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M/s Giggle Infotech Pvt. Ltd., C/o D. Ostwal & Associates, 310, Competent House, F-14, Middle Circle, Connaught Place, New Delhi Vs. ITO, Ward 10(1),New Delhi
January, 02nd 2020
                IN THE INCOME TAX APPELLATE TRIBUNAL
                      DELHI BENCHES : SMC : NEW DELHI


              BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
                           ITA No. 1284/Del/2018
                         Assessment Year : 2008-09


M/S GIGGLE INFOTECH PVT.                 Vs.       ITO, WARD 10(1),
LTD.,                                              NEW DELHI
C/O D. OSTWAL & ASSOCIATES,
310, COMPETENT HOUSE,
F-14, MIDDLE CIRCLE,
CONNAUGHT PLACE,
NEW DELHI ­ 110 001
 (PAN: AACCG6898F)
  (Appellant)                                       (Respondent)


             Assessee by             :    Sh. Deepak Ostwal, FCA
             Department by           :    Sh. Pradeep Singh Gautam, Sr.DR..


                                         ORDER

     This appeal filed by the assessee is directed against the order passed
by the Ld. CIT(A)-35, New Delhi on 09.11.2017 in relation to the assessment
year 2008-09 on the following grounds:-

                 1.      On the facts and in the circumstances of the case,
                 the CIT(A) has erred both on facts and in law, in upholding
                 the illegal action of the ITO to issue notice and reopen
                 assessment of the appellant under section 147 and the
                 perverse order passed by the ITO ought to have been
                 vacated and failure to do so has vitiated the impugned
                 order    as   the       entire   action,    order   and   notice   for
                 reassessment            are      illegal,    without      jurisdiction,
unsustainable and hence liable to be vacated as being
nonest in law.

2.    The CIT (A) has erred in upholding the action of the
AO of in framing impugned assessment order without
removing the objection raised by the appellant regarding
illegal assumption of jurisdiction by Ld. A.O. by passing a
speaking order should therefore be set aside and quashed.

3.    The CIT (A) has erred in upholding the action of the
AO and passing the impugned order by obtaining behind
the back of the appellant some           alleged statements
/information none of which had been made available to the
appellant nor any opportunity provided to rebut the same
and there was not even a show cause notice specifically
proposing   to   make   any   addition   nor   any   effective
opportunity of hearing and hence, the impugned order
passed in violation of natural justice is liable to be
quashed.

4. The CIT(A) has erred in not being guided by correct
factual and legal position, records, and binding precedents
placed before him and has passed the impugned order
erroneously which is therefore liable to set aside and
quashed.

5. The CIT(A) ought to have dealt with all the submissions
and objections of the appellant and ought to have followed
the binding decisions of the Courts and Tribunals placed
before him but has unfortunately not done so and has thus
passed the impugned order erroneously which is liable to
be vacated in this appeal.

                    2
                 6. The CIT(A) has also erred in upholding the illegal
                 addition of Rs. 8,00,000/- as unexplained cash credit u/s
                 68 perversely made by the ITO and impugned order are
                 therefore liable to be quashed and the additions so illegally
                 made and confirmed ought to be deleted.

                 7. The CIT CA) has also erred in upholding the illegal
                 demands of tax as well as interest erroneously raised by
                 the ITO to the extent of additions upheld by him and the
                 entire illegal demands of tax as well as interest must be
                 set aside and quashed as unsustainable both on facts and
                 in law.

                 8. The appellant craves leave to raise additional grounds
                 and file necessary paper book before the Hon'ble Tribunal
                 takes up hearing of the case and records of both lower
                 authorities be directed to be placed before the Tribunal by
                 the Revenue.

2.   The facts in brief are that assessee filed its return of income at Rs. NIL
on 29.9.2008 and the assessment was completed u/s. 143(3) of the Income
Tax Act, 1961 (in short "Act").    Subsequently, notice u/s. 148 of the Act
was issued on 13.3.2015 after recording reasons. In response to the same,
the assessee vide   its letter dated 02.04.2015 submitted that return filed
u/s. 139 of the Act on 29.9.2008 may be treated as filed u/s. 148 of the Act.
The assessee requested to provide the reasons for reopening u/s. 147/148
which were provided to the assessee. The assessee has filed the objections
for initiating the proceedings u/s. 147/148 of the Act which was disposed of
by passing a speaking order dated 26.2.2016. Further, notice u/s. 143(2)
and 142(1) of the Act were also issued to the assesee. In response to the
various statutory notices, issued, the AR of the Assessee attended the






