 148 of the Act. Read in this light, what has been recorded by the Assessing Officer as his "reasons to believe" is nothing more than a report given by him to the Commissioner of Income Tax. As held by the Supreme Court in Chhugamal Rajpal, the submission of a report is not the same as recording of reasons to believe for issuing a notice. The Assessing Officer has clearly substituted form for substance and, therefore, the action of the Respondent falls foul of the law laid down by the Supreme Court in Chhugamal Rajpal which is clearly applicable to the facts of these appeals.

(ii) Seth Brothers Vs. CIT169 CTR 519(Guj) wherein the Hon’ble High Court has laid down following principles for the re-opening of the assessment u/s 148 of the Income Tax Act, 1961: (Reproduced in 28 TW 57,79) “11 (a) There must be material for belief (b) Circumstances must exist and cannot be deemed to exist for arriving at an opinion. (c) Reason to believe must be honest and not based on suspicion, gossip, rumour or conjuncture. (d) Reasons referred must disclose the process of reasoning by which he holds ‘reasons to believe’ and change of opinion does not confer jurisdiction to reassess. (e) There must be nexus between material and belief. (f) The reasons referred must show application of mind by the assessing officer. The validity of initiation of reassessment proceedings has to be judged with regard to the material available with the officer at the point of time 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.

In the light of what is stated above, we hold that there was no material with the AO for having reasons to believe that the income as chargeable to tax, has escaped assessment. We are unable to hold that the jurisdiction assumed u/s 147/148 was legal and valid.”

