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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI
ORDER
Per N. K. Saini, AM:
This is an appeal by the assessee against the order dated 22.08.2012 of ld. CIT(A)-XI, New Delhi.
The main grievance of the assessee in this appeal relates to the validity of the reassessment proceedings u/s 147 r.w.s 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act).
Facts of the case in brief are that the assessee filed the return of income on 01.12.2008 declaring an income of Rs.445/-. Thereafter, the AO initiated the assessment proceedings by issuing the notice u/s 148 of the Act on 30.03.2010 on the basis of information received from DIT(Inv.), New Delhi that the assessee had received accommodation 2 Salasar Polycot Pvt. Ltd. entry of Rs.5,00,000/- during the year from M/s DU Securities (P) Ltd. and the genuineness of the transaction was required to be examined. The AO made the addition of Rs.5,00,000/- and framed the assessment at an income of Rs.5,00,445/-.
Being aggrieved the assessee carried the matter to the ld. CIT(A) and challenged the validity of the reassessment framed by the AO. The ld. CIT(A) however, did not find merit in the submission of the assessee and sustained the addition made by the AO.
Now the assessee is in appeal. The ld. Counsel for the assessee referred to page no. 12 of the assessee’s paper book which is the copy of the reason recorded and submitted that the AO simply relied upon the information obtained from the DIT(Inv.) and had not recorded any satisfaction regarding the escapement of any income by the assessee. It was further stated that the reasons did not disclose the basis on which the AO had termed the receipt of money by the assessee towards share application money as bogus accommodation entries and that the law postulates the AO (and not the Director of IT) to have reasons to believe and that the blind acceptance of the information furnished by the Director of Investigation cannot form reasons leading to the belief by the AO of any escapement of income, therefore, the proceedings initiated by the AO by issuing the notice u/s 148 of the Act on the basis of information received from the Investigation Wing of the department was not valid. The reliance was placed on the following case laws:
3 Salasar Polycot Pvt. Ltd. � ITO Vs Navodaya Castles Pvt. Ltd. in order dated 24.08.2016 � Rasalika Trading & Investment Co. (P) Ltd. Vs ITO in ITA No. 3103/Del/2013 order dated 27.11.2015 � CIT Vs Independent Media Pvt. Ltd. in ITA No. 108/2015 order dated 19.11.2015 � M/s RMG Polyvinyl (I) Ltd. Vs DCIT in ITA No. 1596/Del/2014 order dated 12.04.2016 � Pr. CIT Vs G & G Pharma India Ltd. reported at 384 ITR 147 6. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, from the copy of the reasons recorded placed at page no. 12, it is noticed that the AO while reopening the assessment recorded the reasons in the following manner: “An information from the office of the DIT(Inv.)-1, New Delhi has been received that the assessee M/s Shri Salasar Polycot Pvt. Ltd. has received an accommodation entry of Rs. 5 lacs from M/s DU Securities Pvt. Ltd. into its Bank account during the financial year 2007-08 relevant to assessment year 2008- 09 so as to introduce its unaccounted money into its accounts. In view of the above facts, I have reason to believe that the income of Rs. 5 lacs has escaped assessment in the hands of the assessee in terms of section 147 of the I.T. Act for the assessment year 2008-09. Accordingly, notice u/s 148 of the I.T. Act is issued to the assessee”
In the body of the assessment order also the AO mentioned as under:
4 Salasar Polycot Pvt. Ltd. “Assessment proceedings were initiated by issue of notice u/s 148 on 30.03.2010 on the basis of information received from the DIT(Inv.), New Delhi that assessee had received accommodation entry of Rs. 5 lakhs during the year form M/s DU Securities (P) Ltd. The genuineness of the transaction and sources of the same were required to be examined.”
From the above reasons of the AO, it is crystal clear that the reopening u/s 147 r.w.s 148 of the Act were initiated only on the basis of information received from the DIT(Inv.), New Delhi and the AO has not applied his own mind. Therefore, the reopening u/s 147 by issuing the notice u/s 148 of the Act only on the facts received from the DIT(Inv.) was not valid. Accordingly, the reassessment framed by the AO deserves to be quashed.
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. reported at 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 5 Salasar Polycot Pvt. Ltd. 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.”
In the present case also as we have pointed out in the former part of this order that the proceedings u/s 148 of the Act were initiated only on the basis of the information received from the Investigation Wing of the department and the AO had not applied his own mind. Therefore, those proceedings were 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 23/02/2017)