Shri Satyam Khandelwal, v. The I T O 5 (3),

ITA 377/IND/2008 | 2002-2003
Pronouncement Date: 01-07-2010 | Result: Allowed

Appeal Details

RSA Number 37722714 RSA 2008
Bench Indore
Appeal Number ITA 377/IND/2008
Duration Of Justice 1 year(s) 10 month(s) 14 day(s)
Appellant Shri Satyam Khandelwal,
Respondent The I T O 5 (3),
Appeal Type Income Tax Appeal
Pronouncement Date 01-07-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 01-07-2010
Date Of Final Hearing 01-07-2010
Next Hearing Date 01-07-2010
Assessment Year 2002-2003
Appeal Filed On 18-08-2008
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NO.377/IND/08 A.YS. 2002-03 SATYAM KHANDELWAL INDORE PAN AKJPK-3325-P APPELLANT VS INCOME TAX OFFICER 5(3) INDORE RESPONDENT APPELLANT BY : SHRI PRAKASH JAIN CA RESPONDENT BY : SHRI P.K. MITRA SR. DR O R D E R PER BENCH T HE ORDER OF THE LEARNED CIT(A) DATED 7.5.2008 IS CH ALLENGED BY THE ASSESSEE ON THE FOLLOWING GROUNDS :- 1. THAT IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS BAD IN LAW AS WELL AS ON THE FACTS. IT IS BASED ON INCORRECT INTE RPRETATION OF LAW AND THE FACTS HAVE ALSO BEEN INCORRECTLY CON STRUED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. A.O. ERRED IN REOPENING THE CASE AND FRAMED REASSESSMENT U/S 143(3)/148. THAT NOTICE SO ISSUED AND 2 RE-ASSESSMENT SO FRAMED IS ILLEGAL AND BAD IN LAW THE SAME REQUIRES TO BE QUASHED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) ERRED IN UPHOLDING THE A.O.S ACTION FOR MAKING ADDITION OF RS.414 000/- ON ACCOUNT OF ALLE GED UNEXPLAINED GIFTS BY INVOKING PROVISION OF SECTION 68 WITHOUT APPRECIATING THE FACTS OF THE CASE AND SUBM ISSIONS MADE. DURING HEARING WE HAVE HEARD SHRI PRAKASH JAIN LD . COUNSEL FOR THE ASSESSEE AND SHRI P.K. MITRA LEARNED SENIOR DR . AT THE OUTSET MR. JAIN ASSERTED THAT THE IMPUGNED ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MEGHA KHANDELWAL VS. ITO (I TA NO.16/IND/2010) VIDE ORDER DATED 25.2.2010 BY FURTHER SUBMITTING TH AT THE DONOR IN THE PRESENT APPEAL IS ALSO THE SAME AND THE FACTS ARE I DENTICAL. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE LEARNED REVENUE. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. IN VIEW OF THE AFORESAID ASSERTION/ADMISSION BY THE PARTIES WE AR E REPRODUCING HEREUNDER THE RELEVANT PORTION OF THE AFORESAID ORD ER OF THE TRIBUNAL :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER O F THE LEARNED FIRST APPELLATE AUTHORITY DATED 30.11.2009 ON THE FOLLOWING GROUNDS: 1. THAT IMPUGNED ORDER PASSED BY THE LD. CIT(A) IS BAD IN LAW AS WELL AS ON THE FACTS. IT IS BASED ON INCORRE CT INTERPRETATION OF LAW AND THE FACTS HAVE ALSO BEEN INCORRECTLY CONSTRUED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE A.O. ACTION IN RESPECT OF REOPENING OF CASE U/S 147/148 OF THE INCOME TAX ACT WHICH IS ILLEGAL BAD IN LAW AND WITHOUT JURISDICTI ON. 3 THE ORDER SO PASSED ON THE BASIS OF THE NOTICE ISSU ED U/S 148 THEREFORE REQUIRES TO BE QUASHED. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN UPHOLDING THE A.O. ACTION IN RESPECT OF MA KING ADDITION U/S 68 OF RS.3 46 135/- IN RESPECT OF GIFT RECEIVED THROUGH BANKING CHANNEL FROM HER MAUSI (MOTHERS REAL SISTER) WITHOUT APPRECIATING THE FAC TS OF THE CASE AND SUBMISSION MADE BEFORE HIM. 2. DURING THE HEARING OF THE APPEAL THE FIRST GROU ND WAS ARGUED TO BE GENERAL IN NATURE THEREFORE REQU IRES NO DELIBERATION FROM MY SIDE. THE NEXT GROUND PERTA INS TO UPHOLDING THE REOPENING OF CASE U/S 147/148 OF T HE ACT. THE CONTENTION RAISED ON BEHALF OF THE ASSESSE E IS THAT THIS ISSUE IS COVERED BY THE DECISION IN ITO V S. SHRI PUNIT AGRAWAL (ITA NOS.197 & 198/IND/2007). IT WAS ALSO PLEADED THAT THE LANGUAGE USED IN THE SEC. IS REASO N TO BELIEVE AND NOT REASON TO SUSPECT. MY ATTENTION WAS ALSO INVITED TO THE REASONS RECORDED BY THE LD. ASS ESSING OFFICER. ON THE OTHER HAND THE LD. SR. DR STRONGLY DEFENDED THE REOPENING OF THE CASE BY CONTENDING TH AT ONUS IS ON THE ASSESSEE AND SECONDLY THE ASSESSING OFFICER HAS EVERY RIGHT TO REOPEN THE ASSESSMENT. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON THE FILE. BEFORE COMING TO ANY CONCLUS ION I AM REPRODUCING HEREUNDER (PAGE 1 OF THE PAPER BOOK) THE REASONS RECORDED BY THE LD. ASSESSING OFFICER. REASON FOR ISSUE OF NOTICE U/S 148 OF THE I.T. ACT 1961 17/06/2005 NAME OF THE ASSESSEE:- KU. MEGHA KHANDELWAL 7/4 MAHESH NAGAR INDORE ASSESSMENT YEAR : 2001-2002 THE ASSESSEE HAS FILED RETURN OF INCOME ON 31.3.20 03 FOR ASSESSMENT YEAR 2002-03 FROM THE PERUSAL OF CAPITA L ACCOUNT FOR ASSESSMENT YEAR 2001-02 FILED ALONGWITH RETURN OF INCOME FOR ASSESSMENT YEAR 2002-03 IT IS SEEN THAT THE AS SESSEE HAS RECEIVED GIFT FROM NON-RESIDENT SMT. SARLA KANOONGO ON THREE DIFFERENT OCCASIONS AS UNDER: 1. NRE GIFT OF RS.1 46 000/- ON 4.10.2000 2. NRE GIFT OF RS.1 32 585/- ON 13.11.2000 3. NRE GIFT OF RS.67 550/- ON 13.10.2001 TOTAL: RS.3 46 135/- 4 THE ASSESSEE HAS ALSO RECEIVED NRE GIFT FROM SAME SMT. SARLA KANOONGO ON THREE DIFFERENT OCCASIONS AMOUNT ING TO RS.4 00 000/- DURING THE ASSESSMENT YEAR 2002-03 T HE RECEIPT OF THE GIFT SHOWS THAT IT IS NOT IN THE COURSE OF NORMAL HUMAN CONDUCT AND ASSESSEES OWN INCOME HAS BEEN BROUGHT BACK IN THE GARB OF GIFT THEREFORE I HAVE REASON TO BELIE VE INCOME OF RS.3 46 135/- HAS CHARGEABLE OF GIFT HAS ESCAPED AS SESSMENT. ACCORDINGLY NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT IS ISSUED. INDORE/DT.17.06.2005 SD/- ITO-5(3) INDORE THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT TH E AFORESAID AMOUNT OF GIFT RECEIVED THROUGH BANKING CHANNEL WAS DULY SHOWN IN THE RETURN FILED ON 13.7. 2005 FOR WHICH MY ATTENTION WAS INVITED TO PAGE 1 OF THE PAPER BOOK. THE ASSESSEE ALSO INVITED MY ATTENTION TO THE COPY OF THE PASSPORT OF THE DONOR (PAGES 3 & 4 OF THE PAPER BOOK) DECLARATION OF GIFT DEED (PAGES 5 TO 7 OF THE PAPER BOOK) COPY OF PASSBOOK OF THE ASSESSE E LETTER FROM THE BANK WHEREIN IT HAS BEEN MENTIONED THAT THE IMPUGNED AMOUNT WAS RECEIVED THROUGH BANKING CHANNEL CREDITWORTHINESS OF THE DONOR (PAG ES 12 & 13 OF THE PAPER BOOK) LETTER ADDRESSED TO THE LD. CIT(A) (PAGES 14 & 15 OF THE PAPER BOOK) FORM NO.2 D (COPY OF RETURN DATED 7.2.2005 (RECEIVED BY THE OFF ICE OF THE REVENUE ON 7.2.2005) CERTAIN PHOTOCOPIES OF THE PHOTOGRAPHS (PAGES 21 TO 24 26 TO 29 OF THE PAPER BOOK) COPIES OF THE TAX RETURN (PAGES 31 TO 48 OF THE PAPER BOOK) FINANCIAL STATEMENT OF DR. KANOONGO (HUSBAND OF THE DONOR) (PAGES 49 TO 54 OF THE PAPER BOOK) INCOME-TAX RETURNS OF THE DONOR (PAGES 56 TO 72) AND VARIOUS OTHER DOCUMENTS SHOWING THE FINANCIAL CAPACITY/STABILITY OF THE DONOR. IT WAS ALSO POINTE D OUT THAT THE DONOR IS THE REAL MAUSI (SISTER OF MOTHER) OF THE DONEE. MY ATTENTION WAS ALSO INVITED TO THE LET TER OF GARNER ASSOCIATES CERTIFIED CHARTERED ACCOUNTAN T NORTH WOODHOUSE 138 BROMHAM ROAD BEDFORD MK40 2QW ETC. THE LD. COUNSEL ALSO POINTED OUT THAT THE CASES RELIED UPON IN THE IMPUGNED ORDER ARE NOT APPLICABLE TO THE FACTS OF THE CASE. ON THE OTHER H AND THE LD. SR. DR STRONGLY CONTENDED THAT THE RELATION WITH THE DONOR FINANCIAL CAPACITY OF THE DONOR HAS NOT BEEN PROVED BY THE ASSESSEE. A STRONG PLEA WAS RAISED TH AT GIVING OF GIFT TO THE ASSESSEE IS AGAINST HUMAN PROBABILITIES THEREFORE THE IMPUGNED ORDER WAS DEFENDED. 