We also take into consideration the decision in case of PCIT vs. Meenakshi Overseas (P.) Ltd. [2017] 82 taxmann.com 300 (Delhi)wherein it was held by the Hon‘ble Delhi High court that where TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR reassessment was resorted to on basis of information from DIT(Investigation) that assessee had received accommodation entry but there was no independent application of mind by Assessing Officer to tangible material and reasons failed to demonstrate link between tangible material and formation of reason to believe that income had escaped assessment, reassessment was not justified. In case of Haryana Acrylic Manufacturing Co. v. CIT [2008] 175 Taxman 262 (Delhi) it was held by the Hon‘ble Delhi High Court that notice under section 148, giving reason that it had come to his notice that assessee had taken accommodation entries from 'H' during relevant year when assessee, in course of original assessment proceedings, had supplied all relevant details; in assessment order which were verified and moreover, in reasons supplied to assessee there was no allegation that it had failed to disclose fully and truly all material facts necessary for assessment and because of its failure there had been an escapement of income chargeable to tax, reopening of assessment after expiry of four years from end of relevant assessment year was without jurisdiction. Hence in view of the facts and circumstances and the case laws discussed hereinabove, it is felt that since there was no independent application of mind neither by AO while initiation of reassessment proceedings by issue of notice u/s 148 nor by ld. CIT(A) – 4, TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Jaipur while deciding the issue under consideration. They simply proceeded on borrowed satisfaction reached by some other officials and even without making any enquiry before reaching to the conclusion of escapement of income, which is apparent from the perusal of the reasons where no specific transaction with any of the company alleged as paper companies is specifically mentioned and on general observations that no such transaction was shown by the assessee and no tax was paid on such transaction, the case was reopened. Hence, in this view of the matter, we do not concur with the findings of the ld CIT(A) and this issue raised by the ld. AR of the assessee is allowed. 4.1 Apropos Ground No. 3 to 3.2 of the assessee, wherein it is noticed that the ld. CIT(A) has dismissed the grounds of the assessee by observing as under:- ‘’5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- In these grounds, the appellant has objected to the addition of Rs. 1,50,32.635/-so made by the Id. AO by considering the transaction from impugned two parties as unexplained. During the assessment proceedings the learned AO provided opportunity to the appellant to prove the identity and genuineness and creditworthiness of two parties namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. with respect to the credit entries received from these two parties. The appellant explained that there is no loan taken from these two parties but the payments were received as recovery of outstanding dues on account of sale made to these two parties in preceding years. The Id. AO got the enquiries conducted through Investigation Wing. Kolkata and Inspector deputed for field enquiry reported that at the given address there was TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR neither sign board of Mis Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. nor any name plate nor any letter box of this company. The building is very old and he met with the other people who told that they have never heard the name of aforesaid company. Thus, it is clear that whereabouts and existence of this company is clearly not proved and rather fully incorrect and non-existent. The Id. AO has held that the credit received from these two companies as unexplained. It was submitted by the Id. AR that Id. AO has made addition by considering the amount received from impugned two parties namely M/s Raj Rajeshwari Metals and Minerals Traders Pvt. Ltd. and M/s Glorious Mercandise Pvt. Ltd. as share application money which is totally contrary to the fact on record. In fact, during the year under consideration the appellant has not received any share capital or share application money not only from these two companies but not from any of the companies. Thus addition per-se being on wrong facts deserves to be out-rightly deleted. The Id. AR has further explained that appellant had made sales to these two parties in the preceding year and these parties were appearing as debtors at the end of FY 2011-12. In FY 2012-13 relevant to AY 2013-14, the appellant has merely received the outstanding amount from these two companies through banking channel. It was submitted that Id. AO is not justified in making the addition in AY 2013-14 when the sales have been duly declared and accepted in the preceding year, which tantamounts to double taxation on same income. Sales made in the preceding year to these two companies are supported by the sales invoice containing complete name and address at which goods were delivered, and details of transporter, truck number etc. mentioned in the invoice itself. As regards Inspector's report is concerned wherein the Inspector stated to have visited, the office address of the one of the company, it was submitted that the matter is related to FY 2011-12 and 2012-13 and it may be possible that after such a long gap, the office address have changed. Moreover, without prejudice to above, it was also submitted that in any case, the goods were not supplied at the address at which the Inspector made enquiry but it was supplied at the different address namely "Commerce House", 2-A G.C. Avenue, 8th Floor, Calcutta-700013 as mentioned in the sales invoice itself and no any enquiry was made at this address. Decision:- It is seen that as per the report of ITO (Inv.), Unit-1 and AIU, Kolkata the impugned two parties were part of the parties providing accommodation entries. It is further noticed that the appellant has done transaction with these two parties and has received payment during the year under consideration, though these payments were stated to be recovery of outstanding dues of sales made in the preceding years. However it is noticed that appellant was not able to support his claim of sale with clinching evidence of physical transportation of the goods. The appellant has claimed that truck details etc. are mentioned on invoices however such details are not mentioned. Further there are no normal course stampings on invoices. And also there are no acknowledgements of material having been received by the TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR buyers. The financial data/ITR of these companies as analysed by the Id. AD does not show the credit worthiness. None of the companies responded in response to the notices u/s 133(6) of the Act issued by the Id. AO. Further, in the field inquiries during the assessment proceedings the company was found to be not existing at the address given as per the field enquiry conducted by the Inspector. In this regard opportunity was provided to the appellant, however the appellant did not produce the parties and also did not produce the new address etc. in case there was any change of address. These parties are the witnesses of the appellant and onus in this regard is on the appellant. The argument of the appellant that the companies might have changed the address is a mere self-serving and convenient excuse and is not legally acceptable. as the onus is on the appellant in the peculiar facts of the case. Further the assesses are required to maintain the complete books of accounts and records till the time the assessment can be reopened. The argument of the assessee that some invoices could be traced out after much effort is also a mere self-serving statement and excuse which is not legally acceptable, as the onus is on the appellant. In the case of Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Hon'ble Calcutta High Court) it was held that production of even confirmatory letters from the lender parties before the Income-tax Officer in support of the loan alone would not suffice the loan as genuine. In the case of CIT v. Precision Finance (P.) Ltd. 11994] 208 ITR 465/11995] 82 Taxman 31 (Hon'ble Calcutta High Court) it was held that "It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non- genuine transaction genuine." In the case of CIT v. United Commercial & Industrial Co. (P) Ltd. [1991] 1871TR 596/56 Taxman 304 (Hon'ble Calcutta High Court) it was held that the primary onus lies on the assessee to prove the nature and source of credits in its account. It is necessary for the assessee to prove prima facie the identity of his creditors, the capacity of such creditors to advance the money and lastly the genuineness of the transactions. Only when these things are proved by the assessee prima facie and only after the assessee has adduced evidence to establish the aforesaid facts does the onus shift on to the Department. It is not enough to establish the identity of the creditors. Mere production of the confirmation letters before the Income-tax Officer would not by itself prove that the loans have been obtained from those loan creditors or that they have creditworthiness. The appellant has not been able to prove the sales to these parties. For the same the appellant has not producethe verifiable documents like the truck bilti, challan, weighment slips. State Govt. taxes slips on crossing border, etc. It is a known fact that mal practice of accommodation billing exists whereby in several cases bogus billing is done by the parties. The mere fact that invoice has been raised on TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR payment is received through banking channel does not make the transaction to be genuine and does not prove the creditworthiness and identity of the parties. In the case of Commissioner of Income Tax, Jaipur-ll v. Bright Future Gems [2017] 88 taxmann.com 476 (Rajasthan) [HON'BLE HIGH COURT OF RAJASTHAN] entire bogus purchases were disallowed and upheld. The reasons like non- availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted. Assessee has failed to produce the owners of the two concerns. Hon'ble High Court also observed that merely voucher of the import export challans or chllans of the custom clearance will not prove physical delivery of the material (precious stones). There is nothing on record to certify the stones which were verified by any of the value. It was held that it is all paper transactions for the purpose of taking benefit of the export and tax benefits. The Hon'ble High Court observed as under- "3. The brief facts of the case are that the assessee firm is engaged in the business of precious and semi preciousstones and it is a 100% exporter. During the course of assessment proceedings the AO. has noticed that the assessee was not maintaining quantitative details of day to day purchases and manufacturing of the items. Further on verification it was also noticed by him that the purchases was made from M/s. Vinayak Overseas and M/s JVH Gems. The purchases from above parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment the AO has recorded Statements of concerned parties were established to be bogus after making in depth enquiries by the AO. During the course of assessment proceeding it has been gathered that the assessee has failed to produce the owners of the two concerns. The reasons like non- availability of the said two suppliers at the given addresses, non production of two suppliers by the assessee in spite of various opportunities granted, statement of Sh. Mohan Prakash Sharma Power of Attorney holder of M/s Vinayak Overseas stating of giving accommodation entireties only and nature and volume of transaction appearing in their bank accounts leads the AOto the conclusion that the purchases were bogus. …… …… 7. Before considering the matter, it will not be out of place to mention here that question which is posed for our consideration is whether the purchases which has been done from Vinayak Overseas is genuine or not. The Assessing Officer while observing at page 12 referred hereinabove and which was already considered by the CIT (A) has confirmed the finding and Vinayak overseas has specifically contended that they were not transfer by Vinayak overseas and they were absconding. The Tribunal only on the statement of M.P. Sharma who was power of TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR attorney holder of Vinayak overseas has given the finding. In our view, the finding is perverse. The view taken by the Tribunal is required to be reversed.

