Megha Gupta, Delhi V. ITO, Ward-35(2), New Delhi

ITA 1106/DEL/2018

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2857 (ITAT-DELHI)
• Duration Of Justice: 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 15-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V K JIWANI
• Keywords: Reopening of assessment; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Application of stay; Tangible material; Accommodation entries; Reason to believe; Documents seized; Borrowed satisfaction
• Section: 143(3); 142(1); 234B; 147; 148; 132; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC : NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO.1106/DEL/2018 ASSESSMENT YEAR : 2007-08 AND STAY APPLICATION NO. 172/DEL/2018 (IN ITA NO.1106/DEL/2018 ASSESSMENT YEAR : 2007-08 MEGHA GUPTA, 2-E, KAMLA NAGAR, DELHI 110 007 (PAN: ALBPG3157A) VS. ITO, WARD-35(2), NEW DELHI (APPELLANT) ( RESPONDENT) ASSESSEE BY : SH. GAUTAM JAIN, ADV., SH. PIYUSH KAMAL, ADV. AND SH. LALIT MOHAN, CA DEPARTMENT BY : SHRI V.K. JIWANI, SR. DR ORDER THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A)-12, NEW DELHI ON 15.11.2 017 IN RELATION TO THE ASSESSMENT YEAR 2007-08. THE ASSESSEE ALSO MOVED STAY APPLICATION. WHILE CONSIDERING THE STAY 2 APPLICATION, BOTH THE PARTIES CONSENTED FOR DISPOSAL OF THE APPEAL. THEREFORE, THE STAY APPLICATION AS WELL AS MA IN APPEAL OF THE ASSESSEE FIXED FOR HEARING ON 15.03.2018 AND I AM DECIDING THE MAIN APPEAL FIRST. THE GROUNDS RAI SED IN THE MAIN APPEAL READ AS UNDER- 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-12, NEW DELHI HAS ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING THE INITIATION OF PROCEEDINGS AND ASSESSMENT FRAMED U/S 147/143(3) OF THE ACT WHICH WERE BOTH JURISDICTION AND DESERVED TO BE QUASHED AS SUCH. 1.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT APPELLANT WAS A MINOR IN THE INSTANT YEAR AND THEREFORE NO INCOME COULD HAVE ESCAPED ASSESSMENT AND AS SUCH NOTICE U/S 148 ISSUED WAS ILLEGAL, INVALID AND UNSUSTAINABLE. 3 1.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT REASONS RECORDED MECHANICALLY WITHOUT APPLICATION OF MIND DO NOT CONSTITUTE VALID REASONS TO BELIEVE FOR ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT. 1.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAVING ADMITTED THAT RS. 14,00,000/- WAS PAID BY THE FATHER OF THE APPELLANT HAD NO MATERIAL MUCH LESS TANGIBLE AND RELEVANT MATERIAL TO FORM AN OPINION EVEN PRIMA-FACIE THAT FURTHER SUM OF RS. 21,00,000/- WAS INCURRED AS EXPENDITURE BY THE APPELLANT AND THEREFORE ACTION U/S 147 OF THE ACT WAS ILLEGAL, INVALID AND UNTENABLE. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FURTHER ERRED BOTH IN LAW AND ON FACTS IN UPHOLDING AN ADDITION OF RS. 21,00,000/- REPRESENTING THE ALLEGED DONATION PAID BY THE FATHER 4 OF APPELLANT FOR ADMISSION IN THE COURSE OF MBBS TO SANTOSH GROUP OF INSTITUTION. 2.1 THAT WHILE SUSTAINING THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT ADDITION HAD BEEN MADE ON ARBITRARY ASSUMPTIONS AND, PRESUMPTIONS AND OVERLOOKING THE EVIDENCE AND EXPLANATION TENDERED BY THE APPELLANT. 