                                      3
proceedings from time to time and furnished the necessary information. The
case of the assesse was reopened on the ground that the assessee during
the assessment year in dispute was found to have received accommodation
entries to the tune of Rs. 8 lacs from various paper companies floated by Sh.
SK Jain and Sh. VK Jain, whose residential and business premises were
searched u/s. 132 of the Act and it was established that they are in the
business of providing accommodation entries through a number of paper and
dummy companies in lieu of cash. The re-assessment was then completed
u/s. 147/143(3) of the Act on 30.3.2016 after adding Rs. 8 lacs u/s. 68 of
the Act as the genuineness and creditworthiness of the share application
money received during the relevant assessment year was not proved by the
assessee.

3.   Aggrieved with the aforesaid assessment order dated 30.3.2016,
assessee appealed before the Ld. CIT(A) who vide his impugned order dated
09.11.2017 has affirmed the action of the AO and dismissed the appeal of
the assessee.

4.   During the hearing, ld. Counsel of the assessee has only argued legal
ground no. 1 and stated the reassessment as made is without jurisdiction,
without compliance with mandatory provisions of section 147/148 of the Act
and as such the same deserves to be quashed. He further stated that the
reasons recorded for the reassessment are at pager book page no.13-14 and
the reasons are bald and do not contain even the prima facie view or reason
to believe of the AO that income has escaped assessment to tax within the
meaning of section 147 of the Act. There is no application of mind by the
AO and no process of the matter by the AO before recording of the said
reasons.    It was further submitted that notice under section 148 was issued
merely on the basis of information from DI, Jhandewalan, New Delhi that
assessee has received accommodation entry of Rs. 8 lakhs. Nowehre is there
any mention of any application of mind or any independent inquiry or any
                                      4
link between any tangible material and formation of reason to believe that
income chargeable to tax has escaped assessment. Nothing is independently
examined or considered by the AO which can demonstrate application of
mind by him. There is nothing to show that the cash is paid from coffers of
the assessee. Reasons do no indicate as to who AO reached to the
conclusion that the assessee received accommodation entry and escaped
assessment.     AO jumped on the       conclusion the money is unaccounted
money of the assessee without any basis. It was further submitted that AO
has never alleged the failure of the assessee to disclose true and correct
facts. To support his aforesaid contention, he relied the case law of Hon'ble
Supreme Court of India in the case of ACIT vs. Dhariya Construction Co.
(2011) 197 Taxman 202 (SC); Delhi High Court in the case of Pr. CIT vs.
RMG Polyvinyls (I) Ltd. (2017) 83 taxmann.com 348 (Delhi); Pr. CIT vs.
Meenakshi Overseas () Ltd. vs. ITO 395 ITR 677 (Del.); Signature Hotels
Pvt. Ltd. vs. ITO (2012) 20 taxmann.com 797 (Del.); Pr. CIT vs. G&G
Pharma India Ltd. 384 ITR 147 (Del.) and CIT vs. Sfil Stock Broking Ltd.
2010) 435 ITR 285 (Delhi). In view of above, he requested to quash the re-
assessment.

5.      On the contrary, Ld. DR relied upon the orders of the authorities below
and the case laws referred therein and stated that     Assessing Officer issued
the notice u/s. 148 after due application of mind. He       further stated that
the AO has followed due procedure before issuing the notice u/s 148 of the
I.T. Act, 1961. The Assessing Officer had tangible material in the form of
information received from the Investigation Wing. The Assessing Officer did
not proceed to any hearsay, conjecture or surmises. He stated that apart
from relying on the order of the Ld. CIT(A), the following cases laws may
kindly be considered with regard to reopening of cases u/s. 147 of the I.T.
Act:-



                                        5
1.     Sonia Gandhi vs. ACIT (Delhi High Court) 29018) 97
      taxmann.com 150 (Delhi).

      i)     Where Congress Party gave loan to AJL and
      assigned said loan to non-profit YI which
      subsequently issued shares to assesses at a price
      less than FMV, non-disclosure by assesses of
      allotment of shares in YI would be a reason to
      initiate reassessment proceedings.

ii)   Relying on PCIT vs. Meenakshi Overseas Pvt. Ltd.
      ITA No. 651/Del/2016 dated 11.1.2016 (Hon'ble
      Delhi High Court) approval u/s. 151 upheld.