9. In that view of the matter, we are of the opinion that the view taken by the CIT (A) is required to be upheld and view taken by the Tribunal is required to be reversed. In that view of the matter, we are of the opinion that it is a bogus purchase and in our opinion, the finding which has been arrived by the Tribunal is not in consonance with the provisions of law, therefore, it is required to be reversed" In the case of Indian Woolen Carpet Factory V/s ITAT and Others (2002) 260 ITR 658 (Raj)/178 CTR 4420 (Raj) (https://indiankanoon.org/doc/942953/) entire bogus purchases were disallowed and upheld. It is held that onus was upon the assessee to prove genuineness of purchases. It is observed in the order as under:- "3. The Assessing Officer was of the view that the purchases are not genuine and he added Rs. 2,75,000 in the assessment order dated March 6, 1986. Summons were issued to those parties on the given address. One or two parties appeared and considering their submissions, the addition was reduced to Rs. 2,25,000. Again the assessee went in appeal before the Commissioner of Income-tax (Appeals). …….. ……..

6. Considering the report of the Inspector of Income-tax and submissions of some parties, who are available, from whom wool was purchased, third time addition have been reduced to Rs. 1,12,500. 7 In appeal before the Tribunal, the Tribunal found that many opportunities were given to the assessee, twice the assessment order was set aside, thereafter, assessments were made one after the other, but in spite of that the assessee failed to prove the genuineness of the transactions or the credits. Therefore, the Tribunal confirmed the addition invoking the provisions of Section 68 holding that once the credit entry has been made in the books of account in the names of various parties and if the genuineness of these cash credits could not be proved, the Assessing Officer was justified in making the addition of Rs. 1,12,500.

