JAIN MACHINE TOOLS , MUMBAI V. INCOME TAX OFFICER, WARD 26(1)(7), MUMBAI

ITA 2110/MUM/2024

• Counselvise Citation: [2024] 130 COUNSELVISE.COM (IT) 5553 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Next Hearing Date: 08-07-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 21-04-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESHWARI MENON
• Keywords: Tangible material; Accommodation entries; Reassessment proceedings; Borrowed satisfaction; TDS; Bogus
• Section: 147; 148; 143(3); 40(a)(ia); 143(1); 69A; 48; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SUNIL KUMAR SINGH (JUDICIAL MEMBER) ITA No. 2110/MUM/2024 Assessment Year: 2012-13 Jain Machine Tools, 16, Meghal Industrial Estate, Devidayal Road, Mulund (West) Mumbai-400080. Vs. ITO, Ward 26(1)(7), Room 625, 6 th floor, Kautilya Bhavan, C-41 to C-43, G Block, Bandra Kurla Complex, Bandra (East), Mumbai-400051. PAN NO. AACFJ 6163 H Appellant Respondent Assessee by : Mr. Devendra Jain Revenue by : Ms. Rajeshwari Menon, Sr. DR Date of Hearing : 09/07/2024 Date of pronouncement : 19/08/2024 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 21.02.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2012-13, raising following grounds: 1. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings under section 147 in gross violation of first proviso to section 147 of the Act. 2. In the facts and circumstances of the case and CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the disposing of objections raised by the appellant by a speaking order thereby violating the case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC). 3. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings unde section 147 without setion 19 the recode and on the oronso us belief that no asement under 431) appellant. 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding th initiating the reassessment proceedings u/s 147 of the Act without being in possession of any fresh tangible material after completion of the first reassessment. 5. In the facts and circumstances of the case and in (A) has erred in upholding the action of the Ld. Assessing Officer of issuing notice u/s 148 on borrowed satisfaction merely relying on the basis of alleged information received without any independent application of mind thereon. 6. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act on the basis of vague, ambiguous and unclear reasons. 7. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings under section 147 on the basis of the approval note under section 151 which authority Pr. CIT 29, Mumbai. 8. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings which was initiated with a mechanical and invalid sanction granted 9. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the reassessment proceedings under section 147 by making additions of Rs. was obtained for income escaping assessment of Rs. 1,00,000/ In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings under section 147 in gross violation of first proviso to section 147 of the Act. 2. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of reassessment proceedings under section 147 without first disposing of objections raised by the appellant by a speaking order thereby violating the law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC). 3. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings unde section 147 without setion 19 the recode and on the oronso us belief that no asement under 431) section 143(3) had been done in the case of 4. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act without being in possession of any fresh tangible material after completion of the first 5. In the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of issuing notice u/s 148 on borrowed satisfaction merely relying on the basis of alleged information received without any independent application of mind thereon. n the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act on the basis of vague, ambiguous and unclear reasons. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings under section 147 on the basis of the approval note under section 151 which is not signed by the specified authority Pr. CIT 29, Mumbai. 8. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings which was initiated with a mechanical and invalid sanction granted u/s 151. 9. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the reassessment proceedings under section 147 by making additions of Rs. 2,27,46.240/- while the approval note under section 151 was obtained for income escaping assessment of Rs. 1,00,000/ Jain Machine Tools 2 ITA No. 2110/MUM/2024 In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings under section 147 in gross violation of first proviso to section 147 of the Act. in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of reassessment proceedings under section 147 without first disposing of objections raised by the appellant by a speaking order law laid down by the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd. v. D.C.I.T. (2003) 259 ITR 19 (SC). 3. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings under section 147 without setion 19 the recode and on the oronso us belief that section 143(3) had been done in the case of 4. In the facts and circumstances of the case and in law, the Learned CIT e action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act without being in possession of any fresh tangible material after completion of the first law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of issuing notice u/s 148 on borrowed satisfaction merely relying on the basis of alleged information received without any independent n the facts and circumstances of the case and in law, the Learned CIT (A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings u/s 147 of the Act on the basis In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of initiating the reassessment proceedings under section 147 on the basis of is not signed by the specified 8. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the reassessment proceedings which was u/s 151. 9. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in upholding the action of the Ld. Assessing Officer of completing the reassessment proceedings under section 147 by making e the approval note under section 151 was obtained for income escaping assessment of Rs. 1,00,000/- only. 10. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming additions of Rs. 2,27,46,240/ section 69A of the Act merely on surmises and conjectures. 2. Briefly stated, facts of the case are that against return of income filed by the assessee on 28.09.2012 at Rs.3,87,743/-, the assessment u/s 143(3) of the Income 1961 (in short ‘the Act’) was completed on 16.02.2015 assessing total income at Rs.4,56,290/ u/s 40(a)(ia) of the Act amounting to Rs.68,548/ Subsequently, the Assessing Officer received information from the office of the Dy. Director of the Income vide letter dated 21.12.2018 that assessee had maintained partnership bank account wherein there had been high value transaction of credit aggregating to Rs.12.31 crores for the period from April, 2009 to February, 2015. The Assessing Officer recorded reasons to believe that returned income of the assessee was significantly less than the credits appearing in the bank account and therefore, same need to be verified. Consequently, the Assessing Officer reopened the assessment by way of issue of notice u/s 148 of the Act dated 31.03.2019 u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total credits in the bank account of the assessee amounting to Rs.2,27,46,240/-. 3. On further appeal, the assessee challenged the validity of the reassessment proceedings as well as addition 10. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming additions of Rs. 2,27,46,240/ of the Act merely on surmises and conjectures. Briefly stated, facts of the case are that against return of by the assessee on 28.09.2012 declaring total income , the assessment u/s 143(3) of the Income ort ‘the Act’) was completed on 16.02.2015 assessing total income at Rs.4,56,290/-, wherein addition for disallowance u/s 40(a)(ia) of the Act amounting to Rs.68,548/ Subsequently, the Assessing Officer received information from the e Dy. Director of the Income-tax Investigation, Mumbai vide letter dated 21.12.2018 that assessee had maintained account wherein there had been high value transaction of credit aggregating to Rs.12.31 crores for the period to February, 2015. The Assessing Officer recorded reasons to believe that returned income of the assessee was significantly less than the credits appearing in the bank account and therefore, same need to be verified. Consequently, the opened the assessment by way of issue of notice u/s 148 of the Act dated 31.03.2019 and completed u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total credits in the bank account of the assessee amounting to On further appeal, the assessee challenged the validity of the reassessment proceedings as well as addition on merit. The Ld. Jain Machine Tools 3 ITA No. 2110/MUM/2024 10. In the facts and circumstances of the case and in law, the Learned CIT(A) has erred in confirming additions of Rs. 2,27,46,240/- under Briefly stated, facts of the case are that against return of declaring total income , the assessment u/s 143(3) of the Income-tax Act, ort ‘the Act’) was completed on 16.02.2015 assessing , wherein addition for disallowance u/s 40(a)(ia) of the Act amounting to Rs.68,548/- was made. Subsequently, the Assessing Officer received information from the tax Investigation, Mumbai vide letter dated 21.12.2018 that assessee had maintained account wherein there had been high value transaction of credit aggregating to Rs.12.31 crores for the period to February, 2015. The Assessing Officer recorded reasons to believe that returned income of the assessee was significantly less than the credits appearing in the bank account and therefore, same need to be verified. Consequently, the opened the assessment by way of issue of notice completed the assessment u/s 147 r.w.s. 144 of the Act. The Assessing Officer added the total credits in the bank account of the assessee amounting to On further appeal, the assessee challenged the validity of the on merit. The Ld. CIT(A) rejected the contention of the assessee on the validity of the reassessment. As regard recorded that assessee did not file any documentary evidence to controvert the finding of the Assessing sustained the addition on merit. 4. We have heard rival submission of the parties and perused the relevant material on record including the Paper Book containing pages 1 to 53 filed by the assessee Ld. counsel for the assessee on page 47 of paper book and under reference is 2012 section 143(3) of the Act but notice u/s 148 of the Act has bee issued on 31/03/2019, which is beyond the period of four years from the end of the relevant assessment year and therefore, in view of the proviso below section 147 of the Act, an assessment completed u/s 143(3) of the Act could be reopened beyond the period of four years from the end of the relevant assessment year only in case of failure on the part of the assessee in disclosing all the material facts truly and fully reasons recorded nowhere mentioned any such failure on of the assessee and therefore, the reassessment proceedings need to be quashed in view of the decision of the Hon’ble Bombay High Court in the case of Hindustan Writ Petition No. 483 of 2022. CIT(A) rejected the contention of the assessee on the validity of the reassessment. As regards merit is concerned, the Ld. CIT(A) has recorded that assessee did not file any documentary evidence to controvert the finding of the Assessing Officer, sustained the addition on merit. We have heard rival submission of the parties and perused the relevant material on record including the Paper Book containing pages 1 to 53 filed by the assessee. In support of ground Ld. counsel for the assessee refereed to reason recorded available on page 47 of paper book and submitted that assessment year under reference is 2012-13 , which was already scrutinized under section 143(3) of the Act but notice u/s 148 of the Act has bee issued on 31/03/2019, which is beyond the period of four years from the end of the relevant assessment year and therefore, in view of the proviso below section 147 of the Act, an assessment completed u/s 143(3) of the Act could be reopened beyond the iod of four years from the end of the relevant assessment year failure on the part of the assessee in disclosing all the material facts truly and fully, but the Assessing Officer in the reasons recorded nowhere mentioned any such failure on of the assessee and therefore, the reassessment proceedings need to be quashed in view of the decision of the Hon’ble Bombay High Court in the case of Hindustan Writ Petition No. 483 of 2022. Jain Machine Tools 4 ITA No. 2110/MUM/2024 CIT(A) rejected the contention of the assessee on the validity of the the Ld. CIT(A) has recorded that assessee did not file any documentary evidence to , therefore, he We have heard rival submission of the parties and perused the relevant material on record including the Paper Book containing . In support of ground No. 1 , the refereed to reason recorded available submitted that assessment year 13 , which was already scrutinized under section 143(3) of the Act but notice u/s 148 of the Act has been issued on 31/03/2019, which is beyond the period of four years from the end of the relevant assessment year and therefore, in view of the proviso below section 147 of the Act, an assessment completed u/s 143(3) of the Act could be reopened beyond the iod of four years from the end of the relevant assessment year failure on the part of the assessee in disclosing all but the Assessing Officer in the reasons recorded nowhere mentioned any such failure on the part of the assessee and therefore, the reassessment proceedings need to be quashed in view of the decision of the Hon’ble Bombay High Court in the case of Hindustan Writ Petition No. 483 of 2022. 4.1 In support of ground No. 2, the ld counsel referred to page 48A of the Paper Book which is a copy of objections raised before the Assessing Officer on 3 that following the procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts(India) lt ITR 19(SC), the Assessing Officer was required to dispose off those objection by way of a separate speaking order, raised by the assessee against reassessment proceedings have not been disposed off by the Assessing O reassessment proceedings being in violation of the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p ltd (supra) and hence same need to be quashed. 4.2 The Ld. counsel for the assessee the appeal and submitted believe that income escaped assessment, the Assessing Officer was not having any knowledge that assessment in the case was already completed u/s 143(3) of the Act, which is ev recorded as he has only recorded the fact of return processed u/s 143(1) of the Act and he was not aware that the assessment was already completed u/s 143(3) of the Act on 16/02/2015 ( which subsequently he has recorded in the asses the Ld. counsel for the assessee submitted that Assessing Officer has recorded reasons under the belief proceedings were carried out in the case of the assessee and source of ground No. 2, the ld counsel for th referred to page 48A of the Paper Book which is a copy of objections ed before the Assessing Officer on 3 rd may 2019, and submitted following the procedure laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts(India) ltd Vs DCIT (2003) 259 ITR 19(SC), the Assessing Officer was required to dispose off those objection by way of a separate speaking order, but the objections raised by the assessee against reassessment proceedings have not been disposed off by the Assessing Officer and therefore, reassessment proceedings being in violation of the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p ltd (supra) and hence same need to be quashed. The Ld. counsel for the assessee referred to Gr submitted that at the time of recording reasons to believe that income escaped assessment, the Assessing Officer was not having any knowledge that assessment in the case was already completed u/s 143(3) of the Act, which is evident from the reasons recorded as he has only recorded the fact of return processed u/s 143(1) of the Act and he was not aware that the assessment was completed u/s 143(3) of the Act on 16/02/2015 ( which he has recorded in the assessment order) the Ld. counsel for the assessee submitted that Assessing Officer corded reasons under the belief that no prior scrutiny proceedings were carried out in the case of the assessee and source Jain Machine Tools 5 ITA No. 2110/MUM/2024 for the assessee referred to page 48A of the Paper Book which is a copy of objections may 2019, and submitted following the procedure laid down by the Hon’ble Supreme d Vs DCIT (2003) 259 ITR 19(SC), the Assessing Officer was required to dispose off those but the objections raised by the assessee against reassessment proceedings have not fficer and therefore, reassessment proceedings being in violation of the law laid down by the Hon’ble Supreme Court in the case of GKN Driveshafts (India) p Ground No. 3 of that at the time of recording reasons to believe that income escaped assessment, the Assessing Officer was not having any knowledge that assessment in the case was already ident from the reasons recorded as he has only recorded the fact of return processed u/s 143(1) of the Act and he was not aware that the assessment was completed u/s 143(3) of the Act on 16/02/2015 ( which, sment order). Further, the Ld. counsel for the assessee submitted that Assessing Officer that no prior scrutiny proceedings were carried out in the case of the assessee and source of the credit in bank in HDFC bank account were not examined whereas the bank statement was duly examined by the Assessing Officer. 4.3 In support of ground No. 4, He afresh tangible material available with the Assessing Office reopening of the assessment proceedings. 4.4 In support of ground No. 5 , t the Assessing Officer has not applied his mind independently to the information and he has recorded reasons merely on the suspicion that those credit entries this aspect was duly examined in the regular assessment proceedings. 4.5 On the contrary, the Ld. Departmental Representative (DR) relied on the order of the Ld. CIT(A). 4.6 We have heard rival submissi relevant material on record. Before the Ld. CIT(A), the assessee has challenged the reassessment proceedings on grounds reasons for reopening were to credit in bank account 2009 to February, 2015) thirdly, absence of reason to believe assessment as the bank account is a regular bank as per books of account and entries were explained in earlier scrutiny assessment, of the credit in bank in HDFC bank account were not examined bank statement was duly examined by the Assessing In support of ground No. 4, He submitted that there was no afresh tangible material available with the Assessing Office reopening of the assessment proceedings. In support of ground No. 5 , the Ld. counsel submitted that the Assessing Officer has not applied his mind independently to the he has recorded reasons merely on the suspicion redit entries were not from genuine sources this aspect was duly examined in the regular assessment On the contrary, the Ld. Departmental Representative (DR) relied on the order of the Ld. CIT(A). We have heard rival submission the parties and perused the relevant material on record. Before the Ld. CIT(A), the assessee has challenged the reassessment proceedings on grounds reasons for reopening were too general, secondly credit in bank account mentioned in reasons recorded 2009 to February, 2015) is beyond the concerned absence of reason to believe that income had escaped as the bank account is a regular bank as per books of account and entries were explained in earlier scrutiny assessment, Jain Machine Tools 6 ITA No. 2110/MUM/2024 of the credit in bank in HDFC bank account were not examined bank statement was duly examined by the Assessing submitted that there was no afresh tangible material available with the Assessing Officer for he Ld. counsel submitted that the Assessing Officer has not applied his mind independently to the he has recorded reasons merely on the suspicion genuine sources, whereas this aspect was duly examined in the regular assessment On the contrary, the Ld. Departmental Representative (DR) on the parties and perused the relevant material on record. Before the Ld. CIT(A), the assessee has challenged the reassessment proceedings on grounds, firstly, the secondly, the period of recorded ( i.e. April, ed previous year, income had escaped as the bank account is a regular bank as per books of account and entries were explained in earlier scrutiny assessment, fourthly, objections filed disposed off and compulsory. 4.7 The Ld. CIT(A) after considering submission of the assessee rejected the contention of the assessee observing as under: “5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. ex-parte, the AO issued statutory notices and show cau appellant did not respond to the same. The appellant did not file ROl in response to notice u/s 148. The reasons for reopening the case were specific and based on information received from the Investigation Wing, Mumbai, which is also pa in the information spanned from April 2009 to February 2015, the information/details relevant to the FY under consideration was specifically enquired into and addition was made with reference to such relev period only as seen from the Order. As regards the appellant's claim that the issue of reopening was explained during earlier scrutiny assessment proceedings, the same is not borne out from records. A copy of the brief earlier Assessment Order furnishe only disallowance made was u/s 40(a)(ia) of the Act on account of non deduction of TDS on interest paid to an unsecured loan nothing on record to show that conscious consideration of the material had been made and that specific books of account / issues related to the reopening matter were examined and considered then. Nothing has been brought on record by the appellant to show that there was no omission on its part to disclose fully and truly all mat brought no document/detail/evidence on record in support of its ground that the basis on which the reopening was done constituted information which was already in possession of and examined by the AO and explained by the appe 4.8 In the instant case, the assessee has challenged reasons recorded and submitted that reasons have been recorded merely the suspicion without any believe that income escaped assessment. In view of controversy it is imperative to reproduce the reasons recorded by the Assessing Officer, a copy of which is available on Paper Book Page 47 to 48 , objections filed for reopening during assessment were not and lastly, e-assessment proceedings was not The Ld. CIT(A) after considering submission of the assessee rejected the contention of the assessee observing as under: 5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. parte, the AO issued statutory notices and show cause letter, but the appellant did not respond to the same. The appellant did not file ROl in response to notice u/s 148. The reasons for reopening the case were specific and based on information received from