2.     Raymond Woollen Mills Ltd. v. ITO And Others [236
      ITR 341 (Copy Enclosed) where Hon'ble Supreme
      Court     held    that    in  determining   whether
      commencement of reassessment proceedings was
      valid it has only to be seen whether there was prima
      facie some material on the basis of which the
      department could reopen the case. The sufficiency or
      correctness of the material is not a thing to be
      considered at this stage.

2.1    Yuvraj v. Union of India Bombay High Court [20091
      315 ITR 84 (Bombay)/[2009] 225 CTR 283
      (Bombay) Points      not   decided  while   passing
      assessment order under section 143(3) not a case of
      change of opinion. Assessment reopened validly.

3.     Devi Electronics Pvt Ltd Vs ITO Bombay High Court
      2017-TIQL-92-HC-MUM- IT

      The likelihood of a different view when materials
      exist of forming a reasonable belief of escaped
      income, will not debar the AO from exercising his
      jurisdiction to assess the assessee on reopening
      notice..

4.     Acorus Unitech Wireless (P.) Ltd. Vs ACIT Delhi High
      Court T20141 43 taxmann.com 62 (Delhi)/[2014]

                    6
     223 Taxman 181 (Delhi)(MAG)/[2014] 362 ITR 417
     (Delhi)

          In terms of section 148, law only requires that
          information or material on which Assessing
          Officer records his or her satisfaction has to be
          communicated to assessee, without mandating
          disclosure of any specific document.



5.    PCIT, Vs Paramount Communication (P.) Ltd. Delhi
     High    Court   [2017]   79    taxmann.com   409
     (Delhi)/[2017] 392 ITR 444 (Delhi)

     Information regarding bogus purchase by assessee
     received by DRI from CCE which was passed on to
     revenue authorities was 'tangible material outside
     record' to initiate valid reassessment proceedings.

6.    Paramount Communication (P.) Ltd.          Vs   PCIT
     Supreme Court 2017-TIQL-253- SC-IT

     SLP of assessee dismissed. Information regarding
     bogus purchase by assessee received by DRI from
     CCE which was passed on to revenue authorities was
     'tangible material outside record' to initiate valid
     reassessment proceedings.

7.    Amit Polyprints (P.) Ltd. Vs PCIT Gujarat High Court
     [2018] 94 taxmann.com 393 (Gujarat)

            Where    reassessment  proceedings    were
     initiated on basis of information received from
     Investigation wing that assessee had received
     certain amount from shell companies working as an
     accommodation entry provider, reassessment could
     not be held unjustified.

8.    Aaspas Multimedia Ltd. Vs PCIT Gujarat High Court
     [2017] 83 taxmann.com 82 (Gujarat)


                   7
            Where reassessment was made on basis of
      information        received   from   Principal     DIT
      (Investigation) that assessee was beneficiary of
      accommodation entries by way of share application
      provided by a third party, same was justified.

9.    Murlibhai Fatandas Sawlani Vs ITO Gujarat High Court
       2016-TIQL-370-HC- AHM-IT

            It is not open to the assessee to object to the
      reopening by asking the AO to produce the source
      from where the AO has gathered the information for
      forming a belief that income chargeable to tax has
      escaped assessment.

10.    Ankit Aqrochem (P.) Ltd. Vs JCIT Rajasthan High
      Court [2018] 89 taxmann.com 45 (Rajasthan)

            Where DIT informed that assessee-company
      had received share application money from several
      entities which were only engaged in business of
      providing     bogus      accommodation   entries    to
      beneficiary concerns, reassessment on basis of said
      information was justified.

      11.   Rakesh Gupta Vs CIT P&H High Court f20181
            93 taxmann.com 271 (Punjab & Haryana)

      Where Assessing Officer received information from
      Principle Director of Income Tax (Investigation) that
      assessee had received bogus loss from his broker by
      client code modification, reassessment on basis of
      said information was justified.



                     8
                       12.   Home Finders Housing Ltd. Vs. ITO (2018) 94
                             taxmann.com 84 (SC).

