Appeal details
Counselvise Citation
[2021] 104 COUNSELVISE.COM (IT) 6171 (ITAT-PATNA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-12-2021
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Assessment Year
2012-2013
Appeal Filed On
26-04-2021
Judgement Text
1 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH: PATNA HEARING AT KOLKATA [Before Shri P. M. Jagtap, Vice-President (KZ) and Shri A. T. Varkey, JM] I.T.A. No. 32/Pat/2021 Assessment Year: 2012-13 ACIT, Central Circle-3, Patna Vs. Bhola Ram Papers & Powers Pvt. Ltd. (PAN: AAHCS 8837 K) Appellant Respondent C.O. No. 06/Pat/2021 (Arising out of I.T.A. No. 32/Pat/2021) Assessment Year: 2012-13 Bhola Ram Papers & Powers Pvt. Ltd. (PAN: AAHCS 8837 K) Vs. ACIT, Central Circle-3, Patna Cross-objector Respondent Date of Hearing (Virtual) 10.11.2021 Date of Pronouncement 17.12.2021 For the Appellant Shri Sanjay Mukherjee, CITDR For the Respondent Shri S.K. Tulsiyan, Advocate ORDER Per Shri A.T. Varkey, JM: This is an appeal preferred by the Revenue and cross objection filed by the assessee against the order of Ld. CIT(A)-Patna-3 dated 05.02.2021 for Assessment year 2012-13. 2. At the outset, the Ld. Counsel for the assessee Shri S.K. Tulsiyan contended that the assessee has preferred legal issue in its cross-objection against the order of the Ld. CIT(A) who has erroneously dismissed the same. So, according to him, if this legal issue is considered and adjudicated and if found to be valid then it goes to the root of the impugned re-assessment order and therefore the legal issue raised by the assessee may be first examined and adjudicated. The Ld. CITDR for the revenue does not have any objection. Therefore with the consent of both parties we are inclined to adjudicate the legal issue 2 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 raised by the assessee against the assumption of reopening jurisdiction by the AO u/s 147/148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) when admittedly the assessment has been reopened after four (4) years from the end of the relevant assessment year and the relevant assessment year (AY2012-13) has undergone scrutiny assessment u/s 153A read with Section 143(3) of the Act dated 31.03.2016, so according to Shri S.K. Tulsiyan, the fulfillment of the additional condition precedent as laid down in the first proviso to Section 147 also need to be satisfied i.e First Proviso provides “ no action of reopening shall be undertaken by the AO after the expiry of four (4) years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment order by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment [ emphasis given]”. It was urged by Shri S.K. Tulsiyan that in this case since the first proviso to section 147 is applicable to the facts of this case, before successfully re-opening the assessment, the AO has to satisfy two conditions precedent, that is firstly the AO has to satisfy the basic essential condition precedent to re-open an assessment ‘reason to believe, escapement of income’ by recording his satisfaction in which he should spell out the tangible material on the basis of which AO has reason to believe escapement of income and thereafter secondly the AO has to satisfy the additional condition precedent i.e. escapement of income was due to failure of assessee to disclose fully and truly all material facts necessary for the assessment which according to Shri S.K. Tulsiyan has not been fulfilled in this case before assumption of the jurisdiction to reassess the purported escaped income of the assessee. 3. The legal issue raised by the assessee in Cross objection is as under: 1. That on the facts and in law and in the circumstances of the case, the Ld. CIT(A) erred in upholding the action of the AO in initiating proceedings u/s 147 vide notice dated 29.03.2019 without existence of conditions for the initiation of the said proceedings. 2. That on facts and in law and in the circumstances of the case, the Ld. CIT(A) erred in upholding the action of the Ld. AO initiating proceedings u/s 147 for AY 2012-13 even though the assessee had duly filed return of income disclosing all material facts and the same was assessed u/s 153A r.w.s. 143(3) vide order dated 31.03.2016. 3. That on facts and in law and in circumstances of the case, the Ld. CIT(A) erred in upholding the action of the Ld. AO in initiating proceedings u/s 147 merely on a change of opinion. 3 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 4. That on facts and in law and in circumstances of the case, the Ld. CIT(A) erred in upholding the action of the ld. AO initiating proceedings u/s 147 merely on the basis of assumptions, presumptions and surmises. 5. That on facts and in law and in circumstances of the case, the Ld. CIT(A) erred in upholding the action of the Ld. AO in initiating proceedings u/s 147 without jurisdiction . 4. The facts of the case as discerned from the records including the paper book as well as from a perusal of the assessment order as well as the order of Ld. CIT(A) is that the assessee is a private limited company engaged in manufacture and trading of craft papers and paper boards. The assessee filed its return of income on 11.03.2013 declaring Nil income [Refer page 1 of PB]. Later a search operation was conducted u/s 132 of the Act on 16.09.2013 at the premises of the assessee and thereafter the AO issued statutory notice u/s 153A of the Act on 19.03.2014 and thereafter issued notices u/s 142(1) dated 10.12.2015 which is found placed at page 3 to 5 of PB, wherein the AO had asked for the details of the share application/share premium received from eleven (11) share subscribing companies. The AO in the statutory notice had specifically mentioned about report of the Investigation Wing of the Income Tax Department, Kolkata, which had conducted investigation about bogus/paper companies such as the share subscribing companies and has conveyed to assessee certain adverse findings of the investigation wing vide notice u/s 142(1) of the Act and thereafter the AO in a chart form had given the name and PAN of the share subscribing companies; their addresses and the adverse finding of the Investigation Wing that “company found to be non-existent by the Investigation Wing Kolkata”; and further the AO has also observed in the notice that in the course of search and seizure operation it was found that shares issued in the name of eleven (11) share subscribing companies were lying with M/s Lodha Patel Wadhwa & Co the auditor of the assessee company. Thereafter the AO has noted that 20840 shares of the assessee company were transferred to M/s Pioneer Commosale Pvt. Ltd. on 08.10.2010 and details of it were also given in the form of a chart. Thus it is noted that in the notice u/s 142(1) of the Act, the AO confronted the assessee with the aforesaid adverse information of investigation wing about the share-subscribers of the shares of assessee-company. From a perusal of the said notice it is discerned that the AO based on the investigation report was of the view that the assessee was infusing unaccounted fund from dubious sources through accommodation entry to it in the form of share capital/premium and therefore assessee was 4 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 put to notice by AO as to why the share application money/share capital/share premium claimed to have been received by the assessee during the year from eleven (11) share subscribers should not be added u/s 68 of the Act and also the assessee was given opportunity to produce evidence in respect of share subscribers i.e. to prove their identity, genuineness of the transaction and creditworthiness. The assessee had replied to the aforesaid detailed show cause notice (SCN) by letter dated 06.10.2015 (refer Pg 6 & 7 of PB) and 14.12.2015 (refer page 8 to 11 of PB) and submissions placed at page 12 to 19 of the PB. From a perusal of the reply to the SCN it is seen that the assessee had filed the details regarding the share application money of Rs. 1,58,50,000/-, share capital and share premium of Rs. 6,34,02,000/-. The assessee filed the following documents (refer page 20- 39 of PB) to prove identity of the share subscribers, their respective creditworthiness and genuineness of the transaction in respect of share application and share premium is received from the eleven (11) companies: i) Form for application of equity shares ii) Copy of Board resolution of the respective companies iii) Income Tax acknowledgement copy iv) Certificate of Incorporation. v) Copy of bank statement duly marked. vi) Copy of balance sheet of the company showing the amount of shares shown in the audited balance sheet assets side. vii) Certificate of incorporation of RoC of each share subscribing companies which shows that they are all registered companies under the companies Act. viii) PANs of all the share subscribing companies were furnished ix) And all of these share subscribing companies are assessed to tax. x) The assessee company has filed copy of their balance sheet which reflected the shares of the assessee company in their respective books of account on the assets side. xi) Their CIN, address were also furnished. xii) The assessee company after the receipt of share application money has allotted the shares to the respective applicants after approval by its Board. xiii) After the approval in the Board meeting, the return of allotment in Form 2 has been filed with the registrar of companies. 5 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 xiv) Then share certificate has been issued for the allotted shares. xv) Bank statement highlighting the transfer of share application of money through bank without any prior deposit of cash. 5. Moreover before the AO, the assessee had submitted the copy of Form-2 filed before RoC, Patna along with the filing receipt with the copy of present/current correspondence address of the share subscriber/ applicant companies (Refer page 20-39 of PB). Further it was brought to the notice of the AO that on a perusal of the bank statements of the share applicants it can be seen that no cash was deposited in the accounts of the share applicants prior to cheques were issued by them for share application money. Thus on the strength of the aforesaid facts supported by evidences (supra) according to the assessee it has discharged the burden casted on it as per section 68 of the Act, to prove the nature and source of the credit entry which in this case was share capital and premium the assessee had collected from eleven (11) share subscribers and thus proved the identity of the share applicants, their creditworthiness and genuineness of the transactions. Therefore it was pleaded before the AO that section 68 addition proposed by him in SCN is not warranted in this case, because the nature and source of the credit entries have been proved/explained. The AO after going through the aforesaid documents after conducting enquiry and after verification of the same did not find any infirmity in the documents/information filed by the assessee in respect to the share application/capital/premium collected and so the AO being satisfied with the nature and source of the credit entries in the form of share capital and premium, passed the re- assessment order u/s 153A/143(3) by order dated 31.03.2016 wherein the AO had acknowledged that the assessee had duly complied with the notices u/s 143(2) and 142(1) of the Act and has filed replies along with documents to the requirements called for by detailed questionnaire asked by him. The AO acknowledges that the Chartered Accountant of the assessee has attended the reassessment proceedings from time to time and filed details/particulars as called for as per the questionnaire and had duly noted that in course of assessment proceedings he had obtained and verified the same and thereafter has conducted the enquiry and after verification has accepted the same/return of income filed by the assessee. Moreover the AO, (ACIT, Central Circle-3, Patna) had observed in the assessment order that the order has been passed Commissioner of Income Tax 6. The aforesaid order passed by the AO u/s 153A read with Section 143( 30.03.2016 was proposed to be opened by the AO notice u/s 148 dated 29.03.2019 ( assessee filed reply pursuant to the notice letter dated 12.07.2019 requesti treat the return filed u/s 139 as return in response to notice received u/s requested for the copy of the satisfaction recorded proceedings u/s 147 of the Act. The copy According to Shri S.K. Tulsiyan, the reasons recorded by the AO does not satisfy the essential condition precedent as laid down in Section 147 of the Act i.e. escapement of income as well as the condition precedent as p Section 147 of the Act since it is attracted in this case, i.e. The escapement of income was due to failure of assessee to assessment. So we have to examine whether both the condition precedent satisfied before he had validly usurped go through the contents of the ‘ test whether the AO had successfully usurped the jurisdiction. So let us read the recorded by the AO for reopening Section 143(3) of the Act dated 30.03.2016 (supra) “Information was received in this case from the Deputy Director of Income Tax (Investigation), Unit-3, Kolkata that this assessee has taken accommodation entries from ShriMukesh Banka of Banka Group in the form of bogus unsecured loan o of paper/shell companies of Banka Group through which the assessee, M/s Shree Vishnu Vishal Paper Mills Pvt. Ltd. has benefitted, is as under: 6 Bhola Ram Papers & assessment order that the order has been passed with the prior approval of Joint Tax, Central Range-1, Patna as per of Section 153D of the Act. The aforesaid order passed by the AO u/s 153A read with Section 143( 30.03.2016 was proposed to be opened by the AO again by issuance of notice u/s 148 dated 29.03.2019 (refer page 2 of PB) calling for the return of income and pursuant to the notice letter dated 12.07.2019 requesti treat the return filed u/s 139 as return in response to notice received u/s requested for the copy of the satisfaction recorded/reasons recorded proceedings u/s 147 of the Act. The copy of which is placed at pa According to Shri S.K. Tulsiyan, the reasons recorded by the AO does not satisfy the essential condition precedent as laid down in Section 147 of the Act i.e. as well as the condition precedent as prescribed in First proviso to Section 147 of the Act since it is attracted in this case, i.e. The escapement of income was failure of assessee to disclose fully and truly the necessary relevant facts assessment. So we have to examine whether both the condition precedent validly usurped the reopening jurisdiction. For that we have to first go through the contents of the ‘reasons recorded by the AO’ to reopen test whether the AO had successfully usurped the jurisdiction. So let us read the for reopening the already completed reassessment u/s 153A read with Section 143(3) of the Act dated 30.03.2016 (supra) recorded by AO is as under: “Information was received in this case from the Deputy Director of Income Tax (Investigation), 3, Kolkata that this assessee has taken accommodation entries from ShriMukesh Banka of Banka Group in the form of bogus unsecured loan or in other forms. Unaccounted cash transaction of paper/shell companies of Banka Group through which the assessee, M/s Shree Vishnu Vishal Paper Mills Pvt. Ltd. has benefitted, is as under: ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 the prior approval of Joint of Section 153D of the Act. The aforesaid order passed by the AO u/s 153A read with Section 143(3) dated issuance of the impugned ) calling for the return of income and pursuant to the notice letter dated 12.07.2019 requesting the AO to treat the return filed u/s 139 as return in response to notice received u/s 148 and also /reasons recorded for initiation of placed at page 81 to 82 of PB. According to Shri S.K. Tulsiyan, the reasons recorded by the AO does not satisfy the essential condition precedent as laid down in Section 147 of the Act i.e. Reason to believe rescribed in First proviso to Section 147 of the Act since it is attracted in this case, i.e. The escapement of income was fully and truly the necessary relevant facts during the assessment. So we have to examine whether both the condition precedents, the AO the reopening jurisdiction. For that we have to first to reopen the assessment and test whether the AO had successfully usurped the jurisdiction. So let us read the reasons the already completed reassessment u/s 153A read with is as under: “Information was received in this case from the Deputy Director of Income Tax (Investigation), 3, Kolkata that this assessee has taken accommodation entries from ShriMukesh Banka of r in other forms. Unaccounted cash transaction of paper/shell companies of Banka Group through which the assessee, M/s Shree Vishnu Vishal These appear to be bogus transactions done by assessee as a has been paid taxes and requires further verification. Therefore, on the basis of this tangible material on record, I have reason to believe, within the scope and meaning of terms contained in sec 148(2) read with income to the tune of Rs. 2,04,00,468/ escaped was on account of failure on the part of the assessee to disclose fully and truly all material facts. Therefore, the case of the assessee for AY 2012 bring to tax the income escaped." 7. The assessee objected to the 20.11.2019 (refer page 83 to 89 of PB AO that the assessment for the AY Central Circle-3, Patna approved 31.03.2016. And that the AO had share capital and premium on the basis of investigation wing report the assessee was asked to prove the nature and source of the entire credit entries capital and premium) and pursuant to supporting evidence the identity creditworthiness / genuineness Samkit Finance Pvt. Ltd. and M/s S assessee the nature and source of the credit entry was proved. Thus assessee discharged the burden of proving the identity, creditors/shareholders who had explanation and evidences which are the AO after due verification and enquiry, being satisfied with the genuineness of the transaction had accepted the 1,58,00,000/- & Rs. 6,34,02,000/ 31.03.2016 u/s 153A/143(3) of the Act 7 Bhola Ram Papers & These appear to be bogus transactions done by assessee as a cover for real income on which no has been paid taxes and requires further verification. Therefore, on the basis of this tangible material on record, I have reason to believe, within the scope and meaning of terms contained in sec 148(2) read with sec 147 of the Act, that assessee's income to the tune of Rs. 2,04,00,468/- has escaped assessment for the AY 2012 escaped was on account of failure on the part of the assessee to disclose fully and truly all material ase of the assessee for AY 2012-13 needs to be reopened u/s 147 of the Act to bring to tax the income escaped." The assessee objected to the aforesaid reasons by filing an objection dated refer page 83 to 89 of PB) wherein the assessee brought to the notice of the AO that the assessment for the AY 2012-13 was completed u/s. 153A/ approved by JCIT u/s 153 of the Act vide reassessment order dated And that the AO had particularly scrutinized the credit entries share capital and premium on the basis of investigation wing report and in that proceedings the assessee was asked to prove the nature and source of the entire credit entries and pursuant to the same and the assessee has proved identity of the eleven (11) share subscriber creditworthiness / genuineness including that of two creditors found fault with i.e, M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd. Thus according to the assessee the nature and source of the credit entry was proved. Thus assessee discharged the burden of proving the identity, creditworthiness and genuineness who had subscribed to the shares of the company by satisfactory explanation and evidences which are already on record/assessment folder. And the fact t after due verification and enquiry, being satisfied with the genuineness of the transaction had accepted the nature and source of the entire credit entries to the tune of Rs. & Rs. 6,34,02,000/- and in the said scrutinized reassessment order 31.03.2016 u/s 153A/143(3) of the Act in para 3 and 4 has specifically observed that: ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 ver for real income on which no tax Therefore, on the basis of this tangible material on record, I have reason to believe, within the sec 147 of the Act, that assessee's has escaped assessment for the AY 2012-13. The income escaped was on account of failure on the part of the assessee to disclose fully and truly all material 13 needs to be reopened u/s 147 of the Act to reasons by filing an objection dated ght to the notice of the 13 was completed u/s. 153A/143(3) by the ACIT, assessment order dated ed the credit entries in the form of and in that proceedings the assessee was asked to prove the nature and source of the entire credit entries (share he assessee has proved with the of the eleven (11) share subscribers their respective including that of two creditors found fault with i.e, M/s . Thus according to the assessee the nature and source of the credit entry was proved. Thus assessee discharged the genuineness of the shares of the company by satisfactory /assessment folder. And the fact that after due verification and enquiry, being satisfied with the genuineness of the share nature and source of the entire credit entries to the tune of Rs. assessment order dated in para 3 and 4 has specifically observed that: 8 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 " Stationary notice u/s 42(1) & 143(3) were issued to the assessee along with the detailed questionnaire. In response to which Shri Amit Kamalia, CA of the assessee attended and filed details/particulars as called for as per questionnaire and during the assessment proceedings obtained, verified and placed on record. All relevant records available have been perused and the case was discussed with the Counsel of the assessee in detail. In the above circumstances, available facts in the record and after discussions made with AR, the return income is accepted and assessed at Rs. Nil/-.” 8. The assessee in its objection against the proposed reopening had specifically brought to the notice of the AO that it had disclosed all material facts truly and fully as required as per the law during the already concluded reassessment proceedings dated 31.03.2016 u/s 153A/143(3) of the Act i.e. the precise material/adverse material from investigation wing was confronted to the assessee in the SCN u/s 142(1) dated 10.12.2015 and the AO u/s 153/143(3) after enquiry and verification accepted the nature and source of share capital and premium which includes the transaction with M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd. Therefore according to Shri S K Tulsiyan, the condition precedent as per first proviso to Section 147 of the Act has not been satisfied by the AO before usurping the jurisdiction u/s 147 of the Act. Thus it was brought to the notice of the present incumbent AO that issuing of notice u/s 148 for reassessment is bad because the condition precedent as prescribed by first proviso to Section 147 is not satisfied and requested him to drop the reassessment proceedings being bad for non-satisfaction of first proviso to Section 147 of the Act. According to Ld. A.R., Shri S.K. Tulsiyan, since first proviso is attracted, so the condition prescribed in the first proviso to Section 147 of the Act which is an essential jurisdictional fact has to be satisfied and the jurisdictional fact is whether the assessee failed to disclose during the scrutiny proceedings [pursuant to the AO’s notice u/s 142(1) of the Ac in the earlier scrutiny] to disclose fully and truly the material facts necessary for the assessment of the assessee for that assessment year. According to Shri S.K. Tulsiyan the present AO while over ruling the assessee’s specific objection against usurping the reopening jurisdiction had erroneously on mistaken belief has erroneously over-ruled the valid objections raised by the assessee. Shri S.K. Tulsiyan drew our attention to the AO’s observation while he rejected the objection filed by the assessee as under (Refer page 90 and 91 of PB) : “This issue of proving the identity, creditworthiness of the shareholders and genuineness of the transactions has to be seen in the light of the recent judgment of Hon'ble Supreme Court in the case of PCITvs NRA Iron and Steel Pvt. Ltd (SC) (2018). In view of the above, your objection is overruled as because at the time of Assessment u/s 153A/143(3) the issues related 9 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 to all the entries pertaining to share application money for the FY 2011-12, which includes share application money received from M/s. Samkit Finance Pvt. Ltd. amounting to Rs. 1,04,00,303/- and from M/s. Saphire Conclave Pvt. Ltd. amounting Rs.1,00,00,165/- was not examined with due diligence as discussed above.” 9. The aforesaid action of the AO to over-rule the objection raised by the assessee as well as his jurisdiction to reopen without satisfying the essential jurisdictional fact as stipulated u/s 147 of the Act and more particularly the requirement of first proviso to section 147 of the Act is under challenge before us. It is noted that the AO after over- ruling the objection raised by the assessee has made an addition of Rs. 2,04,00,468/- u/s 68 of the Act . Aggrieved by the aforesaid action of the AO, the assessee preferred an appeal before the Ld. CIT(A) who vide impugned order dated 05.02.2021 held that the AO has rightly reopened the case of the assessee and, therefore, according to him, the issuance of notice u/s. 148 of the Act is valid [refer page 24 of the impugned order of Ld. CIT(A)]. However, the Ld. CIT(A) was pleased to delete the addition made to the tune of Rs.2,04,00,468/- on merits after calling for the remand report from AO and clearly noted that in the earlier scrutiny proceedings u/s 153A/143(3), the AO had gone through the very same issues/facts on which the present proceedings have been reopened/initiated and the Ld. CIT(A) took note of the fact that despite calling for remand report, the AO, failed to conduct proper enquiry on this issue and failed to bring any material on record to rebut the evidence submitted by the assessee to prove the nature and source of credit entries, so he was pleased to delete the addition ordered by the AO. 10. The Ld. CIT(A) also found that in respect of sums received on account of share application money the assessee has submitted during the earlier proceedings (section 153A/143(3) proceedings) the relevant evidence/details to prove the identity, creditworthiness and genuineness of the entire share transaction. According to Ld. CIT(A), the assessee had discharged the burden on it to prove the nature and source of the credit entries; and he found fault with the AO to have failed to examine/verify the documents/details submitted by the assessee and the Ld. CIT(A) found fault with the AO having simply relied upon the information submitted by the DDIT, Investigation, Kolkata [refer page 26 of the impugned order of the Ld. CIT(A)]. The Ld. CIT(A) while giving relief to the assessee had called for the entire search folder u/s. 153A as well as called for 10 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 the remand report from the AO and after considering the same has given relief to the assessee on merits. 11. Against the action of the Ld. CIT(A) the department has filed an appeal against the deletion of addition of Rs.2,04,00,468/-. However, since the assessee has preferred the cross-objection by raising a legal issue challenging the very jurisdiction of AO to reopen the assessment for this relevant assessment year which has already undergone re- assessment u/s 153A/143(3) of the Act, the additional condition precedent as prescribed by the first proviso to Section 147 of the Act is attracted. According to the assessee, the essential condition precedent for invoking the reopening is not met by the AO, so if has assailed the jurisdiction of AO to reopen and this being a legal issue and if found valid, then it goes to the root of the impugned action of AO, we are examining the same first. 12. Assailing the action of the AO to have invoked his jurisdiction to reopen the assessment u/s. 147 of the Act by issuing notice u/s. 148 of the Act based on certain Investigation Wing report, according to Ld. AR, Shri S.K. Tulsiyan, the AO has not validly recorded the “reason to believe escapement of income” of the assessee for the year under consideration. According to Shri S.K. Tulsiyan, the assessee had undergone thorough scrutiny u/s. 153A/143(3) of the Act on the very same issues based on the investigation report from the wing itself and after enquiry the AO had accepted the nature and source of credit entries (share capital and premium) and was passed by the ACIT/AO on 31.03.2016 after approval of the Joint Commissioner of Income Tax u/s 153D of the Act. Therefore according to Shri S.K. Tulsiyan, the AO/ACIT while framing the assessment order u/s 153A/143(3) after issuance of notice u/s 142(1) of the Act and after confronting the assessee with the adverse investigation wing report against all the eleven (11) share subscribers [including the two (2) share subscribers the present AO has raised doubts about based on the report of investigation wing] had called for details of the credit entries/share capital and premium from all eleven (11) share subscribers and after verification and enquiry on the issue having accepted the nature and source of the credit entries including that being again racked up by the present incumbent AO [i.e. in respect of credit entries from M/s Sanskrit Finance Ltd. & M/s Saphire Conclave Pvt. Ltd.] according 11 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 to Ld. A.R, the AO could not have done so on the specious plea that the credit entries from these two entities were not examined with due diligence. According to Shri S. K. Tulsiyan, the AO though have the power to reopen the assessment, does not enjoy the power of review. From the observation of the AO while overruling the objection of assessee against reopening, the only fault according to AO was that earlier AO has not examined with due diligence the credit entries from these two entities. This action of AO according to Shri S.K. Tulsiyan is patently wrong since the second AO failed to realise that he is not the Commissioner exercising power u/s 263 of the Act to revise the action of AO. Further Shri S.K. Tulsiyan drew our attention to the enquiries conducted by the earlier AO on the very same issues. According to Ld. AR, from a perusal of the show cause notice issued during the 153A/143(3) proceeding which is placed at page no. 3 to 5 shows that the AO at that time itself dated 10.12.2015 had clearly nursed doubts about the credit entries from these two entities M/s. Saphire Conclave and M/s. Samkit Finance Pvt. Ltd. which is evident from page 4 wherein these two companies name also has been reflected among the eleven (11) share subscribers and , their addresses given and even the finding of the Investigation Wing that these two companies are found to be non-existent by them. Armed with this adverse information only the AO in that earlier proceeding had issued the show cause notice date 10.12.2015 which was responded to by the assessee by filing all the details pertaining to these two companies and filed the following documents to substantiate the nature and source of the credit entries from both of them: a) Form of application of equity shares b) Copy of Board Resolution of the respective company c) Income tax acknowledgement copy d) Certificate of Incorporation e) Copy of bank statement duly marked f) Copy of balance sheet of the company showing the amount of shares shown in the audited balance sheet assets side. 13. According to Shri S.K. Tulsiyan by filing the aforesaid documents to substantiate the identity, creditworthiness and genuineness of the credit entries, the assessee brought to the notice of the predecessor AO u/s 153A/143(3) of the Act that the sums credited are in the nature of share capital and premium from them and these two entities among others are share subscribers; the predecessor AO going through the documents and after conducting 12 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 enquiry and verification of the same had completed the assessment with the prior approval of the Jt. CIT, Range dated 31.03.2016 u/s 153D of the Act without drawing any adverse view against the nature & source of the credit entries for them (M/s Saphire Conclave Pvt Ltd and M/s Samkit Finance Pvt. Ltd.). It was pointed out by Shri S.K. Tulsiyan that the Ld. CIT(A) before giving relief to the assessee had called for the search folder as well as the remand report from AO and after perusal of the documents has given relief to the assessee. And, therefore, the attempt made by the present AO again to reopen the assessment on the specious plea of having received information received from the DDIT, Investigation Wing -3, Kolkata that the assessee has taken accommodation entry from M/s. Samkit Finance Ltd. and M/s. Saphire Conclave Ltd. is patently erroneous and this information from DDIT, Investigation cannot be termed as tangible material for reopening the already completed assessment u/s. 153A/143(3) of the Act. According to Shri S.K. Tulsiyan from a perusal of reasons recorded to reopen it can be seen that the AO merely mentions about an information from the DDIT, Investigation, however, he has not spelt out the details of the information viz. (i) date of information (ii) what was the content of the information, (iii) whether any material was enclosed with the purported information etc. According to him, a mere passing reference of information from Investigation Wing is akin to “hearsay” which cannot be termed as a tangible material for reopening the completed assessment u/s. 153A/143(3) of the Act when the earlier AO had already conducted enquiry on it and has reached a conclusion on it. According to Ld. A.R., it is settled law that the AO does not enjoy the power of review. According to Shri S.K. Tulsiyan, it is settled position of law that the concept of assessment is governed by the time barring rule and assessee acquires a right as to the finality of the assessment proceeding. According to him, queitus of the completed assessment can be disturbed only when there is tangible material regarding undisclosed income or material to show escapement of income. Here according to Shri S.K. Tulsiyan not only this essential jurisdictional fact necessary for reopening as specified in Section 147 of the Act, has been satisfied and since the reopening for AY 2012-13 which has already undergone scrutiny u/s 153A/143(3) of the Act was admittedly after four (4) years, the additional conditional precedent, jurisdictional fact i.e. AO’s satisfaction that there was failure on the part of the assessee to disclose truly and fully the material facts necessary for assessment [regarding 13 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 the issue i.e. the share capital/premium from M/s Samkit Finance Ltd. and M/s Saphire Conclave Ltd. was given by the assessee in the earlier scrutiny] the Ld AR wondered as to how there can be failure on the part of assessee. So this essential conditional precedent is absent. In this case, according to Shri S.K. Tulsiyan the AO by reopening the assessment, is trying to review the action of the earlier AO to have accepted the nature and source of share capital and premium from M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd. which action of AO according to Shri S.K. Tulsiyan is not permissible and the present AO has no authority of law to do so. Moreover according to Shri S.K. Tulsiyan it can be seen that the AO has formed his belief regarding escapement of income based on the strength of borrowed satisfaction of the Investigation Wing which action of the AO is also bad in law and the impugned action of AO can at best be termed as “change of opinion” on the same facts which also cannot be a ground to reopen. According to the Ld. AR, the power to reopen is not akin to power to review. According to Ld. AR, the AO has power to reopen and reassess and not the power to review an order of his predecessor AO, therefore, according to Shri S.K. Tulsiyan, this is nothing but an attempt made by the AO to review the decision of his predecessor AO which power he does not enjoy and, therefore, the impugned action of the AO by looking from any angle is without jurisdiction and therefore has to be quashed. 14. Per contra, the Ld. CIT, DR Shri Sanjay Mukherjee vehemently opposes the submission of the assessee and submits that when the Investigation Wing report specifically stated that the share subscribers have dubious background and they are accommodating entry operators, therefore the present AO has rightly issued notice u/s. 148 of the Act and, therefore, he does not want us to interfere in the order of the Ld. CIT(A) upholding the action of reopening by the AO. 15. We have heard rival submissions and gone through the facts and circumstances of the case. Before we examine the legal issue one should bear in mind that the concept of assessment is governed by the time barring rule and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments should not be disturbed which is the Rule and exception to this Rule is that it can be done only when there is 14 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 information or evidence/material before him regarding undisclosed income or the AO has information in his possession showing escapement of chargeable income and when Parliament allows such an action, which can be done only if the condition precedent stipulated therein is strictly satisfied. 16. Attention is sought to the provisions of section 147 of the Act which is reproduced here-under:- "If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of section 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment: year)......... " Provided that where an assessment under sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of Section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year.” 17. Hon’ble Bombay High Court in the case of Prashant S. Joshi (2010) 230 CTR 232 (Bom) has observed ‘The AO must have reasons to believe that such is the case (i.e. any income chargeable to tax has escaped assessment for a particular year) before he proceeds to issue notice u/s 147”. In other words, reasons have to be recorded for reopening the assessment prior to issuance of notice u/s 148 of the Act. It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor any thing can be deleted from the reasons so recorded. The Hon’ble Bombay High Court in the case of Hindustan Lever [2004] 267 ITR 332 hasinteralia, observes that “.............. it is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reason not recorded by him. He has to speak through the reasons.” Their Lordship added that “The reasons recorded should be self-explanatory and should not keep the assessee guessing for reasons. Reasons provide link between 15 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 conclusion & the evidence.........”. Therefore reasons are to be examined only on the basis of the reasons as recorded. 18. The next important point is that even though reasons, as recorded, may not necessarily prove escapement of income at the stage of recording the reasons, such reasons must point out to an income escaping assessment and not merely need of an inquiry which may result in detection of an income escaping assessment. Undoubtedly at the stage of recording the reasons for reopening the assessment; all that is necessary is the formation of prima facie belief that an income has escaped the assessment; and it is not necessary the fact of income having escaped is proved to the hilt. What is however, necessary is that there must be something which indicates even if not establishes the escapement of income from assessment. It is only on this basis that the AO can form the belief that an income has escapement. Merely because some further investigation have not been carried out, which if made, could have led to detection to an income escaping assessment, cannot be reason enough to hold the view that income has escaped assessment. It is also important to bear in mind the subtle but important distinction between factor which indicate an income escaping the assessment and the factors which indicates a legitimate suspicion ‘about income escaping the assessment.” The former category consists of the facts which, if established to be correct, will have a cause & effect relationship with the income escaping assessment. The later category consists of facts, which , if established to be correct, could legitimately lead to further inquiries which may lead to detection of an income which has escaped assessment. In order to validly reopen, the requirement is that there has to be some kind of cause & effect relationship between reasons recorded and the income escaping assessment. While dealing with this matter it is useful to bear in mind the following observation of Hon’ble Supreme Court in ITO vs. LakhmaniMewal Das [1976] 103 ITR 437 wherein the Hon’ble Supreme Court has taken note of the additional condition precedent required as per first proviso u/s 147 for reopening the assessment after four (4) years . The relevant portion has held as follows: “The reasons for the formation of the belief must have a rational connection with or relevant bearing of the formation of the belief . Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the ITO and 16 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 the formation of his belief that there has been escapement of income of the assessee from the assessment in the particular year because of his failure to disclose fully & truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material & substitute its own opinion for that of the ITO on the point as to whether actions should be initiated for reopening assessment. At the same time we have to bear in mind that it is not that any or every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee.” 19. Sec. 116 of the Act also defines the Income Tax Authorities as different and distinct authorities. Such different and distinct authorities have to exercise their powers given to them in specified circumstances. If power conferred on a particular authority are arrogated by another authority without mandate of law, it will create chaos in the administration of law & hierarchy of administration will mean nothing. Satisfaction of one authority cannot be substituted by the satisfaction of the other authority. It is trite that when a statute requires a thing to be done in a certain manner, it shall be done in that manner alone and the court would not expect its being done in some other manner. It was also held in the decision in State of Bihar vs .J.A.C. Saldanha&Ors. Reported in AIR 1980 SC 326 . Satisfaction recorded should be ‘independent’ and not borrowed or dictated satisfaction. In the decisions reported in (1995) 5 SCC 302 it was held that if a statutory authority has been vested with jurisdiction, he has to exercise it according to his own discretion. If discretion is exercised under the direction or compliance with some higher authorities instruction, then it will be a cases of failure to exercise discretion altogether. 20. In the case of Ganga Saran and Sons P. Ltd. v. ITO, [1981] 130 ITR 1 (SC) the Hon’ble Supreme Court held: “It is well settled as a result of several decision of this Court that two distinct condition must be satisfied before the AO can assume jurisdiction to issue notice u/s 147. First he must have reason to believe that the income of assessee has escaped assessment. – The important words under Section 147(a) are “has reason to believe” & these words are stronger than the words “is satisfied”. The belief entertained by AO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant & material. The Court of course cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the AO in coming to the belief the 17 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 Court can certainly examine whether the reason are relevant and have a bearing on the matter in regard to which he is required to entertain the belief before he can issue notice u/s 147(1). If there is no rational and intelligible nexus between the reasons & the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the AO could not have reason to believe that any part of the assessee had escaped assessment refer 203 ITR 456 (SC) also). 21. Here it is important to understand one more aspect that information adverse may trigger “reason to suspect”, then the AO to make reasonable enquiry and collect material which would make him believe that there is in fact an escapement of income. The statutory mandate/condition precedent for an AO to exercise his power is that he should have reason to believe escapement of income. Before an AO proposed to reopen an assessment he should record his reasons as to how he has formed the belief about the escapement of income. In this respect, it is settled that “Reason to believe” postulates a foundation based on information and a belief based on reason. After a foundation based on information, is made there still must be some reason which should warrant the holding of a belief that income chargeable to tax has escaped income. In this context it must be remembered that Hon’ble Supreme Court in M/s Ganga Saran & sons (P) Ltd. vs. 130 ITR 1 (SC) has held that the expression “Reason to believe” occurring in section 147 of the Act “is stronger” than the expression “is satisfied” and such jurisdictional requirement has to be met by the AO before he usurp the jurisdiction to re-open an assessment. 22. In the light of the settled position of law regarding the legal issue raised by the assessee challenging the jurisdiction of the present AO (second) to reopen the reassessment dated 31.03.2016 for AY 2012-13 which had undergone scrutiny u/s 153A/143(3) earlier in the hands of ACIT (with approval of JCIT u/s 153D), wherein the first AO has enquired about the very same transaction of share capital and premium inter alia along with other eleven (11) share subscribers/companies which was also based on the adverse report of the investigation wing. And based on a similar investigation wing material/adverse information regarding two (2) entities i.e. M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd before the present AO, (hereinafter the ‘Second AO’) 18 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 the AO formed the belief of escapement of income. Even though it was brought to the notice of second AO that the transaction with M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd had been thoroughly scrutinized by the earlier proceedings u/s 153A/143(3), he did not agree and went ahead to re-assess the transaction which had been accepted by the first AO, is akin to review the action of the first AO which is not permitted by law. So first of all we have to see whether the first AO had examined about these two entities in his reassessment order dated 31.03.2016. For that let us have a look at the relevant portion of the first AO’s SCN dated 10.12.2015 in respect of eleven (11) share subscribers but since we are only concerned about M/s Samkit Finance Pvt. Ltd. and M/s Saphire Conclave Pvt. Ltd. which had subscribed to the share of erstwhile (earlier assessee’s name was M/s Shree Vishnu Vishal Paper Mills Pvt. Ltd. ) we are reproducing only about them, which are as under: “To The Principal officer M/s Shree Vishnu Vishal Paper Mills Pvt. Ltd. (PAN: AAHCS8837K) Plot No. NS-01, Industrial Growth Centre, Giddha, Arah Pin-802314 Sir, Sub: Requisition u/s 142(1) of the I.Tax Act for AY 2012-13-reg During the course of assessment proceeding and gone through reply submitted by you it is found that following amount has been received by your company as share application/share premium through different alleged companies registered in the ROC of Kolkata during the AY mentioned above: Sl No. Name of the company Address 1 Samkit Finance Pvt. Ltd. 2, Lal Bazar Street, 1 st Floor, Kolkata-700001 2 Saphire Conclave Pvt. Ltd. 33/1, N.S. Road, 6 th Floor, Kolkata-700001 During the investigation by the Investigation Wing of Income Tax Department, Kolkata following findings has been communicated regarding above companies: Sl No. Name of the company Address Findings of the investigation wing 1 Samkit Finance Pvt. Ltd. 2, Lal Bazar Street, 1 st Floor, Kolkata-700001 Company found to be non- existent by investigation wing, Kolkata 19 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 2 Saphire Conclave Pvt. Ltd. 33/1, N.S. Road, 6 th Floor, Kolkata-700001 Company found to be non- existent by investigation wing, Kolkata Further it was found in the course of search & seizure operation that the shares issued in the name of above companies were lying with the M/s Lodhal Patel Wadhwa& Co. the auditor of the assessee company. In the course of further investigation it was found that the 20840 shares of the assessee company were transferred to the M/s Pioneer Commosale Pvt. Ltd. on 08.10.2010. In this manner, the shares issued by the assessee company for Rs. 56,60,000/- was finally purchased by the family company of one of the director Shri Sanjay Kumar Modi M/s Pioneer Commosale Pvt. Ltd. for Rs. 1,19,992/-. The above facts clearly shows that the assessee company was in the practice of infusing unaccounted fund from dubious sources through the accommodation entries. It further finds support from the statement given by one of the director Shri Ashok Kumar Bagaria u/s 132(4) in which it was categorically admitted that huge funds were poured into the coffer of the company by the help of accommodation entries. Therefore, considering the similar nature of transactions made with the all the above companies and singularity of the occasion of issue of shares, it appears that the above companies being paper companies utilized as the conduits for providing accommodation entries solely managed by the accommodation entry operators. Therefore it is required to explain that why the share application money/share capital/ premium claimed to have received by you during the year should not be taken as the receipts the source and nature of which remained unexplained and taken as income chargeable to tax u/s 68 of the Income Tax Act. Further it appears from the financial statements submitted by you that loan have been taken from different persons/concerns during the year on several occasions. In this connection you are requested to produce the satisfactory evidences in support of the identity, genuineness of transactions and the creditworthiness along with the proof indicating the status of the lender being one of the shareholders of the assessee company during the relevant time of making such transactions. Further it is required to produce declaration submitted by the members at the time of making loan transactions under the relevant deposit rules.” Pursuant thereto the aforesaid notice, the assessee had submitted replies (refer page 12-19 of PB) along with documents to substantiate the fact that the credit entries from these two companies were that of share capital & premium and the assessee filed proof of both companies along with other eleven (11) share subscribers to establish (i) identity, (ii) Creditworthiness & (iii) Genuineness of the transaction and both the companies financial statements for AY 2012-13 has been found placed at page 40-57 of PB regards M/s Samkit Finance Pvt. Ltd. & from page 58-70 of PB regarding M/s Saphire Conclave Pvt. Ltd. 23. From the documents filed by the assessee pursuant to the SCN issued by AO (first) u/s 142(1) dated 10.12.2015 (page 3-5 of PB) which culminated in the AO accepting the nature and source of credit entry in the form of share capital and premium from both these 20 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 companies, it is noted that the company in the course of assessment proceeding has already submitted details of share application money received during the year along with the name and address of the applicants. Further it is noted that in order to prove the identity, creditworthiness and genuineness of the transaction in respect to share application the assessee/share subscribers had submitted the following papers and documents: i) Form for application of equity shares ii) Copy of Board resolution of the respective companies iii) Income Tax acknowledgement copy iv) Certificate of Incorporation. v) Copy of bank statement duly marked. vi) Copy of balance sheet of the company showing the amount of shares shown in the audited balance sheet assets side. vii) Certificate of incorporation of RoC of each share subscribing companies which shows that they are all registered companies under the companies Act. viii) PANs of all the share subscribing companies were furnished ix) And all of these share subscribing companies are assessed to tax. x) The assessee company has filed copy of their balance sheet which reflected the shares of the assessee company in their respective books of account on the assets side. xi) Their CIN, address were also furnished. xii) The assessee company after the receipt of share application money has allotted the shares to the respective applicants after approval by its Board. xiii) After the approval in the Board meeting, the return of allotment in Form 2 has been filed with the registrar of companies. xiv) Then share certificate has been issued for the allotted shares. 24. Before the earlier AO, the assessee had submitted the copy of Form-2 filed before the RoC, Patna along with the filing receipt with the copy of present/current correspondence address of the applicant companies. Further it was brought to the notice of the AO that on a perusal of the bank statements of the share applicants it can be seen that no cash was deposited in the accounts of the share applicants prior to issuance of cheques for share application money. Thus on the strength of the aforesaid facts supported by 21 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 evidences (supra) according to the assessee it has discharged the burden on it to prove the identity of the share applicants, their creditworthiness and genuineness of the transactions and therefore pleaded before the earlier AO that section 68 addition is not warranted in this case as proposed in the notice. 25. Thereafter the AO (First) being satisfied about the nature & source of the credit entries from both these companies has accepted the same as genuine and passed the reassessment order u/s 153A/143(3) of the Act vide order dated 31.03.2016 (refer page 77- 78 of PB). Thus we find that the first AO had in fact conducted detailed enquiry in respect of these two companies while enquiring about other eleven (11) companies from which the assessee had shown credit entries. It is noted that the first AO had confronted the assessee with the adverse report from the very same source which has now prompted the present incumbent/ second AO to issue notice u/s 148 of the Act [i.e. investigation wing of the Department, Kolkata]. Taking cognizance of the adverse report from the same source the first AO had issued SCN dated 10.12.2015 (supra) and alleged that these two companies (M/s Samkit Finance Pvt. Ltd. & M/s Saphire Conclave Pvt. Ltd.) were not found to be existing. So it is noted that the first AO (ACIT) had raised serious doubt about the existence of these two companies based on the investigation wing report itself and after conducting enquiry & verification and after approval from JCIT u/s 153D has passed the reassessment order dated 31.03.2016 accepting the nature and source of the credit entries from these two companies also. So we find that the first AO has made the reassessment after discharging his duties as an investigator as well as that of an adjudicator. So the action of the Second AO to again rake up the same issue which has undergone scrutiny by his predecessor AO is nothing but review of the action of first AO dated 31.03.2016, which power it is settled that AO (second) does not enjoy. So the impugned actions of Second AO can at best be termed as change of opinion after review of earlier assessment which is not a jurisdictional ground to legally/validly usurp re-opening jurisdiction. And therefore the action of second AO is held to be bad in law on this score alone. Moreover, we find substantial merit in the contention of Ld. A.R. Shri S.K. Tulsiyan that the second AO has believed escapement of income on the strength of borrowed satisfaction of the Investigation Wing without conducting preliminary enquiry which action is also bad in 22 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 law. Moreover, it is noted that in this case the first proviso of Section 147 is attracted, and as discussed supra, the assessee has discharged the burden casted upon it and has disclosed during reassessment dated 31.03.2016 fully and truly all material facts necessary for assessment which culminated in the ACIT order dated 31.03.2016 u/s 153A/143(3) of the Act. On appeal, the Ld. CIT(A) has gone through the search folder and the remand report of AO and has returned a finding that assessee has discharged its burden in respect of credit entries from both these companies. Thus we find that the essential condition precedent for invoking reopening jurisdiction u/s 147 for the AY 2012-13 is absent. In other words, the second AO has erroneously assumed jurisdiction without satisfying the first proviso to Section 147 of the Act also, which also makes the order of second AO bad in law. As per the discussion (supra) looking from any angle as discussed, the action of AO to usurp the jurisdiction to reopen the assessment for AY 2012-13 cannot be countenanced and is held to be bad in law for want of jurisdiction and the Ld. CIT(A) erred in holding otherwise. Therefore we allow the legal issue challenging the jurisdiction of AO and allow the Cross objection of the assessee. Since the assessee succeeds on the legal issue, other issue becomes academic. Therefore the appeal of Revenue assailing the action of Ld. CIT(A) deleting the addition on merits, also is dismissed. 26. In the result, the appeal of the Revenue is dismissed and the cross objection of the assessee is allowed. Order is pronounced in the open court on 17 th December, 2021. Sd/- Sd/- (P. M. Jagtap) (A. T. Varkey) Vice-President Judicial Member Dated:17.12.2021 SB, Sr. PS 23 ITA No. 32/Pat/2021 C.O. No. 06/Pat/2021 Bhola Ram Papers & Powers Pvt. Ltd. Assessment Year: 2012-13 Copy of the order forwarded to: 1. Appellant-ACIT, CC-3, Patna 2. Respondent – Bhola Ram Papers & Powers Pvt. Ltd. Plot No. N.S. 01, Industrial Growth Centre, Giddha, Arrah, Old Name: M/s Vishnu Vishal Paper Mills Pvt. Ltd., Bihar-802314. 3. The CIT(A)- Patna-3, Patna 4. CIT- , Patna 5. DR, Patna Bench, Patna True Copy By Order Sr. Private Secretary/DDO ITAT, Kolkata Benches, Kolkata
