Rajnish Garg, Ludhiana V. ACIT, C-6, Ludhiana

ITA 1206/CHANDI/2019

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 0351 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 05-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K.J. SHALLEY
• Keywords: Reopening of assessment; Transactions in derivatives; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Borrowed satisfaction
• Section: 147; 131; 148; 143(3)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “बी” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH ी एन.के .सैनी, उपा य! एवं ी स ु धांश ु ीवा&तव, या(यक सद&य BEFORE: SHRI. N.K.SAINI, VP & SHRI. SUDHANSHU SRIVASTAVA, JM आयकर अपील सं./ ITA NO. 1206/Chd/2019 नधा रण वष / Assessment Year : 2010-11 Rajnish Garg 524-B, Aggar Nagar Ludhiana बनाम The Asst. CIT Tax Circle-6, Ludhiana थायी लेखा सं./PAN NO: ADFPG2620N अपीलाथ /Appellant यथ /Respondent नधा रती क! ओर से/Assessee by : Shri K.J. Shalley, Advocate राज व क! ओर से/ Revenue by : Dr. Ranjeet Kaur, Sr. DR स ु नवाई क! तार&ख/Date of Hearing : 28/06/2022 उदघोषणा क! तार&ख/Date of Pronouncement : 05/08/2022 आदेश/Order PER N.K. SAINI, VICE PRESIDENT This is an appeal by the assessee against the order dt. 01/06/2019 of Ld. CIT(A)-3, Ludhiana. 2. Following grounds has been raised in this appeal. 1. That the Ld. Commissioner of Income Tax (Appeals) is erred by justifying the reopening of the assessment without appreciating that reopening of assessment is bad in law, invalid and liable to be quashed due to following reasons- (a) Reasons recorded for reopening of the assessment are merely reasons to suspect and not reason to believe that income has escaped assessment. In the assessee's case reopening u/s 148 has been made merely on the basis of vague information received from the O/o ADIT (lnv)-ll" LDH. It is well settled law that proceedings u/s 147 can be initiated only on the basis of tangible material and not on the basis of conjectures and surmises. (b) That initiation of proceedings u/s 147 is also based on non-application of mind much less independent application of mind. That mere recording/ formulation of reasons on the basis of reproduction of information from Investigation Wing and, issuing notice for initiation of re-assessment proceedings does not constitute application of mind much less independent application of mind. Hence, the proceedings are without jurisdiction. That AO cannot act mechanically on the basis of vague report of Investigation Wing not relating to the case of the assessee. In Appellant's case the amount referred in the reasons alongwith party's name on the basis of which proceedings u/s 148 have been initiated is also incorrect. 2 (c) That Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in confirming the addition of Rs. 4999423/- made by AO by holding that assessee was indulged in transferring fictitious profits/loss. In this regard, there is no evidence with the Department for such additions. (d) That no proceedings u/s 147 can be initiated against the assessee merely on the basis of suspicion. 2. That addition confirmed by the Ld. Commissioner of Income Tax (Appeals) is only on the basis of surmises and conjectures that assessee manages losses. It is important to clarify that Client Code Modification (CCM) is permissible only to brokers not to the clients (assessee).That person transacting through authorised brokers appointed by the B.S.E. and N.S.E. not directly involved himself in any client code modification. Thus any profit/loss arising after modification can by no stretch of imagination be considered in the hands of the assessee. 3. That client code modification if any done by the broker in the case of the assessee that has been done as per permissible clauses laid down by SEBI as per circular No. NSCCL/SCE/2004/0464 dated 31-05-2004. 4. That the order is contrary to law and facts of the case. 5. That the Appellant craves leave to add, amend or alter any grounds of Appeal before the Appeal is heard and disposed off. 3. Vide Ground Nos. 1(a), (b) & (d) the grievance of the assessee relates to the reopening of the assessment by initiation of proceedings under section 147 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act’). 4. The facts related to this issue in brief are that the assessment in this case was completed under section 143(3) of the Act on 18/03/2013 at an income of Rs. 11,18,26,820/- by making the addition of Rs. 27,48,340/-. Later on the AO on the basis of information received from the office of ADIT(Inv.)-II Ludhiana vide letter No. 830 dt. 23/03/2015 had reason to believe that a sum of Rs. 49,99,423/- was chargeable to tax and had escaped assessment within the meaning of Section 147 of the Act. Consequently he recorded the following reasons : The client code modification facility as approved by SEBI and provided by the Exchange to brokers is meant to rectify genuine mistakes of punching of orders of a particular trade given by a particular client in its particular account maintained with the broker. In this facility the broker can change the client code of a particular trade and transfer the trade from one account to another account during the trading hours and time permitted by the Stock Exchange after the 'trading hours. After, the modification of client code is made, it is submitted to the Stock Exchange to modify the client code in the exchange data. The Stock Exchange then records tins data as client code modification data. 3 2. Many brokers misused this facility of CCM for creating artificial losses/profits and providing bogus profits/losses to various clients by charging some commission. An expert opinion was procured from NSE to indicate the existence of genuine arid non genuine client code Modification. NSE has broadly distinguished the genuine and non genuine CCM as under. 3. Genuine Client Code Modification 3.1 As per the NSE any client code modification would constitute as genuine client code modification in which the folloxving errors/mistakes are rectified. a) Error due to communication and /or punching or typing such that the original client code/name and the modified client code/name are similar to each other. b) Modification within relatives (Relative for this purpose would mean "Relative" as defined under the Companies Act 1956). c) Any similar genuine error. 4. Non genuine client code modification 4.1 As per the NSE any client code modification to rectify the errors/mistakes other than mentioned above would constitute non genuine client code' modification. The NSE also mentioned some most popular non genuine types of errors/mistakes which used for non genuine client code modification. The.non genuine errors mentioned by the NSE are as under: a) Percentage of modified traded value is significantly higher than the total traded value of any trading members/clients. b) Number of modified trades is significant to total number of trades of any members/clients. c) Profits/loss 'arising on account of all modifications by trading member/client is significant in comparison to the profit/loss in the trades where no modifications have been carried out. d ) Profit/loss arising due to modification is significant. e) Trades have been modified to unrelated parties. f) Both buy and sell leg of different trades have been modified to same client. g) The same sets of clients are observed to be making profit/loss due to the modifications carried out. II) Total number of trade modifications increased before closing of the financial year. 5. The modus operandi 5.1 The, whole process can be explained with an example: Broker executes following trade in morning on a particular day let's say at 10.08 AM in customer XYZ's account as shown in Table 1. TABLE 1: Trade in morning in account of M/s