2.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT IMPUGNED ADDITION HAS BEEN MADE WITHOUT PROVIDING ANY CROSS EXAMINATION TO THE APPELLANT AND THEREFORE THIRD PARTY EVIDENCE AND STATEMENT COULD NOT BE A GROUND TO MAKE AN ADDITION IN THE HANDS OF THE APPELLANT. 2.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS FAILED TO APPRECIATE THAT ASSESSEE 5 WAS 'MINOR' AT THE TIME OF PAYMENT OF FEES AS SHE BECAME MAJOR ON 14.12.2006, AND THEREFORE THERE COULD BE NO BASIS TO EVEN ASSUME THAT ASSESSEE HAS INCURRED ANY EXPENDITURE MUCH LESS UNEXPLAINED EXPENDITURE IN THE INSTANT YEAR. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED BOTH IN LAW AND ON FACTS-IN UPHOLDING THE LEVY OF INTEREST OF RS. 5,35,745/- UNDER SECTION 234A OF THE ACT AND OF RS. 6,34,957/- U/S 234B OF THE ACT WHICH ARE NOT LEVIABLE ON THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE APPELLANT IT IS THEREFORE, PRAYED THAT IT BE HELD THAT ASSESSMENT MADE BY THE LEARNED ASSESSING OFFICER AND SUSTAINED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DESERVES TO BE QUASHED AS SUCH. IT BE FURTHER HELD ADDITION MADE AND UPHELD BY THE LEARNED COMMISSIONER OF INCOME 6 TAX(APPEALS) ALONGWITH INTEREST LEVIED BE DELETED AND APPEAL OF THE APPELLANT BE ALLOWED. 2. THE FACTS IN BRIEF ARE THAT NOTICE U/S. 148 OF THE I NCOME TAX ACT, 1961 (HEREINAFTER REFERRED AS THE ACT) WAS ISSU ED ON 28.03.2014 TO THE ASSESSEE. IN RESPONSE TO NOTICE U/S 148 THE RETURN OF INCOME WAS FILED ON 17.04.2014. FUR THER, VIDE LETTER DATED 17.04.2014 THE ASSESSEE HAS ASKED TO PROVIDE REASONS TO BELIEVE FOR REOPENING THE CASE U/S 1 47 OF THE ACT. THE AO VIDE LETTER DATED 29.04.2014 PROVID ED THE REASONS FOR REOPENING THE CASE. NOTICE. U/S 142(1) ALONG WITH QUESTIONNAIRE WAS ISSUED ON 02.05.2014, FIXING THE CASE F OR HEARING ON 07.05.2014. ON 07.05.2014 THE AR OF THE ASSESSEE HAS ASKED TO PROVIDE COPY OF MATERIAL ON THAT B ASIS THE CASE WAS RE-OPENED. FURTHER, VIDE LETTER DATED 09.06.2014 THE ASSESSEE HAS FILED OBJECTION AGAINST ISSUAN CE OF NOTICE U/S 148 OF THE ACT. NOTICE U/S 142(1) WAS ISSUED ON 22.07.2014 AND DULY SERVED UPON THE ASSESSEE, FIXING T HE 7 CASE FOR 1.08.2014. ON THE DATE FIXED, THE ASSESSEE VIDE LETTER DATED 01.08.2014 AGAIN FILED THE OBJECTION AG AINST RE- OPENING THE CASE. THE AO HAS REMOVED/ DISPOSED OFF THE OBJECTION FILED BY THE ASSESSEE. ON 29.09.2014 THE AR OF THE ASSESSEE HAS FILED ASSESSMENT ORDER DATED 28.08.2014 FOR THE A.Y. 2007-08 OF FATHER OF THE ASSESSEE NAMELY SHRI PARVEEN KUMAR GUPTA AND SUBMITTED THAT AS THE AO HAS CONSIDERED THE DONATION OF RS.21,00,000/- AS ALLEGED TO HAVE BEEN PAID TO SANTOSH MEDICAL COLLEGE AT THE TIME OF ADMISSION OF HIS DAUGHTER MEGHA GUPTA IN JULY 2006 AN D REQUESTED TO DROP THE PROCEEDINGS INITIATED U/S 147/ 148. FURTHER, NOTICE U/S 142(1) WAS ISSUED ON 20.11.2014 AND DULY SERVED UPON THE ASSESSEE FIXING THE CASE ON 8.12.20 14. FURTHER, THE ASSESSEE