M/s. Navodaya Castles Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 366/DEL/2010

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4293 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 9 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 24-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-07-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 09-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: F R MEENA SENIOR
• Keywords: Bogus Share capital; Income from undisclosed sources; Question of law; Accommodation entries; Reason to believe; Set aside; Capital Gains
• Section: 143(3); 139(1); 147; 131; 148; 139; 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F : NEW DELHI) BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.4613/DEL./2010 (ASSESSMENT YEAR : 2002-03) ITO, WARD 13 (1), VS. M/S. NAVODAYA CASTLES PVT. L TD., NEW DELHI. 783, DESH BANDHU GUPTA ROAD, KAROL BAGH NEW DELHI 110 005. (PAN : AAACN5437D) CO NO.366/DEL/2010 (IN ITA NO.4613/DEL./2010) (ASSESSMENT YEAR : 2002-03) M/S. NAVODAYA CASTLES PVT. LTD., VS. ITO, WARD 13 ( 1), 783, DESH BANDHU GUPTA ROAD, NEW DELHI. KAROL BAGH NEW DELHI 110 005. (PAN : AAACN5437D) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN, ADVOCATE REVENUE BY : SHRI F.R. MEENA, SENIOR DR DATE OF HEARING : 02.08.2016 DATE OF ORDER : 24.08.2016 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : SINCE COMMON QUESTIONS OF FACTS AND LAW HAVE BEEN R AISED IN BOTH THE AFORESAID APPEAL AND CROSS OBJECTION, T HE SAME ARE BEING DISPOSED OFF BY WAY OF CONSOLIDATED ORDER TO AVOID REPETITION OF DISCUSSION. ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 2 2. PRESENT APPEAL IS THE OUTCOME OF ORDER DATED 25. 08.2014 PASSED BY THE HONBLE JURISDICTIONAL HIGH COURT IN ITA 320/2012 VIDE WHICH APPEAL HAS BEEN REMITTED TO THE TRIBUNAL TO DECIDE THE WHOLE ISSUE AFRESH ALONG WITH CROSS OBJECTIONS DISM ISSED AS INFRUCTUOUS BY THE TRIBUNAL. FOR READY REFERENCE, OPERATIVE PART OF THE JUDGMENT RENDERED BY HONBLE JURISDICTIONAL HIG H COURT IS REPRODUCED AS UNDER :- 20. NOW, WHEN WE GO TO THE ORDER OF THE TRIBUNAL I N THE PRESENT CASE, WE NOTICE THAT THE TRIBUNAL HAS MEREL Y REPRODUCED THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND UPHELD THE DELETION OF THE ADDITION. IN FACT, THEY SUBSTANTIALLY RELIED UPON AND QUOTED THE DECIS ION OF ITS COORDINATE BENCH IN THE CASE OF MAF ACADEMY P. LTD. , A DECISION WHICH HAS BEEN OVERTURNED BY THE DELHI HIG H COURT VIDE ITS JUDGMENT IN C.I.T VS. MAF ACADEMY P. LTD [ (2014) 206 DLT 277). IN THE IMPUGNED ORDER IT IS ACCEPTED THAT THE ASSESSEE WAS UNABLE TO PRODUCE DIRECTORS AND PRINCI PAL OFFICERS OF THE SIX SHAREHOLDER COMPANIES AND ALSO THE FACT THAT AS PER THE INFORMATION AND DETAILS COLLECTED B Y THE ASSESSING OFFICER FROM THE CONCERNED BANK, THE ASSE SSING OFFICER HAS OBSERVED THAT THERE WERE GENUINE CONCER NS ABOUT IDENTITY, CREDITWORTHINESS OF SHAREHOLDERS AS WELL AS GENUINENESS OF THE TRANSACTIONS. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE FEEL TH AT THE MATTER REQUIRES AN ORDER OF REMIT TO THE TRIBUNAL F OR FRESH ADJUDICATION KEEPING IN VIEW THE AFORESAID CASE LAW . THE QUESTION OF LAW IS, THEREFORE, ANSWERED IN FAVOUR O F THE REVENUE AND AGAINST THE RESPONDENT-ASSESSEE, BUT WI TH AN ORDER OF REMIT TO THE TRIBUNAL TO DECIDE THE WHOLE ISSUE AFRESH. ONE OF THE REASONS, WHY WE HAVE REMITTED THE MATTER IS THAT THE CROSS OBJECTIONS OF THE RESPONDENT-ASSESSEE QUE STIONING NOTICE UNDER SECTION 147/148 WERE DISMISSED AS INFR UCTUOUS AND EVEN IF WE DECIDE THE ISSUE ON MERITS IN FAVOUR OF THE REVENUE, THE CROSS OBJECTIONS WOULD GOT REVIVED AND REQUIRE ADJUDICATION. THE APPEAL IS ACCORDINGLY DISPOSED OF . ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 3 3. APPELLANT, INCOME TAX OFFICER, WARD 13 (1), NEW DELHI (HEREINAFTER REFERRED TO AS THE REVENUE), BY FILI NG THE PRESENT APPEAL SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 02.08.2010 PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- XVI, NEW DELHI QUA THE ASSESSMENT YEAR 2002-03 ON THE GROUND S INTER ALIA THAT :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION O F RS.54,00,000/- MADE U/S 68 OF THE INCOME TAX ACT, 1 961 ON ACCOUNT OF SHARE APPLICATION MONEY 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN IGNORING THE FACT THAT THE ASSESSEE FAILED TO PRODUCE DIRECTORS/AUTHORIZED REPRESENTATI VE OF THE ALLEGED APPLICANTS EVEN AFTER SPECIFICALLY BEING AS KED TO DO SO BY THE A.O. AND, THUS FAILED TO DISCHARGE ITS ONUS TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE SHARE APPL ICANTS AND THE GENUINENESS OF TRANSACTION. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN RELYING UPON THE DECISI ON GIVEN IN THE CASE OF LOVELY EXPORTS (P) LTD. IN THE CASE OF LOVELY EXPORTS P.LTD., THE A.O. DID NOT ASK THE ASSESSEE T O PRODUCE ANY OF THE INVESTOR SHAREHOLDERS. HOWEVER, IN THE I NSTANT CASE THE ASSESSEE WAS SPECIFICALLY ASKED AND GIVEN A NUM BER OF OPPORTUNITIES TO PRODUCE THE DIRECTORS/AUTHORIZED REPRESENTATIVES OF THE INVESTING COMPANIES, BUT YET NONE COULD BE PRODUCED BEFORE THE A.O. BY THE TAXPAYER. 4. THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY F RESH GROUNDS OF APPEAL AND/OR DELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 4. THE OBJECTOR, BY FILING THE PRESENT CROSS OBJECT ION, SOUGHT TO SET ASIDE THE IMPUGNED ORDER DATED 02.08.2010 PASSE D BY THE ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 4 COMMISSIONER OF INCOME-TAX (APPEALS)-XVI, NEW DELHI QUA THE ASSESSMENT YEAR 2002-03 ON THE GROUND THAT :- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS I N CONFIRMING THE ACTION OF LD. AO IN ASSUMING JURISDI CTION U/S 147 AND THAT TOO WITHOUT COMPLYING WITH THE MANDATO RY CONDITIONS AS PRESCRIBED UNDER SECTION 147 TO 153 O F THE INCOME TAX ACT, 1961. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER A CTION OF LD. CTT (A) IN NOT QUASHING THE ASSESSMENT ORDER IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT THE CROSS OBJECTOR CRAVES THE LEAVE TO ADD, AMEND, MODIFY, DELETE ANY OF THE GROUND(S) OF CROSS OBJEC TION BEFORE OR AT THE TIME OF HEARING. 