XYZ. Trade Number Type Script Price Qty. Total value- A Buy Rel Cap 1560 550 8,58,000 B Sell Rel Cap 1560 550 8,58,000 Net QTY 0 Net Profit/Loss 0 4 Broker execute following trade in afternoon on same day at 13.52 hrs in same customer XYS's account TABLE 2: Trade in morning in account ofM/s XYZ. Trade Number Type Script Price Qty- Total value A Buy Rel Cap 1824 550 10,03,200 B Sell Rel Cap 1824 550 10,03,200 Net QTY G Net Profit/Loss 0 TABLE 3: Account of M/s XYZ (before client code modification) Trade Number Type Script Price Qty. Total value A Buy Rel Cap 1560 550 8,58,000 B Sell Rel Cap 1560 550 8,58,000 C Buy Rel Cap 1824 550 10,03,200 D Sell Rel Cap 1824 550 10,03,200 Net Qty 0 Net Profit/Loss 0 TABLE 4: Account Of M/s. PQR (before client code modification) Trade Number Type Script Price Qty- Total value Nil Nil Nil Nil Nil Nil Net Qty 0 Net Profit/Loss 0 TABLE 5: Account of M/s. XYZ (After Client Code Modification) Trade Number Type Script Price Qty Total value A Buy , ReI Cap 1560 550 8,58,000 D Sell Rei Cap 1824 550 10,03,200 Net QTY 0 Net Profit/Loss 1,45,200 TABLE 6: Account of M/s. PQR (After Client Code Modification) Trade Number Type Script Price Qty- Total value B Buy Rel Cap 1560 550 8,58,000 C Sell Rel Cap 1824 550 10,03,200 Net QTY 0 Net Profit/Loss 1,45,200 Here the broker has purchased and sold the same quantity of shares in a day at txvo different time as shown in table 1 & table 2. The profit & loss was created by using the same data shown in table 1 and 2 by changing the client code of the transactions and in this way bogus profit & loss was created which is shown in table No. 5 and 6. 6. Complaints were received by the Directorate of Intelligence and Criminal Investigation that bogus profits and losses were created by some brokers by desecrating the client code modification facility in F&O segment on NSE during March,2010. The brokers were alleged to be 5 involving in transferring the bogus tosses to different clients to decrease their tax liability and also bogus profit to other clients.. Accordingly, the client code modification transactions were taken up for investigation by this Directorate. The client code modification (CCM) data for FN. 2009-10 was procured from NSE, and the CCM transactions received from NSE were further analyzed. Mapping of data was done to ascertain the net amount of bogus profits/losses in every case. After deep scrutiny it was established that the brokers had misused client code modification facility and created un-genuine losses and profits. These losses and'profits were given to different clients/beneficiaries according to their requirement. The clients had taken bogus losses to set off against their profits with a view to decrease their tax liability. Some of the clients also took bogus profits to adjust their undisclosed income or to set off these profits against huge losses. 7. In some of the cases, of brokers, on the spot verification u/s. 131 (1A) was carried out and they accepted having misused the facility of client code modification in order to create bogus losses/profits. They admitted having received brokerage at the. varying from 0.5 upto 2% on the amount of losses/profits for transferring such loses/profits to their client. These brokers have submitted revised computation of income and paid taxes for A.Y. 2010-11 (relevant for F. Y.2009-10). The names and particulars of such brokers are indicated in annexure A enclosed herewith. 8. Based on the statement of brokers. Investigation were also conducted in a few cases of beneficiaries/clients When confronted with the client code modification data and the statements of brokers, these clients admitted having taken bogus loss from the brokers. They also have revised their computation of income and paid taxes for A.Y.2010-11 (relevant for F.Y.2009-10). 9. Notable patterns: 9.1 On the basis of investigation made on the different brokers as well as beneficiaries, the following patterns/features were noticed: i. Number and percentage of modified trades/traded value is significantly higher in the total number of trades/ traded value of particular client involving into CCM. ii. Profit/loss arising on account of all modifications by client is significant in comparison to the profit/loss in the trades where no modifications have been carried out. iii. Trades have been modified to unrelated parties indicating that they are non-genuine. iv. Both buy and sell leg of different trades have been modified to most of the client. v. Number of trade client code modifications significantly increased during the closing months of the financial year. vi. In some cases, the clients in whose accounts trades were transferred after modification did not have enough margin money to trade in the F&O segment. vii. The client code modification was regularly used to always transfer losses in accounts of some clients and profits in the accounts of others. 6 viii. Many brokers admitted that they charged brokerage at the rates varying from 0.5% to 2% on the amounts of accommodation entries provided by them to different beneficiaries: ix. These brokers revised their computation for A.Y. 2010-11 and paid taxes accordingly. x. Some recipients against whom investigation were conducted have accepted and withdrawn their claim of non genuine losses in F&O segment in A.Y. 2010.-11. They have revised their computation for A.Y. 2010-11 and paid taxes accordingly. 10. During the investigation the Directorate found 'carious transactions of assessee Sh. Rajnish Garg in which the client code had been modified. The details as procured from the Directorate are as below:- PAN Broker Name Market Segment number of trade modified Qty of shares modified Value of trade modified PROFIT/ LOSS because of client code modification ADFPC 2620N Compet ent Finman Pvt. Ltd. F&O 676 3035280 401153036 -4999423 (Corrected by Speaking order dated 11.03.2016) 11. From the above inference can be drawn that the assessee has modified the client code for many transactions which'are of significant amount. Also the .condition of SEBI that the client codes should be similar so as to show. that these are due to punching error is also not true in this case since the client codes are completely different. 12. Thus, as observed by the Directorate of I&C1, the assessee has probably shown bogus profits to adjust for unaccounted money generated from business or elsewhere which has now been introduced into the books. 4.1 The AO issued the notice under section 148 of the Act on 25/03/2015. In response to the said notice the assessee e-filed his return of income on 13/05/2015 and also furnished the letter on 18/09/2015 requesting the reasons on the basis of which proceedings were initiated. In response the AO provided the reasons for reopening under section 148 of the Act. The assesee thereafter furnished the detailed reply on 27/01/2016 to the reasons for reopening the assessment, by filing the objection to the same. The AO mentioned in para 6 of the assessment order that the objections of the assessee were disposed off vide speaking order passed on 11/03/2016 and various information’s were called for. 4.2 The AO framed the assessment at an income of Rs. 11,68,26,820/- instead of returned of income of Rs. 11,18,26,820/- which was assessed earlier vide order dt. 18/03/2013 under section 143(3) of the Act. 7 5. Being aggrieved the assessee carried the matter to the Ld. CIT(A) and challenged the jurisdiction for initiating the reassessment proceedings under section 147 of the Act and submitted as under: ISSUE OF NON APPLICABILITY OF PROVISIONS OF SECTION 148 OF THE INCOME TAX ACT It is humbly submitted that Provisions of section 148 of the Income tax Act 1961 are not Applicable in the case of the