VIDE LETTER DATED 30.12.2014 ONCE AGAIN REQUESTED TO KINDLY DROP THE PROCEEDINGS INITIA TED U/S 147/148 OF THE I.T. ACT. SHOW CAUSE NOTICE WAS ISSUED ON 18.02.2015 FIXING THE CASE FOR 25.02.2015. WRITTEN R EPLY DATED 25.02.2015 WAS FILED BY THE A.R., OF THE ASSESSE E 8 WHICH ARE PLACED ON RECORD. FURTHER, ALL THE OBJECTION S RAISED BY THE ASSESSEE MEET OUT VIDE LETTER DATED 20.02.2015. IN THIS FACTS LEADING TO THE INITIATION OR PROCEEDINGS U/ S 148 ARE THAT A SEARCH & SEIZURE ACTION U/S 132 OF THE I.T. ACT, 1961, WAS CARRIED OUT ON 27.06.013 IN SANTOSH GROUP OF INSTITUTIONS & DR. P. MAHALINGAM. THE GROUP COMPRISE S OF THE FOLLOWING INSTITUTIONS:- 1. SANTOSH HOSPITAL (P) LTD. 2. MAHARAJI EDUCATION TRUST AND 3. SANTOSH TRUST. THE ABOVE SAID TRUSTS/INSTITUTIONS, ENGAGED IN RUNNIN G OF THE EDUCATIONAL ACTIVITIES IN HEALTH-CARE, ARE PREDO MINANTLY AND PRINCIPALLY INDULGED IN EXTRACTING SUBSTANTIAL AMO UNT OF FEES IN THE FORM OF DONATIONS/CAPITATION FEES FROM TH E PARENTS OF THE STUDENTS FOR ALLOWING ADMISSION TO THE VARIOUS M EDICAL, DENTAL, PARAMEDICAL & PARA-DENTAL COURSES CONDUCTED BY SUCH TRUSTS/ INSTITUTIONS. THE STATEMENTS WERE RECORDED U/S 9 132(4) DURING THE SEARCH AND SEIZURE ACTION OF DR. P. MAHALIGNAM, FOUNDER CHAIRMAN OF GROUP, SHRI S. CHAKRAVARTHI, GENERAL MANAGER (ADMINISTRATION), SH. J. KAMALA KANAN, FINANCE CONTROLLER AND OTHER RELATED P ERSONS OF THE GROUP, THE MODUS OPERANDI ADOPTED BY THE GRO UP WITH REGARD TO RECEIPT OF UNACCOUNTED CASH IN THE FORM OF CAPITATION FEES/DONATIONS WAS DISCUSSED. 2.1 AO OBSERVED THAT KEEPING IN VIEW THE FACTS, THE DOCUMENTS SEIZED AND THE STATEMENTS OF DR. P. MAHALINGAM , SHRI J. KAMALA KANNAN AND SHRI S. CHAKRAVARTHI, IT WAS HELD THAT THE AMOUNT OF RS.21 ,00,000/- PAID BY THE FATH ER OF THE ASSESSEE FOR PURSUING THE COURSE OF MBBS REPRESENT THE UNACCOUNTED INCOME OF THE ASSESSEE AND THUS THE SUBSTANTIVE ADDITION OF RS. 21,00,000/- IN QUESTION HAS ALREADY BEEN MADE IN THE CASE OF HER FATHER SHRI PARV EEN KUMAR GUPTA FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, DA TED 10 28.08.2014 PASSED BY DY. COMMISSIONER OF INCOME TAX CIRCLE-14(1), NEW DELHI. THEREFORE, ADDITION OF RS.21,00,000/- WAS BEING MADE IN THE HANDS OF THE ASSE SSEE ON PROTECTIVE BASIS AND INCOME WAS ASSESSED AT RS. 21,43,320/- VIDE ORDER DATED 02.03.2015 PASSED U/S. 143(3)/147 OF THE ACT. 3. AGGRIEVED WITH THE AFORESAID ASSESSMENT ORDER DATED 02.3.2015, ASSESSEE APPEALED BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER DATED 15.11.2017 HAS AFFIRMED THE ACTION OF THE AO AND DISMISSED THE APPEAL OF THE ASSESSEE . 