9. We can understand that they will not be available at one point of time. When the parties from whom the wool was purchased are not nomadics, it cannot be said TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR that they have no permanent address and if they are the genuine parties, they should have some address. No person in the name of such party was found particularly when the summons were issued under Section 131 to those parties. If the transactions are genuine and if the parties have migrated somewhere else, their latest address should have been supplied and the burden is on the assessee to prove the genuineness of the transaction, when the assessee claimed that the purchases are genuine." Though the Id. AO has apparently due to typographical error used the term share application money/unsecured loan, but the fact remains that the amount received is credit which is treated as unexplained. The genuine existence of these parties itself is not proved and further the documentation is not shown regarding the sales and the sales by the appellant and purchased by these parties is not proved which is claimed to have taken place in the earlier year. Such sale is found to be sham and thus books of accounts are not reliable and liable to be rejected for the earlier year in which such sales are reflected and such sale amount will get reduced from the sales leading to increase in closing stock. Further, without prejudice, the credit has been received in the year under appeal and the identity and genuineness and creditworthiness are not proved irrespective of the claim of the appellant that the money has been received with respect to the sales made in earlier year, these factors are not proved. The argument of the appellant that the sales were accepted in the immediately preceding year assessment is not borne out of the record that whether the sales were examined in the immediately preceding year. Merely because the fact that in case the assessment has taken place in the earlier year in which such transactions have been recorded in the books of account does not render these transactions automatically to be explained as during the assessment only limited issues can be examined and the appellant has not shown with the documents that the sales were examined in the earlier year and that notices under section 133(6) of the Act was issued to these parties. The present assessment under appeal has been done based on the extra evidences gathered during the assessment proceedings Where the assessee has failed to prove satisfactorily the source and nature of a credit entry in his books, and it is held that the relevant amount is the income of the assesse, it is not necessary for the department to locate its exact source (CIT v. M.Ganapathi Mudaliar [1964] 53 ITR 623 (SC)/A. Govindarajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC)). In the case of Roshan Di Hatti v. Commissioner of Income-tax [1977] 107 ITR 938 (SC) (08-03-1977] it is held by the Hon'ble Supreme Court as under- "Now, the law is well settled that the onus of proving the source of a sum of money found to have been received by an assessee is on him. If he disputes the liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature." In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC)(08-02-1963] it is held by the Hon'ble Supreme Court as under- "It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the Income-tax Officer is entitled to treat it as taxable income: see A. Govindarajulu Mudaliar v. Commissioner of Income-tax [1958] 34 ITR 807 (SC) Referring to the above judgements of Hon'ble Supreme Court, it is held by the Hon'ble ITAT in the case of Navin Shantilal Mehta v. Income-tax Officer, Ward-32 (2) (4), Mumbai [2018] 90 taxmann.com 16 (Mumbai - Trib.) as under- "3.2 As per section 68 of the Act, onus is upon the assessee to discharge the burden so cast upon. First burden is upon the assessee to satisfactorily explain the credit entry contained in his books of accounts. The burden has to be discharged with positive material (Oceanic Products Exporting Co. v. CIT [2000] 241 ITR 497 (Ker.). The legislature had laid down that in the absence of satisfactory explanation, the unexplained cash credit may be charged u/s 68 of the Act. Our view is fortified by the ratio laid down in Hon'ble Apex Court in CIT v. P. Mohankala [2007] 291 ITR 278/161 Taxman 169, A close reading of section 68 and 69 of the Act makes it clear that in the case of section 68, there should be credit entry in the books of account whereas in the case of 69 there may not be an entry in such books of account. The law is wellsettled, the onus of proving the source of a sum, found to be received/transacted by the assessee, is on him and where it is not satisfactorily explained, it is open to the Revenue to hold that it is income of the assessee and no further burden lies on the Revenue to show that income is from any other particular source. Where the assessee failed to prove satisfactorily the source and nature of such credit, the Revenue is free to make the addition. The principle laid down in CIT v. M. Ganpati Mudaliar [1964] 53 ITR 623 (SC)A. Govinda Rajulu Mudaliar v. CIT [1958] 34 ITR 807 (SC) and also CIT v. Durga Prasad More [1969] 72 ITR 807 (SC) are the landmark decisions. The ratio laid down therein are that if the explanation of the assessee is unsatisfactory, the amount can be treated as income of the assessee. The ratio laid down in CIT v. Daulat Ram Rawatmal [1973] 87 ITR 349 (SC) further throws light on the issue. In TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR the case of a cash entry, it is necessary for the assessee to prove not only the identity of the creditor but also the capacity of the creditor and genuineness of the transactions. The onus lies on the assessee, under the facts available on record. A harmonious construction of section 106 of the evidence Act and section 68 of the Income Tax Act will be that apart from establishing the identity of the creditor, the assessee must establish the genuineness of the transaction as well as the creditworthiness of the creditors. In CIT v. Korlay Trading Co. Ltd. [1998] 232 ITR 820 (Cal.), it was held that mere mention of file number of creditor will not suffice and each entry has to be explained separately by the assesseeCIT v. R.S. Rathaore [1995] 212 ITR 390/86 Taxman 20 (Raj.). The Hon'ble Guwahati High Court in Nemi Chandra Kothari v. CIT [2003] 264 ITR 254/[2004] 136 Taxman 213 held that transaction by cheques may not be always sacrosanct, (Emphasis Supplied) The appellant has not discharged the primary onus cast on it as even the complete documentation itself has not been produced before the learned AO. The nature of credit itself is not proved by the appellant. Further, these parties are found to be non- existent and bogus in different enquiries at different times. During field enquiries it was found that for several years in past also no such company was known to be existing at given address. Considering these facts and the legal jurisprudence, the explanation of appellant of payment received as recovery from outstanding dues of sales is not acceptable and is rejected and the same is unexplained credit in terms of section 68 of the Act. The law is now settled by the judgment of Hon'ble Supreme Court of India in the case of PCIT Vs. NRA Iron & Steel Pvt. Ltd. SLP (Civil) No. 29855 of 2018) decided on 05.03.2019 wherein it was held that the taxpayer failed to establish the credit worthiness of investor companies and it was further held that the taxpayer failed to establish the investor's identity, as a few investors were found to be non-existent. Therefore, since the taxpayer failed to discharge the onus required under section 68 of the Act, the assessing authority's action of adding the receipt of share capital/ share premium as income in the hands of the taxpayer as unexplained credits u/s 68 was upheld. Thereby addition of Rs. 1,50,32,635/- made u/s 68 of 1.T. Act, 1961 by the Id. AO is hereby upheld. These grounds of appeal are dismissed.’’ 4.2 During the course of hearing, the ld. AR of the submitted that the ld. CIT(A) was not justified in confirming the addition of Rs.1,50,32,635/- as made by the AO. The ld. AR of the assessee reiterated the same arguments as made before the lower authorities.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 4.3 On the other hand, the ld. DR supported the order of the ld. CIT(A). 4.4 We have heard both the parties and perused the materials available on record. In these grounds of appeal

, it is noted that assessee challenged the action of ld. CIT(A) in confirming the addition of Rs.1,50,32,635/- u/s 68 of the Income Tax Act made by AO on the allegation that assessee had paid cash and in turn received accommodation entry. In the above case, it is noted that the assessment has been reopened based on some information received from some officials of Investigation Wing of the department that assessee had brought back his own unaccounted income in books by obtaining accommodation entry. In the reasons recorded, a single figure of Rs.1,50,32,635/- has been mentioned as unaccounted cash without even giving specific bifurcation as to from which company, how much sum is received by the assessee (APB 60-63). The narration as mentioned at page 2 of ACIT, Circle-4, Jaipur order is as under:- ‘’3. Analysis of information collected / received: As per information, the assessee company has introduced its unaccounted cash of Rs.1,50,43,035/- in various dummy/ paper companies and gradually brought back the same in its books of account in the form of RTGS/Transfer through circulatory fashion of money without paying any tax.’’

