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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SRI MAHAVIR SINGHSmt. Sapna Jaywant Shah,
O R D E R
PER MAHAVIR SINGH, JM:
This appeal by the assessee is arising out of the order of the CIT (A)-27, Mumbai passed in appeal No. CIT (A)-26/16(3) (2)/459/13-14 dated 11-09-2014. Assessment was framed by the ITO, Ward- 16(3)(2), Mumbai for assessment year 2008-09 vide his order dated 21-02-2014 passed u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter referred to as the (“Act”).
The first issue in this appeal of the assessee is against assumption of jurisdiction by the AO for reopening of assessment u/s 147 read with section 148 of the Act.
Briefly stated facts are that the assessee is earning salary income and income from other sources. Search and seizure action u/s 132 of the Act was carried out in the case of M/s. Mahasagar Securities Pvt. Ltd. on 25-11-2009 and subsequent dates on the basis of FIU alert information received regarding suspicious transactions in various bank accounts of the assessee and other companies, wherein S/Shri Mukesh Chokshi and Jayesh K. Sampat are directors. During the course of the operation it is revealed that that M/s. Mahasagar Securities Pvt. Ltd. and its 34 group companies are engaged in fraudulent billing activities and are engaged in providing bogus entries for speculation profit/loss, short term/long term capital gain/loss, share application money, profit/loss on commodities trading. In the statement of Shri Mukesh Chokshi recorded during the course of search, he has admitted that accommodation entries are provided to various persons. According to the AO the assessee is also beneficiary of the above fraudulent transaction. According to the AO, the assessee has obtained accommodation entries/bills and purchase of shares of Ind. Bank Mer, Essar Oil, Reliance N. R. Jai Corporation of Rs.8,49,774/- during the financial year 2008-09 relevant to this assessment year 2009-10 from M/s. Alliance Intermediateries & Network Pvt. Ltd. For this, the AO recorded the following reasons u/s 148 of the Act and the relevant portion of the same reads as under:- “2. From the data collected by the CCIT (Central)-I, Mumbai, it is revealed that the above mentioned assessee has obtained accommodation entries to the tune of Rs.8,49,774/- during the F. Y. 2007-08 relevant to A. Y. 2008-09 through Alliance Intermediatories & Network Pvt. Ltd. in respect of shares of M/s. Reliance N. R. This is nothing but income earned from a source not disclosed to the department in his return of income. Hence, the assessee has suppressed the primary facts required in the return of income.
3. In view of t he above facts and after going through the records available, I have reason to believe that the income chargeable to tax to the tune of Rs.8,49,774/- or any other income chargeable to tax which comes to my notice subsequently in the course of proceedings for re-assessment, has escaped assessment, within the meaning of provisions of Sec 147 of the Act, 1961. Therefore, I am satisfied that the assessee has failed to disclose true and complete particulars of its income for the year under consideration. Accordingly, the case is being re-opened u/s 147 of the I. T. Act 1961 for Asst. Year 2008-09. The AO finally treated this transactions as accommodation entries and made addition of Rs.27,33,578/-. Aggrieved, the assessee preferred appeal before the CIT (A), who also confirmed the action of the AO. Aggrieved, now the assessee is in appeal before the Tribunal.
At the outset, the learned Counsel stated that the Tribunal in for assessment year 2008-09, exactly on identical facts, in assessee’s group cases i.e. in the case of Sangeeta R. Shah Vs. ITO vide order dated 19- 01-2015 has quashed the reopening by observing in Para 9 and 10 as under:-
9. Joining the issue the learned counsel for the assessee submitted that there is no evidence on record to justify that the assessee purchased the shares of other companies and even in the Balance Sheet assessee has not shown either availability of shares or purchase of shares of Essar Oil, Jai Corporation, etc. Even at this stage there is nothing on record to suggest that the assessee had either purchased or sold those shares at a later date. The AO had not at all applied his mind while reopening the assessment except mechanically issuing notice under section 148 of the Act. He thus strongly condemned the action of the AO on the ground that the basic tenet of taxation is that the AO should not proceed on a matter unless the conditions prescribed therein are properly satisfied. Section 147 uses the expression “has reasons to believe which implies that it is for the AO to act independently by looking into the information gathered by him and he cannot merely borrow the view taken by somebody else.
I have carefully considered the rival submissions and perused the record. Admittedly, there is no material on record to suggest that t he assessee purchased and sold shares of Essar Oil, Jai Corporation, etc. Jai Corporation, etc. The figure of Rs.4,18,437/- is not tallying with any material on record which amply prove that the AO had mechanically issued notice under section 148 of the Act. Similar mistake was committed by the CIT (A) by reproducing the grounds of appeal of some other assessee while passing the order, which amply shows that both the authorities below had not applied their minds to the facts of the case. Since the AO issued notice without proper recording of his satisfaction that he has reason to believe that income chargeable to tax had escaped assessment, I am of the firm view that reopening of assessment is bad in law and I order accordingly”. On query from the Bench, the learned Sr. DR could not controvert the above facts that this issue is squarely covered by the above Tribunal judgment. The facts being identical, taking a consistent view, I also quash the reopening of assessment.
5. Since, the main issue relating to reopening of assessment has been quashed, the other two issues in the assessee’s appeal relating to confirmation of addition of Rs.27,33,578/- made u/s 69 on account of alleged unexplained investment and on account of alleged commission paid in cash @2% of Rs.27,33,578/- require no adjudication.