                             SLP dismissed against High Court's order that
                             non-compliance of direction of Supreme Court
                             in GKN Driveshafts (India) Ltd. Vs. ITO (2002)
                             125 Taxman 963 that on receipt of objection
                             given by assessee to notice under section 148,
                             Assessing Officer is bound to dispose
                             objections by passing a speaking order, would
                             not make reassessment order void ab initio.

                       13.   Baldevbahi Bhikhabhai Patel vs. DCIT (Gujarat
                             High    Court)   (2018)    94    Taxmann.co,
                             428(Gujarat)

                       Where revenue produced bunch of documents to

                       suggest       that       entire    proposal   of    reopening    of

                       assessment         alongwith        reasons   recorded   by     the

                       Assessing Officer for               same were placed before

                       Additional Commissioner who, upon perusal of same,

                       recorded his satisfaction that it was a fit case for

                       issuance      of     notice       for   reopening    assessment,

                       reassessment notice issued against assessee was

                       justified."


6.   I have heard both the        parties and            carefully considered the rival
submissions. I note that in this case the AO while recording the reasons for
the belief that income has escaped assessment has recorded the reasons as
under:-




                                            9
10
11
6.1   After perusing the aforesaid reasons recorded, I find that it is a case
where action has been taken mechanically on the basis of information
received from investigation wing, and, not on an independent application of
mind and therefore on this ground, the proceedings are without jurisdiction.
It is apparent from the fact that according to the AO, Investigation Wing has
informed that assessee company has received accommodation entry of Rs.
8 lacs in the garb of share application money which is said to be as per
inquiry made by the Directorate of Investigation (DI) on the persons said to
be involved providing accommodation entries/ bogus share application.
Based on inquiries made, DI is said to have provided details of persons who
are beneficiaries of such accommodation entries and one such beneficiary is
said to be the assessee.   In this case notice u/s. 148 of the Act was issued
merely on the basis of information from D.I. that the assessee has received
accommodation entry of Rs. 8 laks. There is no mention of any application
of mind or any independent inquiry or any link between any tangible
material and formation of reasons to believe that income chargeable to tax
has escaped assessment. It is also noted that in the reasons recorded, the
AO has made vague remarks that assessee has income chargeable to tax
which has escaped assessment. The AO has not even specified as to what is
the amount of alleged income escaping assessment, which shows that AO
has merely recorded certain unsubstantiated allegations on the basis of
some information received, which is against the principle laid down by the
Hon'ble Delhi High Court in the case of     CIT vs SFIL Stock Broking Ltd.
(2010) 325 ITR 285 (Del), wherein it was observed that         reassessment
proceedings were initiated on the basis of information received from
investigation wing regarding alleged accommodation entries and it has been
held by jurisdictional Delhi High Court that mere information received from
DDIT(Inv) cannot constitute valid reasons for initiating reassessment
proceedings in the absence of anything to show that A.O. had independently







                                     12
applied his mind to arrive at a belief that the income had escaped
assessment. Thus, the AO has acted mechanically and without any
independent application of mind. The reasons recorded are therefore vague,
highly non specific and reflect complete non-application of mind. It is also
noted that there is no live link or direct nexus between alleged material and,
inference. It is further noted that initiation of proceedings is also based on
non application of mind much less independent application of mind but is a
case of borrowed satisfaction. Nothing is independently examined or
considered by the AO which can demonstrate application of mind by him.
There is nothing to show that the cash is paid from coffers of the assessee.
Reasons do no indicate as to who AO reached to the conclusion that the
assessee received accommodation entry and escaped assessment. To
support my aforesaid view, I draw support from the following decisions:-

                              i)ACIT        vs.   Dhariya   Construction   Co.
                              (2011) 198 taxman 202 (SC) wherein the
                              Hon'ble Court has held that :

                              "Section 147 of the Income Tax Act, 1961 ­
                              Income escaping assessment ­ Non-disclosure
                              of primary facts ­ Whether opinion of District
                              Valuation Officer (DVO) per se is not an
                              information for purposes of reopening of an
                              assessment under section 147; Assessing
                              Officer has to apply his mind to information, if
                              any, collected and must form a belief thereon ­
                              Held, yes."