the Investigation Wing, Mumbai, which is also part of the Department. While the period referred to in the information spanned from April 2009 to February 2015, the information/details relevant to the FY under consideration was specifically enquired into and addition was made with reference to such relev period only as seen from the Order. As regards the appellant's claim that the issue of reopening was explained during earlier scrutiny assessment proceedings, the same is not borne out from records. A copy of the brief earlier Assessment Order furnished by the appellant itself shows that the only disallowance made was u/s 40(a)(ia) of the Act on account of non deduction of TDS on interest paid to an unsecured loan- nothing on record to show that conscious consideration of the material had been made and that specific books of account / issues related to the reopening matter were examined and considered then. Nothing has been brought on record by the appellant to show that there was no omission on its part to disclose fully and truly all material facts. The appellant has brought no document/detail/evidence on record in support of its ground that the basis on which the reopening was done constituted information which was already in possession of and examined by the AO and explained by the appellant at the time of earlier scrutiny assessment. In the instant case, the assessee has challenged reasons recorded and submitted that reasons have been recorded merely the suspicion without any believe that income escaped assessment. In oversy it is imperative to reproduce the reasons recorded by the Assessing Officer, a copy of which is available on Paper Book Page 47 to 48 : Jain Machine Tools 7 ITA No. 2110/MUM/2024 reopening during assessment were not assessment proceedings was not The Ld. CIT(A) after considering submission of the assessee rejected the contention of the assessee observing as under: 5.5 As seen from the Assessment Order completed u/s 144 of the Act, i.e. se letter, but the appellant did not respond to the same. The appellant did not file ROl in response to notice u/s 148. The reasons for reopening the case were specific and based on information received from the Investigation Wing, rt of the Department. While the period referred to in the information spanned from April 2009 to February 2015, the information/details relevant to the FY under consideration was specifically enquired into and addition was made with reference to such relevant period only as seen from the Order. As regards the appellant's claim that the issue of reopening was explained during earlier scrutiny assessment proceedings, the same is not borne out from records. A copy of the brief d by the appellant itself shows that the only disallowance made was u/s 40(a)(ia) of the Act on account of non- -giver. There is nothing on record to show that conscious consideration of the material had been made and that specific books of account / issues related to the reopening matter were examined and considered then. Nothing has been brought on record by the appellant to show that there was no omission on erial facts. The appellant has brought no document/detail/evidence on record in support of its ground that the basis on which the reopening was done constituted information which was already in possession of and examined by the AO and llant at the time of earlier scrutiny assessment.” In the instant case, the assessee has challenged reasons recorded and submitted that reasons have been recorded merely the suspicion without any believe that income escaped assessment. In oversy it is imperative to reproduce the reasons recorded by the Assessing Officer, a copy of which is available on “1. On verification of records it is seen that the assessee has filed return of income for A. Y.2012 Rs.387743/-. Enquiries made on FTBA (360 degree portal) show that the assessee has filed normal business income of Rs.387743/ was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL. 2. Information has been received from office of Deputy Director of Income tax (Investigation), Unit West branch, Mumbai received a letter from the Mumbai Sales Tax authorities stating that the assessee M/s.Jain Machine T no 0015232000060 April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax Act 2002. ii) The assessee M/s Jain Machine Tools Mumbai (a/c no.00152320000605) maintains partn branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti Shah are the partners and have declared the profile as trader of machine tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as AACFJ6 163H. iii) Scrutiny of the account statement of M/s Jain Machine Tools Mumbai (a/c no 00152320000605) from April2009 to February 2015 revealed that the customer has received total credits aggregating to Rs.12. 31 Crores out of which cheque deposits are aggrega are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs a/e no 08782020002841). M/s Simpra Engineering and Services Pvt Ltd (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. 00 Lakhs-a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 Lakhs-a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 L no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores mainly from M/s K J Tech (Rs 14. 86 S Communication (Rs 31. 61 Lakhs 33. 78 Lakhs-IDBI Bank) (Rs 11. 56 Lakhs by managers cheque issuance of Rs 51. 27 Lakhs. Credits were immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan Motor Mfg Co (Rs 66. 99 Lakh industries (Rs 56. 