5. BRIEFLY STATED THE FACTS OF THIS CASE ARE : ASSE SSEE COMPANY FILED RETURN OF INCOME DECLARING LOSS OF RS.1,58,03 5/- ON 20.10.2002 WHICH WAS PROCESSED UNDER SECTION 143 (1 ) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). SUBSEQ UENTLY, IT WAS NOTICED BY THE REVENUE AUTHORITIES THAT DURING THE YEAR UNDER ASSESSMENT, THE ASSESSEE RECEIVED ACCOMMODATION ENT RY UNDER THE GARB OF SHARE APPLICATION MONEY/SHARE CAPITAL/SHARE PREMIUM FROM THE FOLLOWING ENTRY OPERATORS :- BENEFI- CIARY BENEFI- CIARY VALUE OF ENTRY TAKEN INSTRU- MENT NO. BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF A/C ACCOUNT HOLDER OF ENTRY OF GIVING A/C BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVING BANK A/C NO. OF ENTRY GIVING ACCOUNT HDFC BANK RAJENDER NAGAR MKT., 70000 972521 07.3.02 SEKHAWATI FINANCE P. LTD. SBP DARYAGANJ 50111 ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 5 ND HDFC OLD RAJENDER NAGAR, ND 1000000 13.3.02 D.K. ISPAT & TIMBER LTD. SBP - DO - 50090 HDFC - D O - 650000 13.3.02 KUBERSO SALES P. LTD. SBP - DO - 50084 HDFC -DO- 1200000 14.3.02 DINANATH LUHARIWAL SPINNING MILLS LTD. SBP -DO- 50103 HDFC - DO - 850000 33834 16.3.02 TECHNOCOM ASSOCIATES P.LTD. INNOVA TIVE WAZIRPUR 220 HDFC -DO- 1000000 18.3.02 CHINTPURI CREDITS SBP DG 50058 TOTAL 5400000 6. ON THE BASIS OF MATERIAL PLACED BEFORE THE AO, A O CAME TO THE CONCLUSION THAT THE ASSESSEE HAS FAILED TO DISC LOSE FULLY AND TRULY ALL THE MATERIAL FACTS QUA THE ASSESSMENT OF INCOME OF RS.54,00,000/- RECEIVED ON ACCOUNT OF SHARE APPLICA TION MONEY, CONSEQUENTLY ASSESSMENT WAS REOPENED U/S 147 OF THE ACT AND SERVICE OF NOTICE U/S 148 OF THE ACT WAS EFFECTED O N 25.03.2009. 7. ASSESSEE PREFERRED THAT RETURN FILED U/S 139(1) BE TREATED AS REPLY TO THE NOTICE U/S 148 OF THE ACT. REASONS RE CORDED BY THE AO WERE COMMUNICATED TO THE ASSESSEE TO WHICH ASSESSEE RAISED OBJECTIONS THAT THE REASONS RECORDED FOR REOPENING THE ASSESSEE DID NOT CONTAIN THE FULL DETAILS AND REASONS WITHIN THE MEANING OF SECTION 147 OF THE ACT. ASSESSEE WAS CALLED UPON T O SHOW CAUSE AS TO WHY SHARE CAPITAL OF RS.54,00,000/- BE NOT TREAT ED AS INCOME FROM UNDISCLOSED SOURCES. SUMMONS ISSUED U/S 131 O F THE ACT TO ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 6 THE AFORESAID SIX PARTIES SUBSCRIBING THE SHARE CAP ITAL WERE RETURNED UNSERVED IN CASE OF FIVE PARTIES. ASSESSEE SHOWED ITS HELPLESSNESS TO PRODUCE THE DIRECTOR / PRINCIPAL OFFICER OF THE AFORESAID SIX COMPANIES. SO, ON FAILURE OF THE ASSESSEE TO DISCH ARGE ITS ONUS TO ESTABLISH THE IDENTITY AND CREDITWORTHINESS OF THE AFORESAID SIX PARTIES AND ALSO THE GENUINENESS OF THE TRANSACTION MADE ADDITION OF RS.54,00,000/- U/S 68 OF THE ACT APART FROM MAKING AN ADDITION TO THE TUNE OF RS.1,08,000/- @ 2% OF THE AFORESAID AMO UNT PAID AS COMMISSION TO THE ENTRY OPERATORS. CIT (A) HOWEVER DELETED THE ADDITION. 8. IN THE FIRST ROUND OF LITIGATION, THE REVENUE AS WELL AS ASSESSEE CHALLENGED THE IMPUGNED ORDER PASSED BY LD . CIT (A) BEFORE THE APPELLATE TRIBUNAL WHICH HAS DISMISSED T HE APPEAL ON MERIT AND DISMISSED THE CROSS OBJECTION FILED BY TH E ASSESSEE AS INFRUCTUOUS. THEN REVENUE CHALLENGED THE ORDER PAS SED BY THE APPELLATE TRIBUNAL DATED 31.10.2011 BEFORE HONBLE JURISDICTIONAL HIGH COURT WHICH HAS REMITTED THE CASE BACK TO THE TRIBUNAL TO DECIDE AFRESH ALONG WITH CROSS OBJECTION. 