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Facts
The assessee filed a return for AY 2012-13, which was initially assessed. Subsequently, the Assessing Officer (AO) received information about high-value transactions in the assessee's partnership bank account and reopened the assessment under Section 147, adding Rs. 2,27,46,240/-. The assessee challenged the validity of the reassessment.
Held
The Tribunal found that the reassessment proceedings were initiated based on mere suspicion without any tangible material or fresh information. The AO failed to establish any failure on the part of the assessee in disclosing material facts, and there was no clear evidence that the credits were non-genuine or accommodation entries. The reassessment was also initiated beyond the four-year period without proper justification.
Key Issues
Whether the reassessment proceedings initiated by the Assessing Officer were valid and based on sufficient material, and whether the additions made were justified.
Sections Cited
143(3), 147, 148, 144, 40(a)(ia), 151, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT & SHRI SUNIL KUMAR SINGH
This appeal by the assessee is directed against order dated 21.02.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds:
1. In the facts and circumstances of the case and in law, the Learned In the facts and circumstances of the case and in law, the Learned In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings under CIT(A) has erred in upholding the reassessment proceedings under CIT(A) has erred in upholding the reassessment proceedings under section 147 in gross violation of first proviso to section 147 of the Act. section 147 in gross violation of first proviso to section 147 of the Act. section 147 in gross violation of first proviso to section 147 of the Act.
2. In the facts and circumstances of the case and 2. In the facts and circumstances of the case and in law, the Learned in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the reassessment proceedings under section 147 without first reassessment proceedings under section 147 without first disposing of objections raised by the appellant by a speaking order disposing of objections raised by the appellant by a speaking order disposing of objections raised by the appellant by a speaking order thereby violating the thereby violating the law laid down by the Hon'ble Supreme Court in the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC). case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC). case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC).
3. In the facts and circumstances of the case and in law, the Learned 3. In the facts and circumstances of the case and in law, the Learned 3. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings unde CIT(A) has erred in upholding the reassessment proceedings unde CIT(A) has erred in upholding the reassessment proceedings under section 147 without setion 19 the recode and on the oronso us belief that section 147 without setion 19 the recode and on the oronso us belief that section 147 without setion 19 the recode and on the oronso us belief that no asement under 431) no asement under 431) section 143(3) had been done in the case of section 143(3) had been done in the case of appellant.
4. In the facts and circumstances of the case and in law, the Learned CIT 4. In the facts and circumstances of the case and in law, the Learned CIT 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding th (A) has erred in upholding the action of the Ld. Assessing Officer of e action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act without being initiating the reassessment proceedings u/s 147 of the Act without being initiating the reassessment proceedings u/s 147 of the Act without being in possession of any fresh tangible material after completion of the first in possession of any fresh tangible material after completion of the first in possession of any fresh tangible material after completion of the first reassessment.
5. In the facts and circumstances of the case and in 5. In the facts and circumstances of the case and in law, the Learned CIT law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of (A) has erred in upholding the action of the Ld. Assessing Officer of (A) has erred in upholding the action of the Ld. Assessing Officer of issuing notice u/s 148 on borrowed satisfaction merely relying on the issuing notice u/s 148 on borrowed satisfaction merely relying on the issuing notice u/s 148 on borrowed satisfaction merely relying on the basis of alleged information received basis of alleged information received basis of alleged information received without without without any independent any independent any independent application of mind thereon. application of mind thereon.
In the facts and circumstances of the case and in law, the Learned CIT n the facts and circumstances of the case and in law, the Learned CIT n the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of (A) has erred in upholding the action of the Ld. Assessing Officer of (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act on the basis initiating the reassessment proceedings u/s 147 of the Act on the basis initiating the reassessment proceedings u/s 147 of the Act on the basis of vague, ambiguous and unclear reasons. of vague, ambiguous and unclear reasons.
In the facts and circumstances of the case and in law, the Learned In the facts and circumstances of the case and in law, the Learned In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings under section 147 on the basis of initiating the reassessment proceedings under section 147 on the basis of initiating the reassessment proceedings under section 147 on the basis of the approval note under section 151 which the approval note under section 151 which is not signed by the specified is not signed by the specified authority Pr. CIT 29, Mumbai. authority Pr. CIT 29, Mumbai.
In the facts and circumstances of the case and in law, the Learned 8. In the facts and circumstances of the case and in law, the Learned 8. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings which was CIT(A) has erred in upholding the reassessment proceedings which was CIT(A) has erred in upholding the reassessment proceedings which was initiated with a mechanical and invalid sanction granted initiated with a mechanical and invalid sanction granted u/s 151. u/s 151.
