Madan Lal Chadhary, Delhi v. ITO, New Delhi

ITA 901/DEL/2013 | 2002-2003
Pronouncement Date: 14-11-2017 | Result: Allowed

Appeal Details

RSA Number 90120114 RSA 2013
Assessee PAN ABYPC2326E
Bench Delhi
Appeal Number ITA 901/DEL/2013
Duration Of Justice 4 year(s) 9 month(s)
Appellant Madan Lal Chadhary, Delhi
Respondent ITO, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2017
Appeal Filed By Assessee
Tags No record found
Order Result Allowed
Bench Allotted E
Tribunal Order Date 14-11-2017
Date Of Final Hearing 14-06-2017
Next Hearing Date 14-06-2017
First Hearing Date 14-06-2017
Assessment Year 2002-2003
Appeal Filed On 14-02-2013
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE : SHRI BHAVNESH SAINI JUDICIAL MEMBER AND SHRI L.P. SAHU ACCOUNTANT MEMBER ITA NO. 901/DEL/2013 ASSESSMENT YEAR: 2002-03 MADAN LAL CHAUDHARY 8A/17 GEETA COLONY DELHI. PAN ABYPC 2326 E (APPELLANT) VS. INCOME - TAX OFFICER WARD 36(3) NEW DELHI (RESPONDENT) APPELLANT BY SH. K. SAMPATH ADVOCATE & SH. RAJA KUMAR ADVOCATE RESPONDENT BY MS. RAKHI VIMAL SR. DR ORDER PER L.P. SAHU A.M.: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A)- XXVII NEW DELHI DATED 01.10.2012 FOR THE ASSESSMEN T YEAR 2002-03 ON THE FOLLOWING GROUNDS : THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE AUTHORITIES BELOW ERRED IN : 1. INITIATING PROCEEDINGS U/S. 148 OF THE INCOME-TA X ACT 1961 WITHOUT THERE BEING ANY VALID REASONS FOR RECORDING SATISFA CTION AS TO ESCAPEMENT OF INCOME; 2. PASSING ORDER U/S. 148/147/143(3) OF THE ACT WIT HOUT DISPOSING OF THE OBJECTIONS RAISED BY THE APPELLATE AGAINST THE ARBI TRARY REOPENING OF THE ASSESSMENT; DATE OF HEARING 28.09.2017 DATE OF PRONOUNCEMENT 14 .1 1 .2017 ITA NO. 901/DEL./2014 2 3. MAKING FOLLOWING ADDITIONS TO THE RETURNED INCOM E WITHOUT CONSIDERING THE MATERIAL SUBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS A) RS.6 LACS U/S. 69A OF THE ACT TREATING THE AMOUN T OF GIFTS RECEIVED AS INCOME FROM UNDISCLOSED SOURCES; B) RS.12 000/- BEING THE ALLEGED COMMISSION PAID FO R OBTAINING ACCOMMODATION ENTRIES AS UNEXPLAINED EXPENDITURE U/ S. 69C OF THE ACT. ALL THE ABOVE ACTIONS BEING ARBITRARY ERRONEOUS AN D UNTENABLE MUST BE QUASHED WITH DIRECTIONS FOR RELIEF. IN SUBSTANCE ALL THE ABOVE GROUNDS CHALLENGE THE S USTENANCE OF ADDITION OF RS.6 00 000/- U/S. 69A AND RS.12 000/- U/S. 69C MAD E BY THE ASSESSING OFFICER IN THE REASSESSMENT PROCEEDINGS U/S. 147/14 3(3) OF THE IT ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE AO RECE IVED AN INFORMATION FROM DDIT (INV.) UNIT-II(2) NEW DELHI VIDE LETTER DATE D 31.03.2009 THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE RECEIVED ACC OMMODATION ENTRIES IN HIS BOOKS OF ACCOUNT OF RS.3 00 000/- ON 15.01.2002 AND RS.3 00 000/- ON 07.02.2002 FROM SH. HARISH PAWAR PROP. OF M/S. AMI T IMPEX INDIA ON PAYMENT OF CERTAIN AMOUNT AS COMMISSION. ON THE BAS IS OF THIS INFORMATION THE AO ISSUED NOTICE U/S. 148 TO THE ASSESSEE AFTER RECORDING THE REASONS FOR REOPENING OF THE CASE. SINCE THE AMOUNTS OF ENTRIE S NOTED ABOVE STOOD CREDITED IN THE BANK ACCOUNTS OF ASSESSEE THROUGH M ANAGERS CHEQUE THE AO ASKED THE ASSESSEE TO EXPLAIN THE ACCOMMODATION ENT RIES RECEIVED. IN RESPONSE THE ASSESSEE FILED TWO GIFT DEEDS DATED 0 7.02.2002 FOR RS.3 00 000/- ITA NO. 901/DEL./2014 3 EACH SIGNED BY SHRI HARISH PAWAR. THE AO OBSERVED T HAT HARISH PAWAR IN HIS STATEMENTS RECORDED ON OATH ON 12.03.2009 DENIED TO HAVE FILED ANY RETURN OF INCOME AND ADMITTED THAT THE BANK ACCOUNTS OF M/S. AMIT IMPEX (INDIA) WERE USED FOR PROVIDING ACCOMMODATION ENTRIES AND THEREF ORE THE CREDITWORTHINESS OF THE ALLEGED DONOR STOOD DOUBTFU L. THE AO WAS ALSO OF THE VIEW THAT THE ALLEGED GIFTS HAVING BEEN GIVEN OUT O F LOVE AND AFFECTION RELATIONSHIP OF ASSESSEE WITH THE DONOR OCCASION O F GIFT COULD NOT BE PROVED ON THE PART OF THE ASSESSEE AND THE ASSESSEE UTTERL Y FAILED TO PROVE THE CREDITWORTHINESS OF THE DONOR AND GENUINENESS OF TH E TRANSACTION. THEREFORE IN VIEW OF THE ABOVE FACTS AND STATEMENTS OF THE DO NOR THE AO ADDED A SUM OF RS.6 00 000/- TREATING IT AS INCOME OF THE ASSESSEE U/S. 69A AND FURTHER MADE ADDITION OF RS.12 000/- U/S. 69C AS PAYMENT OF COMM ISSION FOR OBTAINING ACCOMMODATION ENTRIES. IN APPEAL THE LD. CIT(A) CO NFIRMED THE ACTION OF THE ASSESSING OFFICER VIDE IMPUGNED ORDER WHICH HAS BE EN CHALLENGED BY ASSESSEE BY MEANS OF THIS APPEAL. 3. THE LEARNED AR OF THE ASSESSEE SUBMITTED THAT TH E LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF AO WITHOUT CO NSIDERING THE FACT THAT NO VALID REASONS NOT RECORDED TO FORM A BELIEF OF ESCA PEMENT FOR RESORTING TO THE PROVISIONS OF SECTION 147/148 OF THE ACT; THAT THE ASSESSMENT WAS MADE WITHOUT DISPOSING OF THE OBJECTIONS RAISED BY THE A SSESSEE ON THE VALIDITY OF ITA NO. 901/DEL./2014 4 NOTICE U/S. 148 IN VIEW OF DECISION OF HONBLE SUPR EME COURT IN GKN DRIVESHAFTS(INDIA) LTD. VS. ITO 259 ITR 19(SC) AND THAT THE ADDITIONS WERE MADE WITHOUT FULLY CONSIDERING THE MATERIAL PRODUCE D BY ASSESSEE BEFORE THE AO. RELIANCE IS FURTHER PLACED ON THE FOLLOWING DEC ISIONS : (I). CIT VS. SFIL STOCK BROKING LTD. 325 ITR 285 (II). ITO VS. LAKHMANI MEWAL DAS 103 ITR 437 (III). PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. 3 95 ITR 677 (DEL.) 4. ON THE OTHER HAND THE LD. DR RELIED ON THE IMPU GNED ORDER AND SUBMITTED THAT SINCE THE ASSESSEE COULD NOT PROVE T HE CREDITWORTHINESS OF DONOR AND GENUINENESS OF THE TRANSACTIONS COUPLED W ITH THE STATEMENTS OF THE DONOR ADMITTING THEIR BANK ACCOUNT TO HAVE BEEN USE D ONLY FOR THE PURPOSE OF PROVIDING ACCOMMODATION ENTRIES THE LD. CIT(A) RIG HTLY CONFIRMED THE ASSESSMENT ORDER AND SUSTAINED THE ADDITIONS. 5. AFTER HEARING THE SUBMISSIONS OF BOTH THE PARTIE S IN THE LIGHT OF RELEVANT RECORD ON FILE WE FIND NO SUBSTANCE IN THE CONTENT ION OF THE ASSESSEE THAT THE ASSESSMENT HAS BEEN MADE WITHOUT DISPOSING OF THE O BJECTIONS OF ASSESSEE. IN THIS REGARD WE FIND THAT THE LD. CIT(A) HAS RIGHTL Y DEALT WITH THIS ISSUE. IT IS NOT DISCERNIBLE EITHER FROM THE ASSESSMENT ORDER OR FRO M THE REMAND REPORT THAT THE ASSESSEE DID FILE ANY SUCH OBJECTIONS BEFORE TH E AO WHICH HE CLAIMS TO HAVE BEEN FILED. THE AO CATEGORICALLY DENIED ANY OB JECTION FILED BY THE ITA NO. 901/DEL./2014 5 ASSESSEE ON RECORD. THE LD. CIT(A) ALSO EXAMINED TH E CASE RECORDS OF THE ASSESSEE WHERE NO SUCH OBJECTIONS TO THE REASONS R ECORDED WERE FOUND. MOREOVER THE ASSESSEE ITSELF HAS FAILED TO FILE EV EN THE COPY OF ANY SUCH OBJECTION EITHER BEFORE THE LD. CIT(A) OR BEFORE US . THEREFORE LD. CIT(A) WAS JUSTIFIED TO REJECT THIS CONTENTION OF THE ASSESSEE . 6. AS REGARDS THE CONTENTION OF THE ASSESSEE REGARD ING INVALID REASONS RECORDED BY THE AO FOR FORMING A BELIEF OF ESCAPEME NT WE FIND CONSIDERABLE SUBSTANCE IN THIS SUBMISSION OF THE ASSESSEE. IT IS NOTABLE THAT THE LD. ASSESSING OFFICER HAS FORMED HIS BELIEF OF ESCAPEMENT OF INCO ME SIMPLY BY RELYING ON THE INFORMATION RECEIVED FROM INVESTIGATION WING THAT T HE ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM SH. HARISH PAWAR PROP. M/ S. AMIT IMPEX (INDIA) THROUGH ITS BANK ACCOUNT. A PERUSAL OF THE REASONS RECORDED SHOWS THAT THE ASSESSING OFFICER APPEARS TO HAVE SIMPLY CONCLUDED ON THE SAID INFORMATION TO FORM THE BELIEF OF ESCAPEMENT OF INCOME WITHOUT A PPLYING HIS OWN MIND AND BRINGING ON RECORD ANY TANGIBLE MATERIAL TO RECORD HIS SATISFACTION. IT IS WORTHWHILE TO NOTE THAT THOUGH THE AO HAS OBSERVED IN THE ASSESSMENT ORDER THAT THE ALLEGED DONOR SHRI HARISH PAWAR IN HIS ST ATEMENT RECORDED BY THE INVESTIGATION WING HAD DEPOSED THAT THE BANK ACCOUN T OF ITS PROPRIETARY CONCERN M/S. AMIT IMPEX WAS BEING USED FOR PROVIDI NG ONLY ACCOMMODATION ENTRIES BUT NO SUCH FACT REGARDING DEPOSITION OF A LLEGED DONOR IS FOUND ITA NO. 901/DEL./2014 6 MENTIONED IN THE REASONS RECORDED BY THE AO SO AS T O FORM A BELIEF ON SOME TANGIBLE MATERIAL. THE LD. ASSESSING OFFICER HAS FE LT SATISFIED ONLY BY CONCLUDING THE INFORMATION AND THEREFORE THE BELIE F FORMED BY AO ON SUCH CONCLUSION IS NOT TENABLE TO JUSTIFY THE INITIATION OF PROCEEDINGS U/S. 147/148. FOR THIS VIEW WE STAND FORTIFIED BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN PR. CIT VS. MEENAKSHI OVERSEAS PVT. LTD. ( SUPRA) WHEREIN THE HONBLE COURT HAS HELD AS UNDER : 22. AS RIGHTLY POINTED OUT BY THE ITAT THE 'REASON S TO BELIEVE' ARE NOT IN FACT REASONS BUT ONLY CONCLUSIONS ONE AFTER THE OTHER. THE EXPRE SSION 'ACCOMMODATION ENTRY' IS USED TO DESCRIBE THE INFORMATION SET OUT WITHOUT EXP LAINING THE BASIS FOR ARRIVING AT SUCH A CONCLUSION. THE STATEMENT THAT THE SAID ENTR Y 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 MENTION ED. HOW HE CAN BE SAID TO BE 'A KNOWN ENTRY OPERATOR' IS EVEN MORE MYSTERIOUS. CLEA RLY THE SOURCE FOR ALL THESE CONCLUSIONS ONE AFTER THE OTHER IS THE INVESTIGAT ION REPORT OF THE DIT. NOTHING FROM THAT REPORT IS SET OUT TO ENABLE THE READER TO APPR ECIATE HOW THE CONCLUSIONS FLOW THEREFROM. 23. THUS THE CRUCIAL LINK BETWEEN THE INFORMATION M ADE AVAILABLE TO THE AO AND THE FORMATION OF BELIEF IS ABSENT. THE REASONS MUST BE SE LF EVIDENT THEY MUST SPEAK FOR THEMSELVES. THE TANGIBLE MATERIAL WHICH FORMS THE BAS IS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT MUST BE EVIDENT FROM A READIN G OF THE REASONS. THE ENTIRE MATERIAL NEED NOT BE SET OUT. HOWEVER SOMETHING THE REIN WHICH IS CRITICAL TO THE FORMATION OF THE BELIEF MUST BE REFERRED TO. OTHERWIS E THE LINK GOES MISSING. 24. THE REOPENING OF ASSESSMENT UNDER SECTION 147 I S A POTENT POWER NOT TO BE LIGHTLY EXERCISED. IT CERTAINLY CANNOT BE INVOKED CASUALLY O R MECHANICALLY. THE HEART OF THE PROVISION IS THE FORMATION OF BELIEF BY THE AO THAT INCOME HAS ESCAPED ASSESSMENT. THE REASONS SO RECORDED HAVE TO BE BASED ON SOME TANG IBLE MATERIAL AND THAT SHOULD BE EVIDENT FROM READING THE REASONS. IT CANNOT BE SUP PLIED SUBSEQUENTLY EITHER DURING THE PROCEEDINGS WHEN OBJECTIONS TO THE REOPENING AR E CONSIDERED OR EVEN DURING THE ASSESSMENT PROCEEDINGS THAT FOLLOW. THIS IS THE BARE MINIMUM MANDATORY REQUIREMENT OF THE FIRST PART OF SECTION 147 (1) OF THE ACT. ITA NO. 901/DEL./2014 7 25. AT THIS STAGE IT REQUIRES TO BE NOTED THAT SINCE THE ORIGINAL ASSESSMENT WAS PROCESSED UNDER SECTION 143 (1) OF THE ACT AND NOT SECTION 143 (3) OF THE ACT THE PROVISO TO SECTION 147WILL NOT APPLY. IN OTHER WORD S EVEN THOUGH THE REOPENING IN THE PRESENT CASE WAS AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY IT WAS NOT NECESSARY FOR THE AO TO SHOW THAT THERE WAS ANY FAILURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSME NT. 26. THE FIRST PART OF SECTION 147 (1) OF THE ACT RE QUIRES THE AO TO HAVE 'REASONS TO BELIEVE' THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAP ED ASSESSMENT. IT IS THUS FORMATION OF REASON TO BELIEVE THAT IS SUBJECT MATTE R OF EXAMINATION. THE AO BEING A QUASI JUDICIAL AUTHORITY IS EXPECTED TO ARRIVE AT A SUBJECTIVE SATISFACTION INDEPENDENTLY ON AN OBJECTIVE CRITERIA. WHILE THE R EPORT OF THE INVESTIGATION WING MIGHT CONSTITUTE THE MATERIAL ON THE BASIS OF WHICH HE FORMS THE REASONS TO BELIEVE THE PROCESS OF ARRIVING AT SUCH SATISFACTION CANNOT BE A MERE REPETITION OF THE REPORT OF INVESTIGATION. THE RECORDING OF REASONS TO BELIEV E AND NOT REASONS TO SUSPECT IS THE PRE- CONDITION TO THE ASSUMPTION OF JURISDICTION UN DER SECTION 147 OF THE ACT. THE REASONS TO BELIEVE MUST DEMONSTRATE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE BELIEF OR THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 27. EACH CASE OBVIOUSLY TURNS ON ITS OWN FACTS AND N O TWO CASES ARE IDENTICAL. HOWEVER THERE HAVE BEEN A LARGE NUMBER OF CASES EXP LAINING THE LEGAL REQUIREMENT THAT REQUIRES TO BE SATISFIED BY THE AO FOR A VALID ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE ACT TO REOPEN A PAST ASSESSMENT. 28.1 IN SIGNATURE HOTELS PVT. LTD. V. INCOME TAX OF FICER (SUPRA) THE REASONS FOR REOPENING AS RECORDED BY THE AO IN A PROFORMA AND P LACED BEFORE THE CIT FOR APPROVAL READ THUS: '11. REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT.- INFORMATION IS RECEIVED FROM THE DIT (INV.-1) NEW DELHI THAT THE ASSESSEE HAS INTRODUCED MONEY AMOUNTING TO RS. 5 LAKH DURING THE F.Y. 2002-03 REL ATING TO A.Y. 2003-04. DETAILS ARE CONTAINED IN ANNEXURE. AS PER INFORMATION AMOUNT RE CEIVED IS NOTHING BUT ACCOMMODATION ENTRY AND ASSESSEE IS A BENEFICIARY.' 28.2 THE ANNEXURE TO THE SAID PROFORMA GAVE THE NAM E OF THE BENEFICIARY THE VALUE OF ENTRY TAKEN THE NUMBER OF THE INSTRUMENT BY WHIC H ENTRY WAS TAKEN THE DATE ON WHICH THE ENTRY WAS TAKEN NAME OF THE ACCOUNT HOLD ER OF THE BANK FROM WHICH THE CHEQUE WAS ISSUED THE ACCOUNT NUMBER AND SO ON. 28.3 ANALYSING THE ABOVE REASONS TOGETHER WITH THE A NNEXURE THE COURT OBSERVED: '14. THE FIRST SENTENCE OF THE REASONS STATES THAT INFORMATION HAD BEEN RECEIVED FROM DIRECTOR OF INCOME-TAX (INVESTIGATION) THAT THE PET ITIONER HAD INTRODUCED MONEY AMOUNTING TO RS. 5 LACS DURING FINANCIAL YEAR 2002- 03 AS PER THE DETAILS GIVEN IN ITA NO. 901/DEL./2014 8 ANNEXURE. THE SAID ANNEXURE REPRODUCED ABOVE RELAT ES TO A CHEQUE RECEIVED BY THE PETITIONER ON 9TH OCTOBER 2002 FROM SWETU STONE PV FROM THE BANK AND THE ACCOUNT NUMBER MENTIONED THEREIN. THE LAST SENTENCE RECORDS THAT AS PER THE INFORMATION THE AMOUNT RECEIVED WAS NOTHING BUT AN ACCOMMODATION ENT RY AND THE ASSESSEE WAS THE BENEFICIARY. 15. THE AFORESAID REASONS DO NOT SATISFY THE REQUIR EMENTS OF SECTION 147 OF THE ACT. THE REASONS AND THE INFORMATION REFERRED TO IS EXTR EMELY SCANTY AND VAGUE. THERE IS NO REFERENCE TO ANY DOCUMENT OR STATEMENT EXCEPT A NNEXURE WHICH HAS BEEN QUOTED ABOVE. ANNEXURE CANNOT BE REGARDED AS A MATERIAL OR E VIDENCE THAT PRIMA FACIE SHOWS OR ESTABLISHES NEXUS OR LINK WHICH DISCLOSES ESCAPEMENT OF INCOME. ANNEXURE IS NOT A POINTER AND DOES NOT INDICATE ESCAPEMENT OF I NCOME. FURTHER IT IS APPARENT THAT THE ASSESSING OFFICER DID NOT APPLY HIS OWN MI ND TO THE INFORMATION AND EXAMINE THE BASIS AND MATERIAL OF THE INFORMATION. THE ASSES SING OFFICER ACCEPTED THE PLEA ON THE BASIS OF VAGUE INFORMATION IN A MECHANICAL MANNE R. THE COMMISSIONER ALSO ACTED ON THE SAME BASIS BY MECHANICALLY GIVING HIS APPROVA L. THE REASONS RECORDED REFLECT THAT THE ASSESSING OFFICER DID NOT INDEPENDENTLY AP PLY HIS MIND TO THE INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME-TAX (INVESTIGA TION) AND ARRIVE AT A BELIEF WHETHER OR NOT ANY INCOME HAD ESCAPED ASSESSMENT.' 28.4 THE COURT IN SIGNATURE HOTELS PVT. LTD. V. INC OME TAX OFFICER (SUPRA) QUASHED THE PROCEEDINGS UNDER SECTION 148 OF THE ACT. THE FACTS IN THE PRESENT CASE ARE MORE OR LESS SIMILAR. THE PRESENT CASE IS THEREFORE COVERED AGAINST THE REVENUE BY THE AFOREMENTIONED DECISION. 29.1 THE ABOVE DECISION CAN BE CONTRASTED WITH THE DE CISION IN AGR INVESTMENT V. ADDITIONAL COMMISSIONER OF INCOME TAX (SUPRA) WHER E THE 'REASONS TO BELIEVE' READ AS UNDER: 'CERTAIN INVESTIGATIONS WERE CARRIED OUT BY THE DIR ECTORATE OF INVESTIGATION JHANDEWALAN NEW DELHI IN RESPECT OF THE BOGUS/ACCOM MODATION ENTRIES PROVIDED BY CERTAIN INDIVIDUALS/COMPANIES. THE NAME OF THE ASSE SSEE FIGURES AS ONE OF THE BENEFICIARIES OF THESE ALLEGED BOGUS TRANSACTIONS GIV EN BY THE DIRECTORATE AFTER MAKING THE NECESSARY ENQUIRIES. IN THE SAID INFORMA TION IT HAS BEEN INTER-ALIA REPORTED AS UNDER: 'ENTRIES ARE BROADLY TAKEN FOR TWO PURPOSES: 1. TO PLOUGH BACK UNACCOUNTED BLACK MONEY FOR THE PUR POSE OF BUSINESS OR FOR PERSONAL NEEDS SUCH AS PURCHASE OF ASSETS ETC. IN THE FORM OF GIFTS SHARE APPLICATION MONEY LOANS ETC. 2. TO INFLATE EXPENSE IN THE TRADING AND PROFIT AND LOSS ACCOUNT SO AS TO REDUCE THE REAL PROFITS AND THEREBY PAY LESS TAXES. ITA NO. 901/DEL./2014 9 IT HAS BEEN REVEALED THAT THE FOLLOWING ENTRIES HAVE BEEN RECEIVED BY THE ASSESSEE:....' 29.2 THE DETAILS OF SIX ENTRIES WERE THEN SET OUT I N THE ABOVE 'REASONS'. THESE INCLUDED NAME OF THE BENEFICIARY THE BENEFICIARY'S BANK VALUE OF THE ENTRY TAKEN INSTRUMENT NUMBER DATE NAME OF THE ACCOUNT IN WHICH ENTRY WAS TAKEN AND THE ACCOUNT FROM WHERE THE ENTRY WAS GIVEN THE DETAILS OF THOSE BANK S. THE REASONS THEN RECORDED: 'THE TRANSACTIONS INVOLVING RS. 27 00 000/- MENTIO NED IN THE MANNER ABOVE CONSTITUTES FRESH INFORMATION IN RESPECT OF THE ASS ESSEE AS A BENEFICIARY OF BOGUS ACCOMMODATION ENTRIES PROVIDED TO IT AND REPRESENTS THE UNDISCLOSED INCOME/INCOME FROM OTHER SOURCES OF THE ASSESSEE COMPANY WHICH H AS NOT BEEN OFFERED TO TAX BY THE ASSESSEE TILL ITS RETURN FILED. ON THE BASIS OF THIS NEW INFORMATION I HAVE REASON TO BELIEVE THAT THE INCOME OF RS. 27 00 000/- HAS ESCAPED ASSESSMENT AS DEFINED BY SE CTION 147 OF THE INCOME TAX ACT. THEREFORE THIS IS A FIT CASE FOR THE ISSUANCE OF T HE NOTICE UNDER SECTION 148.' 29.3 THE COURT WAS NOT INCLINED TO INTERFERE IN THE ABOVE CIRCUMSTANCES IN EXERCISE OF ITS WRIT JURISDICTION TO QUASH THE PROCEEDINGS. A C AREFUL PERUSAL OF THE ABOVE REASONS REVEALS THAT THE AO DOES NOT MERELY REPRODUCE THE I NFORMATION BUT TAKES THE EFFORT OF REVEALING WHAT IS CONTAINED IN THE INVESTIGATION RE PORT SPECIFIC TO THE ASSESSEE. IMPORTANTLY HE NOTES THAT THE INFORMATION OBTAINED WAS 'FRESH' AND HAD NOT BEEN OFFERED BY THE ASSESSEE TILL ITS RETURN PURSUANT TO THE NOTICE ISSUED TO IT WAS FILED. THIS IS A CRUCIAL FACTOR THAT WENT INTO THE FORMATION OF THE BELIEF. IN THE PRESENT CASE HOWEVER THE AO HAS MADE NO EFFORT TO SET OUT THE P ORTION OF THE INVESTIGATION REPORT WHICH CONTAINS THE INFORMATION SPECIFIC TO THE ASSE SSEE. HE DOES NOT ALSO EXAMINE THE RETURN ALREADY FILED TO ASCERTAIN IF THE ENTRY HAS BEEN DISCLOSED THEREIN. 30.1 IN COMMISSIONER OF INCOME TAX NEW DELHI V. HI GHGAIN FINVEST (P) LIMITED (2007) 164 TAXMAN 142 (DEL) RELIED UPON BY MR. CHAU DHARY THE REASONS TO BELIEVE READ AS UNDER: 'IT HAS BEEN INFORMED BY THE ADDITIONAL DIRECTOR OF INCOME TAX (INVESTIGATION) UNIT VII NEW DELHI VIDE LETTER NO. 138 DATED 8 TH APRIL 2003 THAT THIS COMPANY WAS INVOLVED IN THE GIVING AND TAKING BOGUS ENTRIES/ TR ANSACTIONS DURING THE FINANCIAL YEAR 1996-97 AS PER THE DEPOSITION MADE BEFORE THEM BY SHRI SANJAY RASTOGI CA DURING A SURVEY OPERATION CONDUCTED AT HIS OFFICE P REMISES BY THE INVESTIGATION WING. THE PARTICULARS OF SOME OF THE TRANSACTION OF THIS NATURE ARE AS UNDER: DATE PARTICULARS OF CHEQUE DEBIT AMT. CREDIT AMT 18.11.96 305002 5 00 00 0 THROUGH THE BANK ACCOUNT NO. CA 4266 OF M/S. MEHRAM EXPORTS PVT. LTD. IN THE PNB NEW ROHTAK ROAD NEW DELHI. ITA NO. 901/DEL./2014 10 NOTE: IT IS NOTED THAT THERE MIGHT BE MORE SUCH ENTR IES APART FROM THE ABOVE. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 1997-9 8 WAS FILED BY THE ASSESSEE ON 4TH MARCH 1998 WHICH WAS ACCEPTED UNDER SECTION 143 (1) AT THE DECLARED INCOME OF RS. 4 200. IN VIEW OF THESE FACTS I HAVE REASON TO BELIEVE THAT THE AMOUNT OF SUCH TRANSACTIONS PARTICULARLY THAT OF RS. 5 00 000 (AS MENTIONED ABOVE) HAS ESCAPED THE ASSESSMENT WITHIN THE MEANING OF THE PROVISO TO SEC TION 147 AND CLAUSE (B) TO THE EXPLANATION 2 OF THIS SECTION. SUBMITTED TO THE ADDITIONAL CIT RANGE -12 NEW DELH I FOR APPROVAL TO ISSUE NOTICE UNDER SECTION 148 FOR THE ASSESSMENT YEAR 1997-98 IF APPROVED.' 30.2 THE AO WAS NOT MERELY REPRODUCING THE INFORMAT ION RECEIVED FROM THE INVESTIGATION BUT TOOK THE EFFORT OF REFERRING TO TH E DEPOSITION MADE DURING THE SURVEY BY THE CHARTERED ACCOUNTANT THAT THE ASSESSEE COMPA NY WAS INVOLVED IN THE GIVING AND TAKING OF BOGUS ENTRIES. THE AO THUS INDICATED W HAT THE TANGIBLE MATERIAL WAS WHICH ENABLED HIM TO FORM THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. IT WAS IN THOSE CIRCUMSTANCES THAT IN T HE CASE THE COURT CAME TO THE CONCLUSION THAT THERE WAS PRIMA FACIE MATERIAL FOR THE AO TO COME TO THE CONCLUSION THAT THE ASSESSEE HAD NOT MADE A FULL AND TRUE DISC LOSURE OF ALL THE MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. 31. IN COMMISSIONER OF INCOME TAX V. G&G PHARMA (SU PRA) THERE WAS A SIMILAR INSTANCE OF REOPENING OF ASSESSMENT BY THE AO BASED ON THE INFORMATION RECEIVED FROM THE DIT (I). THERE AGAIN THE DETAILS OF THE EN TRY PROVIDED WERE SET OUT IN THE 'REASONS TO BELIEVE'. HOWEVER THE COURT FOUND THAT THE AO HAD NOT MADE ANY EFFORT TO DISCUSS THE MATERIAL ON THE BASIS OF WHICH HE FORMED PRIMA FACIE VIEW THAT INCOME HAD ESCAPED ASSESSMENT. THE COURT HELD THAT THE BASI C REQUIREMENT OF SECTION 147 OF THE ACT THAT THE AO SHOULD APPLY HIS MIND IN ORDER TO FORM REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT HAD NOT BEEN FULFILLE D. LIKEWISE IN CIT-4 V. INDEPENDENT MEDIA P. LIMITED (SUPRA) THE COURT IN S IMILAR CIRCUMSTANCES INVALIDATED THE INITIATION OF THE PROCEEDINGS TO REOPEN THE ASS ESSMENT UNDER SECTION 147 OF THE ACT. 32. IN ORIENTAL INSURANCE COMPANY LIMITED V. COMMIS SIONER OF INCOME TAX 378 ITR 421 (DEL) IT WAS HELD THAT 'THEREFORE EVEN IF IT I S ASSUMED THAT IN FACT THE ASSESSEES INCOME HAS ESCAPED ASSESSMENT THE AO WOULD HAVE NO JURISDICTION TO ASSESS THE SAME IF HIS REASONS TO BELIEVE WERE NOT BASED ON ANY COGEN T MATERIAL. IN ABSENCE OF THE JURISDICTIONAL PRE-CONDITION BEING MET TO REOPEN THE ASSESSMENT THE QUESTION OF ASSESSING OR REASSESSING INCOME UNDER SECTION 147 O F THE ACT WOULD NOT ARISE.' 33. IN RUSTAGI ENGINEERING UDYOG (P) LIMITED (SUPRA ) IT WAS HELD THAT '...THE IMPUGNED NOTICES MUST ALSO BE SET ASIDE AS THE AO HA D NO REASON TO BELIEVE THAT THE ITA NO. 901/DEL./2014 11 INCOME OF THE ASSESSEE FOR THE RELEVANT ASSESSMENT YEARS HAD ESCAPED ASSESSMENT. CONCEDEDLY THE AO HAD NO TANGIBLE MATERIAL IN REGAR D TO ANY OF THE TRANSACTIONS PERTAINING TO THE RELEVANT ASSESSMENT YEARS. ALTHOUGH THE AO MAY HAVE ENTERTAINED A SUSPICION TH AT THE ASSESSEES INCOME HAS ESCAPED ASSESSMENT SUCH SUSPICION COULD NOT FORM T HE BASIS OF INITIATING PROCEEDINGS UNDER SECTION 147 OF THE ACT. A REASON TO BELIEVE - NOT REASON TO SUSPECT - IS THE PRECONDITION FOR EXERCISE OF JURISDICTION UNDER SEC TION 147 OF THE ACT. ' 34. RECENTLY IN AGYA RAM V. CIT (SUPRA) IT WAS EMP HASIZED THAT THE REASONS TO BELIEVE 'SHOULD HAVE A LINK WITH AN OBJECTIVE FACT I N THE FORM OF INFORMATION OR MATERIALS ON RECORD...' IT WAS FURTHER EMPHASIZED T HAT 'MERE ALLEGATION IN REASONS CANNOT BE TREATED EQUIVALENT TO MATERIAL IN EYES OF LAW. MERE RECEIPT OF INFORMATION FROM ANY SOURCE WOULD NOT BY ITSELF TANTAMOUNT TO R EASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENTS.' 35. IN THE DECISION OF THIS COURT DATED 16TH MARCH 2016 IN W.P. (C) NO. 9659 OF 2015 (RAJIV AGARWAL V. CIT) IT WAS EMPHASIZED THAT 'EVEN IN CASES WHERE THE AO COMES ACROSS CERTAIN UNVERIFIED INFORMATION IT IS NECESS ARY FOR HIM TO TAKE FURTHER STEPS MAKE INQUIRIES AND GARNER FURTHER MATERIAL AND IF S UCH MATERIAL INDICATES THAT INCOME OF AN ASSESSEE HAS ESCAPED ASSESSMENT FORM A BELIEF THAT INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT.' 36. IN THE PRESENT CASE AS ALREADY NOTICED THE RE ASONS 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 MATERI AL WHICH FORMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMEN T. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INVE STIGATION 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 E SCAPED ASSESSMENT. 37. FOR THE AFOREMENTIONED REASONS THE COURT IS SA TISFIED THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE NO ERROR HAS BEEN COMMITT ED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROC EEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QU ESTION 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 DI SMISSED BUT WITH NO ORDERS AS TO COSTS. ITA NO. 901/DEL./2014 12 7. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HON BLE JURISDICTIONAL HIGH COURT WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND HOLD THE INITIATION OF PROCEEDINGS U/S. 147/148 AS INVALID THEREBY QUASHI NG THE REASSESSMENT IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CASE. SINCE THE VERY INITIATION OF PROCEEDINGS IS NOT FOUND LEGALLY SUST AINABLE WE DO NOT THINK IT APPROPRIATE TO CONSIDER THE MERITS OF ADDITION MADE ON ACCOUNT OF NON- GENUINE GIFT TRANSACTIONS OR FAILURE TO PROVE CREDI TWORTHINESS OF DONORS ETC. AS CONSIDERED BY THE AUTHORITIES BELOW. ACCORDINGLY THE APPEAL OF THE ASSESSEE DESERVES TO BE ALLOWED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.11.2017. SD/- SD/- (BHAVNESH SAINI) (L.P. SA HU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 14.11.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES NEW DELHI