NEETA GUPTA,NEW DELHI vs. ITO, NEW DELHI

This is an appeal filed by the Assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-XXVI dated 31.10.2012 pertaining to the Assessment Year (A.Y.) 2002-03.

Name and Value of entry Cheque No. And Date Name of the address of the taken Rs. Bank account holder beneficiary of entry giving account Ms.Neetu Gupta Rs.5,00,000/- SBP Daryaganj 11.05.2001 Chintpurni 75/557 Regharpura K Bagh N.Del The assessee has taken the above accommodation entry in the form of gifts share transaction etc. Which has escaped assessment. Therefore the case is being kreopened u/s 148 of the Act accordingly notice is being issued.”

4.1. The Hon’ble Delhi High Court in the case of Principal Commissioner of Income Tax vs.G & G Pharma India Ltd. in vide order dt. 8.10.2015 at para 12 and 13 held as follows.

“12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10 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 Neeta Gupta 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. Mr. Sawhney took the Court through the order of the CIT(A) to show how the CIT (A) discussed the materials produced during the hearing of the appeal. The Court would like to observe that this is in the nature of a post mortem exercise after the event of reopening of the assessment has taken place. While the CIT may have proceeded on the basis that the reopening of the assessment was valid, this does not satisfy the requirement of law that prior to the reopening of the assessment, the AO has to, applying his mind to the materials, conclude that he has reason to believe that income of the Assessee has escaped assessment. Unless that basic jurisdictional requirement is satisfied a post mortem exercise of analysing materials produced subsequent to the reopening will not rescue an inherently defective reopening order from invalidity .” 4.2. Applying the propositions laid down in this case, to the facts of the case on hand, I hold that the reopening is bad in law as the A.O. in this case has not applied his mind to the information received from DDI (Inv.) so as to have reason to believe that income of the assessee has escaped assessment.