Assessee. In as much as, it is well settled law that before issuing any notice under section 147/148 of the Income Tax Act 1961, Ld. Assessing officer must record tangible reasons with fresh material for initiation of provisions of section 148 of the Income Tax Act 1961.The only basis is that general information received by the Directorate of Intelligence and passed on to the Ld. Assessing Officer that assessee has probably shown bogus profits to adjust for un-accounted money generated from business . It proves that proceeding U/S 148 were initiated on the basis of surmises and conjectures not on the basis of tangible material on the basis of probabilities it was on serve that there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, this appears to be a case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. That reasons do not indicate the basis for the Ld. Assessing Officer to come to conclusion that there has been any escapement of income on the ground that the modifications done in the client code was not on account of genuine error, originally occurred while punching the trade. It is further relevant to mention that reopening of assessment u/s 147 of the Income Tax Act 1961 in the case of the assessee has been carried out merely on the basis of information received from the investigation wing. That there is no independent forming of the opinion by the Ld. Assessing Officer and/or any reason to believe by the A.O. that any income has escaped assessment. That impugned reassessment proceedings in the case of the assessee can be said to be on borrowed satisfaction of the investigation wing, which is not permissible under law. It is well settled law that after considering the information / material received from Other source, Ld. Assessing Officer is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be'any reassessment for the verification. It is basic requirement of Section 147 of the Income tea Act that Ld. Assessing Officer should apply his mind in order to form reasons to believe that income had escaped assessment had not been fulfilled. That Ld. Assessing Officer would have no jurisdiction to assess the same if his reasons to believe were not based on any cogent material. Although the AO may have entertained a suspicion that the Assessee"s income has escaped Assessment, such suspicion could not form the basis of initiating 8 proceedings under Section 147 of the Act. A reason to believe — not reason to suspect - is the precondition for exercise of jurisdiction under Section 147 of the Act. It was settled by the Hon'ble High court in the case of Agya Ram v. CIT (supra), it was emphasized that the reasons to believe "should have a link with an objective fact in the form of information or material on record... " It was further emphasized that "mere allegation in reasons cannot be treated equivalent to material in eyes of law. Mere basis of probality from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessments. " Further It is a regular practice for the broker to make modifications in the client code after the purchase and sale of securities as per guidelines of SEBI. The mere fact that there is a client code modification prima facie does not mean that any income has escaped assessment in the case of the assessee. It appears to be case of 'reason to suspect' and not 'reason to believe' IN THE SUPREME COURT OF INDIA 320ITR PAGE 561 (SC) COMMISSIONER OF INCOME TAX VS KEL VINA TOR OF INDIA L TD It was held by Hon 'ble Apex court that after I s ' April 1989, the Assessing officer power to reopen , provided there is a TANGIBLE MATERIAL to come to the conclusion that there is a escapement of income from Assessment, reasons must have a link with the formation of belief. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence dismissed. In support of assessee, relevant Judgment of Hon 'ble High Court is reproduced as under: PUNJAB AND HARYANA HIGH COURT C.I.T. Vs. PARAMJITKAUR 311 ITR38(P &H) Relevant portion of the petition filed is hereby quoted as under: That assessing officer had initiated reassessment proceedings on the basis of information received from the survey circle that the assessee had got prepared a demand draft for a sum of Rs. 83,040 which was not accounted in the books of account of the assessee. The assessing officer had not examined and corroborated the information received from the survey circle before recording his own satisfaction of escaped income and initialing reassessment proceedings. The assessing officer had thus acted only on the basis of suspicion and it cannot be said that the same was based on belief that the income chargeable to tax had escaped income. The assessing officer has to act on the basis of' reasons to believe' and not on 'reasons to suspect'. The Tribunal had, thus, rightly concluded that the assessing officer had failed to incorporate the material and his satisfaction for reopening, the assessment and, therefore, the issuance of notice under Section 148 of the Act for reassessment proceedings was not valid. In support of assessee, relevant Judgment of Hon 'ble High Court is reproduced as under: 9 IN THE HIGH COURT OF JUDICA TURE AT BOMBAY M/s. Coronation Agro Industries Ltd. Vs. Deputy Commissioner of LncomeTax WRIT PETITION NO. 2627 OF 2016 Relevant portion of the petition filed is hereby quoted as under: That reasons in support of notice issued u/s 147 of the Income Tax Act 1961 accept the fact that as a matter of regular practice, a broker in the stock exchange makes modifications in the client code on sale and purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. The reasons do not indicate the basis for the Assessing Officer to come to reasonable belief that there has been any escapement of income on the ground that the modifications done in the client code was not on account of a genuine error, originally occurred while punching the trade. The material available is that there is a client code modification done by the Assessee's broker but there is no link from there to conclude that it was done to escape assessment of a part of its income. Prima facie, it is a case of reason to suspect and not reason to believe that income chargeable to tax has escaped assessment. We are of the view that notice issued is without jurisdictional as it lacks reasons to believe that income chargeable to tax has escaped assessment. BOMBAY HIGH COURTS M/SAventis Pharmu Limited VS Assistant Commissioner of Income Tux 232ITR570 Relevant portion of the Judgment is reproduced as under: The assessing Officer has power to reopen, provided there is ' tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. For the reasons already indicated, on the question as to whether the Assessing Officer has reason to believe that income has escaped assessment within the meaning of section 147, we have come to the conclusion that there was no tangible material before the Assessing officer to hold so and that the reasons recorded for reopening the assessment constitute a mere change of opinion. For these reasons, the petition is allowed. Further the assessment proceedings, especially those u/s 143(3) of the Income tea Act 1961, have to be accorded sanctity and any reopening of the same has to be on a strong and sound legal basis. It is well settled that a mere conjectures or surmise is not sufficient. There have to be a reasons to believe and not merely reasons to suspect that income has escaped assessment. Moreover it is well settled law that no proceedings u/s 147 can be initiated against the assessee merely on the basis of information. The Assessing Officer, should also have a “reason to believe” that proceedings under the said section is sustainable against 10 the assessee. In the assessee's