63 Lakhs Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs Bank of Baroda), M/s Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs. 3. On the basis of the information received/available and the as have not been incorporated in the computation and return of income during the year under consideration I have reason to believe that the income chargeable to tax in the case of M/s. Jain Machine Tools to the tune of above Rs. 1,00,000/ 1. On verification of records it is seen that the assessee has filed return of A. Y.2012-13 on 29.09.2012 declaring total income of . Enquiries made on FTBA (360 degree portal) show that the assessee has filed normal business income of Rs.387743/ was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL. tion has been received from office of Deputy Director of Income tax (Investigation), Unit-6(2). Mumbai that On February 02, 2015 Mulund West branch, Mumbai received a letter from the Mumbai Sales Tax authorities stating that the assessee M/s.Jain Machine Tools Mumbai (a/c no 00152320000605) is liable to pay a sum of Rs.9,05,244/ April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax ii) The assessee M/s Jain Machine Tools Mumbai (a/c no.00152320000605) maintains partnership account with Mulund West branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti Shah are the partners and have declared the profile as trader of machine tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as . Scrutiny of the account statement of M/s Jain Machine Tools Mumbai 00152320000605) from April2009 to February 2015 revealed that the customer has received total credits aggregating to Rs.12. 31 Crores out of which cheque deposits are aggregating Rs. 4. 23 Crores cash deposits are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs o 08782020002841). M/s Simpra Engineering and Services Pvt Ltd (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 L no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores mainly from M/s K J Tech (Rs 14. 86 S-Axis Bank), M/s Shanti Communication (Rs 31. 61 Lakhs-Bank of India).M/s Sahyadri Agrovet (Rs IDBI Bank) (Rs 11. 56 Lakhs-Bank of Maharashtra) followed by managers cheque issuance of Rs 51. 27 Lakhs. Credits were immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan Motor Mfg Co (Rs 66. 99 Lakhs-a/e no 00862320002603), M/s. industries (Rs 56. 63 Lakhs-a/c no.00862790000129), M/s Shiv Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs Bank of Baroda), M/s JMT Drive solution (Rs 2. 03 Lakhs Punjab National Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs. 3. On the basis of the information received/available and the as have not been incorporated in the computation and return of income during the year under consideration I have reason to believe that the income chargeable to tax in the case of M/s. Jain Machine Tools to the tune of above Rs. 1,00,000/- has escaped assessment for A.Y.2012 Jain Machine Tools 8 ITA No. 2110/MUM/2024 1. On verification of records it is seen that the assessee has filed return of 29.09.2012 declaring total income of . Enquiries made on FTBA (360 degree portal) show that the assessee has filed normal business income of Rs.387743/-. The return was processed u/s 143(1) on 28.09.2012 resulting in demand of Rs.NIL. tion has been received from office of Deputy Director of Income- 6(2). Mumbai that On February 02, 2015 Mulund West branch, Mumbai received a letter from the Mumbai Sales Tax ools Mumbai (a/c 244/-for the period April01, 2009 to March 30, 2012 under the Maharashtra Value Added Tax ii) The assessee M/s Jain Machine Tools Mumbai (a/c ership account with Mulund West branch, Mumbai since October 20. 2001. Mr Shailesh Shah and Ms. Pratiti Shah are the partners and have declared the profile as trader of machine tools with an annual turnover of Rs 80. 00 Lakhs. PAN is updated as Scrutiny of the account statement of M/s Jain Machine Tools Mumbai 00152320000605) from April2009 to February 2015 revealed that the customer has received total credits aggregating to Rs.12. 31 Crores out ting Rs. 4. 23 Crores cash deposits are aggregating to Rs 6. 05 Lakhs from various locations such as Powai. Ulhas Nagar in Mumbai, Noida. Belgaum, Goa. Coimbatore, fund transfers aggregating to Rs 3. 07 Crores mainly from self account (Rs 8. 50 Lakhs- o 08782020002841). M/s Simpra Engineering and Services Pvt Ltd (Rs 3. 14 Lakhs a/e no 02768020000164). M/s Jaymech Engineers (Rs 5. a/e no 04882020000107). Ms. Nirmalaben Nagda (Rs 5. 00 a/e no 01631330001199). Mr. Bhavanji Nagda (Rs 5. 50 Lakhs-a/e no 01631330001214), NEW/RTGS credits aggregating to Rs 2. 14 Crores Axis Bank), M/s Shanti Bank of India).M/s Sahyadri Agrovet (Rs f Maharashtra) followed by managers cheque issuance of Rs 51. 27 Lakhs. Credits were immediately followed by cheque issuances aggregating to R$7. 90 Lakhs, fund transfers aggregating to Rs. 2. 24 crores mainly to M/s. Hindustan a/e no 00862320002603), M/s. HEM a/c no.00862790000129), M/s Shiv Enterprise (R 10. 95 Lacs a/c no 16962320000147), NEM/RTGS transfers aggregating to Rs 1. 13 Crores mainly to self account (Rs 88. 50Lakhs JMT Drive solution (Rs 2. 03 Lakhs Punjab National Bank), managers cheque issued aggregating to Rs 56. 67 Lakhs followed by cash withdrawals across the counter aggregating to Rs 23. 45 Lakhs. 3. On the basis of the information received/available and the assessee have not been incorporated in the computation and return of income during the year under consideration I have reason to believe that the income chargeable to tax in the case of M/s. Jain Machine Tools to the tune of assessment for A.Y.2012-13 and needs to be assessed in its proper perspective and to bring to tax appropriate income of the assessee. It is needs to be assessed in its proper perspective and bring to tax appropriate income of the, assessee. 