5 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND ON PERUSAL OF REC ORD I HAVE FOUND THAT WHEN THE REASONS WERE RECORDED BY T HE ASSESSING OFFICER THERE WAS NO MATERIAL AVAILABLE WITH HIM TO SUSPECT THE GENUINENESS OF GIFTS. IN THE REA SONS RECORDED IT HAS BEEN MENTIONED THAT IT IS AGAINST THE NORMAL HUMAN CONDUCT AND OWN INCOME OF THE ASSESSEE HAS BEEN BROUGHT BACK IN THE GARB OF GIFT. HOWEVER I H AVE FOUND THAT NO SUCH MATERIAL IS AVAILABLE WITH THE A SSESSING OFFICER TO SUSPECT THE GIFTS AND EVEN OTHERWISE HU MAN PROBABILITIES ARE TO BE CONSIDERED IN THE ABSENCE O F DIRECT EVIDENCE. I AM OF THE CONSIDERED OPINION THAT SUSPI CION CANNOT TAKE THE SHAPE OF EVIDENCE HOWEVER STRONG I T MAY BE. THE RECORD AVAILABLE IN THE FILE CLEARLY SHOWS THAT THE AMOUNT OF GIFT WAS PAID THROUGH BANKING CHANNEL AND IT IS NOT THE CASE THAT OWN MONEY OF THE ASSESSEE HAS BEE N ROUTED THROUGH THE ACCOUNT OF THE DONOR THEREFORE SIMPLY SUSPICION CANNOT STAND ON ITS OWN LEGS. IDEN TICAL ISSUE HAS BEEN DELIBERATED UPON BY THE INDORE BENCH IN THE CASE OF ITO VS. SHRI PUNIT AGRAWAL (SUPRA) WHEREIN ANOTHER DECISION IN THE CASE OF SHRI NITIN AGRAWAL (ITA NO.556/IND/2006 AND CO 99/IND/2006 ORDER DATED 22.5.2009) JAI BHARAT MARUTI LTD. VS. CIT (223 CTR 269) (DEL) RAJESH JHAVERI STOCK BROKERS P. LTD. (291 IT R 500) (SC) D.D. MORE (82 ITR 540) (SC) SUMATI DAYAL (2 14 ITR 801)(SC) AND P. MOHAN KALA (291 ITR 278) (SC) HAVE ALREADY BEEN CONSIDERED. THE RELEVANT PORTION OF THE ORDER IS REPRODUCED HEREUNDER: THE DEPARTMENTAL APPEALS AS WELL AS THE CROSS OBJE CTIONS BY THE ASSESSEE ARE DIRECTED AGAINST THE DIFFERENT ORD ERS OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-II IN DORE DATED 15.12.2006 & 20.12.2006 FOR THE ABOVE ASSESSM ENT YEARS RESPECTIVELY. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PA RTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW A ND THE MATERIAL AVAILABLE ON RECORD. 3. C.O. NOS. 27 & 28/IND/2007 3. THE ASSESSEE ON GROUND NO. 1 HAS CHALLENGED THE UPHOLDING OF THE ASSESSING OFFICERS ACTION IN RESPECT OF REO PENING OF THE CASE UNDER SECTION 147 OF THE ACT. 4. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT ASSESSEE FILED RETURN FOR AY 2001-02 ON 31.10.2001 AND FOR AY 2002 -03 RETURN WAS FILED ON 6.1.2003 IN WHICH GIFTS RECEIVE D HAVE BEEN SHOWN. THE RETURNS WERE PROCESSED U/S 143(1) OF THE IT ACT. THEREAFTER THE AO ISSUED NOTICES U/S 148 OF THE IT ACT AND THE 6 AO VIDE SEPARATE ORDER REJECTED THE OBJECTIONS OF T HE ASSESSEE WITH REGARD TO THE INITIATION OF THE REASSESSMENT P ROCEEDINGS. HE HAS SUBMITTED THAT AO HAS INITIATED REASSESSMENT PROCEEDINGS ON THE GROUNDS THAT GIFTS ARE NOT RECEI VED IN NORMAL COURSE OF HUMAN CONDUCT IN BOTH THE YEARS AN D THAT IN AY 2001-02 AO ALSO NOTED IN THE REASONS THAT ASSES SEE HAS CLAIMED DEDUCTION OF INTEREST OF RS.5 62 864/- ON T HE LOANS WHICH IS NOT ALLOWABLE AS PER PROVISIONS OF SEC. 14 A OF THE IT ACT. HE HAS SUBMITTED THAT THERE WAS NO MATERIAL OR EVIDENCE AVAILABLE BEFORE THE AO TO FORM HIS BELIEF THAT INC OME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS SU BMITTED THAT AO WAS HAVING MERE REASON TO SUSPECT THEREF ORE ON THAT BASIS THE INITIATION OF REASSESSMENT PROCEEDI NGS IS BAD IN LAW. HE HAS SUBMITTED THAT THE ISSUE IS SQUARELY CO VERED IN FAVOUR OF ASSESSEE BY THE ORDER OF ITAT INDORE BEN CH IN THE CASE OF PRAVEEN JINDAL 12 ITJ 227 AND ALSO SUBMITT ED THAT IDENTICAL ISSUE WAS ALSO CONSIDERED BY DIVISION BEN CH OF ITAT INDORE BENCH IN THE CASE OF ITO VS. SHRI NITIN AGRA WAL IN ITA NO.556/IND/2006 AND CO 99/IND/2006 AND VIDE ORDER D ATED 22.5.2009 THE REASSESSMENT PROCEEDINGS WERE QUASHE D BY ALLOWING THE CROSS-OBJECTION FILED BY THE ASSESSEE. COPY OF THE ORDER IS PLACED ON RECORD. HE HAS REFERRED TO PB/2 WHICH ARE THE REASONS FOR REOPENING THE ASSESSMENT AND ALSO R ELIED UPON RECENT DECISION OF DELHI HIGH COURT IN THE CASE OF JAY BHARAT MARUTI LTD. VS. CIT 223 CTR 269 IN WHICH INITIAT ION OF REASSESSMENT PROCEEDINGS ON THE SAME FACTS WAS HELD TO BE BAD IN LAW. LD. COUNSEL FOR ASSESSEE THEREFORE SUBMIT TED THAT REASSESSMENT PROCEEDINGS IN THESE CASES MAY BE QUAS HED. 5. ON THE OTHER HAND LD. DR REITERATED THE SUBMISS IONS MADE IN THE CASE OF SHRI NITIN AGRAWAL (SUPRA) AND FURTH ER SUBMITTED THAT IN BOTH THE AYS THE REASONS FOR REOPENING THE ASSESSMENTS IS SAME I.E. GIFTS NOT RECEIVED IN THE NORMAL COURS E OF HUMAN CONDUCT AS IS CONSIDERED IN THE CASE OF NITIN AGRAW AL (SUPRA). HOWEVER HE HAS HIGHLIGHTED THAT IN AY 2001-02 THE AO HAS FURTHER RECORDED REASONS FOR REOPENING THE ASSESSME NTS THAT CLAIM OF DEDUCTION OF INTEREST ON BORROWED LOANS IN A SUM OF RS.5 62 864/- IS NOT ALLOWABLE DEDUCTION AS PER SEC . 14A OF THE IT ACT. HE HAS FURTHER SUBMITTED THAT THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. 291 ITR 500 IS NOT CONSIDERED IN T HE CASE OF SHRI NITIN AGRAWAL (SUPRA) ON THE PRINCIPLE THAT SI NCE RETURN WAS ONLY PROCESSED U/S 143(1) THEREFORE IT IS NOT AN ASSESSMENT HENCE THERE IS NO CHANGE OF OPINION. H E HAS SUBMITTED THAT SINCE RETURN WAS PROCESSED U/S 143(1 ) ONLY THEREFORE AO DID NOT APPLY MIND WHILE PROCESSING T HE RETURN. HE HAS SUBMITTED THAT AO IS NOT BOUND BY TECHNICAL RULES AND THE PREPONDERANCE OF PROBABILITY SHALL HAVE TO BE C ONSIDERED WHILE CONSIDERING THE MATTER AND RELIED UPON DECISI ONS OF HON'BLE SUPREME COURT IN THE CASES OF D.D. MORE 82 ITR 540 SUMATI DAYAL 214 ITR 801 AND P. MOHAN KALA 291 IT R 278. 7 HE HAS SUBMITTED THAT THE GIFTS FROM THE STRANGER A RE ARRANGED AFFAIRS ON WHICH BOGUS GIFTS HAVE BEEN RECEIVED AND SUBMITTED THAT THIS BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF THE DEPARTMENT IN THE CASES REPORTED IN 10 ITJ 293 & 12 ITJ 107. HE HAS SUBMITTED THAT AT THE REOPENING STAGE NO EV IDENCE WILL COME IN THE REASONS UNLESS THE AO WILL MAKE INVESTI GATION INTO THE MATTER. HE HAS SUBMITTED THAT THE AO HAS TO TAK E PRIMA FACIE VIEW AT THE TIME OF REASSESSMENT PROCEEDINGS. HE HAS SUBMITTED THAT AO HAS RIGHTLY FORMED HIS BELIEF THA T GIFTS ARE NOT RECEIVED IN NORMAL COURSE OF HUMAN CONDUCT AND THAT INTEREST ON LOANS WAS NOT ALLOWABLE DEDUCTION U/S 1 4A OF THE IT ACT. ON SPECIFIC QUERY BY THE BENCH LD. DR ADMITTE D THAT THERE WAS NO OTHER MATERIAL OR EVIDENCE AVAILABLE ON RECO RD WITH THE AO AT THE TIME OF RECORDING THE REASONS FOR REOPENI NG THE ASSESSMENTS EXCEPT THE RETURN OF INCOME AND THE PAP ERS FILED ALONG WITH RETURN OF INCOME FILED BY THE ASSESSEE. HE HAS SUBMITTED THAT RETURN ITSELF IS AN INFORMATION FOR THE AO TO FORM HIS BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. LD. DR THEREFORE SUBMITTED THAT THIS ISSUE MAY BE REAPPRE CIATED AGAIN AND SUBMITTED THAT CROSS-OBJECTION OF THE ASSESSEE ON THIS GROUND MAY BE DISMISSED. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND MATERIAL A VAILABLE ON RECORD. THE ASSESSEE HAS FILED COPY OF THE REASONS RECORDED BY THE AO FOR REOPENING THE ASSESSMENTS U/S 147/148 OF THE IT ACT. THE REASONS FOR REOPENING THE ASSESSMENTS AS RECORDED B Y THE AO ARE REPRODUCED AS UNDER: AY 2001-02 IN THIS CASE RETURN OF INCOME FOR THE ABOVE ASSESSM ENT YEAR WAS FILED DISCLOSING TAXABLE INCOME OF RS.2 60 760/ - & AGRICULTURAL INCOME AMOUNTING TO RS.50 800/- ON 31. 10.2001. IN THE CAPITAL ACCOUNT ACCOMPANYING THE RETURN THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.23 42 136/- UNDER THE HEAD NRI AND OTHER GIFT. THE GIFT SO CREDITED IS NOT RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT AND THUS THE SAME IS THE INCOME OF TH E ASSESSEE FROM UNDISCLOSED SOURCES. THEREFORE I HAVE REASON TO BELIEVE THAT AN AMOUNT OF RS.23 42 136/- CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE ASSESSEE HAS SHOWN UNSECURED LOANS AMOUNTING TO RS.2 01 62 968/- AS PER BALANCE-SHEET IN THE LIABIL ITY SIDE. IN THE ASSET SIDE ON AMOUNT OF RS.1 98 47 000/- HAS B EEN SHOWN AS INVESTMENT IN EQUITY SHARE IN PATH (I) LTD. IN T HE COMPUTATION OF INCOME AN AMOUNT OF RS.5 62 864/- H AS BEEN CLAIMED AS INTEREST PAID ON LOANS. SUCH EXPENDITURE IS NOT ALLOWABLE AS PER PROVISIONS OF SEC. 14A OF THE IT A CT 1961. 8 THEREFORE I HAVE REASON TO BELIEVE THAT AN AMOUNT OF RS.5 62 864/- CHARGEABLE TO TAX HAS ALSO ESCAPED AS SESSMENT. I THEREFORE PROPOSE TO ASSESS ABOVE INCOME TOTALI NG TO RS.29 05 000/- AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 O F THE IT ACT 1961. ISSUE NOTICE U/S 148 OF THE I.T. ACT 1961. AY 2002-03 THE ASSESSEE-INDIVIDUAL HAS FILED RETURN OF INCOME FOR THE ABOVE AY DECLARING TAXABLE INCOME AT (-) RS.9860/- ON 06.01.2003 WHICH HAS BEEN PROCESSED U/S 143(1). ASS ESSEE HAS ALSO FILED CAPITAL ACCOUNT ALONG WITH THE RETURN FI LED IN WHICH AN AMOUNT OF RS.33 46 285/- HAS BEEN CREDITED UNDER THE HEAD GIFT RECEIVED. THE GIFT AS ABOVE AMOUNTING TO RS.33 46 285/- CREDI TED IN THE CAPITAL ACCOUNT IS NOT RECEIVED IN THE NORMAL COURS E OF HUMAN CONDUCT AND THUS THE SAME IS THE INCOME OF THE ASSE SSEE FROM UNDISCLOSED SOURCES. THEREFORE I HAVE REASON TO BE LIEVE THAT AN AMOUNT OF RS.33 46 285/- CHARGEABLE TO TAX HAS E SCAPED ASSESSMENT. I THEREFORE PROPOSE TO ASSESS SUCH INCOME AND ALS O ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSME NT AND WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 OF THE IT ACT 1961. ISSUE NOTICE U/S 148 OF THE IT ACT 1961. 7. LD. COUNSEL FOR ASSESSEE SUBMITTED THAT THE ISSU E IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF ITAT IND ORE BENCH IN THE CASE OF SHRI NITIN AGRAWAL (SUPRA). IN THIS CAS E THE FINDINGS GIVEN IN PARA 6 TO 11 ARE REPRODUCED AS UN DER: 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. BOTH THE PARTIES FILE D COPY OF REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING OF ASSESSMENT UNDER SECTION 147/148 OF THE ACT. THE R EASONS FOR REOPENING OF ASSESSMENT AS RECORDED BY THE ASSESSIN G OFFICER ARE REPRODUCED AS UNDER :- THE ASSESSEE INDIVIDUAL HAS FILED RETURN OF INCOM E FOR THE ABOVE ASSESSMENT YEAR DECLARING TAXABLE INCOME AT RS.1 47 400/- ON 06.01.2003 WHICH HAS BEEN PROCESSE D U/S 143(1). ASSESSEE HAS ALSO FILED CAPITAL ACCOUNT AL ONG WITH THE 9 RETURN FILED IN WHICH AN AMOUNT OF RS.63 91 543/- H AS BEEN CREDITED UNDER THE HEAD GIFT RECEIVED. THE GIFT AS ABOVE AMOUNTING TO RS.63 91 543/- CRED ITED IN THE CAPITAL ACCOUNT IS NOT RECEIVED IN THE NORMAL C OURSE OF HUMAN CONDUCT AND THUS THE SAME IS THE INCOME OF TH E ASSESSEE FROM UNDISCLOSED SOURCES. THEREFORE I HAV E REASON TO BELIEVE THAT AN AMOUNT OF RS. 63 91 543/- CHARGE ABLE TO TAX HAS ESCAPED ASSESSMENT. I THEREFORE PROPOSE TO ASSESS SUCH INCOME AND AL SO ANY OTHER INCOME CHARGEABLE TO TAX WHICH COMES TO MY NO TICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 O F THE INCOME TAX ACT 1961. IT IS AN ADMITTED FACT THAT THE ASSESSEE IN THE RET URN OF INCOME HAS DISCLOSED THE RECEIPT OF THE GIFTS. IT IS ALSO ADMITTED FACT THAT THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AND THEREAFTER NO MATERIAL OR INFORMATION WAS BROUG HT ON RECORD WHICH WOULD JUSTIFY THE REOPENING OF ASSESSM ENT IN THE MATTER. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON SPECIFIC QUERY STATED THAT THE RETURN ITSELF IS INFORMATION FOR REOPENING AN ASSESSMENT ON ACCOUNT OF ESCAPEMENT OF INCOME ON ACCOUNT OF GIFTS RECEIVED BY THE ASSESSEE. THE LEAR NED DEPARTMENTAL REPRESENTATIVE DID NOT POINT OUT IF AN Y OTHER MATERIAL OR INFORMATION WAS BROUGHT ON RECORD BY TH E ASSESSING OFFICER FOR REOPENING OF ASSESSMENT. 7. ON CONSIDERATION OF THE RIVAL SUBMISSIONS AND TH E MATERIAL ON RECORD WE ARE OF THE VIEW THAT THE ISS UE WAS CONSIDERED BY ITAT INDORE BENCH IN THE CASAE OF P RAVIN JINDAL (SUPRA) AND IN THE CASE OF SMT. SANTOSH AGRA WAL (SUPRA). THE FINDINGS RECORDED IN PARAS 5 AND 6 IN THE CASE OF SMT. SANTOSH AGRAWAL (SUPRA) IN WHICH ON IDENTIC AL FACTS THE REOPENING OF ASSESSMENT WAS QUASHED ARE AS UND ER :- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND TH E MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL F OR THE ASSESSEE FILED COPY OF NOTICE UNDER SECTION 148 OF THE ACT AS WELL AS REASONS RECORDED BY THE ASSESSING OFFICER F OR REOPENING OF ASSESSMENT. THE REASONS FOR REOPENING OF ASSESSMENT AS RECORDED BY THE ASSESSING OFFICER ARE REPRODUCED AS UNDER :- IN THIS CASE RETURN OF INCOME FOR THE ABOVE ASSE SSMENT YEAR WAS FILED DISCLOSING TAXABLE INCOME OF RS.84 9 80/- ON 31.10.2001. IN THECAPITAL ACCOUNT ACCOMPANYING THE RETURN THE ASSESSEE HAS CREDITED AN AMOUNT OF RS.37 50 000 /- UNDER THE HEAD GIFT RECEIVED. 