9. NOW, THE REVENUE AS WELL AS ASSESSEE ARE AGAIN B EFORE THE TRIBUNAL BY WAY OF FILING APPEAL AS WELL AS CROSS O BJECTION IN THE SECOND ROUND OF LITIGATION. ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 7 10. UNDISPUTEDLY, IT IS SETTLED PRINCIPLE OF LAW TH AT THE AO IS REQUIRED TO REACH AT AN INDEPENDENT CONCLUSION BY A PPLYING HIS OWN MIND THAT HE HAS REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT TO ASSUME THE JURISDICTION F OR REOPENING OF THE ASSESSMENT U/S 147 / 148 OF THE ACT. 11. NOW BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO PERUSE THE REASONS RENDERED BY THE AO FOR REOPENING OF THE ASS ESSMENT U/S 147 OF THE ACT WHICH ARE REPRODUCED FOR READY REFER ENCE AS UNDER :- INFORMATION HAS BEEN RECEIVED FROM THE INVESTIGATI ON WING OF THE INCOME TAX DEPARTMENT THAT THE ABOVE NAMED A SSESSEE IS A BENEFICIARY OF ACCOMMODATION ENTRIES RECEIVED FROM CERTAIN ESTABLISHED ENTRY OPERATORS IDENTIFIED BY T HE WING DURING THE PERIOD RELEVANT TO A.Y. 2002-03. A COMPREHENSIVE INVESTIGATION WAS CARRIED OUT BY THE INVESTIGATION WING FOR IDENTIFICATION OF ENTRY OPER ATORS ENGAGED IN THE BUSINESS OF MONEY LAUNDERING FOR THE BENEFICIARIES AND ON THE BASIS OF INVESTIGATION CAR RIED OUT AND EVIDENCES COLLECTED, A REPORT HAS BEEN FORWARDED. THE ASSESSING OFFICER HAS PERUSED THE INFORMATION CONTA INED IN THE REPORT AND THE EVIDENCES GATHERED. THE REPORT PROVIDERS DETAILS OF THE MODUS OPERANDI OF THE MONEY LAUNDER ING SCAM AND EXPLAIN HOW THE UNACCOUNTED MONEY OF THE BENEFI CIARIES ARE PLOUGHED BACK IN ITS BOOKS OF ACCOUNT IN VARIOU S FORMS INCLUDING THE FORM OF BOGUS SHARE CAPITAL / CAPITAL GAINS ETC. AFTER ROUTING THE SAME THROUGH THE BANK ACCOUNT(S) OF THE ENTRY OPERATORS. ENTRY OPERATORS WERE IDENTIFIED A FTER THOROUGH INVESTIGATION ON THE BASIS OF DEFINITE ANA LYSIS OF THEIR IDENTITY, CREDITWORTHINESS AND THE SOURCE OF THE MONEY ULTIMATELY RECEIVED BY THE BENEFICIARIES. THESE EN TRY OPERATORS ARE FOUND TO BE MOSTLY ABSCONDING / NON-C OMPLYING AFTER THE UNEARTHING OF THE MONEY LAUNDERING SCAM LEAVING THE SAID MONEY AT THE DISPOSAL OF THE BENEFICIARIES WITHOUT ANY ASSOCIATED COST OR LIABILITY. IN THE INSTANT C ASE, THE ASSESSEE IS FOUND TO BE THE BENEFICIARY OF ACCOMMOD ATION ENTRY FROM SUCH ENTRY OPERATORS AS PER THE FOLLOWIN G SPECIFIC DETAILS OF TRANSACTION :- ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 8 BENEFI - CIARY BANK NAME BENEFI - CIARY BANK BRANCH VALUE OF ENTRY TAKEN INSTRU - MENT NO. BY WHICH ENTRY TAKEN DATE ON WHICH ENTRY TAKEN NAME OF A/C ACCOUNT HOLDER OF ENTRY GIVING A/C BANK FROM WHICH ENTRY GIVEN BRANCH OF ENTRY GIVING BANK A/C NO. OF ENTRY GIVING ACCOUNT HDFC BANK 79, OLD RAJENDER NAGAR MKT., ND 70 000 TO CLG. 00972521 7 - MAR - 02 SEKHAWATI FINANCE P. LTD. SBP DG 50111 HDFC OLD RAJENDER NAGAR 1000000 13- MAR-02 D.K. ISPAT & TIMBER LTD. SBP DG 50090 HDFC OLD RAJENDER NAGAR 1000000 13- MAR-02 D.K. ISPAT & TIMBER LTD. SBP DG 50090 HDFC OLD RAJENDER NAGAR 650000 13- MAR-02 KUBERSO SALES P. LTD. SBP DG 50084 HDFC OLD RAJENDER NAGAR 650000 13- MAR-02 KUBERSO SALES P. LTD. SBP DG 50084 HDFC OLD RAJENDER NAGAR 1200000 14 - MAR-02 DINANATH LUHARIWAL SPINNING MILLS LTD. SBP DG 50103 HDFC OLD RAJENDER NAGAR 1200000 14 - MAR-02 DINANATH LUHARIWAL SPINNING MILLS LTD. SBP DG 50103 HDFC OLD RAJENDER NAGAR 850000 33834 16- MAR-02 TECHNOCOM ASSOCIATES P.LTD. INNOVA TIVE WAZIRPUR 220 HDFC OLD RAJENDER NAGAR 850000 33834 16- MAR-02 TECHNOCOM ASSOCIATES P.LTD. INNOVA TIVE WAZIRPUR 220 HDFC OLD RAJENDER NAGAR 1000000 18- MAR-02 CHINTPURI CREDITS SBP DG 50058 HDFC OLD RAJENDER NAGAR 1000000 18 - MAR-02 CHINTPURI CREDITS SBP DG 50058 THE ASSESSEE HAS RECEIVED UNEXPLAINED SUMS FROM THE ENTRY OPERATORS AS PER THE ABOVE DETAILS AS PER INFORMATI ON AVAILABLE WITH THE UNDERSIGNED. AS EXPLAINED ABOVE, THE IDEN TITY, CREDITWORTHINESS AND GENUINENESS OF TRANSACTIONS WI TH THE PERSONS FOUND TO BE ENTRY OPERATORS CANNOT BE ESTAB LISHED. THE ASSESSING OFFICER THEREFORE HAVE REASONS TO BEL IEVE THAT ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE O R DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR AS SESSMENT FOR ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 9 ABOVE ASSESSMENT YEAR, THE INCOME CHARGEABLE TO TAX TO EXTENT OF ACCOMMODATION ENTRY MENTIONED ABOVE, HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT. 12. IN THE BACKDROP OF THE AFORESAID FACTS AND CIRC UMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATIO N IN THIS CASE IS :- AS TO WHETHER AO IS EMPOWERED TO INITIATE THE PROCEEDINGS U/S 147/148 OF THE ACT MERELY ON THE BA SIS OF REPORT RECEIVED FROM THE INVESTIGATION WING THAT THE ASSESSEE HAS BEEN PROVIDED WITH ACCOMMODATION ENTRY TO THE TUNE OF RS.54,00,000/- BY THE ENTRY OPERATOR S, WITHOUT APPLYING HIS MIND? 13. IDENTICAL ISSUE HAS COME UP BEFORE THE HONBLE SUPR EME COURT IN JUDGMENT CITED AS CHHUGAMAL RAJPAL VS. S.P. CHALIHA (1971) 79 ITR 603, WHEREIN IT IS HELD AS UNDER :- THE SUPREME COURT WAS DEALING WITH A CASE WHERE TH E AO HAD RECEIVED CERTAIN COMMUNICATIONS FROM THE COMMISSION ER OF INCOME TAX SHOWING THAT THE ALLEGED CREDITORS OF TH E ASSESSEE WERE NAME-LENDERS AND THE TRANSACTIONS ARE BOGUS. THE AO CAME TO THE CONCLUSION THAT THERE WERE REASONS TO BELIEV E THAT INCOME OF THE ASSESSEE HAD ESCAPED ASSESSMENT. THE SUPREME CO URT DISAGREED AND OBSERVED THAT THE AO HAD NOT EVEN CO ME TO A PRIMA FACIE CONCLUSION THAT THE TRANSACTIONS TO WHICH HE REFERRED WERE NOT GENUINE TRANSACTIONS. HE APPEARED TO HAVE HAD ONLY A VAGUE FELLING THAT THEY MAY BE BOGUS TRANSACTIONS. IT WAS FURT HER EXPLAINED BY THE SUPREME COURT THAT : BEFORE ISSUING A NOTICE UNDER S. 148, THE ITO MUST HAVE EITHER REASONS TO BELIEVE THAT BY REASON OF THE OMI SSION OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER S. 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT YEAR, INCOME CHARGEABLE TO TAX HAS ESCAPED ASS ESSMENT FOR THAT YEAR OR ALTERNATIVELY NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED ABOVE ON T HE PART OF THE ASSESSEE, THE ITO HAS IN CONSEQUENCE OF INFO RMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR. UNLESS THE REQUIREMENTS OF CL. (A) OR CL. (B) OF S. 147 ARE ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 10 SATISFIED, THE ITO HAS NO JURISDICTION TO ISSUE A N OTICE UNDER S. 148. THE SUPREME COURT CONCLUDED THAT IT WAS NOT SATISFI ED THAT THE ITO HAD ANY MATERIAL BEFORE HIM WHICH COULD SATISFY THE REQUIREMENTS UNDER SECTION 147 AND THEREFORE COULD NOT HAVE ISSU ED NOTICE UNDER SECTION 148. 14. IDENTICAL ISSUE HAS ALSO COME UP BEFORE HONBLE JURISDICTIONAL HIGH COURT IN JUDGMENT CITED AS G & G PHARMA INDIA LTD. (SUPRA) WHEREIN HONBLE HIGH COURT, BY FOLLOWING T HE JUDGMENT DELIVERED BY HONBLE SUPREME COURT, ENTITL ED CHHUGAMAL RAJPAL VS. S.P. CHALIHA (SUPRA) HELD AS UNDER :- 12. IN THE PRESENT CASE, AFTER SETTING OUT FOUR EN TRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10 TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVE STIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSES SEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES. THE ABOVE CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER TH E AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABO UT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE M ATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMOD ATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE B EEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VE RY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHIC H MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14 TH NOVEMBER 2004 AND WAS PROCESSED UNDER SECTION 143( 3) OF THE ACT. WITHOUT FORMING A PRIMA FACIE OPINION, ON THE BASIS OF SUCH MATERIAL, IT WAS NOT POSSIBLE FOR THE AO TO HAVE SIMPLY CONCLUDED: IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BAN K BY WAY OF ACCOMMODATION ENTRIES. IN THE CONSIDERED VIEW O F THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIEN T CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREIN BEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MI ND TO THE ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 11 MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN TH E PRESENT CASE. 15. FURTHERMORE, SIMILAR ISSUE HAS CROPPED UP BEFOR E THE ITAT, DELHI BENCH H IN M/S. USG BUILDWELL PVT. LTD. (SUPRA), WHEREIN ADDITION OF RS.20,00,000/- WAS MADE BY THE AO ON THE BASIS OF SIMILAR INTIMATION SENT BY ACIT, CENTRAL C IRCLE 19, NEW DELHI ON THE BASIS OF SURVEY OPERATION CONDUCTED IN S.K. GUPTA GROUP OF CASES ON 20.11.2007 AND THE COORDINATE BEN CH CAME TO THE CONCLUSION THAT THE AO HAS NOT APPLIED HIS MIND ON THE INFORMATION RECEIVED FORM ACIT AS REQUIRED U/S 147 OF THE ACT AND AS SUCH, ASSESSMENT FRAMED U/S 143 READ WITH SECTIO N 143(3) IS NOT SUSTAINABLE. 16. NOW, ADVERTING TO THE CASE AT HAND IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND SETTLED PRINCIPLE OF LAW DISCUSSED IN THE PRECEDING PARAS, WE ARE OF THE CON SIDERED VIEW INTER ALIA THAT :- (I) THE AO HAS MERELY ACTED IN MECHANICAL MANNER ON RECEIPT OF THE REPORT FROM THE INVESTIGATION WING T HAT HE HAS REASON TO BELIEVE THAT INCOME OF RS.54,00,000/- HAS ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 2002-03 DUE TO FAILURE ON THE PART OF ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 12 THE ASSESSEE TO DISCLOSE FULLY OR TRULY ALL MATERIA L FACTS NECESSARY FOR ASSESSMENT ; (II) THE AO HAS NOT EVEN SATISFIED HIMSELF TO PRIMA FACIE MAKE OUT THAT INCOME OF RS.54,00,000/- HAS ESCAPED ASSESSMENT IN THE YEAR UNDER ASSESSMENT BY PURSUING RECORD, IF ANY; (III) THAT WHEN THE AO HAS BEEN PROVIDED WITH COPIE S OF SHARE APPLICATION FORMS CONTAINING NAMES, ADDRESSES , PAN, BANK DETAILS AND CONFIRMATION OF THE INVESTORS , HE WAS REQUIRED TO CONDUCT THE INDEPENDENT INVESTIGATION TO SATISFY HIMSELF THAT SUCH AND SUCH INCOME HAS ESCAPED ASSESSMENT BEFORE ASSUMING JURISDICTION U/S 147 OF THE ACT; (IV) THAT EVEN ON MERITS WHEN THE ASSESSEE HAD PROV IDED COPIES OF SHARE APPLICATION FORMS CONTAINING NAMES, ADDRESSES, PAN, BANK DETAILS AND CONFIRMATION OF TH E INVESTORS, THE ONUS STOOD SHIFTED TO THE AO TO PROV E THAT THESE ARE THE SHELL COMPANIES AND NOT TO FASTE N THE LIABILITY OF THE ASSESSEE ON THE GROUND THAT ASSESS EE HAS FAILED TO PRODUCE THE AFORESAID SIX INVESTOR ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 13 COMPANIES, MORESO ASSESSEE CANNOT BE CALLED UPON TO PROVE NEGATIVE; (V) THAT FORMING AN OPINION MERELY ON THE BASIS OF INFORMATION SUPPLIED BY INVESTIGATION WING OF THE REVENUE THAT SUCH AND SUCH COMPANY HAS PROVIDED AN ACCOMMODATION ENTRIES TO THE ASSESSEE TO THE TUNE O F RS.54,00,000/- DOES NOT AMOUNT TO THE SATISFACTION OF THE AO IN ANY MANNER WHATSOEVER TO REOPEN THE CASE U/S 147 OF THE ACT; (VI) THAT WHEN THE AO HAS SUFFICIENT MATERIAL TO CO NDUCT THE INDEPENDENT INVESTIGATION TO ASSUME THE JURISDICTION U/S 147/148 OF THE ACT, WHICH HE HAS N OT USED FOR THE REASONS BEST KNOWN TO HIM RATHER PROCEEDED ON THE BASIS OF REPORT OF INVESTIGATION W ING WITHOUT APPLYING HIS MIND, WHICH IS NOT PERMISSIBLE UNDER LAW; (VII) THAT IN VIEW OF THE LAW LAID DOWN BY THE HON BLE SUPREME COURT AND HONBLE JURISDICTIONAL HIGH COURT IN THE JUDGMENT CITED AS CHHUGAMAL RAJPAL VS. S.P. CHALIHA AND G & G PHARMA INDIA LTD.(SUPRA) RESPECTIVELY WHEN THE INITIATION OF PROCEEDINGS U/S 147 ITA NO.4613/DEL./2010 CO NO.366/DEL/2010 14 OF THE ACT IN THIS CASE IS ITSELF BAD IN LAW, CONSE QUENT ASSESSMENT FRAMED U/S 143(3)/147 OF THE ACT IS ALSO NOT SUSTAINABLE, HENCE HEREBY QUASHED. 18. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, SINCE THE REOPENING OF THE PROCEEDINGS U/S 147 OF THE ACT AND CONSEQUENT ASSESSMENT FRAMED U/S 143 (3) / 147 HAVE HELD TO BE NOT SUSTAINABLE IN THE EYES OF LAW FOR WANT OF JURISDICTIONAL ERROR ON THE PART OF THE AO, GROUNDS NO.1, 2 & 3 RAISED BY THE REVENUE IN IT A NO.4613/DEL/2010 CHALLENGING THE ADDITION OF RS.54, 00,000/- MADE BY THE AO AND DELETED BY THE LD. CIT (A) U/S 68 OF THE ACT HAS BECOME INFRUCTUOUS. RESULTANTLY, PRESENT APPEAL FI LED BY THE REVENUE IS DISMISSED AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE STAND ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 24 TH DAY OF AUGUST, 2016. SD/- SD/- (J.S. REDDY) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 24 TH DAY OF AUGUST, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.