Mere reproduction of conclusions of investigation report in own words by AO is borrowed satisfaction

ACIT Vs M. K. Wood India Pvt. Ltd. (ITAT Delhi)

In the case in hand based upon the statement of Kishori Saran Goel, recorded u/s 131 of the Act during the course of search of proceedings upon M/s. Spaze Group on 17.02.2016 the ld. AO made a conclusion that assessee had received accommodation entries. However, there is not a word in this reasons that what were the nature of accommodation entries because it is not a case of unexplained cash credits but a bogus sale. How the return filed reflected a possible escape of income. The reasons as recorded by the Ld. AO has no discussion of the material which was taken in account by the investigation wing. It was considered to be sacrosant. The statement of Kishori Saran Goel is not part of the reasons to believe nor supplied and confronted to assessee, while issuing notice u/s 148 of the Act. There is force in contention of counsel of assessee that as scrutiny assessment u/s 153A in regard to assessee was conducted that all the more required to disclose the tangible material in regard to transaction requiring reassessment. There should have been an independent application of mind by the Ld. AO to the information out of the statement forming basis of allegations of accommodation entries. Merely reproducing the conclusions of investigation report in his own words is indeed borrowed satisfaction as contended by counsel for the assessee. Consequently, the Bench is inclined to decide these grounds of cross objection in favour of the assessee.

The Ld. CIT had fallen in error in disallowing ground no. 1 to 4 with regard to challenge of proceedings initiated by Ld. Assessing Officer u/s 147 of the Act by observing that mere non mentioning of all the material in the reasons to believe does not lead to a conclusion that such material was not available with the Ld. AO. The bench is of considered view that assessee cannot be kept in dark of the matter relied and discussed on assumption that such matter was otherwise available. Ld. CIT(A) went on to observe that “it is the allegation made by the appellant, and hence, burden is upon the appellant to substantiate the same, however, accept for making the claim, nothing has been brought on record to substantiate such submissions.” These findings reflect the Ld. CIT(A) has failed to appreciate the mandate of law which cast burden upon the Assessing officer to ensure that reasons recorded must indicate a conclusive opinion formed by the Ld. AO on its own and not to draw benefit from the weakness of possible defence of assessee. The principles of natural justice require that the fate of objections raised are communicated to the assessee.

As a sequel to the above discussion the Bench is inclined to decide the grounds no. 1, 2 and 4 of Cross Objections, filed by the assessee, in its favour. Accordingly, the Cross Objections are allowed and as the same were with regard to the very defect in assumption of jurisdiction by the Ld AO, the impugned re­assessment order is set aside and so is the appeal of Revenue dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

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