10 THE GIFT SO CREDITED IS NOT RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT AND THUS THE SAME IS THE INCOME OF TH E ASSESSEE FROM UNDISCLOSED SOURCES. THEREFORE I HAV E REASON TO BELIEVE THAT AN AMOUNT OF RS.37 50 000/- CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT. I THEREFORE PROPOSE TO A SSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO MY NOTICE SUBSEQUENTLY IN THE COURSE OF PROCEEDINGS U/S 147 O F THE IT ACT 1961. ISSUE NOTICE U/S 148 OF THE I.T. ACT 1961. IT IS AN ADMITTED FACT THAT THE ASSESSEE IN THE RET URN OF INCOME HAS DISCLOSED THE GIFTS OF RS.37 50 000/-. THE RETU RN WAS ALSO PROCESSED UNDER SECTION 143(1) AND THEREAFTER NO MA TERIAL OR INFORMATION WAS BROUGHT ON RECORD WHICH WOULD JUSTI FY THE REOPENING OF ASSESSMENT IN THE MATTER. ON CONSIDER ATION OF THE RIVAL SUBMISSIONS AND THE MATERIAL ON RECORD W E ARE OF THE VIEW THAT THE ISSUE IS SQUARELY COVERED IN FAVO UR OF THE ASSESSEE BY THE ORDER OF THE ITAT INDORE BENCH IN THE CASE OF PRAVEEN JINDAL (SUPRA) IN WHICH ON IDENTICAL FAC TS THE REOPENING OF ASSESSMENT WAS QUASHED. THE FINDINGS I N THIS CASE FROM PARAS 6 TO 10 ARE REPRODUCED:- 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PARTIES AND THE MATERIAL AVAILABLE ON RECORD. I.T.A .T. DELHI B BENCH ( T.M.) IN THE CASE OF O.P.CHAWLA (SUPRA ) HELD AS UNDER :- EVEN THOUGH NO OPINION WAS FORMED BY THE ASSESSING OFFICER WHEN HE PROCESSED THE RETURN U/S 143(1)(A) AND THEREFORE IT CANNOT BE A CASE OF A MERE CHANGE OF OPINION UNSUBSTANTIATED BY FRESH FACTS OR CHANGE IN LAW COM ING TO HIS NOTICE STILL AN ATTEMPT TO PROBE THE RETURN FURTHE R ON THE PART OF THE A.O. IS CERTAINLY NOT TAKEN IN BY THE EXPRES SION REASON TO BELIEVE. THE CONSEQUENCES OF CONDONING SUCH AN ATTEMPT WOULD BE GRAVE. IT IS NOT TO BE UNDERSTOOD AS HOLDI NG THAT DESPITE FRESH FACTS OR MATERIAL OR INFORMATION OR A CHANGE IN THE LEGAL POSITION THE A.O. CANNOT REOPEN THE ASSE SSMENT WHERE THE RETURN HAD ONLY BEEN PROCESSED UNDER SECT ION 143(1)(A). THERE HAS TO BE A DISTINCTION BETWEEN CA SES WHEREAFTER THE PROCESSING OR ACCEPTANCE OF THE RETU RN UNDER SECTION 143(1)(A) SOME FRESH FACTS OR INFORMATION O R MATERIAL HAS COME TO THE POSSESSION OF THE A.O. OR THERE HA S BEEN A CHANGE IN THE LEGAL POSITION AND CASES WHERE THERE IS NO SUCH DEVELOPMENT. IN THE FORMER CLASS OF CASES THE NOTIC E FOR REOPENING THE ASSESSMENT WOULD BE VALID. BUT IN THE LATTER CLASS OF CASES THE A.O. CANNOT ASSUME POWERS TO IS SUE THE NOTICE UNDER SECTION 148 FIRST AND THEN MAKE ENQUIR IES IN AN ATTEMPT TO UNEARTH ESCAPED INCOME. THIS WOULD PUT A SSESSEES 11 TO UNWARRANTED HARDSHIP AND DISTURB THE FINALITY OF ASSESSMENTS WITHOUT ANY JUSTIFICATION. WHERE A RETU RN HAS BEEN ACCEPTED/PROCESSED WITHOUT ENQUIRY UNDER SECTI ON. 143(1)(A) AND THEREAFTER THE A.O. COMES ACROSS EVID ENCE OR MATERIAL TO SHOW ESCAPEMENT OF INCOME HE MAY FORM THE REQUISITE BELIEF AND PROCEED TO ISSUE NOTICE U/S 14 8 AFTER RECORDING REASONS INDICATING THE NEXUS OR LIVE LINK OR RATIONAL CONNECTION BETWEEN THE MATERIAL BEFORE HIM AND THE FORMATION OF THE BELIEF. IN SUCH A CASE HE DOES HA VE REASON TO BELIEVE AND NOT MERELY REASON TO SUSPECT. BUT IF HE HAS NO SUCH MATERIAL OR EVIDENCE AND MERELY WANTS BY H IS IPSE DIXIT TO TAKE UP THE RETURN FOR FURTHER PROBE IT W ILL BE A CASE OF REASON TO SUSPECT. IN ADDITION IT WILL BE A C ASE OF AN ARBITRARY EXERCISE OF THE POWER TO REOPEN THE ASSES SMENT IF ONE LOOKS AT THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CASE TO REOPEN THE ASSESSMENT THE ONLY REASON STATED THEREIN IS THAT THE BALANCE SHEET OF THE AS SESSEE REVEALS THAT THE ASSESSEE HAS RECEIVED A GIFT OF RS . 28 90 000 FOR WHICH NO DETAILS HAVE BEEN FILED. THERE IS NO REFERENCE TO ANY INVESTIGATION CARRIED OUT IN THE ASSESSEES OWN CASE OR IN THE CASE OF THE DONOR OR ANY OTHER EVIDENCE OR M ATERIAL COLLECTED AS A RESULT OF ANY INVESTIGATION CARRIED OUT BY ANY INVESTIGATING AGENCY INCLUDING THE IT DEPARTMENT IN ANY CASE WHICH COULD HAVE AFFORDED THE REQUIRED NEXUS OR LIV E LINK OR RATIONAL CONNECTION WITH THE BELIEF THAT INCOME CHA RGEABLE TO TAX HAD ESCAPED ASSESSMENT. THE A.O. HAS MERELY RE FERRED TO THE ABSENCE OF ANY DETAILS FILED WITH THE RETURN IN SUPPORT OF THE GIFTS. THE REASONS RECORDED IN THE PRESENT CASE BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT ARE A MERE PRETENCE AN EXCUSE TO ENQUIRE INTO THE GIFTS RECEI VED BY THE ASSESSEE WITHOUT ANY MATERIAL OR EVIDENCE COMING I NTO HIS POSSESSION AFTER HE PROCESSED THE RETURN U/S 143(1) (A). THE A.O. DID NOT HAVE REASON TO BELIEVE THAT INCOME O F THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. CONSEQUENTLY THE CIT(A) WAS JUSTIFIED IN HOLDING T HAT THE REOPENING OF THE ASSESSMENT WAS NOT VALID AND THER EFORE THE REASSESSMENT MADE WAS VOID AB INITIO AND BAD IN THE EYES OF LAW.. 7 CONSIDERING THE FACTS OF THE CASE IN THE LIGHT OF THE ABOVE DECISION I AM OF THE VIEW THAT REOPENING IS NOT JU STIFIED IN THE MATTER. THOUGH THERE IS NO DISPUTE THAT REOPENING C OULD NOT BE QUASHED IN THIS CASE ON ACCOUNT OF CHANGE OF OPINION BECAUSE NO OPINION WAS FORMED WHILE PROCESSING THE RETURN U/S 143(1)(A) AS IS HELD BY THE LD.CIT(A). 8. IT IS NOT IN DISPUTE THAT THE ASSESSEE WHILE FILING THE ORIGINAL RETURN OF INCOME HAVE SHOWN IN THE CAPITAL ACCOUNT THE GIFTS RECEIVED FROM FOUR PERSONS. THE AFORESAID RETURN WAS PROCESSED. THE A.O. WHILE RECORDING THE REASONS FOR 12 REOPENING HAS MERELY MENTIONED THAT THE GIFTS ARE N OT RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT. THE LD.CIT(A) NOTED THAT IT IS WELL KNOWN FACT THAT GIF TS CLAIMED TO BE RECEIVED WERE AN ARRANGED AFFAIRS. THE AFORESAID FACTS NOTED IN THE REASONS FOR REOPENING AN ORDER OF THE CIT(A) CLEARLY PROVE THAT THE ASSESSEE WHILE FILING THE RE TURN HAS SHOWN THE GIFTS IN THE CAPITAL ACCOUNT AND BALANCE SHEET AND THAT THERE IS NO REFERENCE TO ANY INVESTIGATION CA RRIED OUT IN THE CASE OF THE ASSESSEE OR IN THE CASE OF THE DONO R. NO EVIDENCE OR MATERIAL IS BROUGHT ON RECORD WHICH CO ULD HAVE AFFORDED THE REQUIRED NEXUS ON LIVE LINK OR RATIONA L CONNECTION WITH THE BELIEF OF THE A.O. THAT INCOME CHARGEABLE TO TAX HAVE ESCAPED ASSESSMENT. THE A.O. HAS MERELY REFERRED TO THE HUMAN CONDUCT IN WHICH SUCH A GIFT COULD NOT HAVE BEEN RECEIVED GENUINELY BY THE ASSESSEE. THE A .O. HAS THUS FORMED HIS OPINION ON VAGUE AND UNSUBSTANTIAT ED REASONS. THE BELIEF OF THE A.O. IS NOT THUS BASED UPON ANY INFORMATION MATERIAL OR EVIDENCE. THE REASONS RECO RDED BY THE ASSESSING OFFICER WERE ONLY HIS SUSPICION AND P RETENCE. THE HON'BLE SUPREME COURT IN THE CASE OF M.P. INDU STRIES LIMITED VS. ITO 57 ITR 637 HELD THAT NOTICE U/S 1 48 CANNOT BE ISSUED MERELY TO MAKE FISHING ENQUIRY INTO THE R ETURN. 