4. Considering believe that income chargeable to tax in the hands of the assessee for the year under consideration to the tune of above Rs.1,00,000/ assessment due to failure on the part of the assess and truly all material facts 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s.148 has to be obtained separately from Principal Commissi of Income Tax-29, Mumbai as per the provisions of section 151 of the Act. 4.9 On perusal of the above reasons recorded, we find that there is no information that any income had escaped assessment. The Assessing Officer has referred to various credit received from the customers. mentioned in the the reasons recorded. The Assessing Officer has nowhere mentioned that either those parties are bogus or the entries received are assessment has been reopened only for the purpose of verification of those credits and on the premise that assessee had not income arising from said transaction The Assessing Officer has merely spe nowhere suggests corresponding to those transactions full Bench of the Hon’ble Delhi High Court in the case of Commissioner of Income International Ltd. (2012) 348 ITR 485 (Del) conditions are required for reopening in assessment made u/s 143(3) of the Act. (i) to be assessed in its proper perspective and to bring to tax appropriate income of the assessee. It is needs to be assessed in its proper perspective and bring to tax appropriate income of the, assessee. 4. Considering the facts and circumstances of the case. I have reason to believe that income chargeable to tax in the hands of the assessee for the year under consideration to the tune of above Rs.1,00,000/ assessment due to failure on the part of the assessee to disclosed fully and truly all material facts 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s.148 has to be obtained separately from Principal Commissi 29, Mumbai as per the provisions of section 151 of the Act. On perusal of the above reasons recorded, we find that there is no information that any income had escaped assessment. The Assessing Officer has referred to various credit entries stated to be received from the customers. Name of the customers have the reasons recorded. The Assessing Officer has nowhere mentioned that either those parties are bogus or the in the nature of accommodation entries. The assessment has been reopened only for the purpose of verification and on the premise that assessee had not income arising from said transactions into the return of income. The Assessing Officer has merely speculated and the information that assessee had not offered income corresponding to those transactions in the return of income full Bench of the Hon’ble Delhi High Court in the case of Commissioner of Income-tax-VI, New Delhi International Ltd. (2012) 348 ITR 485 (Del) held that following conditions are required for reopening in assessment made u/s 143(3) of the Act. (i) The Assessing Officer must form a tentative or Jain Machine Tools 9 ITA No. 2110/MUM/2024 to be assessed in its proper perspective and to bring to tax appropriate income of the assessee. It is needs to be assessed in its proper perspective the facts and circumstances of the case. I have reason to believe that income chargeable to tax in the hands of the assessee for the year under consideration to the tune of above Rs.1,00,000/- has escaped ee to disclosed fully 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence, necessary sanction to issue notice u/s.148 has to be obtained separately from Principal Commissioner 29, Mumbai as per the provisions of section 151 of the Act.” On perusal of the above reasons recorded, we find that there is no information that any income had escaped assessment. The entries stated to be Name of the customers have also been the reasons recorded. The Assessing Officer has nowhere mentioned that either those parties are bogus or the modation entries. The assessment has been reopened only for the purpose of verification and on the premise that assessee had not included into the return of income. culated and the information that assessee had not offered income in the return of income. The full Bench of the Hon’ble Delhi High Court in the case of VI, New Delhi v. Usha held that following conditions are required for reopening in assessment made u/s The Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is un assessment or escapement of income; facie opinion into writing; the reasons recorded or the information available on record must show that the opinion is not a mere suspicion; (iv and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer In cases where the first proviso appli requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. 4.10 In the instant case reasons to believe recorded by the Assessing Officer is merely based on the in Investigation Wing that there is a credit in bank statement in the course for the period from 2009 to 2015 there is no such information that those credits were non entry. Even the Assessing Officer is mentioning customers from whom those credits were received. Obviously there is a mere suspicion in the mind of the Assessing Officer and notice has been issued for the purpose of verification and for clearing the cloud of suspicion. The reasons to bel on what basis Assessing Officer formed reasonable believe that those credit appearing suspicion is not enough and the reasons to believe should prima facie opinion on the basis of material that there is un assessment or escapement of income; (ii) He must record the prima facie opinion into writing; (iii) The opinion formed is subjective but the reasons recorded or the information available on record must opinion is not a mere suspicion; (iv) Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income; (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. In the instant case reasons to believe recorded by the Assessing Officer is merely based on the information from the Investigation Wing that there is a credit in bank statement in the course for the period from 2009 to 2015 there is no such information that those credits were non-genuine or accommodation entry. Even the Assessing Officer is mentioning the name of the customers from whom those credits were received. Obviously there is a mere suspicion in the mind of the Assessing Officer and