4. DURING THE HEARING, LD. COUNSEL OF THE ASSESSEE STAT ED THAT ACTION OF THE LD. CIT(A) IN UPHOLDING THE INIT IATION OF PROCEEDINGS AND ASSESSMENT FRAMED U/S. 147/143(3) OF THE ACT IS WRONG AND DESERVED TO BE QUASHED. IT WAS FURTHER SUBMITTED THAT LOWER AUTHORITIES HAVE NOT CONSIDERED TH E FACT THAT ASSESSEE WAS A MINOR IN THE INSTANT YEAR AND THEREF ORE NO INCOME COULD HAVE ESCAPED ASSESSMENT AND AS SUCH 11 NOTICE U/S. 148 OF THE ACT ISSUED WAS ILLEGAL, INVALID AN D UNSUSTAINABLE. IT WAS FURTHER STATED THAT REASONS RECORDED BY THE AO MECHANICAL AND WITHOUT APPLICATION OF MIND AND DO NOT CONSTITUTE VALID REASONS TO BELIEVE FOR ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT HAVING ADMITTED THAT RS. 14,00,000/- WAS PAID BY THE FATHER OF THE ASSESSEE HAD NO MATERIAL MUCH LESS TANGIBLE AND RELEVANT MATERIAL TO F ORM AN OPINION EVEN PRIMA-FACIE THAT FURTHER SUM OF RS. 21,0 0,000/- WAS INCURRED AS EXPENDITURE BY THE ASSESSEE AND THEREFORE ACTION U/S. 147 OF THE ACT WAS ILLEGAL, INVALID AND UN TENABLE. IT WAS FURTHER STATED THAT LOWER AUTHORITIES WRONGLY MADE/UPHELD THE ADDITION OF RS. 21,00,000/- REPRESEN TING THE ALLEGED DONATION PAID BY THE FATHER OF ASSESSEE FO R ADMISSION IN THE COURSE OF MBBS TO SANTOSH GROUP OF INSTITUTION AND ALSO FAILED TO APPRECIATE THAT ADDITI ON HAD BEEN MADE ON ARBITRARY ASSUMPTIONS AND, PRESUMPTIONS AN D OVERLOOKING THE EVIDENCE AND EXPLANATION TENDERED B Y THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ADDITION HAS BEEN 12 MADE WITHOUT PROVIDING ANY CROSS EXAMINATION TO THE ASSESSEE AND THEREFORE THIRD PARTY EVIDENCE AND STATEME NT COULD NOT BE A GROUND TO MAKE AN ADDITION IN THE HAN DS OF THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE LOWER AUTHORITIES ALSO IGNORED THE FACT THAT ASSESSEE WAS 'MINOR ' AT THE TIME OF PAYMENT OF FEES AS SHE BECAME MAJOR ON 14.12.2006, AND THEREFORE THERE COULD BE NO BASIS TO E VEN ASSUME THAT ASSESSEE HAS INCURRED ANY EXPENDITURE MUCH LESS UNEXPLAINED EXPENDITURE IN THE INSTANT YEAR. IT W AS FURTHER STATED THAT LEVY OF INTEREST OF RS. 5,35,745/- UNDER SECTION 234A OF THE ACT AND OF RS. 6,34,957/- U/S. 234B OF THE ACT WHICH ARE NOT LEVIABLE ON THE FACTS AND CIRCUMSTA NCES OF THE CASE OF THE ASSESSEE. ON THE ISSUE OF INITIATION O F PROCEEDINGS U/S. 147 OF THE ACT ON THE BASIS OF NO MAT ERIAL MUCH LESS ANY TANGIBLE AND, RELEVANT MATERIAL AND AS SUCH REASONS RECORD DO NOT CONSTITUTE VALID REASON TO BELIEVE FOR INITIATING PROCEEDINGS U/S. 147 OF THE ACT, HE RELIED UPON THE DECISION IN THE CASE OF CIT VS. KELVINATOR OF INDIA LT D. 320 13 ITR 561 (SC); ACIT VS. RAJEH JHAVERI STOCK BROKERS (P ) LTD. 291 ITR 500 (SC) AND CIT VS. BATRA BHATTA & CO. 321 ITR 526 (DEL). ON INITIATION OF PROCEEDINGS ON THE BASIS OF NON- APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION O F MIND BUT IS A CASE OF BORROWED SATISFACTION, HE CITED THE CASE LAW OF HONBLE DELHI HIGH COURT IN THE CASE OF PR. C IT VS. G& G PHARMA INDIA LTD. 384 ITR 147 (DEL.); PR. CIT VS. MEENAKSHI OVERSEAS () LTD. VS. ITO 395 ITR 677 (DEL.). LD. COUNSEL OF THE ASSESSEE ALSO STATED THAT NO VALID APPROVAL HAD BEEN OBTAINED IN TERMS OF SECTION 151 OF THE ACT A ND IN VIEW THEREOF THE APPROVAL SO GRANTED IS INVALID RENDE RING THE PROCEEDINGS INITIATED ILLEGAL AND UNTENABLE LAW AND RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT I N THE CASE OF PR. CIT VS. M/S NC CABLES LTD. IN ITA 335/2015. 5. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND STATED THAT ASSESSING OFFICER IS SUED THE NOTICE U/S. 148 AFTER DUE APPLICATION OF MIND. TH E 14 ASSESSING OFFICER NOTED IN THE REASONS THAT ASSESSEE HAD NO T FILED HER RETURN OF INCOME FOR AY 2007-08 AND HAD GI VEN DONATION OF RS.21,00,000/- IN CASH FOR ADMISSION IN TH E COURSE MBBS TO THE SANTOSH MEDICAL COLLEGE, GHAZIABAD. SINCE, THE ASSESSEE NOT FILED HER RETURN OF INCOME FOR T HE RELEVANT ASSESSMENT YEAR, THE CASH PAYMENT OF RS.21,00,000/- WAS FROM UNDISCLOSED SOURCES HAVING ESCAPED THE ASSESSMENT. SUCH REASONING RECORDED BY THE ASSESSING OFFICER WAS AFTER DUE APPLICATION OF MIND. HE FURTHE R STATED THAT THE AO HAS FOLLOWED DUE PROCEDURE BEFORE ISSUING THE NOTICE U/S 148 OF THE I.T. ACT, 1961. THE ASSESSING OFF ICER HAD TANGIBLE MATERIAL IN THE FORM OF INFORMATION RE CEIVED FROM THE INVESTIGATION WING. THE ASSESSING OFFICER DID NOT PROCEED TO ANY HEARSAY, CONJECTURE OR SURMISES. IN SO FAR AS APPROVAL OF THE JOINT COMMISSIONER FOR ISSUING THE NOT ICE U/S 148 IS CONCERNED, HE STATED THAT AO HAS CLEARLY MENTION ED THIS FACT IN THE FIRST LINE OF THE ASSESSMENT ORDER. HE FU RTHER STATED THAT THE TOTAL DEPOSIT WAS RS. 35 LACS OUT OF W HICH RS. 15 14 LACS WAS PAID BY WAY OF TR AND THE BALANCE AMOUNT OF RS. 21 LACS WAS PAID IN CASH, HENCE, IT WAS REQUESTED THAT T HE ORDERS OF THE AUTHORITIES BELOW MAY BE UPHELD ON THE LEGAL ISSUE AS WELL AS ON THE MERITS OF THE CASE. 6. I HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONS IDERED THE SAME. I NOTE THAT IN THIS CASE THE AO WHILE RECORDI NG THE REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT HAS RECORDED THE REASONS AS UNDER:- IN THIS CASE, AS PER RECORD THE ASSESSEE HAS NOT FILED HER RETURN OF INCOME FOR AY 2007-08. FURTHER, AS PER INFORMATION RECEIVED. MS. MEGHA GUPTA, R/O 2-E, KAMLA NAGAR, DELHI PAN ALBPG3157A, DURING THE F.Y. 2006-07 RELEVANT AY 2007-08, HAS GIVEN DONATION IN CASH OF RS. 21,00,000/- FOR ADMISSION IN THE COURSE OF MBBS TO THE SANTOSH MEDICAL COLLEGE, GHAZIABAD. AS, THE ASSESSEE HAS NOT FILED HER 16 RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR I.E. AY 2007-08. THEREFORE, ALL THE CASH TRANSACTION MADE TREATED AS HER INCOME FROM UNDISCLOSED SOURCES. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT ASSESSMENT MS. MEGHA GUPTA, PAN ALBPG3147A HAS ESCAPED HER INCOME OF RS. 21,00,000/-. THE INCOME OF RS. 21,0,000/- IS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147(B) AND IS TO BE TAXED ACCORDINGLY. 6.1 AFTER PERUSING THE AFORESAID REASONS RECORDED, I FI ND THAT IT IS A CASE WHERE ACTION HAS BEEN TAKEN MECHANICALL Y ON THE BASIS OF INFORMATION RECEIVED FROM INVESTIGATION WING, AND, NOT ON AN INDEPENDENT APPLICATION OF MIND AND T HEREFORE ON THIS GROUND TOO, THE PROCEEDINGS ARE WITHOUT JURISDI CTION. IT IS APPARENT FROM THE FACT THAT ACCORDING TO THE AO, INVESTIGATION WING HAS INFORMED THAT ASSESSEE HAS PAID CASH 17 OF RS. 21,00,000/- FOR ADMISSION IN THE COURSE OF MBBS TO SANTOSH MEDICAL COLLEGE, GHAZIABAD. IT HAS BEEN FURTH