In the facts and circumstances of the case and in law, the Learned 9. In the facts and circumstances of the case and in law, the Learned 9. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the reassessment proceedings under section 147 by making completing the reassessment proceedings under section 147 by making completing the reassessment proceedings under section 147 by making additions of Rs. additions of Rs. 2,27,46.240/- while the approval note under section 151 e the approval note under section 151 was obtained for income escaping assessment of Rs. 1,00,000/ was obtained for income escaping assessment of Rs. 1,00,000/ was obtained for income escaping assessment of Rs. 1,00,000/- only.
10. In the facts and circumstances of the case and in law, the Learned 10. In the facts and circumstances of the case and in law, the Learned 10. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming additions of Rs. 2,27,46,240/ CIT(A) has erred in confirming additions of Rs. 2,27,46,240/ CIT(A) has erred in confirming additions of Rs. 2,27,46,240/- under section 69A of the Act merely on surmises and conjectures. of the Act merely on surmises and conjectures.
Briefly stated, facts of the case are that against return of Briefly stated, facts of the case are that against return of Briefly stated, facts of the case are that against return of income filed by the assessee on 28.09.2012 by the assessee on 28.09.2012 declaring total income declaring total income at Rs.3,87,743/-, the assessment u/s 143(3) of the Income , the assessment u/s 143(3) of the Income-tax Act, , the assessment u/s 143(3) of the Income 1961 (in short ‘the Act’) was completed on 16.02.2015 assessing ort ‘the Act’) was completed on 16.02.2015 assessing ort ‘the Act’) was completed on 16.02.2015 assessing total income at Rs.4,56,290/ total income at Rs.4,56,290/-, wherein addition for disallowance , wherein addition for disallowance u/s 40(a)(ia) of the Act amounting to Rs.68,548/- was made. u/s 40(a)(ia) of the Act amounting to Rs.68,548/ u/s 40(a)(ia) of the Act amounting to Rs.68,548/ Subsequently, the Assessing Officer received information from the Subsequently, the Assessing Officer received information from the Subsequently, the Assessing Officer received information from the office of the Dy. Director of the Income e Dy. Director of the Income-tax Investigation, Mumbai tax Investigation, Mumbai vide letter dated 21.12.2018 that assessee had maintained vide letter dated 21.12.2018 that assessee had maintained vide letter dated 21.12.2018 that assessee had maintained partnership bank account wherein there had been high value account wherein there had been high value account wherein there had been high value transaction of credit aggregating to Rs.12.31 crores for the period transaction of credit aggregating to Rs.12.31 crores for the period transaction of credit aggregating to Rs.12.31 crores for the period from April, 2009 to February, 2015. The Assessing Officer recorded to February, 2015. The Assessing Officer recorded to February, 2015. The Assessing Officer recorded reasons to believe that returned income of the assessee was reasons to believe that returned income of the assessee was reasons to believe that returned income of the assessee was significantly less than the credits appearing in the bank account significantly less than the credits appearing in the bank account significantly less than the credits appearing in the bank account and therefore, same need to be verified. Consequently, the and therefore, same need to be verified. Consequently, the and therefore, same need to be verified. Consequently, the Assessing Officer reopened the assessment by way of issue of notice opened the assessment by way of issue of notice opened the assessment by way of issue of notice u/s 148 of the Act dated 31.03.2019 u/s 148 of the Act dated 31.03.2019 and completed completed the assessment u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total credits in the bank account of the assessee amounting to credits in the bank account of the assessee amounting to credits in the bank account of the assessee amounting to Rs.2,27,46,240/-.
3. On further appeal, the assessee challenged the validity of the On further appeal, the assessee challenged the validity of the On further appeal, the assessee challenged the validity of the reassessment proceedings as well as addition reassessment proceedings as well as addition on merit. The Ld. on merit. The Ld.
CIT(A) rejected the contention of the assessee on the validity of the CIT(A) rejected the contention of the assessee on the validity of the CIT(A) rejected the contention of the assessee on the validity of the reassessment. As regard reassessment. As regards merit is concerned, the Ld. CIT(A) has the Ld. CIT(A) has recorded that assessee did not file any documentary evidence to recorded that assessee did not file any documentary evidence to recorded that assessee did not file any documentary evidence to controvert the finding of the Assessing controvert the finding of the Assessing Officer, , therefore, he sustained the addition on merit. sustained the addition on merit.