case reopening u/s 148 has been made merely on the basis of that "An information has been received from O/O ADIT(lnv)-II Ludhiana vide letter No. 830 dated 23-03-2015, on the basis of information the A.O. believed had reason that Rs. 4999423/- was chargeable to tax and had escaped assessment within the meaning of section 147 of the Income Tax Act 1961 for the Asstt. Year 2010-11. This phrase of wording has been clearing mentioned in front page of Assessment order. (That copy is also enclosed) In support of contention of the assessee, relevant judgment of Jurisdictional tribunal is quoted as under: IT A T Chandigarh Ashok Goel, Vs. The Income Tax Officer 111(2) ITA No.llO,Chd/2016 (Assessment Year : 2005-06) Relevant portion of judgment is reproduced as under: In the instant case, the Assessing Officer had not examined and corroborated the information received from DDIT (Investigation)-III, Ludhiana before recording his satisfaction of the escaped income and initiating the re-assessment proceedings. In my opinion, the Assessing Officer has thus acted on the basis of suspicion and he has also not applied his mind before recording the reasons for reopening of the assessment. In view of the above discussion, I hold that reopening of the assessment was not valid under the law and, hence I quash the impugned orders of the authorities below. It is also important to mention that the proceedings u/s 147/148 for Asstt. Year 2009-10 initiated on the same issue i.e client code modification were dropped after satisfying as per submissions submitted by the assessee during the course of assessment proceedings. (That copy of notice issued u/s 148 dated 14- 03-2016 for reasons of reopening the assessment alongwith copy of assessment order passed u/s 143(3) r.w.s. 147 of the Income Tax Act 1961 dated 29-12-2016 in which no addition was made on account of client code modification by the Ld. Assessing Officer are hereby enclosed for your kind perusal. It proves that action of making addition for Asstt. Year 2010-11 in the similar issue was not called for and unwarranted and liable to be quashed. It is further pertinent to mention that material available with the Ld. Assessing Officer obtained from Director (Investigation) on the basis of which addition was made as mentioned in the order was never confronted to the assessee. Wliereas it is well settled law that whatever material/evidence used against the assessee is to be confronted to the opposite party. It is also petinent to mention that names of beneficiaries to whom alleged profits was transferred mentioned in the order at page 8 & 9 were never disclosed at any stage of assessment proceedings. It proves that material/evidence whatever in the possession of the Ld. Assessing Officer which is used against the assessee has never been confronted to the assessee which is against the principle of natural justice. It is further pertinent to mention that any evidence/material supplied by the broker .i.e M/S Competent Finman Pvt. Ltd. supplied to the Ld. Assessing Officer as called for during the course of assessment proceedings which is also 11 not confronted at any stage to the assessee. This is also against the principle of natural justice. ISSUE OF GENUINENESS CLIENT CODE MOD1FICA TION. In this "connection, It is humbly submitted that assessee is no way involved in any activity which is prohibited by SEBI or violated any rules framed by SEBI. That assessee's main business is trading in shares; securities and derivatives. He is not a person who does some other work and has used equity market for diverting profits. That assessee is a trader/investor in share business not in the capacity of broker.. The assessee, itself is a client of M/s Competent Finman Pvt. Ltd. which carried out transactions on behalf of the assessee and for other clients. Every client is assigned a unique client code which is punched in at the time of transactions. It is further relevant to mention that Client code modification was allowed to the broker of NSE and BSE by SEBI itself for rectifying genuine mistake like client code was wrongly misquoted due to communication and while punching or wrongly typing by the computer operator. As a matter of regular business practice, a broker in the stock exchange makes modifications in the client code on sale and / or purchase of any securities, after the trading is over so as to rectify any error which may have occurred while punching the orders. That after such modification of client code is made, all detail has been duely submitted with the stock Exchange arid records this data as client code modification .That client code modification if any done by the broker in the case of the assessee that has been done as perpermiss'ible clauses laid down by SEBI. It is clear that client code modification if done that has been done in genuine manner . As per SEBI circular No NSE/INBG/2011/596, there was no penalty for code change modification upto 1% of the total trades. Which means the regulator consider client code modification upto 1% as genuine error at the part of the broker due to technical nature of business. In assessee's case there were 113644 trades done by the assessee in the National Stock Exchange's Future and Option Segment. Out of these, CCM was done by the broker, only in 367 trades, which comprises of a mere .32% of the total trades. It is further relevant to mention that As per a daily scheme of events prescribed by the NSE, the assesse regularlyreceived contract notes from broker which matched with the orders placed with the broker and no difference whatsoever was found. The assesse would also like to emphasize that in the market, there is no way prescribed the SEBI from where the client can get details of any CCM done by his broker. The contract notes do not carry any details of CCM and in assesse's case matched with the orders given by the assesse to the broker. In the background SEBI has allowed the CCM due to the following reasons. • Inexperience of the operating staff in handling technical software and voluminous data. • Communication error owing to the fact that trades are punched in a hurry because of rates in stock markets change every second and mobile phones connections are becoming weak by the day. • Indifference of the broker as the CCM facility was available and the errors was much below the prescribed genuine error limit by the SEBI 12 • Inability of the broker owing to the lack of technical staff due to financial constraints of the broker and non-availability of technical manpower. Staff are daily wagers and such errors are bound to happen. It- is--a general practice that Chving to the large number of orders to be punchedlhe operators forgetting td change the codes have been the primary cause of the errors. In such cases the code similaritf-do^s not arise as it is software and execution error.Same/Some other operators would then execute die Other leg also in the errored client code thinking that the original trade belonged to the errored,client. Such errors are a routine part of assesse's nature of business owing to the volume and technical nature. That nature of business and do not have any purpose of evading tax. It is also relevant to mention that CCM did not increase in the closing months of the financial year, rather it has decreased. This clearly sattes that CCM is random in nature as and when genuine errors have occurs. The chart and tabular presentation are enclosed for your ready referenece. CHART PAGE Month Monthly Breakup o f the Total Number o f CCM entries as per data provided bv The Income Tax Department Apr-09 0.95% May-09 1.26% Jun-09 23.70% Jul-09 2.84% Aug-09 7.58% Oct-09 19.91% Nov-09 12.32%, Dec-09 11.69% Jan-10 11.22% Feb-10 