ER NOTED THAT THE ASSESSEE HAS NOT FILED RETURN OF INCOME F OR THE RELEVANT ASSESSMENT YEAR I.E. ASSESSMENT YEAR 2007-08 AND , AO HAS INVOKED SECTION 148 OF THE ACT TO VERIFY THE SOU RCE OF CASH PAID OF RS. 21,00,000/-. THUS, THE AO HAS ACTED MECHANICALLY AND WITHOUT ANY INDEPENDENT APPLICATION O F MIND. IT IS ALSO EVIDENT THAT WHILE ALLEGING CASH PA YMENT OF RS. 21 LACS IT IS NOT EVEN KNOWN OR STATED ON WHICH DAT E AND ON WHAT BASIS SUCH SUMS WAS ALLEGEDLY PAID BY ASSESSEE; THE REASONS RECORDED ARE THEREFORE VAGUE, HIGHLY NON SPECIF IC AND REFLECT COMPLETE NON-APPLICATION OF MIND. THAT REA SONS RECORDED ARE 'REASON TO SUSPECT' AND, IS A MERE ATTEMPT T O CARRY OUT FISHING AND ROVING EXPEDITION. IT IS ALSO NOT ED THAT IN THE ABSENCE OF SPECIFIC AND INCRIMINATING MATERIAL M UCH LESS TANGIBLE AND, RELEVANT MATERIAL TO FORM EVEN PRI ME FACIE BELIEF THAT THERE WAS ALLEGED PAYMENT OF RS. 21,00,00 0/- IS ALSO APPARENT FROM THE FACT THAT THE ALLEGED DOCUMENT FOUND 18 AND SEIZED DURING THE COURSE OF SEARCH/SURVEY ACTION U/S 132/133A OF THE ACT DOES NOT REFLECT ANY FIGURE OF RS. 21 LACS AND IN THE ABSENCE OF ANY INDEPENDENT ENQUIRY OR EXAMINATION OF FACTS ON RECORD OR NOTICING THE CONTENT OF ALLEGED DOCUMENTS IN THE REASONS RECORDED AND, REASONS BEING SILENT AS TO THE SPECIFIC FACTS, THE VAGUE ALLEGA TION SHOWS THAT ACTION HAS BEEN TAKEN MECHANICALLY ON THE BAS IS OF ALLEGED REPORT OF INVESTIGATION WING, AND, NOT ON INDEPENDENT APPLICATION OF MIND AND THEREFORE ON THI S GROUND TOO, THE PROCEEDINGS ARE WITHOUT JURISDICTION. IT IS AL SO NOTED THAT THERE IS NO LIVE LINK OR DIRECT NEXUS BETWEEN ALL EGED MATERIAL AND, INFERENCE. IT IS A CASE OF INVESTIGATION IN THE GARB OF ACTION U/S 148 OF THE ACT ON THE BASIS THAT PROCEEDINGS HAVE BEEN INITIATED ON THE BASIS OF NO MA TERIAL MUCH LESS ANY TANGIBLE AND, RELEVANT MATERIAL AND AS SUCH REASONS RECORD DO NOT CONSTITUTE VALID REASON TO BELIEVE FOR INITIATING PROCEEDINGS ULS 147 OF THE ACT. IN THIS REGA RD, I DRAW SUPPORT FROM THE DECISION OF THE HONBLE SUPREM E COURT 19 320 ITR 561 (SC) CIT VS KELVINATOR OF INDIA LTD. IT IS FURTHER NOTED THAT INITIATION OF PROCEEDINGS IS ALSO BASED ON NO N APPLICATION OF MIND MUCH LESS INDEPENDENT APPLICATION O F MIND BUT IS A CASE OF BORROWED SATISFACTION. TO SUPPORT T HIS VIEW, I DRAW SUPPORT FROM THE FOLLOWING DECISIONS:- I) 384 ITR 147 (DEL) PR. CIT V. G&G PHARMA INDIA LTD. (INTRODUCTION OF SHARE CAPITAL) 'TODAY WHEN THE CASE WAS CALLED OUT, MR. SAWHNEY PRODUCED BEFORE THE COURT THE VERY SAME LETTER OF THE AO DATED 15TH SEPTEMBER 2010 WHICH HAS BEEN REPRODUCED IN ITS ENTIRELY IN THE IMPUGNED ORDER OF THE ITAT. HE SUBMITTED THAT THE AO WAS HIMSELF PRESENT IN THE COURT AND FURTHER EFFORTS WOULD BE MADE TO LOCATE THE MATERIALS ON THE BASIS OF WHICH THE AO FORMED HIS OPINION REGARDING REOPENING OF 20 THE ASSESSMENT. THE COURT WAS NOT PREPARED TO GRANT FURTHER TIME FOR THIS PURPOSE SINCE IT WAS NOT CLEAR THAT THE MATERIALS WERE, IN FACT, AVAILABLE WITH THE DEPARTMENT. IN THE PRESENT CASE, AFTER SETTING OUT FOUR ENTRIES, STATED TO HAVE BEEN RECEIVED BY THE ASSESSEE ON A SINGLE DATE I.E. 10TH FEBRUARY 2003, FROM FOUR ENTITIES WHICH WERE TERMED AS ACCOMMODATION ENTRIES, WHICH INFORMATION WAS GIVEN TO HIM BY THE DIRECTORATE OF INVESTIGATION, THE AO STATED: I HAVE ALSO PERUSED VARIOUS MATERIALS AND REPORT FROM INVESTIGATION WING AND ON THAT BASIS IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK ACCOUNT BY WAY OF ABOVE ACCOMMODATION ENTRIES.' THE ABOVE 21 CONCLUSION IS UNHELPFUL IN UNDERSTANDING WHETHER THE AO APPLIED HIS MIND TO THE MATERIALS THAT HE TALKS ABOUT PARTICULARLY SINCE HE DID NOT DESCRIBE WHAT THOSE MATERIALS WERE. ONCE THE DATE ON WHICH THE SO CALLED ACCOMMODATION ENTRIES WERE PROVIDED IS KNOWN, IT WOULD NOT HAVE BEEN DIFFICULT FOR THE AO, IF HE HAD IN FACT UNDERTAKEN THE EXERCISE, TO MAKE A REFERENCE TO THE MANNER IN WHICH THOSE VERY ENTRIES WERE PROVIDED IN THE ACCOUNTS OF THE ASSESSEE, WHICH MUST HAVE BEEN TENDERED ALONG WITH THE RETURN, WHICH WAS FILED ON 14TH 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 22 CONCLUDED: 'IT IS EVIDENT THAT THE ASSESSEE COMPANY HAS INTRODUCED ITS OWN UNACCOUNTED MONEY IN ITS BANK BY WAY OF ACCOMMODATION ENTRIES'. IN THE CONSIDERED VIEW OF THE COURT, IN LIGHT OF THE LAW EXPLAINED WITH SUFFICIENT CLARITY BY THE SUPREME COURT IN THE DECISIONS DISCUSSED HEREINBEFORE, THE BASIC REQUIREMENT THAT THE AO MUST APPLY HIS MIND TO THE MATERIALS IN ORDER TO HAVE REASONS TO BELIEVE THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT IS MISSING IN THE PRESENT CASE.' II) 395 ITR 677 (DEL) PR. CIT V. MEENAKSHI OVERSEAS (P) LTD. V. ITO 36. IN THE PRESENT CASE, AS ALREADY NOTICED, THE REASONS TO BELIEVE 23 CONTAIN NOT THE REASONS BUT THE CONCLUSIONS OF THE AO ONE AFTER THE OTHER. THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO TO THE TANGIBLE MATERIAL WHICH FORMS THE BASIS OF THE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. THE CONCLUSIONS OF THE AO ARE AT BEST A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT. INDEED IT IS A BORROWED SATISFACTION'. THE REASONS FAIL TO DEMONSTRATE THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. 37. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATISFIED THAT IN THE FACTS 24 AND CIRCUMSTANCES OF THE CASE, NO ERROR HAS BEEN COMMITTED BY THE ITAT IN THE IMPUGNED ORDER IN CONCLUDING THAT THE INITIATION OF THE PROCEEDINGS UNDER SECTION 147/148 OF THE ACT TO REOPEN THE ASSESSMENTS FOR THE AYS IN QUESTION DOES NOT SATISFY THE REQUIREMENT OF LAW. 38. THE QUESTION FRAMED IS ANSWERED IN THE NEGATIVE, I.E., IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE APPEAL IS, ACCORDINGLY, DISMISSED BUT WITH NO ORDERS AS TO COSTS. III) 396 ITR 5 (DEL) PRO CIT V. RMG PLYVINYL (I) LTD. 11. THERE CAN BE NO MANNER OF DOUBT THAT IN THE INSTANT THERE WAS A FAILURE 25 OF APPLICATION OF MIND BY THE AO TO THE FACTS. IN FACT HE PROCEEDED ON TWO WRONG PREMISES - ONE REGARDING ALLEGED NON-FILING OF THE RETURN AND THE OTHER REGARDING THE EXTENT OF THE SO-CALLED ACCOMMODATION ENTRIES. 12. RECENTLY, IN ITS DECISION DATED 26TH MAY, 2017 IN ITA NO.692/20L6 (PRINCIPAL COMMISSIONER OF INCOME TAX-6 V. MEENAKSHI OVERSEAS PVT. LTD.), THIS COURT DISCUSSED THE LEGAL POSITION REGARDING REOPENING OF ASSESSMENTS WHERE THE RETURN FILED AT THE INITIAL STAGE WAS PROCESSED UNDER SECTION 143(1) OF THE ACT AWL NOT UNDER SECTION 143(3) OF THE ACT. THE REASONS FOR THE REOPENING OF THE 26 ASSESSMENT IN THAT CASE WERE MORE OR LESS SIMILAR TO THE REASONS IN THE PRESENT CASE, VIZ., INFORMATION WAS RECEIVED FROM THE INVESTIGATION WING REGARDING ACCOMMODATION ENTRIES PROVIDED BY A 'KNOWN' ACCOMMODATION ENTRY PROVIDER. THERE, ON FACTS, THE COURT CAME TO THE CONCLUSION THAT THE REASONS WERE, IN FACT, IN THE FORM OF CONCLUSIONS 'ONE AFTER THE OTHER' AND THAT THE SATISFACTION ARRIVED AT BY THE AO WAS A 'BORROWED SATISFACTION' AND AT BEST 'A REPRODUCTION OF THE CONCLUSION IN THE INVESTIGATION REPORT.' 13. AS IN THE ABOVE CASE, EVEN IN THE PRESENT CASE, THE COURT IS UNABLE TO 27 DISCERN THE LINK BETWEEN THE TANGIBLE MATERIAL AND THE FORMATION OF THE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. IN THE PRESENT CASE TOO, THE INFORMATION RECEIVED FROM THE INVESTIGATION WING CANNOT BE SAID TO BE TANGIBLE MATERIAL PER SE WITHOUT A FURTHER INQUIRY BEING UNDERTAKEN BY THE AO. IN THE PRESENT CASE THE AO DEPRIVED HIMSELF OF THAT OPPORTUNITY BY PROCEEDING ON THE ERRONEOUS PREMISE THAT ASSESSEE HAD NOT FILED A RETURN WHEN IN FACT IT HAD. 14. TO COMPOUND MATTERS FURTHER THE IN THE ASSESSMENT ORDER THE AO HAS, INSTEAD OF ADDING A SUM OF 78 LAKH, EVEN GOING BY THE REASONS FOR 28 REOPENING OF THE ASSESSMENT, ADDED A SUM OF RS.1.13 CRORE. ON WHAT BASIS SUCH AN ADDITION WAS MADE HAS NOT BEEN EXPLAINED. 15. FOR THE AFOREMENTIONED REASONS, THE COURT IS SATISFIED THAT NO ERROR WAS COMMITTED BY THE ITAT IN HOLDING THAT REOPENING OF THE ASSESSMENT UNDER SECTION 147 OF THE ACT WAS BAD IN LAW. 6.2 KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS EXPLAINED ABOVE AND RESPECTFULLY FOLLOWING THE PRECEDENTS, AS AFORESAID, THE PROCEEDINGS INITIATED BY INVOKING THE PROVISIONS OF SECTION 147 OF THE ACT BY T HE AO AND UPHELD BY THE LD. CIT(A) ARE NONEST IN LAW AND WITHOUT JURISDICTION, HENCE, THE ASSESSMENT IS QUASHED. SINCE I H AVE ALREADY QUASHED THE ASSESSMENT, THE OTHER GROUNDS HAVE BECOME ACADEMIC AND ARE THEREFORE NOT ADJUDICATED AND ACCORDINGLY, THE ASSESSEES APPEAL IS ALLOWED. 29 7. AS REGARDS THE STAY APPLICATION IS CONCERNED, SINCE THE MAIN APPEAL HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY QUASHING THE ASSESSMENT, AS AFORESAID, HENCE, THE STAY APPLICATION FILED BY THE ASSESSEE HAS BECOME INFRUCTUOUS AND DISMISSED AS SUCH. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STAND S ALLOWED AND STAY APPLICATION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 16-03-2018. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATED, 16-03-2018 SRBHATNAGAR COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.