MEHAR CHAND MITTAL & SONS HUF,NEW DELHI vs. ITO, NEW DELHI

Following grounds have been raised in this appeal: “1. The Commissioner of Income Tax (A) erred in law and on facts in confirming that the Ld AO had assumed proper jurisdiction for framing the assessment pursuant to notice u/s 147/148 in the facts and circumstances of the case.

The Commissioner of Income Tax (A) erred in law and on facts in confirming the addition of Rs. 149500/- being the amount received by account payee cheque from the jeweler on account of jewellary sold by the assessee. The CIT(A) has confirmed the addition on flimsy ground that the purchase bill issued by the jeweler did not bear the cheque number. The CIT (A) further erred in law and on facts in observing that the assessee had not shown any income / loss from sale of jewellary in its return filed before initiation of reassessment proceedings in the face of computation of long term capital gains placed at page 33 of the paper book submitted before her.

Facts of the case in brief are that the assessee was issued a notice u/s 148 of the Act on 27.03.2007 on the basis of information received from DIT(Inv.)-I, New Delhi intimating that an amount of Rs.1,00,000/- and Rs.1,25,600/- were found credited on 02.02.2000 and 04.02.2000. The AO noted that above transaction were only accommodation entry and the assessee was the ultimate beneficiary of the same. After recording the reasons and obtaining the approval of the Addl. CIT-Range-25, New Delhi a notice u/s. 148 of the Act was issued and served upon the assessee on 27.03.2007. In response thereto, the Assessee’s AR vide his letter dated 23.04.2007 responded that assessee had filed its return of income on 30.08.2000 and the same may be treated as filed in response to notice u/s. 148 of the Act. Further, a notice u/s. 142(1) of the Act was issued for hearing on 13.08.2007, but nobody attended the hearing. However, on 01.10.2007, a letter was received by the AO from the A.R. of the Assessee requesting therein to supply the copy of the reasons recorded for issuing the notice u/s 148 of the Act which was supplied

Against the additions made by the AO, the assessee preferred an appeal before the ld. CIT(A) and also challenged the action of the AO in reopening the assessment. The ld. CIT(A) confirmed the reopening of the assessment made by the AO and partly allowed relief out of the additions made by the AO.

Being aggrieved the assessee is in appeal. The ld. Counsel for the assessee submitted that the reopening u/s 147 of the Act was based on a general information received from Director of Income Tax (Investigation-1), New Delhi and the AO had not applied his own mind. Therefore, the reopening was not valid. The reliance was placed on the following case laws: � Pr. CIT-4 Vs G & G Pharma Ltd. 384 ITR 147 (Del.) � Pr. CIT-09 Vs Tupperware India Pvt. Ltd. in ITA 415/2015 order dated 10.08.2015 (Del.) � Pr. CIT-06 Vs M. B. Jwellers (P) Ltd. in ITA 615/2015 order dated 19.08.2015 (Del.)

We have considered the submissions of both the parties and perused the material available on the record. In the present case, the AO himself noted in para 1 of the assessment order dated 04.09.2009 as under: “The information in this case was received from DIT(Inv.- I), new Delhi intimating that an amount of Rs.1,00,000/- and Rs.1,25,600/- were found credits on 02.02.2000 & 04.02.2000 respectively the bank A/c No. 8781 of the assessee maintained with Corporation Bank, Paschim Vihar, New Delhi which was received from M/s Omyx Exim & Sales Pvt. Ltd. & Aay Kay Investments respectively during the course of investigation. It has been noted that the above transaction are only accommodation entry and the assessee is the ultimate beneficiary of the same. After recording the reasons and obtaining the approval of Addl. CIT-range-25, new Delhi a notice u/s 148 read with section 147 was issued and served upon the assessee on 27.03.2007.”

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 Mehar Chand Mittal & Sons for the Assessing Officer to conclude that he had reason to believe that income had escaped assessment.”

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, in view of the ratio laid down by the Hon’ble Jurisdictional High court in the aforesaid referred to cases, 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 held to be invalid and quashed.

In the result, the appeal of the assessee is allowed. (Order Pronounced in the Open Court on 18/05/2017)