                              ii) Pr CIT v. RMG Plyvinyl (I) Ltd. (2017)
                              83 taxmann.com 348 (Hon'ble Delhi High
                              Court has observed as under:-

                              11. There can be no manner of doubt that in
                              the instant there was a failure of application of
                              mind by the AO to the facts. In fact he
                              proceeded on two wrong premises - one

                                       13
regarding alleged non-filing of the return and
the other regarding the extent of the so-called
accommodation entries.

12. Recently, in its decision dated 26th May,
2017     in    ITA       NO.692/20l6      (Principal
Commissioner of Income Tax-6 v. Meenakshi
Overseas Pvt. Ltd.), this Court discussed the
legal   position      regarding      reopening    of
assessments where the return filed at the
initial stage was processed under Section
143(1) of the Act awl not under Section 143(3)
of the Act. The reasons for the reopening of
the assessment in that case were more or less
similar to the reasons in the present case, viz.,
information     was       received      from     the
Investigation Wing regarding accommodation
entries provided by a 'known' accommodation
entry provider. There, on facts, the Court came
to the conclusion that the reasons were, in
fact, in the form of conclusions "one after the
other" and that the satisfaction arrived at by
the AO was a "borrowed satisfaction" and at
best "a reproduction of the conclusion in the
investigation report."

13. As in the above case, even in the present
case, the Court is unable to discern the link
between the tangible material and the
formation of the reasons to believe that income
had escaped assessment. In the present case
too, the information received from the
Investigation Wing cannot be said to be
        14
       tangible material per se without a further
       inquiry being undertaken by the AO. In the
       present case the AO deprived himself of that
       opportunity by proceeding on the erroneous
       premise that Assessee had not filed a return
       when in fact it had.

       14. To compound matters further the in the
       assessment order the AO has, instead of
       adding a sum of 78 lakh, even going by the
       reasons for reopening of the assessment,
       added a sum of Rs.1.13 crore. On what basis
       such an addition was made has not been
       explained.

       15. For the aforementioned reasons, the Court
       is satisfied that no error was committed by the
       ITAT in holding that reopening of the
       assessment under Section 147 of the Act was
       bad in law."

iii)   395 ITR 677 (Del) Pr. CIT v. Meenakshi
       Overseas (P) Ltd.

       "36. In the present case, as already noticed,
       the reasons to believe contain not the reasons
       but the conclusions of the AO one after the
       other. There is no independent application of
       mind by the AO to the tangible material which
       forms the basis of the reasons to believe that
       income     has    escaped   assessment.     The
       conclusions of the AO are at best a
       reproduction of the conclusion in the
       investigation report. Indeed it is a `borrowed
       satisfaction'. The reasons fail to demonstrate
       the link between the tangible material and the
       formation of the reason to believe that income
       has escaped assessment.

       37. For the aforementioned reasons, the Court
       is satisfied that in the facts and circumstances
       of the case, no error has been committed by
       the ITAT in the impugned order in concluding
       that the initiation of the proceedings under
       Section 147/148 of the Act to reopen the


               15
                                  assessments for the AYs in question does not
                                  satisfy the requirement of law.

                                  38. The question framed is answered in the
                                  negative, i.e., in favour of the Assessee and
                                  against   the    Revenue.    The   appeal    is,
                                  accordingly, dismissed but with no orders as to
                                  costs.

6.2       Keeping in view of the facts and circumstances of the case as
explained above and respectfully following the precedents, as aforesaid, the
proceedings initiated by invoking the provisions of section 147 of the Act by
the AO and upheld by the            Ld. CIT(A) are nonest in law and without
jurisdiction, hence, the assessment is quashed and ground no. 1 is allowed.
The judicial decisions relied upon by the Ld. Sr. DR,              have been duly
considered. In my considered view, I           do not find any parity in the facts of
the decisions relied upon with the peculiar facts of the case in hand. Since
no other grounds were raised by the Assessee's counsel,               the same are
dismissed as such. Accordingly, the assessee's appeal is partly allowed.

7.        In the result, the Appeal filed by the Assessee stands partly allowed.

          Order pronounced on 01-01-2020.                         Sd/-

                                                           [H.S. SIDHU]
                                                         JUDICIAL MEMBER
Dated: 01-01-2020
SRB
Copy forwarded to:
     1.   Appellant
     2.   Respondent
     3.   CIT
     4.   CIT (A)
     5.   DR, ITAT
                                                             AR, ITAT, NEW DELHI.




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