1.26% Mar-10 7.27% It is further submitted that there is clear indication of instances of CCM resulting In profit and loss, both thereby indication the randomness and genuineness in the nature of CCM. Since it is not always loss or always profit as mentioned in observation, the genuineness is proved. There are 4 instances of pfofit K b4ing transferred in books of the assesse due to instances of CCM. That effect of CCM 13 has -resulted in increase in the taxable income in the books of assesse. Here it is very much evident that the transactions are random and general in nature owing to the voluminous and technical nature of business and do not have any purpose of evading tax. Further after consulting the broker namely Competent Finman Pvt.Ltd.jhe following points were noted. • Assesse 'sbroker was using numeric codes to fasten the punching of the orders, resulting in higher number of errors. • It is further relevant to mention that up to 1% CCM is allowable as per guidelines of SEBI notice number NSE/INVG/201 l/596as genuine errors owing to voluminous data, nature of stock market as rates change every second , inexperience and human errors on part of operators and other technical snags. It is further highlighted before your goodstlf thai during the course of assessment proceedings Ld. Assesing Officer also mentioned in his Show cause Notice that assessee was doing business with the M/S Maheshwari Technical and Financial Services Ltd. In reply to show cause notice by the assessee that no dealing was ever been done with M/S Maheshwari Technical and Financial Services Ltd. After this Ld. Assessing officer agreed that it was clerical and human error. Similar in such a large scale of transactions clerical mistake are human error are bound to happened It is further relevant to mention that assesse is reflecting income to the tune of Rs. 109078480/- is assessment year 2010-11, i.e. is the relevant year and paying income tax in croresthereon., Hence it is clear that assesse will not indulge in petty illegal activities. It is a hard fact and human psychology. It is further relevant to mention that CCM data rectification was done duly approved by SED1, which is governing body of the stock exchanges of India. No fine or penalty was imposed by SEBI on the broker stating that CCM done due to human, communication, data handling errors & other unavoidable errors mentioned in the reply above and was not intentional.. In support of contention of the assessee, following judgment is hereby quoted as under: in the case of M/S Kunvurji Finance Pvt. Ltd. Vs. A.C.I.T. 1TA No. 615/2010 Relevant portion of the judgment is hereby reproduced. wherein it was held that but if we look it at in terms of total transactions, it is only 0.94%. The total number of trade transactions is 38.58 lacs and the client code modification is only 36,161. Therefore, the client code modification is less than 1% of the total trading transactions. As per circular of Commodity Exchange, client code modification upto 1% is quite normal and is permitted without any penalty. That the Assessing Officer has not given -hny reasonon what basis he presumed 14 the client code modifications to be unusually high. In the light of the MCX circular, we are of the opinion that the client code modification was quite nominal and not unusually high as alleged by the Assessing Officer. Therefore, we are unable to find out any justification for the allegation of the Assessing Officer that the client code modification was with the malafide intention. In support of contention of the assessee, following judgment is hereby quoted as under: IN THE INCOME TAX APPELLA TE TRIB UNAL, M/s. Noble Securities vs. The ITO ITA No. 911/JP/2016, Assessment Year : 2010-11 Relevant portion of the judgment is hereby reproduced. As per Circular No. MCX/T&S/032/2007 dt. 22.01.2007 issued by the Commodity Exchange, client code modification is permitted intraday i.e. on the same day. There is no penalty if the client code modification is upto 1 per cent of the total orders. In the present case, client code modifications made by the assessee being only 0.94 per cent i.e. less that 1 per cent of the total trading transactions, cannot be said to be unusually high or mala fide when the modification M>as made on the same day. Had the client modification been done after the transaction period when the price of the commodity had changed, then perhaps there could have been some basis to presume that client code modification was intentional. Moreover, C1T(A) having found that all transactions at the commodities exchange have been duly accounted in the books of account maintained by the concerned parlies, there cannot be any justification for considering that profit/loss in the case of the assessee on the basis of mere presumption or suspicion. '' Hence appeal of the assessee is allowed on this ground. Moreover in the case of M/S Siihlhi Beverages vs. AC1T1TA No. 409/Ahd/2013 dated 01-08-2016 wherein The Assessing Ojficer held the client code modifications to be malafide with the intention to transfer the profit to other person by modifying the client code so as to avoid the payment of tax. From the circular of the Commodity Exchange, it is evident that client code modification is permitted on the same day. Therefore, we are unable to find out any justification for the allegation of the Assessing Officer that the client code modification was with the malafide intention. When the client code was modified on the same day, there cannot be any malafide intention. Had client modification done after the transactions period when the price of the commodity has already changed, then perhaps there could have been some basis to presume that client code modification is intentional. However, when the client code modification is done on the same day, in our opinion, there was no basis or justification to hold the same to be malafide. That keeping in view of the above facts, submission and in view of the Hon 'ble Supreme Court and High Courts Judgments, it is humbly submitted that reopening of assessment proceedings ids 147/148 of the Income Tax Act merely on the basis of information received from the investigation wing which is not permissible under law. Moreover client code modification if any done by the broker in the case of the assessee that has been done as per permissible clauses laid down by SEBI. That keeping in view the facts, it is humbly requested that assessment proceedings u/s 15 147/148 of the Income Tax Act may please be annulled and addition made on this ground may please be deleted. 5.1 The Ld. CIT(A) after considering the submissions of the assessee observed that the AO on the basis of information available with the Department that the assessee had made investment in trade market through broker and manipulated his income by shifting in losses / shifting in profit amounting to Rs. 49,99,423/- and reopened the case under section 147 of the Act. 5.2 The Ld. CIT(A) opined that the assessee had not been able to satisfactorily explained the reasons and logic of client code modification carried out and also failed to completely to furnish the details and need of modification carried out in the case of assessee through its broker M/s Competent Finman Ltd. He further observed that the assessee was explicitly confronted with the information available with the AO with regard to modalities and change in client code modification during the assessment proceedings. 5.3 The Ld. CIT(A) also observed that the inference drawn by the AO was in the light of the facts available from the information received by him from Investigation Wing and the facts wherein, the searches had been carried out by different brokers including, in the case of M/s Competent Finman Ltd. across India on 23/03/2015, in those searches it was found that those brokers were involved into systematic changes through the client code modification and through those fictitious modifications, had booked profit and losses in the cases of assessees which brought their tax liability down abnormally. The Ld. CIT(A) further observed that merely stating that the assessee was not aware which modifications were carried out did not absolve the assessee from its onus and that the end result was that the assessee had been benefitted from the modification carried out in the profit / loss by bringing in losses in the case of the assessee. Thereafter the Ld. CIT(A) discussed the issue on merit and sustained the disallowance made by the AO, however no specific finding has been given as regards to the legal issue raised by the assessee relating to reopening of the assessment on the basis of the information received from Investigation Wing. 6. Now the assessee is in appeal. 7. The Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the AO reopened the assessment framed 16 under section 143(3) of the Act after making proper inquiries, only on the basis of a general information received from Directorate of Investigation that the assessee had probably shown bogus profits to adjust unaccounted money charged from business which shows that the proceeding under section 148 were initiated on the basis of surmises and conjectures and not on the basis of tangible material. 7.1 It was further submitted that the AO received the information that on the basis of probabilities, there was a client code modification done by the assessee’s broker and issued the notice under section 148 of the Act but there was no link there from the conclusion that it was done to escape the assessment on a part of income. Therefore the reasons recorded were to suspect and not reasons to believe that the income chargeable to tax had escaped assessment and that the reasons did not indicate the basis for the AO to come to conclusion that there had been any escapement of income on the ground that the modifications done in the client code was not on account of genuine error, originally occurred while punching the code. It was stated that the reopening by the AO was on the basis of satisfaction of Investigation Wing, borrowed information without applying his own mind, therefore reopening of the assessment was not justified and deserves to be quashed. Reliance was placed on the following case laws: • M/s Coronation Agro Industries Ltd. Vs. DCIT in Writ Petition No. 2627 of 2017 vide order dt. 23/11/2016 (Bom) • Shri Tulsi Dass Vs. ACIT in ITA No. 6806/Del/2017 vide order dt. 23/01/2019 (Del Trib) • Kamal Kishoree Aggarwal Vs. ACIT in ITA No. 6628/Del/2018vide order dt. 12/04/2019 (Del Trib) • CIT, Delhi Vs. Kelvinator of India Ltd. in Civil Appeal Nos. 2009-2011 of 2003vide order dt. 18/01/2010 (SC) • CIT Vs. Paramjit Kaur [2009] 311 ITR 38 (P&H) • Ashok Goel Vs. The ITO in ITA No. 110/Chd/2016 vide order dt. 19/05/2016 (Chd Trib) 7.2 It was further submitted that the reasons recorded by the AO were wrong as he was not sure as to whether there was an escapement of income because he used the word the “probably”. It was further submitted that even on the basis of similar reasons recorded for reopening of the assessment on the basis of information that some brokers 17 had misused client code modification facility on transfer of Profit & Loss, on account of share transaction from the client to others, the issue has been decided in favour of the assessee by the ITAT Delhi ‘SMC’ Bench in ITA No. 6806/Del/2017 for the A.Y. 2009-10 in the case of Shri Tulsi Dass, Laxmi Nagar, Delhi Vs. ACIT, Circle 58(1), New Delhi, copy of the said order was furnished which is placed on record. 7.3 It was contended that the Ld. CIT(A) mentioned in the impugned order that the searches had been carried out in different brokers cases including in the case of M/s Competent Finman Ltd. across India on 23/03/2015 and M/s Competent Finman Ltd. was the broker of the assessee in this rgard, it was stated that no search and seizure operation was carried out at M/s Competent Finman Ltd. on 23/03/2015. The Ld. Counsel for the assessee furnished a certificate from the said company M/s Competent Finman Ltd. stating therein that no search was conducted at M/s Competent Finman Ltd. on 23/03/2015 copy of the same is placed at page no. 8 of the assessee’s paper book. 8. In his rival submissions the Ld. DR strongly supported the orders of the authorities below and further submitted that the use of the word probably and the search took place in the case of M/s Competent Finman Ltd. on 23/03/2015 was a typhographical mistake which was not deliberately done. He further submitted that the AO applied his mind while recording the reasons for reopening the assessment and after proper examination of the record during the course of assessment proceedings the impugned addition was made. Therefore the Ld. CIT(A) rightly confirmed the impugned addition. 9. We have considered the submissions of both the parties and perused the material available on the record. In the present case it is noticed that the AO in para 3 of the relevant assessment order dt. 30/03/2016 categorically stated that the information had been received from office of ADIT(Inv.)-II Ludhiana vide letter No. 830 dt. 23/03/2015, on the basis of the said information, the AO believed and had reason to believe that Rs. 49,99,423/- was chargeable to tax and had escaped assessment within the meaning of Section 147 of the Act. Thereafter he recorded the reasons, from the aforesaid observations of the AO, it is clear that the reopening was done only on the basis of the information received from Investigation Wing, copy of the reasons recorded are also placed at page no. 1 to 7 of the assessee’s compilation wherein the reasons recorded mentioned as under: 18 10. During the investigation the Directorate found various transactions of assessee Sh. Rajnish Garg in which the client code had been modified. The details as procured from the Directorate are as below:- ADQPM80888 MAHESHWARI TECHNICAL & FINANCIAL SERVICES LTD. F&O 3,115 3,272,102 1,441,201,906 10. From the above inference can be drawn that the assessee has modified the client code for many transactions which are of significant amount. Also the condition of SEBI that the client codes should be similar so as to show that these are due to punching error is also not true in this case since the client codes are completely different. 9.1 It is also noted that the Ld. CIT(A) in the impugned order categorically stated in para 5.4 of the impugned order that the inference was drawn by the AO, in the light of the fact available from the information received by him from investigation wing and that the search had been carried out in different brokers cases including in the case of M/s Competent Finman Ltd. across India on 23/03/2015, the relevant findings given by the Ld. CIT(A) in para 5.4 of the impugned order which reproduced verbatim as under: 5.4 I have duly considered assessee's detailed submission filed at the time of assessment proceedings as well is appellate proceedings. In my considered opinion the assessee has not been able to satisfactorily explain the reason and logic of client code modification carried out in the case of assessee in detail. The assessee has also failed completely to furnish the detail and need of modification carried out in the case of assessee through its broker M/s Competent Finman Ltd. In my considered view the assessee was explicitly confronted with the information available with the Assessing Officer with regard to modalities and change in client