notice has been issued for the purpose of verification and for clearing the cloud of suspicion. The reasons to believe recorded do not show on what basis Assessing Officer formed reasonable believe that those credit appearing constitute income escaped assessment. Mere suspicion is not enough and the reasons to believe should Jain Machine Tools 10 ITA No. 2110/MUM/2024 prima facie opinion on the basis of material that there is under- He must record the prima The opinion formed is subjective but the reasons recorded or the information available on record must Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion regarding escapement of income; (v) es, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. In the instant case reasons to believe recorded by the formation from the Investigation Wing that there is a credit in bank statement in the course for the period from 2009 to 2015 there is no such genuine or accommodation the name of the customers from whom those credits were received. Obviously there is a mere suspicion in the mind of the Assessing Officer and notice has been issued for the purpose of verification and for clearing the ieve recorded do not show as on what basis Assessing Officer formed reasonable believe that escaped assessment. Mere suspicion is not enough and the reasons to believe should demonstrate that such requisite belief reasonable person u or the relevant material the case of Rajesh Jhaveri Stock Brokers (P.) Ltd. Taxman 316 (SC). belief must of a reasonable person reasonable grounds emerging from evidences and not mere discussion, we are of the opinion that the Assessing acted merely on surmise without any rational basis and therefore, action of the reopening is thus contrary to the law and unsustainable. Further, t the four years from the end of the relevant assessment yea therefore, the Assessing Officer was required to justify whether there was any failure on the part of the assessee in disclosing all the material facts fully and truly. However no such satisfaction has been recorded in the reasons to believe by the A only this failure, but we find the Assessing officer is unaware of the fact the assessment was completed u/s 143(3) of the Act, as he though mentioned the fact of processing under 143(1) of the Act but did not mention any prior scruti also the reassessment proceedings are not Accordingly, the reassessment order is quashed. The grounds raised by the assessee challenging validity of the reassessment are accordingly allowed. Si such requisite belief could be formed by a upon a plain reading of some basis/foundation or the relevant material, as held by the Hon’ble Supreme Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. . The words ‘reasons to believe’ indicate that reasonable person , which is reasonable grounds emerging from or through circumstantial and not merely on suspicion. In view of the above discussion, we are of the opinion that the Assessing acted merely on surmise without any rational basis and therefore, action of the reopening is thus contrary to the law and Further, the assessment has been reopened beyond the four years from the end of the relevant assessment yea therefore, the Assessing Officer was required to justify whether there was any failure on the part of the assessee in disclosing all the material facts fully and truly. However no such satisfaction has been recorded in the reasons to believe by the Assessing Officer only this failure, but we find the Assessing officer is unaware of the fact the assessment was completed u/s 143(3) of the Act, as he though mentioned the fact of processing under 143(1) of the Act but did not mention any prior scrutiny u/s 143(3) of the Act, also the reassessment proceedings are not liable to be Accordingly, the reassessment order is quashed. The grounds raised by the assessee challenging validity of the reassessment are accordingly allowed. Since, we have already quashed the Jain Machine Tools 11 ITA No. 2110/MUM/2024 could be formed by a pon a plain reading of some basis/foundation as held by the Hon’ble Supreme Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 161 believe’ indicate that , which is based on the through circumstantial on suspicion. In view of the above discussion, we are of the opinion that the Assessing Officer has acted merely on surmise without any rational basis and therefore, action of the reopening is thus contrary to the law and he assessment has been reopened beyond the four years from the end of the relevant assessment year and therefore, the Assessing Officer was required to justify whether there was any failure on the part of the assessee in disclosing all the material facts fully and truly. However no such satisfaction has ssessing Officer. Not only this failure, but we find the Assessing officer is unaware of the fact the assessment was completed u/s 143(3) of the Act, as he though mentioned the fact of processing under 143(1) of the Act but ny u/s 143(3) of the Act, therefore, liable to be sustainable. Accordingly, the reassessment order is quashed. The grounds raised by the assessee challenging validity of the reassessment are nce, we have already quashed the reassessment proceedings; grounds challenging merit of the additions. 5. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on Sd/ (SUNIL KUMAR SINGH JUDICIAL MEMBER Mumbai; Dated: 19/08/2024 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// proceedings; we are not adjudicating the grounds challenging merit of the additions. In the result, the appeal of the assessee is allowed. nced in the open Court on 19/08 Sd/- (SUNIL KUMAR SINGH) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Jain Machine Tools 12 ITA No. 2110/MUM/2024 we are not adjudicating the other In the result, the appeal of the assessee is allowed. /08/2024. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai