SHANKAR CONSTRUCTION,PANCHGACHIA V. ITO, WARD-3(1), PURNEA

ITA 565/PAT/2024

AI Insights

The case involves Shankar Construction, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 50,90,700 as unexplained cash credit under section 69A of the Income Tax Act. The addition was initially made by the Assessing Officer based on information from the Investigation Wing, suggesting that the assessee had obtained a bogus accommodation entry in the form of an unsecured loan. The tribunal found that the Assessing Officer had not conducted any independent inquiry or verification and had relied solely on the information uploaded on the Income Tax Department's portal. The tribunal noted that the loan was a short-term loan obtained and repaid within the same financial year through banking channels, which was not considered by the Assessing Officer.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473169 (ITAT-PATNA)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-11-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-10-2024
• Assessment Year: 2016-2017
• Appeal Filed On: 30-08-2024
• Other Referred Cases: Karan Maheshwari - vs.- Assistant Commissioner of Income Tax, Income Tax Officer, Calcutta and Ors. Vs.- Lakhmani Mewal Das, Commissioner of Income-tax v. SFIL Stock Broking Ltd., PCIT vs Meenakshi Overseas Pvt Ltd, CIT vs. Kelvinator India Ltd., Pr. Commissioner of Income Tax-4 vs. G and G Pharma India Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reassessment proceedings; Question of law; Unexplained cash credit; Reopening of assessment; Search and seizure; Accommodation entries; Source of fund; Audit objection; Assessment record; Reason to believe; Tangible material; Bogus
• Section: 147; 148; 143(1); 68; 90; 69A; 139; 191

Judgement Text

" ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA-PATNA ‘e-COURT’, KOLKATA [Hybrid Court Hearing] Before Shri Rajpal Yadav, Vice-President & Shri Rajesh Kumar, Accountant Member I.T.A. No. 565/PAT/2024 Assessment Year: 2016-2017 Shankar Construction,………………..…….……Appellant Panchgachia, Panchgachia-852124, Bihar [PAN:ABOFS0800R] -Vs.- Income Tax Officer,………………….……..……Respondent Ward-3(1), Purnea, Bihar Appearances by: Shri S.K. Tulsiyan, Advocate, appeared on behalf of the assessee Shri Ashok Kumar, CIT (DR), appeared on behalf of the Revenue Date of concluding the hearing: October 22, 2024 Date of pronouncing the order: November 18, 2024 O R D E R Per Rajpal Yadav, Vice-President:- The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 15th July, 2024 passed for Assessment Year 2016-17. ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 2 2. The assessee has taken six grounds of appeal, out of which under Grounds No. 1 & 2, the assessee has challenged the reopening of assessment by issuance of a notice under section 148 of the Income Tax Act. 2.1. In Grounds No. 3 to 6, in brief, grievance of the assessee is that ld. CIT(Appeals) has erred in confirming the addition of Rs.50,90,700/-, which was added by the ld. Assessing Officer under section 69A of the Income Tax Act. 3. Brief facts of the case are that the assessee is engaged in construction activity. It has filed its return of income on 13th October, 2016 declaring taxable income of Rs.35,36,520/-. This return was processed under section 143(1) of the Income Tax Act. The ld. Assessing Officer thereafter observed that he has received an information from Investigation Wing that the assessee had obtained bogus accommodation entry in the nature of bogus unsecured loan. According to him, this loan was obtained by the assessee in F.Y. 2014-15 relating to A.Y. 2015-16. He recorded the reasons for reopening of assessment under section 147 of the Income Tax Act and thereafter issued a notice under section 148 of the Income Tax Act on 30.03.2021. In response to the notice, assessee appeared and submitted the relevant details. 4. A perusal of the record would indicate that the assessee has obtained the short-term loan and had repaid it on the following dates:- ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 3 Date Amount Cheque No. 02.04.2015 20,00,000 025478 27.04.2015 10,00,000 025481 19.05.2015 10,00,000 025487 08.06.2015 10,00,000 025490 31.03.2016 90,740 Provision of interest Date Amount Cheque No. 29.05.2015 10,00,000 RTGS 30.06.2015 20,00,000 RTGS 01.07.2015 20,00,000 RTGS 5. The ld. Assessing Officer on pages no. 2 & 3 of the assessment order has observed that he has received an information, which was flagged on insight portal as uploaded by ld. DIT (Inv.)/ I&CI and such report was downloaded from the portal. According to this report, a survey was conducted in the case of M/s. DB (International) Stock Brokers Limited at 402, New Delhi House, 27, Barakhamba Road, Connaught Place, New Delhi. A perusal of the record further revealed that M/s. New KMS Finance Private Limited is a shareholder of M/s. DB (International) Stock Brokers Limited having 3,22,525 equity shares of face value of Rs.2/- each. On the basis of this report uploaded on the Portal, he formed an opinion that the loan taken by the assessee and its repayment of the loan is not to be genuine. In response to the notice of hearing, the assessee submitted the confirmation from M/s. New KMS Finance Private Limited. It has submitted copy of the ledger account along with Bank statement, which are available on pages no. 34 to 46 of the paper book filed before the Tribunal. The ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 4 assessee has submitted the copy of the return filed by M/s. New KMS Finance Private Limited and other details. The ld. Assessing Officer did not look into any of the aspects and straightway believed the alleged investigation report uploaded on the portal as gospel truth. He accordingly made the addition. 6. Appeal to the ld. CIT(Appeals) did not bring any relief to the assessee. 7. The ld. Counsel for the assessee has filed two paper books and written submissions running into nineteen pages. He submitted that ld. Assessing Officer himself has not conducted any sort of inquiry either while recording the reasons for reopening or while examining the issue on merit. 8. On the other hand, ld. CIT(D.R.) contended that Investigating Wing of the Department has carried out survey and search and prepared a report, which is to be relied upon. 9. We have duly considered the rival contentions and gone through the record carefully. A perusal of the assessment record would indicate that ld. Assessing Officer has simply and blindly relied upon the alleged information uploaded on the Portal of the Income Tax Department. The ld. Assessing Officer has not verified whether any addition in the hands of M/s. New KMS Finance Private Limited was made. It is also not on record whether any scrutiny assessment in that case was undertaken. The material which enabled the Investigation Wing to form that opinion has ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 5 never been supplied to the ld. Assessing Officer. The ld. Assessing Officer was only possessing the information or an opinion of an Investigating Officer on the Portal. Apart from that, he does not have any other material nor he tried to verify the material. When the assessee filed the copy of income tax return of M/s. New KMS Finance Private Limited, he has not thought it proper to issue a show-cause notice to that concern to verify whether it has given loan to the assessee. It is pertinent to observe that a short-time loan was taken by the assessee through account payee cheque and it was paid through banking channel. As against these materials, there is no effort at the end of the ld. Assessing Officer except the branding transaction as bogus. But how it is bogus has not been recorded. Therefore, in our opinion, the addition is not sustainable. 10. The ld. Counsel for the assessee has made a very detailed submission while challenging the reopening of assessment and we deem it appropriate to take note of such submission, which read as under:- “It is submitted that reasons recorded did not constitute reasonable belief of escapement of income and were based on mere suspicion, without application of mind. On the basis on the reading of the reasons recorded, it is clear that (i) The ld. AO has acted merely on reasons to suspect and there is no reasons to believe that income has escaped assessment. (ii) There is no direct or circumstantial evidence referred to by the AO and the AO has acted on mere suspicion, gossip and rumour. (iii) The proceeding has been initiated with an object to carrying out fishing investigation and/or roving inquiry. (iv) There is no live link or nexus between the material/information which are vague, indefinite, far-fetched and remote referred to by ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 6 the AO and the formation of his belief on such vague, non-specific, indefinite, far-fetched and remote material/information and (v) Proceeding has been initiated on mere change in opinion a. Reason to believe cannot be reason Io suspect In connection to the above it is submitted that on the facts and in the circumstances of the case, it cannot be said that the belief formed by the Ld. A.O. is that of an honest and reasonable person based upon reasonable ground and that the Ld. A.O. has invoked the powers/assumed the jurisdiction under this section on direct or circumstantial evidence rather has acted on mere suspicion, gossip and rumour. Reason to believe being the foremost criteria for reopening of assessment under section 148 of the Act, it should be interpreted in the right perspective. 'Reason to believe’ cannot be reason to suspect merely. There must be a direct nexus between the tangible material coming to the notice of the assessing officer and the subsequent formation of belief based on such material that there has been escapement of the assessee’s income. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer when he recorded reason In this regard attention is sought to the recent decision of the Hon'ble Bombay High Court in the case of Karan Maheshwari - vs.- Assistant Commissioner of Income Tax in 465 ITR 232 (Bom.)[2024] wherein it has been held t4hat “it is settled law that the reasons for the formation of the belief that there has been escapement of must have a rational connection with or relevant bearing on the information. Rational connection postulates that there must be a direct nexus or link line between the material coming to the notice of the Income Tax Officer and his view that there has been escapement of income of the assessee from assessment in the particular year. It is ot any and every material, howsoever vague and indefinite or distant, remote and far- fetched which dould suggest escapement of the income of the assessee from assessment. The powers of the income tax officer to reopen assessment, though wide, are not plenary The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The live link or close nexus believing that income of the assessee the income Tax Officer and the belief which he should be there between the information before the Income Tax Officer and the belief which he has to prima facie form an opinion regarding the escapement of the income of the assessee. In support of this contention the assessee, Hon’ble Supreme Court in the case of Income Tax Officer, Calcutta and Ors. Vs.- ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 7 Lakhmani Mewal Das [ 1976] 103 ITR 437 (SC)], wherein it was held as under:- \"7. It would appear from the perusal of the provisions reproduced above that two conditions have to be satisfied before an Income- tax Officer acquires jurisdiction to issue notice under Section 148 in respect of an assessment beyond the period of Jour years but within a period of eight years from the end of the relevant year. v.z„ (1) Ute Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee (a) to make a return under Section 139 for the assessment year to the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must coexist in order to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reason of before initiating proceedings as required by Section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account book or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extent beyond making a true and full disclosure of primary facts. Once he has done that his duty ends; It is for the Income Tax Officer to draw the correcdt inference from the primary facts. It is no responsibility of the assessee to advise the Income Tax Officer with regard to the inference which he should draw from the primary facts If an income tax officer draws an inference which appears subseqauently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. 8. The grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief Equate or not is not a matter for the Court to issue notice. Whether the grounds are adequate or not is not a matter for the ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 8 court to investigate. The sufficiency of grounds which induce the income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income Tax Officer did not hold the belief that there had been such non- disclosure. The existence of the belief can be challenged by the assessee but not the sufficiency of reasons for the belief. The expression “reason to believe” does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To this limited extent, the actioin of the Income Tax Officer in starting proceedings in respect of income escaping assessment is open to challenge in a Court of law (see observations of this Court in the case of Calcutta Discount Co. Ltd. -vs.- Income Tax Officer [1961] 41 ITR 191 (SC) and Narayanappa -vs.- Commissioner of Income Tax [1967] 63 ITR 219 (SC) while dealing with corresponding provisions of the Indian Income Tax Act, 1922). 9………………… 10………………. 11. As staled earlier, the reasons for the formation of the belief must have a rational connection with or relevant bearing on 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 Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material fact. It is no doubt true that the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income Tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time, we have to bear in mind that it is not any and 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 from assessment. The fact that the words ‘definite information’ which were there in section 34 of the Act of 1922 at one time bfore its amendment in 1948 are there in section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. 12. The powers of the Income-tax Officer to reopen assessment though wide are not plenary. The words of the statute are ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 9 \"reason to believe\" and not \"reason to suspect.\" The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about Orders made in judicial and quasijudicial proceedings. It is, therefore essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income-tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case. In any event, the link was too tenuous to provide a legally sound basis for reopening the assessment. The majority of the learned Judges in the High Court, in our opinion, were not in error in holding that the said material could not have led to the formation of the belief that the income of the assessee respondent had escaped assessment because of his failure or omission to disclose fully and truly all material facts. We would, therefore, uphold the view of the majority and dismiss the appeal with costs. Reliance is also placed in the case of Commissioner of Income- tax v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del), where the High Court has held that: 10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as \"reasons\" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration. ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 10 b. Reason recorded did not constitute reasonable belief of escapement of income --- Attention of your Honours is sought to the proviso to section 148 of the I.T. Act, 1961 which read as follows:- Provided that no notice under this section shall be issued unless there is information with the AO which suggests that the income chargeable to tax has escaped assessment in the case of the assesese for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section. Explanation 1. For the purposes of this section and section 148A, the information with the assessing officer which suggests that the income chargeable to tax has escaped assessment means— (i) Any information in the case of assessee for the relevant assessment year in accordance with the risk management strategy formulated by the board from time to time: (ii) Any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or iii) any information received under an agreement referred in in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v)any information which requires action in consequence of the order of a Tribunal or a Court.] ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 11 Whether it is “information to suggest” under amended law or “reason to believe” under erstwhile law the benchmark of “escapement of income chargeable to tax” still remains the primary condition to be satisfied before invoking powers u/s 147 of the Act. Merely because the revenue classifies a fact already on record as “information” may vest it with the power to issue a notice of re assessment u/s 148A(b) but would certainly not vest it with the power to issue a re-assessment notice u/s 148 post an order u/s 148A(d). As per clause (d), the assessing officer would decide on the basis of material available on record and if reply is furnished, where it is a fit case for issuing notice u/s 148 of the Act. In the facts of the present case, the reasons as recorded by the Assessing Officer are as under:- Reason for initiating proceedings u/s 147/148 of the I.T. Act, 1961 In this case the information regarding of the assessee was flagged on insight portal as uploaded by DIT (Inv)/ (I&CI) and requisite enquiry report was downloaded from the portal. As per the report, a survey was conducted in the case of M/s DB (International) Stock Brokers Ltd at 402. New Delhi House, 27, Barakhamba road, Connaught Place, New Delhi. Om perusal of the impounded materials, it was observed that M/s New KMS Finance Pvt Ltd is shareholder of DB HOLDING 3, 22,525 equity shares of a face value of Rs. 2 each and hold 0.92% share holding in DB. Further, it was also observed that M/s New KMS Finance Pvt. Ltd had made huge investments in different companies and source of these investments was the securities premium of Rs. 72, 00, 02,200/- received from various Kolkata based companies. After due analysis, it was found that the source of securities premium was from bogus shell entities and the companies where investments were made were also bogus non-existent companies. M/s New KMS has offloaded the investments held with it to various companies in the form of unsecured loan. The source of these investments is securities premium received from bogus entities who do not have any major source of funds for making huge investments in the form of securities premium to M/s New KMS. These companies are mainly paper companies. During the year under consideration M/s Shanker Construction had received unsecured loan of Rs. 50,90,740/- during the financial year 2015-16. As M/s New KMS is showing very meager income and it does not have any activity to support the huge loans and advances, it has forwarded to various entities. ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 12 It was also proved beyond doubt that the assessee company's source of found of making huge loans is also from bogus Kolkata based shell companies. Hence, the loan received by M/s Shankar construction may be added under the provision of section 68 of the Act as the assessee has availed accommodation unsecured loan from M/s new KMS Finance Pvt. Ltd. M/s New KMS Finance Pvt Ltd had provided accommodation entry in the form of unsecured loan to different beneficiaries among which M/s Shanker Construction is one of them. M/s Shanker Construction had received loan of Rs.50,90,740/- during the year under consideration. As it has already been established that Mix New KMS Finance Pvt Ltd's source of fund was disclosed from bogus Kolkata based shell companies. Hence, there was no creditworthiness with M/s new KMS Finance Pvt Ltd to provide loan to different persons. Hence, the loan as accepted by M/s Shanker Construction for Rs.50.90,740/- is nothing but accommodation entry Thus, the loan taken by the assessee i.e. M/s Shanker Construction is to be treated as unexplained cash credit in the books of the assessee under the provision of section 68 of the Act. In this regard, enquiry was carried out on ITBA. e-filing portal and ITD database and on perusal of the ITR as filed by the assessee, it was observed that the assessee has not Page 2 of 4 ABOFS0800R- SHANKAR CONSTRUCTION A.Y. 2016-17 ITBA/AST/F/147(SCN)/2021- 22/1041820954(1) declared such loan in his ITR. In this regard, on perusal of the audit report as uploaded on system, it is observed that column 31(a) for form 3CD does not indicate any loan taken/accepted during the year under consideration, which suggests that this amount was undisclosed and accepted out of books. As per the information provided, the assessee had taken loan of Rs. 50,90,740/- from M/s New KMS Finance Pvt lid and whose source of providing loan was itself proved bogus. As discussed in foregoing paras, M/s New KMS Finance Pvt Ltd had provided accommodation entry in the form of unsecured loan to different beneficiaries among which M/s Shanker Construction is one of them. M/s Shanker Construction had received loan of Rs. 50,90,740/- during the year under consideration. As it has already been established that M/s New KMS Finance Pvt Ltd's source of fund was disclosed from bogus Kolkata based shell companies.\" That reason recorded above like “………….Thus, the loan taken by the assessee ie. M/s Shanker Construction is to be treated as unexplained cash credit in the books of the assessee under the provision of section 68 of the Act. In this regard, enquiry was carried out on ITBA, e-filling portal and ITD database and on perusal of ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 13 the ITR as filed by the assessee, it was observed that the assessee has not Page 2 of 4 ABOFS0800R SHANKAR CONSTRUCTION Α.Υ. 2016-17 ITBA/AST/F/147/(SCN)2021- 22/1041820954(1) declared such loan in his ITR... Even not considered facts apparent on records that loan has been repaid during the year so question of the same reflecting in the Income Tax Return do not arises. That even Learned officer has considered information that loan Rs. 50,90,740 has been taken during the year, but ignored fact that loan had been repaid in the same financial year. On perusal of the aforesaid, it would be evident that the reasons do not constitute any valid reason to belief that income of the Appellant has escaped assessment in as much as: The reasons recorded merely refers to the information flagged on insight portal as uploaded by DIT (inv) / (1 & CI) and requisite enquiry report downloaded from the portal. It is pertinent to note that the copy of said downloaded report has not been supplied to the Appellant and any reliance or reference thereon is completely baseless and bad in law; It is vaguely and badly alleged that the Appellant has not received accommodation entries. It has not even been stated how is the Appellant alleged to be a beneficiary of accommodation entry of some Rs. 50,90,740/-. In absence of such basis details, the reasons are, it would be appreciated, completely vague and based on purely conjectures and surmises; It is evident that no independent application of mind or verification/enquiry has been done by the Assessing Officer prior to replying on some purported report downloaded while recording reasons to allege escapement of income in the hands of the Appellant. In absence of any enquiry by the Assessing Officer, the reasons cannot be stated to be reason to believe' of the Assessing Officer which is sina qua non for initiation of reassessment proceedings. In view of the aforesaid, the impugned reassessment proceeding, and consequential order are illegal and bad in law and liable to be quashed on the said ground alone. C. No tangible material was found It is submitted that that as required u/s 147/148 of the Act, the reasons recorded must demonstrate live link between the ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 14 tangible material and the formation of the belief that income has escaped assessment. In the present case, except the information received, had no material in your possession to even remotely suggest that income has escaped assessment. In the present case, as evident from the reasons recorded, no independent enquiries were undertaken by the L.d. A.O before forming the alleged reason to believe that the assessee's income has escaped assessment. The documents filed by the assessee at this stage clearly evidences the purchase and sale transactions. As such, it is an unfounded assumption on the Ld. A. O's part to say that Rs.30,69,138/-has escaped assessment. In the present case the Ld. A.O. has only 'reason to suspect' and not 'reason to believe'. The recording of 'reasons to believe' and not 'reasons to suspect' is the pre-condition to the assumption of jurisdiction under section 147. In the present case the Ld. A.O has straightaway jumped to the conclusions rather than first forming 'reason to believe that income has escaped assessment. Further, as required under the statute and followed in a plethora of judgments, the AO is bound to conduct enquiries and apply his mind independent of the information received from an outside source before initiating proceedings u/s 148 of the Act. In connection to the above, attention is invited to the judgment of the Delhi High Court in the case of PCIT vs Meenakshi Overseas Pvt Ltd [2017] 82 taxmann.com 300 (Delhi) wherein it was observed that, A perusal of the reasons as recorded by the Assessing Officer reveals that there are three Darts to it. In the first part, the Assessing Officer has reproduced the precise information he has received from the Investigation Wing of the revenue. This information is in the form of details of the amount of credit received, the payer, the payee, their respective banks, and the cheque number. This information by itself cannot be said to be tangible material, [Para 19] Coming to the second part, the Assessing Officer. It is expected of him to point out what he found when he went through the information. In other words, what in such information led him to form the belief that income escaped assessment. But this is absent. He straightaway records the conclusion that \"the abovesaid instruments are in the nature of accommodation entry which the assessee had taken after paying unaccounted cash to the accommodation entry given (sic giver). The Assessing Officer adds that the said accommodation was 'a known entry operator', the source being 'the report of the Investigation Wing.\" [Para 20] ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 15 The third and last part contains the conclusion drawn by the Assessing Officer that in view of these facts, the alleged transaction is not the bona fide one. Therefore, there is reason to believe that an income of Rs.5,00,000 has escaped assessment in the assessment year 2004-05 due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. [Para 21] As rightly pointed out by the Tribunal, the 'reasons to believe' are not in fact reasons but only conclusions, one after the other. The expression 'accommodation entry' is used to describe the information set out without explaining the basis for arriving at such a conclusion. The statement that the said entry was given to the assessee on his paying \"unaccounted cash\" is another conclusion the basis for which is not disclosed. Who is the accommodation entry giver is not mentioned. How he can be said to be \"a known entry operator\" is even more mysterious. Clearly the source for all these conclusions, one after the other, is the Investigation report of the DIT. Nothing from that report is set out to enable the reader to appreciate how the conclusions flow therefrom. [Para 22] The Hon'ble Supreme Court of India in the case of CIT vs. Kelvinator India Ltd. reported [2010] 320 ITR 561 (SC) held that: \"Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is \"tangible material to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief. However, in the instant case of the assessee, on a perusal of the reasons recoded it can be seen that the information provided has been accepted as gospel truth without any verification or independent enquiry. It is further submitted that as required u/s 147/148 of the Act, the reasons recorded must demonstrate live link between the tangible material and the formation of the belief that income has escaped assessment. In the present case, except the information received that the assessee had undertaken bogus trade amounting to Rs.57,40,517/- with Ayaan Commercial Pvt Ltd and its associates, the Ld. A.O. had no material in his possession to even remotely suggest that Rs.30,69,138/- has escaped assessment. In the present case, as evident from the reasons recorded, no independent enquiries were undertaken by the Ld. A.O before forming the alleged reason to believe that the assessee's income has escaped assessment. d. Mere receipt of information is not a sufficient ground of reopening ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 16 Further, the Ld. A.O. had received information on mere suspicion sent notice u/s 148 solely on the basis of information received without even verifying or examining the veracity of the said information. The conclusion that income has escaped assessment has to be reached by the L.d. AO independently. Mere receipt of information from Investigation wing or any other authority is not a sufficient ground to reopen the case of an assessee In connection to the above, reliance is placed in the case of Commissioner of Income-tax v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Del), where the High Court has held that: 10. From the above, it is clear that the Assessing Officer referred to the information and the two directions as \"reasons\" on the basis of which he was proceeding to issue notice under Section 148. We are afraid that these cannot be the reasons for proceeding under Section 147/148 of the said Act. The first part is only an information and the second and the third parts of the beginning paragraph of the so-called reasons are mere directions. From the so-called reasons, it is not at all discernible as to whether the Assessing Officer had applied his mind to the information and independently arrived at a belief that, on the basis of the material which he had before him, income had escaped assessment. Consequently, we find that the Tribunal has arrived at the correct conclusion on the facts. The law is well settled. There is no substantial question of law which arises for our consideration. Reliance is also place in the decision of the Hon'ble Delhi High Court in the case of Pr. Commissioner of Income Tax-4 vs. G and G Pharma India Ltd. reported in [2016] 384 ITR 147 (Delhi), wherein it was held the following: \"12. In the present case, after setting out four entries, stated to have been received by the Assessee on a single date i.e. 10th February 2003, from four entities which were termed as accommodation entries, which information was given to him by the Directorate of Investigation, the AO stated: \"I have also perused various materials and report from Investigation Wing and on that basis it is evident that the assessee company has introduced its own unaccounted money in its bank account by way of above accommodation entries.\" The above conclusion is unhelpful in understanding whether the AO applied his mind to the materials that he talks about particularly since he did not describe what those materials were. Once the date on which the so called accommodation ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 17 entries were provided is known, it would not have been difficult for the AO, if he had in fact undertaken the exercise, to make a reference to the manner in which those very entries were provided in the accounts of the Assessee, which must have been tendered along with the return, which was filed on14th November 2004 and was processed under Section 143(3) of the Act. Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: \"it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries\". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case.\" The above details very clearly show that the Ld. A.O had acted in a mechanical manner and only emphasized on the matter that the department had credible information without examining the documents and explanations submitted by the assessee. Also the credible information is factually incorrect and there is no live link between the assessee's data and information provided by the assessee. Accordingly, it is being humbly urged by the assessee before your Honours that the proceedings initiated against it u/s 147 of the Income Tax Act, 1961 may be declared invalid and cancelled and the additions made by the Id. A.O. may be deleted”. 11. In the light of above proposition of law, we have examined the brief reasoning given by the ld. Assessing Officer on page no. 2 of the assessment order for reopening of the assessment. We find that it is only an information uploaded on the Portal of the Income Tax Department. The ld. Assessing Officer himself has neither cross verified this information with the record of the assessee nor tried to lay his hand on any other material about the correctness of this transaction for the purpose of reopening of the assessment. In our opinion, the ld. Assessing Officer instead of making any effort simply downloaded the information and then reopened the assessment. Without verifying the fact that this loan was a ITA No. 565/PAT/2024 (A.Y. 2016-2017) Shankar Construction 18 temporary loan, which was obtained through banking channel and repaid during the year itself through banking channel. Therefore, we are of the view that even reopening by the ld. Assessing Officer is not justifiable, hence the appeal of the assessee is allowed on both the counts, namely additions are deleted on merit as well as reopening is quashed. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 18/11/2024. Sd/- Sd/- (Rajesh Kumar) (Rajpal Yadav) Accountant Member Vice-President Kolkata, the 18th day of November, 2024 Copies to :(1) Shankar Construction, Panchgachia, Panchgachia-852124, Bihar (2) Income Tax Officer, Ward-3(1), Purnea, Bihar (3) Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi; (4) CIT - , Patna; (5) The Departmental Representative; (6) Guard File TRUE COPY By order Assistant Registrar, Income Tax Appellate Tribunal, Kolkata Benches, Kolkata Laha/Sr. P.S. "