code modification during the assessment proceedings. The inference drawn by the Assessing Officer, is in light of the facts available from the information received by him from investigation wing and the fact, wherein, the searches have been carried out in different brokers cases including, in the case of M/s Competent Finman. Ltd, across India on 23/03/2015. In the searches it was found that these brokers were involved into systematic changes through the client code modification and through these fictitious modifications, have booked profit and losses in the cases of assessee is bringing their tax liabilities down abnormally. It is observed from the assessment record that the assessee was made aware of the modalities and the modus operandi observed by the investigation wing in the searches carried out across India on 23/03/2015 and detailed investigation report covering the case of the broker of the assessee, i.e. M/s Competent Finman Ltd, vide its report dated 08/03/2016. It is seen that during entire assessment proceedings the assessee has not been able to satisfactorily explain the logic and reasoning of modification carried out, in his case, using client code by its broker. In the case of assessee the client code modification carried out have also not been justified by the assessee at all. Merely stating that the assessee was not aware which modifications were carried out this does not absolve the assessee from its onus, the end result, it is the assessee who has been benefited from the modifications carried out in the profits/losses by bringing in 19 losses in the case of assessee specifically as any merit in by the Assessing Officer in the assessment order which has been duly confronted to the assessee during the course of assessment proceedings. From the aforesaid notings of the Ld. CIT(A) as well as the AO, it is clear that the reassessment proceedings under section 147 r.w.s 148 were initiated by the AO only on the basis of the information received from the Investigation Wing and there was no independent application of mind by the AO, and moreover there was no search in the case of broker of the assessee i.e; M/s Competent Finman Ltd. on 23/03/2015, in this regard one certificate has been given by the said company, copy of which is placed at page no. 58 of the assessee’s compilation. Therefore the reasons for initiating the reassessment proceedings were also based on the wrong facts other than the facts available on the recod. 9.1 On a similar issue the ITAT Chandigarh ‘SMC’ Bench Chandigarh in the case of Ashok Goel, Mullanpur Vs. ITO –III(2), Ludhiana in ITA No. 110/Chd/2016 for the A.Y. 2005- 06 vide order dt. 19/05/2016 held as under: It is observed that the expression appearing in section 147 is 'reason to believe', which refers to the belief. The same prompts the Assessing Officer to apply section 147 to a particular case. It is well settled that the expression in section 147 'has reason to believe' is stronger than the words 'is satisfied'. In the case of Emirates Shipping Line, FZE Vs. Assistant Director of Income Tax (2012) 349 ITR 493 (Del), the Hon'ble Delhi High Court at pages 509 and 510 held as under : "23. We have quoted the "reasons to believe" recorded by the Assessing Officer. For invoking this power, it is not the requirement nor is the provision confined to cases of concealment of income. Reassessment provision empowers the Assessing Officer to assess income which has escaped assessment. The object of the section is to ensure that the taxable income is computed and calculated as per the Act and tax payable thereon is paid. At the same time, the power under this Section is not unbridled and there are several safeguards. One of the safeguards stipulated in the section itself is the requirement that the Assessing Officer must record 'reasons to believe'. This requirement mandates that the Assessing Officer must state in writing why and for what reason, i.e. cause or justification, he is invoking the said power. The said reasons must satisfy the stipulation that the Assessing Officer should have formed a prima facie belief that income has escaped assessment. 24. 'Reasons to believe' recorded by the Assessing Officer are a result of the subjective satisfaction of the assessing officer, but in a way has to satisfy the test of objectiveness. The belief must be honest and should be based upon some material or basis but not on mere suspicion, gossip or rumour. 'Reasons to believe' do not mean 'reasons to suspect'. The Assessing Officer cannot institute or start a fishing investigation or rowing inquiry. There must be some information or material 20 which is on the file which makes the assessing officer form a tentative or prima facie opinion that income has escaped assessment. This material or information cannot be wholly vague, indefinite or farfetched. It must have nexus or live link with the formation of belief. The test is whether a reasonable person would have formed the requisite belief on the basis of information or material as stated/recorded by the Assessing Officer that income has possibly escaped assessment. Mere ipse dixit or a hunch does not amount to reason to believe. Inspite of the wide power, the exercise of power must meet this requirement that there was relevant material and ground for the Assessing Officer to form a tentative or prima facie opinion that the income as escaped assessment which includes non assessment or under assessment. But, it is not the requirement that the Assessing Officer should have finally ascertained the fact of escapement of income by recording findings or conclusion. This final ascertainment takes place when the final assessment order is passed. The Assessing Officer has to show tentatively or prima facie that income has escaped assessment. There should be some material or basis for the said formation of belief (refer Assistant Commissioner of Income Tax v Rajesh Jhaveri Stock Brokers, (2008) 14 SCC 208; ITO v. Selected Dalurband Coal Co. (P) Ltd. (1997) 10 SCC 68; Raymond Woollen Mills Ltd. v. ITO, (2008) 14 SCC 218)." 10. In the above case, the Hon'ble Delhi High Court has categorically stated that under section 147 of the Act, it is the requirement that the Assessing Officer must record 'reason to believe'. This requirement mandates that the Assessing Officer must state in writing why and for what reason, i.e. cause or justification, he is invoking the power. The Hon'ble High Court further held that the reasons must satisfy the stipulation that the Assessing Officer should have formed a prima-facie belief that income has escaped assessment. In the instant case, the Assessing Officer proceeded on the premise that the asessee had made complaint to the SSP of Police, Ludhiana regarding Roka and Engagement functions solemnized on 29.8.2004 and expenditure of Rs.7 lacs was incurred on these functions. This observation is factually incorrect and it cannot be said that the Assessing Officer has formed a prima-facie belief that income has escaped assessment. At this juncture, I may refer to the decision t Hon'ble Jurisdictional High Court in the case of CIT Vs. Atlas Cycle Industries (1989) 180 ITR 319 (P&H), wherein it has been held that the Assessing Officer did not have the jurisdiction to proceed with the re- assessment, the moment he found the two grounds mentioned in the re- assessment notice incorrect or non- existent. In the instant case also, notice was issued to the assessee on ground that he had made the complaint to the SSP of Police, which is factually incorrect. In fact, the assessee did not make any complaint to the SSP, Ludhiana. Secondly, the Assessing Officer has mentioned in the reasons recorded that information was received from DDIT (Investigation)-III, Ludhiana that the assessee and his daughter Ms.Sarika Jain had spent approximately Rs.37 lacs on her engagement and marriage ceremony. It is brought to our notice that no addition has been m le in the hands of Ms.Sarika Jain. On the contrary, Smt.Sarika Jain alleged in her complaint made with the Police that the assessee had spent an amount of Rs.7 lacs at the time of Roka and Engagement functions. It is also observed that in this case the information was provided by DDIT (Investigation)-III, Ludhiana on the basis of Police Report, wherein the daughter of the assessee alleged that a huge amount has been spent on marriage and Roka ceremony. The complaint was made by Ms.Sarika Jain against her husband and in-laws. Shri S.K. Maingi, learned counsel for the assessee submitted that the said complaint was made by Ms.Sarika Jain in order to fetch money from her husband and in-laws. This contention of the learned 21 counsel for the assessee has some force, which can not be ignored. Recently, Division Bench of this Tribunal in the case of Shri Subhash Chander Goel Vs. ITO, Chandigarh in ITA No.282/Chd/20i4 relating to assessment year 2006-07 held that statement recorded by the police officer under section 161 of CrPc, 1983 is neither given on oath, nor it is tested by cross examination and, therefore, such a statement cannot be treated as substantive evidence to reopen the assessment proceedings. Injjigjnstant case., the . Assessing Officer had not examined and corroborated the information received from DDIT (Investigation)-III, Ludhiana before recording his satisfaction of the escaped income and initiating the re- assessment proceedings. In my opinion, the Assessing Officer has thus acted on the basis of suspicion and he has also not applied his mind before recording the reasons for reopening of the assessment. Thus in my considered opinion, the statement made by Ms.Sarika Jain under section 161 of CrPc cannot be treated as relevant material for reopening proceedings under section 147 of the Act. 11. In view of the above discussion, I hold that reopening of the assessment was not valid under the law and, hence I quash the impugned orders of the authorities below. 9.2 In the instant case also the reopening was done on the basis of information received from the Investigation Wing as has been accepted by the AO and the Ld. CIT(A) in their respective orders, therefore, in the absence of independent application of mind by the AO, the reopening in the instant case under section 147 r.w.s 148 of the Act was not justified. 9.3 On a similar issue in the case of Shri Tulsi Dass, Laxmi Nagar, Delhi Vs. ACIT (supra) reopening in the similar circumstances was quashed vide order dt. 23/01/2019 in ITA No. 6806/Del/2017 for the A.Y. 2009-10 (supra) the relevant findings has been given in para 9 of the aforesaid referred to order dt. 23/01/2019 which read as under: 9. On perusal of the above recording shows that this was not at all a reason to believe envisaged u/s 147 of the Act. At best the same can be considered as reason to suspect only. The recording states that the assessee Sh. Tulsi Dass has suffered a loss of Rs.4,77,732.50/- in a transaction in which client code modification was involved and earned profit of Rs.10,05,287/- in a transaction in which client code modification was involved. However, there is no material on record to show that prima facie the said client code modification was because of some malafide reason and the assessee has received cash in lieu of payment made for loss of Rs.4,77,732.50/- and profit of Rs.14,20,202.5 in which client code modification was involved. Thus, the above recording does not satisfy requirement of law mandatory for assuming jurisdiction to reopen the assessment. My above view is supported by the decision of the Bombay High Court in the case of Coronation Agro Industries Ltd. Vs. DCIT reported in 390 ITR 464. Therefore, the reassessment order passed pursuant to the above recording is hereby quashed and ground of the appeal of the assessee is allowed. 22 9.4 In the instant case also the Investigation Wing supplied the information to the AO that there was a client code modification to manipulate the profit as was the case in the aforesaid referred to case of Shri Tulsi Dass, Laxmi Nagar, Delhi Vs. ACIT(supra). Therefore for the same reasoning the reassessment order in the case of the assessee also deserves to be quashed. 9.5 On a similar issue the Hon’ble Jurisdictional High Court in the case of CIT vs. Smt. Paramjit Kaur [2009] 311 ITR 38 (P&H) held as under: “ that the Assessing Officer had not examined the information received from the survey circle before recording his own satisfaction of escaped income and initiating reassessment proceedings. The Assessing Officer had thus acted only on the basis of suspicion and it could not be said that it was based on belief that the income chargeable to tax had escaped income. The Assessing Officer had to act on the basis of “reason to believe” and not on “reasons to suspect”. The Tribunal rightly concluded that the Assessing Officer had failed to incorporate the material and his satisfaction for reopening the assessment and therefore the issuance of notice under section 148 of the Act for reassessment proceedings was not valid.” 9.6 In the instant case also the AO acted only on the basis of suspicion and acted on the basis of information received from the Investigation Wing therefore the reassessment proceedings was not valid. Moreover in the reasons recorded, copy of which is placed at page no. 2 to 7 of the assessee’s paper book. The AO categorically stated in para 12 that the AO had reason to believe on the basis of observation of the Directorate of Investigation that the assessee had probably shows bogus profit to adjust unaccounted money generated from business or elsewhere and he had reason to believe on that basis that the amount of Rs. 49,99,423/- had escaped assessment within the meaning of Section 147 of the Act. 12. Thus, as observed by the Directorate of I&CI , the assessee has probably shown bogus profits to adjust for unaccounted money generated from business or elsewhere which has now been introduced into the books. Therefore, I have reason to believe that the above noted, amount i.e; Rs. 49,99,423/- for A.Y. 2010-11 has escaped assessment within meaning of section 147 of Income Tax Act, 1961. Notice u/s 148 is being issued separately. From the aforesaid notings of the AO in the reasons recorded it is clear that the AO was not sure as to whether income escaped the assessment. Since the word probably has been used, and there was no application of his own mind by the AO who depended only on the information received from the Investigation Wing. We therefore by considering the totality of the facts as discussed herein above are of the view that the reopening in the instant case on the basis of borrowed information by the AO from 23 the Investigation Wing without applying his independent mind was not justified. Accordingly the subsequent reassessment proceedings framed by the AO is quashed. 10. Since we have quashed the reassessment proceedings, therefore no findings are being given on other grounds raised by the assessee on merits. 11. In the result, appeal of the assessee is allowed. (Order pronounced in the open Court on 05/08/2022 ) Sd/- Sd/- स ु धांश ु ीवा&तव एन.के .सैनी, (SUDHANSHU SRIVASTAVA) ( N.K. SAINI) या(यक सद&य/ JUDICIAL MEMBER उपा य! / VICE PRESIDENT AG Date: 05/08/2022 आदेश क! त,ल-प अ.े-षत/ Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आय ु /त/ CIT 4. आयकर आय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न4ध, आयकर अपील&य आ4धकरण, च7डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File