We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the We have heard rival submission of the parties and perused the relevant material on record including the Paper Book containing relevant material on record including the Paper Book containing relevant material on record including the Paper Book containing pages 1 to 53 filed by the assessee pages 1 to 53 filed by the assessee. In support of ground . In support of ground No. 1 , the Ld. counsel for the assessee Ld. counsel for the assessee refereed to reason recorded available refereed to reason recorded available on page 47 of paper book and on page 47 of paper book and submitted that assessment year submitted that assessment year under reference is 2012 under reference is 2012-13 , which was already scrutinized under 13 , which was already scrutinized under section 143(3) of the Act but notice u/s 148 of the Act has been section 143(3) of the Act but notice u/s 148 of the Act has bee section 143(3) of the Act but notice u/s 148 of the Act has bee issued on 31/03/2019, which is beyond the period of four years issued on 31/03/2019, which is beyond the period of four years issued on 31/03/2019, which is beyond the period of four years from the end of the relevant assessment year and therefore, in view from the end of the relevant assessment year and therefore, in view from the end of the relevant assessment year and therefore, in view of the proviso below section 147 of the Act, an assessment of the proviso below section 147 of the Act, an assessment of the proviso below section 147 of the Act, an assessment completed u/s 143(3) of the Act could be reopened beyond the completed u/s 143(3) of the Act could be reopened beyond the completed u/s 143(3) of the Act could be reopened beyond the period of four years from the end of the relevant assessment year iod of four years from the end of the relevant assessment year iod of four years from the end of the relevant assessment year only in case of failure on the part of the assessee in disclosing all failure on the part of the assessee in disclosing all failure on the part of the assessee in disclosing all the material facts truly and fully the material facts truly and fully, but the Assessing Officer in the but the Assessing Officer in the reasons recorded nowhere mentioned any such failure on the part reasons recorded nowhere mentioned any such failure on reasons recorded nowhere mentioned any such failure on of the assessee and therefore, the reassessment proceedings need to of the assessee and therefore, the reassessment proceedings need to of the assessee and therefore, the reassessment proceedings need to be quashed in view of the decision of the Hon’ble Bombay High be quashed in view of the decision of the Hon’ble Bombay High be quashed in view of the decision of the Hon’ble Bombay High Court in the case of Hindustan Writ Petition No. 483 of 2022. Court in the case of Hindustan Writ Petition No. 483 of 2022. Court in the case of Hindustan Writ Petition No. 483 of 2022.
4.1 In support of ground No. 2, the ld counsel of ground No. 2, the ld counsel for th for the assessee referred to page 48A of the Paper Book which is a copy of objections referred to page 48A of the Paper Book which is a copy of objections referred to page 48A of the Paper Book which is a copy of objections raised before the Assessing Officer on 3 ed before the Assessing Officer on 3rd may 2019, and submitted may 2019, and submitted that following the procedure laid down by the Hon’ble Supreme following the procedure laid down by the Hon’ble Supreme following the procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts(India) lt Court in the case of GKN Driveshafts(India) ltd Vs DCIT (2003) 259 d Vs DCIT (2003) 259 ITR 19(SC), the Assessing Officer was required to dispose off those ITR 19(SC), the Assessing Officer was required to dispose off those ITR 19(SC), the Assessing Officer was required to dispose off those objection by way of a separate speaking order, objection by way of a separate speaking order, but the objections but the objections raised by the assessee against reassessment proceedings have not raised by the assessee against reassessment proceedings have not raised by the assessee against reassessment proceedings have not been disposed off by the Assessing O been disposed off by the Assessing Officer and therefore, fficer and therefore, reassessment proceedings being in violation of the law laid down by reassessment proceedings being in violation of the law laid down by reassessment proceedings being in violation of the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p ltd (supra) and hence same need to be quashed. ltd (supra) and hence same need to be quashed.
4.2 The Ld. counsel for the assessee The Ld. counsel for the assessee referred to Gr Ground No. 3 of the appeal and submitted submitted that at the time of recording reasons to that at the time of recording reasons to believe that income escaped assessment, the Assessing Officer was believe that income escaped assessment, the Assessing Officer was believe that income escaped assessment, the Assessing Officer was not having any knowledge that assessment in the case was already not having any knowledge that assessment in the case was already not having any knowledge that assessment in the case was already completed u/s 143(3) of the Act, which is ev completed u/s 143(3) of the Act, which is evident from the reasons ident from the reasons recorded as he has only recorded the fact of return processed u/s recorded as he has only recorded the fact of return processed u/s recorded as he has only recorded the fact of return processed u/s 143(1) of the Act and he was not aware that the assessment was 143(1) of the Act and he was not aware that the assessment was 143(1) of the Act and he was not aware that the assessment was already completed u/s 143(3) of the Act on 16/02/2015 ( which completed u/s 143(3) of the Act on 16/02/2015 ( which, completed u/s 143(3) of the Act on 16/02/2015 ( which subsequently he has recorded in the asses he has recorded in the assessment order) sment order). Further, the Ld. counsel for the assessee submitted that Assessing Officer the Ld. counsel for the assessee submitted that Assessing Officer the Ld. counsel for the assessee submitted that Assessing Officer has recorded reasons under the belief corded reasons under the belief that no prior scrutiny that no prior scrutiny proceedings were carried out in the case of the assessee and source proceedings were carried out in the case of the assessee and source proceedings were carried out in the case of the assessee and source of the credit in bank in HDFC bank account were not examined of the credit in bank in HDFC bank account were not examined of the credit in bank in HDFC bank account were not examined whereas the bank statement was duly examined by the Assessing bank statement was duly examined by the Assessing bank statement was duly examined by the Assessing Officer.
4.3 In support of ground No. 4, He In support of ground No. 4, He submitted that there was no submitted that there was no afresh tangible material available with the Assessing Officer for afresh tangible material available with the Assessing Office afresh tangible material available with the Assessing Office reopening of the assessment proceedings. reopening of the assessment proceedings.
4.4 In support of ground No. 5 , t In support of ground No. 5 , the Ld. counsel submitted that he Ld. counsel submitted that the Assessing Officer has not applied his mind independently to the the Assessing Officer has not applied his mind independently to the the Assessing Officer has not applied his mind independently to the information and he has recorded reasons merely on the suspicion he has recorded reasons merely on the suspicion he has recorded reasons merely on the suspicion that those credit entries redit entries were not from genuine sources genuine sources, whereas this aspect was duly examined in the regular assessment this aspect was duly examined in the regular assessment this aspect was duly examined in the regular assessment proceedings.
4.5 On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) On the contrary, the Ld. Departmental Representative (DR) relied on the order of the Ld. CIT(A). relied on the order of the Ld. CIT(A).
4.6 We have heard rival submissi We have heard rival submission the parties and perused the on the parties and perused the relevant material on record. Before the Ld. CIT(A), the assessee has relevant material on record. Before the Ld. CIT(A), the assessee has relevant material on record. Before the Ld. CIT(A), the assessee has challenged the reassessment proceedings on grounds, firstly, the challenged the reassessment proceedings on grounds challenged the reassessment proceedings on grounds reasons for reopening were to reasons for reopening were too general, secondly secondly, the period of credit in bank account credit in bank account mentioned in reasons recorded recorded ( i.e. April, 2009 to February, 2015) 2009 to February, 2015) is beyond the concerned ed previous year, thirdly, absence of reason to believe absence of reason to believe that income had escaped income had escaped assessment as the bank account is a regular bank as per books of as the bank account is a regular bank as per books of as the bank account is a regular bank as per books of account and entries were explained in earlier scrutiny assessment, account and entries were explained in earlier scrutiny assessment, account and entries were explained in earlier scrutiny assessment, fourthly, objections filed , objections filed for reopening during assessment were not reopening during assessment were not and lastly, e-assessment proceedings was not disposed off and assessment proceedings was not compulsory.
4.7 The Ld. CIT(A) after considering submission of the assessee The Ld. CIT(A) after considering submission of the assessee The Ld. CIT(A) after considering submission of the assessee rejected the contention of the assessee observing as under: rejected the contention of the assessee observing as under: rejected the contention of the assessee observing as under:
“5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. 5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. 5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. ex-parte, the AO issued statutory notices and show cau parte, the AO issued statutory notices and show cause letter, but the se letter, but the appellant did not respond to the same. The appellant did not file ROl in appellant did not respond to the same. The appellant did not file ROl in appellant did not respond to the same. The appellant did not file ROl in response to notice u/s 148. The reasons for reopening the case were response to notice u/s 148. The reasons for reopening the case were response to notice u/s 148. The reasons for reopening the case were specific and based on information received from the Investigation Wing, specific and based on information received from the Investigation Wing, specific and based on information received from the Investigation Wing, Mumbai, which is also pa Mumbai, which is also part of the Department. While the period referred to rt of the Department. While the period referred to in the information spanned from April 2009 to February 2015, the in the information spanned from April 2009 to February 2015, the in the information spanned from April 2009 to February 2015, the information/details relevant to the FY under consideration was specifically information/details relevant to the FY under consideration was specifically information/details relevant to the FY under consideration was specifically enquired into and addition was made with reference to such relev enquired into and addition was made with reference to such relev enquired into and addition was made with reference to such relevant period only as seen from the Order. As regards the appellant's claim that period only as seen from the Order. As regards the appellant's claim that period only as seen from the Order. As regards the appellant's claim that the issue of reopening was explained during earlier scrutiny assessment the issue of reopening was explained during earlier scrutiny assessment the issue of reopening was explained during earlier scrutiny assessment proceedings, the same is not borne out from records. A copy of the brief proceedings, the same is not borne out from records. A copy of the brief proceedings, the same is not borne out from records. A copy of the brief earlier Assessment Order furnishe earlier Assessment Order furnished by the appellant itself shows that the d by the appellant itself shows that the only disallowance made was u/s 40(a)(ia) of the Act on account of non only disallowance made was u/s 40(a)(ia) of the Act on account of non only disallowance made was u/s 40(a)(ia) of the Act on account of non- deduction of TDS on interest paid to an unsecured loan deduction of TDS on interest paid to an unsecured loan- -giver. There is nothing on record to show that conscious consideration of the material had nothing on record to show that conscious consideration of the material had nothing on record to show that conscious consideration of the material had been made and that specific books of account / issues related to the been made and that specific books of account / issues related to the been made and that specific books of account / issues related to the reopening matter were examined and considered then. Nothing has been reopening matter were examined and considered then. Nothing has been reopening matter were examined and considered then. Nothing has been brought on record by the appellant to show that there was no omission on brought on record by the appellant to show that there was no omission on brought on record by the appellant to show that there was no omission on its part to disclose fully and truly all mat its part to disclose fully and truly all material facts. The appellant has erial facts. The appellant has brought no document/detail/evidence on record in support of its ground brought no document/detail/evidence on record in support of its ground brought no document/detail/evidence on record in support of its ground that the basis on which the reopening was done constituted information that the basis on which the reopening was done constituted information that the basis on which the reopening was done constituted information which was already in possession of and examined by the AO and which was already in possession of and examined by the AO and which was already in possession of and examined by the AO and explained by the appe explained by the appellant at the time of earlier scrutiny assessment. llant at the time of earlier scrutiny assessment.” 4.8 In the instant case, the assessee has challenged reasons In the instant case, the assessee has challenged reasons In the instant case, the assessee has challenged reasons recorded and submitted that reasons have been recorded merely the recorded and submitted that reasons have been recorded merely the recorded and submitted that reasons have been recorded merely the suspicion without any believe that income escaped assessment. In suspicion without any believe that income escaped assessment. In suspicion without any believe that income escaped assessment. In view of controversy it is imperative to reproduce the reasons oversy it is imperative to reproduce the reasons oversy it is imperative to reproduce the reasons recorded by the Assessing Officer, a copy of which is available on recorded by the Assessing Officer, a copy of which is available on recorded by the Assessing Officer, a copy of which is available on Paper Book Page 47 to 48 Paper Book Page 47 to 48 :
“1. On verification of records it is seen that the assessee has filed return of 1. On verification of records it is seen that the assessee has filed return of 1. On verification of records it is seen that the assessee has filed return of income for A. Y.2012 A. Y.2012-13 on 29.09.2012 declaring total income of 29.09.2012 declaring total income of Rs.387743/-. Enquiries made on FTBA (360 degree portal) show that the . Enquiries made on FTBA (360 degree portal) show that the . Enquiries made on FTBA (360 degree portal) show that the assessee has filed normal business income of Rs.387743/ assessee has filed normal business income of Rs.387743/ assessee has filed normal business income of Rs.387743/-. The return was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL. was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL. was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL.
2. Information has been received from office of Deputy Director of Income tion has been received from office of Deputy Director of Income tion has been received from office of Deputy Director of Income- tax (Investigation), Unit tax (Investigation), Unit-6(2). Mumbai that On February 02, 2015 Mulund 6(2). Mumbai that On February 02, 2015 Mulund West branch, Mumbai received a letter from the Mumbai Sales Tax West branch, Mumbai received a letter from the Mumbai Sales Tax West branch, Mumbai received a letter from the Mumbai Sales Tax authorities stating that the assessee M/s.Jain Machine T authorities stating that the assessee M/s.Jain Machine Tools Mumbai (a/c ools Mumbai (a/c no 0015232000060 no 00152320000605) is liable to pay a sum of Rs.9,05,244/ 244/-for the period April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax Act 2002. ii) ii) ii) The The The assessee assessee assessee M/s M/s M/s Jain Jain Jain Machine Machine Machine Tools Tools Tools Mumbai Mumbai Mumbai (a/c (a/c (a/c no.00152320000605) maintains partn no.00152320000605) maintains partnership account with Mulund West ership account with Mulund West branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti Shah are the partners and have declared the profile as trader of machine Shah are the partners and have declared the profile as trader of machine Shah are the partners and have declared the profile as trader of machine tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as AACFJ6 163H. . iii) Scrutiny of the account statement of M/s Jain Machine Tools Mumbai Scrutiny of the account statement of M/s Jain Machine Tools Mumbai Scrutiny of the account statement of M/s Jain Machine Tools Mumbai (a/c no 00152320000605) from April2009 to February 2015 revealed that 00152320000605) from April2009 to February 2015 revealed that 00152320000605) from April2009 to February 2015 revealed that the customer has received total credits aggregating to Rs.12. 31 Crores out the customer has received total credits aggregating to Rs.12. 31 Crores out the customer has received total credits aggregating to Rs.12. 31 Crores out of which cheque deposits are aggrega of which cheque deposits are aggregating Rs. 4. 23 Crores cash deposits ting Rs. 4. 23 Crores cash deposits are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs- a/e no 08782020002841). M/s Simpra Engineering and Services Pvt Ltd o 08782020002841). M/s Simpra Engineering and Services Pvt Ltd o 08782020002841). M/s Simpra Engineering and Services Pvt Ltd (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. 00 Lakhs-a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 Lakhs-a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 L a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 L a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 Lakhs-a/e no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores mainly from M/s K J Tech (Rs 14. 86 S mainly from M/s K J Tech (Rs 14. 86 S-Axis Bank), M/s Shanti Axis Bank), M/s Shanti Communication (Rs 31. 61 Lakhs Communication (Rs 31. 61 Lakhs-Bank of India).M/s Sahyadri Agrovet (Rs Bank of India).M/s Sahyadri Agrovet (Rs 33. 78 Lakhs-IDBI Bank) (Rs 11. 56 Lakhs IDBI Bank) (Rs 11. 56 Lakhs-Bank of Maharashtra) followed f Maharashtra) followed by managers cheque issuance of Rs 51. 27 Lakhs. Credits were by managers cheque issuance of Rs 51. 27 Lakhs. Credits were by managers cheque issuance of Rs 51. 27 Lakhs. Credits were immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan Motor Mfg Co (Rs 66. 99 Lakh Motor Mfg Co (Rs 66. 99 Lakhs-a/e no 00862320002603), M/s. a/e no 00862320002603), M/s. HEM industries (Rs 56. 63 Lakhs industries (Rs 56. 63 Lakhs-a/c no.00862790000129), M/s Shiv a/c no.00862790000129), M/s Shiv Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs Bank of Baroda), M/s Bank of Baroda), M/s JMT Drive solution (Rs 2. 03 Lakhs Punjab National JMT Drive solution (Rs 2. 03 Lakhs Punjab National Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs. by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs. by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs.
On the basis of the information received/available and the as 3. On the basis of the information received/available and the as 3. On the basis of the information received/available and the assessee have not been incorporated in the computation and return of income during have not been incorporated in the computation and return of income during have not been incorporated in the computation and return of income during the year under consideration I have reason to believe that the income the year under consideration I have reason to believe that the income the year under consideration I have reason to believe that the income chargeable to tax in the case of M/s. Jain Machine Tools to the tune of chargeable to tax in the case of M/s. Jain Machine Tools to the tune of chargeable to tax in the case of M/s. Jain Machine Tools to the tune of above Rs. 1,00,000/ above Rs. 1,00,000/- has escaped assessment for A.Y.2012 assessment for A.Y.2012-13 and needs to be assessed in its proper perspective and to bring to tax appropriate to be assessed in its proper perspective and to bring to tax appropriate to be assessed in its proper perspective and to bring to tax appropriate income of the assessee. It is needs to be assessed in its proper perspective income of the assessee. It is needs to be assessed in its proper perspective income of the assessee. It is needs to be assessed in its proper perspective and bring to tax appropriate income of the, assessee. and bring to tax appropriate income of the, assessee.
4. Considering 4. Considering the facts and circumstances of the case. I have reason to the facts and circumstances of the case. I have reason to believe that income chargeable to tax in the hands of the assessee for the believe that income chargeable to tax in the hands of the assessee for the believe that income chargeable to tax in the hands of the assessee for the year under consideration to the tune of above Rs.1,00,000/ year under consideration to the tune of above Rs.1,00,000/ year under consideration to the tune of above Rs.1,00,000/- has escaped assessment due to failure on the part of the assess assessment due to failure on the part of the assessee to disclosed fully ee to disclosed fully and truly all material facts and truly all material facts 5. In this case more than four years have lapsed from the end of 5. In this case more than four years have lapsed from the end of 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue assessment year under consideration. Hence, necessary sanction to issue assessment year under consideration. Hence, necessary sanction to issue notice u/s.148 has to be obtained separately from Principal Commissi notice u/s.148 has to be obtained separately from Principal Commissi notice u/s.148 has to be obtained separately from Principal Commissioner of Income Tax-29, Mumbai as per the provisions of section 151 of the Act. 29, Mumbai as per the provisions of section 151 of the Act.” 29, Mumbai as per the provisions of section 151 of the Act. 4.9 On perusal of the above reasons recorded, we find that there is On perusal of the above reasons recorded, we find that there is On perusal of the above reasons recorded, we find that there is no information that any income had escaped assessment. The no information that any income had escaped assessment. The no information that any income had escaped assessment. The Assessing Officer has referred to various credit Assessing Officer has referred to various credit entries stated to be entries stated to be received from the customers. received from the customers. Name of the customers have Name of the customers have also been mentioned in the the reasons recorded. The Assessing Officer has the reasons recorded. The Assessing Officer has the reasons recorded. The Assessing Officer has nowhere mentioned that either those parties are bogus or the nowhere mentioned that either those parties are bogus or the nowhere mentioned that either those parties are bogus or the entries received are in the nature of accommodation entries. The modation entries. The assessment has been reopened only for the purpose of verification assessment has been reopened only for the purpose of verification assessment has been reopened only for the purpose of verification of those credits and on the premise that assessee had not and on the premise that assessee had not and on the premise that assessee had not included income arising from said transaction income arising from said transactions into the return of income. into the return of income. The Assessing Officer has merely spe The Assessing Officer has merely speculated and the information culated and the information nowhere suggests that that assessee assessee had had not not offered offered income income corresponding to those transactions corresponding to those transactions in the return of income in the return of income. The full Bench of the Hon’ble Delhi High Court in the case of full Bench of the Hon’ble Delhi High Court in the case of full Bench of the Hon’ble Delhi High Court in the case of Commissioner Commissioner of of Income Income-tax-VI, VI, New New Delhi Delhi v. Usha International Ltd. (2012) 348 ITR 485 (Del) International Ltd. (2012) 348 ITR 485 (Del) held that following held that following conditions are required for reopening in assessment made u/s conditions are required for reopening in assessment made u/s conditions are required for reopening in assessment made u/s 143(3) of the Act. (i) 143(3) of the Act. (i) The Assessing Officer must form a tentative or The Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is under- prima facie opinion on the basis of material that there is un prima facie opinion on the basis of material that there is un assessment or escapement of income; assessment or escapement of income; (ii) He must record the prima He must record the prima facie opinion into writing; facie opinion into writing; (iii) The opinion formed is subjective but The opinion formed is subjective but the reasons recorded or the information available on record must the reasons recorded or the information available on record must the reasons recorded or the information available on record must show that the opinion is not a mere suspicion; (iv opinion is not a mere suspicion; (iv) Reasons recorded Reasons recorded and/or the documents available on record must show a nexus or and/or the documents available on record must show a nexus or and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion that in fact they are germane and relevant to the subjective opinion that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer formed by the Assessing Officer regarding escapement of income; (v) regarding escapement of income; (v) In cases where the first proviso appli In cases where the first proviso applies, there is an additional es, there is an additional requirement that there should be failure or omission on the part of requirement that there should be failure or omission on the part of requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. the assessee in disclosing full and true material facts. the assessee in disclosing full and true material facts.
In the instant case reasons to believe recorded by the 4.10 In the instant case reasons to believe recorded by the In the instant case reasons to believe recorded by the Assessing Officer is merely based on the in Assessing Officer is merely based on the information from the formation from the Investigation Wing that there is a credit in bank statement in the Investigation Wing that there is a credit in bank statement in the Investigation Wing that there is a credit in bank statement in the course for the period from 2009 to 2015 there is no such course for the period from 2009 to 2015 there is no such course for the period from 2009 to 2015 there is no such information that those credits were non information that those credits were non-genuine or accommodation genuine or accommodation entry. Even the Assessing Officer is mentioning entry. Even the Assessing Officer is mentioning the name of the the name of the customers from whom those credits were received. Obviously there customers from whom those credits were received. Obviously there customers from whom those credits were received. Obviously there is a mere suspicion in the mind of the Assessing Officer and notice is a mere suspicion in the mind of the Assessing Officer and notice is a mere suspicion in the mind of the Assessing Officer and notice has been issued for the purpose of verification and for clearing the has been issued for the purpose of verification and for clearing the has been issued for the purpose of verification and for clearing the cloud of suspicion. The reasons to bel cloud of suspicion. The reasons to believe recorded do not show ieve recorded do not show as on what basis Assessing Officer formed reasonable believe that on what basis Assessing Officer formed reasonable believe that on what basis Assessing Officer formed reasonable believe that those credit appearing those credit appearing constitute income escaped assessment. Mere escaped assessment. Mere suspicion is not enough and the reasons to believe should suspicion is not enough and the reasons to believe should suspicion is not enough and the reasons to believe should demonstrate that such requisite belief such requisite belief could be formed by a could be formed by a reasonable person u upon a plain reading of some basis/foundation pon a plain reading of some basis/foundation or the relevant material or the relevant material, as held by the Hon’ble Supreme Court in as held by the Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 Rajesh Jhaveri Stock Brokers (P.) Ltd. Taxman 316 (SC). . The words ‘reasons to believe’ indicate that believe’ indicate that belief must of a reasonable person reasonable person , which is , which is based on the reasonable grounds emerging from reasonable grounds emerging from or through circumstantial through circumstantial evidences and not mere and not merely on suspicion. In view of the above on suspicion. In view of the above discussion, we are of the opinion that the Assessing Officer has discussion, we are of the opinion that the Assessing discussion, we are of the opinion that the Assessing acted merely on surmise without any rational basis and therefore, acted merely on surmise without any rational basis and therefore, acted merely on surmise without any rational basis and therefore, action of the reopening is thus contrary to the law and action of the reopening is thus contrary to the law and action of the reopening is thus contrary to the law and unsustainable. Further, t Further, the assessment has been reopened beyond he assessment has been reopened beyond the four years from the end of the relevant assessment year and the four years from the end of the relevant assessment yea the four years from the end of the relevant assessment yea therefore, the Assessing Officer was required to justify whether therefore, the Assessing Officer was required to justify whether therefore, the Assessing Officer was required to justify whether there was any failure on the part of the assessee in disclosing all there was any failure on the part of the assessee in disclosing all there was any failure on the part of the assessee in disclosing all the material facts fully and truly. However no such satisfaction has the material facts fully and truly. However no such satisfaction has the material facts fully and truly. However no such satisfaction has been recorded in the reasons to believe by the A been recorded in the reasons to believe by the Assessing Officer ssessing Officer. Not only this failure, but we find the Assessing officer is unaware of the only this failure, but we find the Assessing officer is unaware of the only this failure, but we find the Assessing officer is unaware of the fact the assessment was completed u/s 143(3) of the Act, as he fact the assessment was completed u/s 143(3) of the Act, as he fact the assessment was completed u/s 143(3) of the Act, as he though mentioned the fact of processing under 143(1) of the Act but though mentioned the fact of processing under 143(1) of the Act but though mentioned the fact of processing under 143(1) of the Act but did not mention any prior scruti did not mention any prior scrutiny u/s 143(3) of the Act, ny u/s 143(3) of the Act, therefore, also the reassessment proceedings are not also the reassessment proceedings are not liable to be liable to be sustainable. Accordingly, the reassessment order is quashed. The grounds Accordingly, the reassessment order is quashed. The grounds Accordingly, the reassessment order is quashed. The grounds raised by the assessee challenging validity of the reassessment are raised by the assessee challenging validity of the reassessment are raised by the assessee challenging validity of the reassessment are accordingly accordingly allowed. allowed. Since, Si nce, we we have have already already quashed quashed the the reassessment proceedings; proceedings; we are not adjudicating the we are not adjudicating the other grounds challenging merit of the additions. grounds challenging merit of the additions.
In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on nced in the open Court on 19/08 /08/2024.