EVERMORE FINANCIAL SERVICES PVT LTD.,NEW DELHI vs. ITO,WARD 8(1), DELHI

At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that though full compliance was made by the assessee before the Ld. AO, the Ld. CIT(A) made a wrong statement that the assessee never responded to the notice issued during the assessment proceedings. In fact, the compliance made by the assessee duly been recorded by the Ld. AO in his order under challenge. Apart from that the reason recorded by the Ld. AO was mainly of escaping assessment by the assessee to the tune of Rs.1 crore which was alleged to have been received from one M/s Fitworth Financial Services Pvt. Ltd. in the form of unsecured loan in the year under consideration which was absolutely an incorrect finding of fact as there was no transaction entered with the said company by the assessee to the tune of Rs.1 crore. At no point of time during the Financial Year 2012-13 the amount of Rs.1 crore was credited in the bank account of the appellant assessee. In fact, the assessee paid cash of Rs.1,10,67,266/- on 30.03.2013 to M/s Fitworth Financial Services Pvt. Ltd. through RTGS. As the assessee has not received the said amount of Rs. 1 crore from M/s Fitworth Financial Services Pvt. Ltd. the question of recording of ownership of the said money by the assessee is absolutely incorrect finding of fact recorded by the Ld. AO and explanation in regard to the source of acquisition of such money of Rs.1 crore does not and cannot Evermore Financial Services Pvt.Ltd.(AY: 2013-14) arise under the present facts and circumstances of the case. In fact, the satisfaction recorded as apparently on a wrong finding of fact and initiation of proceeding on the basis of the same without verifying the said fact before recording reason and particularly on the basis of vague information and further that the nature of transaction mentioned in the reason recorded is nothing but a non application of mind by the Ld. AO and approval thereof by the Ld. PCIT is, therefore, further non application of mind while recording satisfaction that I am satisfied with the reason recorded, it is a fit case for reopening under Section 147 of the Act by the Ld. PCIT as argued by the Ld. AR. No independent inquiry has been conducted by the Ld. AO and simply relying upon the information received from the DCIT, Circle 9(1) the Ld. AO proceeded against the assessee by reopening of the assessment under Section 147 of the Act which is bad in law and therefore, liable to be quashed as was the crux of the argument advanced by the Ld. Counsel appearing for the assessee. It was further contended by him that objection raised by the assessee was neither disposed of nor the assessee was given opportunity to place this fact effectively before the Ld. AO through video conference though prayed for. The entire acts of the Ld. AO seems to be clearly arbitrary so as to reopen assessment against the assessee which on a wrong finding of fact and conclusion thereof by making addition in the hands of the assessee under Section 69A of the Act is, thus, bad in law.

We have heard the rival submissions made by the respective parties and we have also perused the relevant materials available on record. It Evermore Financial Services Pvt.Ltd.(AY: 2013-14) appears that the assessment was reopened under Section 147 of the Act by the Ld. AO solely on the basis of an information received from the DCIT, Circle 9(1) that the assessee has received an amount of Rs.1 crore from one M/s Fitworth Financial Services Pvt. Ltd. in the form of unsecured loans but no evidence to that effect is being mentioned by the Ld. AO while recording reason of escaping assessment by the assessee. No evidence to that effect neither reveals from the order passed by the Ld. AO while making addition. The case of the assessee that no such transaction of Rs.1 crore was ever made with the M/s Fitworth Financial Services Pvt. Ltd. has been considered by the Ld. AO. We note that from the documents submitted by the assessee, it appears that the assessee debited an amount of Rs.1,10,67,266/- to the M/s Fitworth Financial Services Pvt. Ltd. Thus, the recording of reasons apparently on incorrect finding of fact rather blindly based on the information received from the DCIT, Circle 9(2). Before recording reason neither we get any iota of evidence that the Ld. AO has made any investigation whether actually there is an escapement of assessment of Rs. 1 crore by the assessee on the alleged amount received from one M/s Fitworth Financial Services Pvt. Ltd. in the form of unsecured loan. Thus, in the absence of any document in the hands of the revenue, the finding of fact is palpably bad that too initiation of reopening of assessment under Section 147 of the Act without making any inquiry by the Ld. AO cannot be said to be justified. The PCIT has also erred in confirming the recording of reasons and addition on escaping assessment by the Ld. AO without verifying the said fact recorded by the Ld. AO; the same is thus, also a product of non application of mind. Therefore, once the basis of the reopening of assessment being the reason recorded by the Ld. AO is not the actual fact and as the Ld. AO erred in law and on facts while reopening the assessment, the entire proceeding is vitiated and the same is thus, quashed.

The appeal of the assessee is allowed.