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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. N. K. Saini
ORDER This is an appeal by the assessee against the order dated 04.07.2016 of ld. CIT(A)-17, New Delhi.
Following grounds have been raised in this appeal: “1. That on the facts & circumstance of the case, the order passed by the A.O. is bad both in law and on facts of the case.
2. The Ld. A.O. totally unjustified in reopening the case on the basis of information from the investigation department & has not applied his own mind.
3. That on the facts & circumstance of the case, The A. O. has erred in making addition of Rs. 8,55,306/- on A/c of bogus purchases & CIT(A)-17, New Delhi further erred in upholding the addition to the tune of 20% of 2 S. Jagjit Singh purchases of Rs. 8,55,306/- on A/c of bogus purchases purely on surmises basis.
4. The Ld. CIT(A)-17 is totally unjustified in upholding the addition of 20% of Rs. 8,55,306/- where there is no bogus purchase as the assessee's sale have been duly accepted. The additions are up-hold without any basis.
5. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. Vide Ground No. 2, the main grievance of the assessee relates to the reopening of the assessment on the basis of information received from investigation department and without applying his own mind by the AO.
During the course of hearing the ld. Counsel for the assessee drew our attention towards assessment order dated 18.03.2015 wherein the AO stated that the case was reopened on the basis of information received from ACIT, Central Circle-10 vide letter dated 13.03.2013. It was stated that the AO did not apply his own mind before reopening the assessment. Therefore, the reopening was not valid. The reliance was placed on the following case laws: � Principal Commissioner of Income Tax-4 Vs G & G Pharma Ltd. 384 ITR 147 (Del.) � Signature Hotels Pvt. Ltd. Vs ITO and Anr. (2011) 338 ITR 51 (Del.) � Unique Metal Industries Vs ITO in order dated 28.10.2015 3 S. Jagjit Singh � Radhey Shyam & Co. Vs ITO in ITA No. 1429/Del/2015 order dated 30.11.2015 � Karshni Metal Store Vs ITO in ITA No. 1365/Del/2015 order dated 23.03.2016 � Kishan Lal Gambhir & Sons Vs ITO in ITA No. 1376/Del/2015 order dated 02.12.2015 5. In his rival submissions the ld. DR strongly supported the impugned order passed by the ld. CIT(A) and further submitted that since the case was reopened when the AO got the information that assessee had taken accommodation entry from the entry provider Sh. Shaym Trading Company. Therefore, the ld. CIT(A) was justified in confirming the action of the AO.
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 not in dispute that the AO reopended the assessment on the basis of information received from the Investigation Wing i.e. from the ACIT, Central Circle-10, Jhandewalen Extension, New Delhi vide letter dated 13.03.2013 which was forwarded through CIT, Central-II, New Delhi and CCIT, Delhi-I, New Delhi vide their letters dated 19.03.2013 and 26.03.2013 respectively. In the present case, the AO had the reason for belief that the income had escaped assessment only on the basis of information received from the Investigation Wing and did not apply his own mind.
4 S. Jagjit Singh 7. On a similar issue the Hon’ble Jurisdictional High Court in the case of Principal Commissioner of Income Tax-4 Vs G & G Pharma Ltd. 384 ITR 147 (supra) held as under: “The basic requirement of law for reopening an assessment is application of mind by the Assessing Officer, to the materials produced prior to reopening the assessment, to conclude that he has reason to believe that income has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not make an inherently defective reassessment order valid.” It has further been held as under: “Without forming a prima facie opinion, on the basis of such material, it was not possible for him to have simply concluded that it was evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries. The basic jurisdictional requirement was application of mind by the Assessing Officer to the material produced before issuing the notice for reassessment. Without analysing and forming a prima facie opinion on the basis of material produced, it was not possible for the Assessing Officer to conclude that he had reason to believe that income had escaped assessment.”
Similarly, the Hon’ble Jurisdictional High Court in the case of Signature Hotels Pvt. Ltd. Vs ITO and Anr. (2011) 338 ITR 51 (supra) held as under:
5 S. Jagjit Singh “Section 147 of the Income-tax Act, 1961, is wide but not plenary. The Assessing Officer must have "reason to believe" that an income chargeable to tax has escaped assessment. This is mandatory and the "reasons to believe" are required to be recorded in writing by the Assessing Officer. Sufficiency of reasons is not a matter, which is to be decided by the writ court, but existence on belief is the subject-matter of the scrutiny. A notice under section 148 can be quashed if the "belief" is not bonafide, or one based on vague, irrelevant and non-specific information. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded the reason. There should be a link between the reasons and the evidence/material available with the Assessing Officer. The "reasons to believe” would mean cause or justification of the Assessing Officer to believe that the income has escaped assessment and not that the Assessing Officer should have finally ascertained the fact by legal evidence or reached a conclusion, as is determined and decided in the assessment order, which is the final stage before the Assessing Officer. It has further been held that: “the reassessment proceedings were initiated on the basis of information received from the Director of Income-tax (Investigation) that the petitioner had introduced money amounting to Rs. 5 lakhs during financial year 2002-03 as stated in the annexure. According to the information, the amount received from a company, S, was nothing but an accommodation entry and the assessee was the beneficiary. The reasons did not satisfy the requirements of section 147 of the Act. There was no reference to any document or statement, except the annexure. The annexure could not be regarded as a material or evidence that prima facie showed or established nexus or link which disclosed escapement of income. The 6 S. Jagjit Singh annexure was not a pointer and did not indicate escapement of income. Further, the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. There was no dispute that the company, S, had a paid-up capital of Rs. 90 lakhs and was incorporated on January 4, 1989, and was also allotted a permanent account number in September, 2001. Thus, it could not be held to be a fictitious person. The reassessment proceedings were not valid and were liable to be quashed.”
In the present case also the AO simply acted upon the information received from the Investigation Wing and did not apply his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act only on the basis of information received from the Investigation Wing was not valid. Accordingly, the reassessment framed by the AO is quashed.
In the result, the appeal filed by the assessee is allowed. (Order Pronounced in the Court on 15/05/2017)