9. THE REASONS RECORDED BY THE ASSESSING OFFICER ARE VAGUE INDEFINITE AND ARE NOT BASED ON ANY INFORMAT ION OR MATERIAL. IT WAS ASSUMPTION OF THE A.O. THAT GIFTS ARE NOT RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT. THE FINDINGS OF THE LD.CIT(A) ARE PERVERSE IN THE SENSE THAT LD.CIT(A) ASSUMED THAT GIFTS SO RECEIVED WERE AN AR RANGED AFFAIRS WHICH IS NOT BASED ON ANY EVIDENCE. THESE FACTS CLEARLY SHOWED THAT THE A.O. WAS NOT JUSTIFIED IN R EOPENING THE ASSESSMENT IN THE MATTER. THE REASONS RECORDED BY THE ASSESSING OFFICER FOR FORMING HIS BELIEF FOR REOPEN ING ASSESSMENT U/S 147 WERE NOT BASED UPON ANY MATERIAL OR FACTS. THE BELIEF OF THE A.O. FOR INITIATING PROCEE DINGS U/S 147 HAD NO RATIONAL CONNECTION WITH REASONS. THERE WERE NO MATERIAL WITH THE DEPARTMENT TO JUSTIFY THE INITIAT ION OF THE RE-ASSESSMENT PROCEEDINGS IN THIS CASE BECAUSE IT SHOWED THAT THE A.O. HAD INITIATED RE-ASSESSMENT PROCEEDIN GS WITHOUT APPLICATION OF MIND. THEREFORE IT WAS NOT FIT CASE TO SUSTAIN THE REASSESSMENT. THE A.O. THEREFORE DID NOT VALI DLY ASSUME JURISDICTION IN INITIATING PROCEEDINGS U/S 147. I R ELY UPON THE DECISION OF I.T.A.T. AMRITSAR BENCH (SPECIAL BENCH ) IN THE CASE OF DURGA PRASAD GOYAL VS. ITO 98 ITD 227 (ASR ) ( S. B.) IN WHICH EVEN GENERAL INFORMATION CONTAINED IN LETTER OF ASSISTANT COMMISSIONER INVESTIGATION CIRCLE WAS N OT FOUND RELEVANT MATERIAL TO SUSTAIN INITIATION OF RE-ASSES SMENT PROCEEDINGS U/S 147 OF THE INCOME-TAX ACT 1961 . THE PRESENT CASE IN APPEAL IS ON THE WORST FOOTING. THE REFORE THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE SUSTAINED IN LAW. 13 10. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED A BOVE WE ARE OF THE VIEW THAT AS THERE WAS NO INVESTIGATION OR EVIDENCE COLLECTED BY THE ASSESSING OFFICER HAVING A NEXUS O R LIVE LINK OR RATIONAL CONNECTION BETWEEN THE MATERIAL BEFORE HIM AND THE FORMATION OF BELIEF TO ASSUME THERE WAS INCOME ESCAPING ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING O FFICER WERE MERELY REASONS TO SUSPECT. THEREFORE THE AU THORITIES BELOW WERE NOT JUSTIFIED IN REOPENING THE ASSESSMEN T IN THE MATTER. I ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REASSESSMENT PROCEEDINGS. BY FOLLOWING THE SAME ORDER WE ARE OF THE VIEW THA T THE REOPENING OF ASSESSMENT ON THE FACTS AND CIRCUMSTAN CES OF THE CASE IS NOT JUSTIFIED. WE ACCORDINGLY SET ASID E THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REASSESSMENT PROCEEDINGS. 6. AS A RESULT THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. 8. HON'BLE HIGH COURT OF DELHI IN THE CASE OF CIT V. BATRA BHATTA COMPANY (SUPRA) NOTED THE REASONS RECORDED F OR REOPENING OF ASSESSMENT UNDER SECTION 147 OF THE IN COMETAX ACT WHICH READ AS UNDER :- THE ASSESSEE FIRM HAS SOLD AN AGRICULTURAL LAND FOR RS.57 37 500 IN MARCH 1996 AND CLAIMED EXEMPTION U NDER PROVISIONS OF S. 2(14). THE CLAIM OF ASSESSEE THAT THE LAND IS AGRICULTURAL AND HENCE NOT A CAPITAL ASSET REQUIRE S MUCH DEEPER SCRUTINY. THE COST OF ACQUISITION IS SHOWN AT RS.4 41 279/-. I HAVE REASON TO BELIEVE THAT THE IN COME FROM CAPITAL GAIN TO TUNE OF RS.52 LACS HAS ESCAPED ASSE SSMENT FOR FINANCIAL YEAR 95-96. ISSUE NOTICE UNDER S. 148. HON'BLE HIGH COURT OF DELHI CONSIDERING THE ABOVE R EASONS DISMISSED THE DEPARTMENTAL APPEAL AND HELD AS UNDER :- A READING OF THE REASONS RECORDED DOES NOT DISCLOS E THAT THE AO IN FACT HAD REASONS TO BELIEVE THAT ANY INCOME H AD ESCAPED ASSESSMENT. IT IS NOT JUST THE BELIEF OF T HE AO THAT IS MATERIAL BUT SUCH A BELIEF MUST BE BASED ON CERTAI N REASONS. THE FIRST SENTENCE OF THE REASONS RECORDED IS MEREL Y A STATEMENT OF FACT THAT THE ASSESSEE FIRM SOLD AGRIC ULTURAL LAND FOR RS. 57 37 500 IN MARCH 1996 AND CLAIMED EXEMPT ION UNDER THE PROVISIONS OF S. 2(14). THE SECOND SENTEN CE IS MERELY EXPLORATORY IN NATURE IN THE SENSE THAT IT S AYS THAT THE CLAIM OF THE ASSESSEE THAT THE LAND IS AGRICULTURAL AND HENCE NOT A CAPITAL ASSET REQUIRES MUCH DEEPER SCRUTINY . THERE IS NO INDICATION AS TO ON WHAT INFORMATION OR ON WHAT MATERIAL THE AO HARBOURED THE BELIEF THAT THE CLAIM OF THE A SSESSEE REQUIRED DEEPER SCRUTINY. IN FACT AS RECORDED IN THE ORDER OF 14 THE CIT(A) NO NEW MATERIAL IS ON RECORD AFTER THE FILING OF THE RETURN AND TILL THE ISSUANCE OF THE NOTICE UNDE R S. 147. THE PROCEEDINGS UNDER S. 147 ARE NOT TO BE INVOKED AT THE MERE WHIM AND FANCY OF AN AO AND IT HAS TO BE SEEN IN EVERY CASE AS TO WHETHER THE INVOCATION IS ARBITRARY OR R EASONABLE. MERELY BECAUSE THE AO FELT THAT THE ISSUE REQUIRED MUCH DEEPER SCRUTINY IS NOT GROUND ENOUGH FOR INVOKING S. 147. IT IS NOT BELIEF PER SE THAT IS A PRE-CONDITION USED I N S. 147 BUT A BELIEF FOUNDED ON REASONS THE EXPRESSION USED IN SE CTION 147 IS. IF THE AO HAS REASON TO BELIEVE AND NOT IF THE AO BELIEVES. THERE MUST BE SOME BASIS UPON WHICH THE BELIEF CAN BE BUILT. IT DOES NOT MATTER WHETHER THE BELIE F IS ULTIMATELY PROVED RIGHT OR WRONG BUT THERE MUST B E SOME MATERIAL UPON WHICH SUCH A BELIEF CAN BE FOUNDED. IN THE PRESENT CASE THE CIT(A) AS WELL AS THE TRIBUNAL HA VE FOUND AS A FACT THAT THERE WAS NO MATERIAL UPON WHICH THE AO COULD HAVE BASED HIS BELIEF THAT INCOME HAD ESCAPED ASSES SMENT. THE CIT(A) AS WELL AS THE TRIBUNAL HAVE RETURNED TH E CONCURRENT FINDING OF FACT THAT THERE WAS NO MATERI AL BEFORE THE AO ON THE BASIS OF WHICH THE AO COULD HAVE MAIN TAINED A BELIEF THAT THE AGRICULTURAL LAND SOLD BY THE ASSES SEE WAS A CAPITAL ASSET WITHIN THE MEANING OF S. 2(14). IN F ACT THE AO DID NOT EVEN HAVE SUCH A BELIEF. AND AS THE EXPRES SION REQUIRES MUCH DEEPER SCRUTINY INDICATES THE AO W AS EMBARKING ON MERE EXPLORATION WITHOUT ANY BELIEF M UCH LESS A BELIEF BASED ON REASON AND MATERIALS. CONSEQUENT LY THERE IS NO ERROR IN THE DECISION OF THE TRIBUNAL. NO SU BSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION. THE DECISIONS CITED BY THE LEARNED DEPARTMENTAL REPRESENTATIVE NOTED ABOVE WOULD NOT SUPPORT THE CA SE OF THE REVENUE IN ANY MANNER. THE LEARNED DEPARTMENTAL REPRESENTATIVE HEAVILY RELIED UPON EXPLANATION 2(B) TO SECTION 147 OF THE ACT WHICH IS ALSO CONSIDERED BY THE HON'BLE HIGH COURT OF MADRAS IN THE CASE OF ITO V. K.M.PACH IAPPAN (SUPRA). HOWEVER IN THE AFORESAID DECISION THE H ON'BLE HIGH COURT OF MADRAS CONSIDERING THE PROVISIONS OF SECTION 147 NOTED THAT THE CONDITIONS PRECEDENT FOR PROCEED INGS UNDER SECTION 147 ARE THAT THE ASSESSING OFFICER SH OULD HAVE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSES SMENT. IT IS NOT NECESSARY THAT THE ASSESSMENT SHOULD HAVE BE EN COMPLETED UNDER SECTION 143(3) OF THE ACT BEFORE IT COULD BE REOPENED. EXPLANATION 2(B) TO SECTION 147 SPECIFICA LLY PROVIDES THE CASES WHERE THE ASSESSING OFFICER NOTI CED THAT THE ASSESSEE HAS UNDERSTATED THE INCOME IN THE RETU RN OF INCOME. THE WORD NOTICED USED IN EXPLANATION 2(B ) OF SECTION 147 OF THE INCOMETAX ACT IS VITAL AND SIGNI FICANT IN THE SENSE THAT THERE SHOULD BE SOME BASIS UPON WHIC H THE BELIEF CAN BE BUILT BY THE ASSESSING OFFICER. IT D OES NOT MATTER WHETHER THE BELIEF IS ULTIMATELY PROVED RIGH T OR WRONG 15 BUT THERE MUST BE SOME MATERIAL UPON WHICH SOME BEL IEF CAN BE FOUNDED. IN THE PRESENT CASE WE HAVE NOTICED A S A FACT THAT THERE WAS NO MATERIAL ON RECORD UPON WHICH THE ASSESSING OFFICER COULD HAVE BASED HIS BELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. THE LEARNED DEPARTMENTAL REPRESENTATIVE MERELY SUBMITTED THAT THE RETURN ITS ELF IS AN INFORMATION FOR THE ASSESSING OFFICER TO FORM HIS B ELIEF THAT THE INCOME HAS ESCAPED ASSESSMENT. WE DO NOT AGREE WITH THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATI VE BECAUSE IN THE ABSENCE OF ANY MATERIAL OR INFORMATI ON ON RECORD THE ASSESSING OFFICER MERELY HAD REASON TO SUSPECT THAT THE GIFTS IN THE MATTER HAVE NOT BEEN RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT. OTHERWISE THERE WAS NO MATERIAL ON RECORD TO SUPPORT THE BELIEF OF THE ASS ESSING OFFICER. THUS IT IS A CASE WHERE THERE WAS NO MAT ERIAL OR INFORMATION OR BASIS AVAILABLE TO THE ASSESSING OFF ICER TO FORM HIS BELIEF THAT THE INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT ON ACCOUNT OF GIFT. 9. HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE RE CENT DECISION IN THE CASE OF CIT V. SMT. PARAMJIT KAUR; 311 ITR 38 CONSIDERING THE FACT THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE INFORMATION RECEIVED FROM THE SURVEY HELD THAT THE ASSESSING OFFICER HAD NOT EXAMINED THE IN FORMATION RECEIVED FROM THE SURVEY CIRCLE BEFORE RECORDING HI S OWN SATISFACTION OF ESCAPED INCOME AND INITIATING REASS ESSMENT PROCEEDINGS. THE ASSESSING OFFICER HAD THUS ACTED O NLY ON THE BASIS OF SUSPICION AND IT COULD NOT BE SAID THA T IT WAS BASED ON BELIEF THAT THE INCOME CHARGEABLE TO TAX H AD ESCAPED INCOME. THE ASSESSING OFFICER HAD TO ACT ON THE BA SIS OF REASONS TO BELIEVE AND NOT ON REASONS TO SUSPECT . THE TRIBUNAL RIGHTLY CONCLUDED THAT THE ASSESSING OFFIC ER HAD FAILED TO INCORPORATE THE MATERIAL AND HIS SATISFAC TION FOR REOPENING THE ASSESSMENT AND THEREFORE THE ISSUANCE OF NOTICE UNDER SECTION 148 OF THE ACT FOR REASSESSMEN T PROCEEDINGS WAS NOT VALID. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS REFERRE D TO SEVERAL DECISIONS ABOVE BUT NONE OF THE DECISIONS S UPPORTS HIS CONTENTION BECAUSE THE ASSESSING OFFICER HAS FAILED TO BRING ANY MATERIAL ON RECORD THAT THE GIFTS ARE NOT RECEI VED IN THE NORMAL COURSE OF HUMAN CONDUCT. THE CASE OF THE ASS ESSEE IS THEREFORE SQUARELY COVERED IN HIS FAVOUR BY THE OR DER OF ITAT INDORE BENCH IN THE CASE OF SMT. SANTOSH AGR AWAL (SUPRA) AS WELL AS THE DECISION OF HON'BLE HIGH COU RT OF DELHI IN THE CASE OF BATRA BHATTA COMPANY (SUPRA). THUS THERE IS NO NEED TO REAPPRECIATE THE ISSUE AS ARGUE D BY THE LEARNED DEPARTMENTAL REPRESENTATIVE. 16 11. CONSIDERING THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION FOR THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT IN THE MATTER. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND QUASH THE REASSESSMENT PROCEEDINGS. 8. IN THE PRESENT CASE WE HAVE NOTICED AS A MATTER OF FACTS THAT THERE WAS NO MATERIAL ON RECORD UPON WHICH THE AO COULD HAVE BASED HIS BELIEF THAT THE INCOME HAS ESCAPED A SSESSMENT. LD. DR ADMITTED THAT EXCEPT RETURN OF INCOME AND PA PERS FILED ALONG WITH THE RETURN OF INCOME THERE WAS NO OTHER INFORMATION OR MATERIAL AVAILABLE ON RECORD FOR THE AO TO FORM HIS BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. WE M AY NOTE THAT EACH AND EVERY GIFT CANNOT BE TREATED AS BOGUS OR HAVE NOT BEEN RECEIVED IN THE NORMAL COURSE OF HUMAN CONDUCT . THE FACTS OF EACH & EVERY CASE SHALL HAVE TO BE CONSIDE RED ON THE BASIS OF THE INFORMATION MATERIAL AND EVIDENCE AVA ILABLE ON RECORD. WE DONT AGREE WITH THE SUBMISSION OF LD. D R BECAUSE IN THE ABSENCE OF ANY MATERIAL OR INFORMATION ON RE CORD THE AO MERELY HAD REASON TO SUSPECT THAT THE GIFTS IN T HE MATTER HAVE NOT BEEN RECEIVED IN THE NORMAL COURSE OF HUMA N CONDUCT. OTHERWISE THERE WAS NO MATERIAL ON RECORD TO SUPPO RT THE BELIEF OF THE AO. IT IS A CASE WHERE THERE WAS NO M ATERIAL OR INFORMATION OR BASIS AVAILABLE TO THE AO TO FORM HI S BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON ACCOUNT OF GIFT. 9. WE MAY ALSO MENTION THAT HONBLE DELHI HIGH COUR T IN THE CASE OF JAY BHARAT MARUTI LTD. VS. CIT REPORTED IN 223 CTR 269 CONSIDERED THE SIMILAR ISSUE OF REOPENING OF AS SESSMENT AND NOTED THE FOLLOWING REASONS FOR REOPENING OF TH E ASSESSMENT: DURING THE COURSE OF EXAMINATION OF EXCISE AND MODV AT ACCOUNT IT WAS FOUND THAT IN ASSESSMENT YEAR 1993- 94 THERE WAS CLOSING BALANCE OF RS.25 LACS IN MODVAT. THIS A MOUNT WAS CHARGED INTO P & L A/C. BY THIS METHOD THE ASS ESSEE REDUCED IT PROFIT IN THE ASSESSMENT YEAR 1993-94 BY RS.25 LACS. THE BALANCE IN THE MODVAT ACCOUNT AT THE END OF PRE VIOUS YEAR RELEVANT FOR ASSESSMENT YEAR 1993-94 SHOULD HA VE BEEN CARRIED FORWARD AND SHOWN AS LOANS AND ADVANCES ON THE ASSET SIDE OF THE BALANCE-SHEET. I HAVE REASONS TO BELIEVE THAT THE ABOVE SAID INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ASSESS MENT YEAR 1993-94 BY REASONS OF THE FAILURE ON THE PART OF TH E ASSESSEE FOR NOT DISCLOSING FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR HIS ASSESSMENT FOR ASSESSMENT YEAR 1993-94. THI S CASE IS 17 REOPENED UNDER S. 147 OF THE IT ACT. ISSUE NOTICE U NDER S. 148. HONBLE HIGH COURT CONSIDERING THE PRINCIPLE OF LA W DECIDED BY HON'BLE SUPREME COURT IN THE CASE OF RAJ ESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) HELD: IN THE INSTANT CASE IF THE TEST OF THE REASONABLE P ERSON IS APPLIED IT IS CLEAR THAT NO REASONABLE PERSON COUL D HAVE COME TO A CONCLUSION THAT THERE WAS RELEVANT MATERIAL AV AILABLE WITH THE AO TO HAVE REASON TO BELIEVE THAT ASSESSEE S INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ONLY BY VI RTUE OF THE FACT THAT THE ASSESSEE HAD CHARGED TO ITS P & L A/C THE CREDIT BALANCE AVAILABLE IN ITS MODVAT ACCOUNT. IT IS RUDIMENTARY THAT MODVAT IS NOTHING BUT CREDIT OF DU TY PAID BY A PERSON ON INPUT USED BY THE ASSESSEE FOR MANUFACT URE OF ITS FINAL PRODUCT. THE NOTICE UNDER S. 148(1) COULD NOT HAVE BEEN BASED ON A GROUND AS TENUOUS AS THE ONE DISCLOSED B Y THE REVENUE. IF ONE WERE TO ACCEPT SUCH A GROUND AS THE ONE OBTAINING IN THE PRESENT CASE THEN IT WOULD VIRTUAL LY AMOUNT TO GIVING POWER TO THE AO TO REOPEN THE PROCEEDINGS AT HIS OWN WHIM AND FANCY. WHILE THERE IS WIDEST WIDTH AND AMPLITUDE TO THE AO TO INITIATE PROCEEDINGS UNDER S . 147 R.W.S. 148 THERE IS A CAVEAT; WHICH IS AS TO HOW A REASON ABLE MAN WOULD VIEW THE ARTICULATED REASONS [AS PRESCRIBED U NDER SUB- S. (2) OF S. 148] WHICH FORMED THE BASIS OF A NOTIC E UNDER S. 148(1). THIS BY ITSELF WOULD SUFFICE IN DECLARING T HE PROCEEDINGS BAD IN LAW.-ASSTT. CIT VS. RAJESH JHAVE RI STOCK BROKERS (P) LTD. (2007) 210 CTR (SC) 30 : (2007) 29 1 ITR 500 (SC) RELIED ON. THE ABOVE DECISIONS OF THE HONBLE DELHI HIGH COUR T CLEARLY SUPPORT THE FINDINGS GIVEN IN THE CASE OF S HRI NITIN AGRAWAL (SUPRA). 10. LD. DR ALSO SUBMITTED THAT IN AY 2001-02 THERE IS ONE MORE REASON FOR REOPENING OF ASSESSMENT I.E. INTERE ST PAID ON LOANS IS NOT ALLOWABLE EXPENDITURE AS PER PROVISION S OF SEC. 14A OF THE IT ACT AND THUS AO HAD REASON TO BELIEV E THAT AN AMOUNT OF RS.5 62 864/- CHARGEABLE TO TAX HAS ALSO ESCAPED ASSESSMENT. WE FIND FROM THE IMPUGNED ORDER THAT ON THIS ISSUE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT AS SESSEE CLAIMED PROPORTIONATE INTEREST OF RS.7 01 156/- AGA INST THE INTEREST ON CAPITAL AMOUNTING TO RS.6 76 894/- RECE IVED FROM THE FIRM AND PART OF THE TOTAL INCOME AND RS.5 62 8 64/- AGAINST THE INTEREST INCOME OF RS.5 23 777/- EARNED FROM LO ANS GIVEN TO OTHERS WHICH IS AGAIN PART OF TOTAL INCOME. IT WAS THEREFORE SUBMITTED THAT THE BIFURCATION OF SAID INTEREST PAI D IS MADE IN PROPORTION TO CAPITAL IN FIRM AND LOAN GIVEN TO OTH ERS THEREFORE PROVISION U/S 14A IS NOT APPLICABLE. THE INTEREST 18 CLAIMED IS HAVING DIRECT RELATION WITH INTEREST EAR NED. THE CAPITAL ACCOUNT AND BALANCE-SHEET WERE FILED ALONG WITH THE RETURN OF INCOME CLEARLY DISCLOSED THE LOANS AND CA PITAL INVESTMENT IN THE FIRM WHICH EARN INTEREST APART F ROM THE SHARES OF PROFITS. THE LD. CIT(A) CONSIDERING THE S UBMISSION OF ASSESSEE AND MATERIAL ON RECORD AND CONSIDERING APP ELLATE ORDER OF LD. CIT(A) IN THE CASE OF SHRI NITIN AGRAW AL DIRECTED THE AO TO ALLOW CLAIM OF INTEREST AS CLAIMED IN THE ORIGINAL RETURN SUBJECT TO VERIFICATION OF THE NEXUS AS CLAI MED BY THE ASSESSEE. THE REVENUE DEPARTMENT DID NOT CHALLENGE THE ABOVE FACTS AND THE DIRECTION OF THE LD. CIT(A) IN THE DE PARTMENTAL APPEAL IN ITA NO.197/IND/2007. HONBLE SUPREME COUR T IN THE CASE OF S.A. BUILDERS REPORTED IN 288 ITR PAGE 1 HE LD THAT INTEREST PAID ON BORROWED CAPITAL IS ALLOWABLE DEDU CTION. HONBLE ALLAHABAD HIGH COURT IN THE CASE OF GORAWAR A PLASTICS & GENERAL INDUSTRIES 289 ITR 224 HELD TH AT BORROWED FUNDS NOT UTILIZED FOR PURPOSE FOR WHICH I T WAS SANCTIONED BUT UTILIZED FOR BUSINESS PURPOSE. INTE REST ALLOWED DEDUCTION. IT WOULD THEREFORE CLEARLY PROVE THAT THE AO WITHOUT HAVING ANY INFORMATION OR MATERIAL ON RECOR D MERELY HAD REASON TO SUSPECT THAT THE INTEREST PAID ON LOA NS IS NOT ALLOWABLE DEDUCTION U/S 14A OF THE IT ACT. IN THIS CASE IF THE TEST OF THE REASONABLE PERSON IS APPLIED AS PER DEC ISION IN THE CASE OF JAY BHARAT MARUTI LTD. (SUPRA) IT IS CLEAR THAT NO REASONABLE PERSON COULD HAVE COME TO A CONCLUSION T HAT THERE WAS RELEVANT MATERIAL AVAILABLE WITH THE AO TO HAVE REASON TO BELIEVE THAT ASSESSEES INCOME CHARGEABLE TO TAX HA D ESCAPED ASSESSMENT ONLY BY VIRTUE OF FACT THAT THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST PAID ON THE LOANS TO ITS PROF IT & LOSS ACCOUNT. THE NOTICE U/S 148 COULD NOT HAVE BEEN ISS UED ON SUCH RIDICULOUS REASONS. IF ONE WERE TO ACCEPT SUCH A RE ASON AS NOTED ABOVE IN THIS CASE THEN IT WOULD VIRTUALLY AM OUNT TO GIVING POWER TO THE AO TO REOPEN THE PROCEEDINGS AT HIS OWN WHIM AND FANCY. HONBLE DELHI HIGH COURT IN THE CAS E OF JAY BHARAT MARUTI LTD. (SUPRA) RELIED UPON DECISION IN THE CASE OF RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) IN FAV OUR OF ASSESSEE AS IS RELIED UPON BY THE LD. DR AGAINST TH E PRESENT ASSESSEE. WE MAY ALSO NOTE THAT THE AFORESAID DECIS ION WAS NOT RELIED UPON IN THE CASE OF NITIN AGRAWAL (SUPRA). H OWEVER SUBMISSION WAS CONSIDERED THAT RETURN WAS PROCESSED U/S 143(1) THEREFORE IT WAS NOT A CASE OF CHANGE OF O PINION. LD. DR HAS REFERRED TO DECISIONS OF HON'BLE SUPREME COU RT IN THE CASES OF D.D. MORE SUMATI DAYAL & P. MOHAN KALA (S UPRA) BUT IN OUR HUMBLE OPINION THESE DECISIONS HAVE BEE N QUOTED OUT OF CONTEXT BECAUSE THEY HAVE NO BEARING ON THE QUESTION OF REOPENING OF THE ASSESSMENT. IN THE CASE OF NITIN A GRAWAL (SUPRA) THESE DECISIONS WERE RELIED UPON BY LD. DR ON MERITS. HOWEVER WHEN THE REASSESSMENT PROCEEDINGS WERE QUA SHED AND DEPARTMENTAL APPEALS WERE NOT DECIDED ON MERIT 19 THEREFORE THERE WAS NO PURPOSE TO REFER THESE DECI SIONS IN THE ORDER. 11. CONSIDERING THE ABOVE DISCUSSION WE ARE OF THE VIEW THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED IN HIS FAVOUR BY THE ORDER OF ITAT INDORE BENCH IN THE CASE OF SHRI NIT IN AGRAWAL (SUPRA) DECISIONS OF HONBLE DELHI HIGH COURT IN T HE CASE OF BATRA BHATTA CO. & JAY BHARAT MARUTI LTD. (SUPRA) A S WELL AS DECISION OF HONBLE P & H HIGH COURT IN THE CASE OF SMT. PARAMJEET KAUR (SUPRA). THUS THERE IS NO NEED TO R EAPPRECIATE THE ISSUE AS IS ARGUED BY LD. DR. IN VIEW OF THE AB OVE WE ARE OF THE VIEW THAT THERE WAS NO JUSTIFICATION FOR THE AO TO REOPEN THE ASSESSMENT IN THE MATTER. WE ACCORDINGLY SET ASID E THE ORDERS OF AUTHORITIES BELOW AND QUASH THE REASSESSMENT PRO CEEDINGS IN BOTH THE AYS. AS A RESULT BOTH THE COS OF THE A SSESSEE ARE ALLOWED. ITA NO.197/IND/2007 & ITA NO.198/IND/2007 12. IN BOTH THE DEPARTMENTAL APPEALS REVENUE HAS C HALLENGED DELETION OF ADDITION ON A/C OF NRI GIFT AND UNEXPLA INED LOANS U/S 68 OF THE IT ACT. SINCE THE REASSESSMENT PROCEE DINGS ARE QUASHED THERE IS NO NEED TO CONSIDER THESE APPEALS ON MERITS IN WHICH LD. CIT(A) DELETED THE ADDITIONS. ONCE REA SSESSMENT PROCEEDINGS ARE QUASHED ALL ADDITIONS MADE THROUGH THE SAME REASSESSMENT ORDER STAND DELETED. IN THIS VIEW OF M ATTER THE ISSUES WOULD BE OF ACADEMIC INTEREST IN NATURE THE REFORE THERE IS NO NEED TO DECIDE DEPARTMENTAL APPEALS ON MERITS . 13. IN VIEW OF THE ABOVE DISCUSSION COS OF THE ASS ESSEE ARE ALLOWED AND DEPARTMENTAL APPEALS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.6.2009. 4. IN THE AFORESAID ORDER THE HONBLE BENCH HAS ALREADY CONSIDERED VARIOUS JUDICIAL PRONOUNCEMENTS AND THE FACTS ARE ALSO IDENTICAL. THE AFORESAID ORDER O F THE BENCH HAS ALSO ATTAINED FINALITY AS NO CONTRARY DEC ISION WAS BROUGHT TO MY NOTICE BY THE REVENUE EVIDENCING THAT EITHER THE FACTS ARE CONTRARY OR THE AFORESAID DECISION HAS BEEN REVERSED BY ANY HONBLE HIGHER FORUM/HONBLE COURT. EVEN THE DECISION OF ACIT VS. O.P. CHAWLA (2008) (8 SOT 242) (TM) (DEL) DURGA PRASAD GOEL VS. ITO (2006) (98 ITD 227) (ASR) (SB) FURTHER FORTIFY THE CASE OF THE ASSESSEE. IN THE PR ESENT APPEAL BEFORE ME THERE IS NO MATERIAL WITH THE DEPARTMENT TO JUSTIFY THE INITIATION OF REASSESSMEN T PROCEEDINGS THEREFORE I AM OF THE CONSIDERED OPIN ION THAT THE LD. ASSESSING OFFICER DID NOT VALIDLY ASSU ME JURISDICTION IN INITIATING PROCEEDINGS U/S 147/148 OF THE ACT. THE DECISION OF THE INDORE BENCH IN PRAVIN JIN DAL 20 VS. ITO (2009) (12 ITJ 227) FURTHER FORTIFIES THE C ASE OF THE ASSESSEE BECAUSE THERE IS NO EVIDENCE ON RECORD TO PROVE ANY NEXUS BETWEEN THE REASONS AND BELIEF. A DETAILED DELIBERATION HAS BEEN MADE THAT TOO ON IDENTICAL FACTS IN THE CASE OF SHRI PUNIT AGRAWAL ( SUPRA) THE FACTS AND JUDICIAL PRONOUNCEMENTS CONTAINED THEREIN MAY BE READ AS PART AND PARCEL OF THIS ORDE R AND NOT BEING REPEATED FOR THE SAKE OF BREVITY THEREFORE I AM OF THE CONSIDERED OPINION THAT ONLY ON THE BASIS OF REASONS TO SUSPECT NO REOPENING IS JUSTIFIED ESPECIALLY WHEN THE CONDITIONS REQUIRED F OR MAKING GIFTS HAS BEEN DULY FULFILLED CONSEQUENTLY THIS GROUND OF THE ASSESSEE IS ALLOWED. 