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Income Tax Appellate Tribunal, DELHI BENCH “SMC”, NEW DELHI
Before: SHRI R. K. PANDA
O R D E R PER R. K. PANDA, AM : This appeal filed by the assessee is directed against the order dated 15.05.2017 of CIT(A)- 10, New Delhi relating to assessment year 2008-09.
Facts of the case, in brief, are that the assessee is an individual. The case was reopened u/s 148 on the basis of information received from Addl. CIT, Central Range, Surat wherein it has been mentioned that a search and seizure operation was carried out by the DGIT (Inv.), Mumbai in the case of M/s Rajesndra Jain Group, M/s Sanjay Chaudhary Group and M/s Dharmichand Jain Group (entry operators). On the basis of the findings of the search operation, a list of beneficiaries of the accommodation entries from the above mentioned concerns was forwarded to the Assessing Officer along with the same information. The name of M/s N. N. Associates M. Vajubhai Jewelles was mentioned according to which the assessee was a beneficiary of accommodation entry of Rs.14,54,400/- on account of sale during the financial year 2007-08.
The said entry has been recorded on account of sale of jewellery/diamond to M/s N. N. Associates, Prop. Nihal Chand Rakyan by M/s Aadi Impex, 406, Saryu Jadda Khadi, Mahendrapura, Surat, Gujrat. In response to notice u/s 148, the assessee filed his return of income. The assessee asked for the reasons recorded which was provided by the Assessing Officer. The assessee raised the objection for such reopening which was also disposed off by the Assessing Officer. Subsequently, the Assessing Officer issued notice u/s 133(6) to Aadi Impex to provide the confirmation of said transactions made with the assessee and explanation of the nature of transaction. However, none attended on behalf of the said parties i.e. M/s Aadi Impex. The Assessing Officer brought the above to the notice of the assessee who submitted that the purchase has been made from known sources and paid by account payees cheques. Subsequently, the Assessing Officer asked the assessee to explain the nature of transaction.
Rejecting the various explanations given by the assessee and in absence of providing any confirmation from M/s Aadi Impex, the Assessing Officer made addition of Rs.14,54,400/- to the total income of the assessee.
Before the ld. CIT(A), the assessee apart from challenging the addition on merit also challenged the validity of the reopening. However, ld. CIT(A) dismissed the appeal filed by the assessee both on merit as well as on legal ground.
Aggrieved with such order of the ld. CIT(A), the assessee is in appeal before the Tribunal both on merit as well as on validity of the reassessment proceedings.
Ld. counsel for the assessee at the outset submitted a copy of the order of the Tribunal in assessee’s own case in the preceding assessment year i.e. A.Y. 2007-08 and submitted that under identical circumstances, the Tribunal has held that the reopening of the assessment on the basis of information received from the Investigation Wing is invalid and subsequent assessment framed was void ab initio. She also relied on the following decisions wherein it has been held that reopening on the basis of information received from the Investigation Wing without independent application of mind by the Assessing Officer is invalid :-
a. M/s Lavitra Technologies Pvt. Ltd. vs. ITO (ITA No.2912/Del/2013 order dated 14.07.2016). b. G & G Pharma India Limited vs. ITO (ITA No.3149/Del/2013 order dated 09.1.2015). c. Pr.CIT vs. G & G Pharma India Ltd. (ITA 545/2015 order dated 08.10.2015). d. DCIT vs. M/s Viney Auto Pvt. Ltd. (ITA No.291/Del/2010 order dated 14.03.2016). e. M/s MKM Finsec (P) Ltd. vs. ITO (ITA No.5203/Del/2013 order dated 08.08.2016).
Ld. DR on the other hand heavily relied on the order of the ld. CIT(A).
She submitted that it has been clearly established that the assessee has received accommodation entries on account of bogus purchase which was detected during the course of search in the case of M/s Rajesndra Jain Group, M/s Dharmichand Jain Group. No confirmation from M/s Aadi Impex explaining that the assessee has not received the accommodation entries/bogus purchase was filed during the course of assessment proceedings. Therefore, under the facts and circumstances of the case, the addition made by the Assessing Officer and sustained by the ld. CIT(A) has to be upheld. She also relied on the decision of the Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. vs. ITO reported in 236 ITR 34 to the proposition that in determining whether commencement of reassessment proceedings was valid or not it has only to be seen whether there was prima-facie some material on the basis of which Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. She accordingly submitted that the grounds raised by the assessee be dismissed.
7. I have considered the rival arguments made by both the sides, perused the orders of the authorities below and the Paper Book filed on behalf of the assessee. I have also considered the various decisions cited before me. A perusal of the reasons recorded for reopening the assessment, copy of which is placed at page 15 of the Paper Book, shows that the following reasons were recorded for reopening of the assessment :-
Reasons for reopening the case u/s 147/148 of the I.T. Act, 1961 For A.Y. 2008-09. The Addl. Commissioner of Income Tax, Central Range, Surat vide letter no.SRT/Addl.CIT/CR/Rajendra Jain, Dharmichand Jain, Sanjay Choudhary Gr./2014-15/506 dated 13/03/2015 has informed that a search and seizure operation u/s 132 of the I.T. Act 1961 in the case of Sh. Rajendra Jain, Sh. Sanjay Choudhary and Sh. Dharmichand Jain Group was carried out on 03/10/2013 by the DGIT (Inv.), Mumbai Charge. During investigation it was found that Sh. Rajendra Jain, Sh. Sanjay Choudhary and Sh. Dharmichand Jain were some of the entry providers operating in Mumbai, indulging in providing accommodation entries in the nature of bogus sales and unsecured loans. During investigation it was also revealed that besides above lender group, some other entry providers were also engaged in providing accommodation entry. As per information provided, M/s N.N. Association, the assessee was one of the beneficiaries of such bogus accommodation entries. The complete details of the transactions between the entry provider and the assessee are as under :-
PAN of Bill Name of Bill A.Y. Nature of Beneficiary Beneficiary Total value of Real value of Provider Provider Transaction PAN Name the transaction Transaction Rs. Rs. (if available) AHOPJ3837B AADI 2008-09 Sale Under N.N. 14,54,400 14,54,400 Process Association
From above it is clear that this issue could not be examined for the assessment year under consideration. Therefore, I have reasons to believe that the income of the assessee to the extent of Rs.14,54,400/- for A.Y. 2008-09 has escaped assessment in terms of Section 147 of the I.T. Act 1961. Sd/- (G. Sathish) Assistant Commissioner of Income Tax Circle 30(1), New Delhi
8. I find identical issue had come up before the Tribunal in assessee’s own case in the immediately preceding assessment year and the Tribunal vide order dated 08.11.2016 held the reassessment proceedings as not valid by observing as under :-
“6. I have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case it is noticed from the reasons recorded for reopening the assessment placed on page No.12 of the assessee’s paper book that the reopening was done only on the basis of the information received from the Additional Director of Income Tax (Investigation) Unit VI New Delhi vide letter dated 24.3.2014 who suggested that notice u/s 148 was required to be issued to bring to tax the undisclosed income in respect of accommodation entries taken by different persons/companies as per the list enclosed with the said letter.
On a similar issue, the Hon’ble Jurisdiction High Court in the case of Pr. Commissioner of Income Tax – 4 vs. G & G Pharma India Ltd. (supra) vide order dated 8.10.2015 held as under :- “12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: “I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries.” The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on 14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: “it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries”. In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.
Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity.”
In the present case, the reopening was done only on the basis of information received from Investigation Wing. Therefore, in view of the ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case, the reopening was not valid and the subsequent assessment framed was void ab initio. Accordingly, the same is set-aside.
In the result, the appeal of the assessee is allowed.”
9. Since the facts and circumstances of the case are identical to the facts of the case decided by the Tribunal in assessee’s own case in the immediately preceding assessment year, therefore, respectfully following the decision of the Co-ordinate Bench of the Tribunal in assessee’s own case and in absence of any contrary material brought to my notice against the said decision, I hold that the reassessment proceedings initiated by the Assessing Officer is invalid.
Therefore, subsequent assessment framed is void ab initio. In the result, the appeal filed by the assessee is allowed on the issue of validity of the reassessment proceedings. Since the assessee succeeds on this legal ground, I refrain myself from adjudicating the issue on merit.
Resultantly, the appeal filed by the assessee is allowed. Order pronounced in the open Court on this 12th day of December, 2017.