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Income Tax Appellate Tribunal, DELHI BENCHES : “H” NEW DELHI
Before: SHRI INTURI RAMA RAO & SHRI SUDHANSHU SRIVASTAVA
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER This department’s appeal is against the order dated 24.02.2012 passed by the Ld. CIT (A) Faridabad. The brief facts of the case are that the assessee filed a return of income declaring total income of Rs. 87,150/-. Thereafter the AO received information from the Directorate of Income Tax (Inv.) New Delhi that the assessee was the beneficiary of an accommodation entry of Rs. 19 lacs obtained out of his unaccounted money through an entry operator. On the basis of above information it was the AO’s view that he had reason to believe that a sum of Rs. 19 lacs and the commission paid on procuring such entries represented income of the assessee from undisclosed sources, which had escaped assessment within the meaning of section 147 of the Act. The AO, therefore, issued notice u/s 148 of the Act. In response to notice u/s 148 the assessee submitted that the original return filed by him may be treated as return filed in response to notice u/s 148. In compliance to the questionnaire put forth by the AO, it was assessee’s submission that he had received a gift of Rs. 3 lacs from Shri Rohit Rana, Rs. 3 lacs from Ms. Babita, Rs. 2 lacs from Shri Ashok Kumar Gupta, Rs. 2 lacs from Shri Ranjeet Singh, Rs. 3 lacs from Shri Mukesh Gupta, Rs. 3 lacs from Shri Rajesh Kumar Gupta and Rs. 3 lacs from Shri Pramod Kumar. The assessee also filed various documents from the donors to justify the source, capacity, identity and genuineness of the transactions. The assessee was thereafter asked to produce the donors to verify their genuineness and creditworthiness. Instead of producing the donors, the assessee filed written submissions but the donors could not be produced. The AO thereafter issued show cause notice asking the assessee to attend the proceedings personally along with the donors. Besides this summons u/s 131 (1) of the Act were issued to all the seven persons to appear personally and furnish relevant documents. All the summons were returned back without service with the remarks like refused, no such address, under construction and unclaimed. The AO thereafter held that the existence of the persons from whom gifts were received was unreal and not authentic. The AO accordingly made an addition of Rs. 19 lacs as income from undisclosed sources.
The Ld. CIT (A) in his order has deleted the entire addition on the ground that there was no material before the AO which could lead to formation of “ reason to believe” before taking recourse to provisions of 148. The Ld. CIT(A) noted that the allegation that the appellant had received a gift of Rs. 19 lacs was not correct as the assessee had received gifts from seven persons. The Ld. CIT(A) also noted that this was the case of reopening of assessment after four years from the end of relevant assessment year. That the AO had called for a copy of return from the assessee along with profit and loss account and balance sheet led to the inference that records were not available with the AO at the time of recording of reasons. The Ld. CIT(A) gave a categorical finding that there remained no dispute that the AO has recorded the reasons for reopening of assessment in absence of case records and has issued notice u/s 148 of the Act only on the strength of the information received from investigation wing. Accordingly the assessment order dated 29.12.2010passed by the AO was annulled.
We have heard the arguments of both the sides and perused the material placed before us. At page 2 and 3 of the assessment order the AO has given the reasons recorded for reopening of assessment which are being reproduced below for ready reference :-
“ There is an information with the department that the above named assessee is the beneficiary of an accommodation entry amounting to Rs. 19,00,000/- which was actually his own unaccounted money introduced to his own capital without paying any tax, by approaching the entry operator who after receiving the cash equal to entry amount and commission which is normally 10% of the entry, from the assessee, got prepared bank instrument on 18.4.2002 of Rs. 19,00,000/- out of his own bank account in favour of the assessee presentable at BOB, Faridabad. A big racket of providing such “accommodation entries” has been unearthed by the Income Tax Department. After examining the information and further details so available. I have reason to believe that on account failure on the part of the assessee to disclose the particulars. I have reason to believe that on account of failure on the part of the assessee to disclose the particulars of his income truly and correctly, an amount of Rs. 19,00,000/- chargeable to tax has escaped assessment for the A.Y. 2003-04. In view of above, proceedings u/s 147 of Income Tax Act, 1961 are hereby initiated against the assessee for the A.Y. 2003-04, by issuance of notice u/s 148 to bring to tax the above mentioned undisclosed income of Rs. 19,00,000/- plus the commission @ 10% of this entry amount (exact amount of commission subject to verification during the proceedings u/s 147) and also any other income chargeable to tax which has escaped assessment and which comes to my notice subsequently in the course of the proceedings under section 147 of the Act.”
At the time of hearing before us the Ld. Counsel for the assessee stated that the reasons recorded by the AO are factually incorrect, vague and do not give any specific information so as to even prima facie point out any escapement of income.