5. ON MERIT FOR MAKING ADDITION U/S 68 OF THE ACT ADMITTEDLY THE ONUS IS ON THE ASSESSEE TO PROVE TH E CAPACITY CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IN THE PRESENT APPEAL IF THE TOTALITY OF FACTS ARE ANALYSED THERE IS NO DISPUTE THAT THE DO NOR IS A WOMAN OF MEANS(HAVING SUBSTANTIAL ASSET/INCOME) THE TRANSACTION IS THROUGH BANKING CHANNEL DULY REFLECTED IN THE RESPECTIVE RETURNS GIFT WAS DULY CONFIRMED BY DECLARATION OF GIFT AND OTHER DOCUMENT ARY EVIDENCE CERTIFICATE FROM THE BANK EVIDENCING THAT THE IMPUGNED AMOUNT WAS DULY TRANSFERRED FROM THE NRE ACCOUNT OF THE DONOR THE CERTIFICATE ISSUED BY THE CHARTERED ACCOUNTANT OF THE DONOR EVIDENCING THAT THERE IS SUBSTANTIAL ASSET/INCOME OF THE DONOR AS W ELL AS THE HUSBAND OF THE DONOR FURTHER FORTIFIES THE CAPACITY TO DONATE CONSEQUENTLY ALL THESE DOCUMENTARY EVIDENCES CLEARLY PROVES THAT THE DONOR (ALONG WITH HER HUSBAND) ARE HAVING SUBSTANTIAL ASSETS/INCOME THEREFORE THE CAPACITY IS ALSO PROV ED. SINCE THE DONOR IS THE MAUSI OF THE DONEE THEREFOR E IDENTITY/RELATION IS ALSO PROVED. IT IS PERTINENT T O MENTION HERE THAT ALL THESE DOCUMENTS (FILED THROUG H PAPER BOOK) HAVE NOT BEEN CONTROVERTED BY THE REVENUE. SINCE THE TRANSACTION/GIFT IS THROUGH BANK ING CHANNEL DULY REFLECTED IN THE RESPECTIVE RETURN THEREFORE THE GENUINENESS OF TRANSACTION IS ALSO N OT IN DISPUTE. A HARMONIOUS CONSTRUCTION OF SEC. 106 OF EVIDENCE ACT AND SEC. 68 OF THE I.T. ACT WILL BE TH AT THOUGH APART FROM THE ESTABLISHING THE IDENTITY OF THE CREDITOR THE ASSESSEE MUST ESTABLISH THE GENUINENE SS OF TRANSACTION AS WELL AS THE CREDITWORTHINESS OF T HE CREDITOR. IT IS NOT THE BUSINESS OF THE ASSESSEE TO FIND OUT THE SOURCE OF THE MONEY OF ITS CREDITOR. I AM A WARE THAT IF THE EXPLANATION OF THE ASSESSEE IS 21 UNSATISFACTORY THE AMOUNT CAN BE TREATED AS INCOME OF THE ASSESSEE BUT SINCE THE IDENTITY OF THE CREDITOR CREDITWORTHINESS GENUINENESS OF THE TRANSACTION AN D ALSO THE RELATION WITH THE DONEE HAS BEEN DULY PROV ED THEREFORE NO ADDITION CAN BE MADE U/S 68 OF THE AC T. EVEN OTHERWISE THE REVENUE HAS NOT PRODUCED ANY EVIDENCE SUBSTANTIATING THAT OWN MONEY OF THE DONEE HAS BEEN ROUTED THROUGH THE ACCOUNT OF THE DONOR THEREFORE ON MERIT ALSO THE ASSESSEE IS HAVING A STRONG CASE. I AM AWARE THAT TRANSACTION BY CHEQUE IS ALWA YS MAY NOT BE SACROSANCT BUT THE TOTALITY OF FACTS CAN NOT BE IGNORED ESPECIALLY WHEN ALL THE THREE INGREDIENT S OF SEC. 68 HAVE BEEN PROVED BY THE ASSESSEE THEREFORE THE DECISIONS IN CIT VS. PADAM SINGH CHOUHAN (315 I TR 433) (RAJ) CIT VS. RAM DEV KUMAR CHITLANGIYA (315 ITR 435) (RAJ) ACIT VS. UJAGAR SINGH (121 TTJ 228)(DEL ) CIT VS. R.S. SIBBAL (269 ITR 429) (DEL) CIT VS. BATRA BHATTA COMPANY (2008) (220 CTR 531) (DEL) (2009) (223 CTR 269) (DEL) FURTHER FORTIFY THE CASE OF THE ASSESSE E. IN THE CASE OF SHRI PUNIT AGRAWAL (SUPRA) VARIOUS CAS E- LAWS HAVE ALREADY BEEN DISCUSSED THEREFORE THE SA ME ARE NOT BEING REPEATED FOR THE SAKE OF BREVITY AND MAY BE READ AS PART AND PARCEL OF THIS ORDER. IN VIEW O F THESE FACTS AND JUDICIAL PRONOUNCEMENTS I AM OF TH E CONSIDERED OPINION THAT NO ADDITION U/S 68 OF THE A CT IS JUSTIFIABLY MADE OUT THEREFORE THE IMPUGNED ADDIT ION IS DELETED. FINALLY THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.2.2010. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. FIRST OF ALL IT IS PERTINENT TO MENTION HERE THAT IN THE AFORESAID CAS E OF KU. MEGHA KHANDELWAL IDENTICAL ISSUE HAS BEEN RAISED WHEREIN A DETAILED AND ELABORATE ATTEMPT HAS BEEN MADE BY THE BENCH IN COM ING TO A PARTICULAR CONCLUSION AND VARIOUS JUDICIAL PRONOUNCEMENTS AND THE FACTS HAVE BEEN DULY CONSIDERED. VARIOUS DECISIONS FROM HONBL E APEX COURT AND HONBLE VARIOUS HIGH COURTS INCLUDING THE TRIBUNAL HAVE BEEN 22 CONSIDERED. THE CAPACITY AND IDENTITY OF THE DONO R GENUINENESS OF THE TRANSACTIONS THROUGH BANKING CHANNEL REFLECTION OF THE AMOUNTS IN THE RESPECTIVE RETURNS ALL THESE FACTS HAVE BEEN DULY CONSIDERED BY THE BENCH IN THE AFORESAID ORDER AND THIS FACTUAL MATRI X WAS NOT CONTROVERTED BY THE REVENUE. IN THE PRESENT APPEAL ALSO THE FAC TS ARE IDENTICAL AND THE LEARNED AO HAS NOT BROUGHT ANY EVIDENCE ON RECO RD TO SUSPECT THE GENUINENESS OF THE GIFT. EVEN OTHERWISE NO CONTRAR Y DECISION CONTROVERTING THE FACTS AND THE JUDICIAL PRONOUNCEM ENTS WAS BROUGHT TO OUR NOTICE. IN THE PRESENT APPEAL THE ASSESSEE RE CEIVED GIFTS OF RS.4 14 000/- FROM A CLOSE RELATIVE WHO IS AN NRI RESIDING IN UNITED KINGDOM. THESE GIFTS WERE ADDED U/S 68 OF THE ACT BY THE LEARNED AO SUSPECTING THE SAME TO BE NON-GENUINE. THE DETAILS OF THE IMPUGNED AMOUNTS WERE DULY FILED BEFORE THE LEARNED AO VIDE LETTER DATED 2.2.2005. THE ASSESSEE RECEIVED THE GIFTS FROM MO USI (REAL ELDER SISTER OF MOTHER) THE DETAILS OF WHICH ARE AS UNDER :- S.NO. DATE CHEQUE NO. AMOUNT IN RS. 1 1.10.2001 86987 2 00 000 2 6.10.2001 86989 50 000 3 8.10.2001 86990 1 00 000 4 13.3.2002 86997 50 000 5 15.3.2002 86999 14 000 TOTAL 4 14 000 23 THE FOLLOWING DOCUMENTS WERE FURNISHED BY THE ASSES SEE IN SUPPORT OF THE ABOVE GIFTS :- 1. PHOTOCOPY OF PASSPORT OF THE DONOR 2. COPY OF DECLARATION OF GIFT DEED. 3. PHOTOCOPY OF THE BANK CERTIFICATE CERTIFYING THA T THE CHEQUES WERE DEBITED TO THE NON-RESIDENT EXTERNAL SB A/C NO . 46 MAINTAINED WITH THE BANK IN THE NAME OF SMT. SARLA KANUNGO. IF THE FACTS STATED IN THE IMPUGNED ORDER NARRATED BEFORE US BY THE LEARNED RESPECTIVE COUNSELS ARE ANALYSED IT IS AN ADMITTED FACT THAT BURDEN IS ON THE ASSESSEE TO PROVE THE SOURCE OF RE CEIPT. PRIMA FACIE IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE N ATURE AND SOURCE OF RECEIPTS IS NOT SATISFACTORY THE ONUS SERIOUSLY C ASTS UPON THE ASSESSEE TO FURNISH EVIDENCE IN ITS SUPPORT. IF THE TOTALIT Y OF FACTS IS ANALYSED WE FIND THAT NECESSARY EVIDENCE WAS FURNISHED BY THE A SSESSEE BEFORE THE AUTHORITIES BELOW. THE TRANSACTION IN THE PRESENT A PPEAL IS THROUGH BANKING CHANNEL AND THERE IS NO EVIDENCE ON RECORD THAT OWN MONEY OF THE ASSESSEE WAS ROUTED THROUGH BANKING CHANNEL. O NCE THE ONUS IS DISCHARGED BY THE ASSESSEE IT SHIFTS TO THE REVENU E TO PROVE OTHERWISE. WE FIND THAT THE REQUIREMENTS OF SECTION 68 ARE DUL Y MET WITH BY THE ASSESSEE AS THE IDENTITY AND CAPACITY OF THE DONOR HAVE BEEN ESTABLISHED ALONG WITH THE GENUINENESS OF THE TRANS ACTION THEREFORE KEEPING IN VIEW THE ASSERTION OF THE RESPECTIVE COU NSELS AND FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL THIS APPEAL OF THE ASSESSEE IS ALLOWED. 24 FINALLY THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT IN THE PRESENCE OF L EARNED REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF HEARING ON IST JULY 2010. (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER IST JULY 2010 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE *DN/