4. Enquiries made by the AO as sequel to information collected / received: The specific information was receive from the ITO (Inv). Unit-I & AIU, Kolkata. The information is specific and after going through this it is found that no further inquiries is necessary before recording satisfaction for issuance of notice.’’ TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR In this case, it was reiterated by the assessee that they had made sales in F.Y. 2011-12 relevant to A.Y. 2012-13 to M/s Raj Rajeshwari Metal and Minerals Pvt. Ltd. and M/s Glorious Merchandise Pvt. Ltd. of Rs.68,08,020/- and Rs.82,24,615/- respectively, which aggregated to Rs.1,50,32,635/-. The Sales so made by the assessee were subjected to verification by AO during scrutiny assessment proceedings of A.Y.2012-13 completed u/s 143(3), wherein no adverse inference whatsoever was drawn with regards to trading results or regarding parties to whom sales waseffected nor any doubts were raised against the Debtors outstanding at the end of the year. In the year under consideration, i.e. in F.Y. 2012-13 relevant to A.Y. 2013-14, assessee has merely received the amount through banking channels, being the sum outstanding from debtors which includes the payment received from above stated two companies. It wasargued by the ld. AR that AO has exceeded his jurisdiction in taxing the amount in the year of recovery when Sales was already declared and accepted as such in the preceding year and such action of AO amounts to double taxation of same income in A.Y. 2012-13 as well as A.Y. 2013-14, which is against the principle of taxation. It is further submitted by the ld AR that eventually, AO has made addition of Rs.1,50,32,635/- by holding the same as accommodation entries in the shape of Share Application Money, TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR which is not only clearly contrary to the reasons recorded but also contrary to the fact on record as no fresh share application money was taken during the year, which is evident from face of Balance Sheet itself (APB 06-49), where there is no change in the figure of Share capital/ application money as compared to preceding year. Also, no loan is appearing from any of the companies as mentioned in the Reasons recorded. At this juncture, the ld. AR invited our attention to para 4 page 10 of assessment order titled as “Some important facts”, where AO has noted that “….As per database of shell companies, (1) M/s Moonshine Distributors Pvt. Ltd. (2) Shivganga Suppliers Pvt. Ltd. etc. are shell companies…..”. Basically, these are not the new facts compiled by ld.AO during the course of assessment proceedings and are rather exactly the same words as are appearing in the Reasons recorded (para 2 of reasons) (APB 60-63). The AO in para 2 at page 11 of the reassessment order has further observed that “Further, the field enquiries by the ITI substantiated the above facts. It is pertinent to mention here that the name of the companies which reflects in the said investigation report, have financial transactions with the assessee as well…….”These observations of AO also clarify that no enquiries whatsoever were made by AO to substantiate the reasons recorded and assessment was completed solely on the basis of information received TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR from investigation wing without application of mind. It is also noted that AO at page 11 of the order has observed that“…On perusal of bank accounts of all the companies, it is observed that there are cash deposits and RTGS credits and transfers from different a/cs and simultaneously the said amount transferred to the different a/cs through RTGS/transfer….” Thus it is clear from these observations that there is no specific information which substantiates the allegation of AO as to how assessee has routed his unaccounted income. Similarly, AO, though had named 8 companies in the reasons recorded, however eventually has treated only 2 companies as “shell companies”. All these facts show that AO has relied upon only generalized information for making such a huge addition. Going further, AO observes that “….the assessee have paid interest to all other persons/firms from where he has taken unsecured loan except to the companies which reflects in the said report.” We appreciate that these remarks also strengthen the case of assessee and are self-explanatory that sum received by assessee were not in the nature of loan as has been alleged by the AO. It is noted that assessee is a public limited company and has to make different compliances under various Government departments, i.e. Excise, Income Tax, ROC etc. and is also at times, subject to spontaneous verification by such departments. Books of TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR accounts of the company were also subject to audit, wherein no adverse remarks have been given by the auditor. In the scenario, an addition made by AO, without rebutting any of the documentary evidences submitted by assessee and without bringing any document in support of his allegation is absolutely arbitrary and deserves to be deleted. It is also noted from the records that, assessee has not received any credit entry during the year in the shape of unsecured loan or share application money from these two companies as has been alleged by AO rather assessee has received the sales consideration money in lieu of sales made in immediately preceding year, i.e. A.Y. 2012-13. As noted above, assessment for A.Y. 2012-13 was completed u/s 143(3) after thorough examination of details furnished by assessee, which was again subject to reopening and both in proceedings u/s 143(3) and in 147, sales of assessee was accepted as such, no action could be taken in AY. 2013-14, where assessee has merely received payment against outstanding balances of debtors and no transaction of loan or share application has taken place. During the course of assessment proceedings, assessee furnished copies of ledger accounts of respective parties as appearing in its books of accounts for F.Y. 2011-12 as well as for F.Y. 2012-13, wherein no discrepancy was pointed out and addition was on pre conceived notion that assessee has obtained accommodation entry.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR We noticed that AO has also alleged that notices u/s 133(6) were issued to Raj Rajeshwari Metals & Minerals Traders Pvt. Ltd. and Glorious Merchandise Pvt. Ltd. in response to which no compliance was made by them. Further the AO on the basis of field enquires stated to be made through inspector of the office of DDIT, Kolkatta has alleged that these “INVESTOR COMPANIES” have not existed at the given addresses. At page 6 of the re-assessment order, report of the inspector in the case of M/s Raj Rajeshwari Metals & Minerals Pvt. Ltd. was also reproduced. During the course of reassessment proceedings, this information was also provided to the assessee and assessee was asked to establish the identity, genuineness and creditworthiness of the “INVESTOR”. In reply, assessee vide letter dt. 03.12.2019 (APB 83-85) has clearly submitted that no unsecured loan or share application money from these two companies was received and only payment received was against the sales made to them. In support of the same copy of sale invoices issued containing complete name, addresses at which goods were delivered, details of transporter, Truck No. etc. and the amount of VAT charged on the same were furnished, which remained uncontroverted. Rather the AO has based her allegations on the strength of judgment of Hon’ble Apex court given in the case of NRA Iron & Steel Pvt. Ltd. which TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR case is not applicable to the facts of the present case in appeal as the assessee in the present case has never received any unsecured loan or share application money and the amount under reference was received against the sales made. Further it is noticed that no effort was made by the Department to make verification at the address given in the sale invoices which is incidentally be the different from the address at which the spot enquiry was made by the Inspector of DDIT, Investigation Wing, Kolkata. All these facts further prove that the transaction carried out by the assessee with these two companies were genuine transactions and were already accepted by the department in the order passed u/s 143(3) for A.Y. 2012-13 at the time of sales and resultant profit has already been assessed to tax. Therefore, by making addition of the consideration received against the sales made is nothing but taxation of an income twice which is not permissible under any provisions of Income Tax Act. Regarding non- compliance of notice u/s 133(6), reliance is placed on the judgment of Delhi Benches of ITAT in the case of Phool Singh vs ACIT, ITANo.2901/Del/2014 (Case Law Paper Book pages 60-68), wherein purchases made by assessee from certain supplier was doubted for the reason that notices issued to them u/s 133(6) returned unserved. In this case, it was categorically held that:

