Neel Builders Pvt. Ltd. Vs ITO (ITAT Delhi)
A perusal of the reasons for reopening of the case for the impugned assessment year, copy of which is placed at paper book page No. 20-21 shows that the reopening was made on the basis of the report of the investigation wing and there is no independent application of mind by the Assessing Officer for such reopening. The Hon’ble Delhi High Court in a number of cases has held that the reopening on the basis of report of investigation wing without independent application of mind by the Assessing Officer is not valid. Accordingly the reassessment proceedings which were based on the report of the investigation wing and without independent application of mind by the Assessing Officer have been held to be illegal. Since the Assessing Officer in the instant case has reopened the assessment on the basis of report of the investigation wing and there appears to be no independent application of mind by the Assessing officer for reopening of the case, therefore, the reassessment proceeding initiated by the Assessing Officer are not proper. I, therefore, hold that the reassessment proceeding initiated by the Assessing Officer is illegal and accordingly the subsequent proceedings also become illegal and void.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by assessee has been directed against the order of Ld. CIT(Appeals)-37, New Delhi dated 28.06.2019 for AY 2008-09, challenging the reopening of the assessment u/s 147/148 of the Income Tax Act, 1961 and addition of Rs. 25 lakhs and Rs. 45,000/- u/s 68 of the Act.
2. I have heard Ld. Representatives of both the parties and perused the material on record.
3. Briefly the facts of the case are that assessee company filed its return of income on 08.07.2008 for assessment year under appeal declaring income at Rs. 5,340/- which was processed u/s 143(1) of the Act. During the year, company was engaged in business of building and construction. The AO has received information from Director of Income Tax (Investigation-II) dated 12.03.2013 mentioning therein that a search operation was conducted in the case of Shri S.K. Jain group of cases in which the assessee has also found to have received accommodation entry from M/s Nisha Holding Limited Rs. 9 lakhs, M/s Brite Indu Resources Ltd. Rs. 9 lakhs and M/s Finage Leasing & Finance India Ltd. Rs. 7 lakhs, totaling to Rs. 25 lakhs. The AO initiated the reassessment proceedings and after considering the explanation of the assessee made addition of Rs. 25 lakhs u/s 68 of the Act and further made addition of Rs. 45,000/- on account of unexplained investment. The Ld. CIT(A) dismissed the appeal of assessee.
4. Ld. Counsel for assessee referred to copy of the reasons recorded for reopening of the assessment which is filed at page 1 & 2 of the Paper Book and reads as under:
Annexure – “A”
Reasons for the belief that income has escaped assessment in the case of M/s Neel Builders Pvt. Ltd. AY 2008-09 (PAN AABCN9572C)
A search and seizure action u/s 132/133A of the Income Tax Act, 1961 was conducted at the residential and business premises of Shri Surender Kumar Jain group of cases (Entry operator). During the course of post search investigation and preparation of appraisal report it has been evidently established that Shri Surender Kumar Jain is known entry providers and is in the business of providing accommodation entries to various beneficiary companies/entities/persons through cheques through a number of paper of dummy companies in lieu of cash. These dummy companies are totally managed and controlled by Shri Surender Kumar Jain.
During the course of search action various incriminating documents were found and seized. These documents includes date wise and month wise had written cheque books and cash books maintained by Shri Surender Kumar Jain over a long period of time. In these cheque books and cash books details of cheque provided to the beneficiary companies/entities/persons companies/entities/person were recorded date wise.
From the examination of the documents seized from the residence of Shri Surender Kumar Jain, it clearly appears that the assessee company had obtained accommodation entries from various paper entities to Shri Surender Kumar Jain in lieu of cash during the FY 2007-08 relevant to the AY 2008-09 for the total amount mentioned against their names. These bogus share capital and premium has clearly escaped taxation in these assessment years therefore, these amounts are requires to be taxed in the hands of these companies by initiating action under section 148 of the Income Tax Act, 1961.
As per the information received from the Investigation Wing of the department, vide letter no. DIT(Inv.)-II/U/s148/2012-13/194 dated 12/03/2013 during FY 2007-08 M/s Neel Builders Pvt. Ltd. has received total accommodation entries of Rs. 25,00,000/- from the entities managed and controlled by Shri Surender Kumar Jain for providing accommodation entries to the beneficiaries. The details of entry are as under:
