SH. ASHOK ARORA,NEW DELHI vs. ITO, NEW DELHI

That the assessment order passed by the Assessing Officer are further wrong, because of not adjudicating the Affidavit filed by the Mr. Deepak Bhardwaj wherein the denied specifically to receive any loan / advance from the appellant during the year.

6. That the interest charged u/s 234B of the Income Tax Act, 1961, is further illegal because specific directions if any has ever been passed for the levy of the same while passing the orders.

7. That the assessee assails his right to amend alter or change any Grounds of Appeal at any time, even during the course of hearing of the instant appeal.

PRAYER:-

Keeping in view of the above, it is, therefore, prayed:-

(i) That the illegal and impugned assessment orders passed u/s 147 / 144 of the Income Tax Act, 1961, for the Assessment Year 2002-03, may please be quashed / cancelled or alternatively delete the illegal and impugned additions made of Rs.2,50,000/- by the Assessing Officer and confirmed by the Ld. CIT(A). (ii) That the interest charged u/s 234B may please also be cancelled. (iii) That any other relief which this Hon'ble Court may please be deems fit and proper in the facts and to the circumstances of the case. It is prayed accordingly.” 2. Briefly stated the facts of this case are : on the basis of a tax evasion petition received by the revenue to the effect that the assessee has advanced loan of Rs.2,50,000/- to Shri Deepak Bhardwaj and Rs.3,00,000/- to Shri Sanjay regarding which cases are pending before the Court of Mr. Manoj, ld. MM, Rohini, Delhi.

After necessary approvals, notice u/s 148 of the Act was issued on 27.02.2009 and in response thereto, assessee along with Mr. B.K.

Gupta, Advocate/AR attended the proceedings. Assessees was provided with reasons for reopening of the case who has filed objections. During the relevant assessment year, total taxable income of the assessee was Rs.85,650/-. Assessee has failed to explain the amount of Rs.5,50,000/- given as loan to the aforesaid persons and as such, the same has been added to his taxable income u/s 68 of the Act and his total income comes to Rs.6,35,650/-.

5. From the perusal of the assessment order, we have noticed that the AO without applying the mind and without being satisfied, as required u/s 147 of the Act proceeded to reopen the proceedings which are bad in law, as has been held in decisions rendered by Hon’ble jurisdictional High Court in Pr. Commissioner of Income Tax-4 vs. G & G Pharma Limited in ITA 545/2015 order dated 08.10.2015 and ITAT, Delhi Bench ‘H’, New Delhi in case of USG Buildwell Pvt. Ltd. vs. ACIT, Central Circle 23, New Delhi order dated 15.02.2016. However, the ld. DR for the revenue relied upon the order passed by the AO as well as the ld. CIT (A).

“ Asstt. Year 2002-03 A perusal of the TEP received in this case reveals that the assessee has advanced loans to various persons in cash as well as in cheque and in some instances the assessee has received post dated cheques from persons to whom he advances loans. The copies of receipts given by persons who have taken loans from the assessee reveals that during the period relevant to assessment year 2002-03 the assessee has advanced loans to the following persons as per details given below :-

S. Name of the party Amount Post Relevant Case Pending No. dated Asstt. No. in the cheques Year court of received by Sh. Ashok Arora – No. & date 1 Sh. Deepak 2,00,000 877565 2002-03 209/1 Sh. Bhardwaj in cash & dt. /03 Manoj 50,000/- 12.03.03 Kumar, cheque of for Rs. Hon’ble No. 3,00,000 MM, 041920 of SBI, Rohini, dated Samaipur Delhi 12.07.01 of OBC, Rohini Sh. Sanjay CSP 2002-03 No.7497 37 dated 15.06.01 for Rs. 60,000/- of OBC, Rohini & cash of Rs.

2,40,000 from Anita Arora

As mentioned above, the assessee has filed cases before the Metropolitan Magistrate, which confirms the fact that the assessee has advanced loans to the above mentioned persons to the tune of Rs.5,50,000/- and has also received post dated cheque of Rs.3,00,000/-. The money advanced as loans to various persons to the extent of Rs.5,50,000/- during the F.Y. 2001-02 relevant to Asstt. Year 2002-03 has escaped assessment. To re-assess the income of the assessee correctly, action u/s 147 of the I.T. Act, 1961 is required to be taken.”

Chaliha – (1971) 79 ITR 603 by returning the following findings:-

“The Supreme Court was dealing with a case where the AO had received certain communications from the Commissioner of Income Tax showing that the alleged creditors of the Assessee were “name-lenders and the transactions are bogus.” The AO came to the conclusion that there were reasons to believe that income of the Assessee had escaped assessment. The Supreme Court disagreed and observed that the AO “had not even come to a prima facie conclusion that the transactions to which he referred were not genuine transactions. He appeared to have had only a vague felling that they may be “bogus transactions.” It was further explained by the Supreme Court that : “Before issuing a notice under S. 148, the ITO must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under S. 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year or alternatively notwithstanding that there has been no omission or failure as mentioned above on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year. Unless the requirements of cl. (a) or cl. (b) of S. 147 are satisfied, the ITO has no jurisdiction to issue a notice under S. 148.” The Supreme Court concluded that it was not satisfied that the ITO had any material before him which could satisfy the requirements under Section 147 and therefore could not have issued notice under Section 148.”

“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.”

u/s 147 of the Act on the basis of tax evasion petition that the assessee has provided loan of Rs.2,50,000/- and Rs.3,00,000/- to Mr. Deepak and Mr. Sanjay respectively; (ii) that the AO has merely forwarded the intimation contained in the tax evasion petition to the assessee without recording any reasons whatsoever;

(iii) that the AO has not even came to prima facie conclusion that the alleged loan transaction between the assessee and Deepak and Sanjay were genuine transactions and as to what are the findings returned by the ld. Civil Court in the alleged suit filed by the assessee; (iv) that the AO has admittedly not recorded that he has reason to believe that the income of Rs.5,50,000/- has escaped assessment and he has satisfied himself before initiating the proceedings u/s 147 of the Act; (v) that when the AO without recording any reason for reopening forwarded the information received by way of tax evasion petition, according of approval by CIT for reopening is also a mechanical exercise without applying the mind and as such, approval accorded by the CIT is also not sustainable. Reliance in this regard is placed upon judgment in case of Vijay Rameshbhai Gupta vs. ACIT – (2013) 32 taxman.com 41 (Guj.). (vi) that even after initiation of the proceedings u/s 147/148, the AO has failed to lay hand on the evidence if Sanjay has received a sum of Rs.2,50,000/- in cash as advance from Amita Arora, w/o Ashok Arora, rather resorted to the best judgment assessment u/s 144 of the Act; (vii) that neither the AO has applied his mind to satisfy himself to reopen the case nor he has investigated the matter during reassessment proceedings nor CIT had applied his mind before according approval for reopening.

filed by the assessee is hereby allowed Order pronounced in open court on this 18th day of May, 2016.