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR “…….assessee is regularly purchasing material from the above party and in the past the assessment under section 143(3) were made in case of the assessee wherein purchases from these parties are accepted. The purchases are made from the party through account payee cheques and the proper adequate bills supporting purchases were submitted. The assessee has submitted the confirmed copy of the account from the books of the supplier and also stated that he is assessed to income tax with ITO Ward 25/4 New Delhi. Further regarding the address supplied by the assessee on which notices under section 133(6) remained unserved, assessee supplied the same address which is also shown in the income tax return of the supplier. Non complianceof summons under section 131 by the suppliers cannot be the concern of the assessee. It is not the case of the revenue that assessee was asked to produce the supplier. ………… ………… The assessing officer made the whole addition by pointing out certain lacunas in the bank account of the suppliers of the assessee, which cannot be permitted. Merely because 133(6) notices issued to the party returned un-served though it was the same address, which was supplied by supplier while filing its income tax return, no fault can be put on the shoulder of assessee. Further, the learned Commissioner (Appeals) confirmed the finding of the learned assessing officer without giving any reason but merely reiterating the findings of the assessing officer. In view of this the addition made by the learned assessing officer of Rs. 2657303 from Suresh HYP Enterprises cannot be sustained and hence, deleted. In the result ground No. 2 of the appeal of the assessee is allowed.”

It is noted that the assessee’s case is on a better footing where the notices issued u/s 133(6) were served upon the respective parties. However, it is well known fact that usually people have a fear of ongoing inquiries and litigation by the Income Tax Department, thus non-compliance of notices u/s 133(6) could be for any reason and no adverse view be taken in the case of assessee for this reason. It is also submitted by the ld.AR that Address as mentioned in the Inspector’s report is “27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012”, whereas the supply of material TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR was made to that company at the address i.e. “Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013” which was also appearing on the copies of the sale invoices (APB 86-126) submitted during the course of assessment proceedings. It therefore appears that field enquiry has been conducted by the inspector at the wrong address and adverse inference drawn on the basis of such reportis not justified. Moreover, no result of the inquiry carried out in the case of Glorious Merchandise Pvt. Ltd. has been brought on record, therefore, it is not clear whether any field inquiry was actually carried out or not in the case of this company. Thereafter, as submitted above, from pages 8 to 15 in para 3 to 8 of the assessment order, AO has tried to make out a case of accommodation entry in the shape of unsecured loan / share application money and nothing is stated about the claim of the assessee that the sales were made to these parties which fact remained uncontroverted. Further as noted above in these paras no new fact was brought on record rather AO has reproduced the reasons recorded at the time of initiation of reassessment proceedings that too in identical words. Further the other judgments relied upon of Hon’ble Delhi High Court in case of CIT Vs. N.R. Portfolio Pvt. Ltd., Hon’ble Guwahati High Court in case of Nemichand Kothari Vs. CIT, Hon’ble Supreme Court in case of CIT Vs. P. Mohan Kala, Sumati Dayal Vs. CIT are all related to TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR section 68 of the Act and not relevant to the fact of the case in hand and thus are totally distinguishable to the fact and not applicable. It is time and again submitted during the course of reassessment proceedings as well as in the present submission that the amounts received from these two companies is against the sales made to them in preceding years and AO while recording the reasons has alleged the same as the assessee’s own money routed through RTGS in the shape of accommodation entries and while completing the assessment changed his stand from unsecured loan to share application money without any basis or material brought on record to allege the same more particularly when no amount whatsoever was received by the assessee as share application money in the year under appeal as is clearly evident from the perusal of the financial statements of the assessee company available with the Assessing Officer (APB 06-49). We also noticed that AO has further alleged that assessee could not provide evidences regarding transportation of goods from its place to the destination companies. In this regard, it was submitted that assessee not only furnished ledger copies of both the parties but also furnished copies of invoices, which contained the necessary details of transporters and details of vehicle through which goods were transported, but the AO brushed aside the same without any cogent reason. We find that it is a matter of fact that TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR the AO made addition by relying upon the information received from Investigation Unit and some enquiries made, without even providing assessee an opportunity to cross examine. Hon’ble Apex court in the case of CCE Vs. Andaman Timber Industries, (324) ELT 641 (Case Law Paper Book pages 69-75) has held as under: “6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.

7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above.”

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR We also take into consideration the decision of Hon’ble Apex Court in the case of CIT vs Odeon Builders Pvt. Ltd. in Civil Appeal No. 9604-9605 of 2018(Case Law Paper Book pages 76-78) has held as under:- S. 68/69 Bogus Purchases: Disallowance cannot be made solely on third party information without subjecting it to further scrutiny. The assessee has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. The AO has also not provided a copy of the statements to the assessee, thus denying it opportunity of cross examination. Hence, it is observed that ld. CIT(A) while deciding the matter on merits has observed that the assesseewas unable to support claim of sale since there is neither any truck details nor any stamping on invoices. In this regard it was submitted that observations of ld. CIT(A) are not in parity with evidence adduced before him. The attention of the Bench was invited to paper book pages 86 to 126, wherein assessee has furnished the copies of invoices of both the parties i.e M/s Glorius Merchandise Private Limited (APB 86-107) &M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. (APB 108-126). On perusal of invoices, it is clearly evident that Truck No. are clearly mentioned in the Dispatch Document No. & Transporter Name in “Dispatched through” details. Further Invoices are duly verified and properly stamped by the authorized signatory. It is further relevant to state that ld. CIT(A) has also failed to acknowledge the fact that Address as TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR mentioned in the Inspector’s report for one of the party i.e. M/s Raj Rajeswari Metals & Minerals Traders Pvt. Ltd. is “27, Western Street, Room No. 511, 2nd Floor, Kolkata, -700012”, whereas the supply of material was made to that company at the address i.e. “Commerce House, 2A, GC Avenue, 8th Floor, Kolkata 700013” which was also appearing on the copies of the sale invoices (APB 108-126). Thus, the allegation of ld. CIT(A) that assessee has not provided new address of the parties is infructuous and it clearly depicts that ld. CIT(A) has confirmed the additions so made by AO by solely relying upon the information of Investigation wing. Hence, the bench noticed that addition confirmed by ld. CIT(A) is contrary to the facts on record and is against the principle of taxation, whereas assessee has substantiated its claim by furnishing all the necessary documentary evidences, therefore, the Bench does not concur with the findings of the ld. CIT(A) and addition so sustained is directed to be deleted. Thus ground No. 3 to 3.2. of the assessee is allowed.

5.1 Apropos Ground No. 4 of the assessee, it is noticed that the ld. CIT(A) dismissed this ground of the assessee by observing as under:- ‘’6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR In this ground of appeal, the appellant has challenged the addition of Rs. 3,75,816/- made by Id. AO by alleging the commission @ 2.5% being paid for obtaining accommodation entry. It was submitted that no accommodation entry of share application money has been taken by the appellant and rather no share application money or share capital has been raised by the appellant during the year under consideration and accordingly there is no question of payment of commission. I have considered the argument of the Id. AR and facts on record. As I have upheld the addition of the credit shown as received as unexplained credit u/s 68 of 1.T. Act, 1961 wherein impugned companies have provided accommodation entries, the payment of commission for obtaining these entries cannot be ruled out and is in natural course. Accordingly the addition so made by the Id. AO is hereby confirmed. The ground of appeal is dismissed. 5.2 During the course of hearing, the ld. AR of the assessee submitted that that the ld. CIT(A) was not justified in upholding the addition of Rs.3,75,816/- by alleging the same as commission for obtaining accommodation entry. The ld. AR further submitted that while holding the sum received from debtors bogus merely on the basis of information received from investigation wing, the AO as well as ld. CIT(A) have further presumed that a commission of the above mentioned amount @ 2.5% might have been paid by assessee as a consideration for arranging such accommodation entry.The ld. AR submitted that firstly, no transaction in the nature of unsecured loan / share application money was entered into by Assessee Company during the year under consideration with the two companies from which it was alleged that assessee has received share application money. It is also an uncontroverted fact that the sales were TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR made to these two parties in preceding year and assessee has received outstanding amount in the year under appeal. It was also submitted that sale made by assessee in F.Y. 2011-12 is completely genuine as has been stated in ground of appeal No. 2 above, and assessee has not taken any loan/share capital as has been alleged. Thus, in view of the same there arises no question of any commission payment. Secondly, the ld. AR submitted that this addition also is solely based upon the information received from third party absolutely uncorroborated in much as there is no material available on record to rebut the documentary evidences furnished by assessee. It is therefore submitted that the addition of Rs.3,75,816/- so confirmed by ld. CIT(A) are on the basis of assumptions and presumptions deserves to be deleted. 5.3 On the other hand, the ld. DR supported the order of the ld CIT(A) 5.4 After hearing both the parties and perusing the materials available on record, the Bench noticed that when we have deleted the addition to the tune of Rs.1,50,32,535/- made by the AO u/s 68 of the Act then there is no question arise relating to commission amount of Rs.3,75,816/- paid by the assessee for obtaining accommodation entry. Hence, the same is directed to be deleted.

PER :NARINDER KUMAR, JUDICIAL MEMBER. I have gone through the draft order received from Learned Brother. I find it to be a fit case to discuss the contentions, actually put forth in the course of arguments, by Learned AR for the appellant, and Learned DR for the Department, and record reasons and findings on the issues raised.

6. It may be mentioned here that the case was earlier completed on 12.3.2016 under section 143(3) of the Act, after addition of Rs. 5,12,198/-. However, the case was re-opened under section 148 of the Act, after seeking approval of the competent authority. It was re-opened on receipt of information that the assessee was found to have received a credit entry from shell/dummy/paper companies and introduced his own unaccounted cash by routing it through a web of dubious companies and by way of suspicious transactions.

7. The assessee filed his return of income on 20.9.2019, in response to the notice under section 148 of the Act, and declared current year loss of Rs. 1,90,14,577/-. Notice under section 143(2) of the Act was then served, followed by notice under section 142(1) and subsequent notices. In the assessment proceedings, the assessee was called upon to establish identity and creditworthiness of share holders/investors and also genuineness of the transactions. The assessee submitted his reply dated 3.12.2019. Same has been reproduced at page 7 and 8 of the assessment order by way of scanning. Learned Assessing Officer discussed the version put forth by the assessee in the reply and recorded his observations at page 9 of the assessment order to arrive at the conclusion that the amount credited in the books by the dummy companies remained unexplained, and further that merely because identity of investors is proved, but creditworthiness is not proved, the assessee does not stand discharged of the onus on him. That is how, additions came to be made to the income of the assessee. As noticed above, Learned CIT(A) upheld the two additions and thereby dismissed the appeal filed by the assessee.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR Contentions & Discussion 8. While arguing the appeal, Learned AR for the appellant has submitted that the subject amount was as against sales of the previous year, but received in the year under consideration, and that the Assessing Officer had checked the account books of the assessee including ledger accounts, and further that the invoices contained all relevant details, and as such, the Assessing Officer should not have reopened the case by issuing notice under section 148 of the Act. On the other hand, Learned DR for the department has submitted that addition under section 68 of the Act was made finding that the subject entry was not on account of sales, and further that while discussing the ground raised on behalf of the appellant, CIT(A) had discussed the version of the assessee as regards sales part and held the sales to be sham, and as such, there is no merit in the contention raised on behalf of the appellant.

9. Per contra, Learned AR for the appellant has pointed out that the assessee had filed objections before the Assessing Officer to the re- opening of the case, but those never came to be disposed of, and rather, CIT(A) has dealt with said point without notice or opportunity to the appellant of being heard in this regard. Further, it has been pointed out that subsequently, an order disposing of the objections was passed by the Assessing Officer, but ultimately said order disposing of the objections was withdrawn. The contention is that the objections to the re-opening were never decided by the Assessing Officer. Learned DR does not dispute this factual position regarding subsequent disposal of the objections by the Assessing Officer and ultimate withdrawal of the said order disposing of the objections. The only submission put forth by Learned DR in this regard is that the same was withdrawn, as it pertained to some other case and was inadvertently uploaded as if relating it to the appellant.

10. The fact remains that the order disposing of the objections was withdrawn.

11. As regards Ld. CIT(A) having dealt with the issue of non disposal of objections by the Assessing Officer, Learned DR has contended that when CIT(A) discussed the issue of re-opening and referred to case law as regards his powers co-terminus with that of Assessing Officer, the order does not become invalid.

TIJARIA POLYPIPES LTD VS DCIT CIRCLE-4, JAIPUR 12. In this regard, suffice it to state that when as per requirement of the law, the objections filed by the assessee were to be disposed of by the Assessing Officer, same were required to be disposed of by the said Officer, before framing of the assessment, and not by Learned CIT(A). Therefore, there is no merit in the explanation put forth on behalf of the department on this issue.

15. Admittedly, assessment stood already completed under section 143(3) of the Act on 12.3.2016. Assessment pertains to the assessment year 2013-14.

20. As a result, the appeal deserves to be allowed. Appeal file be laid before Learned Brother for pronouncement.