The Ld. AR submitted that the AO has not mentioned the names of persons from whom the accommodation entries, if any, were received and the nature of accommodation entries. He submitted that during the assessment year under consideration the assessee had received gifts of Rs. 19 lacs from seven persons but in the reasons recorded there is no mention of any gift and no mention of the different amounts received from various persons. On the other hand, the only mention in the reasons recorded is the so called accommodation entry of Rs. 19 lacs.
Ld. AR submitted that the AO did not apply his mind before issuance of notice u/s
He further relied on the decision of the Hon’ble Jurisdictional High Court in the case of CIT vs. Paramjit Kaur (2009) 311 ITR 38 (P&H) and also upon the decision of Hon’ble Delhi High Court in the case of Signature Hotels Pvt. Ltd. vs. ITO and another (2011) 338 ITR 51 (Delhi).
Ld. DR on the other hand stated that at the time of issue of notice u/s 148 only a tentative or prima facie belief regarding the escapement of income is required. No conclusive finding with regard to escapement of income is required.
The Ld. DR submitted that information was received from the investigation wing of the Department with regard to a big racket of providing accommodation entries.
From the details received from the investigation wing it was gathered that the assesee is a beneficiary of accommodation entry amounting to Rs. 19 lacs. Ld. DR submitted that the reopening of assessment was quite justified and therefore the order of the Ld. CIT(A) should be reversed and that of the Assessing Officer should be restored.
We have carefully considered the submissions of both the sides and perused the relevant material placed before us. From a perusal of the reasons recorded, it is evident that the AO has mentioned about some information by which the assesee was a beneficiary of an accommodation entry of Rs. 19 lacs. However in the reasons recorded that there is no mention about the name of the person who is alleged to be the entry provider. It is not also a case where the assessee did not file his return of income u/s 139(1) of the Act so as to be covered under clause (a) of Explanation -2 to section 147 of the Act.
In our considered opinion, the AO has merely acted on the report of the investigation wing. In order to assume jurisdiction u/s 148 and to issue notice in respect of assessment beyond the period of four years but within the period of six years from the end of the relevant assessment year, two conditions need to be satisfied. First is that the AO must have reason to believe that income chargeable to tax has been under assessed. The second is that he must also have reason to believe that such under assessment has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are required to be satisfied before the AO could have the jurisdiction to issue notice for the assessment or reassessment beyond the period of four years. It is clear from the facts of the present case that the AO did not himself apply his mind to any fact in order to come to any belief with regard to the omission or failure of the assessee to disclose any primary fact relevant for the purpose of assessment of income nor he could have any belief that as a consequence of such failure or mission, the income for that year had escaped assessment. Thus in our considered opinion, the conditions precedent for the issue of the impugned notice u/ s148 in the instant case were not satisfied.
The Hon’ble Punjab and Haryana High Court in the case of CIT vs. Paramjit Kaur (supra) has held that where the AO has not corroborated and examined the information before recording his own satisfaction of escaped income and initiated reassessment proceedings, it could be said that the AO has acted only on the basis of suspicion and the issuance of notice was invalid. The Hon’ble P & H High Court (which is also the jurisdictional High Court for the assessee) has observed as under:
“Section 147 of the Act defines the power and jurisdiction of the Assessing Officer for making an assessment or reassessment of escaped income. Section 148 of the Act, on the other hand, provides for initiation of the reassessment proceedings with issuance of a notice on the assessee concerned. Section 147 empowers the Assessing Officer to assess or reassess income chargeable to tax if he has reasons to believe that the income for any assessment year has escaped assessment. The power conferred under this section is very wide, but at the same time it cannot be stated to be a plenary power. The Assessing Officer can assume jurisdiction under the said provision provided there is sufficient material before him. He cannot act on the basis of his whim and fancy, and the existence of material must be real. Further, there must be nexus between the material and escapement of income. The Assessing Officer must record reasons showing due application of mind before taking recourse to reassessment proceedings. Still further, the Assessing Officer can assume jurisdiction for reassessment proceedings provided he has reasons to believe but the same cannot be taken recourse to on the basis of reasons to suspect. Held, that the Assessing Officer had not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it cannot be said that the same was based on the belief that the income chargeable to tax had escaped income. The Assessing Officer has to act on the basis of " reasons to believe" and not on " reasons to suspect". The Tribunal had, thus, rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and, therefore, the issuance of notice under section 148 of the Act for reassessment proceedings was not valid.”
Therefore, in view of the facts of the case and respectfully following the ratio of the judgment laid down by the Hon’ble P & H High Court in CIT vs. Paramjit Kaur (supra) we find no justification to interfere with the order of the Ld. CIT (A).
Grounds Nos. 1 to 4 are rejected.
In the result the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 30th September, 2015. sd/- sd/- (INTURI RAMA RAO) (SUDHANSHU SRIVASTAVA )
ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: the 30. 9. 2015 ‘veena’ Copy of the Order forwarded to: