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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)-28, New Delhi, dated 19.11.2025 arising out of assessment order dated 30.12.2019 passed under section u/s 143/147 of the Act for the Assessment Year 2012-13. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming addition of Rs. 86,30,104/- made in the impugned order as unexplained income ignoring the fact that the order passed by the Id. AO is illegal and void ab-initio and barred by limitation and is contrary to the principles of natural justice and has been passed by recording incorrect facts and findings and the same is not sustainable on various legal and factual grounds
1.1.That on the facts and circumstances of the case and in law the learned CIT (A) while confirming the addition arbitrarily and, mechanically rejected the explanation and evidence tendered by the appellant and confirmed the addition by drawing subjective, premeditated and preconceived inferences therefore the same is not sustainable.
At the outset, the ld. Counsel for the assessee drew our attention to its ground of appeal No.1 being a legal ground and requested that the same be adjudicated first in preference to the other ground of appeal. It was stated that the ground of appeal no.1 strikes at the very root of the matter. The ld. Counsel for the assessee took us through the brief factual matrix of the case. It was submitted search u/s 132(1) was conducted upon the assessee on 20.09.2013. Thereafter order u/s 143(3) r.w.s. 153A was passed on 30.03.2016 determining the total income of the assessee Rs.1,46,01,350/-. The ld. Assessing Officer subsequently initiated proceedings u/s 147 r.w.s. 148 by recording the reasons. It was concluded therein that the assessee was guilty of concealment of true income and that transactions aggregating to Rs.86,30,104/- were not accounted for. The ld. Assessing Officer held that it was a failure on the part of the assessee to disclose its transactions completely and correctly. The ld. Assessing Officer made addition of Rs.86,30,104/- vide his order under section 147 r.w.s. 143(3) dated 30.12.2019. In appeal, the ld. First Appellate Authority confirmed the findings of the Assessing Officer and sustained the addition.
Challenging the invocation of proceedings u/s 148 of the Act, the ld. Counsel for the appellant assessee has argued that the re-opening of its case is based upon borrowed satisfaction and that the ld. Assessing Officer has merely placed reliance upon the enquiries and report of the Investigation Wing. It was submitted that no independent enquiries were conducted. The ld. Counsel drew our attention to its paper book, inter alia, containing reasons recorded. In particular attention was invited to paras-3 to 6 of the impugned reasons containing as under:-
“…..3. Analysis of information collected/received: On examination of information available on record, it is found that this account was managed and controlled by a well known entry operator Sri Devesh Upadhyay, a well-known Kolkata base entry operator who has admitted in his statement on oath u/s 131 that these bank accounts were used by various beneficiaries through intermediary accounts for benefitting the targeted assessee's and Sh. Jai Deo Prasad Minda has received Rs.86,30,104/-which was emanated from these accounts and received by the assessee the assessee has received the above fund during the relevant previous year, which is reported as received through accommodation entries, hence I have the reason to believe that taxable income minimum to the extent of Rs.86,30,104/- has escaped assessment within the meaning of section 147 of the I.T.Act, 1961 due to failure on the part of the assessee to truly disclosed the nature of this receipt.
4.Enquiries made by the Assessing Officer as sequel to information collected or received: The Information of the Investigation Wing coupled with the enquiries made by them has been examined and it has been found that the assessee company had made transactions which have not been accounted for in the books of account and therefore the same remained unexplained. Notice u/s 133(6) has been issued to the assessee to explain the same on 25/03/2019 with prior approval of Ld. PCIT, Central-2, New Delhi but, no response received till date.
5.Findings of the AO: In view of the information received from Investigation Wing and after examination of the seized documents it is found that income to the tune of Rs.86,30,104/- has escaped assessment and needs be assessed as income of the assessee during the assessment year 2012-13 under the provisions of section 147 of IT Act, 1961.
6.Basis of forming reasons to believe and details of escapement of income: On examination of information available on record, it is found that this account was managed and controlled by a well known entry operator Sri Devesh Upadhyay, a well-known Kolkata base entry operator who has admitted in his statement on oath u/s 131 that these bank accounts were used by various beneficiaries through intermediary accounts for benefitting the targeted assessee's and Sh. Jai Deo Prasad Minda has received Rs.86,30,104/- which was emanated from these accounts and received by the assessee. The assessee has received the above fund during the relevant previous year, which is reported as received through accommodation entries, hence I have the reason to believe that taxable income minimum to the extent of Rs.86,30,104/- has escaped assessment within the meaning of section 147 of the I.T.Act, 1961 due to failure on the part of the assessee to truly disclosed the nature of this receipt, I have reason to believe that income to the tune of Rs.86,30, 104/- has escaped assessment for the Assessment Year 2012-13 and case needs be re-assessed as per the provisions of section 147 of the Act..”
The ld. Counsel argued that the above reasons clearly demonstrate that the ld. Assessing Officer has not done any independent enquiries but rather has merely placed reliance upon the enquiry and report of Investigation Wing. The ld. Counsel submitted that the reasons (supra) show non-application of mind as para-3 and 6 are mere a case of copy paste. The ld. Counsel also argued that no blame of any non-disclosure can rest upon the assessee since it had disclosed all the transactions in its Return of Income and which were scrutinized in the original scrutiny proceedings. It was accordingly submitted that in terms of decision of Hon’ble Apex Court in the case of Kelvinator India Ltd. 320 ITR 561 and of Hon’ble Delhi High Court in Signature Hotels Pvt. Ltd. 338 ITR 51(Del.) an Assessing Officer is required to do independent enquiries of his own before farming any opinion on escapement of income. Reliance was also placed upon a catena of other judgments on the subject and being cited as binding judicial precedents. Accordingly, it was said that the assessment order based upon invalid reasons cannot survive and deserves to be quashed.
The ld. DR would like to make us believe on the correctness of the order of lower authorities.
We have heard rival submissions in the light of material placed on records. Upon consideration of the reasons recorded by ld. Assessing Officer (supra), we have noted that it evidences therefrom that no independent enquiry were conducted by the ld. Assessing Officer and that he has merely relied upon the enquiries of the Investigation Wing and their report. We have also noted that the contents of para-3 and 6 of the impugned reasons recorded exhibit, a clear case of copy paste and thus alluding towards non-application of mind. We have also noted that the Hon’ble Apex Court in Kelvinator of India Ltd. 320 ITR 561(SC) emphasised on the difference between a power to review and the power to reassess. The Apex Court held that the Assessing Officer has no power to review but has only the power to reassess. The concept of 'change of opinion' must be treated as an in-built test to check abuse of power by the Assessing Officer. The relevant extract of the judgment is reproduced as under :-
".......However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989 , Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer.............".
We have further noted that the Hon’ble jurisdictional High Court in the case of Signature Hotels Pvt. Ltd. 338 ITR 51(Del.) has observed that it is compulsory for an Assessing Officer to hold is own independent enquiries qua material available before him before drawing any conclusion regarding applicability of provisions of section 148 of the Act and that no reliance should be placed upon report of other persons. Thus, it was held that
“The aforesaid reasons do not satisfy the requirements of Section 147 of the Act. The reasons and the information referred to is extremely scanty and vague. There is no reference to any document or statement, except Annexure, which has been quoted above. Annexure cannot be regarded as a material or evidence that prima facie shows or establishes nexus or link which discloses escapement of income. Annexure is not a pointer and does not indicate escapement of income. Further, it is apparent that the Assessing Officer did not apply his own mind to the information and examine the basis and material of the information. The Assessing Officer accepted the plea on the basis of vague information in a mechanical manner. The Commissioner also acted on the same basis by mechanically giving his approval. The reasons recorded reflect that the Assessing Officer did not independently apply his mind to the W.P. (C) NO. 8067/2010 Page 13 information received from the Director of Income-Tax (Investigation) and arrive at a belief whether or not any income had escaped assessment…”
We have further noted that the Revenue has failed to prove its charge of non-disclosure of relevant material by the assessee in its Return of Income. The Return of the appellant with all its annexures was before the Revenue authorities at the time of original assessment proceedings and therefore the blame of any concealment or non-disclosure cannot be placed upon the appellant assessee. Accordingly, we are of the considered view that the reasons recorded to reopen case of the assessee u/s 148 is not based upon any independent enquiries/investigation of the Assessing Officer but is a case of borrowed satisfaction. We have also noted that the Revenue has failed to establish any definite failure on the part of the assessee for non-disclosure of its transactions. Accordingly, we set-aside and quash the order of the lower authorities. The assessment order dated 30.12.2019 u/s 147/143(3), which is based upon invalid notice u/s 148 is therefore quashed. The ground of appeal no.1 is therefore allowed.
As the assessee has succeeded in its ground of appeal no.1, being a legal ground, the ground of appeal no.1.1 challenging the merits of the addition has become academic in